Datasets:

rusheeliyer

/

uk-abs

like 0

The appellant (NML) is a Cayman Island Company. It is an affiliate of a New York based hedge fund of a type sometimes described as a vulture fund. Vulture funds feed on the debts of sovereign states that are in acute financial difficulty by purchasing sovereign debt at a discount to face value and then seeking to enforce it. This appeal relates to bonds issued by the Republic of Argentina in respect of which, together with all its other debt, Argentina declared a moratorium in December 2001. Between June 2001 and September 2003 affiliates of NML purchased, at a little over half their face value, bonds with a principal value of US$ 172,153,000 (the bonds). On 11 May 2006, NML, as beneficial owner, obtained summary judgment on the bonds for a total, including interest, of US$ 284,184,632.30, in a Federal Court in New York. NML brought a common law action on that judgment in this jurisdiction, and succeeded before Blair J in the Commercial Court. That judgment was reversed by the Court of Appeal, which held that Argentina is protected by state immunity. The question raised by this appeal is whether that finding was correct. The bonds and the New York Judgment The bonds were issued by Argentina in February and July 2000 pursuant to a Fiscal Agency Agreement between Argentina and Bankers Trust Company. The terms applicable to the bonds were contained in the Agreement and the bonds themselves, both of which were expressly governed by the law of New York. In November 2003, having declared events of default under the Fiscal Agency Agreement, relying on the moratorium and Argentinas subsequent failure to pay interest on the bonds, NML commenced proceedings against Argentina in the United States District Court, Southern District of New York, to recover principal and interest due under the bonds. Jurisdiction was founded on an express submission to New York jurisdiction in the Fiscal Agency Agreement. Argentina appeared and defended the proceedings. Judge Thomas P Griesa granted NMLs motion for summary judgment. Argentina does not, in these proceedings, challenge that judgment. The proceedings in this jurisdiction In order to serve a foreign sovereign state it is necessary to obtain the permission of the court to serve the claim form out of the jurisdiction. On 14 March 2008 NML applied ex parte for this permission. The witness statement supporting this application, and the draft particulars of claim exhibited to it, alleged two reasons why Argentina was not entitled to state immunity. The first was that under clause 22 of the Fiscal Agency Agreement Argentina had waived, and agreed not to plead, any claim that it might have to state immunity. The second was that NMLs claim was founded on the Fiscal Agency Agreement and the bonds, and consequently constituted proceedings relating to a commercial transaction for the purposes of the State Immunity Act 1978 (the 1978 Act). On 2 April 2008, David Steel J granted NML permission to serve Argentina out of the jurisdiction, and service was duly effected. On 5 September 2008 Argentina applied under CPR 11(1) to set the order for service aside on the ground that Argentina enjoyed state immunity from the jurisdiction of the English courts. At the hearing of this application before Blair J NML conceded that it could rely, at first instance, on neither of the grounds for alleging that Argentina did not enjoy immunity that had been advanced in support of the application to serve out. Instead NML sought to rely first on the provisions of section 31 of the Civil Jurisdiction and Judgments Act 1982 (the 1982 Act) and secondly on alternative provisions as to waiver and jurisdiction in the bonds themselves. I shall follow the example of Aikens LJ in annexing in Appendix 1 the relevant provisions of section 31, in Appendix 2 Article 20 of the European Convention on State Immunity (ECSI), to which I shall refer in due course, and in Appendix 3 the relevant terms of the bonds. Argentina contended that it was not open to NML to invoke alternative grounds for contending that immunity did not apply when these had not been relied on in the original ex parte application. NMLs proper course was to make a fresh application for permission to serve Argentina out of the jurisdiction. Blair J rejected this procedural objection and found in favour of NML on both the new substantive points [2009] EWHC 110 (Comm); [2009] QB 579. The Court of Appeal reversed Blair J on all three issues [2010] EWCA Civ 41; [2011] 1 QB 8. Aikens LJ gave the only reasoned judgment, with which Mummery and Elias LJJ agreed. The issues The following issues are raised by this appeal: (1) Whether the present proceedings for the recognition and enforcement of the New York courts judgment are proceedings relating to a commercial transaction within the meaning of section 3 of the State Immunity Act 1978. (As I shall explain, this issue was not open to NML in the courts below). (2) Whether Argentina is prevented from claiming state immunity in respect of the present proceedings by Section 31 of the Civil Jurisdiction and Judgments Act 1982. (3) Whether the bonds contain a submission to the jurisdiction of the English court in respect of these proceedings within the meaning of section 2 of the State Immunity Act 1978. (4) Whether NML was entitled to raise at the inter partes hearing the two new points not previously relied on in the ex parte application for permission to serve Argentina out of the jurisdiction. (5) Whether, having regard to the answers to the above questions, Argentina is entitled to claim state immunity in respect of these proceedings. The resolution of the first two issues turns on statutory interpretation. This must be carried out in the context of simultaneous developments in the law of sovereign immunity and of the recognition of foreign judgments. State immunity At the beginning of the 20th century state immunity was a doctrine of customary international law, applied in England as part of the common law. Under this doctrine a state enjoyed absolute immunity from suit in the court of another state. The property of the state was also immune from execution. Because a state could not be sued, there was no procedural provision in this jurisdiction for service of process on a foreign state. The Court of Appeal had, however, occasion to consider the law of state immunity when proceedings in rem were served on a mail packet owned by Belgium which had been involved in a collision in the case of The Parlement Belge (1880) LR 5 PD 197. The Court held that the vessel, being the property of a foreign sovereign state, was immune from legal process. Giving the judgment of the court Brett LJ explained the reason for this immunity, at pp 207 208 and 220: From all these authorities it seems to us, although other reasons have sometimes been suggested, that the real principle on which the exemption of every sovereign from the jurisdiction of every court has been deduced is that the exercise of such jurisdiction would be incompatible with his regal dignity that is to say, with his absolute independence of every superior authority. By a similar examination of authorities we come to the conclusion, although other grounds have sometimes been suggested, that the immunity of an ambassador from the jurisdiction of the courts of the country to which he is accredited is based upon his being the representative of the independent sovereign or state which sends him, and which sends him upon the faith of his being admitted to be clothed with the same independence of and superiority to all adverse jurisdiction as the sovereign authority whom he represents would be. It has been held that an ambassador cannot be personally sued, although he has traded; and in both cases because such a suit would be inconsistent with the independence and equality of the state which he represents. If the remedy sought by an action in rem against public property is, as we think it is, an indirect mode of exercising the authority of the court against the owner of the property, then the attempt to exercise such an authority is an attempt inconsistent with the independence and equality of the state which is represented by such an owner. The property cannot upon the hypothesis be denied to be public property; the case is within the terms of the rule; it is within the spirit of the rule; therefore, we are of opinion that the mere fact of the ship being used subordinately and partially for trading purposes does not take away the general immunity. In Mighell v Sultan of Johore [1894] 1 QB 149 leave to effect substituted service on the Sultan of Johore in an action in personam was set aside on the ground that he enjoyed sovereign immunity. To an argument that he had waived this immunity, the court held that the only way that a sovereign could waive immunity was by submitting to jurisdiction in the face of the court as, for example, by appearance to a writ. If the sovereign ignored the issue of the writ, the court was under a duty of its own motion to recognise his immunity from suit. In Compania Naviera Vascongado v Steamship Cristina [1938] AC 485 the House of Lords confirmed that a state owned ship that was used for public purposes could not be made the subject of proceedings in rem. Lord Atkin started his judgment with the following definition of state immunity, at p 490: The foundation for the application to set aside the writ and arrest of the ship is to be found in two propositions of international law engrafted into our domestic law which seem to me to be well established and to be beyond dispute. The first is that the courts of a country will not implead a foreign sovereign, that is, they will not by their process make him against his will a party to legal proceedings whether the proceedings involve process against his person or seek to recover from him specific property or damages. The second is that they will not by their process, whether the sovereign is a party to the proceedings or not, seize or detain property which is his or of which he is in possession or control. There has been some difference in the practice of nations as to possible limitations of this second principle as to whether it extends to property only used for the commercial purposes of the sovereign or to personal private property. In this country it is in my opinion well settled that it applies to both. Three members of the House questioned, however, whether state immunity would protect a vessel that was used for the purposes of commercial trade. This reflected a growing recognition around the world of the restrictive doctrine of state immunity under which immunity related to governmental acts in the exercise of sovereign authority (acta jure imperii) but not to commercial activities carried on by the state (acta jure gestionis). The absolute doctrine of state immunity could pose a disincentive to contracting with a state and some states attempted to avoid this disadvantage by including in contracts an agreement not to assert state immunity. The English courts held, however, that such a purported waiver was ineffective. Immunity could only be lost by a submission to the jurisdiction when it was invoked, and not earlier see Duff Development Co v Kelantan Government [1924] AC 797 and Kahan v Pakistan Federation [1951] 2 KB 1003. In Rahimtoola v Nizam of Hyderabad [1958] AC 379, 422 Lord Denning expressed, obiter, the view that judicial immunity should not apply to commercial transactions, but the other members of the House expressly dissociated themselves from this view, because the point had not been argued. It was not until nearly I shall deal with the intervention of Parliament in the form of the 1978 and twenty years later that Lord Denning MR was able to carry the rest of the Court of Appeal with him in applying the restrictive doctrine of state immunity in Trendtex Trading Corporation v Central Bank of Nigeria [1977] QB 529. This decision was approved by the House of Lords in I Congreso del Partido [1983] 1 AC 244. 1982 Acts when I deal specifically with the first two issues. Enforcement of foreign judgments Prior to the 1982 Act the common law provided two alternative remedies to a plaintiff who had obtained a judgment against a debtor in a foreign jurisdiction. He could bring a claim on the judgment or he could bring a claim on the cause of action in respect of which he had obtained the judgment. The former did not merge in the latter. In order to establish jurisdiction to sue on the judgment the plaintiff had to serve a writ in personam in accordance with the normal procedure. The existence of a foreign judgment was not a ground upon which permission could be obtained to serve a writ out of the jurisdiction. The plaintiff had to establish that a number of conditions were satisfied in order to claim successfully on the foreign judgment. In particular, he had to establish that the foreign court had had jurisdiction over the defendant in accordance with the English rules of private international law and the judgment had to be final and conclusive on the merits. Part II of the Administration of Justice Act 1920 (the 1920 Act) provides an alternative means of enforcing, in the United Kingdom, the judgment of a superior court in another part of His Majestys dominions. Section 9 of that Act provides that, subject to the conditions there specified, the High Court may, if in all the circumstances of the case they think it is just and convenient that the judgment should be enforced in the United Kingdom order the judgment to be registered. The conditions include a requirement that the foreign court should have had jurisdiction and preclude registration where the judgment is in respect of a cause of action which for reasons of public policy or for some other similar reason could not have been entertained by the registering court. These conditions plainly preclude the registration of a judgment against a defendant who, under English law, is subject to state immunity. Prior to 1978 there is no record, so far as I am aware, of any plaintiff having attempted to register such a judgment. The Foreign Judgments (Reciprocal Enforcement) Act 1933 was passed to make provision for the enforcement in the United Kingdom of judgments given in foreign countries that accord reciprocal treatment to judgments given in the United Kingdom. Section 2 of this Act provides for registration of such judgments on specified conditions, subject to the right of the judgment debtor to apply to have the judgment set aside. The section provides that for the purposes of execution a registered judgment is to be treated as if it were a judgment of the registering court. Section 4 makes provision for an application to set aside a registered judgment. The section includes a provision that the judgment shall be set aside if the registering court is satisfied that the foreign court had no jurisdiction in the circumstances of the case. The section further provides by subsection (3)(c) that the foreign court shall not be deemed to have had jurisdiction if the judgment debtor, being a defendant in the original proceedings, was a person who under the rules of public international law was entitled to immunity from the jurisdiction of the courts of the country of the original court and did not submit to the jurisdiction of that court. This last provision is significant in the present context in that it implicitly provides for the registration of a judgment against a state, a state entity or an individual who was subject to state immunity in the foreign country if there has been a submission to the foreign jurisdiction. The 1933 Act contains no provision, however, that permits enforcement of such a judgment against property owned by a state. Furthermore section 2(1)(b) of the Act precludes recognition of a judgment that cannot be enforced by execution in the country of the original court, and section 4(1)(a)(v) requires the registration of a judgment to be set aside if enforcement would be contrary to the public policy of the registering court. So long as the absolute doctrine of state immunity prevailed in the United Kingdom it is hard to envisage registration of a foreign judgment against a judgment debtor who had been entitled to state immunity, but who had submitted to the foreign jurisdiction, except perhaps a diplomat in respect of whom his state had waived diplomatic immunity. There does not seem to be any recorded instance of such a case. Issue 1: are the present proceedings proceedings relating to a commercial transaction within the meaning of the State Immunity Act 1978? The 1978 Act had its origin in the need to give effect to the ECSI, but as the Bill passed through Parliament the scope of the legislation was widened so as to make provisions in relation to state immunity having effect on all states, and not just those party to the Convention. Fox on The Law of State Immunity 2nd ed (2008), at p 241 and following, describes the genesis of the Act. Section 3(1) of the 1978 Act provides: A State is not immune as respects proceedings relating to (a) a commercial transaction entered into by the state. Section 3(3)(b) defines commercial transaction as including any loan or other transaction for the provision of finance. In view of this definition it is not surprising that it is common ground that the action in respect of which NML obtained judgment in New York was a proceeding relating to a commercial transaction within the meaning of section 3(1)(a). Permission to effect service on Argentina out of the jurisdiction was obtained from David Steel J on the basis of an averment that the common law action that was to be brought in England on the New York judgment was also a proceeding relating to a commercial transaction. However before Blair J and the Court of Appeal NML conceded that this averment was not open to them short of the Supreme Court. This was because of two reasoned decisions, one in the High Court and one in the Court of Appeal which, albeit that the latter was obiter, constrained NML to accept that, for the purposes of section 3(1)(a), the action that NML was seeking to bring was a proceeding relating to the New York judgment and not to the transaction to which that judgment related. Before this Court Mr Sumption QC has challenged these authorities. Issue 1 turns on the question of whether they were rightly decided. The first of these cases is AIC Ltd v Federal Government of Nigeria [2003] EWHC 1357 (QB). AIC registered under the 1920 Act a judgment that they had obtained in Nigeria against the Nigerian Government in relation to what AIC alleged to be a commercial transaction. The Nigerian Government applied to have the registration set aside on the ground that registration was an adjudicative act and that Nigeria was protected by state immunity by reason of section 1 of the 1978 Act. AIC argued that their application to register the judgment was a proceeding relating to a commercial transaction within section 3(1)(a). Stanley Burnton J rejected this submission. His reasoning appears in the following short passage in para 24 of his judgment In my judgment, the proceedings resulting from an application to register a judgment under the 1920 Act relate not to the transaction or transactions underlying the original judgment but to that judgment. The issues in such proceedings are concerned essentially with the question whether the original judgment was regular or not. Stanley Burnton J held that this conclusion was supported by two matters. The first was that section 9 of the 1978 Act excludes immunity as respects proceedings which relate to [an] arbitration where the state has entered into a written arbitration agreement. As most arbitrations relate to commercial transactions, section 9 would be unnecessary if a claim in respect of an arbitration constituted a proceeding relating to the commercial transaction to which the arbitration related, for that would fall within 3(1)(a). The second matter was that it would be illogical to exempt from immunity the enforcement of a judgment in relation to a commercial transaction, but not the enforcement of a judgment in relation to any of the other matters in respect of which the 1978 Act provided exceptions to immunity under sections 3 to 11 of the Act. Stanley Burnton J remarked at para 30 that it was unsurprising that the defendants were immune from proceedings for the registration of the Nigerian judgment: the underlying principle of the State Immunity Act is that a state is not immune from the jurisdiction of the courts of the United Kingdom if it enters into commercial transactions or undertakes certain activities having some connection with this jurisdiction. Purely domestic activities of a foreign state are not the subject of any exception to immunity. Sections 3(1)(b), 4, 5, 6, 7, 8 and 11 all contain territorial qualifications to the exceptions to immunity to which they relate. Section 3(1)(a) does not include any such qualification, but even there the claimant wishing to bring proceedings must establish a basis for jurisdiction under CPR Part 6.20, normally under paragraphs (5) or (6), relating to contractual claims. Stanley Burnton J went on to observe that Lord Denning MR when advancing the restrictive doctrine of state immunity in Rahimtoola v Nizam of Hyderabad [1958] AC 379, 422, in Thai Europe Tapioca Service Ltd v Government of Pakistan, Directorate of Agricultural Supplies [1975] 1 WLR 1485, 1491 and in Trendtex Trading v Bank of Nigeria [1977] 1 QB 529, 558 had emphasised the significance not merely of the fact that the proceedings related to a commercial transaction, but that the transaction was connected with the United Kingdom. A similar issue to that considered by Stanley Burnton J arose in Svenska Petroleum Exploration AB v Government of the Republic of Lithuania (No 2) [2005] EWHC 2437 (Comm); [2006] 1 Lloyds Rep 181. There the relevant issue was whether a claim to enforce an arbitration award constituted proceedings relating to the transaction that gave rise to the award for the purposes of section 3(1)(a). Gloster J followed Stanley Burnton Js reasoning in holding that it did not. Her decision on the point was obiter, but it received reasoned approval, also obiter, when the case reached the Court of Appeal [2006] EWCA Civ 1529; [2007] QB 886. The court held at para 137: In our view the expression relating to is capable of bearing a broader or narrower meaning as the context requires. Section 3 is one of a group of sections dealing with the courts' adjudicative jurisdiction and it is natural, therefore, to interpret the phrase in that context as being directed to the subject matter of the proceedings themselves rather than the source of the legal relationship which has given rise to them. To construe section 3 in this way does not give rise to any conflict with section 9, which is concerned with arbitration as the parties' chosen means of resolving disputes rather than with the underlying transaction. In our view AIC Ltd v Federal Government of Nigeria was correctly decided and Gloster J was right to follow it in the present case. I agree with the Court of Appeal that the expression relating to is capable of bearing a broader or narrower meaning as the context requires. I disagree, however, with their conclusion as to the relevant context. Sections 1 to 11 of the 1978 Act are a comprehensive statement of the scope of state immunity under the law of the United Kingdom. Section 3(1)(a) makes it plain that the United Kingdom applies the restrictive doctrine of state immunity. The context in which the question of the meaning of relating to has arisen in this case is the issue of whether Argentina is or is not protected by state immunity against the proceedings that NML seek to bring. The object of bringing these proceedings is to enforce the New York judgment. Argentina has not suggested that (subject to the issue of immunity) these proceedings did not fall within CPR 6.20(9), which provides for service out of the jurisdiction if a claim is made to enforce any judgment or arbitral award. The only issue is whether Argentina is immune from the claim. Whether a state is immune from such a claim should, under the restrictive doctrine of state immunity, depend upon the nature of the underlying transaction that has given rise to the claim, not upon the nature of the process by which the claimant is seeking to enforce the claim. When considering whether a state is entitled to immunity in respect of a claim to enforce a foreign judgment the question does the claim constitute proceedings relating to a commercial transaction? can only be given a meaning that is sensible if relating to is given a broad, rather than a narrow, meaning. The proceedings relate both to the foreign judgment and to the transaction underlying that judgment, but in the context of restrictive state immunity it only makes sense to focus on the latter. The argument to the contrary accepted by Stanley Burnton J in AIC proceeds as follows. There is a distinction between the adjudicative and the executionary stages of these proceedings. First NML has to establish liability in this jurisdiction and then proceed to attempt to levy execution. The question is whether Argentina enjoys immunity from the adjudicative stage. That stage involves the conversion of the New York judgment into an English judgment. The proceedings to effect this conversion do not turn on the nature of the underlying transaction, but on whether the judgment in respect of that transaction was regularly obtained. Thus those proceedings do not relate to the underlying transaction. The fallacy in this argument is that the issue raised in the present proceedings is not the regularity of the New York judgment but whether Argentina is immune to an action on that judgment. Mr Howard QC put the matter more accurately at para 15 of his written case: It is important to bear in mind that the issue in these proceedings is not whether the English court had jurisdiction to entertain proceedings on the bonds. It is common ground that it did not. Rather, the issue is whether the present proceedings for the recognition and enforcement of the New York judgment are proceedings relating to that judgment, or are, instead, proceedings relating to a commercial transaction entered into by Argentina within the meaning of section 3(1)(a) on the grounds that the New York proceedings on which the New York judgment was based were proceedings relating to a commercial transaction entered into by Argentina (ie relating to the bonds). The issue that Mr Howard identifies has to be answered in order to determine whether, under English law, Argentina enjoys state immunity in relation to these proceedings. That question ought to be answered in the light of the restrictive doctrine of state immunity under international law. There is no principle of international law under which state A is immune from proceedings brought in state B in order to enforce a judgment given against it by the courts of state C, where state A did not enjoy immunity in respect of the proceedings that gave rise to that judgment. Under international law the question of whether Argentina enjoys immunity in these proceedings depends upon whether Argentinas liability arises out of acta jure imperii or acta jure gestionis. This involves consideration of the nature of the underlying transaction that gave rise to the New York judgment. The fact that NML is seeking to enforce that judgment in this jurisdiction by means of an action on the judgment does not bear on the question of immunity. This leads to the conclusion that the context in which the issue of the meaning of the words relating to arises in this case requires one to look behind the New York judgment at the underlying transaction. I must deal with the matters that Stanley Burnton J considered supported the narrower interpretation of relating to in AIC Ltd v Federal Government of Nigeria. The first is that section 9 would not be needed if section 3(1)(a) applies to proceedings to enforce an arbitration award. It is true, if relating to is given the wider meaning, that the circumstances covered by section 9 of the 1978 Act will often overlap with the circumstances covered by section 3(1)(a), but this will not In order to deal with the second matter to which Stanley Burnton J referred, always be the case. Not all arbitrations relate to commercial transactions. Furthermore, as Mr Sumption pointed out, section 9 relates not only to proceedings to enforce an award, but to all proceedings relating to an arbitration to which a state is party, and establishes jurisdiction of the English court in relation to all such proceedings. it is necessary to quote the point that he made in his own words at para 26: Furthermore, if Parliament had intended the State Immunity Act to include an exception from immunity relating to the registration of foreign judgments, it would have been illogical to limit it to commercial transactions entered into by the state (which is the consequence of AICs contentions), with no provision for the registration of foreign judgments where the exception to immunity before the original court was the equivalent of one of the other exceptions to immunity in that Act. In argument this point was, I believe, misunderstood. It was assumed that Stanley Burnton J was suggesting that if a foreign judgment relating to a commercial transaction were enforceable here, so logically should a foreign judgment dealing with one of the other matters specifically exempted from immunity under the 1978 Act. Thus, for instance, if in New York a judgment were given against Argentina in respect of personal injury caused to the claimant in the United Kingdom, one would expect that judgment to be enforceable here see section 5 of the 1978 Act. Mr Sumptions answer was that the judgment would in fact be enforceable here. An action on the New York judgment would be an action in respect of the personal injury caused in the United Kingdom. I believe that we all misunderstood Stanley Burnton Js point. It was not that it would be logical to be able to enforce here a New York judgment dealing with a personal injury caused in the United Kingdom, but a New York judgment where there was an exemption from immunity equivalent to that provided by section 5 ie a New York judgment in respect of a personal injury caused in New York. As to that point, I agree with Stanley Burnton J. It was illogical that the 1978 Act did not make provision for the enforcement in this country of such a judgment. This was because the draftsman of the 1978 Act did not deal generally with foreign judgments. That omission was made good by section 31 of the 1982 Act, as I shall show. The other matter that impressed Stanley Burnton J was the desirability of giving section 3(1)(a) an interpretation which would have the effect of requiring a link between the defendant states commercial transaction and the United Kingdom jurisdiction. He drew attention to the existence of such a link in the other exemptions to state immunity in the 1978 Act and to dicta of Lord Denning. It is true that the need for such a link receives support from dicta of Lord Denning in the judgments prior to 1978 in which he sought to introduce the restrictive doctrine of state immunity into English law. Thus in Thai Europe Tapioca Service v Government of Pakistan he said, [1975] 1 WLR 1485, 1491 1492: a foreign sovereign has no immunity when it enters into a commercial transaction with a trader here and a dispute arises which is properly within the territorial jurisdiction of our courtsBy this I do not mean merely that it can be brought within the rule for service out of the jurisdiction under RSC Ord, 11, r 1. I mean that the dispute should be concerned with property actually situate within the jurisdiction of our courts or with commercial transactions having a most close connection with England, such that, by the presence of parties or the nature of the dispute, it is more properly cognisable here than elsewhere. Fox on The Law of State Immunity at p 269 describes the academic criticism of what was alleged to be confusion by Lord Denning of the doctrine of state immunity with principles of extra territorial jurisdiction. When Parliament enacted the 1978 Act the exemption from immunity under section 3(1)(a) in respect of proceedings relating to a commercial transaction entered into by the state was not qualified by any requirement for a link between the transaction and the United Kingdom. This was not accidental. The United Kingdom ratified the ECSI on the same day that the 1978 Act came into force, and the Act was designed to give effect to the Convention. The original Bill followed closely the structure of the ECSI. Its scope was, however, significantly enlarged by amendment. The ECSI only applies as between contracting states. The 1978 Act was expanded so as to apply to all states. The ECSI does not give effect to the restrictive doctrine of sovereign immunity. Article 24 provides, however, that any state may declare that its courts shall be entitled to entertain proceedings against another Contracting State to the extent that its courts are entitled to entertain proceedings against States not party to the present Convention. Such declaration shall be without prejudice to the immunity from jurisdiction which foreign States enjoy in respect of acts performed in the exercise of sovereign authority (acta jure imperii). The United Kingdom made such a declaration at the time of ratification of the Convention. In Kuwait Airways Corporation v Iraqi Airways Corporation [1995] 1 WLR 1147, 1158 Lord Goff, with whom the rest of the Committee agreed, observed that the declaration: must have been intended to recognise the inapplicability in English law of the principle of sovereign immunity in cases in which the sovereign was not acting jure imperii, as had by then been recognised both in The Philippine Admiral [1977] AC 373 and in the Trendtex case [1977] QB 529, though the authoritative statement of the law by Lord Wilberforce in I Congreso del Partido [1983] 1 AC 244, 262, was not then available. At all events, the consequential exception included in section 3 of the Act of 1978 related to commercial transactions, though in section 3(3) the expression commercial transactions is very broadly defined. I can see no justification for giving section 3(1)(a) a narrow interpretation on the basis that it is desirable to restrict the circumstances in which it operates to those where the commercial transaction has a link with the United Kingdom. The restrictive doctrine of sovereign immunity does not restrict the exemption from immunity to commercial transactions that are in some way linked to the jurisdiction of the forum. For these reasons I have concluded that Stanley Burnton Js decision on this point in AIC and the Court of Appeals approval of it in Svenska was erroneous. By reason of section 3(1)(a) of the 1978 Act Argentina is not immune from the proceedings that NML have commenced in this jurisdiction. My conclusion accords with the decisions on the identical points of the Quebec Court of Appeal and the Supreme Court of Canada in Kuwait Airways Corporation v Republic of Iraq [2009] QCCA 728; [2010] SCC 40, [2010] 2 SCR 571. Mr Howard relied upon the approaches taken in Holland v Lampen Wolfe [2001] 1 WLR 1573, 1587, per Lord Millett, in Australian Competition and Consumer Commission v P T Garuda Indonesia Ltd (2010) 269 ALR 98, paras 105 137 and Bouzari et al v Attorney General of Canada et al (Bouzari v Iran (Islamic Republic)) [2004] 243 DLR (4th) 406, para 51. None of these cases concerned, however, the meaning of relating to in the context of an action on a foreign judgment. Such an action is sui generis and I did not find the authorities in question of assistance. For these reasons I differ from the Court of Appeal on the answer to the first issue. My conclusion is that the present proceedings are proceedings relating to a commercial transaction within the meaning of section 3 of the 1978 Act. The conclusion that I have reached resolves an issue that may not have occurred to the draftsman of the 1978 Act or to Parliament when enacting it. While section 9 of the Act makes express provision for arbitration awards, the Act makes no mention of proceedings in relation to foreign judgments against states, other than Part II, which deals with judgments against the United Kingdom in the courts of other states party to the ECSI; there have been, in fact, only 8 ratifications of that Convention. Prior to 1978 there had been no attempts to enforce in the United Kingdom foreign judgments against states. As I have explained the 1920 and the 1933 Acts gave little scope for registering foreign judgments against states and there is no recorded instance of an attempt to do this before 1978. In 1978 the Rules of Court made no provision for impleading a foreign sovereign, no doubt reflecting the previous absolute doctrine of state immunity. Section 12(1) of the 1978 Act made provision for service on a state and section 12(7) made it plain that such service required permission, which could only be granted in accordance with the rules of court governing service out of the jurisdiction. There was no provision in 1978 for service out of the jurisdiction of a claim to enforce a judgment. In these circumstances it is perhaps not surprising that the Act made no express provision in relation to proceedings to enforce foreign judgments, other than judgments against the United Kingdom covered by the ECSI. My decision on the first issue may make the other three issues academic, but they were fully argued and I propose to deal with them, not least because other members of the Court may not agree with me on the first issue. Issue 2: Is Argentina prevented from claiming state immunity in respect of the present proceedings by section 31 of the Civil Jurisdiction and Judgments Act 1982? The primary object of the 1982 Act was to give effect to the Brussels Convention of 1968. This Convention made provision for the reciprocal recognition and enforcement of judgments. The application of section 31 was not, however, restricted to the states who were parties to that Convention. The following are the most significant provisions of that section: (1) A judgment given by a court of an overseas country against a state other than the United Kingdom or the state to which that court belongs shall be recognised and enforced in the United Kingdom if and only if (a) it would be so recognised and enforced if it had not been given against a state; and (b) that court would have had jurisdiction in the matter if it had applied rules corresponding to those applicable to such matters in the United Kingdom in accordance with sections 2 to 11 of the State Immunity Act 1978. (4) Sections 12, 13 and 14(3) and (4) of the State Immunity Act 1978 (service of process and procedural privileges) shall apply to proceedings for the recognition or enforcement in the United Kingdom of a judgment given by the court of an overseas country (whether or not that judgment is within subsection (1) of this section) as they apply to other proceedings. It is NMLs case that section 31 provides comprehensively for the recognition and enforcement of the foreign judgments to which it applies. If this is correct the first issue ceases to be of relevance but for the possible impact of the fourth issue. My conclusion in relation to the first issue is, however, entirely in harmony with NMLs case on the second issue. Blair J found in favour of NML on this issue, but his decision was reversed by the Court of Appeal. If NMLs interpretation of section 31 is correct, it effected an addition to the categories of exemption from state immunity set out in the 1978 Act. Aikens LJ could not accept that an extension would have been effected in this way, without any express amendment to the 1978 Act. He interpreted section 31 as imposing an additional requirement to exemption from immunity where an action was brought to enforce a foreign judgment. The claimant would first have to show that section 31 of the 1982 Act was satisfied and then that the proceedings fell within one of the exemptions from immunity set out in sections 2 to 11 of the 1978 Act. I do not believe that Aikens LJs analysis is correct. Section 31 provides for recognition of a foreign judgment against a state where there exists a connection between the subject matter of that judgment and the forum state that is equivalent to one that would give rise to an exception to immunity in this jurisdiction. Thus, so far as foreign judgments are concerned, section 31 both reflects and, in part, replaces the exemptions from immunity contained in the 1978 Act. The words if, and only if in section 31 are important. Let me revert to the example that I gave in para 32 above. Section 31 provides for the recognition and enforcement of a New York judgment against a state in respect of a personal injury caused in New York. Conversely it would not permit recognition of a New York judgment against a state in respect of a personal injury caused by the state in the United Kingdom unless, as in reality would be likely to be the case, there was an alternative basis for recognition that satisfied section 31, such as submission to New York jurisdiction by the foreign state. In short, far from providing an additional hurdle that the claimant has to cross before enforcing a foreign judgment against a state, section 31 provides an alternative scheme for restricting state immunity in the case of foreign judgments. If Aikens LJ were correct, section 31 would be largely nugatory. Even though, according to the British view of state immunity, the state against which the foreign judgment was given would have had no entitlement to immunity, this country would be prevented from recognising or enforcing the foreign judgment unless the case also fell within one of the exceptions in the 1978 Act. If I am right on the first issue, one exception which would in practice be capable of application would be section 3(1)(a). None of the other exceptions would be likely to be capable of application, with the exception of section 2. Both the wording of section 31(1) and the scheme to which it gives effect appear to me to be clear. State immunity cannot be raised as a bar to the recognition and enforcement of a foreign judgment if, under the principles of international law recognised in this jurisdiction, the state against whom the judgment was given was not entitled to immunity in respect of the claim. There is, however, one complication. The complication is as to the effect of section 31(4) of the 1982 Act. The first problem that I have is reconciling the words in parenthesis in the subsection whether or not that judgment is within section 31(1) with the provision in section 31(1) that a foreign judgment shall be enforced if, and only if the requirements of the subsection are satisfied. The second is as to how to make sense of the provisions of section 14(3) in the context of proceedings to enforce a foreign judgment. Mr Howard QC for Argentina submitted that, with the aid of the application of a wet towel to the head, it was possible to determine that the provisions of section 14(3) were only consistent with Argentinas case on the construction of section 31(1). This argument was considered by Aikens LJ at paras 80 to 86 of his judgment. He concluded that the reference in section 31(4) of the 1982 Act to section 14(3), and so to 14(2) of the 1978 Act tends to support Argentinas case on the construction of section 31. I agree with this conclusion. It is not easy to reconcile the reference in section 14(3) to the submission by a separate entity to the jurisdiction in respect of proceedings in the case of which it is entitled to immunity with a scheme where any relevant submission to jurisdiction will be in a foreign forum. Sections 14(2) and 14(3) are part of a particularly complex part of the 1978 Act. It is not easy to make sense of all their provisions in the context of the 1978 Act itself, let alone section 31 of the 1982 Act. Their general object is, however, clear, which is to provide the same protection for a separate entity acting in the exercise of sovereign authority as is accorded to a state, including the protection against enforcement in section 13. I do not consider that it would be right to abandon an interpretation of section 31 which I find clear and compelling in order to attempt to give a coherent role to section 14(3) of the 1978 Act, as applied by section 31(4) of the later Act. Section 31(4) made section 12 of the 1978 Act applicable to proceedings for the recognition or enforcement of a foreign judgment and thereby made such proceedings subject to the rules of court governing service out of the jurisdiction. These rules were significantly amended in consequence of the passing of the 1982 Act by Rules of the Supreme Court (Amendment No 2) 1983 (SI 1983/1181). In particular the following new provision was introduced into RSC, Ord 11, r (1)(1): service of a writ out of the jurisdiction is permissible with the leave of the court if in the action begun by the writ (m) the claim is brought to enforce any judgment or arbitral award. It thus became possible to obtain leave to serve out of the jurisdiction proceedings in respect of an action on a foreign judgment in circumstances where this was not governed by any Convention. No question appears to have been raised as to the fact that this opened the door to enforcement proceedings in this country of overseas judgments given against states. For these reasons, in agreement with Blair J at para 26 of his judgment, and disagreement with Aikens LJ, I conclude that the effect of section 31 of the 1982 Act, together with the addition to RSC, Order 11 was accurately summarised by Dicey, Morris & Collins, The Conflict of Laws, 14th ed (2006), vol 1, para 14 095, as follows: The effect of [section 31] is that a foreign judgment against a state, other than the United Kingdom or the state to which the court which pronounced the judgment belongs, is to be recognised and enforced in the United Kingdom if [the judgment] would be so recognised and enforced if it had not been given against a state and the foreign court would have had jurisdiction in the matter if it had applied rules corresponding to those applicable to such matters in the United Kingdom in accordance with sections 2 to 11 of the [1978 Act]. A foreign judgment against a state will be capable of enforcement in England if both of the following conditions are fulfilled: first, that the foreign court would have had jurisdiction if it had applied the United Kingdom rules on sovereign immunity set out in sections 2 to 11 of the [1978 Act], the effect of which is that a state is not immune (inter alia) where it submits to the jurisdiction or where the proceedings relate to a commercial transaction; second, that under United Kingdom law the state is not immune from the processes of execution. Section 31(4) of the 1982 Act gives to judgments against foreign states the benefit of (inter alia) the immunities from execution contained in sections 13 and 14(3), (4) of the 1978 Act; their effect is that there can be no execution against sovereign property without the written consent of the foreign state unless the property is in use or intended for use for commercial purposes. Issue 3: Do the Bonds contain a submission to the jurisdiction of the English court in respect of these proceedings within the meaning of section 2 of the 1978 Act? Section 2(2) of the 1978 Act varied the law of what was capable of amounting to a submission by a state to the jurisdiction of the English court, as I have described it at paras 9 and 11 above, in that it provided that a state could submit to the jurisdiction by a written agreement prior to any dispute arising. The issue on this appeal is simply whether, on the true construction of the relevant provisions of the bonds, Argentina submitted to the jurisdiction of the English court. The bonds were governed by New York law and that law applies a narrow construction in favour of the state to the construction of a term which is alleged to waive state immunity. The relevant provisions of the bonds are set out in appendix 3 in two paragraphs. Blair J at paras 32 to 38 of his judgment concluded that the first paragraph contained a submission to the jurisdiction of the English court. Before Aikens LJ, NML relied on the second paragraph as supporting the conclusion that Blair J had drawn from the first. They were, however, unsuccessful, for Aikens LJ ruled that, even when the two paragraphs were read together, they did not constitute a submission to the jurisdiction of the English court. There was and is a degree of common ground. It is accepted that the judgment of the New York court is a related judgment, that is a judgment in related proceedings. The issue in relation to the provisions of the first paragraph is whether the following provision constitutes a submission to the jurisdiction of the English court: the related judgment shall be conclusive and binding upon [Argentina] and may be enforced in any specified court or in any other courts to the jurisdiction of which the republic is or may be subject (the other courts) by a suit upon such judgment Blair J considered at para 38 that this provision constituted a submission to the jurisdiction of the English court inasmuch as Argentina unambiguously agreed that a final judgment on the bonds in New York should be enforceable against Argentina in other courts in which it might be amenable to a suit on the judgment. Aikens LJ did not agree. He held at para 101 that the agreement that the New York judgment could be enforced in any courts to the jurisdiction of which Argentina is or may be subject by a suit upon such judgment was neither a waiver of jurisdiction nor a submission to the jurisdiction of the English court. I do not follow this reasoning. It seems to rob the provision of all effect. Blair J held that this agreement was more than a mere waiver, and I agree. If a state waives immunity it does no more than place itself on the same footing as any other person. A waiver of immunity does not confer jurisdiction where, in the case of another defendant, it would not exist. If, however, state immunity is the only bar to jurisdiction, an agreement to waive immunity is tantamount to a submission to the jurisdiction. In this case Argentina agreed that the New York judgment could be enforced by a suit upon the judgment in any court to the jurisdiction of which, absent immunity, Argentina would be subject. It was both an agreement to waive immunity and an express agreement that the New York judgment could be sued on in any country that, state immunity apart, would have jurisdiction. England is such a country, by reason of what, at the material time, was CPR 6.20(9). The provision in the first paragraph constituted a submission to the jurisdiction of the English courts. If consideration of the first paragraph alone left any doubt that the terms of the bonds included a submission to this jurisdiction, this would be dispelled by the second paragraph. Omitting immaterial words, this reads: To the extent that the republic shall be entitled, in any jurisdiction in which any other court is located in which any suit, action or proceeding may at any time be brought solely for the purpose of enforcing or executing any related judgment, to any immunity from suit, from the jurisdiction of any such court from execution of a judgment or from any other legal or judicial process or remedy, and to the extent that in any such jurisdiction there shall be attributed such an immunity, the republic has irrevocably agreed not to claim and has irrevocably waived such immunity to the fullest extent permitted by the laws of such jurisdiction solely for the purpose of enabling a holder of securities of this series to enforce or execute a related judgment. The words may at any time be brought which I have emphasised once again constitute Argentinas agreement that the waiver of immunity applies in respect of any country where, immunity apart, there is jurisdiction to bring a suit for the purposes of enforcing a judgment on the bonds. England is such a jurisdiction. Thus the second paragraph constitutes an independent submission to English jurisdiction. Both jointly and severally the two paragraphs amount to an agreement on the part of Argentina to submit to the jurisdiction of the English (no doubt among other) courts. This conclusion does not involve a departure from the narrow approach to construction required by the law of New York. It gives the provisions as to immunity in the bonds the only meaning that they can sensibly bear. Neither Aikens LJ nor Mr Howard suggested any alternative meaning for the words. The reality is that Argentina agreed that the bonds should bear words that provided for the widest possible submission to jurisdiction for the purposes of enforcement, short of conferring jurisdiction on any country whose domestic laws would not, absent any question of immunity, permit an action to enforce a New York judgment. No doubt those responsible were anxious to make the bonds as attractive as possible. Aikens LJ held at para 103 that because, in the present proceedings, NML had to bring an action in this jurisdiction to obtain recognition of the New York judgment, the proceedings here were not brought solely for the purpose of enforcing or executing any related judgment. This was to confuse the means with the ends. Obtaining recognition of the New York judgment is no more than an essential stepping stone to attempting to enforce it. No suggestion has been made that there is any other purpose in bringing these proceedings. For this reason I would reverse the decision of the Court of Appeal on the third issue also. Issue 4: Were NML entitled to raise at the inter partes hearing the two new points not relied on in the ex parte application to serve Argentina out of the jurisdiction? This issue has been described as the gateway issue. It involves consideration of the effect of what I shall describe as the rule in Parker v Schuller (1901) 17 TLR 299. A claimant has always been required by rules of court to include in the application for permission to serve proceedings out of the jurisdiction a statement of the ground for doing so. This requirement is currently to be found in CPR 6.37 (1)(a), which expressly requires an application for permission to serve a claim form out of the jurisdiction to set out which of the grounds for service out (now contained in paragraph 3.1 of Practice Direction B) is relied on. CPR 6.37 (3) provides: The court will not give permission unless satisfied that England and Wales is the proper place in which to bring the claim. In Parker v Schuller the plaintiffs obtained leave to serve a writ out of the jurisdiction under Order 11, r 1(e) of the RSC on the ground that the claim was for breach of a contract within the jurisdiction. The breach alleged was of a CIF contract, and the allegation was that the contract was broken by reason of a failure to deliver in Liverpool the goods that were the subject of the contract. Leave was given ex parte and upheld inter partes. In the Court of Appeal the plaintiffs conceded that the way that their claim had been advanced had been misconceived in that a CIF contract involves an obligation to deliver documents, not the goods to which the documents relate. The plaintiffs sought to persuade the Court of Appeal to uphold the leave given to serve out on the basis of substituting for the original claim a claim for failure to deliver the relevant documents in Liverpool. The Court of Appeal refused to permit this. At p 300 A L Smith MR is reported as saying: It was not until the case came into this Court that the plaintiff set up another cause of action. That could not be allowed. Romer LJ added: an application for leave to issue a writ for service out of the jurisdiction ought to be made with great care and looked at strictly. If a material representation upon which the leave was obtained in the first instance turned out to be unfounded, the plaintiff ought not to be allowed, when an application was made by the defendant to discharge the order for the issue of the writ and the service, to set up another and a distinct cause of action which was not before the judge upon the original application. It should be noted that in this case the plaintiffs sought to rely upon different facts and not merely upon a different cause of action. Parker v Schuller was soon lost from sight until it was applied with obvious reluctance by Sir Nicolas Browne Wilkinson V C in Re Jogia (A Bankrupt) [1988] 1 WLR 484. Since then it has been referred to or applied in a significant number of decisions at first instance or in the Court of Appeal. The most significant of these, for it expanded the scope of the original decision, was Metall und Rohstoff A G v Donaldson Lufkin & Jenrette Inc [1990] 1 QB 391. The facts of that case are complex, but it suffices to record the response, at p 436, of Slade LJ, giving the judgment of the court, to one of the submissions of counsel for the plaintiffs: One of Mr Wallers responses to this contention has been to refer us to the general observations made by Lord Denning MR in In re Vandervells Trusts (No 2) [1974] Ch 269, 231, as to the modern practice concerning pleadings: It is sufficient for the pleader to state the material facts. He need not state the legal result. If, for convenience, he does so, he is not bound by, or limited to, what he has stated. We respectfully agree with this statement as a general proposition. However, it was not made in the context of a pleading intended to be served out of the jurisdiction, to which we think rather different considerations apply. In our judgment, if the draftsman of a pleading intended to be served out of the jurisdiction under Ord 11, r 1(1)(f) (or indeed under any other sub paragraph) can be reasonably understood as presenting a particular head of claim on one specific legal basis only, the plaintiff cannot thereafter, for the purpose of justifying his application under Ord 11, r 1(1)(f), be permitted to contend that that head of claim can also be justified on another legal basis (unless, perhaps, the alternative basis has been specifically referred to in his affidavit evidence, which it was not in the present case). With this possible exception, if he specifically states in his pleading the legal result of what he has pleaded, he is in our judgment limited to what he had pleaded, for the purpose of an Order 11 application. To permit him to take a different course would be to encourage circumvention of the Order 11 procedure, which is designed to ensure that both the court is fully and clearly apprised as to the nature of the legal claim with which it is invited to deal on the ex parte application, and the defendant is likewise apprised as to the nature of the claim which he has to meet, if and when he seeks to discharge an order for service out of the jurisdiction. No rule of court requires a claimant, when seeking to serve a state out of the jurisdiction, to make clear, in the application for permission, the basis upon which it is alleged that the state does not enjoy immunity from suit. The Practice Note at CPR para 6.37.24, repeating what at the material time was 6.21.24, states that the claimant must show distinctly (a) why the prospective defendant is not absolutely immune from suit. It is Argentinas case that if the grounds relied upon in the application for permission for contending that the defendant state is not immune from suit prove to be unfounded, the rule in Parker v Schuller precludes the subsequent grant of permission to the claimant to rely on alternative valid grounds. Blair J did not accept this submission. He held that it involved an extension of the rule in Parker v Schuller, which he declined to make. He held at para 48 that where permission to serve out is given on the basis of a mistaken legal analysis of the absence of state immunity, but on a correct legal analysis the state is not in fact immune from the jurisdiction, the court has a discretion whether or not to set aside the order giving permission to serve out. He exercised that discretion in favour of NML because this involved no prejudice to Argentina, and to require NML to start proceedings afresh would be pointless and involve a waste of costs para 49. Aikens LJ reversed this decision. He held at para 61: the order of Steel J was made upon an incorrect basis of the court having jurisdiction in respect of the proposed claim against Argentina. Logically therefore, that order has to be set aside for want of jurisdiction, just as it must when a claimant has relied on an incorrect cause of action or an incorrect ground for permission to serve out of the jurisdiction. There can be no question of exercising a discretion to correct the error (in the absence of a new application on a different basis) because the lack of jurisdiction is fatal. He added at para 66 if NML incorrectly identified the basis on which it asserted that Argentina was subject to the adjudicative jurisdiction of the English court, then the basis for the exercise of the jurisdiction was incorrect. It is not a mere procedural error, because it goes to the very basis for invoking the jurisdiction against a sovereign state. It is, qualitatively speaking, in the same position as a failure to identify the correct cause of action or the correct ground for obtaining permission to serve out of the jurisdiction. Strictly, Aikens LJs decision involves an extension of the rule in Parker v Schuller, inasmuch as the requirement to identify the reason why a state is not immune when seeking permission to serve out is not found in the rules, but only in a Practice Note. But I think that Aikens LJ was correct to find that there was no difference in principle between the two situations. Mr Sumption sought to persuade the Court to distinguish Parker v Schuller, but at the same time he invited this Court to hold that there is no longer any justification for following that decision, if indeed there ever was. I believe that Mr Sumption is correct. Procedural rules should be the servant not the master of the rule of law. Lord Woolf, by his Reports on Access to Justice, brought about a sea change in the attitude of the court to such rules. This included the adoption of the overriding objective with which the new CPR begins. CPR 1.1 states that the overriding objective of the Rules is to enable the court to deal with cases justly, and that this involves saving expense and ensuring that cases are dealt with expeditiously. Where an application is made to amend a pleading the normal approach is to grant permission where to do so will cause no prejudice to the other party that cannot be dealt with by an appropriate order for costs. This accords with the overriding objective. Where all that a refusal of permission will achieve is additional cost and delay, the case for permitting the amendment is even stronger. I can see no reason in principle why similar considerations should not apply where an application is made for permission to serve process out of the jurisdiction. It is, of course, highly desirable that care should be taken before serving process on a person who is not within the jurisdiction. But if this is done on a false basis in circumstances where there is a valid basis for subjecting him to the jurisdiction, it is not obvious why it should be mandatory for the claimant to be required to start all over again rather than that the court should have a discretion as to the order that will best serve the overriding objective. Before Parker v Schuller there had been a relevant decision of a powerful Court of Appeal, of which A L Smith LJ was a member, which was not referred to and does not seem to have been cited in the later case. In Holland v Leslie [1894] 2 QB 450 leave to serve out of the jurisdiction had been granted in relation to a bill of exchange which had been erroneously described in the statement of claim indorsed on the writ. The Court of Appeal upheld an order giving leave to amend the writ. In doing so Lord Esher MR said this at p 451: Leave was given for the issue of the writ so indorsed, and service of notice of it out of the jurisdiction; such notice was duly served upon the defendant abroad; and the defendant has in due course appeared in this country. It is argued that, under these circumstances, the writ cannot be amended. Why not? The rules with regard to amendments appear in terms to apply to such a case. It is contended, nevertheless that there cannot be an amendment, because the writ was for service, and has been served, out of the jurisdiction. But the defendant has now appeared in this country; and I can see no reason why an amendment such as this should not be made, just as in the case of a writ served within the jurisdiction. We were pressed with the possibility that, if such a writ could be amended, it might be amended so as to introduce a cause of action in respect of which leave could not have been originally given for service out of the jurisdiction. That is not the present case. When that case arises, there may be good reason for refusing to allow the amendment. The other two members of the Court agreed. It is not easy to reconcile the approach in this decision with Parker v Schuller. Certainly it is good reason to confine the latter decision to its particular facts. There are a number of authorities which follow the approach of Lord Esher in suggesting that there is, in principle, no objection to amending a pleading which has been served out of the jurisdiction unless the effect will be to add a claim in respect of which leave could not, or would not, have been given to serve out: Waterhouse v Reid [1938] 1 KB 743, 747, 749; Beck v Value Capital Ltd (No 2) [1975] 1 WLR 6,15; Bastone & Firminger Ltd v Nasima Enterprises (Nigeria) Ltd [1996] CLC 1902, 1907; Donohue v Armco Inc [2001] UKHL 64; [2002] 1 All ER 749. Masri v Consolidated Contractors International (UK) Ltd (No 3) [2008] EWCA Civ 625; [2009] QB 503, para 74. While most of these cases involved proceedings which had progressed beyond the initial leave stage, I can see no reason for adopting a less generous approach to amendment at the earlier stage. While amending to add a cause of action is not the same as amending to substitute one, in either case the amendment involves subjecting the overseas party to a claim other than the one that he entered an appearance to meet, and similar principles should apply in each case. For all these reasons I would hold that the rule in Parker v Schuller should no longer be applied. The same approach should be taken to an application to amend a pleading that has been served out of the jurisdiction as is adopted to any other application to amend a pleading. If this conclusion is not shared by the majority, I would confine the rule in Parker v Schuller and not extend it to cover the different facts of the present case. There is no question here of relying on a different cause of action to that in respect of which leave was obtained to serve out. Nor is there any question of relying on facts that were not before David Steel J when he gave permission to serve Argentina out of the jurisdiction. Nor is there any failure to comply with a rule of court. It follows that I consider that the application to rely on alternative reasons why Argentina has no immunity was one to be determined by Blair J in the exercise of his discretion. There are no valid grounds for challenging his decision. It has not been suggested that Argentina will be any better off if NML is required to start proceedings afresh. To require them to do so would be a waste of time and money. Argentina agreed when the bonds were issued to a wide ranging waiver of immunity and submission to jurisdiction. The court had an independent obligation to satisfy itself that Argentina is not entitled to immunity. It had before it all the relevant material. Any initial mistake on the part of NML in identifying the correct reason why Argentina enjoys no immunity should not preclude NML from proceeding with its action. For these reasons, I would reverse the Court of Appeal on the fourth issue also. Issue 5: Is Argentina entitled to claim state immunity in respect of these proceedings? My answer is no. I would allow this appeal. LORD MANCE Lord Phillips has set out the facts and, in para 7 identified the five issues to which they give rise. I agree with his judgment on the second and third issues; that is, the effect of section 31 of the Civil Jurisdiction and Judgments Act 1978 and whether the bonds contain a submission to the English jurisdiction. I also agree that NML was entitled to raise these two new issues, not having relied upon them on the ex parte application for permission to serve the Republic of Argentina out of the jurisdiction. For reasons which Lord Collins has given, I do not think that the rule in Parker v Schuller (1901) 17 TLR 299 should be treated as extending to the present case, but I also agree that it should, in any event, no longer be followed. In the result, I also agree with Lord Phillips answer to the fifth issue, namely that the Republic is not entitled to claim state immunity in the present proceedings to enforce against it the judgment obtained in New York proceedings. But I do so by a different route to his primary route. This is because I am unable to agree with Lord Phillips on the first issue: the scope of section 3 of the State Immunity Act 1978. This represents his preferred basis for his answer to the fifth issue. I do not consider that the drafters of that Act or Parliament contemplated that section 3(1)(a) of the 1978 Act had in mind that it would or should apply to a foreign judgment against a foreign state. I understand Lord Phillips effectively to accept that (para 42), but, nonetheless, he and Lord Clarke treat the words as wide enough to cover such a judgment. I do not consider this to be justified. The pursuit of a cause of action without the benefit of a foreign judgment is one thing; a suit based on a foreign judgment given in respect of a cause of action is another. In the present case, the only issue arising happens to be the issue of state immunity with which the Supreme Court is concerned. But a claim on a cause of action commonly gives rise to quite different issues from those which arise from a claim based on a judgment given in respect of a cause of action. A claim on a cause of action normally involves establishing the facts constituting the cause of action. A suit based on a foreign judgment normally precludes re investigation of the facts and law thereby decided. But it not infrequently directs attention to quite different matters, such as the foreign courts competence in English eyes to give the judgment, public policy, fraud or the observance of natural justice in the obtaining of the judgment. These are matters discussed in rules 42 to 45 of Dicey, Morris & Collins, The Conflict of Laws 14th ed (2009) vol 1. A recent example of their potential relevance is, in a Privy Council context, AK Investment CJSC v Kyrgyz Mobil Tel Ltd [2011] UKPC 7, paras 48 and 109 to 121. The exceptions from immunity provided by sections 2 to 11 of the 1978 Act focus on specific conduct (submission) in the domestic UK proceedings or on specific transactions, contexts or interests in relation to which causes of action may arise. The recognition and enforcement of foreign judgments has long been recognised as a special area of private international law. Careful statutory attention was given to it in the Administration of Judgments Act 1920 (judgments of courts from other parts of Her Majestys dominions) and the Foreign Judgments (Reciprocal Enforcement) Act 1933 (judgments from certain other countries) in terms which (as Lord Phillips points out in paras 16 to 18) respect the existence of state immunity, as well as in Part II of the 1978 Act itself (judgments against the United Kingdom in other states party to the European Convention on State Immunity, now Regulation EC44/2001) in terms specifically addressing state immunity. In this context, it stretches language beyond the admissible to read proceedings relating to a commercial transaction as covering proceedings relating to a judgment which itself relates to a commercial transaction. The improbability of so extended a construction is underlined by the extreme care that the drafters of the Act took to define in s.3, in the widest terms, the concept of commercial transactions. I do not however agree with the view (expressed by Stanley Burnton J in AIC Ltd v The Federal Government of Nigeria [2003] EWHC 1357 (QB), paras 30 32) that the improbability can be supported on the basis of an implied limitation of section 3(1)(a) of the 1978 Act to commercial transactions with a domestic nexus. That view ignores the clear contrast between the wording of section 3(1)(a) and (b). If there were any doubt about the point (which there is not), it would be dispelled by the Parliamentary history. In the original bill, clause 3(1), the precursor to section 3(1)(a), was territorially limited to commercial activity by a State through an office, agency or establishment maintained by it for that purpose in the United Kingdom. Following strong criticism of this limitation by Lords Wilberforce and Denning (Hansard HL Deb 17 January 1978 vol 388 cc51 78), the Lord Chancellor moved an amendment inserting a clause in the form which became section 3(1), making expressly clear that this was to ensure that No qualifications, no jurisdictional links with the United Kingdom are to be required under sub clause (a) as distinct from sub clause (b): Hansard HL Deb 16 March 1978 vol 389 cc1491 540. Even before the enactment of section 34 of the Civil Jurisdiction and Judgments Act 1982, it is extremely doubtful whether the principle that a cause of action did not merge in a foreign judgment survived in English law: Carl Zeiss Stiftung v Rayner & Keeler Ltd [1967] 1 AC 853, 966 per Lord Wilberforce. This, to my mind, also makes unconvincing a reading of proceedings relating to (a) a commercial transaction which covers proceedings to enforce a judgment based on a cause of action arising from a commercial transaction. Where a state has agreed in writing to submit a dispute to arbitration, section 9 of the 1978 Act provides that the state is not immune as respects proceedings in United Kingdom courts which relate to the arbitration. This subsection addresses the consequences of submission, and leaves it to the court to determine whether such has occurred. The subsection also covers ancillary or interlocutory applications relating to arbitration, and is not limited to arbitration relating to commercial transactions. But very many arbitrations are commercial; and a major purpose of section 9 must on any view have been to lift state immunity in respect of the enforcement of arbitration awards against states, including foreign arbitration awards since the subsection is in general terms (see further on this last point para 90 below). Section 9 thus reversed the effect of the House of Lords reasoning in Duff Development Co Ltd v Government of Kelantan [1924] AC 797 on the concept of submission as understood in Kahan v Federation of Pakistan [1951] 2 KB 1003, although section 13(2) to (4) restricts the issue of process against state property (principally, to property for the time being in or intended for use for commercial purposes). I would endorse on these aspects what is said in paragraphs 117 to 122 of the judgment of the Court of Appeal handed down by Moore Bick LJ in Svenska Petroleum Exploration AB v Government of the Republic of Lithuania (No 2) [2007] QB 886. In case there were any room for doubt, paras 119 and 120 set out extracts from Hansard (HL Debs16 March 1978 vol 389 cc1516 1517 and 28 June 1978 c316), where the Lord Chancellor confirmed expressly the intention to remove state immunity in respect of the enforcement of arbitration awards. On NMLs case, there is, as a result, an unlikely dichotomy between the express treatment of arbitration in Part I of the 1978 Act and the suggested tacit, but nonetheless (if achieved) very important, removal of state immunity in respect of judgments relating to commercial transactions. At the time of the 1978 Act, the rules of court provided no basis for obtaining leave to serve out of the jurisdiction in respect of a claim to enforce any judgment or arbitral award. Such a basis was only introduced, as what was then RSC O.11 r.1(1)(m), from 1 January 1984. Section 12(7) of the 1978 Act maintained the need for leave to serve out of the jurisdiction where required by the rules of court. The lifting by section 9 of the 1978 Act of state immunity in respect of arbitration awards had obvious relevance in a case, like Duff Development Co Ltd v Government of Kelantan itself, where a foreign state had by an English arbitration agreement undertaken to submit to the English jurisdiction in respect of an application to enforce any award as a judgment. Indeed, as appears from the original bill and from the passages in Hansard quoted in the Svenska Petroleum Exploration case at paras 119 and 120, the clause in the original bill which became section 9 in the 1978 Act was confined to arbitration in or according to the law of the United Kingdom, and this phrase was only deleted in the House of Commons. In relation to foreign judgments there was, however, no equivalent problem to that raised by the Duff Development and Kahan cases, and the absence when the 1978 Act was passed of any basis for obtaining leave to serve out in respect of a foreign judgment or award also points, I think, against a construction stretching the wording of section 3(1) to cover suits to enforce such judgments. It is true that the 1978 Act adopted the restrictive theory of state immunity, but the question before the Supreme Court now is: how far and in respect of what transactions. It is true that it is now well recognised that no principle of international law renders state A immune from proceedings brought in state B to enforce a judgment given against it in state C. But the question is how far the drafters of the 1978 Act appreciated or covered the full possibilities allowed by international law, or, putting the same point in a different way, how far these were only covered a little later by section 31 of the 1982 Act. As Lord Phillips records at para 12, English common law was at the time itself in development and not finally settled, on the point that states were not immune in respect of commercial transactions, until the House of Lords decision in I Congreso del Partido [1983] AC 244, some years after the 1978 Act. The question whether a claim to enforce a judgment constitute[s] proceedings relating to a commercial transaction simply does not arise, unless one assumes that the wording of section 3(1)(a) of the 1978 Act covers proceedings on judgments. But that is the very issue which is before the Supreme Court. On NMLs case, which Lord Phillips favours, Parliament by section 3(1) of the 1978 Act achieved a partial and oddly imbalanced lifting of state immunity in respect of foreign judgments against foreign states. First, it omitted to introduce any analogue of a most obvious situation in which a foreign judgment might be rendered against a state. Under section 2, a state is not immune as respects proceedings in respect of which it has submitted to United Kingdom courts; but nothing in the 1978 Act lifts state immunity in the United Kingdom in respect of a foreign judgment on the basis of its submission in proceedings abroad. Secondly, the Act either fails to lift immunity or, if it lifts immunity at all, does so in a partial and illogical way, in situations paralleling those covered by sections 4 to 11 of the Act. To this, Mr Sumption QC responds on behalf of NML that, if relating to a commercial transaction can be read widely enough to cover relating to a foreign judgment relating to a commercial transaction, then phrases in other sub sections such as in respect of death or personal injury (section 5(a)) can be read widely enough to mean in respect of a foreign judgment in respect of death or personal injury caused by an act or omission in the United Kingdom. However, as Mr Mark Howard QC points out on behalf of the Republic, even if this persistent stretching of words were to be accepted, it does not remove the anomalies which flow from NMLs case. It does not, in particular, address the cases of a foreign judgment against a state where the contract of employment was not made in the United Kingdom or the work was not wholly or to be performed here (cf section 4); or in respect of death or personal injury or damage or loss of tangible property caused by an act or omission not occurring in the United Kingdom (cf section 5); or relating to immovable property not in the United Kingdom (cf section 6); or relating to any patent not registered in the United Kingdom (cf section 7); or relating to membership of any body corporate not incorporated or constituted under United Kingdom law (cf section 8). Lord Phillips acknowledges the illogicality (para 34). The territorial limits involved in these sections are understandable in proceedings actually relating to such contexts or interests. But they make no real sense as a basis for distinguishing between foreign judgments in respect of which state immunity is and is not said to exist. On NMLs analysis, section 3 of the 1978 Act therefore gave a very partial and haphazard mandate for enforcement of foreign judgments, while section 31 of the 1982 Act was necessary, though only necessary, to restore the comprehensive harmony which in that respect the 1978 Act had singularly failed to achieve. There is however no trace of that in the 1982 Act itself. On the contrary, section 31(1)(b) refers to sections 2 to 11 of the 1978 Act without discrimination and evidently without recognising that (on NMLs analysis) the legislator must, by reason of the words if and only if, have been replacing a partial scheme of enforcement of foreign judgments under the 1978 Act with a new scheme provided by section 31(1) of the 1982 Act. Further, section 31(1) makes clear that the scheme it introduces is to apply to judgments by a foreign court against a state other than the United Kingdom or the state to which that court belongs. Mr Sumption submits that this would, in consequence of the words if and only if, supersede section 3(1) as regards judgments against the state to which that court belongs. If that were so, then the 1982 Act would for some unexplained reason be cutting down what is, on Mr Sumptions case, the width of section 3(1). But I do not think that Mr Sumptions submission is correct. All that the words if and only if achieve is the exclusion of judgments against the state to which that court belongs from the scheme of section 31. They do not overrule or affect any provision of section 3(1) which, on NMLs case, already covered such judgments. The patchwork provision of the two statutes, which arises on NMLs case, and which Lord Phillips and Lord Clarke are minded to accept, becomes even less probable as a matter of imputed Parliamentary intention. I see no basis for giving the phrase relating to in section 3(1)(a) what is described as an updated meaning. What constitutes a family or cruel or inhuman treatment or a true and fair view (to take three well known examples) may vary, and has varied, with social or professional attitudes from time to time. But a connecting factor like relating to is most unlikely to have this elasticity, and it is implausible to suggest that Parliament intended that its meaning or application in or under section 3(1)(a) could, over time, expand to remove immunity in respect of judgments. This would amount to altering the scope of the Act in a way not falling within the principles originally envisaged, contrary to the rule stated in Bennion on Statutory Interpretation (5th ed) section 288, para (6). Further, even if (contrary to my view) any expansion were theoretically possible, no legal, social or other developments have been identified justifying it in this case. On the contrary: the enactment of section 31(1) of the 1982 Act argues strongly against any such expansion of the ambit of relating to in section 3(1)(a) of the 1978 Act; and the only effect of expanding the scope of section 3(1)(a) would be partially to create an overlap with that section and/or the illogical patch work effect referred to in preceding paragraphs. It is for these reasons that I am unable to follow Lord Phillips and Lord Clarkes answer to the first issue. In my view, section 31 is the means by which the United Kingdom legislator achieved, for the first time, a comprehensive and coherent treatment of the issue of state immunity in respect of foreign judgments, and it enables the enforcement of the New York judgment in this case. But the bonds also contain a comprehensive submission to the English jurisdiction in respect of the enforcement of the New York judgment, and this leads to the same result. I would, on this basis, therefore allow the appeal. LORD COLLINS (with whom Lord Walker agrees) I agree with Lord Phillips that the appeal should be allowed, but, in agreement with Lord Mance, I would rest my conclusion on section 31 of the 1982 Act and on Argentinas submission and waiver of immunity, and not on section 3 of the 1978 Act. Although I agree with Lord Phillips observations on the so called rule in Parker v Schuller (1901) 17 TLR 299, in my judgment the point does not, and did not, arise in these proceedings because there has never been a rule (as distinct from good practice) that the grounds for absence of immunity must be set out once and for all at the stage when an application for permission to serve the foreign State is made; and there is no analogy between the rules for applications for service out of the jurisdiction in general and good practice in relation to service on foreign States. Introduction The first widespread defaults on sovereign debt occurred in the early 19th century. The newly independent former Spanish American colonies besieged London for loans in the years 1822 1825 and the proceeds were quickly expended on armaments, or otherwise wastefully dissipated, with little regard to the quite different purposes for which, in many instances, the loan had been ostensibly raised: see Borchard, State Insolvency and Foreign Bondholders, Vol 1 (1951), pp xx xxi, quoting Wynne (1935) 42 J Can. Bankers Assn 472. The Province of Buenos Aires defaulted in 1827 on loans raised for it by Baring Brothers: see Ferns, Britain and Argentina in the Nineteenth Century (1960), pp 141 et seq; Marichal, A Century of Debt Crises in Latin America (1989), p 59. National courts of the debtor state and of the creditors were unable to secure the rights of unpaid bondholders. In Twycross v Dreyfus (1877) LR 5 Ch D 605, a case concerning Peruvian bonds, Sir George Jessel MR said (at 616): [T]he municipal law of this country does not enable the tribunals of this country to exercise any jurisdiction over foreign governments as such. Nor, so far as I am aware, is there any international tribunal which exercises any such jurisdiction. The result, therefore, is that these so called bonds amount to nothing more than engagements of honour, binding, so far as engagements of honour can bind, the government which issues them, but are not contracts enforceable before the ordinary tribunals of any foreign government without the consent of the government of that country. By the beginning of the 20th century only a few countries (including Belgium and Italy) had adopted a restrictive theory of sovereign immunity, but only with regard to jurisdiction, and not to execution: see Borchard, Diplomatic Protection of Citizens Abroad (1915), p 307. The only remedy for countries whose citizens were affected by sovereign default was force, and in response to the blockade of Venezuelan ports by the United States, Italy, Germany and Britain, the Minister of Foreign Affairs of Argentina, Dr Drago, enunciated in 1902 what became known as the Drago doctrine, namely that the public debt [of an American nation] cannot occasion armed intervention by a European power: Hackworth, Digest of International Law, vol 5 (1927), p 625. Venezuelan bond claims were subsequently submitted to mixed claims commissions: Borchard, op cit, pp 322 325. But law and practice was revolutionised in the second half of the 20th century by the widespread (but by no means uniform) adoption of the restrictive theory of sovereign immunity, and the modern law now depends on the application of the restrictive theory of immunity and on the almost invariable use in international loan agreements and bond issues since the 1970s of clauses providing for submission to national jurisdiction and waivers of immunity. NML is one of several bondholders who have obtained judgments in the New York Federal District Court against Argentina on the bonds: see also Lightwater Corp v Republic of Argentina, 2003 WL 1878420 (SDNY 2003); NW Global Strategy v Republic of Argentina, 2011 WL 1237538 (SDNY 2011). The idea behind vulture funds is not new. Borchard State Insolvency and Foreign Bondholders, Vol 1 (1951), pp.xx xxi, quotes Wynne, op cit, in relation to the early South American defaults: Meanwhile, however, the bonds had largely passed out of the hands of the original purchasers into the possession of speculators who bought them up at next to nothing and, in due time, reaped a handsome profit. So also in the famous Greek bond cases in England in the 1960s and 1970s, the bondholders were speculators who had bought cheaply bonds issued by the Greek Government in the 1920s and unpaid since 1941: see eg National Bank of Greece SA v Westminster Bank Executor and Trustee Co (Channel Islands) Ltd [1971] AC 945; UGS Finance Ltd v National Mortgage Bank of Greece [1964] 1 Lloyds Rep 446. So called vulture funds have given rise to at least two problems. First, the ability of investors to acquire defaulted debt can be abused: see, eg, the Barcelona Traction case (Belgium v Spain), 1970 ICJ Rep 3; Highberry Ltd v Colt Telecom Group plc (No 1) [2002] EWHC 2503 (Ch), [2003] 1 BCLC 290; (No 2) [2002] EWHC 2815 (Ch), [2003] BPIR 324. Second, particular attention has focussed on the ability of vulture funds to thwart loan re structuring by highly indebted poor countries: see Lumina, Report to the UN Human Rights Council on the effects of foreign debt and other related international financial obligations of States on the full enjoyment of all human rights, particularly economic, social, and cultural rights, April 29, 2010 (A/HRC/14/21); Donegal International Ltd v Republic of Zambia [2007] EWHC 197 (Comm), [2007] 1 Lloyds Rep 397; and the Debt Relief (Developing Countries) Act 2010. Argentina declared a sovereign debt moratorium in December 2001 and has restructured much of its debt through debt exchange, but that has no effect on these proceedings because (a) there is no international insolvency regime for States; and (b) the bonds are governed by New York law and are unaffected by any Argentine moratorium. Issue 1: proceedings relating to a commercial transaction and the State Immunity Act 1978, section 3 The proceedings in the present appeal are proceedings at common law for the enforcement of the New York judgment. None of the statutory methods of enforcement is available for judgments rendered in the United States. On this part of the appeal the only relevant question is whether the proceedings in England at common law on the New York judgment are proceedings relating to a commercial transaction entered into by the State, where commercial transaction includes any loan or other transaction for the provision of finance: section 3(1)(a); section 3(3)(b). Whether the New York proceedings were themselves proceedings relating to a commercial transaction is not the relevant question. The question on this issue is whether the expression relating to is to be given the meaning ascribed to it (in proceedings different from the present ones) by Stanley Burnton J in AIC Ltd v Federal Government of Nigeria [2003] EWHC 1357 (QB) (registration of a Nigerian judgment under the Administration of Justice Act 1920) and by Gloster J and the Court of Appeal in Svenska Petroleum Exploration AB v Government of the Republic of Lithuania (No 2) [2005] EWHC 2437 (Comm), [2006] 1 Lloyds Rep 181, [2006] EWCA Civ 1529; [2007] QB 886 (enforcement of Danish arbitral award under Arbitration Act 1996, section 101). The question, to what do the proceedings for enforcement of the New York judgment relate, can be given a narrow or a wide answer. The narrow meaning would result in a conclusion that they relate to the enforceability of the New York judgment, which would involve such matters (not likely to be the subject of dispute in a case such as the present one) as whether the New York court had in personam jurisdiction (here there was a clear submission to the jurisdiction of the New York courts) or whether enforcement could be resisted on any of the traditional grounds (such as want of natural justice, fraud, or public policy), none of which has any arguable application. The wider meaning would give effect to the practical reality that the proceedings relate to liability under the bonds, the issue of which was plainly a commercial transaction for the purposes of section 3. My conclusion that the narrower meaning is the one which must be ascribed to Parliament rests on considerations somewhat different from the reasons articulated by Stanley Burnton J in AIC. I do not consider that a potential overlap with the arbitration provision in section 9 supports a narrow interpretation of section 3. The overlap would not be complete, and it would be artificial and over technical to use the potential overlap to cut down the scope of section 3. Nor do I consider that the narrow construction is supported by an argument that section 3(1)(a) should be interpreted so as to require a link with the territorial jurisdiction of the United Kingdom. No such link is required in the 1978 Act in relation to the head of commercial transactions covered by section 3(3)(b). Both the Quebec Court of Appeal and the Supreme Court of Canada in Kuwait Airways Corporation v Republic of Iraq [2009] QCCA 728; revd [2010] SCC 40, [2010] 2 SCR 571, although reaching different conclusions on the facts, decided that, in an action to enforce an English judgment, the question whether the proceedings in Canada relate[d] to any commercial activity of the foreign state (State Immunity Act RSC 1985, c 18, section 5) depended on the nature of the underlying proceedings in England. But neither judgment articulates the reasons for that conclusion, and they are therefore unhelpful on this appeal. What is not likely to be in doubt is that at the time the 1978 Act was enacted it would not have been envisaged that section 3 would have applied to the enforcement at common law of a foreign judgment against a foreign State based on a commercial transaction. That was because until RSC Order 11, r 1(1)(m) (now CPR PD6B, para 3.1(10)) was enacted in 1982 (and came into force on January 1, 1984) a defendant outside the jurisdiction could not be served in an action on a foreign judgment even if there were assets within the jurisdiction to satisfy the judgment (and consequently no freezing injunction could be made in relation to those assets: Perry v Zissis [1977] 1 Lloyds Rep 607). Nor is it likely that section 31 of the Civil Jurisdiction and Judgments Act 1982 would have been enacted in the form that it was enacted if Parliament had thought that the 1978 Act already applied to a class of foreign judgments. I accept that neither of those points is conclusive as to the meaning of section 3. There is no impediment in public international law to the institution of proceedings to enforce a foreign judgment based on commercial transactions. It is now possible to serve a foreign sovereign out of the jurisdiction in such proceedings, and the 1978 Act could be construed in the light of present circumstances: Fitzpatrick v Sterling Housing Association Ltd [2001] 1 AC 27, 49; Yemshaw v Hounslow London Borough Council (Secretary of State for Communities and Local Government intervening) [2011] UKSC 3, [2011] 1 WLR 433, paras 5 27. But for section 31 of the 1982 Act, and the almost invariable employment of wide express waivers of immunity, it might have been desirable as a matter of policy to give section 3 the wider meaning. There would, however, be no principled basis on which to found such a conclusion. The proceedings in England relate to the New York judgment and not to the debt obligations on which the New York proceedings were based. Issue 2: section 31 of the Civil Jurisdiction and Judgments Act 1982 This is a very short point. If the Court of Appeal was right to accept Argentinas argument, the section has such limited effect that it would not have been worth enacting, and certainly would not have justified the attention that it was given in the Parliamentary process: see Fox (2009) 125 LQR 544, at 547 548 for some of the history. The natural meaning of section 31(1) is that it requires recognition and enforcement of a foreign judgment against a foreign State (other than the United Kingdom or the State in which the foreign proceedings were brought) if (a) the normal conditions for recognition and enforcement of judgments are fulfilled, and (b) mutatis mutandis the foreign State would not have been immune if the foreign proceedings had been brought in the United Kingdom. That meaning is the one which text writers have propounded since the section was enacted: Collins, Civil Jurisdiction and Judgments Act 1982 (1983), p 140; Dicey & Morris, Conflict of Laws 11th ed (1987), pp 454 455 (now Dicey, Morris & Collins, 14th ed (2006), para 14 095); Cheshire, North & Fawcett, Private International Law, 14th ed (2008), pp 588 589. It is true that there are some drafting infelicities, including the reference to such matters in section 31(1)(b), and the words in parentheses in section 31(4), but they give no support to the Court of Appeals surprising conclusion that, in the absence of an express amendment to the 1978 Act, section 31 does not affect the law of immunity, and therefore has no discernible purpose. Issue 3: submission As late as 1957 Delaume, Jurisdiction of Courts and International Loans (1957) 6 Am J Comp L 189, 203, said there was no consensus of opinion as to whether contractual waivers of immunities are valid and binding upon a foreign sovereign or as to what acts are necessary to constitute such a waiver. In 1965 the Restatement Second, Foreign Relations Law of the United States, section 70(1) stated that a foreign State might waive its immunity by agreement with a private party, including an agreement made before the institution of proceedings. The Reporters Note accepted that there had been no judicial decision to this effect, but that it was believed that United States courts would apply a waiver rule. As indicated above (para 103), it was only in the 1970s that it became almost invariable practice for syndicated bank loans to States and international bonds issued by States to contain wide submissions to the jurisdiction of national courts and express waivers of immunity. The position in English law prior to the enactment of the 1978 Act was that it was thought that a prior contractual submission to the jurisdiction of the court was ineffective to amount to a waiver of immunity and that nothing less than an appearance in the face of the court would suffice: Duff Development Co v Government of Kelantan [1924] AC 797 and Kahan v Federation of Pakistan [1951] 2 KB 200, relying on Mighell v Sultan of Johore [1894] 1 QB 149, 159, 160. In Mighell v Sultan of Johore [1894] 1 QB 149 the argument for the unfortunate Miss Mighell was that the Sultan had waived his immunity by coming to England as Albert Baker and making contracts as a private individual. That argument was rejected. Submission had to be when the Court is about or is being asked to exercise jurisdiction over him and not any previous time (Lord Esher MR at 159); the only mode in which a sovereign can submit to the jurisdiction is by a submission in the face of the court, as, for example, by appearance to a writ (Lopes LJ at 161); or unless upon being sued he actively elects to waive his privilege and to submit to the jurisdiction (Kay LJ at 164). In Duff Development Co Ltd v Government of Kelantan [1924] AC 797 the question was whether the Government had waived immunity in relation to an application to the court to enforce an arbitration award by agreeing to the arbitration clause in the deed of concession and by applying to the court to set aside the award. The effect of the decision was that a submission to arbitration was not a submission to enforcement. Only Viscount Cave and Lord Sumner relied on the approach in Mighell. Cf Lord Dunedin at 821. In Kahan v Federation of Pakistan [1951] 2 KB 1003, in a contract for the supply of Sherman tanks Pakistan agreed to submit for the purposes of this agreement to the jurisdiction of the English courts and agreed a method of service within the jurisdiction. Relying on three of the speeches in Duff Development and the decision in Mighell, the Court of Appeal held that there was no submission in the absence of an undertaking given to the court at the time when the other party asked the court to exercise jurisdiction over it. As Dr F A Mann said, the proposition that a waiver or submission had to be declared in the face of the court was a peculiar (and unjustifiable) rule of English law: (1991) 107 LQR 362, at 364. In a classic article (Cohn, Waiver of Immunity (1958) 34 BYIL 260) Dr E J Cohn showed that from the 19th century civil law countries had accepted that sovereign immunity could be waived by a contractual provision, and that the speeches in Duff Development on the point were obiter (and did not constitute a majority) and that both Duff Development and Kahan v Federation of Pakistan had overlooked the fact that submission in the face of the court was not the only form of valid submission since the introduction in 1920 in RSC Ord 11, r 2A (reversing the effect of British Wagon Co Ltd v Gray [1896] 1 QB 35) of a rule that the English court would have jurisdiction to entertain an action where there was a contractual submission. In particular, in Duff Development Lord Sumner had overlooked the fact that British Wagon Co v Gray was no longer good law. The principle enunciated in Kahan v Federation of Pakistan was reversed by section 2(2) of the 1978 Act, which provided that a State could submit to the jurisdiction by a prior written agreement. This is consistent with international practice: United States Foreign Sovereign Immunities Act 1976, section 1605(a)(1) (State not immune if it has waived its immunity either explicitly or by implication, notwithstanding any withdrawal of the waiver . ); European Convention on State Immunity 1972, Art 2(b) (no immunity if it has undertaken to submit to the jurisdiction of [the] court by an express term contained in a contract in writing); UN Convention on Jurisdictional Immunities of States and their Property 2004, Art 7(1)(b) (no immunity if the State has expressly consented to the exercise of jurisdiction by the court with regard to the matter or case in a written contract). The Waiver and Jurisdiction Clause in the bonds provided that a related judgment: shall be conclusive and binding upon [Argentina] and may be enforced in any Specified Court or in any other courts to the jurisdiction of which the Republic is or may be subject (the Other Courts) by a suit upon such judgment. The New York judgment was on any view a related judgment. Argentina agreed that it could be enforced in any other courts to the jurisdiction of which the Republic is or may be subject. This was the clearest possible waiver of immunity because Argentina was or might be subject to the jurisdiction of the English court since the English court had a discretion to exercise jurisdiction in an action on the New York judgment by virtue of CPR 6.20(9) (now CPR PD6B, para 3.1(10)). The waiver is confirmed by the second paragraph of the clause, which provides: To the extent that the Republic shall be entitled, in any jurisdictionin which anyOther Court is located in which any suit, action or proceeding may at any time be brought solely for the purpose of enforcing or executing any Related Judgment, to any immunity from suit, from the jurisdiction of any such courtfrom execution of a judgment or from any other legal or judicial process or remedy, and to the extent that in any such jurisdiction there shall be attributed such an immunity, the Republic has hereby irrevocably agreed not to claim and has irrevocably waived such immunity to the fullest extent permitted by the laws of such jurisdiction solely for the purpose of enabling the Fiscal Agent or a holder of Securities of this Series to enforce or execute a Related Judgment. Again England is a jurisdiction in which an action may be brought to enforce the New York judgment and Argentina agreed not to claim any immunity in that jurisdiction. The contrary conclusion of the Court of Appeal is not readily explicable. Issue 4: The Parker v Schuller point As I have said, in my judgment the point in Parker v Schuller (1901) 17 TLR 299 does not arise. As Lord Walker said in Roberts v Gill & Co [2010] UKSC 22, [2011] 1 AC 240, at [94], the law of procedure and practice has traditionally been regarded as the province of the Court of Appeal rather than the House of Lords (or, now, the Supreme Court), and this court should be especially hesitant to decide points of procedure in appeals in which they do not even arise. The reason why the point does not arise is as follows. The current CPR 6.37(1)(a) provides that an application for permission to serve a claim form out of the jurisdiction must set out which ground in paragraph 3.1 of Practice Direction 6B is relied on. There was substantially the same rule under the RSC, where Order 11, r 4(1) provided that an application for the grant of leave to serve a writ out of the jurisdiction had to be supported by an affidavit stating the grounds on which the application is made. If there is such a rule as the so called rule in Parker v Schuller (1901) 17 TLR 299 it is a rule that the court must decide an application for permission to serve out of the jurisdiction on the basis of the cause or causes of action expressly mentioned in the pleadings and the claimant will not be allowed to rely on an alternative cause of action which he seeks to spell out of the facts pleaded if it has not been mentioned: see now Civil Procedure 2011, vol 1, para 6.37.15.1 (or under the RSC, Supreme Court Practice 1999, para 11/1/10). But there is no analogous rule relating to the exceptions to State immunity. There is simply a note in Civil Procedure, vol 1 (now para 6.37.24, and formerly, eg at Supreme Court Practice 1999, Vol 1, para 11/1/17) indicating that the practitioner should note that an application for permission to serve the foreign State should show distinctly why the prospective defendant is not absolutely immune from suit. This is neither a rule nor a Practice Direction nor has it ever been. There is no analogy between the specific rule for service out of the jurisdiction and the good practice note and therefore no basis for the conclusion of the Court of Appeal that because the basis for absence of immunity was incorrectly identified the English court had no jurisdiction. That is why the point simply does not arise. If it had arisen, I would have agreed with the general approach of Lord Phillips. It is to be noted in particular that in Parker v Schuller itself Romer LJ (at 300) based his decision on the ground very close to that of non disclosure. He said an application for leave to issue a writ for service out of the jurisdiction ought to be made with great care and looked at strictly. If a material representation upon which the leave was obtained in the first instance turned out to be unfounded, the plaintiff ought not to be allowed, when an application was made by the defendant to discharge the order for the issue of the writ and the service, to set up another and a distinct cause of action which was not before the judge on the original application. It was on the representation that the defendants were bound to deliver the goods in England that leave had originally been granted. In cases of non disclosure, the court has a discretion (a) to set aside the order for service and require a fresh application; or (b) to treat the claim form as validly served, and deal with the non disclosure if necessary by a costs order: Macaulay (Tweeds) Ltd v Independent Harris Tweed Producers Ltd [1961] RPC 184; Kuwait Oil Co (KSC) v Idemitsu Tankers KK, The Hida Maru [1981] 2 Lloyds Rep 510. By analogy, where the so called rule in Parker v Schuller (1901) 17 TLR 299 might apply in a case where the ground for service out has been incorrectly identified, the court would also have power to grant permission to serve out on a fresh basis and dispense with re service. LORD CLARKE I agree that the appeal should be allowed for the reasons given by Lord Phillips. I add a short judgment of my own because of the difference of opinion between Lord Phillips and Lord Mance, Lord Collins and Lord Walker on the first issue. As to the fourth issue, I agree with Lord Collins that the point does not arise but, if it does, like him I agree with Lord Phillips observations on the so called rule in Parker v Schuller (1901) 17 TLR 299. The question raised by the first issue is whether these proceedings are proceedings relating to a commercial transaction entered into by the state of Argentina within the meaning of section 3(1)(a) of the State Immunity Act 1978 (the 1978 Act). The Court of Appeal held that they are not. As Lord Phillips observes at para 20, it is common ground that the New York proceedings in which NML obtained judgment against Argentina were such proceedings. The contrary would have been unarguable because they were brought in order to establish Argentinas liability under the bonds described by Lord Phillips. NMLs argument is that, if the New York proceedings related to a commercial transaction, it is but a short step to hold that these proceedings, which were brought in order to enforce a judgment in respect of a liability under the bonds, are also proceedings relating to a commercial transaction. I agree. As ever, all depends upon the context, but it seems to me to follow naturally from the conclusion that the New York proceedings were such proceedings that the same is true of these. Both have the same purpose, namely to enforce Argentinas liabilities under commercial bonds. There is nothing in the language of section 3(1) to lead to any other conclusion. The Court of Appeal reached its conclusion in the light of the decision of Stanley Burnton J in AIC Ltd v Federal Government of Nigeria [2003] EWHC 1357 (QB) and in the light of dicta in the Court of Appeal in Svenska Petroleum Exploration AB v Government of the Republic of Lithuania (No 2) [2006] EWCA Civ 1529, [2007] QB 886. Lord Phillips has set out the relevant parts of the judgments in those cases at paras 21 and 23 and para 25 respectively. In Svenska the judgment of the court was given by Moore Bick LJ. Scott Baker LJ and I were the other two members of the court. I have now reached the conclusion that the decision in AIC and the dicta in para 137 of Svenska (to which I was a party) were wrong, essentially for the reasons given by Lord Phillips at paras 26 to 41 which I adopt without repeating. Lord Mance has reached a different view. He notes in para 84 that in para 42 Lord Phillips recognises that the conclusion that he has reached may not have occurred to the draftsman of the 1978 Act or to Parliament. Lord Mance concludes that Lord Phillips approach and conclusions are not justified. He does so principally by looking at circumstances as they existed at the time the 1978 Act was enacted. However, in my opinion, that is to approach the construction of section 3(1)(a) of the Act too narrowly. It is stated in Bennion on Statutory Interpretation, 5th ed (2008) at section 288 that, unless a contrary intention appears, an enactment is intended to develop in meaning with developing circumstances and should be given what Bennion calls an updating construction to allow for changes since the Act was initially framed. Bennion distinguishes that case, which he calls the usual case, from the comparatively rare case of the Act which is intended to be of unchanging effect. The commentary to section 288 states that the court must, in interpreting an Act, make allowances for the fact that the surrounding legal conditions prevailing on the date of its passing have changed. That approach seems to me to be entirely consistent with that of Lady Hale in Yemshaw v Hounslow London Borough Council (Secretary of State for Communiteis and Local Government intervening) [2011] UKSC 3, [2011] 1 WLR 433, paras 25 to 28, where she was considering whether words such as violence in a statute could be given an updated meaning. She concluded that the question was whether an updated meaning was consistent with the statutory purpose. See also Fitzpatrick v Sterling Housing Association Ltd [2001] 1 AC 27, per Lord Clyde at 49 50, where he said in the context of the meaning of family in the Rent Acts: The judges in Helby vs Rafferty [1979] 1 WLR 13 had difficulty in accepting that a word which had been repeated throughout the successive Rent Acts could change its meaning from time to time. But as a matter of construction I see no grounds for treating the provisions with which we are concerned as being in the relatively rare category of cases where Parliament intended the language to be fixed at the time when the original Act was passed. The rule of contemporary exposition should be applied only in relation to very old statutes (Governors of Campbell College, Belfast v Commissioner Northern Ireland Valuation [1964] 2 All ER 705). The general presumption is that an updating construction is to be applied (Bennion on Statutory Interpretation, 3rd ed p 686). Such an approach was recently adopted by this House in Reg v Ireland [1988] AC 147. In my opinion it is appropriate and consistent with the statutory purpose of the 1978 Act to give it an updated meaning. The question is whether, viewed at the time the question arises, particular proceedings for the enforcement of a particular foreign judgment are proceedings relating to a commercial transaction. At the time the 1978 Act was enacted there was no machinery for seeking permission to serve proceedings out of the jurisdiction in respect of a claim to enforce either an arbitration award or a foreign judgment. It could thus be said with force that at that time it was not contemplated that proceedings could be brought in England on a foreign judgment, at any rate unless the defendant accepted service of them. I note that section 12(6) of the 1978 Act permits a state to accept service of proceedings against it in a particular manner, including no doubt proceedings to enforce a foreign judgment. As Lord Phillips says at para 42, prior to 1978 there had been no attempts to enforce in the United Kingdom judgments against states. However, he adds that section 12(7) makes it plain that service on a sovereign state requires permission, which could only be granted in accordance with the rules of court governing service out of the jurisdiction. In my opinion, Parliament must have recognised that those rules, then RSC Order 11, would be likely to be amended from time to time and, indeed, may well have contemplated that at some future date a rule would be introduced permitting permission to be given allowing service out of the jurisdiction. As Lord Collins explains at para 114, such a rule was introduced with effect from January 1 1984 in RSC Order 11 r 1(1)(m). It subsequently became CPR 6.20(9) and is now CPR 6BPD para 3.1(10), which provides for service of proceedings out of the jurisdiction where a claim is made to enforce any judgment or arbitral award. As I see it, the question is whether such proceedings are proceedings relating to a commercial transaction within section 3(1)(a) in circumstances where such proceedings are contemplated by the present rules of court. I would answer that question in the affirmative. As Lord Phillips has explained, there was during the 20th century a growing recognition round the world of the restrictive doctrine of state immunity under which immunity related to government acts in the exercise of sovereign authority (acta jure imperii) but not to commercial activities carried on by the state (acta jure gestionis). As I see it, the conclusion that these proceedings are proceedings relating to a commercial transaction is no more than a further example of that growing recognition. The question arises in the context of the particular proceedings in this case. As Lord Phillips observes at para 29, the question in these proceedings is whether Argentina enjoys state immunity. I agree with him that, there being no principle of international law under which state A is immune from proceedings brought in state B in order to enforce a judgment given against it by the courts of state C where state A did not enjoy immunity in respect of the proceedings that gave rise to that judgment, under international law the question whether Argentina enjoys immunity in these proceedings depends upon whether its liability arises out of acta jure imperii or acta jure gestionis. That involves a consideration of the nature of the underlying transaction and demonstrates that the proceedings, at any rate on the facts of this case, relate to a commercial transaction. I agree with Lord Collins that the expression relating to in section 3(1)(a) can be given a narrow or wide meaning. I also agree with him that these are proceedings relating to the foreign judgment. The question is whether they are also proceedings relating to a commercial transaction entered into by Argentina. I agree with Lord Collins in para 111 that the wider meaning would give effect to the practical reality that the proceedings relate to liability under the bonds, the issue of which was plainly a commercial transaction for the purposes of section 3. For my part, I see no reason why, in construing the meaning of relating to, the court should not reflect that practical reality. I agree with Lord Collins in para 112 that a potential overlap with the arbitration provision in section 9 does not support a narrow interpretation and that there is no warrant for holding that section 3(1)(a) should be interpreted as requiring a link with the territorial jurisdiction of the United Kingdom. I also agree with him that the absence of reasoning in the Canadian case to which he refers in para 113 makes it of little assistance. In para 114 Lord Collins notes that it was decided in Perry v Zissis [1977] 1 Lloyds Rep 607 that, since a defendant could not be served out of the jurisdiction in an action on a foreign judgment, no freezing injunction could be granted in respect of assets within the jurisdiction. I agree that that was indeed the position at that time. The position would surely be different now that the rules have been changed. Finally I agree with Lord Collins that it is not likely that section 31 of the Civil Jurisdiction and Judgments Act 1982 would have been enacted in the form in which it was if Parliament had thought that the 1978 Act already applied to a class of foreign judgments. However, Lord Collins accepts at para 115 that neither of those points is conclusive as to the meaning of section 3. That is because there is no impediment in international law to the institution of proceedings to enforce a foreign judgment. Lord Collins adds that it is now possible to serve a foreign sovereign out of the jurisdiction and that the 1978 Act could be construed in the light of present circumstances. He cites Fitzpatrick v Sterling Housing Association Ltd [2001] 1 AC 27, 49 and Yemshaw [2011] 1 WLR 433, paras 5 to 27 for that proposition. As stated in para 144 above, I would go further and hold that it should be given an updated meaning. As Lord Clyde said in Fitzpatrick in the passage quoted above, the general presumption is that an updating construction is to be applied. As I see it, once it is concluded that an updating construction should be applied, the wider meaning would give effect to the practical reality that the sole purpose of the proceedings is to enforce Argentinas liability under a commercial transaction and that there is no impediment to such a construction in international law, both policy and principle lead to the conclusion that the wider interpretation is to be preferred. APPENDIX 1 State Immunity Act 1978 Immunity from jurisdiction "1.(1) A State is immune from the jurisdiction of the courts of the United Kingdom except as provided in the following provisions of this Part of this Act. (2)A court shall give effect to the immunity conferred by this section even though the State does not appear in the proceedings in question. Exceptions from immunity 2.(1)A State is not immune as respects proceedings in respect of which it has submitted to the jurisdiction of the courts of the United Kingdom. (2)A State may submit after the dispute giving rise to the proceedings has arisen or by a prior written agreement; but a provision in any agreement that it is to be governed by the law of the United Kingdom is not to be regarded as a submission. (3)A State is deemed to have submitted (a) if it has instituted the proceedings; or (b) subject to subsections (4) and (5) below, if it has intervened or taken any step in the proceedings. (4)Subsection (3)(b) above does not apply to intervention or any step taken for the purpose only of (a) claiming immunity; or (b) asserting an interest in property in circumstances such that the State would have been entitled to immunity if the proceedings had been brought against it. (5)Subsection (3)(b) above does not apply to any step taken by the State in ignorance of facts entitling it to immunity if those facts could not reasonably have been ascertained and immunity is claimed as soon as reasonably practicable. (6)A submission in respect of any proceedings extends to any appeal but not to any counter claim unless it arises out of the same legal relationship or facts as the claim. (7)The head of a State's diplomatic mission in the United Kingdom, or the person for the time being performing his functions, shall be deemed to have authority to submit on behalf of the State in respect of any proceedings; and any person who has entered into a contract on behalf of and with the authority of a State shall be deemed to have authority to submit on its behalf in respect of proceedings arising out of the contract. 3.(1)A State is not immune as respects proceedings relating to (a) a commercial transaction entered into by the State; or (b)an obligation of the State which by virtue of a contract (whether a commercial transaction or not) falls to be performed wholly or partly in the United Kingdom. (2)This section does not apply if the parties to the dispute are States or have otherwise agreed in writing; and subsection (1)(b) above does not apply if the contract (not being a commercial transaction) was made in the territory of the State concerned and the obligation in question is governed by its administrative law. (3)In this section "commercial transaction" means (a)any contract for the supply of goods or services; (b)any loan or other transaction for the provision of finance and any guarantee or indemnity in respect of any such transaction or of any other financial obligation; and (c)any other transaction or activity (whether of a commercial, industrial, financial, professional or other similar character) into which a State enters or in which it engages otherwise than in the exercise of sovereign authority; but neither paragraph of subsection (1) above applies to a contract of employment between a State and an individual. 4.( 1) A State is not immune as respects proceedings relating to a contract of employment between the State and an individual where the contract was made in the United Kingdom or the work to be wholly or partly performed there. (2) Subject to subsections (3) and (4) below, this section does not apply if (a) at the time when the proceedings are brought the individual is a national of the State concerned; or (b) at the time when the contract was made the individual was neither a national of the United Kingdom nor habitually resident there; or (c) the parties to the contract have otherwise agreed in writing. (3) Where the work is for an office, agency or establishment maintained by the State in the United Kingdom for commercial purposes, subsection (2)(a) and (b) above do not exclude the application of this section unless the individual was, at the time when the contract was made, habitually resident in that State. (4) Subsection (2)(c) above does not exclude the application of this section where the law of the United Kingdom requires the proceedings to be brought before a court of the United Kingdom. (5) In subsection (2)(b) above "national of the United Kingdom " means a citizen of the United Kingdom and Colonies, a person who is a British subject by virtue of section 2, 13 or 16 of the British Nationality Act 1948 or by virtue of the British Nationality Act 1965, a British protected person within the meaning of the said Act of 1948 or a citizen of Southern Rhodesia. (6) In this section "proceedings relating to a contract of employment" includes proceedings between the parties to such a contract in respect of any statutory rights or duties to which they are entitled or subject as employer or employee. 5. A State is not immune as respects proceedings in respect (a) death or personal injury; or (b) damage to or loss of tangible property, caused by an act or omission in the United Kingdom. 6. (1) A State is not immune as respects proceedings relating to (a) any interest of the State in, or its possession or use of, immovable property in the United Kingdom; or (b) any obligation of the State arising out of its interest in, or its possession or use of, any such property. (2) A State is not immune as respects proceedings relating to any interest of the State in movable or immovable property, being an interest arising by way of succession, gift or bona vacantia. (3) The fact that a State has or claims an interest in any property shall not preclude any court from exercising in respect of it any jurisdiction relating to the estates of deceased persons or persons of unsound mind or to insolvency, the winding up of companies or the administration of trusts. (4) A court may entertain proceedings against a person other than a State notwithstanding that the proceedings relate to property (a) which is in the possession or control of a State; or (b) in which a State claims an interest, if the State would not have been immune had the proceedings been brought against it or, in a case within paragraph (b) above, if the claim is neither admitted nor supported by prima facie evidence. 7. A State is not immune as respects proceedings relating to (a) any patent, trade mark, design or plant breeders rights belonging to the State and registered or protected in the United Kingdom or for which the State has applied in the United Kingdom; (b) an alleged infringement by the State in the United Kingdom of any patent, trade mark, design, plant breeders' rights or copyright; or (c) the right to use a trade or business name in the United Kingdom. 8.( 1) A State is not immune as respects proceedings relating to its membership of a body corporate, an unincorporated body Membership or a partnership which (a) has members other than States; and (b) is incorporated or constituted under the law of the United Kingdom or is controlled from or has its principal place of business in the United Kingdom, being proceedings arising between the State and the body or its other members or, as the case may be, between the State and the other partners. (2) This section does not apply if provision to the contrary has been made by an agreement in writing between the parties to the dispute or by the constitution or other instrument establishing or regulating the body or partnership in question. 9. (1)Where a State has agreed in writing to submit a dispute which has arisen, or may arise, to arbitration, the State is not immune as respects proceedings in the courts of the United Kingdom which relate to the arbitration. (2)This section has effect subject to any contrary provision in the arbitration agreement and does not apply to any arbitration agreement between States. 10(l) This section applies to (a) Admiralty proceedings ; (b) proceedings on any claim which could be made the subject of Admiralty proceedings. (2) A State is not immune as respects (a) an action in rem against a ship belonging to that State; or (b) an action in personam for enforcing a claim in connection with such a ship, if, at the time when the cause of action arose, the ship was in use or intended for use for commercial purposes. (3) Where an action in rem is brought against a ship belonging to a State for enforcing a claim in connection with another ship belonging to that State, subsection (2)(a) above does not apply as respects the first mentioned ship unless, at the time when the cause of action relating to the other ship arose, both ships were in use or intended for use for commercial purposes. (4) A State is not immune as respects (a) an action in rem against a cargo belonging to that State if both the cargo and the ship carrying it were, at the time when the cause of action arose, in use or intended for use for commercial purposes ; or (b) an action in personam for enforcing a claim in connection with such a cargo if the ship carrying it was then in use or intended for use as aforesaid. (5) In the foregoing provisions references to a ship or cargo belonging to a State include references to a ship or cargo in its possession or control or in which it claims an interest; and, subject to subsection (4) above, subsection (2) above applies to property other than a ship as it applies to a ship. (6) Sections 3 to 5 above do not apply to proceedings of the kind described in subsection (1) above if the State in question is a party to the Brussels Convention and the claim relates to the operation of a ship owned operated by that State, the carriage of cargo or passengers on any such ship or the carriage of cargo owned by that State on any other ship. 11. A State is not immune as respects proceedings relating to its liability for (a) value added tax, any duty of customs or excise or any agricultural levy; or (b) rates in respect of premises occupied by it for commercial purposes. 12. (1)Any writ or other document required to be served for instituting proceedings against a State shall be served by being transmitted through the Foreign and Commonwealth Office to the Ministry of Foreign Affairs of the State and service shall be deemed to have been effected when the writ or document is received at the Ministry. (2)Any time for entering an appearance (whether prescribed by rules of court or otherwise) shall begin to run two months after the date on which the writ or document is received as aforesaid. (3)A State which appears in proceedings cannot thereafter object that subsection (1) above has not been complied with in the case of those proceedings. (4)No judgment in default of appearance shall be given against a State except on proof that subsection (1) above has been complied with and that the time for entering an appearance as extended by subsection (2) above has expired. (5)A copy of any judgment given against a State in default of appearance shall be transmitted through the Foreign and Commonwealth Office to the Ministry of Foreign Affairs of that State and any time for applying to have the judgment set aside (whether prescribed by rules of court or otherwise) shall begin to run two months after the date on which the copy of the judgment is received at the Ministry. (6)Subsection (1) above does not prevent the service of a writ or other document in any manner to which the State has agreed and subsections (2) and (4) above do not apply where service is effected in any such manner. (7)This section shall not be construed as applying to proceedings against a State by way of counter claim or to an action in rem; and subsection (1) above shall not be construed as affecting any rules of court whereby leave is required for the service of process outside the jurisdiction. 13. (1)No penalty by way of committal or fine shall be imposed in respect of any failure or refusal by or on behalf of a State to disclose or produce any document or other information for the purposes of proceedings to which it is a party. (2)Subject to subsections (3) and (4) below (a)relief shall not be given against a State by way of injunction or order for specific performance or for the recovery of land or other property; and (b)the property of a State shall not be subject to any process for the enforcement of a judgment or arbitration award or, in an action in rem, for its arrest, detention or sale. (3)Subsection (2) above does not prevent the giving of any relief or the issue of any process with the written consent of the State concerned; and any such consent (which may be contained in a prior agreement) may be expressed so as to apply to a limited extent or generally; but a provision merely submitting to the jurisdiction of the courts is not to be regarded as a consent for the purposes of this subsection. (4)Subsection (2)(b) above does not prevent the issue of any process in respect of property which is for the time being in use or intended for use for commercial purposes; but, in a case not falling within section 10 above, this subsection applies to property of a State party to the European Convention on State Immunity only if (a)the process is for enforcing a judgment which is final within the meaning of section 18(1)(b) below and the State has made a declaration under Article 24 of the Convention; or (b)the process is for enforcing an arbitration award. (5)The head of a State's diplomatic mission in the United Kingdom, or the person for the time being performing his functions, shall be deemed to have authority to give on behalf of the State any such consent as is mentioned in subsection (3) above and, for the purposes of subsection (4) above, his certificate to the effect that any property is not in use or intended for use by or on behalf of the State for commercial purposes shall be accepted as sufficient evidence of that fact unless the contrary is proved. (6)In the application of this section to Scotland (a)the reference to "injunction" shall be construed as a reference to "interdict"; (b)for paragraph (b) of subsection (2) above there shall be substituted the following paragraph "(b) the property of a State shall not be subject to any diligence for enforcing a judgment or order of a court or a decree arbitral or, in an action in rem, to arrestment or sale."; and (c)any reference to "process" shall be construed as a reference to "diligence", any reference to "the issue of any process" as a reference to "the doing of diligence" and the reference in subsection (4)(b) above to "an arbitration award" as a reference to "a decree arbitral". Supplementary provisions 14. (1)The immunities and privileges conferred by this Part of this Act apply to any foreign or commonwealth State other than the United Kingdom; and references to a State include references to (a)the sovereign or other head of that State in his public capacity; (b)the government of that State; and (c)any department of that government, but not to any entity (hereafter referred to as a "separate entity") which is distinct from the executive organs of the government of the State and capable of suing or being sued. (2)A separate entity is immune from the jurisdiction of the courts of the United Kingdom if, and only if (a)the proceedings relate to anything done by it in the exercise of sovereign authority; and (b)the circumstances are such that a State (or, in the case of proceedings to which section 10 above applies, a State which is not a party to the Brussels Convention) would have been so immune. (3)If a separate entity (not being a State's central bank or other monetary authority) submits to the jurisdiction in respect of proceedings in the case of which it is entitled to immunity by virtue of subsection (2) above, subsections (1) to (4) of section 13 above shall apply to it in respect of those proceedings as if references to a State were references to that entity. (4)Property of a State's central bank or other monetary authority shall not be regarded for the purposes of subsection (4) of section 13 above as in use or intended for use for commercial purposes; and where any such bank or authority is a separate entity subsections (1) to (3) of that section shall apply to it as if references to a State were references to the bank or authority. (5)Section 12 above applies to proceedings against the constituent territories of a federal State; and Her Majesty may by Order in Council provide for the other provisions of this Part of this Act to apply to any such constituent territory specified in the Order as they apply to a State. (6)Where the provisions of this Part of this Act do not apply to a constituent territory by virtue of any such Order subsections (2) and (3) above shall apply to it as if it were a separate entity. PART II JUDGMENTS AGAINST UNITED KINGDOM IN CONVENTION STATES . 18.( 1) This section applies to any judgment given against the United Kingdom by a court in another State party to the European Convention on State Immunity, being a judgment (a) given in proceedings in which the United Kingdom was not entitled to immunity by virtue of provisions corresponding to those of sections 2 to 11 above; and (b) which is final, that is to say, which is not or is no longer subject to appeal or, if given in default of appearance, liable to be set aside. (2) Subject to section 19 below, a judgment to which this PAn ill section applies shall be recognised in any court in the United Kingdom as conclusive between the parties thereto in all proceedings founded on the same cause of action and may be relied on by way of defence or counter claim in such proceedings. (3) Subsection (2) above (but not section 19 below) shall have effect also in relation to any settlement entered into by the United Kingdom before a court in another State party to the Convention which under the law of that State is treated as equivalent to a judgment. (4) In this section references to a court in a State party to the Convention include references to a court in any territory in respect of which it is a party. 19.( 1) A court need not give effect to section 18 above in the case of a judgment (a) if to do so would be manifestly contrary to public policy or if any party to the proceedings in which the judgment was given had no adequate opportunity to present his case; or (b) if the judgment was given without provisions corresponding to those of section 12 above having been complied with and the United Kingdom has not entered an appearance or applied to have the judgment set aside. (2) A court need not give effect to section 18 above in the case of a judgment (a) if proceedings between the same parties, based on the same facts and having the same purpose (i) are pending before a court in the United Kingdom and were the first to be instituted; or (ii) are pending before a court in another State party to the Convention, were the first to be instituted and may result in a judgment to which that section will apply; or (b) if the result of the judgment is inconsistent with the result of another judgment given in proceedings between the same parties and (i) the other judgment is by a court in the United Kingdom and either those proceedings were the first to be instituted or the judgment of that court was given before the first mentioned judgment became final within the meaning of subsection (1)(b) of section 18 above; or (ii) the other judgment is by a court in another State party to the Convention and that section has already become applicable to it. (3) Where the judgment was given against the United Kingdom in proceedings in respect of which the United Kingdom was not entitled to immunity by virtue of a provision corresponding to section 6(2) above, a court need not give effect to section 18 above in respect of the judgment if the court that gave the judgment (a) would not have had jurisdiction in the matter if it had applied rules of jurisdiction corresponding to those applicable to such matters in the United Kingdom; or (b) applied a law other than that indicated by the United Kingdom rules of private international law and would have reached a different conclusion if it had applied the law so indicated. (4) In subsection (2) above references to a court in the United Kingdom include references to a court in any dependent territory in respect of which the United Kingdom is a party to the Convention, and references to a court in another State party to the Convention include references to a court in any territory in respect of which it is a party. " Civil Jurisdiction and Judgments Act 1982 ". Provisions relating to recognition and enforcement of judgments 31 Overseas judgments given against states, etc (1)A judgment given by a court of an overseas country against a state other than the United Kingdom or the state to which that court belongs shall be recognised and enforced in the United Kingdom if, and only if (a)it would be so recognised and enforced if it had not been given against a state; and (b)that court would have had jurisdiction in the matter if it had applied rules corresponding to those applicable to such matters in the United Kingdom in accordance with sections 2 to 11 of the State Immunity Act 1978. (2)References in subsection (1) to a judgment given against a state include references to judgments of any of the following descriptions given in relation to a state (a)judgments against the government, or a department of the government, of the state but not (except as mentioned in paragraph (c)) judgments against an entity which is distinct from the executive organs of government; (b)judgments against the sovereign or head of state in his public capacity; (c)judgments against any such separate entity as is mentioned in paragraph (a) given in proceedings relating to anything done by it in the exercise of the sovereign authority of the state. (3)Nothing in subsection (1) shall affect the recognition or enforcement in the United Kingdom of a judgment to which Part I of the Foreign Judgments (Reciprocal Enforcement) Act 1933 applies by virtue of section 4 of the Carriage of Goods by Road Act 1965, section 17(4) of the Nuclear Installations Act 1965, section [166(4) of the Merchant Shipping Act 1995], [regulation 8 of the Railways (Convention of International Carriage by Rail) Regulations 2005] (4)Sections 12, 13 and 14(3) and (4) of the State Immunity Act 1978 (service of process and procedural privileges) shall apply to proceedings for the recognition or enforcement in the United Kingdom of a judgment given by a court of an overseas country (whether or not that judgment is within subsection (1) of this section) as they apply to other proceedings. (5)In this section "state", in the case of a federal state, includes any of its constituent territories. 50. In this Act, unless the context otherwise requires . " Contracting State " has the meaning given by section 1(3) ; " the 1968 Convention " has the meaning given by section 1(1), and references to that Convention and to provisions of it are to be construed in accordance with section 1(2) (a) ; " the Conventions " has the meaning given by section 1(1) ; . " overseas country " means any country or territory outside the United Kingdom ; . Civil Procedure Rules 2008 . 6.20(9) In any proceedings to which rule 6.19 does not apply, a claim form may be served out of the jurisdiction with the permission of the court if a claim is made to enforce any judgment or arbitral award. " APPENDIX 2 EUROPEAN CONVENTION on STATE IMMUNITY Chapter III Effect of Judgment "Article 20 1. A Contracting State shall give effect to a judgment given against it by a court of another Contracting State: a. if, in accordance with the provisions of Articles 1 to 13, the State could not claim immunity from jurisdiction; and b. if the judgment cannot or can no longer be set aside if obtained by default, or if it is not or is no longer subject to appeal or any other form of ordinary review or to annulment. 2. Nevertheless, a Contracting State is not obliged to give effect to such a judgment in any case: a. where it would be manifestly contrary to public policy in that State to do so, or where, in the circumstances, either party had no adequate opportunity fairly to present his case; b. where proceedings between the same parties, based on the same facts and having the same purpose: i. are pending before a court of that State and were the first to be instituted; ii. are pending before a court of another Contracting State, were the first to be instituted and may result in a judgment to which the State party to the proceedings must give effect under the terms of this Convention; c. where the result of the judgment is inconsistent with the result of another judgment given between the same parties: i. by a court of the Contracting State, if the proceedings before that court were the first to be instituted or if the other judgment has been given before the judgment satisfied the conditions specified in paragraph 1.b; or ii. by a court of another Contracting State where the other judgment is the first to satisfy the requirements laid down in the present Convention; d. where the provisions of Article 16 have not been observed and the State has not entered an appearance or has not appealed against a judgment by default. 3. In addition, in the cases provided for in Article 10, a Contracting State is not obliged to give effect to the judgment: a. if the courts of the State of the forum would not have been entitled to assume jurisdiction had they applied, mutatis mutandis, the rules of jurisdiction (other than those mentioned in the annex to the present Convention) which operate in the State against which judgment is given; or b. if the court, by applying a law other than that which would have been applied in accordance with the rules of private international law of that State, has reached a result different from that which would have been reached by applying the law determined by those rules. However, a Contracting State may not rely upon the grounds of refusal specified in sub paragraphs a and b above if it is bound by an agreement with the State of the forum on the recognition and enforcement of judgments and the judgment fulfils the requirement of that agreement as regards jurisdiction and, where appropriate, the law applied. " APPENDIX 3 The terms of the bonds " The republic has in the fiscal agency agreement irrevocably submitted to the jurisdiction of any New York state or federal court sitting in the Borough of Manhattan and the courts of the republic of Argentina ('the specified courts') over any suit, action or proceeding against it or its properties, assets or revenues with respect to the securities of this series or the fiscal agency agreement (a 'related proceeding') The republic has in the fiscal agency agreement waived any objection to related proceedings in such courts whether on grounds of venue, residence or domicile or on the ground that the related proceedings have been brought in an inconvenient forum. The republic agrees that a final non appealable judgment in any such related proceeding ('the related judgment') shall be conclusive and binding upon it and may be enforced in any specified court or in any other courts to the jurisdiction of which the republic is or may be subject (the 'other courts') by a suit upon such judgment." "To the extent that the republic or any of its revenues, assets or properties shall be entitled, in any jurisdiction in which any specified court is located, in which any related proceeding may at any time be brought against it or any of its revenues, assets or properties, or in any jurisdiction in which any specified court or other court is located in which any suit, action or proceeding may at any time be brought solely for the purpose of enforcing or executing any related judgment, to any immunity from suit, from the jurisdiction of any such court, from set off, from attachment prior to judgment, from attachment in aid of execution of judgment, from execution of a judgment or from any other legal or judicial process or remedy, and to the extent that in any such jurisdiction there shall be attributed such an immunity, the republic has hereby irrevocably agreed not to claim and has irrevocably waived such immunity to the fullest extent permitted by the laws of such jurisdiction provided further that such agreement and waiver, in so far as it relates to any jurisdiction other than a jurisdiction in which a specified court is located, is given solely for the purpose of enabling the fiscal agent or a holder of securities of this series to enforce or execute a related judgment." . " Lord Collins suggests at para 116 that, but for section 31 and the almost invariable employment of wide express waivers of immunity, it might have been desirable as a matter of policy to give section 3 the wider meaning. He adds that there would, however, be no principled basis for doing so. I respectfully disagree. I do not think that either the enactment of section 31 or the fact that some parties use wide submission and waiver clauses points to a narrow meaning of relating to, whether as a matter of policy or as a matter of principle. In my opinion, viewed as at the time the question has to be decided these proceedings relate both to the New York judgment and to the underlying commercial transaction. ".

This appeal relates to bonds issued by the respondent, the Republic of Argentina (Argentina), in respect of which, together with all its other debt, Argentina declared a moratorium in December 2001. The appellant NML Capital Limited (NML) is an affiliate of a New York based hedge fund, which purchased the bonds at little over half their face value between June 2001 and September 2003 and then pursued the respondent for the return of their full principal value and interest in the New York courts. On 11 May 2006 NML obtained summary judgment on the bonds from a Federal Court in New York for over $284m. It then sought to enforce the judgment against assets held by Argentina in England by bringing a common law action on the judgment in London. NML applied for permission to serve the claim form out of the jurisdiction on Argentina, initially alleging two reasons why Argentina was not entitled to state immunity. The first was that Argentina had waived immunity as a term of its agreement with Bankers Trust to issue the bonds, and the second that the claim constituted proceedings relating to a commercial transaction and so fell within the exception in section 3(1)(a) of the State Immunity Act 1978 (the 1978 Act). Permission was granted and the proceedings were served. Argentina then applied to have the order for service set aside. NML resisted this application by reliance on two different grounds: the provisions of section 31 of the Civil Jurisdiction and Judgments Act 1982 (the 1982 Act) and terms as to waiver and jurisdiction in the bonds themselves. The High Court dismissed Argentinas application but this decision was reversed by the Court of Appeal, which held that Argentina was protected by state immunity from the claim. The Supreme Court unanimously allows the appeal. Lord Phillips and Lord Clarke find that the claim falls within the scope of section 3(1)(a) of the 1978 Act. Lord Mance, Lord Collins and Lord Walker disagree on this point but all agree that the appeal should in any event succeed by reason of the provisions of s 31 of the 1982 Act and by Argentinas submission and waiver of immunity in the bonds. The scope of s 3(1)(a) of the 1978 Act Sections 1 11 of the 1978 Act are a comprehensive statement of the scope of state immunity under the law of the United Kingdom. During the twentieth century there was a growing recognition around the world of the restrictive doctrine of state immunity, under which immunity was given to governmental acts in the exercise of sovereign authority but not to commercial activities carried on by the state [10]. S 3(1)(a) made it clear that the UK was adopting the restrictive doctrine. The context for interpreting the phrase proceedings relating to a commercial transaction in this case was the enforcement of a judgment which absent state immunity would be permitted by Civil Procedure Rule 6.20(9). Lord Phillips and Lord Clarke considered that the words relating to should be given a broad rather than a narrow meaning. The proceedings related both to the foreign judgment and to the transaction underlying that judgment [26]. Although Parliament was unlikely to have thought the 1978 Act to apply to a class of foreign judgments at a time when there was no procedural machinery to serve a defendant out of the jurisdiction, s 3(1)(a) should be given an updated meaning consistent with the statutory purpose of the act [152]. Lord Mance did not think it was justified to treat the wording of s 3(1)(a) as applying to a foreign judgment against a foreign state, which had long been recognised as a special area of private international law [80]. S 31 of the 1982 Act was the means by which Parliament had achieved for the first time a comprehensive treatment of the issue of state immunity in respect of foreign judgments [98][118]. Lord Collins (with whom Lord Walker agreed) pointed to the almost invariable use in international loan agreements and bond issues since the 1970s of clauses providing for submission to national jurisdiction and waivers of immunity [103]. He preferred a narrow interpretation of s 3(1)(a). There was no policy reason to give it a wider meaning in the light of s 31 of the 1982 Act and the widespread use of express waivers [116]. Effect of s 31 of the 1982 Act S 31 of the 1982 Act reflected and in part replaced the categories of exemption from state immunity set out in the 1978 Act as far as foreign judgments were concerned. It was an alternative scheme rather than an additional hurdle [47]. State immunity could not be raised as a bar to the recognition and enforcement of a foreign judgment if, under the principles of international law recognised in this jurisdiction, the state against whom the judgment was given was not entitled to immunity in respect of the claim [49]. Did the bonds contain a submission to the jurisdiction of the English court? The High Court had correctly held that the agreement in the bond was more than a mere waiver and amounted to a submission to jurisdiction [59]. It was the only meaning the provision could sensibly bear [62] [128]. Could NML rely on new issues at the High Court hearing? Lord Phillips considered that the rule in Parker v Schuller (1901) should no longer be applied. Allowing a party to amend a pleading where no prejudice was caused to the other party that could not be dealt with by an appropriate order for costs accorded with the overriding objective [75]. The other justices did not think that the rule applied on the facts of this case, but agreed with his observations.

This appeal raises difficult and important issues about the effect of adjudication pursuant to provisions implied into a construction contract under section 108(5) of the Housing Grants, Construction and Regeneration Act 1996, read with the Scheme for Construction Contracts (England and Wales) Regulations 1998 (SI 1998 No 649). The construction contract (within the broad meaning assigned by section 104(2) of the 1996 Act) was a contract by the respondent, Aspect Contracts (Asbestos) Ltd (Aspect), to carry out an asbestos survey and report on blocks of maisonettes in Hounslow which the appellant building contractor, Higgins Construction Plc (Higgins), was considering redeveloping. The survey was conducted in March 2004 and the report was dated 27 April 2004. During the redevelopment in early 2005, Higgins allegedly found and had to have removed asbestos containing materials which had not been identified in the report. A dispute consequently arose with Aspect. Negotiation and mediation having failed, Higgins referred the dispute to adjudication, claiming 822,482 damages plus interest. The claim was for breach of contractual and/or conterminous tortious duties to exercise reasonable skill and care. By a decision dated 28 July 2009, the adjudicator, Ms Rosemary Jackson QC, concluded that Aspect had been in breach of such duties causing Higgins loss in various, though not all, respects alleged by Higgins, and ordered that Aspect pay Higgins 490,627, plus interest which amounted, at the date of the decision, to 166,421.05. She also ordered Aspect to pay her own fees of 8,750 plus VAT. On 6 August 2009 Aspect duly paid Higgins 658,017, a sum which included further interest from the date of the decision. Higgins did not commence any proceedings, whether to recover the balance of its claim, 331,855 plus interest, or otherwise. The limitation period expired on the face of it on or about 27 April 2010 for any action by Higgins founded on breach of the construction contract and at the very latest by early 2011 for any action founded on tort: Limitation Act 1980, sections 2 and 5. Higgins was evidently content to let matters rest. It did not, so far as appears, ask Aspect to agree, and Aspect did not agree, to treat the adjudicators decision as final. Aspects claim Only after the expiry of both the above mentioned limitation periods did Aspect on 3 February 2012 itself commence the present proceedings seeking to recover the sum it paid on 6 August 2009. It did so without giving prior notice that it was dissatisfied with Ms Jacksons decision or going through any pre action protocol procedure. Aspect confines itself expressly to a contention that no sum was due to Higgins on an examination of the merits of the original dispute, regarding the alleged failure to identify and report the existence of asbestos containing materials beyond those mentioned in its report. It claims that the sum of 658,017 is repayable accordingly. Higgins however seeks to counterclaim for the 331,855 balance of its claim and interest. Only in relation to this balance does Aspect raise a limitation plea, under sections 2 and 5 of the Limitation Act. These sections provide that any action founded on, respectively, tort or simple contract shall not be brought after the expiration of six years from the date on which the cause of action accrued. Aspect rests its claim on an implied term, alternatively in restitution. The implied term is that: in the event that a dispute between the parties was referred to adjudication pursuant to the Scheme and one party paid money to the other in compliance with the adjudicators decision made pursuant to the Scheme, that party remained entitled to have the decision finally determined by legal proceedings and, if or to the extent that the dispute was finally determined in its favour, to have that money repaid to it. The present proceedings By consent on 31 January 2013 Akenhead J ordered the trial of a preliminary issue as to (a) the existence of the implied term, (b) the limitation period applicable to any such implied term, (c) the limitation period applicable to the counterclaim, and (d) the existence or otherwise of a claim for restitution. By a clear and comprehensive judgment dated 23 May 2013, he held that there was no such implied term as alleged, that Aspect could have claimed a declaration of non liability at any time within six years after performance of the contract, upon the grant of which declaration the court would then have had ancillary and consequential power to order repayment, but that any such claim was now time barred. He also held that there was, in these circumstances and in the absence of any recognised basis like mistake or duress and of any right to have the adjudicators decision set aside, no claim in restitution. The Court of Appeal (Longmore, Rimer and Tomlinson LJJ) [2014] 1 WLR 1220, in a concise judgment given by Longmore LJ, reached an opposite conclusion. It held that the Scheme implied that any overpayment could be recovered. It noted that Higginss contrary case faced a number of difficult questions, such as, first, the fairness of a conclusion that required any claim for repayment to be made within six years of the original contractual performance, second, the juridical basis for a conclusion that a declaration of non liability would carry with it a right to order repayment and, third, the correctness of the judges conclusion that a declaration of non liability was liable to be time barred. Aspect did not pursue its pleaded restitutionary claim before the Court of Appeal. The present appeal follows by this courts permission. In giving permission, the court informed the parties that: without prejudging whether it would be open to [Aspect] to raise any positive point on restitution, the Supreme Court may wish as part of the context to have explained the legal position regarding restitution. The parties accordingly exchanged cases which addressed the position regarding restitution, and, during the course of the hearing, Miss Fiona Sinclair QC for Aspect sought permission to raise a case in restitution based on the payment made. Mr Andrew Bartlett QC for Higgins resisted this, and the court heard submissions on it de bene esse. In the event, since the issue was raised at first instance and is one of pure law, I consider that permission should be granted to Aspect to rely upon restitution as an alternative to its primary claim based on an implied term. The legislation Section 108 of the Housing Grants, Construction and Regeneration Act 1996 (in its original form, as in force before its presently immaterial amendment by the Local Democracy, Economic Development and Construction Act 2009) provides: 108. Right to refer disputes to adjudication. (1) A party to a construction contract has the right to refer a dispute arising under the contract for adjudication under a procedure complying with this section. For this purpose dispute includes any difference. (2) The contract shall (a) enable a party to give notice at any time of his intention to refer a dispute to adjudication; (b) provide a timetable with the object of securing the appointment of the adjudicator and referral of the dispute to him within 7 days of such notice; (c) require the adjudicator to reach a decision within 28 days of referral or such longer period as is agreed by the parties after the dispute has been referred; (d) allow the adjudicator to extend the period of 28 days by up to 14 days, with the consent of the party by whom the dispute was referred; (e) impose a duty on the adjudicator to act impartially; and (f) enable the adjudicator to take the initiative in ascertaining the facts and the law. (3) The contract shall provide that the decision of the adjudicator is binding until the dispute is finally determined by legal proceedings, by arbitration (if the contract provides for arbitration or the parties otherwise agree to arbitration) or by agreement. The parties may agree to accept the decision of the adjudicator as finally determining the dispute. (5) If the contract does not comply with the requirements of subsections (1) to (4), the adjudication provisions of the Scheme for Construction Contracts apply Section 114 provides that: (1) The Minister shall by regulations make a scheme (the Scheme for Construction Contracts) containing provision about the matters referred to in the preceding provisions of this Part. (4) Where any provisions of the Scheme for Construction Contracts apply by virtue of this Part in default of contractual provision agreed by the parties, they have effect as implied terms of the contract concerned. The Scheme contained in the Schedule to the Regulations is in parallel terms to those indicated in section 108(1) to (4), with slight differences which no one suggests are significant. It provides: 1(1) Any party to a construction contract (the referring party) may give written notice (the notice of adjudication) at any time of his intention to refer any dispute arising under the contract, to adjudication. (3) The notice of adjudication shall set out briefly the nature and a brief description of the dispute (a) and of the parties involved, (b) details of where and when the dispute has arisen, 19(1) The adjudicator shall reach his decision not later than twenty eight days after receipt of the referral (a) notice mentioned in paragraph 7(1), or (b) if the referring party so consents, or forty two days after receipt of the referral notice (c) such period exceeding twenty eight days after receipt of the referral notice as the parties to the dispute may, after the giving of that notice, agree. 23(2) The decision of the adjudicator shall be binding on the parties, and they shall comply with it until the dispute is finally determined by legal proceedings, by arbitration (if the contract provides for arbitration or the parties otherwise agree to arbitration) or by agreement between the parties. By providing that the decision of an adjudicator is binding and that the parties shall comply with it, paragraph 23(2) of the Scheme makes the decision enforceable for the time being. It is enforceable by action founded on the contractual obligation to comply with the decision combined, in a normal case, with an application for summary judgment. The limitation period for enforcement will be six years from the adjudicators decision. But the decision is only binding and the obligation to comply with it only lasts until the dispute is finally determined in one of the ways identified. By use of the word until, paragraph 23(2) appears to contemplate that there will necessarily be such a determination. The short time limits provided by paragraph 19(1) also indicate that adjudication was envisaged as a speedy provisional measure, pending such a determination. But there is nothing to prevent adjudication being requested long after a dispute has arisen and without the commencement of any proceedings. Further, it seems improbable that the Scheme imposes on either party any sort of obligation to start court or arbitration proceedings in order to confirm its entitlement. Either or both of the parties might understandably be content to let matters rest. Section 108(3) of the Act and paragraph 23(2) of the Scheme might in the above circumstances have been more realistic if they had expressed the binding nature of an adjudicators decision as extending unless and until. As already explained, it seems clear that neither party is obliged ever to commence legal proceedings, and that if neither does the adjudicators decision continues to bind. In this respect, an adjudication cannot be equated with an interim payment ordered by the court in the course of court proceedings. The recipient of such an interim payment cannot discontinue the proceedings without the payers consent or the courts permission, and is therefore at risk of being ordered to make repayment as a condition of discontinuance: see CPR 25.8(2)(a) and 38.2(2)(b). Analysis of the question on this appeal The key question is how far a paying party, here Aspect, is able to disturb the provisional position established by an adjudicators decision, by itself commencing proceedings after the time has elapsed when Higgins could bring any claim founded on the original breach of contract or tort. That depends upon the basis of any claim by Aspect to recover the sum it has provisionally paid under the adjudicators decision. Just as Higgins has a right to enforce payment pursuant to an adjudicators decision, so Aspect must on some basis be able to recover such a payment, if it is established, by legal proceedings, arbitration or agreement, that such sum was not due in respect of the original dispute. Without the ability to recover such a payment, the Scheme makes no sense. Adjudication is conceived as a provisional measure. At a cash flow level, Higgins remains entitled to the payment unless and until the outcome of legal proceedings, arbitration or negotiations, leads to a contrary conclusion. But at the deeper level of the substantive dispute between the parties, the parties have rights and liabilities, which may differ from those identified by the adjudication decision, and on which the party making a payment under an adjudication decision must be entitled to rely in legal proceedings, arbitration or negotiations, in order to make good a claim to repayment on some basis. Aspects case is, as I have noted, that this entitlement arises from the payment, to the extent that this is subsequently shown not to have been due, and is based on an implied term or alternatively restitution. Higginss primary case In contrast, on Higginss case, Aspects only entitlement is to seek declaratory relief, and, after obtaining a declaration, to rely on a power in the court to grant consequential relief by way of an order for repayment. Higgins submits that any such claim to declaratory relief became time barred in contract in April 2010 and in tort at the same date (or at latest by early 2011), so that there is now no way in which Aspect can in the present proceedings ask the court to order repayment. That corresponds with the result at which Akenhead J arrived. It involves in Higginss submission an appropriate correlation of the time limits within which Higgins can pursue claims against Aspect and Aspect can pursue claims against Higgins. I have no difficulty in accepting that Aspect could at any time, from at least the development in early 2005 of the original dispute, have asked the court to declare that it had not committed any breach of contract or incurred any tortious liability to Higgins, and that the court would have regarded proceedings of this nature for a declaration as entirely admissible and appropriate. But, in common with the Court of Appeal, I cannot accept that this is a complete analysis of the route by which Aspect could and should have pursued the claim which it now brings. It ignores a core ingredient of and the immediate trigger to Aspects current claim, which is that it has been ordered to make and has made a large payment in 2009. It is artificial to treat a claim to recover that sum as based on an alleged cause of action accruing in 2004 or early 2005. To treat Aspects remedy as being to seek a declaration, and then to invite the court to use its alleged consequential powers in order to grant the relief which is the true object of the proceedings, is equally artificial. Mr Bartlett did not, to my mind, identify any authority for the proposition that a court can or should make orders consequential upon a declaration of non liability for the payment of any sums which the recipient would not have a right to claim on some independent juridical basis. The majority judgments in Guaranty Trust Company of New York v Hannay [1915] 2 KB 536 do not support such a proposition. They show that declarations may be given in situations where there is, or is as yet, no cause of action. A common example is where a claim is made by an insured against liability insurers seeking a declaration that they will be liable to indemnify him in respect of any third party liability which he may be found to have. But consequential relief depends, as Pickford LJ indicated at pp 558 559, upon the existence of a cause of action, or interference, actual or threatened, with a right. When Bankes LJ said at p 572 that the word relief was not confined to relief in respect of a cause of action, he was referring to the requirement under the Judicature Act 1873, section 100 and the then RSC O XVI rule 1 that there must in every action be a person seeking relief, and to the possibility of claiming relief by way of a declaration when no such cause of action exists. He was not suggesting that a claim for such a declaration could be accompanied by consequential relief ordering a payment to which there was no independent right. I am furthermore unable to accept that a claim for a declaration that a person has not committed a tort or breach of contract is a claim falling within, respectively, section 2 or 5 of the Limitation Act 1980, or that either section could be applied by analogy as Higgins also submitted. A claim for a declaration that a contractual right has accrued has been held at first instance to be a claim involving a cause of action founded on simple contract: P&O Nedlloyd BV v Arab Metals Co (The UB Tiger) [2005] EWHC 1276 (Comm), [2005] 1 WLR 3733, para 20. Accepting without considering that analysis, a claim for a declaration that a person has not broken a contract might also be regarded as a claim founded on simple contract (though a claim that a person was not party to any contract certainly could not be); however a claim that a person has not broken a contract could not be a claim in respect of which it could sensibly be said that any cause of action had accrued, still less accrued on any particular date. On that basis section 5 could not apply, directly or by analogy. As to section 2, a claim that a person had not committed a tort could not in any circumstances sensibly be regarded as a claim founded on tort, quite apart from the impossibility of identifying any date on which the cause of action accrued, for the purpose of applying section 2 either directly or by analogy. The special time limit for negligence claims provided by section 14A of the Limitation Act 1980 would also be impossible to apply in relation to a claim for negative declaratory relief as to the absence of any liability in tort. Miss Sinclair submitted that what the adjudicator described as Higginss coterminous tort claim was capable of being submitted to adjudication, along with its contract claim. In support of that proposition, Miss Sinclair referred to Premium Nafta Products Ltd v Fili Shipping Co Ltd [2007] UKHL 40, as superseding the more limited approach taken in Fillite (Runcorn) Ltd v Aqua lift (1989) 45 BLR 27 (CA) see also Woolf v Collis Removal Service [1948] 1 KB 11, 18 19, Astro Vencedor Co Na SA v Mabanaft GmbH [1971] 2 QB 588, 595, Empresa Exportadora de Azucar v Industria Azucarera Nacional SA [1983] 2 Lloyds Rep 171, 183 and Chimimport plc v G DAlexio Sas [1994] 2 Lloyds Rep 366, 371 372; Mr Bartlett did not accept that the approach taken in Premium Nafta could apply to statutory adjudication, but I am very content to proceed on that basis. But Mr Bartlett went on to submit, with reference to section 108(1) of the 1996 Act and paragraph 1(1) of the Scheme, that this would necessarily mean that any tort claim which Higgins has must, even if it could be the subject of adjudication at all, be capable of being regarded as a claim arising under the contract, and to submit that such a claim would not be subject to section 14A of the 1980 Act (or, presumably, to section 2). It is unnecessary to say more than that I do not, as at present advised, accept this submission. Assuming, as I am presently prepared to, that a coterminous tort claim can fall within the language of section 108(1) of the 1996 Act and paragraph 1(1), it does not follow that it ceases to be a tort claim for limitation purposes. So the usual rule would apply that limitation periods in contract and tort are separate matters, even where the tort claim is based essentially on negligence in the performance of contractual obligations: see eg Henderson v Merrett Syndicates Ltd [1995] 2 AC 145, esp at p 185E G per Lord Goff. Finally, I understand Mr Bartlett also to suggest that, whatever the limitation position, Aspect, having been adjudicated liable in both contract and tort, would need to bring proceedings to establish that it was not liable within the limitation periods applicable to both, if it was to recover anything. Suffice it to say that I am unpersuaded by this suggestion, though this is not critical to the decision of this appeal in view of what follows below. In my view, it is a necessary legal consequence of the Scheme implied by the 1996 Act into the parties contractual relationship that Aspect must have a directly enforceable right to recover any overpayment to which the adjudicators decision can be shown to have led, once there has been a final determination of the dispute. I agree with the Court of Appeal that the obvious basis for recognition of this right is by way of implication arising from the Scheme provisions which are themselves implied into the construction contract. I prefer to express the implication in the way I have, because it focuses on the core element of Aspects claim which is to recover an alleged overpayment. The implied term which Aspect pleads tends to open the way to Higginss argument, which I reject, that the essence of Aspects claim is to declaratory relief and that this is relief which Aspect has always been (remained) entitled to pursue, since the contract was first performed, and has now become time barred. I emphasise that, on whatever basis the right arises, the same restitutionary considerations underlie it. If and to the extent that the basis on which the payment was made falls away as a result of the courts determination, an overpayment is, retrospectively, established. Either by contractual implication or, if not, then by virtue of an independent restitutionary obligation, repayment must to that extent be required. The suggested implication, on which the preliminary issue focuses, goes to repayment of the sum (over)paid. But it seems inconceivable that any such repayment should be made in a case such as the present, years later without the payee having also in the meanwhile a potential liability to pay interest at an appropriate rate, to be fixed by the court, if not agreed between the parties. In restitution, there would be no doubt about this potential liability, reflecting the time cost of the payment to the payer and the benefit to the payee: see eg Sempra Metals Ltd v Inland Revenue Commissioners [2007] UKHL 34, [2008] AC 561. Whether by way of further implication or to give effect to an additional restitutionary right existing independently as a matter of law, the court must have power to order the payee to pay appropriate interest in respect of the overpayment. This conclusion follows from the fact that, once it is determined by a court or arbitration tribunal that an adjudicators decision involved the payment of more than was actually due in accordance with the parties substantive rights, the adjudicators decision ceases, retrospectively, to bind. Since Aspects cause of action arises from payment and is only for repayment, it is, whether analysed in implied contractual or restitutionary terms, a cause of action which could be brought at any time within six years after the date of payment to Higgins, ie after 6 August 2009. For this purpose an independent restitutionary claim falls to be regarded as founded on simple contract within section 5 of the Limitation Act: Kleinwort Benson Ltd v Sandwell Borough Council [1994] 4 All ER 890, 942 943, per Hobhouse J, not questioned by the House of Lords in Kleinwort Benson Ltd v Lincoln City Council [1999] 2 AC 349, when it had to consider whether, in the circumstances of that case, section 32(1)(c) of the Act operated so as to extend the normal six year limitation period. Higgins complains that this gives Aspect a one way throw and undermines finality. By delaying commencement of the present claim until 2012, Aspect can sue to recover all or part of the 658,017 paid to Higgins, without having the risk of ending up worse off, since Higgins is barred by limitation from pursuing the 331,855 balance of its original claim. That consequence follows, however, from Higginss own decision not to commence legal proceedings within six years from April 2004 or early 2005 and so itself to take the risk of not confirming (and to forego the possibility of improving upon) the adjudication award it had received. Adjudication was conceived, as I have stated, as a provisional mechanism, pending a final determination of the dispute. Understandable though it is that Higgins should wish matters to lie as they are following the adjudication decision, Higgins could not ensure that matters would so lie, or therefore that there would be finality, without either pursuing legal or arbitral proceedings to a conclusion or obtaining Aspects agreement. Further, as Akenhead J pointed out in para 43 of his judgment, this is not one of those very typical building contract cases where there are set offs and cross claims on each side, each allegedly over topping the other. In such cases, if there is an adjudication award within six years from performance, without any further proceedings being commenced, both sides are after the six year period time barred in respect of any claim to any balance which they originally contended to be due them. Any further proceedings would be limited to a claim for repayment by the party required by the adjudication to pay a net balance to the other. Aspect accepts by its pleadings and Miss Sinclair confirmed in her oral submissions that what Aspect contends for, in support of its claim for repayment, is the determination of the parties original rights and liabilities as they stood when they were adjudicated upon by the adjudicator. Aspect does not suggest that it is of any relevance that the limitation period would now have expired, if Higgins were now assumed to be bringing an action for the total of 822,482 plus interest originally claimed, or for the 490,627 plus interest awarded by the adjudicator. Aspect is in my view correct in this approach. What the Scheme contemplates is the final determination of the dispute referred to the adjudicator, because it is that which determines whether or not the adjudicator was justified in his or her assessment of what was due under the contract. The Scheme cannot plausibly mean that, by waiting until after the expiry of the limitation period for pursuit of the original contractual or tortious claim by Higgins, Aspect could automatically acquire a right to recover any sum it had paid under the adjudicators award, without the court or arbitration tribunal having to consider the substantive merits of the original dispute, to which the adjudicators decision was directed, at all. If and so far as the adjudicator correctly evaluated a sum as due between the parties, such sum was both due and settled. A subsequent court or arbitration determination to the same effect would simply confirm that such sum was due and was correctly settled as being due. Any limitation period which would apply to a claim for such a sum, if it had not yet been settled, is in these circumstances quite irrelevant. I accept, without further examination, that the final determination of the dispute might be affected in a particular case by circumstances occurring after the adjudicators decision, and that in such a case any payment ordered by the adjudicator might be shown now to have been more than was, in the light of subsequent events, justified. A claim for an adjustment could then exist, but it would exist on the basis of those subsequent events. As I have already indicated, the justification for an adjudicators decision cannot however be undermined by pointing out that, if payment of a sum which was due when ordered had not in fact been ordered and made, it would have become too late by virtue of limitation to pursue a separate claim for such sum by whatever date the proceedings for final determination were begun. If the adjudicators order was justified on the basis of the underlying dispute, the payment made pursuant to it was due: the payment met obligations which the payer had. It meant that the payee had no claim to any further payment, while retaining the right to ask the court finally to determine that this was the case. One further point requires stating. In finally determining the dispute between Aspect and Higgins, for the purpose of deciding whether Higgins should repay all or any part of the 658,017 received, the court must be able to look at the whole dispute. Higgins will not be confined to the points which the adjudicator in his or her reasons decided in its favour. It will be able to rely on all aspects of its claim for 822,482 plus interest. That follows from the fact that the adjudicators actual reasoning has no legal or evidential weight. All that matters is that a payment was ordered and made, the justification for which can and must now be determined finally by the court. Similarly, if Aspects answer to Higginss claim to the 490,627 plus interest ordered to be paid had been not a pure denial of any entitlement, but a true defence based on set off which the adjudicator had rejected, Aspect could now ask the court to re consider and determine the justification for that defence on its merits. Higginss alternative case Higgins also submitted that, if, as I conclude, Aspect had six years from the making of payment under the adjudication in which to commence proceedings for repayment, asking the court for this purpose to determine the original dispute, the corollary ought to be that Higgins also has a fresh six year period from the making of such payment in which to bring proceedings for any balance which the adjudicator refused to award. But there is no basis upon which to recognise a payee as acquiring by virtue of the receipt of a payment a fresh right to claim any further balance allegedly due. Higgins argued that the adjudicators refusal of the balance might be regarded as an allowance, analogous to a payment. Even if, contrary to the fact, the balance had been disallowed because of some set off which Aspect had asserted, I would not accept this argument. Higgins would have had a claim to the balance which it could and should have pursued within six years of the cause of action for such balance first arising on performance of the contract or the commission of any tort by Aspect. Conclusion It follows that, in my opinion, the Court of Appeal was correct in its disposal of the present appeal. A differently constituted Court of Appeal in Walker Construction (UK) Ltd v Quayside Homes Ltd [2014] EWCA Civ 93, [2014] 1 CLC 121 indicated, obiter, that it would follow the decision of Akenhead J in the present case, without having had drawn to its attention the present Court of Appeals decision, given during the interlude between submissions and judgment in Walker. It follows from the present judgment that the obiter observations in Walker were wrong and must be over ruled, and that the present appeal should be dismissed.

Aspect Contracts (Asbestos) Limited (Aspect) contracted with Higgins Construction Plc (Higgins) to survey and report on a block of maisonettes which Higgins was considering redeveloping. Aspects report was dated 27 April 2004. During the redevelopment in 2005, Higgins discovered asbestos not identified in Aspects report and a dispute arose between the parties [1 2]. The contract contained an implied term (under sections 108 and 114 of the Housing Grants, Construction and Regeneration Act 1996, read with The Scheme for Construction Contracts (England and Wales) Regulations 1998 (SI 1998 No 649)) enabling disputes to be referred to adjudication [1]. Higgins referred the dispute to adjudication and claimed 822,482 plus interest for breach of Aspects contractual and/or tortious duties to exercise reasonable skill and care in carrying out the survey. On 20 July 2009, the adjudicator found that Aspect had been in breach of such duties and awarded Higgins 490,627 plus interest. Aspect duly paid Higgins 658,017 on 6 August 2009 [3]. It was also an implied term of the contract, under sections 108(3) of the 1996 Act and paragraph 23(2) of the 1998 Regulations, that the decision of the adjudicator is binding until the dispute is finally determined by legal proceedings, by arbitration or by agreement. The parties did not agree to treat the adjudicators decision as final. Higgins did not commence any proceedings to recover the 331,855 balance of its claims. The limitation period for any such claim by Higgins expired in contract on or about 27 April 2010, and in tort by early 2011 [4]. On 3 April 2012 Aspect issued proceedings to recover the sum it had paid to Higgins, claiming that no payment had been due to Higgins on the merits of the original dispute. Higgins then sought to counterclaim the 331,855 balance of its original claims. Aspect responded that any such counterclaim became time barred after six years in 2010 or latest 2011. The High Court (Akenhead J) rejected Aspects claim on the basis that there was no implied term for repayment and no entitlement to restitution after the expiry in 2010 or 2011 of a six year limitation period during which Aspect could have claimed a declaration of non liability with consequential relief. The Court of Appeal allowed Aspects appeal on the basis that the contract contained an implied term for repayment by Higgins of any sum paid by Aspect which Aspect could show had not been due on the merits, and that this attracted a six year limitation period running from the date of Aspects payment. The alternative restitutionary basis was not pursued by Aspect in the Court of Appeal. Both courts held Higgins counterclaim for 331,855 to be time barred. Permission having been granted to Higgins to appeal to the Supreme Court, the Supreme Court invited submissions on restitution as well as on the implied term. The Supreme Court unanimously dismisses Higgins appeal in a judgment given by Lord Mance. The Court concludes that: (1) Adjudication is intended to be a speedy provisional measure, pending final determination. The decision of an adjudicator is binding from the time it is given, but lasts only until the dispute is finally determined by one of the ways identified in paragraph 23(2) of 1998 the Regulations or section 108 of the 1996 Act [14 15]. (2) Higgins argument that Aspects only claim was for declaratory relief and consequential orders and that such relief is time barred in the same way as Higgins own counterclaim is misconceived. Consequential orders cannot be made for the repayment of money to which there is no independent basis for claiming [19 20]. (3) Aspect has an independent basis for having the original dispute finally determined, and for repayment, arising on an implied contractual or restitutionary basis. That right arises upon and from Aspects payment [16 17]. It was an implied contractual term that Aspect, having made payment as ordered by the adjudicator, would have a directly enforceable right to recover such payment if, on a final determination on the merits of the original dispute, those sums were shown not to have been due to Higgins [23]. Repayment can also be claimed by way of restitution, it being retrospectively established by final determination that the sums paid pursuant to the adjudication amounted to an overpayment [24]. (4) The limitation periods for Aspects claims in contract and restitution are six years from the date of payment [21 22] and [25]. Aspect can require repayment by reference to a determination of the parties original rights and liabilities as they stood when they were adjudicated upon. (5) Higgins on the other hand is time barred from pursuing its counterclaim for the balance of its original claim. This is the consequence of Higgins own decision not to commence legal proceedings to have the dispute finally determined within the limitation periods applicable to its claims [26 29 and 33]. (6) The Court of Appeals obiter observations in Walker Construction Ltd v Quayside Homes Ltd [2014] EWCA Civ 93, approving Akenhead Js decision in the present case, were wrong [34].

The Supreme Court has before it appeals by four individuals, VB, CU,CM and EN, whose extradition is requested by the respondent, the Government of Rwanda (GoR), so that they may stand trial in Rwanda for crimes allegedly committed during the civil war which took place between April and July 1994. Memoranda of Understanding dated 8 March 2013 were made between the United Kingdom and Rwanda in respect of the four appellants and a certificate issued by the Secretary of State under section 194 of the Extradition Act 2003. Consequently, Part 2 (contained in sections 69 et seq) of the 2003 Act applies to the relevant extradition proceedings. The main issues are whether, in the absence of any relevant statutory power, it is open to the district judge hearing the extradition proceedings (a) to use a closed material procedure to receive evidence which the appellants wish to adduce, or (b) in the alternative in relation to some of such evidence to make an irrevocable non disclosure order providing for the disclosure of such evidence to the Crown Prosecution Service (CPS), but prohibiting its disclosure to the GoR. A subsidiary point is whether in relation to some of the evidence it would be possible to make an anonymity order, either under the Coroners and Justice Act 2009, section 87, or otherwise. 4. The GoR has sought previously, in 2007, to obtain the extradition of the appellants. The district judge was satisfied that there was a prima facie case of involvement in genocide and crimes against humanity, but in April 2009 the High Court discharged the appellants on the ground that the appellants faced a real risk of a flagrant denial of justice if returned to Rwanda to stand trial: VB and others v Government of Rwanda [2009] EWHC 770 (Admin). Since 2009 there have been changes in Rwanda, including the introduction of facilities for witness protection, video conferencing and the possibility of using international judges to try cases of alleged genocide, and in the light of these changes a number of national and international courts have held that other persons wanted for trial in Rwanda would receive a fair trial there. The appellants case is that the risks remain, at least in relation to them and some of the Rwandan based witnesses whose evidence they wish to adduce; that they themselves would as a result suffer a flagrant denial of justice, in breach of article 6 of the Human Rights Convention, or even torture or mistreatment in breach of article 3, if extradited to Rwanda; that the evidence to demonstrate the existence of such risks requires, by the very nature of the risks, either to be received in closed session or to be disclosed only to the CPS; and that witness anonymity would, at least in relation to much of such evidence, offer no solution, since the content of the evidence is such as would necessarily disclose the identity of the witness giving it. None of this means that there is not and will not also be other evidence before the district judge, and some of it has already been called. The extradition proceedings to date 5. The current extradition proceedings have been proceeding before District Judge Arbuthnot. The Government of Rwandas evidence to establish a prima facie case has been read, and the District Judge has already heard, in open court, various witnesses called by the appellants. Among them is Ms Scarlet Nerad, co founder of Centre for Capital Assistance and founder of Community Resource Initiative. She had investigated in Rwanda witnesses giving evidence for the GoR against CU and attested to meeting one of them, who had been tortured during the period ending in 2000 and remained too frightened of being tortured again to give evidence unless its disclosure was limited to the CPS, and to believing that others were in similar position. The appellants also called an expert, Professor Filip Reyntjens. Two further experts are scheduled to give evidence later in the proceedings, Dr Phil Clark to be called by the Government, who will it appears take issue with points made by Professor Reyntjens, and Professor Timothy Longman to be called by the appellants. It is common ground that in relation to issues of extraneous circumstances (section 81), human rights (section 87) and abuse of process, it is established practice to allow extensive relaxation of the ordinary rules of evidence in extradition proceedings. However, the closed material which the appellants wish to adduce is, they say, factual and specific evidence which would not otherwise be capable of being adduced. 6. 7. The issues thus arising regarding use of a closed material procedure were argued before District Judge Arbuthnot. She on 28th January 2014 gave a judgment in which she held herself bound by authority to hold that it would be unlawful to sit in private. However, during a case management hearing in December 2013 from which she excluded the Government of Rwandas representative, those representing VB gave her a file of the proposed evidence and in January 2014 those representing CU sent her another file, not for disclosure to the Government. The District Judge recorded in her judgment (para 5) that she had read both files, and was for the purpose of 8. this argument only prepared to accept they contain important and material evidence which is relevant to the issues I have to decide. After concluding that the applications to rely on the material in a closed hearing must fail, she also added (para 23): I have concerns that there may be a risk of serious prejudice to the defence in making that decision but in all the circumstances I do not consider I have any choice. For that reason with some reluctance I refuse the application. That was a comment which she made without the Government of Rwanda having had the opportunity to make submissions on, or to explore the accuracy of, the material in question. Unless and until the District Judge reached a conclusion on the permissibility of a closed material procedure opposite to that which she in fact reached, the right course would have been not to see or read the files. In the course of her judgment, District Judge Arbuthnot also considered whether (if and to the extent that the substance of any of the proposed evidence could be disclosed) a witness anonymity order could be made under section 87 of the Coroners and Justice Act 2009. She thought not, in view of the requirement under section 87(3) that, in the case of an application by a defendant, the defendant must inform the prosecutor as well as the court of the identity of the witness. 9. The four appellants challenged the District Judges judgment by judicial review, identifying the Westminster Magistrates Court as defendant, the Government of Rwanda as first interested party and the CPS as second interested party. By judgment dated 27 March 2014, the Administrative Court (Moses LJ and Mitting J) granted permission, but dismissed the challenge to the District Judges refusal to admit evidence that was not disclosed to the Government of Rwanda. The Administrative Court, effectively of its own motion, raised the question whether section 87 of the Coroners and Justice 2009 applied, and in its judgment expressed the view that it would enable the appellants to apply for a witness anonymity order in respect of any evidence the substance of which they were willing to disclose. The Court reached this conclusion on the basis that, although the appellants were defendants and the proceedings were criminal proceedings within the meaning of the 2009 Act, neither the CPS nor the Government of Rwanda was a prosecutor within the definition in that Act. There was thus no requirement under section 87(3) to disclose the identity of the relevant witnesses to anyone save the court. 10. On appeal to the Supreme Court, the main burden of the appellants submissions has been taken by Mr Alun Jones QC for VB and by Mr Edward Fitzgerald QC for CU. Both endorse each others submissions. They submit that under the previous legislative scheme the Secretary of State had a role which enabled him to decide whether extradition was appropriate in the light of material which the requesting state did not see, and that under the 2003 Act the courts must have been intended to inherit a similar role or freedom. They submit that extradition proceedings are not classic adversarial or criminal proceedings, but sui generis. They rely upon the established practice to relax the normal rules of evidence in relation to certain issues capable of arising in extradition proceedings (para 6 above). 11. These submissions all contribute to the further principal submissions, that the courts should recognise in respect of extradition proceedings a third exception to the normal rule identified in Al Rawi, that absent Parliamentary authority justice should be open as between all the parties to litigation; or that, alternatively and by analogy with the position in asylum proceedings (cf W (Algeria) v Secretary of State for the Home Department [2012] UKSC 8, [2012] 2 AC 115), the courts should recognise the GoR as a special kind of party and restrict disclosure to the CPS. 12. Mr Fitzgerald supports this last submission with the argument that, if an order for extradition were to be made on the basis of the open material alone, it would still be open to those appellants who are not United Kingdom citizens to apply for asylum, which application could be decided, both by the Secretary of State and (since there is a statutory scheme in place for use of a closed material procedure in asylum cases) by the courts, on the basis of both open and closed material. The resulting anomaly would be compounded by the possibility that those appellants who are United Kingdom citizens would, because they could not make an asylum claim, be worse off than those who were not (although the appellants also submit that their United Kingdom status might give them corresponding protection by a different route). The Extradition Act 2003 analysis 13. The 2003 Act was framed to provide a clear structure for decision making. The Secretary of States role was carefully delimited and section 70(11) now provides, by amendment made in 2013, that she is not to consider whether the extradition would be compatible with the Convention rights within the meaning of the Human Rights Act 1998. Once an extradition request has been received and certified, and the person sought has been arrested under a provisional warrant and the appropriate judge has received the relevant documents under section 70, the extradition hearing will be fixed to commence under section 76. At that hearing, according to section 77(1): the appropriate judge has the same powers (as nearly as may be) as a magistrates court would have if the proceedings were the summary trial of an information against the person whose extradition is requested. 14. Assuming that the District Judge is satisfied as to certain important preliminaries, she must then proceed under section 79 to consider whether any one of five potential bars to extradition applies. They are the rule against double jeopardy (section 80), extraneous considerations (section 81), the passage of time (section 82), hostage taking considerations (section 83) and (since 14 October 2013) forum (section 83A E). Section 81 provides: A persons extradition to a category 2 territory is barred by reason of extraneous considerations if (and only if) it appears that (a) the request for his extradition (though purporting to be made on account of the extradition offence) is in fact made for the purpose of prosecuting or punishing him on account of his race, religion, nationality, gender, sexual orientation or political opinions, or (b) if extradited he might be prejudiced at his trial or punished, detained or restricted in his personal liberty by reason of his race, religion, nationality, gender, sexual orientation or political opinions. 15. Assuming that none of the five bars applies, the judge must proceed under section 84 which provides: (1) If the judge is required to proceed under this section he must decide whether there is evidence which would be sufficient to make a case requiring an answer by the person if the proceedings were the summary trial of an information against him. (2) In deciding the question in subsection (1) the judge may treat a statement made by a person in a document as admissible evidence of a fact if (a) the statement is made by the person to a police officer or another person charged with the duty of investigating offences or charging offenders, and (b) direct oral evidence by the person of the fact would be admissible (3) In deciding whether to treat a statement made by a person in a document as admissible evidence of a fact, the judge must in particular have regard (a) to the nature and source of the document; (b) to whether or not, having regard to the nature and source of the document and to any other circumstances that appear to the judge to be relevant, it is likely that the document is authentic; (c) to the extent to which the statement appears to supply evidence which would not be readily available if the statement were not treated as being admissible evidence of the fact; (d) to the relevance of the evidence that the statement appears to supply to any issue likely to have to be determined by the judge in deciding the question in subsection (1); (e) to any risk that the admission or exclusion of the statement will result in unfairness to the person whose extradition is sought, having regard in particular to whether it is likely to be possible to controvert the statement if the person making it does not attend to give oral evidence in the proceedings (4) A summary in a document of a statement made by a person must be treated as a statement made by the person in the document for the purposes of subsection (2). 16. If the judge decides under section 84(1) that sufficient evidence exists, she must then under section 87: decide whether the persons extradition would be compatible with the Convention rights within the meaning of the Human Rights Act 1998 If she does so decide, she must send the case to the Secretary of State for her decision whether the person is to be extradited, informing the person of his right to an appeal to the High Court (which will not however be heard until after the Secretary of State has made her decision). The Secretary of States role in respect of any case so sent her is closely circumscribed by section 97, which limits it to considering whether she is prohibited from ordering the extradition sought by section 94 (death penalty), section 95 (speciality), section 96 (earlier extradition to the UK from other territory or section 96A (earlier transfer to the UK by the International Criminal Court). If none of those sections applies, then (unless the request for extradition has been withdrawn or the person is discharged in the light of competing extradition requests or claims or on national security grounds), the Secretary of State must under section 93(4) order extradition. 17. The specific scheme introduced by the 2003 Act is not consistent with the appellants submission that the court has simply acquired the like powers to any which the Secretary of State might have exercised prior to the Act. The scheme involves a tight delineation of the respective roles and powers of the Secretary of State and the courts, by reference to which the present appeals must be decided. The extradition process is now substantially judicialised. But the previous legislation also gave courts a significant substantive role in relation to the extraneous considerations now covered by section 81of the 2003 Act: see section 6(1) of the Extradition Act 1989; prior to that, it had a similar role, as regards any request made with a view to trial or punishment for an offence of a political character: see section 3(1) of the Extradition Act 1870, considered in R v Governor of Brixton Prison, Ex p Schtraks [1964] AC 556. Outside the express statutory scheme, the court can however consider whether an extradition request involves an abuse of process by the requesting state: R (Government of the USA) v Bow Street Magistrates Court (Tollman no. 1) [2006] EWHC 2256 (Admin), [2007] 1 WLR 1157. None of these circumstances provides any support for the appellants submission that any wider powers previously possessed by the Secretary of State must now by implication be exercisable by the courts. 18. The appellants submission that extradition proceedings are not conventional criminal proceedings is correct, up to a point. They do not lead to conviction, but they are brought to obtain surrender for the purpose of trial abroad. They are an important aspect of enforcement of the rule of law worldwide. The jurisdiction of a magistrate in extradition proceedings is derived exclusively from statute: In re Nielsen [1984] AC 606, p 623D E, per Lord Diplock. The 2003 Act prescribes that the district judges powers are the same as nearly as may be as those possessed by a magistrate on a summary trial and that the judges role is to decide whether there is evidence that would be sufficient to make a case requiring an answer by the person if the proceedings were the summary trial of an information against him: see sections 77(1) and 84(1) of the 2003 Act cited in paras 13 and 15 above. The appellants submit that section 77(1) is not to be read as covering evidential matters; on their case, it deals only with other matters such as powers over witnesses and the conduct of proceedings. The powers of a magistrates court on a summary trial and of a District Judge under the 2003 Act are however statutory, and the natural effect of section 77(1) is to provide for all aspects of their exercise, including the admission and admissibility of evidence. 19. Both the general correctness of treating extradition proceedings as criminal proceedings, albeit of a very special kind, and the correctness of understanding section 77(1) in its natural sense as embracing evidence and procedure, are confirmed under the parallel provision in the previous legislation, the Extradition Act 1989, by R v Governor of Brixton Prison, Ex p Levin [1997] AC 741. In that case, Lord Hoffmann, in a speech with which all other members of the House concurred, said, at pp 746 747: Finally, I think that extradition proceedings are criminal proceedings. They are of course criminal proceedings of a very special kind, but criminal proceedings nonetheless. Both case law and the terms of the Extradition Act 1989 point to extradition proceedings being categorised as criminal. First, the cases. In Amand vs Home Secretary and Minister of Defence of Royal Netherlands Government [1943] A.C. 147 this House approved the decision of the Court of Appeal in Ex parte Alice Woodhall (1888) 20 Q.B.D. 832 that the refusal of an application for habeas corpus by a person committed to prison with a view to extradition was a decision in a criminal cause or matter. It would seem to me to follow a fortiori that the extradition proceedings themselves are criminal proceedings and in Amand's case Viscount Simon L.C. said, at p 156, that the cases demonstrated that the matter in respect of which the accused is in custody may be criminal although he is not charged with a breach of our own criminal law. Secondly, the Extradition Act 1989. Section 9(2) and paragraph 6(1) of Schedule 1 require that extradition proceedings should be conducted "as nearly as may be" as if they were committal proceedings before magistrates. Committal proceedings are of course criminal proceedings and these provisions would make little sense if the metropolitan magistrate could not apply the normal rules of criminal evidence and procedure. The suggestion of counsel in Ex parte Francis that extradition proceedings were sui generis would only make matters worse, because it would throw doubt upon whether the magistrate could apply the rules of civil evidence and procedure either. 20. The appellants submit that contrary indication is to be found in established case law and the provisions of section 202 of the 2003 Act. Section 202(3) providing that a document issued in a category 2 territory may be received in evidence in extradition proceedings if duly authenticated which by section 202(4) means that it purports to be signed by a judge, magistrate or officer of the territory, or to be authenticated by the oath or affirmation of a witness. The purpose of section 202(3) is clearly to permit the use of such documents as evidence of the matters stated therein, about which oral evidence would otherwise have to be called. Section 202(5) goes on to provide that this does not prevent a document which is not duly authenticated from being received in evidence in proceedings under the Act. On its face, this simply extends the power to admit a document as evidence of its contents to unauthenticated documents. But it is unnecessary on these appeals to decide finally that this is as far as it goes, since it clearly cannot be read as addressing the issues whether any form of closed material procedure is permissible, now before the Supreme Court. 21. The parties to this appeal agree that, as a matter of established practice, the normal rules of evidence are relaxed on issues arising under the heads of extraneous considerations, human rights and abuse of process in extradition proceedings. At the root of their agreement on this point is the decision in Schtraks. There the House of Lords was considering the courts role under section 3(1) of the Extradition Act 1870, which prohibited surrender if the person requested prove to the satisfaction of the court before whom he is brought on habeas corpus, or to the Secretary of State, that the requisition for his surrender has in fact been made with a view to try or punish him for an offence of a political character 22. The House reasoned that, since the Secretary of State could not have been intended to be bound by the strict rules of evidence, the court could not have been intended to be. In Lodhi v The Governor of Brixton Prison [2001] EWHC 178 Admin, para 89, and Hilali v The Central Court of Criminal Proceedings No 5 of the National Court, Madrid [2006] EWHC 1239 Admin, the Divisional Court was concerned with an issue of extraneous circumstances arising under, respectively, section 6(1) of the 1989 Act and section 13 of the 2003 Act. Making express reference to Schtraks v Government of Israel [1964] AC 556, it said (in paras 89 and 63 respectively) that it was, in this context, common ground . that the court is not restricted to considering evidence in the strict sense and long . established that the Court is not bound by the ordinary rules of evidence; the appellant may rely on any material in support of a submission based on section 13. 23. The legislation has changed since Schtraks v Government of Israel [1964] AC 556, but it is unnecessary on this appeal to say anything more about the established practice on which the parties are agreed. Whatever its admissible scope, the Supreme Court understands it to be common ground that it does not extend beyond the areas of extraneous considerations, human rights and abuse of process; in particular, it does not apply to other issues such as whether a prima facie case has been shown under section 84(1). Under the current legislation, the better analysis may be not that the ordinary rules of evidence are suspended in the areas to which the practice is agreed to apply, but that a broad approach is taken to the nature and basis of the expert evidence that is admissible. In any event, any relaxation in the areas of extraneous considerations, human rights and abuse of process cannot affect the normal rule that applies to a witness called to give evidence before a court, viz that his or her evidence must be given and be capable of being tested inter partes. Any relaxation, on whatever basis, does not therefore help on the present issue whether the district judge can operate a closed material procedure without any statutory authority. 24. Reliance was also placed on a procedure accepted by the Divisional Court in Tollman no. 1 [2007] 1 WLR 1157 (para 16 above), whereby a judge, before whom reason was shown to believe that an abuse of process had occurred, could call upon the requesting authority to provide whatever information or evidence he or she might require in order to adjudicate upon the issue so raised. Such information and evidence should normally be made available to the defendants, because (para 90) Equality of arms requires that, in normal circumstances, the party contesting extradition should be aware of, and thus able to comment on, the material upon which the court will be basing its decision. 25. However, the Divisional Court in Tollman no. 1 indicated that it was not open to the district judge to order the production of the material. If the requesting government was unwilling for it to be seen by a defendant, but prepared to allow the judge to see it, then the judge could evaluate its significance. If the judge concluded that its disclosure was in fairness required, the requesting government could be given a further chance to disclose, failing which disclosure the appropriate course would be to dismiss the extradition request as an abuse. The Divisional Court would by implication presumably also have regarded dismissal as appropriate if the requesting authority refused to allow the material to be seen even by a judge before whom reason had been shown to believe that an abuse of process had occurred. 26. Tollman no. 1 is of no real assistance on the issue now before the Supreme Court. It concerns circumstances where a prima facie case of abuse of process is shown and the requesting authority cannot rebut that case without disclosing to the defendant material which it has. In such a case, it may well be appropriate to put the requesting authority to its election to disclose such material or in effect abandon its request. The present appeal concerns circumstances where a defendant wishes, in support of its case, to rely on material which he has, without showing such material to the requesting government. Far from promoting the equality of arms, of which the Divisional Court spoke in Tollman no. 1, the appellants case involves departing significantly from it. 27. At the core of the appellants case is the submission that extradition proceedings are special in a sense which justifies or calls for a further qualification of the principle of open justice, beyond any recognised in Al Rawi v Security Service [2011] UKSC 34. In Al Rawi and, more recently, in R (British Sky Broadcasting Ltd) v Central Criminal Court [2014] UKSC 17, the courts were concerned with the question whether they could, without any statutory basis, use closed hearing procedures to enable public authorities to avoid disclosure to individual litigants of allegedly sensitive security material, including the identity of the witness providing it. This Court declined any general power to do so, and in Al Rawi at paras 63 65, per Lord Dyson, identified only two categories of potential exception to the normal rule: (a) child welfare cases where the whole object of the proceedings is to protect and promote the best interests of the child and (b) intellectual property cases where full disclosure would undermine the whole object of the proceedings (to protect intellectual property), so that confidentiality rings are permissible, at least at the interlocutory stage. 28. The appellants point to the underlying rationale of those cases, that a departure from the normal rule may be justified by special reasons in the interests of justice: para 63, per Lord Dyson. In their submission, a further departure is justified in the present case by the protective nature of the bars to extradition which exist in cases of extraneous circumstances, potential human rights violations and abuse of process; and, if a closed material procedure is necessary in order to be able to demonstrate the existence of one or more of these bars, a closed material procedure must be permissible. The appellants submit that this is reinforced by a triangulation of interests present where public interest considerations militating in favour of extradition and trial are matched by the need to protect not only the appellants but also independent witnesses from risks of persecution, human rights violations and abuse of process. The phrase comes from Lord Woolfs speech in R (Roberts) v Parole Board [2005] UKHL45, [2005] 2 AC 738, para 48. 29. A principal difficulty about accepting these submissions is that they assume what they set out to prove. The appellants already have the benefit of expert evidence and such factual evidence as they are able to call without a closed material procedure. Expert evidence customarily includes material of which there is no direct proof, and it is, as stated, common ground on this appeal that the strict rules governing the adducing of factual material will not be applied to the relevant issues. It is inevitably only speculation that any material which the appellants might adduce in a closed material procedure would be relevant, truthful or persuasive, and the very nature of a closed material procedure would mean that this could not be tested. The same applies to any material which might be ordered to be adduced to the CPS on the basis that it would not be further disclosed to the GoR. The appellants are inviting the Court to create a further exception to the principle of open inter partes justice, without it being possible to say that this would be necessary or fair. 30. The two exceptions identified in Al Rawi differ from the further exception now advocated. In the first, the paramount object of the proceedings is not the resolution of an inter partes dispute, but the protection of a third party, the child. In the second, the object, to protect intellectual property belonging to one party, would be frustrated if the intellectual property were disclosed. Even then, in giving this example, Lord Dyson at para 64 made clear that its focus was on the interlocutory stages of proceedings; the trial could be expected to proceed on a fully inter partes basis, without use of the intellectual property as such in evidence. 31. Roberts was explained in this Court in Al Rawi as turning on the existence of an express statutory power to adopt a closed material procedure: para 55, per Lord Dyson. But, in any event, there is in the present case no triangulation of interests parallel to that identified by Lord Woolf in Roberts. The witnesses whose evidence the appellants wish to adduce are on no basis at risk. If a closed material procedure (or, where relevant, a limitation of disclosure of their evidence to the CPS) were ordered, they would not be at risk. But, equally, if a closed material procedure or such a limitation is refused, the appellants will not adduce their evidence at all. There is therefore a two sided issue between the GoR and the appellants alone, not a triangulation. 32. As to the appellants reliance on the special nature of extradition proceedings (para 19), the public and international interest in bringing potential offenders to trial is significant. So too of course is the public and human interest in ensuring that individuals are not surrendered to places where they will suffer risks of human rights or other abuses. But the assessment of each of these potentially competing factors falls to be determined on an inter partes basis between, in this case, the GoR and the appellants. It is an assessment subject to the clearly established statutory procedure in the 2003 Act, and it is one which, so far as appears from that Act, can and should be performed in the ordinary way by the adducing of evidence on the relevant issues on each side. 33. For good measure, I note that it was also a balance struck in relation to surrender to Rwanda for trial by the High Court in VB and others v Government of Rwanda [2009] EWHC 770 (Admin) (refusing surrender), but that there have been a number of subsequent decisions concluding that fair trial was possible in Rwanda notably by the ICTR Referral Chamber on 28 June 2011 in respect of Mr Uwinkindi, the Oslo District Court on 11 July 2011 in respect of Mr Bandora, the European Court of Human Rights on 27 October 2011 in respect of Mr Ahorugeze, the ICTR Appeals Chamber upholding the Referral Chamber in respect of Mr Uwinkindi on December 2011 and the ICTR Referral Chamber on 22 February 2012 in respect of Fulgence Kayishema. The nature of the issues and procedures involved in 34. these cases has not however been the subject of any close examination on this appeal. In these circumstances, I see no basis on which this Court would be justified in recognising or creating in the present circumstances a closed material procedure as a new exception to the principle of open inter partes justice recognised in Al Rawi. 35. The appellants fall back case in respect of some of the relevant material is that the district judge should be recognised as having power to limit disclosure to the CPS and to prohibit further disclosure to the GoR. In extradition proceedings under the 2003 Act the CPS acts on behalf of a requesting state or authority, although owing duties to the court, as explained in R (Raissi) v Secretary of State for the Home Department [2008] EWCA Civ 72, [2008] QB 836. In relation to the possibility of a non disclosure order, the appellants rely on W (Algeria) v Secretary of State for the Home Department [2012] UKSC 8, [2012] 2 AC 115. There, the Home Secretary had given each appellant notice of the intention to deport him to Algeria on the basis that his presence in the United Kingdom was not conducive to the public good on grounds of national security. Each asserted before the Special Immigration Appeals Commission (SIAC) that he would be likely on return to Algeria to suffer ill treatment contrary to article 3 of the Human Rights Convention. One of them wished to adduce evidence from a source who required an absolute and unconditional guarantee of permanent confidentiality as a precondition to giving evidence. It was common ground (para 27) that SIAC had under the Special Immigration Appeals Commission (Procedure) Rules 2003, rules 4, 39(1) and 43 power to make such an order against the Home Secretary, with the effect of precluding any disclosure of the evidence to Algeria. 36. Lord Brown and Lord Dyson, in judgments with which the other members of this Court agreed, held that, although such orders come perilously close to offending against basic principles of open justice and although it would mean that the Home Secretary will be largely unable to investigate [the evidence] and will find it difficult, therefore, to explain or refute it (paras 16 and 17, per Lord Brown), nonetheless such an order was in the circumstances justified. Lord Dyson noted that: 36. Regrettably, . the circumstances of a case sometimes call for unusual and undesirable remedies. Ultimately, the court has to decide what is demanded by the interests of justice. In weighing the prejudice that the Secretary of State may suffer in the appeal process as a result of an irrevocable non disclosure order, it should not be overlooked that the appeals themselves will be conducted entirely inter partes. In particular, no material that is placed before SIAC by the appellants will be withheld from the Secretary of State. She may be able to demonstrate that the claimed need for confidentiality is without foundation and to persuade SIAC to give the evidence little or no weight for that reason alone. She may also be able to test the evidence of the witness(es) effectively even though she has been unable to discuss it with the AAs. For example, she may be able to show on the basis of objective general material about the conditions in Algeria that the evidence of the witness is unlikely to be true; and even where the evidence is more specific, she may be able to obtain information from the AAs which will enable her to rebut the evidence without divulging the name or identity of the witness or saying anything which might lead to his or her identification. It will, of course, depend on the nature of the evidence to be given by the witness. I do not wish to suggest that the effect of an irrevocable non disclosure order may not inhibit the ability of the Secretary of State to resist the appeals. In some cases, such an order will undoubtedly have that effect. But it cannot safely be said that it is bound to do so in every case. 37. The circumstances in W (Algeria) differ very significantly from the present. The issue there was between the Secretary of State and Algerian nationals, who the Secretary of State was seeking to remove from the jurisdiction. Algeria had no interest in claiming or receiving the return of W or his fellow Algerians, perhaps the contrary. Algeria was not party to the proceedings brought by the Algerian nationals against the Secretary of State to challenge the order for their removal. SIAC had express statutory power to make the non disclosure order sought. In contrast, the present appeals are taking place on an inter partes basis between the appellants and the GoR, which has a real and direct interest in their pursuit and in obtaining the surrender of the appellants. The CPS are merely representing the legal interests of the GoR. Further, even if these factors were not by themselves conclusive, the district judge has no special statutory power which could enable her to make a non disclosure order in relation to the GoR. 38. This brings me to two final points made by the appellants. First, VB has since 2001 or 2002 been a United Kingdom citizen. Relying on Halligen v Government of the USA, sub nom. Pomiechowski v Poland [2012] UKSC 20, [2012] 1 WLR 1604, Mr Jones submits that he enjoys a common law right of residence in the United Kingdom, and that article 6 applies to the determination of extradition proceedings which engage that right. Accepting the premise, I am unable to draw from it any conclusion that article 6 requires the district judge to discard the ordinary principles of open inter partes justice, contrary to Al Rawi and to the conclusions that I have reached up to this point. 39. The other point, advanced forcefully by Mr Fitzgerald, relates to the other appellants who are foreign nationals. If they are unable to adduce evidence under a closed material procedure or to obtain a non disclosure order, and extradition orders are made against them, then they will claim asylum, says Mr Fitzgerald. On an asylum claim, the issue will be between them and the United Kingdom authorities. They will be able under the relevant rules, in particular AIT (Procedure) Rules 2005 rules 45(1) and 45(4)(i), to invite the First Tier Tribunal to make directions relating to the conduct of the proceedings and, more particularly, to issue directions making provision to secure the relevant appellants anonymity. The Tribunal would, if necessary, also be able under rule 54(3) to exclude the public in order to protect such appellants private lives or under rule 54(4), in exceptional circumstances and if and to the extent strictly necessary, to ensure that publicity does not prejudice the interests of justice. Mr Fitzgerald submits that the Tribunals rules are sufficiently analogous with those of SIAC for it to be able, like SIAC, to make a non disclosure order such as was permitted in W (Algeria). (Since the present cases do not appear to engage interests of public order or national security, the further provisions of rule 54(3) addressing those interests appear irrelevant, and, for the same reason, it appears that any asylum claim by the present appellants would come before the Tribunal, rather than SIAC.) 40. When the Convention relating to the Status of Refugees (1951) (Cmd 9171) was agreed, the answer to any such claim for asylum as Mr Fitzgerald suggests may have been conceived as lying in article 1F(b), which provides that: The provisions of this Convention shall not apply to any person with respect to whom there are serious reasons for considering that: (a) he has committed a crime against peace, a war crime, or a crime against humanity, as defined in the international instruments drawn up to make provision in respect of such crimes; (b) he has committed a serious non political crime outside the country of refuge prior to his admission to that country as a refugee; (c) that he has been guilty of acts contrary to the purposes and principles of the United Nations.2 42. 41. Regulation 2 of the Refugee or Person in Need of International Protection (Qualification) Regulations 2006 (SI 2006/2525) (transposing into United Kingdom law Council Directive 2004/83) provides that "'refugee' means a person who falls within article 1(A) of the Geneva Convention and to whom regulation 7 does not apply". Regulation 7(1) states that "A person is not a refugee, if he falls within the scope of article 1D, 1E or 1F of the Geneva Convention". In R (JS (Sri Lanka)) v Secretary of State for the Home Department [2010] UKSC 15, [2011] 1 AC 184, Lord Brown recorded (para 2) that It is common ground between the parties (i) that there can only be one true interpretation of article 1F(a), an autonomous meaning to be found in international rather than domestic law; (ii) that the international instruments referred to in the article are those existing when disqualification is being considered, not merely those extant at the date of the Convention; (iii) that because of the serious consequences of exclusion for the person concerned the article must be interpreted restrictively and used cautiously; and (iv) that more than mere membership of an organisation is necessary to bring an individual within the article's disqualifying provisions. 43. In Al Sirri v Secretary of State for the Home Department [2012] UKSC 54, [2013] 1 AC 745, the Supreme Court considered the standard of proof required to bring a case within article 1F(c) and held (para 16) The article should be interpreted restrictively and applied with caution. There should be a high threshold defined in terms of the gravity of the act in question, the manner in which the act is organised, its international impact and long term objectives, and the implications for international peace and security. And there should be serious reasons for considering that the person concerned bore individual responsibility for acts of that character. 44. Since criminal proceedings against Mr Al Sirri had been dismissed on the ground that no reasonable and properly directed jury could on the evidence available convict him (Al Sirri, para 23), it is not entirely clear why it was necessary to attempt to define the relevant standard of proof in that case. Adopting the approach in Al Sirri, article 1F(b), appearing between the two articles considered in these two authorities, covers serious non political crime which may, nevertheless, not always reach the standard of seriousness envisaged in articles 1F(a) and (c). But it seems reasonably clear that a similar approach must apply under all three articles. On that basis, the prima facie proof of involvement in the crimes committed during the Rwandan civil war, which the GoR seeks to adduce against these appellants, may not be sufficient to bring any of the articles in article 1F into play. It is therefore conceivable that, if the present proceedings lead to extradition orders against all four appellants, the three appellants who are not United Kingdom nationals will be able to seek to claim asylum, and in the course of so doing before the First Tier Tribunal to seek some form of order which would have the effect of precluding disclosure to the GoR of evidence which they wish to call but cannot call if its author or contents will or may thereby become known to the GoR whereas VB as a United Kingdom citizen will not be able to do this and will be liable to immediate surrender. 45. A number of observations may be made on this possibility. First, it may of course be that the nature of the evidence adduced before the District Judge in the present proceedings and before the First Tier Tribunal on any asylum claim may satisfy SIAC even to the higher standard which Al Sirri indicates to be required. Second, it is relevant to recognise the normal reason for which a court or tribunal would decide to exercise its discretion to give directions for anonymity or to exclude the public in asylum proceedings. This is not related to the reasons for seeking such a procedure in the present case in other words, it is not to expand the nature of the evidence admissible in asylum proceedings. Rather, it is to protect the asylum seeker him or herself, as well as others, particularly any dependants and family members in his or her home country, from persecution or other harm, which might result from knowledge of the asylum proceedings. This is now reflected in a European Union context in article 22 of Directive 2005/85/EC on minimum standards on procedures in Member States for granting and withdrawing refugee status. In the present case, that reason could have no application. The GoR is well aware of the appellants position, knows where they are and is seeking their return. It now also knows of the possibility that some of them may be eligible to make and may well make asylum claims in the United Kingdom. Other grounds on which an anonymity or exclusion order might be sought, as contemplated in Presidential Guidance Note No 2 of 2011 issued by the President of the FTT on 14 February 2011 and revised 7 July 2011 appear equally irrelevant. The appellants may well therefore be unable to obtain any anonymity or exclusion order. However, the further power which was recognised in W (Algeria) was to restrain the Home Secretary from disclosing to the relevant foreign government evidence relating to risks which the asylum seeker claimed that he would face in the foreign country, which evidence he would otherwise have been unable to adduce. Assuming the First Tier Tribunal to have a like power under its rules, as Mr Fitzgerald submits, the reasoning in W (Algeria) lends support to the appellants case that they might be able in asylum proceedings before the Tribunal, to which the GoR is not party, to adduce evidence from witnesses which they cannot adduce in the present proceedings to which the GoR is party. 46. Third, assuming that the (on the face of it somewhat anomalous) scenario indicated in the preceding paragraphs is a possible one, and that the appellants might in fact also be able to obtain permission to obtain from the First Tier Tribunal some form of order which would prevent disclosure of material evidence to the GoR, this would be the consequence of a variety of factors: the possession by the appellants of different nationalities; different standards of proof involved in extradition and in asylum proceedings; and different statutory regimes. It cannot in my view distort or alter the clear conclusions which I have arrived at in relation to the extradition proceedings, which are all that are currently before the Supreme Court. Section 87 of Coroners and Justice Act 2009 47. I add a brief word on the application of section 87 of the Coroners and Justice Act 2009, on which the Administrative Court expressed views, as set out in para 9 above. The Divisional Court concluded that the term defendant in section 87 was wide enough to include the appellants, but that the term prosecutor was incapable of covering a requesting state. That would appear unsustainable on any view. However, before the Supreme Court, it was in the event common ground that section 87 has no relevant application to extradition proceedings at all. 48. The reasons were explained by Mr James Lewis QC for the GoR as follows: Section 87 only applies where there is a defendant charged with an offence to which the proceedings relate: section 97(1). That, on a true construction, does not embrace extradition proceedings with a view to a trial abroad. a. b. By the same token, a foreign state requesting surrender should not be treated as prosecutor, even though extradition proceedings are criminal proceedings of a special kind. c. The Extradition Act 2003 itself is careful to refer to the person whose surrender is requested as such, rather than to the defendant, and it makes specific provision when the concept of defendant is intended to include such person as well as when the concept of prosecutor is intended to include a requesting authority: see e g section 205(3). One might have expected similar caution in the 2009 Act, had section 87 been intended to cover extradition proceedings. 50. Assuming section 87 to be inapplicable, there is authority that anonymous evidence may be admissible in certain circumstances in extradition proceedings: R (Al Fawwaz) v Governor of Brixton Prison [2001] UKHL 69, [2002] 1 AC 556. In the light of the requirement in section 84 of the Extradition Act 2003 that there should be evidence . sufficient to make a case requiring an answer if the proceedings were the summary trial of an information, that conclusion cannot be justified on a simple basis that extradition proceedings are not themselves criminal proceedings. Equally, it is no longer possible to justify the reasoning in Al Fawwaz in so far as it endorsed the approach to anonymous evidence taken at common law in R v Taylor and Crabb [1995] Crim LR 254, prior to the Houses decision in R v Davis [2008] UKHL 36; [2008] 1 AC 1128. But, since the enactment of the Criminal Evidence (Witness Anonymity) Act 2008 and now sections 86 97 of the Coroners and Justice Act 2009, anonymous evidence may under statutory conditions be admitted at trial, and, without going further into this aspect, in those circumstances at least the requirements of section 84 of the Extradition Act 2003 will be capable of being met. Again, I have read and agree with Lord Hughes analysis of the law in this respect. Conclusion 51. For the reasons given in paras 1 to 46, I would dismiss the appellants appeals. LORD HUGHES (with whom Lord Neuberger and Lord Reed agree) 52. (i) and I very largely agree with the conclusions set out in Lord Mances judgment and need not repeat what he so clearly sets out. It is clear to me that the extradition court ought never to embark upon closed material procedures, hearing evidence on behalf of the person whose surrender is sought, but altogether withholding that evidence from the other party, the Requesting State, so that the latter not only cannot respond to it, but does not even known what it is to which response is called for. I deal here only with two issues: the impact (if any) of our decision upon procedure to be adopted in any subsequent asylum or human rights claims which might be made by any of the appellants, or by people in a similar position; the separate question whether an extradition judge conducting proceedings under the Extradition Act 2003 has the power to receive evidence from a witness who is anonymous, that is to say whose identity is withheld from one or other party to the proceedings. That is of course not the same as a closed material procedure, where evidence is received which is altogether withheld from one or other party. A witness who is anonymous is heard by all parties. All parties have the opportunity to agree or contradict what he says and his evidence can be tested by cross examination, albeit the extent of cross examination may be limited by his anonymity. Subsequent immigration or human rights claims (ii) (i) 53. The possible relevance of subsequent proceedings developed as a potential issue in the present case in the course of oral argument before this court. Before the courts below, and in written argument for this court, the argument advanced on behalf of the persons whose surrender is sought was that immigration proceedings, and particularly asylum claims, provided an analogy, which should be adopted by extradition courts. In asylum claims, it was correctly pointed out, an immigration judge has power to sit in private, in order to protect the confidentiality of the applicant and in particular in order to deny access by the state from whom protection is claimed to the fact that an allegation of danger of persecution is made and to any evidence which may demonstrate that danger, lest reprisals follow. Hence, it was submitted, an extradition court should also by analogy deny a requesting state access to evidence that it would infringe the Convention rights of the person sought, in case the requesting state might use the evidence to ill treat either the person sought or others, such as witnesses. A similar and alternative argument was advanced that an extradition court should in appropriate cases make an irrevocable non disclosure order by analogy with the procedure permitted to SIAC in exceptional circumstances by W (Algeria) v Secretary of State for the Home Department [2012] UKSC 8; (2012) 2 AC 115. 54. However, as the oral argument proceeded, the submission made on behalf of the persons sought expanded beyond suggested powers in the extradition court found by way of analogy with immigration proceedings. It became the more striking submission that unless the extradition court has the powers claimed (to conduct closed material procedures and to make irrevocable non disclosure orders) there would be likely to follow asylum claims by the persons sought, in which different procedures would apply. Said Mr Fitzgerald QC, the applicants whom he represents, who have hitherto been granted leave to remain without dispute and who have never made any kind of asylum claim, might now make such a claim. If they do, he submitted, they ought to be permitted by the Immigration Judge in the First Tier Tribunal to adduce the evidence on which they wish at present to rely before the extradition court, in order to demonstrate that they would be at risk of persecution in Rwanda. And, he submitted, they ought to be permitted to adduce this evidence in a private hearing from which the Government of Rwanda and its representatives are excluded, and to have that evidence relied upon by the Immigration Judge in deciding the asylum claim. Moreover, he submitted, they ought similarly to be permitted to obtain from the First Tier Tribunal an irrevocable non disclosure order preventing the Secretary of State, as the other party to the asylum appeal, from ever disclosing the evidence to Rwanda. The consequence may well be, he submitted, that the Immigration Judge may accept the refugee status of the persons sought, in effect contrary to the findings of the extradition court. 55. Mr Fitzgerald offered the further argument that, if this scenario were to come to pass, there would ensue an unfair distinction between, on the one hand, a person sought who was a foreign national, and thus able to apply for asylum, and, on the other, a British national who is sought. As it happens, one of the present appellants is a British citizen. 56. These arguments call for some consideration of the inter relation of asylum or immigration proceedings on the one hand and extradition proceedings on the other. Is there a prospect of inconsistent findings of fact, or (worse) of inconsistent orders? The court is significantly inhibited in deciding these questions by the late appearance of the arguments, and by their resulting incomplete content. It is likely that if the suggested scenario should come to pass, further full consideration will be essential. It may help, however, to identify at least some signposts. 57. The first and principal reason why an immigration judge may exercise the power to sit in private in an asylum case is to satisfy the international duty of confidentiality towards asylum claimants. This is now well recognised, in particular in Europe by article 22 of Directive 2005/85/EC on minimum standards on procedures in Member States for granting and withdrawing refugee status, which provides: Article 22 Collection of information on individual cases For the purposes of examining individual cases, Member States shall not: (a) directly disclose information regarding individual applications for asylum, or the fact that an application has been made, to the alleged actor(s) of persecution of the applicant for asylum; (b) obtain any information from the alleged actor(s) of persecution in a manner that would result in such actor(s) being directly informed of the fact that an application has been made by the applicant in question, and would jeopardise the physical integrity of the applicant and his/her dependants, or the liberty and security of his/her family members still living in the country of origin. 58. The purpose of this duty of confidentiality is to protect the asylum claimant and/or his family from any risk of reprisals for having made allegations against his home State. For the reasons Lord Mance explains at paragraph 45, this can have no application where the State accused, here Rwanda, knows full details of the persons sought, and indeed has been informed in open court of the suggested possibility of asylum applications. It follows that there would be no reason for any immigration judge to accede to an application to hear any asylum claim in private on this, the common, ground, nor on this ground to hear evidence which Rwanda is prevented from hearing. 59. A second, distinct, possible scenario is afforded in limited circumstances by the decision in W(Algeria) v SSHD (supra). This court there concluded that there could be circumstances in which justice required that, in order to determine whether or not deportation to a particular State would infringe the article 3 (or, it must follow, the article 2) rights of the individual concerned, a court could receive evidence on terms that the other party (the Secretary of State) is ordered not to disclose it to anyone else, including the State to which return is under consideration. That is possible, it was held, where the evidence would otherwise be withheld for fear of reprisals. W(Algeria) was a strong case. The proposed State of return was known to practice torture, which would ordinarily have been a bar to return on article 3 grounds. The evidence went to whether assurances offered by that State to the Secretary of State could be relied upon. The judgments of both Lord Brown and Lord Dyson make it clear that the procedure contemplated was wholly exceptional, because it infringes ordinary principles of natural justice by impairing the ability of one party, the Secretary of State, to challenge and test the evidence. They also make it clear that such a procedure could be expected to be justified only when article 3 rights, not to be the subject of torture or inhuman or degrading punishment, was in question. If other rights were in question, the balance would be likely to fall against so unusual a procedure. 60. There is no question of W (Algeria) authorising the receipt by an extradition judge of evidence of the kind here sought to be adduced. The proceedings in W (Algeria) were deportation (immigration) proceedings, to which the parties were the individual and the Secretary of State, but not Algeria, the proposed State of return. The claimant was at pains to disclaim any argument that the Secretary of State, as a party to the proceedings, should be unable to hear the evidence in question. The order sought, and granted, was one preventing the Secretary of State from passing the evidence on, by way of enquiry or otherwise, to Algeria. In extradition proceedings, the proposed State of return, here Rwanda, is a party. 61. However, the exceptional procedure thus sanctioned in W (Algeria) needs to be considered in context when the relationship of asylum or deportation to extradition is in question. The terms of the Extradition Act make it clear that extradition is subject to the non infringement of the Convention or refugee rights of the individual sought. For Part I extraditions, to European States, section 39 provides that a European arrest warrant is not to result in extradition whilst a claim for asylum is pending. The present case falls under Part II, via section 194. In the context of Part II extraditions, to non European States, the process of extradition begins when the Secretary of State certifies that a valid request for an individual has been received: see section 70. Under section 70(2)(b) and (c) the Secretary of State need not certify if either the individual has been accepted as a refugee or he has been granted leave to remain in this country on the grounds that removal to the requesting State would involve infringement of his article 2 or article 3 rights. Ordinarily, it may well be that any person sought for serious crime would be excluded from refugee rights by article 1F(b) of the Refugee Convention, set out by Lord Mance at paragraph 40, and it seems to me to follow that the scope for a finding that there is a prima facie case justifying extradition but no serious reasons for thinking that he is guilty of such a crime is likely to be narrow. But Convention rights, as extended by the Soering principle, may well be more extensive than refugee rights. The Act appears to contemplate that any asylum claim will be made before any extradition proceedings, and it goes on to provide in section 70(11) that once the Secretary of State has issued the section 70 certificate all questions of human rights are for the extradition judge, who is required by section 87 to halt the sequential process provided for by the Act, and to discharge the person sought, if breach of such rights (not limited to articles 2 or 3) would be the result of extradition. That makes it clear that the extradition process is, once the section 70 certificate is issued, an entirely judicialised one. Once the judicial ruling for extradition has been made, the Secretary of State is bound by section 93 of the Extradition Act, to give effect to it unless specified reasons (death penalty, specialty, earlier extradition into the UK or transfer to it by the ICC) apply. Whether there remains room for a subsequent application, outside the extradition process, for asylum, or (absent any asylum or refugee claim) for a decision by the Secretary of State (or immigration judge on appeal) that removal to the requesting State would involve infringement of article 2 or 3 rights, appears to remain unexplored. But if there is room for such, then it would appear to follow as a possibility that a W (Algeria) non disclosure order might be open for consideration in such proceedings. It would be a material consideration that the application was made late, and in a form which in effect mounted a collateral challenge to an earlier ruling of the extradition judge that the individual is to be extradited. (ii) Anonymity of witnesses 62. The Divisional Court itself raised the possibility that an extradition judge could hear an anonymous witness. Having done so, it held that such a power did exist and that it derived from sections 86 97 of the Coroners and Justice Act 2009 (the 2009 Act), or the equivalent provisions of its predecessor, the Criminal Evidence (Witness Anonymity) Act 2008 (the 2008 Act). It described the application of those Acts to extradition as adventitious. 63. Closer examination demonstrates that the Divisional Court was right to say that an extradition judge has power, if justice calls for it, to receive the evidence of a witness who is anonymous to one or all parties, but not to derive this power from either the 2008 or the 2009 Act. 64. The 2008 Act was passed to give a criminal court the express power, in defined conditions, to allow a witness (by whomever called) to remain anonymous to the defendant and/or to co defendants. The principal conditions are that such a course of action must be found to be necessary on specified grounds, which include preserving the safety of the witness, and that the court must be satisfied that the trial can nevertheless be fair. The Act was passed against the background of growing concern about witness intimidation and the reluctance of potential witnesses to crime, for fear of reprisals, to be seen to be co operating with a police investigation. In the years before 2008 courts hearing criminal trials in England and Wales had from time to time permitted witnesses to give evidence anonymously where satisfied that the evidence would not otherwise be given, or effectively given, owing to genuine fear, and that the defendant was not disabled from properly challenging it. However, in R v Davis [2008] UKHL 36; (2008) 1 AC 1128 the House of Lords held that this was not permissible because at common law the rights of a defendant in a criminal case to know and confront his accuser had to prevail. The House held that if a power was to be created to hear evidence in a criminal case from a witness who remained anonymous to a defendant, that could only be done by statute. The 2008 Act was the immediate Parliamentary response. It was enacted after a greatly attenuated legislative timetable, with the agreement of all major parties. It was expressly stipulated to have a short life, so that further consideration could be given to the principle to which it gave effect. After such further consideration, the 2009 Act re enacted its provisions in substantially the same terms. In the present case the Divisional Court held that these provisions applied. Its reasoning was as follows (by reference to the 2009 Act): 65. (i) the Act applies to criminal proceedings; these are defined in section 97(1) as those in a Magistrates court, Crown court or the Court of Appeal (Criminal Division) in England and Wales which are: criminal proceedings consisting of a trial or other hearing at which evidence falls to be given; (ii) extradition proceedings are a kind of criminal proceeding within that definition, and extradition was described as a form of criminal proceeding by Lord Hoffmann in R vs Governor of Brixton Prison Ex parte Levin [1997] AC 741 at 746 F G; (iii) the present appellants, whose surrender was sought by Rwanda, were defendants for the purpose of the 2009 Act because they had been charged with offences (in Rwanda); (iv) although section 87(3) requires a defendant who applies for a witness anonymity order to disclose the identity of the proposed witness to the prosecutor, as well as to the court, this presented no obstacle because that term is defined in section 97 as any person acting as prosecutor, whether an individual or a body; a requesting State making an application for extradition is not acting as a prosecutor; either it, or some other body may in due course, if extradition is granted, take up the role of prosecutor at the subsequent trial, but that stage has not yet been reached; (v) although the Crown Prosecution Service (CPS) generally conducts extradition proceedings on behalf of the Requesting State, and does so in this case, it, like the State, is not acting as a prosecutor when it does so. 66. There is no difficulty with propositions (iv) and (v). Extradition proceedings are not a criminal trial. The person whose extradition is sought is not in peril in them of conviction, and his guilt or innocence will not be decided. The issue is whether he should be surrendered to the Requesting State for the purpose of subsequent trial. The Requesting State is not prosecuting him before the English court; it is asking the UK to surrender him. The CPS generally acts as the advocate or agent of the Requesting State; that its principal role in England & Wales is to prosecute allegations of crime does not mean that it does not have this separate and different function in extradition proceedings. Its role in extradition proceedings is made clear by section 190 of the Extradition Act 2003. That amends section 3(2) of the Prosecution of Offences Act 1985, which ascribes various functions to the CPS, chief of which is to take over the conduct of all criminal proceedings (with specified exceptions). The amendment made by section 190 of the Extradition Act inserts a new additional function, namely: (2)(ea) to have the conduct of any extradition proceedings That, however, is made subject to the specific exception that the CPS is not to do so when requested not to by the Requesting State. This makes clear the advocacy or agency role of the CPS in extradition proceedings. [It ought to be noted that the CPS may separately fulfil a different function under section 83A and following of the Extradition Act where forum proceedings fall to be determined, but these do not affect the foregoing propositions.] 67. The difficulty lies in propositions (i) to (iii). There cannot be the slightest doubt that the 2008 and 2009 Acts were passed in order to deal with criminal prosecutions in England, Wales and Northern Ireland. They were a direct response to R v Davis which itself was concerned with such prosecutions and with no other form of proceeding. The modest extension afforded by the definition section (section 97) to other hearings at which evidence falls to be given is plainly intended to encompass the kind of ancillary application or proceeding which may attend a criminal prosecution either in advance of the trial or after it has finished. Many possible examples might be envisaged. They might include, in advance of trial, case management hearings at which a fear of witness intimidation falls to be considered or where rulings as to the giving of evidence are to be considered, and, after trial, hearings relating to such matters as sentencing or the making of protective orders like Sexual Offences Prevention Orders or Serious Crime Prevention Orders. In the days when magistrates conducted committal proceedings to hear the Crown evidence and to determine whether there was a case to answer, those would no doubt have fallen within the definition, for such committal proceedings were an integral part of the prosecution process and the parties were the same as they would be at trial in the Crown Court, namely a prosecutor and the defendant. But one cannot treat extradition proceedings as a part of a criminal prosecution in England and Wales. Even though, in the case of some (but by no means all) Part II territories, it may be necessary for the Requesting State to establish a prima facie case, the proceedings are not a prosecution but, rather, concerned solely with the issue of surrender. Any prosecution is yet to come; it may or may not ensue and if it does it will not be under English rules. It is true that in Ex p Levin Lord Hoffmann, giving the sole speech in the House of Lords, described extradition proceedings as criminal proceedings for the purpose of the application of the evidential rules contained in the Police and Criminal Evidence Act 1984. In the end, the observation was obiter, because the issue in the case was the admissibility of certain bank records and since they were held to be real evidence rather than hearsay their admissibility did not depend on that Act at all. But Lord Hoffman did accept that the Act would apply to extradition proceedings, and indeed that so had the power of the court under section 78 to exclude prosecution evidence on the ground that it would have an unfair effect on the proceedings, until the amendment of that section to except committal proceedings. It does not, however, follow that extradition proceedings can be equated to a criminal prosecution or that they are criminal proceedings for all purposes, still less that they are criminal proceedings for the purpose of the 2008 and 2009 68. Acts. On the contrary, it is clear that neither proposition is correct. That appears from any or all of the following considerations. (i) Lord Hoffmann explicitly described extradition proceedings as criminal proceedings of a very special kind (at 746F). (ii) The application to extradition proceedings of English rules of criminal evidence (including those in the Police and Criminal Evidence Act 1984) was clear in any event, then as now. At that time the relevant provision was paragraph 7(1) of Schedule 1 to the Extradition Act 1989, which provided that the prospective defendant was to be remanded in custody for the decision of the Secretary of State upon surrender if "such evidence is produced as . would, according to the law of England and Wales, justify the committal for trial of the prisoner if the crime of which he is accused had been committed in England or Wales Now, the same result follows from section 84(1) of the Extradition Act 2003, read with section 77. Section 84(1) requires the appropriate judge to determine whether: there is evidence which would be sufficient to make a case requiring an answer by the person if the proceedings were the summary trial of an information against him , whilst section 77 provides that he shall have the same powers as nearly as may be as he would have in summary proceedings for an offence. (iii) Lord Hoffmann recognised that even if section 78 did apply to extradition proceedings, it would do so only by way of the (then) rule that evidence was to be considered as if at English committal proceedings. He specifically identified the special nature of extradition proceedings and held that section 78 would require to be modified in its application to them so that what fell for consideration was not any unfair effect on any subsequent trial but unfair effect on the extradition hearing itself: see 748A, where he underlined the fact that at the extradition hearing it ought ordinarily to be assumed that if the prospective defendant is surrendered local procedures in the Requesting State will ensure fairness there. That is a clear recognition of the essential difference between extradition proceedings on the one hand and a criminal prosecution and trial on the other. (iv) Section 87 of the 2009 Act provides for applications for witness anonymity orders to be made either by the prosecutor or by the defendant. Where the application is made on behalf of a defendant, section 87(3) requires the identity of the witness to be revealed not only to the court but to the prosecutor. As the Divisional Court correctly held, there is no prosecutor in an extradition hearing. The notion of criminal proceedings existing without a prosecutor is difficult enough on any view; but even if such a thing can for any purpose be imagined, it is clear that the 2009 Act, and its predecessor the 2008 Act, are confined to prosecutions, with prosecutors. It is also doubtful that the person whose extradition is sought falls within the definition of defendant for the purposes of the 2009 Act. Defendant is defined by section 97 in terms which are plainly appropriate to a person facing trial in England and Wales, but may not be to someone whose surrender is sought for potential trial elsewhere: (v) "the defendant", in relation to any criminal proceedings, means any person charged with an offence to which the proceedings relate (whether or not convicted) Extradition proceedings under Part II of the Extradition Act 2003 depend upon a request to the UK by the Requesting State. For the very detailed process of the Act to begin, the Secretary of State must certify under section 70 that she has received a valid request. A valid request is one which states, inter alia, that the person sought: is accused in the category 2 territory of the commission of an offence specified in the request. The use of the word accused would appear to be deliberate. The person concerned may or may not have been charged in the Requesting State, according, no doubt, among other things, to that States practice in relation to absent persons. It is to be observed that the Extradition Act 2003 generally refers to the person who is the object of extradition proceedings as the person whose extradition is sought, rather than as the defendant, and that in certain places where it wishes to apply other statutory references to a defendant to this person, it says so expressly. An example is section 205(3) which provides: (3) As applied by subsection (1) in relation to proceedings under this Act, section 10 of the Criminal Justice Act 1967 and section 2 of the Criminal Justice (Miscellaneous Provisions) Act (Northern Ireland) 1968 have effect as if (a) references to the defendant were to the person whose extradition is sought (or who has been extradited); (b) references to the prosecutor were to the category 1 or category 2 territory concerned; (vi) Lastly, it is by no means clear that the place of an extradition hearing is within the definition of court for the purposes of the 2009 Act. Section 97 provides that for the purposes of a witness anonymity order: "court" means (a) in relation to England and Wales, a magistrates' court, the Crown Court or the criminal division of the Court of Appeal 69. Those are, of course, the courts in which prosecutions in England and Wales are conducted. Extradition hearings under the Act of 2003 are held before what that Act calls the appropriate judge in relation to Part II see section 70(9) and following. The appropriate judge is, by section 139, a District Judge (Magistrates Courts) specially nominated by the Lord Chief Justice. The fact that the nomination has fallen upon certain District Judges (Magistrates Courts) who ordinarily sit at Westminster Magistrates Court does not mean that they are sitting in that capacity when conducting an extradition hearing, nor that such hearing is held in a Magistrates Court. Consistently with this, section 77 provides that in an extradition hearing, the appropriate judge: has the same powers (as nearly as may be) as a magistrates' court would have if the proceedings were the summary trial of an information against the person whose extradition is requested. It is not, however, necessary to force extradition proceedings into the 2008 or 2009 Acts in order to justify the receipt of evidence from a witness whose anonymity is protected. The jurisdiction to receive evidence on this basis which was discussed in R v Davis derived from the inherent powers of the court to control its own procedure. What Davis decided was that this power did not extend, in a criminal prosecution, to hearing a witness whose identity was not disclosed to the defendant. Statutory sanction was called for. Statutory sanction has now been given for the paradigm case of an English criminal prosecution. The inherent power of the court to admit such evidence in extradition proceedings remains, and can properly be exercised by analogy with the statutes. Indeed, at the time of Davis, there was existing House of Lords authority in R (Al Fawwaz) v Governor of Brixton Prison [2001] UKHL 69, [2002] 1 AC 556 for the proposition that anonymous evidence was indeed receivable in extradition proceedings, and in Davis Lord Bingham endorsed this decision. As Lord Mance observes at paragraph [50] this endorsement may not have given full consideration to the reliance in Al Fawwaz upon the cases in which English criminal courts had admitted anonymous evidence, such as R v Taylor and Crabb [1995] Crim LR 254, nor did it refer to the requirement that a prima facie case be adduced in extradition proceedings. However, I agree with Lord Mance that even if these considerations weaken the authority of the endorsement of Al Fawwaz in Davis, the subsequent passage of the 2008 and 2009 Acts clearly shows that anonymous evidence may be received in English criminal cases, providing the statutory safeguards are met, and it follows that such evidence is equally admissible in extradition proceedings. 70. 71. 72. In the present appeal, Mr Lewis QC for the Government of Rwanda conceded that in relation to some parts of an extradition hearing there could be no objection to the hearing of evidence from a witness who remained anonymous. His concession was confined to issues arising under sections 81 (extraneous considerations) or 87 (human rights barriers to surrender) and was made on the basis that the ordinary rules of evidence do not apply on those issues. That approach enabled him to submit that the persons whose extradition is sought in this case could not rely on witnesses on the issue of prima facie case unless their identity was disclosed to all parties. The practice in relation to material going to section 81 or 87 issues is, however, as Lord Mance says, probably better analysed as a relaxed approach to expert evidence. Experts are generally entitled to give evidence based upon a background corpus of knowledge. What appears to happen on these issues, as in immigration cases, is that there is a relaxed readiness to permit experts to give evidence of opinion as to prevailing circumstances in the foreign State which is based upon information gathered from unnamed and sometimes unknown sources. To that extent, such sources are likely to remain unknown not only to the other party, but to the court. Any possible unreliability of such sources falls to be assessed by the court as part of its overall evaluation of the evidence. Receipt of evidence of this kind is clearly different from hearing a witness who is present but whose identity is known to the court but not to one party. In the present proceedings, the persons whose extradition is requested seek to adduce evidence not only of this expert variety but also from witnesses of fact who are said to be in genuine fear for the safety of themselves or their families if their identity is known to the Requesting State. The evidence in question (which this court has, correctly, not viewed) is said to go both to the question of whether there is or is not a prima facie case and to issues arising under section 81 and/or 87. It is difficult to see why, if witness anonymity is in principle permissible in extradition proceedings, subject to its being fair to receive it, it should be confined to section 81 or 87 issues. In Al Fawwaz the evidence of the anonymous witnesses went to whether there was or was not a prima facie case, and was tendered on behalf of the requesting State. True it is that section 84 of the Extradition Act means that a prima facie case must be established by evidence which could establish it if the proceedings were a summary trial, but the 2009 Act makes it clear that in a summary trial a witness may be heard anonymously if the safeguards set out in that Act are in place. 73. An extradition judge will bear in mind that where the issue is the presence of a prima facie case, he is generally not concerned to assess the credibility of the witnesses relied upon, at least unless they are so damaged that no court of trial could properly rely on them. Nevertheless, it is likely that any extradition judge will be more cautious in relation to the admission of anonymous evidence on the issue of prima facie case than in relation to section 81 or 87 issues, and the more cautious still where it is proffered by the requesting State. It is clear that the overriding principle is that such evidence can be admitted only when it is fair to all parties that it should be. It must remain an unusual exception to the general practice. That is likely to mean that an extradition judge will apply by analogy, so far as may relevant, the same principles as are stipulated in the 2009 Act for criminal prosecutions in England and Wales. He will need to be satisfied that there is genuine cause for anonymity, generally a justified fear for the safety of the witness or others which cannot otherwise be protected, and that justice requires that the evidence be given. It will also be likely to mean that a crucial factor in his decision whether to admit it will be the extent of the means available to the other party to challenge it. In considering this question he will no doubt want to consider whether the party tendering the witness has or has not provided the maximum possible information about the witness, short of identifying material, which could be deployed in challenging him. He will ordinarily require that the court itself is given the fullest information of identity. He will no doubt have in mind that anonymity may often weaken the weight which can be given to evidence given. Providing, however, he makes all relevant enquiries and admits the evidence of a person who is anonymous to a party only if satisfied that the proceedings are nevertheless fair, he has the power to hear such a witness. LORD TOULSON 74. The form of Memorandum of Understanding (MOU) under which the present extraditions are sought begins with three recitals. Two of them are in these terms: HAVING DUE REGARD for human rights and the rule of law; MINDFUL of the guarantees under their respective legal systems which provide an accused person with the right to a fair trial, including the right to an adjudication by an impartial tribunal established pursuant to law; 75. The MOU seeks to achieve the objective of ensuring protection of the appellants human rights by providing in para 4(d) that extradition may be refused if it appears to the Judicial Authority that extradition would be incompatible with [Xs] human rights. 77. 76. The Judicial Authority is defined in paragraph 1 as the judicial authority which is charged under the law of this country with the duty of considering requests for extradition. In other words it is the Magistrates Court. In her judgment dated 28 January 2014 on the appellants application to adopt a closed hearing procedure to enable the appellants to place before the court evidence in the absence of the Crown Prosecution Service representing the Government of Rwanda, District Judge Arbuthnot recorded that she had read for the purposes of the application folders of evidence provided by Dr Browns and Mr Ugirashebujas lawyers. She was later provided with a folder by the lawyers acting for Mr Nteziryayo, but did not read it, and she was told that evidence on behalf of Mr Mutabaruka was in preparation. 78. The judge said that she was prepared to accept that the files which she read contained important and material evidence which was relevant in particular to the question whether the relevant appellants would receive an article 6 compliant trial if they were extradited. She held that she was bound by the decisions of this court in Al Rawi and the Divisional Court in B Sky B (later affirmed by this court) to refuse the applications. But she expressed concern that there may be a risk of serious prejudice to the defence in making that decision and for that reason it was with some reluctance that she refused the application. 79. Dr Browns solicitor has made witness statements in which he says that he has visited Rwanda with leading and junior counsel and taken statements from four witnesses, who all say that they are not willing for their identities to be revealed to the Rwandan Government for fear that they and their families would be placed in serious danger. He states that the nature of their evidence makes them immediately identifiable to the Rwandan authorities and that any redaction that sufficiently protects their identity would make their evidence meaningless. It is said that the most important witness is either a present or former Rwandan prosecutor or police officer, a Rwandan judicial officer or a prosecution witness. It is said that he has given audio taped and video taped evidence to Dr Browns lawyers about the fabrication of evidence against Dr Brown by state officials. 81. 82. 80. The court is in a cleft stick. On the one hand, Lord Mance says (at para 29) that the appellants submission that the court should receive such evidence in a closed session assumes the truth of what they set out to prove; that it is only speculation that what they say would be relevant, truthful and persuasive; and that the very nature of a closed material procedure would mean that this could not be tested. I think that we may take it that the material is relevant because the district judge has accepted that it is, but in any event that would not be difficult to assess. The real problem is whether it is truthful and how that is to be assessed. If it is truthful, then the refusal of the witnesses to allow their identity to be disclosed is not remarkable. (The English courts have experience of truthful witnesses who are too frightened to give evidence if their identity is to be revealed. In some circumstances, statute permits the prosecution to rely on evidence of witnesses whose identity is withheld from the defence.) I do not agree that the appellants submissions assume that the evidence is truthful. Rather, they assert that it is potentially credible and that the court should be prepared to consider it. It is said that if the court is prepared to look at such evidence, it will encourage others to manufacture false evidence. That is certainly a risk. The same objection was made to allowing people accused of serious offences to give evidence on their own behalf prior to the Criminal Evidence Act 1898. No doubt that Act has enabled some defendants to hoodwink juries by inventing false defences which the prosecution has been unable to disprove, but that is a less grave affront to justice than disallowing defendants from putting their evidence before the court on account of the attendant opportunities for abuse. In the present case two of the appellants have obtained evidence which the district judge considers relevant and important to their case, but those witnesses are beyond the protection of the United Kingdom and the appellants are unable to put their evidence before the court unless the court is prepared to consider it without disclosure to the requesting state. There is obvious prejudice to the requesting state if the court agrees to do so and obvious potential for abuse. That is one side of the picture, but there is another. Just as the evidence cannot be assumed to be truthful, so it cannot be assumed to be untruthful. What if it is indeed the case that the prosecutions evidence has been fabricated and that those who have provided that information to the appellants lawyers are genuinely frightened to reveal their identity on understandable grounds? If the United Kingdom authorities decline to look at the evidence unless it is disclosed to the requesting state which it cannot be the appellants are likely to suffer a denial of their human rights as a result of our shutting our eyes to that evidence. In my view that is unacceptable. 83. 84. The evidential problem is very real, but it is not a satisfactory answer simply to apply a blindfold to the evidence. To refuse to consider it has the same practical effect as assuming the evidence to be untrue, which cannot be assumed. I would hold that justice, and the respect for human rights on which the MoU was expressly predicated, require that at some stage in the process the evidence should be able to be considered. There are three ways in which this could occur. 85. The first is for the court to make an exception to the Al Rawi principle in this case. The exception would be based on the need to ensure that the court does not through blindness facilitate a foreseeable and potentially serious breach of human rights by ordering extradition to a foreign country, of which there is evidence that, by the very nature of the circumstances, cannot be disclosed to the requesting state. If that approach is rejected, as it is by the majority in this case, I apprehend that it will be open to those appellants who are not British citizens to apply for asylum or humanitarian protection; and, on appeal against a refusal by the Home Secretary, they would be able to place before the immigration judge the material which the district judge was not permitted to consider, without that evidence being disclosed to the foreign state, since it would not be a party to the proceedings. 86. 87. That avenue would not be available to the appellant who is a British citizen. It would be manifestly unacceptable that a non British citizen should have greater means of protection of their human rights than a British citizen, and that cannot have been the intention of the government in entering into the MoU. I anticipate that it would be open to the British appellant to ask the government to apply the MoU in a way which would involve treating him no less favourably than it would a non British citizen, on the ground that to do otherwise would be a (highly unusual) form of unjustifiable discrimination, and if necessary to bring judicial review proceedings. In my view the first way would be the best. Under the MoU it was intended that determination of any human rights issues should be a matter for the judicial authority. The district judge has received and is due to hear general evidence on the subject. If the evidence which the appellants seek to introduce is to be considered by anyone, it would be best done by the same judge, who would evaluate to the best of her ability it in the context of all the evidence before her. The exercise would be similar to that performed by 88. immigration and asylum judges when considering asylum applications supported by evidence about alleged conduct of foreign authorities which will not have been disclosed to those authorities. Tribunal judges are used to scrutinising such evidence in the light of other objective evidence. It is not a perfect system but it is fair and workable. 89. The second way would avoid the problem of disclosure of the evidence to the foreign state, because the foreign state would not be a party to the application, any more than it would be in any other asylum application. There would be no question of withholding the evidence from the Secretary of State. On the contrary, the evidence would form the basis of the request to the Secretary of State, against which an appeal would lie. It would be contrary to the ordinary practice of the Secretary of State to disclose such evidence to the foreign authority, and it is difficult to imagine that there would be any question of disclosure of statements of witnesses which, if true, could place them or their families in jeopardy. But there are disadvantages to this way of proceeding. 90. First, to have two sets of proceedings with overlapping evidence is undesirable. I do not see that the asylum application could be dismissed as an abuse of process, on the ground that it amounted to a collateral attack on the findings in the extradition proceedings, in circumstances where the appellants would not have been able to present all relevant evidence to the magistrates court. The United Kingdom has an international obligation to consider an application for asylum, and I cannot see that this responsibility could be said to have been fulfilled by an extradition hearing at which the court was precluded by its own rules from hearing evidence relevant to the asylum claim. (Nor do I think, with respect, that the tribunal judge could properly draw any adverse inference about the credibility of the evidence from the lateness of the asylum application, when the applicant on legal advice had sought to deploy the evidence at what was thought to be the appropriate stage.) 91. Secondly, there is the problem that an application for asylum or human rights protection would be open only to the appellants who are not British subjects. Such discrimination might be overcome in the way that I have mentioned, but that would potentially involve a further set of proceedings. 92. Thirdly, rights under the European Convention are not identical with rights under the Refugee Convention, although the overlap is such that in the present case there may well not be a practical problem. 93. Mention has been made by Lord Mance and Lord Hughes of the possibility that any asylum claim would be excluded by article 1F(a) of the Refugee Convention relating to war criminals. Lord Hughes suggests that the scope for a finding that there is a prima facie case for extradition. but no serious reason for applying the exclusion is likely to be narrow. However, there is a significant difference in the standard of proof. A prima facie case for extradition requires a much less high standard of proof than a decision that an applicants rights under the Refugee Convention are excluded by article 1F(a): compare R v Governor of Pentonville Prison Ex parte Alves [1993] AC 284,290,292 and Al Sirri v SSHD [2012] UKSC 54, [2013] 1 AC 745. Moreover the evidence before the district judge and the tribunal judge would be different. I do not therefore consider, with respect, that article 1F(a) is relevant to the issue which this court has to decide. 94. The complications and delays which I foresee arising at the next stage or stages of legal proceedings, if in the circumstances of this case the district judge is not permitted to examine evidence of the kind with which we are concerned in a closed hearing, reinforce my view that the least unjust way to ensure proper protection of the appellants human rights is to make the exception to the Al Rawi principle for which they contend. I would therefore allow these appeals. On the separate question whether an extradition judge conducting proceedings under the Extradition Act 2003 has power to receive evidence from an anonymous witness, I agree with Lord Hughes. 95. 49. Lord Hughes has in his judgment examined the position regarding the 2009 Act in detail and reached the conclusion that it does not apply for fuller reasons, with which I agree.

The issues in this appeal are (a) whether, in the absence of any statutory power, a District Judge in extradition proceedings has the power to admit the evidence in a closed material hearing (without disclosing it to the State requesting extradition); and alternatively (b) whether, in such proceedings, a witness anonymity order can be made under the Coroners and Justice Act 2009, s.87 [2]. The facts were that the Government of Rwanda had, under Memoranda of Understanding with the United Kingdom dated 8 March 2013, requested the extradition of the Appellants and the Intervener to stand trial in Rwanda for war crimes [1]. In the extradition proceedings before Westminster Magistrates' Court, the Appellants sought to establish that their extradition risked exposing them to a flagrantly unfair trial (contrary to Article 6 of the ECHR) and even torture or mistreatment (contrary to Article 3 of the ECHR). Evidence on which they sought to rely came from witnesses who were unwilling to reveal their identity to the Rwandan Government and the Appellants argued that this evidence should be considered by the judge without being disclosed to the Rwandan Government or the CPS (who were acted on its behalf). The District Judge found that she could not consider evidence in a closed hearing or make witness anonymity orders [4] [8]. The Administrative Court dismissed the challenge to the District Judges decision but commented that the Coroners and Justice Act 2009, s.87 enabled witness anonymity orders to be made in extradition proceedings [9]. On appeal to the Supreme Court, it was common ground between the parties that the Coroners and Justice Act 2009, s.87 had no relevant application to extradition proceedings [47]. The Supreme Court dismisses the appeal by a 4 1 majority (Lord Toulson dissenting), finding that: (1) The judge had no power to order a closed material hearing or otherwise limit disclosure and was right not to do so [27] and [34]. (2) The judge had no power to order disclosure to the CPS on the condition that further disclosure to the Rwandan Government was prohibited and was right not to do so [35] and [37]. (3) The judge had no power to make a witness anonymity order under s.87 of the Coroners and Justice Act 2009 [47]. Lord Mance (with whom Lord Neuberger and Lord Reed agrees) gives the lead judgment and agrees with the judgment of Lord Hughes on the admissibility of anonymous evidence in extradition proceedings. Lord Hughes (with whom Lord Neuberger and Lord Reed also agree) agrees with Lord Mance but adds further comments. Lord Toulson dissents, but agrees with Lord Hughes on the admissibility of anonymous evidence in extradition proceedings. Lord Mance reasons that: (1) Section 77(1) of the Extradition Act 2003 provides that in extradition hearings the judge has the same powers (as nearly as may be) as a magistrates court would have if the proceedings were the summary trial of an information against the person whose extradition is requested [13]. That includes matters of evidence and procedure [19]. Although the parties were agreed that the normal rules of evidence should be relaxed in extradition hearings raising issues of human rights [21], the power of the court to order a closed material hearing remained limited to the exceptional circumstances recognised in Al Rawi v Security Service [2011] UKSC 34 (to protect the best interests of a child or where disclosure would undermine the whole object of the proceedings) [27] and [34]. It would not be in the interests of justice to allow further departure from the normal principle of open justice, as the relevance, truthfulness and persuasiveness of the evidence could not be tested in a closed material hearing [29]. (2) As the proceedings were, in substance, between the Appellants and the Rwandan Government, and the CPS represented the latter, there was no power to order disclosure to the CPS but prohibit disclosure to the Rwandan Government [37]. (3) The judge would not, as was common ground between the parties, have had the power to make a witness anonymity order under s.87 of the Coroners and Justice Act 2009 [47] [48]. Lord Hughes agrees with the conclusion of Lord Mance that an extradition court lacks the power to embark upon closed material hearings [53], but makes additional comments on (a) the relationship between extradition proceedings and any subsequent immigration or human rights claims [54] [62]; and (b) the power of the court to admit anonymous evidence in extradition proceedings conducted under the Extradition Act 2003, provided that the proceedings are nevertheless fair [63] [74]: Lord Toulson dissents on the basis that the District Judge had accepted that the proposed evidence was relevant [82] and that it would be wrong to assume (in effect) that the evidence was untrue merely because its veracity could not be tested in a closed material hearing [84]. He concluded that there should be an exception to the principle of open justice where, as here, not ordering a closed material hearing or not prohibiting disclosure to the State requesting extradition would facilitate a foreseeable and potentially serious breach of human rights [86] [93].

In April 2012 the Supreme Court considered a case called Summers v Fairclough Homes Ltd [2012] UKSC 26, [2012] 1 WLR 2004, where the facts were strikingly similar to those here. In that case, as in this one, the claimant suffered an injury at work which was caused by the negligence or breach of duty of his employer. In each case the employer was either held liable (in Summers) or admitted liability (here) as to 80%, the claimant accepting that he was 20% to blame. In each case the claimant dishonestly exaggerated the extent of the consequences of the injury. In Summers the claimant originally claimed damages of over 800,000 but was awarded a total of just over 88,000 on the basis of the true facts, which came to light after undercover surveillance evidence showed that his account of the consequences of his injuries had been grossly and dishonestly exaggerated. In the instant case, the claimant, Mr Colin Hayward, claimed 419,316.59 (exclusive of promotion prospects but discounted for loss of ill health pension). He was ultimately awarded 14,720 after a trial before His Honour Judge Moloney QC (the judge). The reason for the reduction was again partly as a result of undercover surveillance and other evidence that showed that Mr Haywards claim had been grossly and dishonestly exaggerated. In Summers the issue was what remedies were available to the employer and its insurers, whereas in the instant case the issue arises out of a settlement agreement reached between the parties on 3 October 2003, the accident having occurred on 9 June 1998. The agreement was made shortly before the issue of quantum was due to be tried and was incorporated in a Tomlin Order. The employers case was conducted on its behalf by its liability insurer, Zurich Insurance Company Plc (Zurich), which is the appellant in this appeal. The employer (in practice Zurich) agreed to pay 134,973.11, inclusive of CRU of 22,473.11, in full and final settlement of Mr Haywards claim. The Tomlin order was in familiar terms as follows: BY CONSENT IT IS ORDERED THAT All further proceedings in this action be stayed, except for the purpose of carrying such terms into effect. Liberty to apply as to carrying such terms into effect. THE SCHEDULE The claimant accepts in settlement of his cause of action herein the sum of 134,973.11. Upon payment by the defendant of the several sums and costs before mentioned, they be discharged from any further liability to the claimant in relation to the claim herein. 4. In 2005, Mr Haywards neighbours, Mr and Mrs Cox, who had lived next door to him since June 2002, approached the employer to say that they believed that his claim to have suffered a serious back injury was dishonest. From their observation of his conduct and activities, they believed that he had recovered in full from his injury at least a year before the settlement. They were referred to Zurich and made full witness statements to that effect. In February 2009 Zurich commenced the present proceedings against Mr Hayward claiming damages for deceit. Zurich pleaded that both written statements made by Mr Hayward or on his behalf, and his statements of case in the Particulars of Claim and the Schedule(s) of Loss as to the extent of his injury, as well as his accounts given to the medical experts, constituted fraudulent misrepresentations. Damages were claimed equivalent to the difference between the amount of the settlement and the damages that should have been awarded if he had told the truth. The claim was subsequently amended to claim in the alternative rescission of the settlement agreement and the repayment of the sums paid under it. No point has been taken in reliance upon the fact that the action was brought in the name of Zurich rather than the employer. Mr Hayward applied to strike out the proceedings, or for summary judgment in his favour. He contended that the Tomlin Order created an estoppel per rem judicatam and/or by record, alternatively that the action was an abuse of the process because the issue of fraud had been compromised by the settlement. Deputy District Judge Bosman refused to strike out the claim, although he directed Zurich to amend the claim to seek an order that the compromise be set aside rather than an order for damages. Although it was pleaded in the original defence to Zurichs claim that Zurich must satisfy the test in Ladd v Marshall [1954] 1 WLR 1489, that contention was not ultimately pursued following the hearing before the DDJ. His decision was reversed on appeal by Judge Yelton. Zurich appealed to the Court of Appeal (Maurice Kay, Smith and Moore Bick LJJ) and the decision of the Deputy District Judge was unanimously restored: see [2011] EWCA Civ 641. It was held that the settlement gave rise to no estoppel of any kind and that the action was not an abuse of process. It was further held that the fact that Zurich had alleged deliberate exaggeration prior to the settlement did not preclude them from relying on it subsequently as a ground for rescission. In the result, the claim proceeded. I note in passing that Moore Bick LJ said at para 58: If it is to succeed in its action Zurich will have to persuade the court that it was induced to agree to the settlement by fraud on the part of Mr Hayward, a task that may not prove easy, given the fact that it already knew enough to justify the service of a defence in the terms indicated earlier. The trial The trial came before the judge in the Cambridge County Court in November 2012. He heard evidence for Zurich from Zurichs solicitor (Ms Winterbottom) and its claims manager (Mr Birkenshaw), who were responsible for the conduct of the litigation, from Mr and Mrs Cox and from Mr Sharp, who was the orthopaedic expert instructed on behalf of Zurich. Mr Hayward gave evidence together with three members of his family and also called evidence from Mr Varley, who was the orthopaedic surgeon instructed on his behalf. Mr Hayward denied any suggestion that his condition was anything other than genuine or that there was any element of exaggeration. He maintained throughout that he was a seriously disabled individual whose disability arose from the original accident and was such that, ever since, he had not been able to work or carry out normal activities of daily living without assistance. As with the first series of witness statements, Mr Hayward signed the appropriate statements of truth setting out in detail the extent of his disability and presented himself to the medical experts on that basis. Following a four day trial, the judge found that Mr Hayward had deliberately and dishonestly exaggerated the effects of his injury throughout the court process. Of Ms Winterbottom and Mr Birkenshaw, the judge said (at para 2.6 of his judgment quoted in full below) both that: [n]either can be said to have believed the representations complained of to be true and that [t]hey may not themselves have believed the representations to be true; but they did believe that they would be put before the court as true, and that there was a real risk that the court would accept them in whole or part and consequently make a larger award than Zurich would otherwise have considered appropriate. The judge further found that, although Zurich was aware at the time of the settlement of the real possibility of fraud, Mr Hayward had continued his deliberate misrepresentations even after the disclosure of the 1999 video, and that those continuing misrepresentations influenced Zurich into agreeing a higher level of settlement than it would otherwise have done. The judge therefore set aside the compromise. It followed that the issue of quantum in the original action remained to be tried. That issue was heard on 6 September 2013 and, having found that Mr Hayward had made a full recovery from any continuing physical disability by October 1999, the judge thereafter handed down a judgment awarding Mr Hayward damages in the modest sum of 14,720, which was about 10% of the settlement figure. An order was made in the later action directing him to repay the sum paid under the settlement less that amount, namely 97,780, interest of 34,379.45 and 3,951 adjustment for CRU. The appeal to the Court of Appeal Mr Hayward appealed to the Court of Appeal against the decision that the settlement should be set aside but did not appeal against the judges assessment of quantum or (contingent on whether the settlement was set aside) against the order for re payment. Moreover, the judge's findings of fact were not challenged. To my mind, as appears below, this is a critical factor in this appeal. The appeal was heard by Underhill, Briggs and King LJJ. They agreed that the appeal should be allowed. Substantive judgments were given by Underhill and Briggs LJJ. Although King LJ agreed with both judgments, I do not read their reasoning as quite the same. In his para 9 Underhill LJ set out para 2.5 of the judges judgment, where he said that the judge addressed the issue of reliance and dealt with the law. Para 2.5 is in these terms: Lastly, of course, it is necessary that the employer/Zurich should rely on the representations and suffer loss as a result. Here an interesting (and apparently unresolved) question of principle arises. In the ordinary case, sale of goods for example, reliance by the purchaser is effectively equivalent to his belief in the truth of the statement; if he believes the goods are as represented, he will be relying on the representation (and acting on it by his purchase) and if not, not. In the litigation context the position is different. In such a situation, the party to whom the representation is made is by no means likely to believe it to be true at the pre trial stage. At the very least, statements made in the course of litigation will be viewed with healthy scepticism and weighed against the other material available. Often the other party will not be sure, even then, whether the statement is in fact true, and will mainly concern himself with how likely it is to be accepted by the court. Sometimes (a staged road traffic accident for example) the other party may actually be certain from his own direct knowledge that the statement is a deliberate lie. But even then he and his advisers cannot choose to ignore it; they must still take into account the risk that it will be believed by the judge at trial. This situation is quite different from a proposed purchase, where if in doubt one can simply walk away. For these reasons, it appears to me that the many dicta relied on by CH, to the effect that liability requires that the representation must be believed by the other party, are not applicable to a case like the present. The formulation adopted by the editors of Clerk and Lindsell, 20th ed (2010), at 18 34 fits the case better; The claimant must have been influenced by the misrepresentation (my emphasis). I heard the evidence of Ms Winterbottom and Mr Birkinshaw respectively in 2003 Zurichs litigation solicitor and claims handler. Each was aware of the 1999 video and of the real possibility that this was a fraudulent claim. Each was frustrated by the reluctance of their expert, Mr Sharp, to produce a clear supplemental report saying that he now believed CH to have been shamming and to have sustained far less harm than was being claimed. Neither can be said to have believed the representations complained of to be true. But, if the law is as stated at 2.5 above, this does not matter provided the representations influenced them in their decision how much to pay CH in settlement. I am in no doubt that they did. They may not themselves have believed the representations to be true; but After noting that CH was shorthand for Mr Hayward, Underhill LJ set out (also in his para 9), para 2.6 of the judges judgment as follows: they did believe that they would be put before the court as true, and that there was a real risk that the court would accept them in whole or part and consequently make a larger award than Zurich would otherwise have considered appropriate. Acting in reliance on that belief (which, whether or not CH was truthful or honest, was the belief he and his advisers must have wanted them to form on the basis of the statements) they made the payment into court which led to the Tomlin Order settlement. Underhill LJ then set out the substance of the judges ultimate conclusions from para 6.6 in these terms: although Zurich was aware at the time of the settlement of the real possibility of fraud here, CH had continued his deliberate misrepresentations even after the disclosure of the 1999 video, and those continuing misrepresentations did influence Zurich into agreeing a higher level of settlement than it would otherwise have made. The judge added: The conditions required for setting aside the settlement are therefore made out and I so order. Para 6.6 must be put in its context, which includes paras 6.4 and 6.5. Between paras 6.1 and 6.3 the judge explained why he accepted the evidence of Mr and Mrs Cox as credible. He then said this in paras 6.4 and 6.5: 6.4. The choice before me is not the stark one between no pain at all and complete disability. What I have to decide is whether CHs actual level of pain and disability at the time of the representations was materially less than he was representing, and if so whether that misrepresentation was deliberate and dishonest. It is accepted that there was here an injury leading to a measure of pain and disability, at least up to 2002; and Mr Sharp and Mr Varley do not exclude some continuing pain (as opposed to disability) in the period after the settlement. That being so, the records of pain management and analgesic drug treatment which gave me concern are not irreconcilable with Zurichs case. 6.5 There is no special standard of proof for fraud in civil proceedings; the normal test of balance of probability applies, though of course in assessing the probabilities one bears in mind that fraud is an unusual matter. In this case, the evidence, summarised above, that CH was not in fact suffering from the level of pain and disability that he claimed is so strong that it prevails over his innocent explanations. The probability is, and I so find, that CH was experiencing some pain both before and after the settlement, and did want it treated and managed; but at the same time, he also wanted the maximum compensation he could obtain, and to get it he was dishonestly willing to exaggerate his symptoms to the doctors, and to conceal his real level of ability from them and from the world, so as to give the false impression that he was not capable of heavy work when in fact he was. He must have been aware by the time of the 14 October 1999 surveillance video (at the latest) that his physical abilities were considerably greater than he thereafter represented to the doctors and his employers representatives, and I find that his representations made after that date were knowingly false and misleading. Underhill and Briggs LJJ allowed Mr Haywards appeal for similar but not identical reasons. They did so essentially because of the state of mind of Zurich (and the employer) when the settlement was made. They rejected the conclusions of principle expressed in para 2.5 of the judges judgment set out above. The parties to this appeal agreed that the appeal raised two issues. The first was this. In order to set aside a compromise on the basis of fraudulent misrepresentation, to show the requisite influence by or reliance on the misrepresentation: a) must the defrauded representee prove that it was induced into settlement because it believed that the misrepresentations were true; or b) does it suffice to establish influence that the fact of the misrepresentations was a material cause of the defrauded representee entering into the settlement? The second was this. Under what circumstances, if any, does the suspicion by the defendant of exaggeration for financial gain on the part of the claimant preclude unravelling the settlement of that disputed claim when fraud is subsequently established? Discussion Issue 1 Subject to one point, the ingredients of a claim for deceit based upon an alleged fraudulent misrepresentation are not in dispute. It must be shown that the defendant made a materially false representation which was intended to, and did, induce the representee to act to its detriment. To my mind it is not necessary, as a matter of law, to prove that the representee believed that the representation was true. In my opinion there is no clear authority to the contrary. However, that is not to say that the representees state of mind may not be relevant to the issue of inducement. Indeed, it may be very relevant. For example, if the representee does not believe that the representation is true, he may have serious difficulty in establishing that he was induced to enter into the contract or that he has suffered loss as a result. The judge makes this point clearly and accurately in the third sentence of para 2.5 of his admirable judgment. He makes a further point in the same paragraph which is of importance in the context of this somewhat unusual case. It is this. A person in the position of the employer or its insurer may have suspicions as to whether the representation is true. It may even be strongly of the view that it is not true. However, the question in a case like this is not what view the employer or its insurer takes but what view the court may take in due course. This is just such a case, as the judge correctly perceived. As he put it, the employer and its advisers must take into account the possibility that Mr Hayward would be believed by the judge at the trial. That is because the views of the judge will determine the amount of damages awarded. In any event this is not a case in which Zurich or the employer knew that Mr Hayward was deliberately exaggerating the seriousness and long term effects of his injuries. We now know that he was thoroughly dishonest from October 1999 and that he continued to make false claims in the witness box at the trial even when the evidence against him was overwhelming. Each case of course depends upon its own facts but it seems to me to be putting the case too high to say, as Briggs LJ does at para 30, that Zurich went so far as to plead that Mr Hayward was fraudulent and to support it by a statement of truth. He says this at para 31: In my opinion the true principle is that the equitable remedy of rescission answers the affront to conscience occasioned by holding to a contract a party who has been influenced into making it by being misled or, worse still, defrauded by his counterparty. Thus, once he discovers the truth, he must elect whether to rescind or to proceed with the contract. It must follow that, if he already knows or perceives the truth by the time of the contract, he elects to proceed by entering into it, and cannot later seek rescission merely because he later obtains better evidence of that which he already believed, still less if he merely repents of it. This seems to me to be a fortiori the case where, as here, the misrepresentation consists of a disputed claim in litigation, and the contract settles that claim. To my mind that is to put the position too high in favour of fraudsters in general and Mr Hayward in particular. It is true that in its defence dated 30 October 2001 the employer (no doubt through Zurich) stated that the facts stated in the defence were true. The relevant facts were pleaded in paras 6 and 7 as follows: 6. It is admitted that the claimant suffered an injury to his back as a result of the accident. The defendant relies on the medical reports of Mr Sharp dated 11 June 2000, 20 August 2000 and 26 November 2000. The view of the claimants ongoing physical condition from Mr Bracegirdle relied on by the claimant is not accepted by the defendant. As a result of video surveillance obtained Mr Sharp formed the view that the claimants disability was not as great as he had described and he was capable of working full time even if not with heavy lifting. In view of the claimants lack of candour in relation to his physical condition it is not possible to accept that his depressive state, as described, has been consistent, is continuing or will continue into the future. 7. The claimant has exaggerated his difficulties in recovery and current physical condition for financial gain. These pleas show that Zurich was suspicious of Mr Hayward but no very clear allegations were, or could be, made. However, it is not in dispute that Zurich did as much as it reasonably could to investigate the position before the settlement. The evidence was not as good from its point of view as it might have hoped but the fact is that Zurich did not know the extent of Mr Haywards misrepresentations. The case was settled at a time when the only difference between the experts was the likely duration of future loss. The figure agreed was about half way between the respective opinions of the experts. It was not until the advent of Mr and Mrs Cox that Zurich realised the true position. Hence, as the judge expressly found, the amount of the settlement was very much greater than it would have been but for the fraudulent misrepresentations made by Mr Hayward. The small amount ultimately awarded by the judge, which is not challenged, shows the extent of the dishonest nature of the claim. I am not persuaded that the importance of encouraging settlement, which I entirely agree is considerable, is sufficient to allow Mr Hayward to retain moneys which he only obtained by fraud. The authorities I am not persuaded that the authorities lead to any other conclusion. As stated above, the ingredients of the tort of deceit are not in dispute subject to one question, which is whether a claimant alleging deceit must show that he believed the misrepresentation. In my opinion the answer is no. There are many formulations of the relevant principles in the authorities. I take two examples. In Briess v Woolley [1954] AC 333, 353 Lord Tucker said: The tort of fraudulent misrepresentation is not complete when the representation is made. It becomes complete when the misrepresentation not having been corrected in the meantime is acted upon by the representee. Damage giving rise to a claim for damages may not follow or may not result until a later date, but once the misrepresentation is acted upon by the representee the tortious act is complete provided that the representation is false at that date. To like effect, Lord Mustill said in Pan Atlantic Insurance Co Ltd v Pine Top Insurance Co Ltd (No 2) [1995] 1 AC 501, 542A: In the general law it is beyond doubt that even a fraudulent misrepresentation must be shown to have induced the contract before the promisor has a right to avoid, although the task of proof may be made more easy by a presumption of inducement. The authorities show that questions of inducement and causation are questions of fact. I would accept the submissions made on behalf of Zurich in support of the proposition that belief is not required as an independent ingredient of the tort. It may however be relevant as part of the courts consideration of the questions whether there was inducement and, if so, whether causation has been established. In this regard I agree with the judge when he said at the end of para 2.5 that Clerk and Lindsells statement in the previous edition fits the case better. It simply said The claimant must have been influenced by the misrepresentation. That is a sub heading to para 18 34 in the 21st ed. In para 18 35 the editors say that, although the claimant must show that he was induced to act as he did by the misrepresentation, it need not have been the sole cause. It is submitted on behalf of Mr Hayward that the claimants mind must be at least partly influenced by the defendants misstatements. In Edgington v Fitzmaurice (1885) 29 Ch D 459, 483 Bowen LJ said: The real question is, what was the state of the plaintiffs mind, and if his mind was disturbed by the misstatement of the defendants, and such disturbance was in part the cause of what he did, the mere fact of his also making a mistake himself could make no difference. In Zurichs written case its argument in support of the position that belief in I see no conflict between the judges approach and those conclusions. Mr Hayward relies upon the references in the textbooks and, indeed, in cases like Edgington v Fitzmaurice to the requirement that the representation must have impacted upon the representees mind. To my mind that simply means that the representee must have been induced to act as he did in reliance upon the representation. the truth of the representation is not required is summarised as follows: (i) Inducement is concerned with causation not the representees credulity. Although one may infer that a representee who believes a misrepresentation has been induced to rely on it, an absence of belief does not mean there was no inducement. This is because what is required for there to be the inducement misrepresentation and the representee making a decision or undertaking a course of action on the basis of that representation. That does not require belief in the misrepresentation itself. (ii) also belief in other inducing causes is irrelevant. Just as belief in the misrepresentation is not required, so is a causal connection between (iii) There is a presumption of inducement, particularly where there is an intention to induce by means of fraud. If the defrauded representee first had to show he believed the misrepresentation, there would be little (or no) utility in having the presumption. (iv) That presumption should not be rebutted merely because the representee is sceptical. Otherwise, the doubting representee would be placed in a worse position than the gullible or trusting one. Given that misgivings and suspicion might be more likely to arise where there is fraud, it would be perverse for the prospects of redress to be extinguished on account of those very doubts. Of all representees, it may be thought the defrauded representee (whether believing or not) should be the most deserving of protection. (v) There is no duty upon the defrauded representee to exercise due diligence to determine whether there are reasonable grounds to believe the representations made. Conversely, the fact that the representee does not in fact wholly credit the fraudster and carries out its own investigations does not preclude it from having been induced by those representations. Qualified belief or disbelief does not rule out inducement, particularly where those investigations were never going to find out the evidence that subsequently came to light. (vi) Whereas proof that the representee had knowledge (or blind eye knowledge) of the falsity suffices, nothing short of that avails the misrepresentor. As to sub para (i), inducement, I would accept the submission on behalf of Zurich that materiality is evidence of inducement because what is material tends to induce. As Hutley JA put it in the Court of Appeal of New South Wales, Gipps v Gipps [1978] 1 NSWLR 454, 460, [t]o state that a person is induced by a statement is to affirm a causal relation which is a question of fact, not of law. See also Downs v Chappell [1997] 1 WLR 426, per Hobhouse LJ at 433. Moreover, albeit by reference to section 18(2) of the Marine Insurance Act 1905, in Pan Atlantic Lord Goff, accepted at 517C and 517E respectively that in gauging materiality it suffices if the misrepresentation (or non disclosure) had an impact on the mind or an influence on the judgment. In the same case Lord Mustill adopted references to inducement not being established where the misrepresentation (at 545E) did not influence the judgment, (at 546C) did not influence the mind or (at 551C) had no effect on the decision. In para 6.6 of his judgment (quoted at para 15 above) the judge held that the continuing representations influenced Zurich into agreeing to a higher level of settlement that it would otherwise have done. The judge was entitled to adopt the proposition in Clerk and Lindsell that the claimant must have been influenced by the misrepresentation. In para 28 of his judgment Briggs LJ said this: In my judgment the authorities on rescission for misrepresentation speak with one voice. For a misstatement to be the basis for a claim to rescind a contract, the claimant must have given some credit to its truth, and been induced into making the contract by a perception that it was true rather than false. Where judges and text book writers have used the word influenced as the touchstone for reliance they have done so in order to allow for belief in the truth of the misrepresentation to be a contributory rather than sole cause of the representees entry into the contract: see for example Clerk and Lindsell on Torts (21st ed) para 18 35. They have not thereby intended to allow in any case where the representee can show that he was influenced into making the contract by the mere making of a representation which he did not believe was true. I would not accept this analysis. As I see it, the representees reasonable belief as to whether the misrepresentation is true cannot be a necessary ingredient of the test, because the representee may well settle on the basis that, at any rate in a context such as the present, he thinks that the representation will be believed by the judge. But it is centrally relevant to the question of inducement and causation. Logically, the representee is more likely to settle for a different reason other than the representation, if his reasonable belief is that it is false. One of the extraneous factors in this case, for example, was the fact that the insurers expert Mr Sharp had failed to produce, in their view, a report which set out the extent of the misrepresentations with sufficient clarity see para 15 above. As to sub para (ii), multiple causes, the text books strongly support the proposition that it is sufficient for the misrepresentation to be an inducing cause and that it is not necessary for it to be the sole cause: see eg Chitty on Contracts, 32nd ed, volume 1, para 7 37. See also, for example, Barton v Armstrong [1976] AC 104, where Lord Cross, delivering the majority advice of the Privy Council in a case involving duress by threats of physical violence, invoked, as an appropriate analogy, the treatment of contributing causes in fraud cases. He said at p 118G H: If it were established that Barton did not allow the representation to affect his judgment then he could not make it a ground for relief. If on the other hand Barton relied on the misrepresentation Armstrong could not have defeated his claim to relief by showing that there were other more weighty causes which contributed to his decision for in this field the court does not allow an examination into the relative importance of contributing causes Lord Hoffmann made much the same point in Standard Chartered Bank Ltd v Pakistan National Shipping Corpn Ltd (Nos 2 and 4) [2003] 1 AC 959, paras 15 16: if a fraudulent representation is relied upon, in the sense that the claimant would not have parted with his money if he had known that it was false, it does not matter that he also had some other negligent or irrational belief about another matter and, but for that belief, would not have parted with his money either. The law simply ignores the other reasons why he paid. Lord Hoffmann then quoted with approval the part of the advice of Lord Cross quoted above and added: This rule seems to me to be based upon sound policy. Finally, reliance is placed upon the decision of the High Court of Australia in Gould v Vaggelas (1984) 157 CLR 215, which was a case of deceit, where Wilson J said at p 236: The representation need not be the sole inducement in sustaining the loss. If it plays some part, even if only a minor part, in contributing to the course of action taken a causal connection will exist. As to sub para (iii), the presumption of inducement, it is not a presumption of law but an inference of fact. For example, Chitty on Contracts, 32nd ed (2015), vol 1, put it thus at para 7 040: Once it is proved that a false statement was made which is material in the sense that it was likely to induce the contract, and that the representee entered the contract, it is a fair inference of fact (though not an inference of law) that he was influenced by the statement, and the inference is particularly strong where the misrepresentation was fraudulent. Lord Mustill put it in this way in Pan Atlantic at p 551. He said that the representor: will have an uphill task in persuading the court that the . misstatement . has made no difference [T]here is a presumption in favour of a causative effect. We were further referred to the decision of Briggs J in a case about fraudulent misrepresentations, namely Ross River Ltd v Cambridge City Football Club Ltd [2007] EWHC 2115 (Ch), [2008] 1 All ER 1004, para 241, where he said: First and foremost, in a case where fraudulent material misrepresentations have been deliberately made with a view (as I find) improperly to influence the outcome of the negotiation of the cont[r]act in favour of the maker and his principal, by an experienced player in the relevant market, there is the most powerful inference that the fraudsman achieved his objective, at least to the limited extent required by the law, namely that his fraud was actively in the mind of the recipient when the contract came to be made. See also Australian Steel & Mining Corpn Pty Ltd v Corben [1974] 2 NSWLR 202 per Hutley JA at 208 209. As to sub para (iv), rebutting the presumption of inducement, the authorities are not entirely consistent as to what is required to rebut the presumption. However, it is not strictly necessary to address those differences in this case because, however precisely the test is worded whether what must be proved is that the misrepresentation played no part at all or that it did not play a determinative part, or that it did not play a real and substantial part I would accept the submission made on behalf of Zurich that the presumption is not rebutted on the facts as found in this case. There can be no doubt on the judges findings of fact that, if Zurich had known the true position as to Mr Haywards state of recovery, it would not have offered anything like as much as it in fact offered and settled for in October 2003. Since the issue was touched on in argument, I would simply say that the authorities seem to me to support the conclusion that it is very difficult to rebut the presumption. As it seems to me, the orthodox view is contained in Sharland v Sharland [2015] 3 WLR 1070. In Smith v Kay (1859) 7 HLC 750, 759 Lord Chelmsford LC asked this question in a rescission case based on an allegation of fraudulent misrepresentation: can it be permitted to a party who has practised a deception, with a view to a particular end, which has been attained by it, to speculate upon what might have been the result if there had been a full communication of the truth? In Sharland v Sharland Baroness Hale observed of Smith v Kay that it indeed held that a party who has practised deception with a view to a particular end, which has been attained by it, cannot be allowed to deny its materiality or that it actually played a causative part in inducement. This view is supported by Downs v Chappell [1997] 1 WLR 426, 433D E, where Hobhouse LJ said: The judge was wrong to ask how they [the representees] would have acted if they had been told the truth. They were never told the truth. They were told lies in order to induce them to enter into the contract. The lies were material and successful. The judge should have concluded that the plaintiffs had proved their case on causation . See also BP Exploration Operating Co Ltd v Chevron Shipping Co [2003[ 1 AC 197, per Lord Millett at 244H to 245A. The Hon KR Handley wrote an impressive article entitled Causation in Misrepresentation in 2015 LQR 277, where he expressed this view at p 284: The representor must have decided to make the misrepresentation because he or she judged that the truth or silence would not, or might not, serve their purposes or serve them so well. In doing so they fashioned an evidentiary weapon against themselves, and the court should not subject the victim to what if inquiries which the representor was not prepared to risk at the time. As to sub para (v), I would accept the submissions made on behalf of Zurich. In particular I agree that the representee has no duty to be careful, suspicious or diligent in research. As Rigby LJ put it in Betjemann v Betjemann [1895] 2 Ch 474, 482: What is the duty of a man to inquire? To whom does he owe that duty? Certainly not to the person who had committed the concealed fraud. Here Zurich did as much as it reasonably could to investigate the accuracy and ramifications of Mr Haywards representations before entering into any settlement. As explained above, the questions whether Zurich was induced to enter into the settlement agreement and whether doing so caused it loss are questions of fact, which were correctly decided in its favour by the judge. I accept the submission that the fact that the representee (Zurich) does not wholly credit the fraudster (Mr Hayward) and carries out its own investigations does not preclude it from having been induced by those representations. Qualified belief or disbelief does not rule out inducement, particularly where those investigations were never going to find out the evidence that subsequently came to light. That depended only on the fact that Mr and Mrs Cox subsequently came forward. Only then did Zurich find out the true position. As Mr Hayward knew, Zurich was settling on a false basis. I do not think that any of the cases relied upon on behalf of Mr Hayward, or by the Court of Appeal in his favour justifies its decision. They include Kyle Bay Ltd (t/as Astons Nightclub) v Underwriters Subscribing under Policy No 019057/08/01 [2007] EWCA Civ 57; [2007] 1 CLC 164. Underhill LJ stressed, in his analysis in para 24, that Kyle Bay was not on all fours with the present case, but that it was illustrative of a similar principle. To my mind it is of no real assistance because it was a case which, as Neuberger LJ observed in Kyle Bay at para 42, involved unusual facts and in which the approach of the claimant appeared mystifying. That is not the position here. As to further cases that were said to establish a requirement of belief, in the Court of Appeal Underhill LJ referred at para 12 to Sprecher Grier Halberstam LLP v Walsh [2008] EWCA Civ 1324, para 17, Arkwright v Newbold (1881) 17 Ch D 301, p 324, and Strover v Harrington [1988] Ch 390, p 407. However, as Underhill LJ said, none of those cases contains any relevant discussion of a principle to the effect that belief in the representation is required before a settlement such as this can be set aside. As to sub para (vi), knowledge of falsity, as I understand it, it is accepted on behalf of Zurich that, where the representee knows that the representation is false, he cannot succeed. There is some support in the authorities for this view. So, for example Chitty says at para 7 036, The burden of proving that the claimant had actual knowledge of the truth, and therefore was not deceived by the misrepresentation, lies on the defendant; if established, knowledge on the part of the representee is of course a complete defence, because he is then unable to show that he was misled by the misrepresentation. In the 5th ed (2014) of Spencer Bower & Handley on Actionable Misrepresentation at p 122, para 11.07 say this. A representee cannot be misled by a statement which he knew to be false. The representees knowledge of the truth must normally be full and complete. Partial and fragmentary information, or mere suspicion, will not do, suspicion, doubt and mistrust do not have the same consequence as knowledge. A representee who knows that the representation was false to some extent, but acts on it, may establish inducement if the departure from the truth was significantly greater than expected. See also Gipps v Gipps per Hutley JA at p 460. As I said earlier, it cannot fairly be said that Zurich had full knowledge of the facts here. It follows that it is not necessary to express a final view on the question whether it always follows from the fact that the representee knows that the representation is false that he cannot succeed. As explained earlier, questions of inducement and causation are questions of fact. It seems to me that there may be circumstances in which a representee may know that the representation is false but nevertheless may be held to rely upon the misrepresentation as a matter of fact. This very case could have been such a case. The judge considered this possibility in para 2.5 of his judgment (quoted at para 14 above), where he said: At the very least, statements made in the course of litigation will be viewed with healthy scepticism and weighed against the other material available. Often the other party will not be sure, even then, whether the statement is in fact true and will mainly concern himself with how likely it is to be accepted by the court. Sometimes (a staged road traffic accident for example) the other party may actually be certain from his own direct knowledge that the statement is a deliberate lie. But even then he and his advisers cannot choose to ignore it; they must still take into account the risk that it will be believed by the judge at trial. This situation is quite different from a proposed purchase, where if in doubt one can simply walk away. It seems to me that in the kind of case which I have put in italics the claimant may well establish inducement on the facts. This was not however a case in which the judge found that Zurich was certain from its own direct knowledge that Mr Haywards representations contained deliberate lies. Quantum is not in issue. It follows that I would answer the questions posed by the first issue (and set out in para 17 above) in this way. I would answer (a) no and (b) yes and would allow the appeal. Issue 2 The second issue (also set out in para 17 above) is in these terms: Under what circumstances, if any, does the suspicion by the defendant of exaggeration for financial gain on the part of the claimant preclude unravelling the settlement of that disputed claim when fraud is subsequently established? The answer seems to me to follow from the answer to the first question. As I see it, it is difficult to envisage any circumstances in which mere suspicion that a claim was fraudulent would preclude unravelling a settlement when fraud is subsequently established. Conclusion For these reasons I would allow the appeal. LORD TOULSON: (with whom Lord Neuberger, Lady Hale and Lord Reed agree) I agree with the judgment of Lord Clarke. I add this judgment because of the importance of the matter, about which we are differing from the judgment of the Court of Appeal, based on what I respectfully consider to have been an erroneous conclusion drawn from earlier case law. The issue raised by this appeal is important both as a matter of law and for its practical consequences for insurers and dishonest claimants. I gratefully adopt Lord Clarkes account of the facts. Bogus or fraudulently inflated personal injury claims are not new. One of the great advocates of the 20th century, Sir Patrick Hastings, recounted vividly in his memoirs, Cases in Court (William Heinemann Ltd, 1949, pp 4 to 20), how as a young barrister before World War 1 he built up a practice defending insurance companies against such claims. Now as then, they present a serious problem. Personal injury claims usually fall to be met by insurers and the ultimate cost is borne by other policy holders through increased premiums. Insurers may often have grounds for suspicion about a claim but lack the hard evidence necessary to prove fraud. To pursue an allegation of fraud without strong evidence is risky. If in such circumstances insurers settle a claim, not in the belief that it is bona fide but in the belief that it is likely to succeed, and if afterwards they discover evidence which proves that the claim was fraudulent, can they bring proceedings to set aside the agreement and recover damages for deceit? In this case the judge at first instance said yes, but the Court of Appeal said no, because in such circumstances the insurers were not deceived. The question which court gave the right answer is important, both for insurers and for those who advise personal injury claimants. Strike out application The Court of Appeal rightly rejected Mr Haywards application to strike out the action on the ground that the issue was res judicata or that the action was an abuse of the process of the court: [2011] EWCA 641. The claim had been compromised by an agreement but, as Lord Bingham emphasised in HIH Casualty and General Insurance Ltd v Chase [2003] UKHL 6, [2003] 2 Lloyds Rep 61, paras 15 and 16, fraud is a thing apart and unravels all. Once proved, it vitiates judgments, contracts and all transactions whatsoever (per Denning LJ in Lazarus Estates Ltd v Beasley [1956] 1 QB 702, 712, cited by Lord Bingham). I refer to this matter because in his judgment now under review Underhill LJ called into question the correctness of the Court of Appeals earlier judgment, and Mr Haywards arguments on this appeal were similarly flavoured with criticism of it, although it was not open to him to attack it directly. Judgment of the County Court I would like to pay testimony to the judgment of His Honour Judge Moloney QC as a model of clarity and cogency. Lord Clarke has set out at, paras 14 and 15, the judges self direction as to the law (para 2.5) and his application of it to the facts (para 2.6). Judgment of the Court of Appeal Briggs LJs reasoning was short and direct. He held that for a misstatement to be the basis for a claim to rescind a contract, the claimant must have given some credit to its truth and have been induced into making the contract by a perception that it was true rather than false. He said that when judges and text book writers used the word influenced as the touchstone for reliance, they did so in order to accommodate cases where belief in the truth of the statement was a contributory rather than the sole cause of the representees entry into the contract. Underhill LJs reasoning was somewhat different but led him to the same place. His starting point was that when a person enters into a contract to settle a dispute he knowingly takes the risk of making a payment for a claim which may be ill founded, and he pays a sum commensurate with his assessment of that risk. But he said that the risk which a settlor must be taken to have accepted will depend on the circumstances of the case. A settlor will not normally be taken to have accepted the risk that the claimants case is not just ill founded but dishonest. However, if it is sufficiently apparent that the settlor intended to settle notwithstanding the possibility that the claim was fraudulent, he will be held to the settlement. The fact that the insurers had pleaded that the claim was exaggerated for financial gain proved their awareness of the possibility of fraud, but they chose to settle the claim with that awareness, and it was contrary to the public interest in the settlement of disputes for them to be allowed to set aside the settlement. Underhill LJ was conscious that the logic of this reasoning was that Mr Haywards application to strike out the insurers action ought to have succeeded, contrary to the Court of Appeals earlier decision. He described it as a debatable point whether that decision precluded him from deciding the case on the reasoning which he thought should apply, but he considered that it was possible to re cast his reasoning in a form which was perhaps less satisfactory, but which avoided conflict with the earlier decision. He held that although in one sense the misrepresentations operated on the mind of the insurers, that did not constitute reliance in the relevant sense. In deciding whether to settle, the insurers formed their own independent judgment whether the claim was likely to succeed, and there was no relationship of reliance of the kind which was required for the insurers action to succeed. Ultimately, therefore, he allowed the appeal on substantially the same ground as Briggs LJ. Analysis To establish the tort of deceit it must be shown that the defendant dishonestly made a material false representation which was intended to, and did, induce the representee to act to its detriment. The elements essential for liability can be broken down under three headings: (a) the making of a materially false representation (the defendants conduct element); (b) the defendants accompanying state of mind (the fault element); and (c) the impact on the representee (the causation element). Where liability is established, it remains for the claimant to establish (d) the amount of any resulting loss (the quantum element). In this case there is now no issue as to elements (a), (b) and (d). Mr Hayward made false and material representations to the insurers as well as to the court, both directly and through what he told the doctors and his own legal advisers with a view to it being communicated to insurers and to the court. He did so dishonestly, with the intention of inducing the insurers to pay compensation to him on a false basis. The judges assessment of quantum is not challenged. The issue concerns element (c). In the statement of facts and issues, the parties have identified the critical issue in these terms: In order to set aside a compromise on the basis of fraudulent misrepresentation, to show the requisite influence by or reliance on the misrepresentation, (a) must the defrauded representee prove that it was induced into settlement because it believed that the misrepresentations were true; or (b) does it suffice to establish influence that the fact of the misrepresentations was a material cause of the defrauded representee entering into the settlement? The parties have raised an additional question as to the circumstances, if any, in which suspicion by a settlor of exaggeration of the claim precludes unravelling the settlement when fraud is subsequently established; but insofar as the question involves any point of law, it is enveloped by the first issue. Some torts do not require the claimant to have suffered any detriment. Trespass is an example. Deceit is not in that category. It is essential to show that the defendants false representation caused the claimant to act to its detriment. It stands to reason that this should be so. The vice of the defendants conduct consists in dishonestly making a false representation with the intention of influencing the representee to act on it to its detriment. If it does not cause the representee to do so, the mischief against which the tort provides protection will not have occurred. A misrepresentation which has no impact on the mind of the representee is no more harmful than an arrow which misses the target. Inducement is a question of fact. In a typical case the only way in which a dishonest representation is likely to influence the representee to act to its detriment will be if the representee is led to believe in its truth. It is therefore not surprising to find statements by judges in such cases that the misrepresentee must show that he believed or relied on the misrepresentation. Redgrave v Hurd (1881) 20 Ch D 1, to which Underhill LJ referred, is an example. The plaintiff, an elderly solicitor wishing to retire, advertised for someone to enter into partnership with him and to buy his house. The defendant responded to the advertisement and negotiations followed, in which the plaintiff stated that the practice brought him in about 300 a year. In fact it did not bring in anything like that amount. The parties entered into partnership and into a separate contract for the sale of the house, which made no reference to the business. The defendant paid a deposit and was let into possession. On discovering that the practice was not worth what the plaintiff had said, the defendant gave up possession and refused to complete the purchase. It was therefore a classic case of a purchaser who claimed to have entered into the contract in reliance on the truth of a misrepresentation by the seller. The plaintiff sued for specific performance; the defendant counterclaimed for rescission of the contract and damages for deceit. The plaintiff succeeded at first instance before Fry J, who was not satisfied that the defendant had proved that he relied on the misrepresentation. The Court of Appeal upheld the dismissal of the defendants counterclaim in deceit on the ground that he had not sufficiently pleaded or proved dishonesty, but it allowed his appeal on the issue of rescission on the ground that the facts gave rise to an inference that he was induced to enter into the contract by the plaintiffs misrepresentation. Jessel MR said at p 21: If it is a material misrepresentation calculated to induce him to enter into the contract, it is an inference of law that he was induced by the representation to enter into it, and in order to take away his title to be relieved from the contract on the ground that the representation was untrue, it must be shown either that he had knowledge of the facts contrary to the representation, or that he stated in terms, or shewed clearly by his conduct, that he did not rely on the representation. Smith v Chadwick (1884) 9 App Cas 187 was another case of a purchaser who claimed to have entered into the contract in reliance on the truth of a misrepresentation by the seller. The plaintiff claimed damages for deceit through having been induced to buy shares in an iron company by false representations in a prospectus as to the output of the iron works. The House of Lords held that his claim failed because the critical words of the prospectus were ambiguous, and the plaintiff had failed to show that he understood them in a sense which was false. Lord Blackburn surmised, at p 200, that the plaintiffs counsel refrained from asking the plaintiff in examination in chief how he understood the wording for fear of receiving a damaging answer. The case was cited in the present case for the opening passage in the speech of Lord Selborne LC at p 190: My Lords, I conceive that in an action of deceit, like the present, it is the duty of the plaintiff to establish two things; first, actual fraud, which is to be judged by the nature and character of the representations made, considered with reference to the object for which they were made, the knowledge or means of knowledge of the person making them, and the intention which the law justly imputes to every man to produce those consequences which are the natural result of his acts: and, secondly, he must establish that this fraud was an inducing cause to the contract; for which purpose it must be material, and it must have produced in his mind an erroneous belief, influencing his conduct. (Emphasis added) In the same case Lord Blackburn had pertinent things to say about the fundamental link between fraud and damage in an action for deceit, at p 195: In Pasley v Freeman, 2 Smiths Leading Cases 66, 73, 86 (8th ed), Buller J says: The foundation of this action is fraud and deceit in the defendant and damage to the plaintiffs. And the question is whether an action thus founded can be sustained in a court of law. Fraud without damage, or damage without fraud, gives no cause of action, but where these two concur an action lies, per Croke J, 3 Bulst 95. Whatever difficulties there may be as to defining what is fraud and deceit, I think no one will venture to dispute that the plaintiff cannot recover unless he proves damage. In an ordinary action of deceit the plaintiff alleges that false and fraudulent representations were made by the defendant to the plaintiff in order to induce him, the plaintiff, to act upon them. I think that if he did act upon these representations, he shews damage; if he did not, he shews none. So far I have been considering the typical case. But it is possible for a representor to make a false and fraudulent misrepresentation, with the intention of influencing the representee to act on it to its detriment, without the representee necessarily believing it to be true. If the representor succeeds in his object of influencing the representee to act on the representation to its detriment, there will be the concurrence of fraud and deceit in the representor and resulting damage to the representee. In principle, the representee should therefore be entitled to a remedy in deceit. That inducement is a question of fact, necessary to establish causation in all cases but not necessarily in the same way, was recognised and well expressed in the decision of the Court of Appeal of New South Wales in Gipps v Gipps [1978] 1 NSWLR 454. A woman sued her former husband for deceit in relation to a property settlement which they had entered into at the time of their divorce. They were joint shareholders in a private company and as part of the settlement the wife transferred her shares to the husband. The shares were valued by an independent accountant, but the husband dishonestly contrived to see that the valuation was a substantial undervaluation. The wife did not trust the husband and suspected that the shares were worth more than the valuation, but she did not know the extent of the undervaluation. It was submitted on the husbands behalf that if a representee knows that a representation is false in a material particular, as a matter of law he or she cannot sue in respect of it. The court rejected that argument. After referring to various authorities, including particularly the passage from the judgment of Jessel MR in Redgrave v Hurd set out at para 64 above, Hutley JA said (at p 460): The question whether a person has been induced by a statement made to him to enter into an agreement is, in my opinion, a single issue of fact. No doubt pre contractual knowledge that the statement made is not wholly true has a very direct bearing on the resolution of this question of fact but it does not of itself necessarily provide the answer. To say that it does is to formulate a different question. To state that a person is induced by a statement is to affirm a causal relation which is a question of fact, not of law. That being so, it is impossible to apply to any situation a rule which produces a final result. The trial judge or jury have to answer the question: Did the misrepresentation cause the representee to enter into the contract, it being understood that the representation, as was stated in Australian Steel and Mining Corpn Pty Ltd v Corben [1974] 2 NWLR 202, 207, was among the factors which induced the contract. Some assistance may also be had from the judgment of Hobhouse LJ in Downs v Chappell [1997] 1 WLR 426, 433, where he said that for a plaintiff to succeed in the tort of deceit of deceit it is necessary for him to prove that (1) the representation was fraudulent, (2) it was material and (3) it induced the plaintiff to act to his detriment. He added that As regards inducement, this is a question of fact and that The word reliance used by the judge has a similar meaning but is not the correct criterion. I agree with His Honour Judge Moloney QCs analysis in para 2.5 of his judgment. The question whether there has been inducement is a question of fact which goes to the issue of causation. The way in which a fraudulent misrepresentation may cause the representee to act to his detriment will depend on the circumstances. He rightly focused on the particular circumstances of the present case. Mr Haywards deceitful conduct was intended to influence the mind of the insurers, not necessarily by causing them to believe him, but by causing them to value his litigation claim more highly than it was worth if the true facts had been disclosed, because the value of a claim for insurers purposes is that which the court is likely put on it. He achieved his dishonest purpose and thereby induced them to act to their detriment by paying almost ten times more than they would have paid but for his dishonesty. It does not lie in his mouth in those circumstances to say that they should have taken the case to trial, and it would not accord with justice or public policy for the law to put the insurers in a worse position as regards setting aside the settlement than they would have been in, if the case had proceeded to trial and had been decided in accordance with the corrupted medical evidence as it then was. For those reasons, which accord to all intents and purposes with the judgment of Lord Clarke, I too would allow the insurers appeal and restore the order of Judge Moloney. Postscript It was expressly conceded on behalf of the insurers for the purposes of the present appeal that whenever and however a legal claim is settled, a party seeking to set aside the settlement for fraud must prove the fraud by evidence which it could not have obtained by due diligence at the time of the settlement. It makes no difference to the outcome of the present case and the court heard no argument about whether the concession was correct. Any opinion on the subject would therefore be obiter, and since the court has not considered the relevant authorities (including Commonwealth authorities such as Toubia v Schwenke [2002] NSWCA 34) or academic writing, it is better to say nothing about it.

The respondent, Mr Hayward, suffered an injury at work in June 1998. Mr Hayward brought proceedings and the employer admitted liability, but he deliberately and dishonestly exaggerated the extent of the injury in order to achieve a higher settlement figure of 134,973.11 from the appellant, the employers liability insurer. At the time of the settlement in October 2003, the insurer had video evidence of the exaggeration. But by February 2009, the insurer had gathered further evidence showing that Mr Hayward had fully recovered a full year before the settlement. It sought to set aside the settlement and claimed damages for deceit. Mr Hayward applied for summary judgment on the basis that the claim had already been compromised in the previous proceedings. His application for summary judgment or strike out was successful before the County Court, but overturned by the Court of Appeal. The insurers claim was therefore allowed to proceed. On the claim itself, the judge found that Mr Hayward had deliberately exaggerated the effects of his injury, set aside the settlement agreement, and awarded Mr Hayward a much reduced sum of 14,720. A second Court of Appeal allowed Mr Haywards appeal, holding that the insurer could not be allowed to set aside the settlement agreement since it was aware of Mr Haywards fraud at that time. The Supreme Court unanimously allows the insurers appeal, restoring the judges conclusion that the settlement agreement should be set aside and that Mr Hayward be paid the reduced sum. Lord Clarke gives the lead judgment. Lord Toulson gives a concurring judgment. The other Justices agree with both judgments. The critical issue on appeal is whether, in order to show the requisite influence by or reliance on the misrepresentation in a claim to set aside a compromise on the basis of fraudulent misrepresentation, the defrauded representee (i.e. the insurer in this case) must prove that it settled because it believed that the misrepresentations were true. The answer is no. There is no authority supporting a freestanding requirement of belief that the misrepresentations are true. The representees state of mind is instead relevant to, but not necessarily decisive of, the courts consideration of inducement into the settlement agreement, and causation [18, 23, 25]. There may be factual circumstances in which a representee knows that a representation is false but nevertheless relies on it, but this is not such a case. The insurer in this case did not know that Mr Hayward was deliberately exaggerating his injuries to such an extent as later became clear, and did everything that it could to investigate. Qualified belief in a misrepresentation does not rule out the conclusion that the insurer was induced by it [20 22, 40]. Lord Toulson, concurring, adds that the issue in this case is whether a suspicious insurer, who nevertheless settles the claim on the basis that it is likely to succeed but then later discovers a fraud, can set aside that settlement and recover damages for deceit [52]. It must be shown that the false representation caused the insurer to act to its detriment, but such inducement is always a question of fact going to the issue of causation. Mr Haywards misrepresentation induced the insurer to enter into the settlement agreement in this case [70]. It is not necessary to decide whether knowledge of the falsity of a representation would always prevent a representee from nevertheless proving that he was induced by it [40 48].

This case is about the employment status of district judges, but it could apply to the holder of any judicial office. The issue is whether a district judge qualifies as a worker or a person in Crown employment for the purpose of the protection given to whistle blowers under Part IVA of the Employment Rights Act 1996 (the 1996 Act). If a district judge does not on the face of it qualify for whistle blower protection, the further question is whether this is discrimination against her in the enjoyment of her right to freedom of expression under the European Convention on Human Rights. And if it is, what is the remedy? In section 230(3) of the 1996 Act, a worker is defined as an individual who has entered into or works under (or where the employment has ceased, worked under) (a) a contract of employment, or (b) any other contract, whether express or implied and (if it is express) whether oral or in writing, whereby the individual undertakes to do or perform personally any work or services for another party to the contract whose status is not by virtue of the contract that of a client or customer of any profession or business undertaking carried on by the individual. The appellant does not claim that a judge works under a contract of employment within limb (a) of that definition, but contends that she does fall within limb (b) of the definition. The history of the case The appellant was appointed a district judge by the then Lord Chancellor, Lord Falconer of Thoroton, with effect from 6 February 2006. Under section 6 of the County Courts Act 1984, as it then stood, district judges were appointed by the Lord Chancellor. As it now stands, they are appointed by Her Majesty the Queen on the recommendation of the Lord Chancellor. In October 2005, the appellant had been sent a letter offering her appointment which talked in terms of her accepting that offer. The letter itself contained several stipulations as to the duration of her appointment, her salary, her pension on retirement, and other matters. Enclosed with the letter was a memorandum entitled District Judges Memorandum on conditions of employment and terms of service. This was a detailed document, which included terms as to sitting days, sick pay, maternity, paternity and adoption leave, training, the prohibition of legal practice, relations with the press and media, outside activities, and much more. The memorandum made it clear that the salary was taxed under Schedule E to the Income Tax Act and that the judge was an employed earner for the purpose of national insurance contributions. Although described as a life time appointment, a judge is required to vacate office on her 70th birthday (unless extended) and can resign before that date. The appellants Instrument of Appointment, signed by the Lord Chancellor on 27 January 2006, simply talked in terms of his approving her to sit at each of the county courts on the Wales and Chester circuit. In fact, she first sat at the Crewe County Court and in 2009 transferred to the Warrington County Court. In 2010, the Cheshire courts were transferred to the Northern Circuit and major cost cutting reforms were announced. In 2011, the Runcorn County Court was closed and the business transferred to Warrington, as were some tribunal sittings. The appellant raised a number of concerns relating to the cuts, in particular about the lack of appropriate and secure court room accommodation, the severely increased workload placed upon the district judges, and administrative failures. She raised these with the local leadership judges and senior managers in Her Majestys Courts and Tribunals Service and eventually in a formal grievance. She claims that her complaints fell within the definition of qualifying disclosures under section 43B of the 1996 Act, in particular as tending to show a failure to comply with legal obligations, that miscarriages of justice were likely, or that the health and safety of any individual had been, is being or is likely to be endangered. The disclosures were made to an employer or other responsible person within the meaning of section 43C of the 1996 Act and thus they were protected disclosures within the meaning of section 43A. Under section 47B(1) of the 1996 Act, a worker has the right not to be subjected to any detriment by any act, or any deliberate failure to act, by his employer done on the ground that the worker has made a protected disclosure. The appellant claims that she was subjected to a number of detriments as a result of her complaints: a significant delay in investigating her grievance; being seriously bullied, ignored and undermined by her fellow judges and court staff; being informed that her workload and concerns were simply a personal working style choice; and inadequate steps to support her in returning to work; she also claims that a severe degradation in her health, resulting in psychiatric injury and a disability under the Equality Act 2010, was such a detriment. The appellant was signed off work due to stress from the end of January 2013 but has recently returned. In February 2015 the appellant made a two part claim in the Employment Tribunal. Both parts of her claim depended upon her being a worker within the meaning of section 230(3) of the 1996 Act (or having the same protection as such a worker). One part of her claim was for disability discrimination under the Equality Act 2010, as a result of failure to make reasonable adjustments to cater for her disability. This claim is derived from European Union law. It is therefore accepted that, as a result of the decision of this court in OBrien v Ministry of Justice (formerly Department for Constitutional Affairs) [2013] UKSC 6; [2013] 1 WLR 522, in the light of the guidance given by the Court of Justice of the European Union in ((Case C 393/10) [2012] ICR 955), a judge is a worker for the purpose of European Union law and national law has to be interpreted in conformity with that. That case concerned discrimination against part time workers, but the same result was reached by the Court of Appeal for Northern Ireland in Perceval Price v Department of Economic Development [2000] IRLR 380, that tribunal judges were workers for the purpose of discrimination on grounds of sex. Hence the disability discrimination claim will continue in any event. The other part of her claim was under the whistle blowing provisions in Part IVA of the 1996 Act, inserted by the Public Interest Disclosure Act 1998. These provisions are not derived from European Union law and accordingly the definition of worker does not have to be read so as to conform to the requirements of EU law. This means that a judge may have a different status in employment law, depending upon whether or not the employment right in question is derived from EU law. In relation to the whistle blowing claim, the Ministry of Justice objected that the appellant was not a worker as defined by section 230(3)(b) of the 1996 Act. At a preliminary hearing, the Employment Tribunal judge held that she was not a worker, that accordingly she had no protection against infringement of her right to freedom of expression under article 10 of the ECHR, but that it was not possible to read or give effect to section 230(3)(b) so as to give her that protection. The Employment Appeal Tribunal also held that she was not a worker, but found that there were adequate safeguards in place to protect freedom of speech for judges and there was therefore no need to read section 230(3)(b) so as to bring a judge within it, but that in any event it was not possible to do so: [2017] ICR 404. The Court of Appeal also held that the appellant was not a worker. The appellant was permitted also to raise for the first time the argument that denying her whistle blowing protection was discrimination in the enjoyment of her right to freedom of expression and thus contrary to article 14 of the ECHR read with article 10. But she failed in that too: [2018] ICR 827. On appeal to this court, the appellant continues to argue that she is a worker within the meaning of section 230(3)(b) of the 1996 Act. She also raises for the first time a new argument, that she is in Crown employment within the meaning of section 191 of the 1996 Act. If she fails in each of those, she continues to argue that her exclusion from whistle blowing protection is a breach, either of her rights under article 10 or under article 14 read with article 10 of the ECHR and that either section 230(3)(b) or section 191 of the 1996 Act should be read and given effect so as to bring her within that protection. Is a judge a worker? It is not in dispute that a judge undertakes personally to perform work or services and that the recipient of that work or services is not a client or customer of the judge. The issue is whether that work or services is performed pursuant to a contract with the recipient of that work or services or pursuant to some different legal arrangement. Nor is it in dispute that judges hold a statutory office. In broad terms, an office has been defined (by Lord Atkin in McMillan v Guest [1942] AC 561, 564) as a subsisting, permanent, substantive position which had an existence independent of the person who filled it, and which went on and was filled in succession by successive holders. Office holders do not necessarily hold office pursuant to any kind of contract. As Lord Hoffmann explained in Percy v Board of National Mission of the Church of Scotland [2005] UKHL 75; [2006] 2 AC 28, para 54: The distinction in law between an employee, who enters into a contract with an employer, and an office holder, who has no employer but holds his position subject to rules dealing with such matters as his duties, the terms of his office, the circumstances in which he may be removed and his entitlement to remuneration, is well established and understood. One of the oldest offices known to law is that of constable. It is notorious that a constable has no employer. It required special provision in [section 17 of the Sex Discrimination Act 1975] to bring the office of constable within the terms of the Act and to deem the chief constable to be his employer. But there are many other examples of offices; public, ecclesiastical and private. However, it is also well established that an office holder may hold that office under a contract with the person or body for whom he undertakes to perform work or services. The obvious example is a director of a company, who may hold that office concurrently with a service contract. Percy itself was another example. Ms Percy was an ordained minister of the Church of Scotland who was appointed associate minister to a particular parish. This was undoubtedly an ecclesiastical office, but the House of Lords held, by a majority, that she also had a contract personally to execute work, thus enabling her to bring a claim for sex discrimination against the Board of Mission which had appointed her. It might be thought that there is a distinction between private or ecclesiastical offices, on the one hand, and public or statutory offices, on the other, and that the former may be held concurrently with a contract whereas the latter may not. After all, before the introduction of modern protection from unfair dismissal, public and statutory office holders might be better protected than others, under the line of cases beginning with Ridge v Baldwin [1964] AC 40. However, in Miles v Wakefield Metropolitan District Council [1987] AC 539, which concerned the statutory office of superintendent registrar of births, deaths and marriages, Lord Oliver of Aylmerton, at p 567, questioned whether the mere fact that the plaintiff was appointed to his office under the provisions of the [Registration Service Act 1953] necessarily precludes the existence of a parallel contract between him and the council for the carrying out of his statutory duties. As this court held in Preston (formerly Moore) v President of the Methodist Conference [2013] 2 AC 163, whether an office holder holds office under a legally binding contract depends upon the intentions of the parties: The mere fact that the arrangement includes the payment of a stipend, the provision of accommodation and recognised duties to be performed by the minister, does not without more resolve the issue. The question is whether the parties intended these benefits and burdens of the ministry to be the subject of a legally binding agreement between them (Lord Sumption, para 26). Earlier, when commenting on the Percy case, he had explained that The primary considerations are the manner in which the minister was engaged, and the character of the rules governing his or her service. But, as with all exercises in contractual construction, these documents and any other admissible evidence of the parties intentions fall to be construed against their factual background (para 10). Part of the background in that case was the spiritual purpose of the functions of a minister of religion, although it had been established in Percy that there was no presumption against the contractual character of their service. In Preston, there was no difference between the majority, led by Lord Sumption, and me, the sole dissenter, as to the nature of the exercise upon which we were engaged: we differed only in our interpretation of the facts. It is clear, therefore, what the question is: did the parties intend to enter into a contractual relationship, defined at least in part by their agreement, or some other legal relationship, defined by the terms of the statutory office of district judge? In answering this question, it is necessary to look at the manner in which the judge was engaged, the source and character of the rules governing her service, and the overall context, but this is not an exhaustive list. In looking at the manner in which the judge was engaged, it could be said that there was classic offer and acceptance: there was a letter offering appointment, upon the terms and conditions set out in the letter and accompanying memorandum, which the appellant was invited to accept and did accept. However, the manner of appointment is laid down in statute: under section 6 of the County Courts Act 1984, district judges are now appointed by Her Majesty on the recommendation of the Lord Chancellor; but under the Constitutional Reform Act 2005, the whole process of selection is in the hands of the Judicial Appointments Commission, applying the criteria laid down in that Act. Furthermore, there was nothing in the letter offering appointment or in the accompanying memorandum which was expressed in contractual terms: indeed, some provisions were expressed in terms of what the Lord Chancellor expected or regarded as essential rather than as contractually binding obligations. In looking at the content of the relationship, it could be said that the terms and conditions contained some provisions, for example, those relating to maternity and paternity and adoption leave, which are not derived from statute. It could also be said that deployment decisions, as in any other employment, may be the subject of some negotiation between the individual judge and the leadership judges in her area; but ultimately the Lord Chief Justice is responsible for the deployment of judges. The essential components of the relationship are derived from statute and are not a matter of choice or negotiation between the parties. Under section 6(5) of the 1984 Act, a district judge is to be paid such salary as the Lord Chancellor may determine with the concurrence of the Treasury, but this cannot later be reduced; nor, of course, can it be increased by individual negotiation, as opposed to later determination of what the remuneration for that office is to be. Judicial pensions are also governed by statute and are not a matter of individual negotiation. Under section 11 of the 1984 Act, district judges must leave office on reaching the age of 70 (with the possibility of extension thereafter); otherwise they hold office during good behaviour and may only be removed for misbehaviour or inability to perform the duties of the office by the Lord Chancellor with the concurrence of the Lord Chief Justice; disciplinary proceedings against them are governed by the Judicial Discipline (Prescribed Procedures) Regulations 2014 (SI 2014/1919). It is also noteworthy that the appellant had difficulty in identifying her employer. These proceedings were brought against the Ministry of Justice. However, the appellant was in fact appointed by the then Lord Chancellor, while later district judges are appointed by Her Majesty the Queen. Responsibility for the judiciary is in fact divided between the Lord Chancellor, as a Minister of the Crown, and the Lord Chief Justice, as Head of the Judiciary. Many of the matters of which the appellant complained related to deployment and workload and many of her complaints were directed towards the local leadership judges, although some were directed to senior officials in Her Majestys Courts and Tribunals Service. This fragmentation of responsibility has both statutory and constitutional foundations and highlights how different is the position of a judge from that of a worker employed under a contract with a particular employer. Finally, and related to that, there is the constitutional context. Fundamental to the constitution of the United Kingdom is the separation of powers: the judiciary is a branch of government separate from and independent of both Parliament and the executive. While by itself this would not preclude the formation of a contract between a Minister of the Crown and a member of the judiciary, it is a factor which tells against the contention that either of them intended to enter into a contractual relationship. Taken together, all of these factors point against the existence of a contractual relationship between a judge and the executive or any member of it. Still less do they suggest a contractual relationship between the judge and the Lord Chief Justice. Crown employment Section 191(1) of the 1996 Act provides that Subject to section 192 and 193, the provisions of this Act to which this section applies shall have effect in relation to Crown employment and persons in Crown employment as they have effect in relation to other employment and other employees or workers. Included among the provisions to which the section applies, in section 191(2)(aa), is Part IVA. There is a debate about whether including judges within Crown employment would bring with it all the listed protections given to employees and workers or only those given to limb (b) workers. Fortunately, it is not necessary for us to resolve that debate in order to decide this case. Section 191(3) provides that In this Act, Crown employment means employment under or for the purposes of a government department or any officer or body exercising on behalf of the Crown functions conferred by a statutory provision. Clearly, employment in this section cannot mean employment under a contract because it would then add nothing to the definition in section 230(3). The predecessor to section 191 was inserted into the Industrial Relations Act 1971 because historically Crown servants had not been seen to be employed under contracts of service and had not been able to complain of wrongful dismissal. The object was to enable them to complain of unfair dismissal and enjoy the other employment rights listed in section 191(2). Thus, argues the appellant, section 191 is apt to give her the protection of Part IVA even if she is not employed under a contract. The definition in section 191(3) has two limbs: employment under or for the purposes of a government department; and employment under or for the purposes of an officer or body exercising on behalf of the Crown functions conferred by a statutory provision. For the reasons given earlier, it is impossible to regard the judiciary as employed under or for the purposes of the Ministry of Justice. They are not civil servants or the equivalent of civil servants. They do not work for the ministry. It is slightly more plausible to regard them as working under or for the purposes of the Lord Chief Justice, who since the 2005 Act has had statutory responsibilities in relation to the judiciary: under section 7 of that Act, he is responsible for the maintenance of appropriate arrangements for the welfare, training and guidance of the judiciary of England and Wales (within the resources provided by the Lord Chancellor) and for their deployment and the allocation of work within the courts. As already noted, he also shares some responsibility for appointments, discipline and removal with the Lord Chancellor. But it is difficult to think that, by conferring these functions upon the Lord Chief Justice, the 2005 Act brought about such a fundamental change in the application of section 191. Judges do not work under and for the purposes of those functions of the Lord Chief Justice but for the administration of justice in the courts of England and Wales in accordance with their oaths of office. Mutatis mutandis, the same reasoning would apply to the identical definition of crown employment in article 236(3) of the Employment Rights (Northern Ireland) Order 1996. It is perhaps worth noting that section 83(2) and (9) of the Equality Act 2010, passed since the 2005 Act, defines employment as covering Crown employment as defined in section 191 of the 1996 Act. But it also makes express provision, in sections 50 and 51, prohibiting discrimination in relation to, among other things, appointment to public offices. These are defined to include officers appointed by or on the recommendation of a member of the executive (such as the Lord Chancellor) or by the Lord Chief Justice or Senior President of Tribunals. Thus judicial office holders are clearly protected by these provisions, which would have been quite unnecessary had they already been protected as persons in Crown employment. Sections 50 and 51 do not apply in Northern Ireland, but this does not affect the force of this point. Human rights The appellant first argued that the failure to extend the 1996 Acts protection against whistle blowing to judicial officers was a violation of her right to freedom of expression under article 10 of the ECHR. It is indeed possible to see that imposing certain detriments upon her as a result of her public interest disclosures would be an interference with her freedom of expression. It is not enough to say that judges are well protected against dismissal and other disciplinary action if they speak their minds. They are not so well protected against the sort of detriments which are complained about in this case bullying, victimisation and failure to take seriously the complaints which she was making. Be that as it may, however, there is a remedy for breach of the Convention rights, by way of an action under section 7(1) of the Human Rights Act 1998, which can result in an award of damages, if this is necessary to afford just satisfaction for the wrong done. But this would not have the effect of extending the specific protection of Part IVA of the 1996 Act to judicial or indeed other non contractual office holders. It would not enable the appellant to pursue the claim which she has made in the Employment Tribunal. The appellant also complains that the failure to extend the protection of Part IVA to judicial office holders is a violation of her rights under article 14 of the ECHR read with article 10. Article 14, it will be recalled, reads: The enjoyment of the rights and freedoms set forth in this Convention shall be secured without discrimination on any ground such as sex, race, colour, language, religion, political or other opinion, national or social origin, association with a national minority, property, birth or other status. This gives rise to four well known questions: (i) do the facts fall within the ambit of one of the Convention rights; (ii) has the applicant been treated less favourably than others in an analogous situation; (iii) is the reason for that less favourable treatment one of the listed grounds or some other status; and (iv) is that difference without reasonable justification put the other way round, is it a proportionate means of achieving a legitimate aim? The answer to question (i) is clearly yes. Indeed, not only do the facts fall within the ambit of the right to freedom of expression protected by article 10; unusually there may well have been a breach of that article in this case; but that is not required. The answer to question (ii) is also clearly yes. The applicant, and others like her, have been denied the protection which is available to other employees and workers who make responsible public interest disclosures within the requirements of Part IVA of the 1996 Act. She is denied protection from any detriment, which is much wider than protection from dismissal or other disciplinary sanctions. She is denied the possibility of bringing proceedings before the Employment Tribunal, with all the advantages those have for applicants. She is denied the right to seek compensation for injury to feelings as well as injury to her health. This is undoubtedly less favourable treatment than that afforded to others in the workplace employees and limb (b) workers who wish to make responsible public interest disclosures. It is no answer to this to say that, by definition, judicial office holders are not in an analogous situation to employees and limb (b) workers. That is to confuse the difference in treatment with the ground or reason for it. What matters is that the judicial office holder has been treated less favourably than others in relation to the exercise or enjoyment of the Convention right in question, the right to freedom of expression. She is not as well protected in the exercise of that right as are others who wish to exercise it. The answer to question (iii) is also clearly yes. An occupational classification is clearly capable of being a status within the meaning of article 14. Indeed, it is the very classification of the judge as a non contractual office holder that takes her out of the whistle blowing protection which is enjoyed by employees and those who have contracted personally to execute work under limb (b) of section 230(3). The constitutional position of a judge reinforces the view that this is indeed a recognisable status. The answer to question (iv) is also, in my view, clearly yes. The respondent argues that this is a case in which the courts should allow a broad margin of discretion to the choices made by Parliament, for two main reasons: first because this is an area of social policy in which the courts should respect the decisions of the democratically elected legislature unless they are manifestly without reasonable foundation; and second, because the status in question is not one of the particularly suspect grounds of discrimination, such as race or sex or sexual orientation, and the less favourable treatment is correspondingly easier to justify. There are several problems with this argument. The first is that, while it is well established that the courts will not hold a difference in treatment in the field of socio economic policy unjustifiable unless it is manifestly without reasonable foundation, the cases in which that test or something like it has been applied are all cases relating to the welfare benefits system: see R (RJM) v Secretary of State for Work and Pensions (Equality and Human Rights Commission intervening) [2008] UKHL 63; [2009] 1 AC 311 (income support disability premium); Humphreys v Revenue and Customs Comrs [2012] UKSC 18; [2012] 1 WLR 1545 (child tax credit); R (SG) v Secretary of State for Work and Pensions (Child Poverty Action Group intervening) [2015] UKSC 16; [2015] 1 WLR 1449 (benefit cap); Mathieson v Secretary of State for Work and Pensions [2015] UKSC 47; [2015] 1 WLR 3250 (child disability living allowance); R (MA) v Secretary of State for Work and Pensions (Equality and Human Rights Commission intervening) [2016] UKSC 58; [2016] 1 WLR 4550 (bedroom tax); R (HC) v Secretary of State for Work and Pensions (AIRE Centre intervening) [2017] UKSC 73; [2017] 3 WLR 1486 (benefits for children of Zambrano carers); R (DA) v Secretary of State for Work and Pensions (Shelter Childrens Legal Services and others intervening) [2019] UKSC 21; [2019] 1 WLR 3289 (revised benefit cap). It is also in that context that the test has been articulated by the European Court of Human Rights: see Stec v United Kingdom (2006) 43 EHRR 47. This case is not in that category, but rather in the category of social or employment policy, where the courts have not always adopted that test: see, for example, In re G (A Child) (Adoption: Unmarried Couple) [2008] UKHL 38; [2009] 1 AC 173. The courts will always, of course, recognise that sometimes difficult choices have to be made between the rights of the individual and the needs of society and that they may have to defer to the considered opinion of the elected decision maker: see R v Director of Public Prosecutions, Ex p Kebilene [2000] 2 AC 326, 381. But the second problem is that in this case there is no evidence at all that either the executive or Parliament addressed their minds to the exclusion of the judiciary from the protection of Part IVA. While there is evidence of consideration given to whether certain excluded groups should be included (such as police officers), there is no evidence that the position of judges has ever been considered. There is no considered opinion to which to defer. That leads on to the third problem, which is that no legitimate aim has been put forward for this exclusion. It has not been explained, for example, how denying the judiciary this protection could enhance judicial independence. Of course, members of the judiciary must take care, in making any public pronouncements, to guard against being seen to descend into the political arena. But responsible public interest disclosures of the sort which are protected under Part IVA do not run that risk. Indeed, the object of the protection was to give workers the confidence to raise malpractice within their organisation rather than placing them in a position where they feel driven to raise concerns externally. It is just as important that members of the judiciary have that confidence. They are just as vulnerable to certain types of detriment as are others in the workplace. To give the judiciary such protection might be thought to enhance their independence by reducing the risk that they might be tempted to go public with their concerns, because of the fear that there was no other avenue available to them, and thus unwillingly be drawn into what might be seen as a political debate. As no legitimate aim has been put forward, it is not possible to judge whether the exclusion is a proportionate means of achieving that aim, whatever the test by which proportionality has to be judged. I conclude, therefore, that the exclusion of judges from the whistle blowing protection in Part IVA of the 1996 Act is in breach of their rights under article 14 read with article 10 of the ECHR. Remedy The most difficult question in this case, therefore, is how to remedy the incompatibility of the exclusion of the judiciary from the protection of Part IVA of the 1996 Act with article 14 of the ECHR. In Ghaidan v Godin Mendoza [2004] UKHL 30; [2004] 2 AC 557, the House of Lords held that the interpretive duty in section 3 of the Human Rights Act 1998 was the primary remedy. Section 3(1) reads: So far as it is possible to do so, primary legislation must be read and given effect in a way which is compatible with the Convention rights. In Ghaidan v Godin Mendoza it was also established that what is possible goes well beyond the normal canons of literal and purposive statutory construction. Philip Sales QC, for the Government, argued (at p 563) that section 3(1) required a similar approach to the duty to interpret domestic legislation compliantly with EU law, so far as possible, citing Litster v Forth Dry Dock Engineering Co Ltd [1990] 1 AC 546. Both Lord Steyn (paras 45 and 48) and Lord Rodger (paras 118 and 121) agreed that what was possible by way of interpretation under EU law was a pointer to what was possible under section 3(1), citing Litster as well as Pickstone v Freemans Plc [1989] AC 66. Lord Nicholls referred to the unusual and far reaching character of the obligation (para 30). He also emphasised that it did not depend critically on the particular form of words used, as opposed to the concept (para 31). Lord Rodger, too, said that to attach decisive importance to the precise adjustments required to the language of the particular provision would reduce the exercise to a game (para 123). The limits were that it was not possible to go against the grain of the legislation in question (para 121) or to interpret it inconsistently with some fundamental feature of the legislation (Lord Nicholls, at para 33, echoing In re S (Minors) (Care Order: Implementation of Care Plan) [2002] UKHL 10; [2002] 2 AC 291). There are two provisions which might be candidates for such interpretation. Most obvious is section 230(3)(b), which, it will be recalled, relevantly defines a worker as: an individual who has entered into or works under (or where the employment has ceased, worked under) (b) any other contract, whether express or implied and (if it is express) whether oral or in writing, whereby the individual undertakes to do or perform personally any work or services for another party to the contract whose status is not by virtue of the contract that of a client or customer of any profession or business undertaking carried on by the individual. Not surprisingly, the appellant points out that the courts have found it possible to interpret this definition so as to include judicial office holders when required to do so by European Union law. In OBrien v Ministry of Justice (formerly Department for Constitutional Affairs), [2013] UKSC 6; [2013] 1 WLR 522, the question was whether part time judges were entitled to the protection against discrimination given to part time workers by the Part Time Workers Directive (Council Directive 97/81/EC) transposed into UK law by the Part Time Workers (Prevention of Less Favourable Treatment) Regulations 2000 (SI 2000/1551). The definition of worker in regulation 1(2) was identical to that in section 230(3) of the 1996 Act. Having determined that judges were workers for the purpose of European Union law, this court had no difficulty in holding that the Regulations applied to them. The respondent argues that to do this would cut across a fundamental feature or go against the grain of the 1996 Act. But it is hard to see why that should be so. To interpret section 230(3)(b) so as to include judicial office holders would not afford them all the rights afforded to workers under the 1996 Act, but only those rights afforded to limb (b) workers, most of which are inapplicable to judges. But in any event, the interpretation in this case would only relate to an exclusion which is incompatible with the Convention rights otherwise the section 3(1) power and duty does not apply. And the inclusion of judicial office holders within the Equality Act 2010, as well as within EU derived employment rights, shows that affording judges some of the rights of other workers does not offend against any fundamental constitutional principle. It is noteworthy that the Court of Appeal, in para 90, was inclined to think that: having regard to the strength of the interpretative obligation under section 3 of the 1998 Act it would be possible to read section 230(3) down so that it extended to an employment relationship of the kind found to exist in OBrien. It does not seem that the definition of a worker by reference to the existence of a contract, so as to exclude a mere office holder, is a fundamental feature of the legislation. I agree. It would not be difficult to include within limb (b) an individual who works or worked by virtue of appointment to an office whereby the office holder undertakes to do or perform personally any work or services otherwise than for persons who are clients or customers of a profession or business carried on by the office holder. The legislation contemplates disclosure to an employer or others responsible for the conduct in question, which in this case would be the leadership judges or the HMCTS or the Ministry of Justice, depending upon the nature of the conduct. It also prohibits both the employer and fellow employees from subjecting the whistle blower to any detriment, which again would have to embrace fellow judges and those in a position to inflict such detriments. None of this would go against the grain of the legislation. When considering whether the disclosures had been made in the public interest, it would of course be relevant to consider whether there were other more appropriate ways of trying to resolve the situation. This would include the judicial grievance procedures policies (currently, policy no 1 relates to grievances between judicial office holders and policy no 3 relates to grievances between judicial officer holders and HMCTS staff); however, the appellant did invoke the grievance procedure and the investigating judge, Tomlinson LJ, commented that it was not a suitable means of dealing with the sort of systemic failures which were being alleged. Bearing in mind, therefore, the parallel seen in Ghaidan v Godin Mendoza between section 3(1) and conforming interpretation in EU law, its strictures against attaching decisive importance to the precise adjustment needed to the language of the provisions, and the ease with which this court interpreted identical language to include judges as limb (b) workers in OBrien, I can reach no other conclusion than that the Employment Rights Act should be read and given effect so as to extend its whistle blowing protection to the holders of judicial office. The relevant provisions of the Employment Rights Act extend to both England and Wales and Scotland (section 244) but not Northern Ireland. However, the equivalent provisions of the Employment Rights (Northern Ireland) Order 1996 (as amended by the Public Interest Disclosure (Northern Ireland) Order 1998) are to the same effect: article 3(3) defines worker in the same times as section 230(3); articles 67A, 67B, 67C define protected disclosures, qualifying disclosures and those to whom such disclosures may be made in the same way as in Part IVA of the 1996 Act; and articles 70B and 71(1A) provide that a maker of a protected disclosure shall not be subjected to any detriment for doing so and for complaints to an employment tribunal. Those provisions, too, should be read and given effect so as to extend the protection given to whistle blowers to the holders of judicial office. I would therefore allow this appeal and remit the case to the Employment Tribunal on the basis that the appellant is entitled to claim the protection of Part IVA of the 1996 Act.

The issue in the appeal is whether a District Judge qualifies as a worker or a person in Crown employment for the purpose of the protection given to whistle blowers under Part IVA of the Employment Rights Act 1996 (the 1996 Act). If not, is this discrimination against her in the enjoyment of her right to freedom of expression, protected by article 14 taken with article 10 of the European Convention on Human Rights (ECHR)? The appellant was appointed a District Judge by the Lord Chancellor with effect from 6 February 2006. The letter offering her appointment specified the duration, salary, pension and conditions of employment, including as to sitting days, sick pay, maternity leave and conduct. By an Instrument of Appointment the Lord Chancellor approved her to sit at county courts on the Wales and Chester circuit. Major cost cutting reforms took place after 2010. The appellant raised a number of concerns relating to the cuts, in particular the lack of appropriate and secure court room accommodation, her severely increased workload and administrative failures, initially with the local leadership judges and senior court managers, and eventually in a formal grievance. She claims that the handling of her complaints led to a severe degradation in her health, resulting in psychiatric injury and disability. In February 2015 she made a two part claim in the Employment Tribunal, both of which depended on her being a worker within the meaning of s 230(3) of the 1996 Act. Her claim for disability discrimination under the Equality Act 2010 is proceeding, as it is accepted that she is a worker for the purpose of European Union law, from which this claim is derived. Her claim under Part IVA of the 1996 Act is not so derived, and the Employment Tribunal determined as a preliminary issue that she was not a worker under domestic law for the purpose of the whistle blowing provisions. It accepted that she therefore had no protection against the infringement of her right to freedom of expression under article 10 ECHR, but that it was not possible to give effect to s 230(3) so as to give her that protection. Her appeals to the Employment Appeal Tribunal and to the Court of Appeal were dismissed. The Supreme Court unanimously allows the appeal and remits the case to the Employment Tribunal on the basis that the appellant is entitled to claim the protection of Part IVA of the 1996 Act. Lady Hale gives the judgment. Worker under domestic law The appellant argued that she is a limb (b) worker under the definition in s 230(3) of the 1996 Act: namely that she works under a contract whereby she undertakes to do or perform personally any work or services for another party to the contract whose status is not by virtue of the contract that of a client or customer of any profession or business she is undertaking [2 3]. The issue is whether the appellants work is performed pursuant to a contract with the recipient of that work or services, or pursuant to some different legal arrangement. Judges hold a statutory office, and office holders do not necessarily hold office pursuant to a contract [12]. It depends on the intention of the parties, which is reflected in the manner of engagement, the source and character of the rules governing service and the overall context [16]. In the appellants case, the essential components of the relationship are derived from statute and not a matter for negotiation; it is difficult to identify her employer; and the separation of powers is a factor against a contract between a Minister of the Crown and a member of the judiciary. Taken together, these factors do not suggest a contractual relationship [17 21]. Nor are judges in Crown employment. They are not civil servants or the equivalent of civil servants. They do not work under or for the purposes of the functions of the Lord Chief Justice, but for the administration of justice in accordance with their oaths of office [22 25]. Human rights The imposition of detriments, such as the bullying, victimisation and failure to take complaints seriously which the appellant alleges, would be an interference with her right to freedom of speech under article 10 ECHR [26]. A claim under the Human Rights Act 1998 (the HRA) would not enable the appellant to seek the wider relief that a worker could under Part IVA of the 1996 Act [27, 30]. The failure to extend the Part IVA protections to judicial office holders is a violation of the appellants right under article 14 not to be discriminated against in her enjoyment of the rights under the ECHR: (i) the facts of her case are within the ambit of article 10; (ii) she has been treated less favourably than other employees and workers who make responsible public interest disclosures; (iii) her occupational classification is clearly a status within the meaning of article 14; and (iv) exclusion of judges is not a proportionate means of achieving a legitimate aim. There is no evidence that either the executive or Parliament addressed their minds to the exclusion of the judiciary from the protection of Part IVA and no legitimate aim has been put forward [28 37]. The remedy for the incompatibility of the exclusion of the judiciary from the protection of Part IVA of the 1996 Act with the rights under the ECHR is found in the obligation on the courts in s 3 of the HRA to read and give effect to primary legislation in a way which is compatible with those rights. It has been established that it is possible to interpret the definition of a limb (b) worker to include judicial office holders when required to do so by EU law, and it would not go against the grain of the 1996 Act to do so in respect of the protections of Part IVA. This interpretation should also apply to the equivalent provisions in the Employment Rights (Northern Ireland) Order 1996 [39 45]. Accordingly the appeal is allowed and the case is remitted to the Employment Tribunal on the basis that the appellant is entitled to claim the protection of Part IVA of the 1996 Act [46].

This appeal concerns the correct approach in law to a request for environmental information when the public authority holding the information relies upon more than one of the exceptions to the duty to disclose such information. Is each exception to be addressed separately, by considering whether the interest served by it is outweighed by the public interest in disclosure? Or can the interests served by different exceptions be combined and then weighed against the public interest in disclosure? Domestically, the presently relevant exceptions are those provided by regulations 12(5)(a) (public safety) and 12(5)(c) (intellectual property) in The Environmental Information Regulations 2004 (S.I. 2004 no. 3391). However, the Regulations were made under the European Communities Act 1972 to implement the United Kingdoms obligation to give effect to Directive 2003/4/EC of 28 January 2003 on public access to environmental information. In the Directive, the relevant exceptions are found, in only slightly different terms, in article 4(2)(b) and (e). The Directive was intended to be consistent with the Aarhus Convention of 25 June 1998, in which equivalent exceptions appear as article 4(4)(b) and (e). The Directive merely permits exceptions of the nature indicated, and it was open therefore to the United Kingdom to introduce exceptions of a more limited nature (as Mr Lewis QC for the appellant, the Information Commissioner, submits). However, the Supreme Court sees no indication that the Regulations intended to do more than introduce into domestic law exceptions matching in their terms and effect those permitted by the Directive. Accordingly, the answer to the question in this appeal appears to the Court to depend upon the interpretation of the Directive. In the Courts view, the answer is not obvious and is necessary for the Courts decision. On this basis, the Courts duty is to refer the question to the Court of Justice under article 267 Treaty on the Functioning of the European Union (prior to 1 December 2009, article 234 EC). The context The information requested relates to the precise location of mobile phone base stations in the United Kingdom. In 2000, the Report of the Independent Expert Group on Mobile Phones, Mobile Phones and Health (the Stewart Report) concluded that radiation from mobile phones did not constitute a health risk, but that, until much more detailed and robust information was available, a precautionary approach was called for. The Stewart Report identified, as matters of public concern, the location of base stations and the authorisation processes for their erection, and recommended a national database. The Sitefinder website was duly set up by the Government and has been operated since the end of 2003 by the respondent, the Office of Communications (Ofcom). The site is constructed from information voluntarily provided by mobile network operators from their databases. It has enabled individuals, by inputting a postcode, town or street name, to search a map square for information about the base stations within it. The Sitefinder website shows the approximate location in each square of each base station, but does not show either its precise location to within a metre or whether it has been mounted at street level or concealed within or on top of a structure or building. An Information Manager for Health Protection Scotland (a branch of the National Health Service) requested from Ofcom grid references for each base station, as it appears for epidemiological purposes. The Information Managers request was refused by Ofcom, both initially and on review. On application to the appellant, the Information Commissioner, disclosure was ordered. On an appeal by Ofcom, the Information Tribunal upheld the order for disclosure, on different grounds which turned on the two presently relevant exceptions. The Tribunal examined the application of each exception in turn. As to the first exception (public safety), T Mobile (a mobile phone operator joined as a party before the Tribunal) submitted that the release of the precise locations of base stations would assist criminal activities. The Tribunal found that the release of the whole database would provide some assistance to criminals (para. 40). Criminals were more likely to use the Sitefinder website itself for the purpose of trawling valuable sites or disrupting public or police communications. But it was conceivable that data manipulation would enable sophisticated criminals to detect patterns of development in base station construction, which could assist their activities and greater risks might result from the release of the five figure grid reference numbers which would enable criminals to establish the precise location of, and (in an urban environment) the resulting ease of access to, base stations. The disclosure of the requested information would in some degree increase the risk of attacks and in that way may adversely affect public safety (para. 40). However, although the matter fell therefore within the scope of the exception, the Tribunal did not accept that the public interest in maintaining it outweighed the public interest in disclosure (para. 41). The public interest in disclosure arose from the recommendations of the Stewart Report, from the general importance attaching to the dissemination of environmental information and from the particular importance of the particular information for epidemiological purposes to the public, either as individuals or as members of interested groups. As to the second exception (intellectual property rights), Ofcom and T Mobile relied upon database rights under the Copyright and Rights in Database Regulations 1997 (S.I. 1997 no. 3032) implementing Directive 96/9/EC of 11 March 1996 and, if and as necessary, copyright under section 3 of the Copyright Designs and Patents Act 1988. It was, in the Tribunals view, clear that mobile network operators had database rights in respect of the dataset information which they provided to Ofcom from which the Sitefinder website was constructed. It was also conceded by the Information Commissioner, although the Tribunal expressed reservations about the correctness of the concession, that the datasets contributed by mobile network operators also enjoyed copyright protection, and that the Sitefinder website itself enjoyed both dataset right and copyright protection. Ofcom and T Mobile asserted that disclosure of the information requested would affect these intellectual property rights adversely in several respects. The information had commercial value, and they might lose licensing opportunities (para. 50). Although the public would still be bound to respect their intellectual property rights in the information, its public disclosure would make infringement more likely and less easy to detect (para. 51). It could enable competitors to map their network and ascertain their network design a factor which, however, the Tribunal considerably discounted, having regard to the existing feasibility of undertaking such an exercise using the Sitefinder website, and the absence of any sign of any competitor as yet undertaking it (para. 52 54). Landowners might be able to identify land where a mobile network operator would require to place a base station, and to demand a higher rent (para. 55). The Tribunal thought the harm likely to be suffered under this last head minimal. But it thought that the various factors considered together involved sufficient adverse effect to trigger the exception (para. 55). Each represented some degree of interference with a property right, although none had any direct impact on the public (para. 62). The Tribunal also thought it right to take into account, as a potential adverse consequence of disclosure, the possibility (now it appears in many cases a reality) that it might lead mobile network operators to refuse to continue to provide information to update the Sitefinder website. Its conclusion was however that the consequences of the interference with intellectual property rights involved in disclosure were outweighed by the same public interest in disclosure as it had identified when considering the first exception. Ofcom submitted to the Tribunal that it should go further and consider the potential adverse effects identified in respect of public safety and intellectual property rights together and weigh them on that basis against the public interest in disclosure. The Tribunal, in rejecting such an approach as incorrect, said (para 58): We do not accept that the language or structure of EIR regulation 12 permits the public interest factors to be transferred and aggregated in this way. It seems to us that for a factor to carry weight in favour of the maintenance of an exception it must be one that arises naturally from the nature of the exception . not any matter that may generally be said to justify withholding information from release to the public, regardless of content. If that were not the case then we believe that the application of the exceptions would become unworkable. It could certainly produce a strange result on the facts of this case. We have already found that the public interest in withholding information that might be of value to criminals does not justify maintaining the public safety exception. On [Ofcoms] argument it could be supplemented by the public interest in not undermining intellectual property rights, in order to try to tip the scales in favour of maintaining the exception. We think that this would produce a nonsensical outcome and it is not a procedure we propose to adopt. Ofcom appealed to the Administrative Court, which took the same approach as the Tribunal on this last point: [2008] EWHC 1445 (Admin). However, on a further appeal, the Court of Appeal reached the opposite conclusion: [2009] EWCA Civ 90. It started with the domestic principle of statutory construction, according to which the singular includes the plural unless the contrary intention appears. In its view, therefore, references to an exception in e.g. regulation 12(1)(a) were to be read as being to one or more exceptions. It also considered that the language of other regulations and of the Directive supported its conclusion. And it did not agree with the Tribunals view that an aggregate approach to the exceptions would be unworkable or nonsensical. On the contrary, it said that it would consider it surprising if the Directive or EIR required disclosure in a case where the overall public interest favoured non disclosure (para. 42). The proceedings before the Supreme Court The appeal before the Supreme Court concerns the single point described in the previous two paragraphs. In the light of the written and oral submissions on the point, the Court is at present divided in its views about the correct legal answer to this question, by a majority of three to two presently favouring the Court of Appeals approach. But all the Courts members are agreed that, in order to ascertain the answer under domestic law, it is, as stated at the outset of this judgment, necessary to know the answer to the equivalent question posed under Directive 2003/4/EC of 28 January 2003, and accordingly, since this is also not obvious, to refer the matter to the Court. It is unclear whether the Information Tribunal would have arrived at any different conclusion had it thought it feasible and appropriate to combine all the adverse factors under the two relevant exceptions and to weigh them against the public interest in disclosure. The adverse factors identified by the Tribunal were on their face scattered and limited, in comparison with the general presumption and other specific factors favouring disclosure of the relevant environmental information. But the point arises as one of general principle, and has been treated as relevant by the Tribunal and in the courts below. In case it would assist the Court of Justice, the Supreme Court will explain in a little greater detail some of the considerations which have impressed its members thinking. All members take as their approach the general guidance given in recital (16) of the Directive. The restrictive interpretation of exceptions is a general Community law principle, evidenced elsewhere in the field of disclosure of information by Sweden and Turco v Council of the European Union Cases C 39 and 52/05 P and Sweden v Commission Case C 64/05P. Exceptions are set out under individual heads in two parts (article 4(1) and article 4(2)) followed by a general paragraph, which reads: The grounds for refusal mentioned in paragraphs 1 and 2 shall be interpreted in a restrictive way, taking into account for the particular case the public interest served by disclosure. In every particular case, the public interest served by disclosure shall be weighed against the interest served by the refusal. Member States may not, by virtue of paragraph 2(a), (d), (f), (g) and (h), provide for a request to be refused where the request relates to information on emissions into the environment. The majority of the Court point to the references to the particular case (in German im Einzelfall and In jedem Einzelfall or in French dans le cas despce and Dans chaque cas particulire) as emphasising the need, in each case when disclosure is requested and refused, to consider the factors relevant to that case, but not as calling for treatment of each exception separately. They also point to the reference to weighing the public interest served by disclosure against the interest served by the refusal and consider that, since the refusal may be on a number of grounds, the whole of the interest or interests giving rise to adverse effects under any and all grounds must be put into the scales at once when the weighing exercise is undertaken. The majority view is that, since all the facets of the public interest in disclosure go into one side of the scales, it makes sense to put all the aspects of the interests served by refusal to go into the other side. These latter interests may be highly diverse and without any common factor (as in the present case, where the arguments against disclosure under the public safety and intellectual property rights exceptions are separate, one being concerned with public, the other with private protection). But that, in the majority view, can be seen as a positive reason why it is permissible to accumulate them. If, in some future case, it was possible to identify some overlap, then some allowance might perhaps be appropriate to eliminate double counting. The majority further point out that some of the heads of article 4(2), particularly (b), already involve different interests under which different factors could arise which could, they consider, presumably be cumulated. The minority view is that each exception appears as a separate head, serving separate interests and requiring separate consideration. First, the minority observes that this must be the case as regards article 4(1) and 4(2). Factors relevant to an exception in article 4(1) could hardly have been intended to be cumulated with factors relevant to an exception in article 4(2). That would not make sense. Secondly, looking at article 4(1) and article 4(2) separately, the word or in the Aarhus Convention makes clear that the provisions in that Convention equivalent to article 4(1) and 4(2) constitute alternative exceptions; and the Directive was intended to be consistent with the Aarhus Convention. Third, there is no common factor behind the exceptions in article 4(2) which enables any sensible cumulation. The Court of Appeal over looked this factor when it spoke of some overall public interest favour[ing] non disclosure (see para. 9 above). The exceptions serve disparate interests, which can and must each be weighed separately against the public interest in disclosure. A public interest in limiting criminal activities which is itself insufficient to outweigh the public interest in disclosure cannot sensibly be cumulated with a private intellectual property right which is itself again also insufficient to outweigh the public interest in disclosure, in order to thereby arrive at some combined interest in non disclosure which would outweigh the public interest in disclosure. The Information Tribunal was right to consider that cumulation of factors would lead to incongruities, and it is far from clear how it could or would work in practice. Fourth, the minority considers that the natural interpretation of the language of the Directive views each exception as a separate potential reason for refusal. If the interest served by it is outweighed by the public interest in disclosure, it ceases to be relevant. If the interest it serves outweighs the public interest in disclosure, the refusal can and will identify that exception as the reason. On Ofcoms case, however, the reason for refusal could however be that, although no particular exception applies, viewed collectively two (or more) exceptions apply. Reasons for reference The question referred is one of general principle, on which the courts below have expressed, and different members of the Supreme Court hold, different views. If it is answered in the negative, that will resolve this litigation. If it is answered in the affirmative, the matter is likely to have to be referred back to the Information Tribunal for further consideration. The question referred The Supreme Court therefore refers to the Court of Justice this question: Under Council Directive 2003/4/EC, where a public authority holds environmental information, disclosure of which would have some adverse effects on the separate interests served by more than one exception (in casu, the interests of public security served by article 4(2(b) and those of intellectual property rights served by article 4(2)(e)), but it would not do so, in the case of either exception viewed separately, to any extent sufficient to outweigh the public interest in disclosure, does the Directive require a further exercise involving the cumulation of the separate interests served by the two exceptions and their weighing together against the public interest in disclosure?

The Information Commissioner ordered the disclosure of information held by Ofcom concerning the precise location of mobile phone masts. On appeal, the Information Tribunal found that the public interest in public security, and in the protection of intellectual property rights, were both engaged but that under each separate exception the public interest in disclosure outweighed the interest alleged by Ofcom. It dismissed the argument of Ofcom that under the Environmental Information Regulations 2004 the Tribunal should conduct a third balancing test weighing all the interests in favour of disclosure against all the public interests in refusing disclosure. The High Court upheld the Information Tribunal. On appeal, the Court of Appeal overturned the Tribunal. It held that the Regulations must be construed in the light of European Directive 2003/4/EC, which they implement. The language of both documents supported an aggregate weighing exercise to assess the overall public interest. The Supreme Court unanimously holds that the appeal raises an issue of general principle and that the answer is not obvious. Different members of the Court hold different views on the correct construction of Environmental Information Regulations 2004, and Directive 2003/4/EC which they implement. Consequently, the Supreme Court is under a duty to refer the question in the appeal to the European Court of Justice (paras [3], [10], [14]). The question referred to the European Court under Article 267 of the Treaty on the Functioning of the European Union is: Under Council Directive 2003/4/EC, where a public authority holds environmental information, disclosure of which would have some adverse effects on the separate interests served by more than one exception (in casu, the interests of public security served by article 4(2(b) and those of intellectual property rights served by article 4(2)(e)), but it would not do so, in the case of either exception viewed separately, to any extent sufficient to outweigh the public interest in disclosure, does the Directive require a further exercise involving the cumulation of the separate interests served by the two exceptions and their weighing together against the public interest in disclosure? (para [15]) A majority of the Court would have upheld the judgment of the Court of Appeal. The majority consider that there are certain linguistic clues in the Directive which favour an aggregate weighing exercise which considers the overall public interest. The diversity of reasons is a positive reason to accumulate them, and certain heads already involve more than one public interest (paras [10], [12]). The minority of the Court also finds linguistic clues in the Directive to suggest that no cumulation of factors is possible given the disparate public interests involved which considered together would produce incongruities and be impractical (para [13]).

SeaFrance SA was a subsidiary of the French state rail group SNCF. It operated a ferry service between Dover and Calais until 16 November 2011, when it went into liquidation in France and its operations ceased. On 2 July 2012, in circumstances which I will describe more fully below, substantially all of its assets were acquired by Groupe Eurotunnel SE (which I shall call GET). GET is the parent company of the group which operates the Channel Tunnel between the United Kingdom and France. It acquired the assets as part of an arrangement with Socit Cooprative de Production SeaFrance SA (or SCOP), a workers cooperative formed to secure the continuance of the ferry service and thus the jobs of SeaFrances employees. The essence of this arrangement was that while the ferry service would be operated by GET or a subsidiary of GET, the ships would be operated and crewed by SCOP. The service was subsequently resumed on this basis on 20 August 2012 using three of the same ships and operated by employees almost all of whom had previously worked for SeaFrance. In September 2014 the Competition and Markets Authority, after an investigation of the impact of the transaction on competition on the cross Channel routes, prohibited GET from operating any ferry service from Dover using the passenger ships acquired from SeaFrance for a period of ten years. Its jurisdiction to do this depended on whether GETs acquisition of the SeaFrance assets created a relevant merger situation for the purpose of the Enterprise Act 2002. The question at issue on this appeal is whether that condition was satisfied. This in turn depends on whether what GET and SCOP acquired on 2 July 2012 was an enterprise or merely the assets of a defunct enterprise. The Authority considered that what GET acquired was an enterprise and that accordingly a merger situation existed. The Competition Appeal Tribunal, sitting as a court of judicial review, held that they were entitled to reach that conclusion. But the Court of Appeal allowed the appeal by a majority (Tomlinson LJ and Sir Colin Rimer, Arden LJ dissenting: [2015] EWCA Civ 487). In their view what had been acquired was not the enterprise formerly carried on by SeaFrance, but only the means to construct a similar but new enterprise. Accordingly no merger situation had been created and there was no jurisdiction to impose remedies. They held that that it had been irrational for the Authority, on the facts which it had found, to reach any other conclusion. The statutory framework The statutory control of the competition aspects of mergers has been one of the more stable parts of the United Kingdoms competition law. It was introduced by the Monopolies and Mergers Act 1965, at a time when the only other country with a comprehensive system of merger control was the United States, and its broad outlines have remained unchanged ever since. The current statutory framework is in Part 3 of the Enterprise Act 2002. Before 1 April 2014, merger control had been the responsibility of the Office of Fair Trading and, successively, the Monopolies and Mergers Commission and the Competition Commission. On that date important organisational changes came into effect as a result of the amendment of the Act by Parts 3, 4 and 5 of the Enterprise and Regulatory Reform Act 2013. The Office of Fair Trading and the Competition Commission were abolished and the relevant functions of both were transferred to a new body, the Competition and Markets Authority. These changes occurred while the reference which has given rise to the present appeal was in progress. But they do not affect the issues before us. I shall therefore refer to the Act throughout in its amended form. The purpose of merger control is to regulate in advance the impact of concentrations on the competitive structure of markets. Some merger regimes, notably that of the United States, apply to any acquisition which is liable to bring about such a concentration. It is, however, a fundamental feature of the United Kingdoms scheme that it distinguishes between the acquisition of assets constituting a business and the acquisition of bare assets. Concentrations arising from the acquisition of bare assets are not subject to statutory merger control ex ante, even if they have potentially adverse effects on competition, although they may be subject to heightened regulation ex post under Part 1, Chapter II of the Competition Act 1998 (Abuse of Dominant Position). The reason for the distinction is that it is thought to be inappropriate to inhibit the organic growth of businesses simply because it is achieved by means of factors of production previously employed in another business, if control of the other business has not itself been achieved. Part 3, Chapter 1 of the Enterprise Act, deals separately with completed and anticipated mergers. Under section 22(1), which is concerned with completed mergers, the Competition and Markets Authority must, subject to limited exceptions, refer arrangements or transactions to a specially constituted group of panellists if it believes that it is or may be the case that: (a) a relevant merger situation has been created; and (b) the creation of that situation has resulted, or may be expected to result, in a substantial lessening of competition within any market or markets in the United Kingdom for goods or services. Once a reference has been made, the Authority is required by section 35(1) to decide (among other things) whether a relevant merger situation has been created, and if it has whether the stipulated effects on competition have resulted or may be expected to result. What constitutes a relevant merger situation depends on section 23. Under section 23(2)(a), a relevant merger situation has been created if two or more enterprises have ceased to be distinct enterprises at a time or in circumstances falling within section 24, provided that the enterprise being taken over had a specified minimum turnover in the accounting period preceding the date when it ceased to be a distinct enterprise: see sections 23(1)(b), 28(3) and the Enterprise Act 2002 (Merger Fees and Determination of Turnover) Order SI 2003/1370, articles 2(c) and 11. Under section 26(1): for the purposes of this Part any two enterprises cease to be distinct enterprises if they are brought under common ownership or common control For this purpose, associated persons and any bodies corporate which they or any of them control are to be treated as one person: section 127(1). Associated persons include persons acting together to secure or exercise control over any enterprise or assets: section 127(4)(d). Of critical importance to these provisions, and to the issues on this appeal, are the definitions of enterprise and business in section 129(1). An enterprise means the activities, or part of the activities, of a business. A business includes a professional practice and includes any other undertaking which is carried on for gain or reward or which is an undertaking in the course of which goods or services are supplied otherwise than free of charge. There is no statutory definition of activities. It is, finally, necessary to refer to the provisions of sections 24 and 27. These deal with the timing of any reference. The effect of section 24 is that a reference must be made within four months of the relevant enterprises ceasing to be distinct or (if later) within four months of the transaction being made public or notified to the Authority. Section 27 provides that where the relevant arrangements or transaction take effect in stages, then two enterprises are deemed to have ceased to be distinct when the parties to the relevant arrangements or transaction become bound to such extent as will result in their ceasing to be distinct: sub section (2). By sub sections (5) and (6), if the enterprises cease to be distinct by virtue of each of a number of successive events occurring within a period of two years, the Authority may, for the purposes of a reference, treat successive events to which this subsection applies as having occurred simultaneously on the date on which the latest of them occurred. The facts The question whether GET acquired an enterprise or the bare assets of a defunct enterprise turns on exactly what happened to the business of SeaFrance during the hiatus of seven and a half months between its cessation of operations and the transaction of 2 July 2012. Since the Authoritys conclusion on this point is said to be irrational, it is necessary to examine with some care the facts on which it was based. The following summary is based on the Authoritys report and on the earlier report issued by the Competition Commission. I shall come back to the circumstances in which a second report was required. Before going into liquidation, SeaFrance had operated the ferry service with four vessels. There were three passenger ferries, the Rodin, the Berlioz and the Molire, and a freight ship, the Nord Pas de Calais. They were all owned by SeaFrance except for the Molire, which was operated by SeaFrance on a bareboat charter. The Molire was redelivered to its owners when the company went into liquidation and for present purposes can be ignored. The service was overmanned, dogged by poor labour relations and unprofitable, and by the spring of 2010 SeaFrance was insolvent. On 28 April 2010, it applied to the Tribunal de Commerce de Paris for protection from its creditors. On 30 June it was placed by the court in the hands of court appointed administrators. They continued to operate the ferry service, while trying without success to sell the business. No acceptable offers having been received, on 16 November 2011 the French Court made what amounted to a provisional order for the liquidation of SeaFrance. The court ruled that for the time being the ferry service could continue, but in fact it ceased from that date. The ships were placed in hot lay up while further attempts were made to find a buyer. This was a minimal operating mode which would enable their condition to be maintained so that they could become fully operational in a short time if a buyer was found. It is, however, plain that a maintenance programme of this kind was a substantial undertaking. It required the services of 190 employees. On 9 January 2012, the French Court formally placed the company in liquidation and ordered it to cease trading. Under French law, the consequence of this order was that all of the SeaFrance employees had to be made redundant within 15 days, apart from those required for the purposes of the liquidation. The latter included the staff engaged in maintaining the vessels in hot lay up. The court minutes record that the dismissals were not the end of the road: On pronouncement, the liquidator under the control of the bankruptcy judge and the court must undertake any discussions that are necessary with the interested parties. Clearly, there must be a trade off between the value of the assets, which are mainly the vessels, and the continuance of employment contracts. The market exists; the vessels are quite new and even the business may be sold later on. He will ensure that the bodies governing the proceedings are particularly attentive to the dramatic social company aspects and to do this he knows that SNCF will do its duty regarding its Group obligations and its capacity to reclassify collaborators under conditions to be negotiated. Among the steps which the liquidator was directed to take was: Reclassification of the business as a competitive and competent organisation in the sea transportation business with enhancement of the assets This was to be achieved by a Plan de Sauvegarde de lEmploi (known as PSE3). Such a plan was required by French law to be prepared by the employer during the 15 day period allowed for the redundancies, with a view to safeguarding the employment of those made redundant. Accordingly, the liquidator began negotiations with the SeaFrance works council to agree a plan. On 23 January 2012, agreement was reached. An important feature of the plan agreed was that SeaFrances parent, SNCF, would make an incentive payment to any alternative employer for each ex SeaFrance employee whom it took on. The amount of the payment would vary from 3,600 to 25,000 according to the nature of the alternative employment. The highest payment, 25,000, would be made for any ex SeaFrance employee who was ultimately re employed on the SeaFrance vessels in operations similar to those carried on by SeaFrance before its liquidation. Subsequently, the liquidator invited sealed bids for the SeaFrance assets by 4 May 2012. A number of bids were received, which were opened in court on 10 May 2012. GET bid 65m for all the assets other than customer contracts, an exception which the Commission regarded as insignificant. The assets acquired included the vessels, the logos, brands and trade names, the computer software, websites and domain names, IT systems and hardware, the office equipment, the customer lists and records, and the inventory of technical and spare parts. It was an integral part of GETs proposal that it would enter into a long term relationship with SCOP under which SCOP would provide the crews and shore staff for the vessels, using as many as possible of the redundant former employees of SeaFrance. The bid documents put the point in this way: The project for which Groupe Eurotunnel is signing up is intended, however, to allow a partnership with the former SeaFrance employees who will be involved as part of a SCOP, so as to revive the operations previously undertaken by SeaFrance. The liquidator recommended the GET bid because, among other reasons, the arrangement with SCOP meant that it was the only one which would safeguard the jobs of at least a substantial part of the workforce. On 11 June 2012, the court accepted the liquidators recommendation, and the acquisition of the SeaFrance assets was completed on 2 July 2012. On 20 August 2012 a subsidiary of GET, MyFerryLink SAS, recommenced the ferry service with the three vessels acquired from SeaFrance. SCOP operated the service under contract with MyFerryLink (or MFL). Between 80% and 90% of those employed in the service, whether on board or ashore, were former SeaFrance employees, although because MFL ran three ships instead of four and at manning levels lower than those of SeaFrance, this accounted for a smaller proportion of those who had been made redundant. The reference to the Competition Commission and the Competition and Markets Authority On 29 October 2012, the Office of Fair Trading referred the acquisition of the SeaFrance assets to the Competition Commission under the legislation then in force. The Commission reported on 6 June 2013 that a relevant merger situation existed which could be expected substantially to lessen competition in the market for ferry services across the Channel. The Commission considered that the question whether the assets acquired constituted an enterprise depended on which assets of the enterprise could be said to constitute the activities or part of the activities of its business. For some businesses the activities are enabled by physical assets alone. In others, such as skilled service industries, key staff may constitute an enterprise (paragraph 4.10). The Commission considered that the enterprise of SeaFrance was constituted essentially by the combination of the vessels, the employees and to a limited extent the brand and goodwill. It approached the acquisition of these three classes of asset on the footing that the extent of the co operation between GET and SCOP made it appropriate to treat them together as associated persons for the purpose of section 127 of the Act, and thus as a single acquirer of all three classes of asset. The Commission thought that the hiatus in SeaFrances operations before the acquisition by GET and SCOP was of some importance, but was outweighed by the indications of continuity. In paragraph 7 of its summary, the Commission explained its decision on the jurisdictional condition as follows: We considered whether the transaction was a relevant merger situation within the meaning of the Enterprise Act 2002 (the Act), in particular whether the transaction, as structured, meant that an enterprise had been acquired. Our assessment turned on the ease and speed with which the Vessels were put back into operation; the fact that GET and the SCOP acted together to secure control of the Vessels and other assets and/or that GET had material influence over the SCOP; the fact that a large proportion of the staff provided by the SCOP to run the MFL service were previously employed by SeaFrance; and the fact that GETs bid had assigned some value to the brand and goodwill. We concluded that, in the context of the particular industry concerned, these elements met the statutory definition of an enterprise, and constituted the activities, or part of the activities, of a business. In the light of the subsequent course of the proceedings, it should be noted that the Commission made only brief and oblique reference to PSE3. They simply remarked (paragraph 3.29) that it was public knowledge in France that under the terms of the liquidation agreed between SeaFrances owner (SNCF), the court and the SCOP, the SCOP would receive an indemnity of 25,000 for each SeaFrance employee that it employed. GET and SCOP challenged this part of the decision before the Competition Appeal Tribunal (CAT), along with other parts which are no longer relevant. The CAT gave judgment on 4 December 2013. This judgment has been referred to in these proceedings as Eurotunnel I [2013] CAT 30, and I shall follow the same convention. At paras 105 106, the CAT set out the principle on which the acquisition of an enterprise fell to be distinguished from an acquisition of bare assets: 105. The key to distinguishing between bare assets and an enterprise lies in: (a) Defining or describing exactly what, over and above bare assets, the acquiring entity obtained; and (b) Asking whether and if so how this placed the acquiring entity in a different position than if it had simply gone out into the market and acquired the assets. The question, then, is whether this difference is capable of constituting what would otherwise be bare assets into something that may properly be described as the activities of a business. Inevitably, this is a question of fact and degree, and there will be no single criterion giving a clear answer. However, if a guiding principle is sought, then we consider that it lies in an understanding of what an enterprise the activities or part of the activities of a business does. An enterprise takes inputs (assets of all forms) and by combining them transforms those inputs into outputs that are provided for gain or reward. It thereby also may generate intangible but valuable assets such as know how or goodwill. It is in this combination of assets that the essence of an enterprise lies. In those cases where the acquiring entity takes over the business of the acquired entity, the answer will be self evident: the same enterprise is simply continuing, albeit under different ownership or control. The difficult case arises where the combination of assets is fractured, such that the assets are no longer, or no longer to the same extent, being used in combination. This case is a particularly good one, where what was clearly once an enterprise was wound down: the difficult question is whether, even though the business of SeaFrance had been wound down to a very considerable extent, there still remained the embers of an enterprise. 106. In this context, it is necessary to make two points: (a) First, it is perfectly possible for an enterprise to wind down, and to wind down to such an extent that it ceases to be an enterprise. The mere fact that in the past the activities of a business were being carried on by an entity does not necessarily mean that, as at the time of the merger, that entity was an enterprise. Of course, it is also important to recognise that some businesses (eg those involved in tourism) trade for some periods and not for others (eg during the low season). Such a hiatus does not preclude the existence of an enterprise. Continuous trading is not essential. (b) Secondly, the fact that the acquiring entity emulates the business of the acquired entity, and even uses that entitys assets, does not necessarily mean that the acquiring entity has acquired an enterprise. As regards the question of whether a relevant merger situation exists, the statutory test is not whether the acquiring entity is carrying out the same activity that was once carried out by the acquired entity, even with the same assets. The statutory test is not satisfied if the acquiring entity reconstructs a business that was once conducted by a different entity, even if the assets of that entity were used to do so. The statutory test in section 26(1) turns on two enterprises ceasing to be distinct because they are brought under common ownership or common control. It is critical that there are two enterprises, not one enterprise (the acquiring enterprise) and a collection of assets. The CAT expressed some doubt about whether the transaction as described by the Commission amounted to any more than an acquisition of bare assets. The reason for its doubt was that the CAT regarded the transfer of the employees as a critical part of the Commissions analysis. But it found no evidence in the Commissions report to show that what had happened amounted to a transfer of the employees, as opposed to their mere re engagement. Referring to the redundancies of January 2012, the CAT remarked that on the face of the Commissions analysis the employees contracts of employment were terminated with no thought as to how they might be employed in the future (para 115). But they pointed to the potential significance of the inducement payments of 25,000 per ex SeaFrance employee, to which the Commission had briefly referred at paragraph 3.29 of its report (quoted above), and noted that this might, if fully explored, provide the necessary link between their employment by SeaFrance and their re employment by SCOP. It also observed that the Commission had failed to explain how the maintenance of the vessels in hot lay up and the employment of ex SeaFrance crews had contributed to the ability of the purchaser to resume the service. It therefore remitted the matter to the Commission so that it could address these points. The reference was subsequently taken over by the Competition and Markets Authority when the functions of the Office of Fair Trading and the Commission were transferred to the Authority on 1 April 2014. On 27 June 2014 the Authority issued its decision on the remittal. The Authority reiterated the conclusion of the Commission that a relevant merger situation existed. At paragraph 2.12, it observed: In making a judgment as to whether or not the acquisition by GET/SCOP of certain SeaFrance assets has resulted in enterprises ceasing to be distinct under the Act, we have had regard to the substance of the arrangements rather than merely their legal form. We did not find that one single factor was determinative in reaching our conclusion; instead we based this on the totality of all the relevant considerations, taking into account the nature of the industry and the particular characteristics of the assets that were acquired (as well as those that were not acquired) in that context. The substance of this report is specifically focused on what we understand the CAT asked us to address. The Authoritys report dealt in detail with the history of the successive attempts to save or sell the business after it had been put into administration in April 2010. In particular it described PSE3 and the role that it had played in the liquidation of SeaFrance, in the dismissal of the employees and in the courts decision to accept GETs bid. The Authority found that the object of PSE3 and the court procedures for the sale of the assets was to achieve some form of business continuity: while various transactions involving one or both of the parties were considered, they all had the aim of continuing SeaFrances activities in some form and providing employment to SeaFrance employees. We noted that many of those involved in the various stages of the sale process, including the liquidator and the French Court, sought to ensure the re employment of ex SeaFrance staff in the Dover Calais region, preferably on the SeaFrance vessels. One reflection of this is the successful negotiation by the SeaFrance works council of an indemnity payment funded by SNCF which was substantially higher in the event that the ex SeaFrance staff were re employed on the SeaFrance vessels used in a similar operation and which ultimately provided the SCOP with a substantial amount of working capital. (para 3.49) The Commission concluded: Overall, we consider that a review of the background to the transaction shows that there is considerable continuity and momentum between the time of SeaFrances operation of the Dover Calais ferry and the commencement of MFLs operation of the same ferries on that route involving ex SeaFrance employees. This is not a situation where a collection of assets (used at some point in the past to carry on a business activity) comes to the market, and a buyer is successful in acquiring them, and then uses them to set up a business similar to the one for which the assets were originally used. For reasons set out above, the circumstances of this case are fundamentally different. (para 3.54) Accordingly, the Commission rejected the suggestion of the CAT that the employees had been dismissed with no thought as to how they might be employed in the future: The indemnity that SNCF SeaFrances parent company at the time agreed to pay created a strong incentive for ex SeaFrance employees to be employed on the SeaFrance Berlioz, SeaFrance Rodin and SeaFrance Nord Pas de Calais in similar operations to those of SeaFrance. It creates a link between the vessels and the employees and it was aimed at ensuring, and ultimately did ensure, to the extent possible , that a significant number of employees transferred from SeaFrance to the operator of the vessels. We consider that this shows that a large proportion of the SeaFrance workforce effectively transferred from SeaFrance to the SCOP. (para 3.107) Turning to the CATs criticism that the Commission had failed to explain how the hot lay up and the continuity of personnel had contributed to the prompt resumption of the service after the acquisition by GET, the Authority pointed out that the vessels were efficient modern vessels specifically designed to operate on the Dover Calais route, and of a size and configuration designed to permit economies of scale. They were not readily replaceable by other, comparable vessels. Their maintenance in hot lay up was the cheapest and most efficient way of enabling them to be brought back into service in the shortest possible time. In addition, the availability of ex SeaFrance crews already trained to operate these vessels was a material advantage enabling a purchaser to restart operations quickly. These points were supported by an extensive analysis of the alternative ways in which the ferry service might have been resumed by another entity after the liquidation of SeaFrance. At paras 4.19 4.20, the Authority expressed its conclusions as follows: 4.19 We therefore conclude that: The combination of acquired assets (in particular, but not limited to, the vessels and employees) means that what was acquired was more than a bare asset in that it enabled the acquirer to establish ferry operations, more quickly, more easily, more cheaply and with less risk than if the relevant assets had been otherwise acquired in the market. Although, in light of the period of inactivity, GET/SCOP did not acquire the SeaFrance assets as a going concern, in reality they obtained much of the benefit of so acquiring them. That is because, in our view, the commercial operability and coherence of the assets used by SeaFrance for the Dover Calais ferry service was actively maintained, and thus impairment was minimised, during the period of inactivity. The result of the combination of steps taken in relation to the vessels and the staff was that substantially the same business activities as had previously been undertaken by SeaFrance were able to be, and were in fact, resumed within a very short period of time following the acquisition. The intention, for good and understandable commercial and employment reasons, was to seek to preserve the former business or something as closely approximating to it as possible. That intention was achieved. Moreover, GET was significantly motivated to acquire the assets that it did by the advantages of continuity (and the consequent ability to resume substantially the same operations as had previously been undertaken by SeaFrance on the Dover Calais route) that those steps had preserved. 4.20 We conclude that the collection of tangible and intangible assets (including the transferred ex SeaFrance employees) that GET/SCOP acquired meets the legal definition of an enterprise in that together they constitute the activities or part of the activities of a business. There was then a further appeal to the CAT, which gave judgment on 9 January 2015. Like the parties, I shall call this Eurotunnel II [2015] CAT 1. It is unnecessary to summarise its reasoning at any length. The CAT reviewed the findings of the Commission and the Authority in the two reports and held that on those findings the Authority had been entitled to reach the conclusion it did. The decision of the Court of Appeal SCOP appealed from the decision in Eurotunnel II to the Court of Appeal. GET did not appeal. In the Court of Appeal, the leading judgment for the majority was delivered by Sir Colin Rimer, with whom Tomlinson LJ agreed. Sir Colin thought (para 167) that the definition of an enterprise as meaning the activities or part of the activities of a business showed that Parliaments intention was focused only on the case in which the acquiring entity takes over another business as a going concern. He thought it possible that activities could be regarded as continuing even during a period when they were not being carried on, for example where a seasonal business traded from May to October and was sold in December, or where a scheme was devised for the suspension of the activities before the transaction with a view to evading the operation of the Act. But the present case was different because when SeaFrance was ordered finally to cease its trading activities in January 2012 there was no prospect of their being resumed in the future. Their continuation was judicially prohibited, SeaFrances ferry activities were therefore at an end and it was anyway incapable of carrying them on. All that remained to be done was for the liquidator to dismiss its employees as redundant, dispose of its assets and, presumably, then to give SeaFrance its final quietus under French law. (para 158) However, Sir Colin did not decide the case on this ground, because the CAT had held in Eurotunnel I that even in these circumstances a hiatus in the activities of a business might be consistent with the subsistence of the enterprise. That judgment had not been appealed, and the correctness of the guidance given in it had not been challenged. He therefore confined himself to the application of the CATs test to the facts. Sir Colin held that the facts found by the Commission and the Authority did not disclose that GET and SCOP had acquired the enterprise of SeaFrance. He approached the matter on the footing, which was common ground before us, that the Authoritys conclusion could be supported only if GET and SCOP had acquired both the vessels and their crews. They had unquestionably acquired the vessels, but had they acquired the crews? Sir Colin thought not. In his view, they would in all probability have acquired the crews if the SeaFrance assets had been acquired from the liquidator before 9 January 2012 when the French Court directed the company to cease operations and to dismiss most of the employees. But that event had made all the difference. It finally and irreversibly brought the relevant activities of SeaFrance to an end, together with the relationship between SeaFrance and its employees. GET and SCOP had merely started up a similar business after 2 July 2012 by hiring ex SeaFrance employees whose services had become available on the market in consequence of their redundancy. His reasons are encapsulated in paras 198 200 of his judgment: 198. The effect of the court order of 9 January 2012 was that the activities in which the workforce had formerly been engaged were finally to cease and that the employees must be dismissed within 15 days as redundant, as they were. At the point of dismissal, the employees connections with SeaFrance were finally severed. It is also true that, at such point, PSE3 was already in place. It was a statutory job saving plan directed at assisting the dismissed employees to find re employment elsewhere than with SeaFrance; and paragraph 3.3.3, its most generous provision, of course raised a high likelihood that they, or most of them, would obtain re employment with any purchaser of the SeaFrance vessels which proposed to use them for ferry operations similar to SeaFrances. 199. PSE3 was, however, in no manner directed at preserving any connection between the employees and SeaFrance, let alone its activities (which had ceased), nor did it do so. In the event, following the successful GET bid, many of the former employees were later re engaged by the SCOP. There is no sustainable basis for any conclusion that such engagements by SCOP resulted from, or were referable to, or were explained by any transfer, or by what was said to be in effect a transfer, by SeaFrance to GET/SCOP as part of the GET/SCOP acquisition. That is not what happened as a matter of law or according to any rational assessment of the facts or by reference to the supposed reality of the situation. Nor would any objective observer of the scene at the time that PSE3 was adopted have considered that if, at some future stage, there were to be a mass re employment of the ex employees by a purchaser of the SeaFrance vessels, such re employment could at that point be characterised as, in reality, a transfer of the employees to the purchaser by SeaFrance together with the purchased vessels. They would foresee such re employment as being simply that which it was, namely a true re employment of employees whose services were available for hire in the market, albeit a re employment incentivised by the terms of PSE3. 200. The CMAs different finding that upon such mass re employment there was in reality a transfer, or a transfer in effect by SeaFrance, is one that I therefore regard as irrationally wrong. It is one that could not properly have been made. Arden LJ dissented, essentially on the ground that a hiatus in the business activities of the enterprise being acquired was not legally decisive, and that in those circumstances its significance was a matter of fact and degree, for evaluation by the Authority as the tribunal of fact. The present appeal On 31 July 2015, shortly after this court gave permission for the present appeal, SCOP went into liquidation. Its liquidator subsequently indicated that it did not propose to participate in the appeal. In the absence of the respondent we have been greatly assisted by Ms Kelyn Bacon QC, who appeared as Advocate to the Court, and by Mr Richard Gordon QC who appeared for GET as Intervener. Their participation, together with the able submissions of Ms Demetriou QC for the Authority, enabled the issues to be fully examined before us. The approach to construction It is necessary to deal first with a threshold issue. To what extent should the question whether a relevant merger situation exists be treated as lying within the specialised expertise of the Competition and Markets Authority? I hope that it will not be thought disrespectful of the learning deployed on this issue, if I deal with it shortly. Under sections 22(1) and 35(1) the existence of a relevant merger situation is a precondition of the Authoritys jurisdiction to proceed with a reference. Section 35 requires the Authority to decide in the first instance whether such a situation has been created, subject to review by the CAT and appeal from the CAT to the Court of Appeal. But the test for determining what are the relevant activities whose absorption by another enterprise founds the jurisdiction of the Authority is a question of law. It depends on the construction of the Enterprise Act. Of course, the process of construction must necessarily be informed by the purpose of these provisions, and to that extent the economic implications of different interpretations may be relevant. Moreover, once the test has been identified its application to particular facts may call for expert economic judgments by the tribunal of fact, in this case the Authority. But otherwise the Authoritys expertise and the specialised nature of its functions do not clothe it with any wider power to determine its statutory jurisdiction than is enjoyed by other administrative decision makers, and its conclusions on the point are entitled to no greater deference on a review or appeal. The legal relevance of a cessation of trading The starting point is the relevance (if any) of the fact that SeaFrance was not actively trading on the date of the transaction by which GET acquired its assets. It was common ground before us, as it had been in the Court of Appeal, that the merger control provisions of the Act were not limited to the acquisition of a business as a going concern. Therefore, it did not necessarily follow from the cessation of the ferry service that SeaFrance had no activities to be acquired in July 2012. Sir Colin Rimer expressed doubts about this, at any rate as a general proposition. But I think that it was correct, and that it is of some importance to understand why. Under section 23(2)(a), what must cease to be distinct in order to create a relevant merger situation are the two enterprises of SeaFrance and GET, ie their business activities. The reason for defining an enterprise by reference to its activities is to show that the merger control regime depends on the merger of business activities, as opposed to the merger of the entities that carry them on. It is no part of the purpose of the definition of an enterprise to fix the time at which the relevant enterprise must actually be performing these activities. Nor is there any other provision of the Act that requires the activities to have been performed at any particular time. Part 3 of the Act does contain provisions relating to timing, but they are limited to determining the latest time after the enterprises have ceased to be distinct when the matter may be referred to the Authority for assessment and possible action. The result is that the possession of relevant activities is simply a descriptive characteristic of an enterprise. It may be characteristic of the enterprise notwithstanding that the activities are not actually being performed at the moment of the transaction, provided that there still exists the capacity to carry them on as part of the same business, whether in the hands of the existing proprietor or of someone else. That is why Sir Colin Rimer was right in his instinctive view that the sale of a seasonal business out of season would in principle be subject to statutory merger control. This is consistent with the purpose of Part 3 of the Act. Merger control is the principal weapon in the laws armoury for pre empting concentrations liable adversely to affect the structure of markets before they do so. Whether an enterprises activities are being carried on at the moment when it ceases to be distinct is likely to depend on adventitious factors, such as the timing of the execution of documents, the rhythm of the business, and so on. It does not necessarily tell us anything about the nature of the business. If the merger control regime is incapable of applying to anti competitive concentrations where the relevant activities are not actually being carried on at the moment when the concentration is achieved, then the result will be a significant limitation of the scope and efficacy of the statutory scheme. That limitation cannot be related to the economic rationale of the legislation, or to any discernible purpose which the legislature can sensibly be thought to have had in mind. The point may be illustrated by considering two situations in addition to the case of the seasonal business which has already been mentioned. One is the familiar situation, one of the commonest occasions for a merger, where a business goes into liquidation and is temporarily mothballed by the liquidator in the hope that a buyer can be found for the whole concern. It would be surprising if the mere fact of the suspension of its business were to remove the possibility of merger control, regardless of the adverse effect of a subsequent purchase on the competitive structure of the relevant market. The other example is the case where the proprietor of a business suspends its activities shortly before selling it to a competitor, in a deliberate attempt to avoid statutory merger control. This is not particularly common, but only because the practice of the competition authorities is to treat a temporary suspension of a firms business activities as inconclusive. The paradigm case is the decision of the Monopolies and Mergers Commission in AAH Holdings Plc and Medicopharma NV (1992), which involved a scheme of just this kind. The Commission rejected the suggestion that the scheme was a sham. It nevertheless considered that the relevant merger situation existed. Once a transaction of this kind is recognised as genuine, it is not easy to see how the intent to avoid the Act could make any difference to the analysis. Either the suspension of the activities did avoid the operation of the Act or it did not. If it did not, it must be by reference to some principle which declines to treat a suspension as decisive whatever the motive for it. Common control of an enterprise: the test The next question is in what circumstances may a firm be said to acquire an enterprise whose activities are no longer actively being carried on. Of course, a hiatus in those activities before the acquisition will usually be relevant even if it is not decisive. But if it is not decisive, its significance must necessarily vary according to its duration, its economic impact, and all the other relevant surrounding circumstances. Under section 106 of the Enterprise Act, the Authority is required to publish general advice and information about (among other things) the making and consideration of references under section 22. In January 2014, it published Mergers: Guidance on the CMAs Jurisdiction and Procedure. In the relevant respects, this broadly corresponds to the guidance formerly issued by the Office of Fair Trading. The implications of a cessation of business are discussed at paras 4.10 4.11: 4.10 The fact that a target business may no longer be actively trading does not in itself prevent it from being an enterprise for the purposes of the Act. In such cases, while the relevant criteria may vary according to the particular circumstances of a case, the CMA will consider, for example: the period of time elapsed since the business was last trading; the extent and cost of the actions that would be required in order to reactivate the business as a trading entity; the extent to which customers would regard the acquiring business as, in substance, continuing from the acquired business; and whether, despite the fact that the business is not trading, goodwill or other benefits beyond the physical assets and/or site themselves could be said to be attached to the business and part of the sale. 4.11 None of these factors, individually, is likely to be conclusive. The CMA will assess all relevant circumstances (including whether there is evidence that the closure of the business was designed to avoid merger control), with a view to determining whether the target business constitutes an enterprise under the Act. This is not so much a test as a list of potentially relevant factors. So what is the underlying principle? The first point to be made is that in applying a scheme of economic regulation of this kind, the Authority is necessarily concerned with the economic substance of relevant transactions and not just with their legal form. Any situation in which an enterprise (call it the target enterprise) ceases to be distinct will involve a transfer of control over assets, whether tangible or intangible. The phrase bare assets does not appear in the Act, and simply as a matter of language may not convey much. But it is a useful concept when it comes to analysing the purpose of this legislation. The object of distinguishing between bare assets and assets amounting to an enterprise is to prevent the merger control regime from capturing an acquisition of assets which simply serve as factors of production in a new enterprise or as a means of achieving organic growth. It is designed to distinguish a case in which the acquirer acquires a business exploiting a combination of assets and a case where he acquires no more than he might have acquired by going into the market and buying equipment, hiring employees, and so forth separately. In the latter case, the fact that the equipment or the employees were previously employed in the target enterprise is irrelevant. He has got no more than he would have done if they had not been. So if the assets of which he acquires control are to be regarded as constituting an enterprise, (i) they must give him more than he might have acquired by going into the market and buying factors of production, and (ii) the extra must be attributable to the fact that the assets were previously employed in combination in the activities of the target enterprise. Plainly, the longer the interval between a target enterprises cessation of trading and the acquisition of control of its assets, the less likely it is that either criterion will be satisfied. The alternative is to conclude that the target enterprise has ceased to exist because its business is no longer characterised by any activities capable of being continued by someone else. Ultimately the question turns on what Ms Bacon, rightly to my mind, called economic continuity. This is substantially the principle stated at paras 105 106 of the CATs judgment in Eurotunnel I, which I have set out above. Put crudely, it depends on whether at the time of the acquisition one can still say that economically the whole is greater than the sum of its parts. While I would wish to guard against any attempt to state a single governing test to answer every case, I consider that the CATs statement of the principle is correct as applied to the generality of cases, including this one. Irrationality The Authority directed itself according to the principle set out by the CAT in Eurotunnel I, which I have held to be correct. Once that point is reached, the application of the principle to the facts is a matter of expert evaluation. In these circumstances, the Authoritys evaluation could not properly be discarded by a court of review unless it was irrational. Sir Colin Rimer found that it was. He considered that the Authority had erred in principle because the facts which it had found did not logically lead to the conclusion that the employees were transferred from SeaFrance to the business operated by GET and SCOP after 2 July 2012. That was also the essence of the case made by Ms Bacon and Mr Gordon. I think that this criticism is unjustified. GET and SCOP acquired substantially all the assets of SeaFrance, including the trademarks and goodwill. The assets included ships specially designed for the particular route, which had been continuously maintained by the liquidator in a condition which enabled the service to be resumed significantly faster and at lower cost and commercial risk than would have been the case if GET had acquired suitable ships elsewhere. The arrangement with SCOP enabled the service to be resumed with substantially the same personnel, again with a substantial advantage in terms of time and operational efficiency. Moreover, each employee came with a dowry of 25,000 paid by SeaFrances parent for the specific purpose of encouraging the re employment of its former crews and shore staff. The payments created a link between the vessels and the employees, and between the old employees and the new. The Authoritys evaluation was that in these circumstances, there was considerable continuity and momentum between the activities carried on by SeaFrance before 16 November 2011 and those carried on with its assets after 2 July 2012. Although GET and SCOP did not acquire the ferry business as a going concern, they did acquire much of the benefit of doing so. This was because the commercial operability and coherence of the assets used by SeaFrance for the Dover Calais ferry service was actively maintained, and thus impairment was minimised, during the period of inactivity paragraph 26(b). These conclusions seem to me to follow logically from the Authoritys findings. The Authoritys conclusion that there still remained what the CAT had called the embers of an enterprise capable of passing under the control of GET and SCOP, was unimpeachable. The essential reason why Sir Colin Rimer thought otherwise was that in his view the order of the French Court on 9 January 2012 directing the dismissal of the employees terminated the link between them and SeaFrance. This, he thought, meant that their future re employment by GET could not amount to a transfer, even when the arrangements embodied in PSE3 were taken into account. In point of form, this was so. But as a matter of economic substance it was not. True it is that the employees were not directly transferred from SeaFrance to SCOP. They were re employed by SCOP after some months in which they had been unemployed or had found other work. However, the question was not whether the dismissals severed the connection between the employees and SeaFrance. The question was whether it severed their connection with a business that could be acquired and operated by someone else. One may test this by asking how the position would have differed if instead of making the employees redundant SeaFrance had kept them on but sent them on gardening leave. The result would have been legally different but its economic implications for what GET and SCOP acquired on 2 July 2012 would have been the same. It is in this context that one must view the impact of PSE3. The connection between the employees and the business was not severed by the court ordered redundancies, because the court directed the redundancies on the express basis, required by French law, that a plan would be prepared within 15 days to safeguard their future employment. PSE3, the plan which emerged, provided a significant financial inducement for any acquirer of the ships to re employ their former crews and shore staff to operate them in the same service as before. The Authority regarded this as a significant pointer to the economic continuity of the business. I think that they were right to do so, but it is enough for present purposes to say that it was a conclusion that they were entitled to reach. This court has recently emphasised the caution which is required before an appellate court can be justified in overturning the economic judgments of an expert tribunal such as the Authority and the CAT: British Telecommunications Plc v Telefnica and others [2014] UKSC 42; [2014] Bus LR 765; [2014] 4 All ER 907 at paras 46, 51. This is a particularly important consideration in merger cases, where even with expedited hearings successive appeals are a source of additional uncertainty and delay which is liable to unsettle markets and damage the prospects of the businesses involved. Concepts such as the economic continuity between the businesses carried on by successive firms call for difficult and complex evaluations of a wide range of factors. They are particularly sensitive to the relative weight which the tribunal of fact attaches to them. Such questions cannot usually be reduced to simple points of principle capable of analysis in purely legal or formal terms. In this case, the majority of the Court of Appeal sought to reduce the question of economic continuity to the single question whether the legal effect of the decisions of the French Court in January 2012 was definitively to terminate the employment relationship between SeaFrance and its crews. In my opinion this led them to take an unduly formal approach to the issue before them, and to discount the depth of economic analysis which underlay the Authoritys original conclusion. Conclusion For these reasons, which substantially correspond to those given by Arden LJ in her dissenting judgment, I would allow the appeal.

SeaFrance SA, a French company, operated a ferry service between Dover and Calais until it ceased operations on 16 November 2011. It was formally liquidated on 9 January 2012, and most of its employees were dismissed. Groupe Eurotunnel SA (GET), the parent company of the Group operating the Channel Tunnel, and Socit Cooprative De Production SeaFrance SA (SCOP), a workers co operative incorporated by a number of former SeaFrance employees to secure the continuance of the ferry service, acquired substantially all of SeaFrances assets on 2 July 2012. This included three of the four SeaFrance vessels, trademarks, IT systems, goodwill and customer lists. GET and SCOP resumed ferry services on 20 August 2012 through GETs subsidiary company, MyFerryLink SAS. The vessels were operated by employees who had almost all worked for SeaFrance. The reemployment of those employees had been incentivised by a statutory Plan de Sauvegarde de lEmploi (known as the PSE3), by which SeaFrances parent company SNCF would provide payments to employers for employing ex SeaFrance employees. The acquisition was referred to the Competition Commission, the regulator at the time. It concluded that there was a relevant merger situation for the purpose of the merger control provisions of the Enterprise Act 2002, which could be expected to result in a substantial lessening of competition in the cross Channel market. The enterprise of SeaFrance continued since its activities continued, even though there had been a hiatus of over seven months in its operations. The Commission imposed restrictions on the operation of the service by GET and SCOP, including a ban on using the ex SeaFrance vessels for ferry services from Dover for 10 years. On appeal to the Competition Appeal Tribunal, the Tribunal gave guidance on the meaning of enterprise in the Eurotunnel I judgment, and remitted the question of jurisdiction back to the new regulator, the Competition and Markets Authority. Upon the remission, the Competition and Markets Authority (which had assumed the functions of the Commission) considered that what had been acquired was an enterprise, and therefore that a relevant merger situation existed. Accordingly they confirmed the restrictions previously imposed by the Commission. That decision was upheld by the Competition Appeal Tribunal in the Eurotunnel II judgment. The Court of Appeal allowed an appeal by a majority, holding that GET and SCOP had not acquired an enterprise, but only the means of constructing a new (but similar) one. In particular, this was because they had not acquired SeaFrances crews. They concluded that it was irrational for the Competition and Markets Authority to reach any other conclusion on the facts. The Supreme Court unanimously allows the appeal by the Competition and Markets Authority, thereby reinstating the decision of the Competition Appeal Tribunal in Eurotunnel II. Lord Sumption gives the judgment of the Court. The merger control provisions of the Enterprise Act 2002 are not limited to the acquisition of a business that is a going concern. The possession of activities is a descriptive characteristic of an enterprise under the Act. An enterprise is subject to merger control if the capacity to perform those activities as part of the same business subsists. [32 35] The test is one of economic continuity. An Acquirer acquiring assets acquires an enterprise where (i) those assets give the Acquirer more than might have otherwise been acquired by going into the market and buying factors of production and (ii) the extra is attributable to the fact that the assets were previously employed in combination in the activities of the target enterprise. The period of time between cessation of trading and acquisition of control of the assets may be a relevant factor, but is not necessarily decisive. [36 40] This was substantially the same principle set out by the Competition Appeal Tribunal in Eurotunnel I, which the Competition and Markets Authority applied in this case. [40 41] The Court of Appeals finding that the Authoritys evaluation was irrational was unjustified. GET and SCOP acquired substantially all the assets of SeaFrance, including trademarks, goodwill, specialist vessels maintained in a serviceable condition, and substantially the same personnel. The Authoritys conclusion that this demonstrated considerable continuity and momentum and the embers of an enterprise, which could be passed to GET and SCOP, was unimpeachable. The order of the French Court of 9 January 2012 to dismiss the employees did not disrupt that continuity and momentum because the order was made on terms that the PS3 preserved the prospect of employment on the ships for the dismissed crew members. [41 43] The majority of the Court of Appeal was wrong to narrow the question of economic continuity to the legal effect of the decision of the French Court in January 2012 and whether this terminated the employment relationship between SeaFrance and its employees. The Competition and Markets Authority is not entitled to any special level of deference: the test for determining whether there is a relevant merger situation and relevant activities is a legal question. [31] But the Authority undertook a broader economic analysis, concluding that there was economic continuity. That evaluation was complex and sensitive to a whole range of factors. It was not a purely legal enquiry. Its economic analysis should be respected. [44 45]

The world community recognises human trafficking and modern slavery as twin evils requiring a world wide response. The United Kingdom is party to both the 2000 Palermo Protocol (the Protocol to Prevent, Suppress and Punish Trafficking in Persons, especially Women and Children, supplementing the United Nations Convention against Transnational Organised Crime) and the 2005 Council of Europe Convention on Action against Trafficking in Human Beings (ECAT). The purposes of ECAT are to prevent and combat trafficking, to protect the human rights of victims, as well as to ensure effective investigation and prosecution, and to promote international co operation on action against trafficking (article 1). An essential part of that is the effective identification of victims (article 10). Accordingly, the United Kingdom has established the National Referral Mechanism (NRM). First responders, such as police officers or social workers, who suspect that a person may be a victim of trafficking refer the case to the Home Office, as the competent authority under the Convention, for investigation. Officials first decide whether there are reasonable grounds to believe that the person may be a victim. If there are, he or she is usually given a period of recovery and reflection during which money, practical assistance and if necessary accommodation are provided. Not less than 45 days later (and nowadays usually much longer) the Home Office will make a conclusive grounds decision as to whether the person is, on the balance of probabilities, a victim of trafficking. Trafficking may, of course, take place internally. But very often it involves moving people across international borders, in which case victims are likely to face immigration issues. This case is principally about the relationship between the decision making processes of the NRM and the decision making processes of the immigration appeals tribunals: in essence, to what extent are the immigration appeals tribunals bound to accept the decisions of the NRM as to whether a person is, or is not, a victim of trafficking? However, it also raises questions about the relevance of a finding that a person has been trafficked to the immigration decisions which come before the tribunals. Specifically, when will a decision to remove a person from the UK be contrary to section 6 of the Human Rights Act 1998 because it is incompatible with that persons rights under article 4 of the European Convention on Human Rights (ECHR)? Article 4.1 provides that No one shall be held in slavery or servitude and article 4.2 that No one shall be required to perform forced or compulsory labour. This raises the broader question of the relationship between the individuals rights under article 4 and the UKs obligations under ECAT. The history MS is a national of Pakistan. He entered the UK on a visitors visa on 22 July 2011 when he was just 16. For the four years before that he had been subject to forced labour and physical abuse by his step grandmother and her nephews in Pakistan. He was brought to the United Kingdom by his step grandmother, who deceived him into thinking that he was coming here for his education. He was not. When he got here, he was initially made to perform labour for which he received no pay; this was arranged by his step grandmother, who profited financially. For the next 15 months, he moved from job to job. The First tier Tribunal (FTT) found that he was under the control of adults, exploited as cheap and illegal labour and felt that he had no choice but to work in these establishments in order to survive. The Upper Tribunal (UT) held that he was acting under compulsion and manipulation throughout those 15 months. He was a commodity who had been bought and sold and put to forced labour for little payment (para 52). MS came to the attention of the police in September 2012. They referred him to the local authority social services department. In November, the social services department referred him to the NRM because he appeared to be a vulnerable young person and potentially a victim of trafficking for exploitation purposes. In February 2013, the NRM decided that there was no reasonable ground to believe that he was a victim of trafficking. The official concerned did not meet or interview MS. On a review of the documents, the official concluded that MS was never under the control or influence of your alleged traffickers to the UK because you were able freely to quit each job you undertook and that you were able to move and work on [sic] your own accord in the UK. This decision was later maintained on review. In April 2013, MS had issued judicial review proceedings challenging the decision. In the meantime, in September 2012, MS had claimed asylum but this claim was rejected on 1 August 2013 and on 2 August the Secretary of State decided to remove him from the UK. MS appealed against this decision to the FTT, which dismissed his appeal on 3 December 2013. Nevertheless, the FTT made various findings of fact which were favourable to MS (see above). Permission to appeal was initially refused by both the FTT and the UT, but the refusal was successfully challenged by judicial review and the UT granted permission to appeal. The UT heard the appeal in December 2015 and January 2016 and promulgated its judgment in March 2016: [2016] UKUT 226 (IAC). It set aside the FTTs decision but preserved some of its positive credibility findings which related to MS time in the UK. Instead of remitting the case, the UT decided it for itself. The removal decision was challenged on two grounds: first, that it was not in accordance with the law because it had been based upon an unlawful NRM decision; and second, that it would be incompatible with MS human rights under article 4 of the ECHR: Nationality, Immigration and Asylum Act 2002 (the 2002 Act), section 84(1)(e) and (c) respectively. The UT decided in the appellants favour on both grounds. It acknowledged that the NRM decision was not an immigration decision which could be appealed under section 82 of the 2002 Act; it could only be directly challenged in judicial review proceedings. Nevertheless, if satisfied that the NRM decision was perverse, the tribunal could make its own decision as to whether the appellant was a victim of trafficking; it could also do so if the decision was in breach of the Secretary of States guidance or on some other public law ground. If the appellant was the victim of trafficking, he was entitled to the protection of ECAT, and the decision to remove him was not in accordance with the law. It was also a breach of his rights under article 4 of the European Convention. The Secretary of State appealed to the Court of Appeal, which allowed the appeal: [2018] EWCA Civ 594; [2018] 4 WLR 63. The court held that, in accordance with AS (Afghanistan) v Secretary of State for the Home Department [2013] EWCA Civ 1469; [2014] Imm AR 513, the tribunal could only go behind the trafficking decision and re determine the factual issues if the decision was perverse or irrational or one which was not open to it (para 70). It was difficult to identify precisely what it was in the NRM decisions which was susceptible to such a challenge (para 75). The UT had in effect treated the NRM decision as an immigration decision, which it was not (para 77). The UT had also been wrongly influenced by a submission that the obligations under ECAT were positive obligations under article 4, contrary to Secretary of State for the Home Department v Hoang Anh Minh [2016] EWCA Civ 565; [2016] Imm AR 1272. Hence it had been wrong to conclude that there had been a breach of the procedural obligations under article 4. A preliminary issue This Court gave the appellant permission to appeal in February 2019. He was later able to resolve his immigration status by other means and applied to withdraw his appeal. However, the Equality and Human Rights Commission had applied to intervene in the case and wished to take over the appeal. This was resisted by the Secretary of State on the grounds that the Commission had no power to take over a case and that the Court had no power to allow it. Accordingly, a preliminary hearing was held on 2 October 2019. The Commission applied to intervene in the appeal under its power to institute or to intervene in legal proceedings, whether for judicial review or otherwise, if it appears that the proceedings are relevant to a matter in connection with which the Commission has a function (Equality Act 2006, section 30(1)). Among the Commissions functions is the protection of human rights and encouraging public authorities to act compatibly with them (section 9(1)(c) and (d)). Thus the only question was what the Court might permit the Commission, as an intervener, to do. An intervener is a party to an appeal (Rules of the Supreme Court 2009 (SI 2009/1603 (L 17)), rule 3(2)). An appeal can only be withdrawn with the written consent of all parties or the permission of the Court (rule 34(1)). The appeal was therefore extant unless and until the Court gave permission to withdraw it. The Rules do not expressly state that the Court may permit an intervener in effect to stand in the shoes of an appellant. However, they do provide that if any procedural question arises which is not dealt with in the Rules, the Court may adopt any procedure that is consistent with the overriding objective, the Constitutional Reform Act 2005 and the Rules (rule 9(7)). The overriding objective is to secure that the Court is accessible, fair and efficient (rule 2(2)). Where an important question of law, which may well have been wrongly decided by the Court of Appeal, is raised in an appeal, it is clearly open to the Court to consider that the question should be fairly decided even though one of the parties no longer wishes to pursue it. Accordingly, we allowed the Commission to intervene and to take over the main conduct of the appeal. The principal issue The Secretary of State now concedes that when determining an appeal that removal would breach rights protected by the ECHR, the tribunal is required to determine the relevant factual issues for itself on the basis of the evidence before it, albeit giving proper consideration and weight to any previous decision of the defendant authority (para 65 of the printed case). Hence it is now common ground that the tribunal is in no way bound by the decision reached under the NRM, nor does it have to look for public law reasons why that decision was flawed. This is an important matter. As the AIRE Centre and ECPAT UK point out, had the tribunal been bound by such decisions, it could have had a profoundly chilling effect upon the willingness of victims to engage with the NRM mechanism for fear that it would prejudice their prospects of a successful immigration appeal. There are several reasons why the tribunal cannot be bound by the NRM decision. First, its jurisdiction is to hear appeals against the immigration decisions of officials: 2002 Act, section 82(1). It does not have jurisdiction judicially to review the decisions of the competent authority under the NRM. An appeal is intrinsically different from a judicial review. Second, those appeals are clearly intended to involve the hearing of evidence and the making of factual findings on relevant matters in dispute. This is made clear both by the 2002 Act and the Rules. Section 85(4) provided: On an appeal under section 82(1) against a decision the tribunal may consider any matter which it thinks relevant to the substance of the decision, including a matter arising after the date of the decision. The Tribunal Procedure (First tier Tribunal) (Immigration and Asylum Chamber) Rules 2014, (SI 2014/2604 (L 31)) in rules 14 and 15, and the Tribunal Procedure (Upper Tribunal) Rules 2008, (SI 2008/2698 (L 15)) in rules 15 and 16, make detailed provision for the calling of witnesses and the production of documents. Third, that this was the role of the tribunal was made crystal clear by the House of Lords in the well known case of Huang v Secretary of State for the Home Department [2007] UKHL 11; [2007] 2 AC 167. That case concerned individuals who did not qualify for leave to enter or remain under the Immigration Rules but claimed that to deny them leave would be incompatible with their rights under article 8 of the ECHR. Discussing the predecessor to the 2002 Act, in section 65 of the Immigration and Asylum Act 1999, Lord Bingham of Cornhill said this: These provisions, read purposively and in context, make it plain that the task of the appellate immigration authority, on an appeal on a Convention ground against a decision of the primary official decision maker refusing leave to enter or remain in this country, is to decide whether the challenged decision is unlawful as incompatible with a Convention right or compatible and so lawful. It is not a secondary, reviewing, function dependent on establishing that the primary decision maker misdirected himself or acted irrationally or was guilty of procedural impropriety. The appellate immigration authority must decide for itself whether the impugned decision is lawful and, if not, but only if not, reverse it. (para 11) The earlier decisions, of Edore v Secretary of State for the Home Department [2003] EWCA Civ 716; [2003] 1 WLR 2979 and M (Croatia) v Secretary of State for the Home Department [2004] UKIAT 24; [2004] INLR 327, were right to recognise that the judgment of the primary decision maker, on the same or substantially the same factual basis, is always relevant and may be decisive. But they do not describe the correct approach of the immigration appellate authority to its role. (para 12) In contrast to cases such as R (Daly) v Secretary of State for the Home Department [2001] UKHL 26; [2001] 2 AC 532 and R v Ministry of Defence, Ex p Smith [1996] QB 517, which were judicial reviews of departmental policy, the appellate immigration authority, deciding an appeal under section 65, is not reviewing the decision of another decision maker. It is deciding whether or not it is unlawful to refuse leave to enter or remain, and it is doing so on the basis of up to date facts. (para 13) In an article 8 case, the authority had a two part role: The first task of the appellate immigration authority is to establish the relevant facts. These may well have changed since the original decision was made. In any event, particularly where the applicant has not been interviewed, the authority will be much better placed to investigate the facts, test the evidence, assess the sincerity of the applicants evidence (para 15) The Upper Tribunal, in the case before us, made the same point: this Tribunal is better equipped than the Authority to make pertinent findings. The decisions of the Authority were the product of a paper exercise, entailing no live evidence. In contrast, we have the distinct advantage of having heard the appellants viva voce evidence and, further, we have received evidence not available to the Authority. Linked to this is the Secretary of States submission, with which we concur, that the appellants credibility is central to the disposal of this appeal. (para 46) The second task was to weigh up the competing considerations for and against granting leave, in other words, the proportionality exercise required by article 8(2) of the ECHR. After listing the public interest factors against granting leave, Lord Bingham in Huang said this: The giving of weight to factors such as these is not, in our opinion, aptly described as deference; it is performance of the ordinary judicial task of weighing up the competing considerations on each side and according appropriate weight to the judgment of a person with responsibility for a given subject matter and access to special sources of knowledge and advice. (para 16) It is thus apparent that the proper consideration and weight, which the Secretary of State says should be given to any previous decision of the authority, will depend upon the nature of the previous decision in question and its relevance to the issue before the tribunal. The decision of the competent authority under the NRM process was an essentially factual decision and, for the reasons given, both the FTT and the UT were better placed to decide whether the appellant was the victim of trafficking than was the authority. The more difficult question is the precise relevance of that factual determination to the appeal before the tribunals. The second issue: trafficking and the ECHR The Secretary of State argues that the Court of Appeal was correct to dismiss the appellants appeal because the decision to remove him from the UK entailed no possible breach of article 4 of the ECHR. The Upper Tribunal found that he would not be at risk of being re trafficked back to the UK (or elsewhere) if he returned to Pakistan. He was now older and more mature and would be able to re locate and establish himself in a manner which would distance him sufficiently from his step grandmother and her nephews (para 66). The positive obligations in article 4, it is argued, follow the same pattern as the positive obligations in articles 2 and 3. It is wrong to enlarge them by reference to the obligations in ECAT, as the appellant and the interveners seek to do. It is therefore necessary to examine the relevant obligations contained in ECAT and the Strasbourg jurisprudence relating to article 4 of the ECHR. However, it may not be necessary to import all of the obligations in ECAT into article 4 in order to find a violation of the obligations in article 4. Article 4 of ECAT defines trafficking as follows: a. Trafficking in human beings shall mean the recruitment, transportation, transfer, harbouring or receipt of persons, by means of the threat or use of force or other forms of coercion, of abduction, of fraud, of deception, of the abuse of power or of a position of vulnerability or of the giving or receiving of payments or benefits to achieve the consent of a person having control over another person, for the purpose of exploitation. Exploitation shall include, at a minimum, the exploitation of the prostitution of others or other forms of sexual exploitation, forced labour or services, slavery or practices similar to slavery, servitude or the removal of organs; b. The consent of a victim of trafficking in human beings to the intended exploitation set forth in sub paragraph (a) of this article shall be irrelevant where any of the means set forth in sub paragraph (a) have been used; c. The recruitment, transportation, transfer, harbouring or receipt of a child for the purpose of exploitation shall be considered trafficking in human beings even if this does not involve any of the means set forth in sub paragraph (a) of this article; Child shall mean any person under 18 years of age; d. e. Victim shall mean any natural person who is subject to trafficking in human beings as defined in this article. Thus, it was sufficient for the appellant, as a child, to be identified as a victim of trafficking if he was recruited and transported for the purpose of exploitation in the form of forced labour or services. There was no need to show that this had been achieved by any of the means set out in article 4.a. ECAT imposes a large number of obligations upon state parties. The following are the most relevant to this case. Article 5 requires parties to establish or strengthen effective policies for preventing trafficking and to use a child sensitive approach to their development and implementation. Article 10 requires parties to identify victims by a procedure which takes account of the special situation of child victims and to have people trained and qualified in preventing and combating human trafficking to do this. Where there are reasonable grounds to believe that a person is the victim of trafficking, that person should not be removed from the country until the identification process is completed. Article 12 requires parties to provide necessary assistance to victims in their physical, psychological and social recovery, including subsistence, accommodation, counselling and information. Article 14 requires those found to be victims to be issued with a residence permit if this is necessary owing to their personal situation or for the purpose of co operation with the authorities in an investigation or criminal proceedings. Articles 18 to 22 require the creation of various criminal offences and article 23.1 requires that they be punishable by effective, proportionate and dissuasive sanctions. Article 40 provides that the Convention does not affect the other international instruments to which the parties are party. Nor does it affect the rights, obligations and responsibilities of states and individuals under international law, including international humanitarian law and international human rights law. This is the usual saving for the other rights and obligations arising under international law: it does not mean that those rights and obligations are to be interpreted without reference to ECAT. ECAT as such has not been incorporated into UK law. Its obligations have been implemented by a variety of measures. The NRM is designed to fulfil the obligations in articles 10, 12 and 13; immigration rules have been modified in the light of article 14; and various criminal offences are created by the Modern Slavery Act 2015. The NRM does not, however, give private law rights to individuals. There is no right of appeal against an adverse decision or against a failure to provide the expected assistance. The only remedy lies in judicial review. However, the Secretary of State has consistently accepted that the NRM should comply with ECAT. In R (Atamewan) v Secretary of State for the Home Department [2013] EWHC 2727; [2014] 1 WLR 1959, para 55, it was accepted that it would be a justiciable error of law if the NRM Guidance did not accurately reflect the requirements of ECAT and a decision based on that error would accordingly be unlawful. The same was common ground in R (PK (Ghana)) v Secretary of State for the Home Department [2018] EWCA Civ 98; [2018] 1 WLR 3955. But this is of limited help to a victim who is subject to an adverse immigration decision. It would be of much greater help if a failure to observe the requirements of ECAT were also a violation of article 4 of the ECHR. Article 4 ECHR The first case in which the European Court of Human Rights examined article 4 in this context was Siliadin v France (2006) 43 EHRR 16. A 15 year old girl from Togo was brought to France by a relative and then lent to a couple who obliged her to work for them unpaid for years without respite and against her will (para 114). The Court held that limiting article 4 to direct state action would be contrary to international instruments and render it ineffective. Accordingly, governments had positive obligations in the same way as under article 3 for example, to adopt criminal law provisions penalising slavery, servitude and forced labour and to apply them in practice (para 89). The court went on to hold that, while the applicant had not been held in slavery, she had been held in servitude and she had been required to perform forced or compulsory labour. The French criminal law at the time was defective and the perpetrators had not been convicted. Hence there was a violation of article 4. To like effect was CN v United Kingdom (2013) 56 EHRR 24 holding that the lack of any legislation in the UK penalising forced labour and servitude violated article 4 (the Modern Slavery Act 2015 followed). The breakthrough in Siliadin was recognising that article 4 imposed, not only negative, but positive obligations upon the state. The court relied principally on instruments relating to forced labour and discussion of modern slavery and made only passing reference to ECAT in its discussion. The leading case on the relationship between ECAT and article 4 is Rantsev v Cyprus and Russia (2010) 51 EHRR 1. A young Russian woman, Ms Rantseva, had been working as an artiste in a cabaret in Cyprus. She left the apartment she was sharing with other women working there, leaving a note that she wanted to go back to Russia. The manager of the cabaret informed the authorities and, when she was seen in a discotheque, he went and apprehended her and took her to a police station. The police consigned her to the manager, who collected her and took her to the apartment of a male employee. The next morning, she was found dead on the street outside the building. An inquest concluded that in an attempt to escape and in strange circumstances she had jumped into the void and was fatally injured. Her father made complaints against both Cyprus and Russia under articles 2 and 4 (and against Cyprus under other articles) complaining of the lack of sufficient investigation and protection. The court had thus to consider whether trafficking, within the meaning of the Palermo Protocol (in force at the time of these events) and ECAT (in force later), fell within the scope of article 4, despite the fact that it referred only to slavery, forced labour and servitude. The court observed: The court considers that trafficking in human beings, by its very nature and aim of exploitation, is based on the exercise of powers attaching to the right of ownership. It treats human beings as commodities to be bought and sold and put to forced labour, often for little or no payment, usually in the sex industry but also elsewhere. It implies close surveillance of the activities of victims, whose movements are often circumscribed. It involves the use of violence and threats against victims, who live and work under poor conditions. It is described by Interights and in the explanatory report accompanying the Anti Trafficking Convention as the modern form of the old worldwide slave trade. (para 281) Hence the court concluded that trafficking within the meaning of article 4(a) of ECAT fell within the scope of article 4 of the ECHR (para 282). It was not necessary to decide whether it was slavery, servitude or forced labour. The court then went on to discuss what this entailed. It repeated, as had been said in Siliadin v France, that, together with articles 2 and 3, article 4 enshrined one of the basic values of the democratic societies of the Council of Europe (para 283). The spectrum of safeguards set out in national legislation must be adequate to ensure the practical and effective protection of the rights of victims and potential victims. This required, not only the criminal law, but also the regulation of businesses used as a cover for trafficking, and immigration rules (para 284). The extent of the positive obligations arising under article 4 had to take account of the broader context of the Palermo Protocol and ECAT, which required not only punishment but prevention and protection (para 285). As with articles 2 and 3, a positive obligation to take operational measures to protect an individual would arise where the authorities were aware, or ought to have been aware, of circumstances giving rise to a credible suspicion that the individual had been or was at real and immediate risk of being trafficked or exploited within the meaning of the Palermo Protocol and article 4(a) of ECAT (para 285). Like articles 2 and 3, article 4 also entailed a procedural obligation to investigate situations of potential trafficking. This did not depend upon a complaint. The authorities must act of their own motion once the matter had come to their attention. The investigation must be independent and capable of leading to the identification and punishment of the individuals responsible (para 288). In relation to Cyprus, violations were found in the regulatory regime for artistes visas which did not afford practical and effective protection against trafficking and exploitation (para 293); in the multiple failures of the police to investigate whether Ms Rantseva had been trafficked and to protect her (para 298); and under article 2 in the failure to conduct an effective investigation into her death (para 300). In relation to Russia, there was no evidence that the Russian authorities were aware of a real and immediate risk to Ms Rantseva before she left and thus no breach of an operational duty towards her (paras 305, 306), but there was a breach of the procedural obligation to investigate alleged trafficking (para 309). Thus, the appellant is right to point to the numerous references to the Palermo Protocol and ECAT in informing the content of the states obligations under article 4. On the other hand, the Secretary of State is also right to point out that the general structure of those obligations was modelled on the general structure of the states obligations under articles 2 and 3. However, as will become apparent, it is not necessary for us to decide whether all the obligations in ECAT are incorporated into the states positive obligations under article 4 in order to decide this appeal. The next case is Chowdury v Greece (Application No 2184/15) Judgment of 30 March 2017. A large group of Bangladeshi strawberry pickers protested that their promised wages had not been paid. They worked very long hours and their living and working conditions were particularly harsh (para 94). They were overseen by armed guards, who opened fire on the protesters and injured some of them. The Greek public prosecutor accepted that the injured workers were victims of trafficking but not that the other workers were. The Assize Court acquitted the employers of trafficking. The workers complained of forced and compulsory labour contrary to article 4.2. The court held that member states are required to adopt a comprehensive approach and put in place measures, not only to punish the traffickers, but also to prevent trafficking and protect the victims (para 86). This required the trilogy of measures set out in Rantsev: a legislative and administrative framework to do this effectively (para 87); an obligation to take operational measures to protect individual victims in certain circumstances (para 88); and a procedural obligation to investigate potential trafficking situations (para 89). The facts of the case clearly demonstrated the existence of forced labour and human trafficking, consistent with the definitions in the Palermo Protocol and ECAT (para 100). Greece had complied with the obligation to put in place a legislative framework to combat trafficking (para 109). The situation in the strawberry fields had been well known to the authorities, the Ombudsman had alerted them to the situation, but there had only been a sporadic reaction; hence there was a breach of the obligation to take operational measures to prevent trafficking and protect the applicant victims (para 115). Further, there was a breach of the obligation to investigate, not only in relation to the injured workers whose treatment had resulted in the failed prosecution (para 127), but also in relation to the other workers, because the public prosecutor had failed to investigate and had disregarded the obligation in article 13 of ECAT to provide a recovery and reflection period (paras 120 122). In short, there had been a breach of the obligations to prevent, to protect, to investigate and to punish (para 128). Thus the judgment does follow the same analytical framework as the judgment in Rantsev, but it more noticeably relies upon specific provisions in ECAT to flesh out the content of those positive obligations. The last case cited to us was J v Austria (Application No 58216/12) Judgment of 17 January 2017. The applicants were Filipina women who had been recruited for domestic work in Dubai where they had been badly treated. They were brought by their employers on a holiday to Vienna but escaped after three days and were supported by the Filipino community there. Some months later, after their employers had returned to Dubai, they went to the police. The Austrian authorities decided not to prosecute because the trafficking had taken place abroad and the traffickers were foreigners. The women complained that the Austrian authorities had failed in their protective and investigative obligations under article 4. The Court repeated the positive obligations to protect victims, to conduct a comprehensive investigation and to put in place a legislative and administrative framework to prohibit and punish trafficking, as well as to take measures to protect victims, in order to ensure a comprehensive approach to the issue, as required by the Palermo Protocol and the Anti Trafficking Convention (para 106). However, it decided that the authorities had done all that could reasonably be expected to protect the women: the police had treated them as potential victims; they had been interviewed by specially trained police officers; a personal data disclosure ban was imposed so that their whereabouts were untraceable; they were supported by an NGO which was publicly funded to provide assistance to victims of human trafficking; and they were given legal representation, procedural guidance and assistance to facilitate their integration in Austria (including special residence permits) (paras 110, 111). There was no obligation on Austria to investigate their recruitment in the Philippines and alleged exploitation in the United Arab Emirates (para 114). The authorities did investigate their treatment in Austria and their conclusion that no offences had been committed there does not appear unreasonable (para 116). Nor could they be expected to try and pursue their investigations with the authorities in the United Arab Emirates (para 117). Application to this case The UT having decided that the appellant was indeed a victim of trafficking, it is necessary to decide whether his removal from the UK would amount to a breach of any of the positive obligations in article 4 of the ECHR. It could well be said that, because of the defective NRM decision, the appellant was denied the protective measures required by ECAT, including the immigration status necessary for him to co operate in the investigation and prosecution of the perpetrators. As is clear from the above cases, article 4 does require operational measures of protection where the authorities were aware, or ought to have been aware, of circumstances giving rise to a credible suspicion that an identified individual had been or was at real and immediate risk of being trafficked or exploited (Rantsev, para 286). However, it does appear that, once he had come to the attention of the police, he was effectively removed from the risk of further exploitation. Further, the UT decided that he would not be at further risk if returned to Pakistan. However, it is clear that there has not yet been an effective investigation of the breach of article 4. The police took no further action after passing him on to the social services department. It is not the task of the NRM to investigate possible criminal offences, although the competent authority may notify the police if it considers that offences have been committed: Secretary of State for the Home Department v Hoang Anh Minh [2016] EWCA Civ 565; [2016] Imm AR 1272. The authorities are under a positive obligation to rectify that failure. And it is clear that an effective investigation cannot take place if the appellant is removed to Pakistan: the UT rightly held that it is inconceivable that an effective police investigation and any ensuing prosecution could be conducted without the full assistance and co operation of the appellant. Realistically this will not be feasible if he is removed to Pakistan (para 64). Accordingly, the appeal should be allowed and the decision of the UT restored on this ground. In accordance with the law In the light of that decision, it is unnecessary for us to consider whether the UT was also correct to hold that, because it followed on from a flawed NRM decision, the removal decision was not in accordance with the law. As from 20 October 2014, that ground of appeal is no longer contained in section 84 of the 2002 Act, following amendments made by the Immigration Act 2014, section 15. It will therefore be of limited relevance in future. It remains a ground of appeal that the removal of the appellant from the United Kingdom would be unlawful under section 6 of the Human Rights Act 1998. As the Upper Tribunal pointed out, appellants will still be able to appeal on this ground if the decision breaches the requirements of article 4.

The Appellant, MS, is a Pakistani national who entered the UK in 2011 at the age of 16 on a visitors visa. During the four preceding years, while still in Pakistan, he had been subjected to forced labour and physical abuse by relatives. One of them, his step grandmother, brought him to the UK by deceiving him into thinking this was for the purpose of his education. On arrival, he was forced to work for no pay, as arranged by his step grandmother for her own financial gain. He then moved from job to job for the next 15 months, under the control and compulsion of adults, as both the First tier Tribunal (FTT) and the Upper Tribunal (UT) later found. In September 2012, the Appellant came to the attention of the police, who referred him to a local authority social services department. They in turn referred him to the National Referral Mechanism (NRM), due to concerns as to his vulnerability and the possibility that he had been trafficked. However, in February 2013, the NRM decided, without meeting or interviewing the Appellant, that there was no reason to believe he was a victim of trafficking. The NRM considered that he was never under the control or influence of traffickers while in the UK and changed jobs freely. The Appellant sought judicial review of this decision in April 2013. In September 2012, the Appellant had also claimed asylum, but that application was rejected in August 2013. The Secretary of State therefore decided to remove the Appellant from the UK. The Appellant appealed this decision on asylum and human rights grounds to the FTT, who found as above that he had been under compulsion and control. The FTT nonetheless dismissed his appeal. The UT granted permission to appeal and re made the decision in view of errors of law by the FTT, finding in favour of the Appellant. In addressing the NRMs decision, the UT observed that that could only be challenged by judicial review proceedings, not through the immigration appeals system. However, the UT also held that if an NRM decision was perverse or otherwise contrary to some public law ground, the UT could make its own decision as to whether an individual was a victim of trafficking. Otherwise, the decision to remove him would be contrary to the European Convention on Action against Trafficking in Human Beings (ECAT) and the European Convention on Human Rights (ECHR). The Respondent appealed to the Court of Appeal, which allowed the appeal for the reason that, in accordance with AS (Afghanistan) v Secretary of State for the Home Department [2013] EWCA Civ 1469; [2014] Imm AR 513, the UT could only go behind the NRMs decision and re determine the factual issues as to trafficking if the decision was perverse or irrational or one which was not open to the NRM. The UT had in effect treated the NRM decision as an immigration decision and had also been wrong to consider that the obligations under ECAT were also positive obligations under article 4 of the ECHR, which prohibits slavery, servitude and forced labour. The Appellant was granted leave to appeal to the Supreme Court. He later wished to withdraw from the proceedings, as his immigration problems had now been resolved. A preliminary issue therefore arose as to whether the Equality and Human Rights Commission (EHRC), which had applied to intervene in the proceedings, could take over the appeal. The Supreme Court unanimously allows the appeal. Lady Hale gives the only judgment, with which Lord Kerr, Lady Black, Lord Lloyd Jones and Lord Briggs agree. As to the preliminary issue, following a hearing in October 2019, the EHRC was permitted to intervene and take over the appeal. An intervener is a party to an appeal (Rules of the Supreme Court, rule 3(1)) and an appeal can only be withdrawn with the consent of all parties or the permission of the Court (rule 34(1)). The appeal therefore remained on foot until the Court permitted otherwise. The Court is permitted to adopt any procedure consistent with the overriding objective, the Constitutional Reform Act 2005 and the Rules (rule 9(7)). The overriding objective is to secure that the Court is accessible, fair and efficient (rule 2(2)). Where an important question of law that may have been decided wrongly below is raised in an appeal, it is open to the Court to permit intervention and allow the intervener to take over the conduct of the appeal [9 10]. On the principal issue, the Secretary of State conceded that, when determining an appeal as to whether a removal decision would infringe rights under the ECHR, a tribunal must determine the relevant factual issues for itself on the evidence before it, albeit giving due weight to a decision making authoritys prior determination. It therefore became common ground that a tribunal is not bound by a decision of the NRM nor must it seek a public law ground for finding such a decision flawed [11]. This is because a tribunal has statutory jurisdiction to hear appeals from immigration decisions. The Nationality, Immigration and Asylum Act 2002 and Immigration Rules indicate that those appeals are plainly intended to involve the hearing of evidence and determination of factual issues. The House of Lords in Huang v Secretary of State for the Home Department [2007] UKHL 11; [2007] 2 AC 167 had made clear that this was a tribunals role [12 14]. The proper consideration and weight to be given to an authoritys previous decision will depend on the nature of that decision and its relevance to the issue before the tribunal. In the present case, the FTT and the UT were better placed to decide whether the Appellant was a victim of trafficking than the authority. The more difficult question was the relevance of that factual determination to the appeals [15]. This depended upon the relationship between the obligations in ECAT and the obligations in article 4 of the ECHR [17]. Article 4 of ECAT defines trafficking such that a child, recruited and transported for the purpose of exploitation through forced labour or services, may be considered a victim of trafficking [18]. ECAT also imposes other obligations on states, to prevent trafficking and to identify and protect its victims [19]. In Siliadin v France (2006) 43 EHRR 6, the European Court of Human Rights held that states have positive obligations under article 4 of the ECHR to adopt and apply criminal law provisions against slavery, servitude, and forced labour. In Rantsev v Cyprus and Russia (2010) 51 EHRR 1, it held that trafficking within the meaning of article 4 of ECAT fell within the scope of article 4 of the ECHR. The state had a positive obligation to prevent, to investigate, to protect and to punish [23 26]. This was confirmed in Chowdury v Greece (Application No 2184/15) and in J v Austria (Application No 58216/13) [32 33]. The investigative duty arises whether or not there has been a complaint and must be capable of leading to the identification and punishment of the individuals responsible [25]. In the present case, the UT decided that the Appellant was indeed a victim of trafficking. Once brought to the attention of police, the Appellant was removed from the risk of further exploitation, while the UT held that he would not be at risk of re trafficking if returned to Pakistan. However, there had not yet been an effective investigation into the breach of article 4, as the police took no action after referring him to social services. Such an investigation is required and cannot take place if the Appellant is removed to Pakistan. The appeal is therefore allowed and the UTs decision on this ground restored [34 36].

Black and Veatch Corp (BV) is an engineering company incorporated in Delaware. This appeal concerns the top layer of its professional liability insurance programme for the year from 1 November 2007. The first or primary layer was with Lexington Insurance Co (Lexington). There are then three successive excess layers (described as the PI tower) with the appellant, Teal Assurance Co Ltd (Teal), which is an associate or captive of BV based in the Cayman Islands. Teal reinsured the risks under these layers with various retrocessionaires (Swiss Re, Zurich, etc). Finally comes the top layer, a top and drop policy, again placed with Teal and reinsured by Teal with the respondents, WR Berkley Insurance (Europe) Ltd and Aspen Insurance UK Ltd for 50% each. Unlike the layers beneath it, which provided worldwide cover, the top and drop policy excludes any claims emanating from or brought in the USA and Canada. BV has received and notified to its insurers various claims, some emanating from or brought in the USA or Canada, others not. The ultimate issue on this appeal is whether BV and Teal or either of them is entitled to choose which claims to meet from the primary and/or lower excess layers, so as to ensure that those remaining are not US or Canadian claims, and can be met by Teal out of the top layer and passed on to the respondents. The courts below (Andrew Smith J, [2011] EWHC 91 (Comm), and the Court of Appeal, [2011] EWCA Civ 1570) have held that Teal cannot do this. They have held that the claims fall to be allocated to the successive layers, starting with Lexingtons primary layer, as and when BVs third party liability is ascertained by agreement, judgment or award in accordance with a general principle of liability insurance established in Post Office v Norwich Union Fire Insurance Society Ltd [1967] 2 QB 363 and Bradley v Eagle Star Insurance Co Ltd [1989] AC 957. Teal now appeals with the Courts permission. Teal submits that a party is entitled to exercise contractual rights as best suits it, here to maximise the insurance cover available to its associate BV. The primary and lower excess layers covered US and Canadian claims and BV and Teal were entitled to take full advantage of this. Further, Teal submits that the top and drop, and each of the lower excess layers, contains a clause (clause 1 of a set of clauses LSW055) making clear that no liability can arise under them unless and until underlying insurers shall have paid or have admitted liability or have been held liable to pay, the full amount of their indemnity inclusive of costs and expenses. Teals case is that liability thereunder necessarily depends upon the order in which underlying insurers, including Teal, choose (or are held liable) to settle insurance claims, rather than upon the order in which third party liability claims are ascertained by agreement, judgment or award as against BV. Teal submits that this scheme is complemented by clause IV.E of the Lexington policy, requiring BV to pay the deductible and self insured retention prior to Lexington indemnifying BV. Teals application for permission and written case also suggested that the case raises, or may raise, what Teal calls a legal fiction, that a claim under a liability insurance is for damages for the insurers failure to hold the insured harmless. It submits that a more appropriate analysis would be that insurers undertake to pay valid claims on the occurrence of particular events. This would have the potential effect that insurers could become liable in damages for non or late payment, contrary to the rule presently established by cases such as Ventouris v Mountain (The Italia Express) (No 2) [1992] 2 Lloyds Rep 281 and Sprung v Royal Insurance (UK) Ltd [1999] 1 Lloyds Rep IR 111. It would also enter upon an area presently under consideration by the English and Scottish Law Commissions: see their Issues Paper 6: Damages for Late Payment and the Insurers Duty of Good Faith (2010) and their subsequent formal consultation paper Insurance Contract Law: Post Contract Duties and Other Issues (2012). However, as the submissions developed, it became apparent that it could make no difference to the outcome of this appeal how an insurers liability to indemnify is formulated. In particular, whether the insurers liability is by way of damages or in debt does not answer the question whether such liability is exhausted as and when a claim, insured and notified under the policy, gives rise to ascertained third party liability or expenses on BVs part. The insurance programme With this introduction, I describe the insurance programme in greater detail: a. BV accepted a deductible of US$100,000 per claim (or US$250,000 for remedial work under an endorsement) and a self insured retention of US$10m per occurrence and US$20m in the aggregate (though it was permitted to insure part of this with Teal under a policy No 2007 006 not relevant to this appeal). b. BVs layer of cover with Lexington was for US$5m excess of the deductible of US$100,000 (or US$250,000) per claim and the self insured retention of US$10m per occurrence, with an aggregate limit of US$20m. c. Above that, the PI tower consisted of the three excess layers: i. Policy No 2007 009 for US$5m any one claim and in the aggregate excess of US$15m any one claim (i.e. excess of the Lexington cover); ii. Policy No 2007 010 for US$30m any one claim and in the aggregate excess of US$20m any one claim; and iii. Policy No 2007 011 for US$20m any one claim and in the aggregate excess of US$50m any one claim. d. The top and drop policy (number 2007 012) applied in excess of the Lexington policy and the PI tower, and had a limit of liability of 10m or equivalent excess of the underlying retention of US$10m any one claim and US$20m in the aggregate. The Lexington policy read: NOTICE: THIS IS A CLAIMS MADE POLICY. SUBJECT TO THE TERMS AND CONDITIONS OF THE POLICY, THIS INSURANCE APPLIES TO ONLY THOSE CLAIMS THAT ARE FIRST MADE AGAINST THE INSURED AND REPORTED TO THE COMPANY DURING THE POLICY PERIOD, OR THE OPTIONAL EXTENDED REPORTING PERIOD. THE COSTS OF DEFENSE UNDER THIS POLICY, INCLUDING ATTORNEY'S FEES, REDUCE THE LIMITS OF COVERAGE AND THE DEDUCTIBLE AND SELF INSURED RETENTION, STATED IN THE DECLARATIONS. THE COMPANY SHALL NOT BE OBLIGATED TO PAY ANY CLAIM OR CLAIM EXPENSES, OR UNDERTAKE TO CONTINUE DEFENSE OF ANY SUIT OR PROCEEDING AFTER THE LIMIT OF THE COMPANY'S LIABILITY HAS BEEN EXHAUSTED. Declarations Deductible and Self Insured Retention: a. $ 100,000 per Claim Deductible (including Claim Expenses) b. $10,000,000 per Claim Self Insured Retention (including Claim Expenses) c. $20,000,000 aggregate Self Insured Retention per Policy Period (including Claim Expenses) The Insured shall have the obligation to pay up to: 1. the Deductible amount stated in line a.; and 2. the per Claim Self lnsured Retention amount stated in line b. Payments made under the per Claim Self Insured Retention, line b. are subject to the maximum Aggregate Self Insured Retention amount in line c. THIS IS A CLAIMS MADE AND REPORTED POLICY. CLAIMS MUST FIRST BE MADE AGAINST THE INSURED AND REPORTED TO THE COMPANY DURING THE POLICY PERIOD UNLESS AN EXTENDED REPORTING PERIOD APPLIES. THE PAYMENT OF CLAIM EXPENSES REDUCES THE LIMITS OF INSURANCE. Various provisions in this policy restrict coverage. Read the entire policy carefully to determine rights, duties and what is and is not covered. Refer to SECTION IV DEFINITIONS for the special meaning of other words and phrases that appear in bold face. In consideration of the premium charged, the undertaking of the Named Insured to pay the Deductible and/or Self Insured Retention and in reliance upon the statements in the application, and subject to the Limit of Liability of this Insurance as set forth in the Declarations, and the Exclusions, Conditions and other terms of this Policy, Lexington Insurance Company, hereafter referred to as the Company, agrees with the Named Insured as follows: PART A I. INSURING AGREEMENT COVERAGE The insurance afforded by this Policy applies to Claimswhich allege any negligent act, error or omission provided The Company will indemnify the Insured all sums up to the Limits stated in the Declarations, in excess of the Insureds Deductible and/or Self Insured Retention, which the Insured shall become legally obligated to pay as Damages if such legal liability arises out of the performance of professional services in the Insureds capacity as an architect or engineer and as stated in the Application provided IV. DEFINITIONS E. Deductible and/or Self Insured Retention means the amount stated in Item 5. of the Declarations that the Insured will pay, as set forth in the Declarations, for Claim Expenses and Damages with respect to every Claim made during the Policy Period. This amount must be paid prior to the Company indemnifying the Insured under the terms and conditions of this Policy. By Endorsement No 8 the Lexington policy further provided: In addition to the coverage granted under this Policy, but subject to the same Self Insured Retention and limits of liability, we agree to indemnify the Named Insured for the Named Insured's Actual and Necessary Costs and Expenses incurred in rectifying a Design Defect in any part of the construction works or engineering works for any project upon which you are providing design/build services provided: A) the Insured reports the Claim for such Actual and Necessary Costs and Expenses as soon as practicable after discovery of such Design Defect but in no event after any certificate of substantial completion has been issued; B) the Insured proves to us that its Claim for Actual and Necessary Costs and Expenses arises out of the Insureds rendering of professional services which resulted in a Design Defect for which a third party could otherwise make Claim against the Insured. Each of the PI tower policies provided cover to BV as the Assured as follows: To indemnify the Assured for claim or claims which may be made against the Assured during the period of insurance hereon up to this Policy's amount of liability (as hereinafter specified) in the aggregate, the excess of the Underlying Policy/ies limits (as hereinafter specified) in the aggregate, the latter amount being the subject of Indemnity Policy/ies (as hereinafter specified) or any Policy/ies issued in substitution or renewal thereof for the same amount effected by the Assured and hereinafter referred to as the Underlying Policy/ies. Each PI tower policy then went on to specify its limit, and the underlying policy number(s) and limit(s). Each then set out the following set of clauses, with the reference LSW055 indicating that they were in fact a standard excess wording (dating, as appears elsewhere, from August 1998): 1. Liability to pay under this Policy shall not attach unless and until the Underwriters of the Underlying Policy/ies shall have paid or have admitted liability or have been held liable to pay, the full amount of their indemnity inclusive of costs and expenses. 2. It is a condition of this Policy that the Underlying Policy/ies shall be maintained in full effect during the currency of this Policy except for any reduction of the aggregate limits contained therein solely by payment of claims or of legal costs and expenses incurred in defence or settlement of such claims. 3. If by reason of the payment of any claim or claims or legal costs and expenses by the Underwriters of the Underlying Policy(ies) during the period of this Insurance, the amount of indemnity provided by such Underlying Policy/ies is: (a) Partially reduced, then this Policy shall apply in excess of the reduced amount of the Underlying Policy/ies for the remainder of the period of insurance; (b) Totally exhausted, then this Policy shall continue in force as Underlying Policy until expiry hereof. 4. In the event of a claim arising to which the Underwriters hereon may be liable to contribute, no costs shall be incurred on their behalf without their consent being first obtained (such consent not to be unreasonably withheld). No settlement of a claim shall be effected by the Assured for such a sum as will involve this Policy without the consent of Underwriters hereon. 5. All recoveries or payments recovered or received subsequent to a loss settlement under this Policy shall be applied as if recovered or received prior to such settlement and all necessary adjustments shall then be made between the Assured and the Underwriters provided always that nothing in this Policy shall be construed to mean that loss settlements under this Policy are not payable until the Assured's ultimate net loss has been finally ascertained. 6. Except as otherwise provided herein this Policy is subject to the same terms, exclusions, conditions and definitions as the Policy of the Primary Insurers. No amendment to the Policy of the Primary Insurers during the period of this Policy in respect of which the Primary Insurers require an additional premium or a deductible shall be effective in extending the scope of this Policy until agreed in writing by the Insurers. 8. If the Assured shall prefer any claim knowing the same to be false or fraudulent, as regards amount or otherwise, this Policy shall become void and all claims hereunder shall be forfeited. The top and drop policy followed similar wording. It was: To indemnify the Insured for claim or claims first made against the Insured during the Period of Insurance hereon up to this Policy's amount of liability (as hereinafter specified) in the aggregate, the excess of the Underlying Policy(ies) limits (as hereinafter specified) in the aggregate, the latter amount being the subject of Indemnity Policy(ies) (as hereinafter specified) or any Policy(ies) issued in substitution or renewal thereof for the same amount effected by the Insured and hereinafter referred to as the Underlying Policy(ies). After stating its policy limits, and the underlying policy numbers and limits, it too set out the LSW055 clauses, but with the addition of the following clause (clauses 5 and 6 above being renumbered accordingly as clauses 6 and 7): 5. Any claim(s) made against the Insured or the discovery by the Insured of any loss(es) or any circumstances of which the Insured becomes aware during the subsistence hereof which are likely to give rise to such a claim or loss, shall, if it appears likely that such claim(s) plus costs and expenses incurred in the defence or settlement of such claim(s) or loss(es) may exceed the indemnity available under the Policy(ies) of the Primary and Underlying Excess Insurers, be notified immediately by the Insured in writing to the Insurers hereon. The reinsurance taken out by Teal in respect of the top and drop layer identified the reinsured interest as Architects and Engineers Professional Liability as more fully defined in the primary policy wording, in connection with the Original Insured's business activities as Architects and Engineers. It also identified the underlying layers and provided Excess Policy in any event no broader than any underlying form, and by Endorsement Seven it defined the basis and scope of indemnity as follows: A. REINSURING CLAUSE Except as otherwise agreed, the Reinsurers liability under this Agreement shall follow that of the Reinsured for losses under all terms, conditions, and limits to the Reinsured Original Policy or Policies specified therein (the Policy). Subject to treaty reinsurance only, the Reinsured warrants to retain for its own account the amount indicated as its Net Retention for the Agreement period. The Reinsured shall provide to the Reinsurer promptly after closing a copy of the Policy and any endorsements thereto affecting this Agreement, and shall make available for inspection and place at the disposal of the Reinsurer at the office of the Reinsured any of its records relating to this Agreement or to claims in connection therewith at all reasonable times during and after the Agreement period. B. SCOPE OF INDEMNITY The Reinsurer shall indemnify the Reinsured to the extent of the Reinsurer's written share for any loss, interest or Allocated Expenses (as defined below) paid by the Reinsured and covered by this Agreement. The claims made During the relevant insurance year, BV notified 27 claims, four of which have a value in excess of US$1m. Two of these four are US or Canadian claims, made against BV by American Electric Power (AEP) and known as (a) FRP Pipe and (b) Jet Bubble Reactors JBR Internals. BV puts the amount of the FRP Pipe claim at US$10,491,368, in respect of which BV has paid out its self insured retention of US$10m and bears an applicable deductible of US$250,000. BV puts the cost of repairs in respect of the JBR Internals at over US$200m, of which its own incurred costs and liability are said to represent the major part. The two non US/Canadian claims are known as (c) Ajman Sewage and (d) PPGPL Trinidad Design Issues. BV puts its incurred costs and liability in respect of the Ajman Sewage claim at over US$33.9m. The PPGPL Trinidad Design Issues represent in fact three separate design issues. After deductibles totalling US$750,000, BV puts the claim at US$8,169,487. In what order these claims may have been ascertained in the sense used in Post Office v Norwich Union and Bradley v Eagle Star, and what relevance this may have is in issue. Teals objective is to ensure that the Ajman Sewage and PPGPL Trinidad Design Issues claims are met from the top and drop policy, irrespective of the dates of their ascertainment against BV. But, if and so far as ascertainment as against BV is relevant, BV and Teal also intend to argue that all or some of BVs liability in respect of the Ajman Sewage claim was ascertained after the PI tower was exhausted by the ascertainment of the other claims, and so falls within the top and drop policy. The nature of third party liability insurance The nature of liability under a third party liability insurance cover was considered in the context of the Lloyds litigation of the 1990s in Cox v Bankside Members Agency Ltd [1995] 2 Lloyds Rep 437. The problem there was that some agents had policies against which there were likely to be various calls, either because several claims were being pursued against the same agents by different Lloyds Names, or because the policies were group policies covering several agents against each of which claims were being pursued, by different Lloyds Names. The essential issue was whether each claim ascertained as against an agent exhausted the agents insurance cover pro tanto, or whether all claims falling individually within a policys scope ranked or could be treated as ranking pari passu against the policy in whatever order they were ascertained against the insured agent or agents. Both Phillips J and the Court of Appeal held that the former was the correct answer. Phillips J said at p 442 (right) that No obligation on the part of the insurer arises until the liability of the assured to a third party is established and quantified by judgment, arbitration award or settlement. A little later, he added: Thereafter if further third party claims are established it does not seem to me that these can result in further liability on the part of the insurer. In between these two passages, he analysed insurers liability in the traditional terms which Teal criticises, that is as a liability for damages for breach of duty in failing to hold harmless or to provide the indemnity. But, whether that analysis is adopted has no bearing on the conclusion that an insurers liability under the policy arises on the ascertainment of the insureds third party liability, and that once it arises the policy indemnity is pro tanto used up. In Cox v Bankside itself, Phillips J held that the policy was called upon to respond in this way to a court order for interim payment; if this were not so, an insured adequately protected by E & O insurance, would nonetheless be liable to be rendered insolvent by his inability to call upon his E & O underwriters to indemnify him against his liability to comply with an interim payment order (p 453, left). In such circumstances, where the quantum of an insureds third party liability or insured expenses is ascertained in stages, its cause of action on its insurer is progressively enlarged, and the insurance limit is progressively used up. In the Court of Appeal Saville LJ expressed a similar conclusion to Phillips Js. He was speaking of the position after the statutory assignment to a claimant under the Third Parties (Rights against Insurers) Act 1930 of the potential right to recover under the insurance policy claims as yet unascertained against the insolvent insured. He said at p 467 (right) that in such a case: That right [the right to immediate payment under a liability policy] only arises when, in each case, the claim is established, just as that right, while owned by the insured, would also arise only when the particular claim in question was established. It is only when that right arises that the insurers come under the correlative obligation to make payment. To my mind it follows that as each claim is established (whether this occurs before or after the statutory assignment), the right to payment arises and thus the amount of the available insurance is in effect diminished, so that when it is exhausted later established claims have no right to an indemnity. I can find nothing in the Act which begins to suggest that somehow a claimant third party whose claim is established cannot recover that claim under the Act, or has to share that recovery with others who have no rights against the insurers because the limit of cover has been reached. General analysis Mr Christopher Butcher QC for Teal challenges the proposition that the ascertainment of a claim against the insured exhausts the insureds insurance policy cover pro tanto. He accepts that, under a claims made liability policy like the present, an insurers liability arises typically as and when loss within the scope of the policy is ascertained as against the insured. But he submits that it is only when the claim is met by the insurer that the policy cover is pro tanto exhausted; until then it is possible, if a second notified claim is made and ascertained against BV as insured, to speak of a second cause of action or claim existing under the policy; BV is free to claim and the insurer is liable to make payment of the later, rather than the earlier, ascertained claim. As regards expenses incurred by BV and covered under Endorsement No 8 to the Lexington policy, he submits that BV as insured can again choose which expenses are paid first and against which claim or claims it sets the self insured retention or deductible, and, after the retention and deductible are used up, in respect of which claim it claims payment of such expenses from its insurer; in the last situation, it is again only when insurers pay those, rather than any earlier ascertained, expenses, that the cover can be said to be exhausted. I cannot accept Mr Butchers case on these points. Where an insurance has a limit, it makes no sense to speak of the insured having causes of action or recoverable claims which together would exceed that limit. If the limit is US$10m and the insured incurs ascertained third party liability of US$10m in respect of each of two successive third party claims, it makes no sense to speak of the insured having two causes of action or two recoverable claims against its insurer totalling US$20m. Likewise, if its liability is ascertained at US$7.5m each claim, the insured will have two causes of action or claims against its insurer, but the second will only be for US$2.5m. The ascertainment, by agreement, judgment or award, of the insureds liability gives rise to the claim under the insurance, which exhausts the insurance either entirely or pro tanto. The claim against the insured must of course fall within the scope of the policy and the insured may have to fulfil procedural requirements regarding notification to the insurer as a condition of recovery (see e.g. Clarke, The Law of Insurance Contracts, paras 17 4D4 and 26 2G), but this appeal raises no issue regarding either of such points. Similar considerations govern the incurring of ascertained expenses where, as here under Endorsement No 8 to the Lexington policy, these fall potentially within the policy indemnity. As and when BV incurs quantified expenses, they fall to be set against the policy retention and deductible; over and above the retention and deductible, any further expenses incurred fall not within the retention and deductible, but within the insurance provided by Lexington (and thereafter, potentially within the successive excess layers). The policy thus serves the purpose of meeting each ascertained loss when and in the order in which it occurs. An insured can forbear from notifying, or can withdraw or abandon, a claim under an insurance in respect of expenses or third party liability. The insurance will not then be exhausted by that claim, and the next claim will be recoverable in the ordinary course under the insurance. But what is here proposed is not the withholding or withdrawal of a claim; it is its continued pursuit, coupled with adjustment of its priority as against the insurance or programme of insurances. Policy terms (a) Lexington On this basis, it is necessary to consider the terms of the insurances involved in the programme to see whether they are consistent with this analysis or lead to a different result. Starting with the Lexington policy, the Definition in Part A.IV.E, read together with the Declarations section and the insuring provisions, requires BV to have paid the amount of the deductible and self insured retention prior to the Company indemnifying the Insured under the terms and conditions of this Policy. Three points arise. First, this provision relates to the deductible and retention; it underlines that, before Lexington can be called upon, the deductible and retention must be used up in meeting expenses or liability to which the policy indemnity otherwise applies. It is not a clause which would be expected to affect, or give a choice as to, the nature or subject matter of the indemnity. Second, it is not certain that the word paid here means disbursed. As was held in Charter Reinsurance Co Ltd v Fagan [1997] AC 313, under a differently worded excess of loss reinsurance referring to the sum actually paid, so here the word paid should in my opinion probably be understood as being used only as a measure of liability incurred, rather than with the intention of insisting on monetary disbursement. Otherwise, the present liability insurance would not meet the aim of providing the insured with an indemnity to avoid the insolvency which third party claims might otherwise threaten a consideration emphasised in the context of reinsurance in Charter Re and in the context of liability insurance by Phillips J in Cox v Bankside. Third, even if the word paid here means disbursed, a requirement of disbursement as a pre condition to recovery from insurers says nothing about what has to be paid for a right to indemnity to arise under the insurance. It means only that, as and when expenses and third party liability are incurred and ascertained, they become recoverable under the insurance, provided that the insured first disburses an amount equivalent to the deductible and self insured retention. It does not mean that the insured, by delaying such disbursement and choosing to make a disbursement in respect of different, later ascertained expenses or liability, can alter the order in which or policy in the insurance programme to which the first ascertained expenses or liability attach. Nor does it give its insurer a right to say that it will only provide indemnity in respect of later ascertained expenses or liability, so promoting the claim in respect of such expenses or liability ahead of the claim in respect of the earlier ascertained expenses or liability. (b) The PI tower and the top and drop policy It follows that, as and when expenses or third party liability are incurred and ascertained, they are to be taken into account against the Lexington policy. First, the self insured retention and deductible must be used up, and then the policy will respond up to its limit. Once that limit is used up, the next layer is engaged, and so on up the PI tower of excess layer policies until the top and drop policy itself is engaged. Taking the set of clauses LSW055, this is what would be expected from in particular clause 6 of the PI tower policies (clause 7 of the top and drop policy), which provides that each excess layer policy, including the top and drop policy, is subject to the same terms, exclusions, conditions and definitions as the primary Lexington policy. It is also the more natural effect of clause 4 of the PI tower policies (clauses 4 and 5 of the top and drop policy), which postulate a degree of certainty from the outset about what claims are likely to impact, and what settlements in particular will impact, different layers of an excess insurance programme. However, Teal relies upon clauses 1, 2 and 3 as leading to a different conclusion. Under clause 1, liability only attaches to each excess layer once the underlying insurers, starting with Lexington and moving upwards, shall have paid or have admitted liability or have been held liable to pay, the full amount of their indemnity inclusive of costs and expenses. So, Teal submits, its liability to BV under the top and drop policy is conditioned by the order in which the underlying insurers pay, or admit or are held to have liability, meaning that Teal in its different capacity as underlying excess layer insurers can shape its own liability as top and drop insurer, in order best to suit the interests of itself or its associate BV. The basic difficulty with this submission is, once again, that it treats a clause intended to define when liability arises as affecting the claims in respect of which liability arises. Liability under an excess policy attaches only after all primary coverage has been exhausted: North River Ins Co v American Home Assurance Co (1989) 210 Cal App 3d 108, 112, quoted in Clarke, The Law of Insurance Contracts, para 28 9B. Clause 1 of LSW055 goes further in performing what Andrew Smith J (paras 36 37) and Tomlinson LJ in the Court of Appeal (para 22) described as the readily understandable function of making clear that the obligation to pay under each excess layer is deferred until the resolution of any uncertainty or dispute as to the liability of underlying insurers. But it cannot sensibly be read as intended to alter the identity of the claims which fall to be met under any underlying insurance or will in due course fall to be met under the excess layer insurances. The basic aim of a layered insurance programme like the present is indicated by clause 6 of the PI tower policies (clause 7 of the top and drop policy). Subject to their differences in threshold, limits, aggregates and premium and to specific exceptions like that in respect of US and Canadian claims in the top and drop policy, each layer operates on the same terms and conditions and attaches to the same risks, albeit under clause 1 at different times depending upon the settlement of claims under the underlying layers. Teals case also looks at the picture from the top down, instead of looking at claims as they in fact impact the programme, from the bottom up. At the bottom, as I have already indicated, Lexington becomes liable, up to its policy limit, for claims in the order in which BV incurs ascertained expenses or third party liability. There are no other claims which Lexington can pay or in respect of which it can admit or be held to have liability under its policy. These are the only claims which Lexington can pay under its policy. To the extent that Lexington has paid or admitted or been held liable to pay claims, there is no basis upon which Teal as an excess layer insurer can pay them either again or instead of Lexington. All that Teal can pay is any balance remaining of such claims or any later ascertained expenses or liability which BV may have incurred. Clause 1 of LSW055 cannot alter this. It merely provides that liability under the first excess layer only attaches as and when Lexington pays or admits or is held to have liability in respect of BVs ascertained expenses or third party liability. The position is confirmed by clause 3(b), providing that, upon payment by Lexington of the relevant ascertained expenses or claim exhausting the Lexington policy, the first excess layer policy drops down to continue in force as the underlying policy. The Lexington policy itself has no equivalent of clause 1. It pays, as explained above, by reference to BVs ascertained expenses or third party liability. In both clauses 2 and 3, the word payment may again be no more than shorthand (in the Charter Re sense of established or ascertained) for the comprehensively expressed test shall have paid or have admitted liability or have been held liable to pay, used in clause 1. But, if this is wrong, it makes no difference. Upon payment by Lexington, whatever that means, the first excess layer policy will have to drop down under clause 3 to become the underlying policy, i.e. on the same terms as the Lexington policy. Liability under the first excess layer, in its new role as underlying policy, will then necessarily be determined by the timing of the ascertainment of BVs third party liability and expenses. The same position will apply successively under each excess layer, including the top and drop, as each is exhausted in turn. It is true, that, if payment in clauses 2 and 3 means disbursement, there may, at least in some cases, be a difference between the time when liability attaches to the first excess layer under clause 1 (e.g. as a result of an admission or finding of liability) and a later moment in time when Lexington disburses payment. But that cannot allow Teal as first excess insurer in that gap period, if it can and does exist, to make payments other than or in a different order than those for which it will in due course become underlying insurer when its excess insurance drops down to become the underlying policy under clause 3(b). Commerciality What I have said corresponds, very substantially, with the reasoning of Longmore and Tomlinson LJJ, with both of whose judgments Sir Robin Jacob agreed, in the Court of Appeal. In reaching his conclusion, Longmore LJ also placed some weight on what he regarded (in his paras 13 and 16) as the commercial common sense of the top and drop policy, citing Rainy Sky SA v Kookmin Bank [2011] UKSC 50, [2011] 1 WLR 2900, paras 21 to 30. Mr Butcher took issue with this, and maintained that, on the respondents case, there was scope both for haphazard results and for some degree of control by an insured or primary insurer in the timing of the ascertainment of BVs third party liabilities or expenses; the scheduling or difficulty of settlement discussions could mean that a later arising third party claim led to ascertained liability on BVs part sooner than an earlier claim; BV or its insurers, in so far as they took over the conduct of a third party claim, might take steps to ensure that either a third party claim or expenses were ascertained sooner than another. This is true. On the other hand, the degree of adjustment of the order of claims which Teal maintains it can achieve, for the benefit of its associate BV, is more remarkable, and only arises as a possibility because Teal is BVs insurance captive and is party to BVs programme of layered insurance coverage. It suits Teal in the present case to claim that BV or it itself can adjust the order in which claims impact the different programme layers, in order to assist Teals associate BV. This produces the unfamiliar phenomenon of an insurer seeking to maximise its own insurance liabilities. Teal can afford to try to do this on the back of its reinsurance in respect of the top and drop layer by the respondents. Had Teal been an independent rather than captive insurer and determined to avoid as much liability to BV as possible, BV would no doubt vigorously have objected to the legitimacy of Teal as its excess layer insurer under the PI tower policies adjusting the order of payment of claims ascertained as against BV, with the aim of ensuring that it was only US and Canadian claims that reached the top and drop policy. Its objection would in my view have been well founded. The freedom of choice which Mr Butcher advocates on behalf of Teal and in the interests of BV cannot in the present context readily be reconciled with the basic philosophy that insurance covers risks lying outside an insureds own deliberate control. I would myself therefore have no doubt about agreeing with Longmore LJs view of commerciality, as confirming and reinforcing the conclusion which he reached and I also reach. However, in my view it is also unnecessary to do so. This is a case where analysis of the terms and scheme of the relevant insurance policies provides the answer without more. Conclusion For these reasons, I would dismiss this appeal.

This appeal concerns the order in which claims made by an insured exhaust layers of insurance cover under a programme of professional liability insurance. Black and Veatch Corp (BV) is a firm of architects and engineers incorporated in Delaware, USA. BV purchased a programme of professional liability insurance containing various layers. The programme provided for a self insured retention of US$10 million per occurrence and US$20 million in the aggregate, as well as for a deductible of US$100,000 per claim (or US$250,000 in the case of remedial work under a special endorsement). Above the self insured retention and deductible, BV had a primary layer of insurance cover underwritten by the insurer Lexington. This primary layer was for US$5 million per claim excess of the self insured retention and deductible. The Lexington policy required BV to have paid the amount of the deductible and self insured retention prior to the Company indemnifying the Insured under the terms and conditions of this Policy. Above this primary layer was a so called PI tower consisting of three differently sized layers of excess insurance, providing in total a further US$55 million of cover. The excess policies covering these layers were underwritten by the appellant, Teal Assurance, which is BVs captive insurer, and reinsured with independent reinsurers not involved in these proceedings. The policies constituting the PI tower were worldwide in scope. Finally, BV had a US$10 million layer of top and drop insurance. It was again underwritten by Teal and was reinsured with the respondents. Unlike all the underlying policies, it excluded US and Canadian claims. Each excess layer policy, including the top and drop, was expressed to be subject to the same terms and conditions as the underlying Lexington policy and to drop down to continue as the underlying policy as and when the policy or policies underlying it were exhausted. Each also provided by clause 1 that liability to pay under it shall not attach unless and until the Insurers of the Underlying Policy(ies) shall have paid or have admitted liability or have been held liable to pay, the full amount of their indemnity inclusive of costs and expenses. During the relevant insurance year, BV notified 27 claims, four of which have a value in excess of US$1 million. Two of these four are US or Canadian claims; the other two claims are non US/Canadian claims. To maximise the cover available to its associate BV, Teal wishes to ensure that the non US/Canadian claims are met from the top and drop policy, irrespective of when BVs liability was ascertained. It maintains that BV can present or it can pay the US/Canadian claims first, and that, thereafter, when the PI Tower cover is exhausted, it can recover the other non US/Canadian claims under the top and drop policy, and pass them on to the respondent reinsurers. It maintains that the order in which BVs liability for claims or expenses was ascertained is irrelevant as a matter of general law and/or under the specific terms of the primary and excess policies. The Court of Appeal rejected Teal/BVs interpretation. The CA held that the claims should be met in the order in which BVs liabilities and expenses were ascertained. Teal appeals to the Supreme Court. The Supreme Court unanimously dismisses Teals appeal. Lord Mance gives the Courts judgment. The ascertainment by agreement, judgment or award, of the insureds liability to a third party, or the incurring by the insured of expenses, within the scope of a liability policy gives rise to a claim under the policy. This is turn exhausts the policy cover either entirely or pro tanto [17]. The Supreme Court rejects the appellants submission that liability insurance is as a matter of principle only exhausted pro tanto when the insurer either admits liability or meets the claim. The appellants analysis could lead to the insured having causes of action or recoverable claims which together exceed the limit of the cover. This would make no sense as an insurer is only liable up to the limit of the cover [16 18]. An insured can decide not to notify a claim to its insurer, or can withdraw or abandon a claim which it has notified. The insurance will not then be exhausted by that claim, and the next claim will be recoverable in the ordinary course under the insurance. That is different from what BV and Teal propose, namely to continue with claims, whilst adjusting their priority [19]. The requirement under the Lexington policy that BV have paid the amount of the deductible and the self insured retention prior to Lexington indemnifying the insured under the terms and conditions of the policy does not literally require BV to have made monetary disbursements. Instead the term paid is better understood as a measure of liability incurred [20 21]. Otherwise the present liability insurance would not provide the insured with indemnity to meet the threat of insolvency which might result from third party claims [21]. Even if the term paid does require BV to make monetary disbursements prior to being indemnified this does not mean that BV can alter the order in which claims are met by the insurance programme simply by choosing to make an earlier disbursement in respect of a later ascertained liability or expense [22]. Under the terms of the primary policy Lexington, and under the terms of each excess policy Teal, are liable for claims in the order that BV incurred ascertained expenses or third party liability up to the policy limit [23 and 25 26]. Clause 1 of the excess policies cannot alter this. It defines when liability arises, not the claims in respect of which liability arises [25 26]. It provides that liability only attaches under each excess policy in turn as and when the underlying insurers pay or admit or are held liable in respect of BVs ascertained expenses or third party liability [26]. As and when this occurs, each excess policy drops down to continue as if it were the primary policy [27]. This also constitutes the commercially more sensible interpretation [29 31].

PH has severe physical and learning disabilities and is without speech. He lacks capacity to decide for himself where to live. Since the age of four he has received accommodation and support at public expense. Until his majority in December 2004, he was living with foster parents in South Gloucestershire. Since then he has lived in two care homes in the Somerset area. There is no dispute about his entitlement to that support, initially under the Children Act 1989, and since his majority under the National Assistance Act 1948. The issue is: which authority should be responsible? This depends, under sections 24(1) and (5) of the 1948 Act, on, where immediately before his placement in Somerset, he was ordinarily resident. There are three possible contenders: Wiltshire, as the authority for the area where he was living with his family when he first went into care, and which remained responsible for him under the 1948 Act; Cornwall, where his family have lived since 1991; or South Gloucestershire, where he lived with his foster parents from the age of four until his move to Somerset. The Secretary of State, acting under section 32 of the 1948 Act, decided that Cornwall were responsible. In doing so, he followed the approach of his own published guidance on the determination of ordinary residence, which drew on two principal authorities R v Barnet LBC, Ex p Shah [1983] AC 309, and R v Waltham Forest, Ex p Vale (unreported, 11 February 1985). The latter is the source of what have become known as Vale tests 1 and 2 (described at paras 45 46 below), the correctness of which is in issue in this appeal. In judicial review proceedings brought by Cornwall, the Secretary of States decision was upheld in the High Court (Beatson J), but set aside by the Court of Appeal, who held that South Gloucestershire were responsible. The Secretary of State and Somerset have appeals with the permission of this court. The appeals are supported by South Gloucestershire and Wiltshire, but opposed by Cornwall. Cornwall also disputes the Secretary of States jurisdiction to make the determination. Although none of the other authorities has argued that Wiltshire should be responsible, the court indicated at the beginning of the hearing that this possibility should not be excluded from consideration. It is regrettable that in this way so much public expenditure has been incurred on legal proceedings. However, the amounts involved in caring for PH and others like him are substantial (some 80,000 per year, we were told). The legal issues are of general importance, and far from straightforward. The legislation The Children Act 1989 Part III Part III of the 1989 Act imposes duties on local authorities to provide support for children and their families. By section 30(1), nothing in this Part of the 1989 Act shall affect any duty imposed on a local authority by or under any other enactment. Section 17 is a general duty of authorities to safeguard and promote the welfare of children in need who are in their area. Section 20 deals with provision of accommodation. By section 20(1), every local authority is required to provide accommodation for any child in need within their area who appears to them to require accommodation as a result (inter alia) of (c) the person who has been caring for him being prevented (whether or not permanently, and for whatever reason) from providing him with suitable accommodation or care. By section 22 the local authority have a duty to promote and safeguard the welfare of a child who is provided with accommodation under section 20 (and is thus looked after by them). One of the ways in which the necessary accommodation and maintenance can be provided is by placing the child in foster care (section 22C). Although under the 1989 Act the primary duty lies with the authority in whose area the child happens to be, ordinary residence also has a part to play. By section 20(2), where a local authority provides accommodation under subsection (1) for a child who is ordinarily resident in the area of another local authority, that other local authority may following notification take over the provision of accommodation for the child. Section 29 provides for recoupment of costs. By section 29(7), where a local authority provide accommodation under section 20(1) for a child who, immediately before they began to look after him, was ordinarily resident within the area of another local authority, they may recover from that other authority the reasonable expenses of accommodation and maintenance. By section 30(2) any question arising under these provisions as to the ordinary residence of a child is to be determined by agreement between the local authorities or, in default of agreement, by the Secretary of State. By section 105(6): In determining the ordinary residence of a child for any purpose of this Act, there shall be disregarded any period in which he lives in any place (c) while he is being provided with accommodation by or on behalf of a local authority. Under section 23C the authoritys duties to children maintained under the 1989 Act (referred to as former relevant children) continue to a limited extent after majority, generally until the age of 21 (section 23C(6)). The authority have a continuing duty to provide for such a child various specific forms of support (not relevant in this case) and (by section 23C(4)(c)) other assistance, to the extent that his welfare requires it . They should also have prepared a pathway plan indicating the support to be provided (sections 22B, 22E). National Assistance Act 1948 Section 21 of the NAA provides: A local authority may with the approval of the Secretary of State, and to such extent as he may direct shall, make arrangements for providing . (a) residential accommodation for persons aged eighteen or over who by reason of age, illness, disability or any other circumstances are in need of care and attention which is not otherwise available to them. By subsection (5) references to accommodation are references to accommodation provided under this and the five next following sections, and include references to board and other services, amenities and requisites provided in connection with the accommodation. By subsection (8): Nothing in this section shall authorise or require a local authority to make any provision authorised or required to be made . by or under any enactment not contained in this Part of this Act . By section 24(1) the duty falls generally on the authority in whose area the person is ordinarily resident. Section 24(3) enables an authority to provide accommodation to someone urgently in need of it even though not ordinarily resident in the area. By section 24(5): Where a person is provided with residential accommodation under this Part of this Act, he shall be deemed for the purposes of this Act to continue to be ordinarily resident in the area in which he was ordinarily resident immediately before the residential accommodation was provided for him. By section 29(1) a local authority may, and shall if directed, make arrangements for promoting the welfare of certain categories of persons ordinarily resident in their area, including those who suffer from mental disorder of any description. Certain specific forms of assistance are described in the section, but without prejudice to the generality of the power. The Secretary of State has made directions (under circular LAC (93)10) which have the general effect of turning these powers into duties, and also sets out in some detail the nature of the arrangements which have to be made. By section 32(3) any question arising under this Part as to a persons ordinary residence shall be determined by the Secretary of State . The procedure for such a determination is governed by the Ordinary Residence Disputes (National Assistance Act 1948) Directions 2010 (made under sections 21(1) and 29(1) of the 1948 Act). Article 2 deals with provision of services under Part III pending determination. The dispute must not be allowed to prevent, delay or otherwise adversely affect the provision of services; one of the authorities in dispute must provisionally accept responsibility pending determination; and, if they are unable to agree, the local authority in whose area the subject is living must do so. The authority providing provisional service is the lead local authority and as such must identify all the local authorities in dispute and co ordinate discussions between those authorities in an attempt to resolve the dispute (article 3(2)). The Secretary of States guidance Before turning to the determination in the present case, it is convenient to refer to the relevant parts of the Secretary of States guidance, which address the problem of defining ordinary residence of a person who is unable to make decisions for himself. As already noted, this is done by reference in part to the Vale tests 1 and 2 (paras 31 34). Of the first, which treats a mentally disabled person in the same way as a small child who was unable to choose where to live, the guidance says: the approach set out in test one of Vale may not always be appropriate and should be used with caution: its relevance will vary according to the ability of the person to make their own choices and the extent to which they rely on their parents or carers. This Vale test should only be applied when making decisions about ordinary residence cases with similar material facts to those in Vale. Of test 2, it says: 34. The alternative approach involves considering a person's ordinary residence as if they had capacity. All the facts of the persons case should be considered, including physical presence in a particular place and the nature and purpose of that presence as outlined in Shah, but without requiring the person themselves to have adopted the residence voluntarily Later paragraphs go into more detail in relation to young people in transition from childrens services to adult services: 147. Although the provisions of the 1989 Act no longer apply once a young person reaches 18 (other than the leaving care provisions, if the young person is eligible for such services), local authorities could reasonably have regard to the 1989 Act and start from a presumption that the young person remains ordinarily resident in the local authority that had responsibility for them under the 1989 Act. Section 105(6) of the 1989 Act provides that, in determining the ordinary residence of a child for any purposes of that Act, any period in which a child lives in the following places should be disregarded: while he is being provided with accommodation by or on behalf of a local authority. 148. Therefore, where a local authority has placed a child in accommodation out of area under the 1989 Act, that local authority remains the childs place of ordinary residence for the purposes of the 1989 Act. In such a case, there would be a starting presumption that the young persons place of ordinary residence remains the same for the purposes of the 1948 Act when they turn 18. 149. However, this starting presumption may be rebutted by the circumstances of the individuals case and the application of the Shah or Vale tests (see Part 1 of this guidance). Under these tests, a number of factors should be taken into account when considering a persons ordinary residence for the purposes of the 1948 Act. These include: the remaining ties the young person has with the authority that was responsible for their care as a child, ties with the authority in which they are currently living, the length and nature of residence in this area and the young person's views in respect of where he/she wants to live (if he/she has the mental capacity to make this decision). If the young person is being provided with residential accommodation under Part 3 of the 1948 Act at the time ordinary residence falls to be assessed, the deeming provision in section 24(5) applies and it would be necessary to assess their place of ordinary residence immediately before such accommodation was provided. 150. In many cases, establishing a young persons local authority of ordinary residence will be a straightforward matter. However, difficulties may arise where a young person has been placed in residential accommodation out of area as a child under the 1989 Act. In this situation, the young person may be found to be ordinarily resident in the local authority that had responsibility for them under the 1989 Act, or they may be found to have acquired a new ordinary residence in the area in which they are living, depending on the facts of their case . PH was born on 27 December 1986. In 1991, PHs parents asked Wiltshire, in whose area they were then living, to provide accommodation for him. Acting under section 20 of the 1989 Act, they placed him with foster parents, Mr and Mrs B, who lived in South Gloucestershire. In November 1991, PHs family moved to Cornwalls area. The parents have continued to be involved in decisions affecting PH and he has regular contact with them. In May 2001, anticipating his 18th birthday on 27 December 2004, Wiltshire wrote to Cornwall regarding the planning of his transition to adulthood. They suggested that his ordinary residence should be taken as that of his parents, in Cornwall. Cornwall maintained that the responsibility for managing the transition rested, under the 1989 Act, with Wiltshire. Inconclusive correspondence on this issue continued for more than a year. It seems to have culminated, on the legal side, with an exchange in June 2002 in which Wiltshire were proposing a reference to the Secretary of State to enable the matter to be resolved before his 18th birthday; Cornwall were taking the position that a reference would be premature until a decision had been made whether he was able to express his own wishes and a suitable placement on that basis had been determined. Meanwhile, on the basis of the residence of his parents in the county, Cornwalls social services department (in a letter of 25 July 2002) was asserting its own interest in assisting his transition to adult living. It seems that Wiltshire did not again take up the issue of legal responsibility with Cornwall until October 2005. In April 2004 Wiltshire conducted an assessment and a care review. It appeared that PH was happy and settled with his foster parents, and that they would have been content for PH to stay with them after his 18th birthday. However, it would not be possible for him to stay there, unless the foster placement were to be re registered as an adult placement. It was noted that PHs parents visited him four or five times a year with occasional visits to the family home usually over Christmas and in the summer. They wanted to maintain at least the current level of contact. The foster parents also wished to help him settle into a new place and to visit him as regularly as possible. Continuing contact with his parents and foster parents was regarded as vitally important. A placement within the M4/M5 corridor was therefore thought to be best for ease of travel. A care home was identified, Blackberry Hill in Somerset, where he would be able to move around the end of the year. At the end of 2004, PH went to Cornwall to stay with his parents for Christmas (including the day before his 18th birthday). He returned to stay with Mr and Mrs B until 24 January 2005, when he moved to Blackberry Hill. This placement was funded by Wiltshire on a provisional basis. Unfortunately, the placement at Blackberry Hill did not work well for him. On 6 June 2005, he moved to Langley House, also in Somerset, where he has remained ever since. His parents were involved in that decision. They have continued to maintain regular telephone contact with him, and he stays with them over Christmas and occasionally in the summer. Mr and Mrs B also keep in regular contact, now mainly by letters and cards. Wiltshire carried out a capacity assessment on 15 April 2008 which concluded that overall and at that time, it was not considered that PH had the capacity to make an informed choice about where he would want to live nor did he have the communication skills for this to be expressed. There appeared to be no evidence of any change in his intellectual abilities since 2004. The Dispute and the Secretary of States determination The question of responsibility as between the three possible authorities (Wiltshire, Cornwall and South Gloucestershire) remained unresolved for a number of years. In August 2011, they jointly referred the dispute to the Secretary of State for determination under section 32(3). On 22 March 2012 he issued a determination that PH had been on 26 December 2004, treated as the relevant date, ordinarily resident in Cornwall. On the basis that the need for accommodation under section 21 of the 1948 Act arose on his 18th birthday, it was considered right to consider the question of ordinary residence at that date. The determination continued: 19. As stated in paragraph 147 of the guidance issued by the Department, local authorities in determining ordinary residence could reasonably have regard to the 1989 Act and start from a presumption that the young person remains ordinarily resident in the local authority that had responsibility for them under the 1989 Act. 20. I consider that, for the purposes of the 1989 Act, [PH] was ordinarily resident in Wiltshire. Residence while accommodation was being provided by or on behalf of a local authority, in this case with foster carers, would be disregarded in accordance with section 105(6)(c) of the 1989 Act. 21. The starting presumption is that [PH] remained ordinarily resident in the area of the local authority which had responsibility for him under the 1989 Act, namely Wiltshire. However, as para 149 of the guidance points out, this starting point may be rebutted by the circumstances of the case and the application of the Shah and Vale tests. That paragraph refers to various factors that should be taken into account in applying those tests. First, I do not consider that [PH] was ordinarily resident in Wiltshire. He had no links to the area. [PHs] parents and siblings left Wiltshire in November 1991, and [by December 2004] there were no remaining ties with Wiltshire. The mere fact that Wiltshire was the responsible authority for [PH] under the 1989 Act is not enough to affirm the presumption that he is ordinarily resident in Wiltshire from 27 December 2004. 24. [PH] has severe learning difficulties and lacks mental capacity to decide where to live. The family home in Cornwall is a place to which [he] returns for holidays and his parents are in regular contact by telephone. In 2004 it was the case that [his] parents visited him four or five times a year. [His] parents have also been closely involved in decisions made in relation to his care. It is clear from the social services papers that proximity to the family home and ease of travel to and from Cornwall has been a consideration in planning the care and support needs of [PH]. I consider that [PHs] base is with [h]is parents. 25. I note that Cornwall question whether the family home in Cornwall can properly be described as a base for [PH] given the infrequency of his visits there. It is not merely the number or frequency of visits that are determinative. The entirety of the relationship between [PH] and his parents is to be taken into account, and when regard is had to that, it is clear that [PHs] base remained with his parents. 26. Nor do I consider that [PHs foster parents] can, despite the years spent caring for [PH], be treated, by analogy, as a parent, such that, in accordance with test 1 in Vale, [PH] could be considered to have been ordinarily resident in South Gloucestershire on 26 December 2004. [PHs] natural parents remained his base throughout [PHs] placement with [his foster parents]. His parents visited him, he stayed with them, and they were involved with decisions regarding his care and well being. I do not consider [his foster parents] to have so far replaced the role of [PHs] parents to be treated by analogy as [his] parents. 27. [I]t was clear that [PHs] remaining in South Gloucestershire was at 26 December a temporary matter. [PH] was to remain with [his foster parents] in South Gloucestershire only until his section 21 accommodation became available. It is clear from the papers that continuing contact with his foster carers was considered to be important and [they] have kept in regular contact, but this is now mainly by letters and cards. His school, respite care and church life were associated with this foster care placement, and ceased once he removed to the accommodation provided under section 21 of the 1948 Act. 22. For these reasons the Secretary of State determined that as at the relevant date, taken as 26 December 2004, PH was ordinarily resident in the area of Cornwall. The court proceedings The decision was upheld by Beatson J who, after a careful review of the authorities, held that the Secretary of States reasoning disclosed no error of law. In summary, he concluded: The Secretary of State examined whether there was a real relationship between PH and his natural parents and whether they were in fact making relevant decisions. He was entitled to take account of that and of the entirety of the relationship between [PH] and his parents. As part of that, he was also entitled to take account of the time spent by PH with them in Cornwall. The process of determining that PH was ordinarily resident in Cornwall may appear artificial. There would, however, have been a similar artificiality in determining that he was ordinarily resident in any of the other counties under consideration (paras 87 89) The Court of Appeal disagreed. Elias LJ (with whom the rest of the court agreed) gave the leading judgment. He took account of authorities since Shah, including Mohamed v Hammersmith and Fulham LBC [2001] UKHL 57; [2002] 1 AC 547 and A v A (Children: Habitual Residence) [2013] UKSC 60; [2014] AC 1. In the former (at para 18) Lord Slynn had said of words like ordinary residence and normal residence that, while they may take their precise meaning from the legislative context, the starting point is where at the relevant time the person in fact resides, in the sense of the place where (voluntarily) he eats and sleeps, regardless of the reason. In the latter the Supreme Court held that, in determining the habitual residence of a child for the purpose of the Brussels II Regulation revised and the Hague Convention, the Shah test should not be followed, the search being rather for the place which reflects some degree of integration by the child into the social and family environment, the intentions of the parents being no more than one relevant factor; in the majoritys view (Lord Hughes disagreeing on this point) physical presence was a necessary element. Against this background, Elias LJ held that, although the Secretary of State had carefully considered the facts, he had wrongly applied the Vale test as if it were a rule of law. He proceeded on the basis that section 105(6), which required the placement in South Gloucestershire to be disregarded for the purposes of the 1989 Act, applied only for the purposes of that Act, not the 1948 Act (citing by way of analogy R (Hertfordshire County Council) v Hammersmith and Fulham LBC [2011] EWCA Civ 77; [2011] PTSR 1623, 32). Accordingly, the fact that he had for a long time lived with foster parents in South Gloucestershire was a relevant factor to consider when assessing his ordinary residence at that time (para 35). He criticised the decision makers use of the term base (following Lord Denning MR in In re P (GE) (An infant) [1965] Ch 568) to describe PHs relationship to his parents home: Even if that is a helpful concept, I do not accept that Cornwall could properly be so described. It was not a place where PH had any settled residence at all; it was simply a place which he occasionally visited for holidays. His parents visited him in South Gloucestershire more frequently than he visited them in Cornwall. PHs parents' house was not, to use Lord Dennings phrase, a place from whence he goes out and to which he returns. Indeed, in so far as it is helpful to adopt the concept of his base at all, this was surely South Gloucestershire. It was there where he lived day by day; it was from there that he left on his very occasional visits to Cornwall and to which he returned; and it was there that he received the visits from his parents. (para 76) He held further that it was unnecessary to remit the matter for redetermination by the Secretary of State: Looking at the facts as at PHs 18th birthday, there was in my judgment only one conclusion properly open to the Secretary of State. PHs place of ordinary residence was South Gloucestershire. It could not be Wiltshire, because he ceased to have any connection with it at all. At that stage he had never lived in Somerset and had no connection with it. And for reasons I have given, the mere fact that his parents' place of ordinary residence was in Cornwall could not justify finding that to be PHs place of ordinary residence. (para 85) Preliminary issues Before turning to the main substantive issue, it is necessary to consider two preliminary issues raised by Mr Lock QC on behalf of Cornwall, for the first time in the court proceedings. Although no objection has been taken to this course, I would wish to reserve my position as to its appropriateness in the context of a statutory power intended to encourage co operation and lack of technicality. He submits, first, that under section 21 there is power to make provision of residential care services only if it is not otherwise available (section 21(1)(a)), and if it is not authorised or required to be made . by or under any enactment not contained in this Part of this Act. In the three years following PHs 18th birthday, so it is said, Wiltshires powers to provide assistance under section 23C of the 1989 Act were wide enough to cover all the services in fact provided for him during that period. There was therefore no place for section 21. It follows that there was at that date no question as to his ordinary residence under the Act requiring determination by the Secretary of State, and his decision was made without jurisdiction. Secondly, for good measure, he submits that Wiltshire itself had no power at all to incur expenditure under the 1948 Act, and no right to seek to recoup it from any other authority. At the time of PHs majority, he was not within their area, and there was no basis for treating him as ordinarily resident there, his only practical connection with the county through his parents having been severed some 14 years before. These arguments were rejected by Beatson J and by the Court of Appeal. Without disrespect to the persistent arguments of Mr Lock QC in this court, I have no doubt that they were right to do so. I would have been content to adopt their reasoning. But there are, in my view, two short answers. The first concerns the nature of the powers, the second timing. The argument only works if there is identity between the two sets of powers. In my view there is not. Part III of the 1948 Act provides the exclusive statutory basis for securing the long term care and accommodation which PH needs and has needed since his majority. That is not displaced by the relevant provisions of the 1989 Act, which are transitional in character. I would not wish to place artificial restrictions of the types of assistance which may be provided if necessary under section 23C. However, their purpose is, not to supplant the substantive regime, but to ease the transition (usually) to adult independence. There may of course be some overlap in some of the specific provision made from day to day, but they are serving different ultimate purposes, one temporary, the other long term. That potential overlap is not such in my view as to exclude section 21(1)(a), under its own terms or by reference to section 21(8). Secondly, and in any event, section 32 should in my view be read broadly in respect of timing. Even if the need for 1948 Act provision did not arise immediately on PHs 18th birthday, the nature of the dispute was already apparent, and needed to be resolved in the immediate future to ensure a smooth transition to the new regime. That dispute was willingly referred to the Secretary of State by the three authorities concerned. It was obviously desirable for all parties, most particularly PH, that it should be resolved without delay. I see no reason to read section 32 as confined to those disputes arising in the period after the duties under the 1948 Act have come into effect. On the contrary a purposive construction would extend it to disputes which need to be resolved in advance, so as to enable the duties under the Act to be exercised by the correct authority from the outset. As to whether Wiltshire itself should have been excluded as a potential party to the dispute, Mr Locks argument is ingenious but unrealistic. As has been seen from the decision determination, the Secretary of States starting point was a presumption that Wiltshire, as the authority responsible under the 1989 Act, should be treated as responsible also under the 1948 Act, unless and until displaced by another authority under the Shah or Vale tests. Thus Wiltshire was (and still is) in the firing line for potential liability, and it would have been irresponsible to proceed on any other basis. No amount of retrospective legal theorising by Cornwall can alter that position. Ordinary residence the law Background The 1948 Act was designed, in the words of its long title, to terminate the existing poor law, and to replace it with a new scheme for the assistance of persons in need by the new National Assistance Board and by local authorities. Miss Mountfield QC (for South Gloucestershire) has helpfully drawn our attention to the approach under the Poor Law Act 1930 to the allocation of responsibility for the old or infirm or those otherwise unable to work. The duty to relieve and maintain such persons was placed on their father, grandfather, mother, grandmother husband or child (1930 Act section 14). They were supported by the duty of the council of every county or county borough to provide such relief as may be necessary for the same group of people (section 15(1)), that duty applying generally to all persons within (their area) (section 15(2)). The adoption by the 1948 Act of ordinary residence in this context, as the basis for allocation of responsibility between local authorities, was a new departure. As will be seen, a similar approach was adopted at about the same time in relation to allocation of responsibilities between education authorities. It is noteworthy that there was no repetition of the pre 1948 statutory duty of parents or family members for maintenance of incapacitated adults, and no recognition even of their practical role in making decisions on behalf of those unable to do so for themselves. The common law could not fill the gap (see re F (Mental Patient: Sterilisation) [1990] 2 AC 1, confirming that the parent of a mentally disabled adult had no power at common law to consent to a medical operation on her behalf). Even in such cases the criterion was to be the ordinary residence of the individual, not of his parent or family, or anyone else. However, it was recognised from the outset that some modification was required in the case of those whose current residence was the result of care decisions, rather than their personal connections with the area in question. Thus section 24(5) provides where a person is being provided with residential accommodation under the Act, he is deemed for the purposes of this Act to continue to be ordinarily resident in the area in which he was ordinarily resident immediately before the residential accommodation was provided. This formulation left open the question whether residence in such accommodation would otherwise have been regarded as ordinary residence for the purpose of section 24 a question to which I shall return. In policy terms it ensured that decisions on placements, inside or outside an authoritys area, were made solely with reference to the interests of the client, without affecting the placing authoritys continuing responsibility for his care. It is common ground that in the present context, unlike others considered in the authorities, the subject can be ordinarily resident in the area of only one local authority. Otherwise that test would not be an effective tool for allocating responsibility for services or their cost. As Beatson J observed (para 55) this factor, combined with what he called the deeming provision in section 24(5), may sometimes lead to artificial and arbitrary results. The ordinary residence test has proved resilient. In its 2010 Consultation Paper on Adult Social Care (CP 192), para 8.12, the Law Commission noted that it had been adopted in a number of care statutes but not all, and that the resulting picture was complex and inconsistent. However, it was not part of their remit to consider the meaning of the expression, nor whether it was the most effective way of determining which local authority is responsible for the provision of services. In their final report (Law Commission Report: Adult Social Care (2011) Law Com 326), they declined invitations from consultees to extend their remit to these issues, regarding them as matters for political policy and not law reform (para 10.11). Nonetheless, in their proposals for a single adult care statute they recommended that ordinary residence should continue to be the primary criterion of responsibility for all community care services (para 10.9). The Care Act 2014, which generally gives effect to their proposals, adopts the criterion of ordinary residence. The basic definition may be made subject to exceptions, to be defined by regulations, for placements in specified types of care accommodation, the effect of which is to substitute reference to the area of ordinary residence before the placement began, or the beginning of the period of consecutive placements of specified types (section 39). The authorities on ordinary residence At the time of the 1948 Act, most prior case law on the meaning of the expression ordinary residence related to income tax. Liability depended on whether a person was resident or ordinarily resident in the United Kingdom for a particular tax year. In that context it had long been established that a person could be ordinarily resident in two places. This approach was affirmed by the House of Lords in two well known cases reported in 1928: Levene v Inland Revenue Comrs [1928] AC 217 and Inland Revenue Comrs v Lysaght [1928] AC 234. In an earlier case, Cooper v Cadwalader (1904) 5 Tax Cases 101, an American resident in New York, who had taken a house in Scotland which he visited for two months each year, was held to be resident and ordinarily resident in the United Kingdom for tax purposes for each such year. It mattered not that for other purposes he might be treated as ordinarily resident in New York. As Viscount Sumner later observed Who in New York would have said of Mr Cadwalader his homes in the Highlands; his home is not here? (Lysaght at p 244). The House of Lords confirmed that approach and reached the same conclusions on the facts of the two cases in the 1928 Reports. Mr Levene lived abroad, but returned each year for about five months for the purpose of obtaining medical advice, visiting relatives and other matters. Mr Lysaght lived in Ireland, but returned to England each month for business purposes, remaining for about a week and usually staying in a hotel. In both cases the Special Commissioners had been entitled to hold that they were resident and ordinarily resident in this country. Those authorities were followed in the leading modern authority on the meaning of the expression in a statutory context. That is the speech of Lord Scarman in R v Barnet LBC, Ex p Shah [1983] AC 309. The question was whether four foreign students qualified for an education grant on the basis that they had been ordinarily resident in the United Kingdom throughout the three years preceding the first year of their course. The authorities had argued that their ordinary residence, in the sense of their real home, was elsewhere. The House disagreed. Lord Scarman, in the leading speech, treated the tax cases as authority for the natural and ordinary meaning of the expression. In particular he cited Viscount Sumners reference to ordinary residence as that part of the regular order of a man's life, adopted voluntarily and for settled purposes (Lysaght p 243). Lord Scarman echoed those words in his own statement of the natural and ordinary meaning of the term: Unless, therefore, it can be shown that the statutory framework or the legal context in which the words are used requires a different meaning, I unhesitatingly subscribe to the view that ordinarily resident refers to a mans abode in a particular place or country which he has adopted voluntarily and for settled purposes as part of the regular order of his life for the time being, whether of short or of long duration. (p 343G H) The mind of the subject was relevant in two respects. First the residence must be voluntarily adopted, rather than for example enforced presence by reason of kidnapping or imprisonment. Secondly, there must be a degree of settled purpose: This is not to say that the (subject) intends to stay where he is indefinitely; indeed his purpose, while settled, may be for a limited period. All that is necessary is that the purpose of living where one does has a sufficient degree of continuity to be properly described as settled. (p 344D) A settled purpose did not need to be indefinite. Education, business or profession or merely love of a place could be enough. There was no justification for substituting a real home test, as the councils had argued (p 345B). Although understandably this passage has been often quoted and relied on in later cases, the weight given to the concept of a settled purpose needs to be seen in context. The focus of the passage was to explain why the undoubted residence of the claimants in this country for the necessary period, albeit for the temporary purpose of education, was sufficiently settled to qualify as ordinary under the accepted meaning. It was relevant therefore to show that it was no less settled than, for example, the residence of Mr Cadwalader during his annual visit to Scotland, or that of Mr Levene on his five month visit for medical and other reasons. Nor did it matter, it seems, that they might have had other ordinary residences in their countries of origin. As Mr Sheldon QC (for the Secretary of State) points out, Lord Scarman made reference, albeit by way of contrast, to provisions in the same legislation for allocating financial responsibility between education authorities, which are not dissimilar to those now in issue. Lord Scarman referred to provisions for allocation as between authorities in Education (Miscellaneous Provisions) Act 1953 section 7, Education Act 1962 section 1(7), and section 31 of the Education Act 1980 section 31 (see Shah pp 338F, 340B)). They had contained a formula, for recoupment of costs as between education authorities, based in part on ordinary residence, and under which disputes were to be determined by the Minister or Secretary of State. (Similar provisions can be traced back to the same time as the 1948 Act: see Education (Miscellaneous Provisions) Act 1948 section 6.) The parallel is not necessarily exact. For example, the 1962 Act contained a schedule dealing with ordinary residence (applied by 1962 Act section 1(7)), in which the primary test was linked with a discretionary power in certain circumstances for the Secretary of State to impose a different result by direction. Lord Scarman described such provisions as administrative and fiscal . in character, by contrast with the justiciable issue before the House. He noted, without expressing an opinion, the possibility that in that context ordinary residence might have a special meaning when the distribution of the fiscal burden between local education authorities is being considered as a matter for the exercise of executive decision by the Secretary of State (p 340B G). This is helpful as illustrating that the meaning of the term ordinary residence may be strongly influenced by the particular statutory context. However, it is common ground as I understand it that in the present context, once properly construed, the issue for the Secretary of State was one of factual judgement rather than executive discretion, and that his decision is justiciable, in the sense that it is reviewable by the courts on ordinary Wednesbury principles. Another authority relied on by the Secretary of State, again from a very different area of the law, is In re P (GE) (An infant) [1965] Ch 568. The Court of Appeal (applying the analogy of the law of treason) decided that the wardship jurisdiction of the Court of Chancery extended to any child ordinarily resident in this country. Lord Denning MR spoke of the ordinary residence of a child of tender years who cannot decide for himself where to live: So long as the father and mother are living together in the matrimonial home, the childs ordinary residence is the home and it is still his ordinary residence, even while he is away at boarding school. It is his base, from whence he goes out and to which he returns (p 585) This is the source of the word base, used in Vale and in the Secretary of States guidance, as indicative of ordinary residence. However, it is important again to see it in context. There is nothing to suggest that Lord Denning MR was intending to separate the idea of a base from the need for physical residence of some kind. The underlying assumption seems to have been that the child would be living at his parents home for the parts of the year when he was not at school, and would remain ordinarily so resident throughout. Shortly after the Shah judgment, in R v Waltham Forest London Borough Council, Ex p Vale (unreported, 11 February 1985), Taylor J had to consider a case much closer to the present, involving the application of the ordinary residence test under the 1948 Act to someone mentally incapable of forming a settled intention where to live. Judith, an English woman, had been in residential care in Ireland for over 20 years where her parents had been living. When her parents returned to England, it was decided that she should return to live near them. She stayed with them at their house in Waltham Forest for a few weeks while a suitable residential home was being found, and she was then placed in a home in Buckinghamshire. The shortfall in costs (so far as not borne by the Department of Health and Social Security) was sought from Waltham Forest on the grounds that she was ordinarily resident in the borough. The case was argued and decided by reference to the Shah test of ordinary residence, adapted for the case of someone lacking the power to form for herself a settled intention where to live. Taylor J adopted a two part approach suggested by counsel, but on either approach he considered that her residence with her parents could be treated as sufficiently settled to satisfy the Shah test. The result is unremarkable, but in view of the weight later given (particularly in the Secretary of States guidance) to Vale tests 1 and 2, it is right to quote the judges own words. For the first approach he made reference to Lord Denning MRs concept of a childs base: Where the (subject) . is so mentally handicapped as to be totally dependent upon a parent or guardian, the concept of her having an independent ordinary residence of her own which she has adopted voluntarily and for which she has a settled purpose does not arise. She is in the same position as a small child. Her ordinary residence is that of her parents because that is her base, to use the word applied by Lord Denning in the infant case cited. (emphasis added) The alternative approach, considering her as if she were a person of normal mental capacity, led to the same result: I cannot accept that during the relevant month Judith should be regarded as a squatter in her parents home. Her residence there had, in my judgment, all the attributes necessary to constitute ordinary residence within Lord Scarmans test, albeit for a short duration. There is no reason to quarrel with Taylor Js conclusion on the unusual facts of the case. In circumstances where her only previous residence had been in Ireland, there was obvious sense in treating her few weeks living with her parents as sufficiently settled to meet the Shah test, whether by reference to the intentions of those making decisions on her behalf, or to the attributes of the residence objectively viewed. With hindsight, it was perhaps unhelpful to elide the Shah test with the idea of a base, used by Lord Denning MR in a different context and for a different purpose. The italicised words in the first passage quoted above cannot be read as supporting any more general proposition than that Judiths ordinary residence was to be equated with that of her parents, without reference to the period of her own actual residence with them. Nor in my view should Taylor Js two approaches be treated as separate legal tests. Rather they were complementary, common sense approaches to the application of the Shah test to a person unable to make decisions for herself; that is, to the single question whether her period of actual residence with her parents was sufficiently settled to amount to ordinary residence. Most subsequent authorities on the issue of ordinary residence in the context of social services have relied on these authorities, without detailed discussion. The Court of Appeal also referred to authorities on other comparable expressions (normal residence, habitual residence) in other statutes. Without disrespect to the high authority of the statements quoted, their interpretation is a doubtful guide to the different language used in the provisions before us, and cannot in any event be considered without regard to the different statutory contexts in which they appear. As was pointed out by Lady Hale in A v A (above, at para 24) the phrase habitual residence was adopted in family legislation partly to distinguish it from ordinary residence as used in the taxation and immigration context. Ordinary residence in the present case I agree with the Court of Appeal that the decision makers reasons for selecting Cornwall cannot be supported. The writer started, not from an assessment of the duration and quality of PHs actual residence in any of the competing areas, but from an attempt to ascertain his base, by reference to his relationships with those concerned. Thus in deciding that the family home in Cornwall could properly be described as a base for [PH] notwithstanding the infrequency of his visits, the determination stated that it was necessary to consider not merely the number or frequency of visits [but] the entirety of the relationship between [PH] and his parents . There is no suggestion that his brief periods of staying with his parents at holiday times could in themselves amount to ordinary residence. Mr Sheldon seeks to support this approach by reference to the guidance and the authorities there relied on. He submits that, in the case of a person who is unable to make decisions for himself, it is necessary to determine the place which most appropriately represents at the material time, the seat of the persons decision making power given his lack of capacity to make decisions where to live, the coming to an end of a placement under the 1989 Act, and the extent to which his parents (or those in loco parentis) can and will make the relevant decisions on his behalf. Miss Mountfield QC is even more explicit, submitting that it is right in principle to look to the ordinary residence of the decision maker in deciding the ordinary residence of a person who lacks capacity. There might be force in these approaches from a policy point of view, since they would reflect the importance of the link between the responsible authority and those in practice representing the interests of the individual concerned. They are however impossible to reconcile with the language of the statute, under which it is the residence of the subject, and the nature of that residence, which provide the essential criterion. In so far as Vale is relied on to substitute an alternative test, based on the seat of (his) decision making, or otherwise on his relationship with his parents and their home, it depends on a misunderstanding of that judgment. The seat of the decision making power in relation to a mentally disabled adult is the authority making the placement (subject to any contrary determination by the Court of Protection), not the parents. For the same reason, the weight put by the decision maker on the so called Vale tests 1 and 2, both in the guidance and in the decision determination, was in my view misplaced. The more difficult issue is to make a principled choice between the two alternatives South Gloucestershire or Wiltshire. Applying the Shah tests without qualification it is easy to understand why the Court of Appeal chose the former. If one asks where was PHs ordinary residence in the period immediately before his move to Somerset, an obvious answer for many purposes would be his home with his carers. That is where he had lived happily for some fourteen years. On an objective view it might be thought sufficiently settled to meet Lord Scarmans test, regardless of whether PH himself took any part in the decision making. The Secretary of State rejected this alternative solely because he did not think that the foster parents had so far replaced the role of [PHs] parents to be treated by analogy as [his] parents under the Vale tests. For the reasons I have given this involved a misunderstanding of the reasoning in Vale. If the question is whether the residence of PH himself was sufficiently settled to satisfy the Shah test, the precise status of his foster parents was irrelevant. On this point the intentions and perceptions of his parents and his foster parents were identical. However, although the choice of South Gloucestershire may fit the language of the statute, it runs directly counter to its policy. The present residence in Somerset is ignored because there is no connection with that county other than a placement under the 1948 Act. By the same policy reasoning, South Gloucestershires case for exclusion would seem even stronger. There is no present connection of any kind with that county, the only connection being a historic placement under a statute which specifically excluded it from consideration as the place of ordinary residence for the purposes of that Act. The question therefore arises whether, despite the broad similarity and obvious underlying purpose of these provisions (namely that an authority should not be able to export its responsibility for providing the necessary accommodation by exporting the person who is in need of it), there is a hiatus in the legislation such that a person who was placed by X in the area of Y under the 1989 Act, and remained until his 18th birthday ordinarily resident in the area of X under the 1989 Act, is to be regarded on reaching that age as ordinarily resident in the area of Y for the purposes of the 1948 Act, with the result that responsibility for his care as an adult is then transferred to Y as a result of X having arranged for his accommodation as a child in the area of Y. It is highly undesirable that this should be so. It would run counter to the policy discernable in both Acts that the ordinary residence of a person provided with accommodation should not be affected for the purposes of an authoritys responsibilities by the location of that persons placement. It would also have potentially adverse consequences. For some needy children with particular disabilities the most suitable placement may be outside the boundaries of their local authority, and the people who are cared for in some specialist settings may come from all over the country. It would be highly regrettable if those who provide specialist care under the auspices of a local authority were constrained in their willingness to receive children from the area of another authority through considerations of the long term financial burden which would potentially follow. The Court of Appeal (para 35), apparently without argument to the contrary, proceeded on the basis that the deeming provision under each statute applied only for the purposes of its own Act. Elias LJ cited R (Hertfordshire County Council) v Hammersmith and Fulham LBC [2011] EWCA Civ 77; [2011] PTSR 1623, in which the court held that section 24(5) was a self contained provision. However, the court was there faced with a rather different argument, which depended on reading the Mental Health Act 1983 section 117 (in which responsibility was based on residence without any deeming provision) as though it had the same meaning as ordinary residence under section 24. The court (para 45) rejected that argument, not only because it was inconsistent with the statute, but also because it was constrained by higher authority to hold that section 117 was a free standing provision not dependent on the 1948 Act. In construing the relevant words in section 24 of the 1948 Act, the statutory context is critical. The purpose of the provision is purely administrative and fiscal, to borrow Lord Scarmans phrase in R v Barnet London Borough Council, Ex p Shah (see para 43 above). It does not affect the rights of the person concerned, but only the allocation of responsibility as between local authorities. Lord Scarman recognised the possibility that such a context might justify a different approach as compared to one directed to a persons entitlement to a benefit. In this respect the function of the relevant provisions in each Act is the same. Section 24(5) poses the question: in which authoritys area was PH ordinarily resident immediately before his placement in Somerset under the 1948 Act? In a case where the person concerned was at the relevant time living in accommodation in which he had been placed by a local authority under the 1989 Act, it would be artificial to ignore the nature of such a placement in that parallel statutory context. He was living for the time being in a place determined, not by his own settled intention, but by the responsible local authority solely for the purpose of fulfilling its statutory duties. In other words, it would be wrong to interpret section 24 of the 1948 Act so as to regard PH as having been ordinarily resident in South Gloucestershire by reason of a form of residence whose legal characteristics are to be found in the provisions of the 1989 Act. Since one of the characteristics of that placement is that it did not affect his ordinary residence under the statutory scheme, it would create an unnecessary and avoidable mismatch to treat the placement as having had that effect when it came to the transition in his care arrangements on his 18th birthday. On this analysis it follows that PHs placement in South Gloucestershire by Wiltshire is not to be regarded as bringing about a change in his ordinary residence. Throughout the period until he reached 18 he remained continuously where he was placed by Wiltshire, under an arrangement made and paid for by them. For fiscal and administrative purposes his ordinary residence continued to be in their area, regardless of where they determined that he should live. It may seem harsh to Wiltshire to have to retain indefinite responsibility for a person who left the area many years ago. But against that there are advantages for the subject in continuity of planning and financial responsibility. As between different authorities, an element of arbitrariness and swings and roundabouts may be unavoidable. For these reasons, I would allow the appeals and in the declaration made by the Court of Appeal for references to South Gloucestershire I would substitute references to Wiltshire. LORD WILSON: (dissenting) My colleagues consider that, in making his determination under section 32(3) of the National Assistance Act 1948 (the 1948 Act) of the place of PHs ordinary residence on 26 December 2004 for the purpose of section 24(1) of the same Act, the Secretary of State could lawfully have reached only one conclusion. It is, according to them, that on that date, which was the day prior to his 18th birthday, PH was ordinarily resident in a county (Wiltshire): a) in which in May 1991, ie about 13 years earlier, he had ceased to live upon his removal to live with the foster parents in South Gloucestershire; b) to which, during the following 13 years, he never returned, not even just to stay overnight; c) in which in November 1991, ie also about 13 years earlier, his parents had ceased to live upon their removal to live in Cornwall; d) in which by 1997, ie about seven years earlier, both sets of his grandparents had, in one case because of relocation and in the other because of death, ceased to live; and e) in which, from 1997 onwards until many years after 26 December 2004, no home remained available, even in principle, for his occupation. Such is a conclusion to which, with great respect to my colleagues, I do not subscribe. It is a conclusion for which no party has contended at any stage of these proceedings. A court should tread cautiously before favouring a solution devised only by itself, particularly where, as here, it has been addressed by an array of excellent counsel instructed by public authorities widely experienced in this area of the law. I agree that there was only one conclusion which the Secretary of State could lawfully have reached. But, so I consider, his conclusion should have been that on 26 December 2004 PH was ordinarily resident in South Gloucestershire. So I believe that the order of the Court of Appeal was correct. I must squarely confront the problem. There appear to be strong reasons of public policy which militate in favour of imposing upon Wiltshire, rather than upon South Gloucestershire, the obligation of making decisions about a suitable placement of PH following his 18th birthday and of funding whatever placement may thereafter be suitable for him from time to time. It would be a heavy financial burden for Wiltshire but its burden in the case of PH would be borne to the same extent by some other local authority in a reverse situation: in other words the burdens should even out. Public policy suggests: a) that it is desirable that a local authority which has exercised the decision making power (and has borne the funding burden) in relation to the placement of a mentally incapacitated minor should, in the light of its knowledge of his needs, continue to exercise that power (and bear that burden) following the attainment of his majority; and b) that it is undesirable that a local authority which is exercising the decision making power (and bearing the funding burden) in relation to the placement of an incapacitated minor should, while he remains a minor, be able to place him in a suitable facility in the area of another local authority (indeed, in the case of a private placement, without the consent of that local authority), with the result that, following the attainment of his majority, the decision making power and, in particular, the financial burden should fall upon that other local authority. In the present case, for example, the evidence suggests that Wiltshires placement of PH in 1991 with his excellent specialist foster parents did not in any way involve the local authority of South Gloucestershire, which for the following 13 years appears to have played no part in directing or securing his care. Yet, on my analysis, it is South Gloucestershire which should thereafter have begun to exercise the decision making power and, in particular, to bear the financial burden. The Secretary of State accepts that, of the young people who move from being looked after by local authorities as minors to being provided with accommodation by them as adults, those lacking capacity are only a small proportion. But he explains convincingly that, in the light of their specialised needs, the cost of maintaining them indefinitely is very high. He proceeds to identify real concerns that a few local authorities might therefore be motivated (to use the crude shorthand which, only for convenience, has been deployed in the hearing before this court) to export such a minor to the area of another local authority prior to the attainment of his majority; and equally that, were that other local authority to be the administrator of a specialist resource entirely suitable to the needs of a minor, it might nevertheless be motivated to refuse him admission to it for fear of the financial consequences following the attainment of his majority. But such is the result which in my view the law, as it stands, clearly compels. I am not a legislator. Nor, with respect, are my colleagues. When, by section 24(1) of the 1948 Act, it decided to identify the local authority responsible for making the provision specified by the Act by reference to a persons ordinary residence in its area, Parliament deployed a well known phrase. The courts confidently assume that, in deploying a phrase, Parliament understands the meaning which the courts have ascribed to it: Regina v G [2003] UKHL 50, [2004] 1 AC 1034, at p 1059 (Lord Steyn). No doubt Parliament understands that in the future the courts may refine and develop their interpretation of a phrase. Subject to that, however, Parliament in 1948 intended that the courts should construe the phrase in section 24(1) by reference to its established meaning. Furthermore, insofar as the courts might encounter any difficulty in applying every aspect of its established meaning to any person entitled to provision under the Act, for example to a mentally incapacitated person, Parliament no doubt intended that the courts should, albeit only to the necessary extent, adapt their interpretation of the phrase. To that extent the framework in which Parliament set the phrase might require the courts to ascribe to it a somewhat different meaning. In 1948 the established meaning of the phrase ordinary residence was that which the House of Lords had ascribed to it in the Levene and Lysaght cases cited by Lord Carnwath at para 39 above. In the former Viscount Cave LC had stated at p 225 that it meant residence in a place with some degree of continuity and apart from accidental and temporary absences. In the latter Viscount Sumner had stated at p 243 that the converse to ordinarily is extraordinarily and that part of the regular order of a mans life, adopted voluntarily and for settled purposes, is not extraordinary. In the Shah case, cited by Lord Carnwath at para 41 above, Lord Scarman, at p 341, quoted both these statements; and it can be seen that his classic definition of the phrase ordinary residence, set out by Lord Carnwath, was in effect no more than an amalgamation of what Viscount Cave and Viscount Sumner had said. By applying his definition, Lord Scarman and the other members of the committee decided that the four foreign students, who had pursued a course of study in the UK for the previous three years with leave to remain in the UK limited thereto, and who aspired, with the aid of grants, to pursue courses of further education, had been ordinarily resident in the UK throughout those three years and were therefore entitled to the grants under the Education Act 1962. Lord Scarman noted at pp 346 and 347 that each of the lower courts had attached importance to their belief that in 1962 Parliament would not have intended that foreign students with only limited leave to remain in the UK should be entitled to grants by which to further their education. He continued, at pp 347 and 348: My Lords, the basic error of law in the judgments below was the failure to appreciate the authoritative guidance given by this House in Levene and Lysaght as to the natural and ordinary meaning of the words ordinarily resident. They attached too much importance to the particular purpose of the residence; and too little to the evidence of a regular mode of life for a settled purpose, whatever it be, whether study, business, work or pleasure. In so doing, they were influenced by their own views of policy and by the immigration status of the students. The way in which they used policy was, in my judgment, an impermissible approach to the interpretation of statutory language. Judges may not interpret statutes in the light of their own views as to policy. [Bold type supplied] In 1948 the jurisdiction to commit a child to the care of a local authority was contained in section 62(1)(b) of the Children and Young Persons Act 1933 (the 1933 Act). No doubt Parliament could have extended the disregard in section 24(5) of the 1948 Act so as to encompass any period in which, immediately prior to the provision of residential accommodation to a person under Part III of that Act, he had been in the care of a local authority under section 62(1)(b) of the 1933 Act. But it did not do so. Equally, following the rationalisation of the provisions for taking children into care achieved by the Children Act 1989 (the 1989 Act), Parliament could have extended the disregard in section 24(5) of the 1948 Act so as to encompass any period in which, immediately prior to the provision of such accommodation, the person had been looked after by a local authority within the meaning of section 22(1) of the 1989 Act. But it did not do so. By paragraph 9 of the Schedule to the Care Act 2014 and Children and Families Act 2014 (Consequential Amendments) Order 2015, (SI 2015/914), made pursuant to section 123(2) of the Care Act 2014 (the 2014 Act), the application of the 1948 Act has now been restricted to Wales. In England accommodation for adults in need of it is now provided under the 2014 Act which, by section 39, has replaced the disregards formerly contained in section 24 of the 1948 Act with wider disregards. But, even now, Parliament has not chosen to include a requirement to disregard a period in which, as a minor, the person has been looked after by a local authority within the meaning of section 22(1) of the 1989 Act. It is instead my colleagues who have chosen to do so. Indeed the statutory disregards, limited though they are, present another difficulty. In para 59 above Lord Carnwath suggests that the legal characteristics of the residence of a minor provided with accommodation under the 1989 Act are such as to make it irrelevant to the determination of his ordinary residence for the purposes of section 24(1) of the 1948 Act. But, if so, they must make it equally irrelevant to the determination of his ordinary residence for the purposes of the 1989 Act itself, including for those of section 31(8)(a) which requires the recipient of a care order to be the local authority within whose area he is ordinarily resident. So then the question arises: why should Parliament, by section 105(6)(c) of the 1989 Act, have troubled to require that the period of provision of such accommodation be disregarded? Lord Carnwaths analysis renders the subsection redundant. More broadly the same charge can, in my view, be levelled in relation to the disregards provided by section 24(5) of the 1948 Act and now by section 39 of the 2014 Act, which provide for the disregard of periods of accommodation which has legal characteristics analogous to those of accommodation provided under the 1989 Act. The Secretary of State determined that on 26 December 2004 PH was ordinarily resident in Cornwall. I agree that his determination was unlawful. Although clearly PH had links with Cornwall which he lacked with Wiltshire, it was artificial to describe him as having had a base with his parents there; and it was unrealistic to regard them as having continued to be the decision makers in relation to him. Having summarised approaches to the issue which, so counsel suggested, favoured the identification of Cornwall as the responsible local authority under the 1948 Act, Lord Carnwath states at para 51 above: There might be force in these approaches from a policy point of view. They are however impossible to reconcile with the language of the statute, under which it is the residence of the subject, and the nature of that residence, which provide the essential criterion. I agree with Lord Carnwaths statement which, by coincidence, encapsulates the reasons for my own rejection of his conclusion that on 26 December 2004 PH was ordinarily resident in Wiltshire. But it is not only by a process of elimination that I conclude that PH was then ordinarily resident in South Gloucestershire. In A v A (Children: Habitual Residence), [2013] UKSC 60, [2014] AC 1, this court determined the proper approach to an inquiry into a childs habitual residence for the purposes of article 8 of Council Regulation (EC) 2201/2003, namely the Brussels II Revised Regulation. It ruled that, in the light of the identity of article 8 as a European regulation, the inquiry into a childs habitual residence was required to be conducted by reference to the interpretation of the phrase favoured by the Court of Justice of the European Union, namely to identify the place which reflects some degree of integration by the child in a social and family environment and that, for the purposes of article 8, such an inquiry was preferable to one determined by reference to Lord Scarmans classic definition of ordinary residence in the Shah case: see para 54(iii) and (v) of the judgment of Lady Hale. The European approach is plainly tailored so as to allow for the inability of most children to make decisions for themselves and, as such, it seems well suited to an inquiry into the ordinary residence of a mentally incapacitated person such as PH. I agree with the observation of Elias LJ in his judgment in the present case that there is much to be said in favour of a determination of PHs ordinary residence by reference to a similar approach. Were the inquiry indeed to be into the place of PHs integration in a social and family environment, that place would plainly be South Gloucestershire. But application of Lord Scarmans definition, subject to the alteration of one word required by PHs incapacity, yields the same conclusion. For on 26 December 2004 South Gloucestershire represented the abode which he had adopted for settled purposes as part of the regular order of his life for the time being. The word which requires alteration is voluntarily. PH did not adopt his abode in the foster home voluntarily. But, as the Secretary of State recorded in his determination, PH was very happy and settled in the foster home and had to leave it only because it was not possible for the foster parents to accommodate an adult under the 1948 Act while continuing to foster children under the 1989 Act. One may confidently infer that, had he had capacity, PH would have adopted his abode in the foster home voluntarily. In the light of his incapacity, however, the context requires a modest replacement of the word voluntarily with the word contentedly and, on that basis, his ordinary residence in South Gloucestershire is again plainly established. I therefore take the view that both of these appeals should be dismissed.

This appeal concerns PH, a young man with physical and learning disabilities, who was born in Wiltshire in 1986. He lacks capacity to decide for himself where he lives. Since 1991, PH has been living with foster parents in South Gloucestershire. In 1991 PHs parents moved away from Wiltshire to Cornwall. PH occasionally visited them there, including at the end of 2004 just before his eighteenth birthday. Since he turned eighteen, PH has lived in two care homes in Somerset. The cost of PHs care is currently estimated to be 80,000 per year for the rest of his life. There is no dispute that he is entitled to support. The issue is which local authority is responsible for providing PHs support South Gloucestershire, Cornwall, or Wiltshire? This depends, under sections 24(1) and 24(5) of the National Assistance Act 1948, on where PH was ordinarily resident immediately before he attained majority. Wiltshire Council arranged PHs foster placement under the Children Act 1989. Section 105(6)(c) provides that, in determining a childs ordinary residence for the purposes of the 1989 Act, there shall be disregarded any period in which the child lives in any place while he is being provided with accommodation by or on behalf of the local authority. At the time PH turned 18, the National Assistance Act 1948 section 21 obliged local authorities to arrange accommodation for people over eighteen with disabilities who need care and attention not otherwise available to them (the application of the 1948 Act has since been restricted to Wales). By section 24(5), a person provided with accommodation under the 1948 Act is deemed to continue to be ordinarily resident in the area in which he was ordinarily resident immediately before that accommodation was provided for him. Section 105(6)(c) and section 24(5) have been referred to as deeming or disregard provisions. In August 2011, the three local authorities jointly referred the question of PHs ordinary residence to the appellant Secretary of State for determination, under section 32(3) of the 1948 Act. The Secretary of State decided that Cornwall Council was responsible. He followed his own guidance on determining ordinary residence, which draw on two principal authorities: R v Barnet LBC, ex p Shah [1983] AC 309, and R v Waltham Forest, Ex p Vale (unreported, 11 February 1985). In Shah, the House of Lords held that ordinary residence connotes an abode voluntarily adopted for settled purposes. In Vale the High Court held that an adult woman whose disabilities meant she was incapable of choosing where to live had her ordinary residence with her parents, because that was her base. The Secretary of State applied this approach, which was challenged in this appeal. Cornwall Council judicially reviewed the Secretary of States decision. The High Court dismissed its challenge. The Court of Appeal disagreed, holding that PHs place of ordinary residence as at his eighteenth birthday was South Gloucestershire, and further that the deeming provisions did not apply to PH since each applied only for the purposes of their own Act. The Supreme Court allows the appeals by a majority of 4 1, and determines PHs ordinary residence at the relevant time to be Wiltshire. Lord Carnwath gives a judgment with which Lady Hale, Lord Hughes and Lord Toulson agree. Lord Wilson gives a dissenting judgment. Lord Carnwath considers that the Secretary of States reasons for selecting Cornwall, which started not from assessment of the duration and quality of PHs actual residence but from an attempt to ascertain his base by reference to his family relationships, cannot be supported. There is no suggestion that PHs brief periods of staying with his parents at holiday times could amount to ordinary residence. [49] Lord Carnwath further reasons that though attribution of responsibility to South Gloucestershire may fit the language of the statute, it runs directly counter to the statutes policy. The only connection with that county was PHs historic placement under a statute, the 1989 Act, which specifically excluded the placement from consideration as ordinary residence for the purposes of the 1989 Act. The policy in both the 1989 and 1948 Acts is that ordinary residence of a person provided with accommodation should not be affected, for the purposes of an authoritys responsibilities, by the location of that persons placement. The purpose of the deeming provisions in both Acts is that an authority should not be able to export its responsibility for providing accommodation by exporting the person who is in need of it. It would be undesirable if, despite the similarity and purpose of these provisions, there is a hiatus in the legislation. It could also have adverse consequences on local authorities willingness to receive children who need specialist care from another local authority. [52 55] Lord Carnwath notes that in construing section 24 of the 1948 Act, the statutory context is critical. The relevant provisions in each Act have the same function, namely allocating fiscal and administrative responsibility between local authorities. [57] PH was at the relevant time living somewhere he had been placed by a local authority under the 1989 Act. It would be wrong to interpret section 24 of the 1948 Act so as to regard PH as having been ordinarily resident in South Gloucestershire by reason of a form of residence whose legal characteristics are found in the 1989 Act. One of those characteristics is that the foster placement did not affect his ordinary residence under the 1989 Acts statutory scheme. [58 59] It follows that PHs placement in South Gloucestershire by Wiltshire is not to be regarded as changing his ordinary residence. Until he turned eighteen, for fiscal and administrative purposes his ordinary residence continued to be in Wiltshire, regardless of where they determined that he should live. [60] Therefore the appeal is allowed and in the declaration of the Court of Appeal references to South Gloucestershire are substituted for references to Wiltshire. [61] Lord Wilson, dissenting, reasons that at the relevant date PH and his family had all moved away from Wiltshire. [62] South Gloucestershire is the result that the law clearly compels on the established meaning of ordinary residence, though public policy militates against it. [65 66, 68] Though he did not adopt it voluntarily, PH was happy and settled there. [74] Parliament has not chosen to widen the provisions in the 1948 Act so as to disregard an adults previous placement as a minor under the 1989 Act. The majoritys analysis that the legal characteristics of a minors residence under the 1989 Act make it irrelevant to determining ordinary residence under section 24 of the 1948 Act makes the statutory disregards in section 105(6) of the 1989 Act and section 24(5) of the 1948 Act redundant. [70 71]

In this case an estate agent claims that commission became payable to him by the vendor of a number flats on the completion of the sale of those flats to a purchaser which he had introduced to the vendor. It gives rise to two issues. The first, raised on appeal by the agent, concerns the agreement between the agent and the vendor and whether it was complete and enforceable by the agent despite there being no express identification of the event which would trigger the obligation to pay the commission. The second, raised on a cross appeal by the vendor, concerns the application of section 18 of the Estate Agents Act 1979 and whether, by reason of the agents failure to comply with the requirements imposed by the Act, the trial judge ought to have dismissed the claim or discharged the vendors liability to pay the commission. The facts In 2007, the defendant, Mr Wells, a retired stockbrokers office administrator, completed the development of a block of flats in Hackney under the terms of a joint venture agreement with Mr White, a builder. By the beginning of 2008 six of the flats had been sold, one was under offer and seven were still on the market. They were being marketed by a local agency, Shaw & Co, under a contract for a sole agency and a commission of 1.75%, or 3% if the properties were sold through another agent. In late January 2008, Mr Wells mentioned to Mr Nicholson, a neighbour in Andorra, where they both lived, that he was having difficulty selling the remaining flats. Mr Nicholson told Mr Wells that he knew of a property investment company in London that might be interested in purchasing the flats and Mr Wells responded that he would be happy for Mr Nicholson to make some enquiries. On 29 January 2008, Mr Nicholson sent an email to the claimant, Mr Devani, who was trading as an estate agent in Kilburn, informing him of the flats and that seven remained unsold. He also gave him Mr Wells and Mr Whites telephone numbers and explained that Mr Wells would be coming to London very soon. Later that day Mr Devani acknowledged receipt of Mr Nicholsons email, thanked him and told him that the information he had been given might well be of interest. He also made a telephone call to Mr Wells in Andorra. The parties at trial gave strikingly different accounts about what was said in the course of this telephone conversation. It was Mr Devanis evidence that he told Mr Wells that he was an estate agent and that his commission terms would be 2% plus VAT. Mr Wells maintained that Mr Devani made no mention of any commission and gave the impression he was an investor looking to buy on his own account. The judge, HH Judge Moloney QC, preferred the evidence of Mr Devani. He found that Mr Devani thought throughout that he was acting as an agent, that he did not describe himself as a buyer or say anything intended to create the impression that he was, and that Mr Wells asked him about fees and he replied that his standard terms were 2% plus VAT. He also found that since February 2008 Mr Wells and Mr White had sought to take advantage of the absence of a written agreement with Mr Devani to deprive him and Shaw & Co of their commissions, and that they had tailored much of their evidence to reinforce their case. Shortly after this telephone conversation, Mr Devani made contact with Newlon Housing Trust which expressed some interest in purchasing the remaining flats. A meeting at the flats was arranged and attended by a representative of Newlon, Mr Wells and Mr White. On 5 February 2008, Newlon agreed to purchase the flats for 2.1m. Mr Wells thereupon telephoned Mr Devani to inform him of the sale and later that day Mr Devani sent to Mr Wells an email in which he expressed delight that Newlon had agreed to purchase the flats and continued: As per our terms of business our fees are 2% + VAT and I look forward to receiving you[r] solicitors details so that we can invoice them directly as per your instruction. He attached to that email the terms of business which provided in relevant part: I am required by section 18 of the Estate Agents Act 1979, as amended to set out our terms of business prior to you formerly [sic] instructing our company. A commission of 2% + VAT (Multiple Agency) of the eventual sale price of the property. The commission will be due on exchange of contracts with a purchaser, but payable from the proceeds of sale by your conveyance, with your written authority. The transaction proceeded to completion and Mr Devani then claimed his commission. Mr Wells refused to pay and so Mr Devani issued these proceedings in the Central London County Court. The trial Apart from the factual issues which the judge resolved in Mr Devanis favour, Mr Wells disputed Mr Devanis entitlement to any commission on two grounds which are material to this appeal. Mr Wells contended first, that he had never entered into a binding contract to engage Mr Devani as his agent because the terms of any agreement between them were too uncertain; and secondly, that Mr Devanis failure to comply with section 18 of the Estate Agents Act 1979 rendered any agreement unenforceable or that any sum payable to Mr Devani by Mr Wells should be discharged or reduced in light of the prejudice Mr Wells had suffered. The judge dealt with the first ground in concise terms. He accepted that Mr Devani only submitted his written terms to Mr Wells after he had introduced Newlon and that his claim therefore depended on what had been agreed on 29 January 2008. He also recognised that Mr Devani did not reach any express agreement with Mr Wells as to the precise event which would entitle Mr Devani to his commission. Nevertheless, he held that, in the absence of any such express agreement, the law would imply the minimum term necessary to give business efficacy to the parties intentions. Here, the judge continued, the least onerous term for Mr Wells, and the one which nobody would have disputed had it been suggested by a bystander, was that payment of the specified commission was due on the completion of the purchase of the properties by any party which Mr Devani had introduced to Mr Wells. Accordingly, he held that there was at the material time an oral contract between Mr Devani and Mr Wells entitling Mr Devani to a payment of 2% plus VAT if Mr Devani effected an introduction between Mr Wells and a prospective purchaser of the flats and that such introduction led to their sale. The judge turned next to the submissions founded upon section 18 of the 1979 Act. He found that Mr Devani had failed to comply with his obligations under the Act in that he did not expressly inform Mr Wells before their agreement of the circumstances under which he would be entitled to commission, and he did not provide Mr Wells with that information in writing until 5 February 2008. He also found that these failures were culpable but that having regard to the degree of that culpability and the prejudice Mr Wells had suffered, it would be just to permit Mr Devani to enforce the agreement but to compensate Mr Wells for that prejudice by reducing the fee he was required to pay by one third. The appeal to the Court of Appeal The Court of Appeal ([2017] QB 959), by a majority, allowed Mr Wells appeal on the issue of whether there was ever a binding contract. Lewison LJ considered the judges approach could not be justified. His reasoning ran as follows. First, a court can imply terms into a contract, but this assumes there is a concluded contract into which the terms can be implied. It is not legitimate, under the guise of implying terms, to make a contract for the parties. This is to put the cart before the horse. Secondly, the trigger event giving rise to an estate agents entitlement to commission is of critical importance and a variety of events can be specified. The identification of the trigger event is therefore essential to the formation of legally binding relations. Thirdly, it follows that, unless the parties specify that event, their bargain is incomplete, and it is wrong in principle to turn an incomplete bargain into a legally binding contract by adding expressly agreed terms and implied terms together. In his view, that is what the judge did in this case. What was more, it was not possible or permissible to support the judges conclusion in any other way. McCombe LJ agreed that the appeal should be allowed, essentially for the reasons given by Lewison LJ. He did not disagree with the judges finding that the parties intended to reach and did reach an agreement. For him the question was whether what they had agreed amounted to a binding contract. In his view, it did not, for an agreement which did not specify the event which triggered the entitlement to commission was not complete. Arden LJ, dissenting, considered that the bargain between the parties was initially a unilateral contract but that it became a bilateral contract at the latest when Newlon, having been introduced to Mr Wells by Mr Devani, completed the purchase of the flats. As a matter of interpretation of the whole contract, the commission became payable on completion. She acknowledged that the judge had arrived at his conclusion by implying a term, but this was of no matter because the outcome was the same. As for section 18 of the 1979 Act, the Court of Appeal decided unanimously that Mr Wells appeal in relation to this issue should be dismissed. Lewison LJ, with whom McCombe and Arden LJJ agreed, made some criticisms of the way the judge had dealt with the relevant elements of culpability and prejudice but concluded that he could not say the judges overall value judgment was wrong. The Court of Appeal also dismissed Mr Devanis cross appeal against the reduction in his fee. Was there a binding contract? The question whether there was a binding contract between Mr Devani and Mr Wells required a consideration of what was communicated between them by their words and their conduct and whether, objectively assessed, that led to the conclusion that they intended to create a legally binding relationship and that they had agreed all the terms that the law requires as essential for that purpose. Lord Clarke explained the relevant principles in this way in RTS Flexible Systems Ltd v Molkerei Alois Mller GmbH [2010] UKSC 14; [2010] 1 WLR 753, para 45: The general principles are not in doubt. Whether there is a binding contract between the parties and, if so, upon what terms depends upon what they have agreed. It depends not upon their subjective state of mind, but upon a consideration of what was communicated between them by words or conduct, and whether that leads objectively to a conclusion that they intended to create legal relations and had agreed upon all the terms which they regarded or the law requires as essential for the formation of legally binding relations. Even if certain terms of economic or other significance have not been finalised, an objective appraisal of their words and conduct may lead to the conclusion that they did not intend agreement of such terms to be a precondition to a concluded and legally binding agreement. It may be the case that the words and conduct relied upon are so vague and lacking in specificity that the court is unable to identify the terms on which the parties have reached agreement or to attribute to the parties any contractual intention. But the courts are reluctant to find an agreement is too vague or uncertain to be enforced where it is found that the parties had the intention of being contractually bound and have acted on their agreement. As Lord Wright said in G Scammel & Nephew Ltd v HC and JG Ouston [1941] AC 251, 268: The object of the court is to do justice between the parties, and the court will do its best, if satisfied that there was an ascertainable and determinate intention to contract, to give effect to that intention, looking at substance and not mere form. It will not be deterred by mere difficulties of interpretation. Difficulty is not synonymous with ambiguity so long as any definite meaning can be extracted. But the test of intention is to be found in the words used. If these words, considered however broadly and untechnically and with due regard to all the just implications, fail to evince any definite meaning on which the court can safely act, the court has no choice but to say that there is no contract. Such a position is not often found. As I have explained, the judge had no doubt that the parties did intend to create legal relations and that they understood that Mr Devanis terms were that he would be entitled to a commission of 2% plus VAT. Mr Devani then introduced Mr Wells to a prospective purchaser, Newlon, and that introduction led directly to the completed sale. It is true that, as the judge found, there was no discussion of the precise event which would give rise to the payment of that commission but, absent a provision to the contrary, I have no doubt it would naturally be understood that payment would become due on completion and made from the proceeds of sale. Indeed, it seems to me that is the only sensible interpretation of what they said to each other in the course of their telephone conversation on 29 January 2008 and the circumstances in which that conversation took place. In short, Mr Devani and Mr Wells agreed that if Mr Devani found a purchaser for the flats he would be paid his commission. He found Newlon and it became the purchaser on completion of the transaction. At that point, Mr Devani became entitled to his commission and it was payable from the proceeds of sale. This interpretation of the parties words and conduct is in my view amply supported by authority. For example, in Fowler v Bratt [1950] KB 96, the plaintiff, a house agent, was instructed by the defendant to find a purchaser of his house and agreed to pay a commission on the price. Subsequently the defendant decided not to go through with the sale and the plaintiff brought proceedings for his commission. The Court of Appeal held that, in order to earn his commission, the plaintiff had at least to find a purchaser who was bound in law to buy, and that he had done. The case is of particular relevance to this appeal in light of this passage in the judgment of Denning LJ (at pp 104 105): I confess that I approach claims by estate agents from the point of view, which I am sure is the common understanding of men, namely, that, in the absence of express terms to the contrary, the commission of the agents is to be paid out of the proceeds of sale. If the sale does not go through, the presumption is that no commission is payable. But in point of law if an agent succeeds in finding a person who actually enters into a binding and enforceable contract to purchase, and if that contract afterwards goes off by the vendors default, the vendor is liable to pay commission. Midgley Estates v Hand [1952] 2 QB 432 concerned an agreement between the plaintiff estate agents and the defendant vendor that the agents commission would be payable as soon as a purchaser had signed a legally binding contract within a certain period of time. The agents did introduce such a purchaser who signed the contract and paid a deposit but was unable to complete. The agents thereupon sought payment of their commission. The Court of Appeal held that the terms of the agreement were clear and the court would give effect to them, and they displaced the prima facie position. Jenkins LJ, with whom Somervell and Morris LJJ agreed, described that prima facie position in these terms (at pp 435 to 436): The question depends on the construction of each particular contract, but prima facie the intention of the parties to a transaction of this type is likely to be that the commission stipulated for should only be payable in the event of an actual sale resulting. The vendor puts his property into the hands of an agent for sale and, generally speaking, contemplates that if a completed sale results, and not otherwise, he will be liable for the commission, which he will then pay out of the purchase price. That is, broadly speaking, the intention which, as a matter of probability, the court should be disposed to impute to the parties. It follows that general or ambiguous expressions, purporting, for instance, to make the commission payable in the event of an agent finding a purchaser, or in the event of the agent selling the property, have been construed as meaning that the commission is only payable in the event of an actual and completed sale resulting, or, at least, in the event of an agent succeeding in introducing a purchaser who is able and willing to purchase the property. That is the broad general principle in the light of which the question of construction should be approached; but this does not mean that the contract, if its terms are clear, should not have effect in accordance with those terms, even if they involve the result that the agents commission is earned and becomes payable although the sale in respect of which it is claimed, for some reason or another, turns out to be abortive. In Dennis Reed Ltd v Goody [1950] 2 QB 277, two home owners instructed the plaintiff agents to find a person ready, willing and able to purchase their property and agreed to pay the agents a commission upon them introducing such a person. The agents found a prospective purchaser but he withdrew before an enforceable agreement for sale had been made. The agents nevertheless claimed they were entitled to their full commission. The Court of Appeal agreed with the trial judge that they were not. Denning LJ explained (at p 284) that when an owner puts his house into the hands of an estate agent, the ordinary understanding is that the agent is only entitled to a commission if he succeeds in effecting a sale; but if he does not, he is entitled to nothing. A little later, he said this about the relationship between owner and agent: All the familiar expressions please find a purchaser, find someone to buy my house, sell my house for me, and so on mean the same thing: they mean that the agent is employed on the usual terms; but none of them gives any precise guide as to what is the event on which the agent is to be paid. The common understanding of men is, however, that the agents commission is payable out of the purchase price. The services rendered by the agent may be merely an introduction. He is entitled to commission if his introduction is the efficient cause in bringing about the sale: Nightingale v Parsons [1914] 2 KB 621. But that does not mean that commission is payable at the moment of the introduction: it is only payable on completion of the sale. The house owner wants to find a man who will actually buy his house and pay for it. All of this reasoning remains as principled and cogent today as it was when expressed and I respectfully endorse it. The case before us is another in which the parties meant by their words and actions that the agent was engaged on the usual terms, that is to say that a commission became payable not upon the introduction by Mr Devani of a prospective purchaser to Mr Wells, nor upon the exchange of contracts, but rather upon completion of the sale and then from its proceeds, for it was at that time that Newlon actually bought and paid for the property and so became its purchaser. It is true that Mr Devanis written terms of engagement made express provision for payment but neither party has suggested they are relevant to the issue before us for they were not supplied until 5 February 2008. In this connection I must also address the decision of House of Lords in Luxor (Eastbourne) Ltd v Cooper [1941] AC 108, for it is one upon which Lewison LJ placed particular reliance. An agent, Mr Cooper, sued two companies, Luxor (Eastbourne) Ltd and Regal (Hastings) Ltd, for breach of an agency agreement. The terms of their bargain were that if a party introduced by Mr Cooper were to buy certain property owned by the companies they would pay him a substantial commission. Under the terms of their agreement, the commission would become due on completion of the sale. Mr Cooper contended that he had introduced prospective purchasers who were ready and willing to buy the property. No sale took place, however, because the owners changed their plans. It necessarily followed from the express terms of their agreement that no commission was payable but Mr Cooper argued that he was nevertheless entitled to damages for breach of an implied term that the vendor companies would do nothing to prevent the satisfactory completion of the transaction and so deprive him of his commission (at p 115). The House of Lords held that no such term could be implied. In the course of his speech Viscount Simon LC observed that there was considerable difficulty in formulating general propositions on the subject of estate agents commissions for their contracts did not follow a single pattern and the primary necessity in each case was to ascertain with precision the express terms of the contract in issue, and then to consider whether they necessitated the addition, by implication, of other terms. He continued (at pp 120, 121): It may be useful to point out that contracts under which an agent may be occupied in endeavouring to dispose of the property of a principal fall into several obvious classes. There is the class in which the agent is promised a commission by his principal if he succeeds in introducing to his principal a person who makes an adequate offer, usually an offer of not less than the stipulated amount. If that is all that is needed in order to earn his reward, it is obvious that he is entitled to be paid when this has been done, whether his principal accepts the offer and carries through the bargain or not. No implied term is needed to secure this result. There is another class of case in which the property is put into the hands of the agent to dispose of for the owner, and the agent accepts the employment and, it may be, expends money and time in endeavouring to carry it out. Such a form of contract may well imply the term that the principal will not withdraw the authority he has given after the agent has incurred substantial outlay, or, at any rate, after he has succeeded in finding a possible purchaser. Each case turns on its own facts and the phrase finding a purchaser is itself not without ambiguity. But there is a third class of case (to which the present instance belongs) where, by the express language of the contract, the agent is promised his commission only upon completion of the transaction which he is endeavouring to bring about between the offeror and his principal. As I have already said, there seems to me to be no room for the suggested implied term in such a case. The agent is promised a reward in return for an event, and the event has not happened. He runs the risk of disappointment, but if he is not willing to run the risk he should introduce into the express terms of the contract the clause which protects him. Lord Russell, with whom Lord Thankerton agreed, said this (at pp 124 to 125): A few preliminary observations occur to me. (1) Commission contracts are subject to no peculiar rules or principles of their own; the law which governs them is the law which governs all contracts and all questions of agency. (2) No general rule can be laid down by which the rights of the agent or the liability of the principal under commission contracts are to be determined. In each case these must depend upon the exact terms of the contract in question, and upon the true construction of those terms. And (3) contracts by which owners of property, desiring to dispose of it, put it in the hands of agents on commission terms, are not (in default of specific provisions) contracts of employment in the ordinary meaning of those words. No obligation is imposed on the agent to do anything. The contracts are merely promises binding on the principal to pay a sum of money upon the happening of a specified event, which involves the rendering of some service by the agent. Lewison LJ thought that it was apparent from these passages that the event giving rise to an estate agents entitlement to commission was of critical importance and that a variety of events could be specified. In his view it followed that, unless the parties specified that event, their bargain was incomplete. I agree with Lewison LJ that the event giving rise to the entitlement to commission may be of critical importance but I respectfully disagree that this means that unless this event is expressly identified the bargain is necessarily incomplete. It may be an express term of the bargain that the commission is payable upon the introduction of a prospective purchaser who expresses a willingness to buy at the asking price, or it may be an express term that it is payable upon exchange of contracts. But if, as here, there is no such express term and the bargain is, in substance, find me a purchaser and the agent introduces a prospective purchaser to whom the property is sold, then a reasonable person would understand that the parties intended the commission to be payable on completion and from the proceeds of sale. I do not understand there to be anything in the speeches of Viscount Simon LC or Lord Russell which undermines this conclusion and I note in this regard that this decision preceded and was cited in each of the decisions of the Court of Appeal to which I have referred at paras 20 to 22 above. Implied term For these reasons I do not think the judge needed to imply a term into the agreement between Mr Devani and Mr Wells. However, had it been necessary and for the reasons which follow, I would have had no hesitation in holding that it was an implied term of the agreement that payment would fall due on completion of the purchase of the property by a person whom Mr Devani had introduced. In Marks & Spencer plc v BNP Paribas Securities Services Trust Co (Jersey) Ltd [2015] UKSC 72; [2016] AC 742, the Supreme Court made clear that there has been no dilution of the conditions which have to be satisfied before a term will be implied and the fact that it may be reasonable to imply a term is not sufficient. Lord Neuberger of Abbotsbury PSC, with whom Lord Sumption and Lord Hodge JJSC agreed without qualification, explained (at paras 26 to 31) that (i) construing the words the parties have used in their contract and (ii) implying terms into the contract, involve determining the scope and meaning of the contract; but construing the words used and implying additional words are different processes governed by different rules. In most cases, it is only after the process of construing the express words of an agreement is complete that the issue of whether a term is to be implied falls to be considered. Importantly for present purposes, Lord Neuberger also made clear (at paras 23 and 24) that a term will only be implied where it is necessary to give the contract business efficacy or it would be so obvious that it goes without saying. The approach adopted by the trial judge was entirely consistent with these principles. He found it was necessary to imply a term to give the contract commercial efficacy. Mr Wells was having difficulty selling his flats. An approach was made to Mr Devani and a short while later he telephoned Mr Wells. In the course of their conversation, Mr Devani explained that his terms were 2% plus VAT. Both parties proceeded on that basis. Mr Devani introduced a purchaser, Newlon, which agreed to buy the flats and a short while later completion of the sale took place. In these circumstances I think the judges approach cannot be faulted for if, contrary to my view, the agreement, on its proper interpretation, did not provide for payment of the commission on completion then a term to that effect must be implied to make the contract work and to give it practical and commercial coherence. In carrying out this exercise of implication the court would be reading into the contract that which its nature implicitly requires. Put another way, to leave Mr Wells without any obligation to pay Mr Devani would be completely inconsistent with the nature of their relationship. In my judgment, the obligation to make payment of the commission on completion would be what was required to give the agreement business efficacy, and would not go beyond what was necessary for that purpose. Scancarriers How then did the majority in the Court of Appeal come to a contrary conclusion? I have outlined the steps in the reasoning of Lewison LJ earlier in this judgment. They have at their heart the proposition that, unless the parties themselves specify the event which will trigger the agents entitlement to commission, their bargain is incomplete; and that it is not possible to turn an incomplete bargain into a legally binding contract by adding expressly agreed terms and implied terms together. Lewison LJ relied in support of his reasoning upon the decision of the Judicial Committee of the Privy Council in Scancarriers A/S v Aotearoa International Ltd [1985] 2 Lloyds Rep 419. Lord Roskill, giving the judgment of the Board, said this (at p 422): the first question must always be whether any legally binding contract has been made, for until that issue is decided a court cannot properly decide what extra terms, if any, must be implied into what is ex hypothesi a legally binding bargain, as being both necessary and reasonable to make that bargain work. It is not correct in principle, in order to determine whether there is a legally binding bargain, to add to those terms which alone the parties have expressed further implied terms upon which they have not expressly agreed and then by adding the express terms and the implied terms together thereby create what would not otherwise be a legally binding bargain. Scancarriers was an unusual case. The appellants, Scancarriers, a liner company, had surplus capacity in their vessels sailing from Australasia to Europe. The respondents, Aotearoa, wished to transport waste paper from New Zealand, where they were based, to India at economic freight rates. They met and discussed the possibility of the appellants transporting the respondents waste paper by introducing a new service to Dubai which could be serviced by a short deviation from the normal route to Europe through the Suez Canal. Onward carriage to India would be provided by transhipment from Dubai. The next day the appellants sent a telex to the respondents offering what was described as a promotional rate which would be held for the next six months for the shipping of waste paper stowed in a specified way. The question to which the appeal gave rise was whether the telex, construed against the background of the discussions, gave rise to a binding legal obligation on the appellants towards the respondents. The trial judge in New Zealand held it did not, but the Court of Appeal reversed his decision. The Privy Council had no difficulty finding that the Court of Appeal had fallen into error. As Lord Roskill pointed out, the telex contained no reference to the number of shipments, nor to the dates of any suggested shipments, nor to the intervals between any such shipments. Instead, the Court of Appeal had added implied terms to the few express terms and in that way created a contractual relationship which the parties had not expressed for themselves. This was plainly not permissible. Lord Roskill went on to explain that the suggestion that, following receipt of the telex, the respondents came under any contractual obligation to the appellants involved reading into the telex provisions which were not to be found in its language. The telex was no more than a quote and the parties never intended its transmission would create a legal relationship. Lewison LJ also referred to the decision of the Court of Appeal in Little v Courage Ltd (1995) 70 P & CR 469. In that case Millett LJ, with whom the other members of the court apparently agreed, cited Lord Roskills judgment in Scancarriers as support for the proposition that it is in general impossible to imply terms (that is to say terms which impose legal obligations) into a unilateral contract for this would be to impose, by implication, a contractual obligation on a person who ex hypothesi is not yet a party to any contract and therefore not yet subject to any contractual obligations at all. In my judgment Scancarriers does not support the far reaching proposition which Lewison LJ identified and I think the passage in Lord Roskills judgment upon which he relied must be seen in the context of the particular facts of that case. I recognise that there will be cases where an agreement is so vague and uncertain that it cannot be enforced. So too, there will be cases where the parties have not addressed certain matters which are so fundamental that their agreement is incomplete. Further, an agreement may be so deficient in one or other of these respects that nothing can be done to render it enforceable. But I do not accept that there is any general rule that it is not possible to imply a term into an agreement to render it sufficiently certain or complete to constitute a binding contract. Indeed, it seems to me that it is possible to imply something that is so obvious that it goes without saying into anything, including something the law regards as no more than an offer. If the offer is accepted, the contract is made on the terms of the words used and what those words imply. Moreover, where it is apparent the parties intended to be bound and to create legal relations, it may be permissible to imply a term to give the contract such business efficacy as the parties must have intended. For example, an agreement may be enforceable despite calling for some further agreement between the parties, say as to price, for it may be appropriate to imply a term that, in default of agreement, a reasonable price must be paid. Similarly, I see no reason in principle why a term cannot be implied into an agreement between a property owner and an estate agent that the agreed commission will be payable on completion of the sale of the property to a person introduced by the agent. Indeed, a very similar term was implied in James v Smith [1931] 2 KB 317. The defendant, the owner of a hotel, wrote a letter to the plaintiff, an estate agent, saying that it would sell the property at a specified price and would pay a commission if the property was sold at that price. The plaintiff introduced a purchaser who signed a contract but was unable to complete. The plaintiff nevertheless claimed that he was entitled to his commission. The Court of Appeal, reversing the trial judge, found he was not. Bankes LJ reasoned that it was necessary to imply a term to make the contract complete, that term being that the commission would be payable upon the introduction of a purchaser who agreed to purchase the property and was able to complete; in other words, a purchaser who was not a man of straw or without means. Scrutton and Atkin LJJ agreed. Scrutton LJ construed the wording of the agreement and identified the minimum obligation on the plaintiff. Atkin LJ approached the case in much the same way as Bankes LJ. He too thought the obligation on the plaintiff had to be implied, and it was to introduce a purchaser who was able to complete at the time he signed the contract. Accordingly, where, as here, the parties intended to create legal relations and have acted on that basis, I believe that it may be permissible to imply a term into the agreement between them where it is necessary to do so to give the agreement business efficacy or the term would be so obvious that it goes without saying, and where, without that term, the agreement would be regarded as incomplete or too uncertain to be enforceable. Each case must be considered in light of its own particular circumstances. In this case the judge carried out the assessment the law requires, and he found it necessary to imply a term to give the contract business efficacy. Further, it cannot be said that, with that term, the agreement is too vague or uncertain to be enforceable. Accordingly, had I not arrived at the same conclusion by a process of interpretation, I would have upheld the judge for the reasons he gave. Finally, I must address Little v Courage. It is not clear from Millett LJs judgment whether he thought that Lord Roskills dictum in Scancarriers was only applicable to unilateral contracts. If he did not and considered it of general and unqualified application, as Lewison LJ appears to have done, then I respectfully disagree with him for the reasons I have given. As for its application to unilateral contracts, there is obvious force in Millett LJs reasoning. It cannot be right to impose by implication an obligation on a person who is not yet a party to the agreement. But here too, I think the reasoning needs some qualification because, as I have said, it is permissible to imply into an offer anything which is so obvious that it goes without saying. Nor, so it seems to me, is there any reason why a term imposing an obligation on the promisee cannot be implied if and when the contract becomes bilateral in the course of its performance. The Estate Agents Act 1979 Section 18(1) of the 1979 Act provides that before any person (the client) enters into a contract with another (the agent) under which the agent will engage in estate agency work on behalf of the client, the agent must give the client certain information. That information is of two kinds. First, by section 18(2), the agent is required to give, among other things, particulars of the circumstances in which the client will become liable to pay remuneration to the agent for carrying out estate agency work. Secondly, by section 18(1)(b), the agent is required to give such additional information as the Secretary of State may prescribe by regulations made under section 18(4), and to do so in the time and manner those regulations require. The Estate Agents (Provision of Information) Regulations 1991 (SI 1991/859) were made pursuant to this provision. Regulation 3(1) provides, so far as relevant: The time when an estate agent shall give the information specified in section 18(2) of the Act is the time when communication commences between the estate agent and the client or as soon as is reasonably practicable thereafter provided it is a time before the client is committed to any liability towards the estate agent. Regulation 4 says that the information must be provided in writing. Section 18 continues: (5) If any person (a) fails to comply with the obligation under subsection (1) above with respect to a contract, or with any provision of regulations under subsection (4) above relating to that obligation, or (b) , the contract shall not be enforceable by him except pursuant to an order of the court under subsection (6) below. (6) If, in a case where subsection (5) above applies in relation to a contract , the agent concerned makes an application to the court for the enforcement of the contract (a) the court shall dismiss the application if, but only if, it considers it just to do so having regard to prejudice caused to the client by the agents failure to comply with his obligation and the degree of culpability for the failure; and (b) where the court does not dismiss the application, it may nevertheless order that any sum payable by the client under the contract shall be reduced or discharged so as to compensate the client for prejudice suffered as a result of the agents failure to comply with his obligation. In this case, Mr Devani failed to comply with his section 18 obligation because he did not provide to Mr Wells all of the information required by subsection 2 at the time and in the manner required by regulations 3 and 4. In particular, Mr Devani did not at the outset or as soon as reasonably practicable thereafter expressly inform Mr Wells of the event which would trigger his entitlement to commission; nor did he provide any of that information in writing. The judge was therefore required to apply section 18(6). Under paragraph (a), the default position in such a case is that the contract is unenforceable. As Lewison LJ explained, the contract will only become enforceable if the court makes an order to that effect, and an agent in the position of Mr Devani, who has failed to comply with his obligations, must make an application to the court for that purpose if he wishes to recover any commission. Further, the court must dismiss the application if, but only if, it considers it just to do so having regard to the prejudice caused to the client by the agents failure to comply with his obligation and the degree of culpability for that failure. Lewison LJ held that, for the purposes of paragraph (a), prejudice and culpability have to be considered together and in the round, and the ultimate question is whether it is just to dismiss the estate agents claim to enforce the contract having regard to the prejudice to the client as a result of the failure to comply and the degree of the agents culpability. In my judgment, this is plainly the right approach. If the court does not dismiss the application then, under paragraph (b), it has a discretion whether to reduce or discharge the sum payable by the client under the contract, to compensate the client for the prejudice he has suffered. It is to be noted that, at this stage, culpability forms no part of the assessment; nor does any wider consideration of justice. The judge therefore proceeded to assess the degree of Mr Devanis culpability and the prejudice that Mr Wells had suffered. In relation to the former, he thought that Mr Devani was culpable and the fact that the matter had proceeded very rapidly was only partial mitigation. As for prejudice, the judge thought that the failure to define the event triggering the entitlement to commission was not prejudicial to Mr Wells because the court had implied the term most favourable to him. On the other hand, the failure to provide written terms was prejudicial because their provision would have led Mr Wells to consult his partner and his solicitor before agreeing to them, and, in turn, this would have led to a discussion of Shaws penalty clause. The judge was not much impressed by the possibility of a claim by Shaw, however. He thought it was a matter of speculation whether Mr Wells would be called upon to pay Shaws commission and that it was also a matter of speculation what the outcome of any claim by Shaw would be. He also thought it relevant that Mr Devani had done a good job and secured a sale of the properties, and that, so far, Mr Wells had evaded paying any commission at all. The judge expressed his final conclusion in these terms (at para 4.9): Doing the best I can, the just course balancing all the above factors is: a. enforce his contract; b. but to compensate [Mr Wells] for the prejudice he has sustained as a result of [Mr Devanis] breach of statutory requirements by making an appropriately substantial reduction to [Mr Devanis] fee. That reduction will be of one third of the fee, so that his claim is reduced to 32,900 inc VAT. to grant [Mr Devani] relief and permit him to On appeal, it was contended for Mr Wells that the judge had fallen into error in various respects and, in particular, that he ought to have dismissed Mr Devanis application and so also his claim for commission. In giving the leading judgment on this issue, Lewison LJ found no fault with the judges approach to the task he was required to carry out as a matter of principle but criticised aspects of his assessment. He found that the judge mischaracterised the effect of speed, for this was an aggravating and not a mitigating factor; that there was some force in Mr Wells argument that Mr Devanis success in finding a buyer was of little or no relevance; and that the judge did not take proper account of the uncertainty to which Mr Wells was subjected, and was wrong to brush off the possibility of a claim by Shaw and so his potential exposure to double liability. Despite these criticisms, Lewison LJ did not think it appropriate to interfere with the judges conclusion. His reasoning lies at the heart of this aspect of the appeal to this court and merits recitation: 74. In deciding whether it was just to dismiss Mr Devanis claim the judge was making a value judgment (an expression I prefer to exercising a discretion). It is, moreover, a value judgment based on a number of factors, measured against an imprecise standard. It is exactly the case in which an appeal court should be particularly wary of disturbing the conclusion of the trial judge. Although I have made some criticisms of the way in which the judge approached the question, and although I am far from sure that I would have reached the same conclusion as the judge, I cannot go so far as to say that his value judgment was wrong. Mr Butler QC, for Mr Wells, submits the Court of Appeal fell into error in two respects. He argues, first, that Mr Devanis culpability was so great as to justify dismissal of his application, irrespective of the issue of prejudice. I recognise that section 18 and the regulations are, as Lewison LJ rightly said, a form of consumer protection, and that their purpose is to ensure that a person instructing an estate agent knows what his liabilities to the agent are before he engages him. I also accept that there may be cases where the degree of culpability is so great that it justifies dismissal of the agents application even if the client has suffered no prejudice. But I am not persuaded that this is one of those cases. The judge assessed the extent of Mr Devanis culpability with care. He recognised that Mr Devani could and should have provided his terms of business to Mr Wells at the outset but also had regard to the fact that the job needed to be done urgently, that Mr Wells was abroad, that events moved very quickly and that the effective period of delay was less than one week. I would add that there was no finding that Mr Devani acted improperly in any other way. The judge assessed all of these matters and the issue of prejudice and decided to allow Mr Devani to pursue his claim but with a significant fee reduction. It is true that Lewison LJ thought the judge ought to have regarded the speed of events as an aggravating rather than a mitigating factor when considering culpability, but he was also of the view that this was not an error which justified any interference with the judges conclusion. I agree with him. In all these circumstances, I am satisfied that Mr Devanis culpability was not so great as to justify dismissal of his application, and the judge made no material error in so deciding. The second argument advanced on behalf of Mr Wells is that once the Court of Appeal had found that the judge had made errors in the course of his assessment under section 18(6), it ought to have carried out the evaluation required by that provision afresh, rather than declining to interfere. Had it done so, the argument continued, it is apparent from para 74 of Lewison LJs judgment that it is likely the court would have arrived at a different conclusion. Attractively though this second argument has been presented, I cannot accept it. It assumes, wrongly in my view, that if an appeal court finds that a trial judge has made any error, however insignificant, in the course of an evaluation of the kind required by section 18(6) then it must set that evaluation aside and carry it out again. In my judgment the law does not require such an inflexible approach. If, as here, it is found that the trial judge has made one or more errors of a minor kind which cannot have affected the decision to which he has come then in my view it is neither necessary nor appropriate for the appellate court to set that decision aside and embark on the evaluative exercise for itself. For all of these reasons, I would allow Mr Devanis appeal and dismiss Mr Wells cross appeal. I have also had an opportunity to read the judgment of Lord Briggs and I agree with the further observations he makes. LORD BRIGGS: I agree with the order proposed to be made by Lord Kitchin, and with his reasons for doing so. I add some observations of my own because we are departing from a judgment of Lewison LJ, who has a pre eminent standing in relation to the interpretation of contracts. Lawyers frequently speak of the interpretation of contracts (as a preliminary to the implication of terms) as if it is concerned exclusively with the words used expressly, either orally or in writing, by the parties. And so, very often, it is. But there are occasions, particularly in relation to contracts of a simple, frequently used type, such as contracts of sale, where the context in which the words are used, and the conduct of the parties at the time when the contract is made, tells you as much, or even more, about the essential terms of the bargain than do the words themselves. Take for example, the simple case of the door to door seller of (say) brooms. He rings the doorbell, proffers one of his brooms to the householder, and says one pound 50. The householder takes the broom, nods and reaches for his wallet. Plainly the parties have concluded a contract for the sale of the proffered broom, at a price of 1.50, immediately payable. But the subject matter of the sale, and the date of time at which payment is to be made, are not subject to terms expressed in words. All the essential terms other than price have been agreed by conduct, in the context of the encounter between the parties at the householders front door. So it is with the contract in issue in the present case. All that was proved was that there was a short telephone call initiated by Mr Devani, who introduced himself as an estate agent, and Mr Wells, who Mr Devani knew wanted to sell the outstanding flats. Mr Devani offered his services at an expressly stated commission of 2% plus VAT. It was known to both of them that Mr Wells was looking for a buyer or buyers so that he could sell the flats, and it was plain from the context, and from the conduct of the parties towards each other, that Mr Devani was offering to find one or more buyers for those flats. The express reference by Mr Devani to the 2% commission was, in the context, clearly referable to the price receivable by Mr Wells upon any sale or sales of those flats achieved to a person or persons introduced by Mr Devani. Furthermore it was evident from the fact that nothing further was said before the conversation ended that there was an agreement, intended to create legal relations between them, for which purpose nothing further needed to be negotiated. The judge decided the case by reference to implied terms. But it follows from what I have set out above that I would, like Lord Kitchin, have been prepared to find that a sufficiently certain and complete contract had been concluded between them, as a matter of construction of their words and conduct in their context rather than just by the implication of terms, such that, by introducing a purchaser who did in fact complete and pay the purchase price, Mr Devani had earned his agreed commission. Nor would I have been dissuaded by the analysis of the hypothetical question whether, if the purchase contract had been made but then repudiated by the purchaser, the commission would still have been payable. If a contract plainly creates a liability for payment in the events that have happened, a perception that a difficult issue or uncertainty as to liability might have arisen on other hypothetical facts should not stand in the way of recognising contractual rights as enforceable where, as here, no such issue arises. As Lewison LJ observed, estate agents may wish to bargain for a variety of different events as triggering a liability to pay commission. But it is difficult to imagine an estate agents contract which did not make the client liable to pay after receipt in full of the purchase price, as occurred here. I do not mean by these observations about the common law in any way to under rate the importance of the statutory duty in section 18 of the Estate Agents Act 1979 requiring estate agents to provide their clients with a written statement of the circumstances in which the client will become liable for their commission, or the judges assessment of the culpability of Mr Devani for failing to do so in good time. It is precisely because the common law will recognise an enforceable liability to pay as arising from the briefest and most informal exchange between the parties that statute protects consumers by imposing a more rigorous discipline upon their professional counterparties.

The appeal concerns an estate agent, Mr Devani, who claims that commission became payable to him by Mr Wells, the vendor of a number flats, on the completion of the sale of the flats to a purchaser Mr Devani had introduced to Mr Wells. In 2007 the vendor, Mr Wells, completed the development of a block of flats. By the beginning of 2008 seven of the flats were still on the market. On 29 January 2008 a neighbour of Mr Wells, Mr Nicholson, sent an email to Mr Devani, who was trading as an estate agent, informing him of the unsold flats. Later that day Mr Devani acknowledged receipt of Mr Nicholsons email and made a telephone call to Mr Wells. Both parties at trial gave different accounts of this telephone conversation. It was Mr Devanis evidence that he told Mr Wells that he was an estate agent and that his commission terms would be 2% plus VAT. Mr Wells maintained that Mr Devani made no mention of any commission. Mr Devani subsequently made contact with Newlon Housing Trust who agreed to purchase the remaining flats for 2.1m. The transaction proceeded to completion and Mr Devani claimed his commission. Mr Wells refused to pay, and so Mr Devani issued proceedings. In the County Court at Central London the judge, His Honour Judge Moloney QC, held that there was a binding contract between the parties. However, as Mr Devani had only submitted his written terms to Mr Wells after he had made the introduction to the Newlon Housing Trust, the final award was subject to a one third deduction to reflect Mr Devanis failure to comply with the requirements of the Estate Agents Act 1979 (the Act). On appeal, the Court of Appeal by a majority, allowed Mr Wells appeal on the issue of whether there was ever a binding contract and unanimously dismissed his appeal in respect of section 18 of the Act. There are two issues for the Supreme Court: (i) the first, raised on appeal by Mr Devani, is whether the agreement was complete and enforceable despite there being no express identification of the event which would trigger the obligation to pay the commission. (ii) The second issue, raised on a cross appeal by Mr Wells, is whether, by reason of Mr Devanis failure to comply with the requirements imposed by section 18 of the Act, the trial judge ought to have dismissed the claim or discharged Mr Wells liability to pay the commission. The Supreme Court unanimously allows Mr Devanis appeal and dismisses Mr Wells cross appeal. Lord Kitchin gives the lead judgment (with whom Lord Wilson, Lord Sumption and Lord Carnwath agree). Lord Briggs gives a concurring judgment. (i) Was there a binding contract? The question is whether, objectively assessed, the parties by their words and their conduct intended to create a legally binding relationship [17]. It may be the case that the words and conduct relied upon are so vague that the court is unable to identify the terms on which the parties have reached agreement. However, the courts are reluctant to find an agreement is too vague or uncertain to be enforced where it is found that the parties had the intention of being contractually bound and have acted on their agreement [18]. In this case it would naturally be understood that payment would become due on completion and made from the proceeds of sale [19]. In short, Mr Devani and Mr Wells agreed that if Mr Devani found a purchaser for the flats he would be paid his commission. Mr Wells found the Newlon Housing Trust and it became the purchaser on completion of the transaction. At that point, Mr Devani became entitled to his commission and it was payable from the proceeds of sale [19]. (ii) Implied term It was therefore unnecessary for the judge to imply a term into the agreement between Mr Devani and Mr Wells. However, had it been necessary, there would be no hesitation in holding that it was an implied term of the agreement that payment would fall due on completion of the purchase of the property by a person whom Mr Devani had introduced [27]. The obligation to make payment of the commission on completion was required to give the agreement business efficacy and would not go beyond what was necessary for that purpose [29]. There will be cases where an agreement is so vague and uncertain that it cannot be enforced [33]. However, each case must be considered in light of its own particular circumstances [35]. (iii) The Estate Agents Act 1979 Section 18(1) of the Act provides that before any person enters into a contract, the agent must give the client certain information [37 39]. In this case, Mr Devani failed to comply with his section 18 obligation because, in particular, Mr Devani did not at the outset, or as soon as reasonably practicable thereafter, expressly inform Mr Wells of the event which would trigger his entitlement to commission; nor did he provide any of that information in writing [43]. However, in the circumstances of this case, Mr Devanis culpability was not so great as to justify dismissal of his application, and the trial judge made no material error in so deciding [54]. As to whether once the Court of Appeal found that the judge had made errors in the course of his assessment under section 18(6), it ought to have carried out the evaluation required by that provision afresh, the law does not require such an inflexible approach where, as here, the errors were of a minor kind and cannot have affected the conclusion to which he came. In these circumstances it is neither necessary nor appropriate for the appellate court to set that decision aside and embark on the evaluative exercise for itself [55 56]. Lord Briggs agrees with Lord Kitchin and with his reasons [58]. Lord Briggs adds that there are occasions, where the context in which the words are used tells you as much, or even more, about the essential terms of the bargain than the words themselves [59]. So it is with the contract in the present case [60]. Lord Briggs agrees that, like Lord Kitchin, he would have been prepared to find that a sufficiently certain and complete contract had been concluded between them, rather than just by the implication of terms [61]. Finally, Lord Briggs adds that none of these observations about the common law in any way under rate the importance of the statutory duty in section 18 of the Act. On the contrary, it is precisely because the common law will recognise an enforceable liability to pay as arising from the briefest and most informal exchange between the parties that statute protects consumers by imposing a more rigorous discipline upon their professional counterparties [63].

When a court grants a decree of divorce, nullity of marriage or judicial separation it has the power to order ancillary relief. Ancillary relief governs the financial arrangements between the husband and the wife on the breakdown of their marriage. Sometimes the husband and wife have already made an agreement governing these matters. The agreement may have been made before the marriage (an ante nuptial agreement) or after the marriage (a post nuptial agreement). Post nuptial agreements may be made when the husband and wife are still together and intend to remain together, or when they are on the point of separating or have already separated. The latter type of post nuptial agreement can be described as a separation agreement. We shall use the generic description nuptial agreements to embrace both ante nuptial and post nuptial agreements. A court when considering the grant of ancillary relief is not obliged to give effect to nuptial agreements whether they are ante nuptial or post nuptial. The parties cannot, by agreement, oust the jurisdiction of the court. The court must, however, give appropriate weight to such an agreement. This appeal raises the question of the principles to be applied by the court when considering the weight that should be attached to an ante nuptial agreement. The Privy Council recently considered this question in relation to a post nuptial agreement in MacLeod v MacLeod [2008] UKPC 64, [2010] 1 AC 298 and it will be necessary to consider the implications of that decision. The approach of English law to nuptial agreements differs significantly from the law of Scotland, and more significantly from the rest of Europe and most other jurisdictions. Most jurisdictions accord contractual status to such agreements and hold the parties to them, subject in some cases to specified safeguards or exceptions. Under English law it is the court that is the arbiter of the financial arrangements between the parties when it brings a marriage to an end. A prior agreement between husband and wife is only one of the matters to which the court will have regard. The uncertainty as to the weight that the court will attach to such agreements has led to calls for reform. The history of steps taken towards the reform of our law is set out in the judgment of Thorpe LJ at paras 16 to 23 of his judgment in this case in the Court of Appeal. For present purposes it suffices to note the following. Families, which included the following statement in para 4.21: In 1998 the Home Office published a consultation document, Supporting The Government is considering whether there would be advantage in allowing couples, either before or during their marriage, to make written agreements dealing with their financial affairs which would be legally binding on divorce. In para 4.23 the Government proposed that any such agreement should be subject to six safeguards. It would not be legally binding: where there is a child of the family, whether or not that child was alive or a child of the family at the time the agreement was made where under the general law of contract the agreement is unenforceable, including if the contract attempted to lay an obligation on a third party who had not agreed in advance where one or both of the couple did not receive independent legal advice before entering into the agreement where the court considers that the enforcement of the agreement would cause significant injustice (to one or both of the couple or a child of the marriage) where one or both of the couple have failed to give full disclosure of assets and property before the agreement was made where the agreement is made fewer than 21 days prior to the marriage (this would prevent a nuptial agreement being forced on people shortly before their wedding day, when they may not feel able to resist). There are many, including some members of the Family Bar and Bench, who would favour a reform along the lines proposed, but the Government has not taken its proposals further. The Law Commission is, however, currently considering this area of the law and is expected to report in 2012. There can be no question of this Court altering the principle that it is the Court, and not any prior agreement between the parties, that will determine the appropriate ancillary relief when a marriage comes to an end, for that principle is embodied in the legislation. What the Court can do is to attempt to give some assistance in relation to the approach that a court considering ancillary relief should adopt towards an ante nuptial agreement between the parties. Earlier this year Resolution, an organisation of over 5,700 family lawyers, published an updated paper on Family Agreements, which proposes legislative reform to the law of ante nuptial and post nuptial agreements. This quotes statistics that show that about 45% of marriages are likely to end in divorce. It comments on the strain and expense that are involved in disputes about ancillary relief, which are increased by the uncertainty of the outcome. In order to address the facts of this particular case it will be necessary, in due course, to set these out in a little detail. At this stage we propose to give a summary that will provide a context for the consideration of the relevant principles that will follow. The appellant (the husband) is a French national. The respondent (the wife) is a German national. They signed the ante nuptial agreement in Germany on 1 August 1998. The husband was then aged 27 and the wife 29. They were married in London on 28 November 1998. They had two children, Chiara, born on 4 September 1999 and Chloe, born on 25 May 2002. In October 2006, after 8 years of marriage, they separated. The wife petitioned for divorce in the Principal Registry of the Family Division that same month. The husband cross petitioned in November. They agreed to proceed undefended on cross decrees and were divorced in July 2007. Meanwhile, the wife had applied for permission to take the girls to live in Germany. In September 2007, His Honour Judge Collins granted that application but made a shared residence order providing that the children should divide their time between their parents. Under his order, they were to spend just under one third of the time with their father and two thirds with their mother. The husband made an unsuccessful application for permission to appeal that order to the Court of Appeal. The wife took the children to live in Germany in February 2008. However, in November 2008 (after the judgment of Baron J in the ancillary relief proceedings), she applied to the German court for permission to take them to live in Monaco. The husband resisted this, but permission was granted in May 2009 and that is where they now live. The ante nuptial agreement was drawn up in Germany by a notary. It contained a choice of law clause that provided that the effects of their marriage, including the laws of matrimonial property and succession, were to be subject to the law of the Federal Republic of Germany. The main part of the agreement provided first for separation of property. In clause 3 it was declared that the statutory matrimonial regime was to be excluded, and that each party was to manage his or her assets entirely independently. By clause 4 the parties excluded the equalisation of pension rights. By clause 5 they waived claims for maintenance after the marriage was terminated. Clause 6 contained a waiver of the statutory right to a portion of the estate of the first one of them to die. The effect of the agreement was that neither party was to derive any interest in or benefit from the property of the other during the marriage or on its termination. It made no provision for what was to happen in the event of their having children. The parties entered into this ante nuptial agreement at the instigation of the wife. She came from an extremely rich family. Some of the family wealth had already been transferred to her, so that she enjoyed substantial unearned income. She expected to receive a further portion of the family wealth if, but only if, she entered into the ante nuptial agreement to protect this. Her father insisted upon this. She herself was anxious that the husband should show, by entering into the agreement, that he was marrying her for love and not for her money. The husband was working for JP Morgan & Co and, at the time of the ante nuptial agreement, was earning about 120,000 a year and had excellent prospects. These were realised inasmuch as he earned about $475,000 dollars in 2001 and about $320,000 in 2002. He then became disenchanted with banking and embarked on research studies at Oxford with the object of obtaining a D Phil in biotechnology. Despite the terms of the ante nuptial agreement the husband brought a claim for ancillary relief, seeking an order against the wife both for periodical payments and for a lump sum. The hearing of his claim began before Baron J on 23 June 2008 and she handed down her judgment on 28 July 2008: [2008] EWHC 1532 (Fam) [2009] 1 FCR 35. The issue that lay at the heart of the proceedings was the weight that should be given to the ante nuptial agreement. Baron J held that the circumstances surrounding the conclusion of the agreement fell foul of a number of the safeguards set out in para 4.23 of the Home Office consultation document (see para 5 above), and for that reason, the weight to be attached to it fell to be reduced. None the less, she held that his award should be circumscribed to a degree to reflect the fact that he had signed the agreement. Her award also had to make provision for the two children, whose arrival had not been anticipated in the agreement. In the event she awarded the husband a total of 5,560,000, on the basis that this would provide him with an annual income of 100,000 for life and enable him to buy a home in London, where the two children could visit him. She awarded him periodical payments of 35,000 a year for each child until they ceased full time education. In addition she awarded a sum to enable him to buy a home in Germany (which would remain owned by the wife) where the two children could stay with him. The wife appealed successfully to the Court of Appeal against Baron Js order. The Court held that Baron J had been wrong to find that the circumstances in which the ante nuptial agreement had been reached reduced the weight to be attached to the agreement. It was not evident that the fact of the agreement had had any significant impact on her award. In the circumstances of the case she should have given the agreement decisive weight. The award should make provision for the husbands role as the father of the two children, but should not otherwise make provision for his own long term needs. The case was remitted to Baron J. Ancillary relief The power to grant a decree of divorce was conferred on a new Court for Divorce and Matrimonial Causes by the Matrimonial Causes Act 1857. Section 32 of that Act gave the court power to order the husband to secure maintenance for the wifes life. The Matrimonial Causes Act 1866 gave the court power to order the husband to pay unsecured maintenance to the wife. Having identified this starting point of the power to award ancillary relief we can jump to 1969. The Divorce Reform Act 1969 revolutionised the English law of divorce by replacing the old grounds of divorce which were based on fault with the single ground that the marriage had irretrievably broken down. This change was accompanied by a fresh approach to the financial consequences of divorce, which was supplied initially by the Matrimonial Proceedings and Property Act 1970, the provisions of which were largely re enacted as Part II of the Matrimonial Causes Act 1973 (the 1973 Act). Significant changes were made to these provisions by the Matrimonial and Family Proceedings Act 1984 and the Family Law Act 1996. The following provisions of the 1973 Act, as amended, are particularly material. Section 23 gives the court the power, on granting a decree of divorce, of nullity of marriage or of judicial separation to make a wide variety of orders. These include an order that either party pay to the other, or pay for the benefit of any child of the family, periodical payments, and that either party pay to the other, or for the benefit of any child of the marriage, a lump sum. Section 24 gives the court power to direct a party to transfer specified property to the other party or to or for the benefit of a child. No power is given to vary a property adjustment order. Section 24B gives the court power to make a pension sharing order. Section 31 gives the court power to vary a periodical payments order but not an order to pay a lump sum. Section 25 provides that it shall be the duty of the court when deciding whether, and in what manner to exercise powers including those referred to above to have regard to: all the circumstances of the case, first consideration being given to the welfare while a minor of any child of the family who has not attained the age of eighteen The section goes on to provide that as regards the exercise of its powers in relation to a party to the marriage the court shall in particular have regard to the following matters: the standard of living enjoyed by the family before the the income, earning capacity, property and other financial (a) resources which each of the parties to the marriage has or is likely to have in the foreseeable future, including in the case of earning capacity any increase in that capacity which it would in the opinion of the court be reasonable to expect a party to the marriage to take steps to acquire; the financial needs, obligations and responsibilities which (b) each of the parties to the marriage has or is likely to have in the foreseeable future; (c) breakdown of the marriage; (d) marriage; (e) marriage; the contributions which each of the parties has made or is (f) likely in the foreseeable future to make to the welfare of the family, including any contribution by looking after the home or caring for the family; the age of each party to the marriage and the duration of the any physical or mental disability of either of the parties to the (g) the conduct of each of the parties, if that conduct is such that it would in the opinion of the court be inequitable to disregard it; (h) in the case of proceedings for divorce or nullity of marriage, the value to each of the parties to the marriage of any benefit which, by reason of the dissolution or annulment of the marriage, that party will lose the chance of acquiring. The principles to be applied to the grant of ancillary relief have twice been considered by the House of Lords, in cases involving substantial assets. In White v White [2001] 1 AC 596 the parties had been married for 33 years, during which time they had together carried on the business of farming. Their net assets were some 4.6 million. The judge awarded the wife a lump sum of a little less than 1 million, on the basis that this would meet her reasonable needs. The Court of Appeal allowed her appeal and held that she was entitled to a lump sum of 1.5 million, reflecting her contribution both to the business and to the family. In the House of Lords, where the decision of the Court of Appeal was upheld, Lord Nicholls of Birkenhead gave the leading speech. He identified the following principles. Fairness, and indeed the 1973 Act itself, required the court to have regard to all the circumstances of the case, and there was one principle of universal application. No distinction should be drawn between the different ways in which husband and wife contributed to the welfare of the family. There should be no bias in favour of the money earner against the home maker and the child carer. As a general guide equality in the division of assets should only be departed from for good reason (p 605). Lord Nicholls went on to draw a distinction between property that one party brought to the marriage, or inherited during the marriage (inherited property) and property acquired by the labours of one or both parties during the marriage (matrimonial property). Lord Nicholls recognised that there was a case for saying that a party should be allowed to keep inherited property, but commented: Plainly, when present, this factor is one of the circumstances of the case. It represents a contribution made to the welfare of the family by one of the parties to the marriage. The judge should take it into account. He should decide how important it is in the particular case. The nature and value of the property, and the time when and circumstances in which the property was acquired, are among the relevant matters to be considered. However, in the ordinary course, this factor can be expected to carry little weight, if any, in a case where the claimants financial needs cannot be met without recourse to this property. (p 610) In Miller v Miller; McFarlane v McFarlane [2006] UKHL 24; [2006] 2 AC 618 two appeals were heard together, one in respect of a marriage that had lasted less than three years. Lord Nicholls started his judgment under the heading The requirements of fairness by observing that under the 1973 Act the first consideration had to be given to the welfare of the children of the marriage. After this a number of strands could be identified. The first was financial needs. He commented at para 11: The parties share the roles of money earner, home maker and child carer. Mutual dependence begets mutual obligations of support. When the marriage ends fairness requires that the assets of the parties should be divided primarily so as to make provision for the parties' housing and financial needs, taking into account a wide range of matters such as the parties' ages, their future earning capacity, the family's standard of living, and any disability of either party. Most of these needs will have been generated by the marriage, but not all of them. Needs arising from age or disability are instances of the latter. A second strand was compensation. This is aimed at redressing any significant prospective economic disparity between the parties arising from the way they conducted their marriage. For instance, the parties may have arranged their affairs in a way which has greatly advantaged the husband in terms of his earning capacity but left the wife severely handicapped so far as her own earning capacity is concerned. Then the wife suffers a double loss: a diminution in her earning capacity and the loss of a share in her husband's enhanced income. This is often the case. Although less marked than in the past, women may still suffer a disproportionate financial loss on the breakdown of a marriage because of their traditional role as home maker and child carer. (para 13) A third strand was sharing. Lord Nicholls postulated that marriage was a partnership. When a marriage ended each was entitled to an equal share of the assets of the partnership unless there was good reason to the contrary, albeit that the yardstick of equality was to be applied as an aid, not a rule. One good reason might be the difference between matrimonial property generated during the marriage and non matrimonial property property brought by one party to the marriage or inherited by or given to one party during the marriage. There was general agreement among the other members of the House with these propositions, although not all agreed on the precise definition of matrimonial property nor on the relevance of the length of the marriage to the principle of sharing. Lady Hale, with whom Lord Mance agreed, identified a sub category of matrimonial property, which the parties treated as separate property and which might not be subject to the sharing principle. The implications of these two decisions were considered by the Court of Appeal, Sir Mark Potter P, Thorpe and Wilson LJJ in Charman v Charman (No 4) [2007] EWCA Civ 503; [2007] 1 FLR 1246. The court observed that in Miller the House had unanimously identified three main principles which governed distribution of property in ancillary relief proceedings need (generously interpreted), compensation and sharing and that each of the matters set out in sub paragraphs (b) to (h) of section 25(2) of the 1973 Act could be assigned to one of the three (paras 68 69). As to the principle of sharing, the court said this, at para 66: To what property does the sharing principle apply? The answer might well have been that it applies only to matrimonial property, namely the property of the parties generated during the marriage otherwise than by external donation; and the consequence would have been that non matrimonial property would have fallen for redistribution by reference only to one of the two other principles of need and compensation to which we refer in para 68, below. Such an answer might better have reflected the origins of the principle in the parties' contributions to the welfare of the family; and it would have been more consonant with the references of Baroness Hale of Richmond in Miller at paras 141 and 143 to sharing the fruits of the matrimonial partnership and to the approach of roughly equal sharing of partnership assets. We consider, however, the answer to be that, subject to the exceptions identified in Miller to which we turn in paras 83 to 86, below, the principle applies to all the parties' property but, to the extent that their property is non matrimonial, there is likely to be better reason for departure from equality. It is clear that both in White at p 605 F G and p 989 respectively, and in Miller, at paras 24 and 26, Lord Nicholls of Birkenhead approached the matter in that way; and there was no express suggestion in Miller, even on the part of Baroness Hale of Richmond, that in White the House had set too widely the general application of what was then a yardstick. The exceptions identified in Miller referred to the possible exception in respect of assets that the parties had treated as separate property. As to these the court commented that the discussion about these perhaps foreshadowed future, albeit no doubt cautious, movement in the law towards a more frequent distribution of property upon divorce in accordance with what, by words or conduct, the parties appear previously to have agreed. Nuptial agreements, separation agreements and public policy It used to be contrary to public policy for a married couple who were living together, or a couple about to get married, to make an agreement that provided for the contingency that they might separate. Marriage involved a duty to live together and an agreement making provision for the possibility of separation might act as an encouragement to separate. Such agreements were void and the court would pay no regard to them: Cocksedge v Cocksedge (1844) 14 Sim 244; 13 LJ Ch 384; H v W (1857) 3 K & J 382. The same was not true of an agreement to separate or an agreement that governed a separation that had already taken place. Lord Atkin in Hyman v Hyman [1929] AC 601 at p 625 626 gave a short history of such contracts and commented on their effect: We have to deal with a separation deed, a class of document which has had a chequered career at law. Not recognized by the Ecclesiastical Courts, such contracts were enforced by the common law. Equity at first frowned. Lord Eldon doubted but enforced them: cf. St. John vs St. John (1803) Ves. 525, 529 and Bateman vs Countess of Ross (1813) 1 Dow 235; and see the arguments of Sir Fitzroy Kelly and Mr Turner and of Mr Bethell in Wilson vs Wilson (1848) 1 H. L. C. 538, 550 553, 564, 565. Finally they were fully recognized in equity by Lord Westburys leading judgment in Hunt vs Hunt (1861) 4 D. F. & J. 221, in which he followed Lord Cottenhams decision in Wilson vs Wilson 1 H. L. C. 538, 550 553, 564, 565, where his argument for the respondent had prevailed. Full effect has therefore to be given in all courts to these contracts as to all other contracts. It seems not out of place to make this obvious reflection, for a perusal of some of the cases in the matrimonial courts seems to suggest that at times they are still looked at askance and enforced grudgingly. But there is no caste in contracts. Agreements for separation are formed, construed and dissolved and to be enforced on precisely the same principles as any respectable commercial agreement, of whose nature indeed they sometimes partake. As in other contracts stipulations will not be enforced which are illegal either as being opposed to positive law or public policy. But this is a common attribute of all contracts, though we may recognize that the subject matter of separation agreements may bring them more than others into relation with questions of public policy. In Hyman v Hyman the husband had left the wife for another woman. Adultery by the husband was not at the time a ground for divorce unless there were aggravating circumstances, such as incest. The parties had entered into a deed of separation under which the husband had paid two lump sums and agreed to make weekly payments of 20 for the life of the wife. The deed included a covenant by the wife that she would not institute any proceedings to make him pay more than this. When the Matrimonial Causes Act 1923 gave the wife the right to petition for divorce on the grounds of her husbands adultery alone, the wife divorced her husband and applied to the court for maintenance pursuant to section 190(1) of the Supreme Court of Judicature (Consolidation) Act 1925. This gave the court the power, on any decree for divorce, to order the husband to pay maintenance. The husband argued that the wife was precluded by her covenant from bringing this claim. The House rejected this argument. Lord Hailsham LC held at p 614 that: the power of the court to make provision for a wife on the dissolution of her marriage is a necessary incident of the power to decree such a dissolution, conferred not merely in the interests of the wife, but of the public, and that the wife cannot by her own covenant preclude herself from invoking the jurisdiction of the court or preclude the court from the exercise of that jurisdiction. Lord Atkin made the same point at p 629. The subsequent history was set out by Lady Hale in MacLeod v MacLeod at paras 21 to 23. The same principle was applied to other statutory powers to award maintenance. In Bennett v Bennett [1952] 1 KB 249 the wife sought to enforce an agreement to pay maintenance given by her husband in consideration of her agreement not to seek a court order for maintenance. The Court of Appeal held that because that agreement was of no effect it did not constitute valid consideration for her husbands agreement and her claim failed. This unfortunate situation was remedied by the Maintenance Agreements Act 1957. The preamble to this Act stated: An Act to make provision with respect to the validity and alteration by the court of financial arrangements in connection with agreements between the parties to a marriage, whether made during the continuance or after the dissolution or annulment of the marriage, for the purposes of those parties living separately; and for purposes connected therewith. The Act provided: 1.(1) This section applies to any agreement in writing made, whether before or after the commencement of this Act, between the parties to a marriage for the purposes of their living separately, being (a) an agreement containing financial arrangements, whether made during the continuance or after the dissolution or annulment of the marriage; or (b) a separation agreement which contains no financial arrangements in a case where no other agreement in writing between the same parties contains such arrangements. (2) If an agreement to which this section applies includes a provision purporting to restrict any right to apply to a court for an order containing financial arrangements, that provision shall be void but any other financial arrangements contained in the agreement shall not thereby be rendered void or unenforceable but, unless void or unenforceable for any other reason, and subject to the next following subsection, shall be binding on the parties to the agreement: . (3) Where an agreement to which this section applies is for the time being subsisting and the parties thereto are for the time being either both domiciled or both resident in England, and on an application by either party the High Court or, subject to the next following subsection, a magistrates court is satisfied either (a) that by reason of a change in the circumstances in the light of which any financial arrangements contained in the agreement were made or, as the case may be, financial arrangements were omitted therefrom, the agreement should be altered so as to make different, or, as the case may be, so as to contain, financial arrangements; or (b) that the agreement does not contain proper financial arrangements with respect to any child of the marriage, the court may by order make such alterations in the agreement by varying or revoking any financial arrangements contained therein or by inserting therein financial arrangements for the benefit of one of the parties to the agreement or of a child of the marriage as may appear to the court to be just having regard to all the circumstances or, as the case may be, as may appear to the court to be just in all the circumstances in order to secure that the agreement contains proper financial arrangements with respect to any child of the marriage; and the agreement shall have effect thereafter as if any alteration made by the order had been made by agreement between the parties and for valuable consideration. These provisions are largely reproduced in sections 34 and 35 of the 1973 Act, albeit that the definition of a maintenance agreement does not state that it is an agreement made for the purposes of their living separately. Wilson LJ at para 134 of his judgment in this case remarks that sections 34 and 35 have been dead letters for more than 30 years. It seems likely that issues as to maintenance have, since the 1973 Act came into force, been pursued in ancillary relief proceedings. As to these section 35(6) provides For the avoidance of doubt it is hereby declared that nothing in this section or in section 34 above affects any power of a court before which any proceedings between the parties to a maintenance agreement are brought under any other enactment (including a provision of this Act) to make an order containing financial arrangements or any right of either party to apply for such an order in such proceedings. Although separation agreements do not override the powers of the Court to grant ancillary relief, they have been held to carry considerable weight in relation to the exercise of the courts discretion when granting such relief. In Edgar v Edgar [1980] 1 WLR 1410 the husband and wife had separated and in 1976, without any pressure from the husband but rather at the instigation of the wife, concluded a deed of separation which had been negotiated through solicitors. Under this the husband agreed to purchase a house for the wife, to confer on her capital benefits worth approximately 100,000, to pay her 16,000 a year and to make periodical payments for the children of the marriage. The wife agreed that if she obtained a divorce she would not seek a lump sum or property transfer orders. The husband complied with all his obligations under the separation deed but, in 1978, the wife petitioned for divorce and applied for ancillary relief, including a lump sum payment. Ormrod LJ said this about the weight to be given to the separation agreement at p 1417: To decide what weight should be given, in order to reach a just result, to a prior agreement not to claim a lump sum, regard must be had to the conduct of both parties, leading up to the prior agreement, and to their subsequent conduct, in consequence of it. It is not necessary in this connection to think in formal legal terms, such as misrepresentation or estoppel; all the circumstances as they affect each of two human beings must be considered in the complex relationship of marriage. So, the circumstances surrounding the making of the agreement are relevant. Undue pressure by one side, exploitation of a dominant position to secure an unreasonable advantage, inadequate knowledge, possibly bad legal advice, an important change of circumstances, unforeseen or overlooked at the time of making the agreement, are all relevant to the question of justice between the parties. Important too is the general proposition that formal agreements, properly and fairly arrived at with competent legal advice, should not be displaced unless there are good and substantial grounds for concluding that an injustice will be done by holding the parties to the terms of their agreement. There may well be other considerations which affect the justice of this case; the above list is not intended to be an exclusive catalogue. I agree with Sir Gordon Willmer in Wright v Wright [1970] 1WLR 1219, 1224, that the existence of an agreement, at least makes it necessary for the wife, if she is to justify an award of maintenance, to offer prima facie proof that there have been unforeseen circumstances, in the true sense, which make it impossible for her to work or otherwise maintain herself. Adapting that statement to the present case, it means that the wife here must offer prima facie evidence of material facts which show that justice requires that she should be relieved from the effects of her covenant in clause 8 of the deed of separation, and awarded further capital provision. Oliver LJ summarised his conclusions as follows at p 1424: in a consideration of what is just to be done in the exercise of the courts powers under the Act of 1973 in the light of the conduct of the parties, the court must, I think, start from the position that a solemn and freely negotiated bargain by which a party defines her own requirements ought to be adhered to unless some clear and compelling reason, such as, for instance, a drastic change of circumstances, is shown to the contrary. The court held that no good reason had been shown not to hold the wife to her agreement. Sitting in the Court of Appeal after his retirement, Sir Roger Ormrod in Camm v Camm (1982) 4 FLR 577 at p. 579, which was another case where ancillary relief was claimed in the face of the terms of a separation agreement, said: It has been stressed all through those same cases that the court must attach considerable importance, the amount of importance varying from case to case, to the fact that there was an agreement, because the court, naturally, will not lightly permit parties who have made a contractual agreement between themselves, even if it is not legally enforceable, to depart from that contractual agreement unless some good reason is shown. In that case the court did not hold the wife to her agreement, which she had entered into under great pressure and which failed to make adequate provision for her needs. In Smith v McInerney [1994] 2 FLR 1077 the husband, who had entered into a separation agreement with his wife, sought a lump sum and property adjustment order when his circumstances changed as a result of being made redundant. Thorpe J cited Edgar v Edgar and Camm v Camm and remarked at p 1081: As a matter of general policy I think it is very important that what the parties themselves agree at the time of separation should be upheld by the courts unless there are overwhelmingly strong considerations for interference. The approach of the courts to separation agreements, as evidenced by the cases cited above, differed markedly from the approach to nuptial agreements that merely anticipated the possibility of separation or divorce and which were consequently considered to be void as contrary to public policy. Contrast the statement of Thorpe J in Smith v McInerney quoted above with what he said at about the same time in F v F (Ancillary Relief: Substantial Assets) [1995] 2 FLR 45. In the latter case a rich German husband relied on a marital property regime which confined the wife to the pension of a retired German judge in the event of their divorce (the wife was in the judicial civil service at the time of the marriage). Thorpe J accepted that such agreements were commonplace in the society from which the parties came, but he did not attach any significant weight to the ante nuptial agreement, and said (at p 66): The rights and responsibilities of those whose financial affairs are regulated by statute cannot be much influenced by contractual terms which were devised for the control and limitation of standards that are intended to be of universal application throughout our society. Judges sitting in the Family Division were prepared to give some weight to ante nuptial agreements, but certainly not to the extent of holding that they should govern the terms of ancillary relief unless there were strong reasons for departing from them. In S v S (Matrimonial Proceedings: Appropriate Forum) [1997] 1 WLR 1200, Wilson J suggested at pp 1203 1204 that there might come a case where the circumstances surrounding the prenuptial agreement and the provision therein contained might, when viewed in the context of the other circumstances of the case, prove influential or even crucial. Where other jurisdictions, both in the United States and in the European Community, have been persuaded that there are cases where justice can only be served by confining parties to their rights under prenuptial agreements, we should be cautious about too categorically asserting the contrary. I can find nothing in section 25 to compel a conclusion, so much at odds with personal freedoms to make arrangements for ourselves, that escape from solemn bargains, carefully struck by informed adults, is readily available here. In N v N (Jurisdiction: Pre nuptial agreement) [1999] 2 FLR 745, 752, Wall J recognised that although they were unenforceable, ante nuptial agreements might have evidential weight in subsequent proceedings for divorce. Some weight was given to an ante nuptial agreement in C v C (Divorce: Stay of English Proceedings) [2001] 1 FLR 624 (Johnson J) (where a French ante nuptial agreement was a significant factor in staying English proceedings); M v M (Prenuptial Agreement) [2002] 1 FLR 654, para 44 (tending to guide the court to a more modest award than might have been made without it, per Connell J); and G v G (Financial Provision: Separation Agreement) [2004] 1 FLR 1011 (CA) (where parties had been married before). But contrast Haneef v Haneef [1999] EWCA Civ 803 (a decision on leave to appeal); J v V (Disclosure: Offshore Corporations) [2003] EWHC 3110 (Fam), [2004] 1 FLR 1042 (Coleridge J) (agreement signed on the eve of marriage without advice or disclosure and without allowance for arrival of children). See also X v X (Y and Z Intervening) [2002] 1 FLR 508, paras 78 103 (Munby J), and K v K (Ancillary Relief: Prenuptial Agreement) [2003] 1 FLR 120, 131 132 (R Hayward Smith QC sitting as Deputy High Court Judge) for a review of the authorities. Some judges cited dicta in Edgar v Edgar in the context of ante nuptial agreements without observing that those dicta were made in the very different context of a separation agreement see N v N at p 753; M v M at para 21, K v K at p 131. A change of attitude on the part of Thorpe LJ was apparent from his decision in Crossley v Crossley [2007] EWCA Civ 1491, [2008] 1 FLR 1467, 1472, at para 15 Thorpe LJ described the ante nuptial agreement there as a factor of magnetic importance. The marriage was a short marriage between two wealthy individuals who entered into an ante nuptial agreement after having taken legal advice. Mrs Crossley asserted that her husbands disclosure had been inadequate and therefore the agreement should be avoided. The issue before the court concerned disclosure. Thorpe LJ drew attention to these facts: the marriage was a childless marriage of very short duration, for a substantial portion of which the parties were living apart; the marriage was between mature adults, both of whom had been previously married and divorced; both parties had very substantial independent wealth; the ante nuptial agreement provided for the retention by each of the parties of their separate properties and division of joint property (of which there was in fact none). He accepted that the combination of these factors gave rise to a very strong case that a possible result of the section 25 exercise would be that the wife receives no further financial award, and concluded (at para 15): All these cases are fact dependent and this is a quite exceptional case on its facts, but if ever there is to be a paradigm case in which the court will look to the prenuptial agreement as not simply one of the peripheral factors in the case but as a factor of magnetic importance, it seems to me that this is just such a case Cases of post nuptial settlements other than separation agreements are rare. One such was NA v MA [2006] EWHC 2900 (Fam); [2007] 1 FLR 1760. That case is of interest because, on one view, it anticipated the approach of the Privy Council in MacLeod. The very wealthy husband had discovered that his wife had committed adultery with one of his friends. He pressurised her into signing an agreement that provided that she would receive a specified lump sum and annual payments if their marriage ended in divorce. The wife signed it because the husband insisted that she should do so if the marriage was to continue. Despite this, Baron J held at para 67 that as the idea of an agreement evolved it hardened into a legal, post nuptial agreement. It was on this basis, as we understand it, that the husband sought to have the agreement converted into an order of the court. When dealing with the law the judge did not distinguish clearly between ante nuptial, post nuptial and separation agreements. She said at para 12: It is an accepted fact that an agreement entered into between husband and wife does not oust the jurisdiction of this court. For many years, agreements between spouses were considered void for public policy reasons but this is no longer the case. In fact, over the years, pre nuptial contracts have become increasingly common place and are, I accept, much more likely to be accepted by these courts as governing what should occur between the parties when the prospective marriage comes to an end. That is, of course, subject to the discretion of the court and the application of a test of fairness/manifest unfairness. It may well be that Parliament will provide legislation but, until that occurs, current authority makes it clear that the agreements are not enforceable per se, although they can be persuasive (or definitive) depending upon the precise circumstances that lead to their completion. The judge went on to apply the law of undue influence, holding at paras 20 and 21 I am clear that, to overturn the agreement, I have to be satisfied that this wifes will was overborne by her husband exercising undue pressure or influence over her. I am also clear that if I do not overturn the agreement per se, I still have to consider whether it is fair and should be approved so as to become a court order. She overturned the agreement on the ground of undue influence. MacLeod v MacLeod This was an appeal to the Privy Council from the High Court of Justice of the Isle of Man. It involved a claim for ancillary relief under the Manx Matrimonial Proceedings Act 2003, which contained provisions identical to sections 23 to 25 and 34 to 36 of the 1973 Act. The husband and wife had married in Florida in 1994, after signing an ante nuptial agreement. A year later they moved to the Isle of Man. Six years and five children later the marriage ran into difficulties and the parties executed a deed which made substantial variations to the ante nuptial agreement. By August 2003 the marriage had totally broken down and in October 2004 a provisional decree of divorce was made. The wife sought ancillary relief, arguing that the deed of variation should be disregarded. The husband contended that it should be upheld, subject to one variation in favour of the wife. The Board, in an advice delivered by Lady Hale, summarised the law in relation to nuptial agreements that we have set out above and pointed out the distinction between separation agreements and agreements providing for the consequences of a possible future separation. At para 31 the Board referred to the position of ante nuptial agreements: The Board takes the view that it is not open to them to reverse the long standing rule that ante nuptial agreements are contrary to public policy and thus not valid or binding in the contractual sense. The Board has been referred to the position in other parts of the common law world. It is clear that they all adopted the rule established in the 19th century cases. It is also clear that most of them have changed that rule, and provided for ante nuptial agreements to be valid in certain circumstances. But with the exception of certain of the United States of America, including Florida, this has been done by legislation rather than judicial decision. The Board went on to draw a distinction between ante nuptial and post nuptial agreements, holding that the latter did constitute contracts. We do not agree with this distinction and, in order to explain where we part company with the reasoning of the Board, we must set this out in detail. 35 In the Boards view the difficult issue of the validity and effect of ante nuptial agreements is more appropriate to legislative rather than judicial development. It is worth noting, for example, that in the Florida case of Posner v Posner (1970) 233 So 2d 381, where such agreements were recognised, attention was drawn to the statutory powers of the courts to vary such agreements. The Board is inclined to share the view expressed by Baron J in NG v KR (Pre nuptial Contract) [2009] 1 FCR 35, para 130, that the variation power in section 50 of the 2003 Act (section 35 of the 1973 Act) does not apply to agreements made between people who are not yet parties to a marriage. Yet it would clearly be unfair to render such agreements enforceable if, unlike post nuptial agreements, they could not be varied. 36 Post nuptial agreements, however, are very different from pre nuptial agreements. The couple are now married. They have undertaken towards one another the obligations and responsibilities of the married state. A pre nuptial agreement is no longer the price which one party may extract for his or her willingness to marry. There is nothing to stop a couple entering into contractual financial arrangements governing their life together, as this couple did as part of their 2002 agreement. There is a presumption that the parties do not intend to create legal relations: see Balfour v Balfour [1919] 2 KB 571. There may also be occasional problems in identifying consideration for the financial promises made (now is not the time to enter into debate about whether domestic services constitute good consideration for such promises). But both of these are readily soluble by executing a deed, as was done here. 37 There is also nothing to stop a married couple from entering into a separation agreement, which will then be governed by sections 49 to 51 of the 2003 Act (sections 34 to 36 of the 1973 Act). As already noted, section 49 applies to any agreement in writing made at any time between the parties to a marriage. There is nothing to limit this to people who are already separated or on the point of separating. It is limited to agreements containing financial arrangements or to separation agreements which contain no financial arrangements. And financial arrangements are limited to those governing their rights and liabilities towards one another when living separately. But section 49(1)(b) provides that such financial arrangements shall be binding unless they are void or unenforceable for any other reason. 38 Leaving aside the usual contractual reasons, such as misrepresentation or undue influence, the only other such reason might be the old rule that agreements providing for a future separation are contrary to public policy. But the reasons given for that rule were founded on the enforceable duty of husband and wife to live together. This meant that there should be no inducement to either of them to live apart: see, for example, H v W 3 K & J 382, 386. There is no longer an enforceable duty upon husband and wife to live together. The husbands right to use self help to keep his wife at home has gone. He can now be guilty of the offences of kidnapping and false imprisonment if he tries to do so: see R v Reid [1973] QB 299. The decree of restitution of conjugal rights, disobedience to which did for a while involve penal sanctions, has not since the abolition of those sanctions been used to force the couple to live together: see Nanda v Nanda [1968] P 351. It was abolished by the Matrimonial Proceedings and Property Act 1970, at the same time as the Law Reform (Miscellaneous Provisions) Act 1970 abolished all the common law actions against third parties who interfered between husband and wife. 39 Hence the reasoning which led to the rule has now disappeared. It is now time for the rule itself to disappear. It has long been of uncertain scope, as some provisions which contemplate future marital separation have been upheld: see, for example, Lily, Duchess of Marlborough v Duke of Marlborough [1901] 1 Ch 165. This means that sections 49 to 51 of the 2003 Act (sections 34 to 36 of the 1973 Act) can apply to such agreements in just the same way as they do to any other. In particular, they can be varied in either of the circumstances provided for in section 50(2). The first is that there has been a change in the circumstances in the light of which any financial arrangements were made or omitted; following the amendment proposed by the Law Commission in 1969, this now includes a change which the parties had actually foreseen when making the agreement. The second is that the agreement does not contain proper financial arrangements with respect to any child of the family. 40 In the Boards view, therefore, the 2002 agreement was a valid and enforceable agreement, not only with respect to the arrangements made for the time when the parties were together, but also with respect to the arrangements made for them to live separately. However, the latter arrangements were subject to the courts powers of variation and the provisions which purported to oust the jurisdiction of the court, whether on divorce or during the marriage, were void. The existence of such powers does not deprive such agreements of their utility. Countless wives and mothers benefited from such agreements at a time when it was difficult for them to take their husbands to court to ask for maintenance. Enforcing an existing agreement still has many attractions over going to court for discretionary relief. 41 The question remains of the weight to be given to such an agreement if an application is made to the court for ancillary relief. In Edgar v Edgar [1980] 1 WLR 1410, the solution might have been more obvious if mention had been made of the statutory provisions relating to the validity and variation of maintenance agreements. One would expect these to be the starting point. Parliament had laid down the circumstances in which a valid and binding agreement relating to arrangements for the couples property and finances, not only while the marriage still existed but also after it had been dissolved or annulled, could be varied by the court. At the same time, Parliament had preserved the parties rights to go to court for an order containing financial arrangements. It would be odd if Parliament had intended the approach to such agreements in an ancillary relief claim to be different from, and less generous than, the approach to a variation application. The same principles should be the starting point in both. In other words, the court is looking for a change in the circumstances in the light of which the financial arrangements were made, the sort of change which would make those arrangements manifestly unjust, or for a failure to make proper provision for any child of the family. On top of that, of course, even if there is no change in the circumstances, it is contrary to public policy to cast onto the public purse an obligation which ought properly to be shouldered within the family. 42 The Board would also agree that the circumstances in which the agreement was made may be relevant in an ancillary relief claim. They would, with respect, endorse the oft cited passage from the judgment of Ormrod LJ in Edgar v Edgar [1980] 1 WLR 1410, 1417, in preference to the passages from the judgment of Oliver LJ, both quoted above, at para 25. In particular the Board endorses the observation that It is not necessary in this connection to think in formal legal terms, such as mispresentation [sic] or estoppel. Family relationships are not like straightforward commercial relationships. They are often characterised by inequality of bargaining power, but the inequalities may be different in relation to different issues. The husband may be in the stronger position financially but the wife may be in the stronger position in relation to the children and to the home in which they live. One may care more about getting or preserving as much money as possible, while the other may care more about the living arrangements for the children. One may want to get out of the relationship as quickly as possible, while the other may be in no hurry to separate or divorce. All of these may shift over time. We must assume that each party to a properly negotiated agreement is a grown up and able to look after him or herself. At the same time we must be alive to the risk of unfair exploitation of superior strength. But the mere fact that the agreement is not what a court would have done cannot be enough to have it set aside. We wholeheartedly endorse the conclusion of the Board in paras 38 and 39 that the old rule that agreements providing for future separation are contrary to public policy is obsolete and should be swept away, for the reasons given by the Board. But for reasons that we shall explain, this should not be restricted to post nuptial agreements. If parties who have made such an agreement, whether ante nuptial or post nuptial, then decide to live apart, we can see no reason why they should not be entitled to enforce their agreement. This right will, however, prove nugatory if one or other objects to the terms of the agreement, for this is likely to result in the party who objects initiating proceedings for divorce or judicial separation and, arguing in ancillary relief proceedings that he or she should not be held to the terms of the agreement. We now turn to explain why we would not draw the distinction drawn by the Board between ante and post nuptial agreements. The Board advances two reasons for this, one specific the other general. The specific reason is that section 35 of the 1973 Act applies to post nuptial but not to ante nuptial settlements and it would be unfair to render the latter enforceable if they could not be varied (para 35). The general reason is that post nuptial agreements are very different from ante nuptial agreements. We shall deal with each in turn. The specific reason Our first reservation in relation to this reason is that we question whether the Board was right to hold that sections 34 and 35 apply to all post nuptial agreements rather than just to separation agreements. We consider that the original provisions in the Maintenance Agreements Act 1957 applied only to separation agreements. The preamble to the Act and the statement in section 1(1) that the section applies to any agreement between the parties to a marriage for the purpose of their living separately so indicate. Furthermore post nuptial agreements of couples living together that provided for the contingency of future separation were void, so Parliament cannot have intended the Act to apply to them. When the provisions of the 1957 Act were incorporated into the 1973 Act, they did not include the preamble or the words that we have emphasised above. But it remained the case that post nuptial agreements that made provision for the contingency of separation were considered to be contrary to public policy. For this reason we find it hard to accept that Parliament intended to extend the ambit of the relevant provisions. More fundamentally, we do not accept that the protection of section 35 must be a precondition to holding that a nuptial agreement takes effect as a contract. If Wilson LJ is right to say that section 35 is a dead letter, the theoretical scope of its protection cannot be critical to the question of whether nuptial agreements have contractual effect. The general reason Is there a material distinction between ante nuptial and post nuptial agreements? Wilson LJ was not persuaded that there is (paras 125 126) and nor are we. The question should be tested by comparing an agreement concluded the day before the wedding with one concluded the day after it. Nuptial agreements made just after the wedding are not unknown and likely to become more common if the law distinguishes them from ante nuptial agreements. between ante and post nuptial agreements: In MacLeod the Board made the following comments about the differences There is an enormous difference in principle and in practice between an agreement providing for a present state of affairs which has developed between a married couple and an agreement made before the parties have committed themselves to the rights and responsibilities of the married state purporting to govern what may happen in an uncertain and unhoped for future. (para 31) This is true, but does not apply fully to a post nuptial agreement entered into at the start of married life, for that also purports to govern what may happen in an uncertain and unhoped for future. Post nuptial agreements, however, are very different from pre nuptial agreements. The couple are now married. They have undertaken towards one another the obligations and responsibilities of the married state. A pre nuptial agreement is no longer the price which one party may extract for his or her willingness to marry. (para 36) As to the last sentence, this focuses on one possible type of duress. But duress can be applied both before and after the marriage. The same principle applies in either case. In either case the duress will lead to the agreement carrying no, or less, weight. As to the first two sentences, we do not see why different principles must apply to an agreement concluded in anticipation of the married state and one concluded after entry into the married state. This is not to say that there are no circumstances where it is right to distinguish between an ante nuptial and a post nuptial agreement. The circumstances surrounding the agreement may be very different dependent on the stage of the couples life together at which it is concluded, but it is not right to proceed on the premise that there will always be a significant difference between an ante and a post nuptial agreement. Some couples do not get married until they have lived together and had children. Does contractual status matter? Is it important whether or not post nuptial or ante nuptial agreements have contractual status? The value of a contract is that the court will enforce it. But in ancillary relief proceedings the court is not bound to give effect to nuptial agreements, and is bound to have regard to them, whether or not they are contracts. Should they be given greater weight because in some other context they would be enforceable? Or is the question of whether or not they are contracts an irrelevance? This can be tested in this way. Did the identification of the fact that there were no public policy reasons not to treat post nuptial agreements as contracts alter the weight that the Board attached to them in MacLeod? The Board did not say that they had to be given more weight as a result of sweeping away the public policy objections to them. Those objections had long ceased to be relevant and had not inhibited courts from giving some and, in some circumstances, decisive weight to ante nuptial agreements. The circumstances surrounding the conclusion of a contract will either result in the contract being of full effect, or of no effect at all. The courts have always adopted a more nuanced approach to ante and post nuptial agreements. We cannot see why it mattered whether or not the agreement in MacLeod was a contract. In summary, we consider that the Board in MacLeod was wrong to hold that post nuptial agreements were contracts but that ante nuptial agreements were not. That question did not arise for decision in that case any more than in this and does not matter anyway. It is a red herring. Regardless of whether one or both are contracts, the ancillary relief court should apply the same principles when considering ante nuptial agreements as it applies to post nuptial agreements. The Boards approach to post nuptial agreements What was the approach that the Board held in MacLeod should be applied to post nuptial agreements? The Board held that the court should adopt the same approach as that laid down by Parliament for varying maintenance agreements in section 35 of the 1973 Act, looking for a change in the circumstances in the light of which the financial arrangements were made, the sort of change which would make those arrangements manifestly unjust (para 41). The Board also endorsed the oft cited passage from the judgment of Ormrod LJ in Edgar, which we have cited at para 38 above. These tests are appropriate for a separation agreement. They are not necessarily appropriate for all post nuptial agreements. A separation agreement is designed to take effect immediately and to address the circumstances prevailing at the time that it is made, as well, of course, as those contemplated in the future. It will have regard to any children of the family, to the assets of husband and wife, to their incomes and to their pension rights. Thus it makes sense to look for a significant change of circumstances as the criterion justifying a departure from the agreement. The same will be true to a lesser extent where a post nuptial agreement is made well on in a marriage, as in NA v MA and MacLeod itself, or at the start of a marriage if one or both parties bring significant property to it. But where a young couple enter into an agreement just after embarking on married life, owning no property of value, there will be no relevant circumstances prevailing at the time of their agreement. In that event change of circumstances will not be such a useful test. The circumstances will almost inevitably have changed by the time the marriage founders and the effect to be given to the post nuptial agreement will depend on wider considerations. MacLeod has done a valuable service in sweeping away the archaic notions of public policy which have tended to obfuscate the approach to nuptial agreements. But for the reasons that we have given we have not found that it assists in approaching the problem at the heart of this appeal for we have been able to accept neither its thesis that ante nuptial agreements are fundamentally different from post nuptial agreements nor, without reservation, its approach to post nuptial settlements. The issues raised The issues raised on the facts of this case can be placed under three heads: a. Were there circumstances attending the making of the agreement that detract from the weight that should be accorded to it? b. Were there circumstances attending the making of the agreement that enhance the weight that should be accorded to it; the foreign element? c. Did the circumstances prevailing when the courts order was made make it fair or just to depart from the agreement? We shall have to consider these questions in the context of the facts of this case, but at this stage we propose to address the issues of principle that they raise. Factors detracting from the weight to be accorded to the agreement If an ante nuptial agreement, or indeed a post nuptial agreement, is to carry full weight, both the husband and wife must enter into it of their own free will, without undue influence or pressure, and informed of its implications. The third and fifth of the six safeguards proposed in the consultation document (see para 5 above) were designed to ensure this. Baron J applied these safeguards, found that they were not satisfied, and accorded the agreement reduced weight for this reason. The Court of Appeal did not consider that the circumstances in which the agreement was reached diminished the weight to be attached to it. In so far as the safeguards were not strictly satisfied, this was not material on the particular facts of this case. The safeguards in the consultation document are designed to apply regardless of the circumstances of the particular case, in order to ensure, inter alia, that in all cases ante nuptial contracts will not be binding unless they are freely concluded and properly informed. It is necessary to have black and white rules of this kind if agreements are otherwise to be binding. There is no need for them, however, in the current state of the law. The safeguards in the consultation document are likely to be highly relevant, but we consider that the Court of Appeal was correct in principle to ask whether there was any material lack of disclosure, information or advice. Sound legal advice is obviously desirable, for this will ensure that a party understands the implications of the agreement, and full disclosure of any assets owned by the other party may be necessary to ensure this. But if it is clear that a party is fully aware of the implications of an ante nuptial agreement and indifferent to detailed particulars of the other partys assets, there is no need to accord the agreement reduced weight because he or she is unaware of those particulars. What is important is that each party should have all the information that is material to his or her decision, and that each party should intend that the agreement should govern the financial consequences of the marriage coming to an end. It is, of course, important that each party should intend that the agreement should be effective. In the past it may not have been right to infer from the fact of the conclusion of the agreement that the parties intended it to take effect, for they may have been advised that such agreements were void under English law and likely to carry little or no weight. That will no longer be the case. As we have shown the courts have recently been according weight, sometimes even decisive weight, to ante nuptial agreements and this judgment will confirm that they are right to do so. Thus in future it will be natural to infer that parties who enter into an ante nuptial agreement to which English law is likely to be applied intend that effect should be given to it. In relation to the circumstances attending the making of the nuptial agreement, this comment of Ormrod LJ in Edgar v Edgar at p 1417, although made about a separation agreement, is pertinent: It is not necessary in this connection to think in formal legal terms, such as misrepresentation or estoppel; all the circumstances as they affect each of two human beings must be considered in the complex relationship of marriage. The first question will be whether any of the standard vitiating factors: duress, fraud or misrepresentation, is present. Even if the agreement does not have contractual force, those factors will negate any effect the agreement might otherwise have. But unconscionable conduct such as undue pressure (falling short of duress) will also be likely to eliminate the weight to be attached to the agreement, and other unworthy conduct, such as exploitation of a dominant position to secure an unfair advantage, would reduce or eliminate it. The court may take into account a partys emotional state, and what pressures he or she was under to agree. But that again cannot be considered in isolation from what would have happened had he or she not been under those pressures. The circumstances of the parties at the time of the agreement will be relevant. Those will include such matters as their age and maturity, whether either or both had been married or been in long term relationships before. For such couples their experience of previous relationships may explain the terms of the agreement, and may also show what they foresaw when they entered into the agreement. What may not be easily foreseeable for less mature couples may well be in contemplation of more mature couples. Another important factor may be whether the marriage would have gone ahead without an agreement, or without the terms which had been agreed. This may cut either way. If the terms of the agreement are unfair from the start, this will reduce its weight, although this question will be subsumed in practice in the question of whether the agreement operates unfairly having regard to the circumstances prevailing at the time of the breakdown of the marriage. Factors enhancing the weight to be accorded to the agreement; the foreign element The issue raised under this heading is whether the foreign elements of a case can enhance the weight to be given to an ante nuptial agreement. In this case the husband was French and the wife German and the agreement had a German law clause. We have already explained why we do not consider it material in English ancillary relief proceedings whether the nuptial agreement under consideration is or is not a contract. The court can overrule the agreement of the parties, whether contractual or not, and applies the same criteria when considering whether to do so. When dealing with agreements concluded in the past, and the agreement in this case was concluded in 1998, foreign elements such as those in this case may bear on the important question of whether or not the parties intended their agreement to be effective. In the case of agreements made in recent times and, a fortiori, any agreement made after this judgment, the question of whether the parties intended their agreement to take effect is unlikely to be in issue, so foreign law will not need to be considered in relation to that question. Fairness White v White and Miller v Miller establish that the overriding criterion to be applied in ancillary relief proceedings is that of fairness and identify the three strands of need, compensation and sharing that are relevant to the question of what is fair. If an ante nuptial agreement deals with those matters in a way that the court might adopt absent such an agreement, there is no problem about giving effect to the agreement. The problem arises where the agreement makes provisions that conflict with what the court would otherwise consider to be the requirements of fairness. The fact of the agreement is capable of altering what is fair. It is an important factor to be weighed in the balance. We would advance the following proposition, to be applied in the case of both ante and post nuptial agreements, in preference to that suggested by the Board in MacLeod: The court should give effect to a nuptial agreement that is freely entered into by each party with a full appreciation of its implications unless in the circumstances prevailing it would not be fair to hold the parties to their agreement. That leaves outstanding the difficult question of the circumstances in which it will not be fair to hold the parties to their agreement. This will necessarily depend upon the facts of the particular case, and it would not be desirable to lay down rules that would fetter the flexibility that the court requires to reach a fair result. There is, however, some guidance that we believe that it is safe to give directed to the situation where there are no tainting circumstances attending the conclusion of the agreement. Children of the family Section 25 of the 1973 Act provides that first consideration must be given to the welfare while a minor of any child of the family who is under 18. A nuptial agreement cannot be allowed to prejudice the reasonable requirements of any children of the family. Autonomy The reason why the court should give weight to a nuptial agreement is that there should be respect for individual autonomy. The court should accord respect to the decision of a married couple as to the manner in which their financial affairs should be regulated. It would be paternalistic and patronising to override their agreement simply on the basis that the court knows best. This is particularly true where the parties agreement addresses existing circumstances and not merely the contingencies of an uncertain future. Non matrimonial property Often parties to a marriage will be motivated in concluding a nuptial agreement by a wish to make provision for existing property owned by one or other, or property that one or other anticipates receiving from a third party. The House of Lords in White v White and Miller v Miller drew a distinction between such property and matrimonial property accumulated in the course of the marriage. That distinction is particularly significant where the parties make express agreement as to the disposal of such property in the event of the termination of the marriage. There is nothing inherently unfair in such an agreement and there may be good objective justification for it, such as obligations towards existing family members. As Rix LJ put it at para 73 if the parties to a prospective marriage have something important to agree with one another, then it is often much better, and more honest, for that agreement to be made at the outset, before the marriage, rather than left to become a source of disappointment or acrimony within marriage. Future circumstances Where the ante nuptial agreement attempts to address the contingencies, unknown and often unforeseen, of the couples future relationship there is more scope for what happens to them over the years to make it unfair to hold them to their agreement. The circumstances of the parties often change over time in ways or to an extent which either cannot be or simply was not envisaged. The longer the marriage has lasted, the more likely it is that this will be the case. Once again we quote from the judgment of Rix LJ at para 73. I have in mind (and in this respect there is no real difference between an agreement made just before or just after a marriage) that a pre nuptial agreement is intended to look forward over the whole period of a marriage to the possibility of its ultimate failure and divorce: and thus it is potentially a longer lasting agreement than almost any other (apart from a lease, and those are becoming shorter and subject to optional break clauses). Over the potential many decades of a marriage it is impossible to cater for the myriad different circumstances which may await its parties. Thorpe LJ has mentioned the very relevant case of a second marriage between mature adults perhaps each with children of their own by their first marriages. However, equally or more typical will be the marriage of young persons, perhaps not yet adults, for whom the future is an entirely open book. If in such a case a pre nuptial agreement should provide for no recovery by each spouse from the other in the event of divorce, and the marriage should see the formation of a fortune which each spouse had played an equal role in their different ways in creating, but the fortune was in the hands for the most part of one spouse rather than the other, would it be right to give the same weight to their early agreement as in another perhaps very different example? The answer to this question is, in the individual case, likely to be no. Of the three strands identified in White v White and Miller v Miller, it is the first two, needs and compensation, which can most readily render it unfair to hold the parties to an ante nuptial agreement. The parties are unlikely to have intended that their ante nuptial agreement should result, in the event of the marriage breaking up, in one partner being left in a predicament of real need, while the other enjoys a sufficiency or more, and such a result is likely to render it unfair to hold the parties to their agreement. Equally if the devotion of one partner to looking after the family and the home has left the other free to accumulate wealth, it is likely to be unfair to hold the parties to an agreement that entitles the latter to retain all that he or she has earned. Where, however, these considerations do not apply and each party is in a position to meet his or her needs, fairness may well not require a departure from their agreement as to the regulation of their financial affairs in the circumstances that have come to pass. Thus it is in relation to the third strand, sharing, that the court will be most likely to make an order in the terms of the nuptial agreement in place of the order that it would otherwise have made. So far as concerns the general approach of the court to ante nuptial agreements, Wilson LJ at para 130 endorsed the following comments of Baron J at first instance 111. I am certain that English courts are now much more ready to attribute the appropriate (and, in the right case, decisive) weight to an agreement as part of all the circumstances of case [within the meaning of section 25(1) of the Act of 1973] 119. Upon divorce, when a party is seeking quantification of a claim for financial relief, it is the court that determines the result after applying the Act. The court grants the award and formulates the order with the parties agreement being but one factor in the process and perhaps, in the right case, it being the most compelling factor We also would endorse these comments. We now turn to apply these principles to the facts of this case. The background to the signing of the agreement At the time the parties met in November 1997 they were both living in London. The wife comes from a very rich German family, whose wealth is derived primarily from two very successful businesses in chromatography, filtration and the processing/refinement of paper, and the manufacture of paper. The husband comes from a family which is well off, his father having been a senior executive with IBM, at one time in charge of its European operations. He now resides in London for tax reasons, but retains property in Antibes. When the couple met the husband had been working in London for about 2 years with JP Morgan & Co, and was earning about 50,000, which was a substantial sum at that date, particularly given his age, and which had increased to about 120,000 by the time the ante nuptial agreement was executed. They became engaged in June 1998 and were married in November 1998. They made London their home. It was the wife who suggested that the parties should enter into an ante nuptial agreement. Although the judge was sure that the wife wanted her husband to love her for herself, the wife emphasised her fathers insistence, because she felt it made her seem less insensitive to her future spouse, given that the terms excluded all his potential rights (even in times of crisis). The wife did not make it obvious that she personally demanded it as a precondition of marriage. The judge found that the husband was eager to comply because he did not want the wife to be disinherited, he wanted to marry her, and he could not perceive of circumstances where he would wish to make a claim. The wifes family decided that this agreement would be drawn up in Germany by a notary, Dr N Magis, who had undertaken other work for the family. The instructions to Dr Magis came originally from the wifes mother on 6 July, 1998, who told him that the marriage was to be in London in the autumn and that neither of the parties wished to make any claim on the other in the event of divorce. Dr Magis pointed out that such a deal might leave a young mother with children in difficulty but he was informed that the daughters income was some DM500,000 a year plus other monies managed by their father and so despite the future son in law's excellent income even in the worse case scenario there would be no risk to their daughter. On the same day, 6 July, 1998, Dr Magis spoke by telephone to the wife. She confirmed the facts given by her mother. It was agreed that the draft was to be prepared as quickly as possible in order to give the husband an opportunity to prepare for the conclusion of the contract which was to be signed on the first weekend of August. Dr Magis was insistent that the husband had sufficient time so that he could take advice if he wished and fully understand the implications of what he was signing. On 17 July, 1998 Dr Magis sent by fax to the wife a draft of the agreement, under cover of a letter in which he wrote: You wanted to discuss the content of the agreement with your future spouse and have it translated into a language convenient for him. In the draft, which was in German, there was a clause for the parties to insert the approximate value of their respective assets; but the wife telephoned Dr Magis that day and said that the clause should be deleted and that she and the husband would separately notify each other of the value of their assets. A second draft was produced by 20 July, 1998 and it was sent to the wife's father. On 23 July, 1998 the wife telephoned Dr Magis and told him that she had discussed the draft with her father and he wanted additions in relation to company shares specifically that the husband should not be able to inherit them directly or circuitously via their children. It was agreed that this would be dealt with by the wifes drawing up a will. A final draft version was made available to the wife in London at about this date. The judge found that it was highly unlikely that the wife showed the husband the first draft, or that she informed him about her mothers or fathers involvement in the drawing up the terms of the agreement. But the judge rejected the husbands evidence that he did not see the draft at all. The judge found that the wife showed him the final draft which was available on about 24 July, 1998, about one week before the signing ceremony. The basic terms were made clear to the husband, but the husband was not made aware that Dr Magis wanted him to have a translation to give him a proper opportunity to consider the precise terms and see a lawyer. On 1 August, 1998 the parties attended at the office of Dr Magis near Dsseldorf. Their meeting with him lasted for between two and three hours. The husband told Dr Magis that he had seen the draft agreement but that he did not have a translation of it. Dr Magis was angry when he learned of the absence of a translation, which he considered to be important for the purpose of ensuring that the husband had had a proper opportunity to consider its terms. Dr Magis indicated that he was minded to postpone its execution but, when told that the parties were unlikely again to be in Germany prior to the marriage, he was persuaded to continue. Dr Magis, speaking English, then took the parties through the terms of the agreement in detail and explained them clearly; but he did not offer a verbatim translation of every line. The parties executed the agreement (which bears the date of 4 August, 1998) in his presence. Not only did the husband not take advantage of Dr Magis wish to postpone execution so that he could take independent legal advice, but in the 4 months or so following the execution of the agreement at the beginning of August 1998 until the marriage in London on 28 November, 1998, the husband did not take the opportunity to seek independent advice. Events leading up to the breakdown of the marriage The parties lived together in London for more than a year after the marriage. In April 2000 the husband was posted to New York by his employers, J P Morgan. The family moved there, but the wife did not find life in America congenial. So she returned to London in May 2001. The husband was transferred back to London in October of that year. Their older daughter (now 11) was born here in September 1999 before they left and their younger daughter (now 8) in May 2002 after their return. In July 2003 he left his employers and embarked on his research studies at Oxford. Both parties accepted that [he] was miserable and discontented [and] a change of tack was inevitable. He embarked upon research for a doctorate in biotechnology at Oxford University, thinking that a combination of scientific knowledge and his banking experience would put him in a good position to capitalise upon and exploit his financial expertise in future years (Baron J, paras 50 and 51). During the first five years of the marriage, while he was working for J P Morgan, the husband generated a very substantial amount of income. He had amassed about $500,000 of capital out of his earnings, but during the next two years he expended it for the benefit of the family. Meantime the wifes father had transferred to her a substantial amount of capital, which raised her shareholding in the two groups of companies to their present level. He also paid her a substantial sum in return for her surrender of any entitlement under German law to a portion of his estate on her death. The husbands work at Oxford led him to spend many nights away from home. By this time the marriage was already in difficulties. By August 2006 separation had become inevitable and the wife moved with the children from the matrimonial home, a rented flat in Knightsbridge where the husband still lives into another rented flat in Knightsbridge. From then on there was no way back, and proceedings for divorce followed soon afterwards. Wilson LJs assessment was that throughout the marriage the familys standard of living had been extremely comfortable, albeit tempered by the wifes aversion to profligacy: para 117. It was originally the husbands intention to return to the financial sector once he had obtained his doctorate, but he no longer wishes to do so and Baron J held that this course would not be open to him in any event. The foreign element and the agreement The wife was German, and the husband was French. The agreement was drafted by a German lawyer under German law. They were then living in London and London was plainly intended to be their first matrimonial home. The agreement stated (in recital 2) that (a) the husband was a French citizen and, according to his own statement, did not have a good command of German, although he did, according to his own statement and in the opinion of the officiating notary (Dr Magis), have an adequate command of English; (b) the document was therefore read out by the notary in German and then translated by him into English; (c) the parties to the agreement declared that they wished to waive the use of an interpreter or a second notary as well as a written translation; and (d) a draft of the text of the agreement had been submitted to the parties two weeks before the execution of the document. Clause 1 stated the intention of the parties to get married in London and to establish their first matrimonial residence there. By clause 2 the parties agreed that the effects of their marriage in general, as well as in terms of matrimonial property and the law of succession, would be governed by German law. Clause 3 provided for separation of property, and the parties stated: Despite advice from the notary, we waive the possibility of having a schedule of our respective current assets appended to this deed. Clause 5 provided for the mutual waiver of claims for maintenance of any kind whatsoever following divorce: The waiver shall apply to the fullest extent permitted by law even should one of us whether or not for reasons attributable to fault on that person's part be in serious difficulties. The notary has given us detailed advice about the right to maintenance between divorced spouses and the consequences of the reciprocal waiver agreed above. Each of us is aware that there may be significant adverse consequences as a result of the above waiver. Despite reference by the notary to the existing case law in respect of the total or partial invalidity of broadly worded maintenance waivers in certain cases, particularly insofar as such waivers have detrimental effects for the raising of children and/or the public treasury, we ask that the waiver be recorded in the above form Each of us declares that he or she is able, based on his or her current standpoint, to provide for his or her own maintenance on a permanent basis, but is however aware that changes may occur. Clause 7(2) recorded that Dr Magis had pointed out to the parties that, despite the choice of German law, foreign law might, from the standpoint of foreign legal systems, apply to the legal relationships between the parties, in particular in accordance with the local law of the matrimonial residence, the law of the place and/or nationality of the husband, with nationality and the place where assets were located being especially relevant to inheritance. The agreement said: The notary has pointed out that he has not provided any binding information about the content of foreign law, but has recommended that we obtain advice from a lawyer or notary practising in the respective legal system. By letter to the parties dated 3 August, 1998 Dr Magis again stressed that, before taking up permanent residence abroad, they should take the advice of a local lawyer in relation to the effect of the agreement there. The unchallenged evidence before the judge was that: (a) the agreement was valid under German law; (b) the choice of German law was valid; (c) there was no duty of disclosure under German law; (d) the agreement would be recognised as valid under French conflict of laws rules. The terms of the agreement recite that the parties intend to establish their first matrimonial residence in London and it confirms by clause 7(2) that the law of their matrimonial residence may come to apply to their legal relationship as spouses. It was therefore inherent in the agreement that another system of law might apply its terms and so it could never be regarded as foolproof. Applicable law In England, when the court exercises its jurisdiction to make an order for financial relief under the Matrimonial Causes Act 1973, it will normally apply English law, irrespective of the domicile of the parties, or any foreign connection: Dicey, Morris and Collins, Conflict of Laws, vol 2, 14th ed 2006, Rule 91(7), and e.g. C v C (Ancillary Relief: Nuptial Settlement) [2004] EWCA Civ 1030, [2005] Fam 250, at para 31. The United Kingdom has made a policy decision not to participate in the results of the work done by the European Community and the Hague Conference on Private International Law to apply uniform rules of private international law in relation to maintenance obligations. Although the United Kingdom Government has opted in to Council Regulation (EC) No 4/2009 of 18 December, 2008 on jurisdiction, applicable law and enforcement of decisions and cooperation in matters relating to maintenance obligations, the rules relating to applicable law will not apply in the United Kingdom. That is because the effect of Article 15 of the Council Regulation is that the law applicable to maintenance obligations is to be determined in accordance with the 2007 Hague Protocol on the law applicable to maintenance obligations, but only in the Member States bound by the Hague Protocol. The United Kingdom will not be bound by the Hague Protocol, because it agreed to participate in the Council Regulation only on the basis that it would not be obliged to join in accession to the Hague Protocol by the EU. The United Kingdom Governments position was that there was very little application of foreign law in family matters within the United Kingdom, and in maintenance cases in particular the expense of proving the content of that law would be disproportionate to the low value of the vast majority of maintenance claims. For the purposes of the present appeal it is worth noting that the Hague Protocol allows the parties to designate the law applicable to a maintenance obligation, but also provides that, unless at the time of the designation the parties were fully informed and aware of the consequences of their designation, the law designated by the parties shall not apply where the application of that law would lead to manifestly unfair or unreasonable consequences for any of the parties (Article 8(1), (5)). The ante nuptial agreement had provision for separation of property and exclusion of community of property of accrued gains (clause 3), in relation to which the chosen law would have governed: Dicey, Morris and Collins, vol 2, para 28 020. But although the economic effect of Miller/Macfarlane may have much in common with community of property, it is clear that the exercise under the 1973 Act does not relate to a matrimonial property regime: cf Case C 220/95 Van den Boogaard v Laumen (Case C 220/95) [1997] ECR I 1147, [1997] QB 759; Agbaje v Agbaje [2010] UKSC 13, [2010] 2 WLR 709, para 57. In summary, the issues in this case are governed exclusively by English law. The relevance of German law and the German choice of law clause is that they clearly demonstrate the intention of the parties that the ante nuptial agreement should, if possible, be binding on them (see para 74 above). The decision of the trial judge Baron J held that the ante nuptial agreement was not a valid contract under English law: paras 129, 132. Nevertheless she said that in assessing the husbands needs she would take account of all the circumstances of the case and that his award should be circumscribed to a degree to reflect the fact that at the outset he agreed to sign the agreement. As she explained in para 139: he understood the underlying premise that he was not entitled to anything if the parties divorced. In essence, he accepted that he was expected to be self sufficient. As a man of the world that was abundantly clear. His decision to enter into the agreement must therefore affect the award. Baron J found that the ante nuptial agreement fell foul of a number of the safeguards set out in para 4.23 of the Home Office consultation document and was, prima facie, unfair: para 38. She said that its preparation was very one sided and therefore was demonstrably not neutral: para 76(d). She held that it was defective under English law because the husband received no independent advice; that it deprived him of all claims to the furthest permissible legal extent even in a situation of want, which was manifestly unfair; that there was no disclosure by the wife; that there were no negotiations; and that two children had been born of the marriage: para 137. It was with these factors in mind that she conducted her assessment. In the result the judge awarded the husband 700,000 to put towards his then debts of 800,000 and 25,000 to buy a car; 2.5m to buy a home of his own in London; 630,000 to buy a home in Germany (to remain owned by the wife or an entity set up by her) for the purpose of caring for his children in accordance with a shared residence order during his periods of residence with them (for 15 years); and 2.335m as a capitalised revenue Duxbury fund to provide the husband with a total annual income for life of 100,000, taking into account an annual gross taxable earning capacity of 30,000 until retirement at age 65. Thus the husbands award amounted in total to 5.560m (excluding the award of 630,000 for housing in Germany). She also awarded him periodical payments of 35,000 for each child until they ceased full time education. No indication is given in the judgment of the extent of the discount, if any, that she made to take account of the terms of the ante nuptial agreement. The decision of the Court of Appeal The wife sought and was granted permission to appeal against this order to the Court of Appeal. On 2 July 2009 the Court of Appeal (Thorpe, Rix and Wilson LJJ) set aside the order of Baron J: [2009] EWCA Civ 649. Thorpe LJ said that, despite the appearance of the ante nuptial contract as a factor, the impression given by the judges award was of a negligible resulting discount: para 43. He held that, in order to give proper weight to the ante nuptial contract, the sum of 2.5m for housing should not be the husbands absolutely but should be held by him only for the years of parenting. The income fund should be capitalised at a rate to cover his needs only until the younger childs 22nd birthday. Thus, while he would not interfere with the awards for the car, for the payment of the husbands debts, for housing in Germany and the periodical payments for the children, the major funds should be provided for his role as a father rather than as a former husband: para 50. Wilson LJ, who delivered the leading judgment on the facts, said that the judges application of the law to the facts was plainly wrong. She erred in the exercise which she conducted under section 25 of the Matrimonial Causes Act 1973 in not giving decisive weight to the ante nuptial contract. The result was that relief should have been granted to the husband only indirectly, in his capacity as a home maker for the girls: paras 135, 149. Rix LJ, agreeing with both judgments, also said that the ante nuptial contract should be given decisive weight in the section 25 exercise: para 81. The husband cross appealed on the sum awarded for housing in Germany based on fresh evidence. His appeal on that matter was allowed and it was remitted to the judge to determine the appropriate figure in the fresh circumstances. Wilson LJ noted that the wife had conceded that, notwithstanding her success in the appeal and thus of her submission that the husbands claim should be limited to that of a home maker for the girls, it was appropriate for her to be ordered to meet the costs of the financial proceedings up to July 2008 when Baron J delivered her judgment and to clear the husbands other debts: para 152. Nevertheless the costs of the appeal were awarded to the wife. She was ordered to pay the costs of the cross appeal. Discussion The circumstances in which the ante nuptial agreement was made The Court of Appeal differed from the finding of the trial judge that the ante nuptial agreement was tainted by the circumstances in which it was made. Wilson LJ, with whom the other two members of the court agree, dealt with these matters in detail. The judge had found that the husband had lacked independent legal advice. Wilson LJ held that he had well understood the effect of the agreement, had had the opportunity to take independent advice, but had failed to do so. In these circumstances he could not pray in aid the fact that he had not taken independent legal advice. The judge held that the wife had failed to disclose the approximate value of her assets. Wilson LJ observed that the husband knew that the wife had substantial wealth and had shown no interest in ascertaining its approximate extent. More significantly, he had made no suggestion that this would have had any effect on his readiness to enter into the agreement. The judge held that the absence of negotiations was a third vitiating factor. Wilson LJ observed that the judge had given no explanation as to why this was a vitiating factor, and that the absence of negotiations merely reflected the fact that the background of the parties rendered the entry into such an agreement commonplace. We agree with the Court of Appeal that the judge was wrong to find that the ante nuptial agreement had been tainted in these ways. We also agree that it is not apparent that the judge made any significant reduction in her award to reflect the fact of the agreement. In these circumstances, the Court of Appeal was entitled to replace her award with its own assessment, and the issue for this court is whether the Court of Appeal erred in principle. Baron J had held that the ante nuptial agreement was manifestly unfair in that it made no provision for the possibility that the husband might be reduced to circumstances of real need. Wilson LJ at para 144 appears to have thought that there was nothing unfair about this and, inferentially, that had the husband been in a situation of real need the agreement would none the less have been good reason for the court to decline to alleviate this by an order of ancillary relief. We would not go so far as this. We stated at para 73 above that the question of the fairness of the agreement can often be subsumed in the question of whether it would operate unfairly in the circumstances prevailing at the breakdown of the marriage, and this is such a case. Had the husband been incapacitated in the course of the marriage, so that he was incapable of earning his living, this might well have justified, in the interests of fairness, not holding him to the full rigours of the ante nuptial agreement. But this was far from the case. On the evidence he is extremely able, and has added to his qualifications by pursuing a D Phil in biotechnology. Furthermore the generous relief given to cater for the needs of the two daughters will indirectly provide in large measure for the needs of the husband, until the younger daughter reaches the age of 22. Finally the Court of Appeal did not upset the judges order that the wife should fund the discharge of debts of 700,000 owed by the husband, only a small part of which she had challenged. In these circumstances we consider that the Court of Appeal was correct to conclude that the needs of the husband were not a factor that rendered it unfair to hold him to the terms of the ante nuptial agreement, subject to making provision for the needs of the children of the family. Compensation There is no compensation factor in this case. The husbands decision to abandon his lucrative career in the city for the fields of academia was not motivated by the demands of his family, but reflected his own preference. Sharing This dispute raises the question of whether, as a result of his marriage, the husband should be entitled to a portion of the wealth that his wife has received from her family, in part before the marriage and in part during, but quite independently of it. When he married her he agreed that he should have no such entitlement. Our conclusion is that in the circumstances of this case it is fair that he should be held to that agreement and that it would be unfair to depart from it. We detect no error of principle on the part of the Court of Appeal. For these reasons we would dismiss this appeal. LORD MANCE I concur with the conclusion reached by the majority and with most of the majoritys reasoning. I address only three specific areas: (i) whether ante and post nuptial agreements have contractual force; (ii) the starting point when considering the weight such agreements bear; and (iii) the Court of Appeals exercise of its discretion. (i) Do ante and post nuptial agreements have contractual force? In the old cases, the public policy objections, seen as existing to both ante and post nuptial agreements, were based on the policy of the law, founded upon the relation which exists between the husband and wife, and the importance to society of maintaining that relation between them: Cartwright v Cartwright (1853) de G, M & G 982 p.990; and see H v W (1857) 3 K & J 382, where a provision in an ante nuptial settlement, whereby income would be paid to the husband instead of the wife if the wife lived separately from him through any fault of her own was held void, because it might induce the husband to consent to her living apart and to refuse to take steps to enforce the restitution of conjugal rights: p.386. The reasoning in these cases is, as Lady Hale observed in MacLeod v MacLeod [2010] 1 AC 298, in legal terms obsolete. The objections thus swept away are not however the only objections which would exist to any regime which made ante or post nuptial agreements binding tout court. Parties who make such agreements are not necessarily on an equal standing, above all emotionally. They may not have a full appreciation of such an agreements significance and likely impact. Above all, they may well not foresee, or cater adequately for, the way in which not only their relationship but their whole lives and individual circumstances may change, especially over time and very often as a direct or indirect result of their marriage. In a context, like the present, where the English courts have jurisdiction and grant a decree of divorce or nullity, the further objections identified in the preceding paragraph are catered for by Part II of the Matrimonial Causes Act 1973. Hence, the majoritys description in para 63 of the legal effect of any ante or post nuptial agreement as a red herring in this case. The principle established in Hyman v Hyman [1929] AC 601, precluding the ousting of the courts statutory jurisdiction after such a decree, must in my view apply to any such agreement. Like Lady Hale, para 138 (1) and (2) and para 156, I go no further and express no view on the binding or other nature of an ante nuptial agreement. It is not difficult to envisage circumstances in which, if such an agreement were to be regarded as having contractual force, its enforcement could be sought before a court, particularly an overseas court, lacking the jurisdiction under Part II of the 1973 Act which applies only when the forum is an English divorce court. I also agree in this respect with what Lady Hale says in para 159. (ii) The starting point: The majority (para 75) and Lady Hale (para 169) both accept the overriding criterion or guiding principle for exercise of the statutory discretion as being one of fairness. But they suggest differently worded tests for approaching this exercise where there has been an ante nuptial agreement. I cannot think the difference in wording likely to be important in practice. It appears to relate primarily to the starting point or onus, when feeding into the discretionary exercise the circumstances as they currently appear compared with those that existed or were contemplated at the date of the ante nuptial agreement. The words intending it to have legal effect in Lady Hales first sentence must, in relation to any future ante nuptial agreement, be implicit in the majoritys formulation freely entered into by each party with a full appreciation of its implications. If Lady Hales second sentence had used the word unfair, rather than fair, its effect would, as I see it, match precisely that of the second part of the majoritys formulation (unless in the circumstances, etc .). My own inclination, in agreement with the majority, is that this is how the application of the overriding criterion should be approached. Given an ante nuptial agreement, made freely and with full appreciation of the circumstances, it is natural in the first instance to ask whether there is anything in the circumstances as they now appear to make it unfair to give effect to the agreement. But the ultimate question remains on any view what is fair, and the starting point or onus is, as I have said, unlikely to matter once all the facts are before the court. (iii) The Court of Appeals exercise of discretion: I agree with the majority that there is no reason to set aside the Court of Appeals re exercise of the statutory discretion, undertaken after concluding that Baron J had erred in principle. Baron J held the husband to be entitled to a house of his own (para 140(a)). The Court of Appeal limited this aspect of the award confining his entitlement to the period, generously assessed, during which he could be expected to provide a home for the children, and concluding that he had no further needs requiring him to retain such a house outright or for a longer period. Viewing the position overall, I do not see that we would be justified in concluding that the husband has or is likely after that period to have needs generated as a result of parenthood which will not be covered by the Court of Appeals order or his own resources. It follows that I agree with Rix LJs conclusion (para 81) that: The provision of a home for the husband and for his needs as a father, carer and home maker for the children will, in the circumstances, more than adequately provide him with the means to support his own needs. There is no case for making that home and financial support his to command for the whole of his life time. LADY HALE The issue in this case is simple: what weight should the court hearing a claim for ancillary relief under the Matrimonial Causes Act 1973 give to an agreement entered into between the parties before they got married which purported to determine the result? I propose to call these ante nuptial agreements because our legislation already uses the term ante nuptial to refer to things done before a marriage. I should also point out that, although our judgments talk only of marriage and married couples, our conclusions must also apply to couples who have entered into a civil partnership. The issue may be simple, but underlying it are some profound questions about the nature of marriage in the modern law and the role of the courts in determining it. Marriage is, of course, a contract, in the sense that each party must agree to enter into it and once entered both are bound by its legal consequences. But it is also a status. This means two things. First, the parties are not entirely free to determine all its legal consequences for themselves. They contract into the package which the law of the land lays down. Secondly, their marriage also has legal consequences for other people and for the state. Nowadays there is considerable freedom and flexibility within the marital package but there is an irreducible minimum. This includes a couples mutual duty to support one another and their children. We have now arrived at a position where the differing roles which either may adopt within the relationship are entitled to equal esteem. The question for us is how far individual couples should be free to re write that essential feature of the marital relationship as they choose. A further question is how far this question can and should be determined by this Court and how far it should be left to Parliament, preferably with the advice and assistance of the Law Commission. There is not much doubt that the law of marital agreements is in a mess. It is ripe for systematic review and reform. The Commission has a current project to examine the status and enforceability of agreements made between spouses and civil partners (or those contemplating marriage or civil partnership) concerning their property and finances and a consultation paper will be published shortly (see Law Commission, Annual Report 2009 10, 2010, Law Com No 323, paras 2.68 to 2.75). This is just the sort of task for which the Law Commission was established by the Law Commissions Act 1965 and in which it has had such success, particularly in the field of family law. The Commission can research and review the law over the whole area, not just the narrow section which is presented by the facts of an individual case. It can consider such research as there is into the use and abuse of marital agreements of all kinds. It can commission research into the experience and attitudes of practitioners and the public. It can identify and discuss the full range of policy arguments, including a detailed examination of the experience of legislative reform in other common law countries (see, for example, I M Ellman, Marital Agreements and Private Autonomy in the United States, where initial enthusiasm has been tempered by experience in practice). It can examine critically their economic impact, and in particular whether they can be expected to increase certainty and decrease cost, or whether in fact the reverse may happen, and in any event whether the suggested benefits will outweigh the suggested costs (see, for example, R H George, P G Harris and J Herring, Pre Nuptial Agreements: For Better or Worse? [2009] Fam Law 934). It can develop options for reform across the whole field, upon which it can consult widely. In the light of all this, it can make detailed proposals for legislative reform, which can be put before Parliament. In short, that is the democratic way of achieving comprehensive and principled reform. There is some enthusiasm for reform within the judiciary and the profession, and in the media, and one can well understand why. But that does not mean that it is right. This is a complicated subject upon which there is a large literature and knowledgeable and thoughtful people may legitimately hold differing views. Some may regard freedom of contract as the prevailing principle in all circumstances; others may regard that as a 19th century concept which has since been severely modified, particularly in the case of continuing relationships typically (though not invariably) characterised by imbalance of bargaining power (such as landlord and tenant, employer and employee). Some may regard people who are about to marry as in all respects fully autonomous beings; others may wonder whether people who are typically (although not invariably) in love can be expected to make rational choices in the same way that businessmen can. Some may regard the recognition of these factual differences as patronising or paternalistic; others may regard them as sensible and realistic. Some may think that to accord a greater legal status to these agreements will produce greater certainty and lesser costs should the couple divorce; others may question whether this will in fact be achieved, save at the price of inflexibility and injustice. Some may believe that giving greater force to marital agreements will encourage more people to marry; others may wonder whether they will encourage more people to divorce. Perhaps above all, some may think it permissible to contract out of the guiding principles of equality and non discrimination within marriage; others may think this a retrograde step likely only to benefit the strong at the expense of the weak. These difficult issues cannot be resolved in an individual case, in particular a case with such very unusual features as this one. Different people will naturally react to this particular human story in different ways, depending upon their values and experience of life. There may be some, for example, who are astonished that an intelligent young man, who was apparently happy to sign away all claims upon his bride to bes considerable fortune, should now be seeking to make any claims upon her at all. There may be others who are astonished that a fabulously wealthy young woman should begrudge what is a very small proportion of her estate to ensure that the father of her children can live in reasonable comfort for the rest of his days. Above all, perhaps, the court hearing a particular case can all too easily lose sight of the fact that, unlike a separation agreement, the object of an ante nuptial agreement is to deny the economically weaker spouse the provision to which she it is usually although by no means invariably she would otherwise be entitled (see, for example, G F Brod, Premarital Agreements and Gender Justice (1994) 6 Yale Journal of Law and Feminism 229). This is amply borne out by the precedents available in recent text books (see, for example, I Harris and R Spicer, Prenuptial Agreements: A Practical Guide (2008, Appendix D), or H Wood, D Lush, D Bishop, and A Murray, Cohabitation: Law, Practice and Precedents (2009, 4th ed, pp 583 592)). Would any self respecting young woman sign up to an agreement which assumed that she would be the only one who might otherwise have a claim, thus placing no limit on the claims that might be made against her, and then limited her claim to a pre determined sum for each year of marriage regardless of the circumstances, as if her wifely services were being bought by the year? Yet that is what these precedents do. In short, there is a gender dimension to the issue which some may think ill suited to decision by a court consisting of eight men and one woman. It is for that reason that I have chosen to write a separate judgment, for although there is much within the majority judgment with which I agree, there are some points upon which I disagree. Specifically: (1) I disagree with the view, mercifully obiter to the decision in this case, that ante nuptial agreements are legally enforceable contracts. (2) I disagree with the view, also mercifully obiter to the decision in this case, that it is open to this court to hold that they are. (3) I disagree with the view that, in policy terms, there are no relevant differences between agreements made before and agreements made after a marriage. (4) I disagree with the way in which the majority have formulated the test to be applied by a court hearing an application for financial relief, which I believe to be an impermissible gloss upon the courts statutory duties. However, I agree that the court must consider the agreement in the light of the circumstances as they now exist and that the way the matter was put by the Privy Council in MacLeod v MacLeod [2008] UKPC 64, [2010] 1 AC 298, was too rigid, and in some cases, too strong; and I broadly agree with the majority upon the relevant considerations which the court should take into account. (5) I disagree with the approach of the Court of Appeal to the actual outcome of this case, which the majority uphold. In my view it is inconsistent with the continued importance attached to the status of marriage in English law. This is independent of the weight to be attached to the agreement in this case. (6) I consider that the reform of the law on ante and post nuptial agreements should be considered comprehensively, not limited to agreements catering for future separation or divorce. I understand that Lord Mance shares my misgivings on points (1) and (2) above. He also takes the view that the difference between our formulations of the test, referred to in point (4) above, is unlikely to be important in practice. As the ultimate question is what is fair, the starting point is unlikely to matter once all the facts are before the court. I hope that he is right. The story so far: the different types of agreement between husband and wife It may be helpful to give a brief account of how the law has got into its current mess (for which I must take some of the blame). The common law regarded husband and wife as one person, and that person was the husband. He acquired ownership or control over all his wifes property and income, along with liability for her pre marriage debts. She had no contractual capacity of her own and so of course they could not make contracts with one another. If the wifes family had property, it became common to make a marriage settlement which would preserve property for the wifes separate use. This was for the purposes of avoiding the property getting into her husbands hands, providing some security for the wife, and preserving it for their children or to revert to the wifes family if the couple were childless. Legislation in the 19th century progressively extended the concept of the wifes separate property, so that after the Married Womens Property Act 1882 everything which a woman owned on marriage or acquired thereafter remained or became her separate property. The system of separate property thus established remains the only matrimonial property regime applicable in the law of England and Wales. It also meant that the wife eventually acquired full contractual capacity and so a husband and wife could now make contracts with one another as well as with third parties. Agreements between a husband and a wife fall into three broad categories: (a) those made during their cohabitation, (b) those made upon or during their separation, and (c) those made in connection with current matrimonial proceedings. Of these, separation (type (b)) agreements have the longest history. Unlike modern ante nuptial agreements, their original purpose was usually to make some sort of provision for the wife rather than to deprive her of it. At common law, the husband did have an obligation to support his wife, but until statute intervened she could only enforce this by pledging his credit for necessaries. There is no need here to trace the evolution of the statutory remedies but two points are worth noting: first, the obligation to maintain while living apart generally depended upon the husband either having committed a matrimonial offence or having agreed to maintain his wife in a separate household; and secondly, the obligations of husband and wife only became fully mutual with the major reforms which came into force in 1971 and are now largely contained in the Matrimonial Causes Act 1973. Moreover, until then there were many more people who lived apart for a long time without ever taking divorce or other matrimonial proceedings. An enforceable contractual obligation was therefore usually a great advantage for the wife. There is nothing to stop a husband and wife from making legally binding arrangements, whether by contract or settlement, to regulate their property and affairs while they are still together (type (a) agreements). These days, the commonest example of this is an agreement to share the ownership or tenancy of the matrimonial home, bank accounts, savings or other assets. Agreements for housekeeping or personal allowances, on the other hand, might run into difficulties. In Balfour v Balfour [1919] 2 KB 571, a husband agreed to pay his wife 30 per month when he returned to his work in Ceylon while she remained in England for medical reasons. Duke LJ doubted whether the wife had given consideration for the husbands promise. Atkin LJ would have had no difficulty in finding that her promise to spend the money for its intended purposes was consideration, but held that the couple had never intended that the arrangement should have contractual force: . the small courts of this country would have to be multiplied one hundredfold if these arrangements were held to result in legal obligations (p 579). But any problems posed by the doctrine of consideration or the need to express contractual intent could be solved by making the agreement by deed. However, agreements between husband and wife were also subject to two quite separate rules, each of which has a basis in public policy. The first rule (public policy rule 1) was that agreements between husband and wife (or indeed between third parties and husband and/or wife) which provided for what was to happen in the event of their future separation or divorce were contrary to public policy and therefore void. This rule was developed in the context of agreements or settlements which made some or better financial provision for the wife if she were to live separately from her husband (for a comparatively recent example, see Re Johnsons Will Trusts [1967] Ch 387). Such an agreement could be seen as encouraging them to live apart for example, by encouraging her to leave him, if it was sufficiently generous or more than she would get if she stayed with him, or encouraging him to leave her, or to agree to her going, if it were not so generous. Such encouragement was seen as inconsistent with the fundamental, life long and enforceable obligation of husband and wife to live with one another. The second rule (public policy rule 2) was developed in the context of separation agreements (type (b) agreements). Agreements for an immediate or existing separation between the spouses were not caught by public policy rule 1. Their purpose was usually two fold. They relieved the couple of the duty to live together: this meant that neither was guilty of the matrimonial offence of desertion and neither could petition for or enforce a decree of restitution of conjugal rights. They might also make provision for the wife and any children. In return she might agree not to go to court for a maintenance order. However, in the leading case of Hyman v Hyman [1929] AC 601 it was firmly established that such agreements could not oust the statutory powers of the courts to award financial provision should the couple divorce. As recounted in MacLeod v MacLeod [2008] UKPC 64, [2010] 1 AC 298, at paras 20 to 24, that rule was later held to apply to other statutory powers to award maintenance. But in Bennett v Bennett [1952] 1 KB 249, it was held that, at least if the wifes promise not to go to court was the main consideration for the husbands promise to pay and could not be severed, the whole agreement (although made by deed) was contrary to public policy and therefore the husbands promise to pay was unenforceable. Following consideration by the Royal Commission on Marriage and Divorce 1951 1955 (see Report, (1956) (Cmd) 9678, pp 192 195), that problem was resolved, and the rule in Hyman v Hyman confirmed, by the Maintenance Agreements Act 1957. The promise not to go to court was void but this did not render void or unenforceable the other financial arrangements in the agreement. Recognising that this might cause hardship to the payer as well as the payee, the quid pro quo was a power to vary or revoke those arrangements, if there was a change in the circumstances in the light of which they were made or the agreement did not contain proper financial arrangements for a child of the family. The provisions in the 1957 Act were later amended in two significant respects by the Matrimonial Proceedings and Property Act 1970 and are now consolidated in the Matrimonial Causes Act 1973, ss 34 to 36. First, while the 1957 Act applied only to agreements made between husband and wife for the purposes of their living separately, sections 34 to 36 of the 1973 Act apply to any agreement in writing made [at any time] between the parties to a marriage. Secondly, the agreement may be varied even if the change in circumstances is one which the parties had foreseen when making the agreement. Subject to this, agreements for a present or immediate separation were and remain valid and enforceable like any other contract. The Court of Appeal in this case suggested (at para 134) that the power to vary such agreements has become a dead letter. It is easy to see why this might be so. Matrimonial practice has changed out of all recognition since the days of the 1957 Act. In those days, many couples separated without ever obtaining a divorce. A divorce could only be obtained if one of the parties had been guilty of a matrimonial offence (or had been incurably of unsound mind for at least five years). The theory was that the innocent spouse was punishing the guilty one by divorcing him or her. There could be no question of divorce by consent. Until 1963, collusion was an absolute bar to obtaining the relief which, often enough, both parties desperately wanted. So the parties had to be very cautious about anything which made it look as if they had agreed terms for their divorce. And the powers of the divorce court to award financial provision were much more limited than they are now. The parties might well agree terms in a separation agreement which were quite different from, and perhaps more generous than, anything which the court might order. All of that has now changed. One of the first priorities of the Law Commission was the reform of family law, and their efforts led to the radical changes brought about by the Divorce Reform Act 1969, the Matrimonial Proceedings and Property Act 1970, and the Law Reform (Miscellaneous Provisions) Act 1970. All of these came into force on 1 January 1971. The first two were consolidated in the Matrimonial Causes Act 1973. The sole ground for divorce is now that the marriage has irretrievably broken down; separation and consent to a divorce is one of the ways of proving this. The theory of the innocent party punishing the guilty has gone. Divorce has become a great deal simpler and easier to obtain. It is fair to assume that there are now far fewer married couples living apart for long periods without divorcing than there were in the 1950s. The court also has comprehensive powers to award financial provision, to transfer and settle property, and to share out pension rights. So the court can now do most things that the couple might want to agree. Divorcing spouses are actively encouraged to agree between themselves what the consequences of their divorce should be. Indeed, despite the impression given in the high profile cases which reach the press, that is what the great majority of people do (see, for example, J Eekelaar, M Maclean and S Beinart, Family Lawyers: The Divorce Work of Solicitors (2000); M Maclean and J Eekelaar, Family Law Advocacy (2009)). If they do reach agreement, it is standard practice to embody its terms in a consent order. This is, on the one hand, because public policy rule 2 means that they cannot oust the jurisdiction of the court in any event and, on the other hand, because a properly drafted court order can finally dispose of the parties claims against one another (see, for example, Dinch v Dinch [1987] 1 WLR 252). So another type of marital agreement (a type (c) agreement) has come on the scene, an agreement to compromise the parties mutual financial and property claims on divorce. Unlike orders made by consent in ordinary civil proceedings, however, the matrimonial order derives its authority from the court and not from the parties agreement, even if embodied in a deed (see, for example, de Lasala v de Lasala [1980] AC 546). The court has an independent duty to check the agreed arrangements and to approve them (see Xydhias v Xydhias [1999] 2 All ER 386, at p 394). As Butler Sloss LJ put it in Kelley v Corston [1998] QB 686, at p 714, The court has the power to refuse to make the order although the parties have agreed to it. The fact of the agreement will, of course, be likely to be an important consideration but would not necessarily be determinative. The court is not a rubber stamp. In fact, as Xydhias itself showed, this too can cut both ways. The fact that the order derives its authority from the court rather than the parties agreement also means that the court can treat them as having agreed upon the essentials of their arrangements, even if their agreement would not be contractually binding because they have not agreed upon all the details. The court may therefore decide to give effect to these, even though it is not a legally binding contract. Thus it is not surprising if practitioners have forgotten about the power to vary marital agreements. Most couples can be persuaded to get a divorce instead. The focus has therefore changed, away from the technical question of whether or not the agreement between the spouses is enforceable as an ordinary contract, in favour of the broader question which is before us now: what is the weight to be given to an agreement between a husband and a wife as to the financial consequences of their separation or divorce by a court which is invited to make orders about it? But before turning to that question, it is necessary to consider the fate of the public policy rule 1 (see para 143 above) and the decision of the Judicial Committee of the Privy Council in MacLeod v MacLeod [2008] UKPC 64, [2010] 1 AC 298. MacLeod was concerned with an agreement made by deed between a married couple while they were still living together. It provided partly for what was to happen while they were still together and partly for what was to happen in the (by then not unlikely) event of their divorcing in the future. Its terms were similar, but not identical, to the terms of an ante nuptial agreement entered into before the couple married in the State of Florida, where such agreements are legally binding. The Board held that the rationale for the first rule of public policy no longer held good. Since the abolition of the decree of restitution of conjugal rights by the Matrimonial Proceedings and Property Act 1970, s 20, the spouses no longer have a legally enforceable obligation to live together. Providing for what is to happen in the event of a future separation or divorce no longer conflicts with the legally enforceable obligations of marriage. Hence the Board held that a post nuptial agreement providing for future separation was valid and enforceable in the same way as any other contract between spouses. The Board would not, however, have felt able to take that step had there not been a power to vary such a contract in the light of changes in the circumstances since it was made or for the sake of the children for whom they were responsible. The injustice of enforcing maintenance agreements without any power of variation had been recognised by Parliament when it enacted the 1957 Act and confirmed in what is now section 35 of the 1973 Act. Secondly, the Board held that these powers of alteration applied, not only to agreements for a current or immediate separation, but also to agreements for a future separation. Although the financial arrangements contained in the agreement must relate to a period when the couple are living separately, section 34(2) defines a maintenance agreement as any agreement in writing made . between the parties to a marriage. It was no longer limited to agreements made for the purpose of their living separately. The Board did express the view, obiter, that sections 34 to 36 did not apply to agreements made between people who were not yet husband and wife and offered some observations, again obiter, about why the matter should be left to Parliament. To sum up the position relating to agreements between husband and wife: (1) There is nothing to stop husbands and wives from making legally enforceable agreements about their property and finances which are to operate while they are living together, subject to the normal contractual requirements. (2) There is nothing to stop husbands and wives who are on the point of separating, or who are already separated, from making legally enforceable agreements about their financial rights and obligations while they are living apart. (3) Following MacLeod v MacLeod, there is also nothing to stop husbands and wives who are not yet separated from making legally enforceable agreements about their financial rights and obligations while they are living apart. (4) However, the court has power to vary the financial arrangements for their separation, made in agreements between husbands and wives, under sections 35 and 36 of the 1973 Act. (5) None of these agreements can oust the jurisdiction of the court to make financial orders should the parties separate or divorce. (6) Even if the parties have agreed what the courts order should be, the order derives its authority from the court and not from the parties agreement. (7) The court therefore has its own independent duty to check the arrangements agreed between the parties and to evaluate them in the light of its statutory duties under section 25 of the 1973 Act. Ante nuptial agreements So where does this leave ante nuptial agreements, made, not between husband and wife, but in contemplation of the couples impending marriage, and providing, perhaps among other things, for the possibility of their eventual separation or divorce? If the rationale for public policy rule 1 no longer applies to post nuptial agreements, following MacLeod, it is hard to see how it can still apply to ante nuptial agreements. So why should these not also be regarded as valid and enforceable in the same way as separation agreements and, if MacLeod is right, other post nuptial agreements? It was not necessary for the Board to decide that question in MacLeod and it is not necessary for this Court to decide it now. The Court of Appeal in this case accepted that the law could only be changed by legislation and neither party has suggested otherwise to this Court. Without legislation, it is not self evident what the right answer should be. There are many different permutations. (i) It could be that MacLeod was right to hold that sections 34 to 36 of the 1973 Act apply to post nuptial agreements providing for a future separation and also right to express the view, obiter, that they do not apply to such agreements made before marriage. (ii) It could be that MacLeod was wrong to hold that sections 34 to 36 apply to any post nuptial agreement, other than an agreement for a present or immediate separation. (iii) It could be that the Board was wrong to consider that the words made between the parties to a marriage in section 34(2) apply only to agreements made while the parties are in fact married. (iv) It could be that the existence of a power of variation is not as important as the Board thought that it was, in assessing whether there are still public policy objections to holding such agreements contractually binding. It will come as little surprise that I adhere to the views expressed by the Board in MacLeod. They accord with the wording of the Act. This was not a particularly adventurous piece of statutory construction, once it is realised that the change in the definition of the agreements covered by sections 34 to 36 was made in the same Act of Parliament, the Matrimonial Proceedings and Property Act 1970, which also swept away the basis of public policy rule 1, the enforceability of the duty to live together. Indeed, that change of wording may be said to strengthen the Boards construction. Making such agreements enforceable, subject to a power of variation, would be entirely logical and consistent. It would, however, have been considerably more adventurous to interpret the words made between the parties to a marriage, in section 34(2) of the 1973 Act, to include a couple who were not yet husband and wife when the agreement was made. After all, another feature of the reforms which came into force on 1 January 1971 was the abolition of the action for breach of promise of marriage. Furthermore, without a power of variation, there remain serious policy objections, albeit different from the original ones, to recognising ante nuptial agreements as valid and enforceable in the contractual sense. Is it to be assumed that, although section 34(1) does not apply, public policy rule 2 (the rule in Hyman v Hyman) does? If it does, what is the answer to the Bennett v Bennett problem if the beneficiary spouse wishes to sue upon the agreement? If it does not, can it be right that the intending spouses can oust the jurisdiction of the courts before their marriage but are unable to do so afterwards? If, on the other hand, either of the spouses wishes to enforce the agreement without going to the family court, can it be right that they should be able to do so without any power of variation no matter what the circumstances? It is no answer to these questions, it seems to me, that these days most people do go to the divorce courts. They should not be obliged to do so. The existence of a power of variation means that they are likely to agree a variation for themselves without going to court. There are still people with conscientious objections to divorce. There are still people who are reluctant to accept that their marriage is over even though there may be temporary difficulties. There are other people who will not be able to go to the divorce courts here because they have been pipped to the post by the first to file jurisdictional rules in the Brussels II Revised Regulation (Council Regulation (EC) No 2201/2003). But in any event, this Court should not be developing the common law in such a way as to produce an injustice and thus to encourage people to seek a divorce when they would not otherwise wish to do so. Even if the old rationale for public policy rule 1 has gone, I still believe that it is the public policy of this country to support marriage and to encourage married people to stay married rather than to encourage them to get divorced. A better answer, it may be, is that MacLeod did not need to decide whether post nuptial contracts providing for a future separation were legally binding either. It too was a case about the weight to be given to such an agreement when the couple came to divorce. Some may think that the question whether an agreement is contractually binding has little if any relevance to the weight which it should be given by the court. Others, however, may think differently, especially if the agreement contains provisions to be implemented during cohabitation which have in fact been honoured. At all events, as the author of (but not the only contributor to) the Boards unanimous advice in MacLeod, I must accept some of the blame for the mess in which we now find ourselves. All of this is to emphasise that this Court is not deciding whether ante nuptial agreements are contractually binding. Nor is it overruling MacLeod on the question of post nuptial agreements. The matter is obviously one for the Law Commission to sort out. My only plea is for a comprehensive and rational approach. Should public policy rule 2 (the rule in Hyman v Hyman) apply to all marital agreements, before or after marriage, before or after separation, and to all its terms, whether operating during cohabitation or after the couple have separated? Or if that rule is to be disapplied to any or all of them, to what extent and in what circumstances? Should there be a power to vary all marital agreements and all their terms, and if so in what circumstances and on what grounds? Should all, some or none of their terms be legally enforceable? By what rules of private international law should such agreements be governed? This last is a particularly complicated question, particularly in a case such as this, where the agreement included both a choice of matrimonial property regime and also a choice of applicable law. It would be a great help if we could clarify our choice of law rules relating to matrimonial property regimes. All of these questions require careful consideration. Once again, I adhere to the view expressed in MacLeod, that there may be important policy considerations justifying a different approach as between agreements made before and after a marriage. This is recognised in those jurisdictions which have legislated to make ante nuptial agreements enforceable. It is, for example, common for them to contain safeguards which do not apply to agreements made after the marriage. Most important is whether, and if so in what circumstances, couples should be allowed to contract out of the fundamental obligations of the married state which they are about to enter. Taking the agreement into account It follows from the well established principles outlined in paragraph 149 above that, as the court always has to exercise its own discretion, if there is to be a starting point for the exercise of that discretion it has to be the statutory duty under section 25 of the 1973 Act. This applies to all applications for orders for financial provision, property adjustment and pension provision ancillary to divorce, judicial separation and nullity decrees. It is in mandatory terms (see paras 20 and 21 above). Furthermore, the same rules and considerations apply to (now almost unheard of) applications to the divorce court under section 27 of the 1973 Act for financial provision in cases of neglect to maintain (see section 27(3)) and to applications for financial provision in magistrates courts under the Domestic Proceedings and Magistrates Courts Act 1978 (see section 3(1) and (2) of that Act, which mirror section 25(1) and (2)(a) to (g) of the 1973 Act). Corresponding provisions also apply between civil partners (see Civil Partnership Act 2004, s 72(1) and (2) and Scheds 5 and 6). Until 1984, as is well known, section 25 contained a tailpiece which directed the court as to the overall objective of its discretion. This was so to exercise its powers: . as to place the parties, so far as it is practicable . to do so, in the financial position in which they would have been if the marriage had not broken down and each had properly discharged his or her financial obligations and responsibilities towards the other. This was deleted from section 25 by the Matrimonial and Family Proceedings Act 1984. Implicitly, as Lord Nicholls of Birkenhead said in White v White [2001] 1 AC 596, at p 604, the objective must be to achieve a fair outcome. But in deciding what was fair, the courts had, perforce, to work out some principled reasons for making any order at all, in the context of a separate property regime. The House of Lords eventually did so in the trio of cases, White v White (above) and Miller v Miller, McFarlane v McFarlane [2006] UKHL 24, [2006] 2 AC 618. Put simply, the House discerned three possible rationales for making an order: the sharing of matrimonial assets, meeting needs arising from or during the marriage, and compensating for sacrifices made because of the marriage. I do not understand the majority judgment in this Court to be casting any doubt, either on the overall objective of a fair outcome, or upon the three possible reasons for the redistribution. White is important for another reason. The leading opinion, with which Lord Hoffmann, Lord Hope of Craighead and Lord Hutton agreed, was delivered by Lord Nicholls. He emphasised that there should be no discrimination between the different contributions of the spouses to the welfare of the family which should be seen as equally valuable. But he also emphasised at pp 605 606: This is not to introduce a presumption of equal division under another guise. a presumption of equal division would go beyond the permissible bounds of interpretation of section 25. In this regard section 25 differs from the applicable law in Scotland. A presumption of equal division would be an inpermissible judicial gloss on the statutory provision. That would be so even though the presumption would be rebuttable. It is largely for this reason that I do not accept [counsels] invitation to enunciate a principle that in every case the starting point in relation to a division of the assets of the husband and wife should be equality. He sought to draw a distinction between a presumption and a starting point. But a starting point principle of general application would carry a risk that in practice it would be treated as a legal presumption, with formal consequences regarding the burden of proof. [My emphasis] These observations are, in my opinion, equally applicable to the consideration of any nuptial or ante nuptial agreement in the mandatory exercise under section 25. It would be an inadmissible judicial gloss to introduce a presumption or a starting point or anything which suggested that there was a burden of proof upon either party. In any event, the concept of an onus or burden of proof is inapplicable in a discretionary exercise such as this. He or she who asserts a fact must, of course, prove it. But it is for the court to carry out the exercise of discretion in the way in which Parliament requires it to do. In my opinion, the test adopted by the majority (in para 75) comes close to introducing such a presumption. For this once again I must accept some responsibility. In MacLeod v MacLeod , at para 41, the Board said this: It would be odd if Parliament had intended the approach to such agreements in an ancillary relief claim to be different from, and less generous than, the approach to a variation application. The same principles should be the starting point in both. In other words, the court is looking for a change in the circumstances in the light of which the financial arrangements were made, the sort of change which would make those arrangements manifestly unjust, or for a failure to make proper provision for any child of the family. On top of that, of course, even if there is no change in the circumstances, it is contrary to public policy to cast onto the public purse an obligation which ought properly to be shouldered within the family. (emphasis supplied) This may have come as a surprise to those former practitioners, such as Wilson LJ, who (for the reasons explained earlier) had never had occasion to look at section 35. But it would of course have been odd for Parliament to adopt one test when looking at the variation of a legally enforceable contract and another test when looking at the weight which should be given to such a contract in proceedings for ancillary relief. With the benefit of hindsight, I would qualify that statement heavily in two ways. First, and most important, there seems no warrant for the inclusion of the word manifestly before unjust. That is nowhere to be found in the legislation. Secondly, in so far as it may be derived from cases on separation agreements, such as Edgar v Edgar [1980] 1 WLR 1410, it fails to acknowledge the manifold factual differences which there may be between the different types of marital agreement. It is, as the majority point out, one thing to look for a very significant change of circumstances in a case such as Edgar, which concerned a deed of separation made when the parties were already separated and quite shortly before the divorce proceedings were begun, or indeed in MacLeod, where the marriage was already in serious trouble and the parties had the possibility of early separation and divorce very much in mind. It is another to adopt the same approach when the agreement was made many years ago, before there was any question of the couple separating, and there are bound to have been many changes in the circumstances in which it was made. In this respect, therefore, I agree with the majority that the MacLeod test was too strict. It seems to me clear that the guiding principle in White, Miller and McFarlane is indeed fairness: but it is fairness in the light of the actual and foreseeable circumstances at the time when the court comes to make its order. Those circumstances include any marital agreement made between the parties, the circumstances in which that agreement was made, and the events which have happened since then. The test to be applied to such an agreement, it seems to me, should be this: Did each party freely enter into an agreement, intending it to have legal effect and with a full appreciation of its implications? If so, in the circumstances as they now are, would it be fair to hold them to their agreement? That is very similar to the test proposed by the majority, but it seeks to avoid the impermissible judicial gloss of a presumption or starting point, while mitigating the rigours of the MacLeod test in an appropriate case. It allows the court to give full weight to the agreement if it is fair to do so and I adhere to the view expressed in MacLeod that it can be entirely fair to hold the parties to their agreement even if the outcome is very different from what a court would order if they had not made it. It may well be that Lord Mance is correct in his view that the difference between my formulation and that of the majority is unlikely to be important in practice. I would prefer not to take that risk. As Lord Nicholls emphasised in Miller, at paras 26 to 29, there can be no inflexible rule about how a judge should approach the task. It may be that a judge, if called upon to decide matters, will find it convenient to conduct the usual section 25 exercise before deciding what weight to give to the agreement. He or she will then have a view of how the usual principles would apply to the particular facts of the case. It may be, on the other hand, that the case is so clear cut, as in Crossley v Crossley [2007] EWCA Civ 1491, [2008] 1 FLR 1467, that it is more convenient to begin with the agreement. If, for example, all the agreement seeks to do is to preserve property acquired before the marriage for the benefit of the spouse to whom it belongs, the court would be most unlikely to interfere unless the outcome would put a spouse or children in real need. It is not for this Court to be prescriptive about how a trial judge should conduct the statutory exercise. In principle, though, I agree that the test should be the same, whether the agreement is a compromise of the proceedings, a separation agreement, a post nuptial agreement made while the couple are together, or an ante nuptial agreement. But the way in which it works out may be very different, depending upon the facts of the case. I therefore also agree that it is difficult to be prescriptive about the factors to be taken into account, and the weight to be given to them, because this would be to fetter the flexibility that the court requires to reach a just result (para 76, above). It may be, however, that the court will generally attach more weight to a separation agreement, made to cater for the existing and future separation of the parties, than to a post nuptial agreement, made while the parties are still together but also to cater for the possibility of a future separation, and more weight to such an agreement than to an ante nuptial agreement, catering for a marriage which has not yet taken place and for a separation which the parties neither want nor expect to happen. The circumstances in which the agreement was made The court will be looking first for a clear indication that the parties intended a divorce court to give effect to their agreement. The textbook and other precedents which I have seen certainly do their best to make this clear. The court should also take into account the parties understanding as to the legal effect of their agreement. This is bound to change as a result of MacLeod and this case. People who entered into separation agreements should always have been advised that they were legally binding as contracts unless and until varied and although not binding upon the divorce court would often be respected on the Edgar principles. People who entered into post nuptial agreements in England and Wales will have been given rather different legal advice until MacLeod and people who enter into ante nuptial agreements will have been given rather different advice until this case. People who have entered into such agreements in other countries will also have been given different advice. The parties expectations and understandings as to the effect of their agreement should they later divorce will therefore be an important factor in deciding what is fair. If the parties did expect the court to give effect to their agreement, the court will then ask whether there were any vitiating factors, such as fraud, duress or misrepresentation, which would make a contract voidable in English law. If there were, the agreement should in principle be ignored. But that is not all. It would be wrong to take a more legalistic view of such factors in the case of ante and post nuptial agreements than has long been taken in the case of separation agreements. Hence the wise words of Ormrod LJ in Edgar v Edgar [1980] 1 WLR 1410, 1417 (quoted in para 38 above) that it is not necessary in this connection to think in formal legal terms, such as misrepresentation or estoppel. There may be something in the circumstances in which the agreement was made which, while falling short of a vitiating factor in the usual contractual sense, indicates that one party has taken an unfair advantage over the other. Relevant to whether one party has taken advantage of the other will be whether there were the safeguards which have generally been regarded as essential in those countries in the common law world which have legislated to give validity to such agreements. These normally include mutual disclosure of assets, independent legal advice, and a degree of distance in time between the agreement and the wedding. These were also included in the safeguards proposed in the Home Office Consultation Paper referred to in the majority judgment at para [5]. These factors should be taken into account in deciding how much weight should be given to the agreement whether or not they are sufficient to vitiate it in the Edgar sense. On the other hand, in the case of an ante nuptial agreement, the court cannot avoid also asking itself whether the marriage would have taken place at all without it, difficult though it may be to discern an accurate answer to that question in the light of later events. This too can cut both ways, because it may or may not indicate that one has taken an unfair advantage of the other. Later events The focus both of my test and that of the majority is upon whether it is now fair to give effect to the agreement. The longer it is since the agreement was made, the more likely it is that later events will have overtaken it. Marriage is not only different from a commercial relationship in law, it is also different in fact. It is capable of influencing and changing every aspect of a couples lives: where they live, how they live, who goes to work outside the home and what work they do, who works inside the home and how, their social lives and leisure pursuits, and how they manage their property and finances. A couple may think that their futures are all mapped out ahead of them when they get married but many things may happen to push them off course misfortunes such as redundancy, bankruptcy, illness, disability, obligations to other family members and especially to children, but also unexpected opportunities and unexplored avenues. The couple are bound together in more than a business relationship, so of course they modify their plans and often compromise their individual best interests to accommodate these new events. They may have no choice if their marriage is to survive. And these are events which take place while it is still hoped that the marriage will survive. There may be people who enter marriage in the belief that it will not endure, but for most people the hope and the belief is that it will. There is also a public interest in the stability of marriage. Marriage and relationship breakdown can have many damaging effects for the parties, their children and other members of their families, and also for society as a whole. So there is also a public interest in encouraging the parties to make adjustments to their roles and life styles for the sake of their relationship and the welfare of their families. All of this means that it is difficult, if not impossible, to predict at the outset what the circumstances will be when a marriage ends. It is even more difficult to predict what the fair outcome of the couples financial relationship will be. A couple who always thought that one would be the breadwinner and one would be the homemaker may be astonished to find that the homemaker has become a successful businesswoman who is supporting her homemaker husband rather than the other way about. A couple who assumed that each would run their own independent professional life and keep their finances entirely separate may find this quite impossible when they have children, especially if they have more than one or one of them has special needs. An older couple who marry a second time round may think it fair at the time to preserve their assets for the sake of the children of their first marriages, but may find that one has to become a carer for the other and will be left homeless and in reduced circumstances if the grown up children take priority even though they are now well established in life and have no pressing need of their inheritance. All of these are changes which would entitle the court to vary a separation (or post nuptial) agreement which turned out to be unfair, even if the parties had foreseen them, and should now be taken into account in deciding whether it is fair to uphold their agreement. On the other hand, if things have indeed turned out much as the parties expected and intended, it could well be fair to give effect to their agreement. Some of the precedents I have seen are of comparatively wealthy couples making a prediction of comparatively generous sums which ought to provide for the reasonable requirements of the recipient spouse in a way which might well have attracted the millionaires defence in the days before White v White. In effect, therefore, they are contracting out of sharing but not out of compensation and support. Provided that the provision made is adequate, why should they not be able to do so? On the one hand, the sharing principle reflects the egalitarian and non discriminatory view of marriage, expressly adopted in Scottish law (in section 9(1)(a) of the Family Law (Scotland) Act 1985 and adopted in English law at least since White v White. On the other hand, respecting their individual autonomy reflects a different kind of equality. In the present state of the law, there can be no hard and fast rules, save to say that it may be fairer to accept the modification of the sharing principle than of the needs and compensation principles. The relevance of conduct? It must also be borne in mind that these are often complicated agreements, providing not only for what is to happen on divorce or death, but also for what is to happen during the marriage. The parties subsequent conduct in relation to the agreement must be among the relevant circumstances when considering what weight should be given to it. Both parties may have conducted, and continued to conduct, their lives on the basis that their affairs are and will be governed by their agreement. In MacLeod, for example, the agreement made provision for the wife while they were still together and the husband had put this into effect. In this case, the wife acquired further assets from her father, which would not have happened had the agreement not been in place. Such factors obviously increase the weight which should be given to the agreement. Conduct in relation to the agreement itself is one thing. But what about conduct in the relationship generally? In the section 25 exercise, the courts do not take conduct into account unless there is a substantial imbalance between the parties, such that it would be inequitable to disregard it. Such cases are very rare. But what if the agreement were to provide for different outcomes, depending upon how the parties have behaved during the marriage? What, for example, if the precedent referred to earlier, providing for the wife to have a predetermined sum for each year of marriage, were also to provide that she should only have this if she has been a good housewife? These are deep waters indeed, but in my view the court would be just as reluctant to enter into such an inquiry in relation to a nuptial agreement as it is now in relation to the section 25 exercise and correspondingly reluctant to hold the couple to their agreement. All the examples that I have seen, both in textbooks and in real cases, are scrupulous in making no reference to marital conduct. The foreign element In strict legal terms the so called foreign element is irrelevant. If the proceedings take place in England and Wales, the applicable law is that of England and Wales, irrespective of where the parties come from, how long they have been here, or how close their connection is with this jurisdiction. The United Kingdom has made a deliberate choice not to adopt the Hague Protocol on the law applicable to maintenance obligations and has only agreed to participate in the Council Regulation (EC) No 4/2009 on the basis that it would not be required to do so. English family lawyers seem to have a horror of having to apply foreign law which must appear strange to European lawyers who are quite used to doing so. Anyone who chooses to divorce here must be advised that the court will apply English law and not the law of the country which the parties have chosen or with which the marriage has the closest connection. In another sense, however, the foreign element cannot be totally irrelevant. It may affect the relevant considerations in a number of ways. It may be a crystal clear indication that the parties intended their agreement to be legally binding, not only upon themselves, but also on the court. On the other hand, a foreign couple may have been warned, as this couple were warned, that their agreement might not have the same effect in other countries as it did in the country where it was made. But it means that their expectations may have been very different. The agreement may also have affected their later behaviour to a greater extent than it would have done had they not regarded it as legally binding. None of this is to suggest that evidence of foreign law will be necessary in a foreign case. The relevance is not as to the effect of a foreign agreement in English law because, by the time the case gets to the divorce court, it has none. The relevance is as to the parties intentions and expectations at the time when they entered into it. This case The agreement with which we are concerned was ante nuptial, in the sense that it was made before the marriage. However, it did more than provide for what was to happen should the couple separate or divorce. It purported to choose German law as the law applicable to all aspects of the marriage; it determined the matrimonial property regime which would govern the marriage, in this case separation of property rather than the deferred community of property which is the default position in German law; it excluded the statutory equalisation of their German pension rights; each party waived the right to a compulsory portion of the estate of the first to die which they would otherwise have under German law; and each party waived any claim to maintenance of any kind whatsoever in the event of their divorce. Most of this is already English law. The matrimonial property regime of England and Wales has to all intents and purposes been a separate property regime since 1882. English law does not provide for the compulsory equalisation of pension rights or for the survivor automatically to inherit a compulsory portion of the estate of a deceased spouse. The difficulty lies with the exclusion of all claims to maintenance on divorce, because in English law this cannot be done (nor, it appears, is it entirely effective in German law). No one has argued that this agreement should be ignored. That might have been a tenable view while public policy rule 1 survived (and even while it was still thought to have survived, the courts were increasingly inclined to take these agreements into account) but that view is no longer tenable now that the rule has gone. Equally no one has argued in this Court that the agreement should be presumptively dispositive. As we have seen, that would be inconsistent with the statutory regime governing financial relief. As may often be the case with these agreements, if the judge had first asked herself what would have been the fair outcome without the agreement and then asked herself what difference the agreement should make, she might well have come closer to the solution adopted by the Court of Appeal. She would have asked herself whether any of the three principles identified by the House of Lords in White, Miller, and McFarlane would justify an award to the husband. She would have concluded that there was no scope for the sharing of matrimonial assets, because in effect there were none. Unusually, this couple had acquired no matrimonial home or other property together. The wife was already independently wealthy before they married and was given even greater wealth during the marriage. But this was undoubtedly intended for her alone. It would not have come to her had her family not been confident that it would remain her separate property. The judge might well also have concluded that there was no scope for compensating the husband for sacrifices made for the sake of the marriage and the family, although I have some reservations about this. The husband had (perhaps) sacrificed a career in investment banking for a much less lucrative career in scientific research. But it could be said that that was for his own sake rather than for the sake of the family. In the circumstances, he was probably right to concede that the basis of any award should be needs rather than sharing or compensation. However, needs is a convenient shorthand for a rather more complicated concept, which is the (now) mutual commitment which each spouse makes to support the other. Under the former tailpiece or statutory objective, this was a life long commitment, surviving divorce although ending on the receiving partys remarriage. Under the present law, it is no longer life long. Each party has a responsibility to try to adjust to living without such support. But they may still be entitled to support for requirements which arose as a result of or during the marriage. Usually, of course, this is because of the demands of child rearing and the (often life long) financial disadvantage which results. But among the statutory factors is disability. If this arises during the marriage, it may be entirely proper to expect the normal support commitment to continue after the marriage ends. In some cases, the support requirement generated by the marriage might go further than this. Most spouses want their partners to be happy partly, of course, because they love them and partly because it is not much fun living with a miserable person. So, choices are often made for the sake of the overall happiness of the family. The couple may move from the city to the country; they may move to another country; they may adopt a completely different life style; one of them may give up a well paid job that she hates for the sake of a less lucrative job that she loves; one may give up a dead end job to embark upon a new course of study. These sorts of things happen all the time in a relationship. The couple will support one another while they are together. And it may generate a continued need for support once they are apart. Whether this is seen as needs or compensation may not matter very much. It can only be for this reason that the husband in this case had any real claim upon his wife apart from his claims as the father of her children. In those circumstances, is it fair to give effect to their agreement? First, did the parties intend it to have legal effect? There can be no doubt that they did. Second, were there any contractually vitiating circumstances? There is nothing to suggest that there were. Thirdly, is there anything in the circumstances in which it was made to suggest that the wife to be was taking an unfair advantage of her husband to be? I think not. He did not have an English translation and he did not have independent legal advice. He was presented with a take it or leave it agreement. This must have been what the judge meant when she referred to the lack of negotiations, and it could be an indication that an unfair advantage has been taken. But in this case the husband did know the essence of what he was agreeing to and there is nothing at all to suggest that he wanted to negotiate for something different. He was not a nave young person in a vulnerable position. He was a financially sophisticated and highly educated young man. He was marrying for love and not for money. In common with the Court of Appeal, therefore, I see nothing in the circumstances in which the agreement was made to make it unfair to hold the parties to it (although I worry that this very experienced and thoughtful judge who had the advantage of seeing and hearing the parties may have seen something which we have not). However, that does not inevitably mean that it is fair to give the agreement its full weight in the circumstances as they now are. We would not, for example allow this wife to cast the burden of supporting her husband onto the state. More relevantly, the agreement did not cater for the fact that they might have children together. It is common ground that provision must be made for their two children. His Honour Judge Collins CBE decided that it is in their best interests to spend time living with each of their parents. These are the children of an extremely rich mother, although she did not want the family to have an unduly lavish life style. Nevertheless, since there are ample means available to enable them to do so, the children should be able to enjoy the same standard of living while they are with their father as they have when they are with their mother. Hence it was accepted that he should have a home for them, not only in England, but also when they were spending time with him in Germany or (now) near the mothers home in Monaco, and also the means to support them generously in their homes with him. The issue is whether this should all come to an abrupt end when the youngest child grows up. When unmarried parents separate, the court has no power to make provision for the parents. It can only provide for the child and indirectly for the parent by taking the childs need for care into account when making provision for the child. Provision for the child has to cease when the child ceases education or vocational training, unless there are special circumstances (Children Act 1989, Sched 1, para 3(2)). And the courts have held that capital payments, or property settlements, to provide the child with a home should revert to the other parent when the child grows up. There is therefore no power to provide for an unmarried parent whose financial position has been irredeemably compromised by the demands of bringing up children or looking after the family. Married parents are different, in that the court has power to make provision, not only for the child, but also for the parent. There is no reason in principle why the court should limit its support in the same way that it has to limit its support for the unmarried parent. Quite the reverse: this is what distinguishes marriage from cohabitation in our law. Where parents are married, the court can look beyond the needs of the child while growing up and look independently at the needs of the parent, and in particular those generated as a result of parenthood. Not only this, these days parents often expect to continue to be a resource for their grown up children, a base to which they can return and a source of the unconditional love and support which is what parenthood is all about. That may well be why the wife agreed to discharge most of the husbands debts and also acknowledged before Baron J that the husband should have a house, not just while the children were growing up, but for life. The Court of Appeal appeared so anxious to disagree with the obiter views of the Board in MacLeod that it decided to treat these parents as if they had never been married. That cannot be the right approach. This couple were married in England. They intended to make their matrimonial home in England. They had been advised that their agreement might not be effective under the laws of another country where they chose to live. The main concern of the wife and her family was to ensure that the husband acquired no proprietary claim to shares in the wifes family companies which might then become forfeit. This was in no way prejudiced, as the judge made clear, by a lump sum order which the wife could readily meet out of her cash income. In my view the Court of Appeal erred in principle in treating a parent who has been married to the other parent in the same way as they would treat a parent who has not. If, for example, a parent has irredeemably compromised her position in the labour market as a result of her caring responsibilities, she is entitled to at least some provision for her future needs, even after the children have grown up. It would not be fair for an ante or post nuptial agreement to deprive her of that. Where parents are not married to one another, there is nothing the court can do to compensate her. But where they are, there is. A nuptial agreement should not stand in the way of producing a fair outcome. I would therefore have varied the judges order so that the husband was entitled to his English home, or any home bought to replace it, for life. I would also have asked myself whether there were likely to be any continuing support needs attributable to his parental status after the children grew up. The answer to that is probably no although I also consider that the husbands decision to leave his lucrative career in banking and acquire further qualifications with a view to changing direction was not as completely selfish as some may have thought it to be. The wife appears to have agreed with it at the time. And why should she not? The couple were rich enough each to be able to pursue their own dreams. She had not been happy in New York and perhaps she understood why her husband was no longer happy in banking. If the decision was taken for the good of the family as a whole, this would have been for the benefit of the children as well as their parents. Happy parents make for happy children. Discontented parents make for discontented children. The judge found that, once that step had been taken, there was no going back. It may be that the case should have gone back to the judge on this basis, as well as on the cross appeal, for we are not in a position to make findings of fact which she did not make. But while I am clear that she did not give enough weight to the agreement in this case, I am equally clear that the Court of Appeal erred in equating married with unmarried parenthood. Marriage still counts for something in the law of this country and long may it continue to do so.

This appeal concerns the principles to be applied when a court, in considering the financial arrangements following the breakdown of a marriage, has to decide what weight should be given to an agreement between the husband and wife made before the marriage (an ante nuptial agreement, often referred to as a pre nuptial agreement). The appellant and respondent were married in London in 1998. The husband is French and the wife German. They entered into an ante nuptial agreement before a notary in Germany three months before the marriage at the instigation of the wife, to whom a further portion of her familys considerable wealth would be transferred if an agreement was signed. The agreement was subject to German law and provided that neither party was to acquire any benefit from the property of the other during the marriage or on its termination. The husband, who at the time worked as a banker, declined the opportunity to take independent advice on the agreement. The parties separated in October 2006 after 8 years of marriage. They have two daughters, born in 1999 and 2002. By this time the husband had left banking and had embarked on research studies at Oxford. The husband applied to the court for financial relief. In the High Court he was granted a sum in excess of 5.5m which would afford him an annual income of 100,000 for life and allow him to buy a home in London where his children could visit him. The judge took into account the existence of the ante nuptial agreement but reduced the weight she attached to it because of the circumstances in which it was signed. The wife appealed successfully to the Court of Appeal, which held that in this case the agreement should have been given decisive weight. The husband should only be granted provision for his role as the father of the two children and not for his own long term needs. The husband appealed to the Supreme Court. The Supreme Court (by a majority of 8 to 1) dismisses the appeal. The substantive judgment is given by Lord Phillips (President), with an additional judgment from Lord Mance. Lady Hale gives a dissenting judgment. Lord Phillips observed that it used to be contrary to public policy for a couple who were married or about to be married to make an agreement which provided for the contingency that they were about to separate, on the basis that this might encourage them to do so, and the court paid no regard to them [31]. After 1957 separation agreements were given considerable weight, as increasingly were post nuptial agreements, in marked distinction to the treatment of ante nuptial agreements [42]. But the reasons for sweeping away the old rule for separation agreements applied equally to ante nuptial agreements [52]. There was not necessarily a material difference between the two [57] and the court was entitled to overrule the agreement in either case [63]. The question was how the court should approach the task of deciding what weight should be given to an ante nuptial agreement. Three issues arose in relation to the agreement in this case for the court to consider: (i) Were there circumstances attending the making of the agreement which should detract from the weight which should be accorded to it? Parties must enter into an ante nuptial agreement voluntarily, without undue pressure and be informed of its implications. The question is whether there is any material lack of disclosure, information or advice [69]. (ii) Did the foreign elements of the case enhance the weight that should be accorded to the agreement? In 1998, when this agreement was signed, the fact that it was binding under German law was relevant to the question of whether the parties intended the agreement to be effective, at a time when it would not have been recognised in the English courts. After this judgment it will be natural to infer that parties entering into agreements governed by English law will intend that effect be given to them [74] (iii) Did the circumstances prevailing at the time the court made its order make it fair or just to depart from the agreement? An ante nuptial agreement may make provisions that conflict with what a court would otherwise consider to be fair. The principle, however, to be applied is that a court should give effect to a nuptial agreement that is freely entered into by each party with a full appreciation of its implications unless, in the circumstances prevailing, it would not be fair to hold the parties to their agreement [75]. A nuptial agreement cannot be allowed to prejudice the reasonable requirements of any children of the family [77], but respect should be given to individual autonomy [78] and to the reasonable desire to make provision for existing property [79]. In the right case an ante nuptial agreement can have decisive or compelling weight [83]. Applying these principles to the facts, the Court of Appeal was correct to conclude that there were no factors which rendered it unfair to hold the husband to the agreement. He is extremely able and his own needs will in large measure be indirectly met from the generous relief given to cater for the needs of his two daughters until the younger reaches the age of 22 [120]. There is no compensation factor as the husbands decision to abandon his career in the city was not motivated by the demands of his family but reflected his own preference [121]. Fairness did not entitle him to a portion of his wifes wealth, received from her family independently of the marriage, when he had agreed he should not be so entitled when he married her [122]. Lord Mance agreed with the conclusion of the majority but, in common with Lady Hale, expressed no view on the binding or other nature of an ante nuptial agreement, which did not arise for decision. Lady Hale (dissenting) stated that modern marriage still possesses an irreducible minimum, which includes a couples mutual duty to support one another and their children. The issue in this case was how far individuals should be free to rewrite that essential feature of the marital relationship as they chose [132]. The law of marital agreements is in a mess and ripe for systematic review and reform. The Law Commission has a current project to examine the status and enforceability of agreements and can then make detailed proposals for legislative reform that Parliament can consider. That is the democratic way of achieving comprehensive and principled reform [135]. The facts of this particular case obscure the fact that the object of an ante nuptial agreement is to deny the economically weaker spouse (usually the wife) the provision to which she would otherwise be entitled [137]. The points on which Lady Hale dissents from the majority are summarised at [138] and include the upholding of the Court of Appeals decision as to the actual outcome of the case. In her view, there remain important policy considerations justifying a different approach for agreements made before and after a marriage [162]. The test to be applied by the court when considering an ante nuptial agreement should not introduce a presumption or starting point in favour of holding the parties to it: the guiding principle should be fairness in the light of the actual and foreseeable circumstances at the time when the court comes to make its order [169]. In this case the Court of Appeal appeared wrongly to treat the parties as if they had never married but only cohabited, and failed to recognise that a parent often expects to continue to be a resource for his or her grown up children [192]. Lady Hale would have varied the judges award to give greater weight to the agreement but would have granted the husband his English home for life [194].

This appeal concerns a planning permission granted on 29 July 2009 for a proposed three mile (4.7km) stretch of roadway to provide a rapid bus service between Fareham and Gosport in South East Hampshire. The permission was challenged on environmental grounds including not least its likely impact on several species of European protected bats inhabiting the general area around the proposed busway. The challenge having failed before Judge Bidder QC (sitting as a Deputy High Court judge) on 17 November 2009 [2009] EWHC 2940 (Admin) and before the Court of Appeal (Ward, Hughes and Patten LJJ) on 10 June 2010 [2010] EWCA Civ 608, [2010] PTSR 1882 this Court on 27 July 2010 gave the appellant limited permission to appeal so as to raise two issues of some general importance. Habitats Directive 92/43/EEC which provides that: Issue one concerns the proper interpretation of article 12 (1)(b) of the Member States shall take the requisite measures to establish a system of strict protection for the animal species listed [the protected species] in their natural range, prohibiting . (b) deliberate disturbance of these species, particularly during the period of breeding, rearing, hibernation and migration; . Issue two concerns the proper application of regulation 3(4) of the Conservation (Natural Habitats, etc) Regulations 1994 SI 1994/2716 (as amended first by the Amendment Regulations 2007 and then the Amendment Regulations 2009), by which domestic effect is given to the Directive: 3(4) . every competent authority in the exercise of any of their functions, shall have regard to the requirements of the Habitats Directive so far as they [the requirements] may be affected by the exercise of those functions. With that briefest of introductions let me turn to the essential factual context in which these issues now arise, noting as I do so that altogether fuller descriptions of the facts can be found in the judgments below. The proposed new rapid busway the first and larger phase of which is already substantially under way, applications for interlocutory relief to stay its continuance having been refused by the Court of Appeal and refused by this Court on granting leave to appeal runs along the path of an old railway line, last used in 1991. The scheme provides for buses to be able to join existing roads at various points along the route. It will create a new and efficient form of public transport to the benefit of many residents, workers and visitors to the region. Central Government has committed 20m to it. Although most of the scheme lies within a built up area, there are a number of designated nature conservation sites nearby and, unsurprisingly, once the railway line ceased to be used, the surrounding area became thickly overgrown with vegetation and an ecological corridor for various flora and fauna. Although, therefore, the scheme was widely supported, it also attracted a substantial number of objectors one of whom is Mrs Morge, the appellant, who lives close by. The respondent authority is both the local planning authority for the relevant area and also the applicant for planning permission through its agent, Transport for South Hampshire, who submitted a planning application on 31 March 2009. Taking it very shortly, on 30 April 2009 Natural England (the Governments adviser on nature conservation) objected to the planning application in part because of their concerns about the impact of the development on bats (an objection reiterated on 29 June 2009). As a result the respondent authority commissioned an Updated Bat Survey (UBS) which was submitted on 9 July 2009. On 17 July 2009, largely as a result of the UBS, Natural England withdrew their objections. There then followed a Decision Report prepared by the respondents planning officers, a further letter from Natural England dated 23 July 2009, an Addendum Decision Report from the officers, and on 29 July 2009 a three hour meeting of the respondents Regulatory Committee which concluded with the grant of planning permission for the scheme by a majority of six to five with two abstentions. The UBS is a document of some 70 pages. For present purposes, however, its main findings can be summarised as follows. No roosts were found on the site. The removal of trees and vegetation, however, would result in a loss of good quality bat foraging habitats. This would have a moderate adverse impact at local level on foraging bats for some nine years, the impact thereafter reducing, because of mitigating measures, to slight adverse/neutral. In addition the busway would sever a particular flight path followed by common pipistrelle bats, increasing their risk of collision with buses (without, however, given the proposed mitigation of this risk, a significant impact on bats at a local level). The Officers Decision Report (again a lengthy document) included these passages with regard to the bats: 3.7 Detailed ecological surveys have been undertaken across the site over the last eighteen months. A number of bat species roost and forage along the corridor . Accordingly, a strategy to mitigate the impact on these species has been developed. The main principles of the strategy [include] enhancement of the habitat of the retained embankment to provide continued habitat for displaced species. Bat surveys have also been carried out to enable appropriate measures to be implemented. 5.6 Natural England initially raised objections on the grounds that the application contains insufficient survey information to demonstrate whether or not the development would have an adverse effect on bats . which are [a] legally protected species. Further survey work was undertaken in response to this objection and provided to Natural England. Following receipt of this information Natural England are now satisfied that the necessary information has been provided and have withdrawn their objection. They recommend that if the council is minded to grant permission for this scheme conditions be attached requiring implementation of the mitigation and compensation measures set out in the reports. Nature Conservation Impact 8.17 . the requirements of the Habitats Regulations need to be considered. 8.19. The surveys also identified the presence of a diversity of bat species, which are protected, using the trees alongside the track for foraging. An Updated Bat Survey Method Statement and Mitigation Strategy has been submitted with measures to ensure there is no significant adverse impact to them from these proposals. Conclusion 8.24 . suitable mitigation measures are proposed for . protected species . The Addendum Report dealt specifically with the Habitat Regulations and repeated that Natural England, having initially objected to the application and required further survey information regarding protected species, were now satisfied and had withdrawn their objection. Against this essential factual background I turn now to the two main issues arising. Issue 1 the proper interpretation of article 12(1)(b) of the Habitat Directive Article 12(1)(b) must, of course, be interpreted in the light of the Directive as a whole. Included amongst the recitals in its preamble is this: Whereas, in the European territory of the member states, natural habitats are continuing to deteriorate and an increasing number of wild species are seriously threatened; whereas given that the threatened habitats and species form part of the Communitys natural heritage and the threats to them are often of a trans boundary nature, it is necessary to take measures at Community level in order to conserve them. Article 1 is the definition article and defines species of Community interest in four categories, respectively endangered, vulnerable, rare, and endemic and requiring particular attention [for various specified reasons]. The six species of protected bats affected by the proposed busway fall variously into the second, third and fourth of those categories. Article 1(i) defines conservation status of a species to mean the sum of the influences acting on the species concerned that may affect the long term distribution and abundance of its populations. It further provides: The conservation status will be taken as favourable when: population dynamics data on the species concerned indicate that it is maintaining itself on a long term basis as a viable component of its natural habitats, and the natural range of the species is neither being reduced nor is likely to be reduced for the foreseeable future, and there is, and will probably continue to be, a sufficiently large habitat to maintain its populations on a long term basis. Article 2(2) provides that: Measures taken pursuant to this Directive shall be designed to maintain or restore, at favourable conservation status, natural habitats and species of wild fauna and flora of Community Interest. There then follow articles 3 to 11 under the head Conservation of natural habitats and habitats of species. Within these provisions one should note article 6(2): Member states shall take appropriate steps to avoid, in the special areas of conversation, the deterioration of natural habitats and the habitats of species as well as disturbance of the species for which the areas have been designated, in so far as such disturbance could be significant in relation to the objectives of this Directive. Articles 12 to 16 inclusive then follow under the head Protection of species. I have already set out article 12(1)(b). Article 16 provides for derogation and so far as material provides: 16(1) Provided that that there is no satisfactory alternative and the derogation is not detrimental to the maintenance of the populations of the species concerned at a favourable conservation status in their natural range, member states may derogate from the provisions of articles 12 . : . (c) in the interests of public health and public safety, or for other imperative reasons of overriding public interest, including those of a social or economic nature and beneficial consequences of primary importance for the environment. Besides the issues now before us the Court of Appeal had to deal in addition with challenges based upon article 12(1)(d) of the Directive and upon the respondents decision not to treat the proposal as an EIA development (matters upon which this court refused leave to appeal). Ward LJ gave the only reasoned judgment, one of infinite care and thoughtfulness and, I may add, one of enormous assistance to this Court in its consideration of this further appeal. As a background to deciding the meaning of article 12(1)(b), Ward LJ necessarily had regard to the European Commissions views upon the scope of the Directive, as set out in a Guidance document issued in February 2007 which include the following: (37) Disturbance (e.g. by noise, source of light) does not necessarily directly affect the physical integrity of a species but can nevertheless have an indirect negative effect on the species (eg by forcing them to use lots of energy to flee; bats, for example, when disturbed during hibernation, heat up as a consequence and take flight, so are less likely to survive the winter due to high loss of energy resources). The intensity, duration and frequency of repetition of disturbances are important parameters when assessing their impact on a species. Different species will have different sensitivities or reactions to the same type of disturbance, which has to be taken into account in any meaningful protection system. Factors causing disturbance for one species might not create disturbance for another. Also, the sensitivity of a single species might be different depending on the season or on certain periods of its life cycle e.g. (breeding period). Article 12(1)(b) takes into account this possibility by stressing that disturbances should be prohibited particularly during the sensitive periods of breeding, rearing, hibernation and migration. Again, a species by species approach is needed to determine in detail the meaning of disturbance. (38) The disturbance under article 12(1)(b) must be deliberate . and not accidental. On the other hand, while disturbance under article 6(2) must be significant, this is not the case in article 12(1), where the legislator did not explicitly add this qualification. This does not exclude, however, some room for manoeuvre in determining what can be described as disturbance. It would also seem logical that for disturbance of a protected species to occur a certain negative impact likely to be detrimental must be involved. (39) In order to assess a disturbance, consideration must be given to its effect on the conservation status of the species at population level and biogeographic level in a member state . For instance, any disturbing activity that affects the survival chances, the breeding success or the reproductive ability of a protected species or leads to a reduction in the occupied area should be regarded as a disturbance in terms of article 12. On the other hand, sporadic disturbances without any likely negative impact on the species, such as for example scaring away a wolf from entering a sheep enclosure in order to prevent damage, should not be considered as disturbance under article 12. Once again, it has to be stressed that the case by case approach means that the competent authorities will have to reflect carefully on the level of disturbance to be considered harmful, taking into account the specific characteristics of the species concerned and the situation, as explained above. No problem arises as to what is meant by deliberate in article 12(1)(b). As stated by the Commission in paragraph 33 of their Guidance: Deliberate actions are to be understood as actions by a person who knows, in light of the relevant legislation that applies to the species involved, and the general information delivered to the public, that his action will most likely lead to an offence against the species, but intends this offence or, if not, consciously accepts the foreseeable results of his action. Put more simply, a deliberate disturbance is an intentional act knowing that it will or may have a particular consequence, namely disturbance of the relevant protected species. The critical, and altogether more difficult, question is what precisely in this context is meant by disturbance. Having, as I too have sought to do, thus cleared the ground and recognised that the central difficulty in the case lies in determining the level of disturbance required to fall within the prohibition, Ward LJ rejected the appellants contention that any disturbing activity save only that properly to be characterised as de minimis too negligible for the law to be concerned with constitutes disturbance within the article. As Ward LJ pointed out, the example given in paragraph 38 of the Commissions Guidance (scaring away a wolf from the sheep fold) must be an a fortiori, rather than a typical one. The judgment then continues (and I make no apology for quoting it at some length): 35 . the disturbance does not have to be significant but, as para 38 of the guidance explains, there must be some room for manoeuvre which suggests the threshold is somewhere between de minimis and significant. It must be certain, that is to say, identifiable. It must be real, not fanciful. Something above a discernible disturbance, not necessarily a significant one, is required. Given that there is a spectrum of activity, the decision maker must exercise his or her judgment consistently with the aim to be achieved. Given the broad policy objective which I explored . above [to ensure that the population of the species is maintained at a level which will ensure the species conservation so as to protect the distribution and abundance of the species in the long term], disturbing one bat, or even two or three, may or may not amount to disturbance of the species in the long term. It is a matter of fact and degree in each case. 36 [Counsel for the appellant] seizes on the words in para 38 . of the guidance, a certain negative impact likely to be detrimental must be involved and he elevates this statement into a test for establishing a disturbance. His difficulty is that that does not answer the critical question: when does the negative impact become detrimental? Para 39 seems to me to spell out the proper approach, namely to give consideration to the effect on the conservation status of the species at population level and bio geographic level. This in my judgment is an important refinement. The impact must be certain or real, it must be negative or adverse to the bats and it will be likely to be detrimental when it negatively or adversely effects the conservation status of the species. Conservation status of a species is a term of art which . means the sum of the influences acting on the species concerned that may affect the long term distribution and abundance of its population. That is why the guidance at para 39 makes the point that the disturbing activity must be such as affects the survival chances . of a protected species. Furthermore, the competent authorities will have to reflect carefully on the level of disturbance to be considered harmful, taking into account the specific characteristics of the species concerned and the situation, to quote the concluding sentence of para 39. The summary in the guidance . has the same emphasis: Disturbance is detrimental for a protected species eg by reducing survival chances, breeding success or reproductive ability. A species by species approach needs to be taken as different species will react differently to potentially disturbing activities. 37. Having regard to the aim and purpose of the Directive and of article 16 and having due consideration of the guidance, I am driven to conclude that for there to be disturbance within the meaning of article 12(1)(b) that disturbance must have a detrimental impact so as to affect the conservation status of the species at population level. . 39. In my judgment whether the disturbance will have a certain negative impact which is likely to be detrimental must be judged in the light of and having regard to the effect of the disturbance on the conservation status of the species, ie, how the disturbance affects the long term distribution and abundance of the population of bats. I remind myself that according to the [Commissions] guidance . , favourable conservation status could be described as a situation where a . species is doing sufficiently well in terms of quality and quantity and has good prospects of continuing to do so in the future. Whether there is a disturbance of the species must be judged in that light. Finally, in a passage in the judgment headed Overall Conclusions, Ward LJ, expressing himself satisfied that the respondents planning committee had due regard to the requirements of the Directive, said this: 73. I have been troubled by the fact that the conclusion of the bat survey upon which such reliance was placed is to the effect that no significant impacts to bats are anticipated. The disturbance does not have to be significant and this is a misdirection or misunderstanding of . [article] 12(1)(b) . of the Habitats Directive. The question for me is, therefore, whether the conclusions can be upheld. I am satisfied that the decision of the planning committee should not be quashed. 74. I reach that conclusion for these reasons. I am satisfied that the loss of foraging habitat occasioned by cutting a swathe through the vegetation does not offend article 12(1)(b) which is concerned with protection of the species not with conservation of the species natural habitats. I am satisfied that that bald statement that the bats have to travel further and expend more energy in foraging does not justify a conclusion that the conservation status of the bats is imperilled or at risk. There is no evidence which would allow the planning committee to conclude that the long term distribution and abundance of the bat population is at risk. There is no evidence that they will lose so much energy (as they might when disturbed during hibernation) that the habitat will not still provide enough sustenance for their survival, or their survival would be in jeopardy. There is no evidence that the population of the species will not maintain itself on a long term basis. There is therefore no evidence of any activity which would as a matter of law constitute a disturbance as the word has to [be] understood. 75. As I have already concluded, the risk of collision cannot amount to a disturbance and article 12(1)(b) is not engaged in that respect. Mr George QC submits that the Court of Appeal were wrong to hold that article 12(1)(b) is breached only when the activity in question goes so far as to imperil the conservation status of the species at population level i.e. that only then does the activity amount to a disturbance of the species. This, he points out (and, indeed, Ward LJ himself recognised), puts the threshold for engaging the article higher than Mr Cameron QC for the respondent put it, Mr Camerons main concern being that such a construction would sit uneasily with article 16 (1) (a provision which itself necessarily implies that article 12(1)(b) may need to be, and be capable of being, derogated from notwithstanding that this is only permissible where it is not detrimental to the maintenance of the populations of the species concerned at a favourable conservation status). The Court of Appeals construction is also, submits Mr George, inconsistent with an Additional Reasoned Opinion addressed to the UK by the Commission dated 18 September 2008 with regard inter alia to what was then the new Regulation 39(1), inserted by the 2007 Amendment Regulations, providing for an offence where someone deliberately disturbs wild animals of any species in such a way as to be likely significantly to affect (i) the ability of any significant group of animals of that species to survive, breed or rear or nurture their young . The prohibition in the Directive, the Commission pointed out in their Opinion, is not limited to significant disturbances of significant groups of animals. Article 12(1)(b) of the Directive, the Opinion later suggested, covers all disturbance of protected species. Whilst not actually conceding that the Court of Appeal approach is wrong, Mr Cameron contends now that the proper approach is to ask whether the activity in question produces a certain negative impact likely to be detrimental to the species having regard to its effect on the conservation status of the species. In my judgment certain broad considerations must clearly govern the approach to article 12(1)(b). First, that it is an article affording protection specifically to species and not to habitats, although obviously, as here, disturbance of habitats can also indirectly impact on species. Secondly, and perhaps more importantly, the prohibition encompassed in article 12(1)(b), in contrast to that in article 12(1)(a), relates to the protection of species, not the protection of specimens of these species. Thirdly, whilst it is true that the word significant is omitted from article 12(1)(b) in contrast to article 6(2) and, indeed, article 12(4) which envisages accidental capture and killing having a significant negative impact on the protected species that cannot preclude an assessment of the nature and extent of the negative impact of the activity in question upon the species and, ultimately, a judgment as to whether that is sufficient to constitute a disturbance of the species. Fourthly, it is implicit in article 12(1)(b) that activity during the period of breeding, rearing, hibernation and migration is more likely to have a sufficient negative impact on the species to constitute prohibited disturbance than activity at other times. Beyond noting these broad considerations it seems to me difficult to take the question of the proper interpretation and application of article 12(1)(b) much further than it is taken in the Commissions own Guidance document. (The Commissions suggestion in their September 2008 Additional Reasoned Opinion that article 12(1)(b) covers all disturbance of protected species in truth begs rather than answers the question as to what activity in fact constitutes such disturbance and cannot sensibly be thought to involve a departure from their 2007 Guidance.) Clearly the illustrations given in paragraph 39 of the Guidance on the one hand any disturbing activity that affects the survival chances, the breeding success or the reproductive ability of a protected species or leads to a reduction in the occupied area, on the other hand scaring away a wolf from entering a sheep enclosure represent no more than the ends of the spectrum within which the question arises as to whether any given activity constitutes a disturbance. Equally clearly, to my mind, the suggestion in paragraph 39 that consideration must be given to its effect [the effect of the activity in question] on the conservation status of the species at population level and biogeographic level does not carry with it the implication that only activity which does have an effect on the conservation status of the species (i.e. which imperils its favourable conservation status) is sufficient to constitute disturbance. I find myself, therefore, in respectful disagreement with Ward LJs conclusion (at para 37) that for there to be disturbance within the meaning of article 12(1)(b) that disturbance must have a detrimental impact so as to affect the conservation status of the species at population level. Nor can I accept his view (at para 36) that the guidance, at para 39, makes the point that the disturbing activity must be such as affects the survival chances . of a protected species. On the contrary, as I have already indicated, para 39 of the guidance uses disturbing activity of that sort merely to illustrate one end of the spectrum. Rather the guidance explains that, within the spectrum, every case has to be judged on its own merits. A species by species approach is needed and, indeed, even with regard to a single species, the position might be different depending on the season or on certain periods of its life cycle (para 37 of the guidance). As para 39 of the guidance concludes: it has to be stressed that the case by case approach means that the competent authorities will have to reflect carefully on the level of disturbance to be considered harmful, taking into account the specific characteristics of the species concerned and the situation, as explained above. Two further considerations can, I think, usefully be identified to be borne in mind by the competent authorities deciding these cases (considerations which seem to me in any event implicit in the Commissions Guidance). First (and this I take from a letter recently written to the respondent by Mr Huw Thomas, Head of the Protected and Non Native Species Policy at DEFRA, the Department responsible for policy with regard to the Directive): Consideration should . be given to the rarity and conservation status of the species in question and the impact of the disturbance on the local population of a particular protected species. Individuals of a rare species are more important to a local population than individuals of more abundant species. Similarly, disturbance to species that are declining in numbers is likely to be more harmful than disturbance to species that are increasing in numbers. Second (and this is now enshrined in Regulation 41(2) of the Conservation of Habitats and Species Regulations 2010 SI 2010/490): 41(2) . disturbance of animals includes in particular any disturbance which is likely (a) to impair their ability (i) to survive, to breed or reproduce, or to rear or nurture their young, or (ii) in the case of animals of a hibernating or migratory species, to hibernate or migrate; or (b) to affect significantly the local distribution or abundance of the species to which they belong. Note, however, that disturbing activity likely to have these identified consequences is included in particular in the prohibition; it does not follow that other activity having an adverse impact on the species may not also offend the prohibition. In summary, therefore, whilst I prefer Mr Camerons suggested approach to this article (see para 18 above) than that adopted by the Court below or that contended for by Mr George, it seems to me in the last analysis somewhat simplistic. To say that regard must be had to the effect of the activity on the conservation status of the species is not to say that it is prohibited only if it does affect that status. And the rest of the formulation is hardly illuminating. Tempting although in one sense it is to refer the whole question as to the proper interpretation and application of article 12(1)(b) to the Court of Justice of the European Union pursuant to article 267 of the Lisbon Treaty, I would not for my part do so. It seems to me unrealistic to suppose that the Court of Justice would feel able to provide any greater or different assistance than we have here sought to give. Issue Two The proper application of Regulation 3(4) of the 1994 Regulations (as amended) I can deal with this issue altogether more briefly. Article 12(1) requires member states to take the requisite measures to establish a system of strict protection for the animal species listed in Annex IV(a) in their natural range. Wisely or otherwise, the UK chose to implement the Directive by making a breach of the article 12 prohibition a criminal offence. Regulation 39 of the 1994 Regulations (as amended) provides that: (1) a person commits an offence if he . (b) deliberately disturbs wild animals of any such species [i.e. a European protected species]. It is Natural England, we are told, who bear the primary responsibility for policing this provision. It used to be the position that the implementation of a planning permission was a defence to a regulation 39 offence. That, however, is no longer so and to my mind this is an important consideration when it comes to determining the nature and extent of the regulation 3(4) duty on a planning authority deliberating whether or not to grant a particular planning permission. Ward LJ dealt with this question in paragraph 61 of his judgment as follows: 61. The Planning Committee must grant or refuse planning permission in such a way that will establish a system of strict protection for the animal species listed in Annex IV(a) in their natural range . If in this case the committee is satisfied that the development will not offend article 12(1)(b) or (d) it may grant permission. If satisfied that it will breach any part of article 12(1) it must then consider whether the appropriate authority, here Natural England, will permit a derogation and grant a licence under regulation 44. Natural England can only grant that licence if it concludes that (i) despite the breach of regulation 39 (and therefore of article 12) there is no satisfactory alternative; (ii) the development will not be detrimental to the maintenance of the population of bats at favourable conservation status and (iii) the development should be permitted for imperative reasons of overriding public importance. If the planning committee conclude that Natural England will not grant a licence it must refuse planning permission. If on the other hand it is likely that it will grant the licence then the planning committee may grant conditional planning permission. If it is uncertain whether or not a licence will be granted, then it must refuse planning permission. In my judgment this goes too far and puts too great a responsibility on the Planning Committee whose only obligation under regulation 3(4) is, I repeat, to have regard to the requirements of the Habitats Directive so far as [those requirements] may be affected by their decision whether or not to grant a planning permission. Obviously, in the days when the implementation of such a permission provided a defence to the regulation 39 offence of acting contrary to article 12(1), the Planning Committee, before granting a permission, would have needed to be satisfied either that the development in question would not offend article 12(1) or that a derogation from that article would be permitted and a licence granted. Now, however, I cannot see why a planning permission (and, indeed, a full planning permission save only as to conditions necessary to secure any required mitigating measures) should not ordinarily be granted save only in cases where the Planning Committee conclude that the proposed development would both (a) be likely to offend article 12(1) and (b) be unlikely to be licensed pursuant to the derogation powers. After all, even if development permission is given, the criminal sanction against any offending (and unlicensed) activity remains available and it seems to me wrong in principle, when Natural England have the primary responsibility for ensuring compliance with the Directive, also to place a substantial burden on the planning authority in effect to police the fulfilment of Natural Englands own duty. Where, as here, Natural England express themselves satisfied that a proposed development will be compliant with article 12, the planning authority are to my mind entitled to presume that that is so. The Planning Committee here plainly had regard to the requirements of the Directive: they knew from the Officers Decision Report and Addendum Report (see para 8 above and the first paragraph of the Addendum Report as set out in para 72 of Lord Kerrs judgment) not only that Natural England had withdrawn their objection to the scheme but also that necessary measures had been planned to compensate for the loss of foraging. For my part I am less troubled than Ward LJ appears to have been (see his para 73 set out at para 16 above) about the UBSs conclusions that no significant impacts to bats are anticipated and, indeed, about the Decision Reports reference to measures to ensure there is no significant adverse impact to [protected bats]. It is certainly not to be supposed that Natural England misunderstood the proper ambit of article 12(1)(b) nor does it seem to me that the planning committee were materially misled or left insufficiently informed about this matter. Having regard to the considerations outlined in para 29 above, I cannot agree with Lord Kerrs view, implicit in paras 75 and 76 of his judgment, that regulation 3(4) required the committee members to consider and decide for themselves whether the development would or would not occasion such disturbance to bats as in fact and in law to constitute a violation of article 12(1)(b) of the Directive. Even, moreover, had the Planning Committee thought it necessary or appropriate to decide the question for themselves and applied to article 12(1)(b) the less exacting test described above rather than Ward LJs test of imperilling the bats conservation status, there is no good reason to suppose that they would not have reached the same overall conclusion as expressed in paras 74 and 75 of Ward LJs judgment (see para 16 above). I would in the result dismiss this appeal. LORD WALKER For the reasons given in the judgment of Lord Brown, with which I agree, and for the further reasons given by Lady Hale and Lord Mance, I would dismiss this appeal. LADY HALE On the first issue, I have nothing to add to the judgment of Lord Brown, with which I agree. I also agree with him on the second issue, but add a few observations of my own because we are not all of the same mind. The issue is whether the Regulatory Committee of Hampshire County Council (the planning authority for this purpose) complied with their duty to have regard to the requirements of the Habitats Directive so far as they may be affected by the exercise of their planning functions (Conservation (Natural Habitats etc) Regulations 1994, reg 3(4); see also Conservation and Species and Habitats Regulations 2010, reg 9(5)). It is, of course, always important that the legal requirements are properly complied with, perhaps the more so in cases such as this, where the County Council is both the applicant for planning permission and the planning authority deciding whether it should be granted. Some may think this an unusual and even unsatisfactory situation, but it comes about because in this country planning decisions are taken by democratically elected councillors, responsible to, and sensitive to the concerns of, their local communities. As Lord Hoffmann put it in R (Alconbury Developments Ltd and others) v Secretary of State for the Environment, Transport and the Regions [2001] UKHL 23, [2003] 2 AC 295, para 69, In a democratic country, decisions about what the general interest requires are made by democratically elected bodies or persons accountable to them. Democratically elected bodies go about their decision making in a different way from courts. They have professional advisers who investigate and report to them. Those reports obviously have to be clear and full enough to enable them to understand the issues and make up their minds within the limits that the law allows them. But the courts should not impose too demanding a standard upon such reports, for otherwise their whole purpose will be defeated: the councillors either will not read them or will not have a clear enough grasp of the issues to make a decision for themselves. It is their job, and not the courts, to weigh the competing public and private interests involved. It is important to understand the chronology in this case. The planning application was dated 31 March 2009. Natural England was consulted. Their first reply is dated 30 April. In it they objected to the application on the ground that that the application contains insufficient survey information to demonstrate whether or not the development would have an adverse effect on legally protected species. Specifically, they were concerned about the impact upon bats and great crested newts. Reference was made to the impacts of the development and mitigation upon European Protected Species and the council were reminded of, among other things, their duty under regulation 3(4). This objection was maintained in a letter dated 29 June 2009. Further information on Great Crested Newts and the Updated Bat Survey were submitted in early July in response to this. Based on this information, Natural England wrote on 17 July 2009 withdrawing their objection, subject to recommendations about the conditions to be imposed if planning permission were granted. This letter also contained comments about common widespread reptiles and asking that these too be addressed although Natural England was not lodging an objection in relation to them. Natural England wrote again on 23 July with their final response to the proposal. This dealt, first, with the fact that the site was close to the Portsmouth Harbour Site of Special Scientific Interest, itself part of the Portsmouth Harbour Special Protection Area and Ramsar site and gave their advice on the requirements of regulation 48(1)(a) of the Habitats Regulations. Regulation 48(1)(a) imposes a specific obligation on planning authorities, among others, to make an appropriate assessment of the implications for a European protected site before granting permission for a proposal which is likely to have a significant effect upon the site. The letter advised that, provided that specified avoidance measures were fully implemented, the proposal would not be likely to have a significant effect upon the protected sites. Thus they had no objection on this score and permission could be granted. The letter went on to deal with Protected species and biodiversity under a separate heading, repeated that they had withdrawn their objection subject to the implementation of all the recommended mitigation, but reminded the council that whilst we have withdrawn our objection to the scheme in relation to European protected species, we have ongoing concerns regarding other legally protected species on site . A separate paragraph went on to deal with biodiversity. The Officers Report was prepared for the Committee meeting, which was due to take place on 29 July 2009, before receipt of the letter of 23 July. It is 31 pages long. The executive summary lists the main issues raised, including concern at the procedure because this is a County Council scheme and nature conservation impact (para 1.4). The account of the Proposals refers to the detailed ecological surveys undertaken, including the bat surveys carried out to enable appropriate measures to be implemented; but states that the impact on the designated sites would be negligible (para 3.7). The section on Consultations includes a paragraph explaining that Natural England had initially objected on the grounds that the application contains insufficient survey information to demonstrate whether or not the development would have an adverse effect on bats and great crested newts which are legally protected species but that they had withdrawn their objection after further survey work was undertaken (para 5.6). The section on Nature conservation impact deals first with the proximity to the protected sites and points out that the requirements of the Habitats Regulations needed to be considered (para 8.17). This is a reference to the specific obligation in regulation 48(1)(a). It went on to explain why it was thought that an appropriate assessment was not needed, noting that Natural England had raised no concerns about any impact on these sites (para 8.18). The report then turns to the corridor itself, referring to the Environmental Report submitted with the application, which dealt with badgers, bats, great crested newts, and reptiles; on bats, it states that An Updated Bat Survey Method Statement and Mitigation Strategy has been submitted with measures to ensure there is no significant adverse impact to them for these proposals (para 8.19). The report concludes by recommending that no appropriate assessment is required under the Habitats Regulations (para 9.2); that planning permission be granted (para 9.3); and that the proposed development accords with the Development Plan and the relevant Policies, because, among other things suitable mitigation measures are proposed for badgers and protected species (para 9.4). There is a cross reference to the annexed policy C18 on Protected Species, which states that Development which would adversely affect species, or their habitats, protected by the Habitats Regulations 1994, the Wildlife and Countryside Act 1981 or other legislation will not be permitted unless measures can be undertaken which prevent harm to the species or damage to the habitats. Where appropriate, a permission will be conditioned or a legal agreement sought to secure the protection of the species or their [habitat]. After receiving the letter from Natural England dated 23 July, an addendum to the report was prepared, dealing with three issues which had arisen since the report was finalised. Under the heading Habitats Regulations it deals first with the objections raised by Natural England requiring additional survey information concerning potential for the presence of great crested newts and bats, which are protected species. It points out that the survey work was undertaken and Natural England had withdrawn their objection. In two separate paragraphs, it goes on to explain that Natural England had now given specific advice on the requirements of regulation 48(1)(a) (thus reinforcing the recommendation made in para 9.2 of the main report). It is quite clear from all of this that separate consideration was being given both to the effect upon European protected species and to the effect upon the protected sites, that both were being considered under the Habitats Regulations, and that the applicable Policy on Protected Species, which also refers to the Habitats Regulations 1994, was being applied. It is true that the report does not expressly mention either regulation 3(4) or article 12 of the Directive. In my view, it is quite unnecessary for a report such as this to spell out in detail every single one of the legal obligations which are involved in any decision. Councillors were being advised to consider whether the proposed development would have an adverse effect on species or habitats protected by the 1994 Regulations. That in my view is enough to demonstrate that they had regard to the requirements of the Habitats Directive for the purpose of regulation 3(4). That is all they have to do in this context, whereas regulation 48(1)(a) imposes a more specific obligation to make an appropriate assessment if a proposal is likely to have a significant effect upon a European site. It is not surprising, therefore, that the report deals more specifically with that obligation than it does with the more general obligation in regulation 3(4). Furthermore, the United Kingdom has chosen to implement article 12 of the Directive by creating criminal offences. It is not the function of a planning authority to police those offences. Matters would, as Lord Brown points out, have been different if the grant of planning permission were an automatic defence. But it is so no longer. And it is the function of Natural England to enforce the Directive by prosecuting for these criminal offences (or granting licences to derogate from the requirements of the Directive). The planning authority were entitled to draw the conclusion that, having been initially concerned but having withdrawn their objection, Natural England were content that the requirements of the Regulations, and thus the Directive, were being complied with. Indeed, it seems to me that, if any complaint were to be made on this score, it should have been addressed to Natural England rather than to the planning authority. They were the people with the expertise to assess the meaning of the Updated Bat Survey and whether it did indeed meet the requirements of the Directive. The planning authority could perhaps have reached a different conclusion from Natural England but they were not required to make their own independent assessment. But if I am wrong about this, and the planning authority did have to make an independent assessment in terms of article 12(1)(b), there is absolutely no reason to think that they would have reached a different conclusion and refused planning permission on this account. They may have reached their decision by a majority of six votes to five. But the Minutes make it clear that there were a great many other problems to worry about with this scheme. While the impact on nature was among the many matters upon which members questioned officers, this was not one of their listed concerns. If this scheme was not going to get planning permission, it would be because of the local residents concerns about the impact upon them rather than because of the members concerns about the impact upon the bats. I would therefore dismiss this appeal on both issues. LORD MANCE I agree with the reasoning and conclusions of Lord Brown and Lady Hale on each of the issues. I add only a few words because the court is divided on the second. Lord Kerrs dissent on this issue is, I understand, based on the premise that (a) Natural England had not expressed a view that the proposal would not involve any breach of the Habitats Directive, and (b) if it had, the planning committee was not informed of this: see his paras 73 and 74. For the reasons given in Lord Browns and Lady Hales judgments, I cannot agree with either aspect of this premise. I add the following in relation to the suggestion that Natural England was, in its letter of 17 July 2009, preoccupied with matters that were quite separate from the question whether there would be disturbance to bats such as would be in breach of article 12 of the Directive or that the letter was principally taken up with the question of possible impact on common widespread reptiles (para 69 below). It is true that the longer part of the text of the letter of 17 July related to the latter topic, in relation to which Natural England at the end of the letter made clear it was not lodging an objection, but was only asking that further attention be given and comments supplied. But the first, and in the circumstances obviously more significant, aspect of the letter consisted in its first three paragraphs. These withdrew Natural Englands previous objection made on 30 April and reiterated on 29 June in relation to great crested newts and bats. The withdrawal was in the light of the information, including the Updated Bat Survey, which the Council had earlier in July supplied. In withdrawing their objection, Natural England emphasised the importance of the mitigation procedures outlined in section 10 of the Survey, and added the further recommendation that the Council look closely at the requirement for night working and keep any periods of such working to an absolute minimum. This confirms the attention it gave to the information supplied. When making its objection in its letter dated 30 April, Natural England had said: Our concerns relate specifically to the likely impact upon bats and Great Crested Newts. The protection afforded these species is explained in Part IV and Annex A of Circular 06/2005 biodiversity and Geological Conservation Statutory Obligations and their Impact within the Planning System. Part IV of Circular 06/2005 stated that the Habitats Regulations Conservation (Natural Habitats &c.) Regulations 1994 implemented the requirements of the Habitats Directive and that it was unlawful under regulation 39 deliberately to disturb a wild animal of a European protected species. Annex A identified all species of bats as wild animals of European protected species. It is therefore clear that Natural England was, from the outset, focusing on the protected status of all species of bats under the Directive and domestic law; and that its withdrawal of its objection on 17 July was directly relevant to the planning committees performance of its role under regulation 3(4) to have regard to the requirements of that Directive in the exercise of its functions. The planning officers first report dated 29 July summarised the position for the planning committee in accurate terms. Thereafter, as Lord Brown and Lady Hale record, Natural Englands further letter dated 23 July arrived, reiterating Natural Englands as position stated in its letter dated 17 July. This too was again accurately summarised to the committee by the planning officer in his addendum dated 29 July to his previous report. With regard to the Updated Bat Survey, there is no reason to believe that Natural England did not, when evaluating this, understand both the legal requirements and their general role and responsibilities at the stage at which they were approached by the Council. The Survey repays study as a whole, and I merely make clear that I do not share the scepticism which Lord Kerr feels about some of its statements or agree in all respects with his detailed account of its terms and their effect. The important point is, however, is that Natural England was well placed to evaluate this Survey, and, having done so, gave the advice they did. This was, in substance, accurately communicated to the planning committee, in a manner to which the committee was entitled to have, and must be assumed to have had, regard. In addition to my agreement with the other parts of Lord Browns and Lady Hales judgments, I confirm my specific agreement with Lady Hales penultimate paragraph. LORD KERR As legislative provisions go, regulation 3 (4) of the Conservation (Natural Habitats, &c.) Regulations 1994 (the Habitats Regulations) is relatively straightforward. Its terms are uncomplicated and direct. It provides: (4) every competent authority in the exercise of any of their functions, shall have regard to the requirements of the Habitats Directive so far as they may be affected by the exercise of those functions. In plain language this means that if you are an authority contemplating a decision that might have an impact on what the Directive requires, you must take its requirements into account before you reach that decision. Of course, if you know that another agency has examined the question and has concluded that none of those requirements will be affected, and if you are confident that such agency is qualified to make that judgment, this may be sufficient to meet your obligation under the regulation. What lies at the heart of this appeal is whether the regulatory committee of Hampshire County Council, when it came to make the decision whether to grant the planning permission involved in this case, either had regard itself to the requirements of the Habitats Directive or had sufficient information to allow it to conclude that some other agency, in whose judgment it could repose trust, had done so and had concluded that no violation arose. An old and currently disused railway line runs between Gosport and Fareham in South Hampshire. A section of this, between Redlands Lane, Fareham and Military Road, Gosport is some 4.7 kilometres in length. On 31 March 2009 Hampshire County Council, acting on behalf of Transport for South Hampshire, applied for planning permission to develop this section in order to create what is described as a busway. Transport for South Hampshire is a name used to describe three local authorities, Hampshire County Council, Gosport Borough Council and Fareham Borough Council. Planning permission was granted on 29 July 2009 At present there is serious congestion on the main road between Gosport and Fareham. It is planned that the busway should operate by allowing buses to join existing roads at various points along the route and that a fast, efficient and reliable public transport service will ensue. It will also be possible to cycle on the route. Local residents will be encouraged to use buses and bicycles in preference to their private vehicles and it is hoped that the congestion will thereby be relieved. The busway is to be constructed in two phases, 1A and 1B. Clearance work for the first of these is already underway and funding is available to complete this phase. The second phase does not yet have funding. Its future development is not assured. The railway line along which the busway is to be developed was closed as a result of recommendations made in the Beeching report of 1963. It appears that closure did not finally take effect until June 1991, however. In that month the last train ran along the line. Since then the area has become overgrown. It is now regarded as an ecological corridor for various flora and fauna. Several species of bats fly through and forage in the area but no bat roosts have been found on the planning application site itself. There are two bat roosts in proximity to the route, one in Savernake Close, near the southern section of Phase 1A, the other at Orange Grove which is close to the northern section of Phase 1B All bats are European Protected Species, falling within Annex IV (a) of Council Directive 92/43/EEC (the Habitats Directive). Article 12 of this Directive requires Member States to take the requisite measures to establish a system of strict protection for the animal species listed in the annex. The Conservation (Natural Habitats, &c.) Regulations 1994 were made for the purpose of implementing the Habitats Directive. The regulations prescribe a number of measures (most notably in relation to this case, Regulation 39) which seek to achieve this level of protection. Derogation from these measures is permitted to those who obtain a licence from the appropriate authority. Natural England is the nature conservation body specified in the regulations as the licensing authority in relation to European protected species. Although the issue of a licence is quite separate from the grant of planning permission, Natural England is regularly consulted on applications for development where the Habitats Directive and the regulations are likely to be in play and so it was that in April 2009 a letter was sent by the environment department of the Council seeking Natural Englands views about the proposal. On 30 April 2009, Natural England replied, objecting to the scheme and recommending that planning permission be refused. Bat surveys had been undertaken in 2008. These considered the suitability of the habitat for bats; they also examined how bats used the site and which species of bats were present. Clearly, however, the detail of the information yielded by these surveys was insufficient to satisfy Natural Englands requirements for it stated that the application contained insufficient survey information to demonstrate whether or not the development would have an adverse effect on legally protected species. The letter also recommended that the local planning authority should consider all the points made in an annex that was attached to the letter. This provided guidance on survey requirements and on how the authority should fulfil its duties on biodiversity issues under [among others] Regulation 3 (4) of The Conservation (Natural Habitats &c.) Regulations 1994 to ensure that the potential impact of the development on species and habitats of principal importance is addressed. Amendments to the scheme were undertaken but these did not allay Natural Englands concerns and their objection to the planning application was repeated in a letter of 29 June 2009. An updated bat survey (leading to the publication of a report entitled Survey Method Statement and Mitigation Strategy) was carried out on behalf of the Council. The survey identified two species of bat which had not been detected in the 2008 survey. Greater levels of foraging and commuting were also recorded along the disused railway. No roost sites were found but the presence of a common pipistrelle roost was confirmed approximately 40 metres from planned works. The report concluded that the works would result in the loss of a number of trees with low to moderate roost potential and approximately seven trees with moderate to high roost potential. Although no known roosts would be lost, because of the difficulty in identifying tree roosts, the Bat Conservation Trust recommends that it should be assumed that trees with high potential as roosts are in fact used as roosts. On this basis a number of roosts will be lost as a result of the works. Impact on commuting of bats between foraging habitats was also anticipated. It was felt that this could be restored in the longer term but, until restoration was complete, at least four species of bats that had been detected in the area would be affected. It was concluded that the removal of trees and vegetation would result in the loss of good quality habitats for foraging. Loss of foraging habitats would have an inevitable adverse impact on three species of local bats with one of these (Myotis sp) being more severely affected. This was characterised as a moderate impact at local level during the time that the vegetation was being re established, a period estimated in the survey to be at least seven years. On the issue of the long term impact of the loss of foraging habitats the report was somewhat ambivalent. At one point it suggested that there would be a long term slight adverse to neutral impact. Later, it suggested that it was probable that the re creation of good foraging habitats would result in an eventual neutral impact. The introduction of artificial lighting would affect the quality of foraging habitat by attracting insects from unlit areas. Although this would favour some species, it would adversely affect others. Moreover, increased lighting can delay the emergence of bats from roosts and so reduce foraging opportunities. Lighting also constitutes a barrier to bats gaining access to foraging areas. Although the report is silent on the duration of these effects, it must be presumed that they will be permanent. In a somewhat bland claim, however, the authors assert that with mitigation to reduce light spill and the selection of lights with a low UV output, the impact of lighting on bats is not anticipated to be significant. Increased noise levels would also have an adverse impact on some species of bats, the Brown long eared in particular. The report concludes at this point that is probable that there would be a slight adverse impact on foraging habitats from operational noise. Again, the report does not expressly state how long this would last but, since the noise source is the operation of the busway, it must be presumed to be permanent. The overall conclusion of the report was that it was probable that there would be a short term moderate adverse impact on bats. (As Lord Brown has pointed out, this short term impact is likely to continue for some nine years). If planned mitigation measures are successful, the long term impact of the works was anticipated to be slight adverse. On this basis the authors of the report concluded that no significant impacts to bats were anticipated. This general conclusion requires to be treated with some caution, in my opinion. There can be no doubt that effects which could not be described as insignificant will occur for some seven to nine years at least. Thereafter, while the long term impact may not be quantitatively substantial, it will be permanent. The bat survey, together with further information, was sent to Natural England in July 2009. In consequence, the objection to the application was withdrawn. Natural England considered that planning permission could now be granted, albeit subject to certain conditions. The letter relaying the withdrawal of the objection contained the following: Natural England has reviewed the further information submitted (Great Crested Newt Survey Method Statement and Mitigation Strategy, June 2009 and Updated Bat Survey Method Statement and Mitigation Strategy, July 2009) and can now confirm that we are able to withdraw our objection of 30 April 2009, subject to the following comments: We recommend that should the Council be minded to grant permission for this scheme, conditions be attached requiring implementation of all the mitigation/compensation detailed within these reports. Particularly at Section 10 of the Bat Report and Section 6 of the Great Crested Newt Report. We would also recommend that the Council look closely at the requirement for night time working and associated flood lighting. Natural England would not advocate night reasons of for time working disturbance/disruption to the lifecycle of nocturnal wildlife and the Council should ensure these periods are kept to an absolute minimum. The head of planning and development made a report (referred to as the officers decision report) to the regulatory committee of the Council which was to take the planning decision on 29 July 2009. The impact on nature conservation was one of the issues of concern identified in the report. Lord Brown has quoted in para 8 of his judgment many of the material parts of the report that touch on this issue and I will not repeat all of those here. It is important, however, I believe, to understand the context of the statement in para 8.17 (quoted in part by Lord Brown) that the Habitats Regulations needed to be considered. The full para reads as follows: The site is not within any designated sites of importance for nature conservation. However the site is within 30 metres, at its closest, to the Portsmouth Harbour Special Protection Area (SPA) and Portsmouth Harbour RAMSAR site. Therefore the requirements of the Habitats Regulations need to be considered. (my emphasis) As Lord Brown has pointed out, the report in para 8.19 stated that the updated bat survey report contained measures to ensure (emphasis added) there is no significant adverse impact to bats from the proposals. This appears to me to be a gloss on what had in fact been said in the report. The actual claim made (itself, in my opinion, not free from controversy) was that it was anticipated that there would be no significant impacts on bats if the mitigation measures succeeded. Two points about the decision officers report should be noted, therefore. Firstly, the enjoinder to consider the Habitats Regulations was made because of the proximity of the works to sites requiring special protection rather than in relation to the need to avoid disturbance of bats in the ecological corridor itself. Secondly, it conveyed to the members of the regulatory committee the clear message that the updated bat survey report provided assurance that there would be no significant impact on bats. No reference was made to the moderate adverse impact that would occur over the seven to nine year period that regeneration of the forage areas would take nor to the permanent, albeit slight, impact that those measures could not eliminate. Lord Brown has said that the addendum to the officers report dealt specifically with the Habitats Regulations. It did, but the context again requires to be carefully noted. In order to do this, I believe that the entire section dealing with the regulations must be set out. It is in these terms: Habitats Regulations As stated in the report Natural England initially raised a holding objection to the application, requiring additional survey information concerning potential for the presence of great crested newts and bats, which are protected species. This survey work was undertaken and sent to Natural England, who are now satisfied and subsequently withdrew their objection. As also stated in the report the application site lies close to habitats which form part of the Portsmouth Harbour Site of Special Scientific Interest (SSSI). This SSSI is part of the Portsmouth Harbour Special Protection Area (SPA) and Ramsar Site. Under the Conservation (Natural Habitats etc) Regulations 1994, as amended ('the Habitats Regulations') the County Council is the competent authority and has to make an assessment of the impacts of the proposal on this European site, therefore the second recommendation for the Committee is to agree that the proposal is unlikely to have a significant impact on the European site. It was implied that by withdrawing their objection Natural England did not consider there would be any significant impact, but they did not specifically give their advice. Since the report was finalised Natural England have now given specific advice on the requirements of Regulation 48 (1) (a) of the "Habitats Regulations". They raise no objection subject to the avoidance measures included in the application being fully implemented and advise that their view is that either alone or in combination with other plans or projects, this proposal would not be likely to have a significant effect on the European site and the permission may be granted under the terms of the Habitats Regulations. Regulation 48 (1) (a) requires a competent authority, before deciding to undertake, or give any consent, permission or other authorisation for, a plan or project which is likely to have a significant effect on a European site in Great Britain to make an appropriate assessment of the implications for the site in view of that site's conservation objectives. It has nothing to do with the need to ensure that there is no disturbance of species of bats. The addendum to the decision officers report, therefore, offered no information whatever to the regulatory committee on the vital question whether the proposal would comply with article 12 of the Habitats Directive. Indeed, it is clear from an examination of the letter from Natural England of 17 July 2009 that it was preoccupied with matters that were quite separate from the question whether there would be disturbance to bats such as would be in breach of article 12 of the Directive. The letter was principally taken up with the question of possible impact on common widespread reptiles. In so far as the letter dealt with the question of the impact on bats, its tone certainly did not convey a view that the planning committee need not consider that matter further. On the contrary, on a fair reading of the letter, Natural England was making it clear that this issue required to be addressed by the committee, not only in terms of the conditions to be applied but also as to whether night time working would be unacceptable because of disturbance to wildlife. The committee considered the report of the decision officer and the addendum to it and received an oral presentation from officers of the council. The minutes of their meeting record the following in relation to the oral presentation: In introducing the report, Officers informed Members that the proposal formed part of the strategy to improve the reliability and quality of public transport in South Hampshire and the access to Gosport and Fareham. A Traffic Regulation Order would be imposed on the bus way to allow only cycles, buses and emergency vehicles to use it. Members were advised that an Environmental Impact Assessment (EIA) was not required as the proposal was a freestanding project that did not give rise to 'significant environmental effects'. Notwithstanding that, the County Council considered that important nature conservation, amenity and traffic issues had to be properly addressed and reports on these matters had been taken into account. The addendum to the report provided reassurance that Natural England had no objection to the proposals and confirmed their view that an appropriate assessment under the Habitat Regulations was not required and provided further clarification about the application and the Issue of 'screening' under the EIA Regulations. At best, this had the potential to mislead. A committee member might well think that Natural England had concluded that there would be no violation of article 39 (1) (b) of the 1994 Regulations (which forbids the deliberate disturbance of wild animals of a European protected species) or, more particularly, article 12 of the Habitats Directive. Of course the true position was that Natural England had expressed no explicit opinion whatever on that question. At most, it might be presumed that this was its view. Even if that presumption could be made, however, it does not affect the clear indication in the letter of 17 July 2009 that this matter was still one which required the committees attention. I can find nothing in the letter which suggests that Natural England regarded this matter as closed. Nor do I believe that the letter could have been properly interpreted by the committee as relieving it of the need to consider the issue. The critical issue on this appeal, therefore, is whether there is any evidence that the regulatory committee considered at all the duty that it was required to fulfil under regulation 3 (4) of the 1994 Regulations. In addressing this question I should immediately say that I agree with Lord Brown on his analysis of the nature of the requirement in article 12 (1) (b) of the Habitats Directive. As he has observed, a number of broad considerations underlie the application of the article. It is designed to protect species (not specimens of species) and its focus is on the protection of species rather than habitats, although, naturally, if major intrusion on habitats is involved, that may have an impact on the protection of the species. Not every disturbance will constitute a breach of the article. The nature and extent of the disturbance must be assessed on a case by case basis. The European Commissions guidance document of February 2007 contains a number of wise observations as to how the application of the article should be approached. While the word significant has not been employed in article 12 (1) (b), a certain negative impact likely to be detrimental must be involved. In making any evaluation of the level of disturbance, the impact on survival chances, breeding success or reproductive ability of the affected species are all obviously relevant factors. Like Lord Brown, I am sanguine about Mr Cameron QCs formulation of the test as one involving the question whether there has been a certain negative impact likely to have been detrimental to the species, having regard to its effect on the conservation status of the species. And also like Lord Brown, I consider that the Court of Appeal pitched the test too high in saying that disturbance must have a detrimental impact on the conservation status of the species at population level or constitute a threat to the survival of the protected species. Trying to refine the test beyond the broad considerations identified by Lord Brown and those contained in the Commissions guidance document is not only difficult, it is, in my view, pointless. In particular, I do not believe that the necessary examination is assisted by recourse to such expressions as de minimis. A careful investigation of the factors outlined in Lord Browns judgment (as well as others that might bear on the question in a particular case) is required. The answer is not supplied by a pat conclusion as to whether the disturbance is more than trifling. Ultimately, however, and with regret, where I must depart from Lord Brown is on his conclusion that the regulatory committee had regard to the requirements of the Habitats Directive. True it is, as Lord Brown says, that they knew that Natural England had withdrawn its objection. But that cannot substitute, in my opinion, for a consideration of the requirements of the Habitats Directive. Regulation 3 (4) requires every competent authority to have regard to the Habitats Directive in the exercise of its functions. The regulatory committee was unquestionably a competent authority. It need scarcely be said that, in deciding whether to grant planning permission, it was performing a function. Moreover the discharge of that function clearly carried potential implications for an animal species for which the Habitats Directive requires strict protection. Neither the written material submitted to the committee nor the oral presentation made by officers of the council referred to the Habitats Directive. The reference to Natural Englands consideration of the Habitats Regulations, if it was properly understood, could only have conveyed to the committee that that consideration had been for a purpose wholly different from the need to protect bats. It could in no sense, therefore, substitute for a consideration of the Habitats Directive by the committee members whose decision might well directly contravene one of the directives central requirements. It is for that reason that I have concluded that those requirements had to be considered by the committee members themselves. It may well be that, if Natural England had unambiguously expressed the view that the proposal would not involve any breach of the Habitats Directive and the committee had been informed of that, it would not have been necessary for the committee members to go behind that view. But that had not happened. It was simply not possible for the committee to properly conclude that Natural England had said that the proposal would not be in breach of the Habitats Directive in relation to bats. Absent such a statement, they were bound to make that judgment for themselves and to consider whether, on the available evidence the exercise of their functions would have an effect on the requirements of the directive. I am afraid that I am driven to the conclusion that they plainly did not do so. As I have said, Natural England (at the time that it was considering the Habitats Regulations in July 2009) had not explicitly addressed the question whether the disturbance of bats that the proposal would unquestionably entail would give rise to a violation of the directive. The main focus of the letter of 19 July was on an entirely different question. Lord Brown may well be correct when he says that it is not to be supposed that Natural England misunderstood the proper ambit of article 12 (1) (b), but the unalterable fact is that it did not say that it had concluded that no violation would be involved, much less that the planning committee did not need to consider the question. It is, of course, tempting to reach ones own conclusion as to whether the undoubted impact on the various species of bats that will be occasioned by this development is sufficient or not to meet the requirement of disturbance within the meaning of article 12. But this is not the function of a reviewing court. Unless satisfied that, on the material evidence, the deciding authority could have reached no conclusion other than that there would not be such a disturbance, it is no part of a courts duty to speculate on what the regulatory committee would have decided if it had received the necessary information about the requirements of the Habitats Directive, much less to reach its own view as to whether those requirements had been met. Since the planning permission was granted on a vote of six in favour and five against, with two abstentions, it is, in my view, quite impossible to say what the committee would have decided if it had been armed with the necessary knowledge to allow it to fulfil its statutory obligation. Other members of the court have expressed the view that this is what the committee would have decided. Had I felt it possible to do so, I would have been glad to be able to reach that conclusion. As it is, I simply cannot. I would therefore allow the appeal and quash the planning permission.

This appeal concerns, first, the meaning of the obligation imposed on the United Kingdom by the Habitats Directive, a European legislative instrument, to prohibit deliberate disturbance of certain species of bats. It concerns, secondly, the scope of the obligation in domestic legislation on planning authorities to have regard to the requirements of the Habitats Directive. Hampshire County Council, the Respondent in the appeal, granted planning permission on 29 July 2009 for a proposed three mile stretch of roadway to provide a rapid bus service between Fareham and Gosport in South East Hampshire. The Appellant, Mrs Morge, lives close by and objects to the scheme. The scheme, its supporters argue, will create a new and efficient form of public transport to the benefit of many residents, workers and visitors to the area. Environmental objections have arisen, however, on grounds that the proposed path of the busway runs along the path of an old railway line, which has become an ecological corridor for various flora and fauna. The planning application was submitted on 31 March 2009 and objected to by Natural England, the Governments adviser on nature conservation, in part because of their concerns about the impact of the development on bats. The Council responded by submitting an Updated Bat Survey (UBS), largely as a result of which Natural England in a letter of 17 July 2009 withdrew their objections. At a meeting of the Councils Planning Committee on 29 July 2009 planning permission was granted by a majority of six to five with two abstentions. The UBS recorded that no bat roosts were found on the site. The removal of trees and vegetation, however, would result in a loss of good quality bat foraging habitats. This would have a moderate adverse impact at local level on foraging bats for nine years, the impact thereafter reducing to slight adverse / neutral. In addition the busway would sever a bat flight path, increasing their risk of collision with buses. Mrs Morge challenged the permission on environmental grounds, including its impact on several species of European protected bats. The challenge failed before the High Court and Court of Appeal, but the Supreme Court granted the Appellant limited permission to appeal on two issues of general importance. The first is the level of disturbance required to engage the prohibition in article 12(1)(b) of the Habitats Directive on deliberate disturbance of the bat species in question. The second is the scope of the obligation in regulation 3(4) of Conservation (Natural Habitats etc.) Regulations 1994 on local authorities to have regard to the requirements of the Habitats Directive in deciding whether to grant planning permission, and whether the Council in this case complied with the obligation. The Supreme Court by a majority of 4 1 dismisses the appeal. Lord Brown gives the lead judgment for the majority, setting out the correct approaches to article 12(1)(b) of the Habitats Directive and regulation 3(4) of the 1994 Regulations, and finding that the Council complied with the obligation in regulation 3(4). Lord Kerr agrees with majority on the article 12(1)(b) issue but dissents on the regulation 3(4) issue. On the first issue, the Court held that certain broad considerations must govern the correct approach to article 12(1)(b) of the Habitats Directive. First, it is an article affording protection specifically to species and not to habitats. Secondly, the prohibition relates to the protection of species and not specimens of these species as in other articles. Thirdly, an assessment is needed of the nature and extent of the negative impact of the activity upon the species and a judgment as to whether that is sufficient to constitute disturbance of the species. Fourthly, it is implicit in the article that activity during the period of breeding, rearing, hibernation and migration is more likely to have a sufficient negative impact on the species to constitute disturbance: [19]. The European Commissions guidance document is of assistance. It provides illustrations at either end of the spectrum within which the question arises as to whether any given activity constitutes disturbance, and explains that every case has to be judged on its own merits. Two further considerations are also of relevance. First, account should be given to the rarity and conservation status of the species in question and the impact of the disturbance on the local population of the species. Secondly, disturbance includes in particular that which is likely to impair an animals ability to survive, breed, rear its young, hibernate or migrate, and that which is likely to affect the local distribution or abundance of the species: [20] [23]. On the second issue, the majority held that the correct approach to regulation 3(4) is that planning permission should ordinarily be granted save only in cases where the Planning Committee conclude that the proposed development would both be likely to offend article 12(1) and be unlikely to be licensed pursuant to the powers to derogate from the requirements of article 12(1). Where Natural England express themselves satisfied that a proposed development will be compliant with article 12(1), the planning authority are entitled to presume that that is so. In the present case the Planning Committee had sufficient regard to the requirements of the Directive so as to satisfy regulation 3(4): the Committee knew that Natural Englands objection had been withdrawn and that necessary measures had been planned to compensate for the loss of foraging: [30]. Lord Kerr, dissenting on this second issue, observed that Natural England had expressed no explicit opinion on the question of whether there would be violation of article 12(1). Even if it could be presumed that Natural Englands view was of no violation, that did not affect the clear indication in the letter of 17 July 2009 that the matter was still one which required the Committees attention. If Natural England had unambiguously expressed a view of no violation and the Committee had been informed of this, it may well have been unnecessary for the Committee to go behind that view. But absent such a statement, they were bound to make the judgment for themselves, something which they did not do. Lord Kerr would have quashed the planning permission on this basis: [75] [84].

Sexual offences can inflict harm whose consequences persist throughout the lives of their victims and some sexual offenders never lose their predisposition to commit sexual offences. Section 82 of the Sexual Offences Act 2003 (the 2003 Act) imposes on all who are sentenced to 30 months imprisonment or more for a sexual offence the duty to keep the police notified of where they are living and of travel abroad (the notification requirements). This duty persists until the day they die. There is no right to a review of the notification requirements. These appeals raise the question of whether the absence of any right to a review renders the notification requirements incompatible with article 8 of the European Convention on Human Rights (the Convention). That article provides: 1. Everyone has the right to respect for his private and family life, his home and his correspondence. There shall be no interference by a public authority with the exercise of this right except such as is in accordance with the law and is necessary in a democratic society in the interests of national security, public safety or the economic well being of the country, for the prevention of disorder or crime, for the protection of health or morals, or for the protection of the rights and freedoms of others. 2. These appeals arise out of two independent claims for judicial review. The first was brought by F. When he was eleven years old he committed a number of serious sexual offences, including two offences of rape, on a six year old boy. On 17 October 2005, having been convicted of these offences after a contested trial, he was sentenced to 30 months imprisonment on each count concurrent. This sentence automatically brought into effect the notification requirements. The second claim was brought by Mr Thompson. He was born on 1 March 1951. On 12 December 1996 he was sentenced to 5 years imprisonment, concurrent, on two counts of indecent assault on his daughter, together with other concurrent sentences for assault occasioning actual bodily harm. This sentence also brought into effect the notification requirements. Neither claimant was in a position to bring proceedings pursuant to section 7(1) of the Human Rights Act 1998 on the ground that the imposition of the notification requirements unlawfully infringed his Convention rights, for section 6(2) of that Act precluded such a claim. Each commenced proceedings for judicial review claiming a declaration that the notification requirements were incompatible with article 8 of the Convention. The claims succeeded before the Divisional Court (Latham LJ, Underhill and Flaux JJ) on 19 December 2008, whose decision was upheld by the Court of Appeal (Dyson, Maurice Kay and Hooper LJJ) on 23 July 2009, [2010] 1 WLR 76. The ground on which the claims succeeded was a narrow one. The courts below held that the notification requirements interfered with article 8 rights, that the interference was in accordance with the law and that it pursued legitimate aims, namely the prevention of crime and the protection of the rights and freedoms of others, but that the lack of any provision for review of the notification requirements rendered these a disproportionate manner of pursuing that legitimate aim. It is not to be inferred from the judgments below that, had either claimant been entitled to challenge, by way of a review, the notification requirements made in his case, the challenge would have succeeded. The only issue raised by these appeals is a general one. Does the absence of any right to a review render lifetime notification requirements disproportionate to the legitimate aims that they seek to pursue? The statutory provisions relevant statutory provisions set out by the Court of Appeal. Statutory notification requirements for sex offenders were first introduced by section 1(3) of the Sex Offenders Act 1997 (the 1997 Act). They were automatic on conviction. Under the 1997 Act regime, the notification requirements were to give the police details of the offenders name, address and date of birth within 14 days of conviction, and to notify any address at which he would be staying for 14 days or longer. The Criminal Justice and Courts Services Act 2000 (the 2000 Act) reduced the initial notification time to 3 days and introduced a new requirement that an offender notify the police if he intended to travel overseas in accordance with regulations made by the Secretary of State. Regulations were made pursuant to the 2000 Act which required that notification of travel should be made at least 48 hours prior to departure and that it should include the identity of the carrier, all I propose to adopt, with some additions, the helpful summary of the points of arrival in destination countries, accommodation arrangements, return date and point of arrival if known. Under the 1997 and 2000 Acts the required notifications could be given either by attending in person at a local police station or by sending a written notification to any such station. All these provisions were repealed by the 2003 Act. Section 82(1) of the 2003 Act contains a table which prescribes the notification periods for different categories of offenders. As I have said, for persons who have been sentenced to imprisonment or detention for 30 months or more, an indefinite period beginning with the relevant date is prescribed. For present purposes the relevant date is defined as the date of conviction (section 82(6)). Section 82(2) provides that, where a person is under the age of 18 on the relevant date, the determinate periods prescribed in the table are halved in respect of sentences shorter than 30 months. Section 83 makes provision for initial notification. Thus, within 3 days of the relevant date, the offender must notify to the police the information specified in subsection (5), namely his date of birth; his national insurance number; his name on the relevant date and, where he used one or more other names on that date, each of those names; his home address on the relevant date; his name on the date on which notification is given and, where he uses one or more other names on that date, each of those names; his home address on the date on which notification is given; and the address of any other premises in the United Kingdom at which, at the time the notification is given, he regularly resides or stays. Section 84 makes provision for the notification of changes in the information given pursuant to section 83 within 3 days of the changes occurring. This includes notification of the person's "having resided or stayed, for a qualifying period, at any premises in the United Kingdom the address of which has not been notified to the police" (subsection (1)(c)). Subsection (6) provides that "qualifying period" means (a) a period of 7 days, or (b) two or more periods, in any period of 12 months, which taken together amount to 7 days. Section 85 provides for periodic notification of the information specified in section 83(5). Section 86(1) provides that the Secretary of State may by regulations make provision requiring offenders who leave the United Kingdom to give a notification under subsection (2) before they leave and a notification under subsection (3) about their subsequent return. A notification under subsection (2) must disclose the date on which the offender will leave; the country (or the first country) to which he will travel and his point of arrival in that country; and any other information prescribed by the regulations which the offender holds about his departure from or return to the United Kingdom or his movements while outside the United Kingdom. A notification under subsection (3) must disclose any information prescribed by the regulations about the offender's return to the United Kingdom. Section 87(1) provides that a person gives a notification by "(a) attending at such police station in his local police area as the Secretary of State may by regulations prescribe, and (b) giving an oral notification to any police officer, or to any person authorised for the purpose by the officer in charge of the station". Section 87(4) provides that where a notification is given, the relevant offender must, if requested to do so by the police officer or authorised person, allow the officer or person to take his fingerprints and/or photograph any part of him. Section 91(1) provides that a person commits an offence "if he (a) fails, without reasonable excuse, to comply with section 83(1), 84(1), 84(4)(b), 85(1), 87(4)or any requirement imposed by regulations made under section 86(1)". Section 91(2) provides that a person guilty of an offence under this section is liable on conviction on indictment to imprisonment to a term not exceeding 5 years and on summary conviction to a term not exceeding 6 months or a fine or both. Pursuant to section 86 the Secretary of State made the Sexual Offences Act 2003 (Travel Notification Requirements) Regulations 2004 (SI 2004/1220). These require extremely detailed information to be given in relation to travel plans. Just as in the case of information required by sections 83, 84 and 85, this information had to be provided in person at a police station. The approach to proportionality In order to decide whether interference with a fundamental right is proportionate to the legitimate end sought to be achieved the court has to ask the questions identified by the Privy Council in de Freitas v Permanent Secretary of Ministry of Agriculture, Fisheries, Lands and Housing [1999] 1 AC 69 at p 80: whether: (i) the legislative objective is sufficiently important to justify limiting a fundamental right; (ii) the measures designed to meet the legislative objective are rationally connected to it; and (iii) the means used to impair the right or freedom are no more than is necessary to accomplish the objective. However, as Lord Bingham of Cornhill observed in Huang v Secretary of State for the Home Department [2007] UKHL 11; [2007] 2 AC 167 at para 19, there is an overriding requirement to balance the interests of the individual against those of society. In this case the importance of the legislative objective has never been in doubt. The prevention of sexual offending is of great social value and the respondents have not suggested that, insofar as notification requirements play a useful role in assisting to achieve this objective, they are not a proportionate means of doing so. The debate has been as to the necessity and utility of imposing notification requirements for life without any review. In respect of this debate the observations of Lord Nicholls of Birkenhead in Wilson v First County Trust Ltd (No 2) [2003] UKHL 40; [2004] 1 AC 816 at paras 62 64 are in point. He remarked that when a court makes a value judgment in respect of proportionality the facts will often speak for themselves, but that sometimes the court may need additional background information tending to show, for instance, the likely practical impact of the statutory measure. Such information may be provided in the course of Parliamentary debate, and it is legitimate to have recourse to Hansard in the search for it. Domestic jurisprudence The Court of Appeal considered three cases, to which this court has also been referred, in which the relevant provisions of the 2003 Act, or its predecessor the 1997 Act, were considered. The first was In re an application by Kevin Gallagher for Judicial Review [2003] NIQB 26, a decision of Kerr J sitting in the High Court of Northern Ireland. The applicant had been sentenced to 33 months imprisonment on three counts of indecent assault and, in consequence, become subject to the automatic reporting restrictions. He complained that these were disproportionate in that they were automatic. The trial judge had no jurisdiction to disapply or vary them where it was clear to him that they were unnecessary or inappropriate. The applicant was particularly concerned with the obligation to give notification of proposed travel arrangements added by the 2000 Act as he moved regularly across the border to the Republic of Ireland, usually for very short periods. The decision and reasoning of Kerr J appear from the following paragraphs of his judgment. 22 . the absence of a dispensing provision whereby the applicant might apply to be relieved of the reporting requirements after a stipulated period will not render the provisions automatically disproportionate. That feature is undoubtedly relevant to the issue but it alone cannot dictate the outcome of the examination of a schemes proportionality. 23. It is inevitable that a scheme which applies to sex offenders generally will bear more heavily on some individuals than others. But to be viable the scheme must contain general provisions that will be universally applied to all who come within its purview. The proportionality of the reporting requirements must be examined principally in relation to its general effect. The particular impact that it has on individuals must be of secondary importance. 24. The gravity of sex offences and the serious harm that is caused to those who suffer sexual abuse must weigh heavily in favour of a scheme designed to protect potential victims of such crimes. It is important, of course, that one should not allow revulsion to colour ones attitude to the measures necessary to curtail such criminal behaviour. A scheme that interferes with an individuals right to respect for his private and family life must be capable of justification in the sense that it can be shown that such interference will achieve the aim that it aspires to and will not simply act as a penalty on the offender. 25. The automatic nature of the notification requirements is in my judgment a necessary and reasonable element of the scheme. Its purpose is to ensure that the police are aware of the whereabouts of all serious sex offenders. This knowledge is of obvious assistance in the detection of offenders and the prevention of crime. If individual offenders were able to obtain exemption from the notification requirements this could at least potentially compromise the efficacy of the scheme. 26. By the same token the fact that the notification requirements persist indefinitely does not render the scheme disproportionate. While this is unquestionably an inconvenience for those who must make the report, that inconvenience must be set against the substantial benefit that it will achieve of keeping the police informed of where offenders are living and of their travel plans so that further offending may be forestalled both by rendering detection more easily and deterring those who might be tempted to repeat their offences. 27. I am therefore satisfied that the notification requirements are proportionate and the application for judicial review must be dismissed. This passage is of obvious relevance, albeit that Kerr J was considering submissions directed at the role of the trial judge. I observe that he treated as axiomatic both the substantial benefit to which he referred in paragraph 26 and the statement in paragraph 25 that it could, at least potentially, compromise the efficacy of the scheme if individual offenders were able to obtain exemption from the notification requirements. In Forbes v Secretary of State for the Home Department [2006] EWCA Civ 962; [2006] 1 WLR 3075 Sir Igor Judge P endorsed Kerr Js analysis of the principles underpinning and justifying the notification requirements. As the Court of Appeal observed, however, Forbes was not concerned with indefinite notification requirements, nor with the possibility of a review of these. A v Scottish Ministers [2007] CSOH 189; 2008 SLT 412 concerns the 2003 Act, as it applies in Scotland, and regulations made pursuant to it. The provisions are not in all respects identical in the two jurisdictions. A brought a petition for judicial review, challenging the compatibility of these provisions with article 8 of the Convention. The petition was refused by the Lord Ordinary and a reclaiming motion was considered by the Inner House on 19 to 21 January. The First Division has reserved judgment until after the court has delivered judgment in this appeal. In these circumstances the court granted permission to intervene in these appeals to both the Lord Advocate and to A. The Lord Ordinary reviewed the relevant jurisprudence in a lengthy judgment and concluded that the notification requirements were proportionate to the legitimate aim at which they were directed and were compatible with article 8 of the Convention (paragraph 58). As the Court of Appeal observed, however, this conclusion was not easy to reconcile with the following passage in paragraph 52 of his judgment: In light of the importance of the aims being pursued I am satisfied that the rigid and indeterminate nature of the scheme under discussion does not result in this petitioner having to bear an individual and excessive burden. That is not to say that if the facts of the case were different the same view would necessarily be arrived at. For example, the proportionality of an indefinite interference with the art 8 rights of an elderly man who had been in no trouble for very many years might cause the issue to be focused in quite a different way. The Lord Ordinary had earlier accepted the proposition that his task was to look at the facts as they applied to the applicant rather than in the abstract, albeit in the context of the general aims of the legislation (para 49), and this is what he appears to have done. His judgment did not focus on the question of whether the lack of any review of the notification requirements could be justified. The Strasbourg jurisprudence An appropriate starting point when considering the Strasbourg jurisprudence is the following statement of the Strasbourg Court in Stubbings & Others v United Kingdom (1996) 23 EHRR 213 at para 62 in relation to the positive obligation owed by States to protect individuals against sexual abuse: Sexual abuse is unquestionably an abhorrent type of wrongdoing, with debilitating effects on its victims. Children and other vulnerable individuals are entitled to state protection, in the form of effective deterrence, from such grave types of interference with essential aspects of their private lives. The reference to deterrence was particularly relevant on the facts of that case, and the duty extends to taking such other steps as are reasonable to prevent the commission of sexual offences. In Ibbotson v United Kingdom (1998) 27 EHRR CD 332, an admissibility decision, the issue was whether the notification requirements under the 1997 Act constituted a penalty for the purposes of article 7 of the Convention. The Commission held that it did not, remarking that the measures did not go beyond a requirement to furnish to the authorities information which could, in any event, be in the public domain. The same conclusion was reached in another admissibility decision, Adamson v United Kingdom (1999) 28 EHRR CD 209. The Court reached the following conclusion as to the purpose of the notification requirements: . the purpose of the measures in question is to contribute towards a lower rate of reoffending in sex offenders, since a persons knowledge that he is registered with the police may dissuade him from committing further offences and since, with the help of the register, the police may be enabled to trace suspected reoffenders faster. The applicant in that case also sought to make an article 8 challenge to the notification requirements. In finding such a challenge inadmissible the Court held that the notification requirements amounted to an interference with private life within article 8(1). The requirements were, however, in accordance with the law and they pursued the legitimate aims of the prevention of crime and the protection of the rights and freedoms of others. It was thus necessary to consider whether the measures were proportionate. This required weighing the fact that they required no more than registration of information with the police against the importance of the aims pursued by the Act, namely to protect individuals from grave forms of interference. The Court found the notification requirements proportionate and the complaint manifestly ill founded. As the Court of Appeal observed at paragraph 21 the Court did not expressly consider the impact of the lack of a mechanism for review since that was not the subject of the complaint. Massey v United Kingdom (Application No 14399/02) (unreported) 8 April 2003 was another case where the Court ruled an application in relation to the notification requirements inadmissible. In that case the applicant made a discrete complaint that there was no assessment or review of the necessity for registration in his particular case. The Court of Appeal at paragraph 23 treated this as a complaint that focussed on the moment when the sentence was imposed. I am not sure that this reading is justified. While assessment naturally applies to the time of sentence review suggests a subsequent process. But this complaint was a subsidiary point to more fundamental challenges to the applicants conviction and sentence and the absence of any review of the notification requirements received no separate consideration by the Court. I now turn to the Strasbourg decisions that have the greatest relevance, and which were particularly relied upon by the respondents. The second of these post dates the decision of the Court of Appeal. In S and Marper v United Kingdom (2008) 48 EHRR 1169 the first applicant had been charged with attempted robbery and acquitted. The second applicant had been charged with harassment of his partner, but the case against him was formally discontinued. Each had had fingerprints, cellular samples and DNA samples taken. They complained that the fact that the police were lawfully entitled to retain these indefinitely infringed their article 8 rights. In holding that there had been a violation of article 8 the Court had regard to a number of matters: the blanket and indiscriminate nature of the power of retention; the fact that the nature and gravity of the suspected offence was immaterial, as was the age of the suspected offender; the fact that the power to retain was unlimited in time and in particular, there is no provision for independent review of the justification for the retention according to defined criteria, including such factors as the seriousness of the offence, previous arrests, the strength of the suspicion against the person and any other special circumstances. In Bouchacourt v France (Application No 5335/06) (unreported) 17 December 2009 an unsuccessful application was made by a man who had been sentenced to ten years imprisonment for rape and sexual assault on minors. This resulted in his name being placed automatically on a Register of Sexual and Violent Offenders. It also resulted in an obligation to confirm his address every year and to give notice of any change of address. This could be done by registered letter including a receipt or invoice, not more than three months old, containing the applicants name and address. How long an offenders name remained on the register depended on the gravity of the offence, but it could be for twenty or thirty years. The Court held that there had been no violation of article 8, for reasons that appear in the following paragraphs of its judgment: 67. Comme lindique le Gouvernement, il sagit dune dure maximale. Quoi quimportante en lespce puisquelle est de trente ans, la Cour observe que leffacement des donnes est de droit, une fois ce dlai coul, lequel se compute ds que la dcision ayant entran linscription cesse de produire tous ses effets. La Cour relve galement que la personne concerne peut prsenter une demande deffacement au procureur de la Rpublique si la conservation des donnes la concernant napparat plus pertinente compte tenu de la finalit du fichier, au regard de la nature de linfraction, de lge de la personne lors de sa commission, du temps coul depuis lors et de sa personnalit actuelle (paragraphe 16, article 706 53 10 du CPP). La dcision du procureur est susceptible de recours devant le juge des liberts et de la dtention puis devant le prsident de la chambre de linstruction. 68. La Cour considre que cette procdure judiciaire deffacement des donnes assure un contrle indpendant de la justification de la conservation des informations sur la base de critres prcis (section et Marper, prcit, 119) et prsente des garanties suffisantes et adquates du respect de la vie prive au regard de la gravit des infractions justifiant linscription sur le fichier. Certes, la mmorisation des donnes pour une priode aussi longue pourrait poser un problme sous langle de larticle 8 de la Convention, mais la Cour constate que le requrant a, en tout tat de cause, la possibilit concrte de prsenter une requte en effacement des donnes mmorises alors que la dcision ayant entran son inscription a cess de produire tous ses effets. Dans ces conditions, la Cour est davis que la dure de conservation des donnes nest pas disproportionne au regard du but poursuivi par la mmorisation des informations. Unofficial translation: 67. As the Government points out, it is a maximum duration. Although significant in this case, since it is of thirty years, the Court observes that what is important in this case, where the period is thirty years, is that the deletion of information is of right once the time has lapsed, as calculated from the date on which the sentence giving rise to registration ceases to have effect. The Court also notes that the person concerned can apply to the prosecutor for the deletion of the information if its preservation no longer appears to be relevant, taking into account the purpose of the register and having regard to the nature of the offence, the age of the person at the time that it was committed, the length of time that has lapsed since then, and the offenders current character (paragraph 16, Article 706 53 10 of the Code of Criminal Procedure). The prosecutors decision is subject to appeal to the juge des liberts et de la detention, then to the president of the investigating chamber. 68. The Court considers that this judicial procedure for removing the information ensures independent review of the justification for the retention of the information according to defined criteria (S and Marper, already cited, para 119) and provides adequate and sufficient safeguards in relation to respect for private life, with regard to the seriousness of the offences justifying registration on the sex offenders register. Certainly, the retention of data for so long a period could be problematic in terms of Article 8 of the Convention, but the Court notes that the Applicant has in any case the concrete opportunity to apply for the deletion of the data retained when the sentence giving rise to his registration has ceased to have effect. In these circumstances, the Court is of the opinion that the length of time that the data is kept is not disproportionate to the aim pursued by the storage of the information. The effect of the jurisprudence The Court of Appeal found in paragraph 35 that there was no authority binding on the court which decided the question of whether the imposition of indefinite notification requirements without the possibility of review was itself a disproportionate interference with an offenders article 8 rights. It might have held that there was no such authority, binding or otherwise. That analysis holds good, despite the decisions in S and Marper and Bouchacourt. Those decisions show, however, that the Strasbourg Court considers that the possibility of reviewing the retention of sensitive personal information and notification requirements in respect of such information is highly material to the question of whether such retention and notification requirements are proportionate and thus compliant with article 8. Paragraph 68 of Bouchacourt suggests that, but for the right to apply for deletion of the data retained, the lengthy registration period would have been held disproportionate. The decision of the Divisional Court Giving a judgment with which the other two members of the court agreed, Latham LJ found that there was general justification for continuing notification requirements for the lifetime of serious sexual offenders. He held, however, that the real question was whether an offender who can clearly demonstrate that he presents no risk, or no measurable risk, of re offending should be precluded from obtaining a review of the notification requirements. Latham LJ gave a negative answer to that question. He held that it was not justifiable in article 8 terms to deny to a person who believed himself to be in a position to establish that he presented no risk the opportunity to do this. The decision of the Court of Appeal The Court of Appeal considered the impact of the notification requirements imposed by the 2003 Act. The court concluded that counsel for the Secretary of State was wrong to describe these as no more than very slight interference with article 8 rights. The court annexed in an appendix to its judgment examples of the difficulty that the requirements posed to those who needed to travel frequently and at short notice, either within the jurisdiction or abroad. The court also made the point that the notification requirements are capable of leading to the disclosure to third parties of the fact that the person subject to them has a past conviction for a sexual offence. For these reasons, while the impact of the notification requirements might be modest for some, for others they would be more substantial. The court considered the submission that a right of review would compromise the utility of the notification requirements as a tool for the prevention and detection of sexual offences. It did not accept that submission for the reasons set out in paragraph 44: . The aim of the notification requirements regime is to assist in the prevention and detection of sexual offences. The assumptions that underpin the provision for indefinite notification requirements are that (i) there is a risk that those who have committed serious sexual offences (ie offences which attract a custodial sentence of at least 30 months in length) may commit further sexual offences for the rest of their lives; and (ii) the notification requirements will assist the police in preventing and detecting such offences and may deter offenders from further offending. These two assumptions are falsified in a case where it is clear that there is no real risk that the sexual offender will re offend. No purpose is served by keeping on the Sexual Offences Register a person of whom it can confidently be said that there is no risk that he will commit a sexual offence. To keep such a person on the police data base does nothing to promote the aims of the notification requirements. To say that the data base is no longer complete begs the question of what a complete data base should comprise. In our judgment, it should not include offenders who no longer present a risk of sexual offending. The court rejected the submission that resource implications were a bar to granting a right of review and that it would be difficult to operate a review process. It observed that a flood of applications could be avoided by setting a high threshold for review as to the time that an application could first be made, the frequency of applications and what had to be proved in order to succeed on the review. To the submission that it would be difficult for applicants to demonstrate that they no longer presented a risk of sexual offending the court observed that this was not a reason for depriving them of the opportunity of attempting to do this, regardless of the circumstances of the particular case. For these reasons the court concluded that an offender was, as a matter of principle, entitled to have the question of whether the notification requirements continued to serve a legitimate purpose determined on a review. This entitlement was even stronger in the case of child offenders because of the fact that children change as they mature. Discussion The issue in this case is one of proportionality. It is common ground that the notification requirements interfere with offenders article 8 rights, that this interference is in accordance with the law and that it is directed at the legitimate aims of the prevention of crime and the protection of the rights and freedoms of others. The issue is whether the notification requirements, as embodied in the 2003 Act, and without any right to a review, are proportionate to that aim. That issue requires consideration of three questions. (i) What is the extent of the interference with article 8 rights? (ii) How valuable are the notification requirements in achieving the legitimate aims? and (iii) To what extent would that value be eroded if the notification requirements were made subject to review? The issue is a narrow one. The respondents case is that the notification requirements cannot be proportionate in the absence of any right to a review. The challenge has been to the absence of any right to a review, not to some of the features of the notification requirements that have the potential to be particularly onerous. I turn to consider the extent of interference with article 8 rights that can result from the notification requirements. When the Strasbourg Court held in Adamson that the notification requirements interfered with private life within the meaning of article 8.1 the interference identified was the obtaining and retention of information by law enforcement authorities. The information, name, date of birth and address was, on the face of it innocuous. The reality is, however, that it is implicit in the requirement to notify the police of his name and address that the ex offender will have to explain the purpose of the notification. The significance of notification is that it links the ex offender with the recorded particulars of his conviction. Thus the notification requirements have been treated as being equivalent to being placed on a Sexual Offences Register and it is convenient to use this terminology, as did the Court of Appeal, see paragraph 44. The notification requirements become a much more serious interference with private life when the information that the individual is on the Sexual Offences Register is conveyed to third parties. As Mr Eadie QC pointed out, one of the objects of the notification requirements is that this information should be conveyed to third parties in circumstances where this is necessary for the prevention of further offending, as in some circumstances it will be. He rightly submitted that the possibility of such use should not be held to add to the case that the requirements are disproportionate. He further submitted that the court should proceed on the premise that the information will only be conveyed to third parties where this is necessary. I do not accept this submission. Giving information to the local police in relation to ones address and ones movements coupled with the explanation that this is necessary because one is on the Sexual Offences Register will necessarily carry the risk that the information may be conveyed to third parties in circumstances where this is not appropriate. This said, the fact that under the 1997 Act the relevant notification could be made in writing and that the information to be provided was limited meant that the task of giving the notification could be described as a mere inconvenience. This ceased to be the case with the increased requirements imposed first by the 2000 Act and then by the 2003 Act. These requirements, which included the requirement to give notification in person at a police station, imposed a considerable burden on anyone who was a frequent traveller, whether within or outside the jurisdiction, as illustrated by the examples given by the Court of Appeal. There is an obvious risk inherent in making repeated visits to a police station to give notification of travel plans that third parties will become aware of the reason for so doing. In short, the changes made by the 2000 and 2003 Acts to the notification requirements will have given some of those subject to those requirements very good reason for wishing to have the requirements lifted, for they are capable of causing significant interference with article 8 rights. I turn to consider how important notification requirements are in furthering the aims of preventing crime and protecting potential victims of crime. It is obvious that it is necessary for the authorities that are responsible for the management and supervision of those convicted of sexual offences to be aware of the whereabouts of those who are subject to active management or supervision. The nature and extent of the management and supervision of such offenders will vary and will depend, in part, upon an assessment of the degree of risk of re offending that they pose. I do not propose to attempt to set out all the complex statutory provisions in relation to sentencing that are relevant, but will summarise the effect of some of them. An offender who has received a fixed term sentence will be released on licence after serving the requisite custodial period. The licence will remain in effect for the length of the sentence. An offender who has been given a life sentence, or a sentence of imprisonment for public protection (IPP) will be released on licence after serving his minimum term if the Parole Board is satisfied that it is no longer necessary for the protection of the public that he be confined. An offender who has been given a life sentence will remain on licence for the rest of his life. An IPP prisoner can apply to the Parole Board which will order the licence to cease to have effect if satisfied that it is no longer necessary for the protection of the public that the licence remain in force. While the licence remains in force, the conditions of the licence will make provision for the supervision of the offender by the appropriate authority. Thus where the Parole Board orders a licence to cease to have effect it is presumably satisfied that such supervision is no longer necessary for the protection of the public. Section 104 of the 2003 Act grants power to a magistrates court to make a sexual offences prevention order (SOPO) in relation to a qualifying offender who has acted in such a way as to give reasonable cause to believe that it is necessary for such an order to be made. Those subject to notification requirements are qualifying offenders. Section 114 of the 2003 Act grants power to a magistrates court to impose a foreign travel order in respect of a qualifying offender where his behaviour makes it necessary to make such an order for the purpose of protecting children generally or any child from serious sexual harm. Such an order prevents the offender from travelling to the countries specified, which may be all countries, outside the United Kingdom. Section 325 of the Criminal Justice Act 2003 requires the responsible authority for each area to establish arrangements for the purpose of assessing and managing the risks posed in that area by relevant sexual and violent offenders. The responsible authority means the chief officer of police, the probation board or provider of probation services and the Minister of the Crown exercising functions in relation to prisons, acting jointly. Relevant sexual offenders include those who are subject to notification requirements. Section 327A of the same Act requires the responsible authority for each area, in the course of discharging its functions under section 325, to consider whether to disclose information in its possession about the relevant previous convictions of any child sex offender managed by it and goes on to make detailed provision for circumstances in which there is a presumption that this should be done. The responsible authority has made Multi Agency Public Protection Arrangements (MAPPA) pursuant to the duty imposed on it by section 325 and makes an annual report in relation to the operation of these. Counsel provided the court with a little information about the manner in which risk is managed under MAPPA and the court has since obtained a press notice issued on the occasion of the publication of MAPPAs 8th Report for 2009. This states that there are three levels of management of offenders. At Level 1 offenders are subject to the usual management arrangements applied by whichever agency is supervising them. At Level 2 risk management involves the active involvement of several agencies via regular multi agency public protection meetings. At Level 3 cases require the involvement of senior officers to authorise the use of special resources, such as police surveillance or specialised accommodation and, sometimes, senior management oversight. The interrelationship between these measures and the notification requirements is obvious. In the first place, the same criteria often apply to determine those who are subject to the notification requirements as apply to determine those who are potentially subject to the various methods of management and supervision. In the second place, notification requirements are important in that they assist the responsible authorities to keep tabs on those whom they are supervising and managing. This case turns, however, on one critical issue. If some of those who are subject to lifetime notification requirements no longer pose any significant risk of committing further sexual offences and it is possible for them to demonstrate that this is the case, there is no point in subjecting them to supervision or management or to the interference with their article 8 rights involved in visits to their local police stations in order to provide information about their places of residence and their travel plans. Indeed subjecting them to these requirements can only impose an unnecessary and unproductive burden on the responsible authorities. We were informed that there are now some 24,000 ex offenders subject to notification requirements and this number will inevitably grow. Both the Divisional Court and the Court of Appeal proceeded on the premise that there were some who were subject to notification requirements who could clearly demonstrate that they presented no risk of re offending or of whom it can confidently be said that there was no risk that they would commit a sexual offence. Mr Eadie came close to admitting that, if this premise were correct, it would be hard to gainsay the proposition that there ought to be a right to a review to enable notification requirements to be lifted in respect of those who no longer posed a risk. He submitted, however, that the nature of sexual offences was such that it was never possible to be sure that someone who had been guilty of a serious sexual offence posed no significant risk of re offending, and that this was borne out by statistical evidence. Either all sexual offenders had a (possibly) latent predisposition to commit further sexual offences or, if some did not, it was impossible to identify who these were. Whether these submissions are well founded is the question that lies at the heart of this appeal. I turn to consider the evidence before the court. Parliamentary material Mr Eadie told the court that there had been a consultation exercise before the introduction of the 1997 Bill that led to the 1997 Act, but that this provided no assistance on the issue raised by this appeal. No material was placed before the court to explain the changes that were made to the notification requirements by the 2000 Act or the 2003 Act. The court was referred to an extract from Hansard for 4 February 1997 (HC Debates), Cols 19, 23, 25 which reported the moving of two amendments in Standing Committee D to the 1997 Bill. I have considered this in the search for background information to explain why the Act contained no right to a review of the notification requirements. The second proposed amendment would have introduced a right to apply to the court to vary the duration of the notification requirements if a chief officer of police certified that the applicant was no longer likely to be a danger to others. Mr Timothy Kirkhope, resisting this amendment, raised the question of how the court would decide whether the need for a notification requirement remained and suggested that such a provision would have resource implications, would create bureaucracy and could weaken the Bills protection. He said that the course adopted reflected the results of consultation. This throws little light on the question of whether reliable risk assessment can be carried out in the case of sex offenders. Mr Eadie relied primarily on statistical evidence to support his submission that a reliable review of the risk posed by those convicted of serious sexual offences was not practicable. The most detailed statistics were provided in a paper published in 2004 in Legal and Criminological Psychology by Ms Jenny Cann and others, then of the Research, Development and Statistics Department of the Home Office. This examined reconviction rates of sexual offenders released from prison in England and Wales in 1979, over a 21 year period. Of 419 offenders 103, or about 25%, committed a total of 405 sexual offences during this period. Of these 37 first re offended over 5 years after release from prison and 19 at least 10 years after release. The authors comment that these figures suggest that sexual offending by sexual offenders released from custody has a longer life span than general re offending and one which often begins a number of years after discharge. The paper recommends further research to look at the type of sexual offender most at risk of receiving a first reconviction for a sexual offence 10 years following discharge. This recommendation illustrates why this paper is inconclusive. Caution must, of course, be taken in relying on reconviction statistics because these will necessarily be lower than the actual incidence of re offending. Nonetheless, these statistics show that 75% of the sexual offenders who were monitored were not reconvicted. No light is thrown on the question of whether it was possible to identify by considering these whether there were some reliable indications of offenders who did not pose a significant risk of re offending. No evidence has been placed before this court or the courts below that demonstrate that it is not possible to identify from among those convicted of serious offences, at any stage in their lives, some at least who pose no significant risk of re offending. It is equally true that no evidence has been adduced that demonstrates that this is possible. This may well be because the necessary research has not been carried out to enable firm conclusions to be drawn on this topic. If uncertainty exists can this render proportionate the imposition of notification requirements for life without review under the precautionary principle? I do not believe that it can. I have referred earlier to a number of situations in which the degree of risk of re offending has to be assessed in relation to sexual offenders. I think that it is obvious that there must be some circumstances in which an appropriate tribunal could reliably conclude that the risk of an individual carrying out a further sexual offence can be discounted to the extent that continuance of notification requirements is unjustified. As the courts below have observed, it is open to the legislature to impose an appropriately high threshold for review. Registration systems for sexual offenders are not uncommon in other jurisdictions. Those acting for the first respondent have drawn attention to registration requirements for sexual offenders in France, Ireland, the seven Australian States, Canada, South Africa and the United States. Almost all of these have provisions for review. This does not suggest that the review exercise is not practicable. For these reasons I have concluded that the Divisional Court and the Court of Appeal were correct to find that the notification requirements constitute a disproportionate interference with article 8 rights because they make no provision for individual review of the requirements. I would dismiss this appeal and repeat the declaration of incompatibility made by the Divisional Court. LORD HOPE I agree with the judgment of Lord Phillips. For the reasons he gives, with which I agree, I too would hold that the indefinite notification requirements in section 82(1) of the Sexual Offences Act 2003 are incompatible with article 8 of the European Convention on Human Rights because they do not contain any mechanism for the review of the justification for continuing the requirements in individual cases. I wish also to associate myself with Lord Rodgers comments, with which I am in full agreement. I would dismiss the appeals. I agree that the appeal should be dismissed for the reasons given by Lord LORD RODGER Phillips, but subject to the following comments. First, at para 33 of his judgment, Lord Phillips quotes the unofficial translation of para 67 of the judgment of the European Court of Human Rights in Bouchacourt v France (Application No 5335/06) 17 December 2009, unreported. The beginning of that translation is inaccurate and misleading. What the court actually says is As the Government points out, [the prescribed period of preservation of the data] is a maximum duration. Although significant in this case, since it is of thirty years, the Court observes that the deletion of the data is by right once this period has elapsed. Secondly, in the case of the most serious offenders, of which the respondents in these cases are examples, the notification period under section 82 of the Sexual Offences Act 2003 (the 2003 Act) is an indefinite period. Although the language was, no doubt, carefully chosen, it is perhaps a little surprising: life would have been a shorter and clearer way of expressing what is actually involved, since, whatever happens, there is no means of ever bringing the notification requirements in question to an end. Indeed such a requirement can only be ended in one situation: under section 93 and Schedule 4, where it relates to an abolished homosexual offence. Schedule 4 provides a mechanism of an application to the Secretary of State, with the possibility of an appeal to the High Court, with the permission of the court. Thirdly, I see no basis for saying that, in themselves, the notification requirements, including those relating to travel, are a disproportionate interference with the offenders article 8 rights to respect for their family life, having regard to the important and legitimate aim of preventing sexual offending. That is particularly the case where, as Lord Phillips explains, these requirements are not to be seen in isolation, but as underpinning the scheme of Multi Agency Public Protection Arrangements which are designed to manage the risk of re offending. Of course, it is possible that the information which offenders provide to the police will be wrongly conveyed to third parties in circumstances where disclosure is not appropriate. The same can be said of the information which we have to supply, say, to Her Majestys Revenue and Customs, or to the social security authorities. The proportionality of the requirement to provide that information has to be judged by reference to its proper use, not by reference to any possible misuse. Organisations which gather sensitive information will, in practice, have adopted administrative practices that are designed to minimise the risk of misuse. The Data Protection Act 1998 provides a legal framework for handling personal data and makes knowing or reckless disclosure of the data a criminal offence. That framework applies to the gathering and retention of information supplied under the 2003 Act. In that situation the proportionality of the requirements made by the Act should be judged on the basis that the information supplied will be handled appropriately. If, as may well happen on occasions, the information is wrongly disclosed or otherwise misused, then the assumption must be that appropriate steps will be taken both to identify and punish those who misuse it and to prevent similar misuse in the future. Fourthly, the need for an offender to give the notification in person at a police station does, of course, impose a burden on him and entails some additional risk of his status becoming known. But it also helps to eliminate the familiar excuses (such as letters allegedly going astray, or real or imaginary delays in the post) which can bedevil the operation of a system which depends, for its effectiveness, on notification being given within short, fixed, time limits limits which those affected may be understandably reluctant to comply with and astute to avoid. Again, I see nothing disproportionate in the requirement. Finally, the case of F shows that, where his offence has been of the most serious kind, a child will be subject to an indefinite notification requirement. That requirement will affect the whole of his adult life. Judges, as individuals, may have views on whether children who offend in this way are likely to have a tendency to repeat that behaviour when they are adults, or will tend to grow out of it. No doubt, in years to come, advances in genetic research may clarify the position. In the meantime it must be open to Parliament to take the view that, as a precaution against the risk of them committing serious sexual offences in future, even such young offenders should be required to comply with the notification rgime indefinitely. But that makes it all the more important for the legislation to include some provision for reviewing the position and ending the requirement if the time comes when that is appropriate.

Under section 82 Sexual Offences Act 2003 all persons sentenced to 30 months imprisonment or more for a sexual offence become subject to a lifelong duty to keep the police notified of where they are living and of travel abroad (the notification requirements). There is no right to a review of the necessity for the notification requirements at any time. The respondents are convicted sex offenders subject to the notification requirements. Both brought claims for judicial review claiming that the absence of a right of review of the requirements rendered them a disproportionate manner of pursuing the legitimate aim of preventing crime and thereby breached their right to privacy protected by Article 8 of the European Convention on Human Rights. The Divisional Court granted the respondents claims and made a declaration that s 82 (1) Sexual Offences Act 2003 was incompatible with Article 8. The Court of Appeal dismissed an appeal by the Secretary of State for the Home Department, who then appealed to the Supreme Court. The Supreme Court unanimously dismissed the appeal and repeated the declaration of the lower courts that s 82(1) Sexual Offences Act 2003 was incompatible with Article 8 because it made no provision for individual review of the notification requirements. Lord Phillips (with whom all the members of the court agreed) stated that the issue in the case was one of proportionality. It was common ground that the notification requirements interfered with the offenders rights to privacy, that the interference was in accordance with the law and that it was directed at the legitimate aims of the prevention of crime and the protection of the rights and freedoms of others. The court had to consider three questions: (i) what was the extent of the interference with the Article 8 rights, (ii) how valuable were the notification requirements in achieving the legitimate aims and (iii) to what extent would that value be eroded if the notification requirements were made subject to review [paragraph 41]? If someone subject to the notification requirements could demonstrate that they no longer posed any significant risk of committing further sexual offences, there was no point in subjecting them to the interference with their Article 8 rights, which would then merely impose an unnecessary and unproductive burden on the responsible authorities [paragraph 51]. The critical issue was whether a reliable risk assessment could be carried out in the case of sex offenders. The research into reoffending rates relied on by the Secretary of State showed that 75% of the sexual offenders who were monitored over a 21 year period were not reconvicted and there was no evidence before the court that showed that it was impossible to identify some at least who posed no significant risk of re offending [paragraph 56]. For various other provisions affecting sex offenders the degree of risk of reoffending had to be assessed. It was obvious that there must be some circumstances in which an appropriate tribunal could reliably conclude that the risk of an individual carrying out a further sexual offence could be discounted to the extent that continuance of the notification requirements was unjustified. The existence of review provisions in other countries with similar registration requirements for sex offenders suggested that a review exercise was practicable [paragraph 57]. Accordingly the courts below were correct to find that the notification requirements constituted a disproportionate interference with Article 8 rights because they made no provision for individual review of the requirements.

On 18 January 2005, at about 2.20 am, a tragic incident occurred on the A282 north of the Dartford River Crossing. The A282 is a six lane carriageway which links the Dartford Crossing bridge and tunnel with the M25 motorway. The respondent, Mr Gareth Jones, was driving a Highways Agency gritter along the nearside carriageway. Slightly ahead of him, in the central lane of the north bound carriageway, was an articulated lorry driven by Mr Brian Nash. Ahead of him there was a car which was parked on the hard shoulder of the carriageway. As Mr Nashs lorry approached it a man ran from near the car into the middle of the central lane, turned towards the lorry, stood in its path and raised his arms. Mr Nash braked, but he was unable to avoid hitting the man, who was killed instantly. As a result of the braking the rear nearside corner of the articulated lorry swerved into the path of the gritter vehicle. There was a collision between the two vehicles, as a result of which the cab of the gritter was destroyed and Mr Jones was thrown from it onto the roadway. He suffered very severe injuries and now requires full time care. The man who ran onto the carriageway was Mr Barry Hughes. The inquest into his death returned an open verdict. But the obvious inference from his actions was that his intention was to kill himself. On 17 May 2007, acting by his mother Mrs Maureen Caldwell, Mr Jones applied to the Criminal Injuries Compensation Authority (the CICA) for an award of compensation under the Criminal Injuries Compensation Scheme 2001 (the Scheme). On 6 March 2008 he was informed by the CICA that it was unable to make an award under the Scheme. The reason that was given for this decision was that the Scheme provided that compensation was payable only if the claimant was the victim of a criminal injury. The CICA had obtained details of the incident from the police and the doctors who provided treatment, but it had been unable to pinpoint a crime of violence of which Mr Jones was a victim which would have enabled an award to be made. Mr Jones then appealed to the First tier Tribunal (the FTT). Suicide is no longer a criminal act. So it was contended on his behalf that Mr Hughes had committed two criminal offences: (i) intentionally and unlawfully interfering with a motor vehicle, contrary to section 22A of the Road Traffic Act 1988 (as inserted by section 6 of the Road Traffic Act 1991), and (ii) inflicting grievous bodily harm, contrary to section 20 of the Offences against the Person Act 1861. On 8 May 2009 the FTT held that it was not open to it to make a full or a reduced award. It was not satisfied that an offence under section 22A had been committed. Nor was it satisfied that any such offence would amount to a crime of violence within the meaning of the Scheme rules: para 39. That conclusion is no longer being challenged, and it is unnecessary to say anything more about it. But the FTT also rejected the claim based on section 20 of the 1861 Act, as it was not satisfied that Mr Hughes intended to cause harm, or was reckless as to whether harm of whatever degree might be caused by his actions, when he ran out into the carriageway: para 38. Mr Jones applied to the Upper Tribunal (Administrative Appeals Chamber) for relief by way of judicial review of the FTTs decision under section 15 of the Tribunals, Courts and Enforcement Act 2007. On 11 June 2010 the Upper Tribunal (Nicol J, Judge Sycamore and Upper Tribunal Judge Mesher) dismissed the application: [2010] UKUT 199, [2011] RTR 55. It accepted that the mens rea for an offence under section 20 of the 1861 Act was that the defendant either intended or foresaw that his act would cause harm to some person: R v Parmenter [1992] 1 AC 699, 752 per Lord Ackner. It noted that the FTT had held that there was no evidence that Mr Hughes deliberately intended to harm the users of the road. This left the question whether he was reckless, in the sense that he actually foresaw that his actions might cause physical harm of whatever degree to other road users: para 37. It held that the FTT had properly directed itself to the question it had to consider, and that its finding that Mr Hughes was not reckless was one to which a rational tribunal could have come: para 39. The Upper Tribunal refused permission to appeal to the Court of Appeal, but on 25 August 2010 Mr Jones sought and was granted permission to appeal to the Court of Appeal under section 13 of the 2007 Act. On 12 April 2011 the Court of Appeal (Mummery, Rix and Patten LJJ) [2012] QB 345 allowed the appeal and granted judicial review of the FTTs decision. It remitted the matter to a differently constituted FTT to reconsider the issue of recklessness in the light of the reasons given in the courts judgment. The CICA now appeals against that decision to this court. The Scheme The Scheme was made under section 1 of the Criminal Injuries Compensation Act 1995. That Act was enacted to establish a scheme for compensation for criminal injuries in place of the non statutory system which had been in existence since 1964 following the publication of the White Paper Compensation for Victims of Crimes of Violence (1964) (Cmnd 2323). In para 13 of the White Paper it was acknowledged that personal injury might arise from a great variety of offences and it refrained from specifying a comprehensive list of crimes whose victims might apply for compensation. The 1964 Scheme did not set out a list of that kind either. But revisions to the 1964 Scheme in 1969 introduced into it the words crime of violence for the first time. As amended, the 1964 Scheme provided for applications for compensation in circumstances where the applicant had sustained personal injury directly attributable to a crime of violence (including arson and poisoning). The same wording was used when a new scheme was introduced in 1979. That scheme has now been replaced by the Criminal Injuries Compensation Scheme which was introduced by the CICA on 27 November 2012. The first statutory scheme was made in 1996. It was followed by the Scheme which was made on 1 April 2001 and is the relevant scheme for the purposes of this case: see para 3, above. Paragraph 6 of the Scheme provided that compensation might be paid in accordance with it to an applicant who had sustained a criminal injury on or after 1 August 1964. In paragraph 8 it was stated: For the purposes of this Scheme, criminal injury means one or more personal injuries as described in the following paragraph, being an injury sustained in Great Britain and directly attributable to: (a) a crime of violence (including arson, fire raising or an act of poisoning); or (b) an offence of trespass on a railway; or (c) the apprehension or attempted apprehension of an offender or a suspected offender, the prevention or attempted prevention of an offence, or the giving of help to any constable who is engaged in any such activity. The expression personal injury is stated in paragraph 9 to include physical injury, mental injury and disease. Section 20 of the 1861 Act inflicting bodily injury, with or without weapon. It is in these terms: Whosoever shall unlawfully and maliciously wound or inflict any grievous bodily harm upon any other person, either with or without any weapon or instrument, shall be guilty of a misdemeanour, and Section 20 of the Offences against the Person Act 1861 is entitled being convicted thereof shall be liable to be kept in penal servitude. In R v Mowatt [1968] 1 QB 421, 425 Diplock LJ observed that the expression unlawfully and maliciously was a fashionable phrase of the Parliamentary draftsman in 1861. It is plain that it is not to be taken to have been used here in the old, rather vague, sense of wickedness. A more precise appreciation as to the test it lays down is required. In R v Cunningham [1957] 2 QB 396 the Court of Criminal Appeal approved of the principle which had been propounded by Professor C S Kenny in the first edition of his Outlines of Criminal Law (1902) and had been repeated in the 16th edition (1952), p 186, that any statutory definition of a crime must be taken to require either (1) an actual intention to do the particular kind of harm that in fact was done, or (2) recklessness as to whether such harm should occur or not (in other words, that the accused has foreseen that the particular kind of harm might be done and yet has gone on to take the risk of it). That formulation was disapproved in part in R v Mowatt. Diplock LJ said at p 426 that the word maliciously does import on the part of the person who unlawfully inflicts the wound or other grievous bodily harm an awareness that his act may have the consequence of causing some physical harm to some other person. But it was unnecessary that he should have foreseen that his unlawful act might cause physical harm of the gravity described in the section: It is enough that he should have foreseen that some physical harm to some person, albeit of a minor character, might result. His description of the principle was approved and applied by the House of Lords in R v Savage; DPP v Parmenter [1992] 1 AC 699: see Lord Ackner at p 752. Mustill LJ said in the Court of Appeal in that case at p 706 that the judgment in R v Mowatt laid down two propositions, one positive and one negative: The positive proposition was that to found a conviction under section 20 it must be proved that the defendant actually foresaw that physical harm to some other person would be the consequence of his act. This is subject to the negative qualification, that the defendant need not actually have foreseen that the harm would be as grave as that which in the event occurred. It was pointed out that the words should have foreseen in Mowatt were intended to bear the same meaning as did foresee or simply foresaw. Crime of violence Various attempts have been made to define what is meant by the phrase a crime of violence for the purposes of the schemes for compensation for criminal injury. Different views were expressed in R v Criminal Injuries Compensation Board, Ex p Clowes [1977] 1 WLR 1353. Eveleigh J said at p 1359 that it referred to that kind of deliberate criminal activity in which anyone would say that the probability of injury was obvious. Wien J said at p 1362 that it meant some crime which as applied to the facts of a case involved the possibility of violence to another person. Lord Widgery CJ said at p 1364 that it was a crime which was accompanied by or concerned with violence. He described counsel for the boards submission that a crime of violence should mean a crime of which violence is an essential ingredient as a very neat and tidy package in which to put the problem. In R v Criminal Injuries Compensation Board, Ex p Webb [1986] QB 184 the Divisional Court (Watkins LJ, Lloyd and Nolan JJ) preferred Lord Widgerys approach. Having asked itself at p 193 why these ordinary English words should not be given their ordinary English meaning, it endorsed at p 195 a submission by counsel for the board which was similar to that made by counsel for the board in Clowes: A crime of violence is, he submits, one where the definition of the crime itself involves either direct infliction of force on the victim, or at least a hostile act directed towards the victim or class of victims. We think that this comes near enough to the ordinary meaning of the words as generally understood. That was a case where the board had rejected applications by four train drivers who suffered from anxiety and depression after their trains struck and killed four people, three of whom had deliberately committed suicide. Their applications were rejected because the board had concluded that their injuries did not result from a crime of violence within the meaning of the scheme. The Divisional Court held that the board had been right to refuse the applications. An appeal against its decision was dismissed by the Court of Appeal (Lawton and Stephen Brown LJJ, Sir John Megaw): [1987] QB 74. But, differing from the submission in Clowes which was endorsed by the Divisional Court, Lawton LJ said at p 79 that what mattered was the nature of the crime, not its likely consequences: It is for the board to decide whether unlawful conduct, because of its nature, not its consequence, amounts to a crime of violence. He added this further guidance as to the approach that should be adopted: Most crimes of violence will involve the infliction or threat of force, but some may not. I do not think it prudent to attempt a definition of words of ordinary usage in English which the board, as a fact finding body, have to apply to the case before them. They will recognise a crime of violence when they hear about it, even though as a matter of semantics it may be difficult to produce a definition which is not too narrow or so wide as to produce absurd consequences Subsequent to that decision provision was made in the 1995 Scheme for compensation to be paid in respect of injuries directly attributable to an offence of trespass on the railway. The same point, that the board had to look at the nature of the crime and not at its results, was made by Lord Macfadyen in C, Petitioner 1999 SC 551, where he dismissed a petition for judicial review of the boards decision to refuse compensation for personal injury attributable to incidents of indecent exposure. At p 557 he said that there was a valid distinction between the criminal act and its consequences: The question whether a criminal act constitutes a crime of violence is to be answered primarily by looking at what was done rather than at the consequences of what was done. As Lawton LJ pointed out in Webb, Most crimes of violence will involve the infliction or threat of force but some may not. It may be that there are cases in which examination of the actual or probable consequences of the criminal act will cast light on its nature. But it is for the light that they cast on the nature of the criminal act rather than for their own sake that the consequences may be relevant. In R (August) v Criminal Injuries Compensation Appeals Panel [2001] QB 774 the Court of Appeal (Pill and Buxton LJJ and Sir Anthony Evans) also followed what Lawton LJ said in Webb. Buxton LJ said in para 19 that it was the leading authority on the construction of crime of violence, and that the court had not been shown any material derogating from the guidance given in that case. Nor have we, and I too would endorse the way Lawton LJ described the approach that should be taken. In August, para 21, Buxton LJ said that he accepted counsels submission that the issue for the panel of whether a crime of violence has taken place is a jury question. It would, I think, be more accurate to say that it is for the tribunal which decides the case to consider whether the words a crime of violence do or do not apply to the facts which have been proved. Built into that phrase, there are two questions that the tribunal must consider. The first is whether, having regard to the facts which have been proved, a criminal offence has been committed. The second is whether, having regard to the nature of the criminal act, the offence that was committed was a crime of violence. I agree with Lord Carnwath for all the reasons he gives that it is primarily for the tribunals, not the appellate courts, to develop a consistent approach to these issues, bearing in mind that they are peculiarly well fitted to determine them. A pragmatic approach should be taken to the dividing line between law and fact, so that the expertise of tribunals at the first tier and that of the Upper Tribunal can be used to best effect. An appeal court should not venture too readily into this area by classifying issues as issues of law which are really best left for determination by the specialist appellate tribunals. The question whether a criminal offence has been committed is a question for the tribunal, having informed itself as to what the law requires for proof of that offence, to determine as a matter of fact. The question whether the nature of the criminal act amounted to a crime of violence may or may not raise an issue of fact for the tribunal to determine. This will depend on what the law requires for proof of the offence. For example, some of the common law crimes known to the law of Scotland are quite loosely defined. The range of acts that fall within the broad definition may vary quite widely, so the question whether there was a crime of violence will have to be determined by looking at the nature of what was done. But in this case the words of the statute admit of only one answer. They speak for themselves. To wound or inflict any grievous bodily harm on another person unlawfully or recklessly, foreseeing that physical harm to some other person will be the consequence of his act, is a crime in terms of section 20 of the 1861 Act. It is also a violent act. So too is the unlawful or reckless application of physical force of any kind to the person, directly or indirectly, so that they suffer injury frightening or threatening someone so that they run into the road and are hit by a car, for example: see also Reg v Martin (1881) 8 QBD 54, where the accused by unlawful conduct caused panic in the course of which a number of people were injured: R v Criminal Injuries Compensation Board, Ex p Webb [1987] QB 74, 79 per Lawton LJ. The crime that section 20 defines will always amount to a crime of violence for the purposes of the scheme for compensation for criminal injury. The decision of the FTT The FTT heard oral evidence from PC Sexton, a traffic investigation officer with Essex Police, who had examined the work records for Mr Nash and Mr Jones and the tachographs recording the speed of both vehicles. It also read a witness statement by Mr Nash and reports by PC Sexton and PC Thurwell, an authorised accident investigator with Essex Police. But it had to face the fact that there was no evidence as to the state of mind of Mr Hughes. It found that in all probability he ran into the road intending to commit suicide. But there was no evidence that he deliberately intended to harm the users of the road: para 35. In its view his act in throwing himself in front of the articulated lorry was not a hostile act directed towards a person who suffered injury as a result: para 37. The central part of the FTTs reasoning is set out in para 38: The tribunal accepted the evidence of PC Sexton that probably Mr Hughes primary aim was to be certain of causing his own death and that in his experience it was very unusual for a suicide in this manner to cause such extensive personal injuries and damage to vehicles. Mr Hughes may have been careless of the injuries that may have been caused to third parties by his actions. However the tribunal were not satisfied that the facts of the case demonstrated that Mr Hughes intended to cause harm or was reckless as to whether harm of whatever degree might be caused when he ran out into the dual carriageway, such as to bring his case within section 20 of the 1861 Act. The reasoning in this paragraph is rather compressed. But it is reasonably clear from the last sentence that the FTT were not satisfied that Mr Hughes actually foresaw that his behaviour might cause physical harm to others. So it was not persuaded that he had the necessary mens rea of recklessness to bring his actions within a section 20 offence. The Upper Tribunal made it clear in its judgment that the FTTs reasoning should be read in this way. It concluded that the FTTs finding that Mr Jones had not established that Mr Hughes was reckless was one to which a rational tribunal could have come and that it was not its function as an appellate body to substitute its own opinion of the facts even if it had been different from that of the tribunal: para 39. Fairly read, therefore, the reason why Mr Jones appeal to the FTT failed was that it was not proved that an offence of the kind described by section 20 had been committed by Mr Hughes. The judgment of the Court of Appeal The judgment of the Court of Appeal was delivered by Patten LJ. He accepted that in order to succeed in his application Mr Jones had to show that the FTT erred in law in reaching the decision under review: para 17. He noted that it was common ground that Mr Hughes conduct included the actus reus of a section 20 offence. He said that the issues that the court had to consider were therefore whether the FTTs conclusion that the necessary mens rea of recklessness had not been established was a permissible conclusion on the evidence, and whether it was right in its view that Mr Hughes had not committed a crime of violence within the meaning of the Scheme: para 21. In para 24 he acknowledged that the questions whether a criminal offence has been committed and whether the applicants injuries are directly attributable to that offence are undoubtedly questions of fact for the CICA or the FTT: They are required to weigh up the evidence and decide whether it supports a finding that a relevant criminal offence has been committed. As part of this process, they have to decide what primary facts are established and what inferences it is permissible to draw from those facts. But in this case I do not accept that the determination as to whether a section 20 offence is a crime of violence within the Scheme rules is anything but a question of law which can only admit of one answer. The wording of the last sentence of para 24 reveals what Patten LJ saw as the issue of law in the appeal. But it contains a flaw in his approach to what the FTT had decided in this case which affects the entire judgment from this point on. He seems to have assumed that the FTT had decided the case against Mr Jones on the ground that Mr Hughes had not committed a crime of violence within the meaning of the Scheme. In paras 25 and 26 he said that a section 20 offence involves the infliction of serious bodily harm by conduct which the accused himself foresees will cause some harm to the victim or another person, and added that most reasonable people faced with those facts would conclude that this was a crime of violence. In para 28 he rejected what he took to be the view of the FTT set out in para 37 that Mr Hughes actions in throwing himself in front of the lorry could not amount to a crime of violence. What the FTT actually said in that paragraph was that, having examined the nature of the act rather than its consequences, in its view Mr Hughes act was not a hostile act directed towards a person who suffered injury as a result. This was a conclusion of fact which was open to the FTT to reach. In paras 30 32 Patten LJ said that the FTT were clearly much influenced by the evidence of PC Sexton, who had expressed the view that Mr Hughes probably intended to kill himself rather than to cause an accident, and that it accepted it as supporting the view that it could not be satisfied that Mr Hughes either intended to cause harm or was reckless in that regard. The difficulty about this was that PC Sexton was not qualified to provide any expert evidence as to whether a person intent on suicide blanks out the possibility of harm to others by his actions. The FTT should have considered whether, on the balance of probabilities, it was likely that some harm was foreseen without attributing any evidential weight to the views of the officer. It was highly improbable that anyone who runs into the path of traffic on a busy motorway will not at the very least foresee the possibility of an accident and, as a consequence, harm being caused to other road users. The FTT had not considered the possibility of an accident and had assumed in para 35 of its decision that an intention to commit suicide was necessarily inconsistent with a deliberate intention to commit harm. From this Patten LJ concluded in para 34 of his judgment that the FTT had applied too narrow a test, as a fact finding exercise as to whether there was recklessness needed to be differently focussed. In para 35 he said that the FTTs decision involved an error of law both in terms of the directions given on the test to be applied and in relation to its finding that there was no evidence from which foresight of some harm on the part of Mr Hughes could be inferred. As to the second point, what the FTT actually said in para 38 (see para 20, above) was that they were not satisfied that the facts of the case demonstrated that Mr Hughes intended to cause harm or was reckless as to whether harm of whatever degree might be caused by his actions. This, as the Upper Tribunal said in para 39 of its decision, was a finding to which a rational tribunal could have come. It was a finding of fact which was not open to review by the Upper Tribunal or by the Court of Appeal. Discussion The Court of Appeal appears to have been unwilling to accept that the question that the FTT was asking itself was whether it could be satisfied that a section 20 offence had been committed rather than whether Mr Hughes actions amounted to a crime of violence. It was also unduly critical of the FTTs reasoning, attributing to it things that it did not, in so many words, actually say. It is well established, as an aspect of tribunal law and practice, that judicial restraint should be exercised when the reasons that a tribunal gives for its decision are being examined. The appellate court should not assume too readily that the tribunal misdirected itself just because not every step in its reasoning is fully set out in it. It is true that the FTT said in para 38 that it accepted the evidence of PC Sexton. But the parts of his evidence referred to were elicited from him in cross examination by counsel who was then appearing for Mr Jones. And PC Sextons comment that in his experience it was very unusual for a suicide such as this to cause such extensive personal injuries and damage to vehicles can hardly be said to have been outside his expertise. There are signs too that the Court of Appeal allowed itself to be unduly influenced by its own view that it was highly improbable that anyone who runs into the path of traffic on a busy motorway will not at the least foresee the possibility of an accident and of consequential harm being caused to other road users. The question whether Mr Hughes did actually foresee this possibility was for the FTT to answer, not the Court of Appeal. Taking its judgment overall, it seems to me that the Court of Appeal failed to identify a flaw in the reasoning of the FTT which could be said to amount to an error of law. The FTT appreciated that the question it had to consider first was whether an offence under section 20 had been committed. It identified correctly the tests that had to be applied and reached the conclusion that it was not satisfied that Mr Hughes did commit that offence. It did not go on to consider whether he had committed a crime of violence within the meaning of the Scheme because, having concluded that no crime was committed, it did not have to. It is a curious feature of this appeal that the issues which the court has been asked to consider assume that the FTT did indeed hold that a section 20 offence had been committed. They are directed to the question whether an applicant who has suffered injury directly attributable to an offence under section 20 is either necessarily or, in the circumstances such as those of the present case could be, a victim of a crime of violence. For the reasons mentioned in para 18, the question whether a section 20 offence is necessarily a crime of violence admits of only one answer. But the FTT never got to the stage of asking itself that question because of its finding, on the facts, that a section 20 offence had not been committed. Conclusion I do not think that the Court of Appeal has been able to demonstrate that it was entitled to interfere with the FTTs decision. I would therefore allow the appeal and restore the decision of the FTT which was that, while every sympathy must be felt for the victim, Mrs Caldwell and their family, the terms of the Scheme do not permit an award of compensation to be made in this case. LORD CARNWATH I agree that this appeal should be allowed for the reasons given by Lord Hope. I add a brief comment on the course of the proceedings, having regard also to the new framework established under the Tribunals Courts and Enforcement Act 2007. Although the general approach under the 2007 Act was to provide a right of appeal on points of law from the First tier to the Upper Tribunal, an exception was initially made for the Criminal Injuries Compensation Appeal Panel. The reason given in the 2004 White Paper which preceded the Act was that a second tier appeal was thought unnecessary, because the first appeal was from an independent body rather than a government department (Transforming Public Services: Complaints, Redress and Tribunals (Cm 6243), para 7.18). However, in practice a similar result was achieved by a different route. Section 18(6) of the 2007 Act enabled the Lord Chief Justice to make directions transferring certain categories of judicial review to the Upper Tribunal. The direction made by the Lord Chief Justice on 29 October 2008 (Practice Direction (Upper Tribunal: Judicial Review Jurisdiction) [2009] 1 WLR 327) included as one class of case transferred to the Upper Tribunal: any decision of the First tier Tribunal on an appeal made in the exercise of a the right conferred by the Criminal Injuries Compensation Scheme This was the route by which the present case reached the Upper Tribunal. It was one of three cases heard together, all relating to the interpretation of the term crime of violence. As the decision explains (para 1), they were directed for hearing by a three judge panel because of the important point of principle involved. The panel consisted of two senior Upper Tribunal judges (Judge Sycamore and Upper Tribunal Judge Mesher) presided over by a High Court Judge, Nicol J. In normal circumstances in the absence of some serious error of principle, one would not have expected there to have been a need for a further appeal to the higher courts. It seems that the main reason for granting permission to appeal in this case was the perception, raised by the grounds of appeal, that there had been inconsistent treatment of such cases in the First tier tribunal. In granting permission Maurice Kay LJ noted that this was essentially a perversity challenge, with all the usual attendant difficulties, but commented: the point is an important one and does not seem always to have been approached consistently by the CICA. The grounds of appeal had referred to the case of Fuller in which, it was said, the tribunal on substantially the same facts had found the requisite degree of recklessness for a section 20 offence. That case had been heard on 30 April 2010, and the decision notice issued on 4 May 2010, shortly before the UT hearing in the present case. For that reason, no doubt, the decision does not seem to have been mentioned before the UT. The notice of appeal to the Court of Appeal enclosed papers relating to the Fuller case (Fuller v Criminal Injuries Compensation Authority (unreported) 4 May 2010), with a copy of the decision notice supplied by the Tribunals Service. That stated the effect of the tribunals decision but gave no reasons. It seems that this remained the only material available to the Court of Appeal at the full hearing. Patten LJ [2012] QB 345, paras 22 24 referred to the FTT decision in Fuller, noting that the CICAs refusal of compensation had been reversed by the FTT on appeal, but with no reasoned decision. Counsel then appearing for the CICA was reduced to submitting that, the question being one of fact for the CICA or the FTT, it was open to them on the same facts to reach a decision either way. Not surprisingly Patten LJ found that an unattractive submission. Unfortunately neither the parties nor the Court of Appeal seem to have been made aware of the relevant practice in the Social Entitlement Chamber, of which this jurisdiction forms part. Reasons may be given orally; written reasons need not be given unless requested within one month (see Tribunal Procedure (First tier Tribunal) (Social Entitlement Chamber) Rules 2008 (SI 2008/2685), rules 33 and 34). There is before us a letter from HM Courts and Tribunals Service dated 23 January 2012. This explains that, where the appellant is represented, as in this case, the practice is for the tribunal chair to give an oral summary of the tribunals decision. A handwritten version of the oral summary is retained in the records, and also passed to the CICA for their admin purposes. It would only be transcribed by the office where a hearing had proceeded in the absence of the appellant or his representative. A request for written reasons had to be made within one month. Had such a request been made, a formal statement of reasons would have been prepared by the tribunal members themselves. That not having been done, the office was able only to supply a verbatim transcript of the handwritten summary of reasons. For present purposes I need only read the first paragraph of this summary: 1. The alleged offender jumped in front of the lorry when it was travelling on the A130 at 50 mph at 8 pm with other traffic on the road. We find that the alleged offender should have foreseen that some physical harm to some person, albeit of a minor character, might result, within the meaning of Lord Ackner in R v Savage [1992] 1 AC 699, 752. He was reckless whether or not anyone else was hurt in the process of his committing suicide The summary ended by observing that this was an important case on the construction of the scheme which is contentious, and that, although the panel had reached a unanimous decision, we would not discourage an appeal to the Upper Tribunal for more authoritative guidance on how the scheme should be interpreted in these circumstances. This invitation was not taken up on that particular occasion. Had this statement of reasons been available to the Court of Appeal, it is unlikely that they would have been unduly troubled by the apparent inconsistency. As is clear from the citations given by Lord Hope, it is not sufficient to establish recklessness that the alleged offender should have foreseen that some physical harm might result. It is necessary to show that he actually foresaw that physical harm to some other person would be the consequence of his act, even if not the degree of harm which actually occurred (see the passage from R v Mowatt, quoted by Lord Hope at para 11). The tribunals apparent misreading of Lord Ackners words in R v Savage [1992] 1 AC 699 is perhaps understandable. The passage in question is as follows: I am satisfied that the decision in Mowatt was correct and that it is quite unnecessary that the accused should either have intended or have foreseen that his unlawful act might cause physical harm of the gravity described in section 20, ie a wound or serious physical injury. It is enough that he should have foreseen that some physical harm to some person, albeit of a minor character, might result. (p752 f g, emphasis added). Taken out of context, the last sentence might seem to support the tribunals view in Fuller. However, it is clear from the preceding passage that it was not intended to have this effect. The question to which this passage provided an answer was set out at p751E: In order to establish an offence under section 20, is it sufficient to prove that the defendant intended or foresaw the risk of some physical harm or must he intend or foresee either wounding or grievous bodily harm? (emphasis added) Thus the need for actual foresight of risk was taken as given, the issue being whether it needed to be risk merely of some physical harm or of something more than that. I agree with Lord Hope that no such mistake was made in the present case by the tribunals at either level. There was accordingly no ground for setting aside their decisions. I also agree with him in questioning the description of the issue as a jury question. That may have seemed an appropriate description in 1987, when Ex p Webb was decided. However, in my view it needs to be updated. Where, as here, the interpretation and application of a specialised statutory scheme has been entrusted by Parliament to the new tribunal system, an important function of the Upper Tribunal is to develop structured guidance on the use of expressions which are central to the scheme, and so as to reduce the risk of inconsistent results by different panels at the First tier level. Promotion of such consistency was part of the thinking behind the recommendation of Sir Andrew Leggatt for the establishment of an appellate tribunal (Tribunals for Users, One System, One Service, March 2001, paragraphs 6.9 to 6.26). It was adopted by the government in the 2004 White Paper, paras 7.14 to 7.21), which spoke of the role of the new appellate tier in achieving consistency in the application of the law. Although the appeal from the First tier Tribunal was to be limited to a point of law, it was observed that for some jurisdictions this may in practice be interpreted widely, for instance to allow for guidance on valuation principles in rating cases. The general principle is that an appeal hearing is not an opportunity to litigate again the factual issues that were decided at the first tier. The role is to correct errors and to impose consistency of approach. (White Paper, para 7.19). Thus it was hoped that the Upper Tribunal might be permitted to interpret points of law flexibly to include other points of principle or even factual judgment of general relevance to the specialised area in question. That might have seemed controversial. However, as an approach it was not out of line with the developing jurisprudence in the appellate courts. In Moyna v Secretary of State for Work and Pensions [2003] 1 WLR 1929, paras 20 28, Lord Hoffmann, in the leading speech, had considered the interpretation by the social security commissioners of the so called cooking test for welfare benefits. He rejected the submission that, because the words used were ordinary English words, it should be treated as a pure question of fact, following Lord Reids well known comments on the meaning of the words insulting behaviour in Cozens v Brutus [1973] AC 854, 861, which Lord Hoffmann thought had been given a much wider meaning than the author intended (para 23). Commenting on the distinction between issues of law and fact, Lord Hoffmann said: 26. It may seem rather odd to say that something is a question of fact when there is no dispute whatever over the facts and the question is whether they fall within some legal category. In his classic work on Trial by Jury (1956) Lord Devlin said, (at p 61): The questions of law which are for the judge fall into two categories: first, there are questions which cannot be correctly answered except by someone who is skilled in the law; secondly, there are questions of fact which lawyers have decided that judges can answer better than juries. 27. Likewise it may be said that there are two kinds of questions of fact: there are questions of fact; and there are questions of law as to which lawyers have decided that it would be inexpedient for an appellate tribunal to have to form an independent judgment. But the usage is well established and causes no difficulty as long as it is understood that the degree to which an appellate court will be willing to substitute its own judgment for that of the tribunal will vary with the nature of the question: see In re Grayan Building Services Ltd [1995] Ch 241, 254 255. Lord Hoffmann took this line of thinking a stage further in Lawson v Serco [2006] ICR 250, where the issue was the application of the Employment Rights Act 1996 to peripatetic employments, involving substantial work outside the UK. He described this as a question of law, although involving judgment in the application of the law to the facts (para 24). Under the heading fact or law, he said (para 34): Like many such decisions, it does not involve any finding of primary facts (none of which appear to have been in dispute) but an evaluation of those facts to decide a question posed by the interpretation which I have suggested should be given to section 94(1), namely that it applies to peripatetic employees who are based in Great Britain. Whether one characterizes this as a question of fact depends, as I pointed out in Moyna v Secretary of State for Work and Pensions [2003] UKHL 44; [2003] 1 WLR 1929, upon whether as a matter of policy one thinks that it is a decision which an appellate body with jurisdiction limited to errors of law should be able to review. I would be reluctant, at least at this stage in the development of a post section 196 jurisprudence, altogether to exclude a right of appeal. In my opinion therefore, the question of whether, on given facts, a case falls within the territorial scope of section 94(1) should be treated as a question of law. On the other hand, it is a question of degree on which the decision of the primary fact finder is entitled to considerable respect. In the present case I think not only that the Tribunal was entitled to reach the conclusion which it did but also that it was right. I discussed these developments in an article in 2009 (Tribunal Justice, A New Start [2009] PL 48, pp 63 64). Commenting on Moyna I said: The idea that the division between law and fact should come down to a matter of expediency might seem almost revolutionary. However, the passage did not attract any note of dissent or caution from the other members of the House. That it was intended to signal a new approach was confirmed in another recent case relating to a decision of an employment tribunal, Lawson v Serco. Of Lord Hoffmanns words in Serco itself, I said: Two important points emerge from this passage. First, it seems now to be authoritatively established that the division between law and fact in such classification cases is not purely objective, but must take account of factors of expediency or policy. Those factors include the utility of an appeal, having regard to the development of the law in the particular field, and the relative competencies in that field of the tribunal of fact on the one hand, and the appellate court on the other. Secondly, even if such a question is classed as one of law, the view of the tribunal of fact must still be given weight. This clarifies the position as between an appellate court on the one hand and a first instance tribunal. But what if there is an intermediate appeal on law only to a specialist appellate tribunal? Logically, if expediency and the competency of the tribunal are relevant, the dividing line between law and fact may vary at each stage. Reverting to Hale LJs comments in [Cooke v Secretary of State for Social Security [2002] 3 All ER 279 paras 5 17], an expert appellate tribunal, such as the Social Security Commissioners, is peculiarly fitted to determine, or provide guidance, on categorisation issues within the social security scheme. Accordingly, such a tribunal, even though its jurisdiction is limited to errors of law, should be permitted to venture more freely into the grey area separating fact from law, than an ordinary court. Arguably, issues of law in this context should be interpreted as extending to any issues of general principle affecting the specialist jurisdiction. In other words, expediency requires that, where Parliament has established such a specialist appellate tribunal in a particular field, its expertise should be used to best effect, to shape and direct the development of law and practice in that field. For the purposes of the present appeal it is unnecessary to consider further the working out of these thoughts. In the present context, they provide support for the view that the development of a consistent approach to the application of the expression crime of violence, within the statutory scheme, was a task primarily for the tribunals, not the appellate courts. LORD WALKER, LADY HALE AND LORD SUMPTION reasons they give, we too would allow this appeal. We agree with the judgments of Lord Hope and Lord Carnwath and, for the

On 18 January 2005, at about 2.20 am, a tragic incident occurred on the A282, a six lane carriageway which links the Dartford Crossing bridge and tunnel with the M25 motorway. Mr Jones was driving a Highways Agency gritter along the nearside carriageway. Slightly ahead of him, in the central lane of the carriageway, was an articulated lorry driven by Mr Brian Nash. Ahead of him there was a car which was parked on the hard shoulder of the carriageway. As Mr Nashs lorry approached it a man ran from near the car into the middle of the central lane, turned towards the lorry, stood in its path and raised his arms. Mr Nash braked, but he was unable to avoid hitting the man, who was killed instantly. As a result of the braking the rear nearside corner of the articulated lorry swerved into the path of the gritter vehicle. There was a collision between the two vehicles, as a result of which the cab of the gritter was destroyed and Mr Jones was thrown from it onto the roadway. He suffered very severe injuries and now requires full time care. The man who ran onto the carriageway was Mr Barry Hughes. The inquest into his death returned an open verdict. But the obvious inference from his actions was that his intention was to kill himself [1, 2]. Acting by his mother Mrs Maureen Caldwell, Mr Jones applied to the Criminal Injuries Compensation Authority (the CICA) for an award of compensation under the Criminal Injuries Compensation Scheme 2001 (the Scheme). The CICA rejected the application essentially on the basis that in terms of the Scheme Mr Jones was not a victim of a crime of violence [3]. Mr Jones appealed to the First tier Tribunal (the FTT), arguing that Mr Hughes had committed two criminal offences, one of which is no longer relevant in this appeal. The FTT dismissed his appeal in relation to the other offence of inflicting grievous bodily harm contrary to section 20 of the Offences against the Person Act 1861 (section 20). It did so because it was not satisfied that Mr Hughes intended to cause harm, or was reckless as to whether harm of whatever degree might be caused by his actions, when he ran out into the carriageway. Mr Jones unsuccessfully sought judicial review of that decision in the Upper Tribunal (Administrative Appeals Chamber) but successfully appealed to the Court of Appeal. The matter was remitted to a differently constituted FTT to reconsider the issue of recklessness in the light of the reasons given in the judgment of the Court of Appeal [4 6]. The parties agreed that the appeal raised the following issues for determination by the Supreme Court: (1) whether an applicant who satisfies the CICA on the balance of probabilities that he has sustained injury directly attributable to an offence under section 20 is necessarily a victim of a crime of violence for the purposes of the Scheme; and (2) if the answer to (1) is no, whether a person who satisfies the CICA on the balance of probabilities that he has sustained injury directly attributable to an offence under section 20 in circumstances such as those in the present case is a victim of a crime of violence for the purposes of the Scheme. The Supreme Court unanimously allows the appeal and restores the decision of the FTT. While every sympathy must be felt for the victim, Mrs Caldwell and their family, the terms of the Scheme do not permit an award of compensation to be made in this case [28]. The lead judgment is given by Lord Hope with whom all the other justices agree. Lord Carnwaths judgment contains observations about procedural aspects of the case among other matters. Built into the phrase a crime of violence there are two questions that the tribunal must consider. The first is whether, having regard to the facts which have been proved, a criminal offence has been committed. That question is for the tribunal, having informed itself as to what the law requires for proof of that offence, to determine as a matter of fact. The second is whether, having regard to the nature of the criminal act, the offence that was committed was a crime of violence. This may also raise an issue of fact for the tribunal to determine, depending on what the law requires for proof of the offence. The range of acts that fall within the broad definition may vary quite widely, so the question whether there was a crime of violence will have to be determined by looking at the nature of what was done. But in this case the words of the statute speak for themselves. To wound or inflict any grievous bodily harm on another person unlawfully or recklessly, foreseeing that physical harm to some other person will be the consequence of his act, is a crime in terms of section 20. It is also a violent act. So too is the unlawful or reckless application of physical force of any kind to the person, directly or indirectly, so that they suffer injury. The crime that section 20 defines will always amount to a crime of violence for the purposes of the Scheme [16 18]. Fairly read, the reason why Mr Jones appeal to the FTT failed was that it was not proved that an offence of the kind described by section 20 had been committed by Mr Hughes [20]. The FTT appreciated that the question it had to consider first was whether an offence under section 20 had been committed. It identified correctly the tests that had to be applied and reached the conclusion that it was not satisfied that Mr Hughes did commit that offence. In particular, the FTT was not satisfied that the facts of the case demonstrated that Mr Hughes intended to cause harm or was reckless as to whether harm of whatever degree might be caused by his actions [24, 26]. The judgment of the Court of Appeal taken overall fails to identify a flaw in the reasoning of the FTT which could be said to amount to an error of law [26]. It appears to have been unwilling to accept that the question that the FTT was asking itself was whether it could be satisfied that a section 20 offence had been committed rather than whether Mr Hughes actions amounted to a crime of violence. It was also unduly critical of the FTTs reasoning [25]. There are signs too that it allowed itself to be unduly influenced by its own view that it was highly improbable that anyone who runs into the path of traffic on a busy motorway will not at the least foresee the possibility of an accident and of consequential harm being caused to other road users. The question whether Mr Hughes did actually foresee this possibility was for the FTT to answer, not the Court of Appeal [26]. It is a curious feature of this appeal that the issues which both sides say are for the court to consider assume that the FTT held that a section 20 offence had been committed. The question whether a section 20 offence is necessarily a crime of violence admits of only one answer. But the FTT never got to the stage of asking itself that question because of its finding, on the facts, that a section 20 offence had not been committed [27]. Where, as here, the interpretation and application of a specialised statutory scheme has been entrusted by Parliament to the new tribunal system, an important function of the Upper Tribunal is to develop structured guidance on the use of expressions which are central to the scheme, and so as to reduce the risk of inconsistent results by different panels at the First tier level. It is primarily for the tribunals, not the appellate courts, to develop a consistent approach to issues such as the two questions built into the phrase a crime of violence, bearing in mind that they are peculiarly well fitted to determine them. A pragmatic approach should be taken to the dividing line between law and fact, so that the expertise of tribunals at the First tier level and that of the Upper Tribunal can be used to best effect. An appeal court should not venture too readily into this area by classifying issues as issues of law which are really best left for determination by the specialist appellate tribunals [16, 41, 47].

The road to hell is paved with good intentions. In this case the good intentions were to introduce mandatory rehabilitation for very short term prisoners by coupling time spent in custody with a release period under licence. This was known as custody plus. Hell is a fair description of the problem of statutory interpretation caused by transitional provisions introduced when custody plus had to be put on hold because the resources needed to implement the scheme did not exist. The problem arises when sentences of less than 12 months and more than 12 months are imposed consecutively. The 1991 Act Early Release In explaining this problem I shall refer only to the most relevant of statutory provisions thereby simplifying the picture. The Criminal Justice Act 1991 (the 1991 Act) introduced for the first time a scheme in which it was mandatory for the Secretary of State to release prisoners part way through the period of their sentence. A prisoner sentenced to less than 12 months imprisonment had to be released unconditionally after serving half his sentence (section 33(1)(a)). A prisoner sentenced to between 12 months and 4 years imprisonment had to be released on licence after serving half his sentence (section 33(1)(b)). A prisoner sentenced to a determinate term of 4 years or more imprisonment had to be released on licence after serving two thirds of his sentence (section 33(2)). This early release scheme might have raised problems in relation to the practice of imposing sentences to be served consecutively. These problems were solved by section 51(2) of the 1991 Act, as amended by section 101 of the Crime and Disorder Act 1998, which provided: For the purposes of any reference in this Part, however expressed, to the term of imprisonment to which a person has been sentenced or which, or part of which, he has served, consecutive terms and terms which are wholly or partly concurrent shall be treated as a single term if (a) the sentences were passed on the same occasion; or (b) where they were passed on different occasions, the person has not been released under this Part at any time during the period beginning with the first and ending with the last of those occasions. Section 33(5) of the 1991 Act defined prisoners sentenced to less than 4 years imprisonment as short term prisoners and prisoners sentenced to 4 years imprisonment or more as long term prisoners. For the purpose of this appeal the more significant distinction is between prisoners serving sentences of less than 12 months, whom I shall describe as under 12 month prisoners and prisoners serving sentences of 12 months or more, whom I shall describe as over 12 month prisoners. Home Detention Curfew In 1998 under the Crime and Disorder Act additional provisions were inserted by amendment into the 1991 Act, which added a degree of complication to the release provisions for short term prisoners serving a sentence of imprisonment of three months or more. Under section 34A after such a prisoner had served the requisite period the Secretary of State was given power to release the prisoners on licence under conditions that required them to live at home, subject to a curfew. I shall describe this as HDC release. The requisite period was so defined as to produce a sliding scale under which the prisoner might be released before what would otherwise have been his mandatory release date. The longer the sentence the longer the potential period of HDC release until this peaked at its maximum of 135 days in respect of a sentence of 18 months or more. A charitable interpretation of the purpose of the introduction of HDC would be that it was intended to facilitate rehabilitation in the community. A more cynical view would be that it was intended to provide the Home Secretary with a safety valve to deal with the pressure on prison accommodation. At all events the Home Secretary made such generous use of this power that short term prisoners were able to look forward with some confidence to being granted HDC release. Licence expiry Section 37 of the 1991 Act provided that, for both short and long term prisoners released on licence, the licence would remain in force until three quarters of the sentence period had elapsed. When an under 12 month prisoner was released under HDC his licence period ended once half the sentence period had elapsed. The appellants sentence I now turn to the position of the appellant Miss Rebecca Noone. On 23 May 2007 she was sentenced at Stafford Crown Court for a number of offences as follows: (a) Theft 22 months imprisonment. (b) Three further offences of theft 4 months imprisonment on each count concurrent to one another but consecutive to the 22 month sentence. (c) Contempt of Court 1 month imprisonment consecutive to all the other sentences. Had the provisions of the 1991 Act been applied to this sentence, its implications would have been easy to appreciate. The sentences would have been aggregated pursuant to section 51(2) to produce a total of 27 months. The appellant would have been entitled to be released after serving half this sentence, that is on her conditional release date. But she could have looked forward with confidence to HDC release 135 days before that date. On 24 May 2007 the appellant was given a release date notification which advised her that this was precisely what she could expect that is: Eligibility for HDC: 15.1.2008 Conditional release date: 28.5.2008 This notification also informed the appellant that her licence would expire on the same day that her sentence would expire that is 13 July 2009. This conflicted with the provision of section 37 of the 1991 Act under which the licence would have been due to expire after three quarters of the sentence period. On 18 July 2007 the appellant was given a fresh notification which put back the date of her eligibility to HDC to 20.4.2008 but advanced both her licence and her sentence expiry date to 10.2.2009. The appellant brought these proceedings in order to challenge this notification. The reason for the confusion as to the date when the appellant would become eligible to HDC and the date on which her licence and her sentence would expire was that those in Drake Hall Prison responsible for the appellants release were grappling with the implications of the Criminal Justice Act 2003, to which I now turn. The Criminal Justice Act 2003 One particular objective of the Criminal Justice Act 2003 (the 2003 Act) was the rehabilitation of offenders. With this objective in mind, those who drafted the Act set out to achieve, among other things, the following: 1) 2) the introduction of custody plus for under 12 month prisoners, and the increase of the licence period to make this co extensive with the period of the sentence. Rather than attempt to summarise the relevant provisions of the 2003 Act, I shall set them out verbatim. Section 181 was the section which made provision for custody plus. It began as follows: Prison sentences of less than 12 months (1) Any power of a court to impose a sentence of imprisonment for a term of less than 12 months on an offender may be exercised only in accordance with the following provisions of this section unless the court makes an intermittent custody order (as defined by section 183). (2) The term of the sentence (a) must be expressed in weeks, (b) must be at least 28 weeks, (c) must not be more than 51 weeks in respect of any one offence, and (d) must not exceed the maximum term permitted for the offence. (3) The court, when passing sentence, must (a) specify the period (in this Chapter referred to as the custodial period) at the end of which the offender is to be released on a licence, and (b) by order require the licence to be granted subject to conditions requiring the offenders compliance during the remainder of the term (in this Chapter referred to as the licence period) or any part of it with one or more requirements falling within section 182(1) and specified in the order. (4) In this Part custody plus order means an order under subsection (3)(b). (5) The custodial period (a) Must be at least 2 weeks, and (b) In respect of any one offence, must not be more than 13 weeks. (6) In determining the term of the sentence and the length of the custodial period, the court must ensure that the licence period is at least 26 weeks in length. (7) Where a court imposes two or more terms of imprisonment in accordance with this section to be served consecutively (a) the aggregate length of the terms of imprisonment must not be more than 65 weeks, and (b) the aggregate length of the custodial periods must not be more than 26 weeks. Section 182 set out the various requirements that could be imposed by way of licence conditions. Custody plus has never been introduced and it is very unlikely that it ever will be. For this reason sections 181 and 182 have not been brought into force. The provisions of section 181 impacted on subsequent provisions of the Act, including the following provisions for release on licence. 244 Duty to release prisoners (1) As soon as a fixed term prisoner, other than a prisoner to whom section 247 applies, has served the requisite custodial period, it is the duty of the Secretary of State to release him on licence under this section. (2) Subsection (1) is subject to section 245. (3) In this section the requisite custodial period means (a) in relation to a person serving a sentence of imprisonment for a term of twelve months or more or any determinate sentence of detention under section 91 of the Sentencing Act, one half of his sentence, (b) in relation to a person serving a sentence of imprisonment for a term of less than twelve months (other than one to which an intermittent custody order relates), the custodial period within the meaning of section 181, . (d) in relation to a person serving two or more concurrent or consecutive sentences none of which falls within paragraph (c), the period determined under sections 263(2) and 264(2). Section 244(3)(b) has not been brought into force. Section 246 of the 2003 Act makes provision for eligibility for HDC in terms of even greater complexity than those of section 34A of the 1991 Act: 246 Power to release prisoners on licence before required to do so (1) Subject to subsections (2) to (4), the Secretary of State may (a) release on licence under this section a fixed term prisoner, other than an intermittent custody prisoner, at any time during the period of 135 days ending with the day on which the prisoner will have served the requisite custodial period, and (b) release on licence under this section an intermittent custody prisoner when 135 or less of the required custodial days remain to be served. (2) Subsection (1)(a) does not apply in relation to a prisoner unless (a) the length of the requisite custodial period is at least 6 weeks, (b) he has served (i) at least 4 weeks of his sentence, and (ii) at least one half of the requisite custodial period. (3) Subsection (1)(b) does not apply in relation to a prisoner unless (a) the number of required custodial days is at least 42, and (b) the prisoner has served (i) at least 28 of those days, and (ii) at least one half of the total number of those days. (6) . the requisite custodial period in relation to a person serving any sentence other than a sentence of intermittent custody, has the meaning given by paragraph (a), (b) or (d) of section 244(3); Section 249 deals with the duration of a licence. It provides: (1) Subject to subsections (2) and (3), where a fixed term prisoner is released on licence, the licence shall, subject to any revocation under section 254 or 255, remain in force for the remainder of his sentence. Section 250 makes provision for licence conditions in relation to both under 12 month and over 12 month sentences. Section 263 deals with concurrent sentences. It provides: 263 Concurrent terms (1) This section applies where (2) Where this section applies (a) a person (the offender) has been sentenced by any court to two or more terms of imprisonment which are wholly or partly concurrent, and (b) the sentences were passed on the same occasion or, where they were passed on different occasions, the person has not been released under this Chapter at any time during the period beginning with the first and ending with the last of those occasions. (a) nothing in this Chapter requires the Secretary of State to release the offender in respect of any of the terms unless and until he is required to release him in respect of each of the others, (b) section 244 does not authorise the Secretary of State to release him on licence under that section in respect of any of the terms unless and until that section authorises the Secretary of State to do so in respect of each of the others, (c) on and after his release under this Chapter the offender is to be on licence for so long, and subject to such conditions, as is required by this Chapter in respect of any of the sentences. (3) Where the sentences include one or more sentences of twelve months or more and one or more sentences of less than twelve months, the terms of the licence may be determined by the Secretary of State in accordance with section 250(4)(b), without regard to the requirements of any custody plus order or intermittent custody order. Section 264 is a critical provision in the context of this appeal. It deals with consecutive sentences. It provides: 264 Consecutive terms (1) This section applies where (a) a person (the offender) has been sentenced to two or more terms of imprisonment which are to be served consecutively on each other, and (b) the sentences were passed on the same occasion or, where they were passed on different occasions, the person has not been released under this Chapter at any time during the period beginning with the first and ending with the last of those occasions, and (c) none of those terms is a term to which an intermittent custody order relates. (2) Nothing in this Chapter requires the Secretary of State to release the offender on licence until he has served a period equal in length to the aggregate of the length of the custodial periods in relation to each of the terms of imprisonment. (3) Where any of the terms of imprisonment is a term of twelve months or more, the offender is, on and after his release under this Chapter, to be on licence (a) until he would, but for his release, have served a term equal in length to the aggregate length of the terms of imprisonment, and (b) subject to such conditions as are required by this Chapter in respect of each of those terms of imprisonment. (4) Where each of the terms of imprisonment is a term of less than twelve months, the offender is, on and after his release under this Chapter, to be on licence until the relevant time, and subject to such conditions as are required by this Chapter in respect of any of the terms of imprisonment, and none of the terms is to be regarded for any purpose as continuing after the relevant time. (5) In subsection (4) the relevant time means the time when the offender would, but for his release, have served a term equal in length to the aggregate of (a) all the custodial periods in relation to the terms of imprisonment, and (b) the longest of the licence periods in relation to those terms. (6) In this section (a) custodial period (i) in relation to an extended sentence imposed under section 227 or 228, means the appropriate custodial term determined under that section, (ii) in relation to a term of twelve months or more, means one half of the term, and (iii) in relation to a term of less than twelve months complying with section 181, means the custodial period as defined by subsection (3)(a) of that section; (b) licence period, in relation to a term of less than twelve months complying with section 181, has the meaning given by subsection (3)(b) of that section. Subsections (4) and (5) have not been brought into force. Section 265 provides: 265 Restriction on consecutive sentences for released prisoners (1) A court sentencing a person to a term of imprisonment may not order or direct that the term is to commence on the expiry of any other sentence of imprisonment from which he has been released early under this Chapter. This reflects sentencing policy that a prisoner should not be released under licence under one sentence before the commencement of the custodial period of a consecutive sentence. The Transitional Provisions The Criminal Justice Act 2003 (Commencement No.8 and Transitional and Saving Provisions) Order 2005 brought into force as from 4 April 2005 provisions of the Act that related to over 12 month sentences, as set out in Schedule 1. At the same time sections 32 to 51 of the 1991 Act were repealed. Schedule 2 set out Transitional and Saving Provisions. Paragraph 14 provided: Saving for prisoners serving sentences of imprisonment of less than 12 months 14. The coming into force of sections 244 to 268 of, and paragraph 30 of Schedule 32 to the 2003 Act, and the repeal of sections 33 to 51 of the 1991 Act, is of no effect in relation to any sentence of imprisonment of less than twelve months (whether or not such a sentence is imposed to run concurrently or consecutively with another such sentence). The interpretation of this paragraph (Paragraph 14) lies at the heart of this appeal. Paragraph 14 serves one obvious purpose. Because section 181 and section 244(3)(b) had not been brought into force and sections 32 to 51 of the 1991 Act were repealed there was no provision for early release, or eligibility for HDC release, for prisoners serving under 12 month sentences. Paragraph 14 was clearly intended to make provision for such sentences, at least when not imposed concurrently or consecutively with over 12 month sentences, to continue to be dealt with exclusively under the 1991 Act. If imposed consecutively to other under 12 month sentences, these would be aggregated pursuant to the provisions of section 51(2) of the 1991 Act and the provisions of section 33 and section 34A applied to the aggregate. This would produce a similar result to that produced by sections 244 and 246 of the 2003 Act in relation to over 12 month sentences. The Enigma The terms of paragraph 14 raise two questions: 1) What is the object and effect of the words in brackets (whether or not such a sentence is imposed to run concurrently or consecutively with another such sentence)? 2) Where sentences of under and over 12 months are ordered to be served consecutively, how are they to be linked together and how are provisions as to early release, release on HDC and licence to operate in relation to each sentence? The words in brackets focus on the effects of concurrent and consecutive sentences. One object that they may have been intended to serve is to make it clear that the provisions of sections 263 and 264 of the 2003 Act are to have no application to sentences which are all of less than 12 months. It is plain, as Mr Giffin QC for the respondents conceded that the word such in the sentence in brackets relates to sentences of less than 12 months. The fact that the words in brackets do not relate to under 12 month sentences which are imposed to run consecutively with over 12 month sentences helps, I believe, to answer the second question that forms part of the enigma. Before turning to this I shall set out the way in which the Secretary of State suggests that this question should be answered and then summarise the answers to it given by the courts below. The Policy of the Secretary of State The National Offender Management Service, setting out the policy of the Secretary of State, gave the following instructions to prison establishments as to how to calculate sentences and administer the HDC scheme: the 1991 Act applies (and the 2003 Act does not apply) to all sentences of under 12 months whenever the offences are committed, and so the provisions of the 1991 Act are applied to single term all [sic] sentences of under 12 months, the release date to be calculated in accordance with that Act. The 2003 Act plainly applies for this purpose to all sentences of 12 months or more where the offence was committed on or after 4 April 2005, and so the custodial periods of such consecutive sentences of 12 months or more must be aggregated, the release dates calculated in accordance with that Act. There will of course be transitional cases where a number of consecutive sentences are given, some being 12 months or more and some being under 12 months. We take the position that the 1991 Act therefore applies to those sentences under 12 months and the 2003 Act applies to those of 12 months or more where the offence was committed on or after 4 April 2005. The consecutive sentences that are single termed under the 1991 Act, and the aggregated sentences under the 2003 Act are treated as two separate sentences ie one 1991 Act sentence and one 2003 Act sentence. Eligibility for HDC is calculated by reference to the custodial term being served. So for example under the 1991 Act, a prisoner is not eligible for release on HDC until he has served the requisite period ie the requisite custodial term, as specified in section 34A(3) of the 1991 Act. Similarly, a prisoner sentenced under the 2003 Act is not eligible for HDC until he has served the requisite custodial period in section 246 of the 2003 Act . A prisoner only becomes eligible for HDC after the requisite custodial part of the last sentence has been served. Under these instructions the licence period and the HDC eligibility depended entirely on the order in which the consecutive sentences fell to be served. As to this prison governors were instructed to proceed on the basis that sentences were to be served in the order imposed by the court. Mitting Js decision Mitting J [2008] EWHC 207 (Admin) held that the Secretary of State could not lawfully lay down such a policy. He held at para 32: The only policy capable of giving effect to the policy of the 2003 Act and to the rational expectations of prisoners dealt with under both Acts is to ensure that they are not disadvantaged in relation to Home Detention Curfew, but are subject to the maximum period of licence on release which can lawfully be imposed. Mitting J directed the first respondent forthwith to consider whether the appellant should be released on HDC, and she was so released on 8 February 2008. The decision of the Court of Appeal The leading judgment of the Court of Appeal [2008] EWCA Civ 1097; [2009] 1 WLR 1321 was delivered by Scott Baker LJ. He agreed with Mitting J that the Secretary of State had had no jurisdiction to issue the policy direction. He held, however, that fortuitously the Secretary of States policy direction reflected the position in law. It was for the judge in his discretion, recognised by section 154 of the Powers of Criminal Courts (Sentencing) Act 2000, to direct how and in what order consecutive sentences should be served, but in the absence of any express direction there was a inference that sentences should be served in the order in which they were imposed. His conclusions appear in the following passage of his judgment: 53. Assuming the judge has said no more than that one sentence is to be consecutive to another, it is necessary to construe in a common sense way what section 154 direction the judge is to be taken to have given as to when the second sentence should commence. It seems to me obvious that the second sentence starts at the point at which release from the first sentence would otherwise occur as of right ie the conditional release date of the first sentence. The other theoretical options are unrealistic. The judge could not intend the second sentence to start when there is merely the possibility of release on a discretionary basis from the first sentence and the direction might or might not be exercised in the prisoner's favour. Nor could the judge intend the second sentence to start only at the sentence expiry date of the first sentence because the consequences would be that the prisoner would be released on licence from the first sentence and later recalled to start serving the second sentence. Accordingly, the second sentence begins, by virtue of the section 154 direction, at the conditional release date of the first sentence and the prisoner is to be treated as eligible for release on HDC and/or release on licence in accordance with the statutory provisions applicable to the second sentence. Those provisions will be those of the 1991 Act where the second sentence is less than 12 months and those of the 2003 Act where the second sentence is 12 months or more. Submissions Mr Weatherby for the appellant made the following powerful attack on the result reached by the Court of Appeal. i) It is at odds with the legislative intention. It produces a result which differs from the uniform approach to consecutive sentences of both the 1991 Act and the 2003 Act. The transitional provisions could not possibly have been intended to produce this result. ii) It leaves a legislative lacuna as to the way in which consecutive sentences should function where some are for less than 12 months and some are for more. iii) To infer that an order that two sentences are to be consecutive directs that the second should start when the custodial part of the first ends has no basis in law and converts a sentence that is directed to be consecutive into a sentence which is in part concurrent. There is force in these submissions. To them could be added that the decision of the Court of Appeal opens the door to the possibility of capricious results, places a near intolerable burden on the sentencer and does not readily cater for the position where a series of sentences is imposed of which some are over and some are under 12 months. Mr Weatherby submitted to us, as he did to the courts below, that it was possible so to interpret paragraph 14 as to provide that the 1991 Act determines the release date, and thus the custodial period and eligibility to HDC, of all under 12 month sentences, but that when such a sentence is imposed consecutively to a sentence of over 12 months, the effect of the two together is determined by section 264 of the 2003 Act. Mr Giffin did not seek to challenge the submission that the decision of the Court of Appeal, and the prior policy of the Secretary of State, produced capricious and anomalous results. Nor did he suggest that there was any principle or policy that justified such results. He simply submitted that it was not possible on the wording of the relevant provisions of the 2003 Act and of paragraph 14 to reach the solution for which Mr Weatherby contended. Conclusions The decisions of the courts below and the submissions of Mr Giffin offer no explanation whatsoever for the words in brackets in paragraph 14. I have already said that I think it significant that those words draw an implicit but clear distinction between under 12 month sentences imposed concurrently or consecutively with other similar (such) sentences and under 12 month sentences imposed concurrently or consecutively with sentences of over 12 months. The clear indication is that they are to receive different treatment. The draftsman has been too economical with his language to make his intention readily apparent. I have reached the conclusion that to give true effect to the wording of paragraph 14, and in particular the words in brackets, it should be read as follows: The coming into force of sections 244 to 268 [of, and paragraph 30 of Schedule 32 to, the 2003 Act], and the repeal of sections 33 to 51 of the 1991 Act, is of no effect in relation to any sentence of imprisonment of less than twelve months (other than a sentence which is imposed to run concurrently or consecutively with a sentence of twelve months or more). The effect of this is that the provisions of the 1991 Act apply to sentences of under 12 months provided that these are not imposed concurrently or consecutively with sentences of 12 months or over, and the 2003 Act will apply to sentences of under twelve months that are imposed concurrently or consecutively with sentences of 12 months or over. I believe that this reading clarifies the intention of the draftsman of paragraph 14, but some problems remain in relation to the application of the 2003 Act to concurrent and consecutive sentences which combine sentences of less than and more than 12 months. I turn to the 2003 Act to examine how these can be resolved. Concurrent sentences: sections 244 and 263(2) Section 244 deals with the duty of the Secretary of State to release on licence. This duty applies when the prisoner has served the requisite custodial period. What is the requisite custodial period in the case of concurrent sentences? Section 244(3)(d) applies so it is necessary to refer to section 263(2). Section 263(2) requires reference back to section 244 to see when the Secretary of State is required to release the prisoner on licence in respect of each individual sentence. Section 244(3)(a) provides that, in the case of a sentence of 12 months or more, this is after serving one half of the sentence. There is, however, no provision that supplies the answer in respect of sentences of less than twelve months, because section 244(3)(b) has not been brought into force. We are, however, dealing with the hypothetical question of when the Secretary of State would have been required to release the prisoner had his sentence not been imposed concurrently with the longer, over 12 month, sentence. Section 33(1) of the 1991 Act applies in that hypothetical situation and provides the answer that the prisoner would have to be released after serving half his sentence. Thus section 244, when read with section 263(2) must be read as requiring the prisoner to be released on licence when he has served one half the shorter and one half the longer of the concurrent sentences. In practice, of course, it will always be the longer, over 12 month, sentence that constitutes the relevant custodial period which governs release, so the problem of ascertaining the release date for the shorter sentence is somewhat academic. Consecutive sentences: sections 244 and 264(2) Once again section 244(3)(d) applies. This time it is necessary to refer to section 264(2) in order to identify the requisite custodial period in the case of consecutive sentences. This subsection requires one to identify the custodial period in relation to each sentence. Section 264(6)(a)(ii) provides the answer in respect of the over 12 month sentence. It is half the sentence. But there is no definition of custodial period for the under 12 month sentence or sentences, because section 181, which would have determined this, has not been brought into force. The custodial period in relation to an under 12 month sentence is, however, obvious. It is the half of the sentence that the prisoner would have had to serve before release, had his sentence not been imposed consecutively with an over 12 month sentence. The relevant custodial period is the amalgam of all the individual custodial periods. HDC release: section 246 This section gives the Secretary of State power to release a prisoner on licence up to 135 days before the day on which he will have served the requisite custodial period, subject to the restrictions in subsections (2), (3) and (4). Section 246(6) provides that requisite custodial period has the meaning given by paragraph (d) of section 244(3) in the case of a prisoner serving consecutive sentences. Thus this period is determined in the manner that I have described in the previous paragraph. The effect of this interpretation of paragraph 14, coupled with the relevant provisions of the 2003 Act, provides uniformity of approach, regardless of the order in which the individual sentences were imposed, qualifies the prisoner for the maximum grant of HDC release, but at the same time subjects the prisoner to the latest sentence and licence expiry date. on 24 May 2007, was correct. process of reasoning. For these reasons I would allow this appeal. I am encouraged that Lord Mance has reached the same result by a similar In the present case, the first release date notification, given to the appellant LORD SAVILLE I would allow this appeal. For the reasons given by Lord Phillips and Lord Mance, I have no doubt that by one route or another the legislation must be construed so as to avoid what would otherwise produce irrational and indefensible results that Parliament could not have intended. judgment. I would also associate myself with the observations of Lord Brown in his LORD BROWN In common with Lord Phillips and Lord Mance I too would allow this appeal. The construction of this legislation, in particular the transitional and saving provisions of the 2005 Order, adopted hitherto has led to the most astonishing consequences which no rational draftsman can ever have contemplated, let alone intended. Suppose the judge passes an 18 month sentence with 6 months consecutive: the prisoner becomes eligible for HDC release 45 days before his mandatory release date. But suppose the sentence had been imposed as 6 months imprisonment with 18 months consecutive (i.e. pronounced in a different order): HDC eligibility is then 135 days before the same mandatory release date. Or suppose the sentence is passed as 2 years imprisonment for the more substantial offence with 6 months concurrent for the lesser offence: again, HDC eligibility is 135 days. Or suppose that a prisoner whilst still serving the custodial part of an 18 month sentence (with the prospect of HDC release 135 days before his mandatory release after 9 months) is sentenced to a consecutive term of 1 month imprisonment. He would thereupon lose all prospect of HDC release, there being no such eligibility on a term under 3 months. These examples can easily be multiplied but the point is surely obvious: it can never have been Parliaments intention that HDC eligibility (and, as a corollary, the licence period following release) should depend on such vagaries of sentencing practice. One can but pay tribute to the succession of judgments which have sought to grapple with the intractable problems of construction thrown up by these ill conceived transitional provisions notably those of Dobbs J in R (Highton) v Governor of Lancaster Farms Young Offender Institution [2007] EWHC 1085 (Admin), Scott Baker LJ (concurred in by Wall LJ and Sir Anthony Clarke MR) in the present case, and Hughes LJ, President of the Criminal Division of the Court of Appeal, giving the judgment of that Court in R v Round [2009] EWCA Crim 2667 and, of course, one understands why they felt driven to the conclusion they arrived at. But the judgments serve also to underline the absurdities of that conclusion. As, indeed, Hughes LJ observed in Round (para 51): We are very conscious that the varying, not to say erratic, effect of the existence of two differing statutory regimes applying to the same defendant is to create real and disturbing anomalies between prisoners who ought in fairness to be treated similarly. To my mind the problems created by the Court of Appeals construction of this legislation are, quite simply, intolerable. Nor, generally, has it been open to sentencing judges to mitigate them. To quote again from the Courts judgment in Round (para 49): Our clear conclusion is that it is not wrong in principle for a judge to refuse to consider early release possibilities when calculating his sentence or framing the manner or order in which they are expressed to be imposed. We are quite satisfied that it is neither necessary nor right, nor indeed practicable, for a sentencing court to undertake such examinations. Ordinarily, indeed, it will be wrong to do so, although there may be particular cases in which an unusual course is justified. The judge must be left to express his sentences in the most natural and comprehensible manner possible. Very often that will no doubt mean that the principal, and longest, sentence comes first. In other cases it may not, for example because, as in Dunne, the judge follows the chronological or indictment order of offences. In these circumstances the Senior Presiding Judges letter circulated to all Crown Courts, referring to the Court of Appeals decision in the present case and enclosing a note from the Prison Service explaining how these sentences are in fact dealt with, could do little if anything to improve the situation. Either sentencing judges should pay heed to such information and adjust their sentencing practices accordingly to produce what they conceive to be the fairest result, or they should ignore it and carry on as usual. They cannot do both. That, however, is essentially by the way. Henceforth, on this courts construction of the legislation, the order in which sentences are imposed will make no difference whatever. As to the precise route by which this plainly preferable construction is to be reached, I am entirely content to follow that taken by Lord Phillips and Lord Mance or, indeed, supposing there to be any substantial difference between them, either of these routes. Both judgments to my mind offer perfectly cogent approaches to the various legislative provisions in play and, so absurd is the alternative conclusion hitherto arrived at, almost any coherent alternative construction will suffice. Had paragraph 14 of Schedule 2 to the 2005 Order really been drafted unambiguously to refer to all under 12 months sentences, even those imposed consecutively or concurrently with over 12 months sentences, there just might have been no alternative but to accept the Court of Appeals construction and dismiss this appeal. As both Lord Phillips and Lord Mance amply demonstrate, however, that is very far from the case. Indeed, for this to be the case, to my mind it would have been necessary for the words in parenthesis in paragraph 14 expressly to include, rather than (as they appear to do) implicitly exclude, consecutive or concurrent terms of both under 12 months and over 12 months. It is, after all, precisely this situation which produces the bizarre consequences which Mr Giffin QC recognises, indeed asserts, flow from his contended for construction of paragraph 14. The appeal must accordingly be allowed. LORD MANCE The appellant was on 23 May 2007 sentenced for five offences, all committed on or after 4 April 2005, the date when much of the Criminal Justice Act 2003 came into force. For one offence of theft, she received 22 months imprisonment, for three further offences, 4 months imprisonment on each, concurrent to one another but consecutive to the 22 months sentence, and for contempt, 1 month consecutive to all the other sentences: a total of 27 months. Prior to sentence, the appellant had been on remand in custody for 40 days, i.e. since 13 April 2007. The appeal concerns the inter relationship of provisions in the Criminal Justice Acts 1991 and 2003. The 2003 Act was conceived as a coherent whole, containing sentencing provisions replacing and making irrelevant reference to those of the former Act. In the event, certain provisions particularly those governing early release under sentences of less than 12 months have never (for resource reasons) been brought into force. The 1991 Act, and in particular sections 33 to 51 relating to early release, thus had to be given a continued application in relation to sentences of less than 12 months. The appeal arises from the fact that the appellant was sentenced both to sentences of less than 12 months and to a longer (22 month) sentence. The issue is, in short: how far, and how, does either or both of the schemes in the 1991 and 2003 Acts apply? The issue does not affect the appellants conditional release date (CRD) the date when she was entitled to be released. But it does affect the earlier date upon which she became eligible for home detention curfew (HDC) as well as her sentence and licence expiry date (SLED) after release. The effect can be illustrated by the prison authorities own change of mind. On 24 May 2007, the appellant was given a notification slip informing her of a HDC date of 15 January 2008, a CRD of 28 May 2008 and a SLED of 13 July 2009. On 18 July 2007 this was replaced by a slip notifying her of a HDC date of 20 April 2008, a CRD as before of 28 May 2008 and a SLED of 10 February 2009. The dates on the first slip were arrived at by combining all the sentences (giving a total term of 27 months), taking the half way point of that term (28 May 2008) as the CRD under section 244(3)(a) of the 2003 Act and deducting 135 days from that point under section 246(1)(a) in order to arrive at the HDC date of 15 January 2008. The licence period was treated as running to the end of the full 27 month term under sections 249(1) and 264(3). The appellant maintains that this approach was correct. The dates on the second slip were arrived at by treating the 22 month sentence as subject to the 2003 Act, and the four shorter sentences as subject in all respects to the 1991 Act and by treating the longer term as commencing first because the sentencing judge pronounced it first. Thus, the 22 month sentence, running first as a separate sentence subject to the 2003 Act, reached its CRD under section 244(3)(a) after 11 months, i.e. on 13 March 2008. The four short sentences subject to the 1991 Act fell by section 51(2) of that Act to be treated as a single term of 5 months. This term was treated as running from the CRD under the 22 month sentence, i.e. from 13 March 2008, and as having under section 34A(4)(b) of the 1991 Act a HDC date after a period equal to one quarter of the term, that is after 1 months, and so on 20 April 2008. The SLED date was stated as 10 February 2009, when the 22 month sentence expired (the 5 month term of the shorter sentences having by then long since expired, on 13 August 2008). Mr Giffin QC for the Secretary of State accepted in oral submissions that even the second slip might not strictly be correct, since, if the 22 month sentence is treated as a separate sentence running independently until 13 March 2008 and the remaining 5 months sentences only began running from that date, then strictly the 22 month sentence should under section 246(1)(a) of the 2003 Act have attracted its own HRD 135 days before 13 March 2008 (i.e. on or about 1 November 2007). However, he submitted that the Secretary of State would never in fact have exercised a discretion to release a prisoner on home detention curfew between 1 November 2007 and 13 March 2008 when the 5 month sentence remained to be served after 13 March 2008, with the result that the second slip could, for practical purposes, be taken as correct. The existence in law, but the loss for practical purposes, of the period of eligibility for HRD under the 22 month sentence is only one of a number of striking anomalies arising from the general approach taken by the second slip. An offender would be deprived of a substantial period during which he might otherwise ask for release on home detention curfew, simply because he was made subject to a second, consecutively running sentence, however short. This second sentence might indeed be imposed at a later date while the offender was already serving the first sentence, and its effect would then be sharply to reduce the period of eligibility to HDC, or even (since there was under s34A(4)(a) of the 1991 Act no eligibility to HDC in the case of any term of less then 3 months) to eliminate it altogether. A second anomaly is that the approach in the second slip treats the 5 month term, as from the CRD of the 22 month sentence, as running concurrently with the 22 month sentence. Such a result could be achieved, by express direction under section 154(1) of the Powers of Criminal Courts (Sentencing) Act 2000. But here it would, on its face, be contrary to the sentencing judges direction that the sentences should run consecutively. It also has the effect that any licence period under the 5 month term (in particular, the licence period which would run until the two and a half month point, if the offender were to be released under section 34A(4)(b) on his HDC date after serving one quarter of that term) runs concurrently with the longer licence period under the 22 month sentence, and is effectively submerged in it and lost. The matter is even more complex, because there may well be cases where, for example, the first and third sentences passed during a judges sentencing exercise are for periods of 12 months or more, whereas the second and fourth sentences are for periods less than 12 months. The solution to this advanced by the Secretary of State and Court of Appeal is to combine all sentences of 12 months or more and treat them as commencing with the first such sentence passed, and likewise to combine all sentences of less than 12 months and treat them as commencing with the first sentence of less than 12 months passed. But this solution is only achieved by departing from the rule otherwise adopted under the approach of the second slip, that sentences should be taken in the order pronounced. A third anomaly is that the approach in the second slip has radically different effects according to which sentence is treated as being served first. If the 5 month term of the four shorter sentences were taken first and the 22 month sentence were treated as running from the CRD (after 2 months, on or about 28 June 2007) of that 5 month term, then the offender would under section 264(1)(a) be eligible for home detention curfew 135 days before the half way point (28 May 2008) of the 22 month sentence, i.e. on 13 January 2008. Which way around sentences are treated as being served depends, on the construction advanced by the Secretary of State and accepted by the Court of Appeal, upon which way around the sentencing judge expresses them, or at least (see the previous paragraph) in which order he expresses the first sentence with which he deals in each category (less than 12 months and 12 months or more). Judges in their sentencing remarks commonly take the longest sentence first, which leads to the least favourable result regarding HDC for offenders in the situation presently under consideration. Mitting J thought that the third anomaly should have been resolved by the Secretary of State adopting a policy ensuring that offenders were subject to the maximum period of licence on release which can lawfully be imposed (para 32). He declared invalid the Secretary of States existing policy (according to which the first imposed sentence was treated as running first), and the Secretary of State thereupon decided to release the offender on HDC on 8 February 2008 (later determining that the time spent on release would count towards the custodial part of her sentence, whatever the outcome of any appeal). The Court of Appeal considered, rightly, that the Secretary of State had no power by way of policy statements to dictate matters such as eligibility for release on licence or the amount of time spent on licence with liability to recall. However, it also considered that the Secretary of States policy of taking the sentences in the order passed reflected the correct legal position. In R v Round and Dunn [2009] EWCA Crim 2667 the Court of Appeal loyally followed the authority of the Court of Appeal in the present case, and, after comprehensive examination of the complexities and possibilities to which it gave rise, rejected an argument that sentencing judges should structure their remarks to make the shortest sentence first. It was not incumbent on such a judge, indeed it was ordinarily wrong, to consider early release possibilities when calculating his sentence or framing the manner or order in which they are [sic] expressed to be imposed (para 49). There was a statutory anomaly, perpetrated (however accidentally) by the Executive and contrary to the discernible policy of Parliament (para 33), and the varying, not to say erratic, effect of the existence of two differing statutory regimes applying to the same defendant is to create real and disturbing anomalies between prisoners who ought in fairness to be treated similarly (para 51). But the judge must be left to express his sentences in the most natural and comprehensible manner possible (para 49). A fourth and fundamental anomaly is that the approach taken in the second slip is quite different in nature and leads to quite different results both to any applying under the 1991 Act, when that was the only relevant piece of legislation, and to any which would have applied under the 2003 Act had that come fully into effect (as must have been envisaged when it was enacted). In short, the transitional provisions bringing the 2003 Act into force in many respects, but keeping the 1991 Act in force in some other respects, are said to have achieved a result which Parliament did not intend by either Act. Under the 1991 Act, all the sentences, of whatever length, would have fallen under section 51(2) to be treated as a single term. The early release provisions, in particular sections 33 and 34A, would then have applied to that single term. The CRD would have been after one half of the term in the case of a short term prisoner sentenced to less than twelve months or two thirds in the case of a long term prisoner sentenced to four years or more (section 33(1) and (2)). The HDC date for short term prisoners would have been on a scale ranging up to 135 days before the CRD. After the CRD, prisoners subject to a term of less than 12 months were to be released unconditionally (sections 33(1)(a) and 33A(1)), while prisoners whose term was for a term of 12 months or more remained on licence until the three quarters date of their nominal term (section 37(1)). Under the 2003 Act, a different approach was adopted, with largely similar, but in certain respects different, consequences. Instead of treating all sentences passed as a single term, the 2003 Act treats them as separate, and then under sections 244 and 264 aggregates the custodial periods of all sentences to arrive at the CRD, with the HDC date arising 135 days before the CRD (section 246(1)(a)). In relation to any sentence of 12 months or over, the custodial period is under section 244(3)(a) one half (in contrast to the position under the 1991 Act, where it was two thirds for long term offenders serving four years or more). Further, under sections 244(1) and 249(1), the licence remains in force for the whole nominal period of any sentences (in contrast to the position under the 1991 Act, which entitles a prisoner serving a sentence or sentences constituting a single term of less than 12 months to be released unconditionally after serving one half of that term and under which the licence in respect of any longer term only lasts until the three quarters date). Against this background, I turn to the statutory instrument which has been the main focus of this appeal. This is the Criminal Justice Act 2003 (Commencement no. 8 and Transitional and Saving Provisions) Order 2005 (S.I. 2005 no. 950) (the 2005 Order). In consequence of the decision not to introduce provisions of the 2003 Act and to continue the application of the 1991 Act relating to sentences of less than 12 months, the 2005 Order: i) did not include (in Schedule 1, listing provisions to come into force on 4 April 2005) section 181 of the 2003 Act, which would have regulated the permissible term of any sentence less than 12 months and required the court when passing such a term to specify a period, referred to as the custodial period, of a length also regulated by the section, at the end of which the offender was to be released on licence for the remainder of the nominal term; ii) did bring into force section 244(1), (2) and (3)(a) and (d), which requires the Secretary of State to release fixed term prisoners on licence after they had served the requisite custodial period, and defines this period in relation to any person serving a term of 12 months or more as one half of his sentence, and in relation to a person serving two or more concurrent or consecutive sentences as the period determined under (so far as material) section 264(2); but did not bring into force section 244(3)(b) and (c), which would have defined the requisite custody period for sentences of less than 12 months (and for intermittent custody orders); iii) also brought into force section 264(1) to (3), (6) and (7), regulating the situation of a person sentenced to two or more consecutive sentences on the same occasion or in circumstances where the prisoner remained in custody at any time during the period beginning with the first and ending with the last occasion on which they were passed. Section 264(2) provides Nothing in this Chapter requires the Secretary of State to release the offender on licence until he has served a period equal in length to the aggregate of the length of the custodial periods in relation to each of the terms of imprisonment. and section 264(6)(a)(ii) defines the custodial period as meaning, in relation to a term of 12 months or more, one half of that term; section 264(3) reads: Where any of the terms of imprisonment is a term of twelve months or more, the offender is, on and after his release under this Chapter, to be on licence (a) until he would, but for his release, have served a term equal in length to the aggregate length of the terms of imprisonment, and (b) subject to such conditions as are required by this Chapter in respect of each of those terms of imprisonment. iv) did not bring into force section 264(4) and (5), providing that [w]here each of the terms of imprisonment is a term of less than twelve months, the offender was on and after release to be on licence until the relevant time, defined as the aggregate of all the custodial periods and the longest of the licence periods in relation to such terms; though it did, as section 264(6)(a)(iii), bring into force a definition of custodial period as meaning, in relation to a term of less than 12 months complying with section 181, . the custodial period as defined by subsection (3)(a) of that section. This definition was, however, otiose or inoperable since section 181 was not brought into force (see point (i) above); v) included among the Transitional and Saving Provisions contained in Schedule 2 was the following provision (para 14), which is critical for present purposes: Saving for prisoners serving sentences of imprisonment of less than 12 months 14. The coming into force of sections 244 to 268 ., and the repeal of sections 33 to 51 of the 1991 Act, is of no effect in relation to any sentence of imprisonment of less than twelve months (whether or not such a sentence is imposed to run concurrently or consecutively with another such sentence). Under Schedule 2, para 14 it is at least clear that, in a case where an offender is subject to one sentence of less than 12 months and no other sentence at all, the full regime of sections 31 to 51 of the 1991 Act continues to apply. Likewise, in a case where an offender is subject to several sentences each of less than 12 months. Their total term may amount to 12 months or more, but they will still be treated as a single term under section 51(2) of the 1991 Act. The problem comes when there is (as in the present case) a series of consecutive sentences, some of less than 12 months and at least one of 12 months or more. Mr Giffin submits that the language is clear: the coming into force of sections 244 to 268 of the 2003 Act (so far, that must mean, as Schedule 1 otherwise brings them into force) and the repeal of sections 33 to 51 of the 1991 Act is [sic] of no effect in relation to any sentence of imprisonment of less than twelve months. So in this situation, he submits and the Court of Appeal accepted, any and every sentence of less than twelve months must be segregated from any other sentence(s) to which it is concurrent or consecutive (whether such other sentences are for less than 12 months or for 12 months or more) and must remain subject to the 1991 Act. On the other hand, in relation to any sentences of 12 months or more, there is nothing in para 14 to prevent the coming into force of sections 244 to 268 or the repeal of sections 33 to 51 having effect, and any such sentences are therefore subject to, in particular, section 244(1) and (3), section 246(1)(a) and section 264(1) to (3), (6) and (7) of the 2003 Act. Two separate regimes have to be applied entirely separately, and there is, contrary to the scheme of both Acts, no mechanism for combining or aggregating sentences, or any aspect of sentences, which are subject to different regimes. Mr Giffin does not deny that this construction leads to the anomalies identified in paras 55 to 60 above. But he says that the wording compels it. Summum jus, summa injuria. Any suggestion that para 14 could be read as maintaining the 1991 Act in force for sentences of 12 months or more as well as sentences of less than 12 months, whenever these happened to be passed concurrently or consecutively with each other, conflicts with the fact that para 14 only applies in relation to any sentence of imprisonment of less than 12 months. It is also inconceivable that the legislator could have intended that the mere passing of, say, a three month sentence to follow a 4 year sentence could take both outside the scheme of the 2003 Act, with all that this would entail (for example, the requirement to serve two thirds of the sentence under section 33(2) of the 1991 Act, rather than half under section 244(3)(a) of the 2003 Act, before the CRD, and the shorter licence period under the 1991 Act). At first sight, the bracketed words in para 14 provide a simple answer to the construction advanced by Mr Giffin and accepted by the Court of Appeal as set out in para 64 above. The bracketed words whether or not such a sentence is imposed to run concurrently or consecutively with another such sentence contemplate only two situations: one where the only sentence passed is a sentence of less than 12 months, the other where such a sentence is passed concurrently or consecutively with one or more other sentences each also of less than 12 months. They therefore suggest that, despite the initial generality of the phrase in relation to any sentence of imprisonment of less than 12 months, the author was not dealing with the situation of a sentence of less than 12 months passed concurrently or consecutively with one or more sentences of 12 months or more. This would be understandable, since it would mean that the provisions of sections 244 to 268 brought into force under Schedule 1 would apply in this situation. They include provisions which expressly contemplate and provide for the situation, in particular section 263(3), providing that where concurrent sentences include one or more sentences of twelve months or more and one or more sentences of less than twelve months, the terms of the licence may be determined by the Secretary of State in accordance with section 250(4)(b) . , and section 264(3), commencing Where any of the terms of imprisonment is a term of 12 months or more . Unfortunately, this simple answer faces the difficulty that, in order to apply section 264(2) and (3) to situations where there are sentences of a length falling either side of 12 months, it must be possible to identify a custodial period in relation to the sentence or sentences of less than 12 months. The provisions of section 181 and 244(3)(b) were intended to identify this under the 2003 Act, but they have never been brought into force, and, without them, the definition in section 264(6)(a)(iii), which was intended under the scheme of the 2003 Act to apply the definition of custodial period contained in section 181 to the earlier subsections of section 264, is inoperable (para 62(iv) above). Further, if situations where there are sentences both of less than 12 months and of 12 months or more are in every respect outside the reach of para 14, that also means that sections 33 to 51 of the 1991 Act were repealed in their entirety in relation to any sentence of less than 12 months passed concurrently and consecutively with sentences of 12 months or more, so that it becomes on the face of it impossible to derive any custodial period from section 33(1)(a) of the 1991 Act. Nevertheless, it is clear that the author of para 14 had in mind two things. First, sections 181, 244(3)(b) and (c) and 264(4) and (5) had not been brought into force and it was therefore important to preserve the regime of the 1991 Act in respect of any individual sentence of less than 12 months. Second, he needed to address cases where there were two or more sentences each of less than 12 months. Section 264(4) and (5) of the 2003 Act were originally intended to address such situations. But they could not be brought into effect or applied to such situations, so long as section 181 was not in effect. Had section 264(4) and (5) come into force without section 181, the approach which they embody would have led to there being no licence period after the CRD at all. This is because section 264(5) requires regard to be had to the aggregate of all the custodial periods and the longest individual licence period under any of the relevant sentences, viewed individually. In the absence of section 181, there would be no such licence period. (Equally, if it had been provided that the sentences of less than 12 months should be viewed individually as if they were subject to the 1991 Act, none of them would give rise to any licence period, because each would attract a right to release unconditionally at its half way point under sections 33(1)(a) of the 1991 Act: see para 60 above.) In these circumstances, the author of para 14 made clear by the bracketed words that, where there were two or more sentences and each was of less than 12 months, sections 33 to 51 of the 1991 Act were to continue to govern the situation. Such sentences might amount in total to more than 12 months, but they would still remain subject to the 1991 Act. In particular, two such sentences totalling more than 12 months could and would (under section 51(2) of the 1991 Act) continue to be treated as a single term of more than 12 months, so that there would under section 37(1) continue to be a licence period (after release at the half way point under section 33(1)(b)) up to the three quarters point of that term. The words in brackets in para 14 of Schedule 2 to the 2005 Order were, on the other hand, clearly drafted so as not to deal with the situation of one or more sentences of 12 months or more being passed concurrently or consecutively with one or more sentences of less than 12 months. (It is common ground that the phrase another such sentence means and can only mean another sentence of less than twelve months.) Sections 263 and 264(2) and (3) had been brought into force by Schedule 1 to the same Order. Their language expressly contemplates and covers the situation of sentences passed of a length either side of 12 months: see para 66 above. Yet, on the Secretary of States and Court of Appeals approach, they cannot apply to such a situation. That cannot have been meant; and this, in my opinion, also provides a key to understanding why the bracketed words in para 14 are limited to cases where the only sentence(s) in the arena had a term of less than 12 months. Leaving aside the difficulty of identifying an applicable definition of custodial period in this situation for the sentences under 12 months, it made sense to bring the provisions of sections 244 to 268 including sections 263(3) and 264(2) and (3) into force, which Schedule 1 did as from 4 April 2005, and it makes sense for these provisions to cover the situation of sentences of a length either side of 12 months. The licence period applicable in that situation would under section 264(3)(a) last until the end of the aggregate length of all the terms of imprisonment imposed. Eligibility for HDC would fall to be determined under section 246, which ties it back to the CRD specified in section 264(2) (see sections 246(1) and (6) and 244(3)(d)). In the compressed wording of para 14, the author was attempting to achieve and reflect this result. However, he must have overlooked the fact that, without section 181, the definition in section 264(6)(a)(iii) of custodial period in relation to any sentence of less than 12 months is inoperable, and that, if he limited the application of para 14 to cases where no sentence of 12 months or more was in question, then section 33(1)(a) would not, on its face, be available to supply the definition and fill the gap in the situation where there were sentences of a length either side of 12 months. However, the continued application of section 33(1)(a) to all cases where the only sentence or sentences in existence are of less than 12 months (giving a custodial period of one half in respect of such sentences) leaves no doubt about the custodial period which the author would and must have intended would apply under sections 263(3) and 264(2) and (3), if, as I consider, he must have intended these to apply to mixed sentences of a length either side of 12 months. (The appropriateness of a custodial period of one half is merely reinforced by the fact that this is also the custodial period in relation to terms of 12 months or more under the 2003 Act: section 264(6)(a)(ii).) Apart from the objection that, under the literal language of para 14, section 33(1)(a) does not apply in relation to the situation of mixed sentences either side of 12 months, I would see no difficulty about deriving a custodial period of one half for the purposes of section 264(2) and (3) from sections 33(1)(a). The definition in section 264(6) is not expressed in exhaustive terms, and, even if it were, the inoperability of section 264(6)(iii), in circumstances in which section 181 has never been brought into force, would justify recourse to the 1991 Act to fill the consequent gap. The author of para 14 may have failed literally to give effect to these intentions; he may well, as the Court of Appeal (in view of other presently irrelevant drafting errors in Schedule 2) suggested in R (Buddington) v Secretary of State for the Home Department [2006] EWCA Civ 280; [2006] 2 Cr App R (S) 109, para. 18, have been suffering from Homeric exhaustion; but each literal construction that has been suggested has wholly implausible and unacceptable consequences. On the other hand, a purposive construction makes it possible, for the purposes of section 264(2), (3) and (6)(a)(iii), to apply the definition of custodial sentence in section 33(1)(a) (which under para 14 applies on any view to all cases of one or more sentences all of less than 12 months) to the situation where there are sentences of a length either side of 12 months. This avoids the anomalies identified earlier in this judgment and makes sense of the transitional provisions. In summary, either the definition of custodial period, when required under section 264(2) and (3) in relation to a term of less than 12 months, can, in circumstances where section 181 has not come into force, be supplied under section 264(6)(a)(iii) simply by reading into that subsection in this limited context a reference to a custodial period of one half of the term (as would have applied under section 33(1) of the 1991 Act). Or para 14 can be understood as if the bracketed passage went on to provide but, where such a sentence is imposed to run concurrently or consecutively with a sentence of 12 months or more, sections 244 to 268 take effect as if section 33(1) continued to apply so as to define the custodial period of the sentence of less than 12 months as one half of such sentence. In my opinion, this is a permissible as well as the correct approach to the understanding of para 14, read in the overall context of the scheme and provisions of the 2003 Act and 2005 Order. In Inco Europe Ltd. v First Choice Distribution [2000] 1 WLR 586, 592C D, Lord Nicholls, giving the only full speech in the House of Lords, noted that it had long been established that the role of the courts in construing legislation is not confined to resolving ambiguities in statutory language but that The court must be able to correct obvious drafting errors. In suitable cases, in discharging its interpretative function the court will add words, or omit words or substitute words. He added (p.592E G) that the latter power was confined to plain cases of drafting mistakes, where the court could be abundantly sure of three matters: (1) the intended purpose of the statute or provision in question; (2) that by inadvertence the draftsman and Parliament failed to give effect to that purpose in the provision in question; and (3) the substance of the provision Parliament would have made, although not necessarily the precise words Parliament would have used, had the error in the Bill been noticed. Any alteration in the literal wording must not be too big, or too much at variance with the language used (p.592H). In Attorney Generals Reference (no. 5 of 2002) [2004] UKHL 40, [2005] 1 AC 167, the House, in view of the absurdity that would otherwise result, refused to give its literal interpretation to a statutory provision which, literally read, precluded the defence from asking questions to establish that there had been interception (consequently illegal) on part of a public telecommunications system, but allowed the prosecution to call evidence to the effect that the interceptions had taken place wholly within a police private telecommunications system (and were therefore legal). The linguistic difficulty was decisively outweighed by a purposive interpretation of the statute (para 31, per Lord Steyn). In my opinion, the reasoning and approach taken in both these cases is applicable to the present. It is the more readily applicable in my view, when this case concerns delegated legislation made by executive action as the Court of Appeal noted in Round and Dunn, and subject only to the limited opportunity for any Parliamentary scrutiny involved in the negative resolution procedure described by Lord Hope in R (Stellato) v Secretary of State for the Home Department [2007] UKHL 5; [2007] 2 AC 70, paras 12 13. Some attention was directed in argument and in the courts below to further provisions of Schedule 2, especially paras 19 and 25 dealing with the application of provisions of the 2003 Act in relation to offences committed before 4 April 2005. To my mind these cannot be decisive in either direction. I would only comment that, as at present advised, I would find it difficult to agree with the Secretary of States and Court of Appeals interpretation of their effect as regards sections 263 and 264. The omission from para 19 of any reference to sections 263 and 264 and the reference in para 25 to those sections seem to me more easily understood as indicating an intention to apply the aggregation provisions of those sections from 4 April 2005 in all circumstances (save only where all sentences in question are for less than 12 months and are therefore within para 14). It was understandable to mention section 244 in para 19 (and so to make clear that, where all sentences in question were for offences committed before 4 April 2005, the relevant provisions of the 1991 Act were to apply). But, where offences committed either side of 4 April 2005 are in question, the language of section 264(2) seems to me quite capable of operating, and to have been intended by para 19 to operate, to require the Secretary of State to release the offender on licence after the period specified. Nothing in para 25 suggests that it was to be confined in scope to cases where one of the sentences was an extended sentence. There seems no reason why para 25 should not be relevant generally (for example, to preclude a long term prisoner serving a sentence of 4 years or more for an offence committed before 4 April 2005 in conjunction with another prison sentence for an offence committed after that date from claiming under section 264(6)(a)(ii) the benefit of a custodial period of one half in respect of the former sentence, instead of the period of two thirds which would follow from section 33(2) of the 1991 Act, the application of which is preserved in relation to the former offence by para 19). For the reasons given in paras 49 to 75, I would in any event allow this appeal, allow the application for judicial review and declare that the appellants release dates were correctly calculated by the Secretary of States first notification slip of 24 May 2007. LORD JUDGE In his Judicial Studies Board Lecture, The Drafting of Criminal Legislation: Need it be so Impenetrable?, given on 13th March 2008, Professor John Spencer QC explained that the collection of statistics in preparation for his lecture was not easy, because there has been so much criminal justice legislation over the last 10 years that accurate figures are now hard to give. However, by my reckoning we have had since 1997 no less than 55 Acts of Parliament altering the rules of criminal justice for England and Wales. The problem he said is not the mere number of statutes, but their increasing bulk. Many of them are enormous. Indeed they are. And that is not the end of the difficulties. Ill considered commencement and transitional provisions, which have to negotiate their way around and through legislation which has been enacted but which for one reason or another has not or will not be brought into force, add to the burdens. And there are hidden traps, the most obvious of which is legislation which repeals the earlier repeal of yet earlier legislation. In the course of his judgment in the Administrative Court in this present case, Mitting J underlined the statutory obligation imposed on the sentencing court to explain the effect of the sentence to the offender in ordinary language. He recorded that These proceedings show that, in relation to perfectly ordinary consecutive sentences imposed since the coming into force of much of the Criminal Justice Act 2003, that task is impossibleIt is simply unacceptable in a society governed by the rule of law for it to be well nigh impossible to discern from statutory provisions what a sentence means in practice. That is the effect here. I entirely agree with these observations. The explanation for the problem is simple. For too many years now the administration of criminal justice has been engulfed by a relentless tidal wave of legislation. The tide is always in flow: it has never ebbed. On 23rd May 2007 a perfectly simple case was listed at Stafford Crown Court before His Honour Judge Eades. After making due allowance for the mitigation the judge concluded that Rebecca Noones criminality merited a sentence of 27 months imprisonment. Whether he imposed a sentence of 27 months for one offence of theft, with lesser concurrent sentences for the remaining offences, or a sentence of 22 months for theft, with consecutive sentences of four months and one month totalling a further 5 months imprisonment (as he did), and whatever the order in which he would eventually pass the sentence, his final assessment required the sentence to reflect the totality principle, recently given the accolade of express reference in statute in section 120(3)(b) of the Coroners and Justice Act 2009. Generations of sentencing judges have been brought up to understand that the relevant legislation always reflected the obvious sense that when sentences are imposed on the same occasion, consecutively to other sentences, and in whatever order they are imposed, for the purposes of ascertaining the prisoners release date, the sentence should be treated as a whole. Thus, section 38(4) of the Criminal Justice Act 1961, section 104(2) of the Criminal Justice Act 1967, and section 51(2) of the Criminal Justice Act 1991 describe the overall effect of such sentences as a single term. In the Criminal Justice Act 2003, in relation to consecutive sentences, the phrase single term has been replaced with a reference to the aggregate length of the custodial period, which can only mean what it appears to say, that is, that all the terms of the sentence will be added up together to form a single whole. This, surely, is the opposite side of the same coin as the totality principle to which the sentencing decision itself is subject. Judge Eades, like every sentencing judge, would have proceeded on the basis that both common sense and justice compelled the conclusion that, altogether ignoring for present purposes the further complications which can arise in relation to licence periods, whether he used concurrent or consecutive sentences for the purpose of constructing his 27 months total sentence, and in which ever order the sentences were pronounced, the time actually to be served in custody by the appellant should be the same. Yet the decision to which the prison authorities felt driven after they examined the policy laid down by the Secretary of State about the administration of the Home Detention Curfew Scheme was that their first conclusion about her date of release, as notified to her, was over generous, and that, notwithstanding any lack of merit in or misconduct by her, her eligibility for release on Home Detention Curfew should be deferred by just over 3 months. In other words the appellant would serve 3 months or so longer in custody because the judge had imposed consecutive rather than concurrent sentences. All this was said to be required by the interaction of the Criminal Justice Act 1991, as amended by the Crime and Disorder Act 1998, with the further provisions of the Criminal Justice Act 2003 and the Criminal Justice Act 2003 (Commencement no. 8 and Transitional and Saving Provisions) Order 2005, a provision which has already achieved a disturbing notoriety for inaccuracy (R v Buddington v Secretary of State for the Home Department [2006] 2 Cr App R(S) 109). The statutory framework has been dissected by Mitting J, and the Court of Appeal, and by counsel before this court in long detailed written and oral arguments. Reflecting on the submissions, I have been unable to find even the slightest indication that it was the legislative intention that the totality principle should be disapplied, or that the fact that this appellants sentence was subject to more than one statutory regime, or even that the introduction of the Home Detention Curfew Scheme by the 1998 Act, was or could ever have been intended to produce the adventitious result for which the Secretary of State contended. I have studied the judgments of Lord Phillips and Lord Mance. Their judgments tell the lamentable story of how elementary principles of justice have come, in this case, to be buried in the legislative morass. They have achieved a construction of the relevant legislation which produces both justice and common sense. I should have been inclined to reject the Secretary of States contention on the grounds of absurdity absurd because it contravened elementary principles of justice in the sentencing process but Lord Phillips and Lord Mance have provided more respectable solutions, either or both of which I gratefully adopt. Nevertheless the element of absurdity remains. It is outrageous that so much intellectual effort, as well as public time and resources, have had to be expended in order to discover a route through the legislative morass to what should be, both for the prisoner herself, and for those responsible for her custody, the prison authorities, the simplest and most certain of questions the prisoners release date.

This appeal concerns the inter relationship between the sentencing provisions of the Criminal Justice Act 1991 (the 1991 Act) and the Criminal Justice Act 2003 (the 2003 Act). Under the 1991 Act it became mandatory for the Secretary of State to release prisoners part way through the period of their sentence. Home Detention Curfew (HDC) was introduced by the Crime and Disorder Act 1998, by which prisoners could be released on licence after they had served a requisite period. The 2003 Act replaced the sentencing regime for sentences over 12 months on 4 April 2005. However, its provisions governing early release for sentences of less than 12 months have never been brought into force. Thus when a prisoner was sentenced to consecutive sentences, including terms both over and under 12 months, it was necessary to have regard to the Criminal Justice Act 2003 (Commencement No 8 and Transitional and Savings Provisions) Order 2005 (the 2005 Order) to determine which scheme should apply. The appellant, Rebecca Noone, was sentenced on 23 May 2007 for five offences to (i) a term of 22 months imprisonment, (ii) three concurrent terms of four months imprisonment to be served consecutively, and (iii) a one month, also to be served consecutively. The policy of the Secretary of State was that her release on HDC should be calculated by treating the longest sentence as subject to the 2003 Act and as commencing first (because it was pronounced first by the sentencing judge), and the shorter sentences as subject to the 1991 Act. This produced an HDC date over three months later than the approach urged by the appellant, which combined all the sentences and took the half way point of the combined term as the conditional release date from which HDC was calculated. The High Court held that the policy of the Secretary of State was unlawful, but on appeal the Court of Appeal held that, although the matter could not be determined by policy, the policy had in fact correctly reflected the position in law. The Supreme Court unanimously allowed the appeal. The substantive judgments were given by Lord Phillips (President) and Lord Mance, with whose approaches the other Justices agreed. Lord Phillips stated that the interpretation of Paragraph 14 of the 2005 Order lay at the heart of the appeal. It raised the question, where sentences of under and over 12 months were ordered to be served consecutively, of how they were to be linked together and how the provisions as to early release on HDC and licence were to operate in relation to each sentence [para 22]. The approach of the Court of Appeal opened the door to the possibility of capricious results, placed a near intolerable burden on the sentencer and did not readily cater for the position where a series of sentences was imposed of which some were over and some were under 12 months (a mixed sentences case) [29]. The words in brackets in Paragraph 14 were drafted too economically to reflect the clear intention that a mixed sentences case was to receive different treatment from sentences of less than 12 months, namely that the 2003 Act should apply to it [para 33]. Consecutive sentences were subject to s 244(3)(d) of the 2003 Act, and it was necessary to refer to s 262(2) to identify the requisite custodial period. Although this did not define custodial period for sentences under 12 months, it was obvious that this was half the sentence that the prisoner would have had to serve before release, had his sentence not been imposed consecutively with an over 12 month sentence. The relevant custodial period was the amalgam of all the individual custodial periods [para 35] and from that eligibility for HDC could be determined [para 36]. Lord Mance observed that the Secretary of States approach meant that the transitional provisions, bringing the 2003 Act into force in many respects, but keeping the 1991 Act in force in some others, achieved a result which Parliament did not intend by either Act [para 60]. He did not agree that the wording of Paragraph 14 compelled it. In his view Paragraph 14 was clearly drafted to be limited to cases where the only sentences in the arena had a term of less than 12 months [para 70]. The draftsman must have overlooked the fact that it left a gap in the definition of the custodial period in a mixed sentences case, but it was clear what was intended to happen (by reference to the continued application of s 33(1)(a) of the 1991 Act to all cases with sentences under 12 months) namely that the provisions of s 263(3) and s 264(2) and (3) should apply [para 71]. Lord Judge deplored the fact that so much intellectual effort, as well as public time and resources, have had to be expended in order to discover a route through the legislative morass to what should be, both for the prisoner herself, and for those responsible for her custody, the prison authorities, the simplest and most certain of questions the prisoners release date [para 87].

This appeal concerns the operation of section 1 of the Crime (International Co operation) Act 2003. That section gives the Secretary of State for the Home Department (who is the appellant in these proceedings) power to serve on a person in the United Kingdom any process or other document at the request of a foreign government or its authorities. Mr Mamdouh Ismail, the respondent, is an Egyptian national. He was chairman of the board of management of the El Salam Maritime Transportation Company which was based in Egypt. Mr Ismails son, Amr, was an executive director and vice chairman. The company operated a ferry. On 3 February 2006 it sank in the Red Sea and more than 1,000 people lost their lives. Mr Ismail and his son were charged with manslaughter. A trial took place before the first instance Safaga Court of Summary Justice. Neither Mr Ismail nor his son was present but they were legally represented. Both were acquitted on 27 July 2008. The prosecution appealed. The respondent and his son were again not present at the appeal hearing but lawyers appeared on their behalf. The respondents sons acquittal was affirmed but on 11 March 2009 Mr Ismail was found guilty. During the hearing before the Appeal Court a lawyer for the prosecution argued that submissions made on behalf of the respondent and his son should not be taken into account because neither was present. It appears that this argument was based on a rule of Egyptian law which requires a defendant to be present in court during a trial of a misdemeanour punishable by imprisonment. The argument was accepted. The respondent was sentenced to the maximum term of imprisonment: seven years, with hard labour. The respondent and his son had entered the United Kingdom on 26 April 2006. They have remained in this country since then. On 11 October 2010 the Egyptian authorities requested the Secretary of State to serve the judgment of the Appeal Court on Mr Ismail. In July 2011 they confirmed that request. On 3 August 2011 the Secretary of State informed the respondent that she intended to serve the judgment. In a letter before claim dated 18 August 2011, Mr Ismails solicitors submitted to the appellant that she would be acting unlawfully if she acceded to the request to serve the judgment. Various reasons were given. Further representations were made on Mr Ismails behalf between August 2011 and January 2012. These prompted an inquiry by the Secretary of State of the Egyptian authorities as to the effect that service of the judgment would have on the respondent. She was informed that the judgment of the Appeal Court, having been given in the respondents absence, could be appealed by means of an objection and this could be done by a lawyer acting on the respondents behalf; time for the lodging of objection (ten days) would begin to run when the judgment was served; if the respondent failed to appeal, the judgment would become final but, in that event, it could be appealed to the Court of Cassation; and if the respondent lodged an objection, he would have to attend the hearing of the appeal in person. On 23 May 2012 the Secretary of State informed Mr Ismails solicitors that she intended to serve the judgment on him. On 20 June 2012 a claim for permission to apply for judicial review of that decision was made. Permission was refused on the papers by Haddon Cave J on 10 October 2012. A renewed application was made and the matter was listed for a rolled up hearing before Goldring LJ and Wyn Williams J on 12 February 2013. Permission to apply for judicial review was given during the hearing and on 26 March 2013 the High Court delivered its reserved judgment, allowing the respondents claim for judicial review. On the Secretary of States application, the High Court certified two points of law of general public importance: 1. What is the extent of the Secretary of States discretion when serving a foreign judgment under section 1 of the Crime (International Co operation) Act 2003? 2. May a persons article 6 rights be engaged on service by the Secretary of State of a foreign judgment under section 1 of the Crime (International Co operation) Act 2003? The judgment of the High Court The High Court considered three grounds advanced on behalf of Mr Ismail. The first of these was that the Secretary of State had been wrong in her analysis of the extent of the obligations imposed on her by article 6 of the European Convention on Human Rights and Fundamental Freedoms (ECHR). The second ground was that the Secretary of State adopted an irrational and unlawful approach in exercising her discretion as to whether or not to accede to the request to serve the judgment on Mr Ismail. Finally, it was argued that the Secretary of State, in her consideration of articles 2, 3 and 8 of ECHR, had failed to take into account all relevant circumstances. Goldring LJ (who delivered the judgment of the court) dealt first with the second of these arguments. He held (in para 63) that, in exercising her discretion under section 1 of the 2003 Act, the Secretary of State could not ignore evidence of obvious illegality or bad faith in the proceedings which had led to the request to enforce a foreign judgment. Nor could she fail to have regard to evidence in relation to the manner in which the judgment had been obtained. She was also obliged to take into account the consequences for the person on whom the judgment was to be served. The consequences which the court considered would ensue for the respondent by service of the judgment were summarised in paras 67 and 68: 67. Service of the judgment would have serious implications for the claimant both in Egypt and the United Kingdom. It would set time running for finalising the judgment. He would have two options: return to Egypt and begin to serve the prison sentence of seven years with hard labour and appeal or remain in the United Kingdom and suffer the consequences of a final judgment. 68. Remaining in the United Kingdom would have significant consequences for the claimant once the judgment is served. Although there is presently no extradition arrangement between the United Kingdom and Egypt, on any request for extradition, the claimant could not dispute the facts. Egypt would then be seeking the extradition of a man guilty of manslaughter. Of course, the claimant would have the protection rights under Part 2 of the Extradition Act 2003. Further, a final judgment in the United Kingdom might well lead to an Interpol red notice. He could not then leave the United Kingdom for fear of being arrested. On the question of whether the proceedings before the court of appeal in Egypt were tainted by illegality or bad faith, Goldring LJ (in para 72) referred to four factors which, he said, constituted sufficient evidence for the Secretary of State to have considered whether this was a judgment obviously obtained in flagrant disregard of justice; in other words, in bad faith (para 73). Those factors were: (i) the background of public pressure after the respondents acquittal for him to be convicted; (ii) the fact that two of the three judges due to hear the appeal were replaced shortly after their appointment by two men who had worked in the prosecutor's office at the time of the investigation; (iii) in the course of the appeal hearing, the respondents legal representation was effectively withdrawn; and (iv) there were grounds to question whether the judgment could be sustained on a proper analysis of the facts. On the first ground advanced on Mr Ismails behalf (that the Secretary of State had been wrong in her understanding of the duties imposed on her by article 6 of ECHR), Goldring LJ said (in para 100) that it was very difficult as a matter of principle to distinguish between enforcing a judgment and directly assisting in the enforcement of it in circumstances such as arose in Mr Ismails case. He considered, therefore, that there was sufficient evidence for the Secretary of State to consider whether article 6 was engaged. He made the following observation at para 102, however: For article 6 to be engaged the disregard of a persons article 6 rights must be flagrant. The test is a very high one. Some indication of that can be gauged from the fact that over the past 20 years article 6 has not been successfully invoked in an extradition context. Even in a case where defence counsel was appointed by the public prosecutor, the applicants were held incommunicado until trial, the hearing was not public and closed to the defence lawyers and self incriminating statements were obtained in highly doubtful circumstances, extradition was permitted (see Lord Browns speech in RB (Algeria) v Secretary of State for the Home Department [2010] 2 AC 110). That underlines how very exceptional must be the circumstances to result in the application of article 6 in a case such as the present. In light of the courts findings on the first two grounds, Goldring LJ said that it was unnecessary to consider the final ground to any degree. He reflected that, since the service of the judgment would have an impact on the respondents family life, the extent and proportionality of any interference with it would have to be assessed. He made an incidental comment on medical evidence that had been submitted on behalf of Mr Ismail. This consisted of three reports from a Professor Kopelman, the last of which suggested that the respondents poor mental condition would worsen if the judgment was served on him. Goldring LJ said (at para 103) that the Secretary of States concerns about this she had said that the claims made about Mr Ismails health were unrealistic may have been entirely justifiable. The appeal before this court For the Secretary of State, Mr Perry QC described the principal question on the appeal as being whether the service of a foreign judgment was capable of engaging the article 6 rights of the individual who is served with the judgment. He submitted that service of such a judgment could not engage article 6 for two reasons: first, service of a foreign judgment does not have the direct consequence of exposing the individual on whom it is served to a breach of any fair trial guarantee; secondly, the consequences of service are not of a type or nature to warrant the engagement of article 6 rights. Mr Perry claimed that it was beyond dispute that service of the judgment on the respondent would have had no direct effect on his rights in this jurisdiction. The only practical effect of service would have been to start the timetable for further appellate proceedings in Egypt. This would in turn require the respondent to decide whether or not to attend those appeal proceedings. Service of the judgment would make no difference to his ability to remain in the United Kingdom, nor would it have any effect on the conditions in which he lived here. By recognising the possible engagement of article 6, the High Courts judgment had impermissibly extended the reach of ECHR to a category of cases to which it had not previously been applied. On the second issue on which a question had been certified (the extent of the Secretary of States discretion when serving a foreign judgment under section 1 of the 2003 Act), Mr Perry submitted that it was not incumbent on the Secretary of State to investigate the fairness of proceedings in a foreign state where she is asked to serve or facilitate the service of a foreign judgment. To impose such a duty would run counter to the purpose of the 2003 Act in that such an obligation would impede the ability of the Secretary of State to offer speedy and effective procedural assistance to the competent authorities in other sovereign states. The High Court was wrong, Mr Perry argued, to treat mere service of process as giving rise to similar duties to those which might attend recognition and enforcement of such process. The two were conceptually and, as a matter of practicality, fundamentally different. The recognition and enforcement of a foreign judgment could have the consequence of directly exposing an individual to a possible breach of his article 6 rights, as in the case of extradition. Mere service of process, carrying no such risk (at present there is no extradition treaty between the UK and Egypt) was of a completely different order. The possibility that at some time in the future an extradition treaty might be made between the two countries was remote, Mr Perry said, and, in any event, a person whose extradition was sought would then have the protections provided for in Part 2 of the Extradition Act 2003. These include the prohibition of extradition where that would be incompatible with ECHR rights. Mr Perry also argued that the High Court was wrong to suggest that the issue of a red notice was contingent on the service of the judgment. Article 82 of INTERPOLs Rules on the Processing of Data explains the purpose of red notices. It stipulates that such notices are published at the request of a National Central Bureau or an international entity with powers of investigation and prosecution in criminal matters in order to seek the location of a wanted person and his or her detention, arrest or restriction of movement for the purpose of extradition, surrender, or similar lawful action. It did not depend on a final judgment having been passed on the person who was the subject of the notice. In fact, as emerged during the hearing of the appeal before this court, a red notice had been issued in respect of Mr Ismail. For the respondent, Ms Montgomery QC suggested that section 1 of the 2003 Act clearly conferred a discretion on the Secretary of State. The essential question was what the extent of that discretion was and what considerations the Secretary of State had to take into account in deciding whether to accede to a request to serve the foreign judgment. In this case there was a properly arguable case that the Egyptian appeal proceedings were manifestly unfair. They should be characterised in article 6 terms as amounting to a flagrant denial of justice Othman v UK (2012) 55 EHRR 1, para 259. To suggest, as did the appellant, that, acceding to the Egyptian governments request to serve the judgment of the appeal court on the respondent would have involved the discharge of a mere administrative function akin to the service of a claim form in a civil/commercial dispute, was unreal. Where material had been placed before the Secretary of State which plausibly suggested that there was inherent and blatant unfairness in the Egyptian trial process, a careful assessment of the respondents representations was needed. Ms Montgomery accepted that in many cases where service of process was sought, this would have limited or ancillary consequences in foreign proceedings. She suggested, however, that this would not invariably be the case and was not the case here. In this instance, service would have had immediate, profound, and irreversible consequences for the respondent. It was the single step necessary to trigger the start of a short period before Mr Ismails conviction and the sentence imposed on him became final. Service of the judgment dramatically reduced the options available to him. He would either have to become a fugitive from justice (having declined to return to Egypt, and having lost forever the opportunity to challenge the allegations), or to have surrendered to Egyptian custody and begun serving the custodial sentence while pursuing an appeal before the Egyptian courts. Contrary to the appellants contention, Ms Montgomery submitted that the service of foreign process was not a purely administrative act; it was, as a matter of principle, an exercise of sovereignty Dicey, Morris and Collins on The Conflict of Laws (15th ed) at 8 049. It was also wrong, Ms Montgomery argued, to suggest that the effects of service would only have been felt abroad. Service would have had foreseeable effects on Mr Ismail in the UK as well. In this jurisdiction the fact that he had become a fugitive from justice would necessarily have had serious implications for him: it would have potentially affected his immigration status and his ability to travel. Most significantly, Mr Ismail would have lost forever his ability to contest the merits of the criminal case against him and the effects of that would be experienced by him in this jurisdiction. (As it happens, Mr Ismails immigration status has not been affected. He was granted indefinite leave to remain on 21 August 2015, following the Egyptian authorities acceptance that the underlying criminal proceedings against him were time barred, and their withdrawal of their request for service of the judgment.) As to the engagement of article 6 of ECHR, Ms Montgomery contended that this case fell within the existing categories of exception to the ordinary territoriality principle under article 1 of the Convention. Relying on Soering v United Kingdom (1989) 11 EHRR 439; Drozd and Janousek v France and Spain (1992) 14 EHRR 745; Bankovic v United Kingdom (2007) 44 EHRR SE5; and Al Skeini v United Kingdom (2011) 53 EHRR 18, she claimed that enforcement of a foreign judgment arising from a flagrantly unfair trial, which would lead to the imposition of punishment in the form of a fine or detention in the UK was capable of engaging the appellants responsibility under article 6 of ECHR. Although the request for assistance in this instance did not seek the imposition of a fine or detention on the respondent, it involved the appellant directly in the process of enforcing the Egyptian judgment. On a proper analysis, in this case the appellant had been asked to participate in and to facilitate a critical step in criminal proceedings in a foreign state. This was not assistance in relation to a collateral feature of an Egyptian criminal process, or engagement with an ancillary part of it. It was participation in a key act with substantive consequences: it would have converted an arguably flagrantly unfair criminal trial process into a final conviction, accompanied by a lengthy sentence of imprisonment. By way of alternative argument, Ms Montgomery suggested that, if it was considered that the case did not come within the already recognised categories of exception to the territoriality principle, an extension of the existing categories of extraterritorial application of ECHR to cover the respondents position would be both limited and justified. The 2003 Act and guidance as to its application The material parts of section 1 of the 2003 Act are these: 1. Service of overseas process (1) The power conferred by subsection (3) is exercisable where the Secretary of State receives any process or other document to which this section applies from the government of, or other authority in, a country outside the United Kingdom, together with a request for the process or document to be served on a person in the United Kingdom. (2) (3) The Secretary of State may cause the process or document to be served by post or, if the request is for personal service, direct the chief officer of police for the area in which that person appears to be to cause it to be personally served on him. The tenor of the provision, looked at from a purely textual perspective, suggests an administrative procedure. It is contemplated that transmission of the document will be made by post unless personal service has been requested. This is not indicative of a requirement that there should routinely be an examination of the proceedings which prompted the request for service of the judgment in order to investigate whether they were infected by obvious illegality or bad faith. On the contrary, at first blush, the Secretary of States role might be regarded as that of a cipher, on account of her obviously occupying the position in the executive through which such requests should pass. Such a role might be considered to chime well with the preamble to the 2003 Act which states that the purpose of the legislation is, among other things, to make provision for furthering co operation with other countries in respect of criminal proceedings and investigations. It might also be considered to properly reflect the circumstance that there are no express statutory preconditions on the exercise of the Secretary of States power. As against such considerations, however, is the fact that the Secretary of State is invested with a power, as opposed to an obligation, to effect service of the foreign process. And, clearly, it was contemplated that there would be circumstances in which it would be appropriate not to authorise service. Mutual Legal Assistance Guidelines are issued by the Secretary of State to inform those who wish to make a request under the 2003 Act. The relevant edition of these guidelines, so far as concerns the present case, is the ninth. In the seventh edition, however, in passages omitted from the ninth, it was stated that the central authority (which administered such requests on behalf of the Secretary of State) should ensure that requests for legal assistance conformed with the requirements of law in the relevant part of the UK and the UKs international obligations and that the execution of particular requests was not inappropriate on public policy grounds. The ninth edition of the guidelines presented a different emphasis. It stated: The UK reserves the right not to serve process or procedural documents where to do so could place a persons safety at risk. (For example: if the procedural documents reveal the address of a key witness in a murder trial). Requesting Authorities should therefore always consider if it is necessary to include details relating to witnesses or victims in such documents. It should be noted that the passages in the seventh edition of the guidelines which required the central authority to ensure that requests for legal assistance conformed with the law of the UK and this countrys international obligations and that the execution of the request was not inappropriate on public policy grounds applied to both requests for service of process and legal assistance generally. The appellant has suggested that these sections were directed to the more intrusive forms of assistance which might be provided within the United Kingdom such as the execution of search warrants. The respondent has sought to counter this argument by referring to the fact that when the Bill which became the 2003 Act was passing through the House of Lords, the Parliamentary Under Secretary of State at the Home Office, Lord Filkin said: Clause 1(3) [section 1(3) of the enacted legislation] is not an obligatory provision. It contains the word may. It always remains open to the Secretary of State to decline to comply with a request. Clearly, there is a burden of responsibility on him when making an appropriate response to any such request. Evidence of this answer was given to the High Court without objection by counsel for the Secretary of State. It is doubtful that it would satisfy the test for admissibility set out in Pepper v Hart [1993] AC 593. In any event, I do not consider that the statement made by Lord Filkin advances the respondents case. It was an answer given to an inquiry as to what might happen if a request for service of process came from countries such as Iraq, North Korea or Zimbabwe. Lord Filkins statement did no more than point out that clause 1(3) was a permissive provision. That is not in dispute. The answer did not deal with the question at issue here, namely, what steps the Secretary of State must take to ensure that there is a lawful exercise of her power under section 1(3). It appears to me, therefore, that neither Lord Filkins answer nor the quoted passages from the seventh edition of the guidelines betoken an intention that the Secretary of State should be, in every instance where service of a foreign judgment is requested, obliged to examine the underlying proceedings which prompted the request for their consistency with the UKs standards of fairness in a criminal trial. The extraterritorial reach of ECHR It is well settled (and not in dispute in the present case) that a person who is physically present in a country which has acceded to ECHR is entitled to the protections enshrined in the Convention. Moreover, such a person may invoke his or her rights where the actions of the member state would expose them to consequences in a non contracting foreign state which would amount to a violation of Convention rights. Thus in Soering v United Kingdom (1989) 11 EHRR 439 the European Court of Human Rights (ECtHR) held that the extradition of the applicant to the United States of America would violate his article 3 rights because he would there be exposed to the risk of the imposition of the death penalty. The violation arose because, as Goldring LJ put it in para 75 of the High Courts judgment, as a direct consequence of the action of a contracting state an individual will be subject to proscribed ill treatment in a foreign state ECtHR was careful to explain, however, the limited nature of this apparent exception to the territorial reach of the Convention. In para 86 the court described the limits of that reach in these terms: Article 1 of the Convention, which provides that the High Contracting Parties shall secure to everyone within their jurisdiction the rights and freedoms defined in Section I, sets a limit, notably territorial, on the reach of the Convention. In particular, the engagement undertaken by a Contracting State is confined to securing (reconnaitre in the French text) the listed rights and freedoms to persons within its own jurisdiction. Further, the Convention does not govern the actions of states not Parties to it, nor does it purport to be a means of requiring the Contracting States to impose Convention standards on other states. Article 1 cannot be read as justifying a general principle to the effect that, notwithstanding its extradition obligations, a Contracting State may not surrender an individual unless satisfied that the conditions awaiting him in the country of destination are in full accord with each of the safeguards of the Convention. It was because the actions of the UK authorities, in extraditing the applicant to a country where he faced the possibility of suffering the death penalty, facilitated that outcome that a violation of article 3 was held to be present. In effect, the UK would have been directly instrumental in exposing Soering to the risk of being executed. Properly understood, therefore, this was not an instance of extending the territorial reach of ECHR. It was the decision to extradite, taken within this jurisdiction, that constituted the breach of article 3. It is, of course, true that the actual transgression of article 3 would take place outside the espace juridique of the Council of Europe but the decision of UK authorities which, it was held, would expose the applicant to the risk of execution was taken within this jurisdiction. Thus understood, Soering provides an obvious contrast with Mr Ismails case. The decision of the Secretary of State to serve the judgment on him did not expose him to the risk of violation of his Convention rights. It is undoubtedly true that service of the judgment would have placed Mr Ismail in something of a dilemma. But it is no part of the Secretary of States function to take steps to relieve him of the need to confront that dilemma. Avoidance of the consequences of the judgment becoming final lay in Mr Ismails hands. He could as he did simply decide not to return to Egypt. That may not have been a pleasant prospect but it is a very far cry from saying that his having to face it amounted to a possible violation of his article 6 rights. It is important to recognise that ECtHR in Soering found that the liability of the UK for a breach of article 3 arose as a direct consequence of the actions of UK authorities. At para 91, the court said: In so far as any liability under the Convention is or may be incurred, it is liability incurred by the extraditing Contracting State by reason of its having taken action which has as a direct consequence the exposure of an individual to proscribed ill treatment. (emphasis supplied) Again the contrast with the respondents position is clear. Service of the Egyptian courts judgment does not have the direct consequence of his becoming exposed to proscribed ill treatment. Even if one assumes that his return to Egypt would involve his being vulnerable to treatment that would, if it occurred within one of the contracting states, amount to a violation of a Convention right, this can on no account be said to be the direct consequence of the Secretary of State having served the judgment on him. Service of the judgment did not require him to return to Egypt. It may be said to have reduced his options but this is quite different from its carrying as an inevitable outcome his exposure to violation of his rights. As I have observed, avoidance of that consequence clearly lay within Mr Ismails control. He may have been faced with an unpalatable choice by the service of the judgment on him but that is quite a different matter from the Secretary of State having taken action which had as a direct consequence the respondents exposure to a violation of his Convention rights. Breach of an individuals rights within a contracting state can arise from actions taken outside the state by a non contracting country. As the judgment in Drozd and Janousek v France and Spain (1992) 14 EHRR 745 illustrates, where a judgment which has been obtained in a non contracting state is enforced in a member state, notwithstanding the fact that it was obtained in circumstances which would have amounted to breach of a Convention right, it may render its enforcement in a member state a violation of that states ECHR obligations. This can only occur if the circumstances in which the judgment was obtained amounted to a flagrant denial of justice para 110 and the concurring opinion of Judge Matscher in Drozd. That argument can be left aside for the present appeal. The issue is whether the service of a judgment can be regarded as akin to its enforcement. Goldring LJ considered that no practical distinction could be drawn between service of the judgment and its enforcement. At para 70 he said that by serving the judgment the Secretary of State would be directly assisting in the enforcement of this Egyptian conviction. He expanded on that thesis in para 100 where he said that it was very difficult as a matter of principle to distinguish between enforcing a judgment and directly assisting in the enforcement of it in such circumstances as the present. This finding lies at the heart of the appeal. Is the service of the judgment part and parcel of its enforcement? Certainly, it is a preliminary step which, on the available evidence, is at least prerequisite to enforcing the judgment. But does it give legal force to the judgment or ratify it? Plainly not. On the contrary section 2(2) of the 2003 Act expressly provides that no obligation arises under the law of the UK to comply with the process by virtue of its service. And section 2(3)(a) requires that the process must be accompanied by a notice drawing to the attention of the person on whom it is served the provisions of subsection (2). I consider that a clear distinction can be drawn between serving a judgment and taking steps to ensure that it is enforced. Enforcement of a judgment necessarily alters the legal position of the person against whom it has been obtained. The legal options available to the respondent may have been narrowed by service but his essential legal position remained unchanged. Mr Ismail remained free to stay in the United Kingdom. Any assets that he held in the UK were unaffected. Service of the judgment on him did not involve any coercive action against him. Moreover, enforcement of the judgment does not flow inexorably from its having been served. It may have been a stage in the process but it did not signify that that process would inevitably continue to its ultimate destination. Indeed, by serving the judgment, the Secretary of State was in no sense committed to authorising its enforcement. Very different considerations would have been in play if she had been asked to take the necessary steps to enforce it presumably, by agreeing to extradite the respondent. Then, as Mr Perry has pointed out, she would be required to observe the obligations imposed on her by the Extradition Act. These would include the duty to ascertain whether the respondents extradition to Egypt would be incompatible with any of his Convention rights precisely the type of exercise contemplated in Soering and Drozd. In my opinion, there is no reason that this type of consideration should be required to take place at the anterior and quite separate stage of deciding whether to serve the judgment. The Secretary of State was quite plainly aware that service of the judgment alone carried no risk of the respondent being exposed to breach of his Convention rights. Sovereignty Whether a decision to serve the judgment is to be characterised as a purely administrative act or the exercise of sovereignty does not seem to me to greatly matter in the present appeal. As Mr Perry submitted, states and international bodies attach increasing importance to their ability to seek assistance in criminal matters swiftly and through processes which are easily accessible. In both Drozd and Willcox v UK (2013) 57 EHRR SE16 the need for strengthening international co operation has been recognised. The European Convention on Mutual Assistance in Criminal Matters 1959 is the primary European instrument providing a framework for mutual legal assistance between EU member states. This is supplemented by the European Convention on Mutual Assistance in Criminal Matters (Council Act of 29 May 2000). It provides for the sending and service of procedural documents. Article 5(1) contemplates service being effected directly by post. It provides that each member state shall send procedural documents intended for persons who are in the territory of another member state to them directly by post. Article 5(2) provides a series of exceptions whereby service may be made via the competent authority of the requested state: 5(2) Procedural documents may be sent via the competent authorities of the requested member state only if: the address of the person for whom the document (a) is intended is unknown or uncertain; or, (b) the relevant procedural law of the requesting member state requires proof of service of the document on the addressee, other than proof that can be obtained by post; or (c) post; or (d) the requesting member state has justified reasons for considering that dispatch by post will be ineffective or is inappropriate. it has not been possible to serve the document by The fact that within the European Union the essentially formal and administrative nature of the exercise of serving process has been given such prominence is not irrelevant to the approach to the interpretation of section 1(3) of the 2003 Act. It would be inconsistent if service of process emanating from an EU country should be treated differently from that of a country which is outside the EU but which enjoys conventional diplomatic relations with the UK. Quite apart from this, the 2003 Act itself and the guidance issued under it clearly indicate that service of process would normally be achieved directly by post. In my opinion, this highlights the predominantly administrative element of this procedure. If service of a judgment is to be regarded as an essentially formal act (as I believe it should be) the question of whether it involves an act of sovereignty recedes in terms of importance. As the appellant has submitted, the United Kingdom plainly regards the service of foreign process as trespassing only in the most minimal way on its sovereignty. Serving a foreign judgment on a person within the UK does not involve any significant compromise on the sovereignty of this country. Consequences Service of the judgment by the Secretary of State would not, therefore, have involved an exercise of the UKs sovereignty nor, for the reasons given above, would it engage Mr Ismails fundamental rights. Indeed, in the particular circumstances of his case, service would have had no material impact on Mr Ismail at all. The High Court considered it to be a significant consequence that he would be exposed to the risk of service of a so called red notice. This, I am afraid, was plainly wrong. Not only was it the case that a red notice had already been issued in respect of him at the request of the Egyptian authorities, INTERPOL rules do not require service of a judgment on a person before a red notice can be issued. The High Court considered that there were other material consequences for the respondent of the service of the Egyptian court of appeals judgment on him: (i) he would have two options only; either to return to Egypt and begin to serve the prison sentence which had been imposed on him or to remain in the UK and suffer the consequences of a final judgment; and (ii) in the event of an extradition agreement being concluded between UK and Egypt, he would not be able to dispute the facts on which his conviction of manslaughter was based. For the reasons that I have earlier given, I do not consider that the narrowing of the respondents options as described in para 50(i) above is sufficient to engage article 6 of ECHR. Nor does the prospect of a future extradition agreement between Egypt and UK, or some other request by Egypt for the respondents extradition, engage article 6 at this stage. If such a circumstance arises, he will then be entitled to rely on the protections afforded by the Extradition Act, including invoking the entire panoply of his article 6 rights. I am also of the view that the Secretary of State was not, in this case, under any obligation to investigate further the consequences that would accrue to the respondent. These were clear. He was entitled to remain in the UK. Service of the judgment could not affect that situation. His assets in the UK were unaffected by having had the judgment served. There was a distinct difference, in terms of its effect on the respondent, between service of the judgment and seeking to have it enforced. While I have concluded that, in the respondents case, article 6 was not engaged and that the Secretary of State was not under an obligation to investigate further the respondents claim, it does not follow that there would not be circumstances in which the service of a judgment would engage article 6 or call for further investigation of the basis on which the judgment was obtained. It is conceivable that service of a judgment, in circumstances different from those arising in the present appeal, might lead more directly to its enforcement or other material consequences, or that obvious illegality or bad faith (that would affect the person on whom service was made in a way that does not arise for Mr Ismail) would warrant a more probing inquiry. On the issue identified by Mr Perry (para 13, above) I therefore consider that it may well be possible in certain cases for service of a foreign judgment to engage article 6. This is not such a case, however. Conclusion I would allow the appeal and dismiss the application for judicial review of the Secretary of States decision.

Mr Mamdouh Ismail, the Respondent, is an Egyptian national who was chairman of the board of the El Salam Maritime Transportation Company. On 3 February 2006, a ferry operated by the company sank in the Red Sea and more than 1000 people lost their lives. Mr Ismail and his son, who was a director and vice chairman of the company, were charged with manslaughter. A trial took place at which neither defendant was present, though they were legally represented. Both were acquitted. The prosecution appealed and, again, Mr Ismail and his son were not present but were legally represented. The sons acquittal was affirmed but, on 11 March 2009, Mr Ismail was found guilty and was sentenced to the maximum sentence of seven years with hard labour. Mr Ismail had entered the United Kingdom on 26 April 2006, and has remained here ever since. On 11 October 2010, the Egyptian authorities requested that the Secretary of State serve the judgment of the Appeal Court in Mr Ismail. On 3 August 2011, the Secretary of State informed Mr Ismail that she intended to do so. In a letter before claim dated 18 August 2011, Mr Ismails solicitors submitted that the Secretary of State would be acting unlawfully if she served the judgment. Further representations were made on Mr Ismails behalf between August 2011 and January 2012. In response to these, the Secretary of State made inquiries with Egyptian authorities as to the effect that service of the judgment would have on Mr Ismail. She was informed that the Appeal Court judgment could be appealed by means of an objection made by a lawyer acting on Mr Ismails behalf within 10 days of service of the judgment; otherwise, the judgment would become final but could still be appealed to the Court of Cassation if Mr Ismail appeared in person. On 23 May 2012, the Secretary of State informed Mr Ismails solicitors that she intended to serve the judgment on him. On 20 June 2012 a claim for permission to apply for judicial review of that decision was made in the English courts. Following a hearing on 12 February 2013, permission was granted and, by a judgment of 26 March 2013 the High Court granted Mr Ismails application for judicial review. It certified two points of law of general public importance, which are pursued on this appeal: 1. What is the extent of the Secretary of States discretion when serving a foreign judgment under section 1 of the Crime (International Cooperation) Act 2003? 2. May a persons ECHR article 6 rights be engaged on service by the Secretary of State of a foreign judgment under section 1 of the Crime (International Co operation) Act 2003? The Supreme Court unanimously allows the Secretary of States appeal and dismisses the application for judicial review of the Secretary of States decision. Lord Kerr gives the only judgment. The Secretary of State contended that service of a foreign judgment could not engage article 6 because (1) it does not have the direct consequence of exposing the individual to a breach of any fair trial guarantee and (2) the consequences of service are not of a type or nature to warrant the engagement of article 6 rights [13]. Further, the Secretary of State submitted that it was not incumbent on her to investigate the fairness of proceedings in a foreign state when she was asked to serve a judgment: that would run counter to the purpose of the 2003 Act which was to provide speedy and effective procedural assistance to other sovereign states [15]. For Mr Ismail, it was submitted that there is a clear discretion in the 2003 Act; that the Secretary of State is required to carefully assess the respondents representations on article 6 when plausible evidence of unfairness in the Egyptian trial was provided to her; and that service is more than a merely administrative act [18, 20]. From a purely textual perspective, the wording of the statute suggests an administrative procedure that does not routinely require examination of the proceedings which prompted the request for service [23]. On the other hand, the Act provides a power and not an obligation to effect service of foreign process and it was therefore contemplated that there would be circumstances in which service would not be appropriate [26]. It is well settled that a person physically present in a country which has acceded to the ECHR is entitled to its protection, even in circumstances where the actions of a member state would expose them to consequences in a non contracting foreign state which would amount to a violation of Convention rights [32]. That, however, is not the context of this case because the decision of the Secretary of State to serve the judgment on Mr Ismail did not expose him to a risk of violation of his Convention rights [36]. Service of the judgment would have undoubtedly placed Mr Ismail in a dilemma whether to return to Egypt to appeal the judgment, or suffer the consequences of the judgment becoming final but having to face that dilemma does not amount to a possible violation of his article 6 rights [36]. Service of the Egyptian judgment does not have a direct consequence of exposing Mr Ismail to proscribed ill treatment. It reduces his options but does not carry the inevitable outcome of exposure to a violation of his rights. He could avoid that exposure by remaining in the UK [38]. Service of a judgment is not the same as enforcement of it because it does not give legal force to the judgment or ratify it [41]. Service does not, therefore, alter the legal position of the person on whom it is served. It may narrow the legal options available to him but his essential legal position remains unchanged [42]. Service of the judgment would not involve an exercise of the UKs sovereignty nor would it engage Mr Ismails fundamental rights. Indeed, in the particular circumstances of this case, it would have no material impact on Mr Ismail at all [48]. The Secretary of State was under no obligation to investigate further the consequences that would accrue to Mr Ismail on service of the judgment [52]. That being said, there may be cases in which service of a judgment would engage article 6 or would call for further investigation of the basis on which the judgment had been obtained. That might occur, for instance, where service would lead more directly to enforcement or have other material consequences on the individual. In certain cases service of a foreign judgment might engage article 6. This is not such a case [53].

This appeal concerns the effectiveness of a scheme, known as Project C, which was designed to minimise the overall liability to VAT of a group of companies involved in motor breakdown insurance (MBI). Summarising matters which I shall at a later point explain in greater detail, the supply of insurance is exempt from VAT. It follows that insurers do not charge VAT on premiums, and do not account to the Commissioners for Her Majestys Revenue and Customs (the Commissioners) for VAT in respect of their insurance business. It also follows that, if an insurer incurs costs in respect of supplies of goods or services which it uses in the course of its insurance business, on which VAT is chargeable, it is unable to deduct the amount of the VAT which it has paid from any VAT which it has received in respect of that business. Instead, it has to bear the VAT element of its costs. MBI insurers normally undertake to indemnify the insured against the cost of repairs. Whether the garage invoices the insured, who is then reimbursed by the insurer, or invoices the insurer directly, in either case the garages invoice will include VAT (provided the garage is registered for VAT, as is normally the case). In such circumstances, the cost of the repair is the cover which the insurer has contracted to provide to the insured under the insurance policy. It is not the cost of a service supplied to the insurer for the purposes of its business, and no possibility arises of the insurer being able to deduct the VAT element of the cost. In principle, however, an MBI insurer might undertake not to indemnify the insured in respect of the cost of repair, but to repair the insureds vehicle; and it could then arrange with a garage for the repair to be carried out, and pay the garages bill. Even in such a case, however, the insurer would not be able to deduct the VAT element of the bill, since, even if the garage were regarded as supplying a service to the insurer for the purposes of its insurance business, the insurer would not be liable to account for any VAT in respect of that business, and would therefore not have received any VAT from which the tax paid to the garage could be deducted. The VAT paid to garages represents a substantial element of the costs of an MBI insurers business, which has to be covered by premiums. The inability to deduct VAT as input tax is perceived by MBI insurers as placing them at a competitive disadvantage relative to businesses, such as car dealers, offering uninsured warranties under which they contract to repair vehicles in the event of a breakdown. Since businesses of the latter kind are not treated as being exempt from VAT, they can set the VAT element of their costs against the VAT which they receive, with the result that the effect of the tax upon their business should in principle be neutral. The competitive disadvantage of the insurers was exacerbated in 1997, when insurance premium tax was imposed on MBI premiums at a rate of 17.5%. The purpose of the scheme with which the appeal is concerned was to redress that competitive disadvantage by enabling the VAT element of the cost of repairs to be recovered by one or other of the members of a group of companies to which an MBI insurer belonged, thereby reducing costs and enabling the insurer to offer lower premiums. The National Insurance and Guarantee Corporation plc (NIG) is a UK insurer. It has underwritten MBI policies for many years. The policies cover the cost of repairs and replacement parts following breakdowns of second hand cars. The policies are marketed and sold by another UK company, Warranty Holdings Ltd (Warranty), which is a member of the Oriel group of companies, the holding company of which is Oriel Group plc. Prior to the implementation of Project C, NIG reinsured the risks under the policies with Practical Insurance Company Ltd (Practical), a Gibraltar based reinsurer which is another member of the Oriel group. Until the implementation of Project C, Warranty was appointed by NIG to handle all claims made under the policies. In the event of a breakdown the insured contacted Warranty, which directed the insured to take the vehicle to an approved repairer, or a repairer of the insureds choice, or the dealer (all of which I shall refer to as the garage) for repair. The garage provided repair services and billed Warranty for the cost or, if the cost of the repair exceeded the insurance cover, for the amount of the cover. As claims handler, Warranty made arrangements with approved repairers which were designed to keep down the cost of repairs. These arrangements resulted in the VAT paid by Warranty on the repair services and parts supplied by the garage being irrecoverable. This was the problem which Project C was designed to solve. Project C had two strands, each of which was based on the operation of statutory provisions. The aim was that the first strand should be enough to secure the recovery of the VAT paid on the repairs. The second strand was designed to provide a fall back position should the first not hold. Putting the matter very broadly, the first strand was based on legislation designed to ensure that there was no VAT burden on the supply of certain insurance and financial services by UK businesses to consumers outside the EU. The legislation gave credit for input tax which was incurred for the purpose of businesses making certain specified types of supply to a person outside the EU. The specified supplies included the provision of assistance in the administration and performance of insurance contracts, including the handling of claims. The legislation was interpreted by those responsible for Project C as enabling a UK insurance claims handler to recover input tax incurred for the purpose of its supplying claims handling services to a non EU recipient. Project C sought to avail itself of this legislation by having the first appellant, WHA Ltd (WHA), a UK member of the Oriel group, supply claims handling services to the second appellant, Viscount Reinsurance Company Ltd (Viscount), a Gibraltar based member of the group, with which 85% of the risk under NIGs MBI policies issued through Warranty was ultimately reinsured. Provided (1) the garages made supplies of labour and parts to WHA (and not, as previously, to the insured car owner) and invoiced WHA for those supplies, (2) WHA then invoiced Viscount for claims handling services and (3) the latter invoice covered the amounts invoiced by the garages, WHA would be able to recover the VAT charged by the garage, and would not have to charge VAT on its onward supply of claims handling services to Viscount. That, in short, was the thinking behind the first strand of Project C. The first strand envisaged, as I have explained, that no VAT would be chargeable on the supplies to Viscount. The second strand of Project C was designed to provide a fall back line of defence if that was disputed by the Commissioners: if, for example, they maintained that WHA did not use the garages supplies for the purpose of making its own supplies of claims handling services to Viscount, or contended (as actually happened) that WHAs supplies to Viscount were wholly or partly chargeable to VAT as being supplies of repairs or parts rather than supplies of claims handling services. Again putting the matter very broadly, the second strand relied upon UK VAT legislation which was interpreted as enabling Viscount to recover the VAT which it paid to WHA so long as Viscount itself made supplies to a non EU recipient. For the purpose of the second strand, it was therefore necessary to instal another non EU entity between NIG and Viscount. That entity was Crystal Reinsurance Company Ltd (Crystal), another Gibraltar based member of the Oriel group. It reinsured 100% of the risk under NIGs MBI policies issued through Warranty, and in turn retroceded 85% of the risk to Viscount. The NIG policies were the only reinsurance business carried on by Crystal and Viscount. The end result of the first strand of Project C was thus intended to be that WHA (1) would be the recipient of the repair services on which the garages charged VAT, (2) would not have to charge output tax on its onward supplies to Viscount, and (3) would therefore be entitled under the relevant legislation to recover the input tax from the Commissioners. The end result of the second strand was intended to be that, if proposition (2) did not hold and WHA had to charge output tax on its supplies to Viscount, Viscount would nevertheless be entitled to recover that tax from the Commissioners. Following the implementation of Project C in 1998, the Commissioners refused the claims made by WHA and Viscount for the repayment of tax. WHA and Viscount then appealed to the Value Added Tax and Duties Tribunal (the tribunal). Before the tribunal, the Commissioners challenged the effectiveness of Project C on the basis that none of its three central planks was sound. First, they maintained that there was no supply of services by the garages to WHA: if that contention were accepted, it was fatal to the success of the scheme, since both strands of Project C depended upon its being accepted that the repair services were supplied by the garages to WHA. Secondly, they maintained that if there was indeed a supply of repair services to WHA, its onward supply to Viscount was in any event subject to VAT: if that contention were accepted, it was fatal to the success of the first strand. Thirdly, they maintained that Viscount was not in any event entitled to recover input tax under the UK legislation in question: if that contention were accepted, it was fatal to the success of the second strand. The Commissioners also advanced further arguments based on the alleged artificiality of the scheme, including a contention based on the EU doctrine of abuse of rights. In its decision ([2002] VATTR 202), the tribunal agreed with the Commissioners on all three of their principal contentions, and dealt only briefly with the Commissioners further arguments. On an appeal to the High Court ([2003] STC 648), Lloyd J disagreed with the tribunal on the first two issues. He held that (1) WHA could treat the VAT payable on the garage bills as input tax, (2) WHA made exempt supplies to Viscount and (3) WHA was therefore entitled to recover its input tax. Having thus accepted that the first strand of Project C was effective, he did not go on to consider the third issue, which was relevant only to the second, fall back, strand of the scheme. A further appeal to the Court of Appeal was dealt with in two stages. In an interim judgment ([2004] STC 1081), the Court of Appeal agreed with Lloyd J on the first issue: that is to say, it held that there was a supply of services by the garages to WHA. It agreed with the tribunal on the second issue: that is to say, it held that WHA made a taxable supply of services to Viscount, and therefore had to charge output tax. The court therefore had to deal with the third issue. In disagreement with the tribunal, it held that Viscount was entitled to recover the VAT which it had to pay WHA. Those conclusions were however all subject to the Commissioners further arguments about abuse of rights, consideration of which was deferred until the preliminary rulings of the European Court of Justice on a number of cases concerned with that subject were available. Following the issue of those rulings, the Court of Appeal subsequently gave its final judgment ([2007] STC 1695), in which it held that the scheme was abusive and that the tribunals decision should therefore be reinstated, albeit for somewhat different reasons. The present appeal is taken against the decision of the Court of Appeal. The parties positions have altered in some respects since that decision was made. The issues now in contention are as follows: (1) Is there a supply of repair services for the purposes of WHAs business by the garages to WHA, as well as or instead of a supply of services to the insured, on which WHA may claim deduction of input tax? (2) If the answer to question (1) is yes, what is the application to WHA's claim of the EU law doctrine of abuse of right? (3) In any event, was the then extant UK legislation pursuant to which Viscount claimed to recover the input tax charged on the supplies to it by WHA ultra vires? If so, was that legislation void ab initio and does this cause the claim by Viscount for recovery of such input tax to fail? (4) Are the Commissioners entitled to raise or rely on the latter issue for the first time before this court or as the sole reason for withholding repayment from Viscount, insofar as (i) Viscount may have had a legitimate expectation that its claim would be met, (ii) the issue was not identified in any of the Commissioners' original decisions, (iii) it was not argued by them before any of the courts below and (iv) the Commissioners have consistently maintained that the tribunal has no jurisdiction to hear or determine public law questions? For reasons which I shall explain, I have come to the conclusion that question 1 should be answered in the negative: there is no supply of repair services by the garages to WHA. It follows from that conclusion that the appeal must be dismissed and the decision of the Court of Appeal affirmed, albeit for different reasons. That being so, it is unnecessary to address the remaining issues. In the following discussion, I shall accordingly focus solely upon the factual and legal issues which are relevant to the question whether the garages make a supply of repair services to WHA for the purposes of its business. The relevant legislation The relevant EU legislation is contained in Council Directive 67/227/EEC of 11 April 1967 on the harmonisation of legislation of Member States concerning turnover taxes (the First Directive), and Council Directive 77/388/EEC of 17 May 1977 (the Sixth Directive), as amended by Council Directive 95/7/EC of 10 April 1995. These are translated into domestic law by the Value Added Tax Act 1994 as amended (the 1994 Act). It is sufficient to refer principally to the EU provisions. Article 2 of the First Directive describes the basic system of value added tax: The principle of the common system of value added tax involves the application to goods and services of a general tax on consumption exactly proportional to the price of the goods and services, whatever the number of transactions which take place in the production and distribution process before the stage at which tax is charged. On each transaction, value added tax, calculated on the price of the goods or services at the rate applicable to such goods or services, shall be chargeable after deduction of the amount of value added tax borne directly by the various cost components. The common system of value added tax shall be applied up to and including the retail trade stage. Article 2 of the Sixth Directive provides: The following shall be subject to value added tax: 1. the supply of goods or services effected for consideration within the territory of the country by a taxable person acting as such . Articles 5 and 6 define supply of goods and supply of services respectively. The former means the transfer of the right to dispose of tangible property as owner. The latter means, generally, any transaction which does not constitute a supply of goods within the meaning of article 5. Article 11 defines the taxable amount. It provides, so far as relevant: A. Within the territory of the country 1. the taxable amount shall be: (a) in respect of supplies of goods and services, everything which constitutes the consideration which has been or is to be obtained by the supplier from the purchaser, the customer or a third party for such supplies. Article 13 provides various exemptions, including at B.(a) insurance and reinsurance transactions, including related services performed by insurance brokers and insurance agents. That is implemented in the UK, so far as related services are concerned, by Group 2, item 4 of Schedule 9 to the 1994 Act, which exempts the provision by an insurance broker or insurance agent of any of the services of an insurance intermediary The latter services are defined by Note (1) as including (c) the provision of assistance in the administration and performance of such contracts, including the handling of claims. Article 17(2) allows a taxable person the right, in so far as the goods and services are used for the purpose of his taxable transactions, to deduct VAT due or paid in respect of goods or services supplied or to be supplied to him by another taxable person. The factual background As this court has recently observed (Her Majestys Revenue and Customs v Aimia Coalition Loyalty UK Limited [2013] UKSC 15, para 68), decisions about the application of the VAT system are highly dependent upon the factual situations involved. A small modification of the facts can render the legal solution in one case inapplicable to another. It is therefore necessary to begin by considering carefully the facts of the present case. As was also noted in the Aimia case at para 38, the case law of the Court of Justice indicates that, when determining the relevant supply in which a taxable person engages, regard must be had to all the circumstances in which the transaction in question takes place. Furthermore, as Lord Walker explained in Aimia at paras 114 115, in cases where a scheme operates through a construct of contractual relationships, as in the present case, it is necessary to look at the matter as a whole in order to determine its economic reality. Accordingly, although the transaction of particular importance is that between the garage and WHA, it has to be understood in the wider context of the arrangements between the insured, NIG, Crystal, Viscount, WHA and the garage. The contractual position is not conclusive of the taxable supplies being made as between the various participants in these arrangements, but it is the most useful starting point. I shall begin with the contract of insurance between the insured and NIG. Two sample policies have been produced in these proceedings. Their terms, so far as material, are to similar effect, and it is sufficient to refer to one of them, described as Motor Cover. The policy makes it clear that the insurer is undertaking to meet the cost of repairs to the vehicle falling within the scope of the policy: it is not undertaking responsibility for the repairs themselves. The policy states, for example, that following a mechanical breakdown of your vehicle, this policy will assist with the cost of repair of the parts listed; and the terms and conditions provide that NIG will not pay more than the limits shown on the proposal form or, if lower, in this policy document. Although the terms and conditions also provide that NIG reserves the right to provide replacement parts and to carry out repairs under this policy or to arrange for their provision by other persons, the implication of that clause is that NIG is under no obligation to do so. The policy also explains to the insured the role of WHA, in terms which are consistent with the financial nature of the insurers obligations. The terms and conditions state that WHA has been appointed to deal with all matters relating to claims handling and settlement, including payment, of claims arising under this policy. Under the heading, How to make a claim, the policy states that the insured should first telephone or write to WHA, which will explain the claims procedure. The insured should next book the vehicle in with the garage and give your permission to carry out any fault finding/diagnosis or dismantling necessary. Next, you agree that you will pay the cost of dismantling and repairing the vehicle if the cause of the breakdown is not covered by the policy and, if it is covered, all costs which exceed the limits on your proposal form. Next, the garage must ask WHA for authority to carry out the repair. If your claim is accepted, your repairer will be informed how much will be paid under this policy You are responsible for paying any amount the repairer charges over and above the amount authorised. When the repairs have been completed, the garage must submit an invoice to WHA. The policy makes it clear that the insured can either take the vehicle to the dealer or to a garage approved by WHA, or he can use a garage of his choice, provided in the latter case that the garage follows WHAs claim procedures and sends its invoice to WHA. It is necessary next to consider the relationships between NIG, Crystal, Viscount and WHA so far as relevant to the issue. First, the agreement between NIG and Crystal provided for Crystal to receive the premium income from the relevant policies, and for NIG to receive a monthly fee. Crystal was also to meet all claims under the policies. In effect, therefore, NIG was what may be described, without any pejorative meaning, as a UK front for an offshore insurance business carried on by the Oriel group. In relation to claims, the agreement between NIG and Crystal provided that in the event of any claim or loss hereunder or under a NIG policy the reinsurer [Crystal] shall have the sole right to appoint adjusters and/or assessors and to control, or to appoint such person as it thinks fit to control, all claims handling, negotiations, investigations, adjustments and settlements in connection with such claims and losses and to make payment in respect thereof under and in accordance with the terms of the relevant NIG policy document . The claims handlers role was accordingly envisaged as encompassing the negotiation, investigation, adjustment, settlement and payment of claims. The agreement between Crystal and Viscount similarly provided for Viscount to control all claims handling in the event of a claim under an NIG policy and to appoint any person it saw fit to control the claims handling and to make payment in respect thereof. Crystal passed on to Viscount the appropriate percentage of the premium income. In terms of the agreement between Viscount and WHA, Viscount appointed WHA to appoint adjusters and/or assessors and to control all claims handling, negotiations, investigations, adjustments and settlements in connection with claims and losses under NIG Policies and to make payment in respect thereof under and in accordance with the terms of the relevant NIG Policy Documents. WHA agreed to handle, investigate, control, negotiate, validate, process, administer and settle all claims arising under NIG Policies in accordance with the terms of the relevant NIG Policy Documents . Under the heading Accounting and Consideration, the agreement provided that all valid claims and losses (to include amounts paid to repairers and suppliers) under the NIG policies were to be settled at WHA's expense. Viscount was to pay WHA the cost of all claims plus 17.60 for each claim settled and paid by WHA. In practice, as was explained in evidence to the tribunal, Viscount provided WHA with a cash float of about 2.5m, taken from the premium income and topped up about once a week, out of which WHA met the claims. WHA was accountable to Viscount for what it spent. The invoices submitted by WHA to Viscount identified separately the claims handling fees (ie the aggregate of the fees of 17.60 per claim) and the cost of meeting the claims. These agreements are accordingly consistent in envisaging the role of WHA as encompassing the negotiation, investigation, adjustment, settlement and payment of claims. There is no indication that WHAs role included undertaking responsibility for the carrying out of repairs. The agreements between NIG and Crystal, Crystal and Viscount, and Viscount and WHA also contained provisions designed to secure that the title to vehicle parts appropriated for use in a repair under a valid claim under an NIG policy would be transferred in turn to Viscount, then Crystal, then NIG, prior to the parts being fitted in the insureds vehicle. It is common ground that these provisions were ineffective: there is no indication that they were notified to either the insured or the garages; they conflicted with retention of title clauses used by some of the garages; they did not address the situation where the policy covered only part of the cost of the repair; and they could not in any event prevent title from passing to the owner of the vehicle once a part was fitted. Turning next to the relationship between WHA and the garages, WHA issued a claims procedure leaflet to authorised repairers which required them to take the following steps: 1. Obtain policy type and number from the proposal form . Check proof of servicing. 2. With policyholder's authority, including agreement to pay all costs incurred by the repairer which do not form part of an authorized repair, establish precise cause of failure and the cost [of] parts and labour required for the repair. 3. To obtain authorization to carry out a repair phone WHA's claims department. No rectification to be carried out without prior authority from WHA. 4. After obtaining authority and having carried out the repair in accordance with the authority given, send a detailed VAT repair invoice for all parts used in the authorized repair and the authorized labour costs together with any relevant service invoices to WHA. 5. Obtain payment from policyholder for all costs in excess of those authorized by WHA. The tribunal found that in an appreciable number of cases the procedure set out in the leaflet was not followed, but that instead the insured paid the garage and was subsequently reimbursed by WHA. The evidence also established that WHA had agreed labour rates and parts discounts with the authorised repairers. Although it was not the subject of an explicit finding by the tribunal, it appears from the leaflet, and from the practical arrangements described by the tribunal, that there was an agreement between WHA and the garage, implied if not express, under which WHA agreed to pay for the work in so far as it was covered by the policy and authorised by WHA. There is no finding that the garage undertook to WHA to carry out repairs properly or at all, or that any steps were taken by WHA to check whether repairs had been carried out properly or at all. The tribunal also found that there was an agreement between the insured and the garage, implied if not express, under which the insured authorised the garage to carry out the necessary investigatory work and agreed to pay for all work carried out by the garage in so far as it was not covered by the policy. The insured must also have authorised the garage to carry out the repairs to his or her car. The tribunals decision Against that background, which reflects the tribunals findings as to the facts, the tribunal, chaired by Stephen Oliver QC, concluded that the garages made supplies of repairs and parts to the insured, and not to WHA. WHA merely paid for those supplies, to the extent that the bill of the garage in question was within the cover provided by the policy. The tribunal stated, at para 71: We are satisfied that the documentation and the arrangements, designed to divert the supplies of labour and parts from their normal direct route from garage to insured by routing them instead via the Gibraltar loop, do no more than create a paper trail. Their purpose is to facilitate Project C. The reality is quite different. The garage supplies the labour and parts to the insured. In support of that conclusion, the tribunal noted that the insured chose the garage and authorised it to carry out the investigatory work. He was liable for the cost of any investigatory or repair work which was not covered by the policy. In a proportion of cases, the insured paid the garage. He became the owner of any parts installed, and the beneficiary of any warranties given. Under the policy, the insurer undertook to cover the cost of the repair. WHA was identified as the claims handler, but that did not oblige it to provide labour and parts. The repair was the responsibility of the garage. The claims procedure leaflet required the garage to obtain authorisation from WHA to carry out repairs, and directed that invoices for authorised repairs should be sent to WHA. This committed WHA to pay for authorised repairs. It did not, however, make WHA the customer of the garage. The tribunal considered that its conclusion was consistent with the reasoning of Lord Millett in Customs and Excise Commissioners v Redrow Group plc [1999] 1 WLR 408, a case to which it will be necessary to return. Asking itself the question posed by Lord Millett at p 418, whether the taxable person making the payment in question obtained anything anything at all used or to be used for the purposes of his business in return for that payment, the tribunal responded that WHA had a business of claims handling, in the course of which it held funds advanced as a float by Viscount and disbursed them in meeting approved garage bills. In return for its services Viscount paid it 17.60 per claim. There was no evidence that the garage's supply of labour and parts was used for the purposes of WHA's business. It is also relevant to note that the tribunal analysed WHAs business as involving two supplies to Viscount. First, it made exempt supplies of claims handling services, for which it was paid 17.60 per claim, and which were capable of generating a profit. Secondly, it made a taxable supply of satisfying the claims. That supply earned nothing: WHA merely disbursed the money advanced by Viscount as a float. The decision of the High Court On appeal, Lloyd J observed that it seemed likely that, when WHA gave authority to a garage to carry out a repair, it came under an obligation to the garage to pay for the work if and when it had been done, provided the garage sought payment in accordance with the correct procedure. It was, he observed, more difficult to say, from the material before the court, that the garage came under any positive obligation to WHA to do anything. Those observations appear to me to be correct. Lloyd J agreed with the tribunal that the garages made supplies of repairs and parts to the insured, but correctly observed that it did not follow that WHA did not receive anything itself which was relevant for VAT purposes. Lloyd J considered that the contrary was the case: WHA's duty to Viscount includes having the appropriate repairs done. Only if that is done are the obligations of the successive insurers to the insured discharged. WHA sees to that by having the work done, that is to say by setting up arrangements whereby garages will do the work with the necessary authority from WHA, and will look to WHA for payment. The service which a garage supplies to WHA is the service of repairing the insured's car, thereby satisfying the obligation of NIG to the insured, and in turn the corresponding obligations of every other party in the insurance chain. (para 40) Addressing the question posed by Lord Millett in Redrow at p 418, Lloyd J stated that WHA received a benefit from its contract with the garage, namely the discharge of its obligations to Viscount. That was a benefit supplied by the garage to WHA and used by WHA for the purposes of its business (para 41). On that basis, Lloyd J disagreed with the tribunals conclusion on this issue. It is to be noted that Lloyd Js approach was based upon two factual premises: first, that NIG (and each of the successive insurers) was under an obligation to the insured to repair the insureds car; and secondly, that WHA was under an obligation to Viscount to have the appropriate repairs done. Neither of those premises was in my view sound, for the reasons I have explained in particular at paragraphs 27 and 30 to 33. Furthermore, the fact that As payment of B discharges an obligation owed by A to C does not eo ipso mean that A has received a supply from B. An insurer may, for example, meet the cost of dental treatment provided to its insured in accordance with the relevant policy, but that does not mean that the dentist supplied her services to the insurer. Lloyd J disagreed with the tribunals analysis of WHAs business as involving separate supplies to Viscount of (1) claims handling services and (2) the satisfaction of claims. He considered that that analysis drew an artificial distinction. In his view the whole process, including the payment of the garages bill, could fairly be described as claims handling, and certainly, in the language of Note (1)(c) to Group 2, item 4 of Schedule 9 to the 1994 Act, as the provision of assistance in the administration and performance of insurance contracts. The decision of the Court of Appeal On a further appeal, the Court of Appeal, in a judgment given by Neuberger LJ with which Waller and Latham LJJ agreed, similarly proceeded upon the mistaken premise that Viscount contracts with WHA to carry out any works required to be effected under the policies (para 2). The Court of Appeal identified the essential features which were said to justify the conclusion that the garage made a supply of services to WHA. First, the invoice was in respect of work carried out by the garage pursuant to an instruction by WHA. Secondly, the only contractual relationship, pursuant to which the work was carried out, existed under an agreement between WHA and the garage. Thirdly, the only person who was liable to pay the garage in respect of that work was WHA. Fourthly, WHA entered into the contractual relationship with the garage in the course of its business. Fifthly, by ensuring that the garage carried out the work, WHA fulfilled its obligation to Viscount under the claims handling agreement, and also became entitled to earn its 17.60 in respect of the claim. The Court of Appeal appears to have accepted that these features existed: Neuberger LJ stated that, in these circumstances, it appeared to him that there was indeed a supply of services by the garage to WHA, unless there was some reason for reaching a contrary conclusion (para 37). Four of the five features relied upon require however some qualification or correction. In relation to the first feature, Neuberger LJ had earlier noted at para 22 that in a fair number of cases the insured agreed with the garage what work would be carried out, paid for it, and was subsequently reimbursed by WHA. Such cases were not typical, but they were relevant to an assessment of the commercial reality of the arrangements. In relation to the second feature, the agreement between WHA and the garage was not the only contractual relationship pursuant to which the work was carried out, as I have explained at paragraph 38: the insured authorised the garage to carry out the necessary investigatory work, authorised the garage to carry out the repairs to his or her car, and agreed to pay for the work in so far as it was not covered by the policy. In relation to the third feature, it is correct to say that the only person liable to pay the invoice submitted to WHA was WHA, assuming that the invoice was in conformity with the agreement between the garage and WHA and the latters authorisation of the work. The insured was however also liable to pay the garage in respect of the work in so far as the cost was not covered by the policy, as I have explained at paragraph 38. In relation to the fifth feature, there was no finding by the tribunal that WHA was under an obligation to Viscount to ensure that the garage carried out the work, and the terms of the agreement between WHA and Viscount indicate only that WHA was under an obligation to handle the claim and make the payment, as I have explained at paragraphs 32 to 33. Consistently with its premises, the Court of Appeal considered that WHA receives a benefit from the carrying out of the repairs (namely satisfaction of an obligation to Viscount and the ability to earn the 17.60) (para 37). That view again rests on the mistaken premise that WHA was under an obligation to Viscount to ensure that repairs were carried out. As I have explained at paragraph 32, the fee of 17.60 was paid in consideration of WHAs settling and paying the claim, not for ensuring that repairs were carried out to the vehicle. It also reflects the mistaken view that, merely because payment for services has the effect of discharging an obligation owed to a third party, it necessarily follows that the person making the payment is the recipient of a supply. The Court of Appeal also put forward at para 40 another reason for rejecting the conclusion that the vehicle owner, rather than WHA, was the person to whom the services should be treated as being supplied: However, such a conclusion suffers from the unattractive feature that the owner does not pay for the work, and receives no invoice in respect of it, and that, accordingly, even if the circumstances would otherwise justify someone recovering the input tax, there could be nobody entitled to recover the input tax, at least on the face of it. The owner could not recover input tax because he had not paid it, and neither could WHA, because although it had paid the VAT, it could not be treated as input tax because there would have been no supply of services to WHA. The court should certainly not lean in favour of analysis which results in such a dichotomy. The difficulty with this reasoning is that the question in dispute cannot be resolved on the basis of a presumption that the VAT on the repairs ought to be deductible as input tax, since whether the VAT is deductible as input tax depends on how one answers the question in dispute. In other words, this approach to the issue begs the question. The whole point of the scheme was to secure that the VAT was deductible as input tax, contrary to the pre existing position, under which it was not. The tribunal considered that the payment made by WHA to the garage should be categorised as third party consideration for services supplied to the owner, as contemplated in article 11A1(a) of the Sixth Directive. WHA maintains that the payment should be categorised as consideration for services supplied to itself. The deductibility of the VAT depends on the answer (subject to the Commissioners further arguments). Which view is correct depends on the proper analysis of the transaction between WHA and the garage. In relation to the nature of WHAs business, the Court of Appeal agreed with the tribunal that it made two separate supplies to Viscount, namely (a) the footing of the bill for the works and (b) the other services, which have been conveniently referred to as claims handling services (para 84). In relation to the footing of the bill, the Court of Appeal described that as the performance of the fundamental obligation of the principal, namely the insurer (para 85). The parties contentions In summary, it was submitted on behalf of WHA that the VAT system works on the basis that the person who pays for a supply in the context of a reciprocal relationship is usually the recipient of the supply. WHA had a reciprocal relationship with the garages. It paid the VAT element of the garages bills in connection with its taxable business activities as defined by the Court of Appeal. The relevant aspect of its business was to discharge the liabilities of the insurer using the money provided for that purpose by Viscount. That aspect of its business had been considered by the Court of Appeal to be taxable. It followed from the principle of fiscal neutrality that WHA should therefore be able to deduct the VAT which it had paid. Applying the guidance given in Customs and Excise Commissioners v Redrow Group plc [1999] 1 WLR 408, WHA received a genuine benefit in the course of its business from the carrying out of the repairs. On behalf of the Commissioners, it was explained that they did not contend that WHA had a liability to account for output VAT even though it had no entitlement to deduct input VAT. The Commissioners contended simply that there was no supply to WHA which could give rise to an entitlement to deduct input VAT. The question of output tax only arose if, contrary to the Commissioners contention, WHA were held to be entitled to deduct input tax. The economic reality was that it was the insured vehicle owner who consumed the repair services. He or she was therefore the person to whom the supply of services was made. The insurer (or the claims handler with whom the insurer had contracted to fulfil its obligation) was obliged to pay for those services. This was a classic example of third party consideration. Discussion As I have explained, under the contract of insurance NIG undertakes to the insured that it will meet the cost of the repair. It does not undertake to repair the vehicle. If NIG were to perform the contract by itself paying the garage, that would be an example of third party consideration within the meaning of article 11A(1)(a) of the Sixth Directive: that is to say, consideration for a supply which the person providing the consideration does not himself receive, but which he pays for, in this example, in order to discharge an obligation owed to the recipient of the supply. On this hypothesis, the garage supplies a service to the insured by repairing his or her vehicle, and NIG meets the cost of that supply because it has undertaken to the insured that it will do so, and has received premiums from the insured as the consideration for its giving that undertaking. In that situation, the breakdown is a risk: an event insured against. The cost of the repair is the cover: it is not the consideration for a service provided to the insurer. The interposition of reinsurers does not alter that position. Neither, on the facts found by the tribunal, does the interposition of WHA. In economic reality, when WHA pays for the repairs it is merely discharging on behalf of the insurer (via the chain of contracts connecting it to NIG, through Viscount and Crystal) the latters obligation to the insured to pay for the repair. WHAs role, in relation to the aspect of its business concerned with the payment of the garages, is to act as the paymaster of costs falling within the cover provided by the policies. The interposition of WHA does not, by some alchemy, transmute the discharge of the insurers obligation to the insured into the consideration for a service provided to the reinsurers agent. That conclusion is supported by a number of considerations. First, as was noted in Her Majestys Revenue and Customs v Aimia Coalition Loyalty UK Limited [2013] UKSC 15 at para 73, the Court of Justice has consistently stressed that the deduction of input tax is meant to relieve the trader entirely of the burden of the VAT payable or paid in the course of all his economic activities. In the present appeal, however, WHA does not bear the burden of the VAT paid to the garage: it pays the garage out of the float provided by Viscount, and its profit or loss is unaffected by the VAT. Secondly, it was also noted in Aimia at para 75 that the consequence of the deduction of input VAT is that the tax is charged, at each stage in the production and distribution process, only on the added value, and is ultimately borne only by the final consumer (or by a person who stands in the shoes of the final consumer). In the present appeal, however, WHA adds no value in respect of its supply of footing the bill, as the Court of Appeal put it: its inputs and its outputs in relation to that aspect of its business are identical. The final consumer of the services supplied by the garage is the insured; and the effect of dismissing this appeal is that VAT is borne on that supply. That conclusion is also consistent with the guidance given in Customs and Excise Commissioners v Redrow Group plc [1999] 1 WLR 408. When Lord Hope of Craighead posed the question at p 412, Was something being done for him for which, in the course or furtherance of a business carried on by him, he has had to pay a consideration ?, and Lord Millett asked at p 418, Did he obtain anything anything at all used or to be used for the purposes of his business in return for that payment?, those questions are to be understood as being concerned with a realistic appreciation of the transactions in question (Aimia, para 66). So understood, it is plain that WHA did not obtain anything in return for the payment to the garage which was used for the purposes of its business. On the contrary, as the tribunal found and the Court of Appeal confirmed, and as I have explained at paragraphs 42 and 53, WHAs business was the making of the payment. Finally, the contention that the principle of fiscal neutrality requires that WHA should be able to deduct the VAT paid to the garages must be rejected. The Commissioners have made it clear that they do not maintain that WHA is under any liability to account for output tax in the present circumstances. Conclusion For these reasons, I would dismiss the appeal.

This appeal concerns the effectiveness of a scheme (Project C) which was designed to minimise the liability to VAT of a group of companies (Oriel) involved in providing motor breakdown insurance (MBI). The supply of insurance is exempt from VAT. Insurers therefore neither charge VAT on premiums nor account to Her Majestys Revenue and Customs (the Commissioners) for VAT in respect of their insurance business. They also bear the VAT element of the costs incurred in the course of their business which are chargeable to VAT, as they may not deduct that VAT element from any VAT that they have received. Accordingly when an MBI insurer indemnifies an insured against the cost of repairs, the insurer may not deduct the VAT element of the repairing garages invoice. The VAT paid to garages by MBI insurers represents a substantial business cost. They perceive themselves to be at a disadvantage relative to competitors whose business is not exempt from VAT, and who can therefore offer car repair services and deduct the VAT element of the costs incurred as input tax. Project C sought to remedy that disadvantage by enabling one or other member of Oriel to recover the VAT element of the repair costs. NIG is a UK insurer which provides a UK front for an offshore MBI business carried on by Oriel. NIGs policies cover the cost of repairs and replacement parts following breakdowns of second hand cars. The policies are marketed and sold by another UK company (Warranty), which is a member of the Oriel group. Prior to the implementation of Project C, NIG reinsured the risk under the policies with a Gibraltar based member of Oriel (Practical). Warranty was appointed by NIG to handle claims made under the policies. In the event of a breakdown, the insured contacted Warranty and was directed to a garage approved by Warranty, a garage of the insureds choice or the dealer garage. Warranty paid for the repairs carried out by the garages. The VAT on such payments was irrecoverable. Project C attempted to solve that problem. It consisted of two strands. The first was based on legislation interpreted by those responsible for Project C as enabling UK insurance claims handlers to recover input tax incurred for the purpose of supplying their services to a non EU recipient. WHA Ltd (WHA), a UK member of the Oriel group, therefore began to supply claims handling services to Viscount Reinsurance Company Ltd (Viscount), a member of the group based in Gibraltar, and therefore outside the EU, with which 85% of the risk under NIGs MBI policies was reinsured. The intention was that WHA would be regarded as the recipient of a supply of repair services from the garages on which VAT would be charged; would not have to charge output tax on its onwards supply of claims handling services to Viscount as the latter was outside the EU; and as a result would be entitled to recover input tax from the Commissioners under the legislation. The second strand of Project C was a fall back line of defence designed to deal with any assertion by the Commissioners that the second stage of the first strand, namely that VAT was not chargeable on WHAs supply of claims handling services to Viscount, was incorrect. That conclusion would render the first strand ineffective. On the basis of legislation which was interpreted as enabling Viscount to recover the VAT which it paid to WHA so long as Viscount itself made supplies to a non EU recipient, another Gibraltar based member of the Oriel group (Crystal) was installed to reinsure 100% of the risk under NIGs MBI policies, and in turn to retrocede 85% of that risk to Viscount. Notably, the second strand also proceeded on the basis that WHA would be regarded as the recipient of a supply of repair services from the garages. The Commissioners refused to repay tax to WHA and Viscount for several reasons that pertained to either the first, second or both strands of Project C. In particular, they argued that the garages did not in fact make a taxable supply of services to WHA, a conclusion that would vitiate both strands. They also argued that even if they were wrong in that and other arguments, Project C was so artificial that it fell foul of the EU law doctrine of the abuse of rights. The Court of Appeal held that the garages did make a taxable supply to WHA, that the first strand of Project C was ineffective for other reasons, but that under the second strand Viscount was entitled to recover the VAT it had paid to WHA, subject to the question of abuse of rights. It subsequently held that the scheme was a breach of the abuse of rights doctrine. WHA and Viscount appeal to the Supreme Court, arguing that WHA does receive a taxable supply from the garages and that Project C is not a breach of the abuse of rights doctrine. The Supreme Court unanimously dismisses the appeal. Lord Reed gives the judgment of the Court. For the reasons summarised below, the Supreme Court holds that there is no supply of repair services by the garages to WHA. It is therefore unnecessary for the Court to address the other issues raised, as both strands of Project C were predicated on the conclusion that there was such a supply [18]. Decisions about the application of the VAT system are highly fact sensitive. When determining the relevant supply in which a taxable person engages, regard must be had to all the circumstances in which a transaction takes place. In cases involving a construct of contractual relationships, the matter must be assessed as a whole to determine the economic reality. The transaction between the garages and WHA must be understood in the context of the wider arrangements between the insured, NIG, Crystal, Viscount, WHA and the garage [26]. Having regard, therefore, to the agreements between NIG and the insured, NIG and Crystal, Crystal and Viscount, and Viscount and WHA, the terms of each contract envisage the role of WHA as encompassing the negotiation, investigation, adjustment, settlement and payment of claims. There is no indication that WHAs role included undertaking responsibility for the carrying out of repairs [33]. Further, the nature of the relationship between the garages and WHA does not suggest that the former provides a service to the latter [35 38]. NIG undertakes to the insured to meet the cost of repairs to a vehicle falling within the scope of the policy. It does not undertake responsibility for the repairs themselves [27, 56]. The economic reality is that the payments made by WHA to the garages merely discharge the obligation which NIG undertook to the insured to pay for the repair of a vehicle up to the value permitted by the policy in the event of a breakdown. The interposition of Viscount and Crystal in the chain of contracts linking WHA to NIG does not alter the position that WHA simply acts as the paymaster of the costs falling within the cover provided by the policies [56 57]. That conclusion is supported by further considerations. First, the deduction of input tax is meant to relieve the trader in question of the VAT payable or paid in the course of his economic activities. However, WHAs own profit and loss is unaffected by VAT as it pays the garages out of a float provided by Viscount. Secondly, the consequence of input tax deduction should be that VAT is only borne on the supply to the final consumer. The effect of dismissing this appeal is that VAT is borne on the supply of services by the garage to the final consumer, namely the insured [58].

This appeal concerns the type of investments which those who administer the local government pension scheme are permitted to make or to continue to hold. More particularly, it concerns the breadth of the ethical investments which they are permitted to make or to continue to hold. By an ethical investment, I mean an investment made not, or not entirely, for commercial reasons but in the belief that social, environmental, political or moral considerations make it, or also make it, appropriate. Parliament has conferred on the respondent, the Secretary of State for Housing, Communities and Local Government (the Secretary of State), the power to issue guidance in relation to some of the functions of the administrators of the scheme, in accordance with which they are required to act. The issue arises out of two passages in the guidance which he has issued to them in relation to their making or continuing to hold ethical investments. By the second passage, which, as I will show, covers the ground covered by the first and indeed goes further, the Secretary of State provides that they [s]hould not pursue policies that are contrary to UK foreign policy or UK defence policy. The claim is that the issue of that guidance was unlawful. It was lawful only if it fell within the power conferred by Parliament on the Secretary of State. The issue therefore requires the court to analyse the scope of the power. Pursuant to the decision of the House of Lords in Padfield v Minister of Agriculture, Fisheries and Food [1968] AC 997, the court must analyse the power by construing the words by which it was conferred on him in their context. From the words in their context Parliaments purpose in conferring the power can be identified; and the purpose will illumine its scope. The Proceedings The claim for judicial review of the two passages in the guidance was launched by, and in this appeal continues to be pursued by, two claimants. The first is Palestine Solidarity Campaign Ltd. This company is dedicated to campaigning both in support of the rights of the Palestinian people, in particular by challenging Israels occupation of the disputed territories, and in opposition to racism in all its forms, including antisemitism as well as islamophobia. The second is Ms Jacqueline Lewis, who is not only a member of the companys executive committee but also an employee of a local authority and a member of its pension scheme. The claim raised issues in relation to the guidance other than the issue identified above; they were determined, adversely to the claimants, in the lower courts and can now be ignored. On 22 June 2017 Sir Ross Cranston, sitting as a judge of the Administrative Court of the High Court of England and Wales, upheld the claim by reference to the issue identified above and declared the two passages in the guidance under challenge to be unlawful: [2017] EWHC 1502 (Admin), [2017] 1 WLR 4611. But on 6 June 2018 the Court of Appeal, by a judgment delivered by Sir Stephen Richards with which Davis and Hickinbottom LJJ agreed, upheld the Secretary of States appeal; set aside the declaration made by Sir Ross; and dismissed the claim: [2018] EWCA Civ 1284, [2019] 1 WLR 376. It is worthwhile to record that, in support of the application of the claimants for permission to appeal to our court, submissions were filed by the Religious Society of Friends in Britain, known as the Quakers, and by the organisation known as Campaign Against Arms Trade. The Local Government Pension Scheme The existing local government pension scheme (the scheme) is a statutory occupational pension scheme established by regulations made under section 7 of the Superannuation Act 1972 (the 1972 Act) and having effect as if made under the Public Service Pensions Act 2013 (the 2013 Act). Pursuant to the scheme, authorities in England and Wales, which can conveniently (albeit not entirely accurately) be taken to be local authorities, administer some 89 distinct funds, which are kept separate from other local authority resources. In its capacity as an employer, a local authority makes contributions into the pension fund referable to its employees, as do its employees themselves. The scheme provides statutorily defined pension benefits for about 5m past and present employees, referable in particular to their age, their pensionable earnings and their years of service. Therefore their benefits do not vary in accordance with the changing value of the fund in relation to them. A local authority is required to set contributions at a level appropriate to ensure its funds solvency; and, were the fund to prove insufficient to meet its obligations to pay pensions to its employees, a local authority might be required to make increased contributions into it. The scheme is thus structurally different from other public sector pension schemes under which payment is unfunded, in other words made not out of ring fenced funds but out of the overall resources of central government. If we consider first the 2013 Act and then the regulations relevant to this appeal which were made under it, we will be able to drill down into the guidance issued pursuant to them which is under challenge. The 2013 Act, which came mainly into force on 1 April 2014, provides by section 1(1) that regulations may establish schemes for the payment of pensions and other benefits to persons specified in subsection (2), which at (c) identifies local government workers for England, Wales and Scotland. By section 2(1) and paragraph (3)(a) of Schedule 2, these so called scheme regulations may, insofar as they relate to local government workers in England and Wales, be made by the Secretary of State as the so called responsible authority. It follows that this appeal does not relate to such regulations as establish the scheme referable to local government workers in Scotland, nor for that matter to those in Northern Ireland, in relation to whom nothing akin to the guidance under challenge seems to apply. Section 3 of the 2013 Act provides as follows: (1) Scheme regulations may, subject to this Act, make such provision in relation to a scheme under section 1 as the responsible authority considers appropriate. (2) That includes in particular (a) provision as to any of the matters specified in Schedule 3; (b) consequential, supplementary, incidental or transitional provision in relation to the scheme Section 3(2)(a) therefore sends us to the matters specified in Schedule 3, in which there is reference in paragraph 1 to eligibility and admission to membership; in paragraph 2 to the benefits which must or may be paid under the scheme; in paragraph 3 to the persons to whom benefits under the scheme are payable; in paragraph 9 to contributions; in paragraph 11 to funds; and in paragraph 12 to the following: The administration and management of the scheme, including the giving of guidance or directions by the (a) responsible authority to the scheme manager On 1 April 2014, when the 2013 Act came mainly into force, the regulations also came into force which established the existing scheme and which, as already explained, had effect as if made under that Act. They were entitled the Local Government Pension Scheme Regulations 2013 (SI 2013/2356). They made provision for the functioning of the scheme in numerous respects. Prior to 1 November 2016, however, the management and investment of funds within the scheme continued to be subject to regulations which had been made in 2009. It was only on that day that the latter were replaced by the regulations relevant to this appeal, namely the Local Government Pension Scheme (Management and Investment of Funds) Regulations 2016 (SI 2016/946) (the 2016 Regulations), which were duly made pursuant to sections 1 and 3 of, and to Schedule 3 to, the 2013 Act, as set out above. The guidance partly under challenge, to which I will later turn, took effect on that same day, 1 November 2016. I refer to the guidance at this stage only in order to quote from part 1 of it an interesting passage as follows, which illumines one of the aims of the 2016 Regulations themselves: One of the main aims of the [2016] regulations is to transfer investment decisions and their consideration more fully to administering authorities within a new prudential framework. Administering authorities will therefore be responsible for setting their policy on asset allocation, risk and diversity, amongst other things. In relaxing the regulatory framework for scheme investments, administering authorities will be expected to make their investment decisions within a prudential framework with less central prescription. Regulation 7 of the 2016 Regulations, entitled Investment strategy statement, provides: (1) An authority must, after taking proper advice, formulate an investment strategy which must be in accordance with guidance issued from time to time by the Secretary of State. (2) The authoritys investment strategy must include a requirement to invest fund money in a wide the authoritys assessment of the suitability of (a) variety of investments; (b) particular investments and types of investments; (c) the authoritys approach to risk, including the ways in which risks are to be assessed and managed; (d) the authoritys approach to pooling investments, including the use of collective investment vehicles and shared services; the authoritys policy on how social, (e) environmental and corporate governance considerations are taken into account in the selection, non selection, retention and realisation of investments; and (f) the authoritys policy on the exercise of the rights (including voting rights) attaching to investments. By this stage, therefore, we have noticed, at para 7 above, that the 2013 Act enables the making of regulations which provide for the administration and management of schemes, including for the issue of guidance in that regard; and, at para 9 above, that the 2016 Regulations, clearly falling within that enabling power, require an administering authority within the local government scheme to formulate an investment strategy which accords with what they describe as guidance but which is in fact mandatory. The guidance The guidance, entitled Local Government Pension Scheme: Guidance on Preparing and Maintaining an Investment Strategy Statement, was issued by the Secretary of State on 15 September 2016. It was issued pursuant to regulation 7(1) of the 2016 Regulations, and it was thus to take effect when the regulations did so, namely on 1 November 2016. The express focus of the guidance was the formulation, publication and maintenance by administering authorities of their investment strategy statement. On 30 June 2014, some two years prior to the issue of the guidance, the Law Commission of England and Wales had, following consultation, published a report entitled Fiduciary Duties of Investment Intermediaries (2014) (Law Com No 350). The government had generally accepted the Commissions recommendations; and, as will become clear, the report, which in places specifically addressed the local government scheme, clearly influenced the drafting of part of the guidance. It is therefore worthwhile to keep in mind the following statements in the report: (a) at para 4.3(3), that the local government scheme was not technically a trust but that at a practical level the duties of those managing its assets were similar to those of trustees; (b) at para 4.79, that in practice administering authorities under the scheme considered themselves to be quasi trustees, acting in the best interests of their members, and that, insofar as they might consider whether to take account of wider or non financial factors in relation to investment, the rules applicable to pension fund trustees should also apply to them; and (c) at para 6.34, in relation to investment decisions by trustees, that In general, non financial factors may only be taken into account if two tests are met: trustees should have good reason to think that (1) scheme members would share the concern; and (2) significant financial detriment to the fund. the decision should not involve a risk of The Secretary of States guidance individually addresses each of the six topics which regulation 7(2) of the 2016 Regulations requires to be included in an authoritys investment strategy. The appeal concerns its address of the fifth topic, set out at (e) of para (2), which for convenience I set out again: the authoritys policy on how social, environmental and corporate governance considerations are taken into account in the selection, non selection, retention and realisation of investments; The reference to corporate governance considerations appears to relate to assessing investment in a company by reference to the quality or otherwise of the manner in which it is governed and operated, including no doubt its treatment of its workforce. The guidance in relation to the fifth topic comprises text, which is followed by a Summary of requirements. It is convenient to divide the relevant part of the text into three sections. This is the first section of the relevant part of the text: Although administering authorities are not subject to trust law, those responsible for making investment decisions must comply with general legal principles governing the administration of scheme investments [S]chemes should consider any factors that are financially material to the performance of including social, environmental and corporate governance factors, and over the long term, dependent on the time horizon over which their liabilities arise. investments, This is the second section of the relevant part of the text: However, the Government has made clear that using pension policies to pursue boycotts, divestment and sanctions against foreign nations and UK defence industries are inappropriate, other than where formal legal sanctions, embargoes and restrictions have been put in place by the Government. This part of the guidance, which I present in bold, is the first of the two passages in it under challenge. It begins by stating that the Government has made clear that . At the hearing of the appeal we asked where and in what circumstances the government had made [it] clear. In answer we were referred to a Procurement Policy Note, Information Note 01/16, issued by the Crown Commercial Service on 17 February 2016. It is entitled Ensuring compliance with wider international obligations when letting public contracts. It suffices to set out para 1: This [Note] sets out contracting authorities international obligations when letting public contracts. It makes clear that boycotts in public procurement are inappropriate, outside where formal legal sanctions, embargoes and restrictions have been put in place by the UK Government. The subject matter of the note is therefore the entry by public authorities into contracts and, as its title indicates and its text proceeds to explain, the policy there identified has been substantially informed by international obligations. It has no relevance to investment decisions made by trustees or by those in an analogous position. This is the third section of the relevant part of the text: Although schemes should make the pursuit of a financial return their predominant concern, they may also take purely non financial considerations into account provided that doing so would not involve significant risk of financial detriment to the scheme and where they have good reason to think that scheme members would support their decision. It will be seen that this part of the guidance is an adoption, almost word for word, of the two tests identified by the Law Commission for investment by reference to non financial considerations in para 6.34 of its report. This is the Summary of requirements: In formulating and maintaining their policy on social, environmental and corporate governance factors, an administering authority: Must take proper advice Should explain the extent to which the views of interested parties will be taken into account when making an investment decision based on non financial factors Must explain the extent to which non financial factors will be taken into account in the selection, retention and realisation of investments Should not pursue policies that are contrary to UK foreign policy or UK defence policy Should explain their approach investments. to social As indicated in para 1 above, the fourth bullet point, which I present in bold, is the second of the two passages in the guidance under challenge. It is clear that the two passages in the guidance under challenge had been the subject of careful consideration by the Secretary of State. In November 2015 he had issued a consultation paper in relation to his proposal to replace the regulations made in 2009 with what became the 2016 Regulations; and in para 3.8 of the paper he had advertised his intention to issue guidance under the proposed regulations which would in particular relate to the extent to which administering authorities should take non financial considerations into account in making investment decisions. He had there spelt out the proposed guidance in almost the same terms as those ultimately adopted. In September 2016 he had published a paper by way of response to the consultation, in which, under Part C, he had written: The majority of respondents also expressed concern about the way in which the policy on compliance with UK foreign policy is to be taken forward in the guidance to be published under draft regulation 7(1). However, the Government remains committed to the policy set out in Novembers consultation paper that administering authorities should not pursue investment policies against foreign nations and UK defence industries, other than where formal legal sanctions, embargoes and restrictions have been put in place by the Government. The Legal Principles The Padfield case, cited in para 1 above, arose out of the statutory requirement in England and Wales that producers of milk should sell it only to the Milk Marketing Board. Producers in the south east of England complained to the minister about the price paid to them by the board. Statute provided that, if the Minister so directs, a committee had to consider their complaint. The minister declined to direct the committee to do so. The House of Lords upheld the claim of the producers that he had acted unlawfully in declining to give the direction. Of the four judges in the majority, one (Lord Hodson) applied long recognised principles of judicial review. But Lord Reid, supported by Lord Pearce at p 1053 and Lord Upjohn at p 1060, reached his decision by reference to a different principle which he explained as follows at p 1030: Parliament must have conferred the discretion with the intention that it should be used to promote the policy and objects of the Act [which] must be determined by construing the Act as a whole [I]f the Minister so uses his discretion as to thwart or run counter to the policy and objects of the Act, then our law would be very defective if persons aggrieved were not entitled to the protection of the court. In R v Secretary of State for the Environment, Transport and the Regions, Ex p Spath Holme Ltd [2001] 2 AC 349 the House of Lords applied the principle identified in the Padfield case, albeit in reaching a conclusion that the Secretary of States order was not unlawful. His order, under challenge by a landlord, capped otherwise justifiable increases in the rent which had been registered as payable under regulated tenancies. The order was made pursuant to a power conferred in wide terms by section 31 of the Landlord and Tenant Act 1985. The landlord argued that Parliaments object in granting the power was that it should be used only in order to counter inflation but the appellate committee held that it had wider objects which extended to the purpose behind the capping order. Lord Bingham of Cornhill said at p 381: no statute confers an unfettered discretion on any minister. Such a discretion must be exercised so as to promote and not to defeat or frustrate the object of the legislation in question The object is to ascertain the statutory purpose or object which the draftsman had in mind when conferring on ministers the powers set out in section 31. Lord Nicholls of Birkenhead said at p 396: The present appeal raises a point of statutory interpretation: what is the ambit of the power conferred on the minister by section 31(1) ? No statutory power is of unlimited scope Powers are conferred by Parliament for a purpose, and they may be lawfully exercised only in furtherance of that purpose The purpose for which a power is conferred, and hence its ambit, may be stated expressly in the statute. Or it may be implicit. Then the purpose has to be inferred from the language used, read in its statutory context and having regard to any aid to interpretation which assists in the particular case. In either event the exercise is one of statutory interpretation. In R (Ben Hoare Bell Solicitors) v Lord Chancellor [2015] EWHC 523 (Admin), [2015] 1 WLR 4175, the Divisional Court of the Queens Bench Division upheld a challenge by solicitors to the lawfulness of a regulation which withheld remuneration under the Civil Legal Aid scheme for work done on behalf of applicants for judicial review unless their applications eventually met with a specified result. The court chose to divide the challenge into two sections. It rejected the first, which it entitled Strict ultra vires, and upheld the second, which it entitled The Padfield / statutory purpose ground. With respect, it is not obvious that such was a helpful division of an inquiry into whether the impugned provision exceeded the scope of the statutory power under which it was claimed to have been made. For those who continue to insist on Latin, an inquiry by reference to the principle in the Padfield case is an inquiry into whether the provision is ultra vires: De Smiths Judicial Review, 8th ed (2018), para 5 018. The Application of the Principles So we must start with the terms of the 2013 Act. Section 3(1) provides that the scheme regulations permitted by section 1(1) may make such provision as the Secretary of State considers appropriate. But the power cannot be as broad as that. No statutory discretion is unfettered. When we read further into section 3, we at once find a helpful signpost. For subsection (2)(a) states that the permitted provision includes, in particular, provision as to any of the matters specified in Schedule 3. It is only a signpost because the words in particular mean that the matters specified in Schedule 3 are not the only matters which can be the subject of provision in the regulations. But it valuably identifies the matters which, in particular, Parliament had in mind. And, when we turn to Schedule 3, we find the relevant matter, in relation to which the Secretary of State can not only make regulations but also give guidance, described as the administration and management of the scheme. Next we turn to the terms of the 2016 Regulations. The content of any unchallenged regulations can be a guide to the interpretation of their enabling Act even when they are not made contemporaneously with the Act: Hales v Bolton Leathers Ltd [1951] AC 531, at 541, 544, 548 and 553. In this case the 2016 Regulations are, in themselves, unchallenged. By regulation 7, clearly made pursuant to the power to provide for the administration and management of the scheme, the Secretary of State mandates the formulation of an investment strategy, to include, at (e), the authoritys policy on how non financial considerations are taken into account in relation to its investments. Finally we address some of the unchallenged parts of the guidance. Its subject matter, as identified in its title, is Preparing and Maintaining an Investment Strategy Statement. And in its text it adopts the two tests commended by the Law Commission for the taking into account of non financial considerations: does the proposed step involve significant risk of financial detriment to the scheme and is there good reason to think that members would support taking it? From these three instruments we therefore collect the following words: (a) (b) administration; management; (c) (d) (e) (f) (g) policy; how considerations are taken into account; preparing; maintaining; and strategy. Yes, all these words must be considered in their context. But in my view, when so considered, they all point in the same direction: that the policy of the Act, recognised in the case of the scheme by the regulations and indeed by most of the guidance, is to identify procedures and indeed the strategy which administrators of schemes should adopt in the discharge of their functions. In the two passages under challenge, however, the Secretary of State has insinuated into the guidance something entirely different. It is an attempt to enforce the governments foreign and defence policies; and it purports to provide that, even when the tests commended by the Law Commission for reaching a potential investment decision by reference to non financial considerations have both been met, an administrator is prohibited from taking the decision if it runs counter to such policies. Presumably it follows that, when the policy changes, the prohibition changes. How does the Secretary of State seek to justify the prohibition? In a witness statement one of his senior officers states as follows: UK foreign and defence policy are matters which are properly reserved for the UK government and do not fall within the competence of local government. It was therefore right to put safeguards in place to ensure that decisions made by the UK government on foreign and defence policy in the interests of the UK as a whole would not be undermined by local boycotts on purely non pension grounds. The implied suggestion that the investment decisions in issue were a function of local government was adopted and developed by Sir Stephen Richards in para 20 of his judgment in the Court of Appeal, as follows: The public service pension schemes to be established under the 2013 Act include central as well as local government schemes. It must be possible to have regard to the wider public interest when formulating the investment strategy for central government schemes; and it would be very surprising if it could not also be taken into account in the giving of guidance to local government authorities, themselves part of the machinery of the state, in relation to the formulation of the investment strategy for schemes administered by them. As it happens, central government pension schemes are unfunded so the concept of an investment strategy does not apply to them. But of greater significance is Sir Stephens description of scheme administrators as part of the machinery of the state. It is a description which Mr Milford, on behalf of the Secretary of State, commends to us as apt to the present context. Indeed he goes further. Pension contributions to the [scheme], he writes, are ultimately funded by the taxpayer. Its public money, so he said to us at the hearing. In my view there has been a misconception on the part of the Secretary of State which probably emboldened him to exceed his powers in issuing guidance which included the two passages under challenge. The misconception relates both to the functions of scheme administrators in relation to investment decisions and, linked to their functions, to the identity of those to whom the funds should properly be regarded as belonging. As the Law Commission observed, administrators of local government schemes have duties which, at a practical level, are similar to those of trustees and they consider themselves to be quasi trustees who should act in the best interests of their members. The view, superficial at best, that the administrators are part of the machinery of the state, and are discharging conventional local government functions, fails to recognise that crucial dimension of their role. And it is equally misleading to claim that pension contributions to the scheme are ultimately funded by the taxpayer. As Sir Nicolas Browne Wilkinson VC said in Imperial Group Pension Trust Ltd v Imperial Tobacco Ltd [1991] 1 WLR 589, 597: Pension benefits are part of the consideration which an employee receives in return for the rendering of his services. In many cases membership of the pension scheme is a requirement of employment. In contributory schemes the employee is himself bound to pay his or her contributions. Beneficiaries of the scheme, the members, far from being volunteers have given valuable consideration. The company employer is not conferring a bounty. The contributions of the employees into the scheme are deducted from their income. The contributions of the employers are made in consideration of the work done by their employees and so represent another element of their overall remuneration. The fund represents their money. With respect to Mr Milford, it is not public money. Irrespective of whether the misconception to which I have referred played a part in leading the Secretary of State to include in the guidance the two passages under challenge, I conclude that his inclusion of them went beyond his powers. HOW does not include WHAT. Power to direct HOW administrators should approach the making of investment decisions by reference to non financial considerations does not include power to direct (in this case for entirely extraneous reasons) WHAT investments they should not make. The Result LORD CARNWATH: In agreement with Lord Wilson I also would allow the appeal. I agree generally with his reasoning. However. since the court is split, and we are differing from the Court of Appeal, it may be helpful therefore for me to express my reasons in my own words. The issue is as to the legality of two parts of the guidance: I would allow the appeal and restore the order made by Sir Ross. the Government has made clear that using pension policies to pursue boycotts, divestment and sanctions against foreign nations and UK defence industries are inappropriate, other than where formal legal sanctions, embargoes and restrictions have been put in place by the Government In formulating and maintaining their policy on social, environmental and corporate governance factors, an administering authority: Should not pursue policies that are contrary to UK foreign policy or UK defence policy Lady Arden and Lord Sales (para 52) criticise Lord Wilson for overstating the effect of the second paragraph: 52. Lord Wilson considers that the statement in the summary of requirements goes further than the statement in the body of the guidance that they should not pursue policies that are contrary to UK foreign policy or UK defence policy. However, the Secretary of State considers that the summary went no further than the body of the guidance. The appellants have not challenged that, and we proceed on that basis. The critical passage is therefore the statement in the body of the document. Even if that were a fair categorisation of the appellants position, I am unable to accept that approach. The guidance is a public document with significance far beyond the parties to this litigation. It must be considered in its own terms. We cannot be constrained by the way in which these particular claimants may have chosen to present their case. In any event, it is part of the appellants complaint that the guidance in this respect is intrinsically unclear in Mr Lannings words (witness statement for the first appellants). I share their difficulty. Even if one directs attention only to the first paragraph, it is far from evident what exactly is its scope. It begins by referring to an earlier, unidentified policy statement (the Government has made clear ). As Lord Wilson explains (para 16), this appears from the evidence to be a reference to a Procurement Policy Note issued in 2016, relating to boycotts in international trade. Like Lord Wilson I find it difficult to see the relevance of this to public sector pensions, which are governed by an entirely different statutory scheme. In what follows the objection in terms is limited to boycotts, divestment and sanctions against foreign nations and UK defence industries. Lady Arden and Lord Sales say there is no issue about the meaning of these concepts. That may be true as between the present parties, but again the meaning should be clear from the document itself. From the governments evidence (in the statement of Mr Megainey, quoted at length by Lady Arden and Lord Sales paras 53ff) it appears that the words were not intended to be read in the abstract, but reflected concerns about the possible impact of the Boycott, Divestment and Sanctions movement. Those terms are in turn explained by Mr Lanning, in a passage again quoted by Lady Arden and Lord Sales (para 51), as describing particular types of campaign conducted by his organisation and others, directed principally against the State of Israel and Israeli companies and their investors. If the reference to these specific concepts is intended to mean no more than that administering authorities should not actively participate in political campaigns of that kind, the advice is unremarkable and clearly right. What however is not clear, even from that paragraph, is whether it would also to apply, for example, to an independent decision by an authority on ethical grounds, supported by its members but not directly linked to any campaign, not to invest in defence companies. I doubt if that would be naturally described as boycott, disinvestment or sanction. But it might more readily be said to involve the pursuit of policies contrary to UK defence policy, contrary to the second paragraph. As I understand Mr Megaineys evidence, the guidance was intended to be read in the wider sense. He distinguishes (paras 22 23 in passages quoted by Lady Arden and Lord Sales) other investment policies which (authorities) may legitimately adopt. He refers for example to investment in companies making products harmful to health (eg tobacco, sugar and alcohol), or harmful to the environment (eg water or air pollution caused by oil or gas companies). He notes that administering authorities have responsibilities for public health and the environment in their areas, and distinguishes such policies from those carrying general risks to UK trade, security or communities, which are said to be matters properly reserved for the UK government. Thus the objection appears to be directed to investment policy generally, whether or not fairly described as boycott, disinvestment or sanctions. The difficulty with that line of reasoning, to my mind, is that there is nothing in the Act or the regulations which limits relevant social factors under regulation 7(1)(e) to matters for which the authority otherwise has statutory responsibility. The judge (Sir Ross Cranston) also understood the guidance in the wider sense. He expressed his objection as follows: But the flaw in the Secretary of States approach is that the guidance has singled out certain types of non financial factors, concerned with foreign/defence and the other matters to which reference has been made, and stated that administering authorities cannot base investment decisions upon them. In doing this I cannot see how the Secretary of State has acted for a pensions purpose. Under the guidance, these factors cannot be taken into account even if there is no significant risk of causing financial detriment to the scheme and there is no good reason to think that scheme members would object. Yet the same decision would be permissible if the non financial factors taken into account concerned other matters, for example, public health, the environment, or treatment of the workforce. In my judgment the Secretary of State has not justified the distinction drawn between these and other non financial cases by reference to a pensions purpose (para 32) Although I am doubtful of the value of his reference to pensions purposes (a term of somewhat uncertain scope), I agree with his identification of the logical flaw in the guidance. I agree with Lady Arden and Lord Sales (para 86) that the scope of the guidance (under Schedule 3, paragraph 12 and regulation 7(1)) cannot be necessarily confined to purely procedural or operational matters, but I do not understand that to be the intended effect of Lord Wilsons words. In particular there is no reason why the guidance should not extend to guidance on the formulation of the investment strategy, including the social and other matters appropriate to be taken into account under regulation 7(e). However, I cannot agree that this opens the door, as they seem to suggest, to the delineation of the functions of central government in relation to the fund, if by that they imply the broadening of the role of central government to include the imposition of its own policy preferences. In my view it is unhelpful to observe, as they do (paras 78, 87), that such a pension scheme is liable to be identified with the British state or that the administering authority is part of the machinery of the state. The fact that the authority may for certain purposes be seen as a state agency tells one nothing about the legal powers and constraints under which it operates. Nor does it give the Secretary of State any decision making role beyond that express or implicit in the relevant statutory framework. Any guidance must respect the primary responsibility of the statutory authorities as quasi trustees of the fund, as Lord Wilson puts it (para 12, echoing the words of the Law Commission). That the primary responsibility rests with the authorities is emphasised by the guidance itself. As it says in the Foreword: One of the main aims of the new investment regulations is to transfer investment decisions and their consideration more fully to administering authorities within new prudential framework The Secretary of States power of intervention does not interfere with the duty of elected members under general public law principles to make investment decisions in the best long term interest of scheme beneficiaries and taxpayers. Responsibility for investment decisions thus rests with the administering authorities. The same must be true of policy choices made under regulation 7(e). As Lord Wilson says (para 17) the guidance in that respect follows the approach of the Law Commissions report (Law Com No 350). That report in turn may be seen as having settled a long running debate as to the extent to which pension trustees could take account of non financial factors, dating back to cases such as Cowan v Scargill [1985] Ch 270 (see for example Lord Nicholls Trustees and their Broader Community: where Duty. Morality and Ethics Converge (1996) Australian Law Journal Vol 70, p 206). There appears now to be general acceptance that the criteria proposed by the Law Commission are lawful and appropriate. I agree. Thus administering authorities may take non financial considerations into account provided that doing so would not involve significant risk of financial detriment to the scheme and where they have good reason to think that scheme members would support their decision. These are judgements to be made by the administering authority, not the Secretary of State. The attempt of the Secretary of State to impose policy choices was objectionable, not so much because they were not pensions purposes (in the judges words see above), but because they were choices to be made by the authorities, not by central government. appellants: In this respect I agree with the submissions of Mr Giffin QC for the What the Secretary of State sought to do in the guidance was to promote the governments own wider political approach, by insisting that, in two particular contexts related to foreign affairs and to defence, administering authorities could not refrain from making particular investments on non financial grounds, regardless of the views held by the scheme members. The analogy drawn by the Court of Appeal between the basis upon which the administering authority may properly act, and the purpose for which the Secretary of State may properly issue guidance, was therefore founded upon a misconception of the administering authoritys position in law. Whilst the Secretary of State was entitled to give guidance to authorities about how to formulate investment policies consistently with their wider fiduciary duties, he was not entitled to use the guidance giving power, conferred by the Investment Regulations, to make authorities give effect to the Secretary of States own policies in preference to those which they themselves thought it right to adopt in fulfilment of their fiduciary duties. For these reasons I also would allow the appeal and restore the order of the judge. LADY ARDEN AND LORD SALES: (dissenting) Padfield v Minister for Agriculture, Fisheries and Food [1968] AC 997 (Padfield) was a ground breaking decision of the House of Lords in which the exercise of a power by a minister for improper purposes was set aside. The House held that an unfettered statutory power could only be exercised to promote the policy and objects of the Act. We will call that holding the Padfield principle. The only issue on this appeal is whether it is outside the broad discretion given to the Secretary of State under the Public Service Pensions Act 2013 (the 2013 Act) to give guidance which prohibits the use of pension policies to pursue boycotts and similar activities against foreign nations against whom the UK has not imposed sanctions or taken similar steps. It is said that this exercise of the power contravenes the Padfield principle, in effect that this too was the exercise of a power for improper purposes rather than for the purposes of promoting the policy and objects of the Act. We shall explain the powers, the guidance and the Padfield principle in more detail below. In summary, we conclude that the objects of the 2013 Act are not simply to set up public service pension schemes such as the Local Government Pension Scheme (LGPS) but also to ensure that the public interest is reflected in the arrangements for the management of those schemes. The 2013 Act was part of a package of measures to reform public service pensions which were intended to take due account of both the public interest and that of the beneficiaries of the pension funds. The powers to give guidance can, therefore, within appropriate limits, extend to matters which reflect the role of the Secretary of State or central government in relation to the funds, which is the essence of the challenged guidance. The wide discretion The 2013 Act was framework legislation setting out broad powers to enable the transition to new public service pension schemes to be achieved. The powers to make regulations under sections 1(1) and 3(1) were both broad. The regulations with which this appeal is concerned were made under both those powers. Although the powers are broad, they are not limitless. The powers in respect of the pension schemes are in circumstances such as those arising in this case at least subject to an obligation to ensure that the administering authorities of the schemes remain able to perform their primary duties in relation to the schemes, to promote the financial well being of scheme members. There may be other limitations. In this judgment, we focus on section 3(1). The power to make regulations conferred by section 3(1) is to make provision as to certain matters and those matters are not limited to the provision of the matters listed in Schedule 3. However, paragraph 12 of Schedule 3 lists as one of those matters as to which regulations may make provision the administration or management of the scheme. The scheme in this case is the LGPS. The management of a scheme includes the delineation of the roles of those who have a relationship to the scheme. Pursuant to his statutory powers under sections 1(1) and 3(1) of the 2013 Act, the Secretary of State made the Local Government Pension Scheme Regulations 2013 (SI 2013/2356). These contained regulation 7, which Lord Wilson sets out in para 9 above. This regulation empowered the Secretary of State to give guidance about the formulation of the administering authoritys investment strategy statement. The guidance in issue The guidance in issue is contained in a document dated September 2016 issued by the Department for Communities and Local Government (DCLG) entitled Local Government Pension Scheme Guidance on Preparing and Maintaining an Investment Strategy Statement (the guidance). As the title to the document states, the general purpose of the guidance is to assist administering authorities in formulating and maintaining their investment strategy statement. The relevant parts of the guidance are marked in bold in the following passage: The law is generally clear that schemes should consider any factors that are financially material to the performance of their investments, including social, environmental and corporate governance factors, and over the long term, dependent on the time horizon over which their liabilities arise. However, the Government has made clear that using pension policies to pursue boycotts, divestment and sanctions against foreign nations and UK defence industries are inappropriate, other than where formal legal sanctions, embargoes and restrictions have been put in place by the Government. Although schemes should make the pursuit of a financial return their predominant concern, they may also take purely non financial considerations into account provided that doing so would not involve significant risk of financial detriment to the scheme and where they have good reason to think that scheme members would support their decision. [] Summary of requirements In formulating and maintaining their policy on social, environmental and corporate governance factors, an administering authority: Must explain the extent to which non financial factors will be taken into account in the selection, retention and realisation of investments Should not pursue policies that are contrary to UK foreign policy or UK defence policy By way of brief explanation, boycotts involve withdrawing support for Israel, and Israeli and international companies, that are involved in the violation of Palestinian human rights. Divestment campaigns urge banks, local councils, churches, pension funds and universities to withdraw investments from all Israeli companies and from international companies complicit in violations of Palestinian rights actions by organisations that have funds under their control, by which they dispose of or do not acquire holdings in certain types of investment. Sanctions campaigns pressure governments to fulfil their legal obligation to hold Israel to account, including There is no issue about the meaning of the concepts used in the guidance so we will set out the meanings given to them by the appellants in the context of the issues with which they are concerned: by ending military trade and through free trade agreements. (First witness statement of Hugh Lanning, para 30) Lord Wilson considers that the statement in the summary of requirements goes further than the statement in the body of the guidance that they should not pursue policies that are contrary to UK foreign policy or UK defence policy. However, the Secretary of State considers that the summary went no further than the body of the guidance. The appellants have not challenged that, and we proceed on that basis. The critical passage is therefore the statement in the body of the document. Mr Chris Megainey, an official of the DCLG, deals with the provenance of the guidance in his evidence on this application. He explains how the guidance, which had not previously been necessary, had come to be issued: 12. It was clear to us that the new guidance on the new Investment Strategy Statement which replaced the [Statement of Investment Principles] under the 2016 Regulations would also need to cover what would be appropriate non financial factors to take into account and the extent to which non financial factors should or should not be taken into account. It was also clear that the power to give such guidance was provided by the 2013 Pensions Act (Schedule 3, paragraph 12) and that such guidance was consistent with the overall purpose of the Pensions Act. 13. However, there were factors which led us to consider whether the content and the status of the guidance on the 2016 Regulations should be strengthened in relation to local boycotts. Firstly, there were concerns about the possible impact of the Boycott, Divestment and Sanctions movement which sought to give practical force to criticism of the policies of certain foreign nations and exports of certain types of arms to certain countries. The Governments fear was that this might undermine UK foreign policy and legitimate UK trade which was in accordance with international law, if adopted by a part of the UK state, in the form of administering authorities. There were also concerns about whether such campaigns might be perceived as legitimising anti Semitic or racist attitudes and attacks. I am aware from subsequent discussions with colleagues that although anti Israel and pro Palestinian campaigning in itself is not anti Semitic, there is a pattern of anti Semitic behaviour in connection with campaigns promoting a boycott of Israel. For example, protests outside an Israeli owned shop in central Manchester in summer 2014 led to some Jewish people using the shop being racially abused by protestors, including shoppers being called Child killer, comments such as You Jews are scum and the whole world hates you, and Nazi salutes being made at Jewish shoppers using the Israeli owned store. On social media, hashtags such as #BDS, #BoycottIsrael and #FreePalestine are regularly used by people posting anti Semitic tweets and comments. Secondly, a Procurement Policy Note had been issued by the Cabinet Office in February 2016 restating the existing policy on procurement, that authorities should comply with international law and that boycotts are inappropriate, except where sanctions, embargoes and restrictions have been put in place by the UK Government. To my knowledge the question of whether investment boycotts could legitimately be put in place had not previously arisen in relation to the LGPS. The overriding duty of authorities to maximise investment returns and act in the interests of scheme members and taxpayers was clear, as was the risk of legal challenge if authorities did not comply with that duty. However, the existing guidance did not specifically address the question of investment boycotts. 14. Given the serious nature of the concerns and the potential impacts across the UK set out above, we concluded that statutory guidance including a specific requirement to reflect UK foreign policy was justified and would fall within the powers in the 2013 Pensions Act. The protection of beneficiaries and taxpayers from the possibility that investment decisions might be taken by authorities purely on the basis of non pensions considerations is in my view a pensions purpose. Mr Megainey then explained that there was a public consultation on the statutory guidance which attracted over 23,000 responses, including responses from supporters of charities in the field of famine relief, education, development and similar fields drawing attention to the problems that a ban on boycotts would have on the selection of investments based on non financial considerations. After careful consideration the guidance was issued limited to boycotts which would undermine UK foreign and defence policy and which constitutionally were outside the competence of local government. Mr Megainey confirmed that the pursuit of boycotts against foreign states was considered to be beyond the competence of local authorities, and that the circumstances with which the guidance was concerned would arise rarely: 22. However, we were clear that UK foreign and defence policy are matters which are properly reserved for the UK government and do not fall within the competence of local government. It was therefore right to put safeguards in place to ensure that decisions made by the UK government on foreign and defence policy in the interests of the UK as a whole would not be undermined by local boycotts on purely non pension grounds. We expected these circumstances to arise very rarely but it seemed right to take these steps in view of the nature and scale of the potential risks. The Secretary of State thus took the view that boycotts were not a matter for the administering authority but for central government. There is no challenge to the rationality of his decision. The decision was clearly one of policy as to what was in the public interest. Mr Giffin submits in reply that the guidance is a recipe for politicisation of pension schemes. We do not agree: if anything the purpose is to preclude their politicisation in limited respects. Mr Giffin further submits that the Secretary of State is seeking to cut back on the legitimate choices of the administering authority: but this is within the statutory power as we read it. Nor do we agree that it is any part of the guidance to tell those who invest what investments to make (cf para 31 of the judgment of Lord Wilson). The guidance deals only with the situation where those who invest funds have no active duty to promote the best interests of the members of the pension fund in financial terms because the considerations are non financial and there is no material financial consequence attached to the decision. If it were otherwise, the guidance could be said to invite administering authorities or scheme managers to breach the primary duties to safeguard the financial well being of scheme members which the guidance accepts that they have. The passage in the guidance quoted in para 53 above is concerned to regulate the extent to which scheme managers may make decisions based on factors which are not financial, in circumstances which, as explained in the next paragraph of the guidance can only arise where the financial interests of scheme members are not materially affected. In doing so, it recognises that framing investment decisions by reference to such factors may serve to communicate or express views of a political, social or ideological character. In our view, it is clear that the state (representing the interest of the general public) and scheme members may both have an interest in how this expressive function is exercised. The LGPS is liable to be identified with the British state. This is because of the impression produced by the combined effect of the nature of the persons who are members of the scheme, its designation as a public sector scheme, the identity of the scheme managers (which include county councils and London boroughs, which are part of the machinery of the state), the funding which the state provides for the scheme, and the degree of state regulation to which it is subject pursuant to the 2013 Act. The precise niceties of how investment decisions are taken are not likely to be recognised or understood. So, for instance, if the managers of funds within the LGPS decided to boycott Israel, that could readily be portrayed as the British state (in the guise of one of its major public sector pension funds) deciding to boycott Israel. Moreover, such a perception could well fuel difficult and sensitive tensions in society, as Mr Megainey explains. For the proper discharge of the governments role in the conduct of international affairs and in promoting harmonious relationships in society, it is important that it should be able to exercise control over the generation of perceptions about the attitude of the British state. Any suggestion that these are not appropriate concerns for government would be unsustainable. No suggestion is made that the position taken in para 22 of Mr Megaineys witness statement was wrong in law, unreasonable or constitutionally incorrect. As explained, the only question on this appeal is whether the 2013 Act enables the Secretary of State to give the guidance in issue. Mr Megainey makes the important point that the part of the guidance in issue related only to the use in limited circumstances of non financial considerations to make investment decisions: 23. The relevant section in the guidance was therefore carefully drafted in the light of the arguments in consultation responses and made in Parliament. It set out the very restricted range of investment policies which could go beyond the competence of an administering authority and potentially undermine policies of the UK government. But it left a very wide range of discretion for authorities on other investment policies which they may legitimately adopt and which are consistent with their wider responsibilities. One example might be local policies against investment in companies responsible for particular products which may be harmful to health (eg tobacco, sugar and alcohol) or which have operations or activities which cause environmental harm (eg water or air pollution caused by oil or gas companies). Administering authorities have responsibilities for public health and the environment in their areas. The guidance makes clear that they may legitimately take into account the potential for harm by refusing to invest in tobacco manufacturers, fossil fuel companies or high sugar products: such policies do not carry general risks to UK trade, security or communities. Mr Megainey made the further important point that the guidance in issue did not interfere with the performance by the administering authority of their legal duties with respect to investment: 24. The guidance did not therefore affect the ability of authorities to comply with their duty to act in the best interests of beneficiaries, nor did it prevent them from taking ethical considerations into account when making investment decisions except in a very narrow range of circumstances. It is common ground that regulation 7(2)(e) of the Regulations (set out in para 54 above) is within the regulation making power in section 3(1) of the 2013 Act. Regulation 7(2)(e) contemplates that guidance issued by the Secretary of State may cover the administering authoritys policy on how social, environmental and corporate governance considerations (ie matters which include non financial factors) are taken into account in the selection, non selection, retention and realisation of investments. That is to say, the Regulations and the 2013 Act envisage that guidance may be issued as regards how non financial factors may (or may not) be taken into account as substantive considerations when the administering authority makes investment decisions. We can see nothing in the wording or context of section 3(1) of the 2013 Act to indicate that its coverage in respect of the giving of guidance in relation to non financial factors to be taken into account, or not, when making investment decisions is limited as the appellant contends. On the contrary, we consider that both the wording and the context of that provision indicate that it is not so limited. As Sir Stephen Richards put it in his judgment in the Court of Appeal (with which Davis and Hickinbottom LJJ agreed), [s]ince the Secretary of State is empowered to give guidance as to an authoritys investment strategy, it seems to be equally plainly within the scope of the legislation for the guidance to cover the extent to which such non financial considerations may be taken into account by an authority (para 20). We agree. The Padfield principle This is an important principle of statutory construction, which for present purposes is encapsulated in the following passage from the speech of Lord Reid in Padfield [1968] AC 997, 1030: Parliament must have conferred the discretion with the intention that it should be used to promote the policy and objects of the Act; the policy and objects of the Act must be determined by construing the Act as a whole and construction is always a matter of law for the court. In a matter of this kind it is not possible to draw a hard and fast line, but if the Minister, by reason of his having misconstrued the Act or for any other reason, so, uses his discretion as to thwart or run counter to the policy and objects of the Act, then our law would be very defective if persons aggrieved were not entitled to the protection of the court. So it is necessary first to construe the Act. We would make a number of observations. First, it is not the practice of Parliament to insert purpose clauses into legislation, and indeed the policies or objects of particular legislation may be quite complex. They may be deduced from the context, including the constitutional position. The relevant constitutional background which sets the context in which the 2013 Act falls to be construed includes the constitutional responsibility of central government for the conduct of the UKs international affairs, for promoting the countrys economy and for seeking to preserve internal good order and harmonious relations between different parts of society. In R v Secretary of State for the Environment, Transport and the Regions, Ex p Spath Holme Ltd [2001] 2 AC 349 (Spath Holme), the House of Lords gave important guidance regarding the operation of the Padfield principle. Lord Bingham, referring to observations by Lord Simon of Glaisdale and Lord Diplock in Maunsell v Olins [1975] AC 373, 393, emphasised at [2001] 2 AC 349, 385E G and 391A B that a statute may well have more than one statutory objective. As Lord Simon (speaking for himself and Lord Diplock) said in Maunsell v Olins, in the passage relied on by Lord Bingham: For a court of construction to constrain statutory language which has a primary natural meaning appropriate in its context so as to give it an artificial meaning which is appropriate only to remedy the mischief which is conceived to have occasioned the statutory provision is to proceed unsupported by principle, inconsonant with authority and oblivious of the actual practice of parliamentary draftsmen. Once a mischief has been drawn to the attention of the draftsman he will consider whether any concomitant mischiefs should be dealt with as a necessary corollary. The Bill leading to the 2013 Act laid down a common framework for pension provision within the public service so that the framework could be adapted to each sector as circumstances required. So, it was clear that the detail had to be filled in by secondary legislation and it is not surprising to find that the powers to make secondary legislation were given in broad terms. One of the purposes of the legislation, as one might expect, was to establish sound governance arrangements for the new schemes. The second point is that it is not good enough if the minister misconstrues the legislation in good faith. This is because the courts are the authoritative organ for the interpretation of a statutory power. We do not have any equivalent of the Chevron doctrine in the United States (Chevron v Natural Resources Defence Council (1984) 467 US 837), where it was held that where a statute directed to a government agency was ambiguous, the court will follow any permissible reading adopted by the agency. Thirdly, as Lord Nicholls explained in Spath Holme, at [2001] 2 AC 349, 396D G, the Padfield principle depends upon the proper interpretation of the relevant statutory provision; and an appropriate starting point is that language is to be taken to bear its ordinary meaning in the general context of the statute (p 397B). [T]he overriding aim of the court must always be to give effect to the intention of Parliament as expressed in the words used: Spath Holme [2001] 2 AC 349, 388D, per Lord Bingham. Here, the language of section 3(1), according to its ordinary meaning, especially when it is read in context and alongside section 3(2) of and Schedule 3 to the 2013 Act, is apt to confer a very wide discretion upon the Secretary of State (as the responsible authority) to promulgate regulations which make such provision in relation to a [public service pension scheme] as the Secretary of State considers appropriate. We do not think that the limitation for which the appellant contends can be read into section 3(1). Again, we agree with Sir Stephen Richards, who said (para 21), I find it helpful to put the question in terms of whether the legislation permits wider considerations of public interest to be taken into account when formulating guidance to administering authorities as to their investment strategy; and given the framework nature of the statute and the broad discretion it gives to the Secretary of State as to the making of regulations and the giving of guidance, I can see no reason why it should not be so read. The policy and objects of the 2013 Act The Preamble to the 2013 Act makes it clear that the 2013 Act is not only about pensions. It reads: An Act to make provision for public service pension schemes; and for connected purposes. This is a very wide formulation. A purpose may be connected with another even if it does not directly or otherwise promote that other provided that it has a relationship with that other. It is enough that it is reasonably or logically associated with it. The reason for having such a wide formulation is to be found in the circumstances leading to the 2013 Act. We take these circumstances from the final report of the Independent Public Sector Pensions Commission issued on 10 March 2011 under the chairmanship of Lord Hutton of Furness (the Hutton Report). This forms part of the context of the 2013 Act admissible on its interpretation since it explains why the legislation was needed and what changes were introduced. What follows is not a comprehensive summary. The Hutton Report found that the then current pensions structure for the public sector needed structural reform, for example because the cost was unfairly borne by employees, employers and the taxpayer. There was an unfunded past service deficit on the LGPS which fell on the employer, and ultimately in the case of local government employees, the taxpayer. Lord Huttons first set of recommendations were directed to ensuring the sustainability of public service pensions. The measures which he recommended included an employers cap, that is, a limit on the amount of contributions which employers would be obliged to make. Such a cap was introduced by the 2013 Act. There was praise for some aspects of local authority pension scheme management (see para 6.62), in particular for the adoption by individual funds within the LGPS of express, transparent investment strategies. However, the Hutton Report also recommended improvements in governance of pension schemes, including the management of investments. It concluded there were valid reasons for differences in the governance arrangements between public service and private pension schemes, but the former could learn from the latter. At the time of his report, some functions were carried out by government departments. On governance, the Hutton Report stated: Clear guidance will be required for members of pension boards on their role and duties. They would fulfil similar duties to trustees, acting in accordance with scheme rules, impartially and prudently, balancing the interests of scheme beneficiaries and of taxpayers. There will be a need for effective committee structures to facilitate sound decision making and strong oversight of scheme administrators and fund managers. (para 6.16) The government accepted the Hutton Report, subject to consultation. What this brief summary makes clear is that the 2013 Act was not simply about matters internal to pension schemes: it also concerned the relationship of ministers to pension schemes and the interests of the taxpayer. There was no suggestion that we have found that the powers of ministers should be limited to protecting the interests of members of pension schemes. The systems for governance would have to be put in place by government. The changes made by the 2013 Act were very significant indeed. In his speech introducing the second reading of the Bill which became the 2013 Act, the Chief Secretary to the Treasury (Danny Alexander MP), the minster responsible for promoting the Bill, stated: Lord Huttons fourth key test related to governance and transparency. The reformed schemes should be widely understood, both by scheme members and by taxpayers. People understand what is in their pay packet each month, and it should be just as easy to understand how their pension works. Under the Bill, the schemes will have robust and transparent management arrangements. Clause 5 [which became section 5] provides for each scheme to have a pension board which will work to ensure that the scheme is administered effectively and efficiently. There will be local pension boards in the case of the locally administered police, fire and local authority schemes. The boards will consist of member representatives, employer representatives and officials. They will operate in a similar way to boards of trustees, holding scheme administrators to account and providing scheme members and the public with more information about the pensions. The board members will be identified publicly, and their duties will be made clear to scheme members. I welcome the greater transparency that the Bill will bring to this area of public pension administration. (Hansard, vol 552, col 63 4, 29 October 2012) Unusually for public service pension schemes, the pension funds within the LGPS are funded. Their aggregate value as at 31 December 2020 was some 287 billion, which makes them very substantial investors indeed. There are some other funded public service pension schemes. The relevant provisions of the 2013 Act apply to both funded and unfunded schemes. In the case of funded schemes like the LGPS, the funding for them has been provided by the state in the past (by funding the employers contributions from taxation and also funding the salaries of relevant employees from taxation, out of which employee contributions have been made) and continues to be provided and underwritten by the state into the future (subject to the employers cap). This is one reason why such public pension schemes are liable to be identified with the British state (para 58 above). It is also a further reason why the government and taxpayer have a legitimate interest in regulating how public sector pension schemes manage the money which is provided to them. In our judgment, having regard to the scope and context of the 2013 Act, in particular as indicated by its preamble and the Hutton Report, the policy and objects of the 2013 Act include not simply setting up the new pension schemes but also the working out of the role of central government in relation to the newly created schemes and in ensuring that the right balance is struck between the public interest and the interests of fund members. The 2013 Act is about introducing a new structure whereby these interests can be brought into account and held in balance. Accordingly, we consider that the part of the guidance in issue was promulgated for reasons falling within the policy and objects of the 2013 Act. At first instance Sir Ross Cranston held the relevant guidance could not be for a pensions purpose because ex hypothesi the decision would have no adverse financial impact on the scheme. He held that the purpose is a desire to advance UK foreign and defence policy, without mentioning its significance in the pension context. However, as Mr Julian Milford for the Secretary of State submits, the court has to read the guidance as a whole and in its proper context. The relevant part of the guidance applies when the administering authority is making an investment decision. It regulates the extent to which they may act other than on the basis of ordinary financial factors. They may only take non financial factors into account if that can be done without any material financial detriment for scheme members. In order to be Padfield compliant, the relevant part of the guidance does not have to promote or affect the LGPS financially. The policy of the 2013 Act was also to establish suitable governance more generally for the deregulated LGPS. The public interest is implicated in decisions which might be made by scheme managers and hence is an appropriate matter to be covered in the guidance relating to such governance. Therefore, if the minister considered that it was in the public interest to restrict the investment decisions that the managers could take consistently with their duties to the scheme members, then in our view this fell within the policy and objects of the 2013 Act. Paragraph 12 of Schedule 3 to the 2013 Act (set out at para 52 above) is in general terms. It does not limit the scope of regulations to the management and administration of pension funds forming part of the LGPS or other public sector pension schemes. The power can be used for any purpose the minister thinks appropriate subject to the Padfield principle. We have already explained that there are some limits on the broad discretion to make regulations to be deduced from the policy and objects of the 2013 Act. The minister cannot require the administering authority, the scheme managers or the board appointed pursuant to section 5 to transgress the primary legal duties upon them to safeguard the financial interests of scheme members. But the relevant part of the guidance has not sought to do this. There was some confusion at the hearing as to whether the guidance in issue would force the administering authority to invest in any particular stock. However, that is not a fair reading of the guidance. The relevant part of it is simply guidance that the administering authority should refrain from making an investment decision for the particular purposes there stated. Moreover, it does not, for example, say that the administering authority could not decide that the LGPS should divest itself of an investment with the incidental purpose of relinquishing all investments in an industry to which the administering authority or the scheme members had ethical objections; but they could not do so for the sole or principal purpose of pursuing boycotts, divestment or sanctions against foreign nations which the UK government had not subjected to sanction, nor against the UK defence industry. This reading of the relevant passage in the guidance is precisely in line with the evidence which the government has filed and with Information Note 01/16, which Lord Wilson considers of no relevance. That Note explains that There are wider national and international consequences from imposing such local level boycotts. They can damage integration and social cohesion within the United Kingdom, hinder Britains export trade, and harm foreign relations to the detriment of economic and international security. The Secretary of State referred to this Note in the consultation document in November 2015 leading to the 2016 Regulations and in the governments response to the consultation in September 2016. It follows that we do not accept that the distinction made by Lord Wilson in para 31 of his judgment between how an administering authority should approach investment decisions and what investments they should not make applies in this situation. The guidance in issue does not purport to tell administering authorities what investments they must hold. One of the points made against the conclusion to which we have come is that government policy on relations with particular foreign nations may change. That is of course so, but it does not follow that the part of the guidance in issue falls outside the purpose and objects of the 2013 Act. The proper characterisation of the guidance is that it reflects and articulates the legitimate role of central government in relation to public sector pensions. Lord Wilson considers that the guidance must be about procedures. That is in our judgment an inappropriately one dimensional view of what management in relation to a scheme created under the 2013 Act involves. Guidance cannot in our judgment realistically be limited to operational controls but must be capable of extending more widely so as to include the objectives of pension provision, including the delineation of the functions of central government in relation to the fund. A public service pension scheme may, by reason of its particular status as a public service scheme funded in substance by the public, entirely properly be made subject to restrictions which are different from those of private sector pensions. For example, as explained by Mr Milford, the public sector equality duty may well apply in relation to public service schemes. Sir Stephen Richards was surely correct to say in his judgment in the Court of Appeal that the administering authority is part of the machinery of the state. On the other hand, we agree entirely that the pensions provided by the LGPS are earned. As Sir Nicholas Browne Wilkinson VC held in Imperial Group Pension Trust Ltd v Imperial Tobacco Ltd [1991] 1 WLR 589, 597: Beneficiaries of the scheme, the members, far from being volunteers, have given valuable consideration. However, the benefits for scheme members are guaranteed by statute and so are underwritten by the state. If, for example, there is a significant change in life expectancy, and a deficiency emerges as regards employees or former employees of a local authority, that deficiency must be made good by the relevant local authority. That burden may therefore end up with local council taxpayers or possibly central government through the grant system. This is an aspect of the public interest in the LGPS. The fact is that there is both a public interest and private interests of scheme members which co exist in relation to the LGPS. Both aspects are recognised by the statute and receive due respect according to the terms of the guidance. Moreover, the guidance which the Secretary of State may give must, as a matter of ordinary language as employed in paragraph 12 of Schedule 3, be capable of covering any action of the administering authority in issue in this case, as regards the taking into account of non financial considerations. We do not accept that the power could only be to explain the approach to investment and not in relation to the substantive power to invest in the circumstances with which we are concerned. There is no obvious or straightforward distinction between these matters, which both fall within the concepts of administration and management of a scheme. This point is reinforced by the terms of paragraph 11 of Schedule 3, which refers to the administration, management and winding up of any pension funds within a scheme, where the terms administration and management clearly cover both procedural and substantive aspects of fund administration and management. We therefore consider that the Court of Appeal were correct to say that the judge read the legislation too narrowly. We would dismiss this appeal.

This appeal concerns the breadth of the ethical investments that the authorities which administer the local government pension scheme (the scheme) are permitted to make. An ethical investment can be defined as one made not, or not entirely, for commercial reasons but in the belief that social, environmental, political or moral considerations make it, or also make it, appropriate. The scheme is an occupational pension scheme under which authoritiesin most cases local authoritiesin England and Wales administer funds separate from their other resources. An authority makes contributions into its fund for its employees, who also make contributions themselves. The scheme provides defined pension benefits for past and present employees. The Public Service Pensions Act 2013 (the 2013 Act) empowers the respondent Secretary of State to make regulations providing for the issue of guidance to authorities on the schemes administration and management (section 3 and para 12 of Schedule 3). The Local Government Pension Scheme (Management and Investment of Funds) Regulations 2016 (the 2016 Regulations), made pursuant to these provisions, require an authority to formulate an investment strategy. This must be in accordance with the guidance and must include the authoritys policy on how social, environmental and corporate governance considerations are taken into account in its investment decisions (reg. 7). The appellants brought a claim for judicial review alleging that two passages in the guidance issued in 2016 by the Secretary of State pursuant to that regulation were unlawful. The first passage states that the Government has made clear that using pension policies to pursue boycotts, divestment and sanctions against foreign nations and UK defence industries are inappropriate, other than where formal legal sanctions, embargoes and restrictions have been put in place by the Government. The second passage states that authorities [s]hould not pursue policies that are contrary to UK foreign policy or UK defence policy. In the High Court the claim was upheld, and the two passages ruled unlawful, on the basis that the issue of them by the Secretary of State exceeded his powers. The Court of Appeal upheld the Secretary of States appeal. The appellants now appeal to the Supreme Court. By a majority, the Supreme Court allows the appeal and restores the High Courts order. Lord Wilson gives the main judgment, with which Lady Hale agrees. Lord Carnwath gives a concurring judgment. Lady Arden and Lord Sales give a joint dissenting judgment. Lord Wilson states that, to determine whether the issue of the guidance under challenge was lawful, the court must analyse the scope of the power conferred by Parliament on the Secretary of State. Pursuant to the decision of the House of Lords in Padfield v Minister of Agriculture, Fisheries and Food [1968] AC 997 (Padfield), it must do so by construing the words by which the power was conferred on him in their context. From the words in their context Parliaments purpose in conferring the power can be identified, and the purpose can be used to shed light on the powers scope [1, 20 22]. Lord Wilson observes that Schedule 3 to the 2013 Act identifies the matters which, in particular, Parliament had in mind when conferring the power, one of which was the administration and management of the scheme [23]. The 2016 Regulations, which can be used to interpret the Act, require the investment strategy to include the authoritys policy on how non financial considerations are taken into account (reg. 7) [24]. The guidance adopts two uncontroversial tests for the taking into account of such considerations: does the proposed step involve significant risk of financial detriment to the scheme and is there good reason to think that members would support taking it? These three legal instruments use words (including administration, management, how considerations are taken into account, and strategy) which, considered in their context, all point in the same direction: that the Acts policy is to identify procedures, and the strategy, which administrators should adopt in the discharge of their functions [25 26]. But in the passages under challenge, the Secretary of State has insinuated into the guidance something entirely different: an attempt to enforce the governments foreign and defence policies by providing that, even when the two tests above have been met, an administrator is prohibited from taking an investment decision if it runs counter to such policies [27]. Lord Wilson suggests that the Secretary of State was probably emboldened to exceed his powers by the misconception that the scheme administrators were part of the machinery of the state and discharge conventional local government functions. This fails to recognise that they have duties which, at a practical level, are similar to those of trustees, and they consider themselves quasi trustees who should act in their members best interests. The Secretary of States claim that contributions to the scheme are ultimately funded by the taxpayer is equally misleading: for the fund represents the contributing employees money, not public money [28 30]. In any event, the Secretary of States inclusion of the two passages in the guidance exceeded his powers. Power to direct how administrators should approach the making of investment decisions by reference to non financial considerations does not include power to direct what investments they should not make [31]. Lord Carnwath notes that, while the scope of the guidance is unclear, it appears to have been intended to preclude authorities who are making investment decisions both from engaging in political campaigns and from taking into account considerations in policy areas reserved for the UK government [36 40]. But the 2013 Act and the 2016 Regulations required any guidance to respect the primary responsibility of the authorities as quasi trustees of the fund [41 42]. The Secretary of State was not entitled, therefore, to make authorities give effect to his own policies in preference to those which they themselves thought it right to adopt in fulfilment of their fiduciary duties [43 44]. Lady Arden and Lord Sales consider that the purposes of the 2013 Act, which implemented the Hutton report, extend to reflecting the public interest and instituting good governance in the reformed public sector pension schemes [47, 69 80]. Guidance as to their management could include establishing the role of the Secretary of State in relation to investment [49]. Following consultation, the guidance related only to decisions based on non financial considerations which are taken to pursue boycotts and disinvestment campaigns against foreign nations [50 55, 82 5]. The Secretary of State had serious concerns that these might undermine foreign policy or trade and might lead to racist behaviour. These were matters for government [53 56]. The schemes were liable to be identified with the British state [58, 87 8]. The power to give guidance is not limited to procedural matters [62, 86, 89]. The leading authorities on the Padfield principle support the approach taken [63 68].

On 22 January 2014, we gave judgment in Marley v Rawlings [2014] UKSC 2, [2014] 2 WLR 213, in which we allowed Mr Marleys appeal against the Court of Appeals dismissal of his appeal against the decision of Proudman J. She had refused to admit to probate a document as the validly executed will of Alfred Rawlings (the will). On its face, this document appeared to be the will of his late wife (who had predeceased him), but it had been signed by Mr Rawlings. This was because, when the solicitor who had drafted the wills (the Solicitor) had visited the couple for the purpose of executing their wills, Mr and Mrs Rawlings had accidently been presented with, and each had signed, the will intended for the other. Mr Marley was the residuary beneficiary under the will, if it was valid, whereas the two sons of Mr and Mrs Rawlings (the respondents) would have inherited on an intestacy. The issue which arises now is how the costs of the proceedings should be allocated. Mr Marleys primary contention is that the respondents should pay his costs of the proceedings, including the two appeals, in addition, of course, to having to pay their own costs. The respondents, on the other hand, contend that the costs of Mr Marley and the respondents should be paid out of the late Mr Rawlingss estate, or, in the alternative, that those costs should be ordered to be paid by the Solicitor, as he was responsible for the unfortunate error. The Solicitor is, of course, insured against such liabilities. Those insurers have also made submissions on costs, and they contend that the respondents should pay Mr Marleys costs. These submissions all have to be seen in the light of the fact that the value of Mr Rawlings estate (the estate) is in the region of 70,000. The position is complicated by the fact that, in the Supreme Court, the respondents solicitors and two counsel were each acting under a conditional fee agreement (a CFA), although they were acting on the traditional basis in the Court of Appeal and at first instance. I will first address the position on the assumption that the respondents solicitors and two counsel were acting on a traditional basis throughout (which will dispose of the costs below), and will then turn to the costs in the Supreme Court in the light of the CFAs. The position disregarding the CFAs On the face of things at any rate, it is possible to justify more than one different order for costs in this unfortunate case. I describe the case as unfortunate, because it has involved a hearing in the High Court, a hearing in the Court of Appeal, and a hearing in the Supreme Court, with each side represented by experienced counsel and solicitors, in order to reach a final decision as to how an estate of 70,000 is to be distributed. Even if the costs have been kept at a modest level at all stages, there is unlikely to be much, if anything, left in the estate if the only order in respect of costs which this court makes is that primarily sought by the respondents, namely all parties costs being paid out of the estate. If there had been no question of negligence on the part of the Solicitor, it would have very difficult to decide what order to make as between Mr Marley and the respondents. On the one hand, there is considerable force in Mr Marleys argument that, although this litigation relates to the validity of a will, and it is a case where both parties can say that they had a reasonable argument, it was ultimately hostile litigation between two parties fighting over money, and that, in those circumstances, the normal rule of loser pays applies, so that Mr Marley should receive his costs from the respondents. There is some support for this in the authorities. On the other hand, the authorities also reveal that, where there is an unsuccessful challenge to the validity of a will, and the challenge is a reasonable one and is based on an error which occurred in the drafting or execution of the will, the court often orders that all parties costs come out of the estate. In the present instance, therefore, and still ignoring the possible liability of the Solicitor, there is a case for saying that Mr Marley should recover his costs from the respondents because they took their chance in hostile litigation and lost, but there is equally a case for saying that the correct order is that the costs of all parties should be paid out of the estate, not least because the cause of the error was in the execution of the will, and the stance adopted by the respondents was far from unreasonable, as is evidenced by the fact that they succeeded both at first instance and in the Court of Appeal. A pragmatic approach might well suggest that, if the estate had been very substantial, the correct order would be to direct that costs be paid out of the estate, but one should hesitate long and hard before making such an order in a case such as the present, where the estate is modest: it would deprive the successful party, in this case Mr Marley, of any benefit from the litigation or from the estate. However, this is not a case where it could possibly be right to ignore the position of the Solicitor. Indeed, there is, at least in terms of broad common sense, considerable attraction in the notion that the Solicitor should bear all the costs, in the sense that he was the person whose unfortunate error was responsible for the litigation. On the other hand, as the insurers point out, (1) a court should always be wary before making an order for costs against a third party, (2) it would, at any rate on the face of it, be odd to require the Solicitor to pay the respondents costs, given that he owed no duty to the respondents, and (3) it was not the Solicitors fault that the respondents chose to fight the case. Although those three arguments have some force, at least on the face of it, I do not find them particularly persuasive. It was the error of the Solicitor which caused the problem that gave rise to the proceedings, as is reflected by the fact that the insurers accepted liability to Mr Marley for his costs in the Court of Appeal and the Supreme Court. Further, when Mr Marley intimated that he had a claim against the Solicitor, the insurers required him to bring proceedings to seek to have the will upheld as valid. I turn to the three specific points raised by the insurers on behalf of the Solicitor. As to point (1), it is by no means unusual to make an order for costs against a party who was funding the litigation or who was responsible for the litigation. As mentioned, the insurers are funding the litigation to the extent of underwriting Mr Marleys costs of the two appeals; further, not only was the Solicitor primarily responsible for the whole problem that gave rise to these proceedings, but the insurers required Mr Marley to bring these proceedings by way of mitigation. Further, the Solicitor has no defence whatsoever to a damages claim from Mr Marley, and therefore this is a particularly strong case for holding a third party liable for costs. As to point (2), given that the respondents decision to fight this litigation was not unreasonable, it would be harsh if they had to pay any substantial costs, as explained above. Consequently, there is considerable force in the notion that they should obtain their costs out of the estate. However, if that happened, those costs would be ultimately borne by Mr Marley, because he is entitled to the estate, and he would suffer to the extent that it is diminished by the respondents costs, and therefore could recover that diminution from the Solicitor. As to point (3), it was both foreseeable to the Solicitor and to the insurers that the respondents would contest the claim, and it was scarcely unreasonable of them to do so all the way, as is demonstrated by the fact that they won in the High Court and the Court of Appeal. Because an order that all parties be paid out of the estate would result in Mr Marley being able, in effect, to reconstitute the estate through a claim for damages against the Solicitor, it appears to me that the position is equivalent to one where the estate is very substantial in nature. Accordingly, an order that the parties recover all their costs out of the estate also seems justified in pragmatic terms, on the basis that all those costs would, in practice, be recovered by Mr Marley from the Solicitor, and by the Solicitor from the insurers. In those circumstances, rather than ordering that the parties receive all their costs out of the estate, and leaving it to Mr Marley to recover the costs from the Solicitor, and leaving it to the Solicitor to be indemnified by the insurers, it seems to me that, assuming that the respondents had funded the litigation traditionally, it would be appropriate to order that the insurers pay all the costs of Mr Marley and the respondents in relation to these proceedings throughout. I take some comfort from the fact that this was the order which was agreed on behalf of the negligent solicitor in not dissimilar circumstances in In re Bimson [2010] EWHC 3679 (Ch), an agreement which, at para 23, Henderson J referred to as very proper, and that in Gerling v Gerling [2010] EWHC 3661(Ch), para 50 HH Judge Hodge QC said in a similar case that he assume[d] that there will be no order as to costs because the costs are going to be borne by the insurers acting for the solicitors who drafted the Will. Such an order would therefore be appropriate in relation to the costs up to and including those incurred in the Court of Appeal, but it is now necessary to consider what order is appropriate in respect of the respondents costs in the Supreme Court, given that their solicitors and counsel were acting under CFAs. The effect of the CFAs in the Supreme Court Two issues arise. The first is whether the CFAs render the respondents liable for any costs in the Supreme Court. The second issue, which only arises to the extent that the answer to the first question is yes, is whether the costs we order to be paid include any uplift. These issues are in fact connected on the unusual facts of this case, as I shall explain in paras 24 27 below. As to the first issue, the insurers argue that, on a true construction of the CFAs in this case, the respondents are not obliged to pay any costs to their lawyers and therefore, given the terms which I would otherwise propose in para 12 above, no order should be made in respect of the respondents costs in the Supreme Court. This submission is based on the basis of the so called indemnity principle as explained by Sir Herbert Cozens Hardy MR in Gundry v Sainsbury [1910] 1 KB 645 and more recently by Judge LJ in Bailey v IBC Vehicles Ltd [1998] 3 All ER 570. The resolution of this issue turns on the terms of the CFAs, to which I now turn. The CFA entered into with the solicitors is short, but it incorporates a Law Society document, the effect of which is that (i) the respondents are liable for the solicitors costs if they recover any damages or in any way derive benefit from pursuing the claim, and (ii) if the respondents lose, the solicitors may require [them] to pay [their] disbursements. The respondents primary claim in connection with the solicitors costs is based on item (i). So far as that is concerned, the reference to pursuing the claim may mean, as the respondents contend, resisting the appeal to the Supreme Court, or it may mean the appeal to the Supreme Court. Whichever it means, at any rate at first sight the respondents (and their solicitors) are not assisted by item (i), as they lost the appeal. However, they contend that they derive[d] benefit from resisting the appeal or from the appeal because they avoided an order to pay Mr Marleys costs here and below and they recovered their own costs as a result of the order I have proposed in para 12 above. I would reject that argument. The result of Mr Marleys appeal to the Supreme Court is that the respondents are plainly worse off so far as the substantive issue is concerned, and certainly no better off so far as costs are concerned, so it is hard to see how they can fairly be said to have obtained any benefit from the appeal. The fact that this Court has decided that they should not have to pay Mr Marleys costs, and can recover their costs from the estate, can scarcely be characterised as a benefit gained from resisting the appeal: it is a mitigation or removal of a disadvantage which they might have otherwise suffered as a result of resisting the appeal. However, I accept that item (ii) assists the respondents (and their solicitors) in the present context, albeit that it is only of limited value to them. This is because, as they lost, the respondents could be rendered liable for their solicitors disbursements, which could include counsels fees payable pursuant to counsels CFAs, as explained above. While it is true that the respondents solicitors may not choose to pursue the respondents for such disbursements, they would have the right to do so. The CFA entered into with each counsel provides that the solicitors were liable for costs if, inter alia, (i) the appeal [is] dismissed, (ii) the deceased [is] held intestate, (iii) any outcome which has a value equal to a minimum of 1 or (iv) either the opposing party (to include the estate) agrees to pay or the court orders that they pay your costs. The respondents rely on items (iii) and (iv). I do not consider that item (iii) assists the respondents for the same reason that I have given for rejecting the primary case advanced by the respondents in relation to the solicitors CFA in para 17 above. As to item (iv), the submissions of both the insurers and the respondents seem to assume that the word your means the clients, ie the respondents. It may be that the word your should be interpreted as referring to the solicitors, given that the CFA is a contract between the solicitors and counsel, and the Client is a defined term. However, on any view, the word your is inappropriate, and it makes little sense that the recoverability of counsels costs should depend on the recoverability of solicitors costs as opposed to the recoverability of the clients costs. Accordingly, I am prepared to proceed on the basis of the view adopted by both parties, which appears to be quite probably correct. In my judgement, on this basis, item (iv) is satisfied, provided that I adhere to the proposal expressed in para 12 above that the respondents costs in the Supreme Court are paid by the insurers. It is true that that proposal would involve the costs being paid by the insurers rather than the estate, but that is simply a practical short circuiting of an order that (a) the estate pays the costs, (b) the estate be reimbursed by the Solicitor, and (c) the Solicitor be reimbursed by the insurers. In other words, it is because I consider that the estate should pay the respondents costs that I propose that the costs be paid direct by the insurers. Accordingly, subject to the vexed second issue, that of the uplift on counsels fees, the logic of the order proposed in para 12 above when applied to the costs in the Supreme Court would be that (i) it applies to counsels fees in the Supreme Court, but (ii) it only applies to the solicitors disbursements in connection with the appeal to the Supreme Court, but not to the other costs of the solicitors. That leaves the second issue, namely whether counsels fees should include the 100% uplift agreed in their CFAs. The parties are rightly agreed that the court has a discretion in this connection see rule 46(1) of the Supreme Court Rules 2009. I am prepared to accept the respondents submission that it would usually be inappropriate not to allow the lawyers who have acted for successful clients under a CFA an uplift (and normally, I expect, it would be the agreed uplift). However, this case is a very long way indeed from being normal. Counsels lay clients in this case have not been successful; far from it: the respondents have lost the appeal. In those circumstances, it can be said with real force that their counsel are lucky to be getting anything. In my opinion, it would be quite inappropriate if any costs order resulted in the unsuccessful respondents counsel receiving a success fee, or, to put it another way, if any costs order resulted in any party, whether the respondents solicitors, the respondents or the insurers, having to pay a success fee to the unsuccessful respondents counsel. On the very unusual facts of this case, reflecting the order I would make as set out in para 12 above, I would be prepared to include counsels base fees in the scope of any order against the insurers, but I would not be prepared to include any uplift for counsel. However, it seems to me that, if we were to allow the respondents to recover their counsels base fees from the insurers, the 100% uplift may very well either be recoverable from the respondents or from the solicitors (and if it could be recovered from the solicitors, it may very well be that they could recover the uplift from the insurers as disbursements). As I have indicated, it would, in my view, be quite wrong to permit this. Accordingly, I consider that, unless both the respondents counsel are prepared to waive their success fees, it would be right to depart from the order which I would otherwise propose, so that the respondents would be entitled to recover no costs from the insurers in respect of counsels fees in connection with the Supreme Court appeal. This is, I appreciate, a fairly remarkable course to take, but the unusual facts of this case coupled with the many unsatisfactory aspects of the CFA system under the Access to Justice Act 1999 (as illustrated in our very recent decision in Coventry v Lawrence (No 2) [2014] UKSC 46), appear to me to require and justify an unusual approach in order to achieve a just result. Conclusion In all these circumstances, it seems to me that the right order to make in this case is that (i) the insurers of the Solicitor pay the costs of these proceedings (a) of Mr Marley up to and including the Supreme Court and (b) of the respondents up to and including the appeal to the Court of Appeal, and that (ii) the insurers of the Solicitor pay (a) the respondents solicitors disbursements and (b) provided that both counsel for the respondents disclaim for all purposes the right to recover any uplift to which either of them would otherwise be entitled under their respective CFAs, counsels base fees, in relation to the further appeal to the Supreme Court. If counsel are not prepared to provide such a disclaimer, the order I would make is that the insurers pay the costs of these proceedings (a) of Mr Marley up to and including the Supreme Court, and (b) of the respondents up to and including the appeal to the Court of Appeal, and that there be no order for costs in the Supreme Court, save that the insurers pay the solicitors disbursements. In the usual way, a copy of this judgment was sent in draft to counsel for the parties and for the insurers of the Solicitor, with an invitation to make comments. Save for some helpful typographical corrections and the like, the only response of substance came from the respondents counsel, who formally confirmed that they disclaimed any entitlement which they may have had under their CFAs to uplift or success fees for all purposes. Accordingly, the costs order we make is as set out in the first sentence of para 27 above. Hilary Term [2014] UKSC 2 On appeal from: [2012] EWCA Civ 61 Marley (Appellant) v Rawlings and another JUDGMENT (Respondents) before Lord Neuberger, President Lord Clarke Lord Sumption Lord Carnwath Lord Hodge JUDGMENT GIVEN ON 22 January 2014 Heard on 3 December 2013 Appellant Robert Ham QC Teresa Rosen Peacocke (Instructed by Hugh Cartwright & Amin) Respondents Nicholas Le Poidevin QC Alexander Learmonth (Instructed by Gillan & Co) LORD NEUBERGER (with whom Lord Clarke, Lord Sumption and Lord Carnwath agree) 1. A husband and wife each executed the will which had been prepared for the other owing to an oversight on the part of their solicitor; the question which arises is whether the will of the husband, who died after his wife, is valid. The factual and procedural background The factual background 2. On 17 May 1999, Alfred Rawlings and his wife, Maureen Rawlings, were visited by their solicitor to enable them to execute the wills which he had drafted on their instructions. The wills were short and, except for the differences required to reflect the identity of the maker, they were in identical terms. Each spouse left his or her entire estate to the other, but, if the other had already died or survived the deceased spouse for less than a month, the entire estate was left to the appellant, Terry Marley, who was not related to them but whom they treated as their son. 3. The will prepared for Mr Rawlings was in these terms: This is the last will of me ALFRED THOMAS RAWLINGS of 15A Hillcrest Road Biggin Hill Kent TN16 3UA 1. I REVOKE all former wills and testamentary dispositions. 2. IF MY wife MAUREEN CATHERINE RAWLINGS survives me by a period of one calendar month then I appoint her to be the sole Executrix of this my will and subject to my funeral and testamentary expenses fiscal impositions and all my just debts I leave to her my entire estate. 3. IF MY said wife MAUREEN CATHERINE RAWLINGS fails to survive me by a period of one calendar month I appoint TERRY MICHAEL MARLEY to be the sole Executor of this my will and subject to my funeral and testamentary expenses fiscal impositions and all my just debts I leave to him my entire estate. IN WITNESS whereof I the said ALFRED THOMAS RAWLINGS have hereunto set my hand the day of 1999: . SIGNED by the testator in our presence and then by us in his: Signature, name, address Signature, name, address of attesting solicitor: of attesting secretary: . . 4. The will prepared for Mrs Rawlings was in identical terms save that it was, of course, in her name instead of that of her husband, so that ALFRED THOMAS RAWLINGS was replaced by MAUREEN CATHERINE RAWLINGS, and my [said] wife MAUREEN CATHERINE RAWLINGS, her, his, and testator were respectively replaced by my [said] husband ALFRED THOMAS RAWLINGS, him, her, and testatrix. 5. By an oversight (which he candidly admitted in his witness statement in these proceedings), the solicitor gave each spouse the others draft will, and nobody noticed. Accordingly, Mr Rawlings signed the will meant for Mrs Rawlings, and Mrs Rawlings signed that meant for Mr Rawlings, and the solicitor and his secretary attested the signature on each document, which was then dated 17 May 1999. 6. Mrs Rawlings died in 2003, and her estate passed to her husband without anyone noticing the mistake. However, when Mr Rawlings died in August 2006, the error came to light. 7. At the time of his death, Mr Rawlings was a joint tenant with the appellant of the house in which they both lived, so the tenancy passed to the appellant through the doctrine of survivorship. In addition, there was some 70,000 in Mr Rawlingss estate. 8. The respondents, Terry and Michael Rawlings, Mr and Mrs Rawlings two sons, challenged the validity of the will which Mr Rawlings had signed. If it was valid, the appellant would inherit the 70,000 under its terms, whereas if it was invalid, Mr Rawlings would have died intestate, and the respondents would inherit the 70,000. The procedural background 9. The appellant began probate proceedings, which came before Proudman J. She gave a judgment based on the understanding that his case was that Mr Rawlingss will (the Will) should be rectified so as to record what he had intended, ie so as to contain what was in the will signed by his wife (the wifes Will), and that probate should be granted of the Will as so rectified. 10. The Judge dismissed Mr Marley's claim, on the grounds that (i) the Will did not satisfy the requirements of section 9 of the Wills Act 1837 (the 1837 Act), and (ii) even if it had done so, it was not open to her to rectify the Will under section 20 of the Administration of Justice Act 1982 (the 1982 Act) [2011] 1 WLR 2146. 11. The appellant appealed to the Court of Appeal, who upheld the decision of Proudman J on the first ground, namely that the Will did not satisfy section 9(b) of the 1837 Act (as well on at least one other ground), and they did not find it necessary to consider the second ground [2013] Ch 271. 12. The appellant now appeals to this court. The legal background 13. There are, unsurprisingly, a large number of cases in which courts haves had to consider the validity of a will and the interpretation of a will, and a few cases where rectification of a will has been considered. The formalities have for a long time largely been laid down by the 1837 Act. By contrast, until very recently at any rate, the interpretation and possible rectification of wills was an issue which Parliament was content to leave to the judges. The formal requirements of a will 14. So far as validity is concerned, the centrally important statutory provision, both in general terms and for present purposes, is section 9 of the 1837 Act (section 9). That section has been amended or re enacted on a number of occasions. Most recently, it was re enacted by section 17 of the 1982 Act, which is headed Relaxation of formal requirements for making wills. 15. wills, and it provides as follows: No will shall be valid unless In its current form, section 9 is headed Signing and attestation of (a) it is in writing, and signed by the testator, or by some other person in his presence and by his direction; and (b) it appears that the testator intended by his signature to give effect to the will; and (c) the signature is made or acknowledged by the testator in the presence of two or more witnesses present at the same time; and (d) each witness either (i) attests and signs the will; or (ii) acknowledges his signature, in the presence of the testator (but not necessarily in the presence of any other witness), but no form of attestation shall be necessary. In addition to these statutory requirements, as Chadwick LJ explained in 16. Fuller v Strum [2002] 1 WLR 1097, para 59: It is not, and cannot be, in dispute that, before admitting the document to probate, the judge needed to be satisfied that it did truly represent the testators testamentary intentions; or, to use the traditional phrase, that the testator knew and approved its contents. Nor is it in dispute that, if satisfied that the testator knew and approved of part only of the contents of the document, the judge was bound, before admitting the document to probate, to require that those parts with respect to which he was not so satisfied be struck out. Interpretation of wills 17. Until relatively recently, there were no statutory provisions relating to the proper approach to the interpretation of wills. The interpretation of wills was a matter for the courts, who, as is so often the way, tended (at least until very recently) to approach the issue detached from, and potentially differently from, the approach adopted to the interpretation of other documents. 18. During the past forty years, the House of Lords and Supreme Court have laid down the correct approach to the interpretation, or construction, of commercial contracts in a number of cases starting with Prenn v Simmonds [1971] 1 WLR 1381 and culminating in Rainy Sky SA v Kookmin Bank [2011] 1 WLR 2900. 19. When interpreting a contract, the court is concerned to find the intention of the party or parties, and it does this by identifying the meaning of the relevant words, (a) in the light of (i) the natural and ordinary meaning of those words, (ii) the overall purpose of the document, (iii) any other provisions of the document, (iv) the facts known or assumed by the parties at the time that the document was executed, and (v) common sense, but (b) ignoring subjective evidence of any partys intentions. In this connection, see Prenn at 1384 1386 and Reardon Smith Line Ltd v Yngvar Hansen Tangen [1976] 1 WLR 989, per Lord Wilberforce, Bank of Credit and Commerce International SA v Ali [2002] 1 AC 251, para 8, per Lord Bingham, and the survey of more recent authorities in Rainy Sky, per Lord Clarke at paras 21 30. 20. When it comes to interpreting wills, it seems to me that the approach should be the same. Whether the document in question is a commercial contract or a will, the aim is to identify the intention of the party or parties to the document by interpreting the words used in their documentary, factual and commercial context. As Lord Hoffmann said in Kirin Amgen Inc v Hoechst Marion Roussel Ltd [2005] 1 All ER 667, para 64, No one has ever made an acontextual statement. There is always some context to any utterance, however meagre. To the same effect, Sir Thomas Bingham MR said in Arbuthnott v Fagan [1995] CLC 1396, that [c]ourts will never construe words in a vacuum. 21. Of course, a contract is agreed between a number of parties, whereas a will is made by a single party. However, that distinction is an unconvincing reason for adopting a different approach in principle to interpretation of wills: it is merely one of the contextual circumstances which has to be borne in mind when interpreting the document concerned. Thus, the court takes the same approach to interpretation of unilateral notices as it takes to interpretation of contracts see Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749, per Lord Steyn at 770C 771D, and Lord Hoffmann at 779H 780F. 22. Another example of a unilateral document which is interpreted in the same way as a contract is a patent see the approach adopted by Lord Diplock in Catnic Components Ltd v Hill & Smith Ltd [1982] RPC 183, 243, cited with approval, expanded, and applied in Kirin Amgen at paras 27 32 by Lord Hoffmann. A notice and a patent are both documents intended by its originator to convey information, and so, too, is a will. 23. In my view, at least subject to any statutory provision to the contrary, the approach to the interpretation of contracts as set out in the cases discussed in para 19 above is therefore just as appropriate for wills as it is for other unilateral documents. This may well not be a particularly revolutionary conclusion in the light of the currently understood approach to the interpretation of wills (see eg Theobald on Wills, 17th edition, chapter 15 and the recent supplement supports such an approach as indicated in RSPCA v Shoup [2011] 1 WLR 980 at paras 22 and 31). Indeed, the well known suggestion of James LJ in Boyes v Cook (1880) 14 Ch D 53, 56, that, when interpreting a will, the court should place [itself] in [the testators] arm chair, is consistent with the approach of interpretation by reference to the factual context. 24. However, there is now a highly relevant statutory provision relating to the interpretation of wills, namely section 21 of the 1982 Act (section 21). Section 21 is headed Interpretation of wills general rules as to evidence, and is in the following terms: (1) This section applies to a will in so far as any part of it is meaningless; in so far as the language used in any part of it is a) b) ambiguous on the face of it; c) in so far as evidence, other than evidence of the testators intention, shows that the language used in any part of it is ambiguous in the light of surrounding circumstances. (2) In so far as this section applies to a will extrinsic evidence, including evidence of the testators intention, may be admitted to assist in its interpretation. 25. In my view, section 21(1) confirms that a will should be interpreted in the same way as a contract, a notice or a patent, namely as summarised in para 19 above. In particular, section 21(1)(c) shows that evidence is admissible when construing a will, and that that includes the surrounding circumstances. However, section 21(2) goes rather further. It indicates that, if one or more of the three requirements set out in section 21(1) is satisfied, then direct evidence of the testators intention is admissible, in order to interpret the will in question. 26. Accordingly, as I see it, save where section 21(1) applies, a will is to be interpreted in the same way as any other document, but, in addition, in relation to a will, or a provision in a will, to which section 21(1) applies, it is possible to assist its interpretation by reference to evidence of the testators actual intention (eg by reference to what he told the drafter of the will, or another person, or by what was in any notes he made or earlier drafts of the will which he may have approved or caused to be prepared). Rectification of wills 27. Rectification is a form of relief which involves correcting a written instrument which, by a mistake in verbal expression, does not accurately reflect the [parties] true agreement The Nai Genova [1984] 1 Lloyds Rep 353, 359. It is available not only to correct a bilateral or multilateral arrangement, such as a contract, but also a unilateral document, such as a settlement see In re Butlins Settlement Trusts [1976] Ch 251. However, it has always been assumed that the courts had no such power to rectify a will see eg Harter v Harter (1873) LR 3 P&D 11 per Hannen P, and In re Reynette James decd [1976] 1 WLR 161, per Templeman J. 28. As at present advised, I would none the less have been minded to hold that it was, as a matter of common law, open to a judge to rectify a will in the same way as any other document: no convincing reason for the absence of such a power has been advanced. However, it is unnecessary to consider that point further, as Parliament has legislated on the topic, in section 20 of the 1982 Act (section 20). Section 20 is headed Rectification, and subsection (1) provides as follows: If a court is satisfied that a will is so expressed that it fails to carry out the testator's intentions, in consequence (a) of a clerical error; or (b) of a failure to understand his instructions, it may order that the will shall be rectified so as to carry out his intentions. Section 20(2) provides that, save with the courts permission, no application for rectification under subsection (1) can be made more than six months after the grant of probate. Section 20(3) protects executors who distribute in accordance with the terms of a will before it is rectified after the six month period referred to in subsection (2). Mr Ham QC, for the appellant, realistically accepted that it would be inappropriate for the court to hold that it had wider powers to rectify a will than those which were conferred by section 20. Given that Parliament decided to confer a limited power of rectification at a time when there was clear authority that the court had no inherent power to rectify, it would be wrong for any court to hold, at least in the absence of a compelling reason, that it actually had an inherent power which was wider than that which the legislature conferred. The issues on this appeal The appellant rested his case on three different contentions. The first was that Mr Rawlingss Will, properly interpreted, should be read, in effect, as if it was the document signed by his wife on 17 May 1999. The second contention was that the extent of Mr Rawlingss knowledge and approval of the contents of the Will was such that it could be validated, albeit with deletions. The third contention was that the Will should be rectified so as to accord with Mr Rawlingss intentions. I shall consider those contentions in turn. Although Mr Ham primarily based his contention that the Will was valid on the ground of rectification (which was the sole basis on which the case was considered in the courts below), he accepted that the interpretation argument ought to be considered first, and the deletions argument second. The appellants contention on interpretation The argument that the Will, properly interpreted, is valid and effective is based on two propositions. The first is that the Will can be read together with the wifes Will, given that it is clear from the face of the two documents that they were signed on the same date, by a cohabiting husband and wife, and were in very similar terms and in the same style, and had the same witnesses. While not mutual wills (ie separate wills entered into pursuant to an agreement between the two testators as to the terms of their wills), they were clearly closely related, and therefore each could properly be looked at when interpreting the other. The second proposition is that, when one looks at the two documents, it is obvious what has happened, and in particular it is obvious that Mr Rawlings intended the Will to be in the form of the wifes Will. Accordingly, runs the appellants case, that is how the Will should be interpreted and read. For the respondents, Mr Le Poidevin QC realistically does not challenge the basis of this argument, namely that the two documents can be read together, and that, on that basis, it is clear what happened and what was intended by Mr Rawlings. However, he contends that this exercise is not one of interpretation at all, but one of rectification. This contention raises a point of some potential importance and difficulty. In Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896, 912H 913E, Lord Hoffmann set out the principles which the court should apply when interpreting documents in five propositions. Most of the content of that passage is unexceptionable, although, in one or two places, the language in which the propositions are expressed may be a little extravagant; thus, the words absolutely anything in his second proposition required some qualification from Lord Hoffmann in Bank of Credit and Commerce, para 39. However, the second sentence of Lord Hoffmanns fifth proposition in Investors Compensation is controversial. That sentence reads, so far as relevant, if one would nevertheless conclude from the background that something must have gone wrong with the language, the law does not require judges to attribute to the parties an intention which they plainly could not have had. Lord Hoffmann took that approach a little further in Chartbrook Ltd v Persimmon Homes Ltd [2009] 1 AC 1101, paras 21 25. Having observed that the exercise of interpretation involves decid[ing] what a reasonable person would have understood the parties to have meant by using the language which they did and referring to the correction of mistakes by construction, he said this: [T]here is not, so to speak, a limit to the amount of red ink or verbal rearrangement or correction which the court is allowed. All that is required is that it should be clear that something has gone wrong with the language and that it should be clear what a reasonable person would have understood the parties to have meant. In a forcefully expressed article, Construction and Rectification after Chartbrook [2010] CLJ 253, Sir Richard Buxton has suggested that Lord Hoffmanns approach to interpretation in these two cases is inconsistent with previously established principles. Lewison on The Interpretation of Contracts (fifth ed (2011), para 9.03, footnote 67, in an illuminating chapter dealing with mistakes) suggests that Sir Richard has made out a powerful case for the conclusion that the difference between construction and rectification has reduced almost to vanishing point, if Lord Hoffmanns analysis is correct. At first sight, it might seem to be a rather dry question whether a particular approach is one of interpretation or rectification. However, it is by no means simply an academic issue of categorisation. If it is a question of interpretation, then the document in question has, and has always had, the meaning and effect as determined by the court, and that is the end of the matter. On the other hand, if it is a question of rectification, then the document, as rectified, has a different meaning from that which it appears to have on its face, and the court would have jurisdiction to refuse rectification or to grant it on terms (eg if there had been delay, change of position, or third party reliance). This point is made good in relation to wills by the provisions of section 20(2) and (3). In my judgment, unless it is necessary to decide this difficult point, we should not do so on this appeal. Interpretation was not the basis upon which the courts below decided this case and it was not the ground upon which Mr Ham primarily relied. Furthermore, and no doubt because of those points, only limited argument was directed to the issue of whether the issue was one of interpretation or of rectification. For the reasons developed below, I consider that this appeal succeeds on the ground of rectification, so I shall proceed on the basis that it fails on interpretation. It should be added that Mr Ham also relied on section 21(2). I do not think that it can take his case any further, although it would enable him to rely on Mr Rawlingss subjective intention, because his argument is still one based on interpretation. This point was made in In re Williams decd [1985] 1 WLR 905, 911G H, where Nicholls J seems to have taken an orthodox view of interpretation. He said that if, however liberal may be the approach of the court, the meaning is one which the word or phrase cannot bear, I do not see how the court can declare that meaning to be the meaning of the word or phrase, and varying or contradicting the language used, would amount to re writing, which is to be achieved, if at all, under the rectification provisions in section 20. The appellants contention on deletions The appellants case under this head rests on two propositions. The first is that, in order to be a valid will, the testator must have known and approved of its contents see Fuller quoted in para 16 above. There is a rebuttable presumption that the testator knew and approved the contents of a regularly executed will with unexceptional provisions. However, that presumption may be rebutted by evidence of the circumstances in which the will was prepared or executed. It can also be rebutted where the will is so worded as to cast doubt on whether the testator can have known or approved of its contents. In the present case, the Will, as literally interpreted, plainly did not represent Mr Rawlingss intentions: accordingly, he cannot have known or approved of its contents, as it stood. The second proposition invoked in the present connection is that, where the testator did not know or approve of only part of a will, that part can be notionally excised by the court, with the remainder being valid and admitted to probate as described in the last sentence quoted from Fuller in para 16 above. Examples of such cases are cited in Theobald, op cit, para 3 028. On this basis, Mr Ham ingeniously argued that the Will can be validated by deleting (i) the opening sentence, (ii) clause 2, (iii) the first phrase of clause 3, and (iv) the reference to Mrs Rawlings at the end of the Will. If this were permissible, it would simply leave the Will as stating that the signatory, Mr Rawlings, revokes his previous wills and leaves his entire estate to the appellant. In my view, this argument must be rejected. The most typical case where only part of a will is rejected on the ground that it was not known and approved by the testator, is where that part is self contained eg a particular clause or subclause. One such example is in In the Goods of Oswald (1874) LR 3 P&D 162, 164, per Sir James Hannen P. However, it is also true that, in some cases, a simple word or expression can be deleted if shewn to have been inserted by mistake per Jeune J in In the Goods of Boehm [1891] P 247, 250. However, it is quite inappropriate to invoke this principle in order to justify selecting phrases and provisions for deletion from a will intended to be signed by someone else, to enable the will, effectively by happenstance, to comply with the testators intentions. I note that Sir James Hannen P and Sir Gorell Barnes P took the same view in, respectively, In the Goods of Hunt (1875) LR 3 P&D 250, at 252, and In re Meyer [1908] P 353, 354. Further, as Jeune J pointed out in Boehm at 251, there is obvious difficulty [in] rejecting words where their rejection alters the sense of those which remain. The appellants proposed exercise in deletion summarised in para 45 above would involve converting what is a simple and beneficial principle of severance into what is almost a word game with haphazard outcomes. That is well illustrated by the fact that, in this case, the suggested deletions from the Will only achieve the intended result because Mrs Rawlings pre deceased her husband, because clause 2 is deleted: therefore, if Mr Rawlings had pre deceased his wife, this argument would not work. valid will by making the deletions suggested on behalf of the appellant. The appellants contention on rectification: introduction The principal ground upon which the appellant contended that the Will should be held to be valid was that it should be rectified pursuant to section 20, so that it had the effect which Mr Rawlings intended, namely that it essentially stated what was in the wifes Will. As I see it, three possible objections may be raised to this contention. The first is that the correction which needs to be made to validate the Will is I would accordingly reject the argument that the Will can be treated as a too extreme to amount to rectification. The second is that section 20 only applies to a will, and, because the Will, as executed, does not satisfy section 9 and/or because it was not executed with Mr Rawlingss knowledge and approval of its contents, it was not a will, and therefore section 20 cannot be invoked. The third argument is that the rectification cannot be justified under either para (a) or para (b) of section 20(1). I shall consider those arguments in turn. The appellants contention on rectification: is it rectification? The first argument did not really figure in the reasoning of the courts below or, unless it was impliedly subsumed in the third argument, in Mr Le Poidevins submissions. Either way, without calling into question the third argument for the moment, I consider that the first argument should be rejected. The fact that it can be said that the claimed correction would effectively involve transposing the whole text of the wifes Will into the Will does not prevent it from being rectification of each of the Wills. As a general proposition, there may be force in the point that the greater the extent of the correction sought, the steeper the task for a claimant who is seeking rectification. However, I can see no reason in principle why a wholesale correction should be ruled out as a permissible exercise of the courts power to rectify, as a matter of principle. On the contrary: to impose such a restriction on the power of rectification would be unprincipled and it would also lead to uncertainty. Subject to the other two points, the present circumstances seem to give rise to a classic claim for rectification. As Black LJ, who gave the leading judgment in the Court of Appeal, observed in para 7, [t]here can be no doubt as to what Mr and Mrs Rawlings wanted to achieve when they made their wills and that was that [the appellant] should have the entirety of their estate and that [the respondents] should have nothing (subject, of course, to the survivor enjoying the entirety of their property until his or her death). Thus, there is certainty as to what Mr Rawlings wanted, and there is certainty as to how he would have expressed himself (as there can be no doubt that he would have signed the will prepared for him if he had appreciated the mistake). Accordingly, this is a very clear case for rectification subject always to the two other points raised by the respondents. The appellants contention on rectification: is the document a will? That brings me to Mr Le Poidevins second argument, which impressed both Proudman J and the Court of Appeal. Black LJ, with whom Sir John Thomas P and Kitchin LJ agreed, considered that the Will was not a will for the purposes of section 20, because (i) (at least arguably) it failed to satisfy section 9(a), (ii) it failed to satisfy section 9(b), and (iii) it was not made with the knowledge and approval of Mr Rawlings; and that therefore it could not be rectified. As already indicated in para 43 above, I accept that, on the basis that it must be interpreted at face value, the Will was plainly not executed by Mr Rawlings with his full knowledge and approval. However, I have been persuaded by Mr Ham that it did not fall foul of section 9(a) or (b). While it is clear, even on a cursory reading of the Will, that something has gone seriously wrong, it is unchallengeable that Mr Rawlings signed it, and that he did so, both on the face of the document, and as a matter of fact, with the intention of it being his last will and testament. Thus, whatever else may be said about the document, it is, on its face (and was in fact according to the evidence), unambiguously intended to be a formal will, and it was, on its face (and was in fact according to the evidence), signed by Mr Rawlings, in the presence of two witnesses, on the basis that it was indeed his will. It is important to bear in mind that section 9 is concerned with formalities. The fact that it is pretty clear from the provisions which it contains that a will may well face problems in terms of interpretation or even validity does not mean that it cannot satisfy the formality requirements. In that connection, it is worth referring to what Lord Wilberforce said in In re Reschs Will Trusts [1969] 1 AC 514, 547E, where (approving what had been said by Luxmoore J in In re Hawksleys Settlement [1934] Ch 384, 395 396) he discussed the difference between the function of the court when considering whether to admit a will to probate and the function of the court if it subsequently interprets the will. As he explained, [t]he fact that a document has been admitted to probate does not prevent a court of construction from coming to the conclusion that this document has no operative effect. It is true that the Will purports in its opening words to be the will of Mrs Rawlings, but there is no doubt that it cannot be hers, as she did not sign it; as it was Mr Rawlings who signed it, it can only have been his will, and it is he who is claimed in these proceedings to be the testator for the purposes of section 9. Accordingly, section 9(a) appears to me to be satisfied. It is true that the Will does not make sense, at least if taken at face value, but that is a matter for a court of construction, as Lord Wilberforce explained. There can be no doubt, however, from the face of the Will (as well as from the evidence) that it was Mr Rawlingss intention at the time he signed the Will that it should have effect, and so it seems to me that section 9(b) was also satisfied in this case. Notwithstanding the fact that the contents of the Will, unless rectified, did not satisfy the requirement that they had the full knowledge and approval of Mr Rawlings, and even if the Court of Appeal had been right in their view that the Will did not satisfy the requirements of section 9(b) or (possibly) section 9(a), I consider that it would still be open for the appellant to invoke section 20. In other words, it does not appear to me that a document has to satisfy the formal requirements of section 9, or of having the testators knowledge and approval, before it can be treated as a will which is capable of being rectified pursuant to section 20. Black LJ said at para 39 that the logical place to start indeed, it seems to me the only place to start is with the question of the formal validity of the will, and, only if it was formally valid would it be open to the court to consider whether to rectify it. In terms of academic linguistic logic, I see the force of that point, but it appears to me to be wrong for a number of reasons. First, the approach adopted by the Court of Appeal takes away much of the beneficial value of section 20. If it could not be invoked to rectify a document which was currently formally invalid into a formally valid will, that would cut down its operation for no apparently sensible reason. Secondly, it seems to me to be equally logical, but plainly more consistent with the evident purpose of the amendments made to the law of wills by sections 17 (which contains the new section 9) and 21 of the 1982 Act, to deal with the validity and rectification issues together, at least in a case such as this, where the two issues are so closely related. Thirdly, the observation of Lord Wilberforce, quoted in para 58 above, demonstrates that a document which subsequently turns out to be invalid as a will can be, and no doubt frequently is, admitted to probate. Thus, even in the context of an entirely traditional approach, there is no objection to treating a document which purports to be a will as a will, even though it may subsequently turn out to be invalid. Fourthly, while it would be wrong to express this as an exclusive definition (although it may be), it appears to me that the reference to a will in section 20 means any document which is on its face bona fide intended to be a will, and is not to be limited to a will which complies with the formalities. Indeed, the opening words of section 9 itself seem to use the word will to include a purported will which does not comply with the requirements of section 9(a) to (d). It provides that no will shall be valid unless it so complies, which clearly carries with it the irresistible implication that a document that does not so comply is none the less a will for the purposes of the section, but not a valid will. Even if that were not right, as a matter of statutory interpretation I can see no reason why the word will in section 20(1) could not be read as meaning a document which, once it is rectified, is a valid will. After all, rectification operates retrospectively see eg per Lord Sterndale MR and Warrington LJ in Craddock Brothers v Hunt [1923] 2 Ch 136, 151 and 160. Fifthly, in another area of the law where formalities are required for validity, land contracts, rectification was permitted even where it had had the effect of converting an ineffective (albeit not an invalid) contract into an enforceable contract: see Domb v Isoz [1980] Ch 548, 559A C per Buckley LJ, with whose reasoning Bridge and Templeman LJJ agreed. (That case was concerned with section 40 of the Law of Property Act 1925, which has now been replaced by section 2(1) of the Law of Property (Miscellaneous Provisions) Act 1989, which, in subsection (4) specifically envisages a contract which does not comply with subsection (1) being rectified so that it does.) The appellants contention on rectification: is it a clerical error? The final issue raised by the appellants rectification claim is whether it is within the ambit of section 20(1). It is not suggested that the claim falls within para (b), a failure to understand [the testators] instructions, but Mr Ham argued that it is within para (a), a clerical error. There is no doubt that there was an error. The question is whether it can be said to be clerical. Proudman J concluded that it could not, and the Court of Appeal did not determine the point. It is clear that, owing to the solicitors error in muddling the two draft wills, the contents of the Will except for three signatures and details of the witnesses, that is the opening words, the three operative clauses and the declaration at the end, were wrongly included in the document signed by Mr Rawlings, as they were intended for Mrs Rawlingss will. Accordingly, if they are to comply with Mr Rawlingss intention, they should be replaced by the equivalent provisions of the wifes Will. The question is whether this can properly be achieved under section 20(1)(a). The meaning and ambit of section 20(1)(a) has been considered in a number of cases at first instance, which are helpfully discussed in Hodge on Rectification (first ed (2010), paras 7 37 to 7 46). Those cases, like the present case, require one to consider what sort of error constitutes a clerical error for the purposes of section 20(1)(a). However none of those cases involves the sort of error which arose in this case, although they do provide some insights into the problem raised here. The best judicial summary of the effect of the cases so far decided on section 20(1)(a) was given by Blackburne J in Bell v Georgiou [2002] EWHC 1080 (Ch) (quoted in para 7 42 of Hodge op cit): The essence of the matter is that a clerical error occurs when someone, who may be the testator himself, or his solicitor, or a clerk or a typist, writes something which he did not intend to insert or omits something which he intended to insert. The remedy is only available if it can be established not only that the will fails to carry out the testators instructions but also what those instructions were. If, as a result of a slip of the pen or mistyping, a solicitor (or a clerk or indeed the testator himself) inserts the wrong word, figure or name into a clause of a will, and it is clear what word, figure or name the testator had intended, that would undoubtedly be a clerical error which could be rectified under section 20(1)(a). It is hard to see why there should be a different outcome where the mistake is, say, the insertion of a wrong clause because the solicitor cut and pasted a different provision from that which he intended. Equally, if the solicitor had cut and pasted a series of clauses from a different standard form from that which he had intended, I do not see why that should not give rise to a right to rectify under section 20(1)(a), provided of course the testators intention was clear. Accordingly, the notion that a wholesale replacement of the provisions of a will is permissible under section 20(1)(a) is demonstrated by the fact that it is difficult both as a matter in principle, and also in practice, to see where the line should otherwise be drawn. However, Mr Le Poidevin contended that, even if a slip of the pen, a mistyping, or a failure to cut and paste correctly, which extend to virtually the whole of the document, can all be characterised as clerical errors, giving the testator the wrong will is a mistake of a rather different character, which cannot naturally be referred to as a clerical error. I accept that the expression clerical error can have a narrow meaning, which would be limited to mistakes involved in copying or writing out a document, and would not include a mistake of the type that occurred in this case. However, the expression is not one with a precise or well established, let alone a technical, meaning. The expression also can carry a wider meaning, namely a mistake arising out of office work of a relatively routine nature, such as preparing, filing, sending, organising the execution of, a document (save, possibly, to the extent that the activity involves some special expertise). Those are activities which are properly be described as clerical, and a mistake in connection with those activities, such as wrongly filing a document or putting the wrong document in an envelope, can properly be called a clerical error. For present purposes, of course, clerical error is an expression which has to be interpreted in its context, and, in particular on the assumption that section 20 is intended to represent a rational and coherent basis for rectifying wills. While I appreciate that there is an argument for saying that it does nothing to discourage carelessness, it seems to me that the expression clerical error in section 20(1)(a) should be given a wide, rather than a narrow, meaning. First, rectification of other documents (including unilateral documents) is not limited to cases of clerical error, however wide a meaning that expression is given. Accordingly, given that there is no apparent reason for a different rule for wills, it would appear appropriate that the grounds for rectification is as wide for wills as the words of section 20(1) can properly allow. Secondly, there is no apparent limit on the applicability of section 20(1)(b), which supports the notion that section 20(1)(a) should not be treated as being of limited application. However, section 20(1)(b) also has a potential limiting effect on the ambit of section 20(1)(a), in the sense that section 20(1)(a) should not be given a meaning which significantly overlaps with, let alone subsumes, that of section 20(1)(b). Thirdly, sections 17 to 21 of the 1982 Act are, as I see it, all aimed at making the law on wills more flexible and rendering it easier to validate or save a will than previously. Section 17, which re enacts section 9, is concerned with the relaxation of formalities (see para 14 above); sections 18 and 19 introduce greater flexibility in relation to the effect of the testators marriage and death of his issue; section 20 introduces rectification for the first time for wills, and section 21 permits the testators subjective intention to be taken into account for the first time. The whole thrust of the provisions is therefore in favour of a broad interpretation of a provision such as section 20(1)(a). Fourthly, I consider that the law would be somewhat incoherent if subtle distinctions led to very different results in cases where the ultimate nature of the mistake is the same. If a solicitor is drafting two wills, and accidentally cuts and pastes the contents of Bs draft will onto what he thinks is As draft will, and hands it to A, who then executes it as his will, that will would be rectifiable under section 20(1)(a), as the solicitors mistake would, on any view, be a clerical error see paras 72 and 73 above. On the other hand, if the solicitor accidentally gives Bs will to A to execute, and A executes it, that would not, on the respondents case, be a clerical error and therefore rectification would not be available. While I accept that fine distinctions can often lead to different outcomes where one is near the limits of the scope of some statutory provisions, a distinction of this sort seems to me to be capricious or arbitrary. The position is essentially the same in the two cases. In each case, it was because his solicitor accidentally handed A a document which contained Bs will rather than As will, that A executed Bs will thinking that it was his will. In each case, the reason that the will which A executed did not represent his intentions was a silly mistake by the solicitor in the mechanics of faithfully carrying out his instructions. In neither case did the mistake involve the solicitor misunderstanding or mischaracterising the testators intention or instructions, or making any error of law or other expertise, so the error may fairly be characterised as clerical and there is no question of trespassing into section 20(1)(b) territory. As explained in para 75 above, the term clerical error can, as a matter of ordinary language, quite properly encompass the error involved in this case. There was an error, and it can be fairly characterised as clerical, because it arose in connection with office work of a routine nature. Accordingly, given that the present type of case can, as a matter of ordinary language, be said to involve a clerical error, it seems to me to follow that it is susceptible to rectification. I accept that the error in this case is not within the narrower meaning of clerical error, as is reflected by the approach to the expression summarised by Blackburne J in Bell as representing the effect of the first instance authorities. However, for the reasons given in paras 75 82 above, I have concluded that, the expression can, and, in the context of section 20(1)(a) should, be given its wider meaning, which covers the mistake made in this case. For completeness, I should make two further points. First, in the course of argument, we were taken to parts of the Law Reform Committees 19th Report (Interpretation of Wills) Cmnd 5301 (1973). It seems clear that much of Part IV of the 1982 Act stems from the 1973 Report. In my view, however, the Report does not help, because, while it gives an example of a clerical error, it does not spell out the intended limits of the expression. Further, it seems that, in enacting Part IV of the 1982 Act, Parliament did not give effect to the recommendations of the Report in their entirety. Secondly, during our deliberations, we wondered what Scots law would make of the problem thrown up by this appeal. In that connection, it is instructive to read Lord Hodges judgment. As frequently happens, the law north and south of the border each appear to have something to learn from the other, and to involve slightly different ways of arriving at the same outcome. Conclusion I would therefore allow this appeal, and hold that the Will should be rectified so that it contains the typed parts of the will signed by the late Mrs Rawlings in place of the typed parts of the will signed by Mr Rawlings. I agree and confine myself to some observations on how Scots law LORD HODGE might have dealt with the problem if it were the governing law. The Law Reform (Miscellaneous Provisions) (Scotland) Act 1985 introduced the remedy of rectification of legal documents into Scots law. The 1985 Act implemented the recommendations of the Scottish Law Commissions report on rectification of contractual and other documents (Scot Law Com no. 79), which was published in 1983 shortly after the introduction of the rectification of wills into English law by section 20 of the Administration of Justice Act 1982. Section 8(6) of the 1985 Act excludes from the scope of the statutory remedy any document of a testamentary nature. The reason for the exclusion was a postponement of a policy decision rather than a rejection of the policy of extending rectification to such documents. The Commission had concluded (report para 3.11) that a policy decision on the rectification of such documents should be made in the context of a review of the law of succession when problems and policies relating to the interpretation of wills had been resolved after due consultation. That work began in 1986 but has taken a long time to bear fruit. The Commissions consultation did not disclose good reasons for denying the remedy of rectification to testamentary documents. In 1990 the Commission recommended in its report on succession (Scot Law Com no. 124) that the remedy be extended to such documents. The Commission repeated that recommendation in its 2009 report on succession (Scot Law Com no.215) and set out a draft statutory provision in section 27 of the draft Bill appended to the report. It proposed to confine the remedy to the rectification of a will prepared by someone other than the testator because of the very great difficulties in obtaining evidence to satisfy the court of the need to rectify a home made will. Until 1985 the only remedy for defective expression which Scots law provided was the rather cumbersome device of partial reduction of the document and a declarator of the terms which were to be treated as having always had effect. This remedy was available for both multilateral and unilateral documents. I have not found any case in which the remedy was applied to a will; but the case law is sparse. As this court has not been addressed on the issue of Scots law, my views do not have the benefit of counsels researches, and must be treated accordingly. I see no reason in principle why the remedy of partial reduction and declarator should not be available to cure defective expression in a will. In Hudson v St John 1977 SC 255 Lord Maxwell used the remedy to correct errors in an irrevocable inter vivos deed of trust. A trust of that nature may have attributes similar to a will, and in particular beneficiaries who are not parties to the document. In Scots law the remedy of partial reduction and declarator is not confined to errors of expression caused by the person who prepared the document. In the leading Scottish case on reduction as a method of correcting defective expression, Anderson v Lambie 1954 SC (HL) 43, Lord Reid stated (at 59) that the court could remedy an error on the part of the professional who instructed the preparation of a document as well as an error by the person who prepared it. He thought that the phrase clerical error, which had been used in the case law, did not prevent the remedy from being available where a solicitor who had two old contracts gave his clerk the wrong one to copy as the style for a new contract. That is a circumstance not far removed from the facts in this appeal. In this case both the testators intention and the solicitors mistake are clear. I see no reason why in Scots law there would not be a remedy of partial reduction and declarator or, in principle, a rectification if the Scottish Law Commissions proposals are enacted.

This appeal related to wills made by a Mr and Mrs Rawlings. They each intended to make wills leaving their respective estates to the other, and, if the other had already died, to the appellant, Mr Marley. Owing to an oversight by their solicitor (the Solicitor), Mr Rawlings signed the will meant for Mrs Rawlings, and Mrs Rawlings signed the will meant for Mr Rawlings. The Supreme Court concluded that each will was nonetheless valid (see [2014] UKSC 2), contrary to the conclusions reached by the High Court and the Court of Appeal. As a result, the appellant inherited the estate of Mr Rawlings which was in the region of 70,000. If the will had been invalid, the respondents would have inherited the estate. The question which now arises is how the costs of these proceedings should be borne. The appellant contends that this was ordinary hostile litigation, and the respondents should pay the appellants costs in all three courts. The Solicitors insurers (the Insurers) have made submissions in support of the appellants case. The respondents contend that all parties costs should come out of the estate, or, in the alternative, should be paid by the Solicitor. The respondents solicitors and counsel acted on a traditional basis in the High Court and the Court of Appeal, but in the Supreme Court were instructed on conditional fee agreements (CFAs), sometimes called no win, no fee arrangements. In a judgment given by Lord Neuberger, the Supreme Court unanimously decides that the Insurers should pay the costs of both parties in the High Court and Court of Appeal. In relation to the costs in the Supreme Court, the Insurers should pay the appellants costs, the respondents solicitors disbursements, and, the respondents two counsels fees, conditional on the respondents counsel disclaiming any entitlement to their success fees under their CFA. The position disregarding the CFAs If there had been no negligence on the part of the Solicitor, it would have been difficult to decide what order to make as between Mr Marley and the respondents. Where there is an unsuccessful challenge to the validity of a will, when the challenge is a reasonable one and based on an error which occurred in the execution of the will, the court often orders all parties costs to come out of the estate. On the other hand, there is considerable force in Mr Marleys argument that, although these proceedings involved a reasonable dispute over the validity of a will, it was ultimately hostile litigation to which the usual rule of loser pays should apply [6].This would be especially true given the small size of the estate, because an order that costs were paid out of the estate would deprive Mr Marley of any benefit from the litigation [7]. However, this is not a case where it could possibly be right to ignore the position of the Solicitor [8]. The problem in this case arose as a result of the Solicitors negligence, and the Insurers, on behalf of the Solicitor, had required Mr Marley to bring proceedings to seek to have the will the upheld. [9]. The appellant has a clear claim in tort against the Solicitor, who would therefore be required, in the event that costs were ordered to be paid out of the estate, to reconstitute the estate [11]. As the Insurers have underwritten the liability of the Solicitor, the right order to make in relation to the costs of both parties in the High Court and the Court of Appeal, and of the appellants in the Supreme Court, would be that the Insurers pay all those costs [12 13]. The respondents costs in the Supreme Court The position in relation to the respondents costs in the Supreme Court is complicated by the fact that their solicitors and two counsel were all instructed on CFAs. The solicitors are, in the light of the terms of their CFA, only entitled to recover their disbursements, so that must be the limit of the Insurers liability so far as the respondents solicitors costs in the Supreme Court are concerned [18]. As to each counsels fees, their CFAs would appear to entitle them each to their full fee if the respondents costs are paid out of the estate. In the light of the fact that the respondents lost, the Court considers that it would be quite wrong if their counsel recovered any success fee from the Insurers: they should be limited to their base fees [24]. But if the order simply recorded that only counsels base fees were to be paid by the Insurers, their 100% success fees may be recoverable from the respondents or else from the solicitors (and, if so, from the Insurers as disbursements) [25]. Accordingly, the Insurers will only be liable to pay the respondents counsels fees in the Supreme Court if both counsel disclaim their entitlement to a success fee [26]. Counsel subsequently confirmed that they disclaimed any entitlement which they may have under the CFAs to a success fee [28].

Supplies of education to students in the United Kingdom are exempt from value added tax (VAT) if they are made by a college of a university within the meaning of Note 1(b) to Item 1, Group 6 of the Value Added Tax Act 1994 (the VAT Act). This appeal concerns the criteria to be applied in determining whether an undertaking is such a college. In these proceedings the appellant (SEL) contends that its supplies of education to students in the United Kingdom were and are exempt from VAT because it was and remains a college of Middlesex University (MU). For this reason, it appealed against assessments raised by the Commissioners for Her Majestys Revenue and Customs (the Commissioners) in respect of its accounting periods 1 May 2009 to 29 February 2012. It has also appealed against subsequent assessments, but these have been stayed by agreement with the Commissioners pending the outcome of this appeal. SELs appeal was allowed by the First tier Tribunal (the FTT, Judge John Clark and Dr Michael James MBE) by its decision dated 28 February 2014: TC/2011/022521. The Commissioners appealed that decision to the Upper Tribunal (the UT, Judge Colin Bishopp and Judge Guy Brannan) which allowed the appeal by its decision dated 25 April 2016: [2016] UKUT 193 (TCC); [2016] STC 1837. SEL then appealed to the Court of Appeal. The appeal was heard over three days in June 2017. The Court of Appeal dismissed the appeal by its decision dated 28 July 2017 (Patten, Black and Sales LJJ): [2017] EWCA Civ 1116; [2017] STC 2166. SEL now appeals to this court. In broad terms the appeal gives rise to the following questions: first, whether the Court of Appeal adopted the correct approach in determining whether SEL was a college of MU for the purposes of Note 1(b) to Item 1, Group 6 of the VAT Act; and secondly, if it did not, whether, upon application of the correct test, SEL was such a college. The relevant facts SEL is an English company and a subsidiary of SAE Technology Group BV, a Dutch company. Both are part of the SAE group of companies which trades around the world under the name SAE Institute (SAEI). SAE is an acronym for School of Audio Engineering and SAEI has for many years provided education in audio and digital media technologies, and as a result has gained a significant reputation in that field. SAEI has conducted business in the United Kingdom since 1985, first through SAE Educational Trust Ltd (SETL) and, since 1 May 2009, through SEL. From that date SEL has taught in the United Kingdom the higher education courses to which I shall come in a moment. MU is a United Kingdom university within the meaning of the VAT Act, Group 6, Item 1, Note 1(b). It has never had any financial interest in any SAE group company, and no MU employee has ever been a director of any such company. Similarly, no SAE group company has had a representative on MUs governing body or has played any direct part in its governance. Nevertheless, the relationship between MU and SAEI has been very close and is a reflection of a series of agreements addressing the nature of that relationship, the validation by MU of SAEI programmes of education and the accreditation of SAE group companies. As early as 1998 SAEI and MU agreed a memorandum of cooperation which provided for the teaching by SAE Technology College of Bachelor of Arts (BA) degree courses in Recording and Multimedia Arts at specified campuses. These courses were described as validated collaborative programmes of MU. Overall responsibility for the courses was retained by MU but their day to day direction was undertaken by employees of an SAEI group company. Over the years that followed this memorandum was superseded by other memoranda of cooperation and the validation of BA degree courses in Multimedia, Interactive Animation and Games Programming. In 2009 another memorandum of cooperation was agreed which consolidated into a single framework the programmes which had by that time been validated by earlier memoranda. It set out the terms on which MU agreed to validate specified courses and how entry requirements were to be set and satisfied. In short, admission requirements would be set by SAEI but conform to MUs general requirements; students who met those requirements would be selected by SAEI using procedures agreed by MU; selected students would be enrolled by SAEI for one of MUs qualifications; enrolled students would be considered members of MU and taught by SAEI subject to MUs quality safeguards; and in due course those enrolled students would be assessed by SAEI subject to MUs regulations and, if they completed their programmes of study successfully, would be awarded a degree by MU. From time to time SAEI and MU also entered into what have been termed partnership agreements which made more general provision relating to the relationship between them. The first such agreement, entered into in 2003, recorded the intention of the parties to work together to develop undergraduate and taught graduate degree courses at SAEI centres in the United Kingdom and around the world. It was intended at that time that within five years MU would consider an application from SAEI for MU accreditation which would allow SAEI to validate for itself courses leading to the award of undergraduate degrees by MU. In 2009 SAEI and MU entered into another partnership agreement which recorded that within 12 months MU would consider an application from SAEI for such accreditation. To this end, it was agreed that senior executives of MU and SAEI would meet three times a year to develop their collaboration on undergraduate and postgraduate courses of study. In September 2010 SAEI was accredited by MU to validate, provide, monitor and review courses of study leading to MU BA degrees in Recording Arts, Film Making, Digital Film Animation and Multimedia articles The instrument of accreditation permitted SAEI to conduct MU graduation ceremonies but graduating students could also attend a graduation ceremony at MU if they so wished. A memorandum of cooperation confirmed the independent status of SAEI and allowed it to retain its own governing council and academic board and responsibility for its own financial management. In July 2011 MU and SAEI entered into what was described as a Special Associate College Agreement (SACA). This recorded their successful cooperation over 14 years in the provision of courses of education, including courses leading to MU undergraduate and graduate awards. It provided, by clause 2: As a further extension of that special relationship in the context of higher education in the United Kingdom, the University and SAE Education, UK (hereinafter referred to as SAE UK) have agreed a long term partnership, which is detailed below. This builds upon the existing status of SAE UK as a Middlesex University Associate College. The legal framework The origin of the common system for the collection of VAT in the European Union lies in the First Council Directive 67/227/EC of 11 April 1967 on the harmonisation of legislation of member states concerning turnover taxes (the First Directive). This recognised the interest of the common market in achieving a harmonisation of legislation concerning turnover taxes so as to eliminate, so far as possible, factors which might distort competition, and it provided, in article 2, that the principle of the common system involved the application to goods and services of a general tax on consumption which was proportional to their price. The Second Council Directive 67/228/EEC, also of 11 April 1967, on the harmonisation of legislation concerning turnover taxes and procedures for application of the common system of VAT (the Second Directive) made further provision for harmonisation and recorded in its fifth recital that the introduction of zero rates of tax gave rise to difficulties and it was highly desirable to limit strictly the number of exemptions. However, article 10 of the Second Directive exempted from VAT in any member state the supply of goods to places outside the territory of that state and the provision of services relating to such goods or goods in transit, and, of particular relevance to this appeal, also provided that, subject to consultation, any member state could determine the other exemptions it considered necessary. The First and Second Directives were followed by the Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonization of the laws of member states relating to turnover taxes (the Sixth Directive). This recited the need for a common system of exemptions and, in Title X, article 13, part A, made express provision for the exemption of certain activities in the public interest, including the supply of services related to education. Article 13A(1) provided, so far as material: A. Exemptions for certain activities in the public interest 1. Without prejudice to other Community provisions, member states shall exempt the following under conditions which they shall lay down for the purpose of ensuring the correct and straightforward application of such exemptions and of preventing any possible evasion, avoidance or abuse: (i) childrens or young peoples education, school or university education, vocational training or retraining, including the supply of services and of goods closely related thereto, provided by bodies governed by public law having such as their aim or by other organizations defined by the member state concerned as having similar objects. Article 13A(2) contained examples of the conditions member states might impose when recognising other organisations having similar objects to those of public bodies. It provided, so far as material: 2(a) Member states may make the granting to bodies other than those governed by public law of each exemption provided for in (1) (i) of this article subject in each individual case to one or more of the following conditions: they shall not systematically aim to make a profit, but any profits nevertheless arising shall not be distributed, but shall be assigned to the continuance or improvement of the services supplied, exemption of the services concerned shall not be likely to create distortions of competition such as to place at a disadvantage commercial enterprises liable to value added tax. In due course the Sixth Directive was itself recast by Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (the Principal VAT Directive). Recital (4) of the Principal VAT Directive reiterates the objective of the legislative scheme as being to harmonise legislation on turnover taxes and eliminate, so far as possible, factors which may distort competition. It reads: The attainment of the objective of establishing an internal market presupposes the application in member states of legislation on turnover taxes that does not distort conditions of competition or hinder the free movement of goods and services. It is therefore necessary to achieve such harmonisation of legislation on turnover taxes by means of a system of value added tax (VAT), such as will eliminate, as far as possible, factors which may distort conditions of competition, whether at national or Community level. Title IX sets out various exemptions, including the exemption concerning the provision of university education first introduced in the Sixth Directive in the manner I have described. Article 131 of Chapter 1 of Title IX provides: The exemptions provided for in Chapters 2 to 9 shall apply without prejudice to other Community provisions and in accordance with conditions which the member states shall lay down for the purposes of ensuring the correct and straightforward application of those exemptions and of preventing any possible evasion, avoidance or abuse. Chapter 2 of Title IX contains Exemptions for certain activities in the public interest. Article 132(1)(i) of this Chapter says that member states shall exempt: the provision of childrens or young peoples education, school or university education, vocational training or retraining, including the supply of services and of goods closely related thereto, by bodies governed by public law having such as their aim or by other organisations recognised by the member state concerned as having similar objects. Article 133 contains examples of the conditions member states may impose when recognising other organisations having similar objects to those of public bodies. It echoes article 13(2) of the Sixth Directive and reads, so far as relevant: Member states may make the granting to bodies other than those governed by public law of each exemption provided for in points (i) of article 132(1) subject in each individual case to one or more of the following conditions: (a) the bodies in question must not systematically aim to make a profit, and any surpluses nevertheless arising must not be distributed, but must be assigned to the continuance or improvement of the services supplied; (d) the exemptions must not be likely to cause distortion of competition to the disadvantage of commercial enterprises subject to VAT. These provisions of the Principal VAT Directive and the general scheme of which they form a part were considered by the Court of Justice of the European Union (the CJEU) in Minister Finansw v MDDP sp z oo Akademia Biznesu, sp komandytowa, (Case C 319/12) [2014] STC 699. MDDP, a Polish undertaking, carried on the business of organising for profit specialised training courses and applied to the Polish Minister for Finance for confirmation that it was entitled to deduct input VAT levied on the goods and services it needed for its business. The Minister refused to provide that confirmation and so MDDP issued proceedings in which it claimed that its activities should not be exempt from VAT but subject to it, and that Polish law, which provided that such activities were exempt, was incompatible with the Principal VAT Directive. A reference by the Polish court to the CJEU asked, in substance, whether articles 132(1), and 133 of the Principal VAT Directive must be interpreted as meaning that educational services provided for commercial purposes not governed by public law were precluded from exemption from VAT. In addressing that question, the CJEU explained (at paras 33 to 36) that articles 132(1)(i) and 133 do not preclude educational services provided for commercial purposes by bodies not governed by public law from being exempt from VAT; however, under article 132(1)(i), supplies of educational services are exempt only if they are provided by bodies governed by public law or by other organisations recognised by the member state concerned as having similar objects. It followed that the exemption in issue, which applied generally to all supplies of educational services, whatever the aim pursued by the private organisations providing those services, was incompatible with article 132(1)(i). The CJEU continued (at paras 37 to 38) that, in so far as article 132(1)(i) does not specify the conditions or procedures for defining those similar objects, it is for the national law of each member state to lay down rules, and that member states have a discretion in that respect; and it is for the national courts to examine whether member states, in imposing such conditions, have observed the limits of their discretion in applying the principles of EU law, in particular the principle of equal treatment, which, in the field of VAT, takes the form of the principle of fiscal neutrality. The answer to the referred question necessarily followed, as the CJEU explained at para 39: point (i) of article 132(1), article 133 and article 134, of the VAT Directive must be interpreted as meaning that they do not preclude educational services provided for commercial purposes by bodies not governed by public law from being exempt from VAT. However, point (i) of article 132(1) of that directive precludes a general exemption of all supplies of educational services, without consideration of the objects pursued by non public organisations providing those services. VAT was introduced to the United Kingdom by the Finance Act 1972 (the FA 1972) which implemented the First and Second Council Directives. Parliament chose to exercise the wide discretion then conferred upon member states by exempting the various supplies set out in Schedule 5. These included as Group 6, Item 1: The provision of education if it is provided by a school or university; or it is of a kind provided by a school or university (a) (b) and is provided otherwise than for profit. Note (3) defined university as including a university college and the college, school or hall of a university. The United Kingdom has given effect to the Principal VAT Directive (and before it, the Sixth Directive) in the VAT Act. Exempt supplies are set out in Schedule 9. Items 1 and 4 of Group 6 of Schedule 9 read, so far as material: 1. The provision by an eligible body of (a) education; 4. The supply of any goods or services (other than examination services) which are closely related to a supply of a description falling within item 1 (the principal supply) by or to the eligible body making the principal supply provided (a) the goods or services are for the direct use of the pupil, student or trainee (as the case may be) receiving the principal supply; and (b) where the supply is to the eligible body making the principal supply, it is made by another eligible body. Note (1) then explains that: (1) For the purposes of this Group an eligible body is (b) a United Kingdom university, and any college, institution, school or hall of such a university; (e) a body which is precluded from distributing and does (i) not distribute any profit it makes; and (ii) applies any profits made from supplies of a description with this Group to the continuance or improvement of such supplies; It can be seen that Parliament has not expressly limited the bodies it has recognised in Note 1(b) to those which do not make a profit. It will also be noted that the phrase any college, institution, school or hall of such a university in Note (1)(b) is similar to the phrase college, school or hall of a university in Schedule 5, Group 6, Item 1, Note (3) of the FA 1972, and this is a matter to which I must return. Domestic authorities The provisions of the VAT Act to which I have referred have been considered in a number of decisions of the courts in this jurisdiction. For the purposes of this appeal, I must refer to three of them for they form an important part of the background to the decisions of the FTT, the UT and the Court of Appeal in this case. The first is that of Burton J in Customs and Excise Comrs v School of Finance and Management (London) Ltd [2001] STC 1690. The School of Finance and Management London (SFM) delivered a number of courses of study for the University of Lincolnshire and Humberside and claimed to be exempt from VAT as a college of a university under Note (1)(b) to Group 6 of Schedule 9 to the VAT Act. The tribunal found that SFMs fundamental purpose was to provide education services leading to the award of a university degree and that it was fairly to be regarded as a college of the university. On appeal, the Commissioners contended first, that, having regard to the provisions of the Sixth Directive set out above, Note (1)(b) only encompassed bodies governed by public law having education as their aim; secondly, that SFM was not a college; and thirdly, if SFM was a college, it was not a college of a United Kingdom university. The judge rejected all three contentions and dismissed the appeal. So far as the third was concerned, the parties put forward a non exhaustive list of 15 relevant factors termed the SFM factors which fell to be considered. For their part, the Commissioners relied on eight factors, the first four of which were said to be determinative: (i) the presence of a foundation document establishing the college as part of the university by way of a constitutional link; (ii) an absence of independence on the part of the college; (iii) the financial dependence of the college on the university or the financial interdependence of each on the other; (iv) the absence of distributable profit; (v) an entitlement to public funding; (vi) the presence of permanent links between the college and the university; (vii) the physical proximity of the college to the university; and (viii) an obligation on the college to offer a minimum number of university places. SFM accepted that all of these factors were arguably relevant but argued that none was determinative. It contended that of more relevance were seven further factors: (ix) the possession by the college of a similar purpose to that of the university; (x) the provision by the college of courses leading to a degree from the university; (xi) the supervision by the university of the colleges courses and the regulation by the university of the quality standards of those courses; (xii) the admission of students of the college as members of the university with university identity cards; (xiii) the submission of students of the college to disciplinary regulations and requirements of the university; (xiv) the entitlement of successful students of the college to receive a degree from the university at a university degree ceremony; and (xv) the description of the college as an associate/affiliated college of the university. The Commissioners accepted these were relevant (subject to their submissions as to the determinative nature of the first four of their own features). Shortly after Burton J handed down his judgment, the Court of Appeal gave judgment in Customs and Excise Comrs v University of Leicester Students Union [2001] EWCA Civ 1972; [2002] STC 147. Here the issue was whether supplies of drinks by the students union of Leicester University were exempt from VAT. The Commissioners took the view that they were not. By an interim decision on a preliminary issue, the Manchester VAT tribunal held that the union was an integral part of the university and so an eligible body, and it was entitled to an exemption in respect of any supplies which were closely related to the supply of education within the meaning of Item 4 of Group 6 of Schedule 9. On appeal, the judge considered that the real question was whether the union was an integral part of the university such that it could properly be said that the soft drinks sold in the union were sold by the university. He held it could not, and that, in consequence, the tribunal ought to have held that the soft drinks were not supplied by the eligible body making the principal supply of education within the meaning of Item 4. On further appeal to the Court of Appeal, the substantial argument was, as before the judge, whether the union was an integral part of the university and as such an eligible body. The Court of Appeal found it was not. It was not encompassed by the phrase a United Kingdom university for it was an entity distinct from the university. Further, it was not an institution of such a university within the meaning of Note 1(b) because it supplied no education. Peter Gibson LJ, with whom Morland J agreed, explained at para 36: 36. Note 1(b) on its face refers to five entities, a United Kingdom University, and four entities of such a University. The conjunction connecting a United Kingdom University with the four other entities is the word and, not including. Further, the four other entities are alternative to each other as can be seen by the conjunction or between school and hall. On the ordinary and natural meaning of the words used in note 1(b) I would construe them as covering both a university itself and, in those cases where there are separate entities which are nevertheless parts of that university, any of those separate entities. Furthermore, the common characteristic of all those four entities in my opinion is that they are suppliers of education. Arden LJ considered that the students union did promote an object of utility within the university community and was potentially an institution of the university. But the question for her was whether the term institution had a narrower meaning in the context of Note (1)(b). She answered that question in two steps, the first of which was to consider the meaning of the expression of such a university: 55. Note 1(b) uses the expression the university and of the university. In the latter expression the word of cannot mean belong to or form part of since the former is not the case with regard to Oxbridge colleges (which are presumably intended to be covered) and the latter is included within the expression the university. In other words, the expression of the university seems to me to denote a state of affairs whereby the university is in some sense an umbrella organisation which provides education and related services in conjunction with other bodies or wherein the body in question has some form of status under the University statutes, for example to present candidates for matriculation. The second was to consider the meaning of the word institution in this context. Here she did not agree that a college, institution, school or hall of a university had itself to be a supplier of education. For her the key question was whether the body in question had academic links with the university and so recognition from the university, and this the union did not have. The third decision is that of the Court of Appeal in Finance and Business Training Ltd v Revenue and Customs Comrs [2016] EWCA Civ 7; [2016] STC 2190. Here the question was whether the taxpayer, FBT, a profit making enterprise, was exempt from VAT in respect of the supply of courses leading to the grant of degrees by the University of Wales. The FTT decided it was not. Although it supplied a university education, FBT also had to show that it was an integrated part of the university, and that it had failed to do. In reaching this conclusion, the FTT applied the SFM factors and attached particular weight to the nature of the relationship between FBT and the university, which it found to be short term, commercial and held out as being one of partnership. An appeal to the UT was dismissed. On further appeal to the Court of Appeal, it was argued by FBT, among other things, that Parliament had failed to set conditions for the education exemption in accordance with EU law and, in particular, the principles of legal certainty and fiscal neutrality. Arden LJ (with whom Gloster and Sharp LJJ agreed), rejected that submission. She explained that it was up to each member state to set the conditions under which bodies not governed by public law would be entitled to the education exemption, and how it did so was a matter for national law. It was therefore open to Parliament to decide which non public bodies would qualify, and it had done so in Note (1)(b). However, Parliament was constrained by article 132(1)(i) as to which bodies it could include. She continued, at paras 55 to 57: 55. In those circumstances, it has taken the view that the body must be one which provides education in like manner to a body governed by public law, that is, there must be a public interest element in its work. It has decided to draw the line, in the case of universities to those colleges, halls and schools which are integrated into universities and which are therefore imbued with its objects. 56. For FBT to show that its exclusion from this group is a breach of the fiscal neutrality principle would require it to say that it belongs to the same class as those institutions which meet the integration test in Note (1)(b). Neither of the tribunals made any findings that would support that conclusion and this court is hearing an appeal only on a point of law. 57. FBT contends that Parliament has not met the requirements of the EU law principle of legal certainty by setting out criteria which are to apply to determine when non public bodies seek to enjoy the education exemption. The criteria have to be neutral, abstract and defined in advance. In my judgment, this is achieved by the combination of note (1)(b) and the SFM factors. These factors are neutral, they are abstract and defined in advance. By applying them, it is possible to know what supplies and which suppliers qualify for exemption. The decisions below (a) The First tier Tribunal The FTT carried out a multi factorial assessment in order to determine whether SEL was sufficiently integrated with MU to justify the conclusion that it was a college of the university and for that purpose considered each of the 15 SFM factors. In carrying out that exercise, it conducted an extensive analysis of the evidence. Having done so, it was satisfied that SEL, as the United Kingdom arm of SAEI, had since May 2009 been an Associate College of MU, and a college of MU within the meaning of Note 1(b). It set out the factors which it considered carried the greatest weight at para 293: (1) Status of Associated College, combined from September 2010 with status of Accredited Institution. (2) Long term links between SAE Institute and MU. Similar purposes to those of a university, namely the provision of higher education of a university standard. (3) Courses leading to a degree from MU, such courses being supervised by MU, which regulated their quality standards. (4) Conferment of degrees by MU, received by SAE students at MU degree ceremonies. (b) The Upper Tribunal On further appeal by the Commissioners, the UT adopted an approach which differed in some respects from that of the FTT. It explained that it is necessary to adopt a multi step evaluation of the relationship between the undertaking and the university. It must first be determined whether they had a common understanding of their relationship. If they did, the next question is whether they had a common understanding that the undertaking was a college of the university. If the answer to that question is also in the affirmative, it must be considered whether the relationship was sufficiently close to justify the conclusion that the undertaking was indeed a college of the university within the meaning of Note 1(b), and it is here that the SFM factors are relevant. If the relationship was sufficiently close, the final step is to consider whether the undertaking supplied university level education. It was the UTs view that the FTT failed properly to take the first and second steps, and had it done so it would have found that they should be answered in the negative. It therefore allowed the Commissioners appeal. (c) The Court of Appeal The approach of the Court of Appeal differed from those of both the FTT and the UT. Patten LJ (with whom Black and Sales LJJ agreed) explained that the test of whether an undertaking is part of a university is considerably more hard edged than earlier decisions had suggested. It is necessary for the relevant undertaking to show that it is a part of the university in the sense of being a constituent part with all the rights and privileges for its students which that entails. Inherent in this test is the need to demonstrate some legal relationship which establishes and confirms the status of the undertaking. It matters not whether this relationship is embodied in a formal foundation or constitutional document or whether it is based upon some other binding agreement. But it has to be one which in a real sense makes the undertaking a constituent part of the university. It had not been established that SEL was a part of MU in a constitutional or structural sense and so the appeal fell to be dismissed. Note 1(b) the correct approach The starting point for a consideration of the proper interpretation of Note 1(b) to Schedule 9, Group 6, Item 1 of the VAT Act must be articles 131 to 133 of the Principal VAT Directive. These make clear that member states must exempt transactions involving the provision of, among other things, university education by bodies governed by public law having such education as their aim. Member states must also exempt transactions by other organisations which they have recognised as having similar objects to those governed by public law and which also have education as their aim. In accordance with well established principles, the terms used in articles 131 to 133 to specify exemptions from VAT must be construed strictly. Nevertheless, they must also be construed in a manner which is consistent with the objectives which underpin them and not in such a way as to deprive them of their intended effects. The general objective of the exemptions in articles 133 to 135 is, I think, readily apparent and, so far as university education is concerned, it is to ensure that access to the higher educational services this necessarily involves is not hindered by the increased costs that would result if those services were subject to VAT. This was explained by the CJEU in Commission of the European Communities v Federal Republic of Germany (Case C 287/00) [2002] ECR I 5811; [2002] STC 982, a decision which concerned article 13A(1)(i) of the Sixth Directive, which, as we have seen, is an exemption drawn in very similar terms to those of article 132(1)(i) of the Principal VAT Directive. The court said this about the purpose of the Article in considering the concept of services which are closely related to university education, and whether research activities fell within its scope: 47. Nevertheless, that concept does not require an especially strict interpretation since the exemption of the supply of services closely related to university education is designed to ensure that access to the benefits of such education is not hindered by the increased costs of providing it that would follow if it, or the supply of services and of goods closely related to it, were subject to VAT (see, by analogy, in relation to article 13(A)(1)(b) of the Sixth Directive, Commission v France (Case C 76/99) [2001] ECR I 249, para 23). However, if the undertaking by State universities of research projects for consideration is made subject to VAT, that does not have the effect of increasing the cost of university education. That does not mean that all organisations which provide educational services may be granted a tax exemption by member states, however. The services must be provided by organisations governed by public law or by other organisations recognised by the member state in issue as having similar objects. It is essentially for this combination of reasons that the CJEU held in MDDP that articles 132(1) and 133 of the Principal VAT Directive do not preclude the inclusion of educational services provided by private organisations for commercial purposes in the tax exemption but do preclude a general exemption of all supplies of educational services without consideration of the objects pursued by the private organisations which are providing them. In implementing articles 132 and 133 of the Principal VAT Directive, the United Kingdom and other member states therefore had a discretion in deciding which bodies, other than those governed by public law, they would recognise as providing educational services, including university education. But that discretion was limited in the manner I have described, and whilst it was open to member states to exempt educational services provided by private bodies for commercial purposes, they could not do so without consideration of the objects those bodies pursued. It was also limited in other important respects for, in implementing the Directive, member states were required to respect the general principles of law that form part of the order of the European Union, including the principles of fiscal neutrality, legal certainty and proportionality. As I have explained, Parliament has chosen to exercise the discretion conferred upon it by exempting from VAT, so far as relevant, the provision of education by a United Kingdom university and any college of such a university. The term university is not defined in the VAT Act. However, the conditions under which a body in the United Kingdom is entitled to use the word university in its title are regulated by statute. Over 100 bodies are presently entitled to call themselves a university and they vary greatly in character. A small but nonetheless significant number of them are private and run for profit. Some, such as the University of London, are collegiate federal universities in which, for many purposes, the constituent colleges operate on an independent basis. Others, such as the University of Oxford and the University of Cambridge, comprise a kind of federal system of colleges, schools and faculties, in which the colleges are generally financially independent and self governing. These are just examples. Other universities also comprise or have close relationships with colleges, including the University of the Arts London, the University of the Highlands and Islands and Queens University of Belfast. The connection between each of these universities and its respective colleges has its own particular character and is a reflection of the history of the institutions involved. It is against the background of the range of possible arrangements between universities and their colleges that the meaning of the phrase college of such a university in Note (1)(b) falls to be determined. In my judgment the following points are material. First, for its activities to fall within the scope of Item 1(a), any college of a university, as an eligible body, must provide education. Secondly and as we have seen, the supply of educational services is exempt only if it is provided by bodies governed by public law or by other bodies recognised by the member state as having similar objects. Parliament has exercised the discretion conferred upon it by recognising for this purpose the provision of education by universities, and it has done so regardless of whether those universities are charities or are private and run for profit. If, as I believe, the phrase a United Kingdom university in Note 1(b) therefore extends to private universities which are run for profit then in my opinion the same must apply to the expression any college of such a university. There can be no justification for treating the scope of the two expressions differently in this respect. Further, were it otherwise, private colleges of a university providing higher education services would be obliged to charge VAT on their supplies, rendering them more expensive and so restricting the opportunities of students to access them, contrary to the purpose of the exemption. Thirdly, there is in my view nothing in Note 1(b) or the broader context which would justify limiting the scope of the phrase any college of such a university to colleges which are a constituent part of a university in a constitutional or structural sense. To the contrary, if satisfaction of such a constituent part test were required, it would effectively exclude commercial providers such as SEL from the exemption for it is a test they will rarely if ever be able to satisfy. That, so it seems to me, would be contrary to the principle of fiscal neutrality in the light of the decision by Parliament not to limit the bodies it has recognised in Note 1(b) to those which do not make a profit. Fourthly, the United Kingdom must be taken to have recognised that a college (or, for that matter, a school or hall) of a university within the meaning of Note 1(b) has similar objects to those of a university which is governed by public law and which provides education to young people. In my opinion this consideration focuses attention on the objects of the body in issue, the nature of the educational services that it supplies, and how integrated those services are with those of the university. Put another way, it is necessary to examine the characteristics of those educational services and the context in which they are delivered rather than the precise nature of the legal and constitutional relationship between the body that provides them and its university. Of course, I recognise that if a college is a part of a university in a constitutional or structural sense then it is overwhelmingly likely that any educational services it provides will reflect this relationship and so the college may properly be regarded as a college of that university within the meaning of Note 1(b). But it does not follow that the converse is also true. It is entirely possible that an independent and private body which conducts its business of providing education for profit will be so integrated with a university that its educational activities and objects are indistinguishable from those of a college which is constitutionally part of the university or, indeed, from those of the university itself. All of these matters point to the conclusion that the integration test explained in the SFM case and adopted by the FTT is essentially correct. However, I think the factors to be considered do need some refinement. As I have said, the presence of a foundation or constitutional document or some other legal relationship establishing the college as a constituent part of the university in a constitutional or structural sense will be sufficient to prove that it is a college of the university within the meaning of Note 1(b), save in an exceptional case. But that is not a necessary condition. In assessing whether a body is a college of a university the following five questions are also likely to be highly relevant: (i) whether they have a common understanding that the body is a college of the university; (ii) whether the body can enrol or matriculate students as students of the university; (iii) whether those students are generally treated as students of the university during the course of their period of study; (iv) whether the body provides courses of study which are approved by the university; and (v) whether the body can in due course present its students for examination for a degree from the university. If a body can establish the presence of each of these five features, focused as they are on the objects of the body, the relationship between the students of the body and the university and the degree to which the activities of the body are recognised by and integrated with the university, then in my judgment it is highly likely to be a college of the university within the meaning of Note 1(b). Again, I do not suggest that there may not be other cases where the degree of integration of the activities of the body and the university is such that it may properly be described as a college of the university in light of some or most of the factors I have identified and other aspects of the services it supplies. All will depend on the particular circumstances of the case. However, some of the SFM factors are, in my view, likely to be of much less assistance in light of the matters to which I have referred. Here I have in mind: (i) whether the body is independent from the university; (ii) whether the body is financially dependent on the university, or whether the body and the university are financially interdependent; (iii) whether the body generates any distributable profit; (iv) whether the body is entitled to public funding; (v) the presence or absence of permanent links between the body and the university; (vi) the degree of physical proximity between the body and the university; and (vii) whether the body has any an obligation to offer a minimum number of university places. I do not suggest that none of these matters will ever have any evidential weight. For example, the duration of the relationship between the body and the university and how long it may be expected to last may have some relevance, if only as part of the background, but these and similar matters are unlikely to be determinative. In my judgment it follows that the reasoning of Peter Gibson LJ in the University of Leicester Students Union case at para 36 (which I have set out at para 34 above) needs some qualification. I accept that the words in those cases where there are separate entities which are nevertheless parts of the university, any of those separate entities in Note 1(b) include a college, institution, school or hall of a university which is separate from the university but which is nevertheless a part of it in a constitutional or structural sense. But, for the reasons I have given, I do not accept that the scope of Note 1(b) is limited to such entities, and if that is what Peter Gibson LJ meant by the use of these words, I respectfully disagree with him. In my view the correct approach was expressed succinctly by Arden LJ in FBT at para 55, which I have recited above. The question is whether the college and the university are so integrated that the entity is imbued with the objects of the university, and that is best answered in the manner I have described. Did the Upper Tribunal and the Court of Appeal fall into error? The UT did not reject the integration approach or question the value of the SFM factors but introduced the sequential test which I have set out at para 39 above. I recognise that if a taxpaying body is a college of a university one would expect to see some recognition of that by the university. I also accept the importance of establishing that the university and the body have a common understanding that the body is a college of the university. But it seems to me that these are matters which are best addressed in the context of and as part of the general assessment of their relationship, the extent to which their activities are integrated and whether they share the same objects. That brings me to the judgment of Patten LJ in the Court of Appeal, with which Black and Sales LJJ agreed. It is carefully reasoned and merits great respect. His analysis began with the FA 1972. He noted, entirely correctly, that it exempted the provision of education by an eligible body and that it defined the term university as including a university college and the college, school or hall of a university. He also observed, again correctly, that at the time this exemption came into effect the relevant EU provisions on exemptions were those contained in article 10 of the Second Directive which, as we have seen, gave each member state a broad discretion as to which exemptions to create beyond the supply of goods to places outside that state, and services relating to such goods or goods in transit. He concluded, and I agree, that the language of item 1 in the FA 1972 must be taken to represent what Parliament considered at that time should constitute the scope of the exemption for the supply of education by a university. Patten LJ turned next to the meaning of the phrase college, school, or hall of a university in the context of United Kingdom universities as they operated in 1972. Here, focusing on the universities of Oxford and Cambridge, he observed that their colleges and private halls, though self governing and legally independent, formed an integral part of the structure of their respective universities and that their members made up the universitys teaching staff and students. Patten LJ also found support for his approach in the provisions of the Education Reform Act 1988 (the 1988 Act) and the Education (Listed Bodies) (England) Order 2010 (the 2010 Order) made under it. The 1988 Act makes it an offence to award a degree that is not a recognised award. Under section 214(2), a recognised award includes an award granted or to be granted by a university which is authorised by Royal Charter or Act of Parliament to grant degrees, and any award granted or to be granted by any body for the time being permitted by a university to act on its behalf. Any such body falls within the definition of a recognised body in section 216(4). Section 216(2) of the 1988 Act requires the Secretary of State to compile and publish by order a list of the names of the bodies which appear to him to fall within section 216(3) which provides, so far as relevant: (3) A body falls within this subsection if it is not a recognised body and it: (b) is a constituent college, school or hall or other institution of a university which is a recognised body. The 2010 Order was made pursuant to section 216(2) and, as Patten LJ observed, it lists, among other bodies, all the colleges and halls of the universities of Oxford, Cambridge, Durham and Queens University Belfast, and the Institutes constituting the School of Advanced Study in the University of London. I would add that the 2010 Order was revoked and replaced by The Education (Listed Bodies) (England) Order 2013 which came into force on 30 December 2013. This expands the list of colleges and halls and includes one college of the University of South Wales and several colleges of the University of the Highlands and Islands. It was notable, Patten LJ continued, that the provisions of section 216(3)(b) were all but identical to those of Schedule 5, Group 6, Item 1 of the FA 1972 in defining what was included in a university, and it was unlikely that the similarity between the provisions was accidental. He recognised that the purpose of the two sets of provisions was very different but thought that both of them were seeking to identify the constituent parts of a university; and further, that the 1988 Act and the 2010 Order provided a useful illustration of how essentially the same statutory language had come to be interpreted and applied, albeit in the regulation of the granting of degrees. Patten LJ turned next to the VAT Act. Here he noted what he termed the stylistic and grammatical differences between Note 1(b) of Schedule 9, Group 6, Item 1 of the VAT Act and the definition of a university in Note (3) of Schedule 5, Group 6, Item 1 of the FA 1972 but he could see nothing in these differences or in the Sixth Directive to justify giving what he thought was essentially the same language a much wider meaning. He was of the view that there was nothing in the EU legislation which compelled member states to cast the scope of the exemption more widely than, in the case of the United Kingdom, it had previously chosen to do. He thought the focus of Note 1(b), and that of Note (3) before it, was on identifying the constituent parts of the university. The phrase of a university was common to both statutes and in his opinion this was determinative of the position. Patten LJ also considered the decisions in SFM, University of Leicester Students Union and FBT. Having done so, he was still of the view that it was necessary for SEL to establish what he understood Peter Gibson LJ to have described in University of Leicester Students Union, namely that it was a part of the university in the sense of being a constituent part with all the rights and privileges for its students and other members which that entailed. In my judgment Patten LJ has fallen into error in the following important respects. First, in focusing on the colleges of Oxford and Cambridge, all of which form a part of the structure of their respective universities, he has failed to take into account the variety of reasonable and foreseeable arrangements between a university and a college. Secondly, the 1988 Act is in my view of no real assistance in construing the provisions of Schedule 9, Group 6 of the VAT Act. The 1988 Act does not purport to implement or give effect to any EU legislation, let alone the Sixth Directive or the Principal VAT Directive. Further and as Patten LJ himself recognised, the purposes of the 1988 Act and the orders made under it are very different from those of the VAT Act. The 1988 Act is concerned with the grant of awards. The relevant provisions of the VAT Act, on the other hand, are concerned with the provision of education. Thirdly, Patten LJ has in my view failed properly to take into account the difference between the provisions of the First and Second Directives, on the one hand, and those of the Sixth Directive and the Principal VAT Directive, on the other, namely the scope and nature of the discretion they respectively confer on member states to exempt supplies of education from VAT. The provisions of the VAT Act are not the same as those of the FA 1972 and, most importantly, must be interpreted in the light of the wording and purpose of the Sixth Directive and now the VAT Directive, the breadth of the discretion conferred on member states by those Directives, and the need for Parliament, in exercising that discretion, to apply the relevant principles of EU law, including the principle of equal treatment. Finally, and for the reasons I have given, the judgment of Peter Gibson LJ in University of Leicester Students Union does not provide any sound support for the conclusion Patten LJ reached. I have therefore come to the conclusion that the Court of Appeal has fallen into error. The correct approach is to ascertain the nature and purpose of the educational activities of the college in issue, and whether those activities are so integrated with those of its university that it may properly be said to have the same objects as that university. That exercise may conveniently be carried out in the manner I have described at paras 47 to 56 above. The application of the correct approach In my judgment the analysis of the evidence carried out by the FTT was careful and comprehensive. It found, among other things, that SEL, as the United Kingdom arm of SAEI, had been an Associate College of MU since May 2009 and that the parties had proceeded on that basis; that the links between SAEI and MU were well established and likely to endure; that most of SELs courses were supervised by MU and their quality was regulated by MU; that SELs purposes were similar to those of MU; that SELs students became students of MU and received degrees from MU; and that the activities of SEL were substantially integrated into those of MU. It identified the factors upon which it particularly relied in the passage I have set out at para 38 above. In my judgment these findings had a sufficient basis in the evidence and there is no proper ground for interfering with them. In allowing the appeal, the UT considered that the FTT failed to distinguish between the activities of SAEI and those of SEL. It found that the various agreements relied upon by SEL were made between SAEI and MU; that SAEI was not a college of MU and SEL had the same status as SAEI; that MU was initially unaware of SELs existence as a corporate entity and so there was no common understanding between them; and that the FTT failed properly to consider what was meant by the term Associate College. In my judgment these are not fair criticisms. In May 2009 SEL stepped into the shoes of SETL and from that point was the entity through which the activities of SAEI were conducted in the United Kingdom. The factual findings of the FTT were sufficient to justify its conclusion that SELs activities were integrated into those of MU and that it shared the objects of MU. In my opinion the FTT was entitled to find that in May 2009 SEL became and thereafter remained a college of MU within the meaning of Schedule 9, Group 6, Item 1, Note (1)(b) of the VAT Act. Conclusion For the reasons I have given, I would allow the appeal.

Supplies of education to students in the United Kingdom are exempt from value added tax (VAT) if they are made by a college of a university within the meaning of Note 1(b) to Item 1, Group 6 of the Value Added Tax Act 1994 (the VAT Act). The appellant (SEL) contends that its supplies of education to students in the United Kingdom were and are exempt from VAT because it was and remains a college of Middlesex University (MU). SEL is a subsidiary of SAE Technology Group BV. Both are part of the SAE group of companies which trades around the world under the name SAE Institute (SAEI). MU is a United Kingdom university within the meaning of the VAT Act, Group 6, Item 1, Note 1(b). It has never had any financial interest in any SAE group company. Nevertheless, the relationship between MU and SAEI has been very close and is a reflection of a series of agreements addressing the nature of that relationship, the validation by MU of SAEI programmes of education and the accreditation of SAE group companies. SEL appealed against assessments raised by the Commissioners for Her Majestys Revenue and Customs (the Commissioners) in respect of its accounting periods 1 May 2009 to 29 February 2012. It has also appealed against subsequent assessments, but these have been stayed by agreement with the Commissioners pending the outcome of this appeal. SELs appeal was allowed by the First tier Tribunal (FTT). The Commissioners appealed that decision to the Upper Tribunal which allowed the appeal. SEL then appealed to the Court of Appeal, this appeal was dismissed. There are two issues for the Supreme Court: first, whether the Court of Appeal adopted the correct approach in determining whether SEL was a college of MU for the purposes of Note 1(b) to Item 1, Group 6 of the VAT Act; and secondly, if it did not, whether, upon application of the correct test, SEL was such a college. The Supreme Court unanimously allows the appeal. Lord Kitchin, with whom the rest of the Court agrees, delivers the judgment. The starting point for a consideration of the proper interpretation of Note 1(b) to Schedule 9, Group 6, Item 1 of the VAT Act must be articles 131 to 133 of the Principal VAT Directive. These make clear that member states must exempt transactions involving the provision of, among other things, university education by bodies governed by public law having such education as their aim. Member states must also exempt transactions by other organisations which they have recognised as having similar objects to those governed by public law and which also have education as their aim [41]. The general objective of the exemptions is to ensure that access to the higher educational services is not hindered by the increased costs that would result if those services were subject to VAT [43]. Parliament has chosen to exercise the discretion conferred upon it by exempting from VAT the provision of education by a United Kingdom university and any college of such a university. The term university is not defined in the VAT Act. However, the conditions under which a body in the United Kingdom is entitled to use the word university in its title are regulated by statute. Over 100 bodies are presently entitled to call themselves a university and they vary greatly in character. A small but nonetheless significant number of them are private and run for profit [46]. It is against the background of the range of possible arrangements between universities and their colleges that the meaning of the phrase college of such a university in Note (1)(b) falls to be determined [47]. In Lord Kitchins judgment the following points are material [47]. First, for its activities to fall within the scope of Item 1(a), any college of a university, as an eligible body, must provide education [48]. Secondly, the supply of educational services is exempt only if it is provided by bodies governed by public law or by other bodies recognised by the member state as having similar objects [49]. Thirdly, there is nothing in Note 1(b) or the broader context which would justify limiting the scope of the phrase any college of such a university to colleges which are a constituent part of a university in a constitutional or structural sense. To the contrary, if satisfaction of such a constituent part test were required, it would effectively exclude commercial providers such as SEL from the exemption for it is a test they will rarely if ever be able to satisfy [50]. Fourthly, it is necessary to examine the characteristics of those educational services and the context in which they are delivered rather than the precise nature of the legal and constitutional relationship between the body that provides them and its university [51]. Lord Kitchin recognises that the presence of a foundation or constitutional document or some other legal relationship establishing the college as a constituent part of the university in a constitutional or structural sense will be sufficient to prove that it is a college of the university within the meaning of Note 1(b), save in an exceptional case. However, that is not a necessary condition. In assessing whether a body is a college of a university the following five questions are also likely to be highly relevant: (i) whether they have a common understanding that the body is a college of the university; (ii) whether the body can enrol or matriculate students as students of the university; (iii) whether those students are generally treated as students of the university during the course of their period of study; (iv) whether the body provides courses of study which are approved by the university; and (v) whether the body can in due course present its students for examination for a degree from the university [53]. If a body can establish the presence of each of these five features, then it is highly likely to be a college of the university within the meaning of Note 1(b). This is not to suggest that that there may not be other cases where the degree of integration of the activities of the body and the university is such that it may properly be described as a college of the university. All will depend on the particular circumstances of the case [54]. Lord Kitchin concludes that the factual findings of the FTT were sufficient to justify its conclusion that SELs activities were integrated into those of MU and that it shared the objects of MU. The FTT was entitled to find that in May 2009 SEL became and thereafter remained a college of MU within the meaning of Schedule 9, Group 6, Item 1, Note (1)(b) of the VAT Act [73].

The liability of employers for deaths caused by mesothelioma has pre occupied courts and legislators over recent years. The present appeals concern claims to pass the burden of this liability on to insurers, made either by employers or in the case of insolvent employers by the personal representatives of former employees using the mechanism of the Third Party (Rights against Insurers) Act 1930. The appeals concern employers liability insurance. This is in contrast with Bolton MBC v Municipal Mutual Insurance Ltd [2006] EWCA Civ 50, [2006] 1 WLR 1492 where public liability insurance was in issue. Employers liability focuses necessarily upon the relevant employment relationships and activities. Public liability relates to any of the insureds relationships and to activities affecting the world at large. Another feature of employers liability is that, under the Employers Liability (Compulsory Insurance) Act 1969 (the ELCIA), it has since 1 January 1972 been compulsory for every employer other than local authorities carrying on any business in Great Britain to insure, and maintain insurance, under one or more approved policies with an authorised insurer or insurers against liability for bodily injury or disease sustained by his employees, and arising out of and in the course of their employment in Great Britain in that business, but except in so far as regulations otherwise provide not including injury or disease suffered or contracted outside Great Britain The appeals arise because the relevant insurers maintain that the employers liability insurances which they issued respond (or, better, could only have responded) to mesothelioma which developed (or, possibly, manifested itself) as a disease during the relevant insurance periods all long past. In contrast, the relevant employers and personal representatives maintain that the insurances respond to mesothelioma which develops and manifests itself later; all that is required, they say, is exposure of the victim during the insurance period to asbestos in circumstances where the law attributes responsibility for the mesothelioma to such exposure. These alternative bases of response (or triggers of liability) have been loosely described as an occurrence (or manifestation) basis and an exposure (or causation) basis. It is in issue whether the ELCIA, after it came into force, mandated any particular basis of response. A secondary issue, arising if the insurances only respond on an occurrence basis, is whether the aetiology of mesothelioma justifies a conclusion that there was during the relevant insurance period an occurrence sufficient to trigger liability under the insurances. Burton J, [2008] EWHC 2692 (QB), concluded that the relevant insurances all responded on an exposure basis. The Court of Appeal, [2010] EWCA Civ 1096, by a majority (Rix and Stanley Burnton LJJ), upheld the judge in relation to some of the insurances (particularly those covering disease contracted during the relevant insurance period); but they concluded that others (particularly those covering disease sustained during the insurance period) responded only on an occurrence or manifestation basis. Smith LJ would have upheld the judges judgment in its entirety. The full judgments in both courts repay study. They have been of great assistance to this court and make it possible to go directly to the heart of the issues. Mesothelioma is a hideous disease that is inevitably fatal. In most cases, indeed possibly in all cases, it is caused by the inhalation of asbestos fibres: Sienkiewicz v Greif (UK) Ltd [2011] UKSC 10, [2011] 2 AC 229, para 1, per Lord Phillips. It is a cancer of the pleura, which are thin linings around the lungs and on the inside of the rib cage. It is usually undetectable until shortly before death. Its unusual features include what Burton J in this case at para 30 described as the unknowability and indescribability of its precise pathogenesis. In particular, it is impossible to know whether any particular inhalation of asbestos (at least any occurring more than ten or so years prior to diagnosability) played any or no part in such development. Because of this unusual feature, the law has developed a special rule. The special rule was the product of judicial innovation in Fairchild v Glenhaven Funeral Services Ltd [2002] UKHL 22; [2003] 1 AC 32 and in Barker v Corus UK Ltd [2006] UKHL 20; [2006] 2 AC 572. It was modified by statutory intervention in the form of the Compensation Act 2006, section 3. Leaving aside exposures occurring within the ten or so years prior to diagnosability, the rule can now be stated as being that when a victim contracts mesothelioma each person who has, in breach of duty, been responsible for exposing the victim to a significant quantity of asbestos dust and thus creating a "material increase in risk" of the victim contracting the disease will be held to be jointly and severally liable in respect of the disease. Burton Js findings in the present case justify certain further propositions, mostly also corresponding with the summary in Lord Phillips judgment in Sienkiewicz (para 19): (i) A significant proportion of those who contract mesothelioma have no record of occupational exposure to asbestos. The likelihood is that (vi) in their case the disease results from inhalation of asbestos dust that is in the environment. There is, however, a possibility that some cases of mesothelioma are "idiopathic", i.e. attributable to an unknown cause other than asbestos. (ii) The more fibres that are inhaled, the greater the risk of contracting mesothelioma. (iii) There is usually a very long period between the exposure to asbestos and the development of the first malignant cell. Typically this can be at least 30 years. (iv) For a lengthy period (perhaps another five years) after the development of the first malignant cell, there remains a possibility of dormancy and reversal, but at a point (Burton J thought a further five years or so before the disease manifested itself, and was thus diagnosable) a process of angiogenesis will occur. This involves the development by malignant cells of their own independent blood supply, so assuring their continuing growth. (v) The mechanism by which asbestos fibres cause mesothelioma is still not fully understood. It is believed that a cell has to go through 6 or 7 genetic mutations before it becomes malignant, and asbestos fibres may have causative effect on each of these. It is also possible that asbestos fibres have a causative effect by inhibiting the activity of natural killer cells that would otherwise destroy a mutating cell before it reaches the stage of becoming malignant. Mesothelioma currently claims about 3000 lives a year in the United Kingdom. This speaks to the common use of asbestos materials up to the 1960s and 1970s. In Annex I to his judgment Rix LJ set out the insuring clauses of the various forms of policy wording in use from time to time. Subject to re ordering to reflect the development of the language, Annex A to this judgment includes the same and some further wording. It can be seen that the Excess policies and the first two MMI policies promise to indemnify the insured employer against liability if at any time during the period of insurance (or of any renewal) any employee shall sustain under the earlier policies personal injury by accident or disease or under the later policies [any] bodily injury or disease in the case of the first Excess policy while engaged in the service of the Employer or in other cases arising out of and in the course of [his] employment by the insured employer. In the case of the Independent policy, the insurer, under the recital, promised to indemnify the employer during the period of insurance or of any renewal. The insuring clause itself contains no express limitation to any period. It promises indemnity against all sums for which the employer shall be liable for damages for such injury or disease if any employee shall sustain bodily injury or disease arising out of and in the course of his employment by the Insured in connection with the Contract specified or type of work described in the Schedule. The third MMI policy and the BAI policies were in more developed form. The former promises indemnity in respect of legal liability for sums payable as compensation for bodily injury or disease (including death resulting from such bodily injury or disease) suffered by any employee when such injury or disease arises out of and in the course of employment by the Insured and is sustained or contracted during the currency of this Policy. The latter promised indemnity against all sums which the Insured may become liable to pay to any Employee . in respect of any claim for injury sustained or disease contracted by such Employee during the period of insurance or any renewal. The insurers party to the present appeals have at all times represented only a small part of the employers liability insurance market. By far the larger part of the market consists of companies who until the late 1960s (when competition rules intervened) operated a tariff system which bound them to adopt a specified policy form and specified rates. Until 1948 tariff insurance was focused on Workmens Compensation Act claims, but in 1948 legislative changes (in particular the abolition by the Law Reform (Personal Injuries) Act 1948 of the doctrine of common employment) made a common law claim for future accruing causes of action much more attractive. It may well have been in anticipation of these changes that the tariff companies introduced a new form of policy in May 1948, still in widespread use today, providing indemnity if any employee shall sustain any personal injury by accident or disease caused during the period of insurance. Under this tariff wording, sustain looks to the occurrence of an accident or development of a disease at any time, while caused makes clear that the trigger to cover is that the accident or disease has been caused during the insurance period. The present insurers were non tariff companies, and have always been free to set their own wordings. From dates after the insurances the subject of this appeal, three of the insurers in fact ceased to use the wordings set out in Annex A, and themselves moved expressly to causation based wordings Excess in about 1976, Independent in the mid 1980s, and BAI in 1983. As a matter of insurance practice, however, until the decision in Bolton in 2006, all these wordings, whether tariff or non tariff and whether using the language caused, sustain or sustained or contracted, paid out on long tail claims (including the mesothelioma claims which became increasingly frequent in the 1980s) by reference to the date(s) of exposure. Where successive employers with different insurers had exposed a particular employee victim to asbestos, liability was in practice apportioned between the employers, and so insurers, broadly according to the extent of exposure for which each employer was responsible. The rival cases Insurers submit that all the wordings in Annex A require the injury or disease to occur during the period of insurance or of any renewal. In the alternative, if the use of the word contracted in the third MMI policy and the BAI policies or the different formulation of the Independent policy leads to any different conclusion in any of such cases, they submit that this leaves unaffected the clear meaning of the Excess and first two MMI policy wordings. The employers and interested employees contend that all these policies are to be understood as operating on an exposure or causation basis. The implications of these alternative interpretations are clear. On insurers primary contention, the policies set out in Annex A would not respond to current mesothelioma claims. It is unlikely that most of them would have responded to many, if any, mesothelioma claims, since it was only in the 1980s that such claims began to emerge to any great extent. Policies written on a causation basis since the dates indicated in paragraph 10 above would also not respond to current mesothelioma claims. Insurers response is that any insurance must be read according to its terms. Until 1 January 1972, when the ELCIA came into force, it was not obligatory for employers to have any form of employers liability insurance. Further, viewed on an occurrence or manifestation basis, the policies would pick up long tail claims arising from exposure occurring at any time in the past. In this connection, it is to be noted that various long tail diseases were well recognised perils from the era of Workmens Compensation legislation before 1948. Instances were scrotal cancer, pneumoconiosis and more specifically (from the time of Merewether and Prices 1930 Report on Effects of Asbestos Dust on the Lungs and Dust Suppression in the Asbestos Industry) asbestosis. All these would only develop over and could manifest themselves after considerable periods of years. Following upon the 1930 report, The Asbestos Industry Regulations 1931 (SI 1931/1140) were introduced to regulate factories handling and processing raw fibre, and in 1969 The Asbestos Regulations 1969 (SI 1969/690) extended this regulation more widely it appears in the light of an appreciation that mesothelioma could result from exposure to small quantities of asbestos dust (see In re T & N Ltd (No 3) [2006] EWHC 1447 (Ch), [2007] 1 All ER 851, para 118). The Court of Appeals conclusions The force of insurers case rests in the use of the word sustain, whether in connection with the phrase personal injury by accident or disease or bodily injury or disease or in the conjunction injury or disease . sustained or contracted or injury sustained or disease contracted. Rix and Stanley Burnton LJJ concluded that the word sustain looked prima facie at the experience of the suffering employee rather than its cause (paras 232 and 343). Insurances responding to injury or disease sustained during the insurance period would not, on this basis, cover mesothelioma sustained long afterwards. Rix LJ had some compunction about the result because of what he (though not Stanley Burnton LJ) felt was a tension with the commercial purpose of employers liability insurance in the extraordinary context of mesothelioma (para 235). Rix LJ would have liked to hold that mesothelioma sufferers sustained sufficient injury on exposure to asbestos to trigger the insurances in force at the date of such exposure, but felt bound by Bolton to conclude the contrary (paras 277 289). However, Rix LJ, though not Stanley Burnton LJ, considered that the particular wording of the Independent insurances did not explicitly require the injury or disease to be sustained during the insurance period, and could be read as covering the sustaining of injury at any time arising out of and in the course of employment during the insurance period (paras 300 and 350). Rix and Stanley Burnton LJJ differed as to the significance of the ELCIA extension provisions included in the Independent wording, the third MMI wording and the second BAI wording, as quoted in Annex A. Rix LJ thought that the ELCIA required employers to insure on a causation basis (paras 184 and 186) although, since he also expressed the view that an insurance arranged and maintained on a sustained basis could comply with the ELCIA, he may perhaps only have meant required in practice. At all events, he held that the ELCIA extension provisions covered liability incurred to the personal representatives of employees on a causation basis, while enabling insurers to recoup themselves so far as possible from the relevant employers in respect of liability they would not otherwise have had to meet (paras 292, 300 and 302). Stanley Burnton LJ did not agree that the ELCIA required causation wording (para 342), but considered that it required insurance to be taken out and maintained in respect of ex employees, or at least those who were or had been employed at any time after the coming into force of ELCIA (para 342; and see Rix LJs comments at paras 305 307). Rix, Smith and Stanley Burnton LJJ were all agreed that, where provision was made for disease contracted, this could and should be construed as introducing cover on a causation basis, even if or though wording such as injury (or disease) sustained could only respond on an occurrence basis. Analysis Annex A sets out the insuring clauses. Insurers case is, as I have said, rooted most strongly in the word sustain, particularly when it is used by itself, rather than in conjunction with a more ambivalent alternative in the phrase sustained or contracted. The natural meaning of the word sustain, taken in isolation and as defined in the Shorter Oxford English Dictionary from an appropriate date (1965, 3rd ed), is, with respect to injury, undergo, experience, have to submit to, or, possibly, to have inflicted upon one, suffer the infliction of. But the insurance cover granted (and no doubt required) extended expressly beyond injury by accident to embrace disease. This was achieved by less natural conjunctions, such as sustain [any] personal injury by accident or disease or sustain [any] bodily injury or disease. Conscious perhaps that the verb sustain does not fit naturally with the concept of disease, some companies (MMI in its third wording and BAI in its first and second wordings) introduced the different verb contracted in the formulations sustained or contracted or injury sustained or disease contracted. This use of contracted with respect to disease is considerably more natural, but is clearly open to an interpretation that it looks back to the initiating or causative factor of the disease, and (whatever the answer on that point) highlights a question whether any substantial difference exists in this connection between such wordings and other wordings referring more awkwardly to the sustaining of personal injury by disease or the sustaining simply of disease. To resolve these questions it is necessary to avoid over concentration on the meaning of single words or phrases viewed in isolation, and to look at the insurance contracts more broadly. As Lord Mustill observed in Charter Reinsurance Co Ltd v Fagan [1977] AC 313, 384, all such words must be set in the landscape of the instrument as a whole and, at p 381, any instinctive response to their meaning must be verified by studying the other terms of the contract, placed in the context of the factual and commercial background of the transaction. The present case has given rise to considerable argument about what constitutes and is admissible as part of the commercial background to the insurances, which may shape their meaning. But in my opinion, considerable insight into the scope, purpose and proper interpretation of each of these insurances is to be gained from a study of its language, read in its entirety. So, for the moment, I concentrate on the assistance to be gained in that connection. A first point, made very clearly below by Rix LJ (para 263), is that the wordings on their face require the course of employment to be contemporaneous with the sustaining of injury. This leaves open what is meant either by sustaining or by injury. Rix LJ thought that the Independent wording could be understood differently in effect, as if it had expressly read: If any person who is under a contract of service or apprenticeship with the Insured shall at any time sustain bodily injury or disease arising out of and in the course of his employment by the Insured during the policy period in connection with the Contract specified or type of work described in the Schedule . That interpretation assumes that sustain in this context equates with the occurrence, rather than causation, of the injury or disease, and only arises for consideration if that assumption is correct. A second point is that the insurance wordings demonstrate a close link between the actual employment undertaken during each insurance period and the premium agreed to be payable for the risks undertaken by insurers in respect of that period. Premium is linked expressly to actual wages, salaries and earnings during the insurance period under the Excess policies, the first MMI wording and the BAI policies. The second and third MMI wordings contemplate that premium may be linked to wages, salaries and earnings, and, to the extent that any inference regarding the general nature and scope of cover under these standard wordings can be drawn from such a link, it must be capable of being drawn whether or not premium was actually so linked in any particular case. As to the Contractors Combined Policy issued by the Independent, it is a probable inference that the estimates which were provided and were to be updated will have included, in respect of the employers liability cover in section 1, wages, salaries and other earnings paid. Finally, the Independent cover is linked to the actual contract or work which the employer is undertaking during the insurance period. These links are in my view significant. True, premium may sometimes be calculated on a rough and ready basis. Minor discrepancies between the premium calculation and the risk may be understandable: see e.g. Ellerbeck Collieries, Ld v Cornhill Insurance Co [1932] 1 KB 401, 418, per Greer LJ (who pointed out that any such discrepancy there was more apparent than real, since workmen not earning wages because off work would not actually be at risk of any fresh accident, even though they would remain susceptible to certification for disablement). Here the position is quite different. Great care is taken in all the policies to tie premium to the actual employment undertaken during the insurance period, and in the case of the Excess, Independent and MMI policies to tie cover to a business, contract or activities described in the schedule. The natural expectation is that premium is measured by reference to actual employment or work during the insurance period because it is the risks attaching to such employment or work which are being undertaken by insurers. At the very least, the drawing of this link makes improbable the contention advanced by some of the insurers that the present insurances were apt to pick up liabilities emerging during the insurance period which could be attributable to employment and activities undertaken and negligent conduct committed at times long past. The number of employees, their employment activities and the risks involved at those times could be very different. The significance which attaches to the employment current during the insurance period is underlined by legal and practitioner texts. As long ago as 1912, MacGillivray on Insurance (1st ed), pp 966 wrote: The nature and scope of the employers business must be clearly defined in the insurance policy, and workmen employed outside the scope of the assureds business as described in the policy will not be covered In the section on Employers Liability Insurance in Stone & Coxs Accident, Fire and Marine Year Book (1957), pp 688 689, the authors stressed the importance of identifying any special hazards, such as signs of careless management or lack of control or careless workmen, and observed: The surveying of Employers Liability risks has probably become more general than formerly. Apart from the question of the possibilities of accident, there is now the serious question of disability due to disease and in particular the disease known as pneumoconiosis. In 1974 MMI produced a Guide to Insurance Officers in Local Government, which it said that it would like to see on the desk of every insurance officer for ready reference at any time; this, after noting that employers liability was almost invariably dealt with by a separate policy and that its importance had been increased by the ELCIA, went on: "7. Premiums are usually based on wages and salaries this is not only a convenient yardstick but is logical since loss of earnings usually represents a substantial part of claims. Rates of premiums vary according to the nature of the work of the labour force, and the claims experience. 8. A feature of employers liability claims is the length of time which often elapses between the date of the accident and the final settlement, and the cost of servicing claims tends to be high. Injury caused at work during the period of insurance even though it may not be diagnosed till years afterwards can be a liability under the policy." I note in parenthesis that 1974 was the year in which MMI changed from a pure sustain form of wording to a form covering bodily injury or disease suffered, when sustained or contracted during the currency of the policy. Yet there is no suggestion in the Guide of any change in substance. It is in this light improbable that the present insurances can or should be read as offering cover in respect of ancient, as opposed to current, employment and activities. But there is a third point. If insurances in the present form only address risks arising from employment during the insurance period, then, on insurers case, there is a potential gap in cover as regards employers breaches of duty towards employees in one period which only lead to injury or disease in another later period. If the employment relationship spans both insurance periods and the employer remains insured with the same insurers in both periods, there may be no problem. The employee is employed at all relevant times and the insurance may be viewed as a single continuing contract. The policy wordings set out in Annex A, with their references to insurance during the period of insurance or during any subsequent renewal period, would support the latter view. But, even in the days of more stable long term employment and insurance relationships, employees could and would move employment or retire, or employers would cease business, or change insurers. On the basis that the insurances only cover risks arising from employment during the insurance period, there would be no cover unless the liability arose from and in the course of and involved injury or disease during the currency of the same employment and the same insurance (including any renewal). Fourthly, on insurers case, employers would as a result be vulnerable to any decision by insurers not to renew; and such a decision might arise from the simple performance by employers of their common law duty to disclose past negligence to insurers upon any renewal. Employers who discovered or came to appreciate that they had been negligent in the course of past activities in respects that had not yet led to any manifest disease (e.g. by exposing their employees to asbestos) would have such a duty. Insurers could then, on their own case, simply refuse any renewal or further cover. Employers could then have to disclose that refusal also to any further insurers to whom they made a proposal for cover. One response made by insurers to such problems is that they would not arise in the large bulk of cases. That is no doubt true. Most employers liability cases involve short tail claims: typically, an accident involving injury. It is not surprising if the language of the insurances fits more easily with situations in which cause and effect coincide in time. But, by the same token, this does not mean that the underlying risk being assumed was in either partys mind limited to circumstances in which a cause gave rise to an effect during one and the same insurance period. Rix LJ, in accepting that cover depended upon injury being sustained in the sense of experienced during the insurance period, was influenced by the thought that this was not an absurd or meaningless interpretation. The insurance could operate entirely successfully in some 99% of cases (para 235). In the light of this Courts recent decision in Rainy Sky SA v Kookmin Bank [2011] UKSC 50, [2011] 1 WLR 2900, para 30, this, in my view, gives too little weight to the implications of the rival interpretations and to the principle that where a term of a contract is open to more than one interpretation, it is generally appropriate to adopt the interpretation which is most consistent with business common sense. The 1% of cases in which there might be no cover could not be regarded as insignificant. Well before 1948, there was general awareness of the existence of long tail diseases which would only develop and manifest themselves after considerable periods of years (see para 12 above; and see also Cartledge v E Jopling & Sons Ltd [1963] AC 758). The connection between asbestos exposure and mesothelioma became generally known in the mid 1960s, following the publication in 1965 of Newhouse and Thompsons report on Mesothelioma of pleura and peritoneum following exposure to asbestos in the London area and a Sunday Times article. Yet on insurers case, the present insurances would not cover any situation where, after the termination of employment or the expiry of an insurance, injury or disease developed from an employers breach of duty to a relevant employee during an insurance period. A fifth point concerns the way in which the policies deal with the issue of extra territorial scope. The first Excess wording stands apart from the others in its treatment of that issue. Cover only exists in respect of any employee in the employers service who shall sustain any personal injury by accident or disease while engaged in the service of the employer in Great Britain, Northern Ireland, the Isle of Man or Channel Islands, in work forming part of the process in the employers business. As soon as one postulates a delay in time between the causation and experiencing of a disease, it becomes apparent that this wording could operate to very curious effect if sustain looks to the latter rather than the former. A disease (e.g. a cancer) experienced during employment could be covered although caused by pre employment exposure, while a disease caused by employment would not be covered if only experienced while working abroad. The natural inference to draw from the references to being engaged in the employers service and in work forming part of the employers business process is that it was envisaged that the accident or disease would and should arise out of such service and work, rather than merely occur during it. That points to an underlying focus on causation, even if the assumption was that in the majority of cases causation and experiencing of any injury by accident or disease would coincide. As to the other policies, at the very least, the way they deal with territorial issues throws doubt on any proposition that their wordings are so carefully or well chosen that a court should be careful to stick literally to whatever might be perceived as their natural meaning. They address territorial scope by specific exclusions, but the cover and the exclusions use different language. Thus, although the second and third Excess wordings cover liability to employees who sustain personal injury by accident or disease, the territorial exclusion is in respect only of accidents occurring outside Great Britain, etc, leaving it unclear how disease, whether caused or developing outside Great Britain, should be dealt with. The Independent wording also covers liability to employees who sustain bodily injury or disease, while the territorial exclusion is for injury, illness, loss or damage caused elsewhere than in Great Britain, etc. While the contrast in language is capable of lending some support to a view that sustain looks to experiencing, rather than to causation, an alternative possibility is that the two words were understood as having the same effect and that the cover was understood as focused on causation. The language of this exclusion thus cuts both ways, as Rix LJ recognised (para 297). A similar position applies to the contrast between injury or disease sustained and injury or disease caused outside Great Britain, etc. under the first two MMI wordings. Under the third wording, the language of the cover and the exclusion have been deliberately matched. Under the BAI wordings, however, there is an incongruity between cover for injury sustained or disease contracted and the exclusion in respect of liability for accidents . arising outside the United Kingdom. Again, this leaves the position in respect of disease unclear, and the difference between injury sustained and accidents arising can be read either as deliberate or as suggesting that no significance was attached to the difference or that the real concern was with causation. The history and Workmens Compensation Acts Much attention was, both below and before the Supreme Court, paid to the development of employees rights to compensation in respect of personal injury and disease, at common law and under the scheme of the Workmens Compensation Acts (WCAs). The WCAs were in force from 1897 until replaced in 1948 under the National Insurance (Industrial Injuries) Act 1946. The history and a number of the decisions under the WCAs were examined by Rix LJ in paras 126 to 165 of his judgment. He concluded that such an examination yields in the present context not a lot. To a considerable extent, I agree and I shall not repeat the whole exercise, but identify some potentially relevant aspects. Etymologically, some of the language presently in issue can be traced back to statutory language found in the Employers Liability Act 1880 and the WCA 1897. The 1880 Act modified the common law doctrine of common employment, by entitling employees to recover common law compensation for injury caused by specified matters for which employers were responsible, provided that they gave notice, within six weeks of sustaining the injury of its cause and the date at which it was sustained. The 1897 Act, applying to personal injury by accident arising out of and in the course of employment, also required notice to be given of the accident as soon as it occurred, stating the cause of the injury and the date at which it was sustained. These Acts therefore distinguished the causation and the sustaining of an injury, but not in any presently relevant context. Further, any reference to sustaining disappeared from the Workmens Compensation scheme in the 1906 Act, which amended the scheme to require a notice stating the cause of the injury and the date at which the accident happened. The 1906 WCA also expressly extended the scheme to cover certain diseases specified in section 8. In that context, it provided that, where a workman was certified as disabled or suspended from employment or died due to a disease and the disease is due to the nature of any employment in which the workman was employed at any time within the twelve months previous the date of the disablement or suspension, whether under one or more employers, then he or his dependants shall be entitled to compensation under this Act as if the disease or such suspension . were a personal injury by accident arising out of and in the course of that employment . Section 8(a) provided: The disablement or suspension shall be treated as the happening of the accident. Under section 8(c), the compensation was recoverable from the employer last employing the employee within the previous twelve months, providing the employee furnished that employer with particulars of all his other employers in the employment to the nature of which the disease was due. It was not necessary to prove that the disease actually arose from the last employment, merely to prove that the relevant employment gave rise to a risk of such a disease: Blatchford v Staddon and Founds [1927] AC 461. The 1906 Act may be regarded in this respect as involving an early statutory instance of the kind of liability recognised in Fairchild v Glenhaven Funeral Services Ltd [2002] UKHL 22, [2003] 1 AC 32 and Barker v Corus UK Ltd [2006] UKHL 20, [2006] 2 AC 572. However, failing such particulars, the last employer could excuse himself upon proving that the disease was not contracted whilst the workman was in his employment (section 8(c)(i)). The last employer might also join any other employer (within the last twelve months) and it was provided that upon proof that the disease was in fact contracted whilst the workman was in the employment of that other employer, that other employer shall be the employer from whom the compensation is to be recoverable (section 8(c)(ii)). Finally, section 8(c)(iii) provided that: if the disease is of such a nature as to be contracted by a gradual process, any other employer within the last twelve months was liable to make such contributions as might be agreed or determined by arbitration under the Act. Under this scheme, therefore, compensation for disease was initially based upon the nature of the employment and its potential for causing, rather than upon proof that it caused, such a disease. The paternal benevolence of the Legislature (as Visc Sumner put it in Blatchford: p 469) is well known, and if the price of that benevolence is paid by the last employer, who thus has to bear others burdens, that is nothing new in this kind of legislation. However, the last relevant employer could seek, in specified circumstances, to avoid or to pass on to another employer responsibility by proof that the disease was not actually contracted in his employment. Alternatively, in the case of a disease of such a nature as to be contracted by a gradual process, all relevant employers within the last twelve months would be liable to contribute. The scheme was, as I see it, concerned with either the risk of or actual causation, and in its use of the word contracted it appears to me to have been directing attention to the causation, rather than the mere experiencing or manifestation, of disease. The WCA scheme was the subject of further amendment by the 1925 Act. Section 43 superseded section 8 of the 1906 Act as regards scheduled diseases, while section 47 made specific provision for the introduction of a parallel scheme covering silicosis. Effect was given to this by inter alia the Metal Grinding Industries (Silicosis) Scheme which came into force in July 1927, making provision for obtaining compensation from the last employer within the previous three years, and giving such employer rights to look to other such employers within the last five years. An insurance covering employers liability in this connection was considered in Smith & Son v Eagle Star (1933) 47 Ll. L.R. 88, (1934) 48 Ll. L.R. 67. Mr Hill had been employed in processes giving rise to silicosis for some 20 years. For the last two of these years, from 31 March 1928 to 16 June 1930, he worked for Smith & Son. From 30 June 1927 to 17 June 1930, Smith & Son had an insurance against WCA liability in respect of any personal injury or disease which at any time during the continuance of this policy shall be sustained or contracted by any workmen . The policy was expressly extended to cover any liability in connection with any claim made by employees in respect of silicosis, and the decision of the Court of Appeal rested on this ground. But Scrutton LJ also examined the main policy language, and in particular what was meant by contracted. He noted that there has been a good deal of discussion in the Courts about a disease which is gradually contracted commencing at some stage and through the process going on increasing the disease until at last it results in total disablement (p 70), and concluded that the word was not to be read as first contracted, but in the sense of influenced or increased until it ultimately comes to total disablement. This, although not directly focusing on the first development of a disease from some earlier cause, suggests a flexible view of the word contracted, directed once again to the employments responsible for causing the disease. Confirmation that this was Scrutton LJs view can be found in the earlier case of Ellerbeck Collieries Ltd v Cornhill Insurance Co [1932] 1 KB 401. Two workmen who had been in the colliery companys service for many years were on respectively 11 and 12 March 1929 (dates they were actually off work) certified as suffering from miners nystagmus. The Cornhill had on 8 March 1929 issued the colliery company with a three month provisional cover note insuring in terms matching the wording of the insuring clause in the first Excess wording (i.e. against liability in respect of any employee who shall sustain any personal injury by accident or disease while engaged in the service of the employer). Failing a satisfactory survey, the cover note actually expired on 18 March 1929. The first point decided was whether the employees had sustained personal injury by accident or disease during the period of validity of the cover note (8 to 18 March 1929). It was held that they did. The judgments in the Court of Appeal are of interest for a number of reasons. First, both Scrutton LJ (p 408) and Greer LJ (p 417) approached the question of construction on the basis that the policy was intended to protect the employers against their liability to their workmen under the WCAs. Scrutton LJ added that it seems to me that the policy was intended to cover the liability of the employers for the results of industrial diseases caused by the employment (p 409). His description of the policy, covering in terms any employee sustaining personal injury by accident or disease in service, as intended to cover liability . for the results of diseases caused by the employment fits precisely with the analysis which I consider correct (paragraphs 18 28 above). Second, Scrutton LJ went on to refer to the difficulties in saying when an industrial disease, such as miners nystagmus or lead poisoning, begins, and in these circumstances the difficulty for an employee to pick the proper employer to sue. He described the way in which Parliament, by what became section 43 of the WCA 1925, had addressed such difficulties by providing a conventional and artificial means for enabling the workman to get compensation, leaving the various employers to fight out their proportion of the liability between themselves (p 409). He said that the last employer, liable under the WCA scheme, then claims on the insurance company on the ground that he is liable to make compensation for an injury by disease, and the date of the injury or disablement is by statute and certificate fixed as happening between the dates for which he is provisionally covered (p 411). On this basis, and in the light of the House of Lords decision in Blatchford, Scrutton LJ concluded that he was bound to hold that an accident has happened within the period of the provisional cover against the consequences of which the insurance company is bound to indemnify the employer (p 413). In short, the conventional and artificial provisions of the WCA defined what constituted an accident and when personal injury by accident or disease was sustained for the purposes of the insurance. Greer LJ, more shortly, adopted the same approach (p 418). Only Slesser LJ (p 421) expressed a reservation about the possibility that the artificial deeming provisions of section 43(a) of the WCA 1925 might only apply as between employee and employer, and that it might have been necessary to consider separately the date of the sustaining of injury as between the employer and the insurer, had there been any admissible evidence that the two employees had actually contracted the scheduled disease before the granting of the statutory medical certificate. Commercial purpose and practice Much general evidence was directed or elicited before Burton J in relation to the commercial purpose of the present insurances, and to practice relating to their operation in the years before the present issue arose. It was argued that there was, prior to the decision in Bolton, a universal usage of the insurance industry to pay out mesothelioma or similar claims under [employers liability] policies by reference to the date of inhalation/exposure whatever the wording, or an estoppel by convention to like effect. Burton J rejected the argument (paras 180 to 201, esp. para 201), for the reasons that, first, there was no evidence relating to years earlier than the 1980s which could be put down to any kind of arguable usage, second, any usage was not certain, not least because of the multiplicity of approaches to or bases for it and, third, it was not binding. It was not incorporated into the insurance contracts. No issue of estoppel by convention was pursued to the Court of Appeal (Rix LJ, para 24, and Stanley Burnton LJ, paras 332 and 335) and the issue of a universal custom was only pursued by Zurich Insurance Company (Rix LJ, para 24). By a multiplicity of approaches to or bases for insurers practice, Burton J was referring to evidence that insurers followed the practice they did in some cases because they believed that their contracts were to be interpreted on a causation/exposure basis, in others because they believed that the aetiology of diseases such as mesothelioma was such that injury was in fact sustained (in the sense of experienced) at the date of inhalation, while yet others may have failed to realise that their historically relevant wordings had been on a different basis to the causation wordings to which they had since switched or may have failed to address their minds to any relevant issue at all in relation to an insured who was usually a longstanding repeat client. Rix LJ (para 228) contented himself with agreeing with Burton Js reasoning on this aspect, while Stanley Burnton LJ noted and agreed in particular with Burton Js second reason, relating to the believed aetiology of mesothelioma (para 335). Smith LJ, on the other hand, treated the commonly held understanding that diseases such as mesothelioma involved injury at the date of inhalation as part of the factual matrix of all the insurance contracts (paras 322 323), and considered against that background that no difference in meaning should be held to exist between policies using sustained and causation wording, until the time when the two sides of the insurance industry should be considered to have appreciated that some diseases, including mesothelioma, do not occur until many years after exposure to the causative agent (para 327). She put that as around the time of the decision in Bolton, after which parties using a sustained wording must be taken to have meant only to cover injuries actually occurring during the policy period (para 327). The argument of a binding usage was not pursued before the Supreme Court, rightly so for the reasons given by the judge and the majority in the Court of Appeal. Equally, there has been no suggestion of estoppel by convention, along the lines recognised as possible in Chartbrook Ltd v Persimmon Homes Ltd [2009] UKHL 38, [2009] 1 AC 1101, para 47. However, on the issues of policy interpretation, Mr Stuart Smith QC for Zurich Insurance, maintained before the Supreme Court an argument that there was a consensus based on market practice, whereby, for one reason or another, such policies would respond to long tail diseases by reference to the date of exposure, and that this could constitute relevant background to their construction. Assuming that, short of a binding usage or estoppel by convention, a practice, if known to or shared by the relevant parties, could in some circumstances be relevant background (see e.g. Reardon Smith Line Ltd v Yngvar Hansen Tangen [1976] 1 WLR 989), still, in my opinion the argument fails in the present case. It fails in particular in the light of the judges findings, even in relation to policies made in and after the 1980s. A practice based on a mistaken understanding, by only some insurers, that the policies operated on a causation basis cannot be relevant background to the interpretation of every policy; on the judges findings other insurers do not appear to have understood that the policies operated on that basis. A practice based on a mistaken understanding by others in the market as to when long tail diseases could be said to have been experienced or to involve injury is likewise an unpromising start for construing all policies; if the understanding were good, it would mean that such diseases fell within the policies, even though the policy cover was restricted to injury or disease experienced during the policy period. The understanding would not therefore carry any imperative to read a sustained wording as meaning caused. Before the Supreme Court, both employers and employees continued to rely upon the evidence given at trial regarding the general purpose of employers liability insurance as part of the background to the interpretation of the present insurances. Rix LJ (paras 223 to 235) gave it some weight as such, but Stanley Burnton LJ thought that there was little if any assistance to be gained by reference to the commercial purpose of EL insurance, as this was simply to provide the cover defined in the policy (para 333). The Supreme Court was provided with a useful summary of the considerable volume of evidence relied upon in this connection. It consisted in general of answers given by insurers, two at least of them with experience going back to the 1940s. They were asked (frequently in response to leading though not inadmissible on that score questions in cross examination) about their or others views, understandings or perceptions as to the purpose of the policies, and the way in which these would or should respond, in relation to injuries arising from exposure in the course of activities during the policy period. In my judgment, Stanley Burnton LJ was right to reject such evidence as inadmissible. The parties cannot be asked what they meant by their contract, and, failing any binding usage, it is equally inadmissible to ask other persons operating in the market to give general evidence as to what they would have understood the parties to have meant by the words used in the context in which they were used. The evidence does not seem to have amounted to more than that. However, I do not agree with Stanley Burnton LJs suggestion that no useful conclusions can be drawn about the commercial purpose of the policies, save that it was to provide the defined cover. In my opinion, relevant conclusions about the general nature and purpose of the individual policies can be drawn in this case, just as they could in the case of the different (and wordier) instrument in issue in In re Sigma Finance Corporation [2009] UKSC 2, [2012] 1 All ER 571 (see especially paras 10, 12 and 37). They can be drawn from an overall consideration of the individual insurance wordings, and particularly from the features which tie cover to the employees and activities during the relevant policy period and the five points considered in paragraphs 18 to 28 above. Further, if the policies are on any view apt to cover employers liability for long tail diseases which initiate during, but only manifest themselves years after, the original policy period, one may look with scepticism at an interpretation which distinguishes this situation from other situations where a long tail disease is caused but does not strictly begin during the policy period, and only manifests itself years later. This is particularly so if a conclusion that the latter diseases fell outside the policy cover meant that they would or might well not fall within any subsequent employers liability policy. ELCIA 1969 Section 1 of the ELCIA provides: 1. (1) Except as otherwise provided by this Act, every employer carrying on any business in Great Britain shall insure, and maintain insurance, under one or more approved policies with an authorised insurer or insurers against liability for bodily injury or disease sustained by his employees, and arising out of and in the course of their employment in Great Britain in that business, but except in so far as regulations otherwise provide not including injury or disease suffered or contracted outside Great Britain (3) For the purposes of this Act (a) approved policy means a policy of insurance not subject to any conditions or exceptions prohibited for those purposes by regulations. 4. (1) Provision may be made by regulations for securing that certificates of insurance in such form and containing such particulars as may be prescribed by the regulations, are issued by insurers to employers entering into contracts of insurance in accordance with the requirements of this Act . (2) . the employer shall during the currency of the insurance and such further period (if any) as may be provided by regulations (a) comply with any regulations requiring him to display copies of the certificate of insurance for the information of his employees; . The only conditions or exceptions ever prohibited were certain exemptions from liability. Under section 3, the ELCIA did not however apply to local authority employers, such as most of MMIs insureds. Under section 4, provision might be made for certificates of insurance to be issued to employers, and in that event the employer was, obliged during the currency of the insurance and such further period (if any) as may be provided by regulations to comply with any regulations requiring him to display copies of the certificate of insurance for the information of his employees. In reaching his conclusions on the ELCIA (para 16 above), Rix LJ engaged in an impressive analysis, to which I would refer (paras 166 to 186). The only doubt this leaves is how, if the ELCIA requires a causation wording, an employer could properly insure on a wording which only covered injury sustained in the sense of experienced (see para 186 and paragraph 16 above). The scope of the ELCIA is, as Rix LJ indicated, open to three alternative analyses: that it requires cover in respect of (i) all future liability incurred during the insurance period, whenever the negligence or injury, or (ii) liability for all future injury or disease sustained (in the sense of experienced) by employees during the insurance period, whenever the negligence, or (iii) liability for all negligence or breach of statutory duty during the insurance period giving rise to liability as in (ii). The retrospectivity of cover involved in (i) and (ii) is unlikely to have been intended. The only one of the three possibilities not involving a degree of retrospectivity is (iii). A duty on every employer to insure, and maintain, insurance is consistent with a requirement to have the insurance in place during, though to maintain it after, the relevant insurance period. The provision, contemplated by section 4, for copies of insurance certificates to be issued by insurers and to be displayed by any employer for the information of his employees during the currency of the insurance and such further period as may be provided by regulations indicates, first, a desire to assure employees of their insurance protection during the relevant insurance period, and, secondly, an awareness that this assurance might need to remain in place after such insurance period; it is therefore suggestive of (iii), rather than (i) or (ii). As Rix LJ observed, it is only cover in accordance with (iii) that can give an employee the assurance that any injury or disease suffered as an employee and arising out of and in the course of [his] employment will be covered by insurance, the benefit of which would, if necessary, be available to him at the time under the Third Party (Rights against Insurers) Act 1930. An obligation to have a policy in force only at or by the time when injury is actually experienced would leave employees or ex employees at the mercy of compliance with the statute by their employers or ex employers at uncertain future dates. It would also leave such employees or ex employees at the mercy of employers who, for whatever reason, ceased to carry on business either in Great Britain or (for example due to insolvency) at all. Further, if injury or disease suffered or contracted bears the same meaning as insurers suggest that injury or disease sustained or contracted bears, then an employee, who had the misfortune to succumb to a disease abroad caused by his employment or previous employment in Great Britain, would not be covered (unless regulations intervened to ensure that he was). Stanley Burnton LJ thought that any issue as to the nature of the insurance required under ELCIA was resolved by its use of the word sustained, rather than caused. He went on to conclude that the ELCIA covered any injury sustained (in the sense of experienced) during a period of insurance, by anyone who was then or had at any previous time been an employee. However, that latter conclusion introduces a retrospectivity into the scope of the ELCIA, which, as already indicated, I think unlikely to have been intended. The statute could have used the tariff wording of causation instead of sustained. But in the statutory language the word sustained is not coupled with a phrase such as during the period of the insurance. Even if sustained means experienced in the context of the statute, the statute may require insurance on what is effectively a causation basis; the words sustained by his employees may well mean sustained at any future time by his current employees. The key to the meaning of the statutory language seems to me the combination of the phrases arising out of and in the course of their employment in Great Britain and not including injury or disease suffered or contracted outside Great Britain. Together, and for reasons given in the last two paragraphs, they indicate a statutory requirement to insure in respect of activities during the course of employment in Great Britain which may in the future give rise in or out of Great Britain to liability to the employees involved in such activities. In my judgment, therefore, the conclusion which gives proper effect to the protective purpose of the legislation is that the ELCIA requires insurance on a causation basis. The ELCIA extension provision to the Independent and second BAI wordings (see Annex A), as well as a similar extension provision to the MMI policy intended for insureds who were not local authorities, achieved this result expressly in relation to policies written subsequent to the coming into force of the ELCIA, at least for the purpose of ensuring that employees claims were covered by insurance. Any other subsequent insurances not containing that extension provision should, if possible, be read as providing the relevant employers cover required by statute. This is a powerful tool in the interpretation of such insurances. Bolton M.B.C. v Municipal Mutual Insurance Ltd The Court of Appeal in the present case was bound by its previous decision in Bolton MBC v Municipal Mutual Insurance Ltd [2006] EWCA Civ 50, [2006] 1 WLR 1492 on public liability policies. The majority regarded that case as, in effect, determining the meaning which must be put on the word sustained in the present employers liability policies: see paras 284, per Rix LJ, and 339, per Stanley Burnton LJ, who however also found the logic of Longmore LJs judgment convincing in relation to the latter type of policies. Smith LJ on the other hand considered that public liability and employers liability insurances gave rise to different considerations (para 328). In my opinion, that is right. Employers liability policies are subject to particular terms and considerations, analysed above (particularly in paragraphs 18 28 and, in the case of policies effected after the coming into effect of the ELCIA, paragraphs 41 46). These considerations are not or certainly not necessarily applicable to public liability insurances. The present case was concerned with employers liability not public liability insurances, and it may well be that not all the relevant facts relating to the latter are before us. We certainly have not heard full argument on the proper conclusions which may be drawn regarding the basis of liability or trigger generally applicable under the latter. In these circumstances, I would proceed on the basis that we are not bound by Bolton, that this does not involve any view about the correctness or otherwise of Bolton, but only that it is unnecessary to consider what the position generally may be under public liability policies. Assuming that, in relation to public liability insurance, the position generally is as stated in Bolton, that does not alter the conclusions which I reach. It merely means, in their light, that public liability insurance generally and the present employers liability policies operate on different bases, because of their different backgrounds, terms and purposes. Contracted There is no difficulty about treating the word contracted as looking to the causation or initiation of a disease, rather than to its development or manifestation. In relation to the two BAI wordings and the third MMI wording, this interpretation obtains strong support from the general nature and purpose of the relevant policies, derived from their immediate context and terms and analysed in paragraphs 18 to 28 and 41 above. To the limited extent that the WCA background may assist to inform the meaning of later policies, it can be seen overall as a legislative scheme which was concerned with either the risk of or actual causation (para 32 above). Even if, in the phrase sustained or contracted or injury sustained or disease contracted, the word sustained is to be understood as meaning experienced, that would reflect no more than the fact that the cause and effect of an injury commonly coincide; I would still unhesitatingly conclude, as did the Court of Appeal, that the word contracted used in conjunction with disease looks to the initiating or causative factor of the disease. Sustained The majority of the Court of Appeal considered that it was impossible to view policies with pure sustained wordings as operating by reference to the initiating or causative factor of a disease. They did so primarily by reference to the wording of the insuring clauses. In my view, as indicated in paragraphs 18 19 above, a broader approach is necessary. The general nature and purpose of these policies can be derived from their immediate context and terms, analysed in paragraphs 18 to 28 and 41 above. It is true, as Rix LJ said, that phrases such as injury sustained by an employee or an employee who shall sustain injury, in either case by accident or disease, appear to address the impact of the accident or disease on the employee. But the underlying focus of the insurance cover is on the employees and activities current during the insurance period. The cover would be potentially incomplete, and employers would be potentially exposed to uninsured risks, were sustained to be understood as meaning developed or manifested. This is so, even before the ELCIA came into force. Any policies written subsequent to the coming into force of the ELCIA either afford cover consistent with the Acts requirements by virtue of an ELCIA extension provision, or, to the extent that this is not the case, should be construed, if at all possible, as meeting employers obligations under that Act. In my view, such obligations included taking out insurance in respect of negligence during the insurance period affecting an employee in a manner giving rise to bodily injury or disease then or at any subsequent time. On this basis, I consider that, although the word sustained may initially appear to refer to the development or manifestation of such an injury or disease as it impacts employees, the only approach, consistent with the nature and underlying purpose of these insurances both before and after the ELCIA, is one which looks to the initiation or causation of the accident or disease which injured the employee. The disease may properly be said to have been sustained by an employee in the period when it was caused or initiated, even though it only developed or manifested itself subsequently. Disease sustained, read as meaning experienced or incurred Rix LJ was attracted by the submission that, even if sustaining disease meant experiencing or incurring it during the period of the insurance, long tail diseases could be said to have been sustained during the period of insurance in this sense. He asked rhetorically whether an employee who had inhaled asbestos had not sustained an injury in the form of an assault of the fibres, as a result of which he was worse off through having dangerous fibres in his lungs (para 280). He noted that, although there was at most trivial injury or damage, and nothing that could create actionable damage, nevertheless, when mesothelioma develops, it is the risk of mesothelioma created by the exposure which is the damage (see . Barker ) and it is the exposure, and the risk of mesothelioma, that is the damage (para 281). He only felt bound to reject this analysis (para 284) because of the Court of Appeals previous decision in Bolton. It may be that in the case of some long tail diseases, the victim can be said to have incurred or caught them at the same time as the initial ingestion or scratch giving rise to them. But it is clear that this is not the position with inhalation of asbestos in relation to either asbestosis or mesothelioma. No cause of action arises from exposure or inhalation alone: Rothwell v Chemical & Insulating Co Ltd [2007] UKHL 39, [2008] 1 AC 281. Further, for reasons which I develop in paragraphs 64 65 below, the exposure and risk are not by themselves damage in any sense known to the law. Damage is only incurred when mesothelioma develops. Only when it develops does the victim incur damage which is legally relevant, and even then this is not because any physical link necessarily exists or can be proved between the mesothelioma and the original exposure. The rule in Fairchild and Barker imposes liability for the mesothelioma upon persons who have exposed the victim to asbestos, and so created a risk of mesothelioma. But it is not a rule which, even as between employers and employees, deems the latter to have suffered injury or disease at the time of any exposure. And, even if it were viewed simply as a rule imposing retrospective liability on employers for exposing their employees to the risk of mesothelioma, the insurance policies do not insure risks of physical injury or disease, but only actual injury or disease. The application of the insurances in respect of mesothelioma At the outset of these appeals, the application of the insurances in respect of mesothelioma suffered by employees exposed to asbestos during their employment by an insured employer did not appear controversial. This changed after a question from Lord Phillips on day 4 of the hearing, followed by a later written note. All the same, the transcript pages containing any argument on the point numbered only 40 out of a total of some 1140. So far as Mr Edelman made any submissions on this point, in his written case or orally, they were to this effect: if the correct analysis of the Houses decision in Fairchild be that an employer who exposes an employee to asbestos is deemed to have caused that employees mesothelioma, then employers liability insurances held by the employer on a causation basis should respond; but, if the policies do not respond on a causation basis, there is no justification for treating the employee as having suffered injury or a disease during their currency, because employers cannot prove that any particular inhalation caused any injury. This led to some discussion, particularly with counsel for employers and employees, of the points which I have already addressed in paragraphs 50 52 above. The point now expressed forcefully by Lord Phillips in his judgment is that exposure to the risk of mesothelioma is the correct analysis of the Fairchild principle, at least as subsequently interpreted, and that such exposure can satisfy neither the concept of injury nor the concept of causation for the purposes of the policies. If that is right, then the present insurance claims must all fail. Indeed, the great bulk of insurance claims settled by other insurers (e.g. former tariff insurers) or by the present insurers under the causation policies they have issued in more recent years (paragraph 10 above) should presumably also have failed. The only exception may be the case of an employee exposed to asbestos in only one employment by an employer holding insurance throughout with only one insurer. In such a case it might (perhaps) be said that, whichever particular inhalation(s) may have been responsible for the employees mesothelioma, it (or they) must have been insured. Even then, the logic of the Supreme Courts reasoning in Fairchild and Sienkiewicz v Greif (UK) Ltd [2011] UKSC 10, [2011] 2 AC 229 might lead to the conclusion that causation was still unprovable in the light of the possibilities of environmental or idiopathic causation of mesothelioma. Rules regarding causation are created by the courts for the purpose of determining when liability arises in particular contexts. Normally, they reflect a common sense understanding of what is ordinarily understood when we speak of a cause in a particular context. In their leading work on Causation in the law (Clarendon Press, 2nd ed 1985) Professor H. L. A. Hart and Tony Honor examined both this understanding and its relationship to legal decision making. Generally, but not always, a cause must involve an act or omission that was at least a sine qua non of the injury in respect of which responsibility attaches (the but for test). But sometimes two separate acts or omissions may each independently have been sufficient to give rise to that injury (as when A and B simultaneously, but independently shoot C dead), and then we may as a matter of legal policy accept a weaker causal relationship for the imposition of responsibility: see p lxv in the preface to and p 123 of the 2nd edition. Other cases where causal requirements have been relaxed include Bonnington Castings Ltd v Wardlaw [1956] AC 613; there, materially contributing to part of an accumulation of dust which cumulatively led to pneumoconiosis gave rise to liability for the whole disease (although it has been suggested that some apportionment might now be possible in fact and law). Another relevant authority is McGhee v National Coal Board [1973] 1 WLR 1; there, liability for dermatitis was held to exist because the defendant had materially contributed to part of the claimants exposure to dirt, any part of which might, independently of any other, have given rise to the abrasion leading to the claimants dermatitis. It was recognised that this involved liability based on materially contributing to the risk of the injury. Lord Reid at p.4G H described the result as reached taking a broader view of causation, and Lord Wilberforce at p 5G viewed it as involving a conclusion as to the causal connection that had to exist between the default and the disease complained of. The contrary view (viz, that proof of risk was insufficient without proof that the risk caused or materially contributed to the disease) had a logic which Lord Wilberforce acknowledged, but rejected for policy and evidential reasons set out at p.6C F. In Fairchild, McGhee was seen as a precursor of the decision there reached. Putting aside the possibility of an idiopathic or environmental cause, a Fairchild type situation exists when (a) there are two separate potential causes exposing the claimant to the same risk, one involving an act or omission by the defendant, (b) either one of which causes would have been sufficient to give rise to the injury, and (c) one of which did so, but (d) neither of which can as a matter of probability be shown to have done so. Taking into account the later decisions in Barker v Corus and Sienkiewicz, the Fairchild principle extends to any case where there has been an act or omission exposing a person to asbestos, which exposure may have caused the mesothelioma, but which cannot be shown as a matter of probability to have done so. On that basis, the House held in Barker v Corus that each or any persons liability should only be proportionate to the extent that he had exposed another to the risk of mesothelioma. Parliament by the Compensation Act 2006 reversed that conclusion and made each such person liable in respect of the whole of the damage caused by the mesothelioma. Lord Phillips in his judgment addresses the basis of Fairchild in the light of Barker v Corus, the 2006 Act and Sienkiewicz. He accepts that, if Fairchild is now correctly to be understood as a special rule deeming employers who have exposed an employee to asbestos to have caused any subsequently suffered mesothelioma, then the insurance policies should apply (para 109). But he concludes that Fairchild must be understood as creating liability not for the disease, but for the creation of the risk of causing the disease. It follows in his view that employers and employees gain no assistance from the special rule in asserting that mesothelioma suffered by any person was caused or initiated in any particular policy period. On this basis, even though the insurances respond to injuries caused or initiated during their periods, the employers and employees fail for want of proof. It is not fruitful to repeat the exercise undertaken in Barker v Corus of examining in detail the significance of the speeches in Fairchild. The House was not agreed about this in Barker, but the majority speeches of Lords Hoffmann, Scott and Walker were at pains to reject any analysis of Fairchild as proceeding upon a fiction that each exposure had caused or materially contributed to the disease: see paras 31, 61 and 104; they each also referred to the liability created by Fairchild as being not for causing the disease, but for materially increasing the risk of the mesothelioma which was in fact suffered: paras 31, 36 and 40, 53, 61 and 113. Lord Rodger (dissenting) perceived the majority to be misinterpreting Fairchild by failing to acknowledge that it was based on an equation of materially increasing risk with materially contributing to causation, an equation which he thought had been accepted as sufficient causation in Bonnington Castings Ltd v Wardlaw [1956] AC 613 and McGhee v National Coal Board [1973] 1 WLR 1. It is on the apparently bright line distinction said to have been drawn by the majority in Barker between materially contributing to increasing the risk of, and causing, a disease that Lord Phillips now founds his judgment in these appeals. The Compensation Act 2006 applies where a person who has exposed someone to asbestos is liable in tort in connection with damage caused to the latter by mesothelioma whether by reason of having materially increased a risk or for any other reason (section 3(1)(d)). It makes the former person liable in respect of the whole of the damage (section 3(2)(a)). On its face, the Act assumes rather than creates the liability, and only alters the measure of recovery. That was the view expressed in Sienkiewicz by Lords Phillips, Rodger and Brown (paras 70, 131 and 183). However, on further analysis, the distinction identified in paragraphs 58 59 above proves more elusive. Even in Barker itself, Lord Walker described exposing the employee to the risk of mesothelioma as being equated with causing his injury and the result as an explicit variation of the ordinary requirement as to causation (para 104), and spoke of the rule as one by which exposure to the risk of injury is equated with legal responsibility for that injury (para 109). However, it is conceivable that he meant that the ordinary requirement of causation of the disease was entirely replaced by another liability creating rule. It is in the later authority of Sienkiewicz that the difficulty of drawing any clear cut distinction between creating a risk and causation of the disease becomes most apparent. Lord Phillips there stated that the rule in its current form was that the person responsible for the exposure and thus creating a material increase in risk of the victim contracting the disease will be held to be jointly and severally liable for causing the disease (para 1). Later, he said that the law was presently contained in Fairchild and Barker which had developed the common law by equating materially increasing the risk with contributing to the cause in specified and limited circumstances (para 70). That was the analysis of Fairchild advanced by Lord Rodger in Barker v Corus (paras 73 and 83) but rejected there by the majority. Lord Brown in Sienkiewicz spoke of a more relaxed approach to causation (para 178) and flexibility in the approach to causation (para 187). I referred to Fairchild and Barker as involving a special rule of causation (para 188), and Lord Kerr referred to them as involving a modification of the previously applicable legal rules in relation to the causation element in employers liability claims (para 196) and to adjustments in the burden of proof (paras 198 and 200). Lord Rodger was, on the other hand, loyal to the majority view in Barker by referring to liability as based on materially increas[ing] the risk (para 113), and Lord Dyson was cautious in speaking of materially increasing the risk of contracting the disease as sufficient to satisfy the causal requirements for liability (para 207). Lord Phillips has in para 123 set out a passage from an extra judicial commentary written by Lord Hoffmann in Perspectives on Causation (2011), p 8. In it, Lord Hoffmann describes the two ways in which the changes introduced by Fairchild and Barker could be characterised, one as changing the causal requirements for an action for damages for mesothelioma ; all that is necessary is to prove that the risk has been increased and that the specific exposure may have provided the actual agent; the other as creat[ing], exceptionally, a cause of action for the increased risk of mesothelioma, rather than for the disease itself. Lord Hoffmann notes that the House in Barker (Lord Rodger dissenting) adopted the second explanation of what had happened in Fairchild. But in the next sentence, not quoted by Lord Phillips, Lord Hoffmann went on: Parliament almost immediately reversed this decision by a statute giving effect to the first explanation, which had been advocated by Lord Rodger in his dissenting speech. Lord Hoffmanns extra judicial (or judicial) words cannot by themselves alter the true effect of a statute, but his comments do again show that the suggested distinction is more fluid than might at first appear. It is relevant to look more closely at what Barker decides. In Barker, Lord Hoffmann spoke of Fairchild as applying an exceptional and less demanding test for the necessary causal link between the defendants conduct and the damage (para 1) and of the requirement of a sufficient causal link between the defendants conduct and the claimants injury (para 17). In his note in Perspectives on Causation, he picked up this language with references to the causal requirements of the relevant rule and to the issues in cases of mesothelioma and analogous situations as involving the causal requirements for an action for damages for mesothelioma. Lady Hale in Barker also viewed the common law rules governing the measure of recovery as closely linked to the common laws approach to causation, and said that there was no reason in principle why the former rules should not be modified as the latter approach is courageously developed to meet new situations (para 122). In paras 123 and 124, she made clear that in her view the issue in Barker could be seen as arising from the expanded perceptions or developed concept of causation which the law had accepted. These citations all suggest that it is both possible and appropriate to characterise the position achieved by the common law after Barker v Corus as one concerned with the issue of the causal requirements or causal link, as between the defendants conduct and the disease, which the common law requires in order for there to be an action for mesothelioma. But analysis of the rule arrived at after Fairchild and Barker justifies further propositions. Despite the apparent clarity of the suggested distinction between liability for a risk and for a disease, no cause of action at all exists unless and until mesothelioma actually develops. Neither the exposure to asbestos nor the risk that this may one day lead to mesothelioma or some other disease is by itself an injury giving rise to any cause of action: see Rothwell v Chemical & Insulating Co Ltd [2007] UKHL 39, [2008] 1 AC 281; the House there decided that not even the emergence of pleural plaques marking the past exposure to asbestos constituted injury for the purpose of giving a cause of action. In order to fall within the principle in Fairchild and Barker, the development of mesothelioma is a pre condition: see Barker, per Lord Hoffmann (para 48) and Lord Scott (para 53). Lady Hale went further, stressing that she in fact agreed with Lord Rodgers view that the damage which is the gist of these actions is the mesothelioma and its physical and financial consequences. It is not the risk of contracting mesothelioma (para 120). In reality, it is impossible, or at least inaccurate, to speak of the cause of action recognised in Fairchild and Barker as being simply for the risk created by exposing someone to asbestos. If it were simply for that risk, then the risk would be the injury; damages would be recoverable for every exposure, without proof by the claimant of any (other) injury at all. That is emphatically not the law: see Rothwell and the statements in Barker itself, cited above. The cause of action exists because the defendant has previously exposed the victim to asbestos, because that exposure may have led to the mesothelioma, not because it did, and because mesothelioma has been suffered by the victim. As to the exposure, all that can be said (leaving aside the remote possibility that mesothelioma may develop idiopathically) is that some exposure to asbestos by someone, something or some event led to the mesothelioma. In the present state of scientific knowledge and understanding, there is nothing that enables one to know or suggest that the risk to which the defendant exposed the victim actually materialised. What materialised was at most a risk of the same kind to which someone, who may or may not have been the defendant, or something or some event had exposed the victim. The actual development of mesothelioma is an essential element of the cause of action. In ordinary language, the cause of action is for or in respect of the mesothelioma, and in ordinary language a defendant who exposes a victim of mesothelioma to asbestos is, under the rule in Fairchild and Barker, held responsible for and in respect of both that exposure and the mesothelioma. This legal responsibility may be described in various ways. For reasons already indicated, it is over simple to describe it as being for the risk. Another way is to view a defendant responsible under the rule as an insurer, but that too is hardly a natural description of a liability which is firmly based on traditional conceptions of tort liability as rooted in fault. A third way is to view it as responsibility for the mesothelioma, based on a weak or broad view of the causal requirements or causal link appropriate in the particular context to ground liability for the mesothelioma. This third way is entirely natural. It was adopted by Lords Reid and Wilberforce in McGhee, by Lord Hoffmann, Lady Hale and (possibly) Lord Walker in Barker and by Lord Hoffmann in his extra judicial commentary. It seems to have received the perhaps instinctive endorsement of a number of members of this Court, including myself, in Sienkiewicz. Ultimately, there is no magic about concepts such as causation or causal requirements, wherever they appear. They have the meanings assigned to them and understood in ordinary usage in their context. A logician might disagree with a reference to causation or a causal link in a particular context, but that is not the test of meaning: see Lord Wilberforces words in McGhee, p 6C F (cited in para 56 above). The present appeals concern the meanings we assign to the concept of causation, first in the context of considering employers liability to their employees and then in considering the scope of employers insurance cover with respect to such liability. It is instructive in this connection to look more closely at the Compensation Act 2006. Section 3(3) states that section 3(2) does not prevent (a) one responsible person from claiming a contribution from another, or (b) a finding of contributory negligence. Section 3(4) goes on to provide that [I]n determining the extent of contributions of different responsible persons in accordance with subsection (3)(a), a court shall have regard to the relative lengths of the periods of exposure for which each was responsible . Section 3(3) necessarily relates to the legal bases for claiming contribution or asserting contributory negligence, which are to be found in, respectively, the Civil Liability (Contribution) Act 1978 and the Law Reform (Contributory Negligence) Act 1945. The 1978 Act addresses the situation where two or more persons are liable in respect of the same damage (section 1(1)), while section 2(1) provides for contribution in such situations to be such as may be found by the court to be just and equitable having regard to the extent of that persons responsibility for the damage in question. Although under section 3(4) of the 2006 Act, the court must have regard to the relative lengths of the exposure for which each was responsible, the same damage which is a pre condition to the application of the 1978 Act must be the mesothelioma. It cannot be the risk created by the person by or from whom contribution is sought, because each person and exposure creates a separate risk, and no one person or exposure creates the total risk resulting from all exposures. The 2006 Act, by its reference to the 1978 Act, thus assumes that every person, who has exposed to asbestos a victim who later experiences mesothelioma, incurs responsibility for the mesothelioma. That language again fits an analysis whereby the rule in Fairchild and Barker identifies the appropriate weak or broad causal link between the exposure and the mesothelioma. A similar position applies under the 1945 Act. Under section 1(1), that Act applies [w]here any person suffers damage as the result partly of his own fault and partly of the fault of any other person or persons. In that event, the damages recoverable are to be reduced to such extent as the court thinks just and equitable having regard to the claimants share in the responsibility for the damage. The application of this section, as contemplated by the 2006 Act, is only possible on the basis that a mesothelioma sufferer may be said to have suffered the mesothelioma partly as the result . of the fault of anyone who has exposed him to asbestos. In other words, the rule in Fairchild and Barker must have been viewed by the drafters in my opinion entirely understandably as establishing a causal link, between the exposure and the mesothelioma, sufficient for it to be said that the mesothelioma was the result of each (and every) exposure. A similar view is also implicit in the provisions of the Act drafted on the basis that insurers who would commonly of course be employers liability insurers would be among the persons by or for whose benefit or against whom contribution would be sought in cases of multiple responsible persons: see section 3(7)(b) and (10)(a) of the 2006 Act. Those provisions necessarily assume that employers liability insurances, written generally on a causation basis, would respond to Fairchild/Barker type liability incurred by employers. Ultimately, the present appeals raise the questions how the present employers liability insurance policies respond as a matter of construction in circumstances within the rule in Fairchild and Barker. Where two contracts are linked, the law will try to read them consistently with each other. This is so with language in a bill of lading, incorporated from a charterparty: The Njegos [1936] P 90. A similar approach applies to language in a reinsurance incorporated from the insurance: Forsikringsaktieselskapet Vesta v Butcher [1989] AC 852 and Groupama Navigation et Transports v Catatumbo CA Seguros [2000] 2 Lloyds Reports 350, even though there is no guarantee that a reinsurance will in every possible circumstance that may develop pick up every liability that may be held to exist under an insurance: see Wasa International Insurance Co Ltd v Lexington Insurance Co [2009] UKHC 40, [2010] 1 AC 180. The intention under the present insurances must be taken to have been that they would respond to whatever liability the insured employers might be held to incur within the scope of the risks insured and within the period in respect of which they were insured. Thus, as Scrutton and Greer LJJ accepted in the Ellerbeck Collieries case (paragraph 34 above), an employers liability insurance could have been expected to respond to the conventional and artificial definition in the WCAs as to what constituted an accident and when personal injury by accident or disease was sustained for the purposes of employers liability to employees. Furthermore, if the common law during or even after the currency of an insurance develops in a manner which increases employers liability, compared with previous perceptions as to what the common law was, that is a risk which the insurers must accept, within the limits of the relevant insurance and insurance period. Eady J correctly identified this in Phillips v Syndicate 992 Gunner [2003] EWHC 1084 (QB), [2004] Lloyds Insurance and Reinsurance Reports 426, 429 (left). The declaratory theory does not presume the existence of an ideal system of the common law, which the judges from time to time reveal in their decisions. But it does mean that, when judges state what the law is, their decisions do . have a retrospective effect in the sense that the law as stated will, generally speaking, be applicable not only to the case coming before [them] but, as part of the common law, to other comparable cases which come before the courts, whenever the events which are the subject of those cases: Kleinwort Benson Ltd v Lincoln CC [1999] 2 AC 349, 378G H, per Lord Goff. The declaratory theory is a pragmatic tool, essential when cases can only come before the court some time, perhaps some years after the relevant events occurred, and when the law [must] be applied equally to all, and yet be capable of organic change (p 379A). A similar principle must, generally speaking, apply in relation to a statute such as the Compensation Act 2006, which changes or corrects the common law to what Parliament perceives to be a more appropriate result for the purposes of all future cases coming before the courts, whenever the events giving rise to them. In the case of that Act, the result was one which the courts might as a matter of common law well have themselves accepted (and which indeed Lord Rodger in his powerful dissent in Barker v Corus believed that the common law had accepted) in Fairchild. Concluding, as I have done, that the present insurances covered employers liability for injuries or diseases caused during the relevant insurance periods, the question is whether they cover employers liability for mesothelioma arising under the rule in Fairchild and Barker from having exposed employees to asbestos during such periods. It is not in dispute that, if the rule is characterised as a rule of deemed causation, then the policies must respond. A parallel example, so familiar that it is easy to overlook, is the vicarious liability to an employee, A, which rests on any employer, B, who has not himself been negligent but must answer vicariously for the negligence of another employee, C. We have no hesitation in saying that the employer B has in such a case caused the injury or disease suffered by A. But this is so in reality only because a rule of law requires us to equate the acts or omissions of C with those of B. The argument, accepted by Lord Phillips, is that the rule in Fairchild and Barker is not one of deemed causation of or, therefore, liability for the disease, but one of liability for the risk created by the exposure. For reasons which I have set out, I regard this distinction as too simple. The liability arises only because of the incurring of the disease and is for the disease. A condition of such liability is that the employer (negligently) exposed the victim to asbestos. The insurance policies, read as operating on a causation basis, are aimed at covering liability generated by employers activities during their insurance periods: see paragraphs 18 28 and 41 above; unless liability for mesothelioma flowing from negligent exposure during an insurance period is covered by the policies, this aspect of employers activities will not in practice be covered at all. In my view, these considerations justify a conclusion that, for the purposes of the insurances, liability for mesothelioma following upon exposure to asbestos created during an insurance period involves a sufficient weak or broad causal link for the disease to be regarded as caused within the insurance period. It would, I think, have been anomalous and unjust if the law by deeming there to have been causation of the disease could have created policy liability (which is common ground), but the law by insisting that the liability in respect of mesothelioma was for the risk of causation achieved a quite different result. As I have sought to show, it is not in any event accurate to treat the liability as being either solely or strictly for the risk. The risk is no more than an element or condition necessary to establish liability for the mesothelioma. The reality, reinforced by provisions in the 2006 Act, is that the employer is being held responsible for the mesothelioma. For this purpose, the law accepts a weak or broad causal link. The link is to exposure which may but cannot be shown on the ordinary balance of probabilities to have played a role in the actual occurrence of the disease. But for the purposes of the policies the negligent exposure of an employee to asbestos can properly be described as having a sufficient causal link or being sufficiently causally connected with subsequently arising mesothelioma for the policies to respond. The concept of a disease being caused during the policy period must be interpreted sufficiently flexibly to embrace the role assigned to exposure by the rule in Fairchild and Barker. Viewing the point slightly more broadly, if (as I have concluded) the fundamental focus of the policies is on the employment relationship and activities during the insurance period and on liability arising out of and in course of them, then the liability for mesothelioma imposed by the rule in my opinion fulfils precisely the conditions under which these policies should and do respond. Conclusion I would therefore dismiss the appeals by insurers so far as they concern the policies with contracted wordings. I would allow the appeals against insurers, and dismiss the appeal by the Independent, so far as they concern policies with sustained wordings. ANNEX A The policy wordings (dates are approximate) (1) Excess First Wording (late 1940s): Whereas . (hereinafter called The Employer) carrying on the business of . has made a proposal . this Policy witnesseth that in consideration of the payment of . as premium to the Company on the estimated total amount, as set forth in the Schedule hereto, of the wages, salaries, and other earnings of Employees, a description of whom is set forth in the said Schedule (which premium is subject to adjustment as hereinafter provided) the Company agrees to indemnify the Employer in the manner following, namely That if at any time during the period commencing on theday of19 , and ending on theday of19 (both days inclusive) and for such further period or periods as may be mutually agreed upon, any employee in the Employer's immediate service shall sustain any personal injury by accident or disease while engaged in the service of the Employer in Great Britain, Northern Ireland, the Isle of Man or the Channel Islands, in work forming part of or process in the business above mentioned, and in case the Employer shall be liable to damages for such injury, either under or by virtue of the Common Law, the Fatal Accidents Acts 1846 to 1908, or the Law Reform (Miscellaneous Provisions) Act 1934, the Company will indemnify the Employer The Schedule required a description of the insured companys employees and their estimated total wages, salary and other earnings. Condition 1 of the policy further provided that: the Employer shall truly record in a wages book the name of every employee and the amount of wages, salary and other earnings paid to him. Second Wording (late 1950s to 1960s): Whereas the Employer . carrying on the business described in the . Schedule has made . a written proposal and declaration, containing particulars and statements which it is hereby agreed are the basis of this Contract . and has paid the premium mentioned in the Schedule, which premium is subject to adjustment as hereinafter provided, this Policy witnesseth that if at any time during the period of the indemnity as stated in the Schedule or during any subsequent period for which the Company may accept premium for the renewal of this Policy any person of a description mentioned in the Schedule who is under a contract of service or apprenticeship with the Employer shall sustain personal injury by accident or disease arising out of and in the course of employment by the Employer in work forming part of the process in the business mentioned in the Schedule, the Company will indemnify the Employer against liability at law for damages in respect of such injury or disease The policy provided that the Company should not be liable under it in respect of accidents occurring elsewhere than in Great Britain, Northern Ireland, the Isle of Man or the Channel Islands. The policy provided that premiums were to be regulated by the amount of wages, salaries, or other earnings paid to employees by the employer during each period of insurance, with a wages book being kept open to inspection for that purpose and the employer supplying the correct amounts within one month of the expiry of each insurance period. Condition 1 and the Schedule were in similar form to those in the first wording. Third Wording (1970 to 1976) After a recital in the same form as the second wording, this wording provided: that if at any time during the period of the indemnity as stated in the Schedule or during any subsequent period for which the Company may accept premium for the renewal of this Policy any person of a description mentioned in the Schedule who is under a contract of service or apprenticeship with the Employer shall sustain personal injury by accident or disease arising out of and in the course of employment by the Employer in the business mentioned in the Schedule, the Company will indemnify the Employer against liability at law for damages in respect of such injury or disease Under the third wording, there was the same territorial limitation as under the second wording in relation to accidents occurring elsewhere than in Great Britain, etc. Premiums were also regulated by reference to wages, salaries, etc. and condition 1 and the Schedule were in the same terms as in the second wording. (2) Independent Sole wording in Issue (1972 to 1987): This was a Contractors Combined Policy, covering Employers Liability (section 1), Public Liability (section 2) and Loss of or Damage to Contract Works (section 3). It provided: NOW THIS POLICY WITNESSETH that during the Period of Insurance or during any subsequent period for which the Company may accept payment for the continuance of this Policy and subject to the terms, exceptions and conditions contained herein and or endorsed hereon, the Company will indemnify the Insured as hereinafter specified. SECTION 1 EMPLOYERS' LIABILITY If any person who is under a contract of service or apprenticeship with the Insured shall sustain bodily injury or disease arising out of and in the course of his employment by the Insured in connection with the Contract specified or type of work described in the Schedule the Company will indemnify the Insured against all sums for which the Insured shall be liable at law for damages for such injury or disease The Policy provided that the Company was not to be liable for injury, illness, loss or damage caused elsewhere than in Great Britain, the Isle of Man or the Channel Islands. As a result of the ELCIA 1969 making insurance in respect of employers liability compulsory, the Independent wording also contained the further provision (the ELCIA extension provision): "AVOIDANCE OF CERTAIN TERMS AND RIGHT OF RECOVERY The indemnity granted by section 1 of this Policy is deemed to be in accordance with the provisions of any law relating to compulsory insurance of liability to employees in Great Britain. It is agreed the Insured shall repay to the Company all sums paid by the Company which the Company would not have been liable to pay but for the provisions of such law. " The policy Schedule contains spaces for entry of first, annual and minimum premium, as well as of the name of the Principal for whom the insured is undertaking work, the details of the contract or type of work covered by the policy and its situation. Condition 7 provides that the premium is based on estimates provided by the Insured, for record keeping, for the supply of updated information as required by the Company within one month of the expiry of each insurance period and for adjustment of the premium on that basis. (3) MMI First Wording (1949 to 1958) the Company hereby agrees that if at any time during the period of insurance specified in the schedule or thereafter during any subsequent period for which the Insured shall agree to pay and the Company shall agree to accept a renewal premium of the amount specified in the said schedule, or of such other amount as the Company shall from time to time require, any person under a contract of service with the Insured shall sustain any personal injury by accident or disease arising out of and in the course of his employment by the Insured in their activities described in the schedule and if the Insured shall be liable to pay damages for such injury or disease then, subject to the terms and conditions contained herein or endorsed hereon, the Company shall indemnify the Insured against all sums for which the Insured shall be so liable The policy was expressed not to apply to or include liability in respect of injury or disease caused elsewhere than in Great Britain, Northern Ireland, the Isle of Man or the Channel Islands. Condition 5 regulated premiums by reference to wages, salaries, etc, and made provision for a wages book and adjustment to like effect to the Excess second wording. The policy Schedule provided for the classification of staff and employees according to departments and job description, with corresponding figures for estimated total remuneration. Second Wording (1958 to 1974) the Company hereby agrees that if at any time during the First Period of Insurance specified in the said Schedule or during any subsequent period for which the Insured shall agree to pay and the Company shall agree to accept a renewal premium of the amount specified as the Renewal Premium in the said Schedule or of such other amount as the Company shall from time to time require, any person under a contract of service with the Insured shall sustain any bodily injury or disease arising out of and in the course of his employment by the Insured in the Insured's activities described in the said Schedule and if the Insured shall be liable to pay damages for such injury or disease or for death resulting from such injury or disease then, subject to the terms, exceptions and conditions contained herein or endorsed hereon or set out in the Schedule to this Policythe Company will indemnity the Insured against all sums for which the Insured shall be so liable. Like the first wording, this wording contained a territorial exclusion of liability in respect of injury or disease caused elsewhere than in Great Britain, etc. The policy Schedule provided for the entry of the Estimates (if any) on which the premium is calculated, including in particular any such estimate of wages, salaries, etc. paid to staff, and cross referred to condition 7, which provided that, if the premium had been based on any estimates, an accurate record should be kept (of actual amounts), the insured should provide insurers with such particulars and information as might be required within one month of the expiry of the policy period and the premium adjusted accordingly. Third Wording (1974 to 1992) The Company agrees to indemnify the Insured in respect of all sums without limit as to amount which the Insured shall be legally liable to pay as compensation for bodily injury or disease (including death resulting from such bodily injury or disease) suffered by any person under a contract of service or apprenticeship with the Insured when such injury or disease arises out of and in the course of employment by the Insured and is sustained or contracted during the currency of this Policy. The policy Schedule contemplated a premium adjustable in accordance with condition 5, which in turn provided (in like manner to condition 7 of the second wording) for the adjustment of any premium so calculated by reference to actual amounts at the end of the policy period. (4) BAI First Wording (1953 to 1974) . the Company willindemnify the Insured against all sums of money which the Insured may become liable to pay to any Employee engaged in the direct service of the insured or any dependent of such Employee in respect of any claim for injury sustained or disease contracted by such Employee betweenandboth inclusive The policy carried the note: This policy does not cover the insureds liability for accidents to workmen arising outside the United Kingdom. Conditions 1 and 2 made elaborate provision for the regulation of premiums by the amount of wages, salaries, or other earnings paid to employees by the employer during each period of insurance, with pay sheets and books of account being kept open to inspection for that purpose and the employer making a return, and the premium being adjusted, subject to a minimum, at the end of each insurance period. Second Wording (1974 to 1983) the Company willindemnify the Insured against all sums of money which the Insured may become legally liable to pay in respect of any claim for injury sustained or disease contracted by any person engaged in and upon the service of the Insured and being in the Insured's direct employment under a Contract of Service or Apprenticeship between theday ofand theday ofboth inclusive This wording also excluded insurers from liability in respect of accidents to employees arising outside the United Kingdom. Like the Independent and third MMI wordings, the BAI second wording also included the ELCIA extension provision. Conditions 1 and 2 provided for the regulation and adjustment of premiums by reference to actual wages, salaries, etc. during each insurance period, in like terms to conditions 1 and 2 in the first wording. (5) Zurich The Municipal First Select wording (1993 to 1998) The INSURER will indemnify the INSURED in respect of all sums which the INSURED may become legally liable to pay as damages and claimants' costs and expenses in respect of Injury sustained during the Period of Insurance by any EMPLOYEE arising out of and in the course of employment by the INSURED in the BUSINESS within the Geographical Limits. The Municipal Second Select wording (1998 ) The INSURER will indemnify the INSURED in respect of all sums which the INSURED may become legally liable to pay as damages and claimants' costs and expenses in respect of Injury caused during the Period of Insurance to any EMPLOYEE arising out of and in the course of employment by the INSURED in the BUSINESS within the Geographical Limits. The tariff wording (1948 ) if any person under a contract of service or apprenticeship with the Insured shall sustain any personal injury by accident or disease caused during the period of insurance and arising out of and in the course of his employment by the Insured in the business above mentioned and if the Insured shall be liable to pay damages for such injury or disease the Association shall indemnify the Insured against all sums for which the Insured shall be so liable. LORD CLARKE Like other members of the Court, I agree with Lord Mance on the construction issue. Thus I agree that, for the purposes of the EL policies, mesothelioma is sustained or contracted when the process that leads to the disease is initiated as a result of the wrongful exposure of the employee to the asbestos fibre or fibres which cause the disease. I do not wish to add to Lord Mances reasoning on the construction issue. I do however wish to add some words of my own on the causation issue which sharply divides Lord Phillips and Lord Mance. I wish to say shortly why I prefer the conclusion of Lord Mance to that of Lord Phillips. As I see it, the effect of Fairchild, Barker and Sienkiewicz may be summarised in this way. An employer who, in breach of duty, has exposed an employee to asbestos is liable in damages if the employee subsequently suffers the disease. The employees cause of action is not that he was exposed to the risk of mesothelioma. He has no claim unless he in fact suffers the disease. It is the disease which represents the damage which completes the cause of action and it is only then that his cause of action accrues and the relevant time limit begins to run. It is axiomatic that, in order to succeed in tort, the employee must show a sufficient causal link between the breach of duty, namely the exposure to asbestos, and the disease which represents the damage, namely mesothelioma. The effect of the majority opinion in Barker is that, where there are two or more employers who have exposed the claimant to the risk of mesothelioma, they are not jointly and severally liable to the claimant for the whole of the consequences of the disease but only severally liable for an aliquot part. That decision was reversed by the Compensation Act 2006, so that such employers are jointly and severally liable for the whole of the consequences. The question in this appeal is whether the employers liability insurers are liable to indemnify the employers in respect of that liability. It would in my opinion be a remarkable result if they were not. Lord Phillips notes at para 109 that Mr Edelman QC accepted that, if the correct analysis of the special rule, which (using Lord Phillips definitions) was the result of the combined effect of the special approach in Fairchild and Barker and the Compensation Act 2006, was that the employers were deemed to have caused mesothelioma by exposing the employees to asbestos dust, the insurers would be liable. Lord Phillips accepts that that concession was correctly made. I agree, for the reasons he gives at paras 109 to 114. The question is therefore whether the correct analysis of the special rule is indeed that the employers were deemed to have caused the mesothelioma. I accept that in such a case the employee cannot show on the balance of probabilities that the employers negligence caused the disease. The effect of Fairchild and Sienkiewicz was however that the employer is liable where the exposure contributed to the risk that the employee would suffer the disease and where the employee in fact suffers the disease. That is not in dispute. Lord Phillips says at para 124 that the majority in Barker drew the vital distinction between being liable for contributing to the cause of the disease and being liable for the creation of the risk of causing the disease. He quotes para 2 of Lord Hoffmanns speech as follows: Is any defendant who is liable under the exception deemed to have caused the disease? On orthodox principles, all defendants who have actually caused the damage are jointly and severally liable. Or is the damage caused by a defendant in a Fairchild case the creation of a risk that the claimant will contract the disease? In that case, each defendant will be liable only for his aliquot contribution to the total risk of the claimant contracting the disease a risk which is known to have materialised. Lord Phillips further notes that at para 125 Lord Hoffmann advanced the thesis that the basis of liability was the wrongful creation of the risk or chance of causing the disease and that the damage that the defendant should be regarded as having caused was the creation of such risk or chance. See also the passages to like effect referred to by Lord Mance at para 61. I accept that Lord Hoffmann and others did indeed advance that view of Fairchild but it is I think important to note that it was in the context of the question whether, in a case of two or more employers, each was severally liable for a proportion of the consequences of the mesothelioma or whether each was jointly and severally liable for the whole. Lord Hoffmann cannot have intended to hold, without more, that the basis of liability was the wrongful creation of the risk or chance of causing the disease because there would be no liability at all but for the subsequent existence of the mesothelioma. It seems to me that, whether the majority in Barker were correct or not, there is no escape from the conclusion that, in all these cases, where it is not possible to show that the particular employer caused the claimant to suffer mesothelioma, the underlying question is who should be held responsible for causing the mesothelioma which in fact struck down the employee. None of the cases is authority for the proposition that causation is irrelevant. On the contrary, the quest is for the employer who can fairly be held liable for the consequences of the disease and therefore for the employer who can fairly be said to have caused the disease. The courts have embarked on similar quests over the years. Lord Mance has given a number of examples. As Lord Mance shows at para 56, they include Bonnington and McGhee, where Lord Reid was prepared to take a broad view of causation and Lord Wilberforce rejected a traditional approach for policy or evidential reasons. In my opinion the reasoning in Sienkiewicz is of some significance in this context. Lord Mance has given the relevant references in para 61. Thus, as Lord Mance observes, at para 61 Lord Phillips said that Fairchild and Barker had developed the common law by equating materially increasing the risk with contributing to the cause in specified and limited circumstances. Lord Mance further refers to Lord Brown speaking of a more relaxed approach to causation and flexibility in the approach to causation at paras 178 and 187. Lord Mance had himself referred to Fairchild and Barker as involving a special rule of causation at para 188, and Lord Kerr referred to them as involving a modification of the previously applicable legal rules in relation to the causation element in employers liability claims at para 196 and to adjustments in the burden of proof at paras 198 and 200. Again, as Lord Mance observes at para 61 above, Lord Dyson referred (at para 207) to materially increasing the risk of contracting the disease as sufficient to satisfy the causal requirements for liability (para 207). Both Mr Beloff QC and Mr Stuart Smith QC addressed these issues in their oral submissions. They both in effect submitted that the effect of Fairchild, Barker and Sienkiewicz was that the employers were deemed to have caused mesothelioma by exposing the employees to asbestos dust. They both recognised that the ordinary rule of causation could not apply and that some element of policy or doctrine was required in order to explain Fairchild. Mr Stuart Smith submitted that the effect of Fairchild was that each material exposure to asbestos dust is doctrinally held responsible for the mesothelioma. Mr Beloffs submission was to much the same effect. He relied upon a dictum of Lord Walker in Barker at para 109: A rule of law by which exposure to risk of injury is equated with legal responsibility for that injury entails the possibility that an employer may be held liable for an injury which was not in fact caused by that exposure (though in the present state of medical science, that fact can be neither proved nor disproved). The injury is of course the mesothelioma, which is necessary to complete the cause of action. On that basis it seems to me that Lord Walkers statement that the risk of injury is equated with legal responsibility for the injury is in effect to say that, by creating the risk of mesothelioma in the future, the employer is deemed to have caused the mesothelioma, if it should develop in the future. It appears to me that these conclusions are supported by Lord Mances analysis of section 3 of the Compensation 2006 at paras 67 and 68, with which I agree and to which I do not wish to add anything. Given Mr Edelmans concession that, if that is correct, the employers are liable under the policies (and this Courts acceptance of it) I would hold that the causation point does not assist the insurers. I would only add this. It appears to me that, once it is held that, on these facts, the employers are liable to the employees, it would be remarkable if the insurers were not liable under the policies. Rather as in AXA, the whole purpose of the policies was to insure the employers against liability to their employees. That purpose would be frustrated if the insurers submissions on this point were accepted. I agree with Lord Mance, for the reasons he gives at paras 69 73 that these policies respond to these claims. For these reasons, I too would dismiss the appeals by insurers so far as they concern the policies with contracted wordings. I would allow the appeals against insurers, and dismiss the appeal by the Independent, so far as they concern policies with sustained wordings. LORD DYSON I too agree with Lord Mance on the construction issue. As to the causation issue, I agree with the reasoning of Lord Mance and Lord Clarke. Accordingly, I would dismiss the appeals by insurers in so far as they concern the policies with contracted wordings. I would allow the appeals against insurers, and dismiss the appeal by the Independent, so far as they concern policies with sustained wordings. LORD PHILLIPS Introduction So called long tail industrial diseases have raised peculiar difficulties in the field of tort. These diseases result from the effect on the body of exposure to noxious substances. The effect can be long, drawn out and mysterious, in as much as medical science has not yet identified the precise mechanism, or chain of causation, by which the noxious substance causes the disease. Mesothelioma is a long tail disease in which the problems raised have been particularly acute. The problems arise in the application of principles of law that do not ordinarily give rise to difficulty. An employer will be liable in damages if by an act or omission that is negligent or in breach of statutory duty he causes physical harm to an employee. In the vast majority of cases there will be no difficulty in identifying the moment at which the negligence or breach of duty causes the physical harm, for the harm will take the form of an obvious injury. This is not the position in respect of mesothelioma. Asbestos dust, inhaled into the lungs, is the agency that causes mesothelioma, but as long as forty or fifty years may elapse before the effects on the body of dust inhaled culminate in symptoms of mesothelioma. Once the symptoms are felt, the disease will develop swiftly to bring about an inevitable and extremely unpleasant death. Where a victim of mesothelioma was exposed to asbestos dust over a period of years it is impossible, even with hindsight, to determine on balance of probabilities whether dust inhaled in a particular year caused or contributed to the development of the mesothelioma. It follows that, where the victim worked for a series of employers, each of whom exposed him to asbestos dust, it is impossible to prove on balance of probability that any particular employer caused or contributed to the victims mesothelioma. This means that the normal principles of the law of tort provide no remedy to the employee or his dependants. The manifest injustice of this position led the House of Lords in Fairchild v Glenhaven Funeral Services Ltd [2002] UKHL 22; [2003] 1 AC 32 and Barker v Corus UK Ltd [2006] UKHL 20; [2006] 2 AC 572 to create what I shall describe as a special approach to causation in respect of mesothelioma, whose effect was immediately varied by Parliament by section 3 of the Compensation Act 2006. I shall describe the composite result achieved by the House of Lords and Parliament as the special rule. I shall examine the nature of this special rule in due course. Its effect was, however, to place each employer in the same position as that employer would have been under at common law if it were proved, on balance of probability, that its negligence or breach of duty in exposing the employee to asbestos dust had contributed to causing the employees mesothelioma. These developments of the law of tort have formed the backdrop to the issue that has occupied almost all of the eight days that this Court has devoted to this appeal. I shall call this issue the construction issue. The construction issue relates to the true construction of a number of policies of insurance against employers liabilities (EL policies) with similar, but not identical, provisions as to the cover provided. The EL policies provided cover by reference to specific periods usually of a year. The central issue relates to the event or events that, on true construction of each policy, had to occur within the period of the policy in order to render the insurer liable to indemnify the employer in respect of liability for causing an employees mesothelioma. The policies provided cover in respect of diseases sustained or contracted during the period of the policy. The meaning of each of those words, in its context, lies at the heart of the construction issue. It does not seem that the construction issue initially received a great deal of consideration. Insurers treated the policies as if they covered an employer whose breach of duty within the period of the policy had contributed to causing the disease and regarded this requirement as satisfied if the employer was held liable because he had exposed the employee to asbestos dust during that period. Where more than one insurer was liable on this basis, they apportioned liability according to the period of exposure covered by each. The attitude of four of the five insurers party to this appeal changed as a result of the decision of the Court of Appeal in Bolton Metropolitan Borough Council v Municipal Mutual Insurance Ltd [2006] EWCA Civ 50; [2006] 1 WLR 1492. Those insurers are MMI, Excess, BAI and Independent, each of which is in run off. I shall describe them collectively as the insurers. Their opponents I shall describe collectively as the employers, although they embrace solvent employers, individuals claiming under the Third Party (Rights against Insurers) Act 1930, and Zurich, which has a community of interest with these. Bolton concerned the scope of cover of a public liability policy (PL policy) in relation to liability for causing mesothelioma. The policy provided cover in respect of an injury that occurs during the currency of the policy. The argument proceeded on the premise that the chain of causation of mesothelioma, once it was diagnosed, could be traced back to the initial inhalation of asbestos dust. The issue was whether the mesothelioma could properly be said to have occurred at the time of the initial inhalation. The Court of Appeal held that it could not. The injury only occurred, at earliest, at the stage of development of the disease at which malignancy occurred. This was, on the evidence, ten years, give or take a year, from the date on which it became possible to diagnose the existence of the tumour but very many years after the initial inhalation of asbestos dust. This decision led the insurers to take the point that a similar approach should be taken to the interpretation of the cover afforded by the EL policies. Mesothelioma was not, on true construction of the policies, sustained or contracted at the time of the initial inhalation of asbestos dust. It was only sustained or contracted at the much later stage when, as a consequence of the process initiated by asbestos dust, an actionable injury in the form of malignancy, developed. Before Burton J, the Court of Appeal and this Court the construction issue has been argued at great length and in great detail. I agree, as do the other members of the Court, with the conclusions reached by Lord Mance on the construction issue. These conclusions have application not merely to mesothelioma but to employers liabilities in relation to other long tail industrial diseases such as asbestosis and pneumoconiosis. For the purpose of EL policies, these diseases are sustained or contracted when the process that leads to the disease is initiated as a result of the wrongful exposure of the employee to the noxious substance that causes, or contributes to the cause or the extent of, the disease. Throughout the hearing of this appeal there has lurked a second issue. It has not been the subject of argument below, nor does it feature in the agreed Statement of Facts and Issues. This is, perhaps, because it relates to a point that does not arise out of Bolton. It has always been there for the taking, but insurers have not hitherto chosen to raise it, perhaps because its consequences are unattractive. It arises out of a problem that is similar to that which led the House of Lords to formulate the special approach in Fairchild and Barker. It is not possible for an employer to prove that an employees mesothelioma was, in fact, caused in whole or in part by any particular period of exposure to asbestos dust. Thus the employer cannot prove, on balance of probability, that the mesothelioma for which he has been held liable under the special rule was, in fact, initiated in any particular policy year. How, then, can he prove that his liability falls within the scope of the cover, even if the policy bears the construction contended for by the employers and upheld by this Court? How can he prove that his liability arises out of disease sustained or contracted within the policy period, giving these words the same meaning as initiated? I shall call this issue the causation issue. The causation issue and the judgments below Although the causation issue was not raised in argument below, it was dealt with, at least implicitly, in the judgments of both courts. Burton J at first instance, and Rix and Stanley Burnton LJJ in the Court of Appeal proceeded on the basis that, in the case of a mesothelioma victim, exposing the victim to asbestos dust could be treated as equivalent to causing his disease. This approach was based on the special rule. Thus Burton J at paras 42 to 58 summarised, without significant comment, what he described as the special mesothelioma jurisprudence as it was at the time of his judgment. This included Fairchild, Barker and the 2006 Compensation Act. He thereafter proceeded on the basis that exposing a mesothelioma victim to asbestos dust could be treated as having been equivalent to causing the victim to contract the disease. Thus, when summarising his conclusions at para 243 he said: I conclude, in relation to the policies in issue before me, that they respond, just as would policies with caused wording, to claims against insurers where employers are liable on the basis of inhalation by employees during the policy period. They respond, consistently with other EL policies, in respect of mesothelioma claims, on an exposure basis. For the purposes of these policies, injury is sustained when it is caused and disease is contracted when it is caused, and the policies fall to be so construed. Rix LJ drew a distinction between the meaning of contracted and sustained. Contracted referred to the time of the diseases causal origins para 245. He felt constrained by Bolton, however, to hold that no injury was sustained until the disease reached the malignant stage. Implicit in his judgment was the premise that exposure to asbestos dust during the period of the policy could be treated as the causal origin of the disease see for example his comments at para 244. A difficult passage in his judgment at paras 280 283, when considering the meaning of injury, suggests that this premise was founded on the special rule. Thus he was able to conclude that the disease was contracted at the time that the victim was exposed to asbestos dust albeit that injury was not sustained at that point. In a short judgment Stanley Burnton LJ adopted similar reasoning. He stated, at para 338: We are agreed that in any year in which there was substantial exposure to asbestos, mesothelioma was caused by that exposure during that year. The fact that the disease did not develop for some years does not break the chain of causation. Submissions on the causation issue The causation issue was not raised by the insurers as a discrete issue. It none the less surfaced in a passage of the written case for Excess that was addressing the employers case that personal injury by disease was sustained at the moment of inhalation of asbestos dust that triggered the process of sustaining personal injury by disease. One of the arguments advanced by Excess in answer to this submission read as follows: Medically and empirically, one cannot be said to have suffered an injury on a particular day because it cannot be known in (say) a 10 year occupational exposure period on which of the 3652 days the fatal dose was inhaled (and it may be on more than one). It is likely that any ingestion on a particular day was irrelevant to the development of the final condition. There has been a tendency on the part of the claimants to treat inhalation as a single event from which an unbroken line can be drawn to malignancy. It is not. Inhalation (and hence on this theory) injury may occur over several thousands of days. Each day does not bring injury. Any particular day cannot therefore be selected as injury day. To overcome problems of medical causation in a personal injury action against an employer, the House of Lords extended the McGhee principle to mesothelioma in Fairchild. However this was a rule of causation and not definition. There is no such rule in insurance policies which defines what amounts to an injury. The Supreme Court in Sienkiewicz stressed the limits of the Fairchild exception in no uncertain terms, and it is submitted that it would be quite wrong for it now to invade the law of contract. A liability policy responds only to indemnify against a liability (i.e. actionable injury). There is no such liability on inhalation. Injury occurs when the claimant has a personal injury by disease. Thus Excess took the point that the special rule could not properly be invoked to establish that, on true construction of the contracts of insurance, injury was sustained upon inhalation of asbestos dust. This passage appeared after a submission at para 209 that it was only possible to equate the inhalation of a culpable quantity of asbestos dust with sustaining personal injury by disease by, inter alia, creating a special rule governing the response of EL policies in respect of mesothelioma, and possibly other long tail diseases. This proved to be what counsel for the employers sought to do when invited by the Court to address the causation issue. They did so in short oral submissions that cannot, when taken together, have occupied more than half an hour of the eight day hearing. The relevant submissions made by Mr Beloff QC for Akzo and AMEC and the Local Authorities are reported at pp 120 122 of the transcript for 15 December 2011. He started by observing that we had to cut the Gordian knot. He suggested that we should do so by equating creation of a risk with causing bodily injury. This he submitted was permissible because the object of the policy was to provide cover to an employer who, in breach of duty to employees, caused them compensatable damage. Were this approach not adopted, it would be impossible to show that any of a number of insurers providing cover over a period of years was liable. The law should rebel against such a result. In support of this submission Mr Beloff cited a statement by Lord Walker of Gestingthorpe in Barker at para 109 suggesting that the special approach to mesothelioma equated the exposure to the risk of injury with legal liability for the injury. Mr Stuart Smith QC for Zurich dealt with the causation issue at rather greater length in a passage reported at pp 126 to 131 of the same transcript. He started by accepting that it was impossible to know when the metabolic changes that led to the development of mesothelioma in fact occurred. Fairchild dealt with this problem by creating a doctrinal rule under which each significant exposure to asbestos dust was held to be responsible for the mesothelioma. Thus doctrinally the process of developing mesothelioma started upon inhalation. This doctrinal framework for the application of the law of tort was that within which policies of insurance against tortious liability had to operate. Mr Stuart Smith agreed with this summary of his argument advanced by Lord Mance: If the law of tort treats someone, an employee, as having sustained a personal injury and treats the employer as liable to pay damages for such personal injury, then the policy answers. These submissions on behalf of the employers raise the following questions: i) Will the policies respond to fictional or doctrinal events that are deemed to have occurred under the special rule? If so: ii) Does the special rule deem that events have occurred to which the policies should respond? If not: iii) Can this Court properly reformulate the special rule in such a way as to require the policies to respond? Will the policies respond to fictional or doctrinal events? On the premise that he failed on the construction issue, Mr Edelman accepted that, if the correct analysis of the special rule was that the employers were deemed to have caused the mesothelioma by exposing the victims to asbestos dust, then the policies should properly respond. Because of the view that I take of the next two questions I do not need to decide whether the concession was properly made. I have, however, concluded that it was. The policies exist to provide protection against employers liability in tort. If the law of tort, whether laid down by the courts or by Parliament, resorts to legal or doctrinal fictions, it seems logical that the policies should respond as if the fictions were facts. A purposive approach to construction of the policies would lead to this result. Two examples illustrate this approach. Ellerbeck Collieries Ltd v Cornhill Insurance Co Ltd [1932] 1 KB 401 involved a policy of insurance against liability under the Workmens Compensation Act 1925. The terms of the policy entitled the employer to indemnity if at any time during the currency of the insurance any employee sustained any personal injury by accident or disease. The 1925 Act imposed a fictitious test for identifying when an industrial disease was sustained, namely the date on which a certifying surgeon issued a certificate that the employee was suffering from the disease. On the strength of a certificate issued within the currency of a policy of insurance an employer was held liable to two workmen who had, in fact, sustained the relevant disease before the period of the insurance began. The Court of Appeal held that this liability fell within the cover of the policy. The argument for applying the fictional date was a strong one because, as Greer LJ observed at p 417, the policy was intended to cover the employers liability under the Act. The parallel between Ellerbeck and the present case would have been stronger had the relevant policies been taken out after the special rule had been created. In Rothwell v Chemical & Insulating Co Ltd [2007] UKHL 39, [2008] AC 281 the House of Lords held that pleural plaques caused by exposure to asbestos dust did not constitute actionable injury because they produced no adverse physical effects. The Scottish Parliament responded to this decision by introducing the Damages (Asbestos related Conditions) (Scotland) Act 2009 (the Scottish Act). That Act provides by section 1 that asbestos related pleural plaques constitute a personal injury which is not negligible and that accordingly they constitute actionable harm for the purpose of an action for damages for personal injury. In AXA General Insurance Ltd v HM Advocate [2011] UKSC 46, [2011] 3 WLR 871 the Supreme Court rejected a challenge by insurers to the lawfulness of this Act. The Scottish Act effected a limited alteration to the common law in decreeing that asymptomatic pleural plaques constituted non negligible personal injury and thus actionable damage. Lord Mance at para 88 suggested that the main target of the legislation was employers insurers. He went on at para 89 to consider whether the Act would, in fact, alter the meaning to be given to bodily injury under a policy of insurance: A Scottish Act will not on the face of it change the legal effect of an English insurance contract, even in Scotland. However, depending upon the particular policy language, the scope of the concept of bodily injury under a worldwide policy may respond to different conceptions of bodily injury in different parts of the world. Here, the question would be whether it would respond to a development or change, such as that introduced retrospectively by the 2009 Act, in the conception of bodily injury. I say no more about the answer, which may be elicited in another context or suit. While Lord Mance left open the effect of the Scottish Act on the construction of policies of liability insurance, Lord Brown was in no doubt that the effect of the Scottish Act was to subject insurers to liabilities to which they would not have been subject prior to that Act. He referred at para 80 to the undoubted, and deliberate, impact of the legislation upon pending claims. Earlier, at para 77, he drew an analogy with the effect of the decision in Fairchild on EL insurers liability: Had the House of Lords in Rothwell decided that asymptomatic pleural plaques of themselves constitute a non negligible personal injury and thus actionable damage decided in other words that in this particular context the common law should develop in this admittedly novel way the appellants would doubtless have deplored the decision but they could certainly not have questioned its legitimacy. No doubt they would have resented the fact that, as a consequence of the decision, they would unexpectedly have had to pay out on claims resulting from the employees exposure to asbestos upwards of 20 years (quite likely up to 40 years) previously. But they could no more have advanced an [article 1, Protocol 1] challenge to this development of the law than they could have challenged the House of Lords decision some four years earlier in Fairchild v Glenhaven Funeral Services Ltd [2003] 1 AC 32 to adopt a less stringent than the usual but for test for establishing the necessary causal connection between an employers negligence and a claimants condition in, most notably, mesothelioma cases. Employers (and their liability insurers) necessarily take the risk of the common law developing in ways which may adversely affect them with regard to personal injury claims. In this passage Lord Brown assumed that the effect of Fairchild was to bring employers liabilities in respect of mesothelioma within the scope of the cover afforded by EL policies. I am about to consider whether he was correct in this. I agree, however, with the general principle expressed in the last sentence of the extract from his judgment that I have just cited. It is for this reason that I would give an affirmative answer to the first of the three questions posed at para 108 above. I turn to the second. What is the special rule? The employers submissions on the causation issue proceed on the premise that the special rule deems exposure to asbestos dust of an employee who is subsequently diagnosed with mesothelioma to have been a cause of the mesothelioma. I have reached the conclusion that that premise is unsound. In Sienkiewicz v Greif (UK) Ltd [2011] UKSC 10; [2011] 2 AC 229 I summarised the special rule as follows at para 1: When a victim contracts mesothelioma each person who has, in breach of duty, been responsible for exposing the victim to a significant quantity of asbestos dust and thus creating a material increase in risk of the victim contracting the disease will be held to be jointly and severally liable for causing the disease. This is certainly the effect of the special rule, but in order to discover the juridical basis of the rule it is necessary first to identify the basis of the special approach adopted by the House of Lords in Fairchild and Barker and then to consider the effect of section 3 of the Compensation Act, which adapted the special approach into the special rule. The special approach In Sienkiewicz, at para 70, I stated that Fairchild and Barker developed the common law by equating materially increasing the risk with contributing to the cause in specified and limited circumstances, which include ignorance of how causation in fact occurs. As I shall show, this was not an accurate summary of the special approach adopted in those cases. In Fairchild the House of Lords confronted the position where a mesothelioma victim had worked consecutively for a number of employers, each of which had exposed him to asbestos dust. One or more of these had caused his mesothelioma, but because of the limits of medical knowledge it was not possible, on balance of probability, to identify which. In these circumstances their Lordships adopted a special approach that enabled them to find that each of the employers was jointly and severally liable for the mesothelioma. In doing so they purported to be following a similar approach adopted by the House of Lords in McGhee v National Coal Board [1973] 1 WLR 1. They were not, however, all agreed as to the basis of that approach. Lord Hutton, at para 109, held that it was based on the drawing of a factual or legal inference leading to the conclusion that the breach of duty [in exposing the employee to asbestos dust] was a cause of the disease. The majority of the House did not agree. Lord Bingham said, at para 35: I prefer to recognise that the ordinary approach to proof of causation is varied than to resort to the drawing of legal inferences inconsistent with the proven facts. Lord Nicholls of Birkenhead said, at para 42: So long as it was not insignificant, each employer's wrongful exposure of its employee to asbestos dust, and, hence, to the risk of contracting mesothelioma, should be regarded by the law as a sufficient degree of causal connection. This is sufficient to justify requiring the employer to assume responsibility for causing or materially contributing to the onset of the mesothelioma when, in the present state of medical knowledge, no more exact causal connection is ever capable of being established." Lord Hoffmann at para 65 rejected the suggestion that the House in McGhee held that materially increasing the risk of the disease should be treated as equivalent to material contributing to the injury. He concluded: I would respectfully prefer not to resort to legal fictions and to say that the House treated a material increase in risk as sufficient in the circumstances to satisfy the causal requirements for liability. Lord Rodger of Earlsferry did not agree. His reasoning was close to that of Lord Hutton. He held, at para 168: Following the approach in McGhee I accordingly hold that, by proving that the defendants individually materially increased the risk that the men would develop mesothelioma due to inhaling asbestos fibres, the claimants are taken in law to have proved that the defendants materially contributed to their illness. What then happened has been summarised by Lord Hoffmann in Perspectives on Causation (2011) at p 8: There are two ways in which one could characterise this change in the substantive law of negligence. One is to say that the causal requirements for an action for damages for mesothelioma have been changed; all that is necessary is to prove that the risk has been increased and that the specific exposure may have provided the actual agent. The other is to say that the House created, exceptionally, a cause of action for the increased risk of mesothelioma rather than for the disease itself. In the former case, satisfying the new causal requirement would entitle the claimant to sue for the whole injury caused by contracting the disease. In the latter case, he would be able to sue only for the loss caused by the risk of his contracting the disease having been increased. That would be a proportion of the injury caused by the disease, depending on the extent to which the risk had also been created by other causes. In Barker v Corus the House of Lords (Lord Rodger of Earlsferry dissenting) adopted the second explanation of what had happened in Fairchild. I believe that this summary of the position is essentially correct. The majority in Barker were persuaded that justice would best be served if the special approach adopted in Fairchild were applied in such a way as to render each defendant who had wrongfully exposed the claimant to asbestos dust severally liable for that proportion of the mesothelioma that represented the proportion of the wrongful exposure attributable to that defendant. This was achieved by holding that the liability of each defendant resulted from adding to the risk that the employee would contract mesothelioma. It did not result from an implication that each defendant had actually contributed to the cause of the disease. At the start of his speech at para 2 Lord Hoffmann drew the vital distinction between being liable for contributing to the cause of the disease and being liable for the creation of the risk of causing the disease: Is any defendant who is liable under the exception deemed to have caused the disease? On orthodox principles, all defendants who have actually caused the damage are jointly and severally liable. Or is the damage caused by a defendant in a Fairchild case the creation of a risk that the claimant will contract the disease? In that case, each defendant will be liable only for his aliquot contribution to the total risk of the claimant contracting the disease a risk which is known to have materialised. Lord Hoffmann went on to adopt the latter analysis as the basis of liability in Fairchild. At para 31 he held that the majority in Fairchild had not proceeded upon the fiction that a defendant who had created a material risk of mesothelioma was deemed to have caused or materially contributed to the contraction of the disease. The creation of a material risk of mesothelioma was sufficient for liability. At para 35 he advanced the thesis that the basis of liability was the wrongful creation of the risk or chance of causing the disease and that the damage that the defendant should be regarded as having caused was the creation of such risk or chance. Liability for the mesothelioma that developed should be apportioned according to the contribution that each defendant made to the risk that mesothelioma would be contracted. Lord Scott of Foscote and Lord Walker of Gestingthorpe expressly agreed with both Lord Hoffmanns conclusion that liability for the mesothelioma fell to be apportioned and with his reasons for so concluding. Lord Scott held at para 53 that it was essential to keep firmly in mind that liability in Fairchild was not imposed on any of the defendant employers on the ground that the employers breach of contract had caused the mesothelioma. That causative link had not been proved against any of them. It was imposed because each, by its breach of duty, had materially contributed to the risk that the employee would contract mesothelioma. At para 61 he emphasised that the Fairchild principle was not based on the fiction that each defendant had actually caused the eventual outcome. It was based on subjecting the victim to a material risk. Lord Walker, having stated that he was in full agreement with Lord Hoffmanns reasons went on at para 104 to make a statement that was inconsistent with them, this being to the same effect as the statement relied on by Mr Beloff see para 106 above. Lord Walker stated that the decision in Fairchild equated exposing the victim to the risk of injury with causing his injury. This was the same mistake as I made in Sienkiewicz see para 117 above. Had this been the case, each defendant would have been jointly and severally liable for the injury. Lord Walker went on to say, however, that the result in Fairchild was achieved, not by some fiction, but as an explicit variation of the ordinary requirement as to causation. At para 113 he stated that Fairchild was decided by the majority, not on the fictional basis that the defendants should be treated as having caused the victims damage, but on the factual basis that they had wrongfully exposed him to the risk of damage. Lady Hale did not adopt Lord Hoffmanns thesis that the creation of risk constituted the damage for which each defendant was liable. In general, however, she agreed with the majority. She held that in Fairchild, for the first time in our legal history defendants were made liable for damage even though they might not have caused it at all. It was not said that the defendants had caused or materially contributed to the harm. All that could be said was that each had contributed to the risk of harm. In these circumstances it was sensible and fair to apportion liability for the harm in proportion to the contribution that each had made to the risk of harm. Lord Rodger of Earlsferry vigorously dissented from the reasoning of the majority and from the result in so far as it apportioned liability. He observed at para 71 that the majority were not so much reinterpreting as rewriting the key decisions in McGhee and Fairchild. At para 85 he stated that the new analysis that the House was adopting would tend to maximise the inconsistencies in the law. I have some sympathy with the observations of Lord Rodger. It would, I think, have been possible for the House in Barker to have defined the special approach in Fairchild as one that treated contribution to risk as contribution to the causation of damage. The important fact is, however, that the majority did not do so. They were at pains to emphasise that the special approach was not based on the fiction that the defendants had contributed to causing the mesothelioma. Liability for a proportion of the mesothelioma resulted from contribution to the risk that mesothelioma would be caused and reflected the possibility that a defendant might have caused or contributed to the cause of the disease. This was no obiter expression of opinion. It formed the basis of the substantive decision that liability was severable and not joint. The special rule The special approach rendered each employer who had wrongfully exposed a mesothelioma victim to asbestos dust liable for a proportion of the mesothelioma without creating any inference or legal fiction that the employer in question had actually contributed to causing the disease. Section 3 of the Compensation Act altered the position by imposing joint and several liability on those who were only severally liable under the special approach. Did the special rule that resulted involve a different basis of liability to that which formed the basis of the special approach? This question is considered by Jonathan Morgan in his interesting Chapter 4 of Perspectives on Causation headed Causation, Politics and Law: The English and Scottish Asbestos Saga. At p 79 he poses the following question: Has Parliament, by implication, therefore also reversed Lord Hoffmanns principled reinterpretation of Fairchild? Is the nature of Fairchild liability now after all for causing mesothelioma and not increasing risk? Mr Morgan gives a negative answer to this question, expressing the view that Barker has altered the jurisprudential basis of the Fairchild liability irrevocably. I agree that section 3 of the Compensation Act did not alter the jurisprudential basis of the special approach laid down by the House of Lords in Fairchild and Barker. All that it did was to alter the effect of the special approach by making each defendant jointly and severally liable for the whole of the injury sustained. Section 3(1) provides that the section applies where (c) because of the nature of mesothelioma and the state of medical science, it is not possible to determine with certainty whether it was the exposure [for which the defendant was responsible]or another exposure which caused the victim to become ill, and (d) the responsible person is liable in tort(whether by reason of having materially increased a risk or for any other reason). It is not possible to read section 3 as imposing a different basis of liability to that identified by the majority in Barker. The consequence of the special rule Having regard to its jurisprudential basis I cannot see how the employers can found upon the special rule as identifying the policy year or years in which a victims mesothelioma is initiated. The position is that it is impossible to prove on balance of probability when mesothelioma is initiated, or contracted, or sustained, giving each of those words the same meaning. The special rule does not fill the gap for it raises no implication or fictional assumption as to when mesothelioma is initiated. The consequence is that if claimants have to show that mesothelioma was initiated in a particular policy year in order to establish that insurers are liable they are unable to do so. Should this Court redefine the special rule in order to engage the EL policies? The special approach of the majority in Barker had the object of ensuring that employers who had wrongfully subjected their employees to asbestos dust should bear what the majority considered to be a fair share of responsibility for their wrongdoing. It does not seem likely that the majority gave consideration to the implications for the responsibility of EL insurers of the manner in which this object was achieved. Should this Court now redefine the special rule with the object of enabling claims to be brought under the EL policies? This would, I think, involve holding that the majority in Barker erred in their analysis and that the true basis of the special approach in Fairchild was that contribution to risk should be deemed to be contribution to causation. I would give a firm No to this question. The adoption of the special approach in Fairchild has provoked considerable criticism, both judicial and academic. An example of the former is to be found in the judgment of Lord Brown in Sienkiewicz. An example of the latter is Mr Morgans closely reasoned Chapter 4 of Perspectives on Causation. But the object of the special approach in Fairchild and Barker was at least to ensure that those who had breached the duties that they owed to their employees did not escape liability because of scientific uncertainty. It would be judicial law making of a different dimension to create a legal fiction as to the policy years in which cases of mesothelioma were initiated in order to render liable insurers who could not otherwise be shown to be liable. The Secretary of State has intervened in this appeal and has submitted that, should the claims of employees or their dependants not be met by insurers, they are likely to be a burden on the public purse. It is open to question whether this is a proper consideration, even when considering whether the special rule should be redefined for what are essentially reasons of policy. In any event it seems to me that the position is somewhat more complex than the Secretary of State suggests. The burden of claims in respect of mesothelioma on a scale that was never anticipated is reducing both employers and insurers to insolvency. If this Court were to redefine the special rule so as to impose liability for mesothelioma claims on EL insurers where it could not otherwise be made out, this would in many cases be at the expense of others with claims on the same insurers founded on facts and not legal fictions. The liabilities in respect of mesothelioma will increase the overall shortfall on the part of insurers and this is also likely to have implications for the public purse. So far as I am concerned, however, these considerations have little relevance. Even if there were a compelling case for contending that a means should be found to render EL insurers liable, my reaction would be that this was a matter for Parliament not the courts. It would be wrong in principle for this Court to depart from the reasoning of the majority in Barker for the sole purpose of imposing liability on EL insurers.

These appeals concern the obligations of insurance companies under various contracts of employers liability (EL) insurance. In particular, the appeals concern the scope of the insurers obligations to indemnify employers against their liabilities towards employees who have contracted mesothelioma following exposure to asbestos. Mesothelioma has an unusually long gestation period, which can be in excess of 40 years between exposure to asbestos and manifestation of the disease. The insurers maintain that the EL policies only cover mesothelioma which manifested as a disease at some point during the relevant policy period. In contrast, the employers submit that the insurance policies respond to mesothelioma caused by exposure to asbestos during the relevant policy period but which develops and manifests itself sometime later. The usual rule in negligence cases is that the claimant must establish on the balance of probabilities that the defendants negligence caused his injury or disease. In Fairchild v Glenhaven Funeral Services Ltd [2002] UKHL 22 and Barker v Corus UK Ltd [2006] UKHL 20 the House of Lords developed an exception to this general principle in cases involving mesothelioma caused by exposure to asbestos. The effect of this special rule is that an employer is liable where exposure to asbestos contributed to the risk that the employee would suffer mesothelioma and where the employee in fact develops the disease. The insurers submit that the special rule in Fairchild/Barker is not applicable when deciding, for the purposes of an EL insurance policy, whether an employees mesothelioma was caused by exposure to asbestos during a particular policy year. At first instance Burton J held that the policies should all be interpreted as having a causation wording. He therefore held that the liability trigger under the EL policy was when the employee inhaled the asbestos and not the date when the malignant lesion developed. A majority of the Court of Appeal (Rix and Stanley Burnton LJJ) upheld the judge in relation to some of the EL insurance policies (particularly those covering disease contracted during the relevant insurance period); however they concluded that other policies (particularly those covering disease sustained during the insurance period) responded only on an occurrence or manifestation basis. These appeals to the Supreme Court raise two issues: (i) On the correct construction of the EL policies, is mesothelioma sustained or contracted at the moment when the employee is wrongfully exposed to asbestos or at the moment when the disease subsequently manifests in the employees body? (ii) Does the special rule in Fairchild/Barker apply when determining whether, for the purposes of the EL policies, an employee sustained or contracted mesothelioma during a particular policy period? The Supreme Court dismisses the insurers appeal by a 4 1 majority; Lord Phillips dissenting on the second issue. Lord Mance gives the main judgment. To resolve the meaning of the EL policies it is necessary to avoid over concentration on the meaning of single words or phrases viewed in isolation, and to look at the insurance contracts more generally [19]. Several features point the way to the correct construction. First, the wordings of the policies on their face require the course of employment to be contemporaneous with the sustaining of the injury [20]. Second, the wordings demonstrate a close link between the actual employment undertaken during each period and the premium agreed by the parties for the risks undertaken by the insurers in respect of that period. Third, on the insurers case there is a potential gap in cover as regards employers breaches of duty towards employees in one period which only lead to disease or injury in another later period [24]. Fourth, on the insurers case employers would be vulnerable to any decision by the insurers not to renew the policy. A decision not to renew might arise from the employers complying with their duty to disclose past negligence upon any renewal. Employers who discovered that they had been negligent in the course of past activities in respects that had not yet led to any manifest disease would have such a duty. The insurers could then simply refuse any renewal or further cover [25]. Fifth, the way most of the policies deal with extra territorial issues throws doubt on any suggestion that the wordings are so carefully chosen that a court should stick literally to whatever might be perceived as their natural meaning [28]. Section 1 of the Employers Liability Compulsory Insurance Act 1969 also points the way to the correct interpretation. This states that every employer shall insure, and maintain insuranceagainst liability for bodily injury or disease sustained by his employees, and arising out of and in the course of their employment. In order to give proper effect to the protective purpose of that legislation, the Act requires insurance on a causation basis [47]. There is no difficulty in treating the word contracted as looking to the causation of a disease, rather than its development or manifestation. The word contracted used in conjunction with disease looks to the initiating or causative factor of the disease [49]. While the word sustained may initially appear to refer to the manifestation of an injury, the nature and underlying purpose of the EL insurances is one which looks to the initiation or causation of the accident or disease which injured the employee. Accordingly a disease may properly be said to have been sustained by an employee in the period when it was caused or initiated, even though it only developed or manifested itself later [50]. In relation to the second issue, the question is whether the EL policies cover employers liability for mesothelioma arising under the special rule in Fairchild/Barker [71]. Under that rule the law accepts a weak or broad causal link between the employers negligence and the employees mesothelioma. When construing the EL policies the concept of a disease being caused during the policy period must be interpreted sufficiently flexibly to embrace the role assigned to exposure by the Fairchild/Barker rule [74]. The purpose of the EL policies was to insure the employers against liability to their employees. Once it is held that the employers are liable to the employees, it would be remarkable if the insurers were not liable under the policies [88]. Accordingly, for the purposes of the EL policies, the negligent exposure of an employee to asbestos during the policy period has a sufficient causal link with subsequently arising mesothelioma to trigger the insurers obligation to indemnify the employer [74]. Lord Phillips dissents on the second issue. The special approach developed in Fairchild/Barker raises no implication or fictional assumption as to when mesothelioma is initiated. The consequence is that if claimants have to show that mesothelioma was initiated in a particular policy year in order to establish that insurers are liable they are unable to do so. This conclusion is not affected by section 3 of the Compensation Act 2009, which did not alter the jurisprudential basis of the Fairchild/Barker approach [132] [133].

Private Jason Smith joined the Territorial Army in 1992, when he was 21 years old. In June 2003 he was mobilised for service in Iraq. On 26 June 2003, after a brief spell in Kuwait for purposes of acclimatisation, he arrived at Camp Abu Naji, which was to be his base in Iraq. From there he was moved to an old athletics stadium some 12 kilometres away, where about 120 men were billeted. By August temperatures in the shade were exceeding 50 degrees centigrade. On 9 August he reported sick, saying that he could not stand the heat. Over the next few days he was employed on various duties off the base. On the evening of 13 August he was found collapsed outside the door of a room at the stadium. He was rushed by ambulance to the medical centre at Camp Abu Naji but died almost immediately of hyperthermia, or heat stroke. Private Smiths body was brought back to this country and an inquest was held. The inquest suffered from procedural shortcomings. His mother commenced judicial proceedings in which she sought an order quashing the coroners inquisition. In bringing her claim Mrs Smith relied upon the Human Rights Act 1998. She contended that throughout the time that her son was in Iraq the United Kingdom owed him a duty to respect his right to life under article 2 of the European Convention on Human Rights and that the inquest also had to satisfy the procedural requirements of article 2. On more narrow grounds than these the Secretary of State conceded that Mrs Smith was entitled to the relief that she sought, and a new inquest is to be held. Two issues of public importance have been raised by her claim. Is a soldier on military service abroad in Iraq subject to the protection of the Human Rights Act 1998 (the HRA) when outside his base? I shall call this the jurisdiction issue. If so, must the death of such a soldier be the subject of an inquest that satisfies the procedures that article 2 of the European Convention on Human Rights (the Convention) implicitly requires where there is reason to believe that a death may be attributable to default on the part of a public authority? I shall call this the inquest issue. These issues are largely academic inasmuch as the Secretary of State has conceded that a fresh inquest must be held in relation to Private Smiths death that satisfies those Convention requirements a concession which does not, of course, bind the Coroner. The courts below have nonetheless been prepared to entertain them because of their importance and this court has done the same. The jurisdiction issue Mrs Smith succeeded on this issue, both at first instance and before the Court of Appeal. Section 6(1) of the HRA provides: It is unlawful for a public authority to act in a way which is incompatible with a Convention right. Section 1 defines the Convention rights as including articles 2 to 12 and 14 of the Convention. It is common ground that the HRA is capable of applying outside the territorial jurisdiction of the United Kingdom, but that section 6(1) will only be infringed by conduct that the Strasbourg Court would hold to have violated a Convention right. This was determined by the House of Lords in R (Al Skeini) v Secretary of State for Defence [2008] AC 153. It follows that, in order to decide whether conduct has infringed section 6(1) of the HRA it is necessary to consider the ambit of application of the Convention. More particularly, no claim can succeed under the HRA unless there has been a breach of a Convention right of a person within the jurisdiction of the United Kingdom that should have been secured pursuant to article 1. Article 1 of the Convention provides: The High Contracting Parties shall secure to everyone within their jurisdiction the rights and freedoms defined in Section 1 of this Convention. The jurisdiction issue is whether, on the true interpretation of article 1, British troops operating on foreign soil fall within the jurisdiction of the United Kingdom. There has recently grown a small body of authority, both in this country and at Strasbourg, dealing with the application of the Convention to the activities of armed forces on foreign soil. The Grand Chamber sat to consider this question in Bankovic v United Kingdom (2001) 11 BHRC 435, which has been recognised both in this country and at Strasbourg as a leading case on the scope of jurisdiction under article 1. I propose to start by considering that case. Bankovic Five of the applicants in Bankovic were close relatives of civilians killed by air strikes carried out on a radio and television centre in Belgrade by members of NATO, when intervening in the Kosovo conflict in 1999. The sixth applicant had himself been injured in the raids. The critical issue in relation to admissibility was whether the applicants and their deceased relatives came within the jurisdiction of the respondent States within the meaning of article 1 of the Convention. The applicants founded their case on the reasoning of the Court in Loizidou v Turkey (1995) 20 EHRR 99. The Court held in that case that a Greek Cypriot, who claimed in relation to the dispossession of her property in Northern Cyprus, was potentially within the jurisdiction of Turkey for the purposes of article 1 by reason of the fact that Turkey exercised effective control of Northern Cyprus. The applicants in Bankovic accepted that they could not contend that the action of the member States in bombing Belgrade put them under an obligation in relation to the observance of all of the Convention rights in the area bombed, but argued that they should be held accountable for those rights that did fall within their control, and in particular the right to life of those whom they bombed. The Court applied the principles agreed in the Vienna Convention on the Law of Treaties 1969 (the Vienna Convention) to the task of interpreting article 1. Thus it paid primary regard to the natural meaning of the words used, but also took into consideration the travaux prparatoires (the travaux) and State practice. This approach contrasted with the approach that the Strasbourg Court has adopted of treating the Convention as a living instrument when considering the manner in which it operates. The Court recognised this at paras 64 and 65 but commented that the scope of article 1 was determinative of the scope and reach of the entire Convention system of human rights protection. The Court was indicating that the meaning of article 1, and thus the scope of application of the Convention, could not change over time, and this seems plainly correct as a matter of principle. I shall describe this as the original meaning principle. The Court approached the natural meaning of jurisdiction on the premise that this had to be consonant with the meaning of that word under principles of public international law. Under these principles the jurisdictional competence of a State was primarily territorial. Thus: article 1 of the Convention must be considered to reflect this ordinary and essentially territorial notion of jurisdiction, other bases of jurisdiction being exceptional and requiring special justification in the particular circumstances of each caseIn keeping with the essentially territorial notion of jurisdiction, the court has accepted only in exceptional cases that acts of the contracting states performed, or producing effects, outside their territories can constitute an exercise of jurisdiction by them within the meaning of article 1 of the Convention. (paras 61 and 67) Thus the Court held that jurisdiction in article 1 was not limited to the territory over which a State exercises lawful authority. It extended in exceptional circumstances requiring special justification to other bases of jurisdiction. The difficulty in delineating article 1 jurisdiction arises in identifying and defining the exceptions to territorial jurisdiction. The Court recognised that one such exception arose where a member State had taken effective control of part of the territory of another member State. I shall call this the principle of effective territorial control. Loizidou v Turkey exemplified this jurisdiction. The Court justified this exception by remarking at para 80 that the inhabitants of Northern Cyprus would have found themselves excluded from the benefits of the Convention safeguards and system which they had previously enjoyed by Turkeys effective control of the territory and by the accompanying inability of the Cypriot Government, as a contracting State, to fulfil the obligations that it had undertaken under the Convention. Thus the Court appeared to restrict the principle of effective territorial control to the territories of the contracting States. The Court made the following comments about this head of jurisdiction: 71. In sum, the case law of the Court demonstrates that its recognition of the exercise of extra territorial jurisdiction by a contracting state is exceptional: it has done so when the respondent state, through the effective control of the relevant territory and its inhabitants abroad as a consequence of military occupation or through the consent, invitation or acquiescence of the government of that territory, exercises all or some of the public powers normally to be exercised by that government. 80. In short, the Convention is a multi lateral treaty operating, subject to article 56 of the Convention, in an essentially regional context and notably in the legal space (espace juridique) of the contracting states. The FRY clearly does not fall within this legal space. The Convention was not designed to be applied throughout the world, even in respect of the conduct of contracting states. Accordingly, the desirability of avoiding a gap or vacuum in human rights protection has so far been relied on by the Court in favour of establishing jurisdiction only when the territory in question was one that, but for the specific circumstances, would normally be covered by the Convention. Article 56 enables a Contracting State to declare that the Convention shall extend to all or any of the territories for whose international relations the State is responsible. Thus, implicitly and paradoxically, the principle of effective territorial control does not appear to apply automatically to such territories see also Bui van Thanh v United Kingdom (1990) 33 Yearbook of the European Convention on Human Rights 59 at p 61; Loizidou v Turkey at paras 86 87; Yonghong v Portugal Reports of Judgments and Decisions 1999 IX, pp 385, 391 392. The Court rejected the suggestion that extra territorial acts could bring individuals within the jurisdiction for the purposes of some Convention rights but not others. It said at para 75: the court is of the view that the wording of article 1 does not provide any support for the applicants suggestion that the positive obligation in article 1 to secure the rights and freedoms defined in Section I of this Convention can be divided and tailored in accordance with the particular circumstances of the extra territorial act in question and, it considers its view in this respect supported by the text of article 19 of the Convention. Indeed the applicants approach does not explain the application of the words within their jurisdiction in article 1 and it even goes so far as to render those words superfluous and devoid of any purpose. Had the drafters of the Convention wished to ensure jurisdiction as extensive as that advocated by the applicants, they could have adopted a text the same as or similar to the contemporaneous articles 1 of the four Geneva Conventions of 1949. I shall describe this as the whole package principle. The Court singled out for special mention as an example of an exceptional case of extra territorial jurisdiction that fell within article 1, the case of Drozd and Janousek v France and Spain (1992) 14 EHRR 745. I shall consider this decision in due course. The Court noted a number of other examples of States exercising extra territorial jurisdiction, implying, I believe, that those affected would be within the jurisdiction of the State in question within the meaning of article 1: Additionally, the Court notes that other recognised instances of the extra territorial exercise of jurisdiction by a state include cases involving the activities of its diplomatic or consular agents abroad and on board craft and vessels registered in, or flying the flag of, that state. In these specific situations, customary international law and treaty provisions have recognised the extra territorial exercise of jurisdiction by the relevant state. The applicants in Bankovic also relied on two admissibility decisions that proceeded on a different basis of article 1 jurisdiction that has been described as state agent authority, namely de facto control by state agents of persons as opposed to territory, Issa v Turkey (Application No 31821/96) (unreported) 30 May 2000 and calan v Turkey (Application No 46221/99) (unreported) 14 December 2000. The Grand Chamber swept these aside with the comment that in neither case was the issue of jurisdiction raised by the respondent Government, adding that the merits of those cases had yet to be decided. The respondent Governments in Bankovic, including the United Kingdom, had in fact accepted the existence of jurisdiction in those cases on the basis that it was the assertion or exercise of legal authority, actual or purported, over persons owing some form of allegiance to that state or who have been brought within that states control. Mr Eadie QC, for the Secretary of State, has not in this Court accepted any general principle whereby article 1 jurisdiction can be based on the exercise of control by State agents over individuals as opposed to territory. It is convenient at this point to consider the treatment by the Strasbourg Court of the question of jurisdiction on the substantive hearings in those two cases. calan and Issa In calan (2005) 41 EHRR 985 the applicant, a Turk, was handed over to Turkish officials aboard a Turkish aircraft at Nairobi. At the substantive hearing, following that before the Court (2003) 37 EHRR 238, the Grand Chamber recorded at para 91 that it was common ground that, directly after being handed over to the Turkish officials by the Kenyan officials, the applicant was under effective Turkish authority and therefore within the jurisdiction of that state for the purposes of Article 1 of the Convention, even though in this instance Turkey exercised its authority outside its territory. It is true that the applicant was physically forced to return to Turkey by Turkish officials and was under their authority and control following his arrest and return to Turkey. The substantive hearing in Issa (2004) 41 EHRR 567 took place before the Second Section, three members of which had been party to the decision in Bankovic. The applicants, Iraqi nationals, alleged that their relatives had been unlawfully arrested, detained, ill treated and killed by Turkish troops in the course of a military operation in Northern Iraq. The claim failed because they were unable to prove this. The Court had, however, permitted Turkey to challenge the existence of article 1 jurisdiction, albeit that no challenge on this ground had been made at the admissibility hearing. The Court at paras 68 69 referred to the substantive decision in Loizidou v Turkey (1996) 23 EHRR 513, para 52 for the proposition that: According to the relevant principles of international law, a States responsibility may be engaged where, as a consequence of military action whether lawful or unlawful that State in practice exercises effective control of an area situated outside its national territory. The obligation to secure, in such an area, the rights and freedoms set out in the Convention derives from the fact of such control, whether it be exercised directly, through its armed forces, or through a subordinate local administration. The Court went on to say, at para 71: Moreover, a State may also be held accountable for violation of the Convention rights and freedoms of persons who are in the territory of another State but who are found to be under the former States authority and control through its agents operating whether lawfully or unlawfully in the latter State.(Citations omitted). This clearly advances state agent authority as an alternative to effective territorial control as a basis of article 1 jurisdiction. Al Skeini The implications of the Strasbourg Courts decision in Bankovic received detailed analysis in Al Skeini in the Divisional Court, the Court of Appeal and the House of Lords. This Court ought to consider the conclusions of the House of Lords to be definitive unless these have plainly been invalidated by subsequent decisions of the Strasbourg Court. The claimants were relatives of six Iraqi civilians who had been killed by or in the course of operations by British soldiers in the period following completion of major combat operations in Iraq and before the assumption of authority by the Iraqi Interim Government. Five of these were shot in separate incidents in Basra. The sixth, Mr Baha Mousa, was beaten to death by British troops while detained in a British military detention unit. The claimants sought independent enquiries into these deaths, relying upon the HRA. Two preliminary issues were before the Court. Did the HRA apply outside the territorial jurisdiction and were the six Iraqi citizens within the jurisdiction of the United Kingdom for the purposes of article 1 of the Convention? The House, Lord Bingham dissenting, answered the first question in the affirmative. So far as concerns the second question, the ambit of article 1 had been exhaustively considered by the Divisional Court [2004] EWHC 2911 (Admin); [2007] QB 140 which had analysed chronologically all the relevant Strasbourg authorities, including Bankovic. The court concluded that these established that the primary meaning of within their jurisdiction in article 1 was within the territorial jurisdiction of the contracting States, subject to a number of exceptions. There was no general exception whereby those subject to the exercise of state agent authority fell within the article 1 jurisdiction of the State. Insofar as Issa had held to the contrary, it should be disregarded as inconsistent with the decision in Bankovic. The Court of Appeal [2005] EWCA Civ 1609; [2007] QB 140 differed on the last point, holding that Issa was authoritative and demonstrated that article 1 jurisdiction was established by the exercise of control over individuals by State agents, both within and outside the jurisdiction of contracting States. The House of Lords preferred the reasoning of the Divisional Court. The majority approached the issue of article 1 jurisdiction on the footing that this was essentially a matter for the Strasbourg court and the House should not construe article 1 as having any further reach than that established by that Court. As to that pre eminence should be given to the decision of the Grand Chamber in Bankovic. The House was, however, faced with the fact that, so far as Mr Baha Mousa was concerned, the Secretary of State had accepted that, because he died as a result of misconduct that took place at a detention centre within a British military base, he met his death within the jurisdiction of the United Kingdom for the purposes of article 1. The claimants sought to rely on a principle of state agent authority, arguing that if such authority was exercised over individuals, this brought them within the jurisdiction for purposes of article 1. The majority was troubled by the fact that some statements of the Court in Issa were hard to reconcile with Bankovic, and particularly with the whole package principle. Insofar as Issa could not be reconciled with Bankovic, the majority held that it should be disregarded. Thus Lord Rodger held, at para 79: the whole package of rights applies and must be secured where a contracting state has jurisdiction. This merely reflects the normal understanding that a contracting state cannot pick and choose among the rights in the Convention: it must secure them all to everyone within its jurisdiction. If that is so, then it suggests that the obligation under article 1 can arise only where the contracting state has such effective control of the territory of another state that it could secure to everyone in the territory all the rights and freedoms in section 1 of the Convention. Lord Brown carried out a detailed analysis of the Strasbourg jurisprudence. He recognised some narrow categories where the Strasbourg Court had found article 1 jurisdiction in circumstances where the State had not got territorial control irregular extradition such as calan and activities of embassies and consulates. These exceptions apart, Lord Brown considered the whole package principle to be of importance: 128. There is one other central objection to the creation of the wide basis of jurisdiction here contended for by the appellants under the rubric control and authority, going beyond that arising in any of the narrowly recognised categories already discussed and yet short of that arising from the effective control of territory within the Council of Europe area. Bankovic (and later Assanidze) stands, as stated, for the indivisible nature of article 1 jurisdiction: it cannot be divided and tailored. As Bankovic had earlier pointed out, at para 40: the applicants interpretation of jurisdiction would invert and divide the positive obligation on contracting states to secure the substantive rights in a manner never contemplated by article 1 of the Convention. When, moreover, the Convention applies, it operates as a living instrument. calan provides an example of this, a recognition that the interpretation of article 2 has been modified consequent on the territories encompassed by the member states of the Council of Europe [having] become a zone free of capital punishment: para 195. (Paras 64 and 65 of Bankovic, I may note, contrast on the one hand the Conventions substantive provisions and the competence of the Convention organs, to both of which the living instrument approach applies and, on the other hand, the scope of article 1 the scope and reach of the entire Convention to which it does not.) Bear in mind too the rigour with which the court applies the Convention, well exemplified by the series of cases from the conflict zone of south eastern Turkey in which, the states difficulties notwithstanding, no dilution has been permitted of the investigative obligations arising under articles 2 and 3. 129. The point is this: except where a state really does have effective control of territory, it cannot hope to secure Convention rights within that territory and, unless it is within the area of the Council of Europe, it is unlikely in any event to find certain of the Convention rights it is bound to secure reconcilable with the customs of the resident population. Applying Bankovic, the majority held that the five Iraqi citizens who had been killed in Basra were not within the jurisdiction of the United Kingdom for the purposes of article 1. Lord Brown indicated that he would recognise the United Kingdoms jurisdiction over Mr Baha Mousa only on the basis of an analogy with the extra territorial exception made for embassies. However, in a subsequent admissibility decision in Al Saadoon and Mufdhi v United Kingdom (2009) 49 EHRR SE 95 the Strasbourg Court has held that detainees in British detention centres in Iraq fell within United Kingdom jurisdiction by reason of the total and exclusive de facto, and subsequently de jure, control exercised by the United Kingdom authorities over the premises in question. (para 88) A more recent example of where the Strasbourg Court has equated control over individuals with article 1 jurisdiction is the decision of the Grand Chamber in Medvedyev and others v France (Application No 3394/03) judgment delivered on 29 March 2010. On the high seas a French warship boarded a merchant vessel, crewed by the applicants who were suspected of being engaged in drug smuggling and compulsorily escorted it on a 13 day voyage into Brest. The court held at para 67 that as the vessel and its crew were, at least de facto, under the control of France, they were effectively under Frances jurisdiction for the purposes of article 1. This decision, when added to that in Issa suggests that the Strasbourg Court may be prepared to found article 1 jurisdiction on state agent authority, even though this principle does not seem consistent with the approach in Bankovic. Gentle The possibility that British soldiers serving abroad were within the article 1 jurisdiction of the United Kingdom because they were under the authority of the United Kingdom was shortly dismissed by Lord Bingham in R (Gentle) v Prime Minister [2008] AC 1356. He said, at para 8: (3) The obligation of member states under article 1 of the Convention is to secure to everyone within their jurisdiction the rights and freedoms in the Convention. Subject to limited exceptions and specific extensions, the application of the Convention is territorial: the rights and freedoms are ordinarily to be secured to those within the borders of the state and not outside. Here, the deaths of Fusilier Gentle and Trooper Clarke occurred in Iraq and although they were subject to the authority of the defendants they were clearly not within the jurisdiction of the UK as that expression in the Convention has been interpreted: R (Al Skeini) v Secretary of State for Defence [2008] AC 153, paras 79, 129. The other members of the House expressed general agreement with Lord Bingham. Article 1 jurisdiction was not, however, at the heart of the case, to the extent that the Court of Appeal, whose decision was upheld, had not found it necessary to decide the point. Gentle nonetheless lends support to the analysis of the House of Lords in Al Skeini. The claimants in Al Skeini have taken their case to Strasbourg and this will give the Strasbourg Court a further opportunity to clarify this difficult area of its jurisprudence. Submissions For the Secretary of State, Mr Eadie submitted that Private Smith was only within the jurisdiction of the United Kingdom when he was within territory that was under the effective control of the United Kingdom. On this basis he conceded that article 2 had applied during those periods when Private Smith was within the military base, which included the time of his death. When, however, he was not within territory controlled by the United Kingdom, he was not within article 1 jurisdiction. His position in those circumstances did not fall within any of the recognised exceptions to the general principle that article 1 jurisdiction was territorial. In so submitting he relied in particular on Bankovic, Al Skeini and Gentle. For Mrs Smith Miss Dinah Rose QC made it clear that her case was not based on Private Smith having been on territory under the de facto control of the United Kingdom, nor upon Private Smith himself having been under the de facto control of the Army, as a State agent, but upon the fact that Private Smith was subject to the jurisdiction of the United Kingdom as a matter of both domestic and international law. He was so subject by reason of his status as a member of the Armed Forces. Miss Rose submitted that soldiers were in the same position as other State agents, such as diplomats, consular agents and judges. When exercising State powers outside the territory of the State they themselves remained subject to the jurisdiction of the State. Mr Beloff QC appeared for the Intervener, the Equality and Human Rights Commission. He supported Miss Roses submissions. He submitted that the authorities dealing with control of territory, or control of persons, did not touch on the basis of jurisdiction asserted in this case. That was personal jurisdiction, which, to quote from para 17 of his written case, does not depend on a persons location. It is founded on the reciprocal rights and obligations of nationals and their state, wherever they may be. Mr Beloff accepted that the precise question of whether article 1 jurisdiction could be founded on this basis had not arisen before the Strasbourg Court. The decision of the Court of Appeal. The Court of Appeal held that article 1 required the existence of a jurisdictional link and that this requirement was satisfied in the case of Private Smith, for the reasons set out in para 29 of its judgment. Members of the armed forces were: subject to United Kingdom military law without territorial limit and may be tried by court martial whether the offence is committed in England or elsewhere. They are also subject to the general criminal and civil law. Soldiers serve abroad as a result of and pursuant to the exercise of United Kingdom jurisdiction over them. Thus the legality of their presence and of their actions depends on their being subject to United Kingdom jurisdiction and complying with United Kingdom law. As a matter of international law, no infringement of the sovereignty of the host state is involved in the United Kingdom exercising jurisdiction over its soldiers serving abroad. The Court was also influenced by what it perceived as the illogicality of holding that Private Smith was within the jurisdiction when on military premises, but not when outside them: it is accepted that a British soldier is protected by the 1998 Act and the Convention when he is at a military base. In our judgment, it makes no sense to hold that he is not so protected when in an ambulance or in a truck or in the street or in the desert. There is no sensible reason for not holding that there is a sufficient link between the solider as victim and the United Kingdom whether he is at a base or not. So too, if he is court martialled for an act committed in Iraq, he should be entitled to the protection of article 6 of the Convention wherever the court martial takes place. The meaning of jurisdiction interpretation. The first is that: Article 31 of the Vienna Treaty lays down a number of general rules of A treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose. Jurisdiction has more than one ordinary meaning. The meanings given by the Shorter Oxford Dictionary include the following: 1. Exercise of judicial authority, or of the functions of a judge or legal tribunal; power of administering law or justice. Also, power or authority in general. 2. The extent or range of judicial or administrative power; the territory over which such power extends. Jowetts Dictionary of English Law, 2nd ed (1977), after giving the primary meaning of legal authority goes on to state: Jurisdiction also signifies the district or geographical limits within which the judgments or orders of a court can be enforced or executed. This is sometimes called territorial jurisdiction. Thus the phrase within the jurisdiction can bear the natural meaning subject to the authority of but can equally bear the natural meaning within the territory over which authority is exercised. There are different varieties of authority that can be described as jurisdiction. Oppenheims International Law, 9th ed (1992), vol 1, describes these and their relationship to territorial jurisdiction: 136 State jurisdiction in general State jurisdiction concerns essentially the extent of each states right to regulate conduct or the consequences of events. In practice jurisdiction is not a single concept. A states jurisdiction may take various forms. Thus a state may regulate conduct by legislation; or it may, through its courts, regulate those differences which come before them, whether arising out of the civil or criminal law; or it may regulate conduct by taking executive or administrative action which impinges more directly on the course of events, as by enforcing its laws or the decisions of its courts. The extent of a states jurisdiction may differ in each of these contexts. The jurisdiction concerns both international law and the internal law of each state. The former determines the permissible limits of a states jurisdiction in the various forms it may take, while the latter prescribes the extent to which, and manner in which, the state in fact asserts its jurisdiction. 137 Territorial jurisdiction As all persons and things within the territory of a state fall under its territorial authority, each state normally has jurisdiction legislative, curial and executive over them. Territoriality is the primary basis for jurisdiction; 138 Jurisdiction over citizens abroad International law does not prevent a state from exercising jurisdiction, within its own territory, over its nationals travelling or residing abroad, since they remain under its personal authority. Accordingly, it may legislate with regard to their conduct when abroad, levy taxes in respect of their assets or earnings abroad, or legislate in respect of their foreign property. In all such cases, however, the states power to enforce its laws depends upon its national being in, or returning to, its territory or having there property against which they can be enforced. Most human rights can only be the subject of protection, or interference, by the State if the individual who enjoys them is within the administrative, or executive, authority of the State. This is obviously true of the rights that protect the person, namely those protected by articles 2, 3 4 and 5 and is also true of articles 8, 9, 10, 11 and 12. Save in exceptional circumstances those requiring State protection of these rights will be within the territorial jurisdiction of the State in question. In respect of these rights it produces a perfectly sensible result to interpret within their jurisdiction in article 1 as meaning within the territorial jurisdiction of the Member States. Public international law recognises that both legislative and judicial authority can be exercised over individuals whether they are inside or outside the territorial jurisdiction of the State. The exercise of these types of jurisdiction may well have potential impact on some human rights, but not on others. The Strasbourg Court appears to have recognised, at least implicitly, that the exercise of these types of jurisdiction can bring those who are subject to them within the jurisdiction for purposes of article 1, whether or not they are within the territorial jurisdiction of the State, in relation to those rights that are affected. In such circumstances there can be no question of the whole package principle applying. I shall give a number of examples. Article 6 protects the right to a fair trial. The English court exercises extra territorial jurisdiction in defined circumstances in relation to civil claims. If a foreigner resident abroad is impleaded by a resident of this country in the English court, it is hard to believe that the Strasbourg Court would hold the English claimant entitled to the benefit of article 6 but the foreign defendant not so entitled. Both would be within the judicial jurisdiction of the English court and there would seem a strong case for equating that with article 1 jurisdiction in the context of the application of article 6. Such an approach would seem implicitly to have been accepted by the Strasbourg Court in plenary session in Drozd and Janousek v France and Spain (1992) 14 EHRR 745. The applicants in that case had been tried in criminal proceedings in Andorra by a Tribunal, presided over by a French judge. Andorra was not party to the Convention. The applicants complained, none the less, of violation of their article 6 rights to a fair trial. The Court held that the judge had not been sitting in his capacity as a French judge, but as an Andorran judge, but appears to have accepted that had this not been so the applicants would have fallen within the jurisdiction of France for the purposes of article 1 in relation to their article 6 rights. This would not, however, have entitled them to claim against France the benefit of protection of the rest of the Convention rights. What of the property rights protected by article 1 of the First Protocol? Many foreign residents own property in this country. Are they within the jurisdiction for the purposes of article 1? In Carson v United Kingdom (Application No 42184/05) judgment 16 March 2010 the Grand Chamber ruled admissible claims against the United Kingdom by 13 persons entitled to British State pensions for violation of article 14 of the Convention in combination with article 1 of the First Protocol. All the claimants had earned pensions by working in Britain, but had emigrated to South Africa, Australia or Canada on retirement. The report states, in para 1 that they were all British nationals, but para 21 states that one of them remained an Australian national. The basis of the claim was discrimination against the claimants in that their pensions were not linked to United Kingdom inflation, in contrast to the position of pensioners resident within the United Kingdom. Neither before the English courts nor before the Strasbourg Court was there any discussion of the basis upon which the claimants were treated as within the jurisdiction of the United Kingdom for the purposes of article 1. One possible answer is that because their pension rights were governed by legislation, they fell within the legislative jurisdiction of the United Kingdom in relation to those rights. There could be no question, however, of the United Kingdom having to afford them protection in relation to the whole package of Convention rights. In X v United Kingdom (1979) 15 DR 137, the Commission ruled inadmissible on the merits a claim by a British citizen, who was employed by the European Commission and resident in Brussels, for violation of article 1 of the Convention in combination with article 3 of the First Protocol. She complained that she had no right to vote in United Kingdom elections whereas members of the diplomatic service and the Armed Forces stationed outside the United Kingdom retained their right to vote. The Commission held that the discrimination was justified in that these persons were not voluntarily abroad but had been sent abroad to serve their country. They fell to be regarded as resident citizens, in contrast to the applicant who was living abroad voluntarily. It was not, however, suggested that the applicant did not fall within the article 1 jurisdiction of the United Kingdom. The basis for this jurisdiction was perhaps that, in relation to voting rights, nationals fall within the jurisdiction of their own State, whether or not they are within the territorial jurisdiction. There are other cases that suggest that where one State delegates to another State authority to control a particular area of government that engages one of the Convention rights, those subject to the exercise of the latter States authority will be deemed to be within the jurisdiction of the latter State for the purposes of article 1 in relation to that right: Drozd; X and Y v Switzerland (1977) 9 DR 57; Gentilhomme, Schaff Benhadji and Zerouki v France (Application Nos 48205/99, 48207/99, 48209/99) (unreported) 14 May 2002. A recent decision of the Strasbourg Court provides a variation on this theme. In Stephen v Malta (No 1) (2009) 50 EHRR 144 the applicant was a British subject who had been arrested and detained in Spain pursuant to an arrest warrant that had been issued by a Maltese Court that had not been competent to issue it. The Strasbourg Court, of its own motion, considered article 1 jurisdiction. It remarked at para 45: the question to be decided is whether the facts complained of by the applicant can be attributed to Malta The Court gave an affirmative answer to this question and held that the applicants complaints under article 5 engaged the responsibility of Malta under the Convention. No principled explanation was given for this departure from the territorial approach to article 1 jurisdiction other than the passage quoted above which, if applied generally, would render that approach nugatory. These cases might be thought to support a general principle that there will be jurisdiction under article 1 whenever a State exercises authority, be it legislative, judicial or executive, which affects a Convention right of a person, whether that person is within the territory of that State or not. So far as the exercise of executive authority is concerned, one can postulate that this requires effective control, either of territory or of individuals, before article 1 jurisdiction is established. The fact remains, however, that the Strasbourg Court has not propounded any such general principle. Nor can such a principle readily be reconciled with the proposition, approved in Bankovic, that article 1 jurisdiction is essentially territorial in nature and that other bases of jurisdiction are exceptional and require special justification in the particular circumstances of each case. There are compelling reasons for following the approach of the Grand Chamber in Bankovic, quite apart from the reasons that led the House of Lords to treat it as a landmark decision. The travaux to which the Court referred demonstrate that the contracting States were concerned with the manner in which those within their territories were treated. It is not credible that the change to the phrase within their jurisdiction was intended to effect a fundamental extension to the scope of the Convention without this being clearly reflected in the travaux. The question then is whether, applying the original meaning principle, it is right to include a States armed forces abroad as falling within the jurisdiction of the State for purposes of article 1 by reason of the special status that they enjoy. That is the proposition that Miss Rose advances and it is one that is, as the Grand Chamber pointed out in Bankovic, not reflected by State practice. It is, furthermore, almost wholly unsupported by Strasbourg jurisprudence. decision of the Commission in Cyprus v Turkey (1975) 2 DR 125: I say almost having regard to the following passage in the admissibility 8The Commission further observes that nationals of a State, including registered ships and aircrafts, are partly within its jurisdiction wherever they may be, and that authorised agents of a State, including diplomatic or consular agents and armed forces, not only remain under its jurisdiction when abroad but bring any other persons or property within the jurisdiction of that State, to the extent that they exercise authority over such persons or property. Insofar as, by their acts or omissions, they affect such persons or property, the responsibility of the State is engaged. I am not aware of any other Strasbourg jurisprudence that suggests that armed forces remain under the jurisdiction of a State when abroad and the reasoning of the Commission in this case was far wider than that of the Court when dealing with Turkeys jurisdiction in Northern Cyprus in Loizidou v Turkey (1995) 20 EHRR 99. Miss Rose drew attention to Strasbourg jurisprudence that holds that those affected by the conduct of a States diplomatic and consular officials abroad can fall within the jurisdiction of the State, which was applied by the Court of Appeal in R (B and others) v Secretary of State for Foreign and Commonwealth Affairs [2004] EWCA Civ 1344; [2005] QB 643. She submitted that it followed from this that such officials were themselves within the jurisdiction of their States and that the same principle should apply to the armed forces. I have some difficulty with the logic of the proposition that State agents whose acts bring those affected by them within article 1 jurisdiction must, in consequence, themselves also be within the article 1 jurisdiction of the State whose agents they are but, more fundamentally, it does not seem to me that the analogy between diplomatic and consular officials and members of the armed forces is compelling. More compelling were the points made by Miss Rose in relation to the unique status of members of the armed forces. When the Convention was agreed men who were British citizens were liable to conscription under the National Service (Armed Forces) Act 1948 and, in consequence of conscription, rendered subject to the executive authority of the armed forces and to the legislative and judicial regimes that applied to the armed forces. A similar situation no doubt existed in the case of other contracting States. Today the same is true of those who volunteer to serve in the armed forces see the description of the relevant legislation set out by Lord Mance in his judgment at para 190. Under domestic law and in accordance with public international law, members of the armed forces remain under the legislative, judicial and executive authority of the United Kingdom, whether serving within or outside United Kingdom territory. From the viewpoint of domestic law they can thus be said to be within the jurisdiction of the United Kingdom wherever they are. It is not attractive to postulate that, when they are outside the territorial jurisdiction in the service of their country they lose the protection afforded by the Convention and the HRA. That, however, is not the question. The question is whether, in concluding the Convention, the contracting States agreed that article 1 jurisdiction should extend to armed forces when serving abroad as an exception to the essentially territorial nature of that jurisdiction. What were the practical implications of so doing? It is not wholly realistic to consider the perceived implications of the application of the Convention in 1953 by reference to the requirements of the Convention, that have been identified by the Strasbourg Court since 1953. In particular, it is perhaps not realistic to apply to conditions in 1953 the positive obligations in relation to article 2 that have quite recently been laid down by the Strasbourg Court. It is nonetheless instructive to consider the implications of applying the Convention to armed forces serving abroad. It is not practicable for a State to secure many of the Convention rights and freedoms for troops in active service abroad. Article 2 is, however, plainly capable of being engaged. The safety of the lives of those fighting abroad can depend critically on the acts or omissions of State agents, covering the equipment with which they are supplied, the missions on which they are sent, and strategic and tactical decisions taken by commanders in the field. If the troops are within the article 1 jurisdiction of the State the question arises of how far these matters fall within the substantive obligations imposed by article 2. Insofar as they do, the question then arises of whether the procedural obligation arises every time a serviceman is killed in circumstances which may involve a shortcoming in the performance of those substantive obligations. These are questions that I shall explore when addressing the Inquest Issue. The Convention was agreed in the aftermath of a global conflict in which millions of troops had been deployed. In 1944 the United Kingdom had over 4.5 million troops serving. British casualties in the war numbered about 330,000. By 1950 the number of British troops in service had reduced to about 700,000, many of whom were conscripts. While the Convention was being negotiated the Korean War was in progress. British casualties in that war numbered about 700. Derogation is permitted under article 15 in time of war or other public emergency threatening the life of the nation, although there can be no derogation from article 2 except in respect of deaths resulting from lawful acts of war. No derogation was made, and troops were deployed abroad in circumstances falling short of those permitting derogation under article 15. The contracting States might well not have contemplated that the application of article 2 to troop operations abroad would have involved obligations such as those I have discussed above, but whatever the implications might have seemed, it is unlikely that they would have appeared a desirable consequence of the Convention. So far as this country is concerned, it is significant that when the Crown Proceedings Act 1947 rendered the Crown susceptible to civil suit an exception was made in relation to the armed forces. Only in 1987 did the Crown Proceedings (Armed Forces) Act remove that exception. This does not lie happily with the proposition that the United Kingdom bound itself to the observance of the Convention obligations toward its armed forces abroad when it ratified the Convention in 1951. Today the size of the forces maintained by contracting States is a fraction of those that they maintained when the Convention was agreed. Every death of a British serviceman abroad is now reported in the British press. The bodies of British servicemen who die on active service are flown back and buried in this country, and it is this fact which makes it mandatory to hold an inquest in each case. The care that is taken to avoid casualties and the procedures that are followed when casualties occur are to be commended, but they would not have seemed practicable in 1953. In Al Skeini at para 107 Lord Brown expressed the view that the House should not construe article 1 as reaching any further than the existing Strasbourg jurisprudence clearly shows it to reach. I endorse that comment. We are here dealing with the scope of the Convention and exploring principles that apply to all contracting States. The contention that a States armed forces, by reason of their personal status, fall within the jurisdiction of the State for the purposes of article 1 is novel. I do not believe that the principles to be derived from the Strasbourg jurisprudence, conflicting as some of them are, clearly demonstrate that the contention is correct. The proper tribunal to resolve this issue is the Strasbourg Court itself, and it will have the opportunity to do so when it considers Al Skeini. For these reasons I would hold that the Court of Appeal should not have held that Private Smith was within the jurisdiction of the United Kingdom within the meaning of article 1 at times when he was not within premises under the effective control of the army. This conclusion, and the reasoning that has led to it, accords with the comprehensive analysis of the relevant jurisprudence in the judgment of Lord Collins. For these reasons I would allow the appeal against the Court of Appeals order on the jurisdiction issue. The Inquest Issue The nature of the issue The Inquest Issue arises on the premise that Private Smith was within the jurisdiction of the United Kingdom within the meaning of article 1 at the time of the events that led to his death, so that he was entitled to the protection of article 2 of the Convention. Article 2 of the Convention provides: 1. Everyones right to life shall be protected by law. No one shall be deprived of his life intentionally save in the execution of a sentence of a court following his conviction of a crime for which this penalty is provided by law. In R (Middleton) v West Somerset Coroner [2004] UKHL 10; [2004] 2 AC 182 the Appellate Committee of the House of Lords, in a considered opinion, summarised the Strasbourg jurisprudence as to the effect of this provision: 2. The European Court of Human Rights has repeatedly interpreted article 2 of the European Convention as imposing on member states substantive obligations not to take life without justification and also to establish a framework of laws, precautions, procedures and means of enforcement which will, to the greatest extent reasonably practicable, protect life. 3. The European Court has also interpreted article 2 as imposing on member states a procedural obligation to initiate an effective public investigation by an independent official body into any death occurring in circumstances in which it appears that one or other of the foregoing substantive obligations has been, or may have been, violated and it appears that agents of the state are, or may be, in some way implicated (references omitted). The Inquest Issue is concerned with the procedural obligation. The procedural obligation requires a State, of its own motion, to carry out an investigation into a death that has the following features: i) It must have a sufficient element of public scrutiny of the investigation or its results. ii) It must be conducted by a tribunal that is independent of the state agents who may bear some responsibility for the death. iii) The relatives of the deceased must be able to play an appropriate part in it. iv) It must be prompt and effective. This means that it must perform its essential purposes. These are to secure the effective implementation of the domestic laws which protect the right to life and to ensure the accountability of state agents or bodies for deaths occurring under their responsibility. These features are derived from the Strasbourg jurisprudence, as analysed in Middleton and R (L (A Patient)) v Secretary of State for Justice [2008] UKHL 68; [2009] AC 588. I shall describe an investigation that has these features as an article 2 investigation. The procedural obligation implicit in article 2 was first recognised by the Strasbourg Court in McCann v United Kingdom (1995) 21 EHRR 97. Since then the Court has repeatedly found such an obligation to have existed, but always in the context of a case in which the respondent State has been held to have been in breach of a substantive obligation imposed by article 2. This is no doubt because complaints of violation of the procedural obligation of article 2 are only likely to be brought by relatives before the Strasbourg Court where these are ancillary to complaints of substantive breaches of article 2. It has been stated on a number of occasions that the procedural obligation under article 2 is parasitic upon the existence of the article 2 substantive right and cannot exist independently see, for example, Lord Binghams observations at para 6 of Gentle. The Inquest Issue has been formulated in the agreed Statement of Facts and Issues as follows: Whether the fresh inquest into Private Smiths death must conform with the procedural obligation implied into Article 2 of the Convention. In the first inquest the Coroner gave a narrative verdict which included the finding that Private Smiths death was caused by a serious failure to recognise and take appropriate steps to address the difficulty that he had in adjusting to the climate. Subsequently, on 5 January 2007 the Coroner gave a ruling holding that the requirements of article 2 did not apply to the inquest because any shortcomings related to a failure to follow the procedures that should have applied and not to any defects in those procedures, so that there was no question of any substantive breach of article 2. The basis upon which Mrs Smith has successfully challenged this ruling has raised an important issue of principle. Both Miss Rose and Mr Beloff have contended that an article 2 investigation must be held whenever a member of the armed services dies on active service and the Court of Appeal has so found. The argument has proceeded on the following basis. There are two different types of inquest. The first has the features that the Court of Appeal identified in R v Coroner for North Humberside and Scunthorpe, Ex p Jamieson [1995] QB 1 (a Jamieson inquest). The second has the features that the House of Lords identified in R (Middleton) v West Somerset Coroner [2004] UKHL 10; [2004] 2 AC 182 (a Middleton inquest). If the requirements of article 2 apply, the coroner must conduct a Middleton inquest. The Middleton inquest will address any alleged failures on the part of the State to comply with the substantive obligations imposed by article 2. Before addressing the Inquest Issue directly I propose to explain a number of reservations that I have in relation to the procedural obligation: i) I do not see how the procedural obligation can work if it is limited to an obligation to hold an article 2 investigation if, and only if, there are grounds for suspecting a breach by the State of a substantive article 2 obligation. ii) I question the extent of the distinction between a Jamieson inquest and a Middleton inquest. iii) There is a major difficulty in identifying the substantive obligations that article 2 imposes on a State in relation to the safety of its armed forces. iv) I question the extent to which an inquest, even a Middleton inquest, will necessarily be an appropriate process for discharging the procedural obligation. The duty to investigate death The duty to hold an article 2 investigation arises where there are grounds for suspecting that a death may involve breach by the State of one of the substantive obligations imposed by article 2. This raises the question of how the State is to identify that there are grounds for such suspicion. Any effective scheme for protecting the right to life must surely require a staged system of investigation of deaths, under which the first stage takes place automatically in relation to every death, whether or not there are grounds for suspecting that there is anything untoward about the death. Where the first stage shows that the death has not, or may not have, resulted from natural causes, there will be a requirement for a further stage or stages of the investigation. The requirement for an article 2 investigation will only arise if the preceding stage of the investigation discloses that there is a possibility that the State has not complied with a substantive article 2 obligation. In the United Kingdom such a staged system of investigating deaths exists. All deaths are required to be registered under the Births and Deaths Registration Act 1953. Registration requires a death certificate certifying the cause of death from a doctor or coroner. Where there is doubt as to whether the death is due to natural causes, it will be reported to a coroner. He then decides whether further enquiries need to be carried out. These may take the form of a post mortem examination or an inquest. Section 8 of the Coroners Act 1988 requires a coroner to hold an inquest where the body of a person is lying within his district and there is reasonable cause to suspect that the deceased has died a violent or an unnatural death, has died a sudden death of which the cause is unknown or has died in prison or in such place or in such circumstances as to require an inquest under any other Act. The inquest was designed to perform a fact finding role. It was not intended necessarily to be the final stage of the investigation. Its mandate expressly excludes determining civil or criminal liability. It is, however, being used as the appropriate process for determining whether there has been a violation of the States article 2 obligations. Jamieson and Middleton Inquests Jamieson involved an application for judicial review brought by the brother of a man who had hanged himself in his prison cell. The report of the case suggests that the evidence adduced at the inquest of the prisoner covered in detail the circumstances that led up to his suicide. It was the applicants case that the prison authorities were aware of the danger that his brother would commit suicide and failed to take the steps that they should have done to prevent this. He submitted to the coroner that he should direct the jury to consider whether the death of his brother was caused or contributed to by lack of care. The coroner refused to do so and it was this decision that was challenged by judicial review. The issue thus related, not to the scope of the investigation that had taken place, but as to the verdict that the jury were permitted to give. Sir Thomas Bingham MR, giving the judgment of the Court of Appeal, traced the statutory history of the coroners role and drew particular attention to the following statutory provisions, which are still in force. Under section 8(1) of the Coroners Act 1988 a coroner has to hold a inquest when a body is lying within his district and there is reason to think that the deceased has died a violent or unnatural death, or has died a sudden death of which the cause is unknown, or has died in prison or in such circumstances as to require an inquest under any other Act. Section 11(5)(b)(i) and (ii) requires the coroners jury to set out in an inquisition who the deceased was and how, when and where he came by his death. The Coroners Rules 1984 provide: 36(1) The proceedings and evidence at an inquest shall be directed solely to ascertaining the following matters, namely(a) who the deceased was; (b) how, when and where the deceased came by his death; (c) the particulars for the time being required by the Registration Acts to be registered concerning the death. (2) Neither the coroner nor the jury shall express any opinion on any other matters. 40. No person shall be allowed to address the coroner or the jury as to the facts. 41. Where the coroner sits with a jury, he shall sum up the evidence to the jury and direct them as to the law before they consider their verdict and shall draw their attention to rules 36(2) and 42. 42. No verdict shall be framed in such a way as to appear to determine any question of(a) criminal liability on the part of a named person, or (b) civil liability. 43. A coroner who believes that action should be taken to prevent the recurrence of fatalities similar to that in respect of which the inquest is being held may announce at the inquest that he is reporting the matter in writing to the person or authority who may have power to take such action and he may report the matter accordingly. In upholding the coroners ruling, the Court of Appeal set out a number of general principles, which included the following: (1) An inquest is a fact finding inquiry conducted by a coroner, with or without a jury, to establish reliable answers to four important but limited factual questions. The first of these relates to the identity of the deceased, the second to the place of his death, the third to the time of death. In most cases these questions are not hard to answer but in a minority of cases the answer may be problematical. The fourth question, and that to which evidence and inquiry are most often and most closely directed, relates to how the deceased came by his death. Rule 36 requires that the proceedings and evidence shall be directed solely to ascertaining these matters and forbids any expression of opinion on any other matter. (2) Both in section 11(5)(b)(ii) of the Act of 1988 and in rule 36(1)(b) of the Rules of 1984, how is to be understood as meaning by what means. It is noteworthy that the task is not to ascertain how the deceased died, which might raise general and far reaching issues, but howthe deceased came by his death, a more limited question directed to the means by which the deceased came by his death. (3) It is not the function of a coroner or his jury to determine, or appear to determine, any question of criminal or civil liability, to apportion guilt or attribute blame. Middleton also involved an inquest on a prisoner who had hanged himself in his cell. Similar allegations of neglect were made and once again the evidence covered the circumstances leading up to the deceaseds suicide. The jury handed the coroner a note stating that the Prison Service had failed in its duty of care to the deceased, but the coroner concluded that this could not be appended to the inquisition. The verdict was challenged on the ground (not open in Jamieson) that it did not comply with the procedural obligations of article 2. Lord Bingham, delivering the considered decision of the Committee, held that where article 2 was engaged it might be necessary, in accordance with section 3 of the Human Rights Act, to give the relevant statutory provisions a different meaning to that which the Court of Appeal had laid down in Jamieson. The change was not a big one: 35. Only one change is in our opinion needed: to interpret how in section 11(5)(b)(ii) of the Act and rule 36 (1)(b) of the Rules in the broader sense previously rejected, namely as meaning not simply by what means but by what means and in what circumstances. 36. This will not require a change of approach in some cases, where a traditional short form verdict will be quite satisfactory, but it will call for a change of approach in others (paras 30 31 above). In the latter class of case it must be for the coroner, in the exercise of his discretion, to decide how best, in the particular case, to elicit the jury's conclusion on the central issue or issues. The decision in Middleton has been given statutory effect by section 5 (2) of the Coroners and Justice Act 2009. That section provides: 5 Matters to be ascertained (1) The purpose of an investigation under this Part into a persons death is to ascertain (a) who the deceased was; (b) how, when and where the deceased came by his or her death; (c) the particulars (if any) required by the 1953 Act to be registered concerning the death. (2) Where necessary in order to avoid a breach of any Convention rights (within the meaning of the Human Rights Act 1998 (c 42)), the purpose mentioned in subsection (1)(b) is to be read as including the purpose of ascertaining in what circumstances the deceased came by his or her death. (3) Neither the senior coroner conducting an investigation under this Part into a persons death nor the jury (if there is one) may express any opinion on any matter other than (a) the questions mentioned in subsection (1)(a) and (b) (read with subsection (2) where applicable); (b) the particulars mentioned in subsection (1)(c). This is subject to paragraph 7 of Schedule 5. It seems to me that the only difference that the decision of the House in Middleton would have made to either the Jamieson inquest or the Middleton inquest would have been to the form of the verdict. In each case the Coroner appears to have permitted exploration of the relevant circumstances despite the fact that he did not permit these to be reflected in the verdict. I question whether there is, in truth, any difference in practice between a Jamieson and a Middleton inquest, other than the verdict. If there is, counsel were not in a position to explain it. Coroners appear frequently to have exercised considerable latitude as to the scope of the inquiry the inquest into the shootings in Gibraltar that were the subject of McCann v United Kingdom (1995) 21 EHRR 97 exemplifies this. The form of the verdict will, no doubt be dictated by the evidence that emerges at the inquest, but I have difficulty with the concept that the inquest itself may in midstream undergo a significant change in character from a Jamieson to a Middleton inquest. How far it is appropriate to widen the scope of an inquest in order to consider allegations of breach of obligations imposed by article 2 is a matter to which I shall revert. The substantive obligations of article 2 in relation to armed forces. If armed forces on active service abroad are within a States jurisdiction for purposes of article 1, the question arises of the scope of the substantive obligations imposed by article 2. Would the Strasbourg Court hold that they extend to the adequacy of the equipment with which the forces are provided; to the planning and execution of military manoeuvres? These questions are not easy to address, but an affirmative answer certainly cannot be excluded. McCann involved the shooting by an SAS unit of three members of the provisional IRA who were suspected of being about to detonate a bomb in Gibraltar. The Court held that article 2 imposed substantive duties in relation to the planning, execution and control of the operation, and a procedural obligation to investigate these matters in the light of the casualties. The Court adopted a similar approach to deaths that resulted from the operations of the Russian military when conducting substantial military operations against insurgents: Isayeva, Yusupova and Basayeva v Russia (Application Nos 57947 49/00) and Isayeva v Russia (Application No 57950/00), decisions of 24 February 2005. There would seem no reason why the Court might not adopt a similar approach to operations resulting in the death of a States own soldiers. The facts of this case do not require the Court to define the extent of the positive duty that article 2 imposes on a State in relation to its armed forces. How appropriate is an inquest for the discharge of article 2 procedural obligations? As I have pointed out, inquests were designed to perform a fact finding function as a stage in an overall scheme of investigation that would commence before the inquest and might continue after it. An inquest will not be the appropriate vehicle for all inquiries into State responsibility for loss of life. An inquest would not have been the appropriate means of determining whether the death of a victim of new variant CJD, contracted from eating BSE infected beef, involved government responsibility, nor for determining the issues of State responsibility for the Bloody Sunday killings. An inquest can properly conclude that a soldier died because a flack jacket was pierced by a snipers bullet. It does not seem to me, however, that it would be a satisfactory tribunal for investigating whether more effective flack jackets could and should have been supplied by the Ministry of Defence. If the article 2 obligation extends to considering the competence with which military manoeuvres have been executed, a coroners inquest cannot be the appropriate medium for the inquiry. Must an article 2 investigation be held whenever a member of the armed services dies on active service? Miss Rose argued that the State was under a positive obligation to take all reasonable steps to protect the lives of military recruits, who were subject to the authority and control of the State. It followed that any death of a serviceman on active service potentially engaged the responsibility of the State. All the evidence was likely to be under the control of the State. Where a soldier died on active service, whether he was a conscript, a regular or a reservist this triggered the obligation to hold an independent investigation. This was certainly the case where the circumstances of a soldiers death indicated the possibility of a systemic or operational failing by military personnel. The Court of Appeal considered a number of cases of deaths in the custody of the State, of one kind or another, where the article 2 procedural duty had been held to arise. It held at para 90: The question in the instant appeal is whether what may be called the custody principles apply to a case like this where the deceased lost his life while serving as a soldier in the Territorial Army. The Court went on to give an affirmative answer to this question, at least in the circumstances of a death from causes such as those that resulted in Private Smiths death. The obligation to hold an article 2 investigation is triggered by circumstances that give ground for suspicion that the State may have breached a substantive obligation imposed by article 2. That in its turn raises the question of the scope of the substantive obligations that a State owes in relation to its armed forces, which I have raised above. Whatever the scope of those obligations I do not consider that the death of a soldier on active service of itself raises a presumption that there has been a breach of those obligations. Troops on active service are at risk of being killed despite the exercise of due diligence by those responsible for doing their best to protect them. Death of a serviceman from illness no more raises an inference of breach of duty on the part of the State than the death of a civilian in hospital. For these reasons I reject the submission that the death of a serviceman on active service, assuming that this occurs within the article 1 jurisdiction of a State, automatically gives rise to an obligation to hold an article 2 investigation. Inquiries into the deaths of servicemen. I have already referred to the fact that, whatever the requirements of the Convention may be, the United Kingdom has a staged system of investigation into deaths. Where a death occurs in circumstances involving a public authority, an in house investigation will often precede the inquest and provide valuable information to assist the inquest. In the present case the Special Investigations Branch of the Military Police carried out an investigation into Private Smiths death and two Boards of Inquiry made reports. It was because the first of these was not disclosed to the coroner that a second inquest is to be held. I would expect that in the case of every military death in service some form of internal investigation is held. As the bodies of servicemen who die or are killed on active service abroad are brought back to this country, any internal investigation that has taken place will be followed by a public inquest that will satisfy many of the requirements of an article 2 investigation. It will often be only in the course of the inquest that it will become apparent that there is an issue as to whether there has been a breach by the State of its positive article 2 obligations. Only at that stage will it be appreciated that the exercise that is in progress is one called for by article 2 and one that must, if possible, satisfy the requirements of that article. Whether the inquest will be the appropriate medium to do this will depend on the nature of the obligation that is alleged to have been broken. The decision in Middleton, and section 5(2) of the 2009 Act that gives effect to it, requires the coroner to adapt the verdict, insofar as this is possible, in order to satisfy the requirements of article 2. Must the second inquest satisfy the procedural requirements of article 2? The Coroner ruled at the end of the first inquest that it was not necessary to satisfy the procedural requirements of article 2. Collins J and the Court of Appeal have held that the Coroner was mistaken. I agree. This is not, however, because Private Smiths death on active service, of itself, gave rise to a suspicion of breach by the State of its substantive article 2 obligations. It is because the evidence that was placed before the Coroner has raised the possibility that there was a failure in the system that should have been in place to protect soldiers from the risk posed by the extreme temperatures in which they had to serve. On the facts disclosed it was arguable that there was a breach of the States substantive obligations under article 2. This was enough to trigger the need to give a verdict that complied with the requirements of article 2. I am not convinced that the Coroners narrative verdict failed to do this. It summarised the facts leading to Private Smiths death and ended: Jason George Smiths death was caused by a serious failure to recognise and take appropriate steps to address the difficulty that he had in adjusting to the climate. The new inquest is likely to receive more detailed evidence of the circumstances surrounding Private Smiths death. In conducting that inquest the Coroner should certainly attempt to satisfy the requirements of an article 2 investigation. For these reasons I would dismiss the appeal on the second issue. LORD HOPE I agree with Lord Phillips that a member of the States armed forces is not, by reason of his or her personal status according to the military law and discipline of the United Kingdom, within the jurisdiction of the state for the purposes of article 1 of the European Convention on Human Rights. To hold otherwise would be to go beyond the categories that have hitherto been recognised by the Strasbourg Court in cases that do not arise from the effective control of territory within the Council of Europe area. But, as to the reasons for this view, I am in full and respectful agreement too with the judgment of Lord Collins. It is perhaps worth noting, in support of his conclusion that there are no policy grounds for extending the scope of the Convention to members of the armed services serving abroad simply because they are under the authority and control of the United Kingdom, that in an interview which he gave shortly after his retirement as President of the European Court of Human Rights, Luzius Wildhaber questioned how the Court could function effectively as a court when there was no prospect of it acquiring reliable evidence concerning the situation beyond the frontiers of Member States. He suggested that expecting the Court to act in such circumstances risked turning it into a campaigning organisation making allegations without solid evidence. He saw this as a compelling reason to be very careful about extending the notion of extra territoriality too far and to be wary about departing too much from the Bankovic judgment: Reflections of a Former President of the European Court of Human Rights [2010] EHRLR 169, 174. It is one thing, therefore, to recognise a Member States jurisdiction over persons within an area beyond the frontiers of the Member States over which their armed forces have established total and exclusive de facto control such as a military base, a military hospital or a detention centre, on the analogy with the extra territorial exception made for embassies: Al Saadoon and Mufdhi v United Kingdom (Application No 61498/08) (unreported) 30 June 2009, para 88. It is quite another to extend that jurisdiction to areas outside premises of that kind over which the armed forces may be operating but over which they do not have exclusive control, where the safeguarding of Convention rights cannot be guaranteed and where reliable evidence about the circumstances of alleged violations could be hard to come by because the state over whose territory these operations are being conducted is not a party to the Convention. A decision that the extra territorial jurisdiction should extend that far in this case would be likely to have profound consequences for other Member States and, it would seem from what Luzius Wildhaber has said, for the Court itself. A decision of that kind is best left to Strasbourg. I would in any event respectfully endorse the view expressed by Lord Brown of Eaton under Heywood in R (Al Skeini) v Secretary of State for Defence [2008] AC 153, para 107, for the further reasons he gives in this case, that article 1 should not be construed as reaching any further than the existing Strasbourg jurisprudence clearly shows it to reach. I also would hold that Private Smith was not within the jurisdiction of the United Kingdom within the meaning of article 1 when he was outside his base while serving in Iraq. There is nothing that I would wish to add on the first issue. The second issue in this appeal is whether the fresh inquest into Private Smiths death would have to comply with the procedural investigatory obligation guaranteed by article 2 of the Convention. At first sight this question is academic because the Secretary of State agrees that he will not submit to the new coroner in the fresh inquest that the scope of the investigation, or the nature of the verdict, should be less broad than would be appropriate if the inquest must satisfy the obligation of the United Kingdom under that article: see the Court of Appeals judgment [2009] 3 WLR 1099, para 62. This is on the assumption that, as Private Smith died on base, he was within the jurisdiction of the United Kingdom within the meaning of article 1 when he died and because the findings of the coroner at the first inquest indicate a possible breach of the positive obligation to establish processes to deal with the risk of heatstroke and hyperthermia. But, as Ms Rose QC for the respondent pointed out, a concession as to the scope of the inquest would not bind the coroner. The question whether the procedural obligation was triggered by Private Smiths death was argued before Collins J, in the Court of Appeal and before this Court on the basis that it raised an important issue of principle. Its importance is not limited to cases where members of the armed forces are serving in places such as Iraq and Afghanistan. It extends to cases where at the time of their death they were serving in the United Kingdom in Northern Ireland, for example or within the territory of another Council of Europe Member State. In the ideal world this would be an empty question. The coroner would have complete freedom to determine the scope of his own inquiry and to adapt the form and content of his verdict according to the needs of each case. That however is not how the scheme for the conduct of inquests has been designed in English law. As Lord Bingham of Cornhill explained in R (Middleton) v West Somerset Coroner [2004] 2 AC 182, paras 34 35, the scheme which has been enacted by and under the authority of Parliament must be respected, save to the extent that a change of interpretation is required to honour the international obligations of the United Kingdom under the Convention: see also R (Sacker) v West Yorkshire Coroner [2004] 1 WLR 796, para 27. The crucial difference is to be found in the way the word how in section 11(5)(b)(ii) of the Coroners Act 1988 and rule 36(1)(b) of the Coroners Rules 1984 is to be interpreted. Tempting though it may be to depart from Middleton by declaring that there is really no material difference between the functions of the coroner and the jury in the two types of inquest as Lord Phillips has indicated, I think for all the reasons that were given in that case we should not do so. The temptation to do this, adopting what the sheriff may do when he is making his determination according to the Scottish model, was confronted and resisted in Middleton, and I think that we must follow the decision that was taken in that case. On the other hand I would not wish to limit the scope that is available to the coroner under rule 43 of the Coroners Rules 1984. How far he may go in pursuing lines of inquiry in order to determine whether he should make a report under that rule with a view to preventing the recurrence of similar fatalities must depend on his judgment as to what is appropriate in the circumstances. It is only in cases where the article 2 procedural duty applies, therefore, that the Middleton approach is available to the coroner. It will then be necessary for him to conduct an inquiry which is effective, as that expression was explained by the Grand Chamber in Ramsahai v The Netherlands (2007) 46 EHRR 983, paras 324 325; see also R (L (A Patient)) v Secretary of State for Justice (Equality and Human Rights Commission intervening) [2009] AC 588, para 78, per Lord Rodger of Earlsferry. But that approach is not available in all cases. It arises only in the comparatively few cases where the states responsibility for the death is or may be engaged: R (Hurst) v London Northern District Coroner [2007] 2 AC 189, para 48 Lord Brown of Eaton under Heywood. In all other cases the proceedings must be conducted according to the regime for conducting inquests in England and Wales as summarised in R v Coroner for North Humberside and Scunthorpe, Ex p Jamieson [1995] QB 1. Section 5 of the Coroners and Justice Act 2009 has retained the distinction between these two forms of inquest. It is only where necessary to avoid a breach of any of the Convention rights that it permits the Middleton approach: see section 5(2). The scheme which Parliament has enacted in section 5 of the 2009 Act is deceptively simple. In practice however it gives rise to a variety of problems to which the Courts attention was drawn by counsel. We cannot resolve them all in this case. But at the root of most, if not all, of them lies the problem of determining whether the case in hand is one which attracts the procedural obligation that is imposed by article 2. In broad terms, it is triggered by any death occurring in circumstances in which it appears that any one or more of the substantive obligations that article 2 imposes not to take life without justification, and to establish a framework of laws, precautions, procedures and means of enforcement which will to the greatest extent practicable protect life, has been, or may have been, violated in circumstances in which it appears that agents of the state are, or may be, in some way implicated: R (Middleton) v West Somerset Coroner [2004] 2 AC 182, paras 2 and 3. The procedural obligation depends on the existence of the substantive right. It cannot exist independently: R (Gentle) v Prime Minister [2008] AC 1356, para 6. Some situations in which the procedural obligation is triggered are now well recognised. The suicide of an individual while in the custody of the state is the prime example. It has been extended to the case where a prisoner attempted to commit suicide while in custody and suffered brain damage: R (L (A Patient)) v Secretary of State for Justice (Equality and Human Rights Commission intervening) [2009] AC 588. This is because it has been recognised that prisoners as a class present a particular risk of suicide and because those who have custody of them, as agents of the state, are or may be in some way implicated. A Middleton inquest is required in all these cases, because it is at least possible that the prison authorities failed to take the steps to protect the prisoners life that the substantive right requires. As Lord Rodger of Earlsferry said in Ls case, para 59, suicide is in this respect like any other violent death in custody. The procedural obligation extends to prisoners as a class irrespective of the particular circumstances in which the death occurred. The fact that they are under the care and control of the authorities by whom they are held gives rise to an automatic obligation to investigate the circumstances. The same is true of suicides committed by others subject to compulsory detention by a public authority, such as patients suffering from mental illness who have been detained under the Mental Health Acts: Savage v South Essex Partnership NHS Foundation Trust (MIND intervening) [2009] AC 681. This approach has the merit of clarity. Everyone knows from the outset that the inquest in these cases must follow the guidance that was given in Middleton, paras 36 38. The issue before the Court is whether it is possible to achieve equal clarity in the case of an inquest into the death of a soldier. Soldiers who die while in military custody are, of course, in the same position as any other prisoner. Their case has the benefit of the substantive obligation, so the procedural obligation applies. So too does the case of members of the other armed services who die in such circumstances. The question is how far, if at all, the detainees approach can be applied to other situations which servicemen and servicewomen encounter in the service of their country, at home or abroad. Death may occur from natural causes as well as a result of neglect or injury. And fatal injuries may occur due to the mishandling of equipment during training or in other situations when personnel are not engaged in combat as well as in the face of the enemy. The conflicts in Iraq and Afghanistan have brought the issue into greater prominence. But the situation that we face today is in principle no different from that which members of the armed forces serving both at home and abroad have faced for many years. The single characteristic which currently unites all our service personnel is that they have volunteered for the branch of the service to which they belong. This applies to those who have made their profession in the armed services as well as those, like Private Smith, who chose to serve part time in reserve forces such as the Territorial Army. Mandatory military service no longer exists in this country. For this reason I would be reluctant to follow the guidance of the Strasbourg Court that is to be found in cases such as Chember v Russia, (Application No 7188/03) (unreported) 3 July 2008. The applicant in that case was called up for two years mandatory military service in the course of which he was subjected to ill treatment and harassment. The court was careful to stress in para 49 that many acts that would constitute degrading or inhuman treatment in respect of prisoners may not reach the threshold of ill treatment when they occur in the armed forces, provided they contribute to the specific mission of the armed forces in which they form part, for example training for battle field conditions: Engel v The Netherlands (No 1) (1976) 1 EHRR 647. But the description which it gave in para 50 of the duty that the State owes to persons performing military service was directed specifically to cases where it decides to call up ordinary citizens to perform military service. That description cannot be applied to those who serve in the armed forces as volunteers. It is true, of course, that those who join the armed services as volunteers accept the obligation to comply with military discipline. They are trained to obey orders, and they are subject to sanctions if they do not do so. Private Smith did not choose to go to Iraq. He received a notice of compulsory call up. But it was a condition of the service for which he volunteered that he would obey instructions of this kind. I do not think that his situation can be distinguished from that of any other member of the armed services who is deployed on active service. There is a close analogy with men and women who volunteer for service in the emergency services. Fire fighters, in particular, may face situations of great danger where their lives are at risk. But they follow instructions because that is a necessary part of the job they have chosen to do. It is tempting to select examples of cases where the cause of a soldiers death may be attributed to failures on the part of the State and to conclude that this fact in itself gives rise to the need for a Middleton inquest. But I would resist this temptation. The examples that Lord Rodger gives illustrate the difficulty. He says that he would apply the reasoning as to a prisoner committing suicide to a raw recruit to the armed forces who committed suicide during initial military training in barracks in this country: para 118. We have no evidence that raw recruits to the armed services are in this respect especially vulnerable, but this reference calls to mind the tragic cases of the four young soldiers who died at Deep Cut Barracks between 1995 and 2002 which according to the Ministry of Defence were all cases of suicide. Those soldiers were still in training, but they were not raw recruits. The training they were undergoing at Deep Cut was a course of further training, additional to the initial training which they had received in an Army Training Regiment. Where does one draw the line between the raw recruit and the more seasoned soldier who is still in training? And what about schoolchildren who commit suicide as a result of bullying from which, as they must attend school, there is no escape? Or students who do so because of the pressures they encounter in colleges or universities? To extend the substantive article 2 obligation to volunteers while they are undergoing basic or advanced training would go further than has so far been indicated as necessary by Strasbourg. Then there is the example that Lord Rodger gives of deaths as a result of friendly fire from other British forces: para 126. Trooper David Clarke, the son of the second claimant in R (Gentle) v Prime Minister [2008] AC 1356, was killed by friendly fire while on armed service with the Queens Royal Lancers in Iraq. He was driving a Challenger 2 tank when it was fired on by another Challenger 2 tank from a different unit whose crew had mistaken it for an enemy vehicle. That was an example of friendly fire by British forces. But a number of other servicemen, including several soldiers serving with the Queens Own Highlanders, were killed during the same campaign when their armoured vehicle was fired on by a US Black Hawk Helicopter. Are cases of accidental deaths due to friendly fire by allied forces to be distinguished from those which are due to accidents caused by British forces? And why should deaths due to friendly fire be distinguished from deaths due to injuries sustained as a result of the actions of opposing forces that could also have been avoided if mistakes had not been made by the soldiers themselves or by their commanders? The risk of death due to friendly fire in the confusion and heat of battle is one of the risks that a soldier must face as part of the mission for which he has volunteered. The same is true of the risk of death while in training due, for example, to mistakes made while handling weapons or other equipment or to exposure to the elements. The Court of Appeal applied the principle that extends the protection of article 2 to detained mental patients to the case of soldiers such as Private Smith who die of heatstroke while on active service in Iraq: [2009] 3 WLR 1099, paras 104 105. The essence of its reasoning is to be found in these sentences taken from para 105: [The soldiers] are under the control of and subject to army discipline. They must do what the army requires them to do. If the army sends them out into the desert they must go. In this respect they are in the same position as a conscript. Once they have signed up for a particular period they can no more disobey an order than a conscript can. On this basis it saw no reason why they should not have the same protection as is afforded by article 2 to a conscript. I think that this reasoning goes further than the Strasbourg Court has gone in the case of conscripts, as its reference in Chember v Russia (Application No 7188/03) 3 July 2008, para 49, to risks inherent in the specific mission of the armed forces shows. But it seems to me to be objectionable on other grounds. Members of our armed services are not conscripts. They have chosen to accept the demands of military discipline. Moreover, if the fact that they must obey orders is to be treated as the criterion, there is no logical stopping place. Every situation where death occurs in circumstances where they were obeying orders, from the training ground to battle conditions, would have to be treated in the same way. I would reject the analogy with those who are in the custody of the state. The volunteer soldiers duty to obey orders is not comparable with the state of the detainee who is held against his will in the States custody. In my opinion the substantive obligation under article 2 does not extend automatically to all service personnel in a volunteer army while they are on active service at home or within the article 1 jurisdiction overseas. Like Lord Mance, I regard the proposition that all deaths of military personnel on active service require to be investigated by a Middleton type inquiry as going too far: para 214. As I said in R (Gentle) v Prime Minister [2008] AC 1356, para 19, the guarantee in the first sentence of article 2(1) is not violated simply by deploying servicemen and women on active service overseas as part of an organised military force which is properly equipped and capable of defending itself, even though the risk of their being killed is inherent in what they are being asked to do. But one must not overlook the fact that there have been many cases where the death of service personnel indicates a systemic or operational failing on the part of the State. These may range from a failure to provide them with the equipment which is needed to protect life to mistakes made in the way they were deployed due to bad planning or inadequate appreciation of the risks that had to be faced. These are cases where the investigator should, as article 2 requires, take all reasonable steps to secure the evidence relating to the incident, to find out, if possible, what caused the death, and to identify the defects in the system which brought it about and any other factors that may be relevant: see R (Middleton) v West Somerset Coroner [2004] 2 AC 182, para 36. Private Smiths death, which occurred on base, seems to me to fall into this category. This was a place over which the armed forces had exclusive control, so the jurisdictional requirement was satisfied. And all the signs are that this was a death which might have been prevented if proper precautions had been taken. There is a sufficient indication of a systemic breach in an area that was within its jurisdiction for the purposes of article 1 to engage the responsibility of the State to carry out an effective investigation into the circumstances. There is something that ought to be inquired into, if only to ensure that tragedies of this or a similar kind do not happen again. I would hold that this is enough to trigger the article 2 procedural obligation so as to require the coroner to conduct a Middleton inquiry in his case. I recognise that the case by case approach which I favour, coupled with the lack of definition in this area of the law, creates a very real problem for the parties as well as for coroners. It risks creating satellite litigation as decisions as to whether a case falls on one side of the boundary are opened up for challenge, resulting in delays and increased costs. The solution to this highly unsatisfactory situation lies in a reform of the law which restricts inquiries in England and Wales which are of that kind to cases where there are grounds for thinking that the substantive obligation under article 2 has been violated. It does not lie in extending the potential reach of article 2 to a broadly defined category of cases which may well deserve sympathy but which lie outside the well defined circumstances in which the positive obligation has hitherto been held to apply. The balance of advantage until the law is reformed lies, I would suggest, in holding the line at cases where there are grounds for thinking that there was a failure by the State in fulfilling its responsibility to protect life and not extending it to cases which, although involving the element of compulsion that is inherent in service life, are truly outside that category. I would allow the appeal against the Court of Appeals order on the first issue. I would dismiss the appeal on the second issue. LORD RODGER The present appeal arises out of the death of Private Jason Smith on 13 August 2003, while serving in Iraq. He died of heat stroke. On the day in question the effects were first noticed when Private Smith was seen lying on the floor in the Stadium at Al Amarah where his accommodation was. He was taken to the medical facility at Camp Abu Naji where he died shortly afterwards. Because he died at the Camp, which was the centre of British operations in the area, the Secretary of State concedes that he died within the jurisdiction of the United Kingdom for purposes of article 1 of the European Convention on Human Rights and Fundamental Freedoms (the Convention). The Secretary of State further concedes that the circumstances of his death are such as to call for an independent inquiry under article 2 of the Convention. Despite these concessions, the Secretary of State asks this Court to decide points relating to the United Kingdoms jurisdiction for purposes of article 1 and to the circumstances in which an inquest which complies with the requirements in R (Middleton) v West Somerset Coroner [2004] 2 AC 182 (a Middleton inquest) has to be held. The precise basis and extent of the Secretary of States concession on the first point are not altogether clear to me. So far as the second point is concerned, the parties appeared to agree that coroners and lawyers found it difficult to know whether, in a case involving the death of a soldier on active service overseas, any inquest should be a Middleton inquest, or whether it should start a Jamieson inquest (one whose more limited scope is described in R v Coroner for North Humberside and Scunthorpe, Ex p Jamieson [1995] QB 1), but evolve into a Middleton inquest if the coroners investigation seemed to require it. For the reasons given by Lord Collins, to which I could not possibly add anything of value, I would allow the appeal on the first issue. It follows that, leaving aside the position when they are on a United Kingdom base, soldiers on active service overseas are not within the jurisdiction of the United Kingdom for purposes of article 1 of the Convention. It follows also that their deaths will not give rise to any requirement to carry out an article 2 investigation. Nevertheless, the Secretary of State asks for a decision on the point. As counsel for the respondent pointed out, an issue could certainly arise in relation to a soldier who had been killed in combat in this country Northern Ireland providing recent examples. Unfortunately, counsels submissions left me, at least, unclear about how exactly a decision one way or the other, as to the form of the inquest, would affect such practical matters as how the coroner or parties prepared for the inquest or what would happen if the coroner decided, half way through, that it should become a Middleton inquest. There is, therefore, a limit to the guidance that this Court can usefully give in a case where the point is moot and in which we have not been told of any particular practical problems that have arisen. Ms Rose QC and Mr Beloff QC submitted, however, that the Court should lay down and it would have to be a matter of law that all inquests into the death of a soldier on active service should be Middleton inquests. Then everyone would know where they stood and such matters as legal aid, representation of relatives and the form of any eventual verdict would be clear from the outset. The submission is superficially attractive and, doubtless for that reason, a somewhat similar argument has been tried before. In R (Hurst) v London Northern District Coroner [2007] 2 AC 189, 214, Lord Brown of Eaton under Heywood dealt with it in this way: Middleton clearly accepted that Jamieson was correctly decided. Were it otherwise, the House could simply have overruled it without recourse to the Human Rights Act 1998 at all, let alone section 3. It is plain that the House was not intending the Middleton approach thereafter to apply in all cases. In the first place, an article 2 investigative obligation only arises in the comparatively few cases where the states responsibility is or may be engaged. Secondly, even where the obligation does arise, it will often be satisfied without resort to a Middleton inquestin some cases by criminal proceedings, in particular where a defendant pleads not guilty and the trial involves a full exploration of the facts surrounding the death (para 30 of the committees opinion delivered by Lord Bingham of Cornhill); in others, like McCann, where short verdicts in the traditional form will enable the jury to express their conclusion on the central issue canvassed at the inquest at para 31 of the opinion. All this is clear from the committee's opinion which in terms recognises at para 36 that only sometimes will a change of approach be called for. The key point is that the decision in Middleton involved using section 3 of the Human Rights Act 1998 to place an extended construction on section 11(5)(b)(ii) of the Coroners Act 1988 and rule 36 of the Coroners Rules 1984 (SI 1984/552). This was justified only because the extended construction was necessary in order to meet the requirements of article 2. So counsels submission really implied that, as a class, the deaths of British soldiers on active service in, say, Iraq or Afghanistan, would trigger the article 2 investigative obligation. I would reject that approach. In R (L(A Patient)) v Secretary of State for Justice [2009] AC 588 a young man had tried to hang himself in Feltham Young Offender Institution. The Secretary of State argued that, since the obligation on the prison authorities to protect a prisoner from himself is not absolute and so only arises in particular circumstances, a suicide can occur without there having been any breach of the authorities article 2 obligation to protect him. So there did not need to be an independent investigation unless there was some positive reason to believe that the authorities had indeed been in breach of their obligation to protect the prisoner. I rejected that argument in these words, at p 619: 59. That argument is mistaken. Whenever a prisoner kills himself, it is at least possible that the prison authorities, who are responsible for the prisoner, have failed, either in their obligation to take general measures to diminish the opportunities for prisoners to harm themselves, or in their operational obligation to try to prevent the particular prisoner from committing suicide. Given the closed nature of the prison world, without an independent investigation you might never know. So there must be an investigation of that kind to find out whether something did indeed go wrong. In this respect a suicide is like any other violent death in custody. In affirming the need for an effective form of investigation in a case involving the suicide of a man in police custody, the European court held that such an investigation should be held when a resort to force has resulted in a persons death: Akdogdu v Turkey, para 52. 60. In R (Middleton) v West Somerset Coroner [2004] 2 AC 182, another case of a suicide in custody, at p 191, para 3, Lord Bingham of Cornhill summarised the jurisprudence of the European court as imposing an obligation to hold an independent investigation if it appears that one or other of the substantive obligations has been, or may have been, violated and it appears that agents of the state are, or may be, in some way, implicated. Mr Giffin suggested that Lord Binghams formulation was inconsistent with there being a requirement for an independent investigation in all cases of suicide in custody. I do not agree. In summarising the case law, Lord Bingham was recognising that, where the circumstances of a prisoners death in custody indicate that the substantive obligations of the state may have been violated, any violation, whether due to a systemic or operational failure, will necessarily have involved members of the prison service in one capacity or another. An independent investigation is therefore required to see whether there was, in fact, a violation. The starting point for the reasoning in this passage is that the prison authorities are under both an obligation to take general measures to diminish the opportunities for prisoners to harm themselves and an operational obligation, in certain limited circumstances, to try to prevent a particular prisoner from committing suicide. The authorities are under these obligations because persons in custody are in a vulnerable position and the authorities are under a duty to protect them: Edwards v United Kingdom (2002) 35 EHRR 487, 507, para 56. Therefore the mere fact that a prisoner has committed suicide indicates that there may have been a failure on the part of the prison authorities to perform their article 2 obligations to prevent those in custody from doing so. I would apply precisely the same reasoning if, say, a raw recruit to the armed forces committed suicide during initial military training. It is obvious and past experience shows that recruits, who are usually very young and away from their families and friends for the first time, may be unable to cope with the stresses of military discipline and training. In these circumstances I would regard such recruits as vulnerable individuals for whom the military authorities have undertaken responsibility. So the authorities must have staff trained, and structures in place, to deal with the potential problems which may, quite predictably, arise. Therefore, if a suicide occurred in such circumstances, this would suggest that there might have been a failure on the part of the authorities to discharge their obligation to protect the recruits. There would need to be an independent inquiry especially since recruits are trained in a closed environment. I would take much the same view of Private Smiths death in this case. It may well be that, in the circumstances in Iraq at the time, a soldier could die of heatstroke without there having been any violation of the Armys obligations under article 2. Nevertheless, the likelihood of extreme heat and its possible effects on soldiers were known to the military authorities. There was an obvious need to take appropriate precautions. So, where, as here, a soldier suffers so badly from heatstroke, while in his living accommodation, that he dies shortly afterwards, it is at least possible that the Army authorities failed in some aspect of their article 2 obligation to protect him. For that reason I am satisfied that, given his concession on jurisdiction, the Secretary of State was correct to concede the need for a Middleton inquest into Private Smiths death. I would, however, take an entirely different view of the death of a trained soldier in action e g, when a roadside bomb blows up the vehicle in which he is patrolling, or when his observation post is destroyed by a mortar bomb. The fact that the soldier was killed in these circumstances raises no prima facie case for saying that the United Kingdom army authorities have failed in their obligation to protect him and that there has, in consequence, been a breach of his article 2 Convention rights. In the first place, even if an active service unit is, in some ways a closed world, it would be quite wrong to construct any argument around the idea that ordinary members of the forces are vulnerable in the same way as prisoners or detained patients or, even, conscripts doing military national service in Russia or Turkey. I have already accepted that, in the initial stages of their training, recruits to the United Kingdom forces may indeed be vulnerable in this sense. But those who pass through training and are accepted into the forces are often the reverse of vulnerable: their training and discipline make them far more self reliant and resilient than most members of the population and, so far from being isolated, they form part of a group whose members are supportive of one another. Even more importantly, any suggestion that the death of a soldier in combat conditions points to some breach by the United Kingdom of his article 2 right to life is not only to mistake, but much worse to devalue, what our soldiers do. It is not just that their job involves being exposed to the risk of death or injury. That is true of many jobs, from steeplejacks to firemen, from test pilots to divers. Uniquely, the job of members of the armed forces involves them being deployed in situations where, as they well know, opposing forces will actually be making a determined effort, and using all their resources, to kill or injure them. While steps can be taken, by training and by providing suitable armour, to give our troops some measure of protection against these hostile attacks, that protection can never be complete. Deaths and injuries are inevitable. Indeed it is precisely because, in combat, our troops are inevitably exposed to these great dangers that they deserve and enjoy the admiration of the community. The long established exemption from inheritance tax of the estates of those who die on active service is an acknowledgment of the fact that members of the armed forces can be called upon to risk death in this way in the defence of what the government perceives to be the national interest. I have deliberately referred to our soldiers and our troops because it may well be that not all Council of Europe countries look on their armed forces in the same way. For historical or cultural reasons, some may be reluctant to see their armed forces engage in combat or carry out dangerous peace keeping operations. So they may have a very different attitude to the risks to which their forces should be exposed. Correspondingly, members of their forces may not attract the level of public esteem that members of our forces, who are regularly expected to face very real threats of death or injury, enjoy. At present our troops are exposed to great dangers in Afghanistan. Inevitably, many have been killed and many more have been wounded. To suggest that these deaths and injuries can always, or even usually, be seen as the result of some failure to protect the soldiers, whether by their immediate companions or by more senior officers or generals or ministers, is to depreciate the bravery of the men and women who face these dangers. They are brave precisely because they do the job, knowing full well that, however much is done to protect them, they are going to be up against opposing forces who are intent on killing or injuring them and who are sometimes going to succeed. This is the background to any inquest into the death of a soldier on active service. In most cases the starting point is that the soldier died as a result of a deliberate attack by opposing forces by, say, a mortar bomb, or a roadside bomb, or by sniper fire. Usually, at least, that will also be the end point of the coroners investigation because it will be an adequate description not only of how the soldier was killed, but also of the circumstances in which he was killed. Of course, it will often perhaps even usually be possible to say that the death might well not have occurred if the soldier had not been ordered to carry out the particular patrol, or if he had been in a vehicle with thicker armour plating, or if the observation post had been better protected. But, even if that is correct, by itself, it does not point to any failure by the relevant authorities to do their best to protect the soldiers lives. It would only do so if contrary to the very essence of active military service the authorities could normally be expected to ensure that our troops would not be killed or injured by opposing forces. On the contrary, in order to achieve a legitimate peacekeeping objective, a commander may have to order his men to carry out an operation when he knows that they are exhausted or that their equipment is not in the best condition. Indeed the European Convention on Human Rights owes its very existence to countless individuals who carried out operations in just such circumstances. For these reasons, I am satisfied that, where a serviceman or woman has been killed by opposing forces in the course of military operations, the coroner will usually have no basis for considering, at the outset, that there has been a violation of any substantive obligation under article 2. So a Middleton inquest will not be called for and indeed it would not be lawful, in such circumstances, to return the wider verdict which is required where a potential violation of article 2 is under consideration. Of course, as his investigation proceeds, the coroner may uncover new information which does point to a possible violation of article 2. To take an extreme example, it may emerge from the evidence that the soldier actually died as a result of friendly fire from other British forces. At that point, the legal position will change because there will be reason to believe that the military authorities may indeed have failed in their article 2 duty to protect the soldiers life. So the coroner will conduct the inquest in the manner required to fulfil the United Kingdoms investigatory obligation under article 2. But the coroner is not concerned with broad political decisions which may seem to have a bearing, and may indeed actually have a bearing, on what happened. This is clear from Nachova v Bulgaria (2005) 42 EHRR 933, 957, para 110, where the Grand Chamber described the essential purpose of an article 2 investigation as being to secure the effective implementation of the domestic laws safeguarding the right to life and, in those cases involving state agents or bodies, to ensure their accountability for deaths occurring under their responsibility. Once it is established, say, that a soldier died because the blast from a roadside bomb penetrated the armour plating on his vehicle, it may well be inferred that he would not have died if the plating had been stronger. And that simple fact may be worth pointing out as a possible guide for the future. But questions, say, as to whether it would have been feasible to fit stronger protection, or as to why the particular vehicles were used in the operation or campaign, or as to why those vehicles, as opposed to vehicles with stronger protection, were originally purchased by the Ministry of Defence, or as to whether it would have been better to have more helicopters available etc, all raise issues which are essentially political rather than legal. That being so, a curious aspect of counsels submissions before this Court was the complete absence of any reference to Parliament as the forum in which such matters should be raised and debated and in which ministers should be held responsible. Of course, in consequence of pressure brought to bear by Parliament, the government might set up an independent inquiry with wide terms of reference to look into all aspects of a situation, including the political aspects. But we are concerned with the scope of a coroners inquest whose function is different. Many of the issues about the deaths of soldiers which are, understandably, of the greatest concern to their relatives are indeed of this much broader nature. In short, they raise questions of policy, not of legality, and so would fall outside the scope of any article 2 investigation which a coroner might be obliged to carry out. For these reasons I agree that the contentions advanced by Ms Rose and Mr Beloff should be rejected. LORD WALKER In common with other members of this Court I feel some disquiet about our engaging in protracted deliberation and the preparation of lengthy judgments on two issues which (as all parties agree) do not actually affect what is to happen in consequence of the tragic death of Pte Smith. It is not the function of this Court to deliver advisory opinions, and in this case we may be going some way beyond what would be regarded as a proper exercise of judicial power in a country with a written constitution providing for the separation of powers (for instance the position in Australia is very fully discussed in a paper A Human Rights Act, the Courts and the Constitution presented to the Australian Human Rights Commission by the Hon Michael McHugh AC on 5 March 2009). The fact that every death of a soldier in Afghanistan brings tragedy to his or her family, and sorrow to the whole nation, may not be a sufficient reason for stretching our jurisdiction to the limits. That is underlined by the second issue, as to coroners inquests, which has led to the submission of further detailed evidence which, informative as it is, has no possible bearing on the second inquest which is to be held on the death of Pte Smith. On the two issues argued before the Court I respectfully agree with Lord Collins on the first issue, and with Lord Phillips and Lord Rodger on the second issue. I would particularly associate myself with paras 118 127 of Lord Rodgers judgment. LADY HALE Mrs Smith must wonder why she is in this court. She did not ask to be here. All she wants is a proper inquiry, in which she can play a proper part, into how it was that her son Jason came to die of heatstroke while serving with the British army in Iraq. She wants to understand what happened to him, but she also wants others to understand it too, so that anything which reasonably can be done will be done to prevent other families suffering as hers has suffered. She had to begin these proceedings because of shortcomings in the first inquest, which are now conceded both by the Coroner and by the Ministry of Defence. The Ministry failed to produce the principal board of inquiry report into Private Smiths death, insisted upon wholesale redaction of the documents which were disclosed, and the coroner wrongly held that he had no power to order disclosure if the Ministry would not agree. As the judge commented, it has seemed to the family that the Army was concerned to cover up any shortcomings and to protect its reputation. That may not be a correct conclusion, but it is not surprising that it has been reached (para 5). But all that is now behind her. A new inquest is to be held and those points are conceded. More than that, Mrs Smith wished to establish that her son had died within the jurisdiction of the United Kingdom, so that he and she were covered by the guarantees in article 2 of the European Convention on Human Rights. This imposes upon the state a duty, not only to avoid taking life, but also to take positive steps to protect the right to life in a variety of ways. One of these is to hold a proper inquiry, in which the family of the deceased may play a proper part, if it appears that the state may have failed in its responsibility to protect life. But both of these points have also been conceded. The Ministry of Defence accept that Private Smith was within the jurisdiction of the United Kingdom when he died. They will also not object to an inquest which examines, not only the precise cause of his death, but also the circumstances in which it took place. This is as far as they or anyone else can go, because it will be for the coroner to decide, on the basis of that inquiry, what sort of verdict should be delivered. But if the evidence were to warrant it, the verdict could clearly be one which identified any breach that there may have been of the United Kingdoms obligations under article 2. That is all that is needed to decide this case. The Ministry of Defence have appealed to this court because both the trial judge and the Court of Appeal accepted the invitation of both parties to decide more than they needed to decide. Of course they meant to be helpful. But because the Ministry of Defence did not like what they said, Mrs Smith has had to wait for more than two years for the case to be over so that the fresh inquest can be arranged. Perhaps worse, it is not at all clear what this court is doing. The trial judge ordered that the first inquisition and verdict be quashed and a new inquest held that complies with the procedural obligations implicit in Article 2 of the European Convention on Human Rights, as set out in the Courts judgment. (He also dismissed a competing claim by the Ministry of Defence but there was no appeal against that.) The Court of Appeal dismissed the Ministrys appeal. So the judges order stands. As I understand it, the most we might be asked to do is to delete the words as set out in the Courts judgment. He made no declarations as to the rights of the parties so we are not asked to change those. So we are merely making observations on two extremely important and interesting questions but we are not deciding anything. In those circumstances I doubt whether any of the important and interesting things which are said about those questions in this court can be part of the essential grounds for our decision and thus binding upon other courts in future. In the words of Sir Frederick Pollock, cited by Lord Denning in Close v Steel Company of Wales Ltd [1962] AC 367, at 388 389: Judicial authority belongs not to the exact words used in this or that judgment, nor even to all the reasons given, but only to the principles accepted and applied as necessary grounds of the decision. Lest it be thought that Lord Denning took an unusual view of the circumstances in which he was bound by previous authority, he also referred to Lord Selborne LC, in Caledonian Railway Company v Walkers Trustees (1882) 7 App Cas 259, at 275: A judgment which is right, and consistent with sound principles, upon the facts and circumstances of the case which the House had to decide, need not be construed as laying down a rule for a substantially different state of facts and circumstances, though some propositions, wider than the case itself required, may appear to have received countenance from those who then advised the House. Pithier still was the Earl of Halsbury LC in Quinn v Leathem [1901] AC 495, at 506: . a case is only an authority for what it actually decides. Technically, therefore, I believe that our views are not binding, but they are of course persuasive. So it is only polite to the powerful arguments advanced by counsel, and to the patience with which Mrs Smith has listened to them, to indicate where I currently stand on each of the two broader issues. On the jurisdiction issue, I remain of the view to which I was inclined in R (Gentle) v Prime Minister [2008] UKHL 20, [2008] AC 1356, that British soldiers serving in Iraq were within the jurisdiction of the United Kingdom when they were killed, in one case by friendly fire and in the other by a road side bomb. I am quite clear that this was not part of the principle, or essential ground, upon which the House of Lords decided the case: this was that taking care to discover whether or not the war was legal in international law had nothing to do with the duty in article 2 to protect life. This can easily be tested. It would have made no difference to the decision on the issue in the case where the soldiers deaths had taken place: whether they were clearly within the jurisdiction of the United Kingdom or whether they were not. The House did hear some argument on the point, but nothing as full as the argument which this court has heard. Although I am sorry to disagree with colleagues whose opinions are worthy of the deepest respect, I agree with the opinions of Lord Mance and Lord Kerr, and for the very full reasons which they give, and there is nothing which I can usefully add. On the second issue, I agree that this is a question for a coroner to determine on the evidence that emerges at the inquest, but I also agree with Lord Phillips and Lord Rodger that we already know enough to raise the serious possibility that the United Kingdom may in some way have been in breach of its obligations under article 2. So the scope of the inquiry must be wide enough to look into this and, depending on the conclusions drawn from the evidence, the verdict must be able to reflect this. I do not believe that we are either allowing or dismissing an appeal on either issue, but if we are I would dismiss it on both. LORD BROWN Are our armed services abroad, in Iraq, Afghanistan or wherever else they may be called upon to fight, within the United Kingdoms jurisdiction within the meaning of article 1 of the European Convention on Human Rights? That is the critical first issue for decision on this appeal. If they are, then the United Kingdom is required to secure to them all the Convention rights and freedoms. Some will say that this is no less than they deserve. They are brave men and women, undoubtedly entitled to these rights and freedoms whilst serving (sometimes, as recently in Northern Ireland, on active service) at home. Why should they not enjoy the same rights when, whether they like it or not, they are called upon to face dangers abroad? When abroad, they are, after all, still subject to UK military law and, indeed, remain generally under the legislative, judicial and executive authority of the UK. Others, however, will say that to accord Convention rights and freedoms to our services whilst engaged in armed combat with hostile forces abroad makes no sense at all. It could serve only to inhibit decision making in the field and to compromise our services fighting power. For my part I can readily see the force of both arguments and do not pretend to have found this an easy case to decide. In the end, however, I have concluded that, save in an exceptional case like that of Private Smith himself whose death resulted from his treatment on base, Convention rights do not generally attach to our armed forces serving abroad. Having regard to the number and length of other judgments in the case, my own reasoning will be brief. Sometimes less is more. I take as my starting point the decision of the House of Lords in R (Al Skeini) v Secretary of State for Defence [2008] AC 153 where I sought to analyse the existing Strasbourg jurisprudence on the reach of article 1. Nothing that I have since heard or read has persuaded me that that analysis is wrong. It was known, of course, at the time this case was argued before us, that the application in Al Skeini was to be heard in Strasbourg on 9 June 2010, with the judgment of the Grand Chamber expected some 3 6 months later, and, obviously, if the application succeeds, it is likely to transform our understanding of the scope of article 1 in cases of this sort. Meanwhile, however, Al Skeini must be assumed to be correct and, in turn, the decision of the Grand Chamber in Bankovic v Belgium (2001) 11 EHRC 435 must be regarded as Strasbourgs ruling judgment on the point. There has been some suggestion (see, for example, paras 29 and 30 of Lord Phillips judgment) that, since Bankovic, a wider concept of article 1 jurisdiction based upon state agent authority has been gaining ground in Strasbourg. In Al Skeini (at paras 124 131) I dealt at length with one post Bankovic Strasbourg decision said to support such an approach Issa v Turkey (Merits) (2004) 41 EHRR 567 and concluded that it should not be understood to detract in any way from the clearly restrictive approach to article 1 jurisdiction adopted in Bankovic. Reference is now made to more recent Strasbourg decisions, in particular Al Saadoon and Mufdhi v United Kingdom (2009) 49 EHRR SE 95 and Medvedyev v France (Application No 3394/03) (unreported) 29 March 2010. To my mind, however, neither casts any real doubt on the Bankovic/Al Skeini analysis. In Al Saadoon the Court at para 62 cited para 132 of my own judgment in Al Skeini recognising the UKs jurisdiction over Mr Mousa essentially by analogy with the extra territorial exception made for embassies (an analogy recognised too in Hess v United Kingdom (1975) 2 DR 72, a Commission decision in the context of a foreign prison which had itself referred to the embassy case of X v Federal Republic of Germany) and, at paras 88 89, concluded that: . given the total and exclusive de facto, and subsequently also de jure, control exercised by the United Kingdom authorities over the premises in question, the individuals detained there, including the applicant, were within the United Kingdoms jurisdiction (see Hess v United Kingdom . ). This conclusion is, moreover, consistent with the dicta of the House of Lords in Al Skeini . (see para 62 above). In the Courts view, the applicants remained within the United Kingdoms jurisdiction until their physical transfer to the custody of the Iraqi authorities on 31 December 2008. It seems to me clear that the Court was there adopting, rather than doubting, the Al Skeini analysis. The decision of the Grand Chamber in Medvedyev is sufficiently described at para 30 of Lord Phillips judgment and paras 180 182 of Lord Mances judgment. I cannot see how it supports an argument for article 1 jurisdiction generally in respect of a states armed services abroad. All that said, I recognise that whilst there is nothing in Al Skeini (or, indeed, Bankovic) which supports the respondents argument on the present appeal, neither is there anything in the cases wholly inconsistent with it. True, as para 61 of Bankovic stated, article 1 reflects an essentially territorial notion of jurisdiction, other bases of jurisdiction being exceptional and requiring special justification in the particular circumstances of each case. And true it is too that the particular basis of exceptional jurisdiction being contended for here has not previously been recognised by the Court, the Commissions express reference to armed forces remaining under a states article 1 jurisdiction when abroad (for example in their 1975 admissibility decision in Cyprus v Turkey 2 DR 125 cited at para 49 of Lord Phillips judgment) being conspicuously omitted from more recent such formulations. Nevertheless, as I recognised at the outset, our armed forces abroad are subject not only to UK military law but also to the UKs general criminal and civil law and (as the Court of Appeal [2009] 3 WLR 1099 pointed out at para 29 of its judgment): As a matter of international law, no infringement of the sovereignty of the host state is involved in the United Kingdom exercising jurisdiction over its soldiers serving abroad. Plainly, therefore, it can respectably be argued that special justification exists for accepting an extra territorial basis of article 1 jurisdiction in their particular case. Arguably, moreover, this would eliminate at a stroke various apparent anomalies otherwise resulting from the position contended for by the Secretary of State for example, Convention rights attaching to a soldier in, say, a tented desert base camp (or military ambulance) but not when out with a patrol group, or, indeed, to a soldier like Private Smith who dies on base but not perhaps if his hyperthermia had resulted from inadequate care and water off base. The two principal reasons why for my part I would reject the respondents argument are these. First, because, if our armed forces abroad are within the reach of the Convention but, as Al Skeini decides, the local population are not, those responsible for the planning, control and execution of military operations will owe article 2 (and article 3) duties to our servicemen but not to the civilians whose safety is also imperilled by such operations. That would seem to me an odd and unsatisfactory situation (not to mention a situation unlikely to win the hearts and minds of the local population) and to sit uneasily with the growing Strasbourg case law on internal armed conflict which, it should be noted, has not hitherto been suggested to extend also to international armed conflict situations. Cases like Ergi v Turkey) (1998) 32 EHRR 388 (extending the principles established in McCann v United Kingdom (1995) 21 EHRR 97 to situations of armed conflict), Isayeva, Yusupova and Bazayeva v Russia (Application Nos 57947 49/00) (Isayeva I) and Isayeva v Russia (Application No 57950/00) (Isayeva II) (decisions of 24 February 2005) show, in the context respectively of Turkish army operations against the PKK in Turkey and Russian army operations against Chechnyan separatist fighters in Chechnya, the ECtHR closely scrutinising the planning, control and execution of military operations and asking whether all this has been done in such a way as to minimise, to the greatest extent possible, recourse to lethal force. The exigencies of armed conflict notwithstanding, Strasbourg requires the state to have taken all feasible precautions to avoid or at least minimise incidental loss of life. In all three cases substantive breaches of article 2 were found established. In Isayeva I, for instance, the Court criticised the failure of the operational command to timeously communicate the fact that civilians may have been in the vicinity of the forces on active deployment, the absence of provision of forward air controllers to direct the military aircraft participating in the attack, and the deployment of missiles with a blast radius of between 300 to 800 metres which the Court regarded as disproportionate weaponry; in Isayeva II it criticised the Russian militarys failure to adequately anticipate the arrival of Chechnyan fighters, the absence of any preemptive measures to warn or evacuate the populace, the failure to accurately quantify the operational risk of deploying aircraft armed with heavy combat weapons, and the decision to utilise what again the Court regarded as disproportionate and indiscriminate weaponry. As can be seen, Strasbourgs concern in these cases is essentially for the safety of civilians caught up in the conflict conflict, of course, occurring within the legal space (espace juridique) of the respective contracting states. Assuming Al Skeini is right, such civilians have no article 2 rights if they are outside the Council of Europe area. It is, however, the respondents case that the soldiers do. Is it really to be suggested that even outside the area of the Council of Europe Strasbourg will scrutinise a contracting states planning, control and execution of military operations to decide whether the states own forces have been subjected to excessive risk (risk, that is, which is disproportionate to the objective sought)? May Strasbourg say that a different strategy or tactic should have been adopted perhaps the use of airpower or longer range weaponry to minimise the risk to ground troops notwithstanding that this might lead to higher civilian casualties? Such problems would to my mind be inescapable were Strasbourg to find armed forces abroad within the reach of article 1 and then adopt with regard to their article 2 rights the approach hitherto taken in situations of internal armed conflict. My second principal reason for not holding the UKs armed forces abroad to be within the states article 1 jurisdiction is that this would be to go further than the ECtHR has yet gone, to construe article 1 as reaching further than the existing Strasbourg jurisprudence clearly shows it to reach. As the ECtHR itself pointed out in Bankovic (para 65), The scope of article 1 . is determinative of the very scope of the contracting parties positive obligations and, as such, of the scope and reach of the entire Convention system of human rights protection. Article 1 is in this respect to be contrasted with the Conventions substantive provisions and with the competence of the Convention organs, to both of which (as the Court had noted at para 64) the living instrument approach applies. It was for these reasons that all of us in Al Skeini decided that it was for the ECtHR to give the definitive interpretation of article 1 and that domestic courts should not construe it as having any wider reach than that established by Strasbourgs existing jurisprudence. The first five appellants there failed because, as Lady Hale put it (at para 91), she did not think that Strasbourg would inevitably hold that the deceased . were within the jurisdiction of the UK when they met their deaths. That is similarly my conclusion in the present case not, of course, with regard to Private Smith himself whose death, it is conceded, occurred in circumstances which did fall within the United Kingdoms jurisdiction, but rather with regard to our armed forces generally whilst serving abroad. For these reasons, together with those given by Lord Phillips and Lord Collins, I would accept the appellants argument upon the first issue. The second issue before us, although ostensibly raised with regard to Pte Smiths death, in reality invites our ruling as to which deaths amongst the UKs armed forces abroad require inquests that comply with the article 2 investigatory obligation. Plainly Pte Smiths does. Equally plainly, if the majority of us are right on the first issue, that would not be so in respect of most of our armed forces abroad (at any rate when not serving within the territory of another Council of Europe state). If, however, the majority of us are wrong on the jurisdiction issue in respect of our forces in, for example, Iraq and Afghanistan, and in any event with regard to our armed forces on, for example, active service in Northern Ireland, together with isolated cases such as that of Pte Smith, then I am in full agreement with Lord Phillips judgment on this issue and there is little that I wish to add. I agree that the obligation to hold an article 2 investigation arises only when there is ground for suspicion that the State may have breached a substantive obligation imposed by article 2 (Lord Phillips at para 84) which would certainly not ordinarily be the case where a soldier dies on active service abroad. I agree also with Lord Rodgers judgment on this point. As I earlier observed in R (Hurst) v London Northern District Coroner [2007] 2 AC 189, 214 (para 48): An article 2 investigative obligation only arises in the comparatively few cases where the states responsibility is or may be engaged. I agree also with Lord Phillips judgment at para 81 that an inquest will not always be the appropriate vehicle for discharging an article 2 investigatory obligation although I note what was said in the considered opinion of the Committee delivered by Lord Bingham in R (Middleton) v West Somerset Coroner [2004] 2 AC 182, 206 (para 47) that: in the absence of full criminal proceedings, and unless otherwise notified, a coroner should assume that his inquest is the means by which the state will discharge its procedural investigative obligation under article 2. I further agree with Lord Phillips that in practice the only real difference between a Jamieson inquest (R v Coroner for North Humberside and Scunthorpe, Ex p Jamieson [1995] QB 1) and a Middleton inquest is likely to be with regard to its verdict and findings, rather than its inquisitorial scope. As I pointed out in Hurst (paras 27 and 51), the scope of the inquiry is essentially a matter for the coroner. Such indeed had been eloquently recognised in Jamieson itself in the Courts judgment given there by Sir Thomas Bingham MR (at para 14 of the Courts general conclusions, p 26): It is the duty of the coroner as the public official responsible for the conduct of inquests, whether he is sitting with a jury or without, to ensure that the relevant facts are fully, fairly and fearlessly investigated. He is bound to recognise the acute public concern rightly aroused where deaths occur in custody. He must ensure that the relevant facts are exposed to public scrutiny, particularly if there is evidence of foul play, abuse or inhumanity. He fails in his duty if his investigation is superficial, slipshod or perfunctory. But the responsibility is his. He must set the bounds of the inquiry. He must rule on the procedure to be followed. His decisions, like those of any other judicial officer, must be respected unless and until they are varied or overruled. As, however, I also pointed out in Hurst (para 51), the verdict and findings are not a matter for the coroner. These are severely circumscribed when an inquest is confined to ascertaining by what means the deceased came by his death (a Jamieson inquest); not so where the inquest is to fulfil the article 2 investigatory obligation when it must also ascertain in what circumstances the deceased came by his death (a Middleton inquest). Sometimes, of course, as in McCann v United Kingdom (1995) 21 EHRR 97 (the Death on the Rock case), short verdicts in the traditional form will enable the jury to express their conclusion on the central issue canvassed at the inquest (Hurst at para 48, citing Lord Bingham in Middleton at para 31). Other times, perhaps generally indeed, an article 2 obligation will require the coroner or jury to state conclusions upon the important underlying issues in a way that plainly goes beyond the sort of restricted verdict available in a Jamieson inquest and in such cases a Middleton inquest is required. Even then, however, as noted at para 37 of Middleton, the conclusions must be conclusions of fact as opposed to expressions of opinion. Nor must the verdict appear to determine any question of civil liability. Although, as I recognised in Hurst (para 51), the coroner may sometimes choose to widen the scope of the inquiry if he recognises that article 2 conclusions of fact (and thus a Middleton verdict and findings) are required, more probably (as Lord Hope envisages at para 95 of his judgment) the coroner is likely to decide the scope of inquiry with a view rather to the exercise of his rule 43 power to make a written report to a responsible authority aimed at avoiding similar fatalities in future. To my mind, guidance beyond these broad generalities is quite impossible. This is really not an area of the law in which advisory opinions are likely to prove especially helpful. LORD MANCE Issue 1 Jurisdiction: (a) general The first issue before the Supreme Court is whether a soldier on military service in Iraq is subject to the jurisdiction of the United Kingdom within the meaning of article 1 of the European Convention on Human Rights so as to benefit from the rights guaranteed by the Human Rights Act 1998 while operating in Iraq. If, or at least to the extent that, such a soldier is subject to United Kingdom jurisdiction within article 1, he will be entitled to rights guaranteed by the 1998 Act. During the period leading up to his death, Private Smith spent time both at locations (particularly the Al Amarah stadium) constituting part of the United Kingdom army bases in Iraq and elsewhere. He became ill on 13 August 2003 at the stadium after performing various duties off base (particularly supervising fuel distribution in circumstances where only coalition troops were acceptable to locals in that role and were, it appears, correspondingly stretched in terms of man power). He was taken then by ambulance to an United Kingdom accident and emergency medical centre at Abu Naji, where he sustained a cardiac arrest and died, the cause of death being heatstroke. The Secretary of State for Defence accepts that, in so far as the events leading to his death occurred on base, they occurred within United Kingdom jurisdiction for the purposes of article 1 of the Convention and that the conduct leading to them is subject to examination for compliance with article 2 of the Convention accordingly. But he submits that, in so far as they occurred elsewhere, the converse applies. This is because, in his submission, jurisdiction under article 1 is primarily territorial and the only relevant exception, covering United Kingdom bases in Iraq, arises from the analogy of United Kingdom embassies, consulates, vessels and aircraft and places of detention abroad. Some members of the Court describe this issue as academic. But it has a potential relevance in relation to the fresh inquest which has now to be held. Before the Court of Appeal, the Secretary of State noted that Mrs Smiths case regarding the circumstances leading to Private Smiths death had been extended to include circumstances that took place outside the British army base and hospital, and argued originally that, as these matters took place outside the jurisdiction of the UK, they can form no part of the consideration in this case of whether the UK is in arguable breach of its obligations under article 2 (skeleton, para 16). By the end of the hearing, the Secretary of State had conceded that he would not submit to the new coroner in the fresh inquest that the scope of that inquest is restricted in any way by any decision by him on the applicability (or not) of the enhanced article 2 investigative obligation (appellants note and Court of Appeal judgment, para 62.) However, by letters dated respectively 22 January and 12 February 2010 the coroner has (correctly) affirmed that it is not for the parties to agree the scope of the new inquest, but for the coroner to do this in the light of the judgment of this Court, and the Secretary of State has (correctly) accepted this to be so. For this reason, the scope and application of article 1 and article 2 are of potential relevance to the future conduct of the fresh inquest. It was on the analogy of embassies, consulates, vessels and aircraft and places of detention that the House of Lords held in R (Al Skeini) v Secretary of State for Defence [2007] UKHL 26; [2008] AC 153 that Mr Mousa (an Iraqi citizen who had died, allegedly as a result of torture, in United Kingdom custody in a United Kingdom base in Iraq) was within this countrys jurisdiction under article 1. The respondent, Private Smiths mother, supported by the Equality and Human Rights Commission, submits that the present case, concerning the relationship between a state and its own armed forces occupying Iraq, falls within another or a more general exception to the general principle of territoriality. (b) Gentle The Secretary of State submits that the House of Lords decision in R (Gentle) v Prime Minister [2008] UKHL 20; [2008] AC 1356 is binding authority in his favour, negativing the application of any such exception in the present context. He refers, in particular, to Lord Binghams speech at para 8(3): Subject to limited exceptions and specific extensions, the application of the Convention is territorial: the rights and freedoms are ordinarily to be secured to those within the borders of the state and not outside. Here, the deaths of Fusilier Gentle and Trooper Clarke occurred in Iraq and although they were subject to the authority of the defendants they were clearly not within the jurisdiction of the UK as that expression in the Convention has been interpreted: . Al Skeini . paras 79, 129. The claimants seek to overcome that problem, in reliance on authorities such as Soering v United Kingdom (1989) 11 EHRR 439, by stressing that their complaint relates to the decision making process (or lack of it) which occurred here, even though the ill effects were felt abroad. There is, I think, an obvious distinction between the present case and the Soering case, and such later cases as Chahal v United Kingdom (1996) 23 EHRR 413 and D v United Kingdom (1997) 24 EHRR 423, in each of which action relating to an individual in the UK was likely to have an immediate and direct impact on that individual elsewhere. But I think there is a more fundamental objection: that the claimants argument, necessary to meet the objection of extra territoriality, highlights the remoteness of their complaints from the true purview of article 2. Paras 79 and 129 in Al Skeini, to which Lord Bingham referred, concern jurisdiction based on effective control. Lord Bingham evidently considered that no other exceptional head of jurisdiction applied. However, in so far as argument was addressed to this point, it appears to have been extremely brief (see pp 1361B C and 1363G H). The passage quoted from Lord Binghams speech constituted the last of three reasons why article 2 could not embrace the process of deciding on the lawfulness of a resort to arms; and it is noticeable that, at its conclusion, in dismissing the submission based on Soering, Lord Bingham reverted to his previous two reasons. Other members of the House focused in their express reasoning on Lord Binghams first two reasons. But Lord Hoffmann, Lord Hope, Lord Scott, Lord Brown and I myself at paras 16, 28, 29, 71 and 74 all also agreed in general terms with Lord Binghams reasons. Lord Rodger said only that his reasons were essentially the same as Lord Binghams and Lord Hoffmanns (para 45), and Lady Hale regarded her reasons as being in substantial agreement with Lord Binghams (para 61), although she expressly disagreed with him on the question whether a British soldier serving under the command and control of his superiors was within the United Kingdoms jurisdiction within the meaning of article 1 (para 60). Lord Carswell left that point open (para 66), and decided the case on the basis (again part of Lord Binghams first two reasons) that article 2 did not involve a duty not to go to war contrary to the UN Charter or to investigate the lawfulness of an armed conflict. In the above circumstances, it is open to doubt whether the first part of the passage in para 8(3) quoted above from Lord Binghams speech was part of the ratio decidendi. But, even if it technically was, it was not the product of the detailed argument and citation which we have now had, and it would, in my view, be wrong to refuse to reconsider it de novo. (c) Bankovic and the concept of jurisdiction Leaving Gentle aside, the submissions of all parties have, realistically, taken as their general starting point the decisions of the European Court of Human Rights in Bankovic v United Kingdom (2001) 11 BHRC 435 and Al Saadoon and Mufdhi v United Kingdom (2009) 49 EHRR SE 95 and of the House of Lords in Al Skeini. Dicta in the House of Lords basing jurisdiction in Al Skeini on the total and exclusive de facto, and subsequently also de jure, control exercised by the United Kingdom authorities over the premises in question were referred to with approval by the European Court of Human Rights in Al Saadoon. The decision in Al Skeini is shortly to be reviewed in that court. But for present purposes the Supreme Court can and should accept it. This starting point avoids the need for any entirely open review of the concept of jurisdiction under article 1. Just how vexed that concept and how controversial the decisions in Bankovic and Al Skeini are appears from extensive literature which they have generated: see e.g. Lawson, Life after Bankovic: on the Extraterritorial Application of the European Convention on Human Rights; OBoyle, The European Convention on Human Rights and Extraterritorial Jurisdiction: A Comment on Life after Bankovic (both in F Coopman and M Kamminga, Extraterritorial Application of Human Rights Treaties; Antwerp Oxford 2004); Loucaides, Determining the Extra territorial Effect of the European Convention: Facts, Jurisprudence and the Bankovic case (2006) 4 EHRLR 391; Milanovic, From Compromise to Principle: Clarifying the Concept of State Jurisdiction in Human Rights Treaties (2008) HRLR 8(3), 411; and King, The Extraterritorial Human Rights Obligations of States (2009) HRLR 521. Arguments that the European Court of Human Rights was guilty of a non sequitur in assimilating the concept of jurisdiction in article 1 to the concept in general international law and in relying upon this to restrict the extra territorial application of the Convention to exceptional circumstances only (see Milanovic, p 435) do not arise for consideration. Nor do similar arguments that the Court in Bankovic was wrong in failing to recognise, as a separate and equal head of jurisdiction having extra territorial effect, the existence of effective authority over individuals or of actual authority or control over a given territory or person, whether lawfully or unlawfully exercised, (Lawson, p 120, Loucaides, p 399 and Milanovic, p 435). Whatever the merits of giving the Convention a wider reach might be de lege ferenda, we are (like, in fact more so than, the House of Lords in Al Skeini: see per Lord Rodger, para 69) only concerned with its reach de lege lata. Criticisms of the House of Lords approach in Al Skeini to jurisdiction based on territorial control (see King, pp 534 536 and 545 547) and suggestions that the House ought (in the light of cases such as Issa v Turkey (2004) 41 EHRR 567) to have recognised a cause and effect notion of jurisdiction (King, p 553) are also out of place in the light of the reasoning in Bankovic and Al Skeini. The argument on the present appeal assumes the correctness of the general principles stated in Bankovic and Al Saadoon and applied in Al Skeini. According to these jurisdiction in article 1 refers primarily to territorial jurisdiction, other bases of jurisdiction being exceptional and requiring special justification in the particular circumstances of each case (Bankovic, para 61). The Court in Bankovic explained this conclusion as follows: 59. As to the ordinary meaning of the relevant term in article 1 of the Convention, the Court is satisfied that, from the standpoint of public international law, the jurisdictional competence of a state is primarily territorial. While international law does not exclude a states exercise of jurisdiction extra territorially, the suggested bases of such jurisdiction (including nationality, flag, diplomatic and consular relations, effect, protection, passive personality and universality) are, as a general rule, defined and limited by the sovereign territorial rights of the other relevant states (Mann, The Doctrine of Jurisdiction in International Law, RdC, 1964, vol 1; Mann, The Doctrine of Jurisdiction in International Law, Twenty Years Later, RdC, 1984, vol 1; Bernhardt, Encyclopaedia of Public International Law edition 1997, vol 3, pp 55 59 Jurisdiction of States and edition 1995, vol 2, pp 337 343 Extra territorial Effects of Administrative, Judicial and Legislative Acts; Oppenheims International Law, 9th ed 1992 (Jennings and Watts), vol 1, 137; Dupuy, Droit International Public, 4th ed 1998, p 61; and Brownlie, Principles of International Law, 5th ed 1998, pp 287, 301 and 312 314). 60. Accordingly, for example, a states competence to exercise jurisdiction over its own nationals abroad is subordinate to that states and other states territorial competence (Higgins, Problems and Process (1994), p 73; and Nguyen Quoc Dinh, Droit International Public, 6th ed 1999 (Daillier and Pellet), p 500). In addition, a state may not actually exercise jurisdiction on the territory of another without the latters consent, invitation or acquiescence, unless the former is an occupying state in which case it can be found to exercise jurisdiction in that territory, at least in certain respects (Bernhardt, cited above, vol 3 at p 59 and vol 2, pp 338 340; Oppenheim, cited above, at 137; Dupuy, cited above, at pp 64 65; Brownlie, cited above, at p 313; Cassese, International Law, 2001, p 89; and, most recently, the Report on the Preferential Treatment of National Minorities by their Kin States adopted by the Venice Commission at its 48th Plenary Meeting, Venice, 19 20 October 2001). The Court found support for a primarily territorial approach to article 1 not only in general international law and the works cited in paras 59 and 60, but also in the travaux prparatoires (Bankovic, paras 19 21 and 63). During the negotiation of the Convention, the words all persons residing within the territories of the signatory States in article 1 were replaced by all persons within their jurisdiction. The Court noted that this was expressly on the basis that there were good grounds for extending the benefits of the Convention to all persons in the territories of the signatory States. However, it is not without significance that the replacement phrase adopted the word jurisdiction, rather than territories; and also that the Court itself has recognised, by the exceptions which it has endorsed, that the Convention is not exclusively confined in its application to persons within the territories of the signatory States. Lawson (cited above) points out (p 88) that the original proposal was to replace residing in by living in, but that the drafting sub committee noting that the aim was to widen as far as possible the categories of persons who are to benefit by the guarantees contained in the Convention proposed the replacement of residing within by within the jurisdiction (or, in French, relevant de leur jurisdiction). The use of the more flexible notion within the jurisdiction, with its potentially wider jurisprudential connotations, was clearly deliberate, even if it is not unlikely that the drafters did not give much thought at all to any extraterritorial impact of the Convention (Lawson, p 90; and see also Loucaides, above, p 397). Jurisdiction in general international law exists in the form of (a) jurisdiction to prescribe or legislate (and, as a subsidiary aspect, adjudicate), which is primarily territorial but generally also regarded as extending to a states nationals wherever they are, and (b) jurisdiction to enforce what is prescribed, which is usually only territorial (and does not usually exist, for example, against the persons of a states nationals, while they remain abroad): see Dr F A Mann in the writings cited in Bankovic at para 59, particularly RdC, 1964, pp 13, 22 et seq. and 127 et seq, and RdC, 1984, Chaps I and II, the Reinstatement of the Law Third: Restatement of the Foreign Relations Law of the United States, para 401 and Alcom Ltd v Republic of Colombia [1984] AC 580, 600C, per Lord Diplock. In drawing on the conception of jurisdiction in general international law (while also reminding itself of the Conventions special character as a human rights treaty: para 57), the Court was (as Lord Rodger noted in Al Skeini, para 64) relating the scope of the Convention to the existence of a pre existing relationship between the relevant state and the victim. For the Convention to apply, the mutual relationship must be one under which the state possessed and was able to enforce lawful authority and power over the victim and the victim was in return under and entitled to the states protection. Jurisdiction in international law is, as Dr Mann said (RdC, 1964, p 13), concerned with the states right of regulation or, in the incomparably pithy language of Mr Justice Holmes, with the right to apply the law to the acts of men. This means that there must be, translated to the international legal sphere, a similar bond of reciprocal allegiance to that identified domestically as existing between sovereign and subject in Calvins Case (1608) 7 Co Rep 1a; 77 ER 377: duplex et reciprocum ligamen; quia sicut subditus regi tenetur ad obedientiam, ita rex subdito tenetur ad protectionem; merito igitur ligeantia dicitur ab ligando, quia continet in se duplex ligamen. A states international jurisdiction, based on this reciprocal bond, respects the matching jurisdiction of other states based on their mutual relationship with those within their territories and their nationals. In international law, each state owes duties to protect those within its jurisdiction. If state A infringes the fundamental human rights of a person subject to state Bs jurisdiction, then, although that person may have no direct right against state A, it may become state Bs duty to pursue the matter at the international level against state A. In the same vein, the Court in Bankovic noted that the Convention was designed to ensure the observance of the engagements undertaken by the Contracting Parties (para 80) engagements which cannot be regarded as having been undertaken to benefit everyone in the world at large. Consistently with the above, in Dr Manns writings, jurisdiction in international law is thus associated with sovereignty: it is an aspect of sovereignty, it is coextensive with and, indeed, incidental to, but also limited by the states sovereignty (RdC, 1964, pp 24 31, esp p 30; see also RdC, 1984, p 20). In Bankovic itself, the only connection with the United Kingdom consisted in the act of bombing Belgrade which was alleged to constitute a breach of the Convention (a pure cause and effect notion of jurisdiction). In that context, it is unsurprising that the Court should emphasise that the Convention was not designed to be applied throughout the world, even in respect of the conduct of contracting states (para 80) and should underline the significance of a pre existing reciprocal relationship under which sovereignty of one sort or another was legitimately possessed and exercised. In Al Skeini (see paras 6, 61, 90, 97 and 132) the House of Lords decided that the United Kingdom as an occupying power did not, except within its military bases, have sufficient effective control over any territory of Iraq to bring such territory within its jurisdiction under article 1 of the European Convention on Human Rights. The present appeal raises a different question, whether the United Kingdom had sufficient authority under international law over its own forces in Iraq for them to be regarded as within its jurisdiction under article 1. (d) The respondents case For present purposes, the respondent accepts the approach taken by the Court in Bankovic and Al Saadoon and by the House in Al Skeini. But she relies on its underlying rationale the limitation of jurisdiction by reference to the limitations of sovereignty and the need to avoid conflicts of jurisdiction. This rationale appears with clarity in both paras 59 and 60 cited above. The suggested bases of extra territorial jurisdiction are, as a general rule, defined and limited by the sovereign territorial rights of the other relevant States. [A] States competence to exercise jurisdiction over its own nationals abroad is subordinate to that States and other States territorial competence; and in addition a State may not actually exercise jurisdiction on the territory of another without the latters consent, invitation or acquiescence, unless the former is an occupying State in which case it can be found to exercise jurisdiction in that territory, at least in certain respects. In the respondents submission, the relationship between the United Kingdom and its armed forces in Iraq meets all these requirements for recognising that it involved in August 2003 the legitimate and effective exercise of jurisdiction, in the prescriptive, the adjudicatory and the enforcement senses. The United Kingdom was in August 2003 exercising its authority lawfully in Iraq, with the consent of the Coalition Provisional Authority (CPA), over United Kingdom troops including Private Smith, a United Kingdom citizen. By CPA Order No 17 issued in June 2003, the CPA formalised the status and arrangements governing the presence of the multinational force (MNF), which included the United Kingdoms armed forces, in Iraq. The MNF was given, inter alia, the right to enter into, remain in and depart from Iraq (section 13), freedom of movement without delay throughout Iraq (section 7), freedom of radio communications (section 6), the right to use without cost such areas for headquarters, camps or other premises as might be necessary as well as to use, free of cost or where this was not practicable at the most favourable rate, water, electricity and other public utilities and facilities (section 9). Importantly, by section 2 the MNF, its personnel, property, funds and assets were immune from Iraqi legal process and all MNF personnel were expressed to be subject to the exclusive jurisdiction of their Sending States. Further, the respondent submits, the CPA was in issuing CPA Order No 17 operating with the legal mandate of the Security Council, which by Resolution 1483 adopted on 22 May 2003 under Chapter VII of the UN Charter, had recognised the specific authorities, responsibilities, and obligations under applicable international law of these states as occupying powers under unified command (the Authority), and called upon the Authority (in practice the CPA) consistent with the Charter of the United Nations and other relevant international law, to promote the welfare of the Iraqi people through the effective administration of the territory. The respondent therefore submits that there would be no interference with Iraqi sovereignty and no attempt to impose Convention standards on Iraq or anyone other than the British state, by recognising the existence of Convention obligations as between the United Kingdom and nationals like Private Smith serving in its armed forces in Iraq. There would be no question of Private Smith being brought within the Convention merely by virtue of the fact that he was a victim of an alleged breach of article 2. On the contrary, the relationship of command and control under which Private Smith served gave the United Kingdom a broad protective capability and responsibility, which meant that a wide range of Convention rights could be effectively secured for his benefit. Further, this being an exceptional head of jurisdiction, it was, in the respondents further submission, no objection if or that there might be some Convention rights which could not be secured; the objection, identified by the House in Al Skeini, to any application of the Convention based on tailoring and restricting Convention rights did not apply to the exceptional heads of jurisdiction. In this connection, the Secretary of State points to para 130 in Lord Browns speech in Al Skeini, to which I return below (para 193). These are forceful submissions, but they require closer analysis of the status of the United Kingdoms armed forces in Iraq. Paras 59 and 60 of the Courts judgment in Bankovic recognise that state A may exercise jurisdiction on or in the territory of state B either (a) with the consent, invitation or acquiescence of state B or (b) as an occupying state at least in certain respects. I will consider in turn these alternative bases of jurisdiction (a) and (b). But first I examine three specific cases of the exceptional extraterritorial jurisdiction contemplated in paras 59 and 60 of Bankovic. These were identified and analysed by Lord Brown in Al Skeini at paras 118 to 122. (e) Cases of exceptional extra territorial jurisdiction The first involves the forcible removal by state A from state B and with state Bs consent of a person wanted for trial in state A (Al Skeini, paras 118 119). Within this category, Lord Brown put calan v Turkey (2005) 41 EHRR 985, where the European Court of Human Rights said: 91. The Court notes that the applicant was arrested by members of the Turkish security forces inside an aircraft registered in Turkey in the international zone of Nairobi Airport. It is common ground that, directly after being handed over to the Turkish officials by the Kenyan officials, the applicant was under effective Turkish authority and therefore within the jurisdiction of that state for the purposes of article 1 of the Convention, even though in this instance Turkey exercised its authority outside its territory. It is true that the applicant was physically forced to return to Turkey by Turkish officials and was under their authority and control following his arrest and return to Turkey (see, in this respect, the aforementioned decisions in Snchez Ramirez v France (1996) 86 A DR 155 and Freda v Italy (1980) 21 DR 250, and, by converse implication, Bankovi v Belgium [(2001) 11 BHRC 435]. Lord Brown commented that, in circumstances where the forcible removal was effected with the full cooperation of the relevant foreign authorities and with a view to the applicants criminal trial in the respondent state, it was unsurprising that the Grand Chamber in calan had felt able to distinguish Bankovic by converse implication. The inference from para 91 in calan is that, if (a) state A exercises authority over an individual in state B by consent of state B, and (b) it does so in order to lead to exercise of state As ordinary domestic jurisdiction over that individual, then it is throughout exercising jurisdiction over that individual under article 1. The present case is not precisely on all fours (not least, because the United Kingdoms authority over its armed forces was to be exercised in Iraq), but, if the case could be analysed in terms of consent, that could hardly be critical in principle. A second exceptional category was considered by Lord Brown in para 121 with reference back to para 109(4)(iii), where he introduced the category in these terms: Certain other cases where a states responsibility could, in principle, be engaged because of acts which produced effects or were performed outside their own territory (para 69). Drozd and Janousek v France and Spain (1992) 14 EHRR 745, at para 91, is the only authority specifically referred to in Bankovic as exemplifying this class of exception to the general rule. Drozd, however, contemplated no more than that, if a French judge exercised jurisdiction extraterritorially in Andorra in his capacity as a French judge, then anyone complaining of a violation of his Convention rights by that judge would be regarded as being within Frances jurisdiction. In para 121, Lord Brown further explained this category: Another category, similarly recognised in Bankovic, was Drozd (see para 109(4)(iii) above ) into which category can also be put cases like X and Y v Switzerland (1977) 9 DR 57 and Gentilhomme, Schaff Benhadji and Zerouki v France (Application Nos 48205/99, 48207/99 and 48209/99) (unreported) 14 May 2002. In X and Y v Switzerland, Switzerland was held to be exercising jurisdiction where, pursuant to treaty provisions with Liechtenstein, it legislated for immigration matters in both states, prohibiting X from entering either. In Gentilhomme, France operated French state schools in Algeria, again pursuant to a treaty arrangement. Drozd concerned complaints brought by defendants tried in Andorra against France and Spain as being allegedly responsible for non observance of the Convention by persons from these countries nominated to sit as judges in Andorra. Its significance is that the European Court of Human Rights found it necessary to consider whether the judges acts could be attributed to France and Spain, even though they were not performed on the territory of those states (Drozd, para 91). As the Court explained in Bankovic (para 69) the impugned acts could not, in the circumstances, be attributed to the respondent states because the judges in question were not acting in their capacity as French or Spanish judges and as the Andorran courts functioned independently of the respondent states (para 69). Rix LJ in the Divisional Court in Al Skeini (paras 158 166 and 256 257) subjected Drozd to close scrutiny, and was puzzled by its reasoning. He noted that, if the judges sitting in Andorra had been acting in their capacities as French and Spanish judges, then in this most important legal sphere, in one sense the heart of what is meant by jurisdiction, there would have been a form of extension of French and Spanish jurisdiction into the territory of Andorra, and regarded Drozd as too much of a special case to provide any firm foundation for a submission that personal jurisdiction exercised extraterritorially by state agents or authorities is a broad principle of jurisdiction under article 1 (para 257). Special case though it was, Drozd points to the possibility that certain relationships, such as those between a national judge and those under his or her authority, may attract the operation of the Convention, irrespective of whether they take place within the territory of the judges state. Gentilhomme is of interest, not just because it recognises the operation by France in Algeria of French schools with the consent of Algeria as capable of amounting to an exercise of jurisdiction by France in Algeria within the scope of article 1, but also because, on the facts, France was held not responsible. The complainants children had, under French law, dual French and Algerian nationality but, under Algerian law, were only recognised as having Algerian nationality. The complaint related to the refusal to admit them to the French schools in Algeria. However, this was the result of a decision taken by Algeria unilaterally, with which France had no option but to comply although that decision was in breach of a declaration of cultural co operation which the two countries had signed on 19 March 1962. The Court held that the conduct complained of could not be attributed to France, and the complaint was accordingly incompatible with the Convention ratione personae. The possibility of exercising jurisdiction abroad by consent, invitation or acquiescence of the overseas state, to which the Court had referred in Bankovic, est subordonne la competence territoriale de cet autre Etat, et, en principe, un Etat ne peut concrtement exerciser sa jurisdiction sur le territoire dun autre Etat sans le consentement, linvitation ou lacquiescement de ce dernier (Bankovic, paras 59 60). This appears clearly to indicate that exceptional jurisdiction may be tailored, in extent and in the liability to which it is capable of giving rise, by reference to the scope of the authority for the exercise of which abroad consent is given. The third exceptional category involves the activities of [a states] diplomatic or consular agents abroad and on board craft and vessels registered in, or flying the flag of, that state (Bankovic, para 73, Al Skeini, paras 109(4)(ii) and 122). As regards the activities of diplomatic or consular agents abroad, the critical feature is, again, the consent of the foreign state, in accordance with general principles of international law, to the exercise within its territory of the authority of the sending state by representatives of that state. As Lord Brown noted in para 122, jurisdiction within article 1 has been held to exist both in relation to nationals of the sending state and even in relation to foreigners. In relation to nationals, the existence of such jurisdiction is more obvious than it is, perhaps, in relation to foreigners. The present case is concerned with the existence of jurisdiction in Iraq in relation to British soldiers. As to a states activities on board craft and vessels registered in, or flying the flag of, that state, the relevant consideration is, once again, that the state has under international law recognised authority and control over such craft and vessels since the view that a ship is a floating part of state territory has long fallen into disrepute (Brownlies Principles of Public International Law, 7th ed (2008), p 318). The recent decision of a seventeen member Grand Chamber in Medvedyev v France (Application No 3394/03) (29 March 2010) is not without interest in this connection. The Winner, a Cambodian vessel was engaged on drug trafficking in the high seas (Cape Verde). Belying its name, it was detected and boarded by the French authorities, who detained the crew on board and took them on the vessel to France for trial. France was, but Cambodia was not, party to the relevant international drug trafficking conventions, which did not in the circumstances authorise the arrest by France of the Cambodian vessel. Nevertheless, Cambodia had given France specific ad hoc authorisation to intercept, inspect and take legal action against the ship. A majority of the Court considered that the crew were within the jurisdiction of France for the purposes of article 1 on the simple basis of France having exercised full and exclusive control over the Winner and its crew, at least de facto, from the time of its interception, in a continuous and uninterrupted manner until they were tried in France (contrast Bankovic, cited above) (para 67). Bankovic was cited in para 64, where the Court noted that it was only in exceptional cases that acts of the Contracting States performed, or producing effects, outside their territories can constitute an exercise of jurisdiction by them for the purposes of article 1, and that This excluded situations, however, where as in the Bankovic case what was at issue was an instantaneous extraterritorial act, as the provisions of article 1 did not admit of a cause and effect notion of jurisdiction (Bankovic, para 75). Having accepted that France had jurisdiction under article 1, the majority in Medvedyev went on to hold the detention of the crew unjustified, on the basis that, although international as well as domestic law was capable of shaping a procedure prescribed by law within article 5.1 (para 79), Cambodias ad hoc authorisation did not meet the requirements under article 5.1 of clearly defined and foreseeable law (paras 99 100). Presumably foreshadowing that conclusion, the majority appear in para 67 to have endorsed the possibility of a purely factual (albeit unlawfully exercised) concept of jurisdiction under article 1. In contrast, seven judges, dissenting from the majoritys conclusion under article 5.1, accepted that article 1 applied on the simple basis that the Winner with the agreement of the flag state was undeniably within the jurisdiction of France for the purposes of article 1 (para 10). That state B may authorise state A to exercise jurisdiction which would otherwise belong to state B for the purposes of article 1 is on any view consistent with the principles in Bankovic, paras 59 60, as well as with the three specific categories of extraterritorial jurisdiction which I have been considering. (f) The present case The present case falls directly within none of these specific categories. But all three categories depend upon the exercise by state A abroad of state power and authority over individuals, particularly nationals of state A, by consent, invitation or acquiescence of the foreign state B. They exemplify in this respect one underlying theme of paras 59 and 60 in Bankovic. The first question is whether the present case represents an example of the exercise by state A (here the United Kingdom) of its lawful authority and power over its nationals in state B (Iraq) with the consent of state B. If it does not, then it will be necessary to consider the alternative possibility mentioned in Bankovic, para 60, namely that the United Kingdom had, as an occupying power, jurisdiction under international law over its armed forces wherever they were in Iraq. (g) Exercise of jurisdiction by consent The answer to the first question depends upon the position of the CPA. The CPAs origin, role and status were examined in Al Skeini, particularly by Rix LJ in the Divisional Court at [2004] EWHC 2911 (Admin); [2007] QB 140, paras 9 39. Following their invasion of Iraq, the United States and United Kingdom became occupying powers within and subject to the provisions of the Hague Convention 1907 and the Fourth Geneva Convention 1949 (Rix LJ, para 11). The CPA was the creation of a freedom message issued in that capacity by United States General Tommy Franks on 16 April 2003 (Rix LJ, para 14). The formation and purpose of the CPA (to exercise powers of government temporarily and to transfer responsibility for administration to representative Iraqi authorities as soon as possible) were reported by letter by the two governments permanent representatives to the Security Council, The Security Council on 22 May 2003 adopted Resolution 1483 under Chapter VII of the UN Charter, that is as a measure taken to maintain or restore international peace and security. Resolution 1483 noted the contents of the letter and, as stated in para 171 above, recognised the specific authorities, responsibilities, and obligations under applicable international law of these states as occupying powers under unified command (the Authority) and called upon the Authority (in practice the CPA) consistent with the Charter of the United Nations and other relevant international law, to promote the welfare of the Iraqi people through the effective administration of the territory (para 4). But it also supported a transformative process in Iraq, through the formation, by the people of Iraq with the help of the Authority, of an Iraqi interim administration as a transitional administration run by Iraqis, until an internationally recognised, representative government is established by the people of Iraq and assumes the responsibilities of the Administration (Resolution 1483, para 9). The CPA had by regulation R1 dated 16 May 2003 already declared that there were vested in the CPA all executive, legislative and judicial authority necessary to achieve its objectives, to be exercised under relevant UN Security Council resolutions. (anticipating in this respect by some 6 days the effect of Resolution 1483, a draft of which was by then publicly available). In June 2003 the CPA issued CPA Order No 17, which formalised the status and arrangements covering the United Kingdoms occupying forces (para 171 above). To complete the picture, on 13 July 2003, following two national conferences and widespread consultation, the Iraqi Governing Council (IGC) announced its formation and was recognised formally by the CPA by regulation R6, in line with para 9 of Security Council Resolution 1483, as the principal body of an Iraqi interim administration, with which the CPA would consult and co ordinate on all matters involving the temporary governance of Iraq. The Security Council by Resolution 1500 on 14 August 2003 welcomed the establishment of the IGC as an important step towards the formation by the people of Iraq of an internationally recognized, representative government that will exercise the sovereignty of Iraq. In its later Resolution 1511 of 16 October 2003, the Security Council, again acting under Chapter VII, reaffirm[ed] the sovereignty and territorial integrity of Iraq, and underscore[ed] in that context, the temporary nature of the exercise by the Coalition Provisional Authority (Authority) of the specific responsibilities, authorities, and obligations under applicable international law recognized and set forth in resolution 1483 (2003) . The IGC eventually dissolved itself on 1 June 2004, and on 28 June 2008 the CPA transferred authority to the Iraqi Interim Government, which became the sole sovereign authority of Iraq (Rix LJ, para 38). The CPA was thus exercising, and was recognised by the Security Council as having under international law, responsibility for the temporary governance and administration of Iraq throughout the relevant period from the end of May to August 2003. In the Court of Appeal in Al Skeini [2005] EWCA Civ 1609; [2007] QB 140, para 123, Brooke LJ said that the CPA, which was not an instrument of the UK government, had the overall executive, legislative and judicial authority in Iraq whenever it deemed it necessary to exercise such authority to achieve its objectives. In the House of Lords (para 83) Lord Rodger expressed himself as being in agreement with paras 120 to 128 of Brooke LJs judgment when concluding that the United Kingdom lacked effective control of Basra and its surrounding areas. The CPA expressly endorsed and authorised the presence of the United Kingdoms armed forces in Iraq, and it had the support of Security Council Resolution 1483 in so acting. But that does not necessarily mean that the CPA equates with the state of Iraq for the purposes of consenting to the presence of foreign troops under international law. The CPA, although separate from the United Kingdom government, was the creature of the occupying forces, and Security Council Resolutions 1483 and 1511 were careful to refer to the CPA in terms consistent with this. An analysis which relies upon the Security Councils recognition of the CPAs role and upon CPA Order No 17 as a basis for saying that the state of Iraq consented to the presence and activities of United Kingdom forces in Iraq may be regarded as essentially circular: the CPA owed its existence, rights and responsibilities to the presence and activities of the occupying forces, and the Security Councils Resolution was drafted on a basis which can be said merely to recognise this truth. On the other hand, if that is so, then it is also true there was during the period May to August 2003 no other body which could claim to represent the state of Iraq, and a correspondingly reduced risk of any objectionable clash of sovereignty. (g) Exercise of jurisdiction over occupying forces This brings me to the other head of extra territorial jurisdiction mentioned in Bankovic, para 60, although not the subject of detailed analysis there or in Al Skeini: that is jurisdiction as an occupying force. The laws of war apply whatever the legitimacy or otherwise of the casus belli. They would not otherwise have much point. In the present case, the specific authorities, responsibilities, and obligations under applicable international law of the occupying forces, as well as the role of the CPA, were also endorsed by Security Council Resolution 1483. The European Court of Human Rights recognised in para 60 in Bankovic that occupation can give jurisdiction at least in certain respects, and referred to inter alia Oppenheims International Law (vol I Peace) (9th ed) (1992) para 137. This states that: International law, however, gives every state a right to claim exemption from local jurisdiction, chiefly for itself, its Head of State, its diplomatic envoys, its warships and its armed forces abroad. In relation to the words and its armed forces, footnote 19 refers to paras 556 558, which, in relation to belligerent occupation of foreign territory, refer in turn by footnote 4 to paras 166 172b of volume II Disputes,War and Neutrality of the same work (7th ed) (1952). Para 166 states that, in modern international law: although the occupant in no wise acquires sovereignty over such territory through the mere fact of having occupied it, he actually exercises for the time being military authority over it. As he thereby prevents the legitimate sovereign from exercising his authority, and claims obedience for himself from the inhabitants, he must administer the country, not only in the interest of his own military Para 169 continues: advantage, but also, at any rate so far as possible, for the public benefit of the inhabitants. As the occupant actually exercises authority, and as the legitimate Government is prevented from exercising its authority, the occupant acquires a temporary right of administration over the territory and its inhabitants; . In carrying out [the administration] the occupant is totally independent of the constitution and law of the territory, since occupation is an aim of warfare, and the maintenance and safety of his forces and the purpose of war, stand in the foreground of his interest, and must be promoted under all circumstances and conditions. But, although as regards the safety of his army and the purpose of war the occupant is vested with an almost absolute power, as he is not the sovereign of the territory he has no right to make changes in the laws, or in the administration, other than those which are temporarily necessitated by his interest in the maintenance and safety of his army and the realisation of the purpose of war. On the contrary, he has the duty of administering the country according to the existing laws and the existing rules of administration; he must ensure public order and safety, must respect family honour and rights, individual lives, private property, religious convictions and liberty. It has been observed that the transformative aspect of Resolution 1483 (para 184 above) and the transformation in Iraqi society and governance which the CPA actually implemented do not reconcile easily with the traditional principles governing occupation stated in Oppenheim: see Adam Roberts, The End of Occupation (2005) ICLQ 27 and Transformative Military Occupation: Applying the Laws of War and Human Rights (2006) 100 AJIL 580, 604 618 and Nehal Bhuta, The antimonies of transformative occupation (2005) EJIL 721. It seems clear that neither the occupying states nor the Security Council viewed the situation as one in which there was, after the overthrow of Saddam Hussein, any legitimate sovereign. It also seems improbable that the wide ranging and in certain respects fundamental measures introduced by the CPA for the temporary governance of Iraq (as described by Rix LJ in the Divisional Court in Al Skeini at paras 19 to 26) would fit with the traditional duty of administering the country according to the existing laws and the existing rules of administration to which Oppenheim refers in para 169. However, I think it unnecessary to consider how far and on what basis the occupation of Iraq may have had features going beyond that of traditional belligerent occupation. What is important for present purposes is that the status even of a traditional occupying state is recognised and regulated by international law, and that it is one in which as regards the safety of his army and the purpose of war the occupant is vested with an almost absolute power, and in which the occupant has the right to claim immunity for its armed forces from local jurisdiction. In the context of Bankovic, the European Court may in para 60 have been thinking primarily of jurisdiction exercised by a state through occupying forces over local inhabitants. But to the extent that such jurisdiction exists, it does so only because of the states pre existing authority and control over its own armed forces. An occupying state cannot have any jurisdiction over local inhabitants without already having jurisdiction over its own armed forces, in each case in the sense of article 1 of the Convention. That is not of course to equate a states jurisdiction over third parties with its pre existing and more widely based jurisdiction over its own armed forces (see further para 191 below). In providing for the occupying forces to have immunity from Iraqi legal process, CPA Order No 17 reflected the general principle of state immunity, under international and common law, precluding civil suits in one state against a foreign state or its servants in respect of sovereign activities of that foreign state: see eg Littrell v United States of America (No 2) [1995] 1 WLR 82, Holland v Lampen Wolfe [2000] 1 WLR 1573 and Jones v Ministry of the Interior of the Kingdom of Saudi Arabia [2006] UKHL 26; [2007] 1 AC 270 (the position relating to torture not being relevant on this appeal) and, under general international law, para 137 of Oppenheim (para 187 above). No such general immunity today exists under English law as between the United Kingdom and those within its territory or having its nationality, whether the conduct occurs within or outside the United Kingdom. Soldiers can bring proceedings in England against the Ministry of Defence in respect of any breach of the states common law duty of care towards them: Crown Proceedings (Armed Forces) Act 1987, section 1. That such liability is capable of arising in respect of operations or activity anywhere in the world appears implicit in section 1 of the 1987 Act (read in the light of section 10 of the Crown Proceedings Act 1947 which it repealed) as well as in section 2 of the 1987 Act. The United Kingdom government is thus already liable to receive claims at common law by soldiers serving in Iraq based, for example, on allegations of failure to take proper care in relation to their safety, other than in the context of active operations against an enemy. A distinction between actual operations against an enemy (during the course of which no common law duty of care exists) and other activities of combatant services in time of war was drawn in Shaw Savill and Albion Co Ltd v Commonwealth of Australia (1940) CLR 344, Burmah Oil Company Ltd v Lord Advocate [1965] AC 75, 110, per Lord Reid (using the term battle damage to describe the former category), Mulcahy v Minister of Defence [1996] QB 732 and Bici v Ministry of Defence [2004] EWHC 786 (QB), paras 90 100. It is unnecessary to examine it or its scope here. I can also leave undecided the question whether the doctrine of act of state might in limited circumstances make even a claim by a British subject non justiciable: see Nissan v Attorney General [1970] AC 179; Bici v Ministry of Defence (above), para 88. In providing for the United Kingdom to have exclusive jurisdiction, CPA Order No 17 also mirrored in effect the domestic position, whereby British soldiers are subject to United Kingdom military law wherever they serve. This was so under the Army Act 1955, the Air Force Act 1955 and the Naval Discipline Act 1957 (the Service Acts), backed up by rules and regulations, including the Queens Regulations 1975, in force in 2003; and it remains so since their replacement from 31 October 2009 by the Armed Forces Act 2006. Although the Service Acts are largely silent on their territorial scope, it is not in dispute that their provisions governed service overseas as well as domestically: see Al Skeini, per Lord Bingham at paras 15(4) and 26. This is, for example, reflected in provisions for courts martial to have jurisdiction over offences committed abroad (Naval Discipline Act 1957, section 48(1)) and to sit abroad (Army Act, section 91): see also Halsburys Laws of England, Armed Forces, vol 2(2), para 303, footnote 4, noting that the jurisdiction of army and air force courts martial to try offences committed outside the United Kingdom is to be inferred from the fact that each of the offence creating provisions provides that the offence in question is committed by any person subject to military or air force law without any limiting words as to where the offence must be committed. Section 70(1) of the Army Act has made it an offence for any person subject to military law to commit a civil law offence anywhere in the world. Section 367 of the 2006 Act now provides expressly that Every member of the regular forces is subject to service law at all times. (h) Conclusion on issue of jurisdiction In the light of the above, it is in my view possible to give a clear answer to the question whether the United Kingdom had jurisdiction under international law over its armed forces wherever they were in Iraq. If the United Kingdom did not, then no state did. The invasion clearly and finally ousted any previous government. The United Kingdom was the only power exercising and having under international law authority over its soldiers. In so far as there was any civil administration in Iraq, it consented to this. If the CPAs consent is disregarded as coming from what was, in effect, an emanation of the two occupying powers, then the United Kingdom was, and was by Security Council Resolution 1483 recognised as, an occupying power in Iraq. Bankovic indicates that one basis on which the UK could be regarded as having had jurisdiction over its forces in Iraq would have been by consent of the state of Iraq. It would be strange if the position were different in the absence of any Iraqi government to give such consent, or therefore to object, to the exercise of such jurisdiction by the UK over its occupying forces. As an occupying power, the UK was necessarily in complete control of the armed forces by which it achieved such occupation, and had under international law an almost absolute power as regards their safety (Oppenheim, para 169, above), as well as duties regarding the effective administration of Iraq and the restoration of security and stability, to be performed through such forces. The United Kingdom did not have such effective control over the whole of the area of Southern Iraq or even Basra as could cause such area to be equated with territory of the United Kingdom, or therefore to require the United Kingdom to ensure the full range of Convention rights to all within it. It is, however, a different matter to suggest that the United Kingdom ceased to have jurisdiction over its armed forces (with the consequence that it ceased to owe them any further Convention duty) whenever they were out of base; and the United Kingdoms jurisdiction over its own armed forces within article 1 does not mean that it had jurisdiction within article 1 over all or any other persons with whom those armed forces came into contact off base. The actual feasibility of the United Kingdom assuring and providing protection for its armed forces in Iraq depends on the circumstances, including the circumstances and place in which such forces are serving. But to distinguish fundamentally between the existence of the protective duties on the part of the United Kingdom towards its armed forces at home and abroad also appears to me as unrealistic under the Convention as it is at common law. The relationship between the United Kingdom and its armed forces is effectively seamless. Members of the armed forces serve under the same discipline and conditions wherever they are, and they are required to go wherever they are ordered. The relationship is not territorial, it depends in every context and respect on a reciprocal bond, of authority and control on the one hand and allegiance and obedience on the other. The armed forces serve on that basis. The compact is that they will receive the support and protection of the country they serve. I recognise that these considerations could apply even in a case where the United Kingdom did not have under international law a recognised role, like that of an occupying power which it had in Iraq. That may, on another day, lead back to re examination of statements (such as that in Medvedyev: see para 182 above) which contemplate the possibility that article 1 may embrace purely factual, though unlawfully exercised, jurisdiction. That possibility does not however require consideration on this appeal. Where, as here, the United Kingdom was present in Iraq, both with the consent of the only civil administrative authority that existed and in any event as an occupying power recognised as such under international law by the Security Council, there is in my view an irresistible case for treating the United Kingdoms jurisdiction over its armed forces as extending to soldiers serving in Iraq for the purposes of article 1 of the Convention. In Al Skeini (para 53) Lord Rodger said, in the context of interpreting the scope of the Human Rights Act 1998, that where a public authority has power to operate outside of the United Kingdom and does so legitimately for example, with the consent of the other state in the absence of any indication to the contrary it would only be sensible to treat the public authority, so far as possible, in the same way as when it operates at home. Similar thinking applies to the scope of a states jurisdiction under article 1 of the Convention, and is not only consistent with, but positively supported by, the Courts reasoning in Bankovic. In the present case, Lord Collins, whose judgment I have read after formulating my own, identifies a number of cases where commonsense in his view justifies a recognition of extra territorial jurisdiction within article 1 albeit necessarily of a limited nature tailored to the context (see paras 281, 301 and 306). I agree, but in my view commonsense also suggests a similar analysis of the relationship between the United Kingdom and the British army. Is such a conclusion precluded on the basis that Convention rights cannot properly be tailored? I do not believe so. We are concerned with an exceptional head of jurisdiction. In Al Skeini, Lord Brown said this at para 130: Realistically the concept of the indivisibility of the Convention presents no problem in the categories of cases discussed in paras 119 126 above: those concern highly specific situations raising only a limited range of Convention rights. This passage might, on one view, be read as suggesting that there is something inherent in the exceptional categories of cases discussed in paras 119 to 126 which means that it could never realistically be suggested that the state was in such cases under any general Convention obligation to secure the Convention rights. But it is not obvious why. The true explanation must be that in circumstances falling within one of the exceptional categories the states Convention duties are limited to those falling within the scope of the relationship giving rise to the exception in question. The consul cannot be expected to guarantee the full range of Convention rights, any more than can a state exercising authority by consent in other circumstances, such as those existing where it takes someone into custody (calan), or operates a school (Gentilhomme) or mans a court (Drozd), abroad by consent of the foreign state. The United Kingdom could not guarantee the full range of Convention rights to foreign litigants using its courts. Yet, once a person brings a civil action in the courts or tribunals of a state, there indisputably exists a jurisdictional link for the purposes of article 1: Markovic v Italy (2006) 44 EHRR 1045, para 54. Thus the Convention was applied, unsurprisingly in my view without anyone suggesting that it might not, as the measure of the legitimacy of claims by such nationals against the United Kingdom for refusal to up rate their pensions to the same level as those of persons residing in the United Kingdom who had made equivalent National Insurance contributions: Carson v United Kingdom (Application No 42184/05), 16 March 2010, where the claims in fact failed on the basis that persons residing within and outside the territory of the United Kingdom were not in an analogous situation. I add, without needing to explore this further, that, even in relation to territorially based jurisdiction, factual inability to enforce all the Convention rights, due to temporary loss of control to rebel forces, may, it appears, qualify the extent of the jurisdiction enjoyed and of the duties attaching to it: Ilacu v Moldova and Russia (2005) 40 EHRR 1040 (GC), paras 332 333. The United Kingdoms jurisdiction over its armed forces is essentially personal. The United Kingdom cannot and cannot be expected to provide in Iraq the full social and protective framework and facilities which it would be expected to provide domestically. But the United Kingdom could be expected to take steps to provide proper facilities and proper protection against risks falling within its responsibility or its ability to control or influence when despatching and deploying armed forces overseas. Will there be consequences beyond or outside any that the framers of the Convention can have contemplated, if Convention rights, and in particular those under article 2, continue to apply as between the United Kingdom and members of its armed forces serving abroad? That the obligation on states under article 1 to secure the Convention rights to everyone within their jurisdiction is, in principle, capable of applying to members of the armed forces as it does to anyone else is clear: see Engel v The Netherlands (1976) 1 EHRR 647, paras 54, 59, and en v Turkey (Application No 45824/99), 8 July 2003, para 1. The factors which justify exposing soldiers to the risk of death differ fundamentally from those that apply where civilian lives are at risk. But there is nothing that makes the Convention impossible or inappropriate of application to the relationship between the state and its armed forces as it exists in relation to overseas operations, in matters such as, for example, the adequacy of equipment, planning or training. See also on these points Gentle, per Lord Hope, para 19. Mr Eadie QC for the Secretary of State accepted in his submissions that it could be argued that to send a soldier out of the United Kingdom (or no doubt, in the light of Al Skeini, out of base) on a mission with inadequate equipment or training could involve a breach of the Convention, by analogy with the principle recognised in Soering v United Kingdom (1989) 11 EHRR 439 and referred to in Bankovic, para 68; and that coroners inquests in respect of deaths on active service in Iraq or Afghanistan have addressed such issues. The jurisprudence of the European Court of Human Rights includes cases where that court has examined closely and criticised the conduct of armed forces in domestic contexts. Such cases start with McCann v United Kingdom (1995) 21 EHRR 97, relating to the shooting by SAS officers of members of the Provisional IRA suspected of planning to attack the Royal Anglian Regiment in Gibraltar, and include Isayeva, Yusupova and Bazayeva v Russia (Application Nos 57947 49/00), 24 February 2005, and Isayeva v Russia (Application No 57950/00), 24 February 2005, relating to the conduct of military operations by the Russian armed forces against Chechen separatist fighters which led to the deaths of civilians. In such cases, it appears that the exigencies of military life go to the standard and performance, rather than the existence of, any Convention duty. Outside the sphere of combat operations or battle damage (para 34 above), this has been held also to be the position at common law, in which connection Elias J said in Bici v Ministry of Defence, para 104 that Troops frequently have to carry out difficult and sensitive peace keeping functions, such as in Northern Ireland, whilst still being subject to common law duties of care. The difficulties of their task are reflected in the standard of the duty rather than by denying its applicability. The European Court of Human Rights has (as Lord Hope noted in Gentle, paras 18 19) itself also acknowledged that when interpreting and applying the rules of the Convention it is necessary to bear in mind the particular characteristics of military life and its effects on the situation of individual members of the armed services (Engel, para 54, and en, p 1(b)). Reluctance about accepting the application of article 2 to the armed forces serving abroad may be due to concerns on several scores: first, the improbability that the founding fathers of the Convention perceived that jurisdiction under article 1 would extend to such matters, second, the apparent absence from the Convention of any immunities paralleling those of combat operations or battle damage (or, perhaps, act of state) recognised at common law (para 189 above), and, third, the extent to which the Court has in practice shown itself ready to re examine and re assess minutely, after the event and in the cold light of day, the factual conduct and decision making of member states in difficult circumstances, as evidenced perhaps by some decisions already mentioned, including in particular McCann and, recently, Medvedyev. But none of these matters seem to me to justify giving to the concept of jurisdiction a different or more limited meaning to that which, in my view, follows from the guidance which the Court has already given, particularly in Bankovic. As to the first such matter, the scope and application of the Convention, as revealed over the years, would probably surprise its founding fathers in many respects, and it seems particularly unrealistic to measure the scope of article 1 (fixed though it is, rather than living) by reference to the now revealed positive meaning of article 2 (cf Lord Phillipss comment to like effect in para 54). As to the second and third matters, it would have been foreseeable when the Convention was concluded that combat operations against an enemy might take place in the territory of a Contracting State a context in which the Secretary of State accepts the application of the Convention. The armed forces have not infrequently also been involved in combat operations in bases under attack in Afghanistan or, previously, Iraq. On the approach accepted in Al Skeini and in Al Saadoon and Mufdhi v United Kingdom (2009) 49 EHRR SE95, the United Kingdom is already required to ensure that its armed forces enjoy whatever protection the Convention, and in particular article 2, may require in such situations. The possible existence of Soering type liability for sending troops out from the United Kingdom with inadequate equipment or training is also acknowledged by the Secretary of State (para 196 above). If (as to which I express no view) the Convention contains no homologue of the common law immunity in respect of combat operations or battle damage, that is, therefore, a concern that already exists in contexts recognised as falling within Contracting States jurisdiction under article 1 of the Convention. It is not a guide to the scope of article 1. In fact, the Convention does contain at least one provision aimed at addressing this concern. Under article 15 of the Convention states are, in time of war or other public emergency, permitted, to the extent strictly required by the exigencies of the situation, to derogate from article 2 in respect of deaths resulting from lawful acts of war. By article 15 the Contracting States were catering for the natural concern that military operations against an enemy should not be unduly hampered. Finally, the Secretary of State submits, even if a soldier in Private Smiths position might be thought to be entitled to the protection of the Convention (and of article 2 in particular) at all times while serving overseas, whether or not he was on a British base, a domestic court should decline so to decide, but should leave the matter to be taken (whether in relation to this or another case) to Strasbourg. The principle here relied upon is that the role of United Kingdom courts, when interpreting the Convention, is to keep in step with Strasbourg neither lagging behind, nor leaping ahead: doing no more, but certainly no less (R (Ullah) v Special Adjudicator [2004] UKHL 26; [2004] 2 AC 323, para 20, per Lord Bingham) or no less, but certainly no more (Al Skeini: paras 90 and 106, per Lady Hale and Lord Brown). However, it is our duty to give effect to the domestically enacted Convention rights, while taking account of Strasbourg jurisprudence, although caution is particularly apposite where Strasbourg has decided a case directly in point or, perhaps, where there are mixed messages in the existing Strasbourg case law and, as a result, a real judicial choice to be made there about the scope or application of the Convention. But neither is the case here. Strasbourg has not decided any case directly in point, and both the messages contained in its existing jurisprudence and considerations of general principle seem to me to point in a clear direction. In my judgment the armed forces of a state are, and the European Court of Human Rights would hold that they are, within its jurisdiction, within the meaning of article 1 and for the purposes of article 2 wherever they may be. On that basis, it is incumbent on us under the Human Rights Act 1998, s.6, to give effect to that conclusion. I would dismiss the appeal on the first issue. Issue 2 article 2 The second issue is whether the fresh inquest into Private Smiths death must conform with the procedural obligation implied into article 2 of the Convention. In essence: what kind of inquest should the coroner hold, leading to what kind of verdict, in respect of Private Smiths death? Again, since questions of jurisdiction are involved, this issue cannot simply be answered by reference to the Secretary of States concession (para 159 above) that he will not object to the fullest type of inquest and (presumably) verdict. The reference to the procedural obligation implied into article 2 is significant. Article 2 has two aspects; one substantive, the other procedural. The latter is implied in order to make sure that [the former is] effective in practice; and is parasitic upon the existence of the substantive right, and cannot exist independently: R (Gentle) v Prime Minister [2008] UKHL 20; [2008] AC 1356, paras 5 6, per Lord Bingham; and see Jordan v United Kingdom (2001) 37 EHRR 52, para 105 and Edwards v United Kingdom (2002) 35 EHRR 487, para 69. In its substantive aspect, article 2 requires states not to take life without justification and also to establish a framework of laws, precautions, procedures and means of enforcement which will, to the greatest extent reasonably practicable, protect life: R (Middleton) v West Somerset Coroner [2004] UKHL 10; [2004] 2 AC 182, para 2 of the opinion of the Appellate Committee given by Lord Bingham. Where there is such an established and appropriate framework, casual errors of judgment or acts of negligence (or operational as opposed to systematic failures) by state servants or agents will not by themselves amount to breach of the substantive obligation inherent in article 2 (a principle established in the context of medical negligence): Powell v United Kingdom (2000) 30 EHRR CD 362, Takoushis v Inner North London Coroner [2005] EyWCA Civ 1440; [2006] 1 WLR 461, paras 51 to 58; Byrzykowski v Poland (2006) 46 EHRR 675, paras 104 106; and Savage v South Essex Partnership NHS Foundation Trust (MIND intervening) [2008] UKHL 74; [2009] AC 681. In its procedural aspect, article 2 requires member states to initiate an effective public investigation by an independent official body into any death occurring in circumstances in which it appears that one or other of the foregoing substantive obligations has been, or may have been, violated and it appears that agents of the state are, or may be, in some way implicated: Middleton, para 3. Thus to make good [a] procedural right to the inquiry which the respondent seeks, she must show at least an arguable case that the substantive right arises on the facts .: Gentle, para 6, per Lord Bingham. The framework of procedures and means of enforcement required under the substantive aspect of article 2 must include, where appropriate, means of civil redress and criminal prosecution. The present focus is however on the procedural aspect of article 2, and on its requirement (based clearly on the potential involvement of the state in the death) for an effective public investigation by an independent official body into certain types of death, that is those occurring in circumstances potentially engaging the substantive right which article 2 contains. English law has long required a coroners inquest in respect of certain types of death. Pending the coming into force of the relevant sections of the Coroners and Justice Act 2009, the position is governed by the Coroners Act 1988. Section 8(1) requires a coroner to hold an inquest in respect of any body lying within his district where there is reasonable cause to suspect that the deceased (a) has died a violent or an unnatural death, (b) has died a sudden death of which the cause is unknown or (c) has died in prison (or in a place or circumstances requiring an inquest under any other Act). Section 8(3) requires the coroner to summon a jury, in various cases, including where it appears that (c) applies, or the death occurred while the deceased was in police custody, or resulted from an injury caused by a police officer in the purported execution of his duty or was caused by an accident, poisoning or disease requiring notice under section 19 of the Health and Safety at Work etc Act 1974, or in circumstances the continuation or possible recurrence of which is prejudicial to public health or safety. Such an inquest is designed to lead to a verdict, certified by an inquisition setting out, so far as such particulars have been proved (i) who the deceased was; and (ii) how, when and where the deceased came by his death: section 11(3) to (5) and rule 36 of the Coroners Rules 1984. There is a clear overlap (particularly when sections 8(1)(c) and 8(3) apply) between the circumstances in which the 1988 Act requires a coroners inquest and those in which the procedural obligation inherent in article 2 arises. But the two do not necessarily coincide. The domestic duty to hold an inquest can quite often arise in circumstances not engaging the procedural obligation under article 2. The procedural obligation inherent in article 2 may be satisfied by other forms of investigation than an inquest, for example a public inquiry or even criminal proceedings. Where the domestic duty to hold an inquest and the procedural obligation inherent in article 2 coincide, the difficulty arose under English law that the coroners duty to seek to ascertain how the deceased came by his death was interpreted as limiting him to considering by what means the deceased died, rather than looking more widely at the circumstances in which this occurred: R v Coroner for North Humberside and Scunthorpe, Ex p Jamieson [1995] QB 1. In Middleton, which concerned the suicide in prison of a long term prisoner, the House of Lords addressed this difficulty, by acknowledging that a broader inquiry was required under article 2, if the investigation was to ensure the proper accountability of state agents for deaths occurring under their responsibility. Accordingly, it held, pursuant to section 3(1) of the Human Rights Act 1998, that the word how must in such a context be given the expanded meaning of in what broad circumstances, so as to give effect to the requirements to be read into article 2 of the Convention. The House thus distinguished between a traditional Jamieson inquest and an article 2 compliant Middleton inquest. In R (Hurst) v London Northern District Coroner [2007] UKHL 13; [2007] 2 AC 189, it was argued that Middleton had established the expanded meaning of how for all contexts, including those not engaging article 2, and that the traditional Jamieson inquest had therefore been entirely superseded. The House categorically rejected the argument. The question arose in Hurst was whether it would serve any useful purpose to reopen an inquest. Lady Hale and I took the view that the distinction between the scope of investigation, (rather than verdict) possible in a Jamieson as opposed to a Middleton inquest was not as stark as we understood Lord Brown (with whom Lord Bingham agreed) to be suggesting: compare paras 19 and 23, per Lady Hale and paras 74 76, per Lord Mance, with paras 51 and 56 57, per Lord Brown. I drew attention (para 74) to the possibility of a coroners report to a responsible person or authority under rule 43 of the Coroners Rules 1984. Lord Rodger (to whom I must have been mistaken in referring in para 74) was at pains to stress the distinction in scope at paras 6 7, noting that on the Jamieson approach the allegations of failure by the police to heed prior warnings of hostility on the part of the deceaseds killer towards the deceased would be outside the scope of the wider enquiry that would have been required on a Middleton approach. The potential limitations of the Jamieson approach on the scope of investigation were encapsulated by Sir Thomas Bingham MR in that case, [1995] QB 1, 23G, in a reference to rule 36 of the 1984 Rules as requiring that the proceedings and evidence shall be directed solely to ascertaining the deceaseds identity, the place and time of death and how the deceased came by his death. The Coroners and Justice Act 2009 (not yet in force) might appear to perpetuate the distinction by underlining that it is only when necessary under article 2 that the purpose of ascertaining how, when and where the deceased came by his or her death is expanded so as to be read as including the purpose of ascertaining in what circumstances the deceased came by his or her death. It is in these circumstances of relevance that Lord Phillips questions the extent of the distinction, and in particular whether there is any difference in practice between a Jamieson and a Middleton inquest, other than the verdict (paras 69(ii) and 78), and to note that he has on this point the support of Lord Walker (though he also agrees with Lord Rodger on this point) as well as of Lord Collins and Lord Kerr. Lord Hope expressly (para 95) and, as I read him, Lord Rodger implicitly (paras 112 115) see a continuing distinction between the scope of investigation under a Jamieson and a Middleton inquest. For my part, I would have wished to be able to go as far as Lord Phillips, but I do feel some difficulty about questioning whether there is in practice any real distinction at all (save in the verdict expressed), having regard to Hurst and the 2009 Act and also having regard to my relative ignorance as to the extent to which such a distinction between the two types of inquest is in fact meaningful in day to day practice (as the courts in Jamieson, Middleton and Hurst must on the face of it have thought). However, it seems unnecessary on this appeal to pursue this aspect further. Everyone agrees that coroners have a considerable discretion as to the scope of their enquiry, although the verdict that they may deliver differs according to the type of inquest being held. The practical solution is no doubt for coroners to be alert to the possibility that a Middleton type verdict may be, or become, necessary, and to be ready to adapt the scope of their investigation accordingly. In the present case, the coroner (whose verdict has been set aside on different grounds) concluded that, on the facts as he saw them in the first inquest, a traditional Jamieson type of inquest was all that was required. Collins J and the Court of Appeal disagreed. They concluded that a Middleton type inquest was required. The Court of Appeals reasoning was that Private Smith was in a position analogous to that of a prisoner, a person detained on mental or other grounds or a conscript, and that a Middleton type inquest was required in respect of any death of such a person in prison or custody or while serving in the army. The Secretary of State appeals to the Supreme Court against the Court of Appeals reasoning and conclusion. The states procedural duty under article 2 to provide for or ensure an effective public investigation by an independent official body of certain deaths or near deaths has been developed in the case law of the European Court of Human Rights and explored in domestic case law, including that of the House of Lords in R (Amin) v Secretary of State for the Home Department [2003] UKHL 51; [2004] 1 AC 653, Middleton (above) and R (L(A Patient)) v Secretary of State for Justice [2008] UKHL 68; [2009] AC 588. Certain categories of case in which the substantive right contained in article 2 has been held to be potentially engaged, with the result that the procedural obligation has been held to exist, are clearly recognisable: (i) Killings by state agents: McCann v United Kingdom (1995) 21 EHHR 97, para 161 (article 2 requires by implication that there should be some form of effective official investigation when individuals have been killed as a result of the use of force by, inter alios, agents of the State") and Jordan v United Kingdom (2001) 37 EHRR 52; and see Amin, paras 20 and 25, per Lord Bingham. (ii) Deaths in custody: Salman v Turkey (2000) 34 EHHR 425, esp para 99 (unexplained death in custody, because persons in custody are in a vulnerable position and the authorities are under a duty to protect them); Edwards v United Kingdom (2002) 35 EHRR 487 (violent death of a prisoner at the hands of his cell mate); Akdogdu v Turkey (Application No 46747/99), 18 October 2005, (suicide in prison); R (D) v Secretary of State for the Home Department [2005] EWHC 728 (Admin); [2006] EWCA Civ 143, considered by the House of Lords in L (a case of suicide in prison). (iii) Conscripts: lvarez Ramn v Spain (Application No 51192/99), 3 July 2001; Kilin v Turkey (Application No 40145/98),7 June 2005; Savage v South East Essex NHS Foundation Trust (MIND intervening) [2008] UKHL 74; [2009] AC 681, paras 35 37, per Lord Rodger. (iv) Mental health detainees: Savage although concerned not with any duty to investigate under article 2, but with responsibility in a claim for damages for the suicide of a mental health detainee who succeeded in absconding and committed suicide highlights the analogy between the states duties (v) towards persons in custody and persons in detention for mental health reasons as well as conscripts. Other situations where the State has a positive substantive obligation to take steps to safeguard life. Such situations exist not only where the right to life is inherently at risk, but also where the State is on notice of a specific threat to someones life against which protective steps could be taken: Osman v United Kingdom (1998) 29 EHRR 245; neryildiz v Turkey (2004) 41 EHRR 325 (state allegedly tolerated and, for political reasons, encouraged slum settlements close to a huge uncontrolled rubbish tip, without making any effort to inform the settlers of dangers posed by the tip, which in the event exploded, killing some 39 residents). In neryildiz the Court said that, where lives had actually been lost in circumstances potentially engaging the responsibility of the State, the procedural aspect of article 2 entailed a further duty on the State to ensure an adequate response judicial or otherwise so that the legislative and administrative framework set up to protect the right to life is properly implemented and any breaches of that right are repressed and punished (para 91), and that the applicable principles are rather to be found in those the Court has already had occasion to develop in relation notably to the use of lethal force, principles which lend themselves to application in other categories of cases (para 93, italics added for emphasis). The Court explained that, just as in homicide cases the true circumstances of the death often in practice were, or might be, largely confined within the knowledge of state officials or authorities, so in its view such considerations are indisputably valid in the context of dangerous activities, when lives have been lost as a result of events occurring under the responsibility of the public authorities, which are often the only entities to have sufficient relevant knowledge to identify and establish the complex phenomena that might have caused such incidents (para 93). It added that: the requirements of article 2 go beyond the state of official investigation, where this has led to the institution of proceedings in the national courts: the proceedings as a whole, including the trial stage, must satisfy the requirements of the positive obligation to protect lives through the law (para 95). In neryildiz itself, it was not the preliminary investigation following the tragedy that was at fault, but rather the operation of the judicial system in response to the tragedy and investigation: paras 96, 115, 117 118 and 150 155. The procedural obligation incumbent on the state to investigate deaths which, either of their inherent nature or in their particular circumstances, involve the states potential responsibility under article 2 may be distinguished from the general substantive obligation under article 2 to establish an appropriate regulatory, investigatory and judicial system. The distinction was drawn clearly in respect of a third party killing in Menson v United Kingdom (2003) 37 EHRR CD 220. The Court there said: The Court observes that the applicants have not laid any blame on the authorities of the respondent State for the actual death of Michael Menson; nor has it been suggested that the authorities knew or ought to have known that Michael Menson was at risk of physical violence at the hands of third parties and failed to take appropriate measures to safeguard him against that risk. The applicants case is therefore to be distinguished from cases involving the alleged use of lethal force either by agents of the State or by private parties with their collusion (see, for example, McCann v United Kingdom (1995) [21 EHRR 97]; Jordan v United Kingdom (2001) [37 EHRR 52]; Shanaghan v United Kingdom, (Application No 37715/97), judgment of 4 May 2001, ECHR 2001 III (extracts), or in which the factual circumstances imposed an obligation on the authorities to protect an individuals life, for example where they have assumed responsibility for his welfare (see, for example, Edwards v United Kingdom (2002) [35 EHRR 487]), or where they knew or ought to have known that his life was at risk (see, for example, Osman v United Kingdom (1998) [29 EHRR 245]. The Court went on: However, the absence of any direct state responsibility for the death of Michael Menson does not exclude the applicability of article 2. It recalls that by requiring a State to take appropriate steps to safeguard the lives of those within its jurisdiction (see LCB v United Kingdom (1998) [27 EHRR 212], para 36), article 2 para 1 imposes a duty on that state to secure the right to life by putting in place effective criminal law provisions to deter the commission of offences against the person, backed up by law enforcement machinery for the prevention, suppression and punishment of breaches of such provisions (see Osman, cited above, para 115). With reference to the facts of the instant case, the Court considers that this obligation requires by implication that there should be some form of effective official investigation when there is reason to believe that an individual has sustained life threatening injuries in suspicious circumstances. The investigation must be capable of establishing the cause of the injuries and the identification of those responsible with a view to their punishment. Where death results, as in Michael Mensons case, the investigation assumes even greater importance, having regard to the fact that the essential purpose of such an investigation is to secure the effective implementation of the domestic laws which protect the right to life (see mutatis mutandis, the Edwards judgment, above cited, para 69). Analysis: Both the substantive and the procedural limbs of article 2 are therefore capable of giving rise to obligations of investigation on the part of state authorities, including the courts. The present appeal concerns the circumstances in which article 2 gives rise to a particular procedural obligation on the part of the state of its own motion to initiate an effective public investigation by an independent official body following a death or near death. This in turn depends upon whether the circumstances involve a potential breach of the substantive obligation which article 2 contains. The questions are how general is this obligation and whether it was potentially engaged by the circumstances giving rise to Private Smiths sad death. The present case: The Court of Appeal treated Private Smiths death as analogous to the killing or suicide of a prisoner, detainee or conscript. It said (para 105): The question is therefore whether the principles apply to soldiers on active service in Iraq. We conclude that they do. They are under the control of and subject to army discipline. They must do what the army requires them to do. If the army sends them out into the desert they must go. In this respect they are in the same position as a conscript. Once they have signed up for a particular period they can no more disobey an order than a conscript can. The army owes them the same duty of care at common law. We recognise that they may not be quite as vulnerable as conscripts but they may well be vulnerable in much the same way, both in stressful situations caused by conflict and in stressful situations caused, as in Private Smith's case, by extreme heat. We see no reason why they should not have the same protection as is afforded by article 2 to a conscript. The scope of this reasoning is uncertain. It is unclear in particular whether the Court of Appeal was suggesting that all deaths of military personnel in service require to be investigated by a Middleton type inquiry. Certainly, it was the respondents submission before the Supreme Court that all soldiers deaths on active service must be regarded as being potentially the states responsibility, because of the degree of control in a closed system, and, therefore, as requiring full investigation by a Middleton type inquiry. In my judgment, that submission goes too far. Death on military service was an everyday risk in the environment of Iraq, as it is today in Afghanistan. Military service against hostile forces in a harsh environment is a situation par excellence where soldiers lives are likely to be lost without their employing state having even potential responsibility. I do not think that courts should subscribe to a view that all military service involves lions led by donkeys (Alan Clarks words in his 1961 work, The Donkeys: a History of the British Expeditionary Force in 1915, the inspiration for Joan Littlewoods Oh, What a Lovely War!). That may or may not have been a fair description of Earl Haigs strategy in the First World War. But, whatever debate may arise about the adequacy of equipment or funding for the armed forces in todays world, I do not think that it should open on an assumption that modern generals or modern ministers of defence are necessarily or even potentially in breach of their article 2 duties. There needs to be something more than that. The European Court of Human Rights jurisprudence summarised in para 210 above, is focused on deaths where, because of the nature or context (whether general or specific) of the death, the state can, without more, be said realistically to have some form of responsibility and in particular where it may alone have sufficient relevant knowledge to identify and establish the cause of the death or near death. Whether it can be said that such responsibility potentially exists in other cases depends upon their particular circumstances. The significance of a state having exclusive knowledge of the relevant events appears to be that this tends to open up a possibility of state involvement and a corresponding need for public investigation to exclude or establish that possibility. Nothing in the case law, and nothing in principle, establishes or indicates that the duty extends to every death of every soldier on active service. There are two particular differences between the present case and any situation previously considered. First, the present case concerns a volunteer Territorial Army soldier, who, the Supreme Court was told, would also have volunteered to go to Iraq (before, then, being served with compulsory call up papers to protect his position, presumably in respect of such matters as employment). I accept that a person who volunteers for active service puts himself or herself in a position where he or she is under extreme discipline, bound to obey orders in a harsh physical environment, the concomitant being that the army authorities must protect him or her against risks potentially arising from obeying such orders. But it does not follow that every death by heatstroke engages, without more, the states potential responsibility. Second, the case concerns death, not by killing, suicide or violence, but by heat associated with the admittedly harsh physical environment in which Private Smith was placed. It was incumbent on the army authorities to address the risks of heat in active service in Iraq, and put adequate systems in place to meet them. But, again, not every death by heat on active service in Iraq can or should be treated without more as involving a potential failure by the state to fulfil that responsibility or a defective system of protection, or therefore, in my view, as requiring the same level of scrutiny and investigation as a death by killing or suicide of a person in custody or a conscript. Some further examination of the particular facts is called for, before such a conclusion. Conclusion on issue 2 In my view, therefore, the coroners general approach was correct. Only if there were sufficient indicia of such a failure or deficiency was it incumbent on the state of its own motion to ensure an effective public investigation by an independent official body, and incumbent therefore on the coroner to expand the inquest to become a Middleton type inquest. The coroner in the first inquest (whose inquisition has now been set aside) concluded that there were insufficient indicia. Death resulting from negligence by members of the armed forces in the application of an established and appropriate system of protection is not axiomatically to be equated with state responsibility for the death under article 2: see para 215 above. But the sequence of events set out in Mrs Smiths case (paras 4 to 35), including the coroners own recommendations after giving judgment, are suggestive of systematic rather than simply operational errors and persuade me that there is here a sufficient case of state responsibility for Private Smiths death for us to be able to rule now that the fresh inquest should be of the Middleton type. The Secretary of States agreement serves merely to confirm the appropriateness of this on the particular facts. I would therefore answer the second issue (identified in para 200 above) affirmatively. It also follows that I would maintain the declaration contained in para 1 of Collins Js Order dated 12 May 2008 (deleting only its final words as set out in the Courts judgment, since it is the judgments in this Court that will now be determinative). LORD COLLINS Preliminary The academic nature of the debate on the first issue As the Court of Appeal recognised, the question of jurisdiction under article 1 on this appeal is academic. After Private Smith collapsed in the stadium where he was billeted, he was taken by ambulance to the medical centre at the camp, where he died of heatstroke. The Secretary of State conceded that the relevant circumstances leading to Private Smiths death took place within the geographical area of a British army camp and a British army hospital, and that a soldier who dies on a United Kingdom base dies within the jurisdiction of the United Kingdom for the purposes of article 1 of the Convention: [2008] 3 WLR 1284, at [7] (Collins J); [2009] 3 WLR 1099, at [8], [14] (CA). These concessions flowed from the decision of the House of Lords in R (Al Skeini) v Secretary of State for Defence [2007] UKHL 26, [2008] AC 153 (see [6], [61], [132] for the concessions) that the Secretary of State was right to concede the correctness of the Divisional Courts reasoning that Mr Mousas death in a British military detention centre in Iraq was within the scope of the Convention because the camp was to be assimilated to exceptional cases of extraterritoriality such as embassies and consulates: [2007] QB 140, at [287] (Div Ct). Nevertheless the Court of Appeal decided to hear argument on, and rule upon, the question whether a British soldier in the Territorial Army, who is on military service in Iraq, is subject to the jurisdiction of the United Kingdom within the meaning of article 1 of the Convention, so as to benefit from the rights guaranteed by the Human Rights Act 1998, while operating in Iraq, or whether he is only subject to the jurisdiction for those purposes when he is on a British military base or in a British hospital. The reason why the Court of Appeal took this course is that Collins J had decided the broader question, and because both the Secretary of State and the Equality and Human Rights Commission had characterised the question as being of great general significance or importance. The question is plainly one of importance, but it is unfortunate that it has been decided in the courts below, and will be decided in this court, in a case in which the point does not arise for decision and in which it is conceded to be academic. There is an obvious danger in giving what are in substance advisory opinions on hypothetical facts divorced from any concrete factual situation: see R (Weaver) v London and Quadrant Housing Trust (Equality and Human Rights Commission intervening) [2009] EWCA Civ 587, [2010] 1 WLR 363, at [90]. That is particularly so in the present case. In some of the cases on article 1 the Strasbourg court has considered relevant the degree of control or authority exercised by the respondent state in the foreign territory and the existence of the consent of the territorial state to the exercise of authority by the respondent state: see eg Loizidou v Turkey (Preliminary Objections) (1995) 20 EHRR 99, at [62]; Bankovi v Belgium (2001) 11 BHRC 435, at [60], [71]; calan v Turkey (2003) 37 EHRR 238, at [93]; (2005) 41 EHRR 985, at [91]; Issa v Turkey (2004) 41 EHRR 567, at [69]; Al Saadoon and Mufdhi v United Kingdom (admissibility) (2009) 49 EHRR SE 95, at [85]. The degree of authority and control exercised by United Kingdom forces in Iraq, and the legal authority under which they operated, have varied from time to time over a lengthy period which is still continuing. The invasion of Iraq by coalition forces led by the United States of America (with a substantial force from the United Kingdom and smaller contingents from Australia and Poland) began on 20 March 2003. Major combat operations ceased at the beginning of May 2003. Private Smith was in Iraq from 18 June 2003 and died on 13 August 2003. It was accepted by the Secretary of State that between 1 May 2003 and 28 June 2004 (when the occupation formally ended) the United Kingdom was an occupying power for the purposes of the Hague Regulations on the Laws and Customs of War on Land, 1949, and the Fourth Geneva Convention on the Protection of Civilians in Time of War, 1949, in those areas of Southern Iraq where British troops exercised sufficient authority. On the relationship between international human rights law and international humanitarian law (such as the Geneva Conventions) contrast Dennis, Application of Human Rights Treaties Extraterritorially in Times of Armed Conflict and Military Occupation (2005) 99 AJIL 119, 141 with Roberts, Transformative Military Occupation: Applying the Laws of War and Human Rights (2006) 100 AJIL 580, 594. The Coalition Provisional Authority (CPA) was established on 16 April 2003 by the United States Government as a caretaker administration until an Iraqi government could be established. On 13 May 2003 the United States Secretary for Defense appointed Ambassador Paul Bremer as Administrator of the CPA with responsibility for the temporary governance of Iraq. The CPA administration was divided into regional areas. CPA South remained under United Kingdom responsibility and control. It covered the southernmost four of Iraq's eighteen provinces, and United Kingdom troops were deployed in the area. The CPA was not a subordinate organ or authority of the United Kingdom. The United Kingdom was represented at CPA headquarters through the office of the United Kingdom Special Representative, who had no formal decision making power within the CPA. All the CPAs administrative and legislative decisions were taken by Ambassador Bremer. By CPA Order No 17, issued in June 2003, all coalition personnel were expressed to be subject to the exclusive jurisdiction of their Sending States (section 2(3)) and immune from legal process and arrest or detention (section 2(1), (3)), and coalition facilities were to be inviolable (section 9(1)): While any areas on which such headquarters, camps or other premises are located remain Iraqi territory, they shall be inviolable and subject to the exclusive control and authority of the MNF, including with respect to entry and exit of all personnel. The MNF shall be guaranteed unimpeded access to such MNF premises. Where MNF Personnel are co located with military personnel of Iraq, permanent, direct and immediate access for the MNF to those premises shall be guaranteed. On 22 May 2003 the UN Security Council adopted Resolution 1483 under Chapter VII of the UN Charter. The Security Council re affirmed the sovereignty and territorial integrity of Iraq and recognised the specific authorities, responsibilities, and obligations under applicable international law of [the United States and the United Kingdom] as occupying powers under unified command. The Resolution supported the formation of an Iraqi interim administration as a transitional administration run by Iraqis until an internationally recognised, responsible government was established to assume the responsibilities of the CPA (article 9). In July 2003 the Governing Council of Iraq was established, which the CPA was to consult on all matters concerning the temporary governance of Iraq. UN Security Council Resolution 1500 (2003) of 14 August 2003 welcomed the establishment of the Governing Council of Iraq, and Resolution 1511 (2003) of 16 October 2003 determined that the Governing Council of Iraq and its ministers were the principal bodies of the Iraqi interim administration which embodied the sovereignty of the State of Iraq during the transitional period until an internationally recognised, representative government was established and assumed the responsibilities of the CPA; called upon the CPA to return governing responsibilities and authorities to the people of Iraq as soon as practicable; and invited the Governing Council of Iraq to produce a timetable and programme for the drafting of a new constitution for Iraq and for the holding of democratic elections under that constitution. It authorised the coalition to take all necessary measures to contribute to the maintenance of security and stability in Iraq and provided that the requirements and mission of the coalition would be reviewed within one year of the date of the Resolution and that in any case the mandate of the coalition was to expire upon the completion of the political process to which the resolution referred. On 8 March 2004 the Governing Council of Iraq promulgated the Law of Administration for the State of Iraq for the Transitional Period, which provided a temporary legal framework for the administration of Iraq for the transitional period which was due to commence by 30 June 2004 with the establishment of an interim Iraqi government. Security Council Resolution 1546 (2004) was adopted on 8 June 2004. It endorsed the formation of a sovereign Interim Government of Iraq to assume full responsibility and authority by 30 June 2004 for governing Iraq, and welcomed that, also by 30 June 2004, the occupation will end and [the CPA] will cease to exist, and that Iraq will reassert its full sovereignty (article 2). It noted that the presence of the coalition force was at the request of the incoming Interim Government (as set out in correspondence between the Iraqi Prime Minister and the United States Secretary of State annexed to the resolution) and reaffirmed the authorisation for the force to remain in Iraq, with authority to take all necessary measures to contribute to the maintenance of security and stability there. Provision was again made for the mandate to be reviewed within 12 months and to expire upon completion of the political process previously referred to. On 28 June 2004 the occupation came to an end when full authority was transferred from the CPA to the Interim Government and the CPA ceased to exist. Subsequently the coalition forces, including the United Kingdom force, remained in Iraq pursuant to the request and consent of the Iraqi Government and authorisations from the Security Council. All of the relevant Security Council resolutions from 1483 (2003) onwards reaffirmed the sovereignty of Iraq. Consequently the legal position of the United Kingdom forces has changed over the period since the invasion. Between March 2003 and June 2004 the United Kingdom was a belligerent occupant. The effective government of Iraq from April 2003 until June 2004 was the CPA, together with (from July 2003) the Governing Council of Iraq. From June 2004 the United Kingdom forces have been present at the request of, and with the consent of, the Iraqi Government. The consequence of the way in which these proceedings have been dealt with is that the court is being asked to determine whether the article 2 obligation existed in relation to a British soldier who died in Iraq in August 2003, when the United Kingdom forces were belligerent occupants in part of Iraq with a very small force. In 2003, in the area of Southern Iraq for which the United Kingdom had responsibility there were about 8,000 British troops for a population of 2,760,000: R (Al Skeini) v Secretary of State for Defence [2004] EWHC 2911 (Admin), [2007] QB 140, at [42] (Div Ct). The United Kingdom was not in effective control of Basra and surrounding areas: [2007] UKHL 26, [2008] AC 153, [83], per Lord Rodger, approving Brooke LJ [2005] EWCA Civ 1609, [2007] QB 140, [124] (CA). The Court of Appeal recognised in the present case that at the time of Private Smiths death the army was neither in effective control of Iraqi territory nor acting through the consent, invitation or acquiescence of the local sovereign or its government: [2009] 3 WLR 1099 [37] [38]. The case for Mrs Smith and for the Equality and Human Rights Commission on Private Smith was not put on the basis of Private Smith having been on territory under the control of the United Kingdom, or of the army as a State agent. Their case was that Private Smith was subject to the jurisdiction of the United Kingdom as a member of the armed forces. But the question whether the elements of authority and control by the United Kingdom and/or consent of the territorial sovereign are relevant cannot be avoided, and it is regrettable that the issues fall to be decided either without any relevant factual background, or on the hypothesis that the death occurred (as Private Smiths death did) in 2003, when United Kingdom forces were not in effective control, and when they were there as belligerent occupants without the consent of the territorial sovereign, and that the only issue is whether jurisdiction over armed forces is sufficient for article 1 purposes. R (Gentle) v Prime Minister The next preliminary matter is that the first question raised on this appeal has already been the subject of a decision of the House of Lords. In R (Gentle) v Prime Minister [2008] UKHL 20, [2008] AC 1356, the appellants submitted that all British servicemen on active service overseas fall within the article 1 jurisdiction of the United Kingdom. The appellants specifically relied upon the fact that the soldiers were United Kingdom nationals under the command and control of the United Kingdom and that they were under the authority of British law when in Iraq. The argument was firmly rejected by Lord Bingham, who said at [8(3)]: Here the deaths of Fusilier Gentle and Trooper Clarke occurred in Iraq and although they were subject to the authority of the defendants they were clearly not within the jurisdiction of the UK as that expression in the Convention has been interpreted [citing Al Skeini [79] and [129]]. Lady Hale took a different view ([60]), and Lord Carswell left the point open ([66]), but Lords Hoffmann ([16]), Hope ([28]), Scott ([29]), Rodger ([45]), Brown ([71]) (but perhaps with a reservation at [70]) and Mance ([74]) agreed generally with Lord Binghams opinion. It would be a sterile exercise to consider whether this holding was part of the ratio, since on any view this important question was not subject to extensive argument, and it would be wrong for this court to dispose of the matter simply on the basis that the issue was covered by precedent. But it has to be said that the views of Lord Bingham in this area (as in many others) are entitled to the greatest possible respect. The application of the Convention and the meaning of jurisdiction The problem presented on this appeal is not a problem unique to the application of modern human rights instruments. In the United States there are many decisions on the application of constitutional rights to United States citizens and aliens abroad. See (among many others) Henkin, The Constitution as Compact and as Conscience: Individual Rights Abroad and at our Gates, 27 Wm & Mary L Rev 11, 17 24 (1985); Lowenfeld, US Law Enforcement Abroad: The Constitution and International Law 83 AJIL 880 (1989) and 84 AJIL 444 (1990); Brilmayer and Norchi, Federal Extraterrioriality and Fifth Amendment Due Process, 105 Harv L Rev 1217 (1992). The trend in the United States is to extend the protection of the Constitution to United States citizens abroad (but not, generally, aliens) whose rights are violated by United States authorities. It has been said that when the Government reaches out to punish a citizen who is abroad, the shield which the Bill of Rights and other parts of the Constitution provide to protect his life and liberty should not be stripped away just because he happens to be in another land: Reid v Covert, 354 US 1, 6 (1957), per Black J, for a plurality of four justices (military court tried and convicted the wife of a US air force sergeant for the murder of her husband at an air base in England: entitled to a jury trial as required by the Sixth Amendment). Thus in relation to the Iraq conflict, United States citizens have been held entitled to make constitutional claims arising out of detention or alleged torture by US military officials: Kar v Rumsfeld, 580 F Supp 2d 80 (DDC 2008); Vance v Rumsfeld, 5 March 2010, WL 850173 (ND Ill 2010) (American citizens do not forfeit their core constitutional rights when they leave the United States, even when their destination is a foreign war zone[T]he right of American citizens to be free from torture is a well established part of our constitutional fabric.) But as the court said in the latter case, the cases establish the importance of citizenship in circumstances in which federal agents outside the United States carry out constitutional violations (at 13). The position is different where non citizens are involved. In United States v Verdugo Urquidez, 494 US 259 (1990) it was held that the Fourth Amendment did not apply to the joint search by Mexican and United States authorities of a Mexican suspects home in Mexico while he was in custody in the United States. This is because the people means the American people. Rehnquist CJ said that aliens should not have extra territorial Fourth Amendment rights, because grave uncertainties would be created for the US employment of armed forces abroad: at 273. See also Rasul v Myers, 563 F 3d 527, 532 (DC Cir 2009) (British citizens detained at Guantanamo Bay); Re Iraq and Afghanistan Detainees Litigation, 479 F Supp 2d 85, 108 (DDC 2007) (alleged torture of Afghani and Iraqi citizens); Arar v Ashcroft, 585 F 3d 559 (2d Cir 2009) (no action against government officials allegedly responsible for aliens extraordinary rendition to Syria). But the application of constitutional protection to activities abroad does not mean that the conduct of military operations is justiciable. In the United States the conduct of military operations is so exclusively entrusted to the political branches of government as to be largely immune from judicial inquiry or interference: Harisiades v Shaughnessy, 342 US 580, 589 (1952). See Arar v Ashcroft, 585 F 3d 559, 590 (2d Cir 2009) On this appeal the question arises in the context of the meaning and application of the expression within their jurisdiction. The expression jurisdiction is used in many senses in international law. The doctrine of jurisdiction in international law has given rise to an enormous literature, of which it is useful to mention, in particular, Mann, The Doctrine of Jurisdiction in International Law, in Studies in International Law (1973), p 1; Oppenheim, International Law, 8th ed Sir Hersch Lauterpacht, 1955, pp 235 et seq; Akehurst, Jurisdiction in International Law (1972 73) 46 BYIL 145; Meessen, Extraterritorial Jurisdiction in International Law (1996); Higgins, Themes and Theories: Selected Essays, Speeches and Writings in International Law, 2009, Vol 2, pp 799 et seq. Not every use of the expression jurisdiction in international law is co terminous with that in article 1. For example, a state may exercise jurisdiction over its nationals abroad in the sense that it may prescribe rules of law in relation to its nationals abroad: Restatement (Third), Foreign Relations Law of the United States, 1987, section 402; Oppenheim, International Law, 9th ed Jennings and Watts, 1992, vol 1, para 138; Higgins, ante, vol 2, p 802. But that does not mean that all United Kingdom nationals wherever they may be are within the jurisdiction of the United Kingdom for the purposes of article 1. Armed forces of the United Kingdom serving abroad are subject to military law and discipline, they owe allegiance to the Crown, and where they are stationed abroad with the consent of the local sovereign, the arrangements with that sovereign will normally provide for immunity (at least in certain respects) from the civil and criminal jurisdiction of the host state: for the immunity of United States armed forces in the United Kingdom see Littrell v United States of America (No 2) [1995] 1 WLR 82 (CA); Holland v Lampen Wolfe [2000] 1 WLR 1573 (HL). In that sense there can be no doubt that armed forces serving abroad are subject to the jurisdiction of the United Kingdom, or as Lord Bingham put it in R (Gentle) v Prime Minister [2008] UKHL 20, [2008] AC 1356, [8(3)], subject to the authority of the United Kingdom. The international practice is confirmed by CPA Order No 17, under which all coalition personnel were expressed to be subject to the exclusive jurisdiction of their Sending States(section 2(3)) and immune from legal process and arrest or detention (section 2(1), (3)). Nor is there any doubt that members of the armed forces have, apart from the Convention, rights to enforce the Crowns duties to them: Mulcahy v Ministry of Defence [1996] QB 732 (subject to a possible exception for active operations: Shaw Savill and Albion Co Ltd v Commonwealth (1940) 66 CLR 344 and cf Burmah Oil Co Ltd v Lord Advocate [1965] AC 75). The Crown Proceedings Act 1947, section 10 excluded armed forces from the benefit of remedies against the Crown, but its operation was suspended by the Crown Proceedings (Armed Forces) Act 1987, section 2 of which gave the Secretary of State for Defence the power (which has not yet been exercised) to revive section 10 of the 1947 Act. What is jurisdiction in international law? According to Oppenheim, International Law, 9th ed Jennings and Watts, 1992, vol 1, p 456: State jurisdiction concerns essentially the extent of each states right to regulate conduct or the consequences of events. In practice jurisdiction is not a single concept. A states jurisdiction may take various forms. Thus a state may regulate conduct by legislation; or it may, through its courts, regulate those differences which come before them, whether arising out of the civil or criminal law; or it may regulate conduct by taking executive or administrative action which impinges more directly on the course of events, as by enforcing its laws or the decisions of its courts. The extent of the states jurisdiction may differ in each of these contexts. The Restatement (Third), Foreign Relations Law of the United States (1987) vol 1, p 230, uses jurisdiction to mean the authority of states to prescribe their law, to subject persons and things to adjudication in their courts and other tribunals, and to enforce their law, both judicially and non judicially. These different aspects of jurisdiction are sometimes said to be curial or judicial jurisdiction, legislative jurisdiction, and enforcement jurisdiction. Curial jurisdiction is essentially concerned with the ability of courts to exercise jurisdiction in civil matters over foreigners. Legislative jurisdiction is about the ability of states to use their own laws to regulate or punish acts in foreign countries. The question in international law is whether states have a legitimate interest in, or sufficient connection with, acts committed abroad so as to justify the application of their laws to them. In the famous Lotus case (France v Turkey), (1927) PCIJ, Series A, No.10, p 4, the Permanent Court of International Justice said (at 19): Far from laying down a general prohibition to the effect that states may not extend the application of their laws . to persons, property and acts outside their territory, it leaves them in this respect a wide measure of discretion which is only limited in certain cases by prohibitive rules International controversies over the extra territorial application of criminal or penal laws, such as anti trust or securities laws, are about the limits of legislative jurisdiction: see Morrison v National Australia Bank Ltd, United States Supreme Court, June 24, 2010. That is no doubt why, as will appear below, the Strasbourg court referred in Bankovi v Belgium (2001) 11 BHRC 435, [59], in the context of the words within their jurisdiction in article 1 of the Convention to the bases of jurisdiction to prescribe criminal offences for conduct abroad. As for enforcement jurisdiction, in the Lotus case (France v Turkey), the Permanent Court said (at 18 19): Now the first and foremost restriction imposed by international law upon a state is that failing the existence of a permissive rule to the contrary it may not exercise its power in any form in the territory of another state. In this sense jurisdiction is certainly territorial; it cannot be exercised by a state outside its territory except by virtue of a permissive rule derived from international custom or from a convention. That is a statement about enforcement jurisdiction, namely the limits of the right of a state to act on the territory of another state or to take measures on its own territory which require compliance in another state. Thus a state cannot, without the consent of the territorial sovereign, perform official acts in a foreign state or carry out official investigations in the foreign state. The inability of a foreign state to claim, directly or indirectly, its taxes in England is sometimes put on the basis that it is an illegitimate extension of its territorial jurisdiction: see Government of India v Taylor [1955] AC 491. The issue on this part of the appeal On this part of the appeal the issue is whether the undoubted jurisdiction which states has over their armed forces abroad means that their soldiers are within their jurisdiction for the purposes of article 1 of the Convention. The obvious starting point is that the operation of the Convention is territorial, and that its extra territorial application is exceptional. The Strasbourg court has recognised few exceptions, and it is not easy to extract a common principled basis for them. The main questions which arise are (1) whether armed forces can be brought within article 1 simply on the basis that in international law they are subject to the jurisdiction of the state which they serve; or (2) whether they are within article 1 because of the authority and control which the state exercises over them; (3) whether they are within article 1 because there is a jurisdictional link between them and the state. In order that these questions may be considered it is necessary to consider Bankovi v Belgium (2001) 11 BHRC 435 and its antecedents, and some of the subsequent Strasbourg cases considered in Al Skeini, and finally cases decided in Strasbourg after Al Skeini. Early cases At the risk of repeating some of what has been said in other cases about the antecedents of Bankovi v Belgium (2001) 11 BHRC 435, it is important to consider what was decided by the Strasbourg court in Bankovi in December 2001 against the background of decisions of the Commission and the Court on the scope of jurisdiction under article 1 stretching over 35 years. In Soering v United Kingdom (1989) 11 EHRR 439, at [86], the Court, in plenary session, had referred to the limit on the reach of the Convention under article 1 as being notably territorial. One line of decisions suggested that a state would be responsible for acts of its officials (especially diplomatic and consular officials) performed abroad in performance of their duties to nationals: X v Germany (1965) 8 Yb ECHR 158 (Commission). Similar statements in Cyprus v Turkey (1975) 2 DR 125, at [8] and Hess v United Kingdom (1975) 2 DR 72 fall within this category also, and are not based, as they could have been (and, in the case of Cyprus, later were), on control of territory in Northern Cyprus in the former decision, or on Spandau prison being an extension of the territory of the occupying powers. It is likely that the emphasis on diplomats and consuls in the early decisions reflected the fiction of the extra territoriality of diplomatic premises. There is, however, no actual decision (as distinct from dicta) either of the Commission or of the Court which assimilates diplomatic or consular premises to the territory of the sending state. So also Cyprus v Turkey (1975) 2 DR 125, at [8] assumed an extended notion of territoriality in relation to ships and aircraft registered in a Convention state. Another line of Commission decisions expressed the thought that the expression within their jurisdiction was not equivalent to or limited to the national territory of the contracting state concerned, and extended to all persons under their actual authority and responsibility, whether that authority is exercised within their own territory or abroad : Cyprus v Turkey (1975) 2 DR 125, at [8]. See also X & Y v Switzerland (1977) 2 DR 57; M v Denmark (1992) 73 DR 193. These strands, acts by officials affecting persons, or officials exercising authority over persons, were brought together in X v United Kingdom, (Application No 7547/76) (1977) 12 DR 73. This was a child abduction case in which a Jordanian married to a British woman took their daughter to Jordan. The complaint was that the British consulate in Amman had not done enough to obtain the custody of her daughter following a custody order by the English court. The Commission was satisfied that the consular authorities had done all that could be reasonably expected of them. The Commission said, on jurisdiction, that it was clear from the constant jurisprudence of the Commission that authorised agents of a state, including diplomatic or consular agents, brought other persons or property within the jurisdiction of that state to the extent that they exercised authority over such persons or property. Insofar as they affected such persons or property by their acts or omissions, the responsibility of the state was engaged. Therefore even though the alleged failure of the consular authorities to do all in their power to help the applicant occurred outside the territory of the United Kingdom, it was still within [the] jurisdiction within the meaning of article 1. It should be noted that this formulation by the Commission is inconsistent with the text of article 1, which is about persons within the jurisdiction, and not about acts or omissions within the jurisdiction. The decision of the Court in plenary session in Drozd and Janousek v France and Spain (1992) 14 EHRR 745 must be read against the background of the previous cases. French and Spanish judges acted as judges in Andorra which was ruled by two co princes, the President of the French Republic and the Bishop of Urgel (in Spain). The applicants were Spanish and Czech citizens, who had been convicted of armed robbery and complained that they had not had a fair trial. The Court agreed with the respondent states that the judges did not sit in their capacity as French or Spanish judges, and their judgments were not subject to supervision by the authorities of France or Spain. It does not seem to have been disputed by France and Spain that, if the judges had sat in their capacity as French or Spanish judges, the jurisdictional test of article 1 would have been satisfied. The way in which the Court put it was that France and Spain would be responsible because of acts of their authorities producing effects outside their own territory. (at [91], citing most of the cases mentioned above). See also Loizidou v Turkey (Preliminary Objections) (1995) 20 EHRR 99, at [62]. The final strand in the authorities prior to Bankovi is represented by the notion that effective control of territory abroad is equivalent to jurisdiction over that territory. In Loizidou v Turkey (Preliminary Objections) (1995) 20 EHRR 99, the Court (reflecting Cyprus v Turkey (1975) 2 DR 125, at [8]) held (at [62]) that the responsibility of a Contracting Party may also arise when as a consequence of military action whether lawful or unlawful it exercises effective control of an area outside its national territory. The obligation to secure, in such an area, the rights and freedoms set out in the Convention, derives from the fact of such control whether it be exercised directly, through its armed forces, or through a subordinate local administration. The concept of control is also taken up in other Northern Cyprus cases: e.g. Loizidou v Turkey (Merits) (1996) 23 EHRR 513, at [52]; Cyprus v Turkey (2001) 35 EHRR 731, at [77]. Prior to Bankovi, the Court had also declared admissible complaints against Turkey (a) arising out of operations of its armed forces in Northern Iraq which were alleged to have resulted in violations of the Convention, including the death and torture of some villagers (Issa v Turkey, Application No 31821/96, 30 May 2000, unreported); and (b) arising out of the arrest by Turkish security officers of the applicant, the leader of the PKK, at Nairobi airport with the consent of the Kenyan authorities, and his subsequent removal to, and trial in Turkey (calan v Turkey, (Application No 46221/99), 14 December 2000, unreported). In neither of these admissibility decisions was there any discussion of jurisdiction under article 1. Bankovi v Belgium The concessions by the respondent states The prior decisions go some way to explaining why the respondent states made a number of concessions in Bankovi, not all of which found their way into the reasoning of the Court. They accepted that (a) the exercise of jurisdiction involved the assertion or exercise of legal authority, actual or purported, over persons owing some form of allegiance to the state or who had been brought within that states control, and that the term jurisdiction generally entailed some form of structured relationship normally existing over a period of time (judgment of the Court at [36]); (b) the Court had applied that notion of jurisdiction to confirm that individuals affected by acts of a state outside its territory could be considered to fall within its jurisdiction because there was an exercise of some form of legal authority by the state over them (at [37]); (c) the arrest and detention of the applicants in Issa v Turkey and calan v Turkey constituted a classic exercise of such legal authority or jurisdiction over those persons by military forces on foreign soil (ibid). The issue The issue in Bankovi, stated in para [54] of the decision of the Grand Chamber by reference to the decisions in Drozd and the cases involving Northern Cyprus, was whether the fact that the acts of the respondent states were performed or had effects outside the territory of the contracting states meant that the applicants were capable of falling within the jurisdiction of the respondent states. The concept of jurisdiction in the Courts decision For present purposes, the relevant points which emerge from Bankovi are these: (1) the jurisdictional competence of a state is primarily territorial; (2) international law does not exclude a states exercise of jurisdiction extra territorially, but the bases of such jurisdiction (including nationality, flag, diplomatic and consular relations, effect, protection, passive personality and universality) are as a general rule defined and limited by the sovereign territorial rights of other states; (3) the competence of a state to exercise jurisdiction over its own nationals abroad is subordinate to the territorial competence of that state and other states; (4) a state may not exercise jurisdiction on the territory of another without the consent of the latter unless it is an occupying state, in which case it may exercise jurisdiction in certain respects; (5) article 1 of the Convention reflects the ordinary and essentially territorial notion of jurisdiction; (6) other bases of jurisdiction are exceptional and require special justification in the particular circumstances of each case; (7) article 1 is not to be treated as part of the living instruments provisions, and the travaux confirmed the ordinary meaning of article 1. It should be noted that the Court nowhere explains what it understands by the expression jurisdiction in the context of article 1. The reference in para [59] to extraterritorial jurisdiction as including nationality, flag, diplomatic and consular relations, effect, protection, passive personality and universality is a mixture of two entirely different concepts of extra territoriality. The first (nationality, flag, diplomatic and consular relations) reflects the fiction of the extra territoriality of ships and aircraft and diplomatic and consular premises. The second (effect, protection, passive personality and universality) represents the generally accepted exceptions to the territorial nature of criminal jurisdiction, that is, the exceptions to the principle that a state cannot use its criminal courts to punish persons for acts committed abroad. The first aspect can be illustrated by the way it is put in the last edition of Oppenheim edited by Sir Hersch Lauterpacht, 8th ed (1955), pp 461, 793): In contradistinction to these real parts of State territory there are some things that are either in every respect or for some purposes treated as though they were territorial parts of a State. They are fictional and in a sense only parts of the territory. Thus men of war and other public vessels on the high seas as well as in foreign territorial waters are essentially in every point treated as though they were floating parts of their home State. The premises in which foreign diplomatic envoys have their official residence are in many respects treated as though they were parts of the home States of the envoys concerned. Again merchantmen on the high seas are in certain respects treated as though they were floating parts of the territory of the State under whose flag they legitimately sail. Extraterritoriality, in this as in every other case, is a fiction only, for diplomatic envoys are in reality not without, but within, the territories of the receiving States. The term extraterritoriality is nevertheless valuable because it demonstrates clearly the fact that envoys must, in most respects, be treated as though they were not within the territory of the receiving States. The so called extraterritoriality of envoys takes practical form in a body of privileges which must be severally discussed. The second aspect of jurisdiction, reflected in the Courts reference to effect, protection, passive personality and universality is that which has much exercised international lawyers (but which has nothing to do with the issue under article 1), namely the extent to which states can exercise criminal jurisdiction in respect of acts committed outside their national territory. In the Lotus case the Permanent Court said (at 20): Though it is true that in all systems of law the principle of the territorial character of criminal law is fundamental, it is equally true that all or nearly all these systems of law extend their action to offences committed outside the territory of the State which adopts them, and they do so in ways which vary from State to State. The territoriality of criminal law, therefore, is not an absolute principle of international law and by no means coincides with territorial sovereignty. Consequently it is well accepted that there are well established exceptions to the territorial principle, and they are reflected in the reference in Bankovi at [59] to effect (normally referred to as effects), protection, passive personality and universality. The exceptions normally articulated are these: first, the nationality principle by which a state has jurisdiction over crimes committed by its nationals abroad; second, the so called protective principle under which states claim jurisdiction over acts committed by aliens abroad which threaten the state; third, the passive personality basis of jurisdiction under which a state may exercise jurisdiction over crimes committed abroad by aliens if the victim is a national of the state claiming jurisdiction; fourth, the controversial effects doctrine where jurisdiction is taken over an offence which is committed abroad, but which has economic effects in the forum state (such as violations of anti trust laws or securities laws), and which is sometimes said to be an aspect of the so called objective territorial principle, jurisdiction over an offence committed outside the state but concluded or consummated within the territory; fifth, the principle of universal jurisdiction, the oldest example being jurisdiction to try pirates, and now frequently invoked in relation to jurisdiction over war crimes. See Jennings, Extraterritorial Jurisdiction and United States Anti Trust Laws (1957) 32 BYIL 146. It has to be said that neither Bankovi nor a case such as the present has anything to do with extra territorial jurisdiction in these two senses. The question here is whether armed forces serving abroad are within the jurisdiction of the contracting states in a quite different sense, namely whether the fact that they are subject to the military law and discipline of the United Kingdom, and generally not subject to the local law, results in their being within the jurisdiction of the United Kingdom for article 1 purposes. The exceptional cases The Court went out of its way in Bankovi to emphasise the exceptional nature of the cases in which a state could be responsible for acts or omissions outside its national territory. First, it expressed the view that article 1 of the Convention must be considered to reflect [the] ordinary and essentially territorial notion of jurisdiction, other bases of jurisdiction being exceptional and requiring special justification in the particular circumstances of each case (at [61]). Second, it said (at [67]): In keeping with the essentially territorial notion of jurisdiction, the Court has accepted only in exceptional cases that acts of the contracting states performed, or producing effects, outside their territories can constitute an exercise of jurisdiction by them within the meaning of article 1 of the Convention. Third, it emphasised (at [71]): In sum, the case law of the Court demonstrates that its recognition of the exercise of extra territorial jurisdiction by a contracting state is exceptional The Courts treatment of the exceptional cases where acts of contracting states performed, or producing effects, outside their territories could constitute an exercise of jurisdiction within the meaning of article 1 may be summarised in this way. The Soering v United Kingdom line of cases is not concerned with the extra territorial exercise of jurisdiction, because liability is incurred in such cases by the action of a state concerning a person while he or she was on its territory and clearly within its jurisdiction: [68]. The exceptions which the Court recognises are these. First, the responsibility of contracting states could in principle be engaged because of acts of their authorities which produced effects or were performed outside their own territory, at [69], citing the Drozd case. Second, the responsibility of a contracting state is capable of being engaged when as a consequence of military action (lawful or unlawful) it exercises effective control of an area outside its national territory as a consequence of military operation or through the consent, invitation or acquiescence of the Government of that territory, and exercises all or some of the public powers normally to be exercised by that Government: at [70], citing Loizidou v Turkey (Preliminary Objections) and Cyprus v Turkey (2001) 35 EHRR 731. These cases were explained on this basis that the respondent state, through the effective control of the relevant territory and its inhabitants abroad as a consequence of military occupation or through the consent, invitation or acquiescence of the Government of that territory, exercises all or some of the public powers normally to be exercised by that Government (at [71]). Third (reflecting the fictional extra territoriality of diplomatic and consular premises and of ships and aircraft) other recognised instances of the extra territorial exercise of jurisdiction by a state include cases involving the activities of its diplomatic or consular agents abroad and on board craft and vessels registered in, or flying the flag of, that state and in these specific situations, customary international law and treaty provisions have recognised the extra territorial exercise of jurisdiction by the relevant state (at [73]). In applying these principles to the facts the Court rejected the suggestion that anyone adversely affected by an act imputable to a contracting state, wherever in the world that act may have been committed or its consequences felt, was thereby brought within the jurisdiction of that state for the purpose of article 1 of the Convention. The applicants had accepted that jurisdiction, and any consequent state Convention responsibility, would be limited in the circumstances to the commission and consequences of that particular act. But the Court was of the view that the wording of article 1 [did] not provide any support for the applicants suggestion that the positive obligation in article 1 to secure the rights and freedoms defined in Section I of this Convention can be divided and tailored in accordance with the particular circumstances of the extra territorial act in question (at [75]). In answer to the argument that failure to recognise the claim of the applicants would leave a vacuum in the Convention system, the Court said (at [80]): The Courts obligation, in this respect, is to have regard to the special character of the Convention as a constitutional instrument of European public order for the protection of individual human beings and its role, as set out in article 19 of the Convention, is to ensure the observance of the engagements undertaken by the Contracting Parties It is therefore difficult to contend that a failure to accept the extra territorial jurisdiction of the respondent States would fall foul of the Conventions ordre public objective, which itself underlines the essentially regional vocation of the Convention system In short, the Convention is a multi lateral treaty operating, subject to article 56 of the Convention, in an essentially regional context and notably in the legal space (espace juridique) of the Contracting States. The Convention was not designed to be applied throughout the world, even in respect of the conduct of Contracting States. Accordingly, the desirability of avoiding a gap or vacuum in human rights protection has so far been relied on by the Court in favour of establishing jurisdiction only when the territory in question was one that, but for the specific circumstances, would normally be covered by the Convention.[Emphasis in original text]. The Court said (at [80]) that Cyprus v Turkey (2001) 35 EHRR 731 related to an entirely different situation: the inhabitants of northern Cyprus would have found themselves excluded from the benefits of the Convention safeguards and system which they had previously enjoyed, by Turkeys effective control of the territory and by the accompanying inability of the Cypriot Government, as a contracting state, to fulfil the obligations it had undertaken under the Convention. The Court did not deal expressly with the applicability of the exception it had identified by reference to Drozd, namely that the responsibility of contracting states could in principle be engaged because of acts of their authorities which produced effects or were performed outside their own territory. But it did deal with the applicants reliance on the admissibility decisions in Issa v Turkey and calan v Turkey. In each of those cases the Court had held admissible complaints relating to Turkeys conduct in non contracting states, Iraq in the former case and Kenya in the latter case. All that the Court said about those cases was this (at [81]): It is true that the Court has declared both of these cases admissible and that they include certain complaints about alleged actions by Turkish agents outside Turkish territory. However, in neither of those cases was the issue of jurisdiction raised by the respondent Government or addressed in the admissibility decisions and in any event the merits of those cases remain to be decided. The conclusion of the Court (at [82]) was that there was no jurisdictional link between the persons who were victims of the act complained of and the respondent states. The subsequent decisions The exceptional nature of any liability for extra territorial acts or omissions articulated in Bankovi has been repeatedly quoted or re stated by the Court: calan v Turkey (2003) 37 EHRR 238, at [93]; Assanidze v Georgia (2004) 39 EHRR 653, at [137]; Ilacu v Moldova and Russia (2005) 40 EHRR 1030, at [314]; Issa v Turkey (2004) 41 EHRR 567, at [68]; Al Saadoon and Mufdhi v United Kingdom (admissibility) (2009) 49 EHRR SE 95, at [85]; Stephens v Malta (No 1)(2009) 50 EHRR 144, at [49]; Medvedyev v France, Grand Chamber, 29 March 2010, at [64]. In particular the concept of jurisdiction based on effective control has been applied in Assanidze v Georgia and Ilacu v Moldova and Russia, ante. The decisions subsequent to Bankovi in Strasbourg up to the time of Al Skeini were fully discussed by the Divisional Court, the Court of Appeal, and the House of Lords, and it is not necessary to go over the same ground. It is useful only to consider the relevance of the decisions in calan v Turkey (2003) 37 EHRR 238; (2005) 41 EHRR 985 (Grand Chamber) and Issa v Turkey (2004) 41 EHRR 567, and of the decisions subsequent to Al Skeini in Markovic v Italy (2006) 44 EHRR 1045 (Grand Chamber); Al Saadoon and Mufdhi v United Kingdom (admissibility) (2009) 49 EHRR SE 95; and Medvedyev v France, Grand Chamber, 29 March 2010. Authority and control and State agents The decisions in calan v Turkey (2003) 37 EHRR 238; (2005) 41 EHRR 985 (Grand Chamber) and Issa v Turkey (2004) 41 EHRR 567, both of which were extensively discussed in Al Skeini, are relevant on this appeal because of what is said to be their support for the argument that armed forces abroad are subject to the jurisdiction of the sending state because they are under the authority and control of the sending state. calan v Turkey In calan v Turkey (2003) 37 EHRR 238; (2005) 41 EHRR 985 (Grand Chamber) the applicant was arrested by members of the Turkish security forces inside a Turkish aircraft in the international zone of Nairobi airport. His complaint related both to his treatment in Nairobi and subsequently in Turkey. As regards his treatment in Kenya, he complained under articles 3 and 5 about handcuffing and blindfolding, alleged sedation and unlawful arrest. There was also a complaint that the abduction overseas on account of his political opinions constituted inhuman or degrading treatment within the meaning of article 3. It was held that the complaints about the arrest in Kenya fell within article 1. In the first decision the Court said (at [93]): the applicant was arrested by members of the Turkish security forces inside an aircraft in the international zone of Nairobi Airport. Directly after he had been handed over by the Kenyan officials to the Turkish officials the applicant was under effective Turkish authority and was therefore brought within the jurisdiction of that State for the purposes of Article 1 of the Convention, even though in this instance Turkey exercised its authority outside its territory. The Court considers that the circumstances of the present case are distinguishable from those in the aforementioned Bankovi case, notably in that the applicant was physically forced to return to Turkey by Turkish officials and was subject to their authority and control following his arrest and return to Turkey The Grand Chamber said (at [91]): The Court notes that the applicant was arrested by members of the Turkish security forces inside an aircraft registered in Turkey in the international zone of Nairobi Airport. It is common ground that, directly after being handed over to the Turkish officials by the Kenyan officials, the applicant was under effective Turkish authority and therefore within the jurisdiction of that State for the purposes of Article 1 of the Convention, even though in this instance Turkey exercised its authority outside its territory. It is true that the applicant was physically forced to return to Turkey by Turkish officials and was under their authority and control following his arrest and return to Turkey (see, in this respect, the aforementioned decisions in the cases of Illich Ramirez Snchez v France and Freda v Italy; and, by converse implication, the Bankovi v Belgium . There are four features about this decision which should be noted. First, the Turkish Government conceded that the case fell within article 1. Second, it involved, at least in part, acts committed on a Turkish aircraft. Third, the Turkish activities were authorised by Kenya. Fourth (as Lord Brown pointed out in Al Skeini at [118] [119]), it involved the forcible removal by state A from state B with state Bs consent of a person wanted for trial in state A. Cf Illich Ramirez Snchez v France (Application No 28780/95) (1996) 86 A DR 155 (Commission); see also Lpez Burgos v Uruguay (1981) 68 ILR 29 and Celiberti de Casariego v Uruguay (1981) 68 ILR 41(UN Human Rights Committee). In Stephens v Malta (No 1) (2009) 50 EHRR 144, at [52], [54], in a section dealing with jurisdiction under article 1, it was held that the arrest of a British citizen in Spain pursuant to an unlawful request for extradition by Malta was attributable to, and engaged the responsibility of, Malta, but the Court did not explain why the applicant was within the jurisdiction of Malta. It is entirely consistent with common sense for the Convention to apply (even to that part of the operation which occurs abroad) when agents of a state go abroad and forcibly remove one of its citizens for trial at home. The decision is not authority for a generalised basis of jurisdiction based on authority and control by state agents. Issa v Turkey Issa v Turkey (2004) 41 EHRR 567 has been subject to close analysis and criticism at all levels in Al Skeini. It arose out of an incursion by Turkish troops into Northern Iraq in 1995 to pursue and eliminate Turkish terrorists who were seeking shelter in Iraq. The applicants were Iraqi villagers who alleged that in contravention of their Convention rights and those of their relatives, Turkish troops had (among other things) detained, tortured, and killed villagers and caused distress to others. The Court decided that the applicants relatives did not come within the jurisdiction of Turkey within the meaning of article 1. Citing Loizidou v Turkey (Merits) (1996) 23 EHRR 513, at [52], the Court re stated (but for the first time in relation to territory outside the Convention states) that the responsibility of a state could be engaged where as a consequence of military action, whether lawful or unlawful, the state in practice exercised effective control of an area situated outside its national territory: [68] [69]. That deals with jurisdiction based on control of territory, and not jurisdiction based on authority and control of the victim by state agents outside the territory of the state. In a much discussed passage, the Court said (at [71]) Moreover, a State may also be held accountable for violation of the Convention rights and freedoms of persons who are in the territory of another State but who are found to be under the former States authority and control through its agents operating whether lawfully or unlawfully in the latter State Accountability in such situations stems from the fact that Article 1 of the Convention cannot be interpreted so as to allow a State party to perpetrate violations of the Convention on the territory of another State, which it could not perpetrate on its own territory (ibid). Consequently, jurisdiction could have been based on either effective control of the area or (although the formulation is by no means clear) on the activities of state agents against local inhabitants. But the applicants were not within the jurisdiction of Turkey because Turkey did not exercise effective control over the relevant area, and also because it had not been proved that Turkish forces had conducted operations in the area in question: [75], [81]. It is implicit in the reasoning in this decision that there would have been jurisdiction if the Turkish troops had been guilty of atrocities even without overall control of the area. If that is so, it is inconsistent with Bankovi. It is impossible to see how an attack on villagers in a cross border incursion into a non contracting state could make the villagers within the jurisdiction of Turkey, when a bombing raid on Belgrade did not make the victims within the jurisdiction of the NATO States involved. The notion of authority and control through State agents operating abroad derives from the report of the Inter American Commission of Human Rights in Coard v United States (Report No 109/99, 29 September 1999) (1999) 9 BHRC 150, which was cited by the Strasbourg court in Issa v Turkey at [71] in support of that notion. The Commission was examining complaints about the applicants detention and treatment by United States forces in the military operation in Grenada. The American Declaration on the Rights and Duties of Man 1948 contains no express provision on its territorial limits. The Commission said: While the extraterritorial application of the Declaration has not been placed at issue by the parties Given that individual rights inhere simply by virtue of a persons humanity, each American state is obliged to uphold the protected rights of any person subject to its jurisdiction. While this most commonly refers to persons within a states territory, it may, under given circumstances, refer to conduct with an extraterritorial locus where the person concerned is present in the territory of one state, but subject to the control of another state usually through the acts of the latters agents abroad. In principle, the inquiry turns not on the presumed victims nationality or presence within a particular geographic area, but on whether, under the specific circumstances, the state observed the rights of a person subject to its authority and control. The Coard report was referred to in Bankovi at [23] and [78], but the Grand Chamber (at [78]) specifically indicated that it derived no assistance from it because the American Declaration on the Rights and Duties of Man 1948 contained no explicit limitation of jurisdiction. Jurisdiction on the basis of authority and control (especially outside the Convention states) as a separate head was firmly rejected by the House of Lords in Al Skeini: see especially Lord Brown at [116] [127], and Lord Rodger at [73] [77]; and see also Rix LJ speaking for the Administrative Court at [216], and Brooke LJ in the Court of Appeal at [103]. Not only is there no firm basis in authority for the notion of authority and control as a basis of jurisdiction under article 1, Issa is also inconsistent with the notion of the regional nature of the Convention. As Lord Rodger said in Al Skeini (at [78]): The essentially regional nature of the Convention is relevant to the way that the court operates. It has judges elected from all the contracting states, not from anywhere else. The judges purport to interpret and apply the various rights in the Convention in accordance with what they conceive to be developments in prevailing attitudes in the contracting states. This is obvious from the court's jurisprudence on such matters as the death penalty, sex discrimination, homosexuality and transsexuals. The result is a body of law which may reflect the values of the contracting states, but which most certainly does not reflect those in many other parts of the world. So the idea that the United Kingdom was obliged to secure observance of all the rights and freedoms as interpreted by the European Court in the utterly different society of southern Iraq is manifestly absurd. Hence, as noted in Bankovi, 11 BHRC 435, 453 454, para 80, the court had so far recognised jurisdiction based on effective control only in the case of territory which would normally be covered by the Convention. If it went further, the court would run the risk not only of colliding with the jurisdiction of other human rights bodies but of being accused of human rights imperialism. See also Mactavish J in the Federal Court of Canada: Amnesty International Canada v Canada (Chief of Defence Staff), 2008 FC 336, [2008] FCR 546, [235]. Medvedyev v France In Medvedyev v France, Grand Chamber, 29 March 2010, the applicants alleged that they had been arbitrarily deprived of their liberty contrary to article 5(1) following the boarding of the ship on which they were crewmen by French authorities and complained that they had not been brought promptly before a judge or other officer authorised by law to exercise judicial power. The ship was registered in Cambodia. Cambodia had given France authorisation to intercept the ship. The Court held unanimously (although it was divided on the merits of the claim) that because France exercised full and exclusive control over the ship and its crew, at least de facto, from the time of its interception, in a continuous and uninterrupted manner until they were tried in France, the applicants were effectively within Frances jurisdiction for the purposes of article 1: at [67]. This case bears some resemblance to calan v Turkey (2003) 37 EHRR 238, except that the aircraft in calan was registered in Turkey, the respondent state, whereas the ship in Medvedyev v France was registered in Cambodia, and the applicant in calan had the nationality of the respondent state, whereas the applicants in Medvedyev had a variety of non French nationalities, Ukrainian, Romanian, Greek and Chilean. The differences are not crucial, since although an aircraft is for some purposes regarded as part of the territory of the country of registration, while it is in an airport it is no sense exempt from the criminal and public law of the territorial state, and non nationals within the jurisdiction are equally entitled to the protection of Convention rights. Al Saadoon and Mufdhi v United Kingdom (admissibility) Nor is Al Saadoon and Mufdhi v United Kingdom (admissibility) (2009) 49 EHRR SE 95 authority for any concept of extra territoriality going beyond Bankovi as recognised in Al Skeini. The applicants complained that their transfer by British forces to the custody of the Iraqi High Tribunal exposed them to a real risk of the death penalty in breach of articles 2 and 3. The United Kingdoms argument on jurisdiction was that the transfer of the applicants into the custody of the Iraqi authorities took place in circumstances where the United Kingdom forces had the power to detain Iraqi nationals only at the request of the Iraqi courts; the United Kingdom forces were not to retain any power to detain Iraqi nationals after 31 December 2008 and, within hours of the actual transfer, the base would have ceased to be inviolable and the Iraqi authorities would have had the right to come physically to the base where the applicants were detained and remove them. Consequently, it was argued, the United Kingdom was not exercising any public powers through the effective control of any part of the territory or the inhabitants of Iraq, The Court recognised that, during the first months of the detention of the applicants, the United Kingdom was an occupying power in Iraq. The United Kingdom exercised control and authority over the individuals detained in the British run detention facilities initially solely as a result of the use of military force. Subsequently its de facto control over the premises was reflected by the CPA order which provided that all premises used by the multi national force should be inviolable and subject to the exclusive control and authority of the multi national force: [87]. Given the total and exclusive de facto and subsequently also de jure control exercised by United Kingdom authorities over the premises, the individuals detained there, including the applicants, were within the United Kingdoms jurisdiction: Hess v United Kingdom. That conclusion, the Court said (at [88]), was consistent with the decision of the House of Lords in Al Skeini and the position adopted by the United Kingdom in that case before the Court of Appeal and the House of Lords (where it had been conceded that the jurisdiction under article 1 extended to a military prison occupied and controlled by the United Kingdom). The Court referred to Rasul v Bush, 542 US 466 (2004) where the United States Supreme Court decided (6 3) that United States courts had jurisdiction to consider challenges to the legality of the detention of foreign nationals incarcerated in Guantanamo Bay, since by the express terms of the agreements with Cuba, the United States exercised complete jurisdiction and control over the Guantanamo Bay. See also Al Saadoon and Mufdhi v United Kingdom (Merits), 2 March 2010, with many references to the United Kingdoms jurisdiction over the applicants: [137], [140], [164], [165]. The decisions in Al Saadoon are consistent with, and do not take the matter any further than, Al Skeini. The concept of a jurisdictional link and Markovic v Italy The conclusion of the Court in Bankovi (at [82]) was that there was no jurisdictional link between the persons who were victims of the act complained of and the respondent states. There was no elucidation of that expression, and the only other decision of the Strasbourg court in the article 1 context which makes use of the notion of jurisdictional link is Markovic v Italy (2006) 44 EHRR 1045 (Grand Chamber), in which the Court said that once a person brings a civil action in the courts or tribunals of a state, there indisputably exists, without prejudice to the outcome of the proceedings, a jurisdictional link for the purposes of article 1 ([54]). Markovic v Italy is a decision which shows that the victim of a breach of the Convention need not necessarily be present in the contracting state. The applicants were nationals of Serbia and Montenegro, who had brought claims in the Italian courts for compensation for damage caused by an airstrike by NATO forces. The Italian Court of Cassation ruled that the Italian courts had no jurisdiction because the claim was a political one. The applicants claimed that this was a refusal to grant them access to a court in breach of article 6. The Court held that there was no breach of article 6 because the inability to sue the state was not the result of an immunity but of the principles governing the substantive right of action in domestic law. The Court held that the applicants were within the jurisdiction of Italy for the purposes of article 1. The Italian and British Governments argued that there was no jurisdiction for the purposes of article 1 because (for reasons which are hard to follow) the underlying claim related to NATO airstrikes outside the Convention countries. But, apart from that, they both accepted that a claimant from outside the contracting states who brings a claim in the courts of the contracting state is within its jurisdiction for article 1 purposes. The Italian Government accepted that the applicants had brought themselves within the ambit of the states jurisdiction by lodging a claim with the authorities: see [38]. The British Government seemed (somewhat artificially) to treat the bringing of the claim as a notional entry into the territory in order to bring proceedings: see [48]. As regards jurisdiction for the purposes of article 1, the Court three times used the expression jurisdictional link in these passages: 54. Even though the extraterritorial nature of the events alleged to have been at the origin of an action may have an effect on the applicability of Article 6 and the final outcome of the proceedings, it cannot under any circumstances affect the jurisdiction ratione loci and ratione personae of the State concerned. If civil proceedings are brought in the domestic courts, the State is required by Article 1 of the Convention to secure in those proceedings respect for the rights protected by Article 6. The Court considers that once a person brings a civil action in the courts or tribunals of a State, there indisputably exists, without prejudice to the outcome of the proceedings, a jurisdictional link for the purposes of Article 1. 55. The Court notes that the applicants in the instant case brought an action in the Italian civil courts. Consequently, it finds that a jurisdictional link existed between them and the Italian State. The expression jurisdictional link in the conclusion in Bankovi (at [82]) is plainly not intended to state or represent a separate and independent test of jurisdiction, and the same must be so of the passages in Markovic v Italy. Consequently, neither of those decisions suggests that there is a separate free standing head of jurisdiction based on a jurisdictional link, and (contrary to the respondents position on this appeal) there is nothing in the opinion of Lord Rodger in Al Skeini which supports such a suggestion. He said (at [64]) It is important therefore to recognise that, when considering the question of jurisdiction under the Convention, the focus has shifted to the victim or, more precisely, to the link between the victim and the contracting state [F]or the purposes of deciding whether the Convention applies outside the territory of the United Kingdom, the key question is whether the deceased were linked to the United Kingdom when they were killed. However reprehensible, however contrary to any common understanding of respect for human rights, the alleged conduct of the British forces might have been, it had no legal consequences under the Convention, unless there was that link and the deceased were within the jurisdiction of the United Kingdom at the time. For, only then would the United Kingdom have owed them any obligation in international law to secure their rights under article 2 of the Convention and only then would their relatives have had any rights under the 1998 Act. All that Lord Rodger was saying was that there must be a relevant link, not that a link, or any link, is a sufficient basis for the existence of jurisdiction under article 1. It should be added in relation to Markovic v Italy that it makes complete sense for the Convention to apply to parties to litigation in contracting states irrespective of where they are. It could not be seriously suggested, for example, that a Japanese defendant in English proceedings who is served out of the jurisdiction is not entitled to article 6 rights. In Lubbe v Cape plc [2000] 1 WLR 1545 the South African asbestosis victims suing in England submitted that to stay the proceedings in favour of the South African forum would violate their article 6 rights. A stay was refused on the non Convention ground that, because of the lack of funding and legal representation in South Africa, they would be denied a fair trial on terms of equality with the defendant. Lord Bingham said (at p 1561) that article 6 did not support any conclusion which was not already reached on application of the stay principles Spiliada Maritime Corpn v Cansulex Ltd [1987] AC 460. There was no suggestion, nor could there have been, that the claimants could not rely on article 6 because they were South Africans without any connection with the United Kingdom. In Bankovi the Court said [75] that the obligation in article 1 could not be divided and tailored in accordance with the particular circumstances of the extra territorial act in question, and the Court has said that in territory which is subject to the effective control of a contracting state the obligation of the State is to secure the entire range of substantive Convention rights Bankovi at [70], citing Cyprus v Turkey (2001) 35 EHRR 731 at [77]. But cases such as Markovic v Italy suggest that some qualification is necessary to the principle of indivisibility of Convention rights, and that there may be cases in which a person may be within the jurisdiction of a contracting state for limited purposes only. Another possible example is suggested by Carson v United Kingdom, Grand Chamber, 16 March 2010 (in which there was no issue under article 1). The applicants were persons who had worked in the United Kingdom and paid national insurance contributions and then emigrated to South Africa, Canada or Australia. State pensions to persons abroad were not up rated to take account of inflation with the result that they received less (far less in some cases). They failed in their claim under article 14 of the Convention and article 1 of the First Protocol, but rightly it was never suggested that because they were permanently abroad they were not within the jurisdiction of the United Kingdom for article 1 purposes in relation to interference with property situate in the United Kingdom (as the pension rights were). Consequently there may be cases in which persons abroad may not be entitled to the whole package of Convention rights. Conclusions Bankovi made it clear that article 1 was not to be interpreted as a living instrument in accordance with changing conditions: [64] [65]. It is hardly conceivable that in 1950 the framers of the Convention would have intended the Convention to apply to the armed forces of Council of Europe states engaged in operations in the Middle East or elsewhere outside the contracting states. Even the limited exceptions to territoriality recognised by the Strasbourg court were plainly not contemplated in the drafting process. The original draft prepared by the Committee of the Consultative Assembly of the Council of Europe on legal and administrative questions referred to all persons residing within their territories. Following a suggestion that residing within be replaced by living in, the Expert Intergovernmental Committee decided instead on persons within their jurisdiction. The reason was that the term residing might be considered too restrictive, and there were good grounds for extending the benefits of the Convention to all persons in the territories of the signatory states, even those who could not be considered as residing there in the legal sense of the word: Collected Edition of the Travaux Prparatoires of the European Convention on Human Rights, vol III, p 260. Apart from a comment by M Rolin, the eminent Belgian representative to the Consultative Assembly, that the protections would extend to all individuals of whatever nationality, who on the territory of any one of the states, might have had reason to complain that their rights were violated, article 1 did not give rise to any further discussion on this aspect and that text was adopted by the Consultative Assembly on 25 August 1950 without further amendment: Collected Edition, vol VI, pp 132, 148. See Bankovi at [19] [21] and also Lawson, Life After Bankovic: On the Extraterritorial Application of the European Convention on Human Rights, in Extraterritorial Application of Human Rights Treaties, ed Coomans and Kamminga, 2004, 83, at 89 90. There is nothing in the drafting history to give the slightest credence to the proposition that the Convention was to apply to the relations of the state with its armed forces abroad. It is noteworthy that, writing in the same year, Professor Hersch Lauterpacht (as he then was) produced a draft of the International Bill of the Rights of Man which provided (article 18): The obligations of this Bill of Rights shall be binding upon States in relation both to their metropolitan territory and to any other territory under their control and jurisdiction. See Lauterpacht, International Law and Human Rights, 1950, p 317. Bankovi (as applied in Al Skeini) confirms that article 1 reflects the territorial notion of jurisdiction, and that other bases of jurisdiction are exceptional and require special justification. In practice the exceptions recognised by the Court have either consisted of (1) territorial jurisdiction by a state over the territory of another contracting state; (2) extensions of territorial jurisdiction by analogy; and (3) commonsense extensions of the notion of jurisdiction to fit cases which plainly should be within the scope of the Convention. The Northern Cyprus cases such as Loizidou v Turkey (Merits) and Cyprus v Turkey, and also Ilacu v Moldova and Russia and Assanidze v Georgia are all illustrations of the extension or application of territoriality to cases of effective control (or lack of control) by contracting states of Council of Europe territory. The extension of the Convention to military bases and hospitals (ultimately based on concession by the Secretary of State) in Al Skeini and Al Saadoon and Mufdhi v United Kingdom (admissibility) is consistent with the treatment in dicta of the Commission and the Court of fixed premises abroad as territorial extensions of the state. If the judges in Drozd v France and Spain had been acting as French or Spanish judges commonsense would have recognised them as extensions of the state judiciary acting abroad. So also in cases such as calan v Turkey and Medvedyev v France, where a states officials detain a person abroad for trial in its territory, it would be odd if there could be no complaint under the Convention in respect of the acts which took place outside the territory. Similarly, the application of article 6 rights to foreign claimants in Markovic v Italy makes complete sense: it would be a travesty of the Convention to deny them the right to access to a court because they were outside the Convention states. This case comes within none of the exceptions recognised by the Strasbourg court, and there is no basis in its case law, or in principle, for the proposition that the jurisdiction which states undoubtedly have over their armed forces abroad both in national law and international law means that they are within their jurisdiction for the purposes of article 1. For the reasons given in the preceding sections of this judgment, jurisdiction cannot be established simply on the basis that the United Kingdoms armed forces abroad are under the authority and control of the United Kingdom, or that there is a jurisdictional link between the United Kingdom and those armed forces. To the extent that Issa v Turkey states a principle of jurisdiction based solely on authority and control by state agents over individuals abroad, it is inconsistent with Bankovi, and with Al Skeini, where it was comprehensively criticised by the House of Lords. Nor is there anything in Markovic v Italy or in Lord Rodgers opinion in Al Skeini to support a jurisdictional link as a free standing basis for jurisdiction under article 1. Nor are there policy grounds for extending the scope of the Convention to armed forces abroad. On the contrary, to extend the Convention in this way would ultimately involve the courts in issues relating to the conduct of armed hostilities which are essentially non justiciable. I would therefore allow the appeal on the first issue. On the second issue, I agree with the judgment of Lord Phillips and would dismiss the appeal. LORD KERR Article 1 of the European Convention on Human Rights and Fundamental Freedoms provides that the High Contracting Parties shall secure to everyone within their jurisdiction the rights and freedoms defined in Section I of this Convention. The first issue in this appeal is concerned with the question of what is meant by the phrase, within their jurisdiction. I have read the judgment of Lord Mance and am in complete agreement with what he has said on the first issue. For the reasons that he has given, I too would dismiss the appeal on the first ground. The first issue It has been accepted in a series of decisions, both domestic and European, that the primary and essential basis for jurisdiction under article 1 is territorial. It has also been accepted that this important principle is subject to exceptions. A central issue on the first ground of appeal is whether the admissible exceptions are confined to those specific examples that have been expressly recognised by the decisions in this field, particularly those reached in Strasbourg, or whether further exceptions may be recognised by the application of principles already established by the European Court of Human Rights. In R (Gentle) v Prime Minister [2008] UKHL 20; [2008] AC 1356, Lord Bingham clearly contemplated that any exceptions to or extensions of the principle of territoriality should be specific and limited see para 8(3) of his opinion. That case of course involved a claim that the lawfulness of the war in Iraq should be investigated in order to test whether the United Kingdom had fulfilled what were said to be its article 2 obligations to soldiers who were exposed to the risk of death in that war. It was not concerned with the question that arises here whether a soldier who is within the control of the state, in the form of the army authorities, remains within the jurisdiction of the state for the purposes of article 1 of the Convention when he is outside the states national territory. As Lord Mance has pointed out, Lord Bingham outlined three reasons that article 2 had never been held to apply to the process of deciding on the lawfulness of a resort to arms. The first was that the lawfulness of military action has no immediate bearing on the risk of fatalities. The second was that the draftsmen of the European Convention had not envisaged that it could provide a suitable framework or machinery for resolving questions about the resort to war. The final reason related to the territoriality issue. On this point, Lord Bingham said: Subject to limited exceptions and specific extensions, the application of the Convention is territorial: the rights and freedoms are ordinarily to be secured to those within the borders of the state and not outside. Here, the deaths of Fusilier Gentle and Trooper Clarke occurred in Iraq and although they were subject to the authority of the defendants they were clearly not within the jurisdiction of the UK as that expression in the Convention has been interpreted: R (Al Skeini) v Secretary of State for Defence [2008] AC 153, paras 79, 129. The Al Skeini case involved the deaths of six Iraqi civilians at the hands of British troops. Five of the deceased were shot in the course of security operations; the sixth, Mr Mousa, died following gross ill treatment while in custody in a UK military detention facility. The appellants, who were relatives of the deceased, asked the Secretary of State to hold a public inquiry into their relatives' deaths. The Secretary of State indicated that he would not hold such an inquiry. The appellants sought judicial review of that decision. In order to promote that application the appellants had to establish (among other things) that their complaint fell within the scope of ECHR and that a Convention right had been violated. The violation alleged by the appellants consisted primarily of a failure to investigate, as required by article 2, a violent death alleged to have been caused by agents of the state. The House of Lords held that the Convention operated in an essentially regional context, most notably in the legal space of the contracting states (ie within the area of the Council of Europe countries). The jurisdiction under article 1 was primarily territorial. The House of Lords recognised, however, that exceptions to that principle existed. These included circumstances where the state had effective control of a foreign territory and its inhabitants through military occupation or by the consent, invitation or acquiescence of the government of that territory and it exercised all or some of the public powers that would normally have been exercised by the local government. This was the context in which the observations in paras 79 and 129 of Al Skeini (on which Lord Bingham relied in Gentle) were made. The statements of Lord Rodger in para 79 of Al Skeini were based largely on his consideration of the decision of the European Court of Human Rights in Bankovic v Belgium (2001) 11 BHRC 435. That case has been extensively discussed in the judgment of Lord Phillips and it is therefore unnecessary for me to rehearse its details. It should be noted, however, that in para 80 the court observed that Strasbourg had so far recognised jurisdiction based on effective control only in the case of territory which would normally be covered by the Convention. From this one can safely assume that it was not contemplated that the exceptions would be confined solely to this situation and, indeed, further extensions to the exceptional category have been recognised in later decisions of ECtHR. The observation in para 80 of Bankovic provided the backdrop for what Lord Rodger said at para 79 of Al Skeini: The essentially regional nature of the Convention has a bearing on another aspect of the decision in Bankovic v Belgium (2001) 11 BHRC 435. In the circumstances of that case the respondent states were plainly in no position to secure to everyone in the RTS station or even in Belgrade all the rights and freedoms defined in Section I of the Convention. So the applicants had to argue that it was enough that the respondents were in a position to secure the victims rights under articles 2, 10 and 13 of the Convention. In effect, the applicants were arguing that it was not an answer to say that, because a state was unable to guarantee everything, it was required to guarantee nothingto adopt the words of Sedley LJ, [2007] QB 140, 300, para 197. The European Court quite specifically rejected that line of argument. The court held, (2001) 11 BHRC 435, 452, para 75, that the obligation in article 1 could not be divided and tailored in accordance with the particular circumstances of the extra territorial act in question. In other words, the whole package of rights applies and must be secured where a contracting state has jurisdiction. This merely reflects the normal understanding that a contracting state cannot pick and choose among the rights in the Convention: it must secure them all to everyone within its jurisdiction. If that is so, then it suggests that the obligation under art 1 can arise only where the contracting state has such effective control of the territory of another state that it could secure to everyone in the territory all the rights and freedoms in Section I of the Convention. It is important, I believe, to note that these comments were made in the context of jurisdiction based on territorial control. This is clear from para 75 of Bankovic, on which they are founded. But the present case is not one of territorial control. It is, rather, a case of control of personnel. Soldiers serving in Iraq were under the complete control of the United Kingdom authorities. They were subject to UK law. They were not amenable to the law of Iraq. The only legal system to which they were answerable or to which they might have recourse was that of the United Kingdom. In these circumstances, one may ask, if they were not within the jurisdiction of the UK, in whose jurisdiction were they? The answer that the appellant impliedly gives to this question is that the soldiers were within the jurisdiction of the UK for all purposes except for those of article 1 of the Convention but that response merely prompts the further question, why and, for reasons that I shall touch on below, to that second query I can find no satisfactory reply. Para 129 of Al Skeini (the other passage on which Lord Bingham relied in Gentle) is equally concerned with the question of territorial control. There Lord Brown said: except where a state really does have effective control of territory, it cannot hope to secure Convention rights within that territory and, unless it is within the area of the Council of Europe, it is unlikely in any event to find certain of the Convention rights it is bound to secure reconcilable with the customs of the resident population. Indeed it goes further than that. During the period in question here it is common ground that the UK was an occupying power in southern Iraq and bound as such by Geneva IV and by the Hague Regulations. Article 43 of the Hague Regulations provides that the occupant shall take all the measures in his power to restore and ensure, as far as possible, public order and safety, while respecting, unless absolutely prevented, the laws in force in the country. The appellants argue that occupation within the meaning of the Hague Regulations necessarily involves the occupant having effective control of the area and so being responsible for securing there all Convention rights and freedoms. So far as this being the case, however, the occupants' obligation is to respect the laws in force, not to introduce laws and the means to enforce them (for example, courts and a justice system) such as to satisfy the requirements of the Convention. Often (for example where Sharia law is in force) Convention rights would clearly be incompatible with the laws of the territory occupied. It is immediately evident that Lord Brown was discussing the nature and degree of control that was required before the territorial control exception could arise. The principal message as it seems to me to emerge from this passage is that the extent of the occupants actual control over the territory in question was very far from complete and therefore entirely incompatible with a capacity to enforce compliance with the Convention. On that account, the extra territorial exception could not be held to apply. When one approaches the matter from the perspective of power over military personnel, however, the level of control of the UK occupying forces is of an altogether different order from that which they could exert over the territory. The control that the UK had over Private Smith was as complete as it is possible in todays world to be. Moreover, for the reasons given by Lord Mance in paras 185 188 of his judgment, no other agency or state was entitled to or could exercise any authority over him. In plain terms, he did not come within any legal order or jurisdiction other than that of the United Kingdom. I therefore respectfully agree with Lord Mance that Lord Binghams statement in Gentle that the soldiers, although subject to the authority of the United Kingdom government, were clearly not within the jurisdiction of the UK must be treated with some reservation. Neither Lord Rodger nor Lord Brown (in the paragraphs of their opinions in Al Skeini that Lord Bingham relied on) had addressed the question whether serving soldiers came within the states jurisdiction for the purposes of article 1 of the Convention. Although a number of other members of the House of Lords in Gentle agreed in general terms with Lord Bingham, like Lord Mance, I doubt that his statement that the soldiers were not within the jurisdiction of the UK forms part of the ratio decidendi of that case. Even if it does, in light of the much fuller argument that this court has received on the topic than was presented to the House of Lords in Gentle, it is right that the matter should be considered again. Lord Brown discussed in Al Skeini the exceptions that had been already identified to the strict territorial basis for jurisdiction and Lord Mance has analysed these in paras 172 to 179 of his judgment. I agree with his analysis and with his conclusion that underpinning each of the exceptions is the exercise by a state in a country other than its national territory of power over individuals by the consent, invitation or acquiescence of the foreign state. The exclusion of extra territorial jurisdiction of one state in the territory of another rests primarily on the sovereign territorial rights of the latter state. As the court in Bankovic said, a States competence to exercise jurisdiction over its own nationals abroad is subordinate to that States and other States territorial competence para 60. Where, however, a state yields authority to a foreign state to exercise power in its sovereign territory, this principle does not apply. Likewise, if the sovereignty of the original state is ousted by an occupying force, the occupiers jurisdiction replaces that of the original state. In the present case both these situations so far as they involved UK military personnel tend to blend into each other. The UK was certainly permitted to exercise power over its soldiers, although this could not be said to be a permission granted by the state having original sovereignty over Iraq since that states sovereignty had been ousted by the invading forces. In so far as the UKs authority to exercise power over its own forces depended on the grant of permission, however, that was certainly constituted by CPA Order No 17 and Security Council Resolution No 1483. For the reasons given by Lord Mance in paras 184 to 186 of his judgment, I also consider that the UK exercised exclusive jurisdiction over its forces by reason of its being an occupying power. The situation can be described simply in the following way: the United Kingdom brought its soldiers into Iraq; it not only asserted complete authority over them while they remained there, it explicitly excluded the exercise of authority over those soldiers by any other agency or state; and it has always been clear that soldiers remain subject to the laws of the UK during their service abroad. In those circumstances it would be, to my mind, wholly anomalous to say that soldiers did not remain within the jurisdiction of the UK while serving in Iraq especially since it has been accepted in Al Skeini and not disputed by the appellant in the present case that all persons while on premises under the control of the army are within the UKs jurisdiction for the purposes of article 1 of the Convention. In Bankovic there were no fewer than 17 respondent states: Belgium, the Czech Republic, Denmark, France, Germany, Greece, Hungary, Iceland, Italy, Luxembourg, the Netherlands, Norway, Poland, Portugal, Spain, Turkey and the United Kingdom. It is interesting and significant that all seventeen subscribed to an argument described in this way in para 36 of the courts judgment: As to the precise meaning of 'jurisdiction', [the respondent governments] suggest that it should be interpreted in accordance with the ordinary and well established meaning of that term in public international law. The exercise of 'jurisdiction' therefore involves the assertion or exercise of legal authority, actual or purported, over persons owing some form of allegiance to that state or who have been brought within that state's control. They also suggest that the term 'jurisdiction' generally entails some form of structured relationship normally existing over a period of time. Of course, most soldiers serving on behalf of a member state in a foreign country would come clearly within the first of these formulations since they are subject to the legal authority of the government of their native country and they owe allegiance to that state. The court in Bankovic did not comment adversely on the argument that a states exercise abroad of legal authority over persons owing allegiance to that state would satisfy the requirements of article 1. Indeed, the courts treatment of the arguments of the parties is not at all inconsistent with that submission. It is to be noted that the final conclusions expressed by the court in paras 67 to 71 are preceded by the cross heading Extra territorial acts recognised as constituting an exercise of jurisdiction (emphasis added). By making its soldiers subject to its sole authority while abroad a state is not engaging in an extra territorial act so much as creating a state of affairs. There may not be much in this point but it is, I think, worth remarking that the focus of the court in Bankovic was whether the actions of the respondent governments might be a sufficient foundation for concluding that the applicants came within their jurisdiction whereas here the essential issue is whether soldiers who are subject to the exclusive legal control of the UK authorities remain within its jurisdiction. There is nothing in Bankovic which speaks directly to the question whether a member state that takes its soldiers abroad, asserts that it has sole authority over them and expressly excludes all other possible forms of control over them can nevertheless claim that those soldiers are not within its jurisdiction for the purposes of article 1 of the Convention. To suggest, as the Secretary of State must, that soldiers are within the jurisdiction of the United Kingdom for every conceivable legal purpose other than article 1 seems to me to involve the acceptance of one anomaly too many. In this appeal the Secretary of State has argued that, because it is impossible to secure the whole package of Convention rights for soldiers serving abroad, it should be concluded that they cannot be within the UKs jurisdiction for article 1 purposes. Expressed in this unvarnished way, the argument appears circular or, at least, intensely pragmatic. But a similar argument found favour with ECtHR in Bankovic and with the House of Lords in Al Skeini. One must consider, therefore, whether this is a universally required prerequisite in order to bring an applicant within the jurisdiction. As Lord Phillips has pointed out (in para 43 of his judgment), the European Court in Drozd and Janousek v France and Spain (1992) 14 EHRR 745 accepted that if the applicants had appeared before a French judge sitting in that capacity in Andorra they would have been within the jurisdiction of France for the purposes of article 1 in relation to their article 6 rights. They would not have been entitled to claim against France the benefit of protection of the other Convention rights, however. It is implicit in that judgment that there are certain settings in which the whole package principle does not apply. In other words, there is not an invariable pre condition that one must be able to have access to the entire panoply of Convention rights in order to be able to claim that one is within the jurisdiction of the member state for the purposes of article 1. Likewise in Carson v United Kingdom (Application No 42184/05) (unreported) 16 March 2010, the decision of the Grand Chamber on the admissibility of claims against the United Kingdom by persons who were resident abroad must have proceeded on the basis that they were within the jurisdiction for the purposes of pursuing a claim of violation of article 14 of the Convention in combination with article 1 of the First Protocol. There was no question of the applicants being entitled to the benefit of other Convention rights. It follows that the whole package of rights principle is not an indispensable requirement in every case. It is not necessary in every instance that it be shown that an applicant, in order to be entitled to claim that he is within the jurisdiction for article 1 purposes, must also show that he is entitled to the benefit of all the Convention rights. It appears to me that this principle is primarily relevant in the territorial control context. One can understand that an applicant who claims that he is entitled to be regarded as within the jurisdiction of a member state on the basis that he was, at the material time, within the territory controlled by that state should be able to demonstrate that the state was in a position to deliver all the protections secured by the Convention. In that instance the capacity of the state (or its lack of capacity) to deliver that breadth of protection can be seen as a measure of the extent of its control of the territory. Having examined the cases of Drozd; X and Y v Switzerland (1977) 9 DR 57; Gentilhomme, Schaff Benhadji and Zerouki v France (Application Nos 48205/99, 48207/99, 48209/99) (unreported) 14 May 2002, Lord Phillips suggests that they might be thought to support a general principle that there will be jurisdiction under article 1 whenever a state exercises legislative, judicial or executive authority which affects a Convention right of a person, whether or not he is within the territory of that state. He points out, however, that the Strasbourg court had not yet propounded such a principle. I agree that no principle in these precise terms has been articulated by the ECtHR but where the exercise of such authority is combined with control over the individual affected, it appears to me that the extra territorial extension of jurisdiction is undeniable. The essence of the decisions in Bankovic and Al Skeini is that an exception to the territorial basis for jurisdiction will be recognised where there is effective control of the relevant territory and its inhabitants by an occupying force. The rationale for the decision is surely the element of control. Where the occupying force supplants and replaces the power which had been wielded by the national authority, it provides, indeed imposes, its own jurisdiction. No particular magic attaches to the geographical dimension of this exercise of power it is the comprehensive nature of the power rather than the area where it is exerted that matters. Obviously, in those areas where the occupying force is unable to exert a measure of power that might be regarded as effective, its jurisdiction will not be established but that is a reflection of the restriction on the power rather than of geography. And so, where the control of an individual is of a sufficiently comprehensive nature as to qualify for the description, effective power, there is no reason in logic or principle that he should not be regarded as being within the jurisdiction of the state which wields that power over him. If a state can export its jurisdiction by taking control of an area abroad, why should it not equally be able to export the jurisdiction when it takes control of an individual? I agree with Lord Phillips that, despite some indications to the contrary, the case law of Strasbourg has not yet developed to the point of recognising a general principle that there will be jurisdiction under article 1 whenever a State exercises legislative, judicial or executive authority in a way that affects an individuals Convention right, whether that person is within the territory of that State or not. But where an individual is under the complete control of his native state while in foreign territory, I cannot see any reason that he should be regarded as being any less within its jurisdiction than individuals who happen to find themselves in a location in that territory which is under the effective control of the same state. And it appears to me that this position has already been recognised, albeit somewhat obliquely, by the ECtHR. In Issa v Turkey (2004) 41 EHRR 567 the court said at para 71: a State may also be held accountable for violation of the Convention rights and freedoms of persons who are in the territory of another State but who are found to be under the former States authority and control through its agents operating whether lawfully or unlawfully in the latter State. Lord Phillips suggests that this passage clearly advances state agent authority as an alternative to effective territorial control as a basis of article 1 jurisdiction. I agree. But, more significantly, it emphasises the importance of control (whether of territory or individuals) as the essential ingredient in extra territorial jurisdiction. That theme featured again in the recent decision of the Grand Chamber in Medvedyev v France (Application No 3394/03) judgment delivered on 29 March 2010. In that case a special forces team from a French warship boarded a merchant vessel which, it was suspected, was carrying drugs. After boarding the vessel, the French commando team kept the crew members of the merchant ship under their exclusive guard and confined them to their cabins during the rerouting of the ship to France. At para 67 the court said: the court considers that, as this was a case of France having exercised full and exclusive control (my emphasis) over the [merchant vessel] and its crew, at least de facto, from the time of its interception, in a continuous and uninterrupted manner until they were tried in France, the applicants were effectively within Frances jurisdiction for the purposes of article 1 of the Convention. The exercise of control was obviously pivotal to the finding that the merchant ships crew were within the jurisdiction of France. That control had no geographical dimension, at least not before the vessel was returned to France. But the very fact that the crew members were under the control of the French authorities, even before they arrived in France, was sufficient to bring them within French jurisdiction for the purposes of article 1 of the Convention. If taking control of the crew members on the high seas is sufficient to bring them within the jurisdiction of France, it appears to me that where a state asserts and exercises exclusive control over the members of its own armed forces while they are in foreign territory, this must be an a fortiori instance of the extra territorial reach of the Convention. The prospect of the state owing article 2 obligations to its soldiers serving overseas is not the daunting one that the appellant in this case has portrayed. For the reasons explained by Lord Rodger in his judgment, the article 2 investigation conducted by means of a coroners inquest is not concerned with matters of policy or broad political decisions. The primary function of a coroners inquest is, as Lord Phillips has put it, to find facts rather than review policy. Lord Brown expresses concern that, if it is held that soldiers operating outside the espace juridique are within the jurisdiction for the purposes of article 1, Strasbourg will scrutinise a contracting states planning, control and execution of military operations to decide whether the states own forces have been subjected to excessive risk. I am afraid that, with great respect, I must disagree. The cases which prompted Lord Browns apprehension were Ergi v Turkey (1998) 32 EHRR 388, Isayeva, Yusupova and Bazayeva v Russia (Application Nos 57947 49/00) [2005] ECHR 129 and Isayeva v Russia (Application No 57950/00) [2005] ECHR 128. In the first of these cases, the Turkish security forces had set up an ambush in the vicinity of the village where the applicants sister lived, purportedly to capture members of the PKK. The applicant alleged that his sister had been killed by a bullet fired by members of the security forces in the course of an indiscriminate, retaliatory attack on the village, apparently carried out because the inhabitants had in the past harboured members of the PKK. Although the court felt unable to conclude that the applicants sister had been killed by a bullet fired by a member of the security forces or that the firing on the village was carried out in retaliation, as alleged, it decided that, even on the governments account of having laid an ambush for the PKK and having been involved in a fire fight with them, a violation of article 2 had been established. This was because insufficient precautions had been taken to protect the lives of the civilian population. It was also held that the investigation into the death was insufficient to satisfy the procedural requirements of article 2. Judgment in the second and third cases referred to by Lord Brown was delivered on the same day, 24 February 2005. In the earlier of these two cases the applicants alleged that they had been the victims of indiscriminate bombing by Russian military planes of a civilian convoy near Grozny. The attack took place while the applicants were on what had been designated a humanitarian corridor. It was found that a large number of civilian vehicles were in the convoy when the attack took place. It was found that, even assuming that the military were pursuing a legitimate aim, the operation had not been planned and executed with sufficient care for the civilian population. In the final case the applicant claimed that she and her family were the victims of an air bombardment by Russian forces while trying to flee their village in Chechnya. It was established that heavy free falling, high explosive bombs and other non guided heavy combat weapons were used in the centre and on the edges of the applicants village. The avowed justification for this was that the civilian population was being held hostage by a large group of Chechen fighters. No attempt had been made to evacuate the village in advance and no steps had been taken to minimise the risk of injury to the civilian population. A breach of article 2 was found. The facts of these three cases are very far removed from the hypothetical example given by Lord Brown of courts embarking on scrutiny of planning, control and execution of military operations to decide whether a states own forces have been exposed to excessive risk. Lord Brown acknowledges that Strasbourgs concern in these cases was essentially for the safety of civilians caught up in conflict. That is a very different matter from the safety of combatants in the course of a war. As Lord Rodger has said, deaths and injuries of soldiers in a combat situation are inevitable. There is no reason, in my view, to anticipate that a similar level of scrutiny to that suitable to the death of a civilian will be required or appropriate where a soldier has been killed in the course of military operations. In this context, I should say that I agree entirely with Lord Rodgers observations in para 126 of his judgment. It will often be possible to suggest, after an event, measures that could have been taken that might have reduced the risk to a particular soldier but that type of retrospective analysis is surely inapposite (and will be recognised by courts as such) to address the question whether a states obligations to its soldiers under article 2 have been discharged. The duty to protect soldiers in a war setting is of an entirely different nature from the obligation to take proper steps to ensure that civilians are not exposed to unnecessary risks from military operations. I do not believe that the fear of tactical decisions taken in the field by military commanders being subject to painstaking dissection by the courts is justified or that it should deter this court from declaring that when our government commits our armed forces to wars in foreign territories, it cannot deny them the protection that the Convention affords. The second issue I have read and agree with the judgment of Lord Phillips in relation to the second issue. For the reasons that he has given, I would dismiss the appeal on this ground also.

Private Jason Smith, a member of the Territorial Army since 1992, was mobilised for service in Iraq in June 2003. After acclimatising for a short period in Kuwait he was sent to a base in Iraq, from where he was billeted in an old athletics stadium. By August the daytime temperature in the shade was exceeding 50 degrees centigrade. On 9 August he reported sick, complaining of the heat. Over the next few days he was employed in various duties off the base. On the evening of 13 August he collapsed at the stadium and died of heat stroke. An inquest found that Private Smiths death was caused by a serious failure to address the difficulty he had in adjusting to the climate. Private Smiths mother commenced proceedings to quash that verdict and for a new inquest to be held. She argued that the United Kingdom had owed her son a duty to respect his right to life which was protected by article 2 of the European Convention on Human Rights (ECHR) and that the inquest had to satisfy the procedural requirements of an investigation into an alleged breach of that right. The Secretary of State denied that a further inquest was required on the facts of the case. He also denied that a soldier on military service abroad was subject to the protection of the Human Rights Act 1998 when outside his base, while accepting that in this case Private Smith had died within the UKs jurisdiction on the base. The High Court held that Private Smith had been protected by the Human Rights Act 1998 at all times in Iraq and ordered a fresh inquest. Before the Court of Appeal the Secretary of State agreed he would not submit to the new coroner that the requirements of article 2 were inapplicable. Notwithstanding that concession, both the Court of Appeal and the Supreme Court considered that the appeal of the Secretary of State raised two issues of general importance and of practical concern: whether on the true interpretation of article 1 of the ECHR British troops operating on foreign soil fell within the jurisdiction of the United Kingdom (the jurisdiction issue); and whether the fresh inquest into the death of Private Smith must conform with the procedural requirements implied into article 2 (the inquest issue). The Court of Appeal answered both questions in the affirmative. The Supreme Court allowed the appeal on the jurisdiction issue (Lady Hale, Lord Mance and Lord Kerr dissenting) and unanimously dismissed the appeal on the inquest issue. It held that it was not necessary in every case of a death of a serviceman abroad to carry out an investigation which examined whether there was fault on the part of the state because (a) the Human Rights Act 1998 did not apply to armed forces on foreign soil and (b) in any event, there was no such automatic right. The type of investigation would depend on the circumstances of the case. The jurisdiction issue Lord Phillips stated that the European Court of Human Rights in Strasbourg had held that jurisdiction within the meaning of article 1 was essentially territorial but extended in exceptional circumstances requiring special justification to other bases of jurisdiction. The difficulty lay in defining those exceptions [para 11]. It was unlikely that the Contracting States, when they agreed the ECHR in 1951 in the aftermath of a global conflict in which millions of troops had been deployed, regarded it as desirable or practicable to extend the protection of article 2 to troop operations abroad [para 58]. It was a novel suggestion that a states armed forces by reason of their personal status fell within the jurisdiction of the state when on foreign soil and the proper tribunal to resolve the issue was the Strasbourg Court itself [para 60]. Lord Collins observed that in practice the exceptions recognised by the Strasbourg court had consisted of (i) territorial jurisdiction by a state over the territory of another contracting state; (ii) extensions of territorial jurisdiction by analogy and (iii) commonsense extensions of the notion of jurisdiction to fit cases which plainly should be within the scope of the ECHR [para 305]. This case came within none of them. Jurisdiction could not be established simply on the basis of the UKs authority and control over them, nor were there policy grounds for extending the scope of the ECHR to armed forces abroad, which would ultimately involve the courts in issues relating to the conduct of armed hostilities which were essentially non justiciable [para 308]. Lord Mance, dissenting, considered that as an occupying power in Iraq, the UK had under international law an almost absolute power over the safety of its forces. The relationship was not territorial but depended on a reciprocal bond of authority and control on the one hand and allegiance and obedience on the other [para 192]. In his view the Strasbourg court would hold that the armed forces of a state were within the meaning of article 1 and for the purposes of article 2 wherever they might be [para 199]. Lord Kerr agreed. If the state could export its jurisdiction by taking control of an area abroad it could equally do so when it took control of an individual. In his view this had already been recognised albeit obliquely by the Strasbourg court [para 331]. The inquest issue Lord Phillips stated that where there was reason to suspect a substantive breach by the state of the article 2 right to life, it was established that the state of its own motion should carry out an investigation into the death which had certain features: a sufficient element of public scrutiny, conducted by an independent tribunal, involving the relatives of the deceased and which was prompt and effective [para 64]. There was no automatic right to such an investigation whenever a member of the armed forces died on active service [para 84]. The UK had a staged system of investigation into deaths. Some form of internal investigation would always be held into military deaths in service [para 85] and a public inquest was required whenever a body was brought back to this country. This would satisfy many of the procedural requirements of article 2. If, in the course of the inquest, it became apparent that there might have been a breach by the state of its positive article 2 obligations, this should, insofar as possible, be investigated and the result reflected in the coroners verdict, so as to satisfy the procedural requirements of article 2 [para 86]. In Private Smiths case, the courts below were correct to hold that the coroner should have found a possibility that there had been a failure of the system to protect soldiers in extreme temperatures. It followed that the new inquest should comply with the procedural requirements of article 2 [paras 87 and 88]. Lord Rodger considered that the Secretary of State had correctly conceded that an article 2 investigation was needed on the facts of this case but this was not always the position. The protection of the armed forces could never be complete; deaths and injuries were inevitable. It was for this very reason that the armed forces deserved and enjoyed the admiration of the community [para 122]. It was contrary to the very essence of active military service to expect the authorities to ensure that troops would not be killed or injured by opposing forces [para 125]. Furthermore, many issues of concern to the relatives of soldiers killed on active service raised questions of policy not legality, and would fall outside the scope of any investigation by a coroner [para 127].

This appeal raises important issues concerning the principle of open justice: in particular, issues concerning the legal basis of the principle, the circumstances in which it can be departed from and the procedure which should be followed. The appeal is brought by the BBC in order to challenge an order made by the Court of Session in proceedings for judicial review of a decision of the Upper Tribunal. In its order, the court permitted the applicant for judicial review to amend his application by deleting his name and address and substituting letters of the alphabet, in the exercise (or, as the BBC argues, purported exercise) of a common law power. The court also gave directions under section 11 of the Contempt of Court Act 1981 (the 1981 Act) prohibiting the publication of his name or other identifying details and directing that no picture of him should be published or broadcast. The appeal raises the following questions: i) Whether the court possesses any power at common law to protect the anonymity of a party to proceedings before it, where the Convention rights set out in Schedule 1 to the Human Rights Act 1998 are engaged. It is argued on behalf of the BBC that any common law power which might previously have been exercised in such circumstances has been superseded by the Convention rights. ii) Whether the court acted compatibly with the BBCs rights under article 10 of the European Convention for the Protection of Human Rights and Fundamental Freedoms (ECHR), as given effect by the Human Rights Act, in making the order complained of, both in relation to the substance of its decision and in relation to the procedure which it followed. iii) Whether the order fell within the scope of section 12 of the Human Rights Act, with the consequence that the BBC should have been notified and given an opportunity to make representations before any order was made. The answers to these questions are of importance to courts, media organisations and individual litigants throughout the United Kingdom. The factual background The first respondent to this appeal, whom I shall refer to as A, is a foreign national who arrived in the UK as a visitor in 1991. Later that year he married a UK citizen, who also came from his country of origin and had a child from a previous relationship. He was then granted indefinite leave to remain in the UK. In 1996 he was convicted of sexual offences against his step child and was sentenced to 4 years imprisonment. In 1998 the second respondent, the Home Secretary, decided that he should be deported, and a notice of intention to make a deportation order was served. A and his wife were by then divorced. In 2000 he re married. He and his second wife have a number of children. Following service of the deportation notice, protracted proceedings began. The salient aspects can be summarised as follows. In 2001 As appeal against the Home Secretarys decision was dismissed. He then applied to the Home Secretary to be allowed to remain in the UK on the ground that his removal would violate his rights under articles 2, 3 and 8 of the ECHR. That application was refused, and a deportation order was served in June 2002. A then appealed against the refusal of his application to remain in the UK. Appeals to an immigration adjudicator and to the Immigration Appeal Tribunal were dismissed in 2003 and 2004 respectively. A further appeal to the Court of Session was however allowed, and it was agreed that the appeal should remitted to the Asylum and Immigration Tribunal for re hearing. Following that re hearing, the appeal was dismissed by the tribunal in 2007. As identity was withheld in the proceedings from 2001 onwards. In its 2007 decision, the tribunal noted that As claim under articles 2 and 3 of the ECHR was based on the argument that, in the event of his return to his country of origin, he would be at risk of death or ill treatment at the hands of persons enraged by his offences. The tribunal accepted that, if he faced such a risk as a known sexual offender, he was unlikely to receive effective protection from the police. The claim that such a risk existed was however largely based upon the premise that his return to his native country would receive publicity. The tribunal was not satisfied that it would. Although threats of violence had been made against him in his country of origin at the time of the criminal proceedings, when his identity had been disclosed in the media, they had not continued in more recent times. The claim based on article 8 was also rejected. For present purposes, it is relevant to note that the facts relied upon included an incident in January 2006 when A and his wife were attacked in their home in Scotland by a group of youths. Their children were then taken into care for a time because of police concerns that the house might be fire bombed. A and his wife were attacked again in June 2006 in a public park in the same town. After that incident A ceased to live with his wife and children. The incidents followed press publicity about As case, in which his name and the town in which he lived were mentioned. An appeal against the 2007 decision was allowed by the Court of Session in relation to article 8 only, and the appeal was again remitted to the tribunal for re hearing on that issue: A v Secretary of State for the Home Department [2008] CSIH 59. Following that re hearing, the appeal on the article 8 ground was dismissed by the tribunal in 2009. Leave to appeal against that decision was refused: CB v Secretary of State for the Home Department [2010] CSIH 89; 2011 SC 248. Later in 2010 A claimed asylum and submitted further representations. The claim and representations were treated by the Home Secretary as an application for the revocation of the deportation order made in 2002. That application was refused in 2011. A then appealed to the First tier Tribunal. It was agreed that the scope of the appeal was confined to articles 3 and 8 of the ECHR. In dealing with the appeal, the First tier Tribunal gave a direction to the parties under rule 45(4)(i) of the Asylum and Immigration Tribunal (Procedure) Rules 2005 (SI 2005/230) that no report of the proceedings should directly or indirectly identify the appellant or any member of his family. Although the words no report might, read in isolation, suggest that the direction operated against the media, it went on to state that it applied to the appellant and to the respondent, consistently with rule 45. The direction was given on the basis that, first, the appeal concerned personal information about the lives of children, whose welfare might be injured if such information were revealed and their names known; secondly, the appeal concerned highly personal evidence which should remain confidential; and thirdly, A or others could be put at risk of harm by publication of his name and details. As claim under article 3 was again based on evidence, including a report by an expert witness, to the effect that he would be at risk of violence if he returned to his country of origin. It was said that the risk would arise as a result of publicity. The claim under article 8 was based on his family life with his wife and children, with whom he had resumed regular contact, although he continued to live apart from them because of the risk of stigmatisation if they were known to be connected to him. The tribunal refused the appeal. In relation to article 3, the tribunal placed weight on the findings made in 2007, and added: The proceedings involving the appellant are now anonymised thus reducing the risk of his being identified. Permission to appeal to the Upper Tribunal was refused. An application to the Upper Tribunal for permission to appeal was also refused. A then applied to the Court of Session for judicial review of the decision of the Upper Tribunal to refuse his application for permission to appeal. The petition was lodged on 21 September 2012, when a first hearing (ie a full hearing of the application) was fixed for 14 December 2012. On 30 October 2012 the Secretary of State gave notice that she intended to remove A on 11 November 2012. A then applied for the suspension (ie stay) of the removal decision ad interim, pending the full hearing of his application for judicial review. The application for interim suspension came before Lord Boyd of Duncansby on 7 November 2012, together with an application to amend the petition by deleting As name and address and substituting initials. Media organisations had not been notified of the hearing, and were not represented at it. Lord Boyd allowed the petition to be amended. He also made an order under section 11 of the 1981 Act prohibiting the publication of the name of the petitioner, or any particulars or details calculated to lead to the identification of the petitioner, and directing that no picture shall be published or broadcast of the petitioner in connection with these proceedings. On 8 November 2012 Lord Boyd refused the application for interim suspension. In his opinion he explained that he had to decide whether A had established a prima facie case for setting aside the Upper Tribunals decision, applying the test laid down in R (Cart) v Upper Tribunal [2011] UKSC 28; [2012] 1 AC 663 and Eba v Advocate General for Scotland [2011] UKSC 29; 2012 SC (UKSC) 1; [2012] 1 AC 710, and, if so, whether the balance of convenience favoured the granting of interim suspension of the removal decision. He concluded that a prima facie case had not been established. One of the arguments which he considered was that the First tier Tribunal had failed to give adequate reasons for rejecting the article 3 claim, and had not properly considered the report of the expert witness. In response, it was argued that the author of the report had failed to recognise that, if the appellant were returned to his home country, that was likely to be following proceedings in which his identity was not disclosed. Lord Boyd concluded that the tribunal had been entitled to find that the risk of As being identified was reduced by anonymisation, and that the point did not satisfy the Cart and Eba test. It was envisaged at the time of the hearing before Lord Boyd that the application for judicial review would proceed to a first hearing, notwithstanding As deportation. His counsel informed the court that he intended to seek the discharge of the first hearing fixed for 14 December 2012, so that a two day hearing could be held instead in January 2013. A reclaiming motion (ie an appeal) against Lord Boyds decision to refuse the application for interim suspension was heard by the Inner House of the Court of Session on 9 November 2012. It was refused: A v Secretary of State for the Home Department [2012] CSIH 86. In the meantime, the BBC became aware of the order made under section 11 of the 1981 Act, and applied for it to be recalled (ie set aside). The application came before the court on 9 November, when it was agreed that it should be continued (ie adjourned) to be heard on a future date. It was subsequently heard by Lord Glennie on 14 and 15 November 2012. On 6 December 2012 he refused the application, and granted leave to reclaim: British Broadcasting Corporation, Applicant [2012] CSOH 185; 2013 SLT 324. Lord Glennie noted that the only issue in the proceedings before the tribunal concerned the risk of its becoming known in his country of origin that A was being sent back. If that fact were known, and particularly if it were linked to information about the timing of his return, then it was accepted that there was a real risk of As article 3 rights being infringed. That was why an anonymity direction had been made by the tribunal. In these circumstances, Lord Glennie accepted that it was necessary to allow As name and identifying details to be withheld from the public in the court proceedings, and to make a section 11 order: first, so as to safeguard As Convention rights, and secondly, so as to preserve the integrity of the court proceedings, since publication of that information would give A grounds for a fresh application to the Home Secretary and frustrate the proceedings before the court. A absconded prior to his planned deportation, and was later detained. The Home Secretary then decided to deport him on 14 December 2012. An application was made to the court for the interim suspension of that decision, and for leave to amend the application for judicial review. The amendment, which was allowed, introduced averments to the effect that, following the granting to the BBC of leave to reclaim, it was uncertain whether the section 11 order would remain in place. The Home Secretary, it was argued, could not deport A until that matter was settled, since the tribunal had relied upon the anonymity order in holding that A would not be at real risk on return to his country of origin. If the BBCs reclaiming motion was successful, a material basis of the tribunals decision would be removed. The application for interim suspension was heard on 12 December 2012. It was accepted on behalf of the Home Secretary that As deportation would be unlawful unless the section 11 order remained in place: in the absence of the order, there would be a real risk that As identity and history as a sex offender would be publicised, and that such publicity would expose him to vigilante behaviour in his country of origin, contrary to his rights under article 3. The court concluded that the BBC was unlikely to succeed in a reclaiming motion against Lord Glennies decision, and refused interim suspension of the deportation decision on that basis. A reclaiming motion against that decision was refused by the Inner House the following day. A was deported to his country of origin on 14 December 2012. The BBC reclaimed against Lord Glennies decision to refuse to recall the section 11 order, and also challenged Lord Boyds decision to make the order in the first place. The reclaiming motion was refused by the Inner House on 17 May 2013: [2013] CSIH 43; 2013 SC 533. The court considered that the material before the tribunal justified the conclusion that anonymity would be a significant protection of As article 3 rights, and that in any event the recall of the section 11 order would subvert the understanding on which As deportation had been authorised. The present appeal is brought against that decision. A first hearing of the application for judicial review has not yet taken place. At the hearing of the reclaiming motion, the court was informed that the possibility of amending the application in order to seek an order for As return to the UK was under consideration. The general principle of open justice It is a general principle of our constitutional law that justice is administered by the courts in public, and is therefore open to public scrutiny. The principle is an aspect of the rule of law in a democracy. As Toulson LJ explained in R (Guardian News & Media Ltd) v City of Westminster Magistrates Court (Article 19 intervening) [2012] EWCA Civ 420; [2013] QB 618, para 1, society depends on the courts to act as guardians of the rule of law. Sed quis custodiet ipsos custodes? Who is to guard the guardians? In a democracy, where the exercise of public authority depends on the consent of the people governed, the answer must lie in the openness of the courts to public scrutiny. The significance of the principle of open justice is illustrated by the fact that it was one of the matters covered by the constitutional legislation enacted following the accession of William and Mary. The Court of Session Act 1693, which remains in force, provides: That in all time coming, all bills, reports, debates, probations and others relating to processes shall be considered, reasoned, advised and voted by the Lords of Session with open doors, where parties, procurators and all others are hereby allowed to be present, as they used to be formerly in time of debates, but with this restriction, that in some special cases the said Lords shall be allowed to cause remove all persons, except the parties and their procurators. The corresponding Act Anent Advising Criminal Processes with Open Doors, passed on the same date, made similar provision for the High Court of Justiciary. As Lord Shaw of Dunfermline commented in Scott v Scott [1913] AC 417, 475, the two Acts formed part of the Revolution Settlement, and bore testimony to a determination to secure civil liberties against judges as well as against the Crown. The principle that courts should sit in public has important implications for the publishing of reports of court proceedings. In Sloan v B 1991 SC 412, 442, Lord President Hope, delivering the opinion of the court, explained that it is by an application of the same principle that it has long been recognised that proceedings in open court may be reported in the press and by other methods of broadcasting in the media. The principle on which this rule is founded seems to be that, as courts of justice are open to the public, anything that takes place before a judge or judges is thereby necessarily and legitimately made public, and, being once made legitimately public property, may be republished (Richardson v Wilson (1879) 7 R 237, 241 per Lord President Inglis). The connection between the principle of open justice and the reporting of court proceedings is not however merely functional. Since the rationale of the principle is that justice should be open to public scrutiny, and the media are the conduit through which most members of the public receive information about court proceedings, it follows that the principle of open justice is inextricably linked to the freedom of the media to report on court proceedings. Exceptions to the principle of open justice Since the principle of open justice is a constitutional principle to be found in the common law, it follows that it is for the courts to determine its ambit and its requirements, subject to any statutory provision. The courts therefore have an inherent jurisdiction to determine how the principle should be applied. That jurisdiction was recognised as long ago as the 1693 legislation I have mentioned. The Court of Session Act allowed the court to sit in private in some special cases, leaving it to the court to determine the circumstances in which a departure from the principle of open justice might be appropriate. The Act concerning criminal procedure declared that in the cases of rape, adultery and the like the said Commissioners [of Justiciary] may continue their former use and custom, by causing remove all persons, except parties and procurators, at the leading of the probation, as they shall see cause. That provision, which has a direct homologue in the modern law, recognised the courts power to determine when departures from the principle of open justice were appropriate in such cases. Exceptions to the principle of open justice were considered in the well known case of Scott v Scott [1913] AC 417, in which the House of Lords emphasised in the strongest terms the importance of the general principle, but also recognised that there were circumstances in which it was necessary to depart from it. Viscount Haldane LC gave the example at p 437 of a court exercising a wardship jurisdiction: such a court was sitting primarily to guard the interests of the ward, and the attainment of that object might require that the public should be excluded. Lunacy proceedings were in a similar position. Another example given by the Lord Chancellor, of greater relevance to the present case, was litigation concerning a secret process, where the effect of publicity would be to destroy the subject matter. The Earl of Halsbury considered wardship and lunacy to fall outside the scope of the general principle that justice should be administered in public, but accepted that proceedings concerning trade secrets, or to prevent the publication of private correspondence, were exceptions to that principle, observing at p 443 that it would be the height of absurdity as well as of injustice to allow a trial at law to protect either to be made the instrument of destroying the very thing it was intended to protect. Similar observations were made by Lord Atkinson at p 450 and by Lord Shaw of Dunfermline at pp 482 483. All of their Lordships stressed the need for a compelling justification for any departure from the principle of open justice. The Lord Chancellor said at pp 437 438: "As the paramount object must always be to do justice, the general rule as to publicity, after all only the means to an end, must accordingly yield. But the burden lies on those seeking to displace its application in the particular case to make out that the ordinary rule must as of necessity be superseded by this paramount consideration. The question is by no means one which, consistently with the spirit of our jurisprudence, can be dealt with by the judge as resting in his mere discretion as to what is expedient. The latter must treat it as one of principle, and as turning, not on convenience, but on necessity." A similar approach was followed in later cases in the House of Lords. In particular, the issue was considered in detail in the cases of In re K (Infants) [1965] AC 201 and Attorney General v Leveller Magazine Ltd [1979] AC 440. In the former case, Lord Devlin noted at p 238 that the ordinary principles of a judicial inquiry included the rules that justice should be done openly, that it should be done only after a fair hearing, and that judgment should be given only upon evidence that is made known to all parties, and also rules of a less fundamental character, such as the rule against hearsay. He continued: But a principle of judicial inquiry, whether fundamental or not, is only a means to an end. If it can be shown in any particular class of case that the observance of a principle of this sort does not serve the ends of justice, it must be dismissed; otherwise it would become the master instead of the servant of justice. Obviously, the ordinary principles of judicial inquiry are requirements for all ordinary cases and it can only be in an extraordinary class of case that any one of them can be discarded. This is what was so clearly decided in Scott v Scott. After citing the dictum of Viscount Haldane which I also have cited, Lord Devlin continued at p 239: That test is not easy to pass. It is not enough to show that dispensation would be convenient. It must be shown that it is a matter of necessity in order to avoid the subordination of the ends of justice to the means. More recently still, the importance of the common law principle of open justice was emphasised by nine Justices of this court in the case of Bank Mellat v Her Majestys Treasury [2013] UKSC 38; [2013] 3 WLR 179. Lord Neuberger, giving the judgment of the majority, described the principle as fundamental to the dispensation of justice in a modern, democratic society (para 2). He added that it had long been accepted that, in rare cases, a court had an inherent power to receive evidence and argument in a hearing from which the public and the press were excluded, but said that such a course might only be taken (i) if it was strictly necessary to have a private hearing in order to achieve justice between the parties, and (ii) if the degree of privacy was kept to an absolute minimum. He gave, as examples of such cases, litigation where children were involved, where threatened breaches of privacy were being alleged, and where commercially valuable secret information was in issue. It has also been recognised in the English case law, consistently with Lord Neubergers requirement of the degree of privacy being kept to a minimum, that where the interests of justice require some qualification of the principle of open justice, it may not be necessary to exclude the public or the press from the hearing: it may suffice that particular information is withheld. In Attorney General v Leveller Magazine Ltd, for example, Lord Diplock accepted at p 451 that, where the court might sit in camera in order to preserve the anonymity of a witness in the interests of national security, it could instead allow a much less drastic derogation from the principle of open justice, namely that the witness should give evidence in public but should be permitted to withhold his name from the public and the press. Viscount Dilhorne and Lord Edmund Davies agreed that the court could do so, in the exercise of its inherent jurisdiction to control its own procedure: pp 458 and 464 respectively. Viscount Dilhorne gave as an example the practice of allowing a witness complaining of blackmail to withhold his identity from public disclosure in court, judicially approved in R v Socialist Worker Printers and Publishers Ltd, Ex p Attorney General [1975] QB 637. The proposition that the court had no power to allow a witnesss name to be withheld from the public had been roundly rejected in that case: such a direction, it was held, was clearly preferable to an order for trial in camera where "the entire supervision by the public is gone" (p 652). In Scotland, as I have explained, the principle of open justice has been recognised by statute since the seventeenth century. The courts power to make exceptions to the general principle was acknowledged in the legislation of 1693. As Lord President Gill noted when the present appeal was before the Inner House, the basis of the courts power to make such exceptions is its inherent power to control its own procedure in the interests of justice: [2013] CSIH 43; 2013 SC 533, para 37. The common law power to make exceptions to the principle of open justice in the interests of justice was recognised in Sloan v B 1991 SC 412. Lord President Hope said at p 442: There is no doubt that as a general rule the proceedings of a court are open to the public, and thus to public scrutiny, at all times. Exceptions have to be made in special circumstances to allow the court to conduct its proceedings behind closed doors where the interests of justice require this to be done. But that is always the exception, and the general principle which applies equally in the sheriff court as it does in the Court of Session is that the court sits both for the hearing of cases and for the advising of them with open doors. It has also been recognised in Scotland that the qualification of the principle of open justice which is necessary in particular circumstances may not require to be as drastic as the complete exclusion of the public or the media from the proceedings, and that less extreme measures, such as the protection of the anonymity of a witness, may sometimes suffice. The point is illustrated by the case of Scottish Lion Insurance Co Ltd v Goodrich Corporation [2011] CSIH 18; 2011 SC 534, in which the court permitted the identities of the applicants to be withheld from public disclosure. The object of the proceedings was to protect the confidentiality of documents disclosing their identities, and an order designed to achieve that objective had previously been made by the court. As the court noted, the disclosure of their identities would be inconsistent with that order and would undermine the confidentiality which the proceedings were intended to preserve. The case was therefore one in which a limitation of the principle of open justice was necessary both to protect confidential information and to prevent the frustration of the judicial process. In relation to this aspect of the present case, counsel for the BBC was critical of a passage in the opinion of the Lord President, at para 38, in which he stated that the court must have regard not only to the justice of its decision, but also to the justice of the procedures by which it gives it. It therefore had the inherent power, in his opinion, to withhold the identity of a party where, regardless of the outcome of the case, the disclosure of that partys identity would constitute an injustice to him. The Lord President gave as examples cases where disclosure would endanger a partys safety or would be commercially ruinous. He added that, quite apart from the Convention related aspects of the problem, he would regard it as the courts duty to withhold the identity of a female pursuer where the decision turned on intimate medical evidence. He also considered that the courts inherent jurisdiction could be extended to the protection of third parties whose rights and interests might be affected in similar ways. The other members of the First Division expressed their agreement. This passage in the Lord Presidents opinion was obiter dictum: his Lordship records that the subject of the courts inherent jurisdiction had not been the subject of submissions by the parties, but had become a matter of some importance because of a decision made by a judge in another case, following the hearing of the instant case. The examples which the Lord President gave were at a correspondingly high level of generality. Counsel argued however that this passage was an incorrect statement of the law, and might be treated by lower courts as authoritative. That apprehension appears to have been one of the principal factors to have prompted the bringing of this appeal, as much of the argument presented on behalf of the BBC was devoted to criticism of this obiter dictum. In the circumstances, some general observations may be made. As I have explained, it has long been recognised that the courts have the power to permit the identity of a party or a witness to be withheld from public disclosure where that is necessary in the interests of justice. The Lord President was plainly right to approach the matter on the basis that the interests of justice are not confined to the courts reaching a just decision on the issue in dispute between the parties. It is necessary in the first place to recognise that the administration of justice is a continuing process: see, for example, Attorney General v Butterworth [1963] 1 QB 696, 725 per Donovan LJ. The court can therefore take steps in current proceedings in order to ensure that the interests of justice will not be defeated in the future. For example, the High Court of Justiciary has permitted undercover police officers to give evidence while screened from the sight of the general public, and without public disclosure of their identities, in order to avoid jeopardising their effectiveness in future investigations. Other cases may raise different considerations. In some cases, for example, anonymity may be necessary in view of risks to the safety of a party or a witness. The point can be illustrated by the case of A v Scottish Minsters 2008 SLT 412, where a prisoner serving a sentence for sexual offences was permitted to bring proceedings, challenging the notification requirements applicable to sexual offenders, without disclosing his identity publicly, because of the danger to his safety if the nature of his offending became known to his fellow prisoners. The same approach was followed when the case subsequently came before the Inner House. In other cases the health of a vulnerable person may be at risk. An example is the case of HM Advocate v M [2007] HCJ 2, 2007 SLT 462, where the court made a section 11 order to prevent the publication of the identity of a woman who was due to be the principal witness at the trial of a person charged with having recklessly infected her with HIV. There was evidence before the court that the womans mental health would be endangered if her identity became publicly known. There was also a risk that the woman would otherwise be unable to give evidence, in which event the prosecution could not proceed. An example of a case where harm of a different kind was considered to justify a departure from the ordinary practice is Devine v Secretary of State for Scotland (22 January 1993, unreported), an action of damages arising from the deployment of the SAS to end a prison siege, where Lord Coulsfield permitted the soldiers to give evidence while screened from the view of the general public, and without disclosing their names publicly. He did so on the basis that their evidence was essential to the proper presentation of the defence, and the Armys ability to deploy them in future operations would otherwise be compromised. In such a case, their appearance and identities were of such peripheral, if any, relevance to the judicial process that it would have been disproportionate to require their disclosure. These are only a few examples. Some of these examples may arguably go beyond the categories envisaged in some of the older authorities. As Lord Loreburn observed however in Scott v Scott at p 446, it would be impossible to enumerate or anticipate all possible contingencies. Furthermore, in this area as in others the common law is capable of development. The application of the principle of open justice may change in response to changes in society and in the administration of justice. It can also develop having regard to the approach adopted in other common law countries, some of which have constitutional texts containing guarantees comparable to the Convention rights, while in others the approach adopted reflects the courts view of the requirements of justice. To give only one example, the Supreme Court of Canada has considered some of the issues which I have mentioned, such as the anonymity of complainants in cases of sexual assault (Canadian Newspapers Co v Canada [1988] 1 SCR 122), the protection of parties to proceedings from embarrassment or humiliation (Edmonton Journal v Alberta [1989] 2 SCR 1326) and the concealment of the identity of undercover police officers (R v Mentuck [2001] 3 SCR 442). The development of the common law can also of course be influenced by the ECHR. The examples given by the Lord President of a party or witness whose safety may be endangered or who may suffer commercial ruin if his identity becomes known, or that of the female pursuer where the decision turns on intimate medical evidence, are all capable of raising issues which could warrant a qualification of the principle of open justice, applying the approach which I have explained. In relation to the last example, which was the subject of particular criticism by counsel for the BBC, I agree with the Lord President that it would be in the interests of justice to protect a party to proceedings from the painful and humiliating disclosure of personal information about her where there was no public interest in its being publicised. Whether a departure from the principle of open justice was justified in any particular case would depend on the facts of that case. As Lord Toulson observed in Kennedy v The Charity Commission [2014] UKSC 20, para 113, the court has to carry out a balancing exercise which will be fact specific. Central to the courts evaluation will be the purpose of the open justice principle, the potential value of the information in question in advancing that purpose and, conversely, any risk of harm which its disclosure may cause to the maintenance of an effective judicial process or to the legitimate interests of others. Convention rights Having considered the source and importance of the principle of open justice, as well as the source and extent of the courts common law power to derogate from it, I now turn to the ECHR standards that apply in this context. Under the Convention, the principle of open justice is expressly protected by article 6(1), which provides that in the determination of his civil rights and obligations or of any criminal charge against him, everyone is entitled to a public hearing. Article 6(1) also provides that judgment shall be pronounced publicly. The rationale of these requirements, as explained by the European Court of Human Rights, is the same as in the common law: The public character of proceedings protects litigants against the administration of justice in secret with no public scrutiny; it is also one of the means whereby confidence in the courts can be maintained. By rendering the administration of justice visible, publicity contributes to the achievement of the aim of article 6(1), a fair hearing, the guarantee of which is one of the foundations of a democratic society (B and P v United Kingdom (2001) 34 EHRR 529, para 36). As in domestic law, the general principle set out in article 6(1) is subject to qualifications: the press and public may be excluded from all or part of the trial in the interests of morals, public order or national security in a democratic society, where the interests of juveniles or the protection of the private life of the parties so require, or to the extent strictly necessary in the opinion of the court in special circumstances where publicity would prejudice the interests of justice. These qualifications broadly reflect the various grounds upon which exceptions to the principle of open justice are made in our domestic law, either under the common law or under statute. In relation to the last of the qualifications (where publicity would prejudice the interests of justice), the assessment is explicitly left to the opinion of the national court. In relation to the other qualifications, as in relation to the qualifications to other Convention guarantees, the European court has allowed national authorities a margin of appreciation. The court has accepted that a state can designate a class of cases, such as proceedings under the Children Act 1989, as an exception to the general rule (B and P v United Kingdom (2001) 34 EHRR 529, para 39). It has also accepted that measures short of the complete exclusion of the press and public, such as allowing a witness to remain anonymous, may be compatible with article 6(1) (see, for example, Doorson v Netherlands (1996) 22 EHRR 330, para 71), and that such measures may even be necessary in order to secure a fair trial (see, for example, V v United Kingdom (1999) 30 EHRR 121, para 87). Article 6 is not the only provision of the Convention which is relevant to the principle of open justice. Articles 2 and 3 may for example apply where parties or witnesses are in physical danger. The rights guaranteed by those articles are, in this context, unqualified. The Convention therefore requires that proceedings must be organised in such a way that the interests protected by those articles are not unjustifiably imperilled: Doorson, para 70. In our domestic law, the courts power to prevent the identification of a witness is accordingly part of the structure of laws which enables the United Kingdom to comply with its obligations under those articles: In re Guardian News and Media Ltd [2010] UKSC 1; [2010] 2 AC 697, para 27 per Lord Rodger. Article 8 may also be relevant. It protects the private lives of the parties, to which article 6(1) also refers, and in addition requires respect for the private lives of other persons who may be affected by legal proceedings, such as witnesses. It is however a qualified right: There shall be no interference by a public authority with the exercise of this right except such as is in accordance with the law and is necessary in a democratic society in the interests of national security, public safety or the economic well being of the country, for the prevention of disorder or crime, for the protection of health or morals, or for the protection of the rights and freedoms of others. The court therefore allows a margin of appreciation to national authorities in striking a fair balance between the interest in publicity of court proceedings, on the one hand, and the interests protected by article 8, on the other hand: Z v Finland (1997) 25 EHRR 371, para 99. Article 10 is also relevant to the principle of open justice, since the right to receive and impart information, which is guaranteed by article 10(1), may be engaged where measures are taken in relation to court proceedings to prevent information from becoming publicly available. The right guaranteed by article 10(1) is however qualified by article 10(2): The exercise of these freedoms, since it carries with it duties and responsibilities, may be subject to such formalities, conditions, restrictions or penalties as are prescribed by law and are necessary in a democratic society for the protection of the reputation or rights of others, for preventing the disclosure of information received in confidence, or for maintaining the authority and impartiality of the judiciary. These qualifications reflect the fact that freedom of expression may conflict with other important values, including the rights to life and to bodily security protected by articles 2 and 3 of the Convention, the integrity of legal proceedings and the rights of litigants and accused persons, protected by article 6, and the right to respect for private life, protected by article 8. Where there is a conflict between the right of the media to report legal proceedings and the rights of litigants or others under a guarantee which is itself qualified, such as article 8, a balance must be struck, so as to ensure that any restriction upon the rights of the media, on the one hand, or of the litigants or third parties, on the other hand, is proportionate in the circumstances. The approach which should be adopted was considered in detail by Lord Steyn in In re S (A Child) (Identification: Restrictions on Publication) [2004] UKHL 47; [2005] 1 AC 593, and by Lord Rodger in In re Guardian News and Media Ltd [2010] UKSC 1; [2010] 2 AC 697. Where the conflict is between the medias rights under article 10 and an unqualified right of some other party, such as the rights guaranteed by articles 2, 3 and 6(1), there can be no derogation from the latter. Care must nevertheless be taken to ensure that the extent of the interference with the medias rights is no greater than is necessary. The need for such care reflects the important role of the media in a democratic society in scrutinising the administration of justice generally, as well as their role as the conduit of information about particular proceedings which may be of public interest. Article 10(2) specifically identifies maintaining the authority and impartiality of the judiciary as a legitimate aim which may justify interference with freedom of expression. The phrase has a wide scope, as the European Court of Human Rights explained in Sunday Times v United Kingdom (1979) 2 EHRR 245, para 55: The Court first emphasises that the expression 'authority and impartiality of the judiciary' has to be understood 'within the meaning of the Convention'. For this purpose, account must be taken of the central position occupied in this context by article 6, which reflects the fundamental principle of the rule of law. The term 'judiciary' ('pouvoir judiciaire') comprises the machinery of justice or the judicial branch of government as well as the judges in their official capacity. The phrase 'authority of the judiciary' includes, in particular, the notion that the courts are, and are accepted by the public at large as being, the proper forum for the ascertainment of legal rights and obligations and the settlement of disputes relative thereto; further, that the public at large have respect for and confidence in the courts' capacity to fulfil that function. The need to maintain the authority and impartiality of the judiciary, as a justification for an interference with freedom of expression, thus overlaps with the right to a fair trial under article 6(1), and with the entitlement to derogate from the open justice principle under that article where publicity would prejudice the interests of justice. As the court indicated in the Sunday Times case, it is article 6(1) which occupies the central position in this context. Where the European court finds that a restriction of the principle of open justice is justifiable under article 6(1), it may not therefore find it necessary to consider the matter under article 10, on the basis that no separate issue arises. In the case of B and P v United Kingdom, for example, the court declined to examine a complaint under article 10 that the applicants were prohibited, upon risk of being found in contempt of court, from disclosing any documents used in proceedings under the Children Act 1989. The orders complained of were ancillary to measures taken to prevent public access to the hearing and to the judgment. Those measures had themselves been found to be justifiable under article 6(1) in order to protect the privacy of the children and the parties and to avoid prejudicing the interests of justice. The European court has accepted that the law of contempt falls within the ambit of the legitimate aim of maintaining the authority and impartiality of the judiciary. As it stated in the Sunday Times case at para 55: The majority of the categories of conduct covered by the law of contempt relate either to the position of the judges or to the functioning of the courts and of the machinery of justice: 'maintaining the authority and impartiality of the judiciary' is therefore one purpose of that law. In many later cases the court has accepted the compatibility with article 10 of restrictions on the publication of material which may prejudice the outcome of court proceedings: see, for example, Worm v Austria (1997) 25 EHRR 454 and BBC Scotland, McDonald, Rodgers and Donald v United Kingdom (Application No 34324/96) (unreported) given 23 October 1997. As the court explained in the Sunday Times case, it is unnecessary, where the aim of maintaining the authority and impartiality of the judiciary is engaged, to give separate consideration to the aim of protection of the rights of others, so far as the rights of the litigants in that capacity are concerned: In so far as the law of contempt may serve to protect the rights of litigants, this purpose is already included in the phrase 'maintaining the authority and impartiality of the judiciary': the rights so protected are the rights of individuals in their capacity as litigants, that is, as persons involved in the machinery of justice, and the authority of that machinery will not be maintained unless protection is afforded to all those involved in or having recourse to it. It is therefore not necessary to consider as a separate issue whether the law of contempt has the further purpose of safeguarding 'the rights of others'. (para 56) The balance to be achieved under article 10, in this context, is therefore between on the one hand protection of public discussion of matters of legitimate interest in a democracy, and on the other protection of the integrity of particular court proceedings or of the administration of justice more generally. If other interests protected under article 10(2) or under other articles of the Convention, such as article 8, are also involved, then they must also be taken into account. This approach is consistent with that adopted under our domestic law, as explained in para 41. The relationship between the Convention and domestic law It was submitted on behalf of the BBC that the source of the courts power to allow a party to legal proceedings not to disclose his identity publicly, in a situation where Convention rights are engaged, is to be found in the Convention rights themselves, rather than in the common law. Reference was made to In re S (A Child) (Identification: Restrictions on Publication) [2004] UKHL 47; [2005] 1 AC 593, para 23 per Lord Steyn, and In re Guardian News and Media Ltd [2010] UKSC 1; [2010] 2 AC 697, para 30 per Lord Rodger. These dicta were not however concerned with the conduct of court proceedings. They concerned a different issue, namely the jurisdiction of the English courts to make orders contra mundum restraining publicity relating to court proceedings, and in particular the publication of information identifying persons involved in those proceedings: a jurisdiction which might otherwise have been in doubt, as Lord Rodger noted. It is apparent from recent authorities at the highest level, including Al Rawi and others v Security Service and others (JUSTICE and others intervening) [2011] UKSC 34; [2012] 1 AC 531, Bank Mellat v Her Majestys Treasury [2013] UKSC 38; [2013] 3 WLR 179 and Kennedy v The Charity Commission [2014] UKSC 20, that the common law principle of open justice remains in vigour, even when Convention rights are also applicable. In another recent decision, R (Osborn) v Parole Board [2013] UKSC 61; [2013] 3 WLR 1020, this court referred at para 61 to the importance of the continuing development of the common law in areas falling within the scope of the Convention guarantees, and cited as an illustration the case of R (Guardian News and Media Ltd) v City of Westminster Magistrates Court (Article 19 Intervening) [2012] EWCA Civ 420; [2013] QB 618, where an issue falling within the ambit of article 10 was decided by applying the common law principle of open justice. Similar observations were made in Kennedy v The Charity Commission at paras 46 and 133; and the majority judgments in that case provide a further illustration of the same approach. That approach does not in any way diminish the importance of section 6 of the Human Rights Act, by virtue of which it is unlawful for the court to act in a way which is incompatible with a Convention right, unless subsection (2) applies. As was made clear in Kennedy, however, the starting point in this context is the domestic principle of open justice, with its qualifications under both common law and statute. Its application should normally meet the requirements of the Convention, given the extent to which the Convention and our domestic law in this area walk in step, and bearing in mind the capacity of the common law to develop as I have explained in para 40. As the case of V v United Kingdom demonstrates, it is however necessary to bear in mind that, although the Convention and our domestic law give expression to common values, the balance between those values, when they conflict, may not always be struck in the same place under the Convention as it might once have been under our domestic law. In that event, effect must be given to the Convention rights in accordance with the Human Rights Act. Section 11 of the Contempt of Court Act 1981 It is necessary next to return to section 11 of the 1981 Act, which provides: In any case where a court (having power to do so) allows a name or other matter to be withheld from the public in proceedings before the court, the court may give such directions prohibiting the publication of that name or matter in connection with the proceedings as appear to the court to be necessary for the purpose for which it was so withheld. Section 11 was enacted in order to implement a recommendation made in the Report of the Committee on Contempt of Court (1974) (Cmnd 5794), para 141, footnote 72, following the case of R v Socialist Workers Printers and Publishers Ltd, Ex p Attorney General [1974] 1 QB 637. As Lord Rodger explained in In re Guardian News and Media Ltd [2010] UKSC 1; [2010] 2 AC 697, para 31, section 11 does not itself confer any power upon courts to allow a name or other matter to be withheld from the public in proceedings before the court, but it applies in circumstances where such a power has been exercised. The purpose of section 11 is to support the exercise of such a power by giving the court a statutory power to give ancillary directions prohibiting the publication, in connection with the proceedings, of the name or matter which has been withheld from the public in the proceedings themselves. Section 11 thus resolves the doubt which had arisen following the Socialist Workers case as to the power of the court to make such ancillary orders at common law. The directions which the court is permitted to give are such as appear to it to be necessary for the purpose for which the name or matter was withheld. It was submitted on behalf of the BBC that section 11 does not enable an order to be made for the purpose of protecting an individuals Convention rights: such an order can only be made, it was argued, in order to protect the public interest in the administration of justice. That submission is of limited significance in the present case since, as I shall explain, one of the purposes of the order was to protect the administration of justice. Section 11 does not in any event contain any such limitation; and, where the courts are required under the Human Rights Act to impose reporting restrictions in order to protect Convention rights, they must use the means which are available to them. It was also submitted that no order could be made under section 11 unless members of the public had been present in the courtroom and had had a name or other matter withheld from them. That is however an unduly narrow construction of the provision. In the present case, for example, even if there were no members of the public present in court during the hearing before Lord Boyd, the effect of the order permitting the applicant for judicial review to be described as A was that his identity would be withheld from anyone looking at the rolls of court, either in Parliament House or on the internet, when any future hearing was listed, and from anyone present in the building when such a hearing was announced over the public address system. Anyone attending subsequent hearings in the case would hear him referred to in the same way; anyone who requested to see court documents to which the public could have access would also see him referred to in that way; and any judgments in the case, published on the internet or in the law reports, would be similarly anonymised. In all these respects, As identity would be withheld from the public. Section 12 of the Human Rights Act 1998 Section 12 of the Human Rights Act provides: (1) This section applies if a court is considering whether to grant any relief which, if granted, might affect the exercise of the Convention right to freedom of expression. (2) If the person against whom the application for relief is made (the respondent) is neither present nor represented, no such relief is to be granted unless the court is satisfied (a) that the applicant has taken all practicable steps to notify the respondent; or (b) that there are compelling reasons why the respondent should not be notified. (3) No such relief is to be granted so as to restrain publication before trial unless the court is satisfied that the applicant is likely to establish that publication should not be allowed. (4) The court must have particular regard to the importance of the Convention right to freedom of expression and, where the proceedings relate to material which the respondent claims, or which appears to the court, to be journalistic, literary or artistic material (or to conduct connected with such material), to (a) the extent to which (i) the material has, or is about to, become available to the public; or (ii) it is, or would be, in the public interest for the material to be published; (b) any relevant privacy code. (5) In this section court includes a tribunal; and relief 'includes any remedy or order (other than in criminal proceedings). As Lord Nicholls of Birkenhead explained in Cream Holdings Ltd v Banerjee [2004] UKHL 44; [2005] 1 AC 253, para 15, section 12 was enacted to allay concerns about the potential impact of article 8 Convention rights upon the grant of injunctions or interdicts against the media. It appears that section 12(2), in particular, was intended to restrict the scope for pre publication injunctions or interdicts being granted against broadcasters or the press on an ex parte basis, and that section 12(3) was designed to impose a more demanding test for the grant of interlocutory injunctions than the American Cyanamid standard. The effect of the provisions depends however upon the language used by Parliament rather than upon the particular concerns which may have prompted their enactment. In the present case, the First Division considered that an order under section 11 of the 1981 Act fell within the scope of section 12(2) of the Human Rights Act, on the basis that the expression relief was wide enough to cover an order of that kind. The first respondent has taken advantage of the BBCs appeal to challenge that conclusion. As I have explained, section 11 of the 1981 Act applies where the court allows a name or other matter to be withheld from the public in proceedings before the court, and permits the court to give such directions prohibiting the publication of that name or matter in connection with the proceedings as appear to the court to be necessary. When an application is made to the court to allow a name or matter to be withheld, that is not an application for relief made against any person: no remedy or order is sought against any respondent. If ancillary directions under section 11 are also sought, prohibiting any publication of the name or matter in question, that equally is not an application for relief made against any respondent: the directions will operate on a blanket basis. In such circumstances there is no respondent who should be notified, or who might be present or represented at the hearing. There is therefore no obligation under section 12(2) of the Human Rights Act to allow the media an opportunity to be heard before such an order can be granted. The Lord President observed at para 39 that, even if the media were not entitled to be heard by virtue of section 12(2) of the Human Rights Act, they were entitled to be heard as a matter of fairness, although there was a question as to the stage at which the opportunity to be heard should be given. I agree. There are many situations in which courts make orders without having heard the persons who may be affected by them, usually because it is impractical, for one reason or another, to afford a hearing to those persons in advance of the making of the order. In such circumstances, fairness is secured by enabling any person affected to seek the recall of the order promptly at a hearing inter partes. In principle, an order under section 11 of the 1981 Act falls within the ambit of that approach. It would be impractical to afford a hearing to all those who might be affected by a section 11 order (including bloggers, social media users and internet based organisations) before such an order was made; but fairness requires that they should be able to seek the recall of the order promptly at a hearing inter partes. Article 13 of the Convention also requires that the media should have an effective remedy for any violation of their article 10 rights. That requirement is capable of being fulfilled, where a section 11 order has been made ex parte, provided its recall can be sought promptly at a hearing at which the media are able to make representations (cf Mackay and BBC Scotland v United Kingdom (2010) 53 EHRR 671, para 32). As the facts of this case demonstrate, the existing procedures in the Court of Session are capable of satisfying those requirements. That said, a conclusion that the existing procedures provide a sufficient safeguard to meet the requirements of the Convention does not mean to say that improved procedures may not be possible and desirable. Although it would be impractical to provide all those who might be affected by a section 11 order with an opportunity to make representations before such an order is made, it may nevertheless be possible in some circumstances to provide such an opportunity to some of those who would be affected. Nothing I have said is therefore inconsistent with the Lord Presidents conclusion that improved procedures should be introduced, or with the intention of the Scottish Civil Justice Council to address that issue. Any improved procedures should not however make it impossible to obtain orders restricting publicity on an ex parte basis: as the Lord President recognised, there will inevitably be circumstances in which it is necessary for such orders to be made on that basis. The present case It is necessary finally to consider the application of these principles to the present case. The BBC was aware of As identity at all material times. It would have been free to report it, were it not for the order made by Lord Boyd under section 11 of the 1981 Act. The order therefore fell within the scope of article 10 of the Convention, as given effect by the Human Rights Act. The BBC was entitled to challenge the order as being incompatible with article 10, on the assumption that a public broadcaster such as the BBC can qualify as a victim of a violation of that article. In the light of the relevant case law of the European Court of Human Rights (eg Radio France v France (2004) 40 EHRR 706; sterreichischer Rundfunk v Austria (Application No 35841/02) (unreported) given 7 December 2006; Mackay and BBC Scotland v United Kingdom (2010) 53 EHRR 671), and in the absence of argument to the contrary, I proceed on the basis that it can. As I have explained, article 10 sets out a qualified guarantee: the right of freedom of expression can be subjected to restrictions which are prescribed in law and are necessary in a democratic society for the protection of the rights of others or for maintaining the authority and impartiality of the judiciary. There is no doubt that an order made under section 11 is prescribed by law. The issue is whether the order made in the present case was necessary in a democratic society for the protection of the rights of others or for maintaining the authority and impartiality of the judiciary. There are undoubtedly features of the case which support the BBCs contention that there was at all material times a public interest in its ability to report it without restrictions. These include the fact that the case concerns the deportation of a foreign sex offender, the remarkable length of time the proceedings have taken, and the cost of the proceedings to the taxpayer. The reporting of the present case would contribute to a debate of general interest: cases concerning the deportation of foreign offenders are not infrequently reported as part of a debate about the impact of European human rights law, or about the procedure followed in such cases. It is also true that A has in the past been the subject of publicity in which his name and photograph were published. It is also undeniable that, although the BBC could report all other aspects of the case, their inability to reveal As identity would detract from the human or journalistic interest of the story. Nevertheless, the arguments in favour of Lord Boyds decision to make the order, and Lord Glennies decision not to recall it, were in my view overwhelming. It is necessary first to recall the procedural context in which those decisions were taken. The tribunal had made a decision, the effect of which was to authorise As deportation, and it had also made an anonymity direction on the ground that A could be put at risk of harm by publication of [his] name and details. Its decision to authorise As deportation, in the face of concerns about the risk of his being ill treated on his return to his country of origin, had been made on the basis that anonymity would be a significant protection of his article 3 rights. Lord Boyds order was then made in proceedings in which the validity of the tribunals decision was challenged. A date had been fixed for the hearing of As challenge to the decision, but the Home Secretary proposed to deport A several weeks before that hearing took place. The case came before Lord Boyd so that he could decide whether the deportation should be allowed to proceed before the challenge to the tribunals decision had been heard. In that situation, the publication of As identity, or of information enabling him to be identified, would have subverted the basis of the tribunals decision to authorise his deportation. That decision had been based on an assessment that there was no real risk of a violation of article 3 if As identity was not publicised in connection with the deportation proceedings. The decision would have been undermined, before the challenge to its validity was determined, if his identity was published in the meantime. A fresh application to be allowed to remain in this country could then have been made on the basis of the new factual situation created by the publication of his identity in connection with the deportation proceedings. That application would then have required to be considered by the Home Secretary, and a fresh decision made. The publication of As identity would therefore have frustrated the judicial review proceedings before the court. Indeed, the entire proceedings since at least 2007 would have been rendered largely pointless. The reasons for making the order were equally compelling if considered from the perspective of protecting As article 3 rights in the event of his deportation. The tribunal, as the fact finding body in this case, had accepted that A would be at serious risk of violence if his identity became known in his country of origin in connection with these proceedings, and had concluded that anonymity would be a significant protection of his article 3 rights. In those circumstances, the courts failure to make a section 11 order would, as the Lord President observed, have had the grave consequence that the deportation might create all the risks that the tribunals directions as to anonymity had been intended to prevent. In these circumstances, it was plainly necessary in the interests of justice, and in order to protect the safety of a party to the proceedings, to depart from the general principle of open justice to the extent involved in the making of the orders made by Lord Boyd. It follows that, subject to any issue arising under the Convention, the order allowing A to withhold his identity in the proceedings was in accordance with the common law, and the section 11 order was made in accordance with the power conferred by that provision. It also follows that the section 11 order was not incompatible with the Convention rights of the BBC. The interference with its freedom of expression was necessary to maintain the authority and impartiality of the judiciary, since its publication of As identity in connection with the proposed deportation would have completely undermined the judicial review proceedings. In these circumstances, where the publication of As identity in connection with the proceedings might well have rendered those proceedings pointless, the interference with the BBCs article 10 rights was unavoidable if the authority and impartiality of the judiciary, within the meaning of article 10(2), were to be maintained. Put shortly, the order had to be made if the court was to do its job, notwithstanding the resulting restriction upon the BBCs capacity to do its job. The interference with the BBCs article 10 rights was also necessary for the protection of the rights of others, namely the right of A not to be subjected to violent attack. As Lord Rodger observed in In re Guardian News and Media Ltd [2010] UKSC 1; [2010] 2 AC 697, para 27, the media do not have the right to publish information at the known potential cost of an individual being killed or maimed. Although the BBC was not represented before Lord Boyd, it was able to apply to the court promptly for the recall of the order. As I have explained, that application was due to be heard by the court on 9 November 2012, only two days after the order had been made. With the BBCs agreement, that hearing was postponed until 14 November 2012, when Lord Glennie heard the BBCs application over the course of two days. He concluded that the order was justified and should not be recalled. For the reasons I have explained, that decision was correct. The procedure that was followed in my opinion satisfied the BBCs entitlement under the Convention to an effective remedy. Anonymity in relation to this judgment At the outset of the hearing of this appeal, the court made an order that no one shall publish or reveal the name of the respondent who is involved in these proceedings or publish or reveal any information which would be likely to lead to the identification of the respondent in connection with these proceedings. That order was made with the agreement of the BBC. A is now residing in the country where, as the tribunal concluded, he is at risk of serious violence if his identity becomes known in connection with these proceedings. His application for judicial review of the tribunals decision to authorise his deportation has not yet been heard. In these circumstances, it is appropriate both in the interests of justice, and in order to protect As safety, that his identity should continue to be withheld in connection with these proceedings, and that the order should therefore remain in place. Conclusion For these reasons, I would dismiss the appeal.

A, a foreign national, arrived in the UK in 1991. He was later granted indefinite leave to remain, but in 1996 was sentenced to four years imprisonment for sexual offences against a child. In 1998, he was served by the Home Secretary with a notice to make a deportation order [4]. A appealed against the decision and protracted proceedings followed in which A cited risks due to his status as a known sex offender of death or ill treatment (contrary to articles 2 and 3 of the European Convention on Human Rights (ECHR)) should he be deported. As identity was withheld in the proceedings from 2001 onwards [5] [9]. In dismissing As appeal against the Home Secretarys refusal to revoke the deportation order, the First tier tribunal noted that the proceedings were anonymised, thus reducing the risk of As identification. In September 2012 A applied to the Court of Session for judicial review of the Upper Tribunals refusal of permission to appeal. The Secretary of State gave notice that she intended to remove A from the UK before the date fixed for the hearing of the judicial review application. On 7 November 2012 Lord Boyd heard As application for interim suspension of the removal decision and allowed him to amend his application for judicial review by substituting initials for his name and address. Lord Boyd also gave directions under section 11 of the Contempt of Court Act 1981 prohibiting the publication of As name or other identifying details and directing that no picture of him should be published or broadcast [2]; [10] [13]. He refused the application for interim suspension, concluding that A had not established a prima facie case for setting aside the Upper Tribunals decision [14]. The Inner House refused As appeal against that decision [16]. Media organisations had not been notified of and were not represented at the hearing before Lord Boyd. The BBC became aware of the section 11 order and applied for it to be set aside. In refusing the application, Lord Glennie noted that it was accepted that if the fact that A was being deported became known in his country of origin there would be a real risk of his article 3 rights being infringed. That was why an anonymity order had been made by the tribunal. It was necessary to withhold As identity to safeguard his article 3 rights and to preserve the integrity of the court proceedings, since publication of the information would give A grounds for a fresh application to the Home Secretary and frustrate the proceedings [17 18]. A was deported on 14 December 2012 [20]. The BBCs appeal against Lord Glennies decision was refused in May 2013. The Inner House considered that the material before the tribunal justified the conclusion that anonymity would be a significant protection of As article 3 rights and that setting aside the section 11 order would subvert the understanding on which As deportation had been authorised [21]. The appeal raises three issues [3]: (i) Whether the court possesses any common law power to protect the anonymity of a party where rights under the ECHR (given effect by the Human Rights Act 1998 (HRA)) are engaged; (ii) Whether the court acted compatibly with the BBCs rights under article 10 ECHR (which protects freedom of expression), both in terms of the substance of its decision and the procedure followed; and (iii) Whether the section 11 order fell within the scope of section 12 HRA, so that the BBC ought to have been notified and given an opportunity to make representations before it was made. In a unanimous judgment delivered by Lord Reed, the court dismisses the BBCs appeal. Lord Reed explains the importance of the general constitutional principle of open justice. Society depends on the courts to act as guardians of the rule of law, and this in turn necessitates the openness of the courts to public scrutiny. The principle has important consequences for the publishing of reports of court proceedings: open justice is inextricably linked to the freedom of the media to report on court proceedings [23] [26]. But there are exceptions. The courts have an inherent jurisdiction to determine how the principle of open justice should be applied [27] [37] and can permit the identity of a party or witness to be withheld from public disclosure where necessary in the interests of justice [38 41]. Central to the courts evaluation will be the purpose of the open justice principle, the potential value of the information in advancing that purpose, and any risk of harm that its disclosure may cause to the maintenance of an effective judicial process or to the legitimate interests of others [41]. The principle of open justice is protected and qualified by the ECHR as it is in domestic law [42] [54]. But the common law principle remains in vigour even where Convention rights also apply [55 57]. The purpose of section 11 is to support the exercise of the courts power to allow a name or other matter to be withheld in court proceedings, by conferring a statutory power to give ancillary directions prohibiting publication of the relevant information. The use of section 11 is not limited to protecting the public interest in the administration of justice [60], or to cases where members of the public are present in court [61]. Section 12 HRA does not apply to section 11 applications as they are not applications for relief made against any person [62 66]. Fairness nevertheless requires the media to have an opportunity to be heard, but both this and the medias right to an effective remedy are secured by enabling any person affected to seek recall of the order promptly at a hearing inter partes [67] [68]. Whilst article 10 ECHR was engaged in the present case, the arguments in favour of making the order were overwhelming. The tribunal had made a decision, the effect of which was to authorise As deportation, on the basis that anonymity would be a significant protection of his article 3 rights. The courts failure to make the order would have meant that the deportation might create all the risks that the tribunals directions as to anonymity had been intended to prevent. The order was justifiable under article 10, since it was both prescribed by law and necessary in a democratic society in order to protect the integrity of the legal proceedings and As article 3 rights [69] [76]. The order allowing A to withhold his identity was in accordance with the courts common law powers. The section 11 order was made in accordance with the power conferred by that provision. It was not incompatible with the BBCs Convention rights [75 76]. The BBC was able to apply promptly for recall of the order, and its application came before the court two days after the order was made [77].

St Andrews is renowned throughout the world as the home of golf. It is also famous for its university, the third oldest in the English speaking world. It is an attractive town, set between the sea and the rural hinterland of Fife, with many historic buildings and a skyline familiar to millions from television coverage of the Open Championship and from the opening of the film, Chariots of Fire. This appeal has been prompted by concern on the part of the appellant, a resident of St Andrews, about Fife Councils policies for the future development of the town as set out in the Fife Structure Plan 2006 2026. She considers that the policies, if implemented, will cause irreversible damage to the landscape setting of the town. She has objected to these policies at every opportunity during the procedure leading to the finalisation of the structure plan by the Council, and during the subsequent procedure leading to its approval, subject to certain modifications, by the Scottish Ministers. The question raised by the appeal is whether the Ministers have given adequate reasons for their decision to approve the structure plan subject to the modifications which they have made. The appellant submits that the reasons given did not adequately address her objections to the Ministers proposed modifications, and that there has in consequence been a failure to comply with the requirements of the relevant legislation. She contends that she has been substantially prejudiced by that failure, as the reasons given raise a doubt as to whether the Ministers have considered the impact of the structure plan policies upon the landscape setting of St Andrews. The relevant legislation It may be helpful at the outset to explain the nature of a structure plan and its role in the planning system. These were clearly and accurately described by Lord Justice Clerk Gill in his opinion in this case ([2011] CSIH 59; 2012 SC 172, para 23): A structure plan is that part of the statutory development plan that sets out the overall strategy on which development in the relevant area will be based. The plan rests on fundamental strategic objectives adopted by the planning authority in accordance with ministerial guidance. The Scottish Ministers retain the ultimate authority to approve its finalised terms. The strategic objectives are the basis of, and are carried into effect by, the various sectoral policies of the written statement. These policies are carried through in more detailed and site specific ways in local plans and are ultimately implemented in ad hoc decisions on planning applications. It is necessary next to explain the procedure leading to the approval of a structure plan as set out in the legislation in force at the relevant time: that is to say, the Town and Country Planning (Scotland) Act 1997 as amended (the Act), and the Town and Country Planning (Structure and Local Plans) (Scotland) Regulations 1983 (SI 1983/1590) as amended (the Regulations). Under section 4 of the Act, the planning authority have a duty to keep under review the matters which may be expected to affect the development of their district or the planning of its development, and may, if they think fit, institute a survey of those matters. Under section 5, the Ministers may designate areas in respect of which planning authorities are to prepare structure plans; and there is a requirement that the district of every planning authority must be included in a structure plan area. Section 7(1)(a) provides that the structure plan for any district shall be a written statement formulating the planning authoritys policy and general proposals in respect of the development and use of land in that district. The planning authority are required by section 7(2) to secure that their policy and general proposals are justified by the results of the survey and by any other information which they may obtain. They are also required to have regard to current policies with respect to the economic planning and development of the region as a whole. In relation to the form of the structure plan, regulation 6 of the Regulations requires that the policies and general proposals formulated in a structure plan must be set out so as to be readily distinguishable from its other contents. Importantly, in the context of the present appeal, regulation 6 also requires that the plan must include a reasoned justification of the policies and general proposals which it contains. It is therefore for the planning authority to provide reasons justifying the policies and general proposals contained in the plan. In relation to procedure, section 8(1) of the Act requires the planning authority, when preparing a structure plan and before finally determining its content for submission to the Ministers, to take such steps as will in their opinion secure that adequate publicity is given to the report of the survey and to the matters which they propose to include in the plan, and that an adequate opportunity is given for the making of representations with respect to those matters. Under section 8(2), the planning authority are required to consider such representations. When the plan is submitted to the Ministers for approval, the planning authority are required by section 8(4) to make copies of it available for inspection. Section 8(5) requires that those copies must be accompanied by a statement of the time within which objections to the plan may be made to the Ministers. Section 8(7) requires the Ministers, if they are satisfied that the purposes of section 8(1) have been adequately achieved, to proceed to consider whether to approve the plan. Under section 10(1) of the Act, the Ministers may either approve the plan (in whole or in part and with or without modifications or reservations) or reject it. Before determining whether or not to approve it, the Ministers are required by section 10(4) to consider any objections to the plan, so far as they are made in accordance with regulations. The Ministers also have a discretionary power to hold an examination in public. Section 10(10) of the Act, which is the critical provision in the present appeal, provides: On exercising his powers under subsection (1) in relation to a relevant proposal, the Secretary of State shall give such statement as he considers appropriate of the reasons governing his decision. The reference in that provision to the Secretary of State is now to be read as referring to the Ministers. The expression a relevant proposal is defined by section 10(2) as meaning inter alia a structure plan. Further provision in relation to the procedure is made by the Regulations. In particular, regulation 18 provides that where the Secretary of State (now to be read as meaning the Ministers) proposes to modify a structure plan he shall, except as respects any modification which he is satisfied will not materially affect any policy or general proposal of the plan, inter alia give notice by advertisement of the proposed modifications, and consider any objections duly made to the proposed modifications. It follows from these provisions that there are several opportunities for objections to be made during the process leading up to the approval of a structure plan. First, representations may be made to the planning authority, in accordance with section 8(1) of the Act, before the plan is finalised for submission to the Ministers. Secondly, objections to the finalised plan can be made to the Ministers, in accordance with section 8(5). Thirdly, objections can be made to any modifications to the plan which are proposed by the Ministers, in accordance with regulation 18 of the Regulations. It also follows that there are two distinct contexts in which reasons require to be given. First, the planning authority must include in the finalised plan a reasoned justification of their policies and general proposals, in accordance with regulation 6 of the Regulations. Secondly, the Ministers must, when exercising their power to approve the plan (in whole or in part, with or without modifications or reservations) or to reject it, give such statement as they consider appropriate of the reasons governing their decision, in accordance with section 10(10) of the Act. The Act also makes provision for the preparation of local plans. Under section 11(1), every planning authority is required to prepare local plans for all parts of their district. Section 11(5) stipulates that the local plan must conform generally to the structure plan, and under section 17(3) the planning authority must not adopt a plan which does not conform to an approved structure plan. Finally in relation to the legislation, section 238(1) of the Act enables any person aggrieved by a structure plan or a local plan who wishes to question the validity of the plan on the ground (a) that it is not within the powers conferred by Part II [of the Act] or (b) that any requirement of that Part or of any regulations made under it has not been complied with in relation to the approval or adoption of the plan to make an application to the Court of Session. There is no dispute that the appellant is a person aggrieved. Her application was made under section 238(1)(b). Section 238(2) concerns the remedies which may be granted on an application under the section. It provides: On any application under this section the Court of Session (b) if satisfied that the plan is wholly or to any extent outside the powers conferred by Part II, or that the interests of the applicant have been substantially prejudiced by the failure to comply with any requirement of that Part or of any regulations made under it, may wholly or in part quash the plan either generally or in so far as it affects any property of the applicant. The preparation of the plan In January 2003 the Council publicised its intention to prepare a replacement of the Fife Structure Plan 2002. A survey was undertaken in accordance with section 4 of the Act, and the Council also commissioned a report from a landscape architect, Alison Grant, on the capacity of the landscape to accommodate new development adjacent to St Andrews, and on a proposed green belt. The report, Landscape Capacity Assessment and Proposed Green Belt Study of St Andrews, was submitted in March 2003. The Grant report identified a number of relatively small areas of land, totalling less than 25 hectares, where development could be accommodated without damaging the landscape. The remaining land adjacent to St Andrews was reported to be subject to landscape constraints on development. The nature and severity of the constraints varied as between different areas. In some locations, development would impact on the setting of St Andrews. In other locations, development would affect the landscape in other ways: for example, by affecting the open character of the location in question, or by affecting an existing designed landscape, or by affecting views from within the town. In particular, as regards land to the west of St Andrews, referred to in the report as St Andrews West, the report identified areas totalling about 20 hectares which were designated as falling into category 3: that is to say, capable of development without adversely affecting the key characteristics and visual qualities of St Andrews. The remaining land in St Andrews West was designated as falling into category 5: that is to say, land where development was inappropriate because of its potential impact on the landscape character, scenic quality or visual attributes of St Andrews and its setting. In March 2005 the Council published its consultative draft structure plan together with its draft report of survey, a sustainability appraisal and other documents. By letter dated 19 April 2005 the appellant made representations in accordance with section 8(1) of the Act. The Council gave consideration to the representations received from the appellant and others and subsequently finalised the plan. The Councils finalised plan Chapter 1 of the finalised plan provided a summary of the plan. It set out the fundamental strategic objective, namely the economic regeneration of Fife. The plan sought to achieve this objective by a number of means, such as restoring population growth, providing low cost housing as a stimulus to population growth and identifying key economic development areas in various parts of Fife. It explained that the strategy implemented the National Planning Framework published in 2004, which had identified St Andrews University as having the ability to contribute to both the national and the local economy, and had also identified St Andrews as a tourism destination of international renown. The strategy was to increase employment opportunities, taking a positive approach to economic development and directing major new employment creating development to the main towns, including St Andrews. Another aspect of the strategy was to accommodate an increase in the population of Fife through the provision of housing at a number of locations, including St Andrews. A further aspect of the strategy was to protect the landscape setting of the historic core of St Andrews through the introduction of a green belt. Chapter 2 described the settlement strategy. It explained that seven strategic development areas would contribute significantly to developing the Fife economy and enhancing communities. Those areas would be the focus for mixed use developments, largely on greenfield land, containing a minimum of 1,200 houses. One of these areas was to be located in St Andrews. Paragraph 2.4 stated: The strategy is to realise the potential of St Andrews as an economic driver for the whole of Fife in terms of academic development and tourism, whilst reconciling this against the need to protect its internationally important heritage. This strategy has significant implications for land use and expansion of the town and has to be balanced with the need to protect its landscape setting. High quality development and expansion of employment land is required over the longer term. Land for 1200 houses in the period to 2026 will be identified; a large proportion of which will be within a strategic development area to the west of the town and will maximise the use of brownfield sites where possible. A 10ha science park and a 10ha general business park will be identified to provide opportunities for employment growth. The local plan will define the green belt boundaries taking account of the need to provide land for development over, and potentially beyond, the plan period. Contribution to a new link road will be required as part of this development. That aspect of the strategy was reflected in a number of policies and proposals, including Policy SDA1, concerned with strategic development areas, and Proposals PE1 and PH2, concerned with employment and housing respectively. Chapter 4 was concerned with the environment. In relation to St Andrews, paragraph 4.5 stated: The key issue for St Andrews is the extent to which the town should grow over a long timescale. The town needs to accommodate further employment land to grow the economy, deliver affordable housing as part of the settlement, while the landscape setting of the town needs to be protected and enhanced by the identification of robust green belt boundaries. The local plan will set out how, where and the extent to which St Andrews should grow over the next 20 years. That approach was reflected in Policy ENV1. Reading paragraphs 2.4 and 4.5 together, it appears therefore that the Council intended to determine through the local plan process how the strategy described in paragraph 2.4 was to be applied in practice, and in particular how, where and the extent to which St Andrews should grow in order to accommodate the further employment land and housing which were needed while protecting the landscape setting of the town. The submission of the finalised plan to the Ministers In June 2006 the Council submitted the finalised plan to the Ministers for approval, together with the report of survey, a sustainability appraisal and strategic environmental assessment, and other documents. Later in June or July 2006 the appellant submitted to the Ministers her objections to the finalised plan. Altogether, the Ministers received over 2700 objections. During 2007 the Ministers agreed to a reappraisal by the Council of limited aspects of the finalised plan, so as to take account of new household projections which had been published by the General Register Office for Scotland. Following the reappraisal, the Council prepared proposed modifications to the finalised plan, and provided an opportunity for representations to be submitted. The appellant submitted such representations. The Council then finalised its proposed modifications, and submitted them to the Ministers in December 2007. It proposed in particular that the amount of new housing required for St Andrews should be reduced from 1200 to 1000 houses. An opportunity was then given by the Ministers for the lodging of objections to the proposed modifications. It appears that the appellant lodged such an objection. The Ministers proposed modifications In December 2008 the Ministers published their proposed modifications to the finalised plan, in accordance with regulation 18 of the Regulations, together with a strategic environmental assessment. The proposed modifications did not materially alter the strategy summarised in Chapter 1 so far as relating to St Andrews. In Chapter 2, the references to strategic development areas were proposed to be replaced by references to strategic land allocations. The minimum number of houses to be contained in such an area was proposed to be reduced from 1200 to 300. The relevant area was proposed to be described as St Andrews West rather than St Andrews. Land was proposed to be located there for a minimum of 1000 houses. Up to 90 additional houses might be assigned to St Andrews following further assessment. Consequential alterations were also proposed to Policy SLA1 (as the former Policy SDA1 was proposed to be re designated) and Proposals PE1, PH2 and PH3. In relation to the environment, the first two sentences of paragraph 4.5 were proposed to be revised so as to read as follows: The key issue for St Andrews is the careful management of growth. The town needs to accommodate further housing and employment land to grow the economy and deliver affordable housing, while protecting and enhancing the landscape setting by the identification of robust green belt boundaries. A consequential alteration was proposed to Policy ENV1. The Ministers strategic environmental assessment The Ministers strategic environmental assessment focused on the environmental effects of the modifications proposed by the Ministers rather than the effects of the finalised plan, in accordance with the relevant legislation. The assessment was however placed within the broader context of the plan as a whole. Paragraph 3.22 summarised the key findings which emerged from the assessment of housing allocations for St Andrews and North East Fife. They included the following: There is potential for significant adverse effects on landscape, due largely to the value and sensitivity of the receiving environment. Further development of a large scale around St Andrews, without appropriate mitigation, has the potential to adversely affect its landscape setting. Expansion of the town will therefore require careful local level site selection and mitigation at the local plan level. Landscape capacity assessments have concluded that capacity to absorb large scale development around St Andrews is very limited. However, to the south and west of the town, specific areas where smaller scale development could be reasonably accommodated (subject to appropriate landscaping and siting) have been identified and should be prioritised for development at the local level, as appropriate. The existing AGLV [Area of Great Landscape Value] and several cSLAs [candidate Special Landscape Areas] could be directly or indirectly affected by housing development within this HMA [Housing Market Area]. The reference in that passage to landscape capacity assessments referred in particular to the Grant report. That summary reflected a fuller account set out in a table appended to the assessment, which stated: Previous landscape capacity studies have identified major constraints to development around St Andrews arising from its special landscape qualities. Areas where development could be accommodated, if appropriately landscaped were also identified, and these should form a focus for future land allocations within the relevant local plans. The design of new housing, siting and scale should take into account landscape capacity. In particular areas around St Andrews that were noted for their distinctive qualities and role in providing the unique setting of the town should be avoided as far as possible. The previous landscape capacity studies referred to included the Grant report. It is apparent from these passages that the Ministers strategic environmental assessment recognised that large scale development could damage the landscape setting of St Andrews. The conclusion drawn was that expansion of the town will therefore require careful local level site selection and mitigation at the local plan level. The sites identified in the Grant report as suitable for development were to form a focus for future land allocations within the relevant local plan. That conclusion was consistent with the Councils approach in the finalised plan, under which the intention was to determine through the local plan process how, where and the extent to which St Andrews should grow in order to accommodate the further housing and employment land which were needed while protecting the landscape setting of the town. The conclusion drawn in the strategic environmental assessment was therefore consistent also with the Ministers decision to approve, without modification, that aspect of the finalised plan. The appellants letter of objection The Ministers allowed an opportunity for objections to be made to the proposed modifications to the finalised plan, in accordance with regulation 18 of the Regulations. The appellant submitted a letter dated 29 January 2009, which objected, not to any modification proposed, but to the absence of any modification of the strategy that St Andrews should be an economic driver for Fife and should accommodate the houses, science park, business park and bypass proposed. In the course of her letter, about 2000 words in length, the appellant made numerous more specific points in support of this general objection, grouped under the headings Fife Population, General Register Office Figures, Landscape Capacity St Andrews, Population St Andrews, Strategic Land Allocations, Affordable Housing, Green Belt for St Andrews, Objections and Representations and Fife Landscape Study. Under the heading Landscape Capacity St Andrews the appellant made several points. She began: In 1998 Fife Council published the St. Andrews Strategic Study. Two of its conclusions were that 'St Andrews is at its landscape capacity and no major expansion should take place. Major new housing development would result in an unacceptable impact on the quality of the towns environment. In 2003 the Alison Grant Landscape Capacity Assessment and Green Belt Study of St. Andrews was published (following a requirement for a landscape assessment in the 2002 Structure Plan). It concluded that there was very little scope for development round St Andrews. The Council has generally ignored this work, and the Tyldesley Landscape Assessments [a 1997 report by David Tyldesley and Associates entitled A Green Belt for St Andrews]. The appellant then made other points under that heading, relating inter alia to the recent history of development in St Andrews and the trend of visitor numbers. The points made in the appellants letter largely repeated those which she had made in her earlier objections to the finalised plan. The Ministers decision In May 2009 the Ministers approved the finalised plan with modifications. In the letter notifying the Council of their decision, the Ministers stated that they had considered all representations and objections made to them, the matters taken into account in the plan as submitted, and such other matters as they thought relevant. So far as relating to St Andrews, the final modifications referred in paragraph 2.4 to the need for the strategic land allocation in St Andrews West to meet the significantly higher need for affordable housing provision in St Andrews and NE Fife. The final modifications were not otherwise materially different from those which had been earlier proposed. The Ministers statement of reasons The Ministers also published at the same time a schedule of reasons for making modifications to the finalised plan, and a separate schedule of reasons for not making modifications to the finalised plan. The former schedule gave a brief explanation of each of the modifications made. The latter schedule summarised objections made (1) to the plan as submitted to the Ministers in 2006, (2) to the modifications proposed by the Council in 2007 and (3) to the Ministers proposed modifications as published in 2008, in respect of which the Ministers had decided not to make modifications, and gave reasons for the Ministers decision. After an introductory section headed General, the schedule followed the layout of the finalised plan. Under the heading General, the schedule addressed objections relating to the housing land requirement. Reason 4, in particular, stated: The strategic allocation to St Andrews West reflects the housing land required across Fife based on an 8% population growth estimate. Reason 5, addressing objections to the effect that policies on landscape are omitted, stated: The plan takes full account of environmental issues and provides an appropriate level of protection. In relation to Chapter 1 of the plan, reason 6 addressed objections to the effect that the plan includes excessive developer led projects and economic development implications, and stated: Subject to the final modifications, the plan's vision and settlement strategy are consistent with government policies on development planning and sustainable economic growth. In relation to Chapter 2, reason 17 addressed objections to the effect that St Andrews West development will affect landscape and amenity, and that [the] scale of development is too high, and stated: It is appropriate for St Andrews to accommodate a strategic allocation of Fifes housing requirement. The local plan will articulate the strategic land allocation which can be accommodated subject to mitigation and landscape enhancement. In relation to Chapter 3, concerned with the implementation of the strategy, reason 22 addressed objections to the effect that a 10 hectare science park at St Andrews would be better placed [elsewhere], and stated: Business and employment proposals for St Andrews are consistent with its academic and scientific profile. In relation to Chapter 4, reason 33 addressed objections which were summarised and answered as follows: Landscape character and capacity assessments indicate that St Andrews is at its landscape capacity or that development should be steered to Craigtoun (named individuals, Royal Burgh of St Andrews CC, St Andrews Preservation Trust, St Andrews Green Belt Forum). Reason: The 2003 Alison Grant study indicates that some scope for further development to the west of St Andrews exists subject to mitigation. The appellants challenge The appellant challenged the validity of the structure plan under section 238 of the Act on the ground that the Ministers had failed in reason 33 to give adequate reasons for rejecting her objection to the proposed modifications, based on landscape capacity, as set out in her letter dated 29 January 2009. The Ministers had therefore failed to comply with a requirement of the Act. Her interests had been substantially prejudiced. These contentions were rejected by the Lord Ordinary, Lord Uist ([2010] CSOH 105). A reclaiming motion was refused by the Inner House ([2011] CSIH 59; 2012 SC 172). Certain material changes have occurred since the reclaiming motion was refused by the Inner House. First, in June 2012 the Ministers approved a strategic development plan for 2012 2032 covering St Andrews. The structure plan in issue in these proceedings thereupon ceased to have effect. Secondly, in October 2012 the Council adopted a local plan covering St Andrews. The appellant has brought separate proceedings in which she challenges the validity of the strategic development plan, and other proceedings in which she challenges the validity of the local plan. In her appeal to this court, the appellant has essentially repeated the arguments advanced in the lower courts and rejected by them. She maintains that the Ministers misrepresented her objection based on landscape capacity in summarising it, in reason 33, as being that St Andrews was at its landscape capacity. Her argument was not that there was no capacity whatsoever, but that the available capacity was inadequate to accommodate development on the scale proposed. Having set up a straw man, the Ministers then knocked it down in reason 33 by pointing out that, according to the Grant report, some scope for further development exists. That reason however failed to address the point which she was actually making. It was no answer to refer to the Grant report, which supported the point being made. She was substantially prejudiced by the failure to provide adequate reasons, since it was not apparent whether the Ministers had grappled with the landscape issue: that is to say, the impossibility of fitting the proposed developments into the 22 hectares which, according to the Grant report, could be developed without damaging the landscape. There was therefore substantial doubt whether the Ministers decision had been taken within the powers of the Act (cf Save Britains Heritage v Number 1 Poultry Ltd [1991] 1WLR 153, 168). Discussion In considering the adequacy of the reasons given for a decision, it is necessary to take account of a number of matters, including the nature of the decision in question, the context in which it has been made, the purpose for which the reasons are provided and the context in which they are given. Although it is not possible to draw a clear cut distinction between the issues to be determined at the level of a structure plan, and those which should be determined in a local plan, it is apparent from section 7(1) of the Act that a structure plan is intended to be concerned with policy and general proposals, rather than with more detailed matters. It is also apparent from section 7(2) that the policy and general proposals set out in the structure plan are to be justified by the survey and by any other information which the planning authority may obtain. Furthermore, as I have explained, regulation 6 of the Regulations requires the structure plan to include a reasoned justification of the policies and general proposals which it contains. The appellant does not suggest that there has been any failure to comply with any of those requirements. Against that background, the duty of the Ministers under section 10(10) to give reasons for their decision either to approve the plan (in whole or in part and with or without modifications or reservations) or reject it cannot be intended to require them to provide a justification for the policies and proposals in the structure plan: those are the policies and proposals of the planning authority, and it is that bodys responsibility to provide a reasoned justification for them. Furthermore, the adequacy of the reasons given in the present case has to be considered on the basis that they are addressed to persons who are familiar with the background and the issues. These factors are relevant to the Ministers exercise of the discretion allowed to them by section 10(10): the duty of the Secretary of State, to whose functions the Ministers have succeeded, is to give such statement as he considers appropriate of the reasons governing his decision. The equivalent provision in the Town and Country Planning Act 1971 was considered in Edwin H Bradley & Sons Ltd v Secretary of State for the Environment (1982) 47 P & CR 374. Glidewell J observed at p 389 that the reasons given must comply with the test formulated by Megaw J in In re Poyser and Mills Arbitration [1964] 2 QB 467, 478: that is to say, they must be proper, adequate and intelligible, and must deal with the substantive points that have been raised. Glidewell J added that provided the reasons comply with that test, the Secretary of State could not be challenged in that respect. He might decide that short reasons would suffice, or that a point was not substantive and thus needed little or no reasoning in his decision. In Westminster City Council v Great Portland Estates plc [1985] AC 661 Lord Scarman stated at p 673, with the agreement of the other members of the House, that he accepted the guidance given in those two cases. It is in addition important to maintain a sense of proportion when considering the duty to give reasons, and not to impose on decision makers a burden which is unreasonable having regard to the purpose intended to be served. In the present case, the Ministers received a plethora of objections to the plan and to their proposed modifications. To judge from the objections which the court has seen, many will have raised numerous distinct matters. The matters raised are likely to have been expressed by different objectors in different ways, with different nuances. If the Ministers were to be expected to address, line by line, every nuance of every matter raised in every objection, the burden imposed in such circumstances would be unreasonable. In such a situation, where objections can properly be grouped in categories according to their general tenor, it is not unreasonable for the Ministers to respond to them on that basis, summarising in broad terms the gist of a group of objections and the reasons for rejecting them. In the present case, it was reasonable for the Ministers to group the objections according to their subject matter, and to organise them according to the relevant chapters of the finalised plan. The objections contained in the appellants letter dated 29 January 2009, in particular, were relevant to several different chapters of the plan. In relation to Chapter 4, reason 33 in the Ministers schedule addressed objections the general tenor of which was summarised as being that St Andrews was at its landscape capacity. Although the appellant complains that that was a misrepresentation of her objection, that exact phrase appears in her letter, at the forefront of the points made under the heading Landscape Capacity St Andrews. The reason for rejecting objections to that general effect, from her and others, was that the Grant study indicated that some scope existed for further development to the west of St Andrews. That response did not address the broader point made by the appellant to the effect that the scale of development in St Andrews envisaged in the strategy set out in the plan, in respect of housing, a science park and a business park, would damage the landscape setting of the town. Reason 33 did not however stand alone. In relation to the plans general strategy as set out in Chapter 1, reason 5 stated the Ministers view that the plan provided an appropriate level of protection of the environment, and reason 6 explained that the plans vision and settlement strategy were consistent with government policies on development planning and sustainable economic growth. In relation to Chapter 2, which set out the strategy of realising the potential of St Andrews as an economic driver and as the location of a strategic allocation of housing, reason 17 explained that, in the Ministers view, it was appropriate for St Andrews to accommodate a strategic allocation of Fifes housing requirement, and that the local plan would articulate the strategic land allocation which can be accommodated subject to mitigation and landscape enhancement. In other words, the strategic allocation which could be accommodated, having regard to landscape considerations, would have to be determined through the local plan process. Reason 4 also explained that the strategic allocation to St Andrews West reflected the housing land required across Fife on the basis of projected population growth. In relation to the science park and business park proposed in Chapter 3, reason 22 explained that business and employment proposals for St Andrews were consistent with its academic and scientific profile. No doubt the Ministers might have explained in their statement of reasons that there was recognised to be a tension between, on the one hand, the economic and housing strategy of the structure plan, and on the other hand the protection of the landscape setting of the town, and that it was proposed to resolve that tension through the preparation of the local plan. Those matters were however explained in the structure plan itself. The reasons given provided an intelligible explanation, especially to a well informed reader such as the appellant, as to why the Ministers were not persuaded by her objections. There has therefore been no failure to comply with the duty to give reasons. Furthermore, even if the reasons might have addressed the appellants objection more clearly, there is no question of their possibly concealing a flaw in the Ministers reasoning by which she might have been prejudiced. Particularly when considered together with the Ministers strategic environmental assessment, which had acknowledged the risks to the landscape and had envisaged that they would be addressed through the local plan process, and to which the appellant had referred in her letter of objection, the reasons given did not raise any doubt as to whether the Ministers had failed to take account of a material consideration, namely the potential impact of the policy and proposals in the structure plan upon the landscape. I should add that no point was taken on behalf of the Ministers as to whether the appellants letter of 19 January 2009 was in reality an objection to the proposed modifications or was an out of time objection to the finalised plan, which did not require to be taken into consideration. Expenses Finally, the appellant took issue with the decision of the Inner House to find her liable to the second respondent, Fife Council, in the expenses of the appeal in both the Outer House and the Inner House. The appellant complained in particular that the Inner House had rejected her submission that she should be spared a prohibitive burden of expenses, in the spirit of the Aarhus Convention, partly on the basis that she had failed to provide information about her capital, although such information had not been requested by the court, and partly on the basis that she had failed to apply for a protective expenses order, although there was no established procedure for applying for such an order at the relevant time. In his opinion on this matter ([2011] CSIH 77), the Lord Justice Clerk observed that the appellant had not been deterred from bringing her application, or from appealing against the decision of the Lord Ordinary, by the possible extent of her liability should she fail. In the event, she had failed on all material points. She had placed before the court information about her income from pension and investments, but that gave the court an incomplete picture of her means, since it did not include any information about her capital. She could have applied for a protective expenses order in accordance with the guidance given in McArthur v Lord Advocate 2006 SLT 170, but had not done so. Lord Hodge also observed that the possibility of applying for such an order was well known. Although the failure to apply for such an order did not prevent consideration of the issue of prohibitive expense at a later stage in the proceedings, it was a relevant consideration at the end of the proceedings that the possibility of an adverse award of expenses had not prevented the appellant from pursuing the appeal. The appellants criticisms of the significance attached by the Inner House to her failure to apply for a protective expenses order must be rejected. The possibility of applying for such an order was well known at the relevant time. Although the procedure was not then regulated by a rule of court, clear guidance as to the procedure which should be followed had been given by Lord Glennie in the case of McArthur. The Inner House were entitled in the circumstances to treat as relevant the fact that the appellant had pursued the present proceedings without having applied for such an order. In relation to the appellants failure to disclose her capital, the submissions recorded as having been made on her behalf before the Inner House included a submission that she was not a person of great wealth. The adequacy of the information provided about her financial position was a matter for the assessment of the Inner House, which is not open to further argument in this court. Conclusion For these reasons it follows that the appeal must be dismissed. Postscript This appeal turned on the construction of particular documents. Although of importance to those affected by the outcome, the appeal did not on examination raise any arguable point of law of general public importance. It was not an appropriate use of the time of this court. This is not the first occasion in recent months when the court has made observations to this effect in respect of a Scottish appeal: see G Hamilton (Tullochgribban Mains) Ltd v Highland Council [2012] UKSC 31; 2012 SLT 1148, para 29. By virtue of section 40(3) of the Constitutional Reform Act 2005, an appeal lies to this court from any order or judgment of a court in Scotland if an appeal lay from that court to the House of Lords at or immediately before the commencement of that section. The effect of that provision is that, subject to certain statutes under which an appeal from the Court of Session lies only with the permission of the Court of Session or the Supreme Court, the general rule is that an appeal against a judgment on the whole merits of a cause lies to this court from the Inner House of the Court of Session without leave. That is a privilege which is not enjoyed by litigants in any other part of the United Kingdom. Appeals against any order or judgment of the Court of Appeal in England and Wales or in Northern Ireland can be brought only with the permission of the Court of Appeal or of this court. In practice, the Court of Appeal normally refuses permission so as to enable an Appeal Panel of this court to select, from the applications before it for permission to appeal, the cases raising the most important issues. The public interest is served, in relation to appeals from England and Wales and Northern Ireland, by the rule that permission to appeal is granted only for applications that, in the opinion of the Appeal Panel, raise an arguable point of law of general public importance which ought to be considered by the Supreme Court at that time, bearing in mind that the matter will already have been the subject of judicial decision and may have already been reviewed on appeal. An application which in the opinion of the Appeal Panel does not raise such a point of law is refused on that ground: Supreme Court Practice Direction 3.3.3. The reasons for adopting that approach were explained by Lord Bingham of Cornhill, at the time when the final court of appeal was the House of Lords, in R v Secretary of State for Trade and Industry, Ex p Eastaway [2000] 1 WLR 2222, 2228: In its role as a supreme court the House must necessarily concentrate its attention on a relatively small number of cases recognised as raising legal questions of general public importance. It cannot seek to correct errors in the application of settled law, even where such are shown to exist. In the case of appeals from the Inner House, the public interest is secured in part by certain statutory rules which qualify the right of appeal, for example by limiting appeals from judgments which were themselves given on appeal from the sheriff to points of law. The primary mechanism for securing the public interest is however the requirement that the notice of appeal must be signed by two Scottish counsel (an expression which for this purpose includes solicitors with a right of audience in the Supreme Court) who must also certify that the appeal is reasonable: Supreme Court Practice Direction 1.2.25. In Wilson v Jaymarke Estates Ltd 2007 SC (HL) 135 the House of Lords emphasised that it was important that the privilege enjoyed by Scottish litigants should not be abused. Lord Hope of Craighead observed at para 17: It is contrary to the public interest that the time of the House should be taken up with appeals which do not raise an arguable question of general public importance, as this is liable to cause delay in the disposal of appeals which merit its attention. It is also relevant to note what was said by Lord Hope at para 20: The privilege which appeals from the Court of Session to this House still enjoy, if properly used, can work to the advantage of Scottish litigants and to the development of Scots law. But the limits on it must be carefully and jealously respected if it is to continue to be in the public interest, given the amount of appellate business that now comes before the House from all parts of the United Kingdom. Those observations apply equally to appeals brought to this court. It is the responsibility of counsel, when considering whether an appeal is reasonable, to bear them in mind.

The Appellant challenges the adequacy of the reasons given by the Scottish Ministers (the Ministers) for their decision to approve Fife Councils policies for the future development of St Andrews. She is concerned that, if implemented, those policies will cause irreversible damage to the landscape setting of the town. In the Scottish planning system (as at the relevant time), the overall strategy adopted by a planning authority on which development in a particular area will be based is set out in a structure plan. It is for the Ministers to approve or reject such a plan. Individuals may make objections to the planning authority prior to the plan being submitted to the Ministers, and to the Ministers themselves after submission. Prior to making a decision to approve or reject a plan, the Ministers must consider any objections properly made to them in respect of either the plan as submitted or any material modification that they, the Ministers, propose to make to it. They must also give such a statement as they consider appropriate of the reasons governing their decision to approve, reject or modify a plan. If a structure plan is approved, its strategy is progressed in more detailed, site specific ways in local plans. In January 2003, Fife Council publicised its intention to prepare a structure plan for Fife. It commissioned a report (the Grant Report) from a landscape architect on the capacity of the landscape adjacent to St Andrews to accommodate development. The report identified approximately 25 hectares of land, 20 of which were to the west of St Andrews, on which development could be accommodated without damaging the landscape. It deemed further development inappropriate because of the potential impact on St Andrews landscape. The finalised structure plan specified the fundamental strategic objective as the economic regeneration of Fife. It stated the intention to realise the potential of St Andrews as the economic driver for Fife by expanding the town, predominantly to the west, by building 1200 houses, a science park, a business park and bypass, while balancing that aim with the need to protect its landscape setting and identify a robust green belt boundary. It also stated that the local plan would determine how, where and the extent to which St Andrews should grow. The plan was submitted to the Ministers in June 2006. In December 2008, the Ministers published proposed modifications to the structure plan, which did not materially alter it as it applied to St Andrews. They also published a strategic environmental assessment (SEA), which concluded that expansion of the town would require careful site selection and mitigation in the relevant local plans due to the limited capacity of the landscape to accommodate development, as identified in the Grant Report. The Appellant submitted a letter in January 2009 objecting to the absence of any modification of the strategy that St Andrews should be an economic driver for Fife. She made specific points grouped under various headings in support of that objection, one of which was Landscape Capacity St Andrews. Under that heading, she referred both to a 1998 study which asserted that St Andrews was at its landscape capacity and to the Grant Reports conclusion that there was limited scope for development. In May 2009, the Ministers approved the final plan with modifications, and stated in a letter to Fife Council that they had considered all objections made to them. They published two schedules of reasons which stated reasons for the modifications made and reasons for not making certain modifications respectively. The latter summarised the objections made, including the Appellants, and stated responses to them. One of these was reason 33, which addressed objections to the effect that landscape capacity assessments had indicated that St Andrews was at its landscape capacity. The reason given for not modifying the structure plan on the basis of such objections was that the Grant Report had indicated that some scope for development to the west of St Andrews existed, subject to mitigation. The Appellant challenges the validity of the structure plan on the ground that the Ministers failed in reason 33 to give adequate reasons for rejecting the part of her objection relating to landscape capacity. She asserts that her objection was not that there was no capacity for development, but that the available capacity could not accommodate the scale of the planned development; that referring to the Grant Report therefore did not address her point; and that she was substantially prejudiced by this failure, as it was unclear whether the Ministers had grappled with that point. The Inner House of the Court of Session rejected these arguments. She also appeals in relation to the way in which the Inner House dealt with the expenses of the proceedings. The Supreme Court unanimously dismisses the appeal. Lord Reed gives the judgment of the Court. Although the distinction is not clear cut, a structure plan is concerned with policy and general proposals, rather than with more detailed matters of the kind addressed by local plans. The duty of the Ministers is to give reasons for approving or rejecting a structure plan, not to justify the policies and proposals set out in it, that being the duty of the planning authority at an earlier stage in the process. Further, the adequacy of the reasons given by the Ministers must be considered on the basis that they are addressed to persons familiar with the background and the issues. These factors are relevant to the exercise of discretion allowed to them in giving such a statement of reasons as they consider appropriate [45 46]. The reasons given must be proper, adequate and intelligible, and must deal with the substantive points raised by way of objection. If that test is met, short reasons may suffice, and if a point of objection is not substantive, little or no reasoning may be given [47]. Further, the Ministers duty to give reasons must be assessed with a sense of proportion, so that an unreasonable burden is not imposed on them. Where Ministers receive a plethora of objections, it is reasonable for the Ministers to group them into broad categories according to their general tenor and to respond to them on that basis [48 49]. The assertion that St Andrews was at landscape capacity appeared in terms in the Appellants letter, and reason 33 addressed objections of that general tenor by citing the finding of the Grant Report that there existed some scope for development to the west of St Andrews [49]. The broader point made by the Appellant that the scale of development envisaged in the structure plan would damage the landscape setting of the town was addressed by the substance of five of the further reasons given in the schedule. For example, reason 17 explained that how the development was to be organised, having regard to landscape considerations, would be determined through the local plan process. The reasons given, read as a whole, provided an intelligible explanation to a well informed reader such as the Appellant as to why the Ministers were not persuaded by her objections [50 51]. Further, there was no flaw in the Ministers reasoning by which the Appellant was prejudiced. The content of the Ministers SEA and schedule of reasons clearly showed that the Ministers had taken account of the potential impact of the policies and proposals in the structure plan on the landscape [52]. In relation to expenses, the Inner House dealt with them in a way that is not open to further argument in the Supreme Court [56]. The court adds some observations about the types of cases which are appropriately considered by it, and explains why this appeal did not fall into that category [58 63].

The ability of asylum seekers who make unsuccessful claims to be allowed to remain to discover further reasons why they should not be removed from the country where they seek refuge is an inescapable feature of any system that is put in place to meet a States obligations under the Geneva Convention on the Status of Refugees and article 3 of the European Convention on Human Rights. The opportunity for further reasons to be put forward is enhanced by the fact that a series of decisions may need to be taken before a persons immigration status is resolved. Various measures have been put in place by the United Kingdom to deal with this phenomenon. Some of these measures are to be found in the Immigration Rules, and on occasion the meaning that is to be given to them is the subject of controversy: see ZT (Kosovo) v Secretary of State for the Home Department [2009] UKHL 6, [2009] 1 WLR 348. In this case however we are concerned with meaning and effect of the statute. The relevant provisions are to be found in Part 5 of the Nationality, Immigration and Asylum Act 2002, which deals with immigration and asylum appeals. The question is whether the expression an asylum claim, or a human rights claim in section 92(4)(a) of the 2002 Act includes any second or subsequent claim that the asylum seeker may make, or only a second or subsequent claim which has been accepted as a fresh claim by the Secretary of State under rule 353 of the Immigration Rules. The facts The first respondent BA is a citizen of Nigeria. He is married to a British citizen, by whom he has four children. He entered the United Kingdom in 1988 as a visitor. Initially he was given six months leave to enter. Later he was granted leave to remain as a student until the end of August 1991. He was granted indefinite leave to remain on 25 May 1994 on the basis of his marriage. On 20 May 2005, however, he was served with a decision by the Secretary of State that he was to be deported following his release on licence from a 10 year sentence of imprisonment for conspiracy to import class A drugs. His appeal against this decision to the asylum and immigration tribunal on human rights grounds failed. On 25 May 2007 he was served with a deportation order. On 25 June 2007 and 8 August 2007 further submissions were made on his behalf as to why he should not be deported. The Secretary of State agreed to consider his reasons for seeking revocation of the deportation order, but she declined to revoke it. Directions were then given for him to be removed from this country on 29 December 2007. The respondent PE is a citizen of Cameroon. He entered the United Kingdom clandestinely in August 2004. On 19 May 2005 he applied for asylum. The Secretary of State refused his application on 5 July 2005. On 9 July 2005 it was decided that directions were to be given for his removal to Cameroon. He did not appeal against this decision. Before it was put into effect however he was sentenced to twelve months imprisonment for having a forged passport and using it to obtain work, to which he had pleaded guilty. As a result of this conviction the Secretary of State decided to make a deportation order against him. He appealed against this decision on asylum and human rights grounds, but his appeal was dismissed. The deportation order was signed, and it was served on him on 10 January 2007. On various dates thereafter his representatives made written representations on his behalf for the decision to be reconsidered. They claimed that he had been and would be persecuted in Cameroon on account of his homosexuality. The Secretary of State declined to reconsider her decision, as in her view his further representations did not amount to a fresh claim within the meaning of rule 353 of the Immigration Rules. He appealed to the tribunal against the Secretary of States refusal to revoke her decision to make the order. The tribunal held that this decision was not an appealable decision. On 27 December 2007 BA applied for judicial review of the directions for his removal. He contended that he had a further in-country right of appeal. It was no part of his case that his further representations amounted to a fresh claim under rule 353 of the Immigration Rules. PE had already applied for judicial review of the decisions that had been made against him. He claimed that he had a right of appeal against a refusal to revoke the deportation order, that this right was exercisable in-country and that in any event the representations amounted to a fresh claim under rule 353. Permission was given in each case, and the applications were heard together by Blake J: [2008] EWHC 1140 (Admin); [2008] 4 All ER 798. The judge held that what determined whether there was an in- country right of appeal was whether or not the Secretary of State was satisfied under rule 353 there was a fresh claim: para 62. In his opinion neither claimant had an in-country right of appeal simply by virtue of having made a protection claim or having made fresh representations supported by different material: para 74. In PEs case he quashed the decision that his was not a fresh claim and remitted it for redetermination by the Secretary of State. He said that if the Secretary of State were to conclude that the claim is a fresh one but it was still refused, PE would have access to a right of appeal in-country before removal. But if it was not a fresh claim, his right to appeal would have to be exercised from abroad. As Sedley LJ observed in the Court of Appeal, this conclusion raises the same issue as that raised by BAs appeal: [2009] EWCA Civ 119; [2009] 2 WLR 1370, para 4. Rule 353 of the Immigration Rules, on which the Secretary of State relies, is headed Fresh claims. It provides: 353. When a human rights or asylum claim has been refused and any appeal relating to that claim is no longer pending, the decision maker will consider any further submissions and, if rejected, will then determine whether they amount to a fresh claim. The submissions will amount to a fresh claim if they are significantly different from the material that has previously been considered. The submissions will only be significantly different if the content: (i) had not already been considered; and (ii) taken together with the previously considered material, created a realistic prospect of success, notwithstanding its rejection. Rule 353A, which needs to be read together with rule 353 to complete the picture, provides: 353A. Consideration of further submissions shall be subject to the procedures set out in these Rules. An applicant who has made further submissions shall not be removed before the Secretary of State has considered the submissions under paragraph 353 or otherwise. This paragraph does not apply to submissions made overseas. The 2002 Act This Act was passed in the light of strong pressure to streamline appeals against immigration decisions in the light of objections that were taken to the large number of repeat claims. Part 5 of the Act provides a general right of appeal against an immigration decision to an adjudicator: section 82(1). The expression immigration decision is defined in section 82(2). It includes, among other things, a decision that a person is to be removed from the United Kingdom who is here unlawfully, a decision to make a deportation order under section 5(1) of the Act and a refusal to revoke a deportation order under section 5(2): sections 82(2)(g), (j) and (k). Having defined this expression, the statute proceeds to lay down an elaborate system for the handling of appeals. Section 84(1) provides that an appeal under section 82(1) against an immigration decision must be brought under one or more of the grounds specified in that subsection. They include the following ground, with a view to ensuring that the United Kingdom complies with its international obligations: (g) that removal of the appellant from the United Kingdom in consequence of the immigration decision would breach the United Kingdoms obligations under the Refugee Convention or would be unlawful under section 6 of the Human Rights Act 1998 as being incompatible with the appellants Convention rights. This is the ground on which both BA and PE rely. Section 92, as amended, provides: (1) A person may not appeal under section 82(1) while he is in the United Kingdom unless his appeal is of a kind to which this section applies. (2) This section applies to an appeal against an immigration decision of a kind specified in section 82(2)(c), (d),(e), (f) . . . and (j). (3) This section also applies to an appeal against refusal of leave to enter the United Kingdom if (a) at the time of the refusal the appellant is in the United Kingdom, and (b) on his arrival in the United Kingdom the appellant had entry clearance. (4) This section also applies to an appeal against an immigration decision if the appellant (a) has made an asylum claim, or a human rights claim, while in the United Kingdom, or (b) is an EEA national or a member of the family of an EEA national and makes a claim to the Secretary of State that the decision breaches the appellants rights under the Community Treaties in respect of entry to or residence in the United Kingdom. The respondents case is that section 92(4)(a) confers a suspensive in-country right of appeal unless the appeal has been certified under either section 94 or section 96 of the 2002 Act. It is suspensive because it suspends the operation of the immigration decision appealed against until the appeal has been disposed of. Section 94 excludes appeals in asylum and human rights cases if the Secretary of State certifies that they are clearly unfounded. The relevant subsections, as amended, provide as follows: (1) This section applies to an appeal under section 82(1) where the appellant has made an asylum claim or a human rights claim (or both). (2) A person may not bring an appeal to which this section applies in reliance on section 92(4)(a) if the Secretary of State certifies that the claim or claims mentioned in subsection (1) is or are clearly unfounded. (9) Where a person in relation to whom a certificate is issued under this section subsequently brings an appeal under section 82(1) while outside the United Kingdom, the appeal shall be considered as if he had not been removed from the United Kingdom. Section 96 removes the right of appeal altogether if the Secretary of State or an immigration officer certifies that the person has dealt with, or ought to have dealt with, the issue in an earlier appeal. The relevant subsections of section 96, as amended, are in these terms: (1) An appeal under section 82(1) against an immigration decision (the new decision) in respect of a person may not be brought if the Secretary of State or an immigration officer certifies (a) that the person was notified of a right of appeal under that section against another immigration decision (the old decision) (whether or not an appeal was brought and whether or not any appeal brought has been determined), (b) that the claim or application to which the new decision relates relies on a matter that could have been raised in an appeal against the old decision, and (c) that, in the opinion of the Secretary of State or the immigration officer, there is no satisfactory reason for that matter not having been raised in an appeal against the old decision. (2) An appeal under section 82(1) against an immigration decision (the new decision) in respect of a person may not be brought if the Secretary of State or an immigration officer certifies (a) that the person received a notice under section 120 by virtue of an application other than that to which the new decision relates or by virtue of a decision other than the new decision, (b) that the new decision relates to an application or claim which relies on a matter that should have been, but has not been, raised in a statement made in response to that notice, and (c) that, in the opinion of the Secretary of State or the immigration officer, there is no satisfactory reason for that matter not having been raised in a statement made in response to that notice. The expressions asylum claim and human rights claim are each defined in section 113(1). It provides: In this Part, unless a contrary intention appears asylum claim means a claim made by a person to the Secretary of State at a place designated by the Secretary of State that to remove the person from or to require him to leave the United Kingdom would breach the United Kingdoms obligations under the Refugee Convention, human rights claim means a claim made by a person to the Secretary of State at a place designated by the Secretary of State that to remove the person from or to require him to leave the United Kingdom would be unlawful under section 6 of the Human Rights Act 1998 (c. 42) (public authority not to act contrary to Convention) as being incompatible with his Convention rights Section 12 of the Immigration, Asylum and Nationality Act 2006 amends those definitions prospectively by adding in each case a provision that the expression: does not include a claim which, having regard to a former claim, falls to be disregarded for the purposes of this Part in accordance with the immigration rules. As Sedley LJ observed in the Court of Appeal, under this amended formula a claim in any case where an earlier challenge to removal has been made and failed will only rank as an asylum claim or a human rights claim if it is a fresh claim under rule 353: [2009] 2 WLR 1370, para 27. The amendment has not yet been brought into force, as the entire system of immigration law is now under review. A Green Paper containing proposals to simplify the law was published in February 2008, and it is expected that a Bill to simplify the law will be published towards the end of this year. No certificates under either section 94 or section 96 have been issued to the respondent in either case. They maintain that in these circumstances they are entitled to have their appeals heard in-country under section 92(4)(a), and that they cannot be removed from the United Kingdom until their appeals have been dealt with. The Secretary of States contention is that an appeal against an immigration decision is available only out of country where, as in BAs case, the further representations have not been advanced as a fresh claim or, as in PEs case, have not been accepted as such by the Secretary of State. He maintains that their appeals must now be pursued out of country. If so, there is now no obstacle to the respondents being deported in accordance with the deportation orders that have been served on them. The competing arguments in more detail For the Secretary of State Miss Laing QC did not dispute that a right of appeal arises under section 82(1) when a decision that is an immigration decision is taken. Nor does she dispute that the Secretary of States refusal in these cases not to revoke the deportation orders were immigration decisions within the meaning of section 82(2)(k) of the 2002 Act. What was in issue was whether the right of appeal against those decisions was to be exercised from within the United Kingdom. Her submission was that the words an asylum claim, or a human rights claim in section 92(4)(a) mean a first asylum or human rights claim or a second or subsequent asylum or human rights claim which has been accepted as a fresh claim under rule 353 of the Immigration Rules. She acknowledged that this was not the literal meaning of this provision, as the definitions of these expressions made no reference to the fact that the claims to which they referred had to be a first or a fresh claim. But she said that they had to be construed in the context of the scheme of the statute as a whole, and that they had to be read in the way she suggested to avoid an absurdity. She submitted that the authorities also showed that they had to be read subject to this qualification. She based this submission on two decisions of the Court of Appeal: Cakabay v Secretary of State for the Home Department (Nos 2 and 3) [1999] Imm AR 176 and R v Secretary of State for the Home Department, ex p Onibiyo [1996] QB 768. In each of these cases observations were made about the treatment of repeat claims for asylum in the context of the provisions of the Asylum and Immigration Appeals Act 1993. In Cakabay v Secretary of State for the Home Department (Nos 2 and 3) [1999] Imm AR 176, 180-181, Schiemann LJ said: The statute makes no express provision as to what is to be done in the case of repeated claims for asylum by the same person. The second claim may be identical to the first (a repetitious claim) or may be different (a fresh claim). It is common ground that a fresh claim attracts all the substantive and procedural consequences of an initial claim whereas a repetitious claim does not. In the case of a repetitious claim no more is required to be done: the first decision has ensured that the United Kingdom has complied with its obligations under the Convention. Section 6 of the 1993 Act creates no inhibition on the claimants removal: the Secretary of State has on the occasion of his decision on the first claim decided the repetitious claim. So far as the decision on the claimants repetitious application for leave to enter is concerned, the claimant will be told that leave has already been refused and that there is no need for any new decision. In R v Secretary of State for the Home Department, ex p Onibiyo [1996] QB 768 the court had to consider whether, as a matter of law, a person might make more than one claim for asylum within the meaning of section 6 of the 1993 Act during a single uninterrupted stay in the United Kingdom. The Secretary of State argued that, once a person had made a claim for asylum, had had that claim refused and had unsuccessfully exercised his rights of appeal under section 9 of that Act, his legal rights were exhausted. There could be no further claim for asylum unless the claimant left the United Kingdom and returned before making a fresh application. At p 781 Sir Thomas Bingham MR rejected that argument. He said that it would undermine the beneficial object of the Convention if the making of an unsuccessful application for asylum were to be treated as modifying the obligation of the United Kingdom or depriving a person of the right to make a fresh claim for asylum. He then discussed what constituted a fresh claim. At pp 783-784 he said that the acid test must always be whether, comparing the new claim with that which had been rejected, and excluding material on which the claimant could reasonably be expected to rely in the earlier claim, the new claim was sufficiently different from the earlier claim to admit of a realistic prospect that a favourable view could be taken of the new claim despite the unfavourable conclusion reached on the earlier claim. Miss Laing said that the same approach should be taken to the words used in section 92(4)(a) of the 2002 Act. She submitted that the intention of Parliament when enacting this provision had to be derived from the context, the legislative history and the requirements of the international instruments. The essential features of the 2002 Act remained the same as those in the 1993 Act. It was to be assumed that where the same words were used they were intended to have the same meaning. It was implicit in the approach that was taken in Ex p Onibiyo that the Convention did not require protection against removal if all that the further representations were doing was to repeat an earlier claim which had been considered and rejected on appeal. What the international instruments required was compliance, not redundancy. It was only a fresh claim that would be an obstacle to the claimants removal, by converting what would otherwise be an out of country appeal into an appeal that must be dealt with in-country. As for the prospective amendment of section 113, she said that it did two things. It removed the requirement that a claim be made at a place designated by the Secretary of State. And it clarified what section 113 should be taken to have meant on enactment. In the words of the Explanatory Notes, its purpose is to clarify that further submissions which follow the refusal of an asylum or human rights claim but which do not amount to a fresh claim will not carry a further right of appeal. But it was of no assistance in resolving the argument either way as to the meaning of the definitions in their current form. Lloyd LJ was right when he said in the Court of Appeal that the amendment should be ignored: [2009] 2 WLR 1370, para 35. Mr Husain too submitted that the meaning of the words used in section 94(2)(a) must be understood from their context. But he said that the context was markedly different from that in the 1993 Act. There was now a series of statutory provisions against abuse which were not to be found in the earlier legislation. It was those provisions, and not those instituted under the Immigration Rules by the executive, that should be used if it was thought that the appeals should not be dealt with in-country. The Secretary of States approach rendered the new provisions otiose and unworkable in the case of second claims. For example, Parliament had provided by section 84(1)(g) that an appeal against an immigration decision might be taken on the ground that the persons removal from the United Kingdom would breach the States obligations under the Refugee Convention. Section 84(1)(c) dealt with the situation where it was contended that the decision was unlawful under section 6 of the Human Rights Act 1998. But the rights conferred by the European Convention on Human Rights were, in various respects, not the same: JM v Secretary of State for the Home Department [2006] EWCA Civ 1402; [2007] Imm AR 293, para 27, per Laws LJ. If the Secretary of State was right that the appeal could only be taken in-country if it was certified under rule 353, the person would be forced to take his appeal out of country even although it was on grounds referred to in section 84(1)(g), which could be different from those advanced at an earlier stage under section 84(1)(c). As he would be without a certificate under section 94, he would be deprived of the benefit of section 94(9). As for what was said in R v Secretary of State for the Home Department, ex p Onibiyo, Mr Husain said that it was not the only relevant authority. Prior to the enactment of the 2002 Act there were two other important decisions to which reference should be made. In R (Kariharan) v Secretary of State for the Home Department [2002] EWCA Civ 1102, [2003] QB 933, reference was made to the one-stop procedure that was introduced by sections 74-77 of the Immigration and Asylum Act 1999 and to section 73 of that Act, which enabled the Secretary of State to certify that a claim that a decision of a decision-maker was in breach of the appellants human rights could reasonably have been made earlier, the effect of which was that the appeal was to be treated as finally determined: see Auld LJ, para 30. In para 36 Sedley LJ said that those provisions gave ample powers to the Secretary of State to dispose summarily of repetitive and abusive appeals. In R v Secretary of State for the Home Department, ex p Saleem [2001] 1 WLR 443, 449, Roche LJ accepted that the right of appeal to an independent appellate body was a fundamental or basic right akin to the right of unimpeded access to a court, an infringement of which must be either expressly authorised by or arise by necessary implication from an Act of Parliament. Furthermore the approach that was taken in R v Secretary of State for the Home Department, ex p Onibiyo to the problem of repeat claims was imprecise and had been rendered unnecessary by the current legislation. In that case, as Sir Thomas Bingham MR recorded at p 783, counsel for the applicant, Mr Blake QC, as he then was, had conceded that that a fresh claim for asylum could not be made by advancing, even with some elaboration or addition, a claim already made or by relying on evidence available to the applicant but not advanced at the time of an earlier claim. A similar concession was made in Manvinder Singh v Secretary of State for the Home Department [1995] EWCA Civ 53, where Stuart-Smith LJ noted that in his skeleton argument Mr Blake QC had accepted that Parliament could not have intended removal to be indefinitely deferred pending successive identical appeals. The observations in Ex p Onibiyo had been inspired by the possibility of abuse. The contours of the legislation had now changed. The opportunity to resolve the issue by bringing the amendment of the definitions in section 113 into force had not been taken. It was difficult to understand why, if its purpose was simply to clarify, it had not been brought into force. As it was, the legislation had to be taken as it stood without regard to what may have been contemplated by the amendment. Discussion I have set out the competing arguments at some length, partly out of respect for the excellent submissions that were advanced by counsel on either side in the Chamber of the House of Lords on the occasion of the last sitting of the House in its judicial capacity, and partly because they demonstrate very clearly the essence of the issue that we must decide. Miss Laing invites us to follow Sir Thomas Bingham MRs analysis of the problem in R v Secretary of State for the Home Department, ex p Onibiyo, to hold that the words an asylum claim, or a human rights claim in section 92(4)(a) of the 2002 Act mean a first asylum or human rights claim or a second or subsequent claim which has been accepted by the Secretary of State as a fresh claim, and that the procedure for determining whether or not a second or subsequent claim is a fresh claim is to be found in rule 353 of the Immigration Rules. Mr Husain on the other hand invites us to examine those words in the context of the current legislation read as a whole, taking full account of the progress of thinking since Ex p Onibiyo as to how the problem of repeat claims should be addressed. He submits that there is no justification, in the light of the provisions for dealing with repeat claims that the 2002 Act contains, for enlarging upon the plain words of the statute. The strength of Miss Laings argument lies in the fact that the definition of the phrase claim for asylum has remained, in substance, the same since its first appearance in section 1 of the 1993 Act where it was said to mean a claim made by a person (whether before or after the coming into force of this section) that it would be contrary to the United Kingdoms obligations under the Convention for him to be removed from, or required to leave, the United Kingdom. The Convention there referred to was, of course, the Refugee Convention. The definition in section 167 of the 1999 Act was in substantially the same terms. Section 113 of the 2002 Act varies the language a little bit, because it calls this kind of claim an asylum claim, introduces a requirement for it to be made at a place designated by the Secretary of State (no such place has been designated) and adds a definition in almost identical terms of a human rights claim. The relevant phrase throughout is a claim. In R v Secretary of State for the Home Department, ex p Onibiyo the Secretary of States argument that once there had been a claim for asylum and one appeal there could be no further claim for asylum unless the claimant had left the United Kingdom and returned before making the fresh application was rejected. It was held that there could be a fresh claim for asylum with the same consequences as to the right of appeal as follow on the refusal of an initial claim, provided that the Secretary of State recognised the fresh claim as a claim for asylum. If one looks no further and applies what Bennion on Statutory Interpretation (5th ed, 2008), section 201 and Part XIV described as the informed interpretation rule, there is plainly much to be said for the view that the definitions that are set out in section 113 of the 2002 Act should be read in the same way. The procedure for determining whether a repeat claim is or is not a fresh claim is set out in rule 353 of the Immigration Rules, the effect of which I attempted to explain in Z T (Kosovo) v Secretary of State for the Home Department [2009] 1 WLR 348, para 33. It is a short step to conclude that a repeat claim which is not held under rule 353 to be a fresh claim falls to be disregarded as an asylum claim, or a human rights claim for the purposes of section 92(4)(a). Like Lloyd LJ, I would not draw an inference either way from the amendment of section 113 by section 12 of the 2006 Act as it is not yet in force. It is an elementary principle, however, that the words of a statute should be construed in the context of the scheme of the statute as a whole. And it is plain that the scheme of the 2002 Act is not the same as that of the 1993 Act to which Sir Thomas Bingham MR addressed himself in Ex p Onibiyo. The problem to which he addressed himself was created by the absence of any provision in the statute to prevent abuse. The question was how that gap might best be filled, having regard to the fact that the blunt solution that was proposed by the Secretary of State would, as the Master of the Rolls pointed out at p 781, undermine the beneficial object of the Convention and the measures giving effect to it in this country. Parliament might, of course, have stood still and left the matter to be dealt with under the Immigration Rules. But it has not stood still. The experience of the intervening years has been taken into account. First, there were the provisions against abuse in sections 73 to 77 of the 1999 Act. Now there is a set of entirely new provisions in the 2002 Act. As Lord Hoffmann said in A v Hoare [2008] UKHL 6, [2008] 1 AC 844, para 15, while there is a good deal of authority for having regard in the construction of a statute to the way a word or phrase has been construed by the court in earlier statutes, the value of such previous interpretation as a guide to construction will vary with the circumstances. In this case the phrase in question has remained, in essence, unchanged. But the system in which it must be made to work is very different. This is a factor to which full weight must be given. The new system contains a range of powers that enable the Secretary of State or, as the case may be, an immigration officer to deal with the problem of repeat claims. The Secretary of States power in section 94(2) of the 2002 Act to certify that a claim is clearly unfounded, if exercised, has the effect that the person may not bring his appeal in-country in reliance on section 92(4). The power in section 96 enables the Secretary of State or an immigration officer to certify that a person who is subject to a new immigration decision has raised an issue which has been dealt with, or ought to have been dealt with, in an earlier appeal against a previous immigration decision, which has the effect that the person will have no right of appeal against the new decision. It is common ground that the present cases are not certifiable under either of these two sections. Why then should they be subjected to a further requirement which is not mentioned anywhere in the 2002 Act? It can only be read into the Act by, as Sedley LJ in the Court of Appeal put it, glossing the meaning of the words aclaim so as to exclude a further claim which has not been held under rule 353 to be a fresh claim: [2009] 2 WLR 1370, paras 20, 30. The court had to do this in Ex p Onibiyo. But there is no need to do this now. It is not just that there is no need now to read those words into the statute. As Mr Husain pointed out, the two systems for excluding repeat claims are not compatible. Take the system that section 94 lays down for dealing with claims that the Secretary of State considers to be clearly unfounded. If he issues a certificate to that effect, the appeal must be pursued out of country. But the claimant will have the benefit of section 94(9), which provides that where a person in relation to whom a certificate under that section subsequently brings an appeal under section 82(1) while outside the United Kingdom the appeal will be considered as if he had not been removed from the United Kingdom. He will have the benefit too of the passage in parenthesis in section 95, which provides: A person who is outside the United Kingdom may not appeal under section 82(1) on the ground specified in section 84(1)(g) (except in a case to which section 94(9) applies). If Miss Laing is right, the effect of a decision by the Secretary of State that the representations that a person makes against an immigration decision of the kind mentioned in section 82(1)(k) a refusal to revoke a deportation order is not a fresh claim will be that an appeal against that decision must be brought out of country. But the interpretative route by which she reaches that position does not save that person from the exclusionary rule in section 95, unless which has not been done in these cases the claims are also certified under section 94(2) as clearly unfounded. The ground of appeal referred to in section 84(1)(g) has been designed to honour the international obligations of the United Kingdom. To exclude claims which the Secretary of State considers not to be fresh claims from this ground of appeal, when claims which he certifies as clearly unfounded are given the benefit of it, can serve no good purpose. On the contrary, it risks undermining the beneficial objects of the Refugee Convention which the court in Onibiyo, under a legislative system which had no equivalent to section 95, was careful to avoid. In my opinion Lloyd LJ in the Court of Appeal was right to attach importance to this point: [2009] 2 WLR 1370, paras 39-40. As he said, the development of the legislative provisions and the powers given to the Secretary of State to limit the scope for in country appeals deprive Miss Laings submissions of the foundation which they need. There is obviously a balance to be struck. The immigration appeals system must not be burdened with worthless repeat claims. On the other hand, procedures that are put in place to address this problem must respect the United Kingdoms international obligations. That is what the legislative scheme does, when section 95 is read together with section 94(9). It preserves the right to maintain in an out of country appeal that the decision in question has breached international obligations. I would hold that claims which are not certified under section 94 or excluded under section 96, if rejected, should be allowed to proceed to appeal in-country under sections 82 and 92, whether or not they are accepted by the Secretary of State as fresh claims. There is no doubt, as I indicated in Z T (Kosovo) v Secretary of State for the Home Department [2009] 1 WLR 348, para 33, that rule 353 was drafted on the assumption that a claimant who made further submissions would be at risk of being removed or required to leave immediately if he does not have a fresh claim. That was indeed the case when this rule was originally drafted, as there was no equivalent of section 92(4) of the 2002 Act. But Mr Husains analysis has persuaded me that the legislative scheme that Parliament has now put in place does not have that effect. Its carefully interlocking provisions, when read as a whole, set out the complete code for dealing with repeat claims. Rule 353, as presently drafted, has no part to play in the legislative scheme. As an expression of the will of Parliament, it must take priority over the rules formulated by the executive. Rule 353A on the other hand remains in place as necessary protection against premature removal until the further submissions have been considered by the Secretary of State. Conclusion I would dismiss these appeals and affirm the orders made by the Court of Appeal. I have had the advantage of reading in draft the judgment of Lord Hope and am persuaded that for the reasons he has given these appeals should be dismissed. I am in full agreement also with the comments made by Lord Brown whose judgment I have also had the advantage of reading in draft. I agree with the judgment of Lord Hope and with the additional observations of Lord Brown. The submission for the Home Secretary that the expression an asylum claim in section 92(4)(a) of the Nationality, Immigration and Asylum Act 2002 should be given the same meaning as Sir Thomas Bingham gave to the expression a claim for asylum in section 6 of the Asylum and Immigration Appeals Act 1993 is at first sight compelling. Certainly, the change in the form of the expression is irrelevant. The contexts within which the two expressions have to be interpreted are, however, relevant. And, as Lord Hope explains, they are significantly different, since the 2002 Act contains a new scheme for dealing with abusive claims. Given that new scheme, there is no longer the same need to adopt the former interpretation and, indeed, the one now adopted fits the new context better. I am afraid that I have reached a different conclusion from the other members of the Court. There is no need to explain my views in detail as it will make no difference to the result. We are concerned with the meaning of the word claim in section 92(4)(a) of the Nationality, Immigration and Asylum Act 2002. When that Act was passed, it had been understood since 1996 that in this context the word claim referred to a first claim, or to a second or subsequent claim which was different from any earlier claim, but not to a second or subsequent claim which was merely repetitious of an earlier claim. This eminently sensible conclusion had been reached by a Court of Appeal led by Sir Thomas Bingham MR in R v Secretary of State for the Home Department, ex parte Onibiyo [1996] QB 768. It is a well-known principle of statutory interpretation that when Parliament re-enacts words which have already been the subject of judicial interpretation it intends them to have the same meaning. There was no need, therefore, for Parliament to spell out what it meant by a claim in section 92(4)(a). It was already well-known. In Onibiyo the Court also considered whether the decision that a claim was a claim was a question of precedent fact for the court to decide or a question for the Secretary of State to decide subject to challenge on the usual judicial review grounds. It was not necessary to decide this question in that case, but the Master of the Rolls inclined to the latter view. This was adopted by the Court of Appeal in later cases: see eg WM (DRC) v Secretary of State for the Home Department [2006] EWCA Civ 1495, [2007] Imm A R 337; R (AK) (Sri Lanka) v Secretary of State for the Home Department [2009] EWCA Civ 447. Rule 353 of the Immigration Rules sets out the test which the Secretary of State applies in making his decision. It should not be thought, however, that Miss Laings argument depends upon the existence and wording of rule 353. That merely provides for how the Secretary of State reaches his decision as to whether or not a claim is a claim. It is not the end of the matter. The Secretary of States test might come under attack for not reflecting the acid test laid down by the Master of the Rolls in Onibiyo. His conclusion reached in an individual case might come under attack on Wednesbury or other conventional grounds. The conclusion of the Court of Appeal, that this is not a question of precedent fact, to be determined by the appellate authorities and ultimately by the courts, might be challenged in the Supreme Court. Miss Laings argument is simply that when Parliament enacted section 92(4)(a) of the 2002 Act it thought that the meaning of an asylum claim, or a human rights claim, was already well established and did not include a claim which was merely repetitious of an earlier one. She is not relying on rule 353 to construe the 2002 Act. I am not persuaded by Mr Husains argument, attractively though it was put, that the new powers under sections 94 and 96 to restrict or deny appeals put such an entirely new complexion on matters that Parliament is to be taken to have abandoned the old meaning of claim without saying so. This would be astonishing given that it is apparently common ground that neither of these claims would have been certifiable under either section. Section 94 removes the right of in-country (but not out-country) appeal if an asylum or human rights claim is clearly unfounded. Yet apparently it is not suggested that the fact that a claim has been made previously and rejected necessarily means that it is clearly unfounded. Section 96 removes the right of appeal altogether if a claim or application raises matters which could have been raised on an appeal against an earlier decision. This does not deal with a claim which raises exactly the same matters as were rejected on an earlier occasion. So it is common ground that these new powers are not apt to cater for repetitious claims. If so, I cannot understand how Parliament, by introducing them, can be taken to have departed from an established interpretation which was designed to deal with a different problem. Nor am I persuaded by the argument that, if an asylum or human rights claim is certified under section 94, the claimant can still raise his asylum or human rights arguments in an out-of-country appeal, but that otherwise section 95 prevents a person from raising asylum or human rights grounds from outside the country. A person whose claim is certified under section 94 is denied any right of appeal in this country, but may appeal from outside. It is only right in those circumstances that he should be able to appeal on the same grounds that he could have raised in this country. A person whose claim is not a claim at all, because essentially the same claim has already been determined, has already enjoyed rights of appeal on asylum or human rights grounds in this country. There is no reason to give him a second bite at the cherry whether here or abroad. This country is bound not to expel people in breach of their human rights or when they have a well-founded fear of persecution in their home country. We must of course have a fair system for deciding whether expulsion will be in breach of those obligations. An initial decision followed by an appeal system in this country is sufficient to do this. This country is not bound to allow people to make essentially the same claim time and time again as a way of staving off their departure. The interpretation put forward by Miss Laing accords with our international obligations, as well as with principle and practicality. I would have allowed this appeal. I have had the advantage of reading in draft the judgment of Lord Hope and am in full agreement with him that these appeals should be dismissed. I would make it clear, however, that this is not a conclusion at which I readily arrived and I reached it only on the basis that, as Mr Husain in his enticing submissions readily accepted, the statutory solution to the problem of abuse created by the making of repeat asylum claims lies not in construing an asylum claim in section 92(4)(a) of the Nationality, Immigration and Asylum Act 2002 as the Court of Appeal in R v Secretary of State for the Home Department ex parte Onibiyo [1996] QB 768 construed a claim for asylum in section 6 of the Asylum and Immigration Appeals Act 1993 but rather in the Secretary of State issuing certificates where appropriate under sections 94 or 96 of the 2002 Act (no equivalent provisions having been available under the 1993 Act). True it is, as observed by Lord Hope in paragraph 29 of his judgment (and noted also at paragraph 13 of Sedley LJs judgment in the Court of Appeal [2009] 2 WLR 1370), that it is common ground between the parties that the present cases are not certifiable under either of these sections. That, however, as I understand it, is solely because, so far as section 94 is concerned, it applies only where the appellant has made an asylum claim or a human rights claim (or both) (subsection 1). By the same token that, on the Secretary of States argument, a repeat claim does not fall within those words in section 92 (4)(a), so he contends that it does not do so for section 94 purposes. Given, however, as Mr Husain submits and I would accept, that a repeat claim does involve making a claim for the purposes of section 92(4)(a), so too it enables the Secretary of State to certify it as clearly unfounded if he so regards it under section 94. Moreover, consistently with what the House said in ZT (Kosovo) v Secretary of State for the Home Department [2009] 1 WLR 348 (Lord Neubergers views expressed at paragraphs 80-81 of his opinion being determinative on this point), there will be precious few cases in which that test differs from the rule 353 test as to whether a claim has a realistic prospect of success. The major reason why finally I am persuaded that the respondents approach is the correct one is that, so far from leaving the critical words an asylum claim in section 92(4)(a) to be construed as the Court of Appeal in Onibiyo construed a claim for asylum in the 1993 Act, Parliament in the 2002 Act not only made express provisions to deal with abusive claims but split up different aspects of the possible abuse between sections 94 and 96. Sir Thomas Bingham MR in Onibiyo had said (at pp783-784): The acid test must always be whether, comparing the new claim with that earlier rejected, and excluding material on which the claimant could reasonably have been expected to rely in the earlier claim, the new claim is sufficiently different from the earlier claim to admit of a realistic prospect that a favourable view could be taken of the new claim despite the unfavourable conclusion reached on the earlier claim. [Ex]cluding material on which the claimant could reasonably have been expected to rely in the earlier claim is now expressly dealt with by section 96. As already explained, ordinary repeat claims fall to be excluded under section 94. As Lord Hope points out, moreover, there is one very clear advantage in providing for any abuse by making repeat claims to be dealt with by section 94 rather than rule 353: by virtue of sections 94(9), 95 and 84(1)(g) it allows an out of country appeal to be brought on human rights grounds when otherwise that would not be possible. For these reasons, therefore, which in large part echo those given in Lord Hopes altogether fuller judgment, I too would dismiss these appeals. For these reasons, therefore, which in large part echo those given in Lord Hopes altogether fuller judgment, I too would dismiss these appeals. For this reason I do not agree with the approach of Lord Wilson to this issue. Lord Neuberger of Abbotsbury MR at para 53 remarked that todays journalism is tomorrows archive and at para 58 In the case of journalism, above all news journalism, information held for purposes of journalism may soon stop being held for that purpose and be held, instead, for historical or archival purposes. I imagine that the Bank of England also archives information initially used for the purposes of carrying out its functions. No doubt the BBC has recourse to its archives for journalistic purposes from time to time and, if held for purposes of journalism is given a broad meaning it could be said in relation to the BBC that one of the purposes of holding archived material is journalism, albeit a relatively remote purpose. However, Lord Neuberger accepted that archived material would not, as such, fall within the protection afforded by the definition. I consider that he was right to do so. Disclosure of material that is held only in the archives will not be likely to interfere with or inhibit the BBCs broadcasting functions. It ought to be susceptible to disclosure under the Act. If possible information held for purposes other than those of journalism, art or literature should be given an interpretation that brings archived material within that phrase. Can this be achieved? I believe that Lord Walker has the answer. He has concluded, as have I, that the protection is aimed at work in progress and BBCs broadcasting output. He suggests that the Tribunal should have regard to the directness of the purpose of holding the information and the BBCs journalistic activities. I agree. Information should only be found to be held for purposes of journalism, art or literature if an immediate object of holding the information is to use it for one of those purposes. If that test is satisfied the information will fall outside the definition, even if there is also some other purpose for holding the information and even if that is the predominant purpose. If it is not, the information will fall within the definition and be subject to disclosure in accordance with the provisions of Parts I to V of the Act. This appeal requires the Supreme Court to focus closely on the language and legislative purpose of the provisions of the Freedom of Information Act 2000 (FOIA) dealing with public authorities to which that statute has limited application. Without that focus, a long trawl through the Strasbourg jurisprudence on article 10 of the European Convention on Human Rights is of little assistance. The relevant provisions are in section 7 of and Schedule 1 to FOIA. Section 7(1) provides that where a public authority is listed in Schedule 1 only in relation to information of a specified description, nothing in Parts I to V of the Act is to apply to any other information held by the authority. Schedule 1, Part VI lists the British Broadcasting Corporation (BBC) in respect of information held for purposes other than those of journalism, art or literature. A similar form of words appears (in adjectival form) in section 3 of the Data Protection Act 1998, which defines the special purposes as meaning any one or more of the following (a) the purposes of journalism, (b) artistic purposes, and (c) literary purposes. Section 32 of the Data Protection Act gives a limited exemption where personal data is processed with a view to the publication by any person of any journalistic, literary or artistic material, and the data controller reasonably believes that, having regard in particular to the special importance of the public interest in freedom of expression, publication would be in the public interest, and that compliance with some specified provisions of the Data Protection Act would be incompatible with the special purposes. Both sets of statutory provisions are evidently aimed at promoting freedom of expression, the value embodied in article 10 of the European Convention on Human Rights. There is no relevant definition of journalism, art or literature in either statute. The three words are abstract nouns which can be used to describe either an activity or the product of that activity. Journalism is a word introduced into the English language from French in the 19th century. The Oxford English Dictionary gives its primary meaning (by reference to journalist) as the occupation of editing or writing for a public journal. In a loose sense it can cover the production of just about anything published in a newspaper (or, today, broadcast on sound radio or television). But in the context of FOIA, its collocation with art and literature suggests that journalism is used to refer primarily to output on news and current affairs (no doubt including sport, an important part of the BBCs output); and the composite expression journalism, art or literature seems to be intended to cover the whole of the BBCs output in its mission (under article 5 of its Royal Charter) to inform, educate and entertain the public. On that comprehensive approach the purposes of journalism, art or literature would be, quite simply, the purposes of the BBCs entire output to the public. Mr Jeremy Clarkson must, it seems, have moved from the pigeonhole of journalism to that of literature when, as Irwin J recorded in British Broadcasting Corporation v Information Commissioner [2009] EWHC 2348 (Admin), [2010] EMLR 121, para 36, it was decided for editorial reasons to change the format of Top Gear so that it became primarily an entertainment programme rather than a consumer programme, [which] increased the production costs to an important degree. British Broadcasting Corporation v Information Commissioner [2009] EWHC 2348 (Admin) (the financial information case) was heard by Irwin J immediately after he heard the case [2009] EWHC 2349 (Admin) in which this appeal is brought, and he handed down his judgment in the two cases on the same day, 2 October 2009. Important parts of the two judgments are, as Irwin J noted in the first paragraph of each judgment, expressed in identical or very similar terms. There is also one other first-instance judgment calling for mention, that is the judgment of Davis J in the first round of Mr Sugars litigation, British Broadcasting Corporation v Sugar [2007] EWHC 905 (Admin), [2007] 1 WLR 2583. The judgment of Davis J contains a valuable discussion of the relevant provisions of FOIA but proceeds on the footing that the Information Tribunal (the Tribunal) had no jurisdiction, in the circumstances, to hear an appeal from the Information Commissioner (the Commissioner). That premise was later shown by the decision of a bare majority of the House of Lords to be erroneous: [2009] UKHL 9, [2009] 1 WLR 430. One of the most important issues of law considered by Irwin J in his twin judgments is whether, as a matter of construction, the word predominantly should in effect be inserted in Schedule 1, Part VI before the phrase for purposes other than those of journalism, art or literature). Irwin J described this (in para 3 of each judgment) as a concession made by the BBC before the Tribunal, but that description depends on the spectators viewpoint. The Court of Appeal (Lord Neuberger MR, para 36) described it as a successful argument. So it is worth looking at how this point developed. Apart from any de minimis principle, which the Court of Appeal (Lord Neuberger MR, para 59) rightly regarded as unhelpful in this context, there are four possible categories of information held by the BBC that need to be considered: (1) information held exclusively for non-journalistic purposes; (2) information held predominantly, but not exclusively, for non-journalistic purposes (the other purposes being those of journalism); (3) information held predominantly, but not exclusively, for journalistic purposes (the other purposes being non-journalistic); and (4) information held exclusively for journalistic purposes. Before the Tribunal Mr Sugar argued that the BBCs immunity under Schedule 1 Part VI (as opposed to its possible exemption under other particular provisions of FOIA) was limited to information in category (4). In other words he was insisting on disclosure (apart from particular exemptions) of categories (1), (2) and (3). The BBC did not oppose categories (1) and (2) (so that category (2) could be termed a concession) but opposed disclosure of category (3), and was successful in that argument. Irwin J felt unable to accept the concession, either in the Sugar appeal or in the appeal in the financial information case. He held that category (1) was the only category of information that the BBC had to disclose (again, subject to particular exemptions). His reasons are at paras 44 to 66 of his judgment in the Sugar case and at paras 53 to 73 of his judgment in the financial information case, which are in almost identical terms. The Court of Appeal agreed with his reasoning and conclusions (Lord Neuberger MR, paras 39 to 52). I respectfully agree. In my judgment the correct view is that (as Lord Neuberger MR put it at para 44): once it is established that the information sought is held by the BBC for the purposes of journalism, it is effectively exempt from production under the Act, even if the information is also held by the BBC for other purposes. So in effect there are only two categories: one is information held for purposes that are in no way those of journalism, and the other is information held for the purposes of journalism, even if it is also held for other (possibly more important) purposes. That conclusion follows both from FOIAs legislative purpose and from its language. First, legislative purpose. It is common ground that FOIA was enacted in order to promote an important public interest in access to information about public bodies. There are (as Schedule 1 to FOIA reveals) thousands of public authorities, large and small, which are paid for out of public funds, and whose actions or omissions may have a profound effect on citizens and residents of the United Kingdom. There is a strong public interest in the press and the general public having the right, subject to appropriate safeguards, to require public authorities to provide information about their activities. It adds to parliamentary scrutiny a further and more direct route to a measure of public accountability. There is therefore force, in relation to FOIA as well as in relation to the Freedom of Information (Scotland) Act 2002, in the proposition that, as the whole purpose of the 2002 Act is the release of information, it should be construed in as liberal a manner as possible. That is how it was put by Lord Marnoch in Common Services Agency v Scottish Information Commissioner [2006] CSIH 58, 2007 SC 231, para 32, approved by Lord Hope in the House of Lords [2008] UKHL 47, [2008] 1 WLR 1550, para 4. But Lord Hope continued: But that proposition must not be applied too widely, without regard to the way the Act was designed to operate in conjunction with the [Data Protection Act 1998]. It is obvious that not all government can be completely open, and special consideration also had to be given to the release of personal information relating to individuals. So while the entitlement to information is expressed initially in the broadest terms that are imaginable, it is qualified in respects that are equally significant and to which appropriate weight must also be given. The scope and nature of the various exemptions plays a key role within the Acts complex analytical framework. (The Commons Services Agency case serves to explain the position on freedom of information in Scotland, which is not immediately apparent from FOIA itself. FOIA extends to Scotland and so applies to operations in Scotland of public authorities which operate throughout the United Kingdom; but Scotland also has its own statute applying to Scottish public authorities.) In this case, there is a powerful public interest pulling in the opposite direction. It is that public service broadcasters, no less than the commercial media, should be free to gather, edit and publish news and comment on current affairs without the inhibition of an obligation to make public disclosure of or about their work in progress. They should also be free of inhibition in monitoring and reviewing their output in order to maintain standards and rectify lapses. A measure of protection might have been available under some of the qualified exemptions in Part II of FOIA, in particular those in sections 36 (Prejudice to effective conduct of public affairs), 41 (Information provided in confidence) and 43 (Commercial interests). But Parliament evidently decided that the BBCs important right to freedom of expression warranted a more general and unqualified protection for information held for the purposes of the BBCs journalistic, artistic and literary output. That being the purpose of the immunity, section 7 and Schedule 1 Part VI, as they apply to the BBC, would have failed to achieve their purpose if the coexistence of other non-journalistic purposes resulted in the loss of immunity. That is confirmed by the language of these statutory provisions. The disclosable material is defined in terms (held for purposes other than those of journalism, art or literature) which are positive in form but negative in substance. The real emphasis is on what is not disclosable that is material held for the purposes of the BBCs broadcasting output. It is the most natural construction, which does not depend on reading in any words. That was the view formed both by Irwin J (see especially paras 55 to 58 and 63 to 65 of his Sugar judgment) and by Lord Neuberger MR (see especially paras 40 to 42, 44 to 46, and 49 of his judgment). Mr Eicke QC was critical of para 49, submitting that it assumed the very answer that the Court of Appeal was seeking to justify. I consider that criticism to be unjustified, though the reasoning was perhaps rather compressed. The unspoken premise is that Parliament must have intended to lay down a workable test, and both an exclusively and a predominantly test would raise almost insoluble problems in their practical application. That is not to say that the test approved by Irwin J and the Court of Appeal is without its difficulties. Parliament has, in trying to provide machinery for determining where the stronger public interest lies, placed a heavy burden on the Tribunal as an expert decision-maker. Davis J cited the well-known speech of Lord Mustill in R v Monopolies and Mergers Commission, Ex p South Yorkshire Transport Ltd [1993] 1 WLR 23, 32-33 (where the relevant statute referred to a substantial part of the United Kingdom): But this clear-cut approach cannot be applied to every case, for the criterion so established may itself be so imprecise that different decision-makers, each acting rationally, might reach differing conclusions when applying it to the facts of a given case. In such a case the court is entitled to substitute its own opinion for that of the person to whom the decision has been entrusted only if the decision is so aberrant that it cannot be classed as rational: Edwards v Bairstow [1956] AC 14. The present is such a case. Even after eliminating inappropriate senses of substantial one is still left with a meaning broad enough to call for the exercise of judgment rather than an exact quantitative measurement. I consider that Davis J was right to regard the present case as falling within that category. He was however mistaken in supposing that the Tribunal had no jurisdiction to hear an appeal, and so he should have treated the Tribunal, and not the Commissioner, as the crucial decision-maker. Irwin J concluded (para 66 of his Sugar judgment) that the Tribunal had erred in law in applying the predominant purpose test. So did Lord Neuberger MR (para 62). So did Moses LJ (para 73), though I have some difficulty with the way his reasoning is expressed on this point, as it seems to come close to conflicting with the reasoning of the majority of the House of Lords in the first round of litigation, [2009] 1 WLR 430. Munby LJ agreed with both judgments. I would therefore dismiss this appeal, but for reasons different from those set out in the judgment of Lord Wilson. I would add that I am conscious that this interpretation of the limitation may be seen as conferring on the BBC an immunity so wide as to make the particular statutory redemptions redundant, and leave the BBC almost free of obligations under FOIA. As the Tribunal observed (paras 96 and 102): On a broad definition, it could be argued that all of the activities of the BBC are for the purposes of journalism, art and literature, as these are broad descriptions of a substantial part of its broadcast output . . . However, if a very broad definition was intended, there would be little point in including the BBC in Schedule 1, Part VI of FOIA. The BBC could have been omitted altogether from the scope of the Act. The same point was made by Davis J [2007] 1 WLR 2583, para 55. In my view the correct approach is for the Tribunal, while eschewing the predominance of purpose as a test, to have some regard to the directness of the purpose. That is not a distinction without a difference. It is not weighing one purpose against another, but considering the proximity between the subject-matter of the request and the BBCs journalistic activities and end-product. As Irwin J observed in the financial information case, para 87, in the context of a critique of what was operational: The cost of cleaning the BBC Boardroom is only remotely linked to the product of the BBC. I respectfully agree with the measured comments of Lord Neuberger MR (para 55): In my view, whatever meaning is given to journalism I would not be sympathetic to the notion that information about, for instance, advertising revenue, property ownership or outgoings, financial debt, and the like would normally be held for purposes . . . of journalism. No doubt there can be said to be a link between such information and journalism: the more that is spent on wages, rent or interest payments, the less there is for programmes. However, on that basis, literally every piece of information held by the BBC could be said to be held for the purposes of journalism. In my view, save on particular facts, such information, although it may well affect journalism-related issues and decisions, would not normally be held for purposes . . . of journalism. The question whether information is held for the purposes of journalism should thus be considered in a relatively narrow rather than a relatively wide way. That is the best way forward in order to strike the difficult balance of competing interests for which Parliament must be taken to have been aiming. But it will still leave some difficult decisions for the Commissioner and, on appeal, the Tribunal. There cannot be (in the words of Davis J, para 57) any unequivocal, bright-line test. All of us agree that on any conventional approach to the construction of the Freedom of Information Act 2000 (the Act) and in particular the expression information held for purposes . . . of journalism within the meaning of Schedule 1 to the Act, it clearly encompasses the Balen Report (the Report) throughout the whole period that the BBC has held it. It is the appellants contention, however, that this approach to the construction of the Act and the consequent non-disclosure of the Report would violate article 10 of the European Convention on Human Rights and that the Court is accordingly bound, consistently with section 3 of the Human Rights Act 1998, to read and give effect to the Act so as to require the Reports disclosure. It is this contention that I am here principally concerned to address. Given, however, that a disagreement exists within the Court as to whether information held for the purposes of journalism but held also for other purposes must be subjected to a test as to which purpose is predominant and disclosed if the predominant purpose is non-journalistic, I shall in conclusion briefly address this issue too, irrelevant though it is to the outcome of this particular appeal. The appellants article 10 contention is not one that appears to have been advanced before Irwin J at first instance (certainly there is no mention of article 10 in his judgment). Article 10 was, however, invoked in the Court of Appeal, indeed by both sides. The BBC submitted that disclosure of the Report (and any other information held for the purposes of journalism) would have a chilling effect upon their right to freedom of expression; the appellant submitted that, subject only to narrow exceptions (none being applicable here), article 10 gives him a right of access to all such information. The Court of Appeal, however, derived no assistance from article 10 either way, Moses LJ (at para 77) finding it impossible to identify within the jurisprudence any pointer for or against the rival contentions. Before this Court Mr Eicke QC has vigorously returned to article 10 and advances what is essentially a two stage argument. First, he contends, in reliance principally upon a trilogy of Strasbourg decisions Matky v Czech Republic (Application No 19101/03) (unreported) 10 July 2006, (Matky), Tarsasag A Szabadsagjogokert v Hungary (2009) 53 EHRR 130 (14 April 2009) (Tarsasag), and Kenedi v Hungary (Application No 31475/05) (unreported) 26 August 2009 (Kenedi) that the ECtHR has recently moved towards the recognition of a right of access to information and that in the particular circumstances of the present case an interpretation of the Act which withholds from disclosure a document such as the Report interferes with the right of access to information protected by article 10(1). Secondly he submits that such interference is not necessary in a democratic society so as to be justified under article 10(2). He not only disputes that the release of the Report would have a chilling effect on freedom of expression but submits that only the need to protect journalistic sources or perhaps, indeed, more narrowly still, the need to protect sources who might otherwise be deterred from assisting journalists would constitute an overriding requirement of the public interest sufficient to justify this interference with the citizens article 10(1) right of access to information. Before turning to the trilogy of decisions upon which the appellant mainly relies it is helpful first to note the well-established body of Strasbourg jurisprudence which is recognised to define, generally speaking, the nature and extent of the right under article 10(1) to receive . . . information and ideas without interference by public authority. It is sufficient for present purposes to cite a short passage from the unanimous Grand Chamber decision in Roche v United Kingdom (2005) 42 EHRR 599 at para 172: The Court reiterates its conclusion in Leander v Sweden (1987) 9 EHRR 433 and in Gaskin v United Kingdom (1989) 12 EHRR 36 and, more recently, confirmed in Guerra v Italy (1998) 26 EHRR 357, that the freedom to receive information prohibits a Government from restricting a person from receiving information that others wish or may be willing to impart to him and that that freedom cannot be construed as imposing on a State, in circumstances such as those of the present case, positive obligations to . . . disseminate information of its own motion. It is right to observe, before moving on, that the circumstances of those particular cases were that the applicants were attempting to obtain information respectively about their being regarded as a security risk (Leander), about their childhood (Gaskin), about a chemical factory (Guerra) and about long-past Porton Down tests in which they had participated (Roche). I come then to the first of the trilogy of cases on which the appellant so strongly relies: Matky. The complainant there was seeking, against the background of a general right to information under the Czech legal system, access to documentation concerning the construction of a new nuclear power station and in particular was challenging a requirement of the domestic legislation (article 133 of the Building Act) that a request for information had to be justified. The Court accepted that the rejection of his request constituted an interference with the complainants right to receive information. But it held that the decision could not be considered arbitrary, recognised that Contracting States enjoy a certain margin of appreciation in this area and unanimously rejected the complaint as manifestly ill-founded. Matky seems accordingly an unpromising foundation upon which to build any significant departure from what may be called the Roche approach to the freedom to receive information protected by article 10. Nevertheless, in Tarsasag (the second in the appellants trilogy of cases) it was to Matky that the Second Section of the Court referred as (the sole) authority for the proposition that, the Leander line of authority notwithstanding, the Court has recently advanced towards a broader interpretation of the notion of freedom to receive information and thereby towards the recognition of a right of access to information. In Tarsasag the court upheld a complaint by the Hungarian Civil Liberties Union that a refusal by the Constitutional Court to grant them access to an MPs pending complaint as to the constitutionality of certain proposed amendments to the Criminal Code breached its article 10 right to receive information. The Government having accepted that there had been an interference with the applicants article 10 rights, Mr Eicke relies in particular upon the following passage in the Courts judgment: [The Court] considers that the present case essentially concerns an interference by virtue of the censorial power of an information monopoly with the exercise of the functions of a social watchdog, like the press, rather than a denial of a general right of access to official documents. . . . Moreover, the states obligations in matters of freedom of the press include the elimination of barriers to the exercise of press functions where, in issues of public interest, such barriers exist solely because of an information monopoly held by the authorities. (para 36) Kenedi, the third in the trilogy of cases, was decided just four months after Tarsasag, also by the Second Section of the Court (including six of the same seven judges who had decided Tarsasag). The applicant there was a historian specialising in the functioning of the secret services of dictatorships. Although a succession of domestic court judgments had held him to be entitled to access to various documents for research purposes, the Ministry had refused to disclose them. Once again, hardly surprisingly in this case, the government conceded that there had been an interference with the applicants article 10 rights. The Court had no difficulty in finding in the result a violation of article 10: the Court cannot but conclude that the obstinate reluctance of the respondent States authorities to comply with the execution orders was in defiance of domestic law and tantamount to arbitrariness. In my judgment these three cases fall far short of establishing that an individuals article 10(1) freedom to receive information is interfered with whenever, as in the present case, a public authority, acting consistently with the domestic legislation governing the nature and extent of its obligations to disclose information, refuses access to documents. Of course, every public authority has in one sense the censorial power of an information monopoly in respect of its own internal documents. But that consideration alone cannot give rise to a prima facie interference with article 10 rights whenever the disclosure of such documents is refused. Such a view would conflict squarely with the Roche approach. The appellants difficulty here is not that Mr Sugar was not exercising the functions of a social watchdog, like the press. (Perhaps he was.) The Jewish Chronicle would be in no different or better position. The appellants difficulty to my mind is rather that article 10 creates no general right to freedom of information and where, as here, the legislation expressly limits such right to information held otherwise than for the purposes of journalism, it is not interfered with when access is refused to documents which are held for journalistic purposes. True it is, as Lord Judge CJ noted when giving the judgment of the Court in Independent News and Media Ltd v A [2010] 1 WLR 2262 (para 42), that the Venice Commission has described Tarsasag as a landmark decision on the relation between freedom of information and the . . . Convention. Whatever else might be said about Mr Eickes trilogy of cases, however, they cannot to my mind be said to support his first proposition having regard to the particular relationship between the parties in this case. I should perhaps add for the sake of completeness that there is absolutely nothing in Independent News and Media Ltd v A, still less in R (Mohamed) v Secretary of State for Foreign Affairs (No 2) [2011] QB 218, to support Mr Eickes reliance on article 10 in the present context. It follows that for my part I would hold that the appellants article 10 case fails at the first stage. There was no interference here with Mr Sugars freedom to receive information. The Act not having conferred upon him any relevant right of access to information, he had no such freedom. Even were that not so, however, I would reject the second stage of Mr Eickes argument too. Even were one to start with the supposition that any refusal by a public authority to disclose information involves a prima facie interference with a persons freedom to receive that information, it seems to me open to the State to legislate, as here, a blanket exclusion of any requirement to disclose information held (whether predominantly or not) for the purposes of journalism. The appellants contrary argument fixes in particular upon a line of Strasbourg cases concerned essentially with journalistic sources: Goodwin v United Kingdom (1996) 22 EHRR 123, Nordisk Film and TV A/S v Denmark (Application No 40485/02) (8 December 2005) and Sanoma Uitgevers BV v The Netherlands (Application No 38224/03) (14 September 2010). What must be recognised, however, is that in each of these cases it was the journalists who were the complainants, that what they were complaining about were domestic court orders requiring disclosure of their sources or research material, and that the starting point for the Strasbourg Courts consideration of these complaints was, as the Grand Chamber noted at paragraph 59 of its judgment in Sanoma: In its earlier case-law the Court has found various acts of the authorities compelling journalists to give up their privilege and provide information on their sources or to obtain access to journalistic information to constitute interferences with journalistic freedom of expression. The applicant in Goodwin succeeded on the basis that he had been ordered to reveal the identity of a person who had provided him with information on an unattributable basis. The applicant in Nordisk failed because on the particular facts of that case (which it is not here necessary to rehearse) the applicant was not being ordered to disclose its journalistic source of information but rather part of its research material and that, even though the latter may have a chilling effect on the exercise of journalistic freedom of expression, there it was justified by an overriding requirement in the public interest: assisting in the prosecution of paedophiles. The applicant company in Sanoma succeeded because there was an order for the compulsory surrender of journalistic material containing information capable of identifying journalistic sources, an interference with its article 10 rights which the Court there held was not prescribed by law: the quality of the law was deficient in that there was no procedure attended by adequate legal safeguards for the applicant company in order to enable an independent assessment as to whether the interest of the criminal investigation overrode the public interest in the protection of journalistic sources. (para 100) Helpful though these cases may be, however, in explaining the limitations placed upon a journalists prima facie right to protect both his sources and his research material from compulsory court orders for their disclosure, they say little if anything about what other interests and concerns may properly be invoked by journalists in resisting the disclosure to others (whether or not themselves journalists) of other information held for journalistic purposes (ie information apart from that necessary to protect confidential sources and research material, including for example the Balen Report). To my mind it stands to reason that the disclosure of a document such as the Report would be likely to affect the candour of any similar future report. As the Information Tribunal itself found in the present case (at para 116): Self-critical review and analysis of output is a necessary part of safeguarding and enhancing quality. The necessary frankness of such internal analysis would be damaged if it were to be written in an anodyne fashion, as would be likely to be the case if it were potentially disclosable to a rival broadcaster. (Or, one may add, to anyone else.) In short I would reject also the second stage of the appellants argument: the contention that section 3 of the Human Rights Act should be invoked here to limit the information stipulated by the Act to be undisclosable through being held for the purposes of journalism merely to that held for the purpose of safeguarding the BBCs confidential sources. I turn then briefly to the question whether, in a case where information is held partly for journalistic and partly for non-journalistic purposes, it is necessary to ask which purpose is predominant and to disclose any information held predominantly for non-journalistic purposes. I conclude, in common with Lord Phillips and Lord Walker (and, indeed, with the Court of Appeal), but in respectful disagreement with Lord Wilson, that the answer is No. My reasons being essentially the same as those given by both Lord Phillips and Lord Walker (although perhaps more particularly those of Lord Walker), I can explain my concurrence very shortly indeed. Really it comes to this. With regard both to the BBC (together with the three other listed broadcasters) and the Bank of England, Parliament, for differing but in each case compelling reasons of national interest, was concerned not to subject these institutions to the operation of the Act including, for example, the need to resort to Part II of the Act to justify any reluctance to withhold some particular information from disclosure save only in strictly limited circumstances. In the case of the BBC and other broadcasters it is only in respect of information held for purposes other than those of journalism, art or literature. In the event that information is held to any significant degree (and we are all agreed that the de minimis principle would otherwise apply) for the purposes of journalism, then to my mind it would seem artificial and impermissible to construe the Act as applying to that information. Quite simply, it remains information held for the purposes of journalism and therefore constitutes (within the meaning of section 7) other information than information held for purposes other than those of journalism. The mere fact that it may be held (even perhaps to a predominant extent) also for purposes other than those of journalism cannot sensibly serve to enlarge the basic category of information in respect of which the BBC is listed and with regard to which, therefore, the Act is not disapplied by section 7. In short, like Lord Walker, I find that the natural construction of the Act, and Parliaments evident concern to ensure that the interests of free expression trump without more those of freedom of information, supports the BBCs case on this issue. As for the point at which information will cease to be held to any significant degree for the purposes of journalism and become held instead, say, solely for archival purposes, that necessarily will depend on the facts of any particular case and involve a question of judgment. I too agree with Lord Walker that the central question to be asked in such a context will be, not which purpose is predominant, but rather whether there remains any sufficiently direct link between the BBCs continuing holding of the information and the achievement of its journalistic purposes. I too would dismiss this appeal. The question on this appeal is whether the Balen Report commissioned by the BBC in relation to its Middle Eastern coverage and completed in July 2004 constituted information held for purposes other than those of journalism, art or literature (within Part VI of Schedule 1 to the Freedom of Information Act 2000). The appeal falls to be approached on the basis that the Report was at the material time held predominantly for journalistic but partly also for other purposes. The material time was in 2005, when Mr Sugar first requested disclosure of the Report. I agree with the other members of the Court that this appeal should be dismissed. However, there is a difference in the basis upon which different members of the Court would dismiss it. Lord Wilson would only dismiss it on the basis that the critical test is whether the BBC held the Report predominantly for the purposes of journalism. Were this not the test, he would have regarded the existence of other not insignificant purposes as sufficient to mean that the Report was held for purposes other than those of journalism, art or literature, and so disclosable. The other members of the Court take an opposite view: once it is established that the BBC held the Report for purposes of journalism, art or literature, the Report was exempt from disclosure, and would have been even had these not been the predominant purposes for which it was held. The rival arguments on this point are finely balanced, and its resolution in the present appeal on the basis of sparse facts causes me a certain concern. However, after some hesitation, I have come to the conclusion that the test applied by Lords Phillips, Walker and Brown is to be preferred. The Freedom of Information Act 2000 reflects the value to be attached to transparency and openness in the workings of public authorities in modern society, and its provisions should be construed in as liberal a manner as possible: Common Services Agency v Scottish Information Commissioner [2008] UKHL 47, [2008] 1 WLR 1550, para 4 per Lord Hope. But, as Lord Walker notes (para 77), Lord Hope went on to add that that proposition must not be applied too widely, and special considerations may lead to restrictions. In the present case, the special consideration to which the legislator gave effect was the freedom of the BBC as a public service broadcaster in relation to its journalistic, artistic and literary output. Information held for any such purposes of journalism, art or literature was absolutely exempt from disclosure. The legislator was not content with the more qualified protection from disclosure, often depending on a balancing exercise or evaluation, which would anyway have been available under section 2, read with sections 28, 29, 36, 41 and 43. To read into the words information held for purposes other than those of journalism, art or literature a need to evaluate whether such purposes were dominant seems to me unjustified. I share Lord Walkers view (para 79) that the real emphasis of the words is on what is not disclosable, so that the exemption applies, without more, if the information is held for any journalistic, artistic or literary purpose. That conclusion is to my mind also fortified by consideration of the exemption relating to certain functions of the Bank of England. Lord Phillips discusses the position regarding archived material. We were not given any clear picture when or on what basis archiving might occur. I assume that the reference is to material not envisaged as having any current purpose, but stored for historical purposes or against the possibility of some unforeseen need to revisit, or produce evidence of, past events. A library maintained for current reference would in contrast contain material held for the purposes of journalism, art or literature. I agree with Lord Browns analysis of the current state of Strasbourg authority, and also with Lord Wilsons comment in para 59 on the decisions (or dicta) in Ullah and Al-Skeini. Nothing in the Strasbourg jurisprudence calls us to do anything but give effect in this case to what we consider to be the proper construction of the 2000 Act under ordinary domestic principles. It is unnecessary to say more, or to add to recent debate about the nature of the Convention rights in the United Kingdom or the domestic courts role in interpreting and applying them taking into account any relevant Strasbourg case-law. I agree with Lord Browns analysis of the current state of Strasbourg authority, and also with Lord Wilsons comment in para 59 on the decisions (or dicta) in Ullah and Al-Skeini. Nothing in the Strasbourg jurisprudence calls us to do anything but give effect in this case to what we consider to be the proper construction of the 2000 Act under ordinary domestic principles. It is unnecessary to say more, or to add to recent debate about the nature of the Convention rights in the United Kingdom or the domestic courts role in interpreting and applying them taking into account any relevant Strasbourg case-law.

BA and PE were each served a deportation order after unsuccessful appeals on human rights and asylum grounds against the decision to deport them. Both unsuccessfully made further submissions to the Secretary of State in an attempt to have the order revoked. They then applied to judicially review the decision not to revoke the deportation order, maintaining that their removal from the United Kingdom would be in breach of their human rights. (Paras [3] [5]) This appeal concerns whether, once a claimant has had his appeal against a decision of the Secretary of State determined, he can make another appeal in country on the same grounds which were rejected on the earlier occasion. The Secretary of State argued that a repetitive claim did not fall within section 92(4)(a) of the Nationality, Immigration and Asylum Act 2002, which provides for an in country appeal where the claimant has made an asylum claim, or a human rights claim whilst in the UK. The Secretary of State argued that where, as in BAs case, further representations have not been advanced as a fresh claim as defined under rule 353 of the Immigration Rules, or, as in PEs case, have not been accepted as such by the Secretary of State, they can only be considered out of country and that there is no obstacle to the deportations. (Paras [8]; [13] [15]) The appeal by the Secretary of State is dismissed by a majority of four to one. A claim for asylum which has been rejected should be allowed to proceed to appeal in country under sections 82 and 92 of the Nationality, Immigration and Asylum Act 2002, unless it has been certified as clearly unfounded under section 94 or excluded under section 96. This should be so whether or not the Secretary of State has accepted it as a fresh claim. (Paragraph [32]) Lord Hope gave the majority judgment of the Court. Lady Hale dissented. Lord Hope considered the phrase an asylum claim, or a human rights claim in s 92(4)(a) in the context of the 2002 Act as a whole and rejected the Appellants argument that the Supreme Court should follow the interpretation in R v Secretary of State for the Home Department, ex parte Onibiyo [1996] QB 768. In Onibiyo, claim in the context of the 1993 Act was held to mean a first claim, or a second or subsequent claim which has been accepted as a fresh claim by the Secretary of State, but not a claim which is repetitious. Lord Hope determined that whilst the 2002 Act uses substantially the same words as the 1993 Act, the statutory system is markedly different given the addition of a range of powers enabling the Secretary of State or immigration officer to deal with repetitious claims. No inference was drawn from the amendment of s 113 by s 12 of the Immigration, Asylum and Nationality Act 2006 as it is not yet in force. (Paras [25] [29]; [44] [46]) In a case such as this where no certification has been given under s 94 (providing for the exclusion of appeals that are clearly unfounded) or s 96 (removing the right of appeal if the claim raises an issue which has been or ought to have been dealt with in an earlier appeal), there is no need to impose a further requirement which is not mentioned elsewhere in the 2002 Act, namely that the words aclaim exclude a further claim which has not been held under rule 353 to be a fresh claim. (Para [29]) The Appellants construction risks undermining the beneficial objects of the Refugee Convention, as it would exclude, by s 95, claims which the Secretary of State considers not to be fresh claims from the ground of appeal in s 84(1)(g), when claims which are certified as clearly unfounded under s 94 would still be given the benefit of that section. (Section 84(1)(g) provides for an appeal where removal would place the UK in breach of its international or human rights obligations.) (Paras [30][32]; [47]) Rule 353 does not affect the operation of the legislative scheme, which provides the complete code for dealing with repeat claims. (Para [33]) Lady Hale, dissenting, would have allowed the appeal. Lady Hale concluded aclaim in s 92(4)(a) of the 2002 Act ought to be given the same meaning ascribed to the phrase in the 1993 Act in Onibiyo. There was no need for it to be defined in the 2002 Act given it had already been judicially interpreted. (Paras [39][40]) The addition of sections 94 and 96 should not be taken to mean that Parliament had abandoned the old meaning of claim without expressly saying so, particularly as the additional sections are not apt to cater for repetitious claims. (Paras [41][42]) Lady Hale disagreed that the Appellants construction would undermine the UKs international obligations. A person who presents a repeat claim on asylum or human rights grounds has already enjoyed the right of appeal on these grounds within this country. The current system allowing for an initial decision followed by an appeal system in the UK is sufficient compliance with those obligations. (Paras [42] [43])

The respondents to the Lord Advocates appeal in these three cases are Raymond Jude, Michael Hodgson and Josh Birnie. They were each detained as suspects for questioning at a police station under sections 14 and 15 of the Criminal Procedure (Scotland) Act 1995. Their detentions took place prior to the decision of this court in Cadder v HM Advocate [2010] UKSC 43, 2011 SC(UKSC) 13; [2010] 1 WLR 2601. As was the practice at that time, they did not have access to legal advice either before or during their police interviews. In the course of their interviews they said things in reply to questions put to them by the police on which the Crown relied at their trials. They were convicted and sentenced to various periods of imprisonment. They then appealed against these convictions. Their appeals were still current when the judgment in Cadder was delivered on 26 October 2010. Among other grounds of appeal in the High Court of Justiciary the respondents advanced submissions which raised a devolution issue. This was that the leading of evidence of statements which they made during their police interviews was a breach of their rights under articles 6(3)(c) and 6(1) of the European Convention on Human Rights and that, in terms of section 57(2) of the Scotland Act 1998, the Lord Advocate had no power to lead that evidence. They referred to the decision in Cadder in support of this ground of appeal. For Birnie it was also submitted that the reliance by the Crown upon his admissions in these circumstances deprived him of a fair trial, to which he was entitled under article 6(1) of the Convention and at common law. The Crowns response to these submissions was that, for various reasons, the principle that was established in Cadder did not apply in these cases. The High Court of Justiciary decided to deal with this response as a preliminary issue, and it was referred to a court of five judges. On 11 May 2011 the Appeal Court (the Lord Justice Clerk (Gill) and Lords Osborne, Eassie, Clarke and Mackay of Drumadoon) repelled the Crowns objections and continued the appeals for hearing on the remaining grounds of appeal: [2011] HCJAC 46, 2011 SLT 722. The Crown was given leave to appeal against that decision to this court under para 13 of Schedule 6 to the Scotland Act 1998. The issues raised by the Crowns response to the devolution issue were as follows: (1) that in the case of each respondent section 118(8) of the Criminal Procedure (Scotland) Act 1995 was an absolute bar to any challenge to the evidence of the police interviews, as objection was not taken at or before the trial to the leading of that evidence; (2) that each of the respondents had waived their right of access to a lawyer when they were interviewed; (3) that by failing to object to the evidence through their respective legal representatives they had waived the right to take the point as a ground of appeal; and (4) in Judes case only, that the point had been taken too late as section 100(3B) of the Scotland Act 1998, as amended by section 1 of the Convention Rights Proceedings (Amendment) (Scotland) Act 2009, provides that any proceedings brought on the ground that an act of a member of the Scottish Executive is incompatible with the Convention rights must be brought before the end of the period of one year beginning with the date on which the act complained of took place. The Crown did not seek leave to appeal from the Appeal Courts decision in relation to the application of section 118(8) of the 1995 Act. Leave was sought and granted in relation to the issues of waiver and the application to Judes case of section 100(3B) of the Scotland Act. In his written case to this court the Lord Advocate made it clear that he did not intend to pursue the point that the respondents had waived their right to object to the admissibility of the evidence of the police interviews because their legal representatives did not object to that evidence at the trial. This was because he accepts that, at the time when the respondents were tried, a person who was detained under section 14 of the 1995 Act did not have an express right in Scots law to legal advice before or during his police interview. As for the issue of individual waiver, his position was that the only point in these appeals which was likely to be of importance for future cases was that raised in the case of Birnie. Unlike the other two respondents Birnie made an unsolicited statement following his police interview, having declined the opportunity to have access to a lawyer prior to and while making it. The advocate depute, Miss Cherry QC, confined her submissions about waiver in these three cases to the question whether Birnie waived his right to a lawyer when he made his unsolicited statement. She made no submissions in support of the proposition that the respondents had waived their right to a lawyer at their police interviews. That issue was however the subject of detailed submissions in the Lord Advocates reference in McGowan (Procurator Fiscal, Edinburgh) v B, which was heard at the same time as these appeals. The court has issued a separate judgment in that case: [2011] UKSC 54. In the result the only matters which remain for consideration in relation to these three appeals are (1) whether the time bar referred to in section 100(3B) of the Scotland Act 1998, as amended, applies to Judes appeal, (2) whether Birnie waived his right of access to a lawyer when he made his unsolicited statement following his police interview and (3) whether the reliance by the Crown upon his admissions in these circumstances deprived him of his right to fair trial under article 6(1) of the Convention. No issue now arises in regard to the preliminary points that were taken by the Crown in Hodgsons appeal. Section 100(3B) Jude went to trial in the High Court of Justiciary at Aberdeen on an indictment which libelled one charge of breach of the peace, one charge of lewd and libidinous conduct, three charges of indecent assault and two charges of assault with intent to rape. On 5 June 2008 he was convicted of one charge of indecent assault and of both charges of assault with intent to rape. On 28 August 2008 he lodged a notice of his intention to appeal against his conviction. On 17 February 2009 his appeal was deemed to have been abandoned because his note of appeal had not been lodged within the period referred to in section 110(1)(a) of the 1995 Act. On 5 October 2010 he lodged an application for extension of time under section 111(2) of that Act along with a note of appeal. His application for extension of time was granted on 6 October 2010 and his note of appeal was received on the same date. It is plain, and not disputed, that the time bar which would have otherwise have applied under section 110 of the 1995 Act was removed when the Appeal Court decided on 6 October 2010 to grant Judes application for an extension of time under section 111(2). At the end of his judgment in Cadder Lord Rodger drew attention to the provisions of section 100 of the Scotland Act, as amended by the Convention Rights Proceedings (Amendment) (Scotland) Act 2009: 2011 SC(UKSC) 13, paras 104 106. In its amended form, the relevant provisions of that section are as follows: (1) This Act does not enable a person (a) to bring any proceedings in a court or tribunal on the ground that an act is incompatible with the Convention rights, or (b) to rely on any of the Convention rights in any such proceedings, unless he would be a victim for the purposes of article 34 of the Convention (within the meaning of the Human Rights Act 1998) if proceedings in respect of the act were brought in the European Court of Human Rights. (3) This Act does not enable a court or tribunal to award any damages in respect of an act which is incompatible with any of the Convention rights which it could not award if section 8(3) and (4) of the Human Rights Act 1998 applied. (3A) Subsection (3B) applies to any proceedings brought on or after 2 November 2009 by virtue of this Act against the Scottish Ministers or a member of the Scottish Executive in a court or tribunal on the ground that an act of the Scottish Ministers or a member of the Scottish Executive is incompatible with the Convention rights. (3B) Proceedings to which this subsection applies must be brought before end of (a) the period of one year beginning with the date on which the act complained of took place, or (b) such longer period as the court or tribunal considers equitable having regard to all the circumstances, but that is subject to any rule imposing a stricter time limit in relation to the procedure in question. (3E) The reference in subsection (3A) to proceedings brought on or after 2 November 2009 includes proceedings relating to an act done before that date. As Lord Rodger observed in para 104 of his judgment in Cadder, the effect of these provisions was not mentioned by any of the counsel who appeared to argue that case in the Supreme Court. Nevertheless he went on to express his opinion on it. He referred in the following paragraph to the fact that the amendment to section 100 was made in response to the decision of the House of Lords in Somerville v Scottish Ministers [2007] UKHL 44, 2008 SC (HL) 45, [2007] 1 WLR 2734, in which it was held that the time limit in section 7(5) of the Human Rights Act 1998 did not apply to proceedings in relation to Convention rights brought by reference to the Scotland Act 1998. Having set out the terms of the section in its amended form, he said that the proceedings in Cadders case were proceedings to which that section applied. So, by reason of section 100(3B), to be competent any such proceedings would need to have been commenced before the end of a year beginning with the date on which the Crown led the evidence, or within such longer period as the court considered equitable having regard to all the circumstances: paras 105 106. I endorsed what he said in those paragraphs in para 60 of my own judgment, when I included appeals that had been brought timeously among the list of cases that would have to be dealt with in the light of Cadder on the basis that a person who was detained must have had access to a lawyer before being questioned by the police. The Crowns attempt to rely on Lord Rodgers analysis in support of its argument that Judes appeal was out of time because the act that was relied on took place more than one year before the lodging of his note of appeal was rejected by the Appeal Court. The Lord Justice Clerk said that he could not follow why Lord Rodger should have taken the view that section 100(3B) applied to these proceedings. In his opinion it applied only to claims made in civil proceedings and then only when they were brought by virtue of the Scotland Act. That was not so in Judes case, as his appeal had been brought under the 1995 Act: 2011 SLT 722, paras 37 38. Lord Rodgers observations in paras 105 106 of Cadder were of course obiter. They must nevertheless be treated with respect. He was, after all, a master of the art of statutory construction. As he declared in one of his unpublished lectures, for him the subject of attention in these matters always was the text of the statute. His hope was that, by immersing himself in the text and the scheme of the legislation, he would be able to see what the experts who had devoted months and months to preparing and adjusting the text saw and, more importantly, what they meant and how it should be applied. His dissenting judgment in Martin v Most [2010] UKSC 10, 2010 SC (UKSC) 40 provides ample evidence of his concern for accuracy and for attention to the detail of the language used by the draftsmen and women when carrying out this exercise. He brought to the question as to the meaning and effect of section 100(3B) his deep familiarity with the provisions of the Human Rights Act 1998 which he had developed since he first engaged with the subject in Aston Cantlow and Wilmcote with Billesley Parochial Church Council v Wallbank [2003] UKHL 37, [2004] 1 AC 546, paras 157 163, and his participation in the carefully argued decision of the House of Lords in Somerville. As Lord Hamilton points out (see para 40, below), he referred to the Somerville case in para 105 of his judgment in Cadder when he was describing the context in which the amendments to section 100 were made. The challenge to the accuracy of his conclusion that section 100(3B) applies to proceedings brought by way of an appeal under the 1995 Act raises two questions. The first is whether, as the Lord Justice Clerk indicated in para 38 of his opinion, that section is rendered inapplicable simply because criminal appeals are brought under the 1995 Act and not under the Scotland Act. The second is whether the wording of the amended section 100 of the Scotland Act itself shows that it has no application to any criminal proceedings, even at the stage of an appeal. I do not think that it is difficult to see why it did not occur to Lord Rodger that the fact criminal appeals are brought under the 1995 Act of itself meant that these appeals lay outside the scope of section 100(3B) of the Scotland Act. He would have concentrated on the wording of the Scotland Act, as I would too. Section 100(3B) refers to proceedings brought by virtue of this Act against the Scottish Ministers or a member of the Scottish Executive. As I said in Somerville, 2008 SC (HL) 45, para 10, anybody who wishes to bring proceedings against a member of the Scottish Executive on the ground that an act or a failure to act is incompatible with the Convention rights, or to rely on the Convention rights in any proceedings, needs to know whether he must do this under sections 6 to 8 of the Human Rights Act or whether he must do so, or can do so only, on the ground that the act or the failure to act is contrary to the provisions of the Scotland Act. This is so whether the proceedings in question are civil or criminal, as issues about Convention rights may arise irrespective of the nature of the jurisdiction that the court or tribunal is being called upon to exercise. A criminal appeal in which it is said that the leading and relying on evidence by the Lord Advocate was contrary to the appellants Convention rights, and that in terms of section 57(2) of the Scotland Act he had no power to lead that evidence, falls plainly into the category of a proceeding that is by virtue of the Scotland Act. It is the Scotland Act which provides the basis for the appeal. The fact that the procedure under which the complaint is made is provided by the 1995 Act is neither here nor there so far as this point is concerned. So I think that the key to the soundness or otherwise of Lord Rodgers reasoning lies in the answer that is to be given to the second question. Section 100(3A) of the Scotland Act refers to any proceedings brought on or after 2 November 2009 by virtue of that Act. In para 106 of his judgment Lord Rodger said that the proceedings in Cadder were proceedings brought on the ground that it was incompatible with articles 6(1) and (3)(c) for the Lord Advocate to lead evidence of answers elicited by the police questioning. In my opinion it would not be a misuse of language to use the word brought in relation to proceedings which take the form of an appeal under section 106 of the 1995 Act. After all, section 106(3) of that Act states that by an appeal under subsection (1) of that section a person may bring under review of the High Court any alleged miscarriage of justice in the proceedings in which he was convicted. The word bring is not used in section 175 which provides for appeals in summary proceedings, but the idea that the appellant is bringing appeals under that procedure is not unreasonable. The wording of section 106(3) also suggests that it would not be a misuse of language to say that the appeal was a separate proceeding from the proceedings in which the appellant was convicted. But that is not an end to the problems that have to be solved in order to understand what is meant by the word proceedings in section 100(3A). One must go back to the opening subsection, which Lord Rodger did not mention in para 106 of his judgment in Cadder. It makes the same distinction as that which is to be found in section 7(1) of the Human Rights Act 1998 between (a) bringing proceedings in a court or tribunal on the ground that an act is incompatible with the Convention rights and (b) relying on any of the Convention rights in any such proceedings. Section 100(1)(a) of the Scotland Act does not reproduce exactly the wording of section 7(1)(a) of the Human Rights Act, as it does not refer to the appropriate court or tribunal which section 7(2) explains as meaning such court or tribunal as may be determined in accordance with rules. The words in any such proceedings do not reproduce exactly the wording of section 7(1)(b) of the Human Rights Act either, as the equivalent phrase in that Act is in any legal proceedings. But I think that they have the same effect. I read the word such in subsection (1)(b) as referring back to the words in a court or tribunal in subsection (1)(a). The distinction between subsections (1)(a) and (1)(b) of section 7 of the Human Rights Act is maintained by section 7(5) of that Act, which provides expressly that proceedings under subsection (1)(a) must be brought before the end of the period to which it refers. It does not impose any time bar on proceedings of the kind referred to in section 7(1)(b). The question then comes to be whether the reference in section 100(3A) of the Scotland Act to any proceedings brought must be taken to refer to proceedings of the former kind only, and not to proceedings of the kind referred to in section 100(1)(b). It seems to me, although it does not of course say so expressly, that the wording of section 100(3A) shows that it has that effect and that the time bar in section 100(3B) does not apply to proceedings of the kind referred to in section 100(1)(b). The point is that proceedings of the kind referred to in subsection (1)(b) are proceedings that have been brought by someone other than the person who maintains that the act in question is incompatible with the Convention rights. In the case of the proceedings referred to in subsection (1)(a), the person to whom the time bar is applied is the person who has brought those proceedings before the court or tribunal in order to obtain a remedy. It is the civil courts that have jurisdiction in cases of that kind, as the rules to which I referred in R v Kansal (No 2) [2002] 2 AC 69, para 63 make clear in the case of the Human Rights Act. The absence of a time bar on the bringing of proceedings of the kind referred to in section 100(1)(a) of the Scotland Act was the problem that was addressed in Somerville, where it was held that the limitations which section 7(5) of the Human Rights Act imposed on remedies sought under that Act did not apply where the case that was brought was that the act or failure to act was outside competence under the Scotland Act: 2008 SC (HL) 45, para 38. The question then is, into which category do appeals that are brought under the 1995 Act fall for the purposes of the Scotland Act? By whom are these proceedings brought? The Lord Justice Clerk said an appeal is part of the prosecution process brought against the appellant by a member of the Scottish Executive: para 38. There is no doubt that this is a correct description of the proceedings up to and including the trial in which the appellant was convicted. The Advocate Depute, Mr Brodie QC, conceded that this was so, and I think that he was right to make this concession. But that is not an end of the matter. The Lord Advocate is the master of the instance. The proceedings are brought in his name. He remains in control of them even after they have been brought into court, and this is so even after the verdict has been returned: Hume, Commentaries on the Law of Scotland Respecting Crimes, (1844), vol II at p 134; Montgomery v HM Advocate 2001 SC (HL) 1, pp18 19. The focus of attention changes when there is an appeal, but the proceedings remain throughout under the ultimate control of the Lord Advocate. The purpose of those proceedings is to secure the conviction and punishment of those who are guilty of committing acts of the kind that the law regards as criminal. That is their only purpose, and it remains their purpose from the start to the very end. The conclusion that an appeal against conviction or sentence, like any other proceeding in any of the criminal courts in Scotland, is still part of the prosecution process that has been brought in the public interest by the Lord Advocate seems to me to be inescapable. It is only fair to Lord Rodger to point out that he mentioned section 100(3B) because he was concerned, as I was too, to try to minimise the effect of the decision in Cadder: see para 60, where to assist this process I invoked the principle of legal certainty. But I am persuaded that the advice which he was offering in paras 105 106 of his judgment was mistaken. I agree with the Appeal Court that the time bar in section 100(3B) of the Scotland Act has no bearing on Judes appeal. I am fortified in this view by the fact the 1995 Act contains in sections 109 and 110 its own system of time limits for the bringing of solemn appeals, as it does in section 176 for an application by stated case. It would be very odd to find, in a case where the High Court had already granted an extension under section 111(2) of the period referred to in section 110(1)(a) of the 1995 Act or under section 181(1) of that Act in an appeal by stated case, that it was open to the Crown to invoke another time limit under another section in a different Act. It is not easy to identify the precise scope or ambit of the mischief which the amendment that section 100(3B) introduced into the Scotland Act was intended to remedy: see Bennion on Statutory Interpretation, 5th ed (2008), p 929, where the importance of achieving precision on this point is emphasised. The fact that the amendment was enacted in response to the decision in Somerville does not exclude the possibility that the time bar was intended to have a wider application than the facts of that case, by themselves, might suggest. But the concluding words of section 100(3B) show that the draftsman was aware that stricter time limits might be found in legislation relating to the procedure in question and that it was not the intention that it should override those other time limits or decisions made under a dispensing power to extend them. So I think that one can be reasonably confident that the view which I have arrived at by studying the language of these provisions is not contrary to what Parliament had in mind when it introduced this amendment. Birnies unsolicited statement According to the agreed statement of facts and issues, two issues arise in Birnies appeal. The first is whether he was offered rights of access to a solicitor prior to and during the taking of his unsolicited statement after his police interview. The second is whether, if he was offered them, he expressly waived those rights. But an examination of the facts shows that this formulation of the issues does not accurately focus the real point which is at issue on this branch of the case. This is because Birnie was offered access to a solicitor before he made his unsolicited statement and he did decline the offer expressly. It is best focused by the additional ground of appeal that was advanced in his case in the High Court of Justiciary: see para 2, above. The question that it poses is whether reliance by the Crown upon the admissions that he made in his unsolicited statement deprived him of the fair trial to which he was entitled under article 6(1) of the Convention. Reference was also made in that ground of appeal to his right to a fair trial at common law. That, of course, does not raise an issue which can be considered by this court, as it is not a devolution issue. But there is, in practice, no difference between these two bases for invoking the right to a fair trial. Birnie went to trial in the Sheriff Court at Aberdeen on 7 December 2009 charged with abduction and assault with intent to rape, a breach of the peace and a contravention of section 127(1)(a) of the Communications Act 2003 by sending sexually explicit messages to a female complainer. He pled guilty to the statutory offence during the trial, and his plea of not guilty to the charge of breach of the peace was accepted at that stage. The Crown led evidence at his trial of answers he gave to the police while he was being questioned as a detainee under section 14 of the 1995 Act without access to a solicitor. It also led evidence of an unsolicited statement which he made to the police following that interview. The jury found him guilty of the first charge under deletion of various averments including that of intent to rape. The facts which provide the background to the argument in Birnies case are as follows. He was interviewed under caution in a police station on Friday 14 August 2009 between 1034 and 1220 hrs with a break between 1118 and 1206 hrs. At the time of his interview he was 18 years of age. He had been on probation since 2008 in respect of a charge of breach of the peace with a sexual aggravation, and he was a registered sex offender. He had been convicted on two occasions of a breach of the notification requirements of sections 83 and 94 of the Sexual Offences (Scotland) Act 2003. He had also previously been interviewed by the police as a suspect. As already mentioned in para 1, above, he was not told that he had a right of access to legal advice prior to or during his police interview as it was not the practice at that time for this to be offered to persons detained under section 14 of the 1995 Act. Birnie made no admissions during the first stage of his interview apart from being at the locus with the female complainer [AR] referred to in the abduction charge and kissing her. He said that this was consensual. He was asked during his interview what expression he would use to describe touching his girl friends private parts, to which he replied with a question: fit like poking her? When asked to explain what he meant by this, he said that it meant putting his fingers in her vagina. After they had completed their questioning about the abduction the interviewing officers charged Birnie with abducting the complainer [AR], with indecent assault and with two charges of breach of the peace, and they arrested him. He was then cautioned and interviewed in relation to another female complainer, to whom he admitted sending a series of text and email messages. After further questioning he was charged with sending indecent messages to that complainer. Following the interview Birnie was, according to an entry in a police notebook, on the verge of tears. At 1223 hrs he asked what was happening to him. He was told that he was to be kept in custody over the weekend to appear in Aberdeen Sheriff Court on Monday 17 August 2009. On being advised of this he burst into tears and said spontaneously I poked her. He was asked by one of the interviewing officers whether he was referring to the complainer [AR], to which he replied Yes. He was told to say nothing further but that other officers would attend later to speak to him if he wished to make any further comments. At 1235 hrs he was asked if he wished a solicitor informed of his arrest and was told that a duty solicitor could be contacted on his behalf. He gave the name of a solicitor. It was not until about two hours later, at 1428 hrs, that a message was left with the solicitors secretary to advise him of the arrest. Birnie also asked that his mother be told of his arrest, but this was not possible as she was apparently not available to answer the telephone. Birnie then told the police that he wished to make a further statement, which he did at about 1345 hrs on 14 August 2009 to two police officers who had not had any prior involvement in the inquiry. Before he made his statement, which it is agreed was unsolicited, he was asked whether he wished to consult a solicitor before making it. He replied that he did not. He was asked whether he wished a solicitor to be present while he was making it. He again said that he did not. He was then cautioned and asked whether he understood the caution, to which he replied Yeah. He then said: I want to admit poking [AR]. She asked me to do it and we did give each other love bites. He was asked to say what he meant by poking, to which he replied that meant putting your fingers in her vagina. He then said: I never locked her in. I never locked her in her house. I asked her several times if she wanted to leave but she says no. I didnt threaten her in any way. It is plain from this narrative that Birnie was offered rights of access to a solicitor before he made his statement and he was also asked whether he wished to have a solicitor present while he was making it. He expressly declined both of these offers. The question is whether, on these facts, his statement was admissible. The Crown submits that it was. This is because the statement was severable from the prior police interview on two grounds: first, it was preceded by a valid waiver of the right of access to a solicitor and, second, because it was voluntary and not elicited by police questioning. The Appeal Court did not address its reasoning to these points, although it had been addressed on them in the course of the hearing of the appeal. The Lord Justice Clerk said in para 32 of his opinion that he accepted that the rights of a detainee or of an accused person under article 6 were capable of being waived, but that the argument for the Crown failed in the case of each of the three respondents. This was because the law at the time did not allow the accused to have access to a lawyer at the time of the pre trial procedure and because the consent to be interviewed in each case was not informed by legal advice. He dealt more fully with the latter ground for rejecting the Crowns argument in para 34, where he said: Furthermore, a valid waiver can proceed only on the basis of an informed decision. Since the right allegedly waived was that of access to legal advice, I cannot see how any of the appellants could waive that right when, ex hypothesi, he had not reason to think that he had any such right and had not had access to legal advice on the The agreed facts show that Birnie was told that he had this right before he made his unsolicited statement following his police interview. As for the objection that he did not have access to legal advice on the point before he declined the offer of access to a solicitor, I would hold that the answer to it is that there is no absolute rule that the accused must have been given legal advice on question whether or not he should exercise his right of access to a lawyer before he can be held to have waived it: see my judgment in McGowan (Procurator Fiscal, Edinburgh) v B [2011] UKSC 54. Lord Kerr says that it is an indispensible prerequisite that there must be some means of ascertaining the reason why the accused did not avail himself of this right: para 53, below. But it was not suggested at any time in the course of the argument that an absolute rule to that effect is to be found in the jurisprudence of the Strasbourg court nor do I find this in Lord Kerrs analysis of the authorities in McGowan. This point is of crucial importance to the proper exercise of the jurisdiction that has been given to this court by the Scotland Act. The only question for us is whether the absence of such an inquiry amounted in itself to a breach of a Convention right. That is the limit of our jurisdiction. A rule of the kind that Lord Kerr has suggested might perhaps be recognised at common law. But it is not for us to say how the law and practice respecting crimes should be developed by the common law in Scotland. That must be left to the High Court of Justiciary, whose decisions on all matters relating to the domestic criminal law of Scotland are final. The fact that the accused did not receive legal advice on the point and was not asked why he did not want to speak to a lawyer need not be left out of account altogether for the purposes of article 6. These are circumstances which can be taken into account in the assessment as to whether he understood the right that was being waived. But they are no more than that. I do not think that the Strasbourg jurisprudence requires us to hold that it would necessarily be incompatible with articles 6(1) and 6(3)(c) of the Convention for the Lord Advocate to lead and rely on evidence of answers given by a suspect during a police interview just because it was not ascertained why he did not want to speak to a lawyer. A descent to that level of detail in the laying down of incontrovertible rules is contrary to the approach that the court itself has adopted. The President of the court, Sir Nicolas Bratza, said in a paper which he gave in Edinburgh in March 2011 that the Strasbourg court has been careful, in general, to leave the national authorities to devise a more Convention compliant system without itself imposing specific requirements on the State: [2011] EHRLR 505, 510. The Supreme Court should, I believe, be no less careful in the way that it deals with Scottish criminal law and procedure. There remains the question whether the statement is properly to be regarded as severable from the police interview so that it can be held to be voluntary and not elicited by the previous police questioning. It is not in doubt that an unsolicited admission which is truly spontaneous and voluntary is admissible. In Cadder Lord Rodger observed that it is quite common for those who have been arrested to decide to make admissions to the police and not to exercise their right to obtain legal advice before doing so: 2010 SLT 1125, para 96. A person can confess if he is willing to do so, and his confession will be admissible if it is truly voluntary. The common law test as to what may be regarded as voluntary was described in Manuel v HM Advocate 1958 JC 41, 48 by Lord Justice General Clyde. He said that, to be voluntary, the statement must have been freely given and not given in response to pressure or inducement and not elicited by questioning other than what is directed simply to elucidating what has been said. The crucial question then is whether this statement freely given? Or was it the result of some kind of pressure or inducement by the police? We were not referred to any jurisprudence of the Strasbourg court on this precise point. But in Oregon v Elstad 470 US 298 (1985), pp 317 318 Justice OConnor, giving the opinion of the US Supreme Court, observed that some courts had applied that courts precedents, including Miranda v State of Arizona 384 US 436 (1966), relating to confessions obtained under coercive circumstances to situations involving wholly voluntary admissions, requiring a passage of time or break in events before a second, fully warned statement can be deemed voluntary. She went on to add these words: Far from establishing a rigid rule, we direct courts to avoid one; there is no warrant for presuming coercive effect where the suspects initial inculpatory statement, though technically in violation of Miranda, was voluntary. The relevant inquiry is whether, in fact, the second statement was also voluntarily made. In Missouri v Seibert (2004) 542 US 600, where the suspect made an initial confession without having been given a Miranda warning, a majority of the court held that his second statement after a Miranda warning was inadmissible. They rejected the minoritys criticism that this was inconsistent with Elstad, on the ground that the failure to give the warning in Elstad was a good faith mistake which was open to correction by careful warnings before systemic questioning in that particular case took place: p 615. In R v Cherie McGovern (1990) 92 Cr App R 228 the Court of Appeal held that a second interview, where a solicitor was present, was tainted by the fact that at her first interview which took place the previous day the appellant had been denied access to a solicitor. There were special features in that case. The appellant, who was aged 19, pregnant and of limited intelligence, was said to have been particularly vulnerable. Farquharson LJ said at p 234 that if the solicitor who was present at the second interview had known that the appellant had been wrongfully denied access to a solicitor at the first interview he would in all probability not have allowed the second interview to take place. Such authorities as there are on this issue suggest that each case must be examined carefully on its own facts. There are signs in this case, as in R v Cherie McGovern, that Birnie was particularly vulnerable when he made what I have referred to as his statement. It was unsolicited. He was no longer being interviewed. But the interval between his making it and the end of the police interview was very short. He had just been told that he was to be detained over the weekend, and he had been crying. It is at least questionable whether he would have made this statement if he had said that he wished to consult a solicitor and he had then received the legal advice to which he was entitled before making it. This is not a question that needs to be answered in every case. But in the circumstances of this case it is not one that can be left out of account in considering whether there was a breach of the right to a fair trial. I think that it is plain that there is room for argument as to whether the statement that Birnie made was truly voluntary and in any event whether, taking all the circumstances into account, it was fair to admit this evidence. Lord Kerr says that on the available evidence the only possible conclusion is that that it has not been established that Birnies decision not to consult a solicitor was an effective waiver of his right to legal consultation: see para 57, below. But here again the limits of our jurisdiction must be respected. It is not our function to act as a second court of appeal on matters that depend on the application of the domestic law. The question whether there has been a breach of the fundamental Convention right to a fair trial is within our jurisdiction. But, as I would hold that it was not necessarily incompatible with articles 6(1) and 6(3)(c) of the Convention for the Lord Advocate to lead and rely on this evidence, I consider that the question of fairness for the purposes of article 6(1) must be examined in the light of all the facts and circumstances. This is pre eminently a matter for determination in the first instance by the High Court of Justicary. As the Appeal Court has not yet addressed itself to this issue, I would remit it to that court for determination as part of the continued hearing of Birnies appeal. Conclusion I would dismiss the Crowns appeal on the question whether section 100(3B) of the Scotland Act 1998 applies in this case. I would dismiss its appeals on the issue as to waiver in regard to the police interviews in all three cases. I would allow its appeal on the question whether it was incompatible with Birnies right to a fair trial under article 6 of the Convention for the Crown to lead and rely on the evidence of the statement which he made following his police interview and remit that matter for determination by the High Court of Justiciary. LORD BROWN on these appeals and would dispose of them as Lord Hope proposes. I am in full agreement with the judgments of Lord Hope and Lord Hamilton LORD DYSON I am in full agreement with the judgments of Lord Hope and Lord Hamilton on these appeals and would dispose of them as Lord Hope proposes. LORD HAMILTON I agree with Lord Hope as to the disposal of all three of these appeals and adopt his narrative of the pertinent circumstances. I also adopt his reasoning in relation to Birnies unsolicited statement. I add a few words of my own on the issue of interpretation of section 100(3B). The question is whether an appeal against a conviction, obtained on indictment or on complaint, is proceedings brought by virtue of [the Scotland Act] against [the Lord Advocate] within the meaning of subsection (3A) of the Scotland Act (as amended by the Convention Rights Proceedings (Amendment) (Scotland) Act 2009). The scope of subsection (3A) must ultimately be determined by the statutory language used. But it is necessary to have regard to that language in the context of the legislation in which it appears and, in my view, in the context also of such other legitimately available material as may assist in the exercise of interpretation. This may involve identifying the mischief at which the enactment was directed. In Bennion on Statutory Interpretation, 5th ed (2008), p 938 it is stated: These presumptions [that Parliament intended to suppress the mischief and that it did not intend to apply coercive measures going wider than was necessary to remedy the mischief in question] as to Parliaments intention may help in construing an enactment whose wording is doubtful. The importance of the mischief goes further than this, however. We cannot be sure whether there is real doubt or not unless we have the mischief in mind. This is one function of the informed interpretation rule. In the consideration of opposing constructions of an enactment in relation to a particular factual situation, we may find that bringing the mischief into account helps to decide whether the enactment is intended to be given a wider or narrower construction. The first thing to notice is that the amendment made by the 2009 Act is an amendment to section 100 itself by adding two subsections to it. That suggests that the intendment of the legislature was to make an improvement, as it saw it, to the effect of section 100 as originally enacted. The nature of that intended improvement is not difficult to find. As Lord Rodger himself said in Cadder v HM Advocate 2011 SC (UKSC) 13, at para 105: In Somerville v Scottish Ministers [2008 SC (HL) 45] the House of Lords held that the time limit in section 7(5) of the Human Rights Act 1998 did not apply to proceedings in relation to Convention rights brought by reference to the Scotland Act 1998. It followed that, subject to any common law limitations or any specific statutory time limit, such proceedings could be brought at any time. The Scottish Parliament eventually responded to that decision by passing the Convention Rights Proceedings (Amendment) (Scotland) Act 2009, which amended section 100 of the Scotland Act so as to introduce a one year time limit like the one in section 7(5) of the Human Rights Act. Somerville was a civil case in which the House of Lords relied significantly upon section 100 of the Scotland Act (as originally enacted) as well as on the other provisions of that statute. Of course, the statutory response may, intentionally or inadvertently, have been wider than to deal with the prior statutory effect which was thought to be undesirable. But all the indications are the other way. The limitation on the bringing of proceedings provided for by section 100(3B) is for practical purposes identical to that provided by section 7(5) of the Human Rights Act 1998. That subsection applies, and applies only, to proceedings brought under section 7(1)(a). Such proceedings are civil proceedings (R v Kansal (No 2) [2002] 2 AC 69, per Lord Hope of Craighead at paras 58 63). This is to be contrasted with section 7(1)(b) which allows for reliance on the Convention right or rights concerned in any legal proceedings a term defined comprehensively by section 7(6). Such reliance can accordingly be had in criminal as well as in civil proceedings. It is difficult to suppose that the Scottish Parliament would have, in effect, adopted the exact language used for civil proceedings in the Human Rights Act if it had intended to provide for criminal as well as for civil proceedings. Further, it is difficult to conceive why the Scottish Parliament should think it appropriate to provide for criminal appeals a limitation period such as that made by section 100(3A) and (3B). The Criminal Procedure (Scotland) Act 1995 makes its own provision for the timeous taking of appellate steps. Section 106 allows a person convicted on indictment, with leave granted in accordance with section 107, to appeal in accordance with that Part of the Act to the High Court against various things, including conviction and sentence. Section 109(1) prescribes that, where a person desires to appeal against any of the things referred to in section 106(1), he shall within two weeks of the final determination of the proceedings, lodge with the Clerk of Justiciary written intimation of intention to appeal . Section 110(1)(a) provides that, in the case of an appeal against conviction, the convicted person may, subject to section 111(2), within eight weeks of lodging intimation of intention to appeal lodge a written note of appeal . A shorter (four weeks) period is allowed for appeals other than appeals against conviction (section 110(1)(b)). Section 111(2) provides: Any period mentioned in section 109(1) or 110(1)(a) of this Act may be extended at any time by the High Court in respect of any convicted person . Thus, as regards proceedings on indictment, the 1995 Act provides its own (much shorter) temporal restrictions on bringing appeals with a similar power in the court to extend the period on equitable grounds. As regards summary proceedings, section 175 allows a convicted person to appeal with leave to the High Court. The more usual mode of appeal is by stated case (section 176), for which again a short timetable is prescribed. Section 181(1) empowers the High Court to direct that such further time as it may think proper be afforded to the applicant to comply with the requirements as to time. The statute recognises other common law modes of appeal (by, for example, bill of suspension). At common law there was no time limit for the bringing of a suspension but acquiescence in the judgment complained of might be inferred from undue delay (Renton and Brown Criminal Procedure, para 33 09). A statutory time limit (three weeks) for bringing a bill of suspension was introduced by section 6(1) of the Criminal Procedure (Legal Assistance, Detention and Appeals) (Scotland) Act 2010. It is difficult to suppose that, in inserting section 100(3)(A) and (3B) into the Scotland Act in 2007, the Scottish Parliament had in mind common law remedies in summary matters. Accordingly, there are persuasive reasons, in my view, for concluding that subsections (3A) and (3B) of section 100 (as amended) were designed to apply only to civil proceedings. Although not spelt out in the legislation, that restriction is consistent with the statutory language used. Against that background the expression any proceedings brought by virtue of this Act against [the Lord Advocate] is to be construed. It is conceded, inevitably, that criminal proceedings at first instance are not within the ambit of section 100(3A). While Part VII of the 1995 Act (headed Solemn Proceedings) is dealt with distinctly from Part VIII (headed Appeals from Solemn Proceedings), it involves, in my view, some artificiality of language to construe any proceedings brought as apt to include an appeal taken against conviction or sentence. In effect, there are single proceedings initiated by service of the indictment or complaint, the appeal by a convicted person being a step taken within these single proceedings. I am not persuaded that the terms of section 106(3) (By an appeal under subsection (1) above a person may bring under review of the High Court any alleged miscarriage of justice) assist in determining whether an appeal is proceedings (distinct from the prosecution) brought by the convicted person. More importantly, in my view, the expression any proceedings brought in subsection (3A) appears to pick up the language to bring any proceedings in subsection (1)(a), which in turn reflects the language of section 7(1)(a) of the Human Rights Act a provision concerned with civil proceedings (supra). In any event, if there is ambiguity about the interpretation of subsection (3A), the considerations referred to earlier would, in my view, conclusively point to a criminal appeal not being within the scope of this provision. There remains for consideration by virtue of this Act. Some elaboration of that phrase is provided by section 126(11) which tells us that by virtue of includes by and under. In Somerville an issue was whether the obiter observations by Lord Hope and by Lord Rodger in R v HM Advocate 2003 SC (PC) 21 as to the effect of the Scotland Act (and in particular section 100(1) of it) were well founded. In R Lord Rodger had said at para 123: Section 100 has a counterpart in section 7 of the Human Rights Act, subsection (1) of which is expressed slightly more fully: (1) A person who claims that a public authority has acted (or proposes to act) in a way which is made unlawful by section 6(1) may (a) bring proceedings against the authority under this Act in the appropriate court or tribunal, or (b) rely on the Convention right or rights concerned in any legal proceedings, but only if he is (or would be) a victim of the unlawful act. Especially in the light of that provision, I would infer from section 100(1) of the Scotland Act that the Act itself enables a person, who claims that an act or proposed act of a member of the Scottish Executive is incompatible with his Convention rights, to bring proceedings in a court or tribunal or to rely on his Convention rights in any proceedings in a court or tribunal. Convention rights and the remedies for vindicating them belong in the sphere of public rather than private law. What particular form the remedy or reliance will take depends on the court or tribunal, and on the jurisdiction, in which the matter arises. In an appropriate court the person affected can seek damages under the Scotland Act in respect of an incompatible act. The majority in Somerville in effect approved that approach namely, that section 100 was, by inference, an enabling provision which, among other things, allowed a victim of an infringement of section 57(2) to rely on the Convention right or rights concerned in any legal proceedings, including criminal proceedings. Thus, while the procedural vehicle by which a person convicted in solemn proceedings brings his conviction or sentence under review is by an appeal under section 106 of the 1995 Act, it is the Scotland Act which enables him in that appeal to rely upon the alleged infringement of that right or those rights. Both statutes have thus a part to play. While I think it is a nice question, I have come with hesitation to the view that it can meaningfully be said that an appeal which relies upon an alleged infringement of a Convention right is one brought by virtue of the Scotland Act. I would accordingly not support the High Courts reasoning in this respect. LORD KERR As Lord Hope has pointed out (in para 5 of his judgment), the advocate depute has confined her challenge to the outcome of the appeals in Jude, Hodgson and Birnie to the claim that Birnie had waived his right to a lawyer when he made an unsolicited statement following his police interview, having declined the opportunity to have access to a lawyer prior to and while making it. It is not now argued that Jude or Hodgson waived their right to a lawyer. It is, of course, suggested that the Appeal Court was wrong in each of the cases in concluding that an effective waiver of their rights under article 6 of ECHR could only be made after they had received legal advice. A further discrete ground was advanced on behalf of the Lord Advocate in the case of Jude to the effect that section 100(3B) of the Scotland Act 1998, as amended by section 1 of the Convention Rights Proceedings (Amendment) (Scotland) Act 2009, precluded a challenge to the Lord Advocates leading evidence of the statement which Jude made because that challenge was made too late. I agree with all that Lord Hope and Lord Hamilton have had to say on that subject and do not propose to expatiate further on it. As I stated in my judgment in the reference (McGowan, Procurator Fiscal v B) I agree with Lord Hope that there is no absolute rule to be derived from the case law of the European Court of Human Rights (ECtHR) that an effective waiver of the right to legal assistance can only take place after the person purporting to waive the right has received legal advice on whether that course should be followed. I believe that generally this will be the most effective way of ensuring that there has been an effective waiver but Strasbourg jurisprudence has not yet developed to the point where that is an essential prerequisite. That fact alone would not have deterred me from concluding that this was necessary if I had felt that the article 6 rights of the respondents could not otherwise be secured see my judgment in Ambrose v Harris (Procurator Fiscal, Oban) [2011] UKSC 43, 2011 SLT 1005. But I am not persuaded that the only possible means of ensuring that there has been an effective waiver is by having the suspect who waives the right receive legal advice on that course before he does so. I have explained in my judgment in McGowan why I consider that such safeguards as are currently available in Scottish law to protect the interests of a suspect are not efficacious to ensure that a decision not to have legal assistance constitutes an effective waiver. In particular, I have pointed out that it is an indispensable prerequisite that there must be some means of ascertaining the reason that a decision not to avail of this fundamental right has been taken. Birnies case strikingly illustrates the elementary need for some inquiry to be made of a suspect as to why he has decided not to have the advice of a solicitor before interview unless the reasons for that are otherwise clearly obvious. Although he was no stranger to the criminal law, Birnie was only eighteen years old when he was interviewed by police. Following interview he was on the verge of tears. When he was told that he was going to be kept in custody he broke down and made what has been said to be an unsolicited admission. It is difficult to imagine that this admission and Birnies breaking down were unrelated to his being told that he was going to be detained over the weekend. At 12.35 pm, some twelve minutes after he had made the admission, he was asked whether he wished to have a solicitor contacted on his behalf. He nominated a firm of solicitors to contact but a message was not left with that firm until some two hours later. He also wanted his mother to be informed of his arrest but that proved impossible. The fact that he wanted both his solicitors and his mother to be informed that he was in detention is at least relevant to his state of mind at that time and his ability to cope without legal assistance during any further questioning. Birnie told police that he wanted to make a statement some time before 1.45 pm notably, some 43 minutes before the solicitors whom he had been asked to be informed of his arrest were given that information. Before he made his further statement at 1.45 pm he was asked whether he wished to consult his solicitor before making it and he replied that he did not, and when asked whether he wished to have a solicitor present while he was making it, again said that he did not. In the circumstances the second inquiry might seem otiose but it was the product of a pro forma procedure. Some such procedure is, of course, required to ensure that a consistent practice is followed but, because of the routine way in which it must be applied, it is hardly the most efficient way to examine whether a suspect has fully understood the importance of the right which is being relinquished. Lord Hope has observed that Birnie expressly declined both offers of legal assistance. This is true but it seems to me inescapable that his decision to do so could not in any circumstance be regarded as an effective waiver of his right to legal counsel and I believe that it is inconceivable that any court could be satisfied of that to the requisite standard. Birnie was not asked why he did not want to speak to a lawyer, notwithstanding that he had nominated a firm of solicitors something over an hour before. He was not told that he could speak to a solicitor by telephone. No inquiry was made as to whether the decision to make a statement at that time was related to the intention of police to detain him over the weekend. That this was, at the very least, a distinct possibility must have been obvious to the police officers who interviewed him. Quite apart from the fact that the unsolicited statement was made shortly after he had been interviewed without having been informed of his right to legal assistance and leaving aside the possible impact that this might have on the admissibility of his later statement, the circumstances in which his unsolicited statement was made raise substantial and inevitable doubts that his waiver of the fundamental right to legal assistance was effective. For these reasons I would hold that it is unnecessary to remit Birnies case to the Appeal Court. I am of the view that, on the available evidence, the only possible conclusion is that it has not been established that Birnies decision not to consult a solicitor was an effective waiver of his right to legal consultation. For these reasons I consider that it has not been and on the available evidence cannot be established that Birnies decision not to consult a solicitor constituted an effective waiver of his right to legal consultation. On that account, I would dismiss the appeal in his case. I would dismiss the appeals in Jude and Hodgson for the reasons given by Lord Hope. In para 29 of his judgment Lord Hope has fastened on my statement (at para 53 above) that it is an indispensable prerequisite that there must be some means of ascertaining the reason that an accused did not wish to avail himself of the right to legal assistance and has characterised this as an absolute or incontrovertible rule. I had not intended to propound any new principle, much less an inflexible rule. In saying that a means must exist for understanding why someone has declined to exercise his right to legal assistance before finding that there has been an effective waiver, I was merely reflecting what I understand to be the unmistakable effect of current Strasbourg jurisprudence. I was not constructing some unheralded, disquieting rule. This can be demonstrated by a few simple propositions: (i) For a waiver to the right to legal assistance to be effective, there must be a knowing and intelligent decision to waive the right. I do not understand the majority in this case to suggest otherwise; (ii) In a case where the effectiveness of the waiver is in dispute, it is for the prosecution to prove that it is effective. Again I do not believe that this is controversial; (iii) It is well recognised that reasons other than those which would qualify as sufficient to support the conclusion that a knowing and intelligent decision has been made will frequently motivate a suspect to decline the right to legal assistance; (iv) In order for the prosecution to show that such reasons do not obtain and that a knowing and intelligent decision has been made, it is necessary to have some insight into why the right has been declined. The requirement that a means exist of obtaining that insight does not involve the creation of some startling new rule. It merely follows the flight of the arrow of logic to its obvious destination. In these circumstances, I respectfully question whether the passage from the paper by the President of ECtHR, Sir Nicolas Bratza, quoted by Lord Hope has any relevance to the current debate. Sir Nicolas had made the entirely unexceptionable statement that the Strasbourg court has been careful to refrain from imposing specific requirements on the State. Quite so but that does not impinge on the conclusion that I have reached about the effect of the case law of the European Court of Human Rights. I have merely indicated where I believe the jurisprudence of that court in this area leads. It was not my intention to descend to a level of detail in laying down an incontrovertible rule. Indeed, I have made it clear that an inquiry into the reasons for a purported waiver is required only when those reasons are not obvious from the circumstances in which it was made.

The Respondents were each detained as suspects for questioning at a police station under sections 14 and 15 of the Criminal Procedure (Scotland) Act 1995. Their detentions took place prior to the decision of this Court in Cadder v HM Advocate [2010] UKSC 43, and they did not have access to legal advice either before or during their police interviews. In the course of their interviews, they each made statements which were later relied on by the Crown at their trials. They were convicted and sentenced to various periods of imprisonment. They appealed, and their appeals were still current when the judgment in Cadder was delivered on 26 October 2010. The Respondents argued, on the basis of Cadder, that the leading of evidence of the statements they made during their police interviews was a breach of their rights under Articles 6(3)(c) and 6(1) of the European Convention on Human Rights, and that, in terms of section 57(2) of the Scotland Act 1998, the Lord Advocate had no power to lead that evidence. For Birnie, it was also submitted that the reliance by the Crown upon his admissions in these circumstances deprived him of a fair trial, to which he was entitled under Article 6(1) and at common law. The Crowns objections to the devolution issue were repelled by the Appeal Court, and the Crown appealed to the Supreme Court. On the question whether the Respondents had waived their right to legal assistance, the Lord Advocates position before the Court was that the important point in these appeals was that raised in the case of Birnie. Unlike the other two Respondents, Birnie made an unsolicited statement following his police interview, having declined the opportunity to have access to a lawyer prior to and while making it. The outstanding matters before the Court were therefore: (i) Whether the time bar referred to in section 100(3B) of the Scotland Act 1998, as amended, applies (ii) Whether Birnie waived his right of access to a lawyer when he made his unsolicited statement (iii) Whether the reliance by the Crown upon the appellants admissions in these circumstances The Supreme Court unanimously dismisses the Crowns appeal on the question whether section 100(3B) of the Scotland Act 1998 applies in this case. It unanimously dismisses its appeals on the issue as to waiver in regard to the police interviews of Jude and Hodgson. By a majority of 4 1, it allows the appeal on the question whether it was incompatible with Birnies right to a fair trial for the Crown to lead and rely on the evidence of the statement which he made following his police interview and remits that matter for determination by the High Court of Justiciary. Lord Hope gives the leading judgment. Lord Kerr gives a partly dissenting judgment. (1) Time Bar: Section 100(3B) of the Scotland Act 1998, as amended, provides that any proceedings brought on the ground that an act of a member of the Scottish Executive is incompatible with the Convention rights must be brought before the end of the period of one year beginning with the date on which the act complained of to Judes appeal; following his police interview; and deprived him of his right to a fair trial under Article 6(1) of the Convention. took place. The question is whether that section applies to proceedings brought by way of an appeal under the 1995 Act [6]. A criminal appeal under section 57(2) of the Scotland Act falls plainly into the category of a proceeding that is by virtue of the Scotland Act. The fact that the procedure under which the complaint is made is provided by the 1995 Act is irrelevant as far as this point is concerned, and does not render section 100(3B) inapplicable[13]. The opening subsection of section 100 makes the same distinction as that found in section 7(1) of the Human Rights Act 1998 between bringing proceedings on the basis of Convention rights, and relying on Convention rights in any such proceedings. The wording is not exactly the same in the two Acts, but the assumption is that they have the same effect. The time bar under section 7(5) of the Human Rights Act refers only to proceedings under section (1)(a) and not those under (1)(b) [15]. The time bar in section 100(3B) has the same effect, so it does not apply to proceedings of the kind referred to in section 100(1)(b). The point is that proceedings under that section are proceedings that have been brought by someone other than the person who maintains that the act in question is incompatible with the Convention rights [16]. An appeal against conviction or sentence is still part of the prosecution process that has been brought by the Lord Advocate [17]. Further, the 1995 Act contains its own system of time limits for the bringing of appeals. It would be very odd if an appeal were subject to two different time limits under two different Acts [18]. (2) Waiver. Birnie was offered rights of access to a solicitor before he made his statement and was also asked whether he wished to have a solicitor present while he was making it. He expressly declined both offers [26]. There is no absolute rule that the accused must have been given legal advice on the question whether or not he should exercise his right of access to a lawyer before he can be held to have waived it: see McGowan (Procurator Fiscal, Edinburgh) v B [2011] UKSC 54 [28]. It was not suggested in the course of argument that an absolute rule requiring reasons for the accuseds decision to waive his right to legal assistance is to be found in the jurisprudence of the Strasbourg court. The only question for this Court is whether the absence of such an inquiry amounted in itself to a breach of a Convention right. It is not for the Supreme Court to say how the law and practice respecting crimes should be developed by the common law in Scotland. The fact that the waiver was made without legal advice and without reasons being requested may be taken into account in the assessment as to whether Birnie understood the right that was being waived. But Strasbourg does not require the Court to hold that it would necessarily be incompatible with Article 6 to rely on statements made to police just because it was not ascertained why the suspect did not want to speak to a lawyer. The Strasbourg court has been careful, in general, to leave the national authorities to devise a more Convention compliant system without itself imposing specific requirements on the State. The Supreme Court should be no less careful in the way that it deals with Scottish criminal law and procedure [29]. There is room for argument as to whether Birnies statement was truly voluntary and in any event whether, taking all the circumstances into account, it was fair to admit this evidence. The question of overall fairness for the purposes of Article 6(1) must be examined in the light of all the facts and circumstances, and is therefore a matter for determination by the High Court of Justiciary [33]. For Lord Kerr, it is an indispensable prerequisite that there must be some means of ascertaining the reason that the right to legal assistance has been waived [53]. On the available evidence, it has not been established that there was an effective waiver by Birnie of his right to legal assistance [57].

These proceedings were brought by the Financial Conduct Authority (FCA) against Asset Land Investment plc and associated parties, alleging the carrying on of regulated activities without authorisation, contrary to section 19 of the Financial Services and Markets Act 2000 (FSMA). The activities in question related to sales of individual plots at six possible development sites in various parts of the country. The only issue in the appeal is whether these activities amounted to collective investment schemes within the meaning of section 235, and thus regulated activities for the purpose of section 19 (as defined by section 22 and the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (SI 2001/544)). (It is convenient to refer generally to FCA as embracing its predecessor, the Financial Services Authority or FSA.) The FCA became aware in early 2007 that Asset Land was selling land to investors, and was representing itself as responsible for seeking rezoning for residential development and for arranging a sale to a developer. Following correspondence with Asset Lands solicitors, SJ Berwin, it accepted assurances that the company would cease to make such representations. In a further exchange in July 2008, SJ Berwin indicated that there were by then 64 plot owners, who had all been informed of the change in the arrangements. They had been offered the choice of exchanging their existing plots for plots that were larger in size and had access to services and roads (enhanced plots), thereby allegedly making it possible for plot owners to apply for planning permission themselves in respect of their individual plots; or of selling their existing plots back to the company for the price paid. It was said that of the 64 owners one had chosen to sell his plot back and the rest had opted for an enhanced plot. On the basis of this and other information provided by SJ Berwin, the FCA closed its inquiry in November 2008. In June 2011 it formed the view that the agreed restrictions on the companys method of working were not being observed. It reopened its inquiry, and gave notice of the appointment of investigators. The present proceedings were begun in June 2012, following a worldwide freezing injunction against the company and Mr Banner Eve. In a judgment given on 8 February 2013 ([2013] EWHC 178 (Ch); [2013] 2 BCLC 480) Andrew Smith J decided that its activities amounted to a collective investment scheme, in breach of the Act. After a second hearing on remedies the judge directed an inquiry into the amounts of restitutionary orders to be made under section 382. He made interim orders for payments totalling over 20m, based on FCA estimates of the amounts paid by investors for their plots, and on the assumption that their residual value, in the absence of planning permission, was nil. There is at this stage no issue before us arising out of those remedial orders (which have been suspended pending the determination of this appeal). The judges decision on liability was upheld by the Court of Appeal, in a judgment given by Gloster LJ ([2014] EWCA 435; [2014] Bus LR 993). Two of the parties Asset Land and its principal owner and director, Mr Banner Eve, appeal to this court. The statutory definition The issue turns on the interpretation and application to the facts of section 235, which reads as follows: 235: Collective investment schemes In this Part collective investment scheme means any (1) arrangements with respect to property of any description, including money, the purpose or effect of which is to enable persons taking part in the arrangements (whether by becoming owners of the property or any part of it or otherwise) to participate in or receive profits or income arising from the acquisition, holding, management or disposal of the property or sums paid out of such profits or income. (2) The arrangements must be such that the persons who are to participate (participants) do not have day to day control over the management of the property, whether or not they have the right to be consulted or to give directions. (3) The arrangements must also have either or both of the following characteristics (a) the contributions of the participants and the profits or income out of which payments are to be made to them are pooled; the property is managed as a whole by or on (b) behalf of the operator of the scheme The background and general purpose of the legislation are described by Lord Sumption. In Financial Services Authority v Fradley [2005] EWCA 1183; [2006] 2 BCLC 616, para 32, Arden LJ gave helpful guidance as to the correct approach to construction of the relevant section: First section 235 is drafted in an open textured way in that it is drafted at a high level of generality and uses words such as arrangements and property of any description, which have a wide meaning. Secondly, the application of section 235 depends on the specific facts of the case and in the event of a dispute those facts will have to be determined by a court of law on the evidence before it. Once those facts are found, then it is unlikely that an appellate court will set those findings aside unless the judge was plainly wrong. Thirdly, since contravention of the general prohibition in section 19 may result in the commission of criminal offences [subject to section 23(3) of FSMA], section 235 must not be interpreted so as to include matters which are not fairly within it. We have been referred to comparable legislation, and related authorities, from other Commonwealth countries. However, the wording varies, sometimes significantly. For example, the Australian Corporations Act 2001, Part 1.2, applies to a managed investment scheme, but refers in the definition of that expression, to investors control not over management of the property, but over the operation of the scheme. Such differences make it advisable to keep the discussion within the ambit of the United Kingdom statute and authorities decided under it. Section 235 and land banking The possible application of section 235 to so called land banking arrangements was given prominence by the publication in March 2006 of draft FSA guidance, which became section 11 of its PERG Manual. We were told by Mr Peacock QC for the FCA that this was a response to the proliferation of schemes offering investors the opportunity to participate in land development projects. As illustrated by the present case, large sums of money may be involved. In the earlier schemes the promoter would often be subject to a contractual obligation to negotiate a sale to a developer, and would retain a call option over individual plots. Once it became known that such arrangements would be regarded as unlawful under section 235, and often following legal advice, adjustments were made to the schemes to keep them outside what was thought to be the ambit of the section. As already noted, the present is such a case. Another reported example of such changes in a land banking scheme (in a director disqualification case) is described in the judgment of Hildyard J in Secretary of State for Business Innovation and Skills v Chohan [2013] Lloyds Rep FC 351 (paras 73ff). He quotes (para 88) the advice of leading counsel (Mr Blair QC) summarising the changes then thought necessary to comply with the law in the light of the guidance: To be safe, the scheme must ensure that the owners actually control the management of their property (and that any management that is carried out on their behalf by the promoter is done on an individual basis). And the scheme must ensure that the owners are not subject to rights or duties, as against the promoter, or anyone else, that could lead to the conclusion that they were locked into any kind of collective management or development of the land. It is the FCAs case that in many instances the wording of brochures, marketing material and contracts ignored reality. The more unscrupulous operators simply took to making covert as opposed to overt representations, and promises to investors regarding the planning or rezoning gains that they would procure for the site. Whatever was said, the true object of the schemes, at least as understood by investors, was to enable them to benefit from an increase in the collectivised value of the individual plots, to be brought about by the operators supposed expertise and experience in the rezoning process, without any real involvement by investors in the management of that process. Although individuals could sell their plots at any time, this was not what was expected to happen. Other schemes have related to different forms of land exploitation. In Financial Conduct Authority v Capital Alternatives Ltd [2015] EWCA Civ 284, [2015] Bus LR 767 (Capital Alternatives) the Court of Appeal considered two schemes, one relating to exploitation of a rice farm in Sierra Leone, the other to tradable carbon credits in respect of forest areas in Australia, Sierra Leone and the Amazon. It will be necessary to consider some aspects of the judgment in due course. This appeal raises the general question whether the FCAs understanding of the law is correct, and specifically whether the law was correctly applied to the facts of the present case. It has potentially wide ranging significance for the application of the Act to this and similar arrangements. In re Sky Land Consultants plc Before turning to the judges findings in detail, it is convenient to refer to the judgment of David Richards J in In re Sky Land Consultants plc [2010] EWHC 399 (Ch) (Sky Land), which has been influential in subsequent cases and in FCA practice. It involved a land banking arrangement similar in many respects to the present. It was held to amount to a collective investment scheme within section 235. In that case, as in the present, the company purported to change its practices following intervention by the FCA. The changes were held by the judge insufficient to take it outside section 235. The case concerned two sites, the Crewe land and the Winterton land, involving sales respectively of some 56 and 98 individual plots. The companys option agreements for both sites stipulated the terms of any future transfers of individual plots, including a restrictive covenant precluding residential development without the consent of Sky Land (paras 22, 25). In the first period investors were given the clear understanding that the company would seek to obtain planning permission for each site as a whole, and would bear the full cost of doing so (paras 29 33). Its website identified by name its planning consultants and planning solicitors. The judge noted the common expectation (though not formally agreed) that in the meantime the land would remain in the occupation of the original owner and would continue to be farmed (para 34). Following the intervention of the FCA, the company agreed to write to investors indicating that the restrictions would be removed, that Sky Land cannot and will not play any further role in the development of the site, and that the individual owners would need to make their own arrangements to realise the value of the site as a whole (paras 37 39). The judge concluded that these statements had not been fulfilled, and that the company had continued as before, representing to investors that it would deal with planning and sale, and undertaking activities for that purpose (para 70). The judge concluded that the arrangements fell within section 235: A scheme whereby investors purchase individual plots within a site on the shared understanding that the company will seek planning permission and market the site including the plots are clearly capable of being arrangements Each of these requirements [of section 235(1)] appears to be satisfied: (i) the arrangements concern land sold off in small plots to investors, (ii) the investors become owners of the individual plots and (iii) the purpose of the arrangements is to receive profits arising from the sale of the individual plots as parts of the larger site. (para 73) He rejected the argument that the property for these purposes should be looked at by reference to individual plots: I consider the property to be the land comprising the individual plots sold to investors. It is that land, very probably as part of a larger site which includes areas retained by the original owner and areas acquired by the company, for which planning permission and a buyer would be sought by the company. The investors participate by each becoming an owner of part of the property. While it is legally possible for an investor to sell his plot on its own, that is not what is intended or likely to happen. The purpose is to obtain planning permission, for, and to sell, the property as a whole. (para 75) On the question whether the individual investors had day to day control for the purposes of section 235(2), the answer depended on the reality of how the arrangements are operated, as to which he saw no real issue: There was no aspect of the management of the property over which the investors had day to day (or any other) control. Steps with a view to obtaining planning permission and with a view to developing or selling the property were in the hands of the company. The physical management of the land continued, as it had before, to be under the control of those farming the land. (para 76) Under section 235(3)(b), the issue was whether the property was managed as a whole by the company. He said: What constitutes management is dictated by the property. Some property, short dated deposits for example, require active and constant management. The management of property of long term nature may involve only intermittent activity. As regards the land in question, management could be said to involve (i) long term goals, such as planning permission, development and sale, and (ii) the short term physical stewardship of the land. The latter was of no real concern to the investors. This was not intended to be an investment in agricultural land the reasonable inference from the evidence is that investors were content to leave it to the company to agree the use of the land pending development or sale. The purpose was to make a profit from an actual or prospective change from agricultural to residential or other use. The management of the property, so far as relevant to the investors, was taking steps with a view to obtaining planning permission and developing or selling the land. Such activities fall naturally within the ambit of management of land. The respondents submission that individual participants were left to deal with their own plots as they see fit has no basis in the evidence. (paras 77 79) This reasoning was in substance adopted in the present case by the judge and by the Court of Appeal. The facts in more detail The judges findings as to the course of dealings between the company and the investors was based largely on the oral evidence of 15 of the latter. Mr Banner Eve was the sole witness for the company, but his evidence was regarded by the judge as generally unreliable. The judges difficulties were compounded by the limited documentary evidence available from the company itself, but also by the FSAs failure to anticipate the need to agree or prove some of the documents (para 21). It is no criticism of the judge that his findings as to how the companys business was in practice conducted, or intended to be conducted, are lacking in precision on some aspects. Happily there is no significant disagreement on matters material to the issues in the appeal. Asset Land Associates Ltd (later Asset Land Investment plc) was incorporated in April 2005. It was owned (as to 95% of its shares) by Mr Banner Eve and his wife, who were also directors. Mr Banner Eve controlled its day to day activities. Some later purchases were made in the name of Asset LI Inc, a Panamanian corporation, of which Mr Cohen (another defendant) was a director. The judge found that Mr Banner Eve was as fully involved with the activities of that company as with the English company. Nothing turns on the difference for the purpose of this appeal. I will refer generally to both as Asset Land or the company. The first site was in South Godstone. It can be taken as typical. The company acquired two sites in February 2006 followed by a third in October 2007. The judge found (on the basis of inferences from bank statements) that the company began to sell plots at South Godstone and receive payments for them shortly after 2 February 2006. It sold plots at trade exhibitions and through telephone sales. In 2007 it began to sell properties through off shore brokers, including an agency called Services Global Destinations (Global) in Spain. During the life of the project some 300 to 400 investors bought plots at South Godstone. The site has never been allocated for development, nor sold to a developer. A valuation report prepared in March 2013 by consultants for the FCA recorded that the site was in the green belt and had currently little prospect of development. There is no evidence of what attempts (if any) were made by or on behalf of the company (or anyone else) to secure rezoning, or to attract the interest of developers. Later sites acquired and apparently marketed in the same way were in Liphook (acquired on 30 April 2008), Lutterworth (11 August 2008), Newbury (20 March 2009), Harrogate (14 May 2010), Stansted (June 2011). They all remain unallocated, and are likewise assessed as currently having little prospect of development. The judge accepted the investors evidence as showing how the company sold plots between July 2007 and 2012: A representative telephoned the potential investor, often by way of a cold call but sometimes in response to an interest in making an investment or buying land expressed over the internet or elsewhere. There generally followed several telephone discussions between Asset Land and the investors. They were given extravagant expectations about the profit that they were likely to make from a short term investment, often within no more than a year or two. Some, but by no means all, potential investors were sent brochures in hard copy or electronically If the investor agreed to invest in a plot (or plots), he or she paid a deposit, generally of 10% of the price. Before paying a deposit, most investors had received at least one letter from Asset Land, and the represented defendants rely upon wording in small print by way of a footer, and its wording was similar to that on the so called check box form [see below] Some time after paying their deposit, the investors were required to pay the rest of the price. After they had done so, Asset Land sent them two copies of a contract for the purchase of the plot(s) that they were buying. It was not Asset Lands practice for investors to have a copy of the contract before they had fully paid for their plot(s) (paras 62 64) This account was also confirmed by the contents of a draft letter prepared for a potential investor in November 2011, which spoke of re zoning being anticipated for two to three years, after which the land would be entered into the LDF (Local Development Framework), and then made available to developers to purchase. Investors were told to have their signature to the contract witnessed, in some cases by a solicitor, but none was encouraged to seek legal or other professional advice. Those who spoke of using a solicitor were told that it was unnecessary to do so (para 65 67). The documents sent to a prospective investor included a so called check box form, to be completed and returned to the company. The form included confirmation that the investor had read and understood a disclaimer (which appeared as a footer in smaller print at the bottom of the form). This noted that the company did not give investment advice or offer regulated investment products to the public, and that having sold the land the company does not pursue re zoning or planning permission , and neither it nor any person connected with it would have any role in pursuing re zoning or planning permission. The contract itself contained what the judge called a representations clause, by which it was confirmed that no representations were relied on outside the contract; and a services clause, which provided that the seller would not apply for planning permission for the property or provide any other services amounting to regulated activities under the Act, although it reserved the right to apply for planning permission for land retained by itself. Notwithstanding these written provisions, and notwithstanding differences in the detailed understanding of the various witnesses, the judge found that they all shared a consistent understanding of the structure of the scheme: i) That Asset Land would seek to progress planning procedures with a view to the sites being used for housing. ii) That Asset Land would then procure their sale, probably to developers. iii) That the investors who sold the plots at the site would be paid a share of the total consideration paid by the purchaser. (paras 71 76) The judge found further support for his view of the arrangements in the evidence of a Sky News reporter, Mr Mansfield (paras 78 80). In spring 2012, in connection with a programme about land banking, he had contacted the company in the guise of a potential investor. In a secretly recorded discussion with a company representative (Ms McKenna) about the Harrogate and the Stansted sites, he was told how Asset Land operated. This involved buying sites by reference to strict criteria, usually with gas, water and electricity all plugged so that a developer can build quickly to maximise his profit margins . The right to build would be sold on to developers under sealed bids. The company was nothing to do with planning permission since it was not involved in construction; but it would, she said, walk (him) hand in hand right up to the end of the investment, advise him of a fair and true market offer, and then return the title deeds to the developer from whom he would by return of post to (his) bank account get the profit (para 78). After agreeing to invest in a plot on the Harrogate site, Mr Mansfield met Mr Cohen (director of ALI Panama) who emphasised that he would have title to his plot and be in control of it: All we do is re zone [the land], get a percentage of the value lifted and then, thats it, were out of it people who buy it, normally construction companies come in and buy it and they put in for the planning and everything. When an offer was made, all the investors would be made aware of it, and they would have to agree the price because otherwise an investor might be left out in the cold anyway because [the developers would] just leave [his plot] as gardens. To avoid the risk of two or three people saying Oh no, were not going to sell and holding the process up for everybody else, they would normally say its 50% who say yes, and then in the contract you have to agree (para 79). The judge summarised the effect of Mr Mansfields evidence: consistently with the FSAs case, the scheme explained to Mr Mansfield was that (i) Asset Land would seek to have the sites re zoned, and (ii) Asset Land would arrange for a third party, in all likelihood a developer, to make an offer for the site as a whole. Mr Cohen recognised that a minority were legally entitled to refuse the offer, but the scheme operated on the basis that it would make no financial sense to do so and in reality they would have to sell. (para 80) Ms McKennas reference to sale by sealed bids also reflects email exchanges in 2010 between Mr Banner Eve and Ms Smeed Hughes (who worked for the company and became a friend: para 25). The judge noted these emails in support of his conclusion that, to Mr Banner Eves knowledge, brokers were telling investors that sites would be sold as a whole with the obvious inference that the company would arrange the sales (para 150). One in January 2010 spoke of the land at South Godstone being sold by sealed bids; another in July spoke of land having been sold at auction; and the third in August commented that Global seemed to adopting different pitches as to how the land would be sold, a favourite being the sealed bids routine, or developers already lined up to purchase. Management activity As already noted, a significant feature of section 235 is the reference to management of the property, either by the operator or by (or under the control of) the participants. The judge did not find it necessary to make detailed findings on the nature and extent of management activity under the arrangements. In agreement with David Richards J in Sky Land he held that steps with a view to enhancing the development value of the land and selling to a developer constituted such management. That approach has since been endorsed by the Court of Appeal in Financial Conduct Authority v Capital Alternatives Ltd [2015] EWCA Civ 284; [2015] Bus LR 767, where management of a development site was contrasted with that of the agricultural property in issue in that case: The [Sky Land] judgment rightly concentrated on the management with which the investors were concerned, namely that which would lead to the intended profit. In the present case that is the management of the farm with its buildings, roads, fields, irrigation areas, machinery and equipment, appurtenances and labourers. (para 85, per Christopher Clarke LJ) Similarly Vos LJ highlighted the need to read the word managed in the context of the particular type of scheme in issue (para 120): The arrangements that need to have the characteristic of being managed as a whole are those relating to one or more of the acquisition, holding, management or disposal of the property. The question of whether the property is managed as a whole may be answered differently depending on which of these types of arrangements have been made in order to produce the intended profits or income. For example, in the land bank cases, the arrangements relate to the obtaining of planning permission which is the core management activity from which profit is expected to arise on disposal. That is plainly a management of the property as a whole The reasoning of the courts below The High Court The judge first addressed the question whether the company had changed its operations after the FSAs intervention in 2007. He held that it continued to lead investors to believe that it would work with the planning authorities to enhance the prospects of housing development, and arrange for planning applications. It also led investors to think that the whole site would be sold together and the proceeds distributed. That was the obvious way for the plots to be sold, and the companys representatives confirmed that this was what would happen (paras 109 110). Under the heading the disclaimer defence: the representations clause and the services clause, he considered arguments relating to the interpretation of the clauses and the application of the Unfair Terms in Consumer Contracts Regulations 1999 (SI 1999/2083) (paras 114 141). He concluded that the representations clause did not assist the defendants because properly interpreted it did not cover what the brokers told investors, it was not binding under the 1999 Regulations, and it was of no effect under the Misrepresentation Act 1967; likewise the services clause did not assist because, even assuming that it could be read as submitted by the company, it was not binding under the 1999 Regulations (para 141). He identified three issues under section 235: i) Were there arrangements within section 235(1)? ii) Were the arrangements such the investors did not have day to day control? iii) Were the arrangements such that the property was managed as a whole by or on behalf of the operator? He answered all three in favour of the FCA. On the first, adopting the reasoning of David Richards J, he held that there were arrangements within section 235: I conclude that, as the FSA submitted, the brokers (or other sales representatives) of Asset Land and investors with Asset Land made arrangements when plots were marketed and investors paid a deposit that they should acquire land at a site, and that the object of the arrangements (as evinced in the exchanges) was that Asset Land should achieve a sale of the site (or a substantial part of it) after it had sought to enhance its value and so the price that it would attract by improving the prospects for housing development (through the site being re zoned, if not granted planning permission), the price paid for it being shared between the owners of the land. (para 157) He rejected the arguments of Mr Coppel QC (for the company) based on the varying understandings of different investors, and the lack of mutual expectation of adherence to [what was planned]. The investors all had a shared understanding of the essential features of the schemes. It was enough that the understanding was reasonably based on what they were told by the companys representatives, whether or not the company had any intention of acting in accordance with them (paras 159 160). He also rejected arguments based on non contractual disclaimers in the letters, including the footers in the check box forms. The footers were verbose and not prominently presented and did not in terms exclude the possibility of a planning application by an agent acting for the company. The investors reasonably continued to rely on what they had been told. The whole structure of the scheme called for plots to be sold together and this could be coordinated only by Asset Land (paras 161 163). Finally he rejected the argument that the company and the investors could not be found to have entered into arrangements inconsistent with the contracts signed by them: People do not live their lives only by reference to their legal rights, and often manage their affairs, and make arrangements, on the basis that the legal framework in which they operate will not be invoked, or is unlikely to be invoked. Non legal arrangements are commonly made in parallel with legal contracts: they do not operate only outside territory occupied by contractual arrangements. Nor are non contractual arrangements and contracts inconsistent if they express differences about what the parties are to do: they operate on different levels (para 164) On the second issue (section 235(2)), again following the reasoning in Sky Land, he held that the relevant property was each site acquired by Asset Land (para 157), and that on that basis none of the investors had any control over the site as whole (para 168). He reached the same view even treating the relevant property as the individual plots, given that the key feature of management was to do with enhancing the development status of the land and arranging a sale, which was in the hands of Asset Land. It was true that investors had the right as owners to deal with their land, and to apply for planning permission: But section 235(2) is not about what legal rights investors had over their plots. First, the subsection is directed to having actual control, and requires that the investors must actually exercise that control sufficiently to be regarded as being in effective control. Secondly, [citing Sky Land] section 235(2) is about what the arrangements were and the reality of how [they] are operated. In reality the arrangements described by Asset Lands representatives and therefore contemplated by the investors could not work if investors in fact exercised the rights to which Mr Coppel referred. (para 169) On the third point (section 235(3)(b)) he said: , the essential nature of the schemes was that plots were investments, and the plan was that they were to be sold as part of the sites after their value had been enhanced through planning permission or the prospect of development after re zoning. The management of the property relevant for identifying the characteristics of the arrangements is therefore, as I see it, management directed to what David Richards J called in [Sky Land] at para 78, the long term goals. The arrangements were that Asset Land would deal with those management matters and the whole structure of the schemes made it obvious that only Asset Land would do so and realistically investors could not do so. (para 172) The Court of Appeal The Court of Appeal in substance adopted the reasoning of the judge on the main issues. Without disrespect it is unnecessary to repeat its reasoning for the purposes of this judgment. It will be sufficient to refer below to those aspects which are subject to specific challenge by the appellants. The appellants arguments in the Supreme Court General approach In this court, Mr Michael Blair QC for the appellants submitted that, given the serious consequences of a finding that the arrangements fall within section 235, a conservative approach to construction is appropriate, and one which promotes certainty. He accepted (appellants case, para 58) the judges finding as to the consistent understanding of the arrangements shared by the investors (para 28 above): that the company would progress the necessary planning procedures, and procure sale of the sites, and the investors would share in the proceeds. But he criticised the legal conclusions drawn from those findings by the courts below. His submissions were grouped under four principal grounds (case, para 59ff): i) Ground 1 The Court of Appeal erred in its identification of the component parts of the arrangements, and in particular gave inadequate weight to an essential feature of the arrangements, that each investor was intended to (and in fact did) own his plot(s) outright. ii) Ground 2 Under sections 235(2) and (3) the court erred in treating the property as each of the sites acquired by the company, rather than the aggregate, from time to time, of the all plots sold to and owned outright by individual investors, together with all the investors appurtenant rights. Applying that approach to section 235(2), it should have held that the arrangements left investors with the necessary control: they owned their individual plots outright, had full control over their inclusion in the scheme or eventual sale, and so between them had day to day control of the management of all the relevant property. iii) Ground 3 Under section 235(3)(b) the critical question was whether the arrangements reserved to the investor the final decision as to the exploitation of the property pursuant to the arrangements. The answer must be yes. Because each investor was the outright owner of his plot, only he could make the final decision to sell (or not sell) his individual plot. iv) Ground 4 The interpretation adopted by the courts below would if uncorrected potentially interfere with a wide range of legitimate business arrangements that should not be characterised as Collective Investment Schemes. These grounds were developed in impressive detail in the written and oral submissions. The following is no more than a summary of what I understood to be the main points. Ground 1 arrangements Under the first ground (para 87ff), the appellants accepted that the company made arrangements for the purpose of section 235. However the courts had extended that concept beyond the legislative intention, for reasons discussed under four sub issues: whose arrangements?, representations, pick and choose, and timing. The overall thrust was that it was wrong to look for a form of compact between the promoter and potential participants. In the interests of certainty in the application of the law, the relevant arrangements had to be those made by the operator himself. They were to be judged objectively, as by an independent observer, taking account of their physical structures and operating machinery, the property to be subject to the arrangements, and representations made by or on behalf of the promoter as to their content; but not of investors understandings, save so far as they were evidence of what representations were actually made. Furthermore it was wrong for the court to pick and choose between the different elements, oral and written, of the arrangements (such as the contractual documents, which were an intrinsic part of what was proposed by the operator). The Court of Appeal had also been wrong also to focus on the early stage of evolution of the arrangements, rather than looking at their whole period. Ground 2 property and day to day control The second ground (paras 119ff) was similarly divided into four sub issues: property, purpose, exercise and legal rights and realities. In substance they addressed two linked issues of interpretation under the section: identification of the property (relevant to both sections 235(2) and (3)(b)), and the meaning of day to day control over management (relevant to section 235(2)). First he criticised the Court of Appeal for wrongly treating the judgment of David Richards J in Sky Land as equating the property with the site acquired by the promoter, rather than the aggregate of the interests owned by the investors. He illustrated the distinction by reference to the example of a property development consisting of individual units and common parts, such as a block of flats, where the flat owners individual rights consist of their ownership of their own flats, and also rights relating to the common parts, to be exercised jointly with other flat owners. On the Court of Appeals interpretation, the flat owners could never have day to day control of the property. By contrast, he submitted, under the manifestly better approach in Sky Land, the arrangement would not be within section 235 because the individual flat owners would have day to day control of their flats and of their rights over the common parts, which together constituted the relevant property (case para 128). He also criticised the courts below, following Sky Land, for directing attention to the purpose of the arrangements, which is a word used in subsection (1) but not subsection (2). The steps taken to achieve the purpose of enhancing the planning status of the site and attracting a developer did not require the company to have any control over management of the property. They could have been undertaken in relation to land owned by strangers. The only essential acts of management relating to individual plots were the decisions first whether or not to withdraw from the arrangements and secondly whether or not to sell to a particular buyer and on what terms. These were under the control of the individual owners. The judge and the Court of Appeal had been wrong also to direct attention to the question not of control as such, but of how it was exercised in practice (following Hamblen J in Brown v InnovatorOne plc [2012] EWHC 1321 (Comm), para 1170). Mr Blair submits that this is a misreading of the section, under which the question is whether the investors have day to day control, not whether or how they exercise it. Further, the concept of control is concerned with the physical and legal aspects of the arrangements, not with their purpose or effect (nor how it may have been represented to investors). It is the legal rights and duties which reflect the realities of the scheme. Ground 3 management by the operator as a whole Mr Blairs submissions under this ground (paras 175ff) were the counterpart of those under Ground 2. The relevant property is the aggregate, from time to time, of the all plots owned by the individual investors, and it is they who have ultimate control over its management. He drew an analogy with FCA guidance as to the role of a managing agent in respect of a block of flats (PERG 11.2). The effect of this guidance, as he submitted, was that an arrangement with respect to multiple units of property would not entail management of the property as a whole by or on behalf of the operator if the arrangement has the following characteristics: (i) individual investors each own a unit of property outright; (ii) the final decision as to whether or not to deal with or exploit the unit in question (to let out the flat, or sell the plot) rests with the owner of that unit; and (iii) the investor receives any net proceeds of dealings with his individual unit. The critical question was whether the arrangements reserved to the investor the final decision as to the application of his own unit. It was immaterial that they would in practice follow the recommendation of the promoter, so long as they retained the right to exercise their own choice as to how to proceed, whether on their own or in collaboration with other unit holders. Ground 4 conservative interpretation Finally (paras 189 191) he submitted that section 235 should not be stretched to cover issues for which other remedies were available, for example misrepresentation, breach of contract, or unenforceability of unfair terms in contracts. There were well established remedies for such practices, in private law or under the comprehensive regulatory regime for consumer protection. The expansion of collective investment schemes in order to bring such ordinary commercial transactions within the regulatory ambit of the FCA was neither necessary nor sensible. Discussion Arrangements I can deal shortly with the first ground. It was not in dispute, as David Richards J held, that section 235 can in principle cover a scheme of the present kind, involving sale of a property in small units to investors with a view to participation in the development profits of the whole site. The word arrangements has its ordinary meaning, and there is no dispute that Asset Land entered into arrangements within the meaning of the section. The content of the arrangements was a matter of fact for the judge. Mr Blair accepts his finding as to the consistent understanding of the investors of what was involved. He argues that the focus of attention should have been on the arrangements as made by the operator, including the documents prepared for that purpose, rather than as they were perceived by others. In my view this is an artificial and unrealistic distinction. The judge was entitled to take the view that the understandings of the investors conformed to what was intended by the operator. Similarly he was not required to give special weight to contractual or other documents, without regard to their context. The four sub issues raised under this head by Mr Blair are in truth no more than factors which may be relevant in the overall assessment, none of them definitive. The judge concluded that arrangements within the section were made when plots were marketed and investors paid their deposits, the object of the arrangements being that the company should achieve a sale of the site after seeking to enhance its value by improving the prospects for housing development, the price to be shared between the owners. That conclusion was amply supported by the evidence, and discloses no error of law. The property and its management Grounds 2 and 3 overlap and it is convenient to deal with them together. It is clear in my view that the relevant property for the purposes of section 235(1) was each of the companys sites taken as a whole, not the individual plots. That was the property whose sale was to lead to the profits which were the object of the exercise, and which brought the scheme within the scope of the section. The appellants, as I understand Mr Blairs submissions, do not dispute that the property means more than the individual plots. However, it is, he submits, not so much the site as acquired by the company, but the aggregate of all the plots owned by the individual investors. It is by virtue of those individual ownerships, viewed collectively, that they have ultimate control over its management. Under his suggested analogy with a block of flats, section 235 would not apply, because the individual flat owners have day to day control of their flats and of their rights relating to the common parts, which together would constitute the relevant property. In my view the distinction drawn by Mr Blair is not one of substance. The property for the purposes of subsection (1) is the whole site. That definition remains the same in principle throughout the section. But management control of the property under subsections (2) and (3) may be achieved in different ways. It is necessary to consider the mechanisms by which the participants on the one hand or the operator on the other manage or have management control of the property. The mechanisms may not be the same in each case, and they need not be legal mechanisms. That follows from the acceptance that the term arrangements is not limited to agreements binding in law. By the same token, the control envisaged by those arrangements is not confined to legal control. Have control in subsection (2) is not a technical term. In context, as David Richards J held in Sky Land, it must be taken to refer to the reality of how the arrangements are to be operated, which may or may not involve rights or powers enforceable in law. Nor is there any absolute rule for what Mr Blair calls multiple units of property, including blocks of flats. The FCAs guidance (PERG 11.2) draws the correct contrast: If the substance is that each investor is investing in a property whose management will be under his control, the arrangements should not be regarded as a collective investment scheme. On the other hand, if the substance is that each investor is getting rights under a scheme that provides for someone else to manage the property, the arrangements would be regarded as a collective investment scheme. The judge found that the facts of the present case brought it within the FCAs second category. He was clearly entitled to do so. Mr Blair does not, as I understand him, challenge the judges view (following Sky Land) that the relevant management of the property as a whole comprised the steps necessary to obtain planning permission and secure a sale to a developer. It was no part of the arrangements that the investors should have any part in, or control over, those management activities. Their ability as individual owners to determine ultimately whether or not to participate in a sale cannot be equated with control of its management in the meantime. In any event as the judge found, it would make no sense for them in practice to opt out of the realisation of the profit which was the only purpose of the arrangements. Even if one directs attention to the rights attached to individual units, there is no parallel with the position of individual lessees in a block of flats. They have day to day control over the management both of their own flats and (collectively) of the common parts, which together make up the relevant property. That remains the position even if in practice they delegate part of that control to a managing agent. It represents the substance of the arrangements from the outset. Under the present arrangements, by contrast, the investors ownership of the individual units was not linked to any exercise of management control, individually or collectively. It was not even envisaged that the plots should be separately identifiable on the ground. The move to marketing of so called enhanced plots did not alter the position. That may have been designed in theory to enable investors to promote individual developments, although the practicalities of that were not put to the test, nor explored in evidence. In any event, the possibility of some individual management activity of that kind added nothing to their management control of the remainder of the property. Conversely, turning to subsection (3)(b), under the arrangements as found by the judge control of the management activities for the property as a whole lay with the company. It was acting as the operator of the scheme, not as mere managing agent for the individual owners. It is true that its control was not underpinned by any legal rights over the units making up the property. That did not affect the substance of the arrangements, even if it might have been an obstacle to their effective implementation. Indeed it might have been thought that lack of legal control would lead to a need for increased management activity to ensure that individual plot owners continued to be committed to the project as it progressed. Unsurprisingly, it was no part of Mr Blairs case that the companys management activity should be disregarded because it lacked reality. That would have been tantamount to an admission that the whole scheme was a fraudulent sham. For the purpose of applying the definition under section 235, the judge was entitled to take the arrangements as found by him at their face value. The issue was not whether those arrangements were good or bad, or even dishonest, but whether they fell within the statutory words. For these reasons I would reject the appeal under Grounds 2 and 3. On this view, no separate issue arises under Ground 4. I accept of course that section 235 should not be stretched to cover matters covered by other legal remedies, under common law or statute. However, the judges application of the section to the facts as found by him involved no distortion of its natural meaning or its intended purpose. Conclusion the appeal. In conclusion, I would uphold the decisions of the courts below, and dismiss LORD SUMPTION: (with whom Lord Mance, Lord Clarke and Lord Hodge agree) I agree with Lord Carnwath that this appeal should be dismissed. My reasons are similar to his, but I propose to express them in a judgment of my own because this is the first case to reach this court or the Appellate Committee of the House of Lords about one of the more problematic features of the United Kingdoms system of statutory investor protection, namely the regulation of collective investment schemes. The appeal is about a scheme for investing in land with development potential. Such schemes are commonly referred to as land banks, although the variety of arrangements that carry that label is so wide that the term is probably better avoided. The question at issue is whether the arrangements made by companies controlled by Mr David Banner Eve to enable members of the public to invest in land constituted a collective investment scheme regulated by the Financial Services and Markets Act 2000. Asset Land was not authorised under the Act to establish or operate collective investment schemes. The facts Shorn of peripheral detail, the facts are straightforward. Between February 2006 and October 2007, Asset Land Investment plc bought three adjoining parcels of greenfield land at South Godstone in Surrey with a view to consolidating them into a single site. The object was to increase the value of the site by persuading the local authority to re zone it for housing development. The site would then be sold as a whole at a profit to a developer. Shortly after acquiring the first parcel the company began to subdivide it into plots and to offer the plots for sale to investors. Ultimately, the consolidated site was divided into 319 plots. Subsequently, another site was acquired at Liphook in Hampshire. A Panamanian company called Asset LI Inc, in which the judge found that Mr Banner Eve was also involved, acquired further sites at Newbury, Lutterworth, Harrogate and Stansted. The additional sites were acquired with the same object and were treated in the same way. Like the judge, I shall refer to the English and the Panamanian company indiscriminately as Asset Land. At the trial, there was much dispute and a good deal of evidence about the manner in which the plots had been marketed to investors. The judge found that it was done orally, mainly by telephone, and usually began with a cold call. Potential investors were given extravagant expectations about the profits to be made, often within a year or two. If the investor decided to proceed, he was required to pay a deposit, generally 10% of the price. Sometime after the payment of the deposit the investor was required to pay the balance of the price. After the investor had paid the full price, he received two copies of the contract for the purchase of his plot(s) from the relevant Asset Land company. He also received a check box form. Once these documents had been signed and returned, the investors plot was conveyed to him and in due course he received a Land Registry certificate of title. Asset Land retained title to the roadways between the plots, the access points to the site and certain other common spaces. During the marketing process, different investors were given different understandings of how the development potential would be realised. However, the judge found that the salesmen gave them all to understand that the scheme had three basic features, which he summarised as follows (para 71): (i) that Asset Land would seek to progress planning procedures with a view to the sites being used for housing; (ii) that Asset Land would then procure their sale, probably to developers; (iii) that the investors who sold the plots at the site would be paid a share of the total consideration paid by the purchaser. I shall refer to these as the core representations. On the judges findings, there was no general understanding about how the shares of the total price would be calculated, although one investor seems to have been told that it would be pro rata to the size of each plot. It is, however, clear that it was not proposed to price each plot separately so that if, say, part of the site was approved for affordable housing the owners of plots in that part would get less while others whose plots lay across an access point designated in the planning permission would be able to hold out for more. Each investor would derive his profit from a share of the price realised for the site as a whole. The core representations by which Asset Land explained how the scheme would work did not extend to requiring investors to sell on terms proposed by Asset Land. But the judge went on to find that in practice the whole structure of the scheme called for plots to be sold together and this could be coordinated only by Asset Land (para 162); and that, although each investor could sell, lease, mortgage or occupy his plot as he pleased once he had acquired it, and could apply for the re zoning of the site or planning permission for his own plot, in reality the arrangements described by Asset Lands representatives and therefore contemplated by the investors could not work if investors in fact exercised [these] rights (para 169). The contracts of purchase and the check box form contradicted the representations in a number of respects. In particular, the contracts included a representations clause (clause 14) and a services clause (clause 16). The representations clause provided: The Buyer confirms that there are and have been no representations made by or on behalf of the Seller on the faith of which the Buyer is entering into this Agreement except and to the extent to which such representations are herein expressly set out or form part of written replies by the Solicitors for the Seller to the written Inquiries before Contract raised by the solicitors for the Buyer or the Sellers replies to Property Information Forms. The services clause provided: For the avoidance of doubt, the Seller is not obliged to and will not apply for planning permission in relation to the Property or in relation to the land as a whole of which the Property forms part, nor will the Seller provide any other services to the Buyer following the purchase of the Property by the Buyer to the extent that the provision of such services would constitute the carrying on by the Seller of regulated activities for the purposes of the Financial Services and Markets Act 2000 unless the Seller is authorised under that Act and permitted by the Financial Services Authority to carry on the relevant regulated activities. Notwithstanding the foregoing, the Seller reserves the right to (but is not obliged to) apply for planning permission in relation to any land owned by the Seller which forms part of the land of which the Property forms part. In addition, the check box form included a non contractual confirmation, signed by the investor, that he had read and understood a disclaimer in the following terms: Asset Land Investment plc is not regulated by the Financial Services Authority (FSA) or any other regulatory body. Asset Land Investment plc is not authorized to give investment advice or offer regulated investment products to the public. Asset Land Investment plc offers parcels of land for sale. Asset Land Investment plc does not pursue planning permission or re allocation of the land once it has been sold and as such, this is not to be viewed as a Collective Investment Scheme (as defined by the Financial Services and Markets Act 2000). Neither Asset Land Investment plc nor any person connected with it will have any role in pursuing planning permission as a way of increasing the value of the land. The judge found that the arrangements governing the scheme were contained in the core representations made when the plots were marketed and before the price was paid (para 157). The contract and the check box form came later. The judge rejected the submission that these last documents superseded or supplemented the representations. This was because the services clause dealt with planning permission but not re zoning of the sites, and was in any event unenforceable under the Unfair Terms in Consumer Contracts Regulations 1999 (SI 1999/2083); the representations clause was of no effect under the Misrepresentation Act 1967; and the disclaimer was verbose, not prominently presented and would not have been read or understood by many investors. The investors, he said, reasonably continued to rely on what they had been told (para 161). The Financial Services and Markets Act 2000: the general prohibition Section 19 of the Financial Services and Markets Act 2000 substantially re enacts section 3 of the Financial Services Act 1986. It provides that no person may carry on a regulated activity unless that person is authorised or exempt. This is referred to in the Act of 2000 as the general prohibition. In the earlier Act, regulated activities had been defined in the Act itself. But in the Act of 2000, a regulated activity is simply defined as an activity of a specified kind which relates to an investment of a specified kind or is carried on in relation to property of any kind: section 22. For this purpose, specified means specified by the Treasury by statutory instrument. The relevant statutory instrument is the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (SI 2001/544). The order identifies specified activities as including (i) activities such as promoting, advising on, managing or dealing in investments; and (ii) establishing, operating or winding up a collective investment scheme: para 51(1)(a) (now renumbered as article 51ZE). Specified investments are identified in Part III of the same order. Although the Treasury is empowered to specify any assets as investments, the order in fact identifies broadly the same kinds of asset as had previously been identified in the Financial Services Act 1986. They comprise shares, bonds and other debt instruments, government and public securities, warrants and tradeable certificates for any of the foregoing, mortgages, options and futures, contracts for differences, units in a collective investment scheme, and similar financial instruments. The statutory consequences of a breach of the general prohibition are severe. The infringer commits a criminal offence: section 23. Any contract made in the course of carrying on the relevant activity is unenforceable: section 26(1). And there are provisions for compensation and restitution in favour of the other party: section 26(2). Collective Investment Schemes Specific provision is made for collective investment schemes in Part XVII of the Financial Services and Markets Act 2000. Chapter I of Part XVII comprises definitions, including the general definition in section 235, which provides: 235 Collective investment schemes. (1) In this Part collective investment scheme means any arrangements with respect to property of any description, including money, the purpose or effect of which is to enable persons taking part in the arrangements (whether by becoming owners of the property or any part of it or otherwise) to participate in or receive profits or income arising from the acquisition, holding, management or disposal of the property or sums paid out of such profits or income. (2) The arrangements must be such that the persons who are to participate (participants) do not have day to day control over the management of the property, whether or not they have the right to be consulted or to give directions. (3) The arrangements must also have either or both of the following characteristics the property is managed as a whole by or on the contributions of the participants and the (a) profits or income out of which payments are to be made to them are pooled; (b) behalf of the operator of the scheme. If arrangements provide for such pooling as is (4) mentioned in subsection (3)(a) in relation to separate parts of the property, the arrangements are not to be regarded as constituting a single collective investment scheme unless the participants are entitled to exchange rights in one part for rights in another. (5) The Treasury may by order provide that arrangements do not amount to a collective investment scheme in specified circumstances; or if the arrangements fall within a specified (a) (b) category of arrangement. The rights or interests of participants in a collective investment scheme are referred to in the Act as units: see section 237(2). The statutory definition substantially re enacts section 75 of the Financial Services Act 1986, except that the exclusions which are left to secondary legislation in the later Act are defined in the body of the earlier one (subject to the general right of amendment reserved to the Treasury). Chapter II of Part XVII comprises restrictions on the promotion of collective investment schemes. Chapters III, IV and V then provide detailed schemes of regulation for the three classes of collective investment scheme at which the Act is principally directed, respectively unit trusts, open ended investment companies and recognised overseas schemes. More recently a fourth category has been added by amendment, namely master feeder structures governed by EU legislation for UCITS (undertakings for collective investments in transferable securities), but nothing more needs to be said about these. The definition and its statutory predecessor of 1986 have been regarded as highly unsatisfactory provisions by professional advisers ever since they were first enacted, mainly because of their generality, lack of definition and dependence on secondary legislation to take transactions out of the scope of the legislation which ought not to be there. As its opening words show, section 235 is primarily intended to operate in conjunction with the detailed provisions of Part XVII relating to units trusts, open ended investment companies and recognised overseas schemes, all of which must satisfy the general definition in section 235 in addition to further criteria specific to each of the three categories. In that context, its application is relatively straightforward. However, section 417, which is a general interpretation section covering the entire Act, adopts the definition in section 235 for all other purposes. Most of the difficulties about the definition arise from its application to transactions not covered by Part XVII. Those difficulties were comprehensively examined in a report prepared by a committee chaired by Michael Brindle QC under the auspices of the Financial Markets Law Committee in July 2008 (Operating a Collective Investment Scheme). The litigation arising from land banks has only served to emphasise them. The legislative background Before examining the statutory provisions in greater detail, it is necessary to say something about the background against which they were enacted and their place in the statutory scheme as a whole. The current statutory provisions for regulating collective investment schemes have their origin in previous schemes for regulating unit trusts, ie arrangements under which a manager invests in securities which are then held in trust for participants. Unit trusts became popular during the 1950s, when they largely replaced direct investment in securities for many private investors, especially the less experienced ones. At that time, statutory investor protection was based on the Prevention of Fraud (Investments) Act 1939, which had introduced a licensing scheme for dealers in securities. The Act was replaced by the Prevention of Fraud (Investments) Act 1958. This retained the basic scheme of the 1939 Act but included a special regime for the managers and trustees of unit trusts. They were not subject to the Acts restrictions on dealing in securities, provided that the unit trust had been authorised under section 17 of the Act by what was then the Board of Trade. A substantial body of practice for authorising and de authorising unit trusts was developed by the Board of Trade and its successor the Department of Trade and Industry, which resulted in unit trusts becoming the most heavily regulated financial products in the United Kingdom. In 1981 Professor LCB Gower was commissioned to examine the existing arrangements for statutory investor protection. He reported in 1984 in his Review of Investor Protection, Part I, Cmnd 9215 (1984), making extensive recommendations for overhauling the existing law. One of Professor Gowers principal objections to the then current statutory arrangements was that their coverage was arbitrary and adventitious. They regulated certain modes of investment while leaving unregulated other arrangements which were functionally similar. In particular, he recommended the extension of regulation to other modes of collective investment which operated in a similar way to unit trusts, except that instead of holding a beneficial interest in the assets, the participant had purely contractual rights (as in the case of life insurance) or redeemable shares (as in the case of open ended investment companies). During the consultation process which preceded the publication of his report, the question was raised of regulating alternative investments in physical assets, such as land, wine, bloodstock, works of art and the like. Professor Gower said about this (para 4.03): Although some responses suggested that physicals as well as futures should be regarded as investments, I do not think that this is necessary. Nor, consistently with the provisional views expressed in the discussion document, do I think it necessary to include stamps, medallions, works of art, porcelain, limited editions, and other collectibles, or interests in land providing that the acquirer obtains exclusive control over them and is not in reality buying rights to share in the income or capital appreciation under an arrangement whereby someone else controls and manages them. If the latter is the situation, they should be treated as investments. This would liberalise and strengthen the present law. Professor Gower recommended that all forms of investment should be regulated other than those in physical objects over which the investor will have exclusive control: para 4.29(a). In 1985, the Government published a White Paper, Financial Services in the United Kingdom: A New Framework for Investor Protection (Cmnd 9432) 1985. The White Paper announced the governments intention of introducing new legislation. It declared, at para 4.2: The definition of investments will set the boundary of the regulated area. It is therefore fundamental to the proposed system of regulation. In defining investments the Government proposes, with minor exceptions, to adopt Professor Gowers approach. The definition which will be in the primary legislation will be specific (to provide certainty for practitioners, customers and investors) and wide (to achieve consistency of treatment between different financial services). In addition to securities and other financial products such as futures contracts or options, the legislation would cover participatory rights in other forms of property: para 4.3(iii). But it would exclude property which can be inspected by or for the potential purchaser and which passes under his direct physical control if he buys it: para 4.7(i). Chapter 9 of the White Paper dealt with the specific forms of regulation proposed for unit trusts, in which category it included not only unit trusts properly so called but open ended investment companies and all collective investment arrangements other than pensions and life assurance; para 9.2. The latter were to be regulated under separate statutory arrangements. These principles informed the drafting of Part I, Chapter VIII of the Act of 1986 and Part XVII of the Act of 2000 which replaced it in 2001. In both cases, the draftsman resolved to deal with the regulation of collective investment schemes comprising physical assets as part of the broader system of statutory regulation governing unit trusts and open ended investment companies, which they largely resembled. In keeping with the policy objectives identified by Professor Gower, there is an important difference, which runs through the whole of the Act between financial instruments and physical assets. With very limited exceptions, regulated activities must relate to assets specified by the Treasury in the Regulated Activities Order. They are (as I have pointed out) financial instruments of one kind or another. Regulated activities as defined do not relate to physical or other non specified assets. Collective investment schemes are the one exception to this. They may comprise arrangements with respect to property of any description. The only respect in which the Act regulates non specified assets is that regulated activities include (i) establishing, operating or winding up a collective investment scheme, which may include non specified assets, and (ii) promoting, advising on, managing or dealing in units in a collective investment scheme, which may include non specified assets. In other words, the Financial Services and Markets Act 2000 regulates only the indirect sale or holding through collective investment schemes of non specified assets. It has no application to the direct acquisition, management or disposal of non specified assets such as land. A huckster may engage in all manner of sharp practice in selling land to consumers, in which case he is likely to fall foul of the common law rules concerning misrepresentations and may well infringe consumer protection legislation such as the Unfair Terms in Consumer Contracts Regulations 1999 (SI 1999/2083) (now in Part 2 of the Consumer Rights Act 2015). But he will not be carrying on an activity regulated by the Financial Services and Markets Act 2000, and will not in general fall under the regulatory powers of the Financial Conduct Authority. Under the Asset Land schemes as found by the judge, Asset Land sold the plots to the investors, but thereafter proposed to do just two things: negotiate with the planning authority to rezone the site and then find a buyer for it. It is accepted by Mr Peacock QC, who appeared for the Financial Conduct Authority, that if Asset Land had simply sold the land and left it at that, they would not have been operating a collective investment scheme. That is plainly right, because land is not a specified asset. Selling it to investors is not therefore a regulated activity. He also accepted that if a planning consultant and an estate agent had come in after the investors had acquired their plots and assumed the functions of negotiating with the planning authority and finding a developer willing to buy the site, the planning consultant and the estate agent would not be operating a collective investment scheme. That is also plainly right. They would simply have been providing professional services to the landowners. Advising, negotiating and finding a buyer might in some circumstances be regulated activities in relation to specified assets, but not in relation to physical assets like land. The Authoritys submission is that it makes all the difference that Asset Land was going to perform all of these functions. But why should that matter? Mr Peacock was inclined to submit that it was because Asset Land set up the whole thing and promoted it as a package. But, with respect, that will not do. The Act does not regulate the establishment or promotion of schemes, unless they are collective investment schemes or involve regulated activities in relation to specified assets. It must first be established that they are. I would agree with the submission, which provided the abiding theme of the Authoritys argument, that it is important when construing a regulatory statute of this kind not to allow technical distinctions to frustrate the purpose of the legislation. But the Financial Services and Markets Act 2000 cannot be construed on the assumption that it was intended to regulate every kind of investment in which members of the public are liable to have advantage taken of them by an unscrupulous intermediary. In the first place, as cases like Office of Fair Trading v Abbey National plc [2010] 1 AC 696 remind us, most regulatory legislation is a compromise between the protection of consumers and the avoidance of regulatory overkill. In a statute such as the Financial Services and Markets Act 2000, which deliberately sets out to regulate some forms of investment but not others, the omission of some transactions from the regulatory net cannot of itself be regarded as compromising the efficacy of the statutory scheme. Secondly, there is, as the White Paper preceding the 1986 Act pointed out, a tension between the need to provide certainty for practitioners, customers and investors, and the need to cast the net wide enough to ensure consistency of treatment between different financial services. The consequences of operating a collective investment scheme without authority are sufficiently grave to warrant a cautious approach to the construction of the extraordinarily vague concepts deployed in section 235. Arden LJ was surely right in Financial Services Authority v Fradley [2006] 2 BCLC 616, para 32, to say that the section must not be interpreted so as to include matters which are not fairly within it. It must, moreover, be interpreted in a way that provides intelligible criteria which can be applied by professional advisers considering schemes in advance of their being marketed. The Treasury has a wide power under section 235(5) to exempt particular categories of transaction, but criminal liability and the avoidance of contracts are not results which can properly be made to depend wholly on the discretion of the Treasury or the enforcement division of the Financial Conduct Authority. It follows that any conclusion that Mr Banner Eve and his companies were operating collective investment schemes must be firmly founded on the language and purpose of section 235, without making arbitrary teleological assumptions. Section 235: general Section 235 begins in subsection (1) with a wholly general description of collective investment schemes which on its own would cover virtually all cooperative arrangements for deriving profits or income from assets. Subsections (2), (3) and (4) narrow down the breadth of that description. They are the heart of the definition. Their function is to give effect to the distinction between direct and indirect dealings, which I have described above. The paradigm cases of arrangements for indirect dealing with assets are the three classes of collective investment regulated by Part XVII to which the definition is primarily directed: unit trusts, open ended investment companies and corresponding overseas schemes. All of these have the common feature that the investors have no control over the assets comprised in the scheme. This is because they have no legal interest in the assets, and in the case of an open ended investment company no beneficial interest either. Of course, other forms of collective investment may exhibit the same lack of control over the assets on the part of the investors, but in different ways. Hence the wider terms of the statutory definition and its application to schemes lying outside Part XVII. Section 235(1): arrangements A collective investment scheme means, as section 235(1) provides, arrangements of the prescribed description. Subsections (1) to (4) all describe the characteristics that the relevant arrangements must have if the resultant scheme is to qualify as a collective investment scheme. Arrangements is a broad and untechnical word. It comprises not only contractual or other legally binding arrangements, but any understanding shared between the parties to the transaction about how the scheme would operate, whether legally binding or not. It also includes consequences which necessarily follow from that understanding, or from the commercial context in which it was made. In these respects, the definition is concerned with substance and not with form. It is, however, important to emphasise that it is concerned with what the arrangements were and not with what was done thereafter. Of course, what was done thereafter may throw light on what was originally understood. It may for example serve to show that some record of the understanding was a sham. It may found an argument that the arrangements originally made were later modified. But it must be possible to determine whether arrangements amount to a collective investment scheme as soon as those arrangements have been made. Whether the scheme is a collective investment scheme depends on what was objectively intended at that time, and not on what later happened, if different. The judge held that the core representations represented a shared understanding about how the scheme would work. On his findings there can I think be no real doubt but that that he was right to say that the mutual understanding based on the core representations constituted arrangements within the meaning of that word in section 235, and that so far as they were inconsistent with those representations, the contract, the disclaimer and publicity material were not part of the arrangements. Section 235(1): with respect to property The next question is: with respect to what property were Asset Lands arrangements with these investors made? The core representations are consistent only with its being the whole of a site. It is not the individual plots. Nor is it, as Asset Land submitted, the totality of the individual plots plus the rights of the plot holders over the roadways, access points and common parts. The reason is that the property referred to in subsection (1) is the property from whose acquisition, holding, management or disposal the profits or income were to be derived. On the judges findings, that was the whole site. It was the whole site that was to be rezoned, and it was the whole site which was to be sold to a developer. The profit which each investor would derive from these transactions would be derived from an aliquot share of the entire sale price for the site. Section 235(2): day to day control The arrangements must be such that the investors do not have day to day control of the management of the property. The judge adopted the opinion of Hamblen J in Brown v InnovatorOne plc [2012] EWHC 1321 (Comm) at para 1170, that the subsection was directed to investors having actual control and required that they must actually exercise that control sufficiently to be regarded as being in effective control: para 169. The Court of Appeal (para 83) agreed with him, but I regret that I do not, essentially for the reason which I have given in para 91 above. Control of property means the ability to decide what is to happen to it. I would accept that that does not only mean the legal ability to decide. It extends to a case where the arrangements are such that the investor will in practice be able to do so. But the critical point is that the absence of day to day control in subsection (2) has to be a feature of the arrangements. This is necessarily prospective, viewed from the time when the arrangements are made. Either those arrangements confer or allow control on the part of the investors or they do not. The test cannot depend on what happens after the arrangements have been made. Nor would a test based on the actual exercise of control be realistic. Some kinds of property require little or nothing by way of management. Some situations do not require any exercise of management control. The question must necessarily be in whom would control be vested were control to be required. For the answer to turn on what exercise of control turned out to be required, would add an arbitrary element to the test which can hardly have been intended. In my opinion, subsection (2) in this case is satisfied for the simpler reason which the judge gave as his main one. The property over whose management the investors must lack day to day control means the property referred to in subsection (1) with respect to which the arrangements were made. The question is therefore whether the arrangements were such that the investors had day to day control of the management of the whole site. This cannot refer to the powers of control exercisable by any individual investor. It is hard to conceive of a case in which an individual investor could ever have day to day control of any more than his own plot. The subsection must therefore refer to the control exercisable by the investors collectively. In the case of Asset Lands sites, the investors collectively did not have the relevant control for two reasons. First, they were not in a position to exercise control of the management of the whole site because the roadways, access points and other common parts were retained by Asset Land. The investors had only easements in respect of those parts. Secondly, even if the investors had been for practical purposes in a position to control the management of the whole site by organising themselves to that end, there were no arrangements to that effect. It follows that the critical part of the definition is subsection (3). Section 235(3)(b): management of the property as a whole Section 235(3) lays down two alternative criteria. The arrangements must be such that either (a) the contributions and the profits or income are pooled, or (b) the property is managed as a whole by or on behalf of the operator of the scheme. The Authority does not rely on (a). That is because the arrangements in this case envisaged the pooling of the proceeds of sale, but not the pooling of their contributions, ie their plots. It follows that the question whether subsection (3) was satisfied depends on paragraph (b). It should be noted that paragraph (b) operates entirely irrespective of whether there is any pooling. It would be the determinative provision in this case even if the arrangements had been that the plots would be individually priced and each investor would receive the price of his own plot. Subsection (3)(b) provides that what has to be managed as a whole is the property the subject of the scheme, not the scheme itself so far as that is different. Acts by way of management of the scheme are relevant only so far as they involve the management of the property. In a classic collective investment scheme, say a unit trust, the property the subject of the scheme will usually comprise incorporeal property such as securities. But where the property of the scheme comprises physical assets, subsection (3)(b) requires the arrangements to be such that the operator manages the physical assets. In this case the property falling to be managed by or on behalf of the operator is, as we have seen, the site. Accordingly, the question is whether, objectively, the functions which the arrangements assigned to Asset Land after the investors acquisition of his plot constituted management of the site. Asset Land had, as I have pointed out, two functions: negotiating with the planning authority and finding a buyer for the site. These two functions amounted to managing the business project, in other words the scheme. But that is not the question. The question is whether, either separately or together, they also constituted managing the site. Management is a protean word which can embrace a wide range of activities involving varying degrees of control over the property being managed. But in section 235 it has a specific purpose. Subsections (2) and (3) together perform two closely allied functions. They describe the classic features of unit trusts and open ended investment companies, under which the investor has no control over the assets. And they give effect to Professor Gowers recommendation that investment in physical assets (which are covered only through the provisions relating to collective investment schemes) should not be regulated if the investor had exclusive control of them. In each case, the section is concerned with arrangements under which the investor exchanges property over which he has entire dominion for units in a larger property over which he has more limited rights. A collective investment scheme may exist in respect of property of which the investors become owners, as section 235(1) makes clear. But their rights in respect of that property are nevertheless limited by the collective nature of the scheme. Section 235(3) identifies two ways in which the investor may part with control over the property. The reason why the subsection treats them as alternative criteria for recognising a collective scheme is that they are functionally equivalent. Subsection (3)(a) refers to cases where the contributions and the profits or income generated by them are pooled, which necessarily imports a loss of control in favour of whoever controls the pool. Subsection (3)(b) refers to cases in which there may be no pooling, but there is an equivalent loss of control to the operator by virtue of his powers of management of the whole property. The fundamental distinction which underlies the whole of section 235 is between (i) cases where the investor retains entire control of the property and simply employs the services of an investment professional (who may or may not be the person from whom he acquired it) to enhance value; and (ii) cases where he and other investors surrender control over their property to the operator of a scheme so that it can be either pooled or managed in common, in return for a share of the profits generated by the collective fund. Unit trusts and open ended investment companies are, as I have said, the paradigm cases in the latter category, and indeed the only cases regulated in detail by Part XVII to which section 235 primarily relates. In the context of land schemes, a good example of a surrender of control by virtue of the arrangements for the management of the property is supplied by the facts of Financial Conduct Authority v Capital Alternatives Ltd [2015] EWCA Civ 284; [2015] Bus LR 767: a farm was divided into plots which were owned outright by investors but run by a manager with complete autonomy over its management: see paras 74 75. It is convenient to deal first with Asset Lands role in finding a buyer. In my opinion, this is an act of management if the arrangements empowered Asset Land to effect a sale on the investors behalf, in the same way as the manager of a unit trust sells securities. The same would be true if the arrangements required the investors to sell on the terms approved by the company. Selling or procuring the sale of an asset is an act of management. The power of disposition which is involved would constitute sufficient control to satisfy the object of section 235(3)(b). This appears to have been the position in In re Sky Land Consultants plc, where the investors entered into a marketing agreement appointing the promoter as their sole agent to sell their plots and gave him a power of attorney for that purpose. The promoter claimed to have abandoned these rights after being challenged by the Financial Services Authority, but the judge found that the changes were notified to only a handful of investors and that the scheme continued to be marketed as before. For that reason I think that that case was rightly decided notwithstanding my reservations about aspects of the reasoning. On the other hand, Asset Lands role in finding a buyer was not an act of management within the meaning of subsection (3)(b) if all that they were expected to do was put a proposal for sale before the investors for them to approve or reject as they saw fit. On that footing the alleged manager had no control at all. The distinction is necessary if there is to be a workable distinction between collective investment schemes and cases in which an intermediary such as an estate agent simply supplies professional services without assuming control over the assets. Some examples will illustrate the point. A wine merchant stores investors wines in specialised storage along with those of other customers, thereby enhancing their value over time. Investors buy flats to let in a block managed by a single manager. Adjoining owners of plots in a commercial forest employ a professional forester to manage the whole forest and sell the timber. The owners of the four flats in a town house get together to instruct an estate agent to sell the whole house as a single property. In each of these cases the owners property or its proceeds are not necessarily pooled, and they do not necessarily have day to day control over all of the property comprised in the arrangement. But, as I have pointed out, paragraph (b) of section 235(3) is an alternative to paragraph (a) and operates entirely independently of any considerations of pooling. Mr Peacock understandably did not go so far as to suggest that these arrangements would be collective investment schemes. But if they are not, then why not? In my opinion, it can only be because in each case the assets were not managed as a whole by or on behalf of the operator of the scheme. This was because the owner retained entire dominion over his property and merely contracted for professional services in relation to its exploitation. On which side of the line does the present case fall? In strictly legal terms, the three core representations did not call for any surrender of control over the plots to an investment intermediary. On the contrary, each investor remained the entire owner and sole controller of his plot and simply counted on Asset Land to enhance its value and find him a buyer. But the transaction cannot be viewed only in legal terms, and the judge has found that the practical consequences of the arrangements went wider than the express terms of the three core representations. He discounted the significance of the investors legal right to dispose of their plots as they pleased, because he considered that the arrangements embodied in the core representations could not work if the investors exercised the rights that they theoretically possessed: see paras 162, 169 of his judgment. The dominion of the investors over their plots, although apparently complete, was in reality an illusion. This was essentially a factual assessment for the judge and, a challenge to it having failed in the Court of Appeal, it could not be right for this court to substitute a different view of its own. On that ground, which is substantially narrower than the submissions addressed to us by the Financial Conduct Authority, but enough for the resolution of this appeal, I agree that the schemes with which we are concerned are collective investment schemes.

These were proceedings brought by the Financial Conduct Authority (FCA) against Asset Land Investment plc and associated parties (Asset Land) and its principal owner and director Mr Banner Eve, alleging they had carried on a of regulated activities without authorisation, namely the operation of collective investment schemes, contrary to section 19 of the Financial Services and Markets Act 2000 (FSMA). The activities related to sales of individual plots at six possible development sites in various parts of the United Kingdom. Asset Land divided the sites into plots which they sold to investors, representing that it would be responsible for seeking rezoning for residential development and for arranging a sale to a developer. The High Court held that in the circumstances this amounted to operating a collective investment scheme. The Court of Appeal upheld the decision. Asset Land and Mr Banner Eve appealed to the Supreme Court. The Supreme Court unanimously dismisses the appeal by Asset Land and Mr Banner Eve, finding that Asset Lands activities amounted to operating collective investment schemes under section 235 FSMA, and were thus regulated activities for the purpose of section 19. Lord Carnwath gives the lead judgment. Lord Sumption gives a concurring judgment. Section 235 FSMA concerns collective investment schemes constituting by arrangements respecting property which enable participants to receive profits or income arising from the acquisition, holding, management or disposal of the property. To fall within section 235 the participants in the scheme must not have day to day control over the management of the property, and the property must be managed as a whole by or on behalf of the operator of the scheme. Lord Carnwath addresses the four principle grounds of appeal raised by the Appellants. Ground 1 was that the Court of Appeal erred in its identification of the component parts of the arrangements, and gave inadequate weight to an essential feature, namely that each investor intended to, and did own his plot(s) outright. Lord Carnwath rejects the Appellants distinction between the arrangements made by the operator and how they were perceived by others as artificial and unrealistic. He finds that the judge was entitled to take the view that the investors understandings conformed to what was intended by the operator, and was not required to give special weight to contractual or other documents, without regard to their context [54]. Ground 2 was that the court erred in treating the property under section 235(2) and (3) as each of the sites acquired by the company, rather than the aggregate of all the plots sold to individual investors, and should have held that the arrangements left investors with the necessary control. Ground 3 argued that that the critical question under section 235(3)(b) was whether the arrangements reserved to the investor the final decision as to the exploitation of the property pursuant to the arrangements, the correct answer to which was yes. Lord Carnwath deals with Grounds 2 and 3 together, finding that the relevant property for the purposes of section 235(1) is the whole site, but that management control of the property under section 235(2) and (3) may be achieved in different ways, and may not be by legal mechanisms or legal control. Have control in subsection 2 refers to the reality of how the arrangements are to be operated [57 59]. Lord Carnwath holds that the judge was entitled to find that the relevant management of the property as a whole comprised the steps necessary to obtain planning permission and secure a sale to a developer, and it was no part of the arrangement that the investors should have any part in or control over those management activities [60]. Ground 4 was that the courts interpretation would potentially interfere with a wide range of legitimate business arrangements which should not be characterised as collective investment schemes. Lord Carnwath finds that no issue arises, as the judges application of section 235 on the facts as found by him involved no distortion of its natural meaning or intended purpose [63]. Lord Sumption reviews the policy underlying the regulation of collective investment schemes. He finds that whether a scheme is a collective investment scheme depends on what was objectively intended at the time the arrangements are made, and not on what later happens [91]. The essence of such a scheme is a lack of legal or practical control by the investor of the profit generating investment which is the subject of the scheme. The investor exchanges property over which he has entire dominion for units in a larger property over which he has more limited rights. A distinction must therefore be made between (i) cases where the investor retains entire control of the property and simply employs the services of an investment professional (who may or may not be the person from whom he acquired it) to enhance value; and (ii) cases where he and other investors surrender control over their property to the operator of a scheme so that it can be either pooled or managed in common, in return for a share of the profits generated by the collective fund. He holds that the judge was right to say that the mutual understanding based on the core representations made by Asset Land to the investors constituted arrangements under section 235, and that so far as the contract, disclaimer and publicity material were inconsistent with those representations, they were not part of the arrangements [92]. The core representations were consistent only with the property the subject of the arrangements being the whole of a site. It was the whole site which was to be rezoned and sold to a developer, and the profit which each investor would derive would be derived from an aliquot share of the entire sale price for the site [93]. As to day to day control, the question must be in whom would control be vested were control to be required, section 235(2) must refer to the control exercisable by the investors collectively. The investors collectively did not have the relevant control of the management of the whole sites because common parts were retained by Asset Land [94 95]. That left as the critical question whether the property was managed as a whole. That depended on whether, objectively, the functions which the arrangements assigned to Asset Land after the investors acquisition of his plot constituted management of the site [97]. The transaction cannot be viewed only in legal terms, and the judge found that the dominion of the investors over their plots was in reality an illusion. This was a factual assessment by the judge and it is not right for this court to substitute a different view. On this narrower ground, Lord Sumption agrees that the schemes are collective investment schemes [102].

These appeals require the Court to consider once again the impact of article 2 of the European Convention on Human Rights (the Convention) on the scope of an inquest. They arise because of a change that the Grand Chamber of the Strasbourg Court has made as to the nature of the obligations imposed by article 2. I shall start by describing briefly the nature of that change. The Convention is a living instrument and over time the Strasbourg Court has extended the ambit of application of Convention rights in many areas. Article 2 provides a good example of this tendency. Article 2 provides that (1) Everyones right to life shall be protected by law. No one shall be deprived of his life intentionally save in the execution of a sentence of a court following his conviction of a crime for which this penalty is provided by law. In McCann v United Kingdom (1995) 21 EHRR 97 the Strasbourg Court held that article 2 by implication gave rise not merely to a substantive obligation on the state not to kill people but, where there was an issue as to whether the state had broken this obligation, a procedural obligation on the state to carry out an effective official investigation into the circumstances of the deaths (the procedural obligation). Romania acceded to the Convention on 20 June 1994. In 1993 a pogrom had taken place in a Roma village, resulting in a number of deaths and widespread destruction of property. The State, in the form of the local police, was alleged to have been implicated. Investigations into the pogrom, and proceedings arising out of it commenced in 1993 but continued up to 2000. In Moldovan v Romania (Application Nos 41138/98 and 64320/01) (unreported) 13 March 2001 the applicants sought to invoke the procedural obligation under article 2, and a parallel obligation arising under article 3, alleging various deficiencies in the investigations. The Court held that the Convention only applied with respect to Romania after the date of its accession; it did not apply to Romania at the time of the pogrom. Because the procedural obligation to conduct an effective investigation was derived from the killings and the destruction of property, whose compatibility with the Convention could not be examined by the Court, it followed that the complaint of breach of the procedural obligations was also incompatible ratione temporis with the provisions of the Convention and had to be rejected. This reasoning was followed by the Court, when reaching similar decisions, in Voroshilov v Russia (Application No 21501/02) (unreported) 8 December 2005 and Kholodov and Kholodova v Russia (Application No 30651/05) (unreported) 14 September 2006. The issue that the Strasbourg Court considered in these cases was echoed by an issue that arose in this jurisdiction in relation to the application of the Human Rights Act 1998 (HRA). In a series of decisions the House of Lords had decided that no claim lay in respect of an alleged breach of the Convention if the facts giving rise to the alleged breach predated the entry into force of the HRA. The issue then arose of whether the procedural obligation to investigate a death applied after the HRA had come into force in relation to a death that had occurred before the Act came into force. In In re McKerr [2004] UKHL 12; [2004] 1 WLR 807 the House of Lords held that it did not. Their reasoning also echoed that of the Strasbourg Court. Because the death occurred before the HRA came into force it was not within the reach of the Act. Because the obligation to hold an investigation was triggered by the death, that consequential obligation was not within the reach of the Act either. This decision was applied by the House of Lords in R (Hurst) v London Northern District Coroner [2007] UKHL 13; [2007] 2 AC 189 and Jordan v Lord Chancellor [2007] UKHL 14; [2007] 2 AC 226. In 2009 the Grand Chamber of the Strasbourg Court took a decision which departed from the reasoning in Moldovan, Voroshilov and Kholodov and further extended the effect of article 2. In ilih v Slovenia (2009) 49 EHRR 996 the Court ruled that article 2 imposed, in certain circumstances, a freestanding obligation in relation to the investigation of a death which applied even where the death itself had occurred before the member state ratified the Convention. The appellants contend that the decision in ilih has destroyed the basis of the decision of the House of Lords in McKerr. Henceforth, if an inquest is held into a death that predated the coming into force of the HRA there is none the less an obligation under the HRA to ensure that it complies with the requirements of article 2. As the HRA came into force on 2 October 2000 it might be thought that this issue is of no great moment. Such a conclusion would be wrong. These appeals relate to two of a significant number of deaths that occurred in Northern Ireland well before 2 October 2000 in respect of which inquests are still pending. The facts The appellants are the next of kin of Martin McCaughey and Dessie Grew who were shot and killed by members of the British Army on 9 October 1990. Allegations have been made that they were victims of a shoot to kill policy. I need not go into the reasons why it is that, despite the fact that they died so long ago, no inquest has yet been held into their deaths, for on these appeals no issue arises in respect of this delay. A Coroner has been assigned to the case, and on 14 September 2009 he held a preliminary hearing. At that hearing the appellants applied to the Coroner for a ruling that he would hold an inquest into the two deaths that complied with the requirements of article 2. The Coroner declined to give such a ruling. He indicated, however, that he intended to hold a vigorous, thorough and transparent inquest. Following a further hearing, on 1 December 2009 the Coroner issued the following preliminary definition of the scope of the inquest that he proposed to hold: The Coroner will consider the four basic factual questions concerning: (a) the identity of the deceased; (b) the place of death; (c) the time of death; and (d) how the deceased came by their deaths. Further, related to the how question, the Coroner will examine in evidence the surveillance operation that culminated in the deaths with reference in particular to the following: (i) the purpose of the operation; (ii) the planning of the operation; (iii) the actions of those involved in the operation; (iv) the state of knowledge of those involved in the operation; (v) the nature and degree of the force used in the operation. In considering this matter, the Coroner will also examine such evidence as exists concerning the circumstances in which the deceased came to be at the locus of death at the relevant time. He stated that this was only preliminary and might be subject to revision at any time. He invited written representations from the parties in relation to it. The appellants made representations to the Coroner to the effect that the scope of the inquest should cover the question of whether the operation was planned and controlled so as to minimise to the greatest extent possible recourse to lethal force. The Police Service of Northern Ireland and the Ministry of Defence made written representations which asserted that the Coroner was precluded from investigating the planning and control of the operation. They asserted that McKerr established that there was no requirement for the inquest to comply with article 2. It followed that the scope of the inquest was restricted to establishing by what means rather than in what broad circumstances the deceased came to their deaths, ie a Jamieson inquest: see R v Coroner for North Humberside and Scunthorpe, Ex p Jamieson [1995] QB 1. The Coroner has not yet made any ruling in relation to these representations. He is, no doubt, wisely awaiting the outcome of these proceedings. It is by no means clear that, even if this Court rules that article 2 has no application to these inquests, the Coroner will not be able lawfully to conduct an inquest which satisfies the requirements of that article or that he will not do so: see the speech of Lord Bingham of Cornhill in Jordan and my comments at para 69 in R (Smith) v Oxfordshire Assistant Deputy Coroner (Equality and Human Rights Commission intervening) [2010] UKSC 29; [2011] 1 AC 1. What is clear is that a decision of this Court is needed to prevent the delay and expense involved in interlocutory in fighting in this and future inquests raising the same issue. The proceedings below In an application for permission to apply for judicial review [2009] NIQB 77 the appellants sought to persuade Weatherup J that they were entitled to a declaration that the Coroner was obliged to conduct the inquest in a way that satisfied the procedural obligation of article 2. They argued that he was not bound by McKerr because the subsequent decision of the Grand Chamber in ilih was inconsistent with it. Weatherup J held that whether or not ilih was inconsistent with McKerr, he was obliged by the law of precedent to follow the latter. Accordingly he refused the appellants the relief that they sought. The Court of Appeal in Northern Ireland [2010] NICA 13 agreed with Weatherup J that McKerr was binding, even if inconsistent with ilih. Indeed that much was conceded by Ms Quinlivan for the appellants. She did not succeed in persuading the Court that ilih was, in fact, in conflict with McKerr. She did, however, persuade them that it was possible that this Court would choose to extend ilih to our domestic law, that they should give the appellants leave to apply for judicial review and, having denied them substantive relief, grant them permission to appeal to this Court. The Strasbourg law at the time of the decision of the House of Lords in McKerr As a backcloth to the decision of the House of Lords in McKerr it is helpful to identify the characteristics of the procedural obligation as laid down by the Strasbourg Court at the time of that decision. McCann, the death on the Rock case, was the first occasion on which the Strasbourg Court identified that article 2 gave rise to the procedural obligation. In so doing the Court was responding to a submission made by the applicants. The applicants complained about the planning, or lack of planning, that had taken place before the shooting of the IRA unit. They alleged that the shooting had either been premeditated or had resulted from negligence. And they complained that the inquest that had been held into the deaths had not constituted an adequate investigation into the circumstances of the killings. They submitted (see para 185 of the Commissions Opinion) that Article 2 should be interpreted as including a procedural element, namely, the provision of an effective procedure after the event for establishing the facts the procedures in this case were inadequate. The Court accepted this last submission. It held, at para 161: [The Court] confines itself to noting, like the Commission, that a general legal prohibition of arbitrary killing by the agents of the state would be ineffective, in practice, if there existed no procedure for reviewing the lawfulness of the use of lethal force by state authorities. The obligation to protect the right to life under this provision [article 2], read in conjunction with the states general duty under article 1 of the Convention to secure to everyone within their jurisdiction the rights and freedoms defined in [the] Convention, requires by implication that there should be some form of effective official investigation when individuals have been killed as a result of the use of force by, inter alios, agents of the state. The Court held at para 162 that there was no need to decide on what form such investigation should take as the inquest that had been held had satisfied the procedural obligation. The Strasbourg Court repeated the McCann formulation of the ancillary duty in Kaya v Turkey (1998) 28 EHRR 1 and Gle v Turkey (1998) 28 EHRR 121. In McCann no issue of jurisdiction ratione temporis arose, for both the killings and the inquest had taken place long after the ratification of the Convention by the United Kingdom. That issue arose for the first time in Moldovan. I have already outlined the facts of Moldovan at para 3 above. The applicants complained that the police had been implicated in the pogrom and that a failure to carry out an adequate criminal investigation had deprived them of their opportunity to file a civil claim for damages against the state. The relevant passage in the Courts judgment on admissibility is at p 13: In the present case, the Court notes that the killings happened in September 1993 before the entry into force of the Convention with regard to Romania, ie 20 June 1994. However, in accordance with the generally recognised rules of international law, the Convention only applies in respect of each contracting party to facts subsequent to its coming into force for that party. The possible existence of a continuing situation must be determined, if necessary ex officio, in the light of the special circumstances of each case (eg, [X and Y v Portugal (1979) 16 DR 209]). The Court must therefore verify whether it is competent ratione temporis to examine the present complaint. It observes however that the alleged obligation under the Convention of the Romanian authorities to conduct an effective investigation capable of leading to the identification and punishment of all individuals responsible for the deaths of the applicants relatives is derived from the aforementioned killings whose compatibility with the Convention cannot be examined by the Court. This passage suggests that the Court considered that it was implicit in the applicants case that the procedural obligation was a continuing obligation which would persist until an investigation was held that satisfied article 2. The Court held that it was not necessary to consider whether this was correct. It was enough to deprive the Court of competence that the obligation asserted was to investigate the circumstances of deaths whose compatibility with the Convention could not be examined by the Court. Moldovan left unanswered the question of whether, if there is an initial obligation under article 2 to conduct an adequate investigation, that obligation continues until such an investigation has been held. That question had, however, been answered by the Commission in a decision on admissibility in McDaid v United Kingdom (1996) 85 A DR 134. 14 residents of Derry made an application alleging inter alia that there had been a breach of the procedural obligation under article 2 to hold a full investigation into the Bloody Sunday killings in 1972. They alleged inadequacies in the Widgery Report, an investigation conducted by the RUC and the inquest that had been held into the deaths. In an attempt to get round the six month time limit for bringing a complaint they submitted that this was a continuing obligation. In rejecting that submission the Commission said this, at p 140: In so far as the applicants complain that they are victims of a continuing violation to which the six month is inapplicable, the Commission recalls that the concept of a continuing situation refers to a state of affairs which operates by continuous activities by or on the part of the state to render the applicants victims (see, eg, [Montion v France (1987) 52 DR 227; Hilton v United Kingdom (1988) 57 DR 108; A P v United Kingdom (Application No 24841/94) (unreported) 30 November 1994]). Since the applicants complaints have as their source specific events which occurred on identifiable dates, they cannot be construed as a continuing situation for the purposes of the six month rule. While the Commission does not doubt that the events of Bloody Sunday continue to have serious repercussions on the applicants lives, this however can be said of any individual who has undergone a traumatic incident in the past. The fact that an event has significant consequences over time does not itself constitute a continuing situation . A precursor to the judicial review proceedings brought by Mr McKerr which ended in the House of Lords was an application that he made to the Strasbourg Court (2001) 34 EHRR 553. It was heard together with three other applications which raised similar issues. His complaint related to the killing of his father on 11 November 1982 by a special unit of the RUC. He alleged, inter alia, that there had been a failure to satisfy the article 2 procedural obligation. Specific complaint was made of a police investigation, a criminal trial, an independent police inquiry and an inquest. These complaints were, in large measure, upheld by the Court. At para 111 the Court expanded on the purpose of the procedural obligation beyond the explanation given in McCann: The essential purpose of such an investigation is to secure the effective implementation of the domestic laws which protect the right to life and, in those cases involving state agents or bodies, to ensure their accountability for deaths occurring under their responsibility. What form of investigation will achieve those purposes may vary in different circumstances. However, whatever mode is employed, the authorities must act of their own motion, once the matter has come to their attention. This then became a standard part of the summary of the Strasbourg law given by the Court in cases where the procedural obligation was in issue. By way of summary of this jurisprudence, the procedural obligation was initially closely related to the substantive obligation that article 2 imposed on the state. The object of the procedural obligation was to check whether there had been a breach of the substantive obligation. If the substantive obligation did not exist the procedural obligation could not exist either. The expanded reason for the procedural obligation given by the Court in McKerr arguably extended the obligation to circumstances in which there was no allegation that the death had resulted from breach by the state of its primary duty under article 2. None the less the instances where there had been a complaint of breach of the procedural obligation had always involved allegations of state implication in the death. Furthermore the complaints had focussed on alleged deficiencies in the historic investigations that had been held. In no case had it been held that there was a continuing obligation to hold an adequate investigation, and in McDaid the Commission had held that there was not. There is one discordant note. In Balasoiu v Romania (Application No 37424/97) (unreported) 20 April 2004 the applicant complained of being beaten up by police in 1993, before Romania had acceded to the Convention, but also of delay in the procedural investigation, which was still ongoing. The Court held the latter complaint admissible, without explaining how this could be reconciled with the reasoning of the Court in Moldovan. The reasoning of the House of Lords in McKerr I must now consider the decision in McKerr in greater detail. This is necessary because the question that arises on the current appeals is whether the reasoning in McKerr applies in the light of the change in nature of the procedural obligation that the decision in ilih has produced. Having secured a finding by the Strasbourg Court of historic failures to comply with the procedural obligation imposed by article 2, Mr McKerr returned to the domestic courts. In judicial review proceedings he contended that the procedural obligation was a continuing obligation and that failure to provide an article 2 compliant investigation was unlawful and a breach of section 6 of the HRA. The Court of Appeal in Northern Ireland upheld this contention and made a declaration that the Government had failed to comply with article 2. The majority in the House of Lords addressed an appeal advanced on the premise that article 2 gave rise to a continuing obligation to hold an adequate investigation that had persisted for over 20 years from the time of the death of Mr McKerrs father: see paras 25, 48, 61, 76. This premise was, however, questioned by Lord Hoffmann in para 66, Lord Rodger at para 80 and Lord Brown at paras 92 to 95, rightly in my view: see para 22 above. Section 6 of the HRA provides that it is unlawful for a public authority to act in a way which is incompatible with a Convention right. The issue before the House was whether, on true interpretation of the HRA, this provision applied to the assumed continuing procedural obligation, notwithstanding that it had its origin in a death that occurred before the HRA had come into force. By the time of McKerr it was well established that the death itself could not give rise to any breach of the HRA because the Act did not apply to conduct that took place before it came into force: see R v Kansal (No 2) [2001] UKHL 62; [2002] 2 AC 69; R v Lambert [2001] UKHL 37; [2002] 2 AC 545; Wilson v First County Trust Ltd (No 2) [2003] UKHL 40; [2004] 1 AC 816. The Lords were unanimous in holding that the obligations created by the HRA did not, on the true interpretation of that Act, extend to the assumed continuing procedural obligation. The reasoning of Lord Nicholls appears in the following passages: 19. The application of section 6(1) of the Human Rights Act to a case of an unlawful killing is straightforward. Section 6(1) applies if the act, namely, the killing, occurred after the Act came into force. Section 6(1) does not apply if the unlawful killing took place before 2 October 2000. So much is clear. 20. The position is not so clear where the violation comprises a failure to carry out a proper investigation into a violent death. Obviously there is no difficulty if the death in question occurred post Act. The position is more difficult if the death occurred, say, shortly before the Act came into force and the necessary investigation would fall to be held in the ordinary course after the Act came into force. On which side of the retrospectivity line is a post Act failure to investigate a pre Act death? 21. In my view the answer lies in appreciating that the obligation to hold an investigation is an obligation triggered by the occurrence of a violent death. The obligation to hold an investigation does not exist in the absence of such a death. The obligation is consequential upon the death. If the death itself is not within the reach of section 6, because it occurred before the Act came into force, it would be surprising if section 6 applied to an obligation consequential upon the death. Rather, one would expect to find that, for section 6 to apply, the death which is the subject of investigation must itself be a death to which section 6 applies. The event giving rise to the article 2 obligation to investigate must have occurred post Act. 22. I think this is the preferable interpretation of section 6 in the context of article 2. This interpretation has the effect, for the transitional purpose now under consideration, of treating all the obligations arising under article 2 as parts of a single whole. Parliament cannot be taken to have intended that the Act should apply differently to the primary obligation (to protect life) and a consequential obligation (to investigate a death). For this reason I consider these judicial review proceedings are misconceived so far as they are sought to be founded on the enabling power in section 7 of the 1998 Act. At para 25 Lord Nicholls explained why it was that some of the lower courts had erred in reaching a contrary conclusion in earlier cases. This was by failing to keep clearly in mind the distinction between (1) rights arising under the Convention and (2) rights created by the 1998 Act by reference to the Convention. These two sets of rights now exist side by side. But there are significant differences between them. The former existed before the enactment of the 1998 Act and they continue to exist. They are not as such part of this country's law because the Convention does not form part of this country's law. That is still the position. These rights, arising under the Convention, are to be contrasted with rights created by the 1998 Act. The latter came into existence for the first time on 2 October 2000. They are part of this countrys law. The extent of these rights, created as they were by the 1998 Act, depends upon the proper interpretation of that Act. It by no means follows that the continuing existence of a right arising under the Convention in respect of an act occurring before the 1998 Act came into force will be mirrored by a corresponding right created by the 1998 Act. Whether it finds reflection in this way in the 1998 Act depends upon the proper interpretation of the 1998 Act. Lord Steyn at para 48 appears to have decided the issue on the simple basis that there was no continuing article 2 obligation to hold an investigation. Any breach of the procedural obligation occurred before the HRA came into force and could give rise to no remedy under domestic law. Lord Hoffmann at para 66 reasoned as follows: the fallacy of the reasoning lies in the notion of a continuing breach of articles 2 and 3. The judge was concerned with the rights of the claimants in domestic law. Before 2 October 2000, there could not have been any breach of a human rights provision in domestic law because the Act had not come into force. So there could be no continuing breach. There may have been a breach of article 2 as a matter of international law and this may have continued after 1 October 2000, although, for the reasons given by my noble and learned friend, Lord Brown of Eaton under Heywood, I think it unlikely. But that is irrelevant to whether the claimants had rights in domestic law, for which there can be no source other than the 1998 Act. The Act did not transmute international law obligations into domestic ones. It created new domestic human rights. The simple question is whether as a matter of construction, those rights applied to deaths which occurred before the Act came into force. 67. Your Lordships House has decided on a number of occasions that the Act was not retrospective. So the primary right to life conferred by article 2 can have had no application to a person who died before the Act came into force. His killing may have been a crime, a tort, a breach of international law but it could not have been a breach of section 6 of the Act. Why then should the ancillary right to an investigation of the death apply to a person who died before the Act came into force? In my opinion it does not. Otherwise there can in principle be no limit to the time one could have to go back into history and carry out investigations. In R (Wright) v Secretary of State for the Home Department Jackson J was prepared to accept the possibility of investigations into breaches of article 2 during the 50 year period between the UKs accession to the Convention and the coming into force of the [1998 Act]. But that was because he regarded an international law right under the Convention as a necessary (and sufficient) springboard for a domestic claim on the basis of a continuing breach. In my opinion, however, the international law obligation is irrelevant. Either the Act applies to deaths before 2 October 2000 or it does not. If it does, there is no reason why the date of accession to the Convention should matter. It would in principle be necessary to investigate the deaths by state action of the Princes in the Tower. Lord Hoffmann added at para 69: In my opinion Parliament intended section 6 of the 1998 Act to be enforced, but enforced only in respect of breaches occurring after it came into force. I have not, with respect, found all of this reasoning easy to follow. Some of it does not appear to focus on the basis of the claim, which was that a continuing obligation under the Convention had given rise to an obligation under domestic law once the HRA came into force. He appears to have concluded, however, that any breach of the Convention that had taken place occurred at the time of the death, which was before the HRA had come into force, so that it gave rise to no breach of domestic law. Lord Rodgers reasoning appears in the following paragraphs of his speech: 79. What the applicant claims, however, is an article 2 Convention right under the Act to have his fathers death investigated even though, as he accepts, the killing did not violate, and is not to be regarded as having violated, any article 2 Convention right under the Act. Such a claim is fatally flawed and must be rejected. 80. Like Lord Brown I am doubtful whether, even in international law terms, there was by October 2000 any continuing breach of the relatives right to an effective investigation of Gervaise McKerrs death under article 2 of the Convention. But, even supposing that there was, that continuing breach of an international obligation was not turned into a continuing breach of an article 2 Convention right in domestic law when the Act came into force. Any breach that there was remained a breach in international law and nothing more. The applicant relies on the Act as part of the domestic law of Northern Ireland. Under the Act the right to an investigation, deriving from an article 2 Convention right, presupposes that the killing could have been in violation of that selfsame Convention right. So, when the applicants father was killed in 1982, his relatives had no right to an investigation under the Act. Moreover, since the Act is not retroactive, they are not now to be regarded as having had such a right in 1982 or at any time after that. Conversely, the Secretary of State is not to be regarded as having been in breach, or continuing breach, of such a right either in 1982 or at any time after that. 81. What the applicant is really saying, therefore, is that, when the Act came into force, it conferred on him a right under article 2 to have his fathers death investigated even though his killing was not, and is not to be regarded as having been, in breach of any article 2 Convention right under the Act. Therefore, the applicant is not asking the courts to apply the Act according to its terms, but to amend them so as to fit this case. That cannot be done. If Parliament had intended the rights under article 2 to be split up, with the Act applying differently to the different aspects, then it would have provided for this expressly. The potential objections are obvious. It would be curious to give a right, under the Act, to an investigation of a killing to which the Act did not apply. If there were to be such a right to an investigation, how far back would it go? Speculation is fruitless: what matters is that Parliament could have made, but did not make, any such transitional provision. The obvious conclusion is that the right to an investigation under the Act is confined to deaths which, having occurred after the commencement of the Act, may be found to be unlawful under the Act. The applicant seeks to contradict the policy of Parliament. There were a number of strands in this reasoning. The one that most closely echoed the reasoning of the Strasbourg Court in Moldovan was that if the Act did not apply at the time of the death, the Act could not sensibly impose an obligation to have an investigation into the circumstances of the death. But Lord Rodger also based his decision on an objective assessment of what Parliament must have intended. Lord Brown, at paras 88 and 89, referred to the object of the procedural investigation as set out by the Strasbourg Court in McKerr at para 111. He observed that the article 2 obligation asserted was a procedural obligation properly to be regarded as secondary or ancillary or adjectival to the substantive obligation to protect life, an obligation arising directly out of the loss of a life. Lord Brown then held that because the obligation to investigate was linked to the death it could not arise under domestic law: The duty to investigate is, in short, necessarily linked to the death itself and cannot arise under domestic law save in respect of a death occurring at a time when article 2 rights were enforceable under domestic law, ie on and after 2 October 2000. The issue in McKerr was whether, on true construction of the HRA, the article 2 procedural obligation could give rise to obligations under the Act after the Act had come into force notwithstanding that the death that triggered that obligation had occurred before the Act came into force. The House of Lords gave a negative answer to that question. In doing so their reasoning echoed that of the Strasbourg Court when giving a negative answer to the different question of whether the procedural obligation could arise under the Convention after it came into force in a particular state when the death that triggered the obligation occurred before the Convention had come into force in respect of that state. The echo was, however, unconscious. Moldovan was not referred to in McKerr and no analogy was drawn with the principle established by that decision. Further developments at Strasbourg before ilih In Voroshilov the Court applied, and extended, the reasoning in Moldovan in relation to an application that alleged breach of the procedural obligation in respect of a breach of the substantive obligation under article 3. The applicant alleged that he had been tortured by the police in 1997, the year before the Convention came into force in respect of the Russian Federation. Criminal proceedings were commenced in 1997 but had not concluded. The applicant claimed that the state had failed to conduct an adequate investigation into his treatment. The Court held the applicants complaint inadmissible for the following reasons: The Court observes that the procedural obligation under article 3 arises where an individual makes a credible assertion of having suffered treatment contrary to article 3 (see Labita, cited above). However, since the Court is prevented from examining the applicants assertions relating to the events outside its jurisdiction ratione temporis, it is unable to reach a conclusion as to whether the applicant has made a credible assertion as required by the above provision. Accordingly, it cannot examine whether or not the Russian authorities had an obligation under the Convention to conduct an effective investigation in the present case (see Moldovan v Romania (Application No 41138/98, 13 March 2001) Likewise the alleged failure to conduct the investigation cannot be held to constitute a continuous situation raising an issue under article 3 in the present case, since the Court is unable to conclude that such an obligation existed. The Court applied similar reasoning to the same effect in Kholodov. The Strasbourg Court gave further consideration to the object of the procedural obligation in Angelova and Iliev v Bulgaria (Application No 55523/00) (unreported) 26 July 2007. The applicants were the mother and brother of a Roma man who had been stabbed to death by a gang of teenagers. There was no suggestion that the killing itself was accompanied by any direct involvement of the state. The applicants complained, however, of inadequacies in the investigation of the crime carried out by the police. The Court held at para 93 that the absence of any direct state responsibility for the death did not exclude the applicability of section 2. The Convention imposed a duty to secure the right to life by putting in place effective criminal law provisions to deter the commission of offences backed by law enforcement machinery. The Court continued at para 94: The Court reiterates that in the circumstances of the present case this obligation requires that there should be some form of effective official investigation when there is reason to believe that an individual has sustained life threatening injuries in suspicious circumstances. The investigation must be capable of establishing the cause of the injuries and the identification of those responsible with a view to their punishment. Where death results, as in the present case, the investigation assumes even greater importance, having regard to the fact that the essential purpose of such an investigation is to secure the effective implementation of the domestic laws which protect the right to life. The Court added at para 98 that it was particularly important that the investigation should be pursued with vigour and impartiality where the attack was racially motivated. This was a further formulation of the purpose of the procedural investigation, whose effect was to treat the duty to investigate almost as part of the substantive duty imposed on the state by article 2 to take positive action to protect life. I have drawn attention in para 20 above to the Commissions finding in McDaid that the article 2 procedural obligation to hold an investigation was not a continuing obligation. In Brecknell v United Kingdom (2007) 46 EHRR 957 the Court considered the circumstances in which that obligation might be revived. The applicant was the widow of a man gunned down by loyalist gunmen in 1975. Investigations took place and consideration was given to criminal prosecutions, but these were concluded in 1981. In 1999 and thereafter further evidence came to light suggesting the possibility of RUC and UDR collusion with loyalist paramilitaries. The applicant contended that this revived the procedural obligation. The Court upheld this contention. It ruled at para 70 that if article 2 did not impose the obligation to pursue an investigation into an incident, the fact that the State chose to pursue some form of inquiry did not have the effect of imposing article 2 standards on the proceedings. The Court then ruled, at para 71: With those considerations in mind, the Court takes the view that where there is a plausible, or credible, allegation, piece of evidence or item of information relevant to the identification, and eventual prosecution or punishment of the perpetrator of an unlawful killing, the authorities are under an obligation to take further investigative measures. The steps that it will be reasonable to take will vary considerably with the facts of the situation. The lapse of time will, inevitably, be an obstacle as regards, for example, the location of witnesses and the ability of witnesses to recall events reliably. Such an investigation may in some cases, reasonably, be restricted to verifying the credibility of the source, or of the purported new evidence. The Court would further underline that, in light of the primary purpose of any renewed investigative efforts (see para 65 above), the authorities are entitled to take into account the prospects of success of any prosecution. The importance of the right under article 2 does not justify the lodging, willy nilly, of proceedings. Meanwhile, the Grand Chamber had had occasion to reconsider its temporal jurisdiction in Blei v Croatia (2006) 43 EHRR 1038. The claimant complained, inter alia, of violation of article 8 as a result of being deprived of a protected tenancy in her absence. Litigation in relation to this continued until 15 February 1996, when the applicant lost an appeal to the Supreme Court. She then lodged a constitutional complaint with the Constitutional Court, which was dismissed on 8 November 1999. Croatia acceded to the Convention on 5 November 1997. The State objected that the Court had no jurisdiction to hear the applicants complaint ratione temporis. The Court held at paras 77 and 82 that this issue fell to be determined by reference to the facts constitutive of the alleged interference. In consequence it was essential to identify, in each specific case, the exact time of the alleged interference. The Court ruled that the complaint to the Constitutional Court did not constitute part of the alleged interference. It was an attempt to obtain a remedy for it. It followed that all the matters complained of had occurred before the date of accession and the Court had no jurisdiction. The decision of the Grand Chamber in ilih The decision in ilih was reached by a Grand Chamber of 17, of which 7 delivered concurring opinions and 2 dissented. The applicants were the parents of a young man who died as a result of medical negligence on 19 May 1993. The applicants made repeated attempts to bring criminal proceedings, which foundered finally and conclusively on 14 July 2003. They also pursued civil proceedings, which reached an unsuccessful conclusion on 10 July 2008. They then lodged a constitutional appeal with the Constitutional Court, which was still pending at the time of the Strasbourg judgment. Slovenia acceded to the Convention on 28 June 1994. The issue before the Grand Chamber was whether, in these circumstances, the applicants could demonstrate that alleged deficiencies in the criminal proceedings after that date violated the procedural obligation of article 2. The Grand Chamber considered the prior jurisprudence and noted that it was faced with a conflict between Moldovan, Voroshilov and Kholodov on the one hand and Balasoiu on the other. At para 152 the Grand Chamber analysed its task as being to determine whether the procedural obligations arising under article 2 can be seen as being detachable from the substantive act and capable of coming into play in respect of deaths which occurred prior to the critical date or alternatively whether they are so inextricably linked to the substantive obligation that an issue may only arise in respect of deaths which occur after that date. The Grand Chambers conclusion appears from the following passage of its judgment: 159. Against this background, the Court concludes that the procedural obligation to carry out an effective investigation under article 2 has evolved into a separate and autonomous duty. Although it is triggered by the acts concerning the substantive aspects of article 2 it can give rise to a finding of a separate and independent interference within the meaning of the Blei judgment . In this sense it can be considered to be a detachable obligation arising out of article 2 capable of binding the state even when the death took place before the critical date. 161. However, having regard to the principle of legal certainty, the Courts temporal jurisdiction as regards compliance with the procedural obligation of article 2 in respect of deaths that occur before the critical date is not open ended. 162. First, it is clear that, where the death occurred before the critical date, only procedural acts and/or omissions occurring after that date can fall within the Courts temporal jurisdiction. 163. Second, there must exist a genuine connection between the death and the entry into force of the Convention in respect of the respondent state for the procedural obligations imposed by article 2 to come into effect. Thus a significant proportion of the procedural steps required by this provision which include not only an effective investigation into the death of the person concerned but also the institution of appropriate proceedings for the purpose of determining the cause of the death and holding those responsible to account (Vo, cited above, para 89) will have been or ought to have been carried out after the critical date. However, the Court would not exclude that in certain circumstances the connection could also be based on the need to ensure that the guarantees and the underlying values of the Convention are protected in a real and effective manner. Applying those principles, the Grand Chamber held that the applicants complaint fell within the Courts temporal jurisdiction. The considerations that led to this conclusion were as follows: 165. Applying the above principles to the circumstances of the present case, the Court notes that the death of the applicants son occurred only a little more than a year before the entry into force of the Convention in respect of Slovenia, while, with the exception of the preliminary investigation, all the criminal and civil proceedings were initiated and conducted after that date. The criminal proceedings opened effectively on 26 April 1996 (see para 23 above) following the applicant's request of 30 November 1995, and the civil proceedings were instituted in 1995 (see para 48 above) and are still pending. I am not alone in having difficulty in identifying the precise circumstances in which the procedural obligation attaches as a separate and autonomous duty. Similar difficulty was expressed by those who delivered concurring opinions, five of them commenting that the application of the relevant principles was likely to be difficult, debatable and unforeseeable. It is, however, necessary to identify what the Grand Chamber decided in order to determine how this impacts on the decision of the House of Lords in McKerr. I can start by stating with some confidence what the Grand Chamber did not decide. It did not decide that there is a continuing obligation to hold a procedural investigation that persists from the time of the death until the obligation has been satisfied. On the contrary it proceeded on the premise that there was no such obligation. That is quite plain from an earlier passage in the judgment. At para 157 the Grand Chamber stated: Moreover, while it is normally death in suspicious circumstances that triggers the procedural obligation under article 2, this obligation binds the state throughout the period in which the authorities can reasonably be expected to take measures with an aim to elucidate the circumstances of death and establish responsibility for it (see, mutatis mutandis, Brecknell v United Kingdom 46 EHRR 957, paras 66 72 and Hackett v United Kingdom (Application No 34698/04) 10 May 2005). This leads me directly to my next conclusion. The procedural acts and/or omissions referred to in para 162 relate to specific incidents of a particular process or procedure. Omissions cannot be read as applying to historic failings before the critical date that have not been remedied. This conclusion is based on the natural meaning of the phrase acts or omissions and is also required by the conclusion expressed at para 47 above. The meaning of each of the three sentences of para 163 is far from clear. The concept of a connection between a death and the entry into force of the Convention for the state in question is not an easy one if, as seems to be the case, this connection is more than purely temporal. The final sentence of the paragraph is totally Delphic and would seem designed to prevent the closing of the door on some unforeseen type of connection. I shall say no more about it. The second sentence is designed to explain the meaning of the first. In part the explanation seems to me to be simple. The obligation to comply with the procedural requirements of article 2 is to apply where a significant proportion of the procedural steps that article 2 requires (assuming that it applies) in fact take place after the Convention has come into force. This appears to be a free standing obligation. There is no temporal restriction on the obligation other than that the procedural steps take place after the Convention has come into force. Thus if a state decides to carry out those procedural steps long after the date of the death, they must have the attributes that article 2 requires. It is this obligation that is of potential relevance in the current case. The United Kingdom is not under a continuing obligation under article 2 to carry out an investigation into the deaths over 20 years ago of Martin McCaughey or Dessie Grew. But an inquest is going to be held into those deaths. As a matter of international obligation it is now apparent that the United Kingdom has come under a free standing obligation under article 2 to ensure that the inquest complies with the procedural requirements of that article, at least in so far as this is possible under domestic law. In ilih the Grand Chamber was satisfied that the two sets of proceedings that had been initiated were theoretically capable of leading to the establishment of the exact circumstances which had led to the death and potential responsibility for it at all levels, see para 125. The appeals before us have proceeded on the basis that the Coroner will be able, if so required, to conduct an inquest that satisfies the requirements of article 2. What of the requirement that the article 2 procedural obligation will apply where a significant proportion of the procedural steps required by the provisionought to have been carried out after the critical date? I think that the meaning of this is illuminated both by para 157 of the Grand Chambers judgment (see para 47 above) and by para 165 (see para 45 above). If the death occurs so soon before the date that the Convention takes effect that (assuming it to have been applicable) the article 2 obligation to hold an investigation would still have persisted, then that obligation will arise as a free standing obligation. I am fortified by the conclusions that I have reached about this difficult passage of the Grand Chambers judgment by the fact that it accords with the clearer statement of the relevant principles in the concurring opinion of Judge Lorenzen. The majority judgment was a radical departure from the reasoning of the Court in Moldovan, Voroshilov and Kholodov, and one that Judges Bratza and Trmen were unable to endorse, as they indicated in a powerful dissent. Sequels to ilih In Varnava v Turkey (Application Nos 16064/90 16066/90, 16068/90 16073/90) (unreported) 18 September 2009 the Court held that where an individual has disappeared in circumstances that raise a suspicion that he may have been killed, article 2 imposes a continuing duty to investigate the death. In that case the duty was said to have persisted for 34 years since the disappearance of a number of Greek Cypriots at the time of the Turkish invasion of Northern Cyprus. An example of that duty was the obligation to investigate a mass grave discovered in 2007. The activities of the Serious Crimes Review Team and the Historical Enquiry Team in relation to historic deaths in Northern Ireland was given by way of illustration of what was sufficient to satisfy this obligation: see para 192. Lyubov Efimenko v Ukraine (Application No 75726/01) (unreported) 25 November 2010 is a very recent example of the application of the procedural obligation as identified in ilih. The applicant was the mother of a young man who was robbed and killed in an attack in a bar. He died on 6 June 1993, four years and three months before the Convention came into force in relation to Ukraine. Investigations were suspended shortly after his death, but resumed after the Convention had come into force. The Court held that the resumed investigations fell within its jurisdiction ratione temporis and that article 2 applied to them. McKerr reviewed The precise meaning of the most difficult passage of the Grand Chambers judgment, which I have analysed at para 52 above, has no implications for the United Kingdom, either directly or by analogy, for we ratified the Convention over half a century ago and incorporated it into our domestic law over a decade ago. What matters is that this country is under an international obligation under the Convention to ensure that, if it does hold an inquest into an historic death, that inquest complies with the procedural obligations of article 2. The issue directly raised by these appeals is whether that obligation is, on true interpretation of the HRA, one to which that Act applies. In considering that issue, however, it is right to bear in mind that a similar issue arises in respect of the article 2 procedural obligation that the Strasbourg Court has held can revive on the discovery of fresh facts and which persists in respect of a suspicious disappearance. The exercise that these appeals involve, as was also the case in McKerr, is one of deducing from the terms of the HRA, and from any relevant Parliamentary or background material, the presumed intention of Parliament as to the ambit of application of that Act. I say presumed intention because Parliament cannot be expected to have foreseen the manner in which the Strasbourg Court would develop the ambit of particular Convention rights. It is, however, possible to determine certain principles that Parliament intended should govern the application of the legislation. There are two relevant principles, and they are potentially in conflict. The first principle is that the HRA does not have retroactive effect (the non retroactive principle). It does not permit a claimant to bring a claim for breach of a Convention obligation that occurred before the Act came into force. I have at para 26 referred to the authorities that support that principle, and need say no more about it. The second principle is that the ambit of application of the Act should mirror that of the Convention (the mirror principle). The object of the Act was to bring human rights home. This will only be achieved if claimants are able to bring in this jurisdiction claims that they would otherwise be permitted to bring before the Strasbourg Court. This principle was applied in relation to the territorial ambit of the HRA in R (Quark Fishing Ltd) v Secretary of State for Foreign and Commonwealth Affairs [2005] UKHL 57; [2006] 1 AC 529 and R (Al Skeini) v Secretary of State for Defence (The Redress Trust intervening) [2007] UKHL 26; [2008] AC 153. As Lord Rodger remarked in the latter case at para 57 in case of doubt, the Act should be read so as to promote, not so as to defeat or impair, its central purpose. Lord Carswell added at para 98 that statements made both in and outside Parliament pointed very clearly to a general intention to equate the scope of the Act with the scope of the Convention and Lord Brown at para 140 protested at an interpretation of the HRA that required human rights complaints to be taken to Strasbourg rather than brought under the Act. The two principles were in conflict in McKerr and the non retroactive principle prevailed. It precluded the courts of this country from entertaining a claim by Mr McKerr in respect of the historic breaches of article 2 which pre dated the coming into force of the HRA. Those human rights were not brought home and he had to go off to Strasbourg to assert them. His subsequent domestic claim raised the spectre that claims could be made under the HRA for breach of a continuing duty to hold an inquest in respect of any death that had occurred since 1951 when this country ratified the Convention, founded on the possibility that the death had involved a breach of the substantive obligation imposed by article 2. In these circumstances it is not surprising that the House of Lords applied the non retroactive principle rather than the mirror principle and held that Mr McKerrs claim did not fall within the scope of the HRA. The close nexus between the post HRA obligation and the pre HRA obligation was of the essence of the approach of most of their Lordships to their decision on the ambit of the Act: see Lord Nicholls reference to treating all the article 2 rights as part of a single whole (para 27 above), his reference to the continuing existence of a right arising under the Convention (para 28 above), Lord Rodgers reference to rights under article 2 being split up (para 32 above) and my first quotation from the speech of Lord Brown (para 34 above). What difference has ilih made? I believe that the most significant feature of the decision in ilih is that it makes it quite clear that the article 2 procedural obligation is not an obligation that continues indefinitely. The spectre that the House of Lords confronted in McKerr is shown to be a chimera. Just because there has been an historic failure to comply with the procedural obligation imposed by article 2 it does not follow that there is an obligation to satisfy that obligation now. Insofar as article 2 imposes any obligation, this is a new, free standing obligation that arises by reason of current events. The relevant event in these appeals is the fact that the Coroner is to hold an inquest into Martin McCaugheys and Dessie Grews deaths. ilih establishes that this event gives rise to a free standing obligation to ensure that the inquest satisfies the procedural requirements of article 2. That obligation is not premised on the need to explore the possibility of unlawful state involvement in the death. The development of the law by the Strasbourg Court has accorded to the procedural obligation a more general objective than this, albeit that in the circumstances of these appeals state involvement is likely to be a critical area of investigation. Is the presumed intention of Parliament when enacting the HRA that there should be no domestic requirement to comply with this international obligation? This is a very different question to that considered by the House of Lords in McKerr, and so far as I am concerned it produces a different answer. The mirror principle should prevail. It would not be satisfactory for the Coroner to conduct an inquest that did not satisfy the requirements of article 2, leaving open the possibility of the appellants making a claim against the United Kingdom before the Strasbourg Court. On the natural meaning of the provisions of the HRA they apply to any obligation that currently arises under article 2. These appeals are concerned with such an obligation. The mirror principle reinforces an interpretation that does not exclude this obligation from the ambit of the HRA. It may be that this involves a departure from the decision of the House of Lords in McKerr. I am inclined to think that it does. If so, it is a departure that it is right to make having regard to the fact that the decision in McKerr was premised on the existence of an international obligation which was very different from that which is now seen to exist. I am not dissuaded from this conclusion by the fact that it opens the door to the argument that the article 2 obligation to re open an investigation because of the discovery of fresh facts as held in Brecknell, or the article 2 continuing obligation to investigate a suspicious disappearance as held in Varnava, also fall within the scope of the HRA. For these reasons I would allow these appeals. LORD HOPE The decision of the Grand Chamber of the Strasbourg Court in ilih v Slovenia (2009) 49 EHRR 996 requires us to take a fresh look at the present state of our domestic law about the holding of inquests in cases where the death occurred before the Human Rights Act 1998 was commenced on 2 October 2000. There are two issues. The first is whether article 2 of the European Convention on Human Rights as interpreted in McCann v United Kingdom (1995) 21 EHRR 97, para 161 gives rise to a procedural obligation on the state to carry out an effective public investigation into the circumstances of a death where agents of the state are, or may be, in some way implicated, even though because the death occurred before 2 October 2000 the substantive obligation does not apply to it in domestic law. The second is whether, if there is no such obligation in domestic law but the state nevertheless decides to carry out an investigation into a pre commencement death of that kind, the investigation which it carries out must meet the procedural requirements of article 2 as explained in R (Middleton) v West Somerset Coroner [2004] UKHL 10, [2004] 2 AC 182. These questions require us to attempt to understand what the Grand Chambers decision in ilih means, and then to see how the message that it conveys can be fitted into domestic law. As we are concerned with pre commencement deaths, the focus must be on the transitional provisions in section 22(4) of the 1998 Act. The struggle which some members of the House of Lords, including myself, had with those provisions are now a distant memory: see R v Kansal (No 2) [2002] 2 AC 69; R v Lambert [2002] 2 AC 545; Wilson v First County Trust Ltd (No 2) [2004] 1 AC 816. But they must now be addressed again, as the decision in ilih appears to have detached the procedural obligation under article 2 from the substantive obligation. The question is whether giving effect to that decision in either of the two ways referred to above would contravene the policy choice by Parliament to which section 22(4) of the Act gave effect. The policy choice was that, save to the limited extent referred to in section 22(4), the Act was not to apply retrospectively. As Lord Nicholls of Birkenhead said in Wilson v First County Trust Ltd, para 12, sections 6 to 9 are forward looking in their reach: one would not expect a statute promoting human rights values to render unlawful acts which were lawful when done. I would add that, as section 6(6) provides that an act includes a failure to act, one would not expect it to apply to failures to act which were not unlawful when the alleged failure occurred. The deaths with which these appeals are concerned took place in October 1990. The papers were passed to the Coroner in 1994, but they were incomplete as they omitted statements from the soldiers who committed the killings. Those statements were not provided to him until 2002. It was not until 14 September 2009 that the Coroner held the preliminary hearing in which he was asked to hold an inquest which complied with the procedural requirements of article 2. It is common ground that, as the deaths occurred before article 2 was made part of domestic law, the substantive aspects of that article cannot be applied to them under the Human Rights Act. Section 22(4) of the Act precludes this. Sections 6(1) and 7(1)(a) of the Act do not apply because the killings occurred before the Act came into force. Any attempt that might have been made in domestic law prior to 2 October 2000 to require the Coroner to carry out an investigation into them that met the requirements of article 2 would have been bound to fail. Human rights had not yet been brought home. The simple fact is that from the date when the deaths occurred to the date immediately before the Act came into force there was no obligation to investigate these deaths in the manner that meets the procedural requirements of article 2 under domestic law. The House of Lords held in In re McKerr [2004] 1 WLR 807 that, where there had been no breach of the procedural obligation before 2 October 2000, there could be no continuing breach thereafter. But the proceedings that the Coroner was asked to undertake when the papers were passed to him were still pending when the Human Rights Act came into force, and they are still pending. In ilih, para 159 the Grand Chamber held that the procedural obligation to carry out an effective investigation under article 2 has evolved into a separate and autonomous duty. It can give rise to a finding of a separate and independent interference with the article 2 right which is capable of binding a State even when the death took place before it ratified the Convention. In so doing, as Judges Bratza and Trmen pointed out in their joint dissenting opinion, it departed from the general rule that the provisions of the Convention do not bind a contracting party in relation to any act or fact which took place before the date of their entry into force with regard to that party. The question is whether section 22(4) of the Human Rights Act permits that novel approach to be adopted in domestic law. In para 21 of McKerr Lord Nicholls said that the obligation to hold an investigation is an obligation triggered by the occurrence of a violent death: The obligation to hold an investigation does not exist in the absence of such a death. The obligation is consequential upon the death. If the death itself is not within the reach of section 6, because it occurred before the Act came into force, it would be surprising if section 6 applied to an obligation consequential upon the death. So, for the new cause of action in section 6 to apply to it, the death which is the subject of investigation must itself be a death to which section 6 applies. The event giving rise to the article 2 obligation to investigate must have occurred after the Act came into effect. He went on in para 22 to say that in this way, for the transitional purpose, all obligations arising under article 2 must be treated as parts of a single whole: Parliament cannot be taken to have intended that the Act should apply differently to the primary obligation (to protect life) and a consequential obligation (to investigate a death). The reasons given by Lord Hoffmann at para 67, by Lord Rodger of Earlsferry at para 81 and by Lord Brown of Eaton under Heywood at para 89, as I read them, are to the same effect. Lord Rodger said that, if Parliament had intended the rights under article 2 to be split up, with the Act applying differently to the different aspects, it would have provided for this expressly. When it made those observations the House was, of course, approaching the matter as one of domestic law. But it was doing so at a time when there was no indication in the jurisprudence of the Strasbourg Court that the procedural obligation under article 2 was detachable from the substantive obligation. The matter was being approached on the assumption, as Lord Nicholls made clear in para 21 of his speech, that it was not. The question whether or not those obligations can be detached from one another is pre eminently a matter for Strasbourg. Section 2(1) of the Act tells us that in determining any question that has arisen in connection with a Convention right we must take into account any judgment of the European Court of Human Rights so far as, in our opinion, it is relevant to the proceedings in which the question has arisen. The judgment in ilih is such a judgment. If we can find a clear ruling on the point in that judgment we should follow it, even if this contradicts the assumption on which the House based its decision in McKerr. We are not absolutely bound to do so, as section 2(1) does not go that far. But our practice is to follow the guidance of the international court unless there are strong reasons for not doing so. As Lord Bingham of Cornhill said in R (Ullah) v Special Adjudicator [2004] UKHL 26, [2004] 2 AC 323, para 20, its case law is not strictly binding but courts should, in the absence of some special circumstances, follow any clear and constant jurisprudence of the Strasbourg court as the Convention is an international instrument, the correct interpretation of which can be authoritatively expounded only by that court. He added that it followed that a national court subject to a duty such as that imposed by section 2 should not without strong reason dilute or weaken the effect of the Strasbourg case law. Only the most starry eyed admirer of the Strasbourg court could describe the guidance that the Grand Chamber offered in para 163 of its judgment in ilih as clear. Judge Lorenzens criticisms in his concurring opinion of the reasoning of the majority and the powerful dissenting opinion of Judges Bratza and Trmen show that it has many shortcomings. But I do not think that it is difficult to identify the point that matters for our purposes. In para 159 the Court concluded from the fact that it had consistently examined the question of procedural obligations under article 2 separately from the question of compliance with the substantive obligation, and where appropriate found a separate violation of article 2 on that account, as revealed by the decisions listed in para 158, that the procedural obligation to carry out an effective investigation under article 2 had evolved into a separate and autonomous duty. Although it was triggered by the acts concerning the substantive aspects of article 2, it could be considered to be a detachable obligation arising out of that article which was capable of binding a state even when the death took place before it ratified the Convention. Support for the view that this was the essential basis for the decision is to be found in para 9 of the dissenting opinion, where Judges Bratza and Trmen said that they could not agree with the reasoning of the majority which was founded on the alleged detachability of the procedural obligation from the substantive obligation. In para O IV14 they said that, while they had no quarrel with the idea that the procedural obligation had evolved into a separate and autonomous duty, they differed from them as to their view that it was detachable from the death which gives rise to it. While the working out of the concept as indicated in para 163 of the Courts judgment is far from clear, the ruling that the procedural obligation is detachable from the death is not. I return then to the two questions which I identified in para 65, above. As to the first question, I see no reason to disagree with the way it was answered in McKerr. One must distinguish between rights arising under the Convention and rights created by the Act by reference to the Convention. The effect of section 22(4) of the Act is that the rights created by the Act came into existence for the first time on 2 October 2000: Lord Nicholls in McKerr, para 25. The right to an investigation under the Act in domestic law is confined to deaths which, having occurred after the commencement of the Act, may be found to be unlawful under the Act: Lord Rodger in McKerr, para 81. The trigger that gives rise to the procedural obligation under the Convention is prevented from operating in domestic law in the case of a pre commencement death by the bar that has been applied by section 22(4). I agree with Lord Rodger (see para 161, below) that, if it were otherwise, a time limit to identify which deaths trigger the duty in domestic law, and which do not, would have had to have been written into the Act. There is none, and I do not think that we should be deflected from holding fast to that position by the way the Strasbourg court has attempted to work out the limits of its own temporal jurisdiction for its own purposes in para 163 of ilih. The concept of a temporal connection with a pre commencement event, so as to bring the event itself within the scope of domestic law, is entirely alien to the system that the Act lays down. As I see it, however, the second question can and does admit of a different answer. We are told by Strasbourg that the procedural obligation, as now understood, has a life of its own as it is detachable from the substantive obligation. Furthermore, there is no need for a trigger to bring the obligation into operation in this case, as it has been decided that an inquest is going to be held into these deaths. The objection that this would be giving retrospective operation to section 6 of the 1998 Act does not arise. The question whether the inquests must satisfy the procedural requirements of article 2 otherwise they will be unlawful in terms of that section is being directed to something that has yet to take place. The answer to it is not to be found in McKerr, as the House treated the procedural and the substantive obligations in that case as inseparable. Lord Rodger says (see para 155, below) that to approach the issue in this way does not reflect the decision in ilih. I, for my part, think that it does. It is true that it does not say this in terms. What the decision seeks to do in para 163 is to identify those pre ratification deaths that will bring the procedural obligation into effect after the date of ratification. Its concern is with the circumstances that the Strasbourg court will accept jurisdiction in such cases. The question whether there is an article 2 obligation to investigate these deaths in domestic law is a different question. But the holding of inquests into the deaths in this case will be a procedural act which the state itself has decided should take place and, as the deaths were the result of acts by agents of the state, the circumstances meet the test for an article 2 inquiry that was identified in R (Middleton) v West Somerset Coroner [2004] 2 AC 182, para 3. These pre commencement deaths could not have given rise to any violation of the obligations of the state under article 2 in domestic law. But I do not think that we can ignore the possibility that they may have violated the deceaseds article 2 rights under the Convention. That certainly is how the matter would be viewed in Strasbourg. There is no doubt that these deaths fall within the jurisdiction of the Strasbourg court, as the events that have happened since the appellants lodged their application with that court have shown. The effect of ilih is to breathe life into the procedural obligation post commencement in a way that domestic law can recognise and give effect to. It may be said that to extend the procedural obligation to these cases would be to give a more generous interpretation to the judgment in ilih than it deserves. I think however that it would be unduly cautious for us not to do this. The whole idea of bringing rights home was to enable effect to be given to the Convention rights in domestic law. I do not think that we need any further guidance on this matter from Strasbourg. As there is nothing in the wording of the 1998 Act to prevent us from directing that when he conducts these inquiries the Coroner must comply with the procedural obligation under article 2, I would hold that we should do so. I would allow the appeals and direct the Coroner to hold an inquiry in each case that complies with the states procedural obligation under article 2 of the Convention. LADY HALE In ilih v Slovenia (2009) 49 EHRR 996, the Grand Chamber of the European Court of Human Rights decided that the procedural obligation under article 2 of the Convention, to investigate deaths where the state might have been in breach of its obligation to protect the right to life, was separate or detachable from the substantive obligation to protect life. In certain ill defined circumstances, therefore, that procedural obligation might still be in existence after the date on which a new Member State had acceded to the Convention, and the Court would have jurisdiction to investigate whether or not it had been broken, even though the death to which it related had taken place before that date. This controversial decision undoubtedly broke new ground. But at first sight it has nothing to do with the United Kingdom. The United Kingdom accepted the right of individual petition to the Strasbourg Court as from 14 January 1966. The deaths in question in these appeals took place on 9 October 1990. So there is no doubt that the Strasbourg Court has jurisdiction to decide whether the United Kingdom is in breach of any of its obligations under article 2. The ilih case makes no difference to that. The obligations of the United Kingdom in international law have not changed. The question, however, is whether the obligations of United Kingdom public authorities in United Kingdom domestic law have changed. This would not matter if all inquests were automatically sufficient to comply with the procedural obligation in article 2. Unfortunately, there remain some differences between those which do, and those which do not, have to comply. Those differences centre on the scope of the available verdict as to how the deceased met his death: in a conventional inquest, how means only by what means whereas in an article 2 compliant inquest it must also encompass in what broad circumstances: see R (Middleton) v West Somerset Coroner [2004] UKHL 10, [2004] 2 AC 182. As Lord Bingham made clear in Jordan v Lord Chancellor [2007] UKHL 14, [2007] 2 AC 226, para 37, the scope of the inquiry is a different matter: . the purpose of an inquest is to investigate fully and explore publicly the facts pertaining to a death occurring in suspicious, unnatural or violent circumstances, or where the deceased was in the custody of the state, with the help of a jury in some of the most serious classes of case. The coroner must decide how widely the inquiry should range to elicit the facts pertinent to the circumstances of the death and responsibility for it. Furthermore, at para 39, there is nothing to prevent a jury finding facts directly relevant to the cause of death which may point very strongly towards a conclusion that criminal liability exists or does not exist. And, at para 40, if those factual findings point towards the commission of a criminal offence, or it appears to the coroner that an offence may have been committed, the coroners duty . is to report promptly to the Director of Public Prosecutions . In this case the coroner gave a preliminary ruling on the scope of the inquest which clearly encompassed the purpose and planning of the surveillance operation which led to these deaths. The appellants were content with this but the Police Service of Northern Ireland argued that it should be made clear that this would be a conventional inquest, concerned in producing a verdict on how the deceased met their deaths, with by what means rather than in what broad circumstances. Hence, in addition to a declaration on delay, which is no longer an issue, the appellants sought a declaration that the coroner is obliged to conduct the inquest in an article 2 compliant manner. It is the refusal of that declaration which has led to these appeals. The Human Rights Act 1998 came into force on 2 October 2000. It became unlawful for a public authority to act in a way which is incompatible with a convention right: section 6(1). A person claiming that a public authority has acted unlawfully may (a) bring proceedings against the authority, or (b) rely on the Convention right or rights concerned in any legal proceedings: section 7(1). However, with one exception, this does not apply to an act taking place before section 7(1) came into force: section 22(4). If the act in question is the death itself, then there is no remedy for deaths taking place before 2 October 2000 (In re McKerr [2004] UKHL 12, [2004] 1 WLR 807) nor does the interpretative obligation in section 3(1) apply (R (Hurst) v London Northern District Coroner [2007] UKHL 13; [2007] 2 AC 189). The exception applies to proceedings brought by or at the instigation of a public authority; in such proceedings, a victim may rely on a Convention right whenever the act in question took place: section 22(4) read with section 7(1)(b). It was argued in Hurst that an inquest was proceedings brought by or at the instigation of a public authority and that the mother of the deceased was therefore entitled to rely on her Convention right to an article 2 compliant inquiry whenever the death took place. That argument was roundly rejected (at paras 60 to 64) on the basis that the exception was meant to allow people against whom a prosecution or civil proceedings had been brought to rely upon his Convention rights to defend himself against the state: Convention rights may be used as a shield to defeat proceedings brought against victims by public authorities, but not as a sword (Lord Brown of Eaton under Heywood, at para 62). In Hurst, the mother was seeking to use the Human Rights Act to compel the coroner to re open an inquest when he had thought that it would serve no useful purpose. Unless she succeeded, there would be no proceedings. Similarly, in McKerr, the son of the deceased was seeking to use the Act to compel the holding of an inquiry which would not otherwise take place. In this case, by contrast, there is indeed to be an inquest. If the application of the exception in section 22(4) had first arisen in this context, I do wonder whether the result would have been the same. Section 7(1)(b) does not require that the proceedings are brought against the victim: it simply says that the victim may rely upon the Convention right in any legal proceedings. And it can plausibly be argued that, for the purpose of section 22(4), an inquest is a legal proceeding brought by a public authority, the coroner. Thus, even if the act in question is the death, were it not for Hurst, I would have been inclined to hold that where there is an inquest on foot it must be conducted in an article 2 compliant way, whenever the death took place. Unsurprisingly, in the light of Hurst, that is not how Ms Quinlivan puts the appellants case. I mention the point only because it leads to the same result as that at which I have arrived by another route. This is where the decision in ilih comes in. The obligation to hold an article 2 compliant inquiry into certain deaths has now to be understood to be separate from the obligation to protect life. The Attorney General complains that this is wrong: the object of the duty to hold an inquiry is to find out what happened, who was responsible, and to hold those responsible to account for the breach of their substantive obligations under article 2. If what they did cannot be an actionable breach of those obligations, because the Human Rights Act was not then in force, it makes no sense to oblige the state to hold an inquiry into whether or not there was a breach. That seems to me to take an unduly narrow view of the purpose of an article 2 investigation. Where deaths take place for which the state may bear some responsibility, a fortiori where, as here, deaths take place at the hands of state agents, there is always a useful purpose in finding out, so far as is possible, what took place, so that everyone, but in particular the relatives, may learn the truth about what took place, and lessons may be learned for the future. As the Court observed in ilih, at para 156, the procedural obligation has not been considered dependent on whether the State is ultimately found to be responsible for the death. The serious criticism of the ilih decision is that it leaves so much uncertainty about when the investigative duty continues. As the Court says in paragraph 161 of its judgment, the obligation cannot be open ended. But, with respect, I agree with the concurring opinion of Judge Lorenzen, when he complains that the criteria laid down in paragraph 163 of the Courts judgment (quoted by Lord Phillips at para 44 above) are not easy to understand. However, I also agree with him that in one respect, they are quite clear. That is, in his words, where the event occurred and an investigation was initiated before the entry into force of the Convention, but a significant part of that investigation was only carried out after that date (p 1045, para O I4). That is this case. The Coroner began his inquiries at the very latest once the Director of Public Prosecutions had announced on 2 April 1993 that there was to be no prosecution. But for a variety of reasons things have proceeded very slowly since then and a significant part of the investigation, in particular the inquest, has still to take place. I do not see this as involving the retrospective operation of the 1998 Act. As public authorities, the coroner and the court have now to act compatibly with the Convention rights. The question is what the Convention rights now entail. It has always been clear that the content of the Convention rights can evolve over time. When the 1998 Act was passed, Parliament must be taken to have known of the jurisprudence which described the Convention as a living instrument in Tyrer v United Kingdom (1978) 2 EHRR 1; which implied further rights into those expressed in Golder v United Kingdom (1975) 1 EHRR 524; which developed autonomous concepts in Engel v The Netherlands (1976) 1 EHRR 647; which recognised positive obligations in Marckx v Belgium (1979) 2 EHRR 330; and which insisted that rights be made practical and effective rather than theoretical and illusory in Airey v Ireland (1979) 2 EHRR 305. In the light of that well known jurisprudence, it cannot have been Parliaments intention that the Convention rights enshrined in the 1998 Act were to remain set in stone as they were when the Act was passed or when it came into force. It must have been intended, as Lord Bingham famously put it in R (Ullah) v Special Adjudicator [2004] UKHL 26, [2004] 2 AC 323, para 20, that the national courts would, at the very least, keep pace with the Strasbourg jurisprudence as it evolves over time. If the evolutive interpretation of the Convention rights means that they now mean something different from what they meant when the 1998 Act was passed, then it is our duty to give effect to their current meaning, rather than to the one they had before. In Bellinger v Bellinger [2003] UKHL 21, [2003] 2 AC 467, to take an obvious example, the House of Lords made a declaration that section 11(c) of the Matrimonial Causes Act 1973 was incompatible with the Convention rights, because in Goodwin v United Kingdom (2002) 35 EHRR 447, decided in July 2002, the Strasbourg court had finally held that the non recognition of a change of sex was in breach of articles 8 and 12 of the Convention. This was a change, albeit well telegraphed in advance, from its previous jurisprudence in Rees v United Kingdom (1986) 9 EHRR 56, Cossey v United Kingdom (1990) 13 EHRR 622, and Sheffield and Horsham v United Kingdom (1998) 27 EHRR 163. No one suggested that the Act did not apply. At the same time, of course, we are not obliged to follow that jurisprudence if there are good reasons to depart from it. We have not so far failed to follow a decision of the Grand Chamber; as Lord Rodger equally famously put it in Secretary of State for the Home Department v AF (No 3) [2010] 2 AC 269, para 98, Argentoratum locutum, iudicium finitum. But the day might come when we would find good reasons to do so. Despite the urgings of the Attorney General, however, I do not think there are such good reasons here. This case fits into the limited class of case identified by Judge Lorenzen in ilih. Accepting that this inquest must comply with the procedural requirements of article 2 does not require that old inquests be re opened (unless there is important new material) or that inquiries be held into historic deaths. The one case which does not quite fit into Judge Lorenzens formula is where there is a death before the relevant date and the decision to hold an inquest or other inquiry is taken after that date. To my mind that would still fit into the criterion of a significant proportion of the procedural steps required by this provision . will have been . carried out after the critical date. In other words, if there is now to be an inquiry into a death for which the state may bear some responsibility under article 2, it should be conducted in an article 2 compliant way. The coroner himself obviously wishes to conduct these inquests in way which complies with article 2. It will save a great many procedural arguments if he does. His concern before us was with the wider potential ramifications of ilih. I hope that these concerns are allayed by our judgments, which seek to provide a principled basis for drawing the line. For these reasons, I would allow this appeal and make the declaration sought by the appellants. LORD BROWN In 1995 the European Court of Human Rights decided that article 2 of the European Convention on Human Rights gives rise to a procedural obligation to hold an inquiry to specified standards into those deaths which occur in circumstances where the states responsibility is or may be engaged. Hitherto it has been understood that this obligation is secondary and ancillary to the death in question. True, it was recognised by Strasbourg as a free standing obligation. But that meant no more than that it was not dependent on the existence of a substantive violation of article 2. It was on that understanding that the House of Lords decided in In re McKerr [2004] 1 WLR 807 that no such procedural obligation can arise in respect of a death occurring before 2 October 2000 when the Human Rights Act 1998 took effect. The recent, post McKerr, decision of the Grand Chamber in ilih v Slovenia (2009) 49 EHRR 996 requires, however, submit the appellants, a fundamental change in that approach. Now it appears that the article 2 procedural obligation is not correctly to be understood as merely ancillary to a particular death but is rather to be seen as a separate and autonomous duty, a detachable obligation arising out of article 2 . even when the death took place before the critical date (para 159 of the courts judgment). In short, the court held that in point of time (and it is time which is all important in the present domestic context just as it was in the international context in which the court in ilih was determining its own temporal jurisdiction over subscribing states) the obligation may arise subsequent to the death requiring investigation and is not to be regarded as outwith the courts jurisdiction merely because the death itself preceded the courts assumption of jurisdiction. I acknowledge, as Lord Rodger points out in his powerful dissenting judgment, that we are here concerned with what Parliament chose to enact in the 1998 Act, not with what it might have chosen to enact. Equally, of course, we are concerned to decide the domestic courts jurisdiction under that Act, not the Strasbourg Courts jurisdiction under the Convention. All that said, by the same token that had McCann v United Kingdom (1995) 21 EHRR 97 been decided after, rather than before, the 1998 Act, we should still have accepted the need under domestic law to give effect to the newly discovered ancillary article 2 procedural obligation, so too it now seems to me right to construe the Act as recognising a domestic law obligation to give effect to what we now learn is a detachable article 2 procedural duty. As for the precise circumstances in which this detachable duty should henceforth be recognised to arise, this, I acknowledge, in the light of the deeply unsatisfactory purported delineation of the duty to be found at paras 161 163 of the Grand Chambers judgment in ilih, is more difficult. Our essential task must be to construe the Act in the context of Parliaments underlying intention that Convention obligations arising after 2 October 2000 should be enforceable here rather than have to be litigated in Strasbourg, but provided always that no particular difficulty results from events having occurred before 2 October 2000 hence Parliaments decision not to apply the Act retroactively save to the limited extent provided for by section 22(4). These considerations are, I believe, essentially those described by Lord Phillips (at paras 58 and 59 of his judgment) respectively as the mirror principle and the non retroactive principle. On this approach I too, in common with Lord Phillips (para 61) and Lord Hope (para 77), would hold that any inquests still outstanding, even, as in these cases, in respect of deaths occurring before 2 October 2000, must so far as remains possible comply with the relatives article 2 Convention rights. Such a conclusion will not to my mind present any great difficulties. There are, we were told, 16 existing legacy inquests (involving 26 deaths) currently outstanding on the coroners books, a further six incidents (involving eight pre 2000 deaths) referred by the Attorney General to the Coroner for inquests pursuant to section 14 of the Coroners Act (Northern Ireland) 1959 and a further 7 deaths (between August 1994 and January 2000) not yet the subject of inquests. Moreover, not merely will there therefore be only comparatively few inquests affected by this ruling but it may be doubted whether in reality there is all that much difference between an article 2 compliant inquest (a Middleton inquest: see R (Middleton) v West Somerset Coroner [2004] 2 AC 182) and one supposedly not (a Jamieson inquest: see R v Coroner for North Humberside and Scunthorpe, Ex p Jamieson [1995] QB 1) a topic exhaustively discussed by this court in R (Smith) v Oxfordshire Assistant Deputy Coroner [2011] 1 AC 1, see particularly Lord Phillips judgment at paras 73 78 and my own at paras 152 154. I too, therefore, would allow these appeals. LORD KERR On 9 October 1990 Martin McCaughey and Desmond Grew were shot and killed by members of the British Army. Some twenty one years later an inquest into their deaths has not been held. These bare facts are testament to the difficulties that beset the investigation of controversial killings in Northern Ireland. Those difficulties are, of course, by no means unique to that province. Lord Phillips in his review of Strasbourg jurisprudence has amply illustrated the huge problems encountered in many member countries of the Council of Europe in the conduct of inquiries into how people come to be killed. The stream of cases that have flowed throughout domestic courts and in Strasbourg paint a disheartening picture. But perhaps the decision of this court in these appeals will mark the end of at least one area of controversy. Lord Phillips has said that a decision of this court is needed to prevent the delay and expense involved in interlocutory in fighting in future inquests raising the same issue as arises here. I share his hope that we can achieve that goal. Before the hearing of this appeal, the appellants (who are the next of kin of Mr McCaughey and Mr Grew) lodged an application with the European Court of Human Rights (ECtHR) complaining of substantive and procedural breaches of article 2 of the European Convention on Human Rights and Fundamental Freedoms (ECHR). That court asked the government of the United Kingdom to provide its written observations on the admissibility and merits of the appellants application. The government applied to the court for suspension of the time limit within which those observations must be submitted while the decision of this court was awaited. The Strasbourg court has agreed to this request. As Lord Rodger has pointed out, ECtHR unquestionably has jurisdiction to deal with a complaint that there has been a failure by the United Kingdom to fulfil its duty to investigate the violent deaths of Mr McCaughey and Mr Grew. If the appellants do not succeed in enforcing that duty in the courts of this jurisdiction, therefore, it is to be presumed that, if there is a failure on the part of the government to institute an article 2 compliant inquiry, the appellants will proceed with the application that they have already lodged. This unsatisfactory and anomalous situation can be avoided if the decision in ilih v Slovenia (2009) 49 EHRR 996 that the procedural obligation to investigate deaths is detachable has the effect in domestic law for which the appellants contend. Whatever may be said about the reasoning in ilih (and, as Lord Dyson has said, it has been the subject of trenchant criticism, not least by the Attorney General for Northern Ireland, intervening in these appeals) the essential ratio of the case is clear. It is to the effect that article 2 involves two distinct and separable obligations, one procedural, the other substantive. Where a death occurs before the accession of a member state to the ECHR, the procedural obligation to investigate the circumstances of the death will, in certain circumstances, require the acceding state to comply with article 2. The real difficulty that the decision of the Grand Chamber creates is in defining the circumstances in which the procedural obligation arises. Clearly not every death that occurred before the ratification of ECHR by a particular state can be subject to the duty to investigate under article 2. Must there be a temporal connection between the death and the procedural obligation to investigate? If so, how close to the time of accession must the death have occurred? Or is another form of connection sufficient to generate the link? Is it sufficient that the ratifying state decides, after it has acceded to the Convention, to investigate a death that occurred before ratification? In that event, can the ratifying state avoid inspiring the procedural obligation by deciding not to investigate the death? Many of these questions remain unanswered by ilih. It seems to me probable that they will ultimately require to be addressed by ECtHR and, for that reason alone, one cannot hope to provide a comprehensive statement on the precise, indispensable elements of the necessary connection but some aspects of this question require to be considered in order to determine whether, if ilih is to be applied to the HRA, these appeals can succeed. First, however, it is necessary to grapple with the issue whether, in light of ilih, the article 2 Convention right under the HRA applies to the investigation, after 2 October 2000, of violent deaths which occurred before that date. Lord Rodger makes a powerful case for the proposition that the temporal application of the Convention is irrelevant for purposes of deciding the temporal application of the HRA but that, as it seems to me, does not provide an answer to the essential question. The majority of the Grand Chamber in ilih elided the criticism of the dissenting minority that the effect of the majority judgment was to make the Convention retroactive. It did so by finding that the procedural right was detachable. The invocation of that right therefore could and did occur after Slovenia had ratified the Convention. In this way, no impact on the temporal jurisdiction of the Convention was involved. The duty arose or at least continued to exist after the Convention had been ratified. The right could be asserted when Slovenia was squarely within the temporal jurisdiction of the Convention and no question of retroactive effect was involved. This process of reasoning brings to centre stage the decisive finding that the separable right either comes to life or continues to exist after the critical date. That central finding, that the procedural right is detachable and not linked inexorably to the death, cannot now be ignored in deciding whether, after the coming into force of HRA, there is a procedural obligation to investigate a death that occurred before that date. The decision in McKerr depended crucially on the indissolubility of the procedural and substantive rights. The passages from Lord Nicholls speech which have been quoted by Lord Phillips in para 27 of his judgment make that unmistakably clear. In particular, Lord Nicholls statement that the interpretation that he proposed had the effect of treating all the obligations arising under article 2 as parts of a single whole makes the point decisively. That stance is no longer possible. Strasbourg has positively said that the obligations arising under article 2 are not parts of a single whole. That inescapable conclusion must inform this courts approach to the application of the HRA. The procedural right has the capacity to be animated or to continue to exist after the coming into force of HRA. If it does come alive or if it continues to have life, then there is no question of HRA being applied retrospectively. It is applied to an extant right. Of course, it is undoubtedly true, as Lord Rodger has said, that Parliament had it in mind that Convention rights would only be accessible domestically for acts that occurred after 2 October 2000 (apart from the closely defined exceptions in section 22(4)). But the phenomenon of an Act having an unintended consequence is by no means unusual. Moreover, the divisibility of the article 2 rights which has now been recognised eliminates any conflict that might otherwise have occurred with Parliaments intention that only rights that accrue after the coming into force of HRA should be enforceable in this jurisdiction. The procedural right to an article 2 compliant investigation, if it accrues or continues to exist after the coming into force of HRA, does not clash with that legislative intention. It is entirely consonant with Parliaments manifest intention that HRA should apply to acts or omissions that take place after the date of the coming into force of HRA. The essence of the decision in ilih is that the procedural obligation is either animated or that it endures after the critical date. I therefore agree with all the judgments of the majority in this case that HRA requires that the procedural obligation under article 2 of the Convention, if it arises or endures after the coming into force of HRA, must be complied with notwithstanding that the death in respect of which the obligation arises occurred before October 2000. How does one determine whether the procedural obligation exists after the critical date in the case of ilih the date of ratification of the Convention by Slovenia, in this case the coming into force of HRA? It is, I think, important to note that the Grand Chamber in ilih reiterated the well established principle that death in suspicious circumstances normally triggers the procedural obligation under article 2 see para 157. But the court also found that this obligation binds the State throughout the period in which the authorities can reasonably be expected to take measures with an aim to elucidating the circumstances of death and establishing responsibility for it also para 157. So, although the procedural obligation is detachable, it is triggered by the death of the deceased. In this case the starting point for the existence of the obligation was plainly before the coming into force of HRA. One must focus, therefore, on the question whether, by reason of its detachability from the substantive right, it continued to have an existence following the coming into force of HRA such as to keep alive after that date the procedural duty to conduct an article 2 compliant inquiry. The fact that the right has been triggered before the critical date is in no sense determinative of whether it continues to have life after that date. In para 159 the court said that Although [the right] is triggered by the acts concerning the substantive aspects of article 2 it can give rise to a finding of a separate and independent interference within the meaning of the Blei judgment. (The decision in Blei v Croatia (2006) 43 EHRR 1038 is discussed by Lord Phillips in paras 40 and 41 of his judgment). Although the court found that separate interference can arise after the critical date, it also made clear that only procedural acts and omissions occurring after that date can fall within the Court's temporal jurisdiction para 162. It would appear, therefore, that procedural obligations spanning the period before and after the coming into force of HRA must be segregated in order to determine which are amenable to article 2 requirements and which are not. This might well have implications in relation to a complaint of delay in holding an article 2 inquiry although, as Lord Phillips has pointed out, this is no longer an issue in the present appeals. The critical passage in the majoritys judgment in ilih is contained in para 163: there must exist a genuine connection between the death and the entry into force of the Convention in respect of the respondent State for the procedural obligations imposed by article 2 to come into effect. Thus a significant proportion of the procedural steps required by this provision which include not only an effective investigation into the death of the person concerned but also the institution of appropriate proceedings for the purpose of determining the cause of the death and holding those responsible to account (Vo, cited above, 89) will have been or ought to have been carried out after the critical date. However, the Court would not exclude that in certain circumstances the connection could also be based on the need to ensure that the guarantees and the underlying values of the Convention are protected in a real and effective manner. A number of points should be noticed about the statements contained in this passage. First, the majority stipulates that there must be a genuine connection between the death and the critical date. It does not, however, specify what genuine connotes in this context. True it is that it is stated that a significant proportion of the procedural steps required by article 2 will have been or ought to have been carried out after the critical date. But it is not at all clear that the court is there postulating that this is an indispensable requirement for the connection to be established or merely observing that this is the consequence of the existence of the connection. In any event, the catch all final section appears to contemplate that the connection could be established by circumstances quite unrelated to any temporal proximity between the death and the critical date. Indeed, this final part of the paragraph is drawn in such wide and general terms that it is difficult to forecast the range of cases that might fall within its embrace. The best, I think, that one can make of this paragraph is that a connection must exist between the death and the critical date; that where much of the investigation into the death occurs or should occur after the critical date, this will be evidence of the existence of the necessary connection; and that there are other unspecified circumstances in which, although the death is not proximate temporally to the critical date, the need to protect the basic guarantees and principles of the Convention dictates that such a connection should be recognised. That this provides a less than clear prescription for all the circumstances in which a sufficient connection is to be recognised has already been made clear by the concurring opinion of Judge Lorenzen in the ilih case. At pp 1044 1045, paras O I3 to O I4 of the report he said: I fail to see that the criteria established by the majority in paragraph 163 are in conformity with this requirement [of legal certainty]. Thus, it is not easy to understand what is meant by the requirement for a genuine connection between the death and the entry into force of the Convention in respect of the respondent State for the procedural obligations imposed by article 2 to come into effect. Furthermore the fact that the majority seem ready to accept such a connection based on the need to ensure that the guarantees and the underlying values of the Convention are protected in a real and effective manner appears to confirm that the jurisdictional limits will be difficult to identify, if they exist at all. I find it incompatible with the declared intention to respect the principle of legal certainty to define the Court's temporal jurisdiction in such a vague and far reaching way. In my opinion, there must be a clear temporal connection between on the one hand the substantive event death, ill treatment, etc and the procedural obligation to carry out an investigation and, on the other, the entry into force of the Convention in respect of the respondent State. This will be the case where the event occurred and an investigation was initiated before the entry into force of the Convention, but a significant part of that investigation was only carried out after that date. Likewise where the event occurred or was only discovered so close to the critical date that it was not possible to commence an investigation before that date. Where on the other hand no investigation was carried out despite knowledge of the event or where the investigation was terminated before the critical date, I would say that the Court would have jurisdiction only where an obligation to carry out investigative measures was triggered by relevant new evidence or information (see, mutatis mutandis, Brecknell v United Kingdom, no. 2457/04, 70 71, 27 November 2007). The statement at the beginning of the second paragraph of this passage that there must be a clear temporal connection between the substantive event and the procedural obligation on the one hand and the critical date on the other hand suggests, at first sight, that Judge Lorenzen considered that unless the substantive event preceded the critical date by a short period, the necessary connection would not be present. On this analysis, the appellants in this case could not succeed for the deaths preceded the coming into force of HRA by some ten years. But Judge Lorenzen appears in the succeeding sentence of the second paragraph to have made an important qualification to his statement about the need for a temporal connection. He suggests that the two elements will be sufficiently connected temporally where the event occurred and an investigation was initiated before the critical date, but a significant part of that investigation was carried out subsequent to that date. On this formulation the appellants cases would qualify because an investigation into the deaths of Mr McCaughey and Mr Grew was begun before the coming into force of HRA but a significant part indeed, the most significant part, the inquest will take place subsequently. It is perhaps unwise to parse the judgments of the majority and of Judge Lorenzen too closely in order to produce a set of precise principles from views which have been expressed at a level of some generality. But it seems to me that the following may reasonably be deduced from both judgments: (i) There must be a connection between the substantive event (the death) and the critical date (in this case, the coming into force of HRA) the majority and Judge Lorenzen; (ii) A close temporal link (in other words where the death has preceded the critical date by a short period) will provide the necessary connection the majority and Judge Lorenzen; (iii) Where much of the investigation into the death occurs after the critical date, the connection is present the majority; (iv) Where a significant part of the investigation ought to take place after the critical date, this will be sufficient to make the connection the majority; (v) Where an investigation begins before the critical date but a significant part of this takes place after the critical date, the connection is present Judge Lorenzen. Although expressed slightly differently from the manner in which the majority put it in para 163, this formulation approximates to that set out in (iii) above; (vi) In certain unspecified circumstances the connection might be based on the need to ensure that the guarantees and the underlying values of the Convention are protected in a real and effective manner the majority. Judge Lorenzen expressly disagreed with this statement; (vii) If the investigation has been completed before the critical date or if, despite knowledge of the event, no investigation was conducted, there will be no sufficient connection. In that event the procedural duty will only arise after the critical date if triggered by relevant new evidence or information Judge Lorenzen. The present appeals come within (iii) and (v) of this list of the principles to be gleaned from the judgments of the majority and Judge Lorenzen. On that account I too would allow the appeals. LORD DYSON The decision of the majority of the ECtHR in the Grand Chamber decision of ilih v Slovenia (2009) 49 EHRR 996 has, with justification, been the subject of trenchant criticism. But I agree with Lord Hope (paras 73 and 74 of his judgment) that the core of the decision is clear enough. It is that the procedural obligation to investigate a death under article 2 of the European Convention on Human Rights (the Convention) is not only distinct from the substantive aspect of the article but is autonomous and detachable from it. It is not profitable to condemn the decision on the grounds that the language used by the majority, in particular at paras 161 to 163 of their judgment, is obscure. Their decision is not a one off aberration. It is an important decision of the Grand Chamber which is now well entrenched in the Strasbourg jurisprudence: see, for example, Varnava v Turkey (2008) 50 EHRR 467, paras 136 to 138 (another decision of the Grand Chamber). There is no good reason not to follow ilih. Both Lord Rodger and Lord Hope say that ilih is a decision about the temporal jurisdiction of the Convention and that it is therefore irrelevant to the interpretation and application of the Human Rights Act 1998 (HRA) and, in particular, to the temporal application of the HRA. To hold otherwise, they say, in effect involves adding to the HRA a transitional provision that is not to be found in section 22 of the act. It involves an impermissible application of the HRA. I shall call this the section 22 argument. Lord Hope would allow the appeals on the narrow basis that, if the state decides to hold an investigation post HRA into a pre HRA death, then it must do so in a way which is compatible with article 2 of the Convention. The position under the Convention In order to see whether the section 22 argument is right, it is necessary first to examine the essential reasoning of the majority decision in ilih. The death in that case occurred before Slovenia ratified the Convention. A question arose as to whether the ECtHR had temporal jurisdiction to adjudicate on the question whether Slovenia had discharged its procedural obligation under article 2 to investigate the death. The fundamental principle that the ECtHR has no temporal jurisdiction to examine a complaint of breach of a Convention obligation by a state which is alleged to have occurred on a date before it ratified the Convention (referred to as the critical date) was not in issue. There is no doubt that the Convention does not have retroactive effect. Indeed, this important principle was asserted and acknowledged in ilih as being the source of the problem that arose in that case: how was the principle to be applied where the death occurs before the critical date and the investigation is conducted wholly or in part after the date of ratification? Thus at para 146, the majority referred to Blei v Croatia (2006) 43 EHRR 1038 (para 82) as confirming that in order to establish the Courts temporal jurisdiction it is therefore essential to identify, in each specific case, the exact time of the alleged interference. At paras 149 to 151, the majority referred to the varying approaches taken by different Chambers of the Court to the issue of temporal jurisdiction in the particular context of a death occurring before the critical date and an investigation into the death occurring wholly or partly after the critical date. These included the decision in Moldovan v Romania (Application Nos 41138/98 and 64320/01) (unreported) where the court held that it had no temporal jurisdiction to deal with the procedural obligation under article 2 as that obligation derived from killings which had taken place before Romania ratified the Convention. At para 152 of their judgment in ilih, the majority said that having regard to the varying approaches taken by different Chambers of the Court to the problem: the Grand Chamber must now determine whether the procedural obligations arising under article 2 can be seen as being detachable from the substantive act and capable of coming into play in respect of deaths which occurred prior to the critical date or alternatively whether they are so inextricably linked to the substantive obligation that an issue may only arise in respect of deaths which occur after that date. This was the question that the court set itself to answer. It is clear, therefore, that it was not the aim of the court to undermine or vary in any way the temporal jurisdiction principle. The question was how that principle was to be applied where the death occurs before the date of ratification and the investigation is conducted wholly or in part after that date. The majority answered that question by reinterpreting the investigative obligation created by article 2. It was now declared to be a distinct free standing obligation. As the majority put it at para 159 of the judgment, the procedural obligation to carry out an effective investigation under article 2 had evolved into a separate and autonomous duty which could give rise to a separate and independent interference within the meaning of the Blei judgment which can be considered to be a detachable obligation arising out of article 2 capable of binding the State even when the death took place before the critical date. This new interpretation of the procedural obligation in article 2 had an important consequence for the temporal jurisdiction of the court. It meant that the court would now have temporal jurisdiction to deal with complaints that investigations into deaths before the critical date were not being conducted in accordance with article 2. Previously, this was not possible because the investigative obligation was seen as deriving from the death and an integral part of the substantive article 2 obligation. If the courts temporal jurisdiction prevented it from dealing with a complaint of breach of the substantive obligation, it inevitably followed that for the same reason it was prevented from dealing with a complaint of breach of the procedural obligation. But the principle that the Convention does not have retroactive effect was left untouched by ilih. It is worth noting that in ilih an objection of the dissenting judges was that the majority interpretation of article 2 would be tantamount to giving retroactive effect to the Convention: see para 9 of the Joint Opinion of Judges Bratza and Trmen. But the majority did not see it that way. Their approach was that they were reinterpreting article 2 by detaching the investigative obligation from the death. The consequence of this was that in certain circumstances there could now be an obligation to investigate deaths that occurred before the critical date. But this was achieved by a substantive interpretation of the article and not by departing from the fundamental principle that the Convention does not have retroactive effect. I have already said that the core reasoning of the decision of the majority in ilih is that the investigative obligation is distinct and detachable from the substantive obligation. But the court recognised that there had to be limits to this distinct obligation in the particular context of the obligation to investigate deaths occurring before the critical date. The court was alive to the need to exclude from the procedural obligation (i) investigations into deaths that occurred many years before the critical date and (ii) investigations into deaths that occurred (even shortly) before the critical date but which are not started until many years after the critical date. Thus the majority said in terms at para 161 that, having regard to the principle of legal certainty, the courts temporal jurisdiction as regards compliance with the procedural obligation of article 2 in respect of deaths that occur before the critical date is not open ended. They defined the limits at paras 162 and 163 in language which, in parts, is extremely obscure. Lord Phillips has quoted the passages at para 44 above. The use of the word genuine in the first sentence of para 163 to describe the nature of the connection that must exist between the death and the critical date is puzzling, but it is not necessary to decide what this means for the purposes of determining the present appeal. There must, however, be a temporal connection between the death and the investigative obligation on the one hand and the critical date on the other hand. Thus if the date of death was not long before the critical date and a significant proportion of the procedural steps required by article 2 falls to be carried out after the critical date, then the investigation should be carried out in accordance with article 2 and the ECtHR will entertain a complaint of non compliance. This is made clear at para 165 of the judgment of the majority in ilih, where they noted that the death occurred little more than a year before the ratification of the Convention by Slovenia and that, with the exception of the preliminary investigation, all the relevant proceedings were initiated and conducted after that date. It was in the light of these factors that they concluded that the alleged interference with the procedural article 2 rights fell within the courts temporal jurisdiction. It was the closeness of the temporal connection between the death and the critical date that led Judge Lorenzen to agree at p 1045, para O I3 of the EHRR report, that the court had jurisdiction to examine the procedural complaint under article 2. It does not, therefore, necessarily follow from the mere fact that an investigation is to take place after the critical date into a death that occurred before the critical date that the investigation must comply with the article 2 procedural obligation. There must be some temporal connection between the investigation and the critical date. That connection will exist where, for example, an investigation was initiated before the critical date, but a significant part was conducted after the critical date. The position under the HRA So much for the position under the Convention. But how does this affect the position in our domestic law under the HRA? I return to the section 22 argument. Unquestionably, the effect of section 22 of the HRA is that there is no remedy under the HRA for breach of the substantive aspect of article 2 of the Convention in respect of deaths occurring before 2 October 2000. In In re McKerr [2004] 1 WLR 807, the House of Lords decided that, in the context of the article 2 investigative duty, the obligation in section 6(1) of the HRA did not apply to a death which occurred before the Act came into force. It is sufficient to refer to the reasoning of Lord Nicholls which Lord Phillips has set out at para 28 above. In particular, at para 22 Lord Nicholls said that this interpretation of section 6: has the effect, for the transitional purpose now under consideration, of treating all the obligations arising under article 2 as parts of a single whole. Parliament cannot be taken to have intended that the Act should apply differently to the primary obligation (to protect life) and a consequential obligation (to investigate a death). But this reasoning cannot stand in the light of ilih. It is no longer right to treat all the obligations arising under article 2 as parts of a single whole. It has now been explained that the procedural obligation is distinct and detachable from the substantive obligation. I agree with Lord Phillips that this is where the mirror principle becomes relevant. Subject to the limits which I have mentioned, the ECtHR has now defined the procedural obligation in article 2 as being detachable from the substantive obligation. That definition must be reflected in our domestic law. This does not make the HRA retroactive in circumstances not permitted by section 22 any more than ilih made the Convention retroactive contrary to the long standing principle of temporal jurisdiction. As Lord Hope said in Aston Cantlow and Wilmcote with Billesley Parochial Church Council v Wallbank [2004] 1 AC 546, para 44 the purpose of [sections 6 and 7 of the HRA] is to provide a remedial structure in domestic law for rights guaranteed by the Convention. One of those rights is to have an article 2 compliant investigation after the critical date into a death that occurred before the critical date. Translated into terms of the HRA, that must mean that there is a right to have such an investigation after 2 October 2000 into a death that occurred before that date if such a right would be recognised by the ECtHR. In my view, it is nothing to the point to speculate what Parliament might have chosen to do if ilih had been decided before the enactment of the HRA. The same question might be asked about any development of the Convention by the ECtHR post HRA. The fact is that Parliament chose to incorporate the Convention and must be taken to have known that, in doing so, it would be likely to be re interpreted by the ECtHR from time to time. The Convention is a living instrument which evolves over time as a result of interpretative decisions of the ECtHR. The procedural obligation implicit in article 2 is itself a good example of such evolution. It was recognised by the ECtHR in McCann v United Kingdom (1995) 21 EHRR 97 when, for the first time, the court held that the obligation to protect life under article 2 requires by implication that there should be some form of effective official investigation when individuals have been killed as a result of the use of force by, inter alios, agents of the State (para 161). Suppose that the decision in McCann itself had postdated the coming into force of the HRA. It would not have been arguable on the basis of the section 22 argument that, since the re interpretation of article 2 had occurred after the HRA came into force, section 6(1) did not require an article 2 compliant investigation. The present case The deaths occurred on 9 October 1990. The papers were passed to the Coroner in 1994, but they were incomplete as they omitted statements from the soldiers who committed the killings. These were not provided until 2002 and it was not until 14 September 2009 that the Coroner held the preliminary hearing in which he was asked to hold an inquest which complied with the procedural requirements of article 2. The deaths were 10 years before the HRA came into force. That is a relevant factor to be taken into account when considering whether there is a sufficient connection between the deaths and the coming into force of the Act. But ilih shows that it is not the only factor. In particular, of considerable importance is the fact that at that date the investigation had been initiated, but a significant proportion of the procedural steps required to be taken had not yet been taken. In that respect, the facts of the case are similar to the facts in ilih. This is the feature of ilih which is emphasised by the majority at para 165 and by Judge Lorenzen at p 1045, para O I4 of the EHRR report. I would hold that the inquests into the deaths should be conducted in accordance with the requirements of article 2. I also agree with Lord Phillips that this conclusion is reinforced by the mirror principle. It would be unsatisfactory for the Coroner to conduct an inquest which did not satisfy article 2 leaving open the possibility of a claim against the United Kingdom in the ECtHR. Conclusion I would allow these appeals. I would add that I hope that before long the ECtHR will have an opportunity to clarify the meaning of para 163 of the judgment of the majority. If nothing else, the present appeal has served to highlight some of its obscurity and the difficulties of its application. DISSENTING JUDGMENT LORD RODGER The appellants are the next of kin of Martin McCaughey and Dessie Grew, who were shot and killed by the Army on 9 October 1990 long after the United Kingdom had ratified the European Convention and recognised the right of individual petition under it. So at all relevant times those who can be regarded as victims of the killings could have applied either to the Commission or, after 1999, to the Court in Strasbourg if they had considered that the United Kingdom had violated article 2 of the Convention and the matter had not been remedied by the domestic courts. The Director of Public Prosecutions decided that no one should be prosecuted for the deaths and he passed papers to the coroner in 1994. While preparatory steps have been taken, so far no inquest has been held. In 1995 the European Court first identified a positive duty inherent in article 2 of the Convention that requires states to investigate relevant deaths: McCann v United Kingdom (1995) 21 EHRR 97. Assuming, therefore, for the sake of the argument, that there had been a failure by the United Kingdom to fulfil its duty to investigate the violent deaths of McCaughey and Grew, the European Court would unquestionably have had jurisdiction ratione temporis to deal with it and to grant any appropriate remedy. By contrast, the widow of Gervaise McKerr, who was shot and killed by police officers in November 1982, did make an application to Strasbourg, alleging inter alia a violation of article 2. In McKerr v United Kingdom (2002) 14 EHRR 553 the European Court held that there had been a violation of article 2 in respect of failings in the investigative procedures relating to that death. The court also awarded McKerrs son, who had taken over the case on his mothers death, 10,000 as just satisfaction in respect of the frustration, distress and anxiety which he must have suffered. The Government paid that sum and presented a package of proposals to the Committee of Ministers with responsibility for supervising execution of judgments. The Human Rights Act 1998 (HRA) came into force on 2 October 2000, some ten years after the deaths of McCaughey and Grew. The issue in the present appeals is whether any failure by the authorities to investigate these deaths can give rise to a breach of the appellants article 2 Convention rights under the HRA. In other words, even if the United Kingdom would be in violation of its international law obligation to investigate the deaths under article 2 of the Convention, would the same facts also constitute a breach of a domestic law duty of the relevant public authorities under the HRA to investigate those deaths? In the case of McCaughey the House of Lords has already answered that question in the negative in Jordan v Lord Chancellor; McCaughey v Chief Constable of the Police Service of Northern Ireland [2007] 2 AC 226. Lord Bingham simply observed, at p 240, para 4 and p 256, para 35, that, since the deaths occurred well before the HRA came into force, the decision of the House of Lords in In re McKerr [2004] 1 WLR 807 meant that the HRA did not apply to any investigation of them. So, although no plea has been taken by the Chief Constable, in substance the point raised in the present appeals is res judicata, so far as the first appellant and the Chief Constable are concerned. In McKerr the issue in the appeal by McKerrs son was the same as in the present appeal. The House of Lords held, unanimously, that the obligation under section 6(1) of the HRA and the article 2 Convention right in Schedule 1 to the Act, to carry out a proper investigation into a violent death, did not apply to a death which occurred before the HRA came into force on 2 October 2000. A significant element in the reasoning of the members of the Appellate Committee was their view that the investigative obligation on a state under article 2 of the Convention was designed to ensure that the state had procedures which would discover whether, in the case of a particular death, there had been a violation of the victims right to life under that article. It followed that there was no obligation under article 2 of the Convention to investigate a death which could not involve a substantive violation of article 2. Their Lordships concluded that, similarly, there was no obligation under section 6 of, and Schedule 1 to, the HRA to investigate a death which could not itself be unlawful under the same provisions. The appellants do not suggest that in McKerr the House of Lords misunderstood the international law as it stood at the time. Rather, they point out that, for the first time, in ilih v Slovenia (2009) 49 EHRR 996 the Grand Chamber of the European Court declared that the investigative obligation under article 2 of the Convention is not only independent of the substantive obligation (that had long been recognised) but also detachable from it. Therefore the investigative obligation was capable of binding a state, even when the death had taken place before the date of the states ratification of the Convention: 49 EHRR 996, 1030, para 159. Similarly, Ms Quinlivan argued, this court should now hold that, for the purposes of the HRA, the investigative obligation under section 6 and under the article 2 Convention right was capable of binding the relevant public authorities even when the death had taken place before the HRA came into force. Having held that an obligation of investigation under article 2 could arise in respect of deaths which had occurred before the state ratified the Convention, the European Court added, at paras 161 163 of its judgment in ilih, that this obligation was limited in some way: 161. However, having regard to the principle of legal certainty, the court's temporal jurisdiction as regards compliance with the procedural obligation of article 2 in respect of deaths that occur before the critical date is not open ended. 162. First, it is clear that, where the death occurred before the critical date, only procedural acts and/or omissions occurring after that date can fall within the court's temporal jurisdiction. 163. Second, there must exist a genuine connection between the death and the entry into force of the Convention in respect of the respondent state for the procedural obligations imposed by article 2 to come into effect. Thus a significant proportion of the procedural steps required by this provision which include not only an effective investigation into the death of the person concerned but also the institution of appropriate proceedings for the purpose of determining the cause of the death and holding those responsible to account will have been or ought to have been carried out after the critical date. However, the court would not exclude that in certain circumstances the connection could also be based on the need to ensure that the guarantees and the underlying values of the Convention are protected in a real and effective manner (internal citation omitted). It would be a work of supererogation for me to criticise the courts legal analysis in para 163 or to emphasise the blow to legal certainty which it has struck. All that need be said on these matters has been said concisely, authoritatively and trenchantly by the best qualified of critics, Sir Nicolas Bratza, in his joint dissenting opinion with Judge Trmen, O IV: 49 EHRR 996, 1050 1055. Since the majority of the Grand Chamber adopted the analysis in para 163 of its judgment in ilih despite this powerful dissent and despite the problems pointed out by other judges, they were clearly determined to bring at least some deaths occurring before a states ratification of the Convention within the courts temporal jurisdiction. Predictably, the Strasbourg court has gone on to apply its new approach in other cases, including Varnava v Turkey (2008) 50 EHRR 467 where it held that it had jurisdiction over a disappearance in 1974, long before Turkey ratified the Convention. Doubtless, similar decisions will follow in future. This court has nothing to do with the temporal jurisdiction of the European Court. Even on the most extensive interpretation of what it said in ilih, the European Court might hesitate to assert jurisdiction over the investigation of deaths before January 1966 when the United Kingdom recognised the right of individual petition. But, even if it did assert jurisdiction, there would be nothing which this court could do about it. In a novel twist to the thinking behind the HRA, however, Ms Quinlivan submits that this court should bring the many problems created by ilih home from Strasbourg. In other words, this court should abandon its clear decision in McKerr and should hold that, in the light of ilih, the article 2 Convention right under the HRA applies to the investigation, after 2 October 2000, of violent deaths which occurred before that date. Understandably perhaps, she declined to formulate a version of the ilih principles which would define the scope of this new obligation under the HRA. It was enough, she said, that the obligation would apply to the inquests into the deaths of McCaughey and Grew since they are to be held at a time when the HRA is in force. According to counsel, ilih means that, even if the public authorities are not under an obligation to hold an investigation, if they actually choose to do so after 2 October 2000, the investigation must comply with the relatives article 2 Convention rights. She drew a comparison with criminal proceedings: while the DPP may not be under an obligation to prosecute someone, if he chooses to do so, after 2 October 2000 the prosecution and trial must comply with the defendants article 6 Convention rights. Whatever else may be said about this carefully crafted and deliberately low key submission, it does not reflect the decision in ilih. Article 2 is not concerned simply with the procedures to be adopted in any investigation which a state may choose to hold after ratification: on the contrary, as para 163 of the decision makes clear by the use of ought, according to the European Court, in an appropriate case the Convention requires the State to hold an article 2 compliant investigation into pre ratification deaths. So, if this court were to apply the reasoning of the European Court by analogy and there is no other pretended justification for overruling McKerr it would have to hold that the HRA requires the relevant public authorities to hold an investigation which complies with the article 2 Convention right into violent deaths that occurred before 2 October 2000. As the court was told, quite a few violent deaths in Northern Ireland have not been investigated in this way. Plainly, if ilih had been decided before McKerr, some of the reasoning of the Appellate Committee would have been different. But it may be more instructive to suppose that ilih had been decided before royal assent was given to the HRA in November 1998. In other words, suppose it had been known then that article 2 of the Convention could apply to the investigation of certain deaths that had occurred before a state ratified the Convention or recognised the right of individual petition. In that situation Parliament would have known that individuals could apply to the Strasbourg court and allege that an investigation should be held into certain deaths occurring within the jurisdiction of the United Kingdom before 14 January 1966. Perhaps let us suppose some such applications had already succeeded. What difference, if any, would this have made to Parliaments decision as to the appropriate temporal application of the HRA? It is hard to see why it should have made any difference at all. The decision as to the temporal application of the HRA cannot have depended on the technicalities of the analysis of the various rights. Rather, recognising that it was about to make a major change to our domestic legal systems, Parliament had to decide how that major change was to be carried through. So, for example, Parliament decided that the HRA should not come into operation for almost two years after royal assent in order to allow time for appropriate preparations to be made. And then, except as provided by section 22(4), the Act was not to be retroactive. Another question was whether, and, if so, how, the HRA was to apply to situations such as the situations in these appeals are said to be which were ongoing when it came into operation on 2 October 2000. These were broad policy questions. I find it impossible to believe that, if the Government and Parliament had been aware of the decision in ilih in 1998, this would have had any effect at all on their choice of policy. After all, the temporal application of the Convention was irrelevant for purposes of deciding the temporal application of the HRA. Moreover, the Government and Parliament knew very well, for example, that, between royal assent and 2 October 2000, there were liable to be many alleged violations of, say, articles 6 and 8 of the Convention. It would have been easy to bring them within the scope of the Act by a suitable transitional provision saying that the Act applied to acts occurring on or after 8 November 1998. But Parliament introduced no such transitional provision: subject to section 22(4), these acts would continue to be justiciable only in Strasbourg. Making the HRA apply to the investigation of violent deaths occurring as far back as 1980 or 1990 would have raised particularly sensitive questions. Is it really to be supposed that Parliament would have decided to introduce a transitional provision that would have imposed a duty to investigate all such pre commencement deaths merely because the European Court thought that it had jurisdiction in respect of violent deaths that had occurred before a state ratified the Convention? Surely not. The reality is that including a transitional provision to cover the investigation of deaths in the 1980s and 1990s would have had significant practical effects. These effects would have been felt, in particular, in Northern Ireland where as was well known from the McKerr case in Strasbourg among others there was pressure for such investigations to be held. The Good Friday Agreement was still in its uncertain infancy. Whether to bring past deaths within the scope of the Act was therefore a policy question, with potentially far reaching ramifications, for the executive and the legislature. And, as the House of Lords held in McKerr, the plain text of the HRA shows that Parliament decided not to bring them within its scope. If, by contrast, Parliament had intended to include them, the relevant provisions would have had to be drafted differently in order to reflect the difference in the way that section 6(1) was intended to apply both in relation to different article 2 Convention rights and in relation to article 2 Convention rights as opposed to, say, article 8 Convention rights. See McKerr [2004] 1 WLR 807, 814, para 22, per Lord Nicholls, and p 831AB, para 81 of my speech. This court is concerned with what Parliament chose to enact, rather than with what it might have chosen to enact. Since the only transitional provision in the HRA is section 22(4), the inevitable inference is that, with this exception, all the provisions, including section 6(1) and the Convention rights in Schedule 1, were intended to apply only to events occurring on or after 2 October 2000. So there was to be no article 2 Convention right to an inquiry into a death that occurred before the Act commenced. If as the House of Lords held in McKerr that is indeed the correct interpretation of the temporal application of the HRA when it was passed, it is both incoherent and impossible to suggest that its temporal application can have been altered by the poorly reasoned and unstable decision of the Strasbourg court on the Convention in ilih more than ten years later. To hold otherwise involves adding to the HRA a transitional provision that never was. That is no small matter since drafters know very well that they must painstakingly consider how all the provisions of the legislation are to apply to circumstances as they will exist on commencement: G C Thornton, Legislative Drafting (4th edition, 1996), p 383. Moreover, if the compelling force for introducing this imaginary transitional provision is para 163 of ilih, then it can safely be said that no Parliamentary counsel would ever have inserted a transitional provision that even remotely resembled the supposed principles in that paragraph. But, if the imaginary transitional provision does not reflect and fully reflect that paragraph, including its open ended tailpiece, then the simple fact is that this court would be overruling McKerr by inventing its own transitional provision which is designed to insert into the Act a backwards time limit that Parliament did not enact. In McKerr [2004] 1 WLR 807, 827, para 67, Lord Hoffmann commented that, if the HRA applies to pre commencement deaths, it would in principle be necessary to investigate the deaths by state action of the Princes in the Tower. That was a vivid illustration of the point that provided the claimant was a victim there would be nothing in the Act to limit the deaths which would have to be investigated. The campaigns by relatives of soldiers who were court martialled and shot during the First World War and by relatives of certain people who were executed in the 1950s suggest that the victim requirement could be satisfied long after the event. A time limit for the deaths to be investigated would therefore have been essential if the HRA had been intended to apply to the investigation of pre commencement deaths. The Act contains no time limit and nothing to provide a proper basis for inferring the existence of one. This was one of the crucial reasons for the decision in McKerr and it remains as powerful today as it was seven years ago. For all of these reasons I would dismiss the appeals. If, having deciphered ilih, Parliament feels moved to amend the HRA so as to impose an obligation on public authorities to investigate deaths which occurred before the HRA came into force, it has every opportunity to do so. It has not done so over the last two years. Somehow, I would be surprised if it did so in future.

The appellants are the next of kin of Martin McCaughey and Dessie Grew, who were shot and killed by members of the British Army on 9 October 1990. They believe that the men were the victims of a shoot to kill policy. In 1994 the Director of Public Prosecutions decided that no prosecutions should be brought and the papers were passed to the Coroner. Some preparatory steps have been taken but for various reasons the inquest into these deaths have still to take place. The appellants seek a declaration that the scope of the inquest should comply with Article 2 of the European Convention on Human Rights (the Convention) and thereby extend to an examination of the planning and control of the operation that led to the deaths. Article 2 (1) provides that Everyones right to life shall be protected by law. No one shall be deprived of his life intentionally save in the execution of a sentence of a court following his conviction of a crime for which this penalty is provided by law. Article 2 gives rise not only to a substantive obligation on the state not to kill people but also a procedural obligation to carry out an effective investigation into the circumstances of the deaths (the procedural obligation). It has been possible since 1966 for an individual to pursue a complaint that the United Kingdom has breached its obligations under Article 2 to the European Court of Human Rights (the ECtHR) if domestic law does not provide a remedy. The issue arising in these appeals is whether the appellants are entitled to bring a domestic claim under the Human Rights Act 1998 (the HRA), which came into force on 2 October 2000. In 2004 the House of Lords held in In re McKerr [2004] UKHL 12 that the procedural obligation to investigate a death was triggered by the death. Investigations into deaths occurring before 2 October 2000 were not therefore within the reach of the HRA, as it was not retrospective. In 2009 the Grand Chamber of the ECtHR extended the effect of Article 2 in ilih v Slovenia (2009) 49 EHRR 996, ruling that it imposed a freestanding procedural obligation, which in certain circumstances arose even where (as in that case) the death occurred before the member state had ratified the Convention. In this case the Coroner assigned to conduct the inquest made a preliminary ruling as to its scope on 1 December 2009. He proposed to consider the purpose and planning of the operation in which the deceased met their deaths. The Chief Constable of the Police Service of Northern Ireland asserted that as there was no requirement to comply with Article 2 under the HRA (in the light of McKerr) the scope of the inquest was restricted to establishing by what means the deceased came to their deaths. On the appellants application for a declaration, the High Court and Court of Appeal in Northern Ireland held that they were bound by McKerr to hold that the HRA did not apply to the appellants claims, even if that decision was now inconsistent with ilih. The Supreme Court by a majority (Lord Rodger dissenting) allows the appeal and holds that the Coroner holding the inquest must comply with the procedural obligation under Article 2. The Convention is a living instrument and the ECtHR has over time extended the ambit of Convention rights in many areas. Article 2 is an example of this. The procedural obligation was first identified in 1995. In 2001 (in Moldovan v Romania) the ECtHR held that the procedural obligation was derived from the deaths, and the Convention would only apply to the procedural obligation if it applied also to the substantive obligation. This reasoning was echoed by the House of Lords in 2004 in McKerr on the question of whether the HRA could apply to the procedural obligation when it did not apply at the time of the death [5]. The Grand Chamber of the ECtHR departed from its reasoning in Moldovan in ilih in 2009. It held that in certain circumstances Article 2 imposed a freestanding or detachable obligation in relation to the investigation of a death which applied even when the death itself had occurred before the member state ratified the Convention. Those circumstances included where a significant proportion of the procedural steps would take place after the Convention had come into force [50]. As a matter of international obligation, therefore, it is now apparent that the UK must ensure that the inquest which is the subject of this appeal complies with Article 2 as far as this is possible under domestic law [51][82]. The ambit of the HRA has to be interpreted by reference to Parliaments presumed intention on enactment concerning future developments by the ECtHR of Convention rights. As to this, two principles could be detected, which were potentially in conflict. The first was that the HRA should not operate retrospectively. The second was that its ambit should mirror that of the Convention, so that claims could now be brought in the UK which would otherwise be permitted before the ECtHR. The first principle prevailed in McKerr. That case was argued on the basis that Article 2 imposed a continuing procedural obligation linked to the death. ilih made it clear, however, that if a State held an inquest, it was under a freestanding obligation to ensure that it complied with the procedural obligations of Article 2. In the light of this, Parliament could be presumed to have intended that there should be a domestic requirement to mirror the international requirement which now applies [60 62]. In practice, comparatively few inquests will be affected by this ruling, given the ten years which have already passed since the HRA came into force [102] Lord Rodger dissented, considering that ilih was irrelevant to the interpretation of the HRA and that the decision of the majority involved adding a transitional provision to the HRA which for policy reasons Parliament had not included [161] Lord Hope agreed with him that there was no right in domestic law to an Article 2 compliant inquest in respect of deaths occurring prior to 2 October 2000. However, he agreed with the majority that where the state has decided to hold an inquest into such a death, that inquest must comply with Article 2 [75].

This appeal raises a question of some importance on the law relating to occupational pension schemes. The agreed statement of facts and issues (SFI) sets out three issues, but they are all variations on the same general theme, that is the dividing line, for regulatory purposes, between defined benefit (normally earnings related) schemes and defined contribution (or money purchase) schemes. The general nature of the distinction between these two types of scheme is familiar, and it may be helpful to start with that (though counsel on both sides properly reminded us that we are concerned with a particular statutory definition, and not with the range of meanings in which imprecise expressions may be used). Under a defined benefit scheme (the commonest variety of which is a final salary scheme) the primary benefit to which a scheme member is prospectively entitled, on retirement at normal pension age, is a pension for life calculated (in a final salary scheme) by reference to the members pensionable salary at retirement. A typical formula for calculating the pension was N/60ths, where N is years of pensionable service, but today the formula is more often N/80ths. The member pays contributions (typically a fraction, such as 5%, of current pensionable salary) and the employer is under a general obligation to pay the balance needed to provide all the benefits under the scheme. Final salary schemes are therefore also referred to as balance of cost schemes. What the member pays makes an important contribution to the benefit, but the amount of the benefit is not calculated by reference to the amount of the members contributions, and the risk of a disappointing investment return on the pension fund is assumed by the employer. Under a defined contribution scheme, by contrast, the members benefit is calculated by reference to the contributions that the member makes, and those that the employer makes in respect of that particular member (for instance the member may pay 4% of his or her current pensionable salary, with the employer matching that with an equal contribution). These contributions, and the investment return on them, are the measure of the members benefits, and for that reason these schemes are also called money purchase schemes. The member, and not the employer, takes the risk of the investment return disappointing expectations. That is one of the main reasons why large numbers of employers have, since the last years of the 20th century, closed their final salary schemes (either completely or to new entrants) and introduced money purchase schemes. There is a variety of techniques by which, under a money purchase scheme, the amount of the contributions by or for a member, and the investment return on them, are mathematically transposed into quantifying the pension that is the primary benefit that the member expects to receive. Indeed the appellants case is that some of the techniques (and in particular, those applicable to the voluntary investment planning (VIP) and MoneyMatch benefits under the scheme that are the subject of this appeal) take the scheme outside the statutory definition of money purchase benefits in section 181 of the Pension Schemes Act 1993 (PSA 1993) as applied for the purposes of section 73 of the Pensions Act 1995 (PA 1995). Section 73 provides a statutory order of priority in the winding up of pension scheme but it does not apply to money purchase schemes, and it applies only in a limited way to hybrid schemes (under which some but not all of the benefits provided are money purchase benefits). These proceedings have taken an unusual course. They began as Part 8 proceedings commenced in 2006 by Bridge Trustees Ltd (the Trustee), the independent corporate trustee of the Imperial Home Dcor Pension Scheme (the Scheme). Three members of the Scheme, that is Mr John Yates (a pensioner in receipt of his pension), Mr Mark Houldsworth and Mr John Hunter (who are entitled to deferred pensions) were joined as representative defendants to represent different classes with different interests. By then the principal employer, The Imperial Home Dcor Group (UK) Ltd (the Company) was in administrative receivership and the Scheme was in course of being wound up. The claim form raised a number of questions of construction which were answered either by the deputy judge (Miss Sarah Asplin QC) or by the Court of Appeal (Mummery, Wilson and Rimer LJJ) and are not raised in this appeal. The issue which is before this Court was raised by a late amendment of the claim form which necessitated a postponement of the first instance hearing. The appellant, the Secretary of State for Work and Pensions, was not a party to the first instance proceedings, but regarded the decision as having serious policy implications. The Secretary of State was granted leave to intervene in an appeal (for which the deputy judge had given permission). The Secretary of State agreed to pay the costs of all parties in the Court of Appeal on the indemnity basis. Before the Court of Appeal he failed to overturn the deputy judges decision on the money purchase issue, and he now appeals to this Court on that issue as being of general public importance. It is also of great importance to the current and deferred pensioners interested under the Scheme, since if the Secretary of State is right part of the contributions paid by or in respect of members still in service or entitled to deferred pensions at the date of commencement of the winding up of the Scheme will be used, under the statutory order of priority in section 73 of PA 1995, to satisfy the rights of those already entitled to receipt of pensions at that date. The history and structure of the Scheme The Scheme was originally established as an exempt approved scheme by an interim trust deed dated 15 December 1971. It had three distinct periods in its history, summarised as follows in para 2.2 of the SFI (in which MP benefit means money purchase benefit within the meaning of the statute): (1) From its inception to 5 April 1983 it was a conventional final salary scheme under which the members received a pension based on 1/60 of their final pensionable salary for each year of service. Members contributed 5% of pensionable salary and the employer contributed the balance of cost. No question arises as to these final salary benefits: none of them is an MP benefit. (2) The Scheme was restructured with effect from 6 April 1983. It continued to provide final salary benefits, albeit on a less generous scale, the members contribution rate being reduced to 3% of pensionable salary and the accrual rate to 1/80 per year. This was known as the Core Plan. In addition members were able to pay further contributions and thereby accrue extra benefits. This part of the Scheme was known as Voluntary Investment Planning or VIP. Again no question arises as to the Core Plan benefits, which are not MP benefits; but whether the VIP benefits are MP benefits where they take the form of internal annuities (ie where a members pension comes into payment it is provided by the Scheme itself rather than by way of an annuity purchased for the member from an external provider, which would also have the effect of terminating the individuals membership of the Scheme) is part of the third issue on this appeal. (3) The Scheme was restructured again with effect from 6 April 1992, when a further benefit structure known as MoneyMatch was introduced. Some older and longer serving existing members (those whose age plus years of membership equalled at least 64) were given the option of continuing to accrue benefit under the existing benefit structure, namely the Core Plan and VIP. Those who were either not given the option, or chose to switch, thereafter accrued benefits on the MoneyMatch basis rather than a final salary basis, as did all new joiners. Those who switched to MoneyMatch benefits for future service could also convert their accrued final salary benefits into MoneyMatch benefits, and were given an incentive to do so. The questions whether MoneyMatch benefits are MP benefits in whole or in part are the first two issues on this appeal and (where they take the form of internal annuities) the other part of the third issue on this appeal. In para 12 of her judgment the deputy judge summarised the effect of these changes on the members of the Scheme: Therefore, after 1992 there were different categories of member: (a) Option 1 members were those who had elected to convert their accrued final salary benefits into MoneyMatch and to accrue future benefits under the MoneyMatch section; (b) Option 2 members were those who retained their accrued benefits in the final salary section but accrued future benefits under MoneyMatch; and (c) Option 3 members were those who both retained their accrued benefits in final salary form and continued to accrue future benefits in final salary form and therefore, did not participate in MoneyMatch at all. They could accrue VIP benefits, this option being open only to those continuing to accrue final salary benefits. In addition, new joiners after 22 April 1992 accrued benefits exclusively by reference to the MoneyMatch section of the Scheme. On 26 June 2003 two partners in Ernst & Young LLP, Mr Garry Wilson and Mr Simon Allport, were appointed as joint administrative receivers of the Company. This triggered a statutory obligation for the appointment of an independent trustee of the Scheme, and on 18 July 2003 the Trustee was appointed to act with the previous corporate trustee, Imperial Home Dcor Pension Trustees Ltd (which has since been wound up). The Company ceased to carry on business on 5 September 2003, when its remaining assets and undertaking were sold. On 22 September 2003 the Trustee resolved to continue the Scheme as a closed Scheme with effect from 5 September 2003. Having taken further legal advice the Trustee then resolved, on 15 October 2003 (the dissolution date) that the Scheme should be wound up. During the Schemes varied existence it was governed by a succession of amending and consolidating trust deeds, including a second definitive deed dated 13 September 1984, a third definitive deed dated 21 April 1994 and (following the Schemes amalgamation with the Borden Wallcoverings Pension Scheme) a consolidating trust deed and rules dated 3 October 1995. These were all in evidence before the deputy judge, but it has not been suggested that they are relevant to this appeal. The last definitive deed and rules were made on 12 March 1998 in the form of a deed (the 1998 deed) made between the Company (then named Borden Decorative Products Ltd) and the former corporate trustee (then named Borden (UK) Pension Trustees Ltd). The 1998 deed was amended in minor respects in 2000, 2002 and 2003, but again it is not suggested that any of these amendments is material to this appeal (the effect of the amendments has been noted in manuscript on the copy of the 1998 deed in evidence before us). The Scheme was contracted out of the State Earnings Related Pension Scheme (SERPS), and from 2002 out of the State Second Pension, on a Guaranteed Minimum Pension (GMP) basis. As explained in para 2.2 of SFI, no question arises as to the final salary benefits earned during the first and second phases of the Schemes history (except of course how far pensions already in payment at the dissolution date, on a final salary basis, take priority to some other benefits). The issues that arise are on VIP benefits earned during the second or third phase, and MoneyMatch benefits earned during the third phase. It is therefore necessary to describe these benefits in some detail. VIP benefits and methods of providing annuities Schedule Four to the 1998 deed contains the rules relating to the final salary benefits and (in paras 2.2, 3.2, 3.3 and 8) VIP benefits. A member could choose what VIP Contribution to pay, within various limits, and in respect of each contributing member the Company undertook to make payments called VIP Match. These started at 50% of VIP Contributions for a member with less than two years service, rising by stages to 100% (that is, a full match) after nine years service. The member could make a choice as to the investment of his VIP Contributions and VIP Match (together VIP total contributions). In practice, the choice was between investment in an account with the Yorkshire Building Society or one of two funds managed by Standard Life. At 5 April 2003 the total funds held in these two forms of investment was about 20.8m (part held as VIP total contributions, and part as MoneyMatch funds, as explained below). Para 8 of Schedule Four provided for benefits in respect of VIP total contributions. This paragraph seems to have been quite extensively amended after 1998 and the manuscript notes of the amendments are far from clear. But neither side based any submissions on para 8. It is common ground that the primary benefit to which VIP total contributions were applicable was a pension, which involved the conversion (one way or another) of VIP total contributions (measured by a sum of money) into a life annuity. Here it is necessary to make an excursus into the part that life assurance companies play in the provision of annuities for pensioners under occupational pension schemes. Life offices have for many years played a very important part in this field. Mr William Phillips (one of the first members of the bar to specialise in this field) referred in his Pension Scheme Precedents, published in 1957, to home schemes (what are now called self administered schemes) and office schemes (set up and managed by a life office). The committee chaired by Professor (now Sir) Roy Goode recorded in its influential report, Pension Law Reform (Cm 2342), published in 1993, that at that time over 97% of contracted out money purchase schemes were insured schemes. Many of them were quite small in terms of numbers and assets, and the cost of a self administered scheme would have been disproportionate. Counsel agreed that that 97% figure may well not hold good today, because of the general flight from final salary schemes in recent years, which has probably increased the average size (in membership and assets) of money purchase schemes. The respondents written case distinguishes between two types of annuity provision, internal and external annuitisation. Mr Christopher Nugee QC, for the Secretary of State, told the Court that there are in fact four different types, and Mr Simmonds QC (for the deferred pensioners) accepted that refinement. The four situations are as follows. (1) An annuity is internally provided in the full sense if the trustees of the pension fund, having taken advice from their actuary about current annuity rates, resolve to provide an annuity at a specified rate out of the resources of the pension fund. This necessarily involves some degree of risk of the resources of the fund proving insufficient to provide all the benefits due, if investment returns are disappointing or annuitants exceed their actuarial life expectations (or both). (2) The next three situations all involve obtaining annuities from life offices. The trustees may purchase an annuity from a life office and pass on instalments of the annuity, as they become due, to the pensioner. The trustees remain responsible for the annuity, but are free from any actuarial risk. (3) Alternatively the trustees may arrange with the life office for the purchase of an annuity in the pensioners own name. This is similar to situation (2) but the trustees are discharged from responsibility as soon as the annuity has been purchased. (4) Under a scheme set up and managed by a life office the trustees of the pension scheme regularly pay premiums to the life office in respect of all the scheme liabilities, which are met by the life office. Here the annuity is paid for throughout the members pensionable service rather than its amount depending on annuity rates current at his or her retirement. It will be apparent that in situation (2) there are two theoretical risks: that of misappropriation or miscarriage of pension instalments, and failure of the life office. In situations (3) and (4) the failure of the life office is the only risk. The way in which VIP total contributions were used in practice before the dissolution date is recorded in SFI para 2.4 (5): The Trustee had power, with the members consent, to purchase an annuity or insurance contract from an insurance company in order to secure his benefits: Schedule 2 rule 8.1. In practice however it appears that the Members VIP Interest was converted into pension using tables of factors periodically supplied by the Scheme actuaries and (as allowed for by article 8.1.5) paid direct from the Scheme; this is what is referred to as internal annuitisation and (together with the same feature in relation to MoneyMatch benefits) forms the subject matter of the third issue on this appeal. Since the Company went into receivership, however, arrangements have been made for the purchase of annuities from a life office. Mr Giles Orton, a director of the Trustee, has deposed that in December 2004 the Trustee transferred approximately 70m to Prudential Retirement Income Ltd in respect of pensioners in order to lock into the mortality rates and investment yields available at that time. MoneyMatch benefits The rules as to MoneyMatch benefits are set out in Schedule Three to the 1998 deed. Under rule 1 members prospectively entitled to these benefits (that is what the deputy judge called Option 1 and Option 2 members, together with new entrants after the 1992 reorganisation) paid contributions at the rate of 3% of contribution earnings. They could also opt to pay MoneyMatch Plus contributions and further supplementary contributions, within specified limits. Under rule 2 the Company made contributions (called MoneyMatch Credits and MoneyMatch Plus Credits) equal to each members MoneyMatch and MoneyMatch Plus (but not supplementary) contributions. There were some special transitional arrangements which it is unnecessary to go into. Rule 3 dealt with the investment of total contributions. The total contributions were to be credited to a Guaranteed Interest Fund (GIF) with the possible exception of (i) a members MoneyMatch Plus contributions (ii) a members supplementary contributions and (iii) the Companys MoneyMatch Plus contributions in excess of 2% of plan earnings (under the definitions in Schedule One plan earnings are defined in similar but not identical terms to contribution earnings; neither side took any point on this). These three items could be invested, at the Members option, in the investment funds mentioned in para 12 above. The GIF was defined in Schedule One as the notional investment fund established by the Trustee for the purpose of MoneyMatch. It was notional in the sense that it was not a separate appropriated fund. It was a part, ascertainable only as a matter of accounting, of the general fund held by the Trustee for the purposes of both Core (that is, final salary) benefits and MoneyMatch benefits. The investment funds mentioned in para 12 above were separate appropriated funds, held for the purposes of MoneyMatch Plus and supplementary contributions (together with VIP total contributions as already explained). Rule 3.1.1(a) and (b) specified which contributions were to be credited to the GIF. Rule 3.1.1(c) must be set out at length as it is crucial to the appellants case that MoneyMatch benefits were not money purchase benefits, because (it is argued) the investment return on MoneyMatch contributions is not directly related to those contributions. It provides as follows: (a) At the Commencement of each Plan Year, the Trustee shall declare a rate of interest on the Guaranteed Interest Fund which shall be applicable to the Plan Year stated. The rate of interest declared shall be 1% less than the rate of interest available from the building society nominated for this purpose by the Trustee on its additional voluntary contribution accounts under company sponsored approved arrangements for which the nominated building society is responsible for the maintenance of individual account balances. The rate of interest available is that rate at the 31 March immediately preceding the Plan Year to which the said rate is to apply. (b) At each Plan Year end commencing with the Plan Year ending on 5th April 1995 the Trustee shall make (or cause to be made) a comparison of: (i) the average rate of investment return on the Fund (but excluding for the purposes only of the present comparison such parts of the Fund as are attributable to the Investment Funds) applicable to the three preceding calendar years (ii) the average interest rate declared for the Guaranteed Interest Fund during the last of the three calendar years in (i) above calculated as one quarter of the interest rate that applied at the start of that calendar year and three quarters of the interest rate that applied at the end of the calendar year. (c) Where the comparison reveals a rate of return under (b)(i) above which is greater than the return under (b)(ii) above then the Trustee shall declare a bonus percentage. The bonus percentage shall be 50% of the excess of (i) over (ii) subject to such bonus not exceeding 4%. Rule 4 set out the benefits to be provided in respect of a members MoneyMatch interest on his or her retirement, early leaving, or death. Counsel did not make any submissions based on the details of these provisions, but it is worth noting that rule 4.1.3 referred to pension increases in accordance with Rule 5 in the general rules set out in Schedule Two. Rule 5.2.2 provided that Revaluation Requirements (defined in Schedule One by reference to the statutory code) should apply to deferred pensions in excess of GMP, and stated: In particular, any money purchase benefits (as defined in section 181((1) of [PA 1995]) shall be calculated in accordance with the investment yield and any bonuses arising from the relevant payments during the period [until state pensionable age], subject to the Revaluation Requirements. The general effect of the provisions in rule 3.1.1(c) is that the amount credited to a member in respect of his or her interest in the notional GIF would not necessarily, and indeed almost certainly would not in practice, precisely mirror the actual investment return on what was a mixed fund of fixed interest government securities, equities, and cash and derivatives. Instead the member would get an annual return determined year by year by the Trustee by reference to building society rates (in the last accounting period before the dissolution date it was 3.12%) together with the prospect of a bonus equal to half the excess (if any) of the unweighted average annual investment return for the last three calendar years over the weighted average interest rate determined at the beginning and end of the year in question (but not exceeding 4%). In practice, this formula could be expected to provide a smoother but rather lower rate of return than the actual investment return (which might in some years be negative), comparable to the smoothing effect achieved by life offices on their long term with profits funds. The statutory provisions The relevant definition of money purchase benefits is in section 181(1) of PSA 1993, applied for the purposes of section 73 of PA 1995 by section 124(5) of the latter Act: Money purchase benefits, in relation to a member of a personal or occupational pension scheme or the widow or widower of a member of such a scheme, means benefits the rate or amount of which is calculated by reference to a payment or payments made by the member or by any other person in respect of the member and which are not average salary benefits. Leaving aside the last seven words (to which it will be necessary to return) the reader sees that the essential feature of these benefits is that their rate (typically so much a year) or amount (typically a lump sum) is to be calculated by reference to contributions made by the member or someone else (typically the employer) in respect of that member. A money purchase scheme is defined (also in section 181(1)) as a pension scheme under which all the benefits that may be provided are money purchase benefits. The issue between the parties may ultimately turn on whether the statutory words calculated by reference to mean (as the Court of Appeal held in Aon Trust Corporation v KPMG [2005] EWCA Civ 1004, [2006] 1 WLR 97, para 171) calculated only by reference to, in the sense that the benefit in question must be the direct product of the contributions. The appellant contends that the need to refer to current annuity rates as well is fatal in the case of VIP benefits which may be provided by an internal annuity; and that the absence of a direct link with the actual investment return on MoneyMatch contributions is similarly fatal in the case of MoneyMatch benefits. In their submissions counsel (mainly, it must be said, in response to questions from the Court) made reference to the statutory origins and contexts of the definition which the Court has to construe. PSA 1993 is a consolidating statute and in Farrell v Alexander [1977] AC 59 the House of Lords gave a firm warning against going behind, or beneath, the text of a consolidating statute. Lord Wilberforces observations on that point (at p73) are too well known to need repetition. No doubt mindful of this, Mr Simmonds, in the deferred pensioners written case, went to the consolidating statute itself, the PSA 1993, to identify four contexts in which the definition of money purchase benefits (or that of a money purchase scheme) is relevant. He referred to the legislative history (in paras 55 to 59 of the case) only as a fallback position. The first context in PSA 1993 is the revaluation of deferred benefits. If a member changes jobs at the age of (say) 45, and does not receive a transfer payment to the new employers pension scheme, there is a danger of the real value of the members deferred benefits being severely eroded by inflation. Sections 83 to 86 of, and Schedule 3 to, PSA 1993 sought to remedy that problem by requiring a minimum level of revaluation of benefits. The permitted methods of revaluation are referred to in section 84(4) and are defined in Schedule 3 as the average salary method, the final salary method, the flat rate method and the money purchase method. Flat rate benefit is defined in section 84(4) as any benefit the rate or amount of which is calculated by reference solely to the members length of service. The definition of money purchase benefits is provided by section 181(1) as already mentioned. Schedule 3, paragraph 5(1) provides: Subject to sub paragraphs (2) and (3), the money purchase method is to apply the investment yield and any bonuses arising from payments made by or on behalf of a member towards providing any pension or other retirement benefit which is payable under the scheme to him or to any other person in respect of him in the manner in which they would have been applied if his pensionable service had not terminated. Sub paragraphs (2) and (3) provide for possible deductions of administrative expenses. It is the provisions of Schedule 3, para 5 that are referred to in rule 5.2.2 of Schedule Two of the 1998 deed. The second context is in connection with contracting out from SERPS. This complex topic is dealt with in Part III of PSA 1993. For present purposes the most material provisions are in section 8(1), under which contracted out employment is defined in terms of employment in a salary related contracted out scheme or a money purchase contracted out scheme. The statutory conditions include (section 9(3)) requirements as to protected rights. Section 28(2)(a) contemplates that effect may be given to protected rights by the provision by the scheme of a pension (complying with various requirements). The appellant accepts that this covers the provision of an internal annuity (in the sense indicated in para 15(1) above). The third context was provided by sections 102 to 108, under which money purchase benefits were excluded from provisions for revaluation of pensions in payment. Mr Simmonds did not develop this point, partly no doubt because the effect of sections 102 to 108 was reversed by PA 1995. But it is another context suggesting that an internal annuity is not incompatible with money purchase benefits. The fourth context is the employers statutory obligation, under section 144, to make good any deficiency of assets as against liabilities when a pension scheme is wound up, or the employer becomes insolvent (eventualities which frequently coincide). Mr Simmonds accepts that the context of this provision is unequivocally that of adequacy of funding. Money purchase schemes were excepted from the scope of section 144. Section 144 has now been repealed and replaced by section 75 of PA 1995, which also excludes money purchase schemes. This exclusion is a very important part of Mr Nugees case for the appellant. He has submitted that it is fundamental to the scheme of the legislation (and confirmed by the EU context, referred to below) that money purchase schemes are (more or less by definition) always fully funded, with no risk of the assets being insufficient to meet the liabilities, and for that reason alone they are excepted from the funding obligation in section 75 and also from the statutory order of priority now found in section 73 of PA 1995. Hybrid Schemes As just noted, the exception in section 73 of PA 1995 applied only to money purchase schemes that is schemes providing no benefit except money purchase benefits. But the Secretary of State had power to modify section 73 by regulations, and exercised this power by making the Occupational Pension Schemes (Winding Up) Regulations 1996 (SI 1996/3126) (the Winding Up Regulations). Regulation 13 (Hybrid schemes) provides as follows: (1) In relation to any scheme (a) which is not a money purchase scheme, but (b) where some of the benefits that may be provided are relevant money purchase benefits, section 73 applies as if (i) the liabilities of the scheme did not include liabilities in respect of those benefits, and (ii) the assets of the scheme did not include the assets by reference to which the rate or amount of those benefits is calculated. (2) In paragraph (1) relevant money purchase benefits means money purchase benefits other than (a) benefits derived from the payment by any member of voluntary contributions, or (b) underpin benefits. (3) In this regulation, underpin benefits means money purchase benefits which under the provisions of the scheme will only be provided in respect of a member if their value exceeds the value of other benefits in respect of him under the scheme which are not money purchase benefits. If (as has happened in this case, if Mr Simmonds is correct) both salary related benefits and money purchase benefits are to be provided out of a single global fund of investments, it is not immediately obvious what are the assets by reference to which the rate or amount of those benefits is calculated. The SFI states (para 4.7), without detailed reference to the facts of this particular case: The effect of the statutory provisions is that if a particular benefit is classified as a relevant MP benefit, regulation 13 takes both the liability and the corresponding assets out of the mandatory priority order in section 73. If it is not a relevant MP benefit, liability for the benefit has to take its place in the section 73 order, under which priority is given to pensioners over deferreds. But it is to be noted that under section 73(3)(a) liabilities derived from a members voluntary contributions have the highest priority. The EU dimension and national lifeboats There are two relevant EU Directives: Council Directive 80/987/EEC of 20 October 1980 (the Insolvency Directive) and Directive 2003/41/EC of the European Parliament and the Council of 3 June 2003 relating to the Activities and Supervision of Institutions for Occupational Retirement Provision (IORP). Article 8 of the Insolvency Directive provides as follows: Member States shall ensure that the necessary measures are taken to protect the interests of employees and of persons having already left the employers undertaking or business at the date of the onset of the employers insolvency in respect of rights conferring on them immediate or prospective entitlement to old age benefits, including survivors benefits, under supplementary company or inter company pension schemes outside the national statutory social security schemes. This provision was considered and applied by the Court of Justice in Robins v Secretary of State for Work and Pensions (Case C 278/05) [2007] 2 CMLR 269. That case was concerned with claims by members of an insolvent salary related pension scheme which was wound up in 2003, so that section 73 and 75 of PA 1995 applied. The Court of Justice held (paras 41 to 45) that Article 8 does not require Member States to provide a full guarantee of pension rights under private sector schemes, but (para 59) that a system such as that established by the UK legislation does not ensure the protection provided for by the Directive and does not constitute proper implementation of Article 8 thereof. It was for the national court (para 69 et seq) to decide, in accordance with well settled principles, whether a remedy in damages was appropriate. IORP is concerned, as its recitals indicate, with establishing a genuine internal market for financial services. Article 15(1) and (2) provide as follows: (1) The home Member State shall ensure that institutions operating occupational pension schemes establish at all times in respect of the total range of their pension schemes an adequate amount of liabilities corresponding to the financial commitments which arise out of their portfolio of existing pension contracts. (2) The home Member State shall ensure that institutions operating occupational pension schemes, where they provide cover against biometric risks and/or guarantee either an investment performance or a given level of benefits, establish sufficient technical provisions in respect of the total range of these schemes. These requirements are then elaborated in paras (3) to (6). Article 16(1) provides: The home Member State shall require every institution to have at all times sufficient and appropriate assets to cover the technical provisions in respect of the total range of pension schemes operated. This requirement is then elaborated in paras (2) and (3). In Robins the Court of Justice (paras 16 and 17) made a brief (and seemingly incomplete) reference to the statutory provisions for compensating members of insolvent schemes as they stood at that time. In this appeal the appellant Secretary of State has provided quite a full account of the far reaching changes in compensation and funding requirements made by the Pensions Act 2004 (PA 2004), which radically altered the regulation of pension schemes. Part 1 of PA 2004 set up the Pensions Regulator in place of the Occupational Pensions Regulatory Authority, and Part 2 set up the Pension Protection Fund (PPF) in place of the Pensions Compensation Board established by PA 1995 (which provided compensation only where there had been a loss caused by dishonesty). PPF is funded by a statutory levy and it has the function of assuming responsibility for the pension schemes of insolvent employers in cases where the scheme is wound up after 5 April 2005. It does not therefore apply to the Scheme. Compensation is not limited to cases of dishonest mismanagement or misappropriation. But its powers do not extend to money purchase schemes (PA 2004, section 126(1)). Part 6 of PA 2004 consists of a single section, section 286, which requires the Secretary of State to set up a financial assistance scheme (FAS) for making payments to qualifying members of qualifying pension schemes. Again, money purchase schemes are excluded from the latter definition (section 286(2)). The principal regulations are the Financial Assistance Scheme Regulations 2005 (SI 2005/1986) (as amended). It should also be noted that insured schemes have been comprehensively protected, throughout the whole relevant period, by the Policyholders Protection Act 1975 and regulations made under that statute. Part 3 of PA 2004 (Scheme funding) is intended to strengthen the regulation of scheme funding. Like Part 2 these provisions were at least in part intended as a response to the United Kingdoms obligations under the Insolvency Directive and IORP. The minimum funding requirement regime was replaced by a new statutory funding objective (set out in section 222(1)) which is generally referred to as scheme specific funding (SSF). These provisions do not apply to money purchase schemes (section 221(1)). The appellants printed case places some emphasis on the fact that money purchase schemes are excluded from the PPF regime, the FAS regime and the SSF regime. With the exception mentioned below, the parties written and oral submissions did not explain how those regimes apply to schemes which provide some money purchase benefits without being exclusively money purchase schemes. The exclusion of money purchase schemes is not, I think, directly relevant to the issues that the Court has to decide, but was mentioned as part of a general submission (which is, as already noted, an important part of Mr Nugees case) that money purchase schemes are by their nature always fully funded, and free from any risk of actuarial insolvency. It is also part of a more particular submission on the Marleasing principle (Marleasing SA v La Comercial International de Alminentacin SA (Case C 106/89) [1990] ECR I 4135) that this Court should prefer a construction which avoids infringement, or possible infringement, of EU obligations. This point was not raised before the deputy judge (when the Secretary of State was not an intervener). It was raised and rejected by the Court of Appeal (paras 95 and 96). The exception mentioned above is that the diligence of Mr Nugee and his junior, Mr Hilliard, produced on the second day of the hearing a note on the treatment of deferred scheme members setting out the appellants counsels view on the practical outcome of the competing cases on the first issue, in terms of what different classes of pensioners would receive from the combined resources of the Scheme and FAS. The rules of FAS as they apply to the Scheme do not at present cover all money purchase benefits that fall to be dealt with under section 73 of PA 1995 (though there is a consultation in progress about this). Although this note was produced in response to a request from the Court I think it better not to refer to it. This is partly because the note was not (I think) agreed by Mr Simmonds. But the more important reason is that this Court has to decide the issues of construction as a matter of principle, and without regard to the practical consequences, however much sympathy we may feel for all the pensioners, faced as they are with a long delay in the final determination of how the Schemes inadequate funds should be divided. The KPMG case: at first instance The decision of the Court of Appeal in Aon Trust Corpn v KPMG [2006] 1 WLR 97 (KPMG) is the only decision of that court which has any close bearing on the issues in this appeal. It has therefore received close attention at every stage in this litigation. The deputy judge, who was of course bound by the decision, distinguished it (primarily at paras 129 to 134 of her judgment). The Court of Appeal, which was also bound by the decision, also distinguished it, primarily at paras 143 to 145 (as regards MoneyMatch benefits) and paras 150 to 152 (as regards internal annuitisation). Mr Nugees position is that KPMG was rightly decided and that in this case the Court of Appeal was in error in distinguishing it. Mr Simmonds accepts that it may have been correctly decided on its facts, but criticises some important parts of its reasoning. On any view it is necessary to take a close look both at the first instance decision of Sir Andrew Morritt V C (who is very experienced in the pensions field) [2004] EWHC 1844 (Ch) [2005] 1 WLR 995, and at the judgment of the Court of Appeal (delivered by Jonathan Parker LJ, with whom Mummery and Chadwick LJJ agreed). The case related to a pension scheme which started life in 1949 as the staff pension scheme of Peat Marwick Mitchell & Co. Until 1999 periodic actuarial valuations showed that the scheme was in surplus, but in that year a small deficit was disclosed. In consequence the scheme was amended to split the pension fund into two, with effect from 31 March 2000. There was a pre 2000 fund which became a closed fund (that is, no new entrants were permitted) and a post 2000 fund which was described by the Vice Chancellor, in para 2, as a conventional money purchase scheme. The proceedings related to the pre 2000 fund (the closed fund). The principal issue in the Court of Appeal was whether the closed fund also was held in a money purchase scheme for the purposes of PSA 1993 and PA 1995 (it was common ground that if it was, the scheme was a relatively unusual type of money purchase scheme). This issue arose in Part 8 proceedings in which the corporate trustee (Aon) sought directions on several matters, including whether the employer, KPMG, was liable or potentially liable under PA 1995 to make good a deficit in the closed fund which had grown, by the time of the 2002 triennial actuarial valuation, to about 71m. The scheme affecting the closed fund was unusual in that it combined one of the salient features of a money purchase scheme defined contributions of equal amount made by both member and employer in respect of that members prospective benefits with actuarially determined formulae under which the amount of pension earned by any member was provisionally ascertainable year by year during a members service. This process was however provisional only because clauses 8.4 and 8.5 of the trust deed provided as follows: 8.4. If an actuarial valuation or interim review of the pre 2000 fund shows a surplus the trustees may with the consent of the principal employer and after taking the actuarys advice and after making any such amendments to the trust deed and/or rules as may be necessary, decrease the contributions of any member and/or increase (by declaration of bonuses or interim bonuses or otherwise) the benefits or future benefits of any member or other person entitled to receive any benefit from the pre 2000 fund. 8.5. If an actuarial valuation of the pre 2000 fund reveals a deficiency in the pre 2000 funds resources the trustees may with the consent of the principal employer make such adjustments and amendments to the benefits secured or thereafter accruing for and in respect of the members as are necessary in the opinion of the trustees after taking the actuarys advice to secure the continued solvency of the pre 2000 fund. It will be observed that these provisions are not strictly mandatory. They confer fiduciary powers, to the exercise of which KPMG had to consent. The alteration in contributions or benefits under clause 8.4 did not have to be carried out in any particular way (though no doubt a general duty of fairness was implicit), and clause 8.5 was similarly unspecific as to how continued solvency was to be maintained. Moreover (by clause 8.2 and 8.3) only the statutory triennial valuation was mandatory, and it was for the trustees to decide (with KPMGs consent) whether to obtain more frequent actuarial valuations or interim actuarial reviews. The operations of the provisions of clause 8.4 and 8.5 (the clause 8 powers) was therefore by no means automatic or rigidly linked to changes in investment returns (as opposed to life expectancy). simplified example: In para 14 of his judgment the Vice Chancellor gave what he called a . take a male aged 25 at his next birthday in the calendar year 1999. The factor is 0.960 for a pension payable unreduced at age 65. If in that year he earned 20,000 and the contribution rate for both him and the employer was 4% then the computation of benefit on retirement at age 65 would be 20,000 x 8% (ie 1,600) x 0.960 = 1,536 per annum. If in the same year there had been a bonus declaration of 5% under clause 8.4 then the pension in respect of that year of service would have increased to 1,612.80 (1,536 + (5% x 1,536)). On the other hand a deduction of the like percentage under clause 8.5 would give rise to a pension aged 65 of only 1,459.20. The formula is applied for each year of service to the contributions made in that year and the pension at retirement is the sum of the product of such computations for each year of service. The last sentence of this passage may be describing how the clause 8 powers were exercised in practice. I rather doubt whether that was the only permissible way of exercising the powers. But the general pattern was what was described in argument as building blocks: each years contributions produced a provisional component of the eventual pension, but the cumulative process could be either accelerated or retarded, at least once every three years, by the exercise of the clause 8 powers. The context in which the KPMG proceedings were brought was that the closed fund had an uncomfortably large deficit and the trustee, Aon, was no doubt considering a fairly drastic exercise of its clause 8.5 power. Three issues were raised at first instance: (i) whether the power could be used to reduce pensions already in payment; (ii) whether the power was a power of modification within the meaning of section 67 of PA 1995 (and so subject to statutory restrictions); and (iii) whether the scheme was a money purchase scheme, so that KPMG was not subject to statutory obligations to make payments under sections 60 and 75 of PA 1995. The Vice Chancellor answered questions (i) and (ii) in the affirmative (paras 18 to 33) and question (iii) in the negative (paras 34 to 58). The Vice Chancellor reached his conclusion on the third question on two alternative grounds, one particular and one general. The particular ground was the exclusion of average salary benefits from the statutory definition of money purchase benefits. The Vice Chancellor explained (paras 52 to 55) that average salary benefits, whatever particular mechanism is used to compute them, are likely to have elements of both defined contribution and defined benefit, and that the last seven words of the statutory definition are in the nature of a tie break (para 55): An average earnings related scheme is likely to have resort to both earnings and contributions/payments in the ascertainment or definition of the benefit. It is necessary to do so in order to take account of both the level of earnings going to make up the average and the time when they arose. This, in my view, is the explanation for the exclusion of average salary benefits at the conclusion of the definition of money purchase benefit. That explanation is illuminating but not directly relevant to this appeal. The more general ground of decision is undoubtedly relevant. The Vice Chancellor reviewed the contexts in which money purchase benefits and money purchase schemes appear in PSA 1993 and PA 1995 (most of these are noted at paras 25 to 28 above). He drew from them two general conclusions. One is in para 46: Nevertheless it appears to me to be obvious that Parliament recognised that in a money purchase scheme in all normal circumstances the benefits are matched by equivalent assets. This is to be contrasted with a defined benefit scheme, such as a final salary scheme, when assets and liabilities will not match each other unless the actuarial and other assumptions on which the level of contribution was fixed actually occur. The other general conclusion is set out, in very similar terms, in paras 42, 44 and 47; I quote from para 44: Thus the distinction recognised that a money purchase benefit had no guaranteed or defined benefit for it depended on the investment yield obtained or attributable to the fund derived actually or notionally from the contributions made by the member and his employer. In each of the three formulations the Vice Chancellor used the expression investment yield. I think it is clear that he was referring not simply to income yield, but to what is generally referred to in the financial services industry as investment return or total return that is income yield together with capital appreciation (if positive during the relevant period) or the difference between the two (if there is a fall in capital value during the relevant period). The Vice Chancellor also accepted KPMGs submission (para 54) that the statutory definition must be applied with regard to the substance of the calculation. He saw that approach as leading both to what I have called the particular ground of decision (para 56) and the more general ground (para 57), on which he considered that the contingent and discretionary effect on benefits of the clause 8 powers was inconsistent with their being money purchase benefits. The KPMG case: Court of Appeal All three issues were raised on the appeal, and on the issue of the reduction of pensions in course of payment the appeal was allowed. Very clear words would have been needed to authorise such a step, and the clause 8.5 power did not go that far. The appeal as to whether the clause 8 powers came within section 67 of PA 1995 was dismissed. We are concerned mainly with a decision on the money purchase issue, on which the Court of Appeal reached the same conclusion as the Vice Chancellor, but for reasons that were expressed in rather different terms. In discussing money purchase schemes in general, Jonathan Parker LJ observed (paras 31 and 32): Alternatively, an employer setting up an occupational pension scheme may decide to define the level of benefits by reference solely to the contributions made in respect of the member concerned, so that the benefit represents no more and no less than the product of the contributions. Such a scheme is commonly called a money purchase scheme (I will come to the statutory definition of that term later). Thus in a typical money purchase scheme there can, by definition, be no mismatch between assets and liabilities. Hence there is no need (indeed, no scope) for a balance of cost obligation on the employer, since the level of contribution dictates the level of benefit and no balance of cost can arise. Counsels arguments before the Court of Appeal were recorded at some length, the parts relevant to the money purchase issue being paras 106 to 117 (Mr Sumption QC for KPMG), paras 123 to 134 (Mr Green QC for the representative active member) and para 148 (Mr Ham QC largely adopting Mr Greens submissions). I will not try to analyse these in detail. There was a good deal of argument about the nature and significance of the clause 8 powers. The argument for KPMG was that they were an integral part of the process of calculating benefits by reference to contributions, and not a provision for reducing settled entitlements. Against this the members stressed what the Vice Chancellor had called the contingent and discretionary nature of these powers. In this appeal the nature and effect of the clause 8 powers have to be compared with the nature and effect of the provisions in rule 3.1.1(c) of Schedule Three of the 1998 deed. Jonathan Parker LJ discussed the rival arguments and set out his conclusions on this issue at paras 151 to 176. In summary (which cannot do justice to the detailed development of his reasoning) the steps were on the following lines. (1) The key to the problem is in the relationship between contributions and benefits, as that relationship emerges from a consideration of the scheme as a whole, properly construed (para 151). (2) The clause 8 powers were not automatic, but discretionary, in their operation (para 153). (3) The calculation of benefits was a three stage process, with the clause 8 powers as a distinct stage, involving actuarial factors, which were also involved in the formulae at the first stage (paras 155 to 166). (4) The scheme lacked the basic characteristics of a money purchase scheme: In the first place, the requisite direct relationship between contributions and benefits is broken by the introduction of actuarial factors. As Mr Ham succinctly put it at the conclusion of his submissions, in the case of a money purchase scheme you do not need an actuary. Secondly, by including the [clause 8 powers] the scheme not only recognises but positively caters for a continuing mismatch between assets and liabilities (para 167, some references omitted). (5) The inclusion at the first stage of actuarial factors made it impossible for the scheme to qualify as a money purchase scheme: the expression calculated by reference to means, in my judgment, calculated only by reference to, in the sense that the benefit in question must be the direct product of the contributions (para 171). (6) The Lord Justice also agreed with the Vice Chancellors alternative ground of decision, the exception for average salary benefit, while commenting that the true reason for it would have to remain a mystery (para 174). The judgments below The deputy judge had to decide several issues. On the money purchase issue she distinguished KPMG as a building block scheme in which actuarial factors were an integral part of the calculation process. She said in relation to the GIF mechanism (para 137): Despite the fact that the final rate of return to be applied to the Members Interest is arrived at by the addition of a bonus percentage to the initial conservatively declared rate, in my judgment, it is merely a rate of return nevertheless. The mechanism by which the rate is arrived at is just that. She considered that to distinguish between the internal and external provision of annuities would produce anomalies. The Court of Appeal rightly paid generous tribute to her judgment. The judgment of the Court of Appeal (delivered by Mummery LJ, but recording that all members of the Court had contributed to it) is, if I may respectfully say so, an admirable effort in explaining a very complex topic in language comprehensible to the members of the Scheme. But the judgment acknowledged the difficulties (paras 38 and 39): The Courts aim has been to produce, as far as possible, a judgment that Scheme members can themselves understand, if not the dense detail, at least the crucial conclusions and the reasons for them. This is particularly important in a case where the benefits of the members are significantly scaled back . Attempts to translate the legislation and the Scheme precisely into ordinary English for the benefit of a wider audience of non experts are probably doomed to failure. The complexity of the subject must be respected. Over simplification that does not do so could make matters even worse by causing confusion and misunderstanding through error and inaccuracy. The Court of Appeal identified seven issues as arising in the appeal. All but one of them were concerned with different aspects of the definition of money purchase benefits and money purchase schemes. The exception concerned the meaning of voluntary contributions in section 73(3)(a) of PA 1995, which is no longer in issue. The issues before the Supreme Court are the first two money purchase issues, designated and discussed in the judgment of the Court of Appeal as follows: (1) Are MoneyMatch benefits money purchase benefits despite the presence of the GIF? (paras 139 to 145) (2) Are pensions granted by way of internal annuities money purchase benefits? (paras 146 to 152). So although the judgment runs to 189 paragraphs the Courts discussion of the crucial issues, and its conclusions on them, can be found in fourteen closely reasoned paragraphs. This economy of expression was achieved partly because the judgment had already (paras 54 to 98) considered the KPMG case at length. The discussion of KPMG contains some very pertinent observations (paras 57 to 59) about the role of precedent in statutory construction. As the report is readily available it is unnecessary to repeat them. Their general tenor (with which I whole heartedly agree) is that judgments on statutory construction are not to be read as if they were themselves statutes, and that apparently wide propositions may have to be read in the context of the particular facts of the case to which they related. The Court of Appeal drew four conclusions (paras 85 to 90) as to the significance of KPMG for the present appeal. First, the scheme in that case was essentially a defined benefit scheme, although that feature was embodied (or concealed) in the actuarial formulae which provided the building blocks of the eventual pension. Second, KPMG contained no teaching about internal annuities or the presence of guaranteed notional returns provided by the GIF. Third, the relationship between contributions and benefits must be determined by looking at the scheme as a whole; the impossibility of a mismatch between assets and liabilities was not a necessary condition of a money purchase scheme, although it was a feature of a typical money purchase scheme. I will set out the fourth point in the Courts own words (para 90): we are also unable to accept that a benefit is precluded from being an MP benefit simply because an actuarial factor is applied at any stage of the calculation, or because the MP benefit pot is increased by reference to a guaranteed or notional return, as with a guaranteed interest fund. There is force in the comment that there would be no MP benefits at all if the introduction of an annuity rate to convert the capital value of the members MP pot into a pension income for the member prevented that benefit from qualifying as an MP benefit. In every case an annuity rate has to be applied, either by an insurance company in the case of the external provision of an annuity, or by the Trustee in the case of internal annuitisation. The important point in such cases is that the pension benefit is related to the size of the members interest or account in the relevant Scheme fund. The Court of Appeal concluded that the approach taken by counsel for the Secretary of State and the pensioner was over analytical and too literal in its treatment of KPMG. It considered (para 92): The question in each case is to ask whether, having regard to the combination of all the features of the scheme in question, the rate or amount of the benefit in question can be sensibly and reasonably said to be calculated by reference to the payments by or in respect of the members. That could not be said in the case of KPMG. As explained below, it can be said here in relation to the calculation of the Members Interest and the VIP Interest, notwithstanding the particular features on which the Department and the pensioner rely for their objections to the members benefits being MP benefits. The Court did not accept that the Marleasing principle was of any assistance in construing the statutory definition (paras 95 and 96). Following that approach, the Court of Appeal thought it wrong to read into the statutory definition a requirement that money purchase benefits (para 144): . must be the direct and actual products of the payments in order to be MP benefits. Those words are not in the definition. It is true that they were used in KPMG, but that was in the context of a very different scheme. In that case the liabilities to members turned on the application of tabulated multipliers to contributions. That calculation was a break in the link between the benefits and returns on invested contribution payments to that scheme. By contrast the use (in the GIF mechanism) of notional returns on the invested contributions did not break the link. The benefits were still calculated by reference to contributions (para 145). As to internal annuitisation, the Court recognised that it brought actuarial factors into play. But (para 152) this was only at the final stage of converting a sum of money into a retirement annuity. The benefits were still calculated by reference to the total contributions. Discussion: some preliminary points This Court has had the benefit of excellent written and oral submissions from counsel. It is unnecessary to summarise them at length. Mr Nugee has placed particular emphasis on the promise of future benefits as the hallmark of defined benefit schemes; on the equilibrium of assets and liabilities as the hallmark of money purchase schemes, and the reason why they are largely excepted from the operation of sections 73 and 75 of PA 1995; on the Court of Appeals insistence, in KPMG, that a money purchase members benefit should be the direct product of the contributions; and on Marleasing. Above all, Mr Nugee appealed for clarification and certainty in the law. Mr Simmonds submitted that Mr Nugee had started with a gloss on KPMG and worked backwards from that. He explored the four statutory contexts dealing with money purchase benefits (these are covered in paras 25 to 28 above). He relied on some particular linguistic points on the legislation (including the use of solely in the definition of flat rate benefit in section 84(4) of PSA 1993, and the exclusion from the definition of money purchase benefits of average salary benefits). He suggested that in considering the meaning of the words calculated by reference to it was helpful to look at the variables and the constants employed in calculations under different types of scheme. It may be best to start by dealing with three points which can to my mind be disposed of fairly quickly. First, KPMG was rightly decided. The use of the actuarial formulae and the width of the clause 8 powers (and the uncertainty as to those powers being exercised either at all, or in any particular way) produced what was on any view too wide a discontinuity between the quantum of a members total contributions (and the return on them), on the one hand, and the benefits to which the member would eventually become entitled, on the other hand. This conclusion is amply confirmed by (rather than being a consequence of) the deficit of over 70m which had appeared in the closed fund by 2002. Secondly, however, some of the reasoning in the Court of Appeals decision in KPMG (and in particular, para 171, quoted in para 55(5) above) is open to question: this is considered further below. I consider that the Vice Chancellor was correct in what he said (para 48 above) about the exception from the statutory definition of average salary benefits. Thirdly, the Marleasing principle is of no real assistance here. In relation to the United Kingdoms obligations under article 8 of the Insolvency Directive, Robins v Secretary of State for Work and Pensions (Case C 278/05) [2007] 2 CMLR 269 shows a very broad brush approach, with the outcome determined largely by the statistics quoted in paras 58 and 61 of the judgment of the Court of Justice. Since the vast majority of money purchase schemes are insured schemes, and since it is agreed that most self administered money purchase schemes have no risk of insolvency, it is hardly conceivable that any drafting error in the legislation could amount to a grave and manifest breach of Community law. Similarly with IORP; if there is an error in the changes made by Part 3 of PA 2004, it is for Parliament to correct it. For the Court to attempt correction by stretching or distorting the statutory language would be likely to lead to more anomalies and more confusion. Calculated by reference to . payments In the discussion of whether the critical words of the definition should be construed strictly (Jonathan Parker LJs approach, [2006] 1 WLR 97, para 172) or in terms of what can sensibly and reasonably be regarded as within the words (Mummery LJs approach, para 92) little attention has been paid to the question of the inclusion within the definition of the investment return (in the sense indicated in para 50 above) on a members total contributions. The only relevant statutory reference that I have found is in the context of revaluation of deferred benefits, where there is a reference to the investment yield and any bonuses arising from payments (PSA 1993, Schedule 3, para 5(1), set out in para 25 above). Section 87 of PA 1995 and regulations made under it require pension scheme trustees or managers to keep detailed records of contributions to money purchase schemes, but those requirements do not appear to cover the investment return on the contributions. No one suggests that the investment return on contributions is not properly included in the calculation of money purchase benefits. In KPMG the Vice Chancellor emphasised that they were included (see paras 49 and 50 above). Indeed, the statement in the House of Commons in 1986 by Mr John Major MP (quoted by Jonathan Parker LJ in para 112 of his judgment [2006] 1 WLR 97) suggests that the inclusion of investment return is of the essence of money purchase benefits. The fact is, however, that the statutory definition in section 181(1) of PSA 1993 makes no reference to investment return. Still less is there anything in the statutory definition requiring meticulous investigation as to the actual investment return earned over the years by every contribution made in respect of a member. A scheme which provided for a pot (to my mind an unhelpful term, since it suggests an appropriated mini fund) of a members total contributions together with annual interest thereon at (say) 3% compounded annually would be just as much calculated by reference to . payments as one which took account of the exact investment return on investments actually or notionally representing the payments. Arguably it would fit better with the statutory definition. It is also worth noting that a scheme which provided for annual interest at the rate of (say) 8% per annum compounded annually would be likely, in the first decade of this century, to have encountered grave solvency problems, although it would seem to fall squarely within the statutory definition. I do therefore respectfully differ from the key conclusion reached by Jonathan Parker LJ in para 171 of his judgment in KPMG [2006] 1 WLR 97, that calculated by reference to means . calculated only by reference to, in the sense that the benefit in question must be the direct product of the contributions. This interpretation involves reading in the word only, which Parliament did not use (whereas it did use solely in the definition of flat rate benefit set out in para 25 above). The altered phrase is then explained (in the sense that) by reference to the contributions direct product though the statutory definition makes no express reference to investment return. It follows that the deputy judge (see para 56 above) and the Court of Appeal (see para 63 above) were right, in my judgment, to conclude that the GIF mechanism did not unhitch a members eventual benefits from that members total contributions. They provided for a yield of guaranteed interest at a modest rate fixed by an objective test, together with the prospect of further bonuses at a modest rate, fixed, again, by an objective test under which the trustees had no discretion. All that is in striking contrast to the much looser terms of the clause 8 powers in KPMG. In the Court of Appeal in KPMG [2006] 1 WLR 97, Jonathan Parker LJ was impressed by the submission of counsel for the representative pensioner (para 148) that with a money purchase scheme there is no need for an actuary. That proposition is entirely correct in the sense that under Regulation 3(2) of the Occupational Pension Schemes (Scheme Administration) Regulations 1996 (SI 1996/1715), it is not obligatory to appoint a scheme actuary for a money purchase scheme. That provision (to which we were not, I think, referred) is consistent with the view that under a money purchase scheme (if not by definition) there should be no mismatch of payments and liabilities. But a statutory instrument made in 1996 cannot affect the construction of a definition in PSA 1993. Moreover, as I have just illustrated, the choice of an over optimistic fixed rate of return can lead to solvency problems, as Equitable Life discovered in another context (see Equitable Life Assurance Society v Hyman [2002] 1 AC 408). There is no evidence before the Supreme Court that the Schemes deficit is the result of the GIF mechanism. It seems more likely that it has arisen in respect of the final salary part of the Scheme, but the actuarial reports exhibited to Mr Ortons affidavit are not before the Court (with the exception of a report dated 20 March 2008 which is not, without explanation, of much assistance). This point may be relevant in connection with Regulation 13 of the Winding Up Regulations, discussed further below. Internal annuities In my judgment the deputy judge and the Court of Appeal were also correct in their conclusion that the provision of internal annuities (as opposed to the purchase of annuities from a life office) is not incompatible with money purchase benefits. As the deputy judge put it (para 135) the distinction would produce insupportable anomalies. As the Court of Appeal put it (para 152), annuity tables based on actuarial calculations are used only at the final stage, when the member retires and the amount earned by his or her defined contributions must be converted from a lump sum into an annuity. That is inescapable under either method of provision, in that actuarial tables will be used, on the advice of actuaries, either by the trustees or by the life office (with the latter building in a profit element). Regulation 13 The Court did not hear full submissions as to the effect of Regulation 13 of the Winding Up Regulations, but (as already noted in para 30) the reference in Regulation 13(1)(ii) to the assets by reference to which the rate or amount of those benefits is calculated is not easy to apply when the money purchase benefits are to be provided out of a single unappropriated fund which is insufficient to meet all its liabilities for defined benefits and money purchase benefits. This point is not expressly raised in the SFI, but it would be most unfortunate if it had to be referred back to a judge of the Chancery Division, with further costs and further delay. In these circumstances I think it right to say that in my view Regulation 13(1) must be interpreted on the basis that Parliament contemplated (as all sides agree) that money purchase benefits would normally be adequately funded but not over funded, and that the money or assets to be withdrawn from the unappropriated fund for the purposes of section 73 of PA 1995 should be of an amount or value equal to the money purchase benefits calculated by the GIF mechanism (less members MoneyMatch Plus contributions, employers MoneyMatch Plus credits in excess of 2% of Plan earnings and supplementary contributions which under Regulation 13(2)(a) are not relevant money purchase benefits, but take first priority under section 73). However if counsel for any party feels that this point has been insufficiently argued the Court would entertain further brief written submissions limited to this single point. Conclusion In his submissions for the Secretary of State, Mr Nugee (invoking, as it were, the prayer of Ajax: St Aubyn v Attorney General [1952] AC 15, 45) pleaded for clarity above all, even if he were to be unsuccessful in his arguments. I have considerable sympathy with that, and so will many others who have to grapple with the complexities of the primary and secondary legislation relating to occupational pension schemes. It is a striking fact that the Trustees report for the year to 5 April 2003 (signed off by the new independent trustee after the dissolution date, and no doubt very carefully considered by the Trustees directors, the auditors and the actuary) stated as a fact that the Scheme had a defined contribution section. None of these experienced professionals expressed any doubt about the point until the Secretary of States intervention. That is not to say that the Secretary of States intervention was unnecessary. Although this Court holds that equilibrium of assets and liabilities is not a requirement of the statutory definition of a money purchase scheme (and similarly for money purchase benefits), it is clear the Parliament has enacted primary legislation, and the Secretary of State has initiated secondary legislation, on that assumption. Nevertheless in all insured schemes, and in the great majority of self administered schemes, that assumption is in practice justified. To the special cases on which counsel agreed (insolvency of a life office, or misappropriation of trust funds) there may have to be added the case of an over optimistic guaranteed fixed rate of return on contributions, or the eventuality of unexpectedly high administration costs (the costs of all parties to litigation such as this are normally paid out of the trust fund, especially if the employer is insolvent, and can be a significant burden for a small scheme). The possibility of exceptional cases of that sort seems unlikely to amount to an infringement of Community obligations, or to necessitate primary legislation as a matter of urgency (although Regulation 13 of the winding up regulations may need clarification). But those are matters for the Secretary of State and for Parliament. For these reasons I would dismiss the Secretary of States appeal on the first and third issues. The second issue (apportionment of MoneyMatch benefits) does not arise. LORD MANCE I have found the resolution of this appeal more difficult than the majority. As Lord Walker points out, the Pensions Schemes Act 1993 (PSA 1993) is a consolidating statute, and we should look at it, rather than undertake historical archaeology. The critical question is what is comprised within the concept of benefits the rate or amount of which is calculated by reference to a payment or payments made by the member or any other person in respect of the member and which are not average salary benefits (PSA 1993, s.181(1)). Although the legislative history is not relevant, the factual background at the time of PSA 1993 may be. While it was only by the Pensions Act 1995 (PA 1995) (amending PSA 1993 and other prior legislation and introducing various new provisions) that Parliament addressed issues raised by the Report of the Pension Law Review Committee chaired by Professor Roy Goode issued in January 1993, that Report must reflect the general understanding of the nature of a money purchase scheme at the time when PSA 1993 was passed. The Report proceeds on the basis (see e.g. paras 2.2.20, 2.4.24 and 4.4.3) that, since under a money purchase scheme the scheme member bears the investment risk, there cannot in principle be a deficiency of assets, save in the case of loss of assets through fraud or misappropriation. The Report also confirms (App 4 Table 10, and see paras 2.4.20 to 2.4.31) that in 1993 most money purchase schemes were insured, and in particular (para 2.3.29) that over 97% of the 26,500 such schemes then contracted out (under what became Part III of PSA 1993) were insured. It is true that insurers can in theory become insolvent, in which case a scheme which had insured itself in respect of a money purchase benefit could suffer a shortfall, but in practice insurance industry solvency is tightly regulated, and there is also extensive statutory protection for beneficiaries in any insolvency. In the present case, the risk of underfunding due to the promised VIP and MoneyMatch benefits may or may not have been slight. But, if benefits of this kind do not undermine the essential nature of the scheme as a money purchase scheme, I find it difficult to see where the line is drawn. This is to my mind confirmed by what I understand to be Lord Walkers view in para 71 that a provision for annual interest on a members total contributions compounded at say 3% or even 8% per annum would still remain a money purchase benefit. It is true that s.181(1) does not itself expressly delimit what is meant by benefits the rate or amount of which is calculated by reference to a payment or payments. But the reason appears to me likely to have been that a direct relationship was implicit. I regard s.84, providing for the revaluation of deferred pensions (accrued at early retirement) to be made using the money purchase method described in Schedule 3, para 5, as pointing strongly in the same direction. Para 5 states that, with presently immaterial qualifications, the money purchase method is to apply the investment yield and any bonuses arising from payments made by or on behalf of a member towards providing any pension or other retirement benefit which is payable under the scheme to him or to any other person in respect of him in the manner in which they would have been applied if his pensionable service had not been terminated. The inference is that money purchase benefits are linked directly to an investment yield and/or (e.g. under with profits policies) to bonuses actually declared. A similar inference appears to me to arise from s.144 (which later became s.75(1) of PA 1995), whereby it is only in the case of an occupational pension scheme which is not a money purchase scheme that an employer is bound to make good to the scheme trustees an amount equal to an excess of the schemes liabilities over the value of its assets. It cannot therefore have been contemplated that there could be any real risk of liabilities exceeding assets in the case of a money purchase scheme. Under s.153(1) of PSA 1993 (s.89(2) of PA 1995) the Secretary of State was given power by regulations to make similar provision, subject to such modifications as he might specify, in respect of other cases. Section 125(2) of PA 1995 conferred a like power expressly in relation to schemes which are not money purchase schemes, but where some of the benefits that may be provided are money purchase benefits. In the event, however, and consistently with the Goode Report (para 83 above), the only possibility addressed by regulations was that of criminal reduction in the aggregate value of the allocated assets of any money purchase scheme: see regulation 7 of the Occupational Pension Schemes (Deficiency on Winding Up etc) Regulations 1996 (S.I. 1996 no. 3128) requiring the employer to make good any such loss. Again, this confirms that it was contemplated in 1993 (or one might add subsequently) that there could not be any other real risk of shortfall in respect of a money purchase scheme. Mr Simmonds QC in his excellent submissions for the scheme member respondents relied upon two other sets of provisions in PSA 1993: the first consists of s.10(1) read with s.28, according to which, in the context of contracting out, protected rights to money purchase benefits may be given effect by the provision by the scheme of a pension which complies with or satisfies certain requirements or conditions; and the second consists of ss.102 108, which require the provision by schemes of annual increases by reference to the RPI of any pension which commences or has commenced under the scheme, but does not include (a) a guaranteed minimum pension or any increase in such a pension under section 109; or (b) any money purchase benefit (section 102(3)). Both sets of provisions therefore contemplate that a money purchase benefit may be given effect by a pension granted by the scheme itself. However, as Mr Nugee QC in his equally excellent submissions pointed out, any pension would in practice have been achieved in 1993 by the means of a back to back insurance taken out by the scheme, either when the member entered the scheme or when he or she retired and sought an annuity. It would not have been achieved by an internal pension exposing the scheme alone. On that basis, these sections do not contemplate, even on retirement, a situation in which the scheme would or could be exposed to any mismatch of liabilities and assets. If and in the event that a pension was granted without matched asset backing in the form of an insurance, the appropriate analysis would be that the benefits conferred by the scheme had become defined benefits, rather then money purchase benefits. Weight was placed by Mr Simmonds on the presence at the end of the definition in s.181(1) of PSA 1993 of the words and which are not average salary benefits. A definition of average salary benefits appears in s.84, albeit in terms only for the purpose of that section, where it means benefit the rate or amount of which is calculated by reference to the average salary of a member over the period of service on which the benefit is based. The words and which are not average salary benefits must have been meant to make clear the need for an investment link which is, on any view, the key to a money purchase scheme or benefit. It does not follow that they were necessary, still less that the link can be partial rather than complete. There are other instances in the legislation where opposites are expressly excluded, e.g. in ss.73 and 125(1) of PA 1995, where a salary related scheme is expressly defined as a scheme which is not a money purchase scheme. I cannot attach significant weight to an addition to s.181(1) which can be read as simply making the antithesis clear. Lord Walker notes (para 79) that the present trustees presented the MoneyMatch section of their scheme as a defined contribution section in the scheme accounts for the year ended 5 April 2003, as they continue to do to this day. But to my mind a more telling indication of professional understanding is provided by the Actuarial Guidance Note GN27 issued by the Faculty & Institute of Actuaries, paragraphs 3.3 and 3.4 of which have been in the same form since version 1.5 effective from 1 December 2000 (and in almost identical form from the outset in version 1 effective from 6 April 1997). They read: 3.3 The value of the liabilities must not be limited to the value of the assets, even where the scheme rules may so provide. In particular, in the valuation of the liabilities in hybrid schemes which give a money purchase benefit subject to a defined benefit promise, the value of the defined benefit promise must not be limited to the value of the assets of the scheme, even if the rules of the scheme restrict the benefit promise where there are not sufficient assets in the scheme. 3.4 The liability in relation to money purchase benefits will, where contributions are accumulated, either in identifiable assets or otherwise, be the accumulated value at the MFR Effective Date, and, where contributions are used to provide minimum benefit rights payable as at a future date, be the value of those rights using the relevant assumptions specified in Appendix 2. Money purchase benefits which have been converted into defined pension rights on the retirement of the member must be valued in the same way as other benefits for pensioners. These paragraphs clearly contemplate that, where a money purchase benefit is used to provide a fixed annuity, not backed by a specific asset such as an insurance policy, the annuity constitutes a defined pension benefit. As Lord Walker also notes (para 80), it is clear that Parliament has enacted primary legislation, and the Secretary of State has initiated secondary legislation, on the assumption that a money purchase scheme (and a money purchase benefit) will not involve any shortfall of assets compared with liabilities. S.73 of PA 1995 provides for the assets of a salary related occupational scheme (i.e. not a money purchase scheme: see s.125(1)) to be applies towards satisfying the liabilities in respect of pensions and other benefits (including increases in pensions) in the order stated in subss. (2) to (4). Regulation 13 of the Occupational Pension Schemes (Winding Up) Regulations 1996 (S.I. 1996 no. 3126) provided that, in relation to a hybrid scheme, defined as one which was not a money purchase scheme, but under which some of the benefits which may be provided are money purchase benefits: s.73 applies as if (i) the liabilities of the scheme did not include liabilities in respect of those benefits, and (ii) the assets of the scheme did not include the assets by reference to which the rate or amount of those benefits is calculated. The assumption in this subsequent legislation is that the rate or amount of benefits can be and is calculated by reference to specific assets, which can be extracted accordingly from the hybrid scheme. On the case presented by Mr Simmonds and the trustee, it is wholly unclear how this exercise can or should be performed, when and if there is a shortfall in the assets required to meet all liabilities under s.73 and in the assets specifically identifiable to meet liabilities for money purchase benefits. It is in particular unclear why the latter should be entitled to take out of the former sufficient to ensure that the latter are fully met, and, if that is not the case or is impossible, it is unclear what order of priority should apply to any claims to money purchase benefits against such assets as may be attributed to money purchase benefits. While later legislators may have misunderstood the effect of earlier legislation, I repeat in relation to the inter relationship of PSA 1993 and PSA 1995 what I said recently in the context of different legislation when giving a judgment with which Lord Walker, Lady Hale and Lord Collins agreed in Bloomsbury International Ltd v Sea Fish Industry Authority [2011] UKSC 25: In the case of a statute which has . been the subject of amendment it is not lightly to be concluded that Parliament, when making the amendment, misunderstood the general scheme of the original legislation, with the effect of creating a palpable anomaly (see eg the principle that provisions in a later Act in pari materia with an earlier may be used to aid the construction of the former, discussed in Bennion on Statutory Interpretation, 5th ed (2008), section 234). Lord Phillips in his judgment went perhaps even further: see especially para 61. In the result, I am not persuaded that it is necessary or appropriate to read PSA 1993 (or subsequent legislation) as embracing within the concept of money purchase benefit, to some undefined and unclear extent, liabilities not matched with any specific asset held by the scheme. This applies as much to internal annuities granted by the scheme as to liabilities by way of guaranteed interest rates undertaken during the accrual of pension rights. Mr Nugee submitted that a distinction might if necessary, and in particular in the light of the points arising from ss.10(1), 28 and 102 108, be drawn between these two situations. I would be disinclined to draw such a distinction, when both involve exposure of the scheme to liabilities unmatched with any assets. My inclination would have been to allow the appeal on both questions identified in para 58 of Lord Walkers judgment.

The subject of the appeal is an occupational pension scheme known as the Imperial Home Dcor Pension Scheme (the Scheme), which is winding up and has a significant deficit. The appeal is concerned with the dividing line, for regulatory purposes, between defined benefit (normally earnings related) schemes and defined contribution (or money purchase) schemes. The general nature of the distinction is that under a defined benefit scheme (the commonest variety of which is a final salary scheme), the amount of the benefit is not calculated by reference to the amount of the members contributions. Under a money purchase scheme, by contrast, the members and the employers contributions, and the investment return on them, are the measure of the members benefits. There is a variety of techniques by which, under a money purchase scheme, the amount of the contributions by or for a member, and the investment return on them, are mathematically transposed into quantifying the pension that is the primary benefit that the member expects to receive. The Secretary of States case is that some of the techniques (and in particular, those applicable to the voluntary investment planning (VIP) and MoneyMatch benefits under the Scheme) take the benefits outside the definition of money purchase benefits in section 181(1) of the Pension Schemes Act 1993. The essential feature of the definition is that the rate (typically so much a year) or amount (typically a lump sum) of the benefits is to be calculated by reference to contributions made in respect of that member. Section 73 of the Pensions Act 1995 provides a statutory order of priority in the winding up of pensions schemes but it does not apply to money purchase schemes, and it applies only in a limited way to hybrid schemes (under which some but not all of the benefits provided are money purchase benefits). The appeal is of great importance to the current and deferred pensioners interested under the Scheme, since if the Secretary of State is right part of the contributions paid by or in respect of members still in service or entitled to deferred pensions at the date of commencement of the winding up of the Scheme will be used, under the statutory order of priority, to satisfy the rights of those already entitled to receipt of pensions at that date. The three issues before the Supreme Court were: (1) Are MoneyMatch benefits money purchase benefits despite the presence of the Guaranteed Interest Fund (GIF)? (2) If not, are they money purchase benefits to the extent that they are attributable to contributions and credits not allocated to the GIF? (3) Are pensions granted by way of internal annuities money purchase benefits? As regards the first issue, a Scheme members total MoneyMatch contributions were, with three possible exceptions, credited to the GIF. As the actual investment returns on contributions might be less than the guaranteed rate of return this could lead to a deficit in the fund. As regards the third issue, in practice internal annuities were used in relation to VIP and MoneyMatch benefits, so that the members interest was converted into a pension using tables of factors periodically supplied by the Scheme actuaries and paid direct from the Scheme. This internal annuitisation necessarily involves some degree of risk of the resources of the fund proving insufficient to provide all the benefits due, if investment returns are disappointing or annuitants exceed their actuarial life expectations (or both). The proceedings were commenced in 2006 by Bridge Trustees Ltd (the Trustee), the independent corporate trustee of the Scheme. Three members of the Scheme were joined as representative defendants. The appellant Secretary of State was not a party to the first instance proceedings, but was granted leave to intervene in an appeal. The appellants case is that it is fundamental to the scheme of the legislation that money purchase schemes are always fully funded, with no risk of the assets being insufficient to meet the liabilities, and for that reason alone they are excepted from the statutory order of priority. Both the deputy judge and the Court of Appeal concluded that neither the GIF mechanism nor the provision of internal annuities (as opposed to the purchase of annuities from a life office) is incompatible with money purchase benefits. The Supreme Court, by a 4 1 majority, dismisses the Secretary of States appeal on the first and third issues, holding that equilibrium of assets and liabilities is not a requirement of the statutory definition of a money purchase scheme (and similarly for money purchase benefits). The second issue does not arise. Lord Walker gives the leading judgment. Lord Mance gives a separate dissenting judgment. On the first issue, the majority, while accepting that KPMG [2006] 1 WLR 97 was correctly decided on its facts, respectfully differ from the key conclusion reached by Jonathan Parker LJ in para 171 of his judgment in KPMG, that calculated by reference to means calculated only by reference to, in the sense that the benefit in question must be the direct product of the contributions. This interpretation involves reading in the word only, which Parliament did not use (whereas it did use solely in the definition of flat rate benefit). The altered phrase is then explained (in the sense that) by reference to the contributions direct product though the statutory definition makes no express reference to investment return. Still less is there anything in the statutory definition requiring meticulous investigation as to the actual investment return earned over the years by every contribution made in respect of a member. The GIF mechanism did not unhitch a members eventual benefits from that members total contributions. It provided for a yield of guaranteed interest at a modest rate fixed by an objective test, together with the prospect of further bonuses at a modest rate, fixed, again, by an objective test under which the trustees had no discretion. [70] [73] On the third issue, the provision of internal annuities (as opposed to the purchase of annuities from a life office) is not incompatible with money purchase benefits. As the deputy judge put it, the distinction would produce insupportable anomalies. As the Court of Appeal put it, annuity tables based on actuarial calculations are used only at the final stage, when the member retires and the amount earned by his or her defined contributions must be converted from a lump sum into an annuity. That is inescapable under either method of provision, in that actuarial tables will be used, on the advice of actuaries, either by the trustees or by the life office (with the latter building in a profit element). [76] Lord Mance is not persuaded that it is necessary or appropriate to read the 1993 Act (or subsequent legislation) as embracing within the concept of money purchase benefit, to some undefined and unclear extent, liabilities not matched with any specific asset held by the scheme. [94]

This appeal raises a question about what the grantee of a deed who has been provided with a defective title needs to establish in order to obtain a remedy under the granters obligation of absolute warrandice. By including a clause of warrandice in a disposition of property which he has sold to the grantee, the seller warrants his title as absolute owner of the property. But warrandice is a contingent obligation. It only comes into effect upon eviction. It has been described as an obligation to warrant the grantee against eviction of the thing sold: MP Brown, A Treatise on the Law of Sale (1821), p 240, para 329. Eviction, in the strict sense of the word, only takes place when a court order is pronounced which deprives a party of his right to continue to occupy the property. As Brown puts it, it is concerned with the loss of the subject through the enforcement of a third partys rights by the sentence of a judge: p 258, para 353. But Scots law has never insisted upon eviction in that sense as the only pre-condition of entitlement to proceed against the granter for recourse under his obligation of warrandice. There can be eviction for this purpose if eviction is threatened and there is shown to be a competing title which will inevitably prevail in competition with that which was given by the granter to the grantee. The question that this case raises is directed to the requirements that must be satisfied if the grantees claim for breach of warrandice is to succeed on the basis of a threat of eviction. It can now be taken as settled law that the claim will succeed if the challenge is made by the party with a competing title to the disputed subjects which is unquestionable and will inevitably prevail in competition with that of the grantee: Clark v Lindale Homes Ltd 1994 SC 210, 216. The problem that has arisen in this case is that, contrary to what was understood at the time when the grantee submitted to the threat of eviction, the party who challenged the grantees title did not at that time have a competing right to the property. The title to the disputed ground was vested in a third party when the threat was made. But the grantee offers to prove that the challenger would have been immediately able to secure title to the disputed ground in its favour and that no proceedings would ever have been required to establish its title to it. That assertion is disputed by the granter, who submits that the grantees claim would be bound to fail even if all the facts on which the grantee relies are proved. Her case is that a challenge by a party whose ownership of the disputed ground was not registered or otherwise established at the time of the threat, but who would have been able subsequently to obtain a registered title, is not sufficient to engage a remedy in warrandice. The situation that has arisen in this case is not one that any previous discussion of the extent of the remedy has contemplated. Some of the dicta might be taken as suggesting that the granter cannot succeed as the essential requirements for a successful claim are not satisfied. But the limits of what it is necessary to prove to establish an eviction for this purpose have never been precisely identified. So I think that it is open to us to address the issue as one of principle. But first it is necessary to set out the facts. The facts The pursuer, Mr Morris, seeks an award of damages against the defender, Mrs Rae. He is the assignee of rights formerly vested in Ransom Developments Ltd (RDL), which is now in liquidation. On 3 August 2004 RDL concluded missives with the defender for the purchase of a plot or area of ground at 152 Dalmellington Road, Ayr. The transaction was settled on 23 August 2004. RDL received a disposition of the subjects in exchange for the purchase price of 140,000. The disposition contained the words and I grant warrandice. RDL took entry and commenced building operations on the subjects which it had purchased. A title to the subjects had not previously been registered in the Land Register under the Land Registration (Scotland) Act 1979. The system of registration of title which that Act introduced replaced the recording of deeds in the Register of Sasines as the principal means of creating real rights in land. Registration of title was introduced by a phased process across Scotland, one area after another. By the date of this transaction it had become fully operational. So it was necessary for RDL to seek registration of the disposition in the Land Register to complete its title to the subjects. The usual search and examination of the title as recorded in the Register of Sasines was carried out before the transaction was settled. It did not suggest that there was any reason to think that there was anything wrong with it. But by letter dated 8 June 2005 the Keeper of the Registers informed RDLs solicitors that an examination of the various title deeds indicated that the defender did not have, and never had, a title to part of the subjects which she had sold to RDL. This was the part adjacent to Kincaidston Drive over which access was to be obtained from the public road to the proposed development (the disputed part). The Keeper was therefore not able to complete the process of registration by issuing an unqualified land certificate. He would have had to exclude a right to indemnity in relation to the disputed part under section 12(2) of the Act. Prior to the introduction of the system of land registration a defect of the kind that the Keeper had identified might have remained undetected. If the subjects were possessed for ten years openly, peaceably and without any judicial interruption after the recording of a deed in the Register of Sasines that was sufficient on its own terms to constitute a real right to the subjects disponed to the purchaser, the right would have been exempt from challenge by the operation of positive prescription as from the expiry of that period: Prescription and Limitation (Scotland) Act 1973, section 1(1)(a). As it was, the fact that the defect had been detected made it necessary for RDL to make further enquiries with a view to resolving the problem. Positive prescription is available under the 1973 Act in cases where a real right has been registered in the Land Register subject to an exclusion of indemnity: section 1(1)(b). But, unless the defect in title could be cured in the meantime, any developments carried out on the disputed part from which the Keeper had excluded the right to indemnity would not have been marketable. The pursuer says in his pleadings that the disputed part was truly owned by James Craig Ltd (JCL), and that JCL can demonstrate that it obtained a good title to it by a disposition in its favour which was recorded in the Register of Sasines in September 1949. It had transferred title to the disputed part inadvertently to John Stevenson Lynch by a disposition dated 30 July 1991, which was recorded in the Register of Sasines on 15 August 1991. But Mr Lynch later acknowledged this error and accepted it. What then happened was that by letter dated 18 November 2005 the solicitors acting for JCL asserted JCLs title to the disputed part and threatened to evict RDL from it. The pursuer avers that in response to this threat RDL had to negotiate with JCL for the purchase of the disputed part, and that in order to do this it was obliged to pay JCL the sum of 70,000. In exchange it obtained a disposition of the disputed part from JCL on 9 March 2006. In recognition of the error Mr Lynch then granted a disposition of the disputed part in favour of RDL dated 30 July 2006 without any consideration having been paid to him. This disposition was then registered by the Keeper without exclusion of indemnity. That was the state of the pursuers pleadings when the case came before a temporary judge on the procedure roll for a debate as to their relevancy. The temporary judge, Rita Rae QC, held that the pursuer was entitled to a proof of his averments. The defender reclaimed, and on 5 April 2011 an Extra Division (Lords Clarke and Bracadale, Lord Bonomy dissenting) allowed the reclaiming motion and dismissed the action: [2011] CSIH 30, 2011 SC 654. Speaking for the majority, Lord Clarke said that it appeared to him from the authorities that the question whether the evicter had an unquestionable title to the subjects in question, and thus the right to evict, had to be judged at the time that eviction was sought or threatened. As JCL did not have a title to the disputed part which would have entitled it to demand possession immediately, there was no breach of warrandice: para 13. Lord Bonomy said that the unquestionable nature of JCLs title could be established by evidence relating to the circumstances of the disposition to Mr Lynch and the arrangements for reconveyance, and that there was no suggestion in the pleadings that any action that JCL might have raised in its own name or with Mr Lynchs authority could have been resisted successfully: para 17. As a result of further enquiries which followed the raising of this action, the pursuer now states in paragraph 7 of the statement of facts and issues which he has lodged for the purposes of his appeal to this court that as at November 2005 RDL and JCL both believed that JCL held the title to the disputed part. He offers to prove that neither party was then aware that the title had, in error, passed to Mr Lynch in 1991. The plans attached to the relevant titles are said to have been difficult to interpret and, just as their examination did not at first reveal that the defender did not have title to the disputed part, their examination did not reveal that JCL did not have a title to it either. JCLs threat of eviction was made in the belief that it held the title to the disputed part, and RDL yielded to that threat on the basis that there was no answer to it. There then follow these averments: Had James Craig Ltd raised proceedings against the appellant, the above mentioned error may not have been discovered. Even if it had been discovered, James Craig Ltd would have been immediately able to secure title to the disputed part in their favour as Lynchs subsequent acknowledgment of the error and co-operation demonstrates. No proceedings (or proof of title) were or would ever have been required to establish the title of James Craig Ltd to the disputed part. The defender states in her statement of facts and issues that the pursuers paragraph 7 is not agreed. In particular she disputes the assertion that if the error had been discovered JCL would have been immediately able to secure title to the disputed part and that no proceedings to establish its title would have been necessary. She states in her written case that it was only after she had pointed out that JCL had conveyed the disputed part to Mr Lynch in 1991 that RDL, having obtained what was essentially a worthless disposition from JCL in return for 70,000, investigated the position and obtained a further disposition from Mr Lynch. Further complications that she has raised are that it now appears that the missives of May 1991 which preceded the disposition of 1991 in favour of Mr Lynch proceeded in the name of James Craig (Farms) Ltd, that the proposition that the disputed part was not intended to be included in that transaction may be open to some doubt and that Mr Lynchs disposition to RDL proceeded in his own name notwithstanding the fact that on 17 June 2002 he had granted a disposition of the subjects that were conveyed to him in 1991 by JCL in favour of Lynchs Trustees. It is plain that there is a substantial dispute as to the true state of the facts. The question before us, however, is whether the pursuer is entitled to a proof of his averments. It is agreed that these must be taken to include what he has set out in his statement of facts and issues. For present purposes the assumption must be that he will be able to prove, among other things, what he avers in paragraph 7. The issue The defender states in her statement of facts and issues that the question in this case is whether a threat to evict RDL by JCL, a party whose ownership was not registered or otherwise established at the time of the threat but who subsequently was able to obtain a registered title, is sufficient to engage a remedy in warrandice. The pursuer puts the point in this way: is it sufficient to engage a remedy in warrandice if the threat was made by the true owner of the disputed part, whose ownership was not yet registered at the time of the threat but to which there was no impediment to registration and which would inevitably prevail? I think that the issue is best approached in two stages. First, there is the way the defender puts the question. In other words, as the majority in the Extra Division held, does the question whether the evicter has an unquestionable title to the subjects in question fall to be judged at the time that eviction is sought or threatened? If that question is answered in the affirmative, it is clear that the pursuers averments are irrelevant. He accepts that, contrary to what he says was understood to be the position at the time when the threat was made, JCL did not then have a title to the disputed part. But if there is room for the remedy to be engaged where the threat is made by someone who does not have a real right to the disputed part at the time of the threat because his competing title has not yet been registered, there is a further question that must be answered. What does the party with the defective title who has incurred loss as a result of a threat need to show in order to establish that the threatened demand amounted to an eviction? The state of the authorities A convenient starting point for an examination of these questions is to be found in the observations by Lord President Hope and Lord Morison in Clark v Lindale Homes Ltd 1994 SC 210 which led the majority in the Extra Division to conclude that the pursuers averments were irrelevant. At p 216B-C I said, with reference to section 895 of Bells Principles (10th ed): As I understand the statement of principle in that paragraph, eviction occurs when there is a loss to the buyer due to the fact that someone else has a competing title which is beyond doubt. Later on the same page, at p 216F, I said: The warrandice is breached when there is shown to be a competing title which will inevitably prevail in competition with that which has been given to the purchaser. But at p 220C-D, having acknowledged that more was required to justify a claim under the warrandice clause than a mere deficiency in the title of the grantee, I said: Something else was required, and according to expressions used in the authorities it is eviction which gives rise to the claim. The word eviction might be thought to imply that the loss is in some respect due to action by the party who has the competing title to assert his rights In the present case there are no averments that any action was taken by the party with the competing title, and if the word eviction is to be understood in this sense that would appear to be conclusive against the pursuer in this case. Lord Morison put the point at p 224C-D in this way: If [eviction] has not been judicially established, the warrandice clause may still be invoked if eviction in the strict sense is threatened, providing that the threat is based on an unquestionable right. Such a threat could only come as a result of a demand from the competing title-holder, for no one else has any right, let alone an unquestionable right, to make it. Taken at their face value, these observations may be said to point clearly to the conclusion that, although there was a demand in this case, the pursuer cannot invoke the warrandice clause as he is not able to show that JCL, who made the demand, had a competing title to the disputed part when the threat was made. According to his averments, the registered title to the disputed part was vested at that time in Mr Lynch. But the question which had to be decided in Clark v Lindale Homes Ltd was not directed to the problem that has arisen in this case. The submission for the pursuer in Clark was that warrandice was a warranty of indemnity for all losses which the purchaser might sustain arising out of a defect in title, whether or not the purchasers had been dispossessed of the whole or any part of the property. It was sufficient for a prevailing right to have been identified by the Keeper of the Registers which resulted in loss to the purchaser: see p 213B-C. This argument was rejected on the ground that there had at least to be the threat of an eviction, provided it was based on an unquestionable right. The proposition that such a threat could only come from a party who, at the time of the threat, was the competing title holder went further than it was necessary to go for the disposal of the action. I think that it is open to us to consider whether it went too far. The first authoritative treatment of the effect of warrandice is in Stair, Institutions of the Law of Scotland (1693), II, iii, 46: The effect of warrandice is, the up-making of what is warranted, in so far as it is evicted, and the ordinary procedure in it is, when any suit is moved whereon eviction may follow, intimation is made to the warrander of the plea, that he may defend; and if eviction follow, and distress thereby, declaratory of distress, and an action of warrandice for relief is competent. Also it is effectual for decerning the warrander to free the thing warranted of that which will undoubtedly infer a distress, though it hath not actually done it Yea, warrandice will take effect where there is unquestionable ground of distress, though the fiar transacted voluntarily to prevent the distress. And though no intimation be made of the plea inferring distress, yet the warrandice taketh effect, unless the warrander had a relevant defence, and could instruct the same. The situation relevant to this case is described in the last two sentences. There was an unquestionable ground of distress, it being accepted that the defender had not given RDL a valid title to the disputed part. There was also the threat of an eviction, as JCL had called upon RDL to remove from the disputed part. RDL then transacted voluntarily with JCL to prevent the distress of an eviction. The fact that there was no intimation to the defender is no answer to the claim. The warrandice takes effect unless the defender had a relevant defence to JCLs claim. The pursuer offers to prove that there was no relevant defence as, if the fact that JCL did not have a title to the disputed part had been discovered when the threat was made, JCL would have been immediately able to secure title to it with the co-operation of Mr Lynch. On these facts, if they can be established, it would seem that the claim that the pursuer makes is within the scope of the remedy as described by Stair. There must, on his description of it, be an unquestionable ground of distress. But it is not said to be an essential requirement, assuming that a threat must be made, that the party who makes the threat must himself have an unquestionable title at the time when he makes it. What is needed is that the warrander would have had no relevant defence to the threatened eviction. That would seem to be the case if there was an unquestionable defect in the grantees title, and the party who made the threat was, as the pursuer avers, in a position by the exercise of a personal right that was vested in him at that time to obtain a real right to the subjects in question immediately. I do not think that any guidance on this point is to be found in Erskine, An Institute of the Laws of Scotland, II, iii, 30, although in Welsh v Russell (1894) 21 R 769, 773 Lord McLaren said that there could be no better authority on the subject. Erskine makes it clear that the remedy is not one of restitution but of indemnification. But he does not appear to accept that warrandice may be effectual where eviction has been threatened but has not actually occurred other than in the case of inconsistent deeds of the granter. As authority for the exception in the case of inconsistent deeds, reference may be made to Smith v Ross (1672) M 16596, in which the court sustained a submission that warrandice may take effect where there is no actual eviction, if the cause inferring eviction be evident and clear, especially if the same be the deed of the party warrander, who is most unfavourable, having granted double dispositions. It does not appear from the discussion of the point by the institutional writers, however, that there is any compelling reason why the cause inferring the eviction, if it be an unquestionable defect against which the grantee would have had no defence until the expiry of the prescriptive period, must be drawn to his attention by the party at whose instance the eviction may take place. This suggests that the law as to the requirements for there to be a relevant threat of eviction, in cases other than those arising from inconsistent deeds of the granter, was not fully developed at that stage. In Bells Principles 10th ed (1899), section 121 eviction is said to include the emerging of an unquestionable burden on the subjects purchased, which the buyer is compelled to discharge. In section 895 the point is again made that warrandice is not an obligation to protect but only to indemnify in case of eviction. Out of this peculiarity there are said to arise several important consequences: Thus there is no action of warrandice till judicial eviction, unless the ground of demand be unquestionable, and proceeding from the fault of the seller; or the obligation to relieve be disputed, in which case the action may be brought when eviction is threatened. The first of these two exceptions arises where the grantees lack of title is due to a second inconsistent deed of the seller, as was noted in Smith v Ross. That is not this case. The second arises where the threat of eviction is settled before a judicial eviction takes place. Here too there is no examination of the requirements that must be satisfied for there to be a relevant threat, other than that the ground of demand must be unquestionable. There must, as Lord Morison observed in Clark v Lindale Homes Ltd at p 224B, be compulsion exerted by a demand. But the discussion so far seems to leave open the question whether the person who makes the demand must at that time have a real right to the disputed subjects, or whether it is enough that he can demonstrate that he has an unquestionable right to obtain one. As Bell refers in support of his description of the obligation in section 121 to Pothiers Treatise on the Contract of Sale (translated 1839), it is perhaps worth noting that in para 83 Pothier observes that the term eviction is applied in practice both to the sentence which orders the abandonment and to the demand which is brought to obtain it. In para 86 he states: The term eviction is applicable, strictly speaking, to those cases only in which the buyer is deprived of the thing sold by a sentence. It is used, however, in a sense less proper, to include cases in which the buyer is deprived, without any sentence, of the power to retain the thing, in virtue of the sale. In para 95, describing the circumstances that could constitute a threatened eviction, he states that where the buyer of the thing sold has to abandon it to a third party who at the time of the contract was the owner or had at least an inchoate right to compel the buyer to abandon it, this gives rise to a warranty provided the buyer can prove that the third party really had the right which he claimed. The situation that he contemplates is one where the buyer has no power to retain the subjects but abandons it to forestall the expense of a sentence against him, provided that party to whom he abandons has the right to compel the abandonment. Brown, Treatise on the Law of Sale (1821), makes the same point in para 330, stating that the eviction must take place in consequence of a right existing in a third party. The question whether that right must be a real right to the disputed subjects, vested in the third party at the time of the demand, is not discussed. In Welsh v Russell at p 773 Lord McLaren said that the obligation of warrandice differed from all other obligations, in that it was not intended that it should be performed immediately, or within a definite time, or even within what the law describes as a reasonable time: It remains latent until the conditions come into existence that give it force and effect, and it continues to affect the granter and his heirs until the possibility of adverse claims has been extinguished by the long prescription. That was a case where a servitude right of way had been established judicially over the garden of subjects purchased by the pursuer, but the pursuer was not able to aver that he had suffered any loss through the existence of the servitude. It is an important authority on the question whether more is needed to justify a claim under the warrandice than a mere unquestionable deficiency in title. But it does not deal with the question as to the nature of the right that must be shown to be vested in the third party at the time when he makes his threat or demand. The first modern case in which it was held that a claim under warrandice was competent where there was no eviction, other than in the case of an absence of title caused by a second inconsistent deed of the granter, is Watson v Swift & Cos Judicial Factor 1986 SC 55. Lord Morison held at p 61 that an unquestionable burden on the subjects had emerged and that this situation had been created by the grant to the pursuers of a disposition which contained an unjustified warrant of its effectiveness. The property was subject to redemption under a decree of adjudication, and an action had been raised by a party who was entitled to decree ordaining the pursuers to discharge the adjudication and remove from the flat. They had no defence to the action, which was sisted for negotiations which resulted in the pursuers obtaining a valid and marketable title to the flat. As in Clark v Lindale Homes Ltd, there was no need in that case to examine the question which is before us in this case. In his essay in A Scots Conveyancing Miscellany (1987) (ed Cusine) entitled Warrandice in the Sale of Land Kenneth G C Reid, as he then was, said at p 158 that there are a number of circumstances in which eviction is not required for a claim to be brought. Two of them, he said, were well established and the possibility of additional categories was not excluded. Those that were well established were (1) where the buyers absence of title was caused by a second, inconsistent deed of the seller, and (2) where an action against the buyers title is raised but then settled without proceeding to decree, provided that the buyer had no stateable defence, as in Watson v Swift & Cos Judicial Factor. He observed that Stair, II, iii, 46 had reached substantially the same conclusion as Lord Morison did in that case 300 years earlier. The circumstances of the present case differ from those in Watson, because no action was raised before the negotiations were concluded. It does not fall within either of the two categories that, writing in 1987, Professor Reid recognised as well established. But it was held in Clark v Lindale Homes Ltd that the warrandice clause may still be invoked if eviction in the strict sense is threatened, provided that the threat is based on a right which is unquestionable. As for the question what the phrase a right which is unquestionable means, the editors of Professor McDonalds Conveyancing Manual 7th ed (2006), para 10.09 state that the warrandice obligation does not indemnify against loss or damage which the grantee may suffer from any cause, other than actual or constructive eviction by an adverse real right. But they cite no authority for this statement, and in his title on Property in the Stair Memorial Encyclopaedia Restatement, para 707, Professor Reid states that what is required is that the true owner of the property successfully assert his right against the transferee, adding in footnote 4 the words or, in the case of a voidable title, the person entitled to lead the reduction. This formulation suggests that, while the existence of an adverse real right is of course an essential requirement, the person who asserts that right need not actually be in possession of it when he leads the reduction or otherwise asserts the right against the grantee. Discussion As I said in para 12, above, it seems to me that the first question that needs to be addressed is whether, as the majority in the Extra Division held, the person who makes the threat has to have an unquestionable title to the subjects in other words, a right in rem at the time when he makes his threat. As I have indicated in my examination of the authorities, they do not appear to me to impose such a rigid requirement on the grantee. Some of the dicta in Clark v Lindale Homes Ltd might be taken as having that stark effect, but they can properly be regarded as obiter. Such discussion of the remedy as there is in the previous authorities concentrates on the point that, in order to bring the obligation into effect, there has to be an eviction or at least the threat of an eviction. Clearly, the party who seeks eviction or who threatens to do so must be in a position to make good his challenge to the title of the grantee. But there would seem to be no good reason why the way in which that challenge may be made good cannot be worked out, in the ordinary way, according to the circumstances of each case. To insist that the right on which the party who makes the threat has to found when he makes his threat must be a real right overlooks the fact that parties who have an undoubted interest in seeking to challenge the title of the grantee may not yet, for a variety of reasons, have registered a title to the subjects in their own name. Where proceedings are raised to obtain an order for eviction, the party who brings those proceedings will need to show that he has a title and interest to make the claim. But I do not see why, so far as the question of title to sue is concerned, that cannot take the form of an undoubted personal right against the person in whom the title to the land is vested by which that person can be required to transfer his real right to the party who has brought the proceedings or, if the proceedings are settled, to the grantee. Mr Reid QC for the pursuer accepted that the obligation of warrandice was a contractual remedy. But he submitted that, in a general sense, it was equitable in nature and that, for this reason, it should be accorded a degree of flexibility. I think that to adopt that approach would be to introduce too much uncertainty, and it sits uneasily with an underlying concept of the law of obligations. Contractual remedies are based on what the parties are to be taken to have agreed to, not what the court thinks just and equitable. But there is force in the idea that, in the working out of the contractual remedy, the law seeks to find practical solutions to the problems that the case gives rise to. That is why it does not insist on actual eviction as the only precondition for a claim under the obligation of warrandice. It accepts that, as Stair II, iii, 46 puts it, the grantee may act voluntarily to prevent the distress. He does not have to engage in pointless litigation. It is, of course, essential that the grantee transacts voluntarily with the right person with the person who has a title and interest to make good the threat. But to insist that the title must take the form of a real right at the time when the threat is made would be to deprive the remedy of utility in circumstances such as in this case, where it is said that the party who made the threat was nevertheless in as good a position to make good the threat as he would have been if the real right had already been vested in him. I would hold that to insist on this does not give full weight to the underlying purpose of the obligation as described by Stair, and that it is wrong in principle. As for what the grantee needs to show in order to establish that the threatened demand amounted to an eviction, he must, as I have just said, be able to show that he transacted with the right person. There must, of course, be a competing title which will prevail in a question with the grantee. And the party who makes the threat must be in a position to make it good if negotiations were to break down and the dispute were to proceed to the stage of an actual eviction. The grantee must, then, be able to show that the threat was capable of being made effective. But an incomplete title to the disputed subjects will be good enough if the party who makes the threat is undoubtedly in a position to compel the party in whom the real right is vested to transfer the title to him or, if the threat is compromised, to the grantee. I do not see this approach as undermining the principle that parties are entitled to transact with each other on the faith of the register, as the defender suggested. It is, of course, to the register that one must go to determine who has the real right. That does not mean, however, that a personal right against the holder of the real right must be left out of account when one is seeking a practical solution to problems of the kind that are illustrated by this case. Although the analogy is not precise, it is perhaps worth noting what is needed for there to be judicial interruption of prescription for the purposes of section 4 of the Prescription and Limitation (Scotland) Act 1973. This is because it could be said that there is an affinity between the judicial interruption of prescription, which if it were to be allowed to run on for the prescriptive period would provide the grantee with an unchallengeable title, and the obligation of warrandice. Warrandice remains latent until the conditions come into existence that give it force and effect. But it continues to affect the grantee until the possibility of adverse claims has been extinguished by the positive prescription. It is plain that a challenge to the possession which gives force and effect to the warrandice will interrupt the running of the prescription. Can it be said that a challenge which is sufficient to interrupt the running of the prescription let us say, on the day before the prescriptive period expires will be sufficient to give force and effect to the obligation of warrandice? As section 4(1) puts it, the interruption occurs when any person having a proper interest to do so makes a claim which challenges the possession in question. As David Johnston, Prescription and Limitation of Actions (1999) points out at p 296, there is nothing in the section to say that it matters who challenges possession, so long as he has a proper interest to do so. In Scammell v Scottish Sports Council 1983 SLT 462 Lord McDonald said that, had it been necessary for him to do so, he would have accepted that the challenger must put forward a competing right to possess by showing that he or someone else had a better title than the possessor. But Johnston suggests at p 296 that this was a rather narrow construction of the sorts of actions which amount to challenges of the required sort, and that it may be that it should not be treated as a universal requirement. I would be reluctant to accept, without further argument, that it is enough for there to be a valid threat for the purposes of the obligation of warrandice that the person who makes the threat should simply be able to assert in some general way that he has a proper interest to do so. But Lord McDonalds narrower construction of the expression in the statute, which Johnston is inclined to reject, has more to commend it. The paradigm case for the purposes of the law of warrandice is a judicial eviction. It is hard to conceive of a case where an eviction would be ordered unless the party by whom the proceedings were brought was able to show that he or someone else had a better title than the grantee, and it is hard to conceive of a case that was brought on the basis that the better title was vested in someone else unless the party who brought the proceedings could show that he had an interest to do so. But proof of the possession of an undoubted personal right which was immediately enforceable against the party with the real right in the subjects would seem to satisfy this requirement: see MRS Hamilton Ltd v Baxter 1998 SLT 1075, 1079C-D. On that approach it could be said that there was a measure of harmony between what I would hold was sufficient on the facts of this case to enable the pursuer to claim under the warrandice and what would have been sufficient for JCL to interrupt the running of prescription in the pursuers favour had appropriate proceedings been brought against him. Conclusion I would hold that the pursuer will be entitled to the remedy he seeks if he can prove that, when RDL yielded to the threat, JCL would have been immediately able to secure title to the disputed part in its favour by calling upon Mr Lynch to transfer the title that was vested in him and that no proceedings would have been required to secure that result. That is what he now offers to prove to make good his case that RDL would have had no defence to an action for its eviction (see para 9, above) and, assuming that the necessary amendment is made, I think that he is entitled to the opportunity of doing so. For these reasons and those given by Lord Reed I would allow the appeal, recall the Extra Divisions interlocutor, restore the temporary judges interlocutor and remit the case to the Outer House for the hearing of a proof before answer. One of the usual terms of a contract of sale of heritable property in Scotland, implied if not expressed, is a warranty against defects in the sellers title to the property sold. Such a warranty is normally contained in a warrandice clause in the disposition of the property. Usually, as in the present case, the clause is what is known as an absolute warrandice, that is to say a warranty against all defects in title which existed when the disposition was delivered. Like other contractual terms, the warrandice clause creates a personal obligation. The obligation is one of indemnity: the seller is obliged to indemnify the purchaser in respect of any loss which he may suffer. The obligation continues until the possibility of adverse claims against the purchaser has been extinguished by prescription (Welsh v Russell (1894) 21 R 769, 773 per Lord McLaren). Contrary to what might be expected, it has long been accepted that a defect in the sellers title to the property is not in itself a breach of the warrandice: no claim arises against the seller unless the purchaser is evicted from the property. The obligation to indemnify created by warrandice is therefore contingent upon eviction. The term eviction is used in this context in a special sense: actual ejection or removal from the property is not required. As Lord McLaren explained in Welsh v Russell (p 773), the obligation is designed to indemnify the purchaser not only against the consequences of complete eviction, but against the loss of the most inconsiderable fraction of the estate, or its diminution in value by reason of the establishment of a burden of any kind. It is because eviction, in this expanded sense, ceases to be possible once a purchaser with an ex facie valid title has enjoyed uninterrupted possession for the prescriptive period that the obligation continues for that period. This approach to the obligations arising under a contract of sale can be traced back to Roman law, under which the primary obligation of the seller was to deliver possession of the property sold. Provided the purchaser remained in undisturbed possession, any defect in his title could be cured by prescription. Putting the matter broadly, the purchaser therefore had no remedy for a lack of title, if the seller had acted in good faith, unless and until he was evicted in whole or in part by the true owner or, without actual eviction, lost the value of his purchase by reason of a defect in title: if, for example, he had to buy off the claim of the true owner, and thus had to pay twice for the same property. Some modern civilian systems, such as German law, have departed from this approach and impose an obligation to convey ownership; but Scots law, like French law, adheres to the older tradition, except in relation to the sale of goods, where a different rule, derived from English law, was introduced by statute. The circumstances of the present case have been fully set out by Lord Hope. Put briefly, Mr Morris offers in his pleadings to prove that RDL purchased the property in question from Mrs Rae in 2004. RDL were subsequently threatened with eviction from the property by JCL, the threat being initially made in 2005. The real right to the property was at that time held by Mr Lynch, but his title was voidable at the instance of JCL, the property having been conveyed to him by JCL in 1991 by mistake. In order to avoid eviction, RDL paid JCL 70,000, and JCL procured the grant of a disposition by Mr Lynch to RDL in 2006, which was then registered. Mr Morris brings these proceedings as the assignee of RDLs claim against Mrs Rae. On those assumed facts, a majority of an Extra Division of the Inner House considered that the action must be dismissed, on the basis that the threat of eviction must be made by a person who, at the time the threat is made, has an unquestionable title to the property, entitling him to demand immediate possession: Morris v Rae 2011 SC 654, para 13, per Lord Clarke, with whom Lord Bracadale agreed. Lord Bonomy dissented on the basis that JCLs threat of eviction could not have been resisted successfully: it would have been a waste of time of time and expense to have resisted eviction when JCL was ultimately bound to succeed (para 17). In the course of the present appeal Mr Morris has provided further information as to the facts, in order to avoid any misunderstanding which might otherwise arise from the pleadings. It appears that JCL granted a disposition of the property to RDL in March 2006, in return for the payment of 70,000. In about May 2006 Mrs Rae informed RDL, in her defences to the present action, that the title was held by Mr Lynch. JCL then contacted Mr Lynch, who acknowledged that the property had been conveyed to him in error and in July 2006 granted the disposition to RDL. I would observe that, if JCL had not procured the grant of that disposition (or a disposition by Mr Lynch to themselves, so as to cure by accretion the defect in their title to grant the March 2006 disposition), RDL would have been entitled to recover the 70,000. It would therefore be an over-simplification to say that RDL paid for a worthless disposition by JCL. In effect, there was a tripartite arrangement under which JCL, who had a right to the title to the property and were threatening RDL with eviction, procured the grant of a disposition to RDL by Mr Lynch, who held the title but was bound to divest himself of it when called upon to do so by JCL, in return for RDLs allowing JCL to retain the 70,000 which had previously been paid to them; and that disposition cured the defect in RDLs title and removed the threat of eviction. This further information does not appear to me to alter the fundamental features of the case as pleaded. Mrs Rae disputes Mr Morriss version of events, and has also put forward some additional information in the course of the appeal. The question however is whether Mr Morris is bound to fail on the assumed facts which he offers in his pleadings to prove. The fact that his averments are disputed is not germane to that question. The critical question in the appeal, therefore, is this: what characteristics does the law insist on for a threat of eviction, to which the purchaser accedes by buying off the threat, to trigger the sellers liability to indemnify the purchaser under the warrandice? In particular, is it essential that the threat of eviction should be made by a person who has at that time a title to the property, as the majority of the Extra Division considered? Or can a personal right ever be sufficient? If so, in what circumstances may it be sufficient? In reaching the conclusion which they did, the majority of the Extra Division relied upon dicta in Clark v Lindale Homes Ltd 1994 SC 210. In that case, Lord President Hope concluded (p 220) that since the pursuer did not aver that any action had been taken against her by the party with the competing title, the action should be dismissed; and Lord Morison said (p 224) that a threat of eviction could only come as a result of a demand from the competing title-holder, for no one else has any right, let alone an unquestionable right, to make it. These dicta must however be read in their context. The issue with which the court was concerned was whether the seller could be liable under the warrandice where a defect in title had been identified by the Keeper of the Registers but there had been no action whatsoever taken against the pursuer in consequence of the defect. The court was not concerned with the precise interest which had to be held by the competing title-holder, nor with the question whether there might be circumstances in which a person who currently had no title to the property might nevertheless be able to challenge the purchasers title. As there does not appear to be any judicial authority directly in point, it is appropriate to begin by considering the relevant principles. Stair states in his Institutions of the Law of Scotland, II.iii.46: The effect of warrandice is, the up-making of what is warranted, in so far as it is evicted, and the ordinary procedure in it is, when any suit is moved whereon eviction may follow, intimation is made to the warrender of the plea, that he may defend; and if eviction follow, and distress thereby, declarator of distress, and action of warrandice for relief, is competent. Also it is effectual for decerning the warrender to free the thing warranted of that which will undoubtedly infer a distress, though it hath not actually done it Yea, warrandice will take effect where there is an unquestionable ground of distress, though the fiar transacted voluntarily to prevent the distress. And though no intimation be made of the plea inferring distress, yet the warrandice taketh effect, unless the warrender had a relevant defence, and could instruct the same. The second sentence in this passage indicates that the sellers liability under the warrandice can be enforced in advance of actual distress, where a defect in title has emerged which will undoubtedly infer a distress. The last two sentences indicate that the seller will be liable under the warrandice where the purchaser buys off the threat of eviction, provided there is an unquestionable ground of distress. The purchasers failure to inform the seller will not prevent recovery under the warrandice unless the seller had a relevant defence to the threatened eviction. These principles have been applied in numerous cases. Two examples can be given. In Downie v Campbell, 31 January 1815, FC, the pursuer had been granted a lease to commence at a future date, with absolute warrandice, by an heir of entail. The heir of entail having subsequently forfeited his right to the estate before the commencement of the lease, the next heir declined to implement the lease. The pursuer did not contest the threat of eviction and did not intimate the threat to the granter of the warrandice, but was held entitled to recover. Lord Meadowbank, with whom the other members of the court agreed, said that the idea that the pursuer should have maintained her title was quite untenable. In Menzies v Queensberry Executors (1832) 11S 18, a tenant was held to be entitled to be indemnified under his landlords warrandice after the lease of another tenant, in identical circumstances, had been set aside in a test case. The fact that no proceedings had been taken against him, and that he had not intimated the threat to the landlord, was not a bar to recovery. Lord Cringletie observed (p 20) that it is clear that any one may abandon a subject where the right is indefensible, and it is not necessary to entitle him to damages as for eviction, that he shall have given intimation, unless the granter could show that he could have defended successfully. It is also relevant to note what was said on this subject by Pothier, whose legal writings influenced the development of the Scots law of obligations during the eighteenth and nineteenth centuries. His Trait du Contrat de Vente (1762), in particular, was extensively cited in Mungo Browns A Treatise on the Law of Sale (Edinburgh, 1821). In his treatise, Pothier states at para 84 that if a buyer pays a sum in order to prevent the loss of the estate, which he would otherwise be unable to preserve, he is entitled to recover the amount which he paid from the seller. Pothier also states at para 95 (as translated by L S Cushing, Pothiers Treatises on Contracts, Boston, 1839, Vol 1, p 55): An abandonment of the thing sold by the buyer, though without sentence [ie without a judicial decision], to a third person, who, at the time of the contract, was the owner of it, or, who, at that time, had at least an inchoate right to compel the buyer to abandon it, gives rise to a warranty, provided the buyer can prove, that the person, to whom he abandoned, really had the right which he claimed. Pothier explains the rationale of this approach as follows (para 96): The equity of this maxim is evident. Though the term eviction, in its proper sense, is applicable only to the abandonment, which one is condemned to make, by a sentence of the judge; yet, when it is proved, that the party, to whom the buyer without any sentence makes an abandonment of the thing, has a right to compel it, and that it is made only for the purpose of forestalling and avoiding the expense of a sentence, it is manifest, that in this case, it is not in the power of the buyer to retain the thing; and, consequently, that the seller does not fulfil his obligation, praestare ipsi rem habere licere, which gives rise to the warranty. These various sources agree that the ground of challenge to the purchasers title must be unquestionable, or looking at the other side of the coin that the purchasers right must be untenable or indefensible. Counsel for Mrs Rae argued that this requirement should be interpreted as meaning that there must be no stateable defence to proceedings against the purchaser. In support of that contention, reliance was placed upon Palmer v Beck 1993 SLT 485, where Lord Kirkwood said at p 488 that a claim for breach of warrandice could arise if there was a real threat of eviction, as, for example, when the true owner raises proceedings seeking to evict the purchaser and there is no stateable defence to the action. It is to be noted however that this was merely an example: Lord Kirkwood went on to say (ibid) that what constituted a threat of eviction giving rise to a claim for breach of warrandice must depend on the circumstances of each individual case. I respectfully agree. Counsel also relied upon a dictum in Holms v Ashford Estates Ltd 2009 SLT 389, where Lord Eassie, delivering the opinion of the court, said (para 45) that one way of putting the requirement that the defect in title be unquestionable was by posing the question whether, were proceedings to take place between the party to whom warrandice had been granted and the competing proprietor, it could immediately be affirmed that the title of the competing proprietor was so plainly preferable as to render the position of the party claiming warrandice unstateable. In other words, Lord Eassie added, there would be nothing that could properly be disputed or argued in such a hypothetical action on behalf of the person to whom the warrandice has been granted. That dictum goes beyond what had been stated in the earlier authorities I have mentioned, and in my opinion it sets too demanding a standard. Pothier requires only that it be proved that the challenger has a right to evict the purchaser: an objective test. Stair can be understood in the same sense. That is also consistent with the approach adopted in Clark v Lindale Homes Ltd. In that case Lord President Hope said (p 216) that the unquestionable nature of the competing title was a fact which could be demonstrated by proof; and his Lordship also observed (ibid) that the warrandice is breached when there is shown to be a competing title which will inevitably prevail in competition with that which has been given to the purchaser. This approach does not depend on whether some argument might be devised by way of a defence to a challenge, but upon whether a defence would inevitably fail. The approach adopted in the passages which I have cited from Stair and Pothier is practical and realistic. If the purchaser of land is facing the prospect of undoubted eviction, even if it is not imminent, he has an immediate practical problem. He cannot, for example, let the land to a tenant for its full value, since he cannot himself grant warrandice; he cannot spend in safety the rent received from any existing tenant, since he is liable to have to account for it to a third party; and he cannot sensibly sow crops, since a third party may be entitled to harvest them. It is important for him to be able to resolve the practical problems arising from the defect in his title as soon as he can. Furthermore, where eviction is threatened and the threat is unquestionably capable of being put into effect, the purchaser has no realistic alternative but to accede to it. To defend his title would be a waste of time and money. That may be so even where the person threatening eviction is not currently vested in the property, if for example he has an unqualified right to demand an immediate conveyance of it. In most cases, the threat of eviction will arise because the purchasers right to the property is challenged by a person who has at that time a title to the property. There is not however an invariable requirement that the challenger must have a title, in the ordinary sense of a right of property (whether in rem or ad rem), in order to be able to evict the purchaser, let alone to threaten eviction. One situation where there is no such requirement is where the purchasers title is voidable, and the challenger is a person entitled to have it set aside. In the present case, for example, supposing that Mr Lynchs title was voidable at the instance of JCL, as is averred, and further supposing that he had granted to a third party a disposition of the property other than bona fide and for value, then the third partys title would be voidable at JCLs instance, notwithstanding that JCL had no title to the property. In the event that Mr Lynch had granted absolute warrandice to the third party, a claim would surely lie under the warrandice notwithstanding that the threat of eviction had been made by a person without a title. It might however be argued that the situation is different where the only ground of challenge to the purchasers title arises from a competing title, and the challenger is not the person holding that title. In most cases, no doubt, the person holding that title will be the only person with any title or interest to challenge the purchasers right to the property, and therefore the only person whose challenge, if resisted, can give rise to liability under the warrandice; and, if a challenge cannot give rise to liability under the warrandice if it is resisted, it can hardly give rise to liability if it is acceded to. Three considerations however support the view that it need not invariably be the case that only a person holding a competing title can effectively challenge the purchasers title and thereby trigger liability under the sellers warrandice. First, it is consistent with the principles stated by Stair and Pothier that the seller should be liable under the warrandice in a case such as the present. On the facts as averred by Mr Morris, there was an unquestionable ground of distress, as RDLs title to the disputed property was unquestionably defective; and the threat of eviction made by JCL, in consequence of that defect, would undoubtedly infer a distress, even if it was necessary for JCL to obtain a conveyance from Mr Lynch or rectification of their disposition to him before distress would actually occur. RDLs title to the disputed property could properly be described as indefensible. Secondly, as I have explained, the rationale of the laws permitting a purchaser who accedes to a threat of eviction, without any judicial determination, to recover under the warrandice is essentially practical. It reflects the undesirabililty of pointless delay and expense, and pointless litigation, where eviction is ultimately inevitable. Where the title competing with the purchasers title is vested in person A, the fact that the threat of eviction is made by person B does not preclude the possibility that the purchaser may have no realistic alternative but to accede to the threat. In particular, if person B has an unqualified right to demand from person A an immediate transfer of the title vested in him if, for example, person As title is voidable at the instance of person B - then no useful purpose will be served by requiring the purchaser to resist the threat until person B has exercised his right against person A and obtained the title: the only practical result of such a requirement would be pointless delay in the resolution of the purchaser's difficulties while the formalities required for the transfer of the title from person A to person B were completed, together with pointless expense and, possibly, pointless litigation. Thirdly, in such a situation, it would be unrealistic, if not perverse, for the law to maintain that the purchaser can rely upon the sellers warrandice if he accedes to a threat by person A, but not by person B, since on the face of things the former has no real interest in threatening eviction, while the latter has an interest, although he has not yet obtained a title to the property. The concept of title, in the context of a title to property, is not however the same as the concept of a title to sue; and it would be a misunderstanding to suppose that only a person who has a title to property can ever have a title to sue to enforce rights in respect of that property. There is a line of authority establishing that there are circumstances in which proceedings may be brought by a person who does not at that time hold the right on which the proceedings are based, provided he has an undoubted entitlement to obtain the right and does so pendente processu. This matter was discussed in the case of Westville Shipping Co Ltd v Abram Steamship Co Ltd 1923 SC (HL) 68, [1923] AC 773, in which the defenders had assigned to the pursuers their rights as the purchasers of a ship under construction. The pursuers had in turn assigned the rights to a third party. Both assignations were voidable on the ground of error. The third party brought proceedings in England against the pursuers to have the second assignation set aside, and the pursuers then brought proceedings in Scotland against the defenders to have the first assignation set aside. The third party subsequently obtained judgment by consent in the English action. The pursuers were held to have had a title to bring the Scottish proceedings notwithstanding the fact that they were not entitled to have the first assignation set aside at the time when the proceedings were commenced, since the second assignation had not at that point been set aside. The matter was most fully considered in the Court of Session by Lord President Clyde, whose opinion was approved in the House of Lords. The Lord President said (1922 SC 571, 583): But the genuine and bona fide character of the English proceedings is not challenged; and, if the pursuers had no good answer to the sub- assignees' action, I cannot see that they were bound to postpone raising action in this court until the rescinding order was actually pronounced. All that actually stood between them and reinstatement in the benefits of the builders' contract was the pronouncement of this order which the sub-assignees were moving the English court to make, and which, if the above stated hypothesis is correct, the pursuers had no means of resisting. I think in these circumstances the pursuers may properly be regarded as having a substantial title to sue, and as being substantially in a position to offer restitution to the defenders. If this be so, the circumstance that the substantial right was not actually completed at the initiation of proceedings is not material. The Westville Shipping Co case is not on its facts an exact parallel to the present appeal, since the pursuers in that case were all along parties to the assignation which they challenged, but were not entitled to have it set aside so long as the second assignation, which depended upon the first, remained in force. The approach described by the Lord President has however been applied in a range of other situations which are closer to the present case. In the case of Doughty Shipping Co Ltd v North British Railway Co 1909 1 SLT 267, for example, a pursuer who had paid out the original creditors of the defender, and therefore had an entitlement to receive an assignation of their rights, did not obtain the assignation until after the proceedings had been commenced, but was held to have had a title to sue. That decision was followed, on similar facts, in the case of Lanarkshire Health Board v Banafaa 1987 SLT 229. The same conclusion was reached in Tayplan Ltd v D & A Contracts 2005 SLT 195, an action for breach of copyright in which the pursuers did not own the copyright at the time when the action was raised, but had a right to have it assigned to them. Lord Kingarth held that a clear and unqualified personal right to demand an immediate assignation of the copyright, as he described it (para 19), was sufficient to confer a title to sue. Returning therefore to the questions which I posed in para 39, it would in my opinion be just and rational for the law to answer that it is not always essential that the threat of eviction should be made by a person who has at that time a title to the property. The test which one might expect, as a matter of principle, is that the purchaser must, objectively, have no realistic alternative but to accede to the threat of eviction. Whether such an alternative exists in particular circumstances must be a matter of judgment on the facts. That judgment would have to be made by the court, in the event that the purchaser acceded to the threat and the seller subsequently disputed his liability under the warrandice. It is likely that no such alternative will exist in a situation where the person making the threat has an unqualified entitlement, exercisable immediately, to demand a transfer of the title currently vested in another person, and upon such a transfer will indubitably be entitled to evict the purchaser. Applying that approach to the present case, Mr Morris offers in his pleadings to prove that JCL were entitled to require Mr Lynch to grant them a corrective disposition, as an alternative to proceedings for the reduction or rectification of the disposition in his favour, to which there would have been no possible defence. In substance, therefore, Mr Morris is offering to prove that JCL had an unqualified entitlement, exercisable immediately, to demand a transfer of the title vested in Mr Lynch. He also offers to prove that, upon such a transfer, RDL would have had no defence to JCLs threat of eviction. In these circumstances he has in my opinion set out a relevant case against Mrs Rae. For these reasons, and those given by Lord Hope, I would allow the appeal. To one still largely unfamiliar with the intricacies of Scottish conveyancing and Scottish civil procedure, it is surprising that the soundness of the appellants claim for damages for breach of warrandice should depend, not on the assumed truth of the elaborate pleading which is before the Court, but on the assumed truth of a different pleading which has not been formulated even in draft. The more so as the rather random selection of documentary evidence which the parties have placed before the Court appears to raise doubts as to the correctness of both the existing pleading and its suggested replacement. Neither deals with Mr John Lynchs sale (for a nominal consideration) of the disputed land (together with other land) by a disposition made on 17 June 2002 in favour of himself and two co-trustees. Neither explains the references to two different companies, James Craig Ltd and James Craig (Farms) Ltd. Neither adverts to rectification being, in Scotland as in England, a discretionary remedy. These difficulties cannot however amount to grounds for a principled dissent. The appeal must be allowed for the reasons given by Lord Hope and Lord Reed. For the reasons given in the judgments of Lord Hope and Lord Reed, we too would allow the appeal.

In 2004, the Respondent, Mrs Rae, sold land to Ransom Developments Ltd (RDL). Her disposition contained the words and I grant warrandice. In Scots law, warrandice is a contractual warranty of title given impliedly if not expressly by a seller to a purchaser. The seller will only be obliged to indemnify the purchaser in respect of losses suffered as a result of a defect in title if the purchaser is evicted from the property, although actual removal is not required. In this case, the warrandice was absolute, meaning that a warranty was given against all defects in title at the time the disposition was delivered. When RDL attempted to complete its title to the land by registering it in the Land Register of Scotland, the Keeper of the Registers informed RDLs solicitors that the Respondent had never had title to part of the land which she had sold to RDL. That part (the disputed part) was truly owned by James Craig Ltd (JCL). The title to the disputed part was in fact held by a Mr Lynch, the disputed part having been transferred by JCL to him in error in 1991. In 2005, JCL threatened to evict RDL from the land. RDL paid 70,000 to JCL to avoid eviction. JCL procured the grant of a disposition of the disputed part by Mr Lynch to RDL in 2006. RDLs title to the land (including the disputed part) was then registered. In 2007 RDL went into liquidation and assigned its rights to the Appellant, Mr Morris. These were the basic facts which the Appellant offered to prove in his action against the Respondent for breach of warrandice. There has not yet been an evidential hearing. At a preliminary stage, the Respondent attacked the relevancy of the Appellants case, arguing that even if the Appellant proved everything that he offered to prove, he could not succeed in his claim. Following a debate, the Temporary Judge (Rita Rae QC) rejected this argument and allowed the case to proceed. The Respondent successfully reclaimed (appealed) to an Extra Division of the Inner House of the Court of Session, who by a majority dismissed the action as irrelevant. [48 and 3336] In the course of his appeal to the Supreme Court, the Appellant offered to prove that when JCL made the eviction threat, RDL and JCL both believed that JCL held title to the disputed part, neither being aware that the title had in error passed to Mr Lynch; that if the error had been discovered, JCL would have been immediately able to secure title to the disputed part from Mr Lynch; and that no proceedings or proof of title would have been required to establish JCLs title to the disputed part. All the facts which the Appellant offers to prove are assumed for the purposes of the appeal which is concerned with whether or not the Appellant is entitled to prove his case. [910 and 3738] The issues in the appeal are whether the person who makes the threat of eviction has to have an unquestionable title to the property at the time when the threat is made and, if not, what the purchaser in those circumstances has to show in order to trigger the sellers liability under the warrandice. [12, 24 and 39] The Supreme Court unanimously allows the appeal. The Appellant is entitled to the opportunity to prove his case. The leading judgments are given by Lords Hope and Reed, who agree with each other, and with both of whom Lords Walker, Sumption, and Carnwath agree. It is not always essential that the threat of eviction should be made by the person who has a title to the property at the time when the threat is made. This is consistent with principle and the practical purpose and rationale of the law of warrandice, which, in order to avoid pointless delay, expense and litigation, permits a purchaser who accedes to a threat, without any judicial determination, to claim against the seller for breach of warrandice. It would be wrong if the law were to maintain that the purchaser can rely on the sellers warrandice only if he accedes to a threat made by the title holder who may have no interest in evicting the purchaser and not a third party who, although not yet having obtained title, has an interest in evicting the purchaser. [2526, 4952 and 56] There must of course be a competing title which will prevail in a question with the purchaser. If the purchaser buys off the threat, he must be able to show that he transacted with the right person (being the person who has a title and interest to make good the threat) and that the threat was capable of being made effective. It will be good enough for the person making the threat to have an incomplete title if he is undoubtedly in a position to compel the title holder to transfer the title to him or, if the threat is bought off, to the purchaser. [2627] In other words, the purchaser must, objectively, have no realistic alternative but to accede to the threat of eviction. Whether such an alternative exists in particular circumstances must be a matter of judgment on the facts. It is likely that no such alternative will exist in a situation where the person making the threat has an unqualified entitlement, exercisable immediately, to demand a transfer of the title currently vested in another person, and upon such a transfer will undoubtedly be entitled to evict the purchaser. [56] In the present case, the Appellant is offering to prove that JCL would have been immediately able to secure title to the disputed part without the need for proceedings by demanding a transfer of the title vested in Mr Lynch, and that RDL would have had no defence to JCLs threat of eviction. He has therefore set out a relevant case against the Respondent. [32 and 57]

This is a test case brought against the Commissioners for Her Majestys Revenue and Customs (HMRC) by the Prudential Assurance Co Ltd (PAC). PAC is a typical United Kingdom-resident recipient of dividends on portfolio investments overseas, representing less (usually much less) than 10% of the relevant overseas companies share capital. The issues originate from two features of the UK tax position in the period 1990 to 1 July 2009. First, throughout that period dividend income received from overseas investments was in principle taxable, subject (as will appear) to certain reliefs. Second, until 6 April 1999 Advance Corporation Tax (ACT) was levied on dividends distributed to UK companies shareholders. The scope of the issues arising from these features and open on this appeal is, as will appear, itself in some dispute, but the appeal on any view involves a number of conceptually difficult points. The principal issues on this appeal can be summarised as follows: I. Does EU law require a tax credit in respect of overseas dividends to be set by reference to the overseas tax actually paid, or by reference to the foreign nominal tax rate (FNR)? II. Is PAC entitled to compound interest in respect of tax which was levied in breach of EU law, on the basis that HMRC were unjustly enriched by the opportunity to use the money in question? III. Subject to HMRCs being granted permission to argue the point, does a claim in restitution lie to recover lawful ACT which was set against unlawful mainstream corporation tax (MCT)? IV. If the answer to (I) is that EU law requires a tax credit to be set by reference to the overseas tax actually paid, PAC seeks permission to cross- appeal on the following question: should the charge to corporation tax on the foreign dividend income under Case V of Schedule D (Income and Corporation Taxes Act 1988 (ICTA), section 18) (DV tax) be disapplied, or should PAC be allowed to rely on FNRs, or on consolidated effective tax rates, as a simplification or proxy for tax actually paid? If HMRC are granted permission to argue Issue III, PAC seek V. permission to cross-appeal on the following questions: (a) where ACT from a pool which includes unlawful and lawful ACT is utilised against an unlawful MCT liability, should the unlawful ACT be treated as a pre-payment of the unlawful MCT liability, or is the ACT so utilised to be treated as partly lawful and partly unlawful; and (b) where domestic franked investment income (FII) was carried back to an earlier quarter, is it to be treated as having been applied to relieve the lawful and unlawful ACT pro rata, or only lawful ACT? Issue I The first issue - Issue I - arises from the approach adopted by UK law in order to avoid or mitigate double taxation of dividends. It is now clear that this was inconsistent with EU law, but in what precise respects and what is due by way of restitution or compensation are live issues. The inconsistency with EU law arose as follows. Domestically, dividends received by one UK-resident company, the source of which was a distribution made by another UK-resident company, were exempt from tax under section 208 of ICTA. The effect is that corporation tax was only levied once, on the latter company which made the profit out of which it distributed the dividend to the former company. In contrast, dividends received by a UK-resident company, the source of which was an overseas company, were in principle subject to DV tax. But where the UK-resident company controlled a certain percentage of the voting power of the relevant overseas company (typically 10%), certain relief was given for foreign tax paid on the underlying profits out of which such dividends were paid. This was done either pursuant to a double taxation treaty or unilaterally under ICTA, section 790. No relief against DV tax was however afforded in respect of portfolio investments, that is investments involving lesser percentage holdings. In Metallgesellschaft Ltd v Inland Revenue Comrs; Hoechst v Inland Revenue Comrs (Joined Cases C-397/98 and C-410/98) EU:C:2001:134; [2001] ECR I-1727; [2001] Ch 620, the European Court of Justice (CJEU) held that the unharmonized domestic tax regime fell under the EC Treaty, and could therefore be challenged if inconsistent with a Treaty provision. Pursuant to a group litigation order dated 30 July 2003, PAC was on 13 November 2003 appointed to conduct the present test case, in which PACs primary contention has been that the UK tax position is inconsistent with article 63 of the FEU Treaty. Article 63FEU (ex article 56 of the EC Treaty) provides: 1. Within the framework of the provisions set out in this Chapter, all restrictions on the movement of capital between member states and between member states and third countries shall be prohibited. 2. Within the framework of the provisions set out in this Chapter, all restrictions on payments between member states and between member states and third countries shall be prohibited. At an early stage in the present case, a reference to the CJEU was found necessary. But, before that reference was heard, the CJEU determined a separate UK reference, in Test Claimants in the FII Group Litigation v Inland Revenue Comrs (Case C-446/04) EU:C:2006:774; [2006] ECR I-11753; [2012] 2 AC 436 (FII ECJ I - FII standing for franked investment income). In it, the CJEU held, at paras 1 and 2 of the operative part: 1. where a member state has a system for preventing or mitigating the imposition of a series of charges to tax or economic double taxation as regards dividends paid to residents by resident companies, it must treat dividends paid to residents by non-resident companies in the same way. [The Treaty provisions] do not preclude legislation of a member state which exempts from corporation tax dividends which a resident company receives from another resident company, when that state imposes corporation tax on dividends which a resident company receives from a non-resident company in which the resident company holds at least 10% of the voting rights, while at the same time granting a tax credit in the latter case for the tax actually paid by the company making the distribution in the member state in which it is resident, provided that the rate of tax applied to foreign-sourced dividends is no higher than the rate of tax applied to nationally- sourced dividends and that the tax credit is at least equal to the amount paid in the member state of the company making the distribution, up to the limit of the amount of the tax charged in the member state of the company receiving the distribution. Article [63FEU] precludes legislation of a member state which exempts from corporation tax dividends which a resident company receives from another resident company, where that state levies corporation tax on dividends which a resident company receives from a non-resident company in which it holds less than 10% of the voting rights, without granting the company receiving the dividends a tax credit for the tax actually paid by the company making the distribution in the state in which the latter is resident. 2. [The Treaty provisions] preclude legislation of a member state which allows a resident company receiving dividends from another resident company to deduct from the amount which the former company is liable to pay by way of advance corporation tax the amount of that tax paid by the latter company, whereas no such deduction is permitted in the case of a resident company receiving dividends from a non-resident company as regards the corresponding tax on distributed profits paid by the latter company in the state in which it is resident. This ruling was re-affirmed in the Reasoned Order by which the CJEU disposed of the reference made by the High Court in the present case: Test Claimants in the CFC and Dividend Group Litigation v Inland Revenue Comrs (Case C- 201/05) EU:C:2008:239; [2008] ECR I-2875; [2008] STC 1513. The issue of a Reasoned Order, without a formal Advocate Generals opinion and with the same juge rapporteur involved as in FII ECJ I, indicates that the CJEU saw the position as relatively straightforward. In the light of these two decisions of the CJEU, it is common ground that the UKs treatment of overseas dividends was incompatible with EU law. In a judgment in the present case, Prudential Assurance Co Ltd v Revenue and Customs Comrs [2013] EWHC 3249 (Ch); [2014] STC 1236, Henderson J held (para 148) that the appropriate means of rectifying this was for PAC to be accorded an appropriate tax credit. (This was on the basis that a complete exemption from UK corporation tax would go further than the CJEU had stated that EU law required.) HMRC also accept that PAC is entitled to repayment or restitution of any corporation tax unlawfully charged as a result of the incompatibility: Amministrazione delle Finanze dello Stato v SpA San Giorgio (Case C-199/82) [1983] ECR 3595 (San Giorgio). However, the amount to be awarded depends significantly on issues of EU law and domestic law which are either open or which HMRC seek to raise on this appeal. Issue I is whether the credit in respect of overseas dividends should under EU law be set by reference to the overseas tax actually paid, as HMRC submit, or by reference to the foreign nominal tax rate (FNR), as PAC submits. HMRC rely in this connection upon the CJEUs judgments in FII ECJ I and on its Reasoned Order in the present case, as well as upon a further judgment of the CJEU in Haribo Lakritzen Hans Riegel BetriebsgmbH v Finanzamt Linz and sterreichische Salinen AG v Finanzamt Linz (Joined Cases C-436/08 and C-437/08) EU:C:2011:61; [2011] ECR I-355; [2011] STC 917. In all three cases, the juge rapporteur was Judge Lenaerts, now the President of the CJEU. In HMRCs submission, these cases demonstrate, first, a difference in principle between portfolio investments, such as PAC held, and non-portfolio investments, conferring a significant measure of control, and, secondly, that at any rate in relation to portfolio investments the credit to be imputed to PAC is in respect of the actual tax incurred overseas. In response, PAC relies upon a later CJEU decision in the FII litigation, Test Claimants in the FII Group Litigation v Revenue and Customs Comrs (formerly Inland Revenue Comrs) (Case C-35/11) EU:C:2012:707; [2013] Ch 431 (FII ECJ II). Judge Lenaerts was once again the juge rapporteur. In this judgment, PAC submits, the CJEU refined its jurisprudence to require the use of the FNR in respect of all dividends received by PAC from overseas. HMRC in reply point out that FII ECJ II was concerned essentially with non-portfolio dividends, and criticise some aspects of its reasoning, particularly its treatment of Haribo. Finally, HMRC submit that the European legal position is unclear, and requires a further reference to the CJEU. There are further issues which HMRC seek to attach to Issue I. The first, identified before us as issue 4 CA, is whether, when considering the relevant overseas tax position, attention should focus on the overseas company directly responsible for the remission of the dividend to the UK (the overseas waters edge company) or on the overseas company (or companies) responsible for generating the profits out of which such dividend was paid and on which it (or they) paid tax overseas. The second issue, which HMRC submit that the Supreme Court should take into account, was identified as issue 6 CA, and is whether any difference has been shown to exist between the effective rate incurred by domestic companies declaring dividends to PAC and the nominal rate payable by UK companies. This is relevant, HMRC submit, because the existence of such a difference was a reason why the CJEU indicated in FII ECJ II that it was appropriate to give a credit for the FNR, rather than the actual tax, incurred on an overseas dividend. PAC submits that neither of issues 4 CA and 6 CA is open in this court. The Court of Appeal refused permission for either issue to be raised before it, and neither issue is properly part of or essential to the resolution of Issue I. The CJEU in FII ECJ I and in its Reasoned Order in the present case clearly established that the discrimination involved in the UKs arrangements for taxation of dividends sourced domestically and from overseas could be resolved by a mixed system, whereby dividends with a domestic source remained exempt, while credit was given against DV tax for tax actually incurred overseas on dividends received from overseas. HMRC point out that the CJEU in FII ECJ I addressed separately the position of dividends received from non-portfolio and from portfolio companies. In relation to the former, the question arose whether a mixed system of exemption in respect of domestically sourced dividends coupled with a credit in respect of dividends received from overseas was compatible with EU law. The CJEU dealt with this at paras 46 to 57. The claimants drew attention to the situation arising if, under the relevant UK legislation, such an exemption was granted in respect of a nationally- sourced dividend received from a company which for some reason had no corporation tax liability or paid corporation tax at a lower rate than the normal UK rate (para 54). The CJEU understood the UK Government to explain that this arose only exceptionally (para 55), and on that basis contented itself with saying (para 56): In that respect, it is for the national court to determine whether the tax rates are indeed the same and whether different levels of taxation occur only in certain cases by reason of a change to the tax base as a result of certain exceptional reliefs. The inference seems to be that, were a significant difference to exist between the effective rate of tax paid by the UK source of the dividend (eg because of some relief or allowance available to the company which was the source of the dividend) and the nominal rate of tax to which the exemption under section 208 of ICTA applied, then a system of credit in respect of overseas-sourced dividends which limited the tax credit to tax actually paid overseas (ie the effective rate of tax) would not be consistent with EU law - because the overseas-sourced dividend would remain liable for any DV tax chargeable after the credit had been taken into account. In other words, the overseas-sourced dividend would not be enjoying, under the tax credit system, any relief or allowance which had reduced the tax actually paid on it, whereas the UK-sourced dividend would enjoy any such relief or allowance. In respect of portfolio dividends, the CJEU faced a more fundamental objection. The UK system was inherently discriminatory, because it failed to give any credit at all for overseas tax paid (paras 61 to 72). The CJEU gave short shrift to the UK Governments argument that practical difficulties in ascertaining the tax actually paid justified a different system for portfolio dividends. It does not however follow from the separate treatment of non-portfolio and portfolio holdings in FII ECJ I that the CJEU saw any significant difference between them regarding the manner in which the deficiencies in the UK tax system needed to be addressed. It is true that the judgment in Haribo in February 2011 concerned portfolio dividends; following FII ECJ I and the Reasoned Order in the present case, it spoke of the need to credit tax actually paid. But it was only in FII ECJ II, where the focus was on non-portfolio holdings, that the CJEU identified the FNR as a more relevant criterion in any context. That therefore in no way indicates that the FNR is not also relevant to portfolio investments. As a matter of logic and principle, there seems no basis in this connection for any distinction between portfolio and non-portfolio holdings, when applying the mixed system of domestic exemption coupled with a credit in respect of overseas- sourced dividends to each. Rather than concentrating on the practical difficulties advanced before the CJEU in FII ECJ II, HMRC now suggest that there are important differences in the approaches and expectations which investors would have with regard to portfolio investments, when compared with non-portfolio investments. There are of course differences between holdings giving a degree of control and smaller holdings, but it is not obvious what relevance they have to the question of central interest on this appeal: that is, the proper treatment of domestically-sourced and overseas-sourced dividends so as to avoid unfair discrimination between them. The CJEUs change of approach in FII ECJ II arose from correction of the misunderstanding evidenced in paragraph 54 in FII ECJ I. Far from being exceptional, it had been established conclusively that it was commonly the position in the UK that a companys effective rate of tax was (due for example to group relief, or the carry forward of trading losses or other reasons) less than the nominal tax rate, and on that basis it was held that the UK tax system infringed what is now article 63: Test Claimants in the FII Group Litigation v Revenue and Customs Comrs [2008] EWHC 2893 (Ch); [2009] STC 254 (FII High Court I), affirmed [2010] EWCA Civ 103; [2010] STC 1251 (FII CA). Pursuant to an order for a further reference made by Henderson J on 20 December 2010, it became necessary for the CJEU to address the implications. The European Commission in written submissions in FII ECJ II said (para 28) that in circumstances where the effective rate borne by the company making the profits from which the dividend came was lower than the nominal rate: 28. to exempt domestic dividends (which in effect amounts to giving credit for the full amount of tax at the statutory rate even where this full amount has not been paid) while giving credit only for the actual amount of tax paid in respect of the profits giving rise to foreign dividends results in more favourable treatment for domestic dividends. The Commission drew from this (para 29) that: 29. It can no longer be said that the credit method is equivalent to exemption, because foreign dividends receive less favourable treatment than domestic dividends. To understand why, let us imagine identical resident and non- resident companies which each have revenues of 100 and have, say, a loss carry-forward of 50. The tax rate is 30% in both the source and residence states. A company which is a shareholder in the resident company and receives a dividend from it will have no further tax obligation, even though that company has paid only 15 in tax (that is, has an effective rate of 15%). A shareholder in the non-resident company will receive a credit equivalent to only 15% and will have to pay an additional 15%. The same result will ensue where both states grant, for example, an identical research and development incentive. That is not equal treatment, and it constitutes a serious obstacle to outward investment. The Commission then discussed how the problem might be addressed (paras 31-34): 31. In such circumstances there seem to the Commission to be two ways of ensuring equal treatment. One is to exempt both domestic and foreign dividends. That solution has the drawback, as outlined above, that it may permit excessively favourable treatment of foreign dividends where the tax rate in the source state is lower than in the United Kingdom. The other, which is wholly consistent with the courts reasoning in Case C-446/04 [FII ECJ I], is to have regard solely to the nominal rate of tax in calculating the tax credit on foreign dividends. 32. That is to say, recipients of such dividends should receive a tax credit representing the amount which would flow from the application of the nominal rate of tax in the source state to the accounting profits of the distributing company. Such a measure would correspond more truly to the exemption of domestic dividends, since the latter amounts in effect to the grant of a credit for tax at the nominal rate. The court has seen and approved a measure of this kind in Joined Cases C-436/08 and C-437/08 Haribo, judgment of 10 February 2011 see point 99 of the judgment. It would no doubt be desirable for a member state applying such a measure to insert a safeguard clause limiting its scope to dividends distributed by a company which is subject to the normal system of taxation in the source state. 33. It should be noted that such a measure would also alleviate to a very large extent the administrative burden faced by taxpayers in relation to foreign dividends, especially taxpayers with small shareholdings. 34. Such a solution does not ensure substantive equal treatment in all cases. In particular, where the tax system in the source state is a simple one in which the effective rate is systematically the same as the nominal rate (because the tax base is constituted by accounting profits, with no modifications), foreign dividends will treated less favourably than domestic dividends, since the latter will benefit from any tax advantages enjoyed by the distributing company. However, to ensure full substantive equal treatment would require systematic re-calculation of the tax position of the foreign company - essentially a simulation of the tax which it would have paid were it resident in the United Kingdom. Such an approach seems impractical. The solution advocated by the Commission ensures formal equality of treatment, is easy to apply and achieves a fair result. It is worth noting in passing para 33. The Commission evidently had no doubt about the relevance of its proposed solution to overseas portfolio holdings. It was a neat solution which evidently appealed to the juge rapporteur, who (according to the informal transcript with which the Supreme Court has been supplied) put to counsel for the UK a series of points, starting with this very simple question: does such an exemption system not in fact come down to as Mr Lyal said, tantamount to a credit system applied at the normal rate of tax applicable to the taxing of those dividends with the shareholding company? Judge Lenaerts went on to put that an exemption system does more than a system crediting tax actually paid, because It gives more relief than the tax actually paid by the distributing company and when you say that you have an exemption system, in fact, you exonerate from any tax liability, you exempt from any tax liability, the shareholding companies at the rate applicable to the taxing of dividends with that shareholding company. The reasoning was the same as the Commissions. Subsequently various questions were put by Advocate General Jskinen to Mr Lyal for the Commission. The Advocate General expressed some doubt whether the Commissions proposed solution was really consistent with the CJEUs previous judgment. He suggested that it would seem to work if there was equivalence of both the domestic and the overseas nominal and effective tax rates, but pointed to a risk of distortion if the nominal and effective tax rates were similar in one state, but diverged significantly in the other. Mr Lyals response was: Yes, my Lord, thats quite right. Thats a danger. It is a danger that can be minimised, if what I said a moment ago about recognizing only the type of tax benefits or discounts or manners of calculation that are recognized in the state of residence of the parent. The practical likelihood of the problem is to some extent limited to the extent that there is something of a correlation between higher taxes, higher company tax rates and lots of discounts, and equally a correlation between lower company tax rates and broad tax bases. So, if there is a source company in Slovakia, say, which has set their tax at, whatever their rate now is, 17%, perhaps, one can be pretty sure that its 17% on accounting profits. And thirdly, this is after all said to be a rough equivalent because the only other practical option that I can see for a rough equivalent of the domestic exemption is exemption for foreign-source dividends as well which would compound the problem that your Lordship refers to. That is to say you would not only have the freedom from taxation represented by the difference between the lower rate, the lower effective rate and [?in] the source state, but also the difference between the statutory rate in the UK and the lower statutory rate. So, again, the problem that your Lordship advances is certainly a correct one, but in circumstances in which the resident state applies an exemption system, we need to find something that gives substantive equivalent taxation for inbound dividends, a measure of which focuses on the actual tax, the effective rate of tax borne by inbound dividends simply is not equivalent. Against this background, the CJEU in FII ECJ II addressed the problem as follows. First, it pointed out (paras 43 to 48) that the tax rate applied to foreign- sourced dividends would be higher than that applied to domestic-sourced dividends, and their equivalence compromised, if the resident company generating the dividends was subject to either a nominal or an effective rate of tax below that to which the resident company receiving the dividends was subject, since in a case where an overseas company generating dividends was subject to an effective tax rate lower than the UK nominal rate, the difference would be chargeable to DV tax. On this basis, it explained that in its judgment in FII ECJ I, para 56, the reference to the tax rates related to the nominal rate of tax while the reference to the different levels of taxation by reason of a change to the tax base related to the effective levels of taxation. The CJEU in FII ECJ II, after stating why such discrimination could not be justified under EU law as necessary to preserve the cohesion of the domestic tax system, then adopted use of the FNR as an acceptable solution in the following paragraphs: 61. The tax exemption to which a resident company receiving nationally-sourced dividends is entitled is granted irrespective of the effective level of taxation to which the profits out of which the dividends have been paid were subject. That exemption, in so far as it is intended to avoid economic double taxation of distributed profits, is thus based on the assumption that those profits were taxed at the nominal rate of tax in the hands of the company paying dividends. It thus resembles grant of a tax credit calculated by reference to that nominal rate of tax. 62. For the purpose of ensuring the cohesion of the tax system in question, national rules which took account in particular, also under the imputation method, of the nominal rate of tax to which the profits underlying the dividends paid have been subject would be appropriate for preventing the economic double taxation of the distributed profits and for ensuring the internal cohesion of the tax system while being less prejudicial to freedom of establishment and the free movement of capital. It is to be observed in this connection that in the Haribo 63. case [2011] ECR I-305, para 99, the court, after pointing out that the member states are, in principle, allowed to prevent the imposition of a series of charges to tax on dividends received by a resident company by applying the exemption method to nationally-sourced dividends and the imputation method to foreign-sourced dividends, noted that the national rules in question took account, for the purpose of calculating the amount of the tax credit under the imputation method, of the nominal rate of tax applicable in the state where the company paying dividends was established. 64. It is true that calculation, when applying the imputation method, of a tax credit on the basis of the nominal rate of tax to which the profits underlying the dividends paid have been subject may still lead to a less favourable tax treatment of foreign-sourced dividends, as a result in particular of the existence in the member states of different rules relating to determination of the basis of assessment for corporation tax. However, it must be held that, when unfavourable treatment of that kind arises, it results from the exercise in parallel by different member states of their fiscal sovereignty, which is compatible with the Treaty 65. In light of the foregoing, the answer to the first question is that articles 49FEU and 63FEU must be interpreted as precluding legislation of a member state which applies the exemption method to nationally-sourced dividends and the imputation method to foreign-sourced dividends if it is established, first, that the tax credit to which the company receiving the dividends is entitled under the imputation method is equivalent to the amount of tax actually paid on the profits underlying the distributed dividends and, second, that the effective level of taxation of company profits in the member state concerned is generally lower than the prescribed nominal rate of tax. These paragraphs are generally stated, and there is no reason why they should not be as applicable to portfolio holdings as they are to non-portfolio holdings. There is no hint of any distinction between portfolio and non-portfolio holdings. If any had been intended, one would have expected it to be mentioned, particularly when the same juge rapporteur was active in all four of the key decisions, covering between them both types of holding. Instead, in para 63 of FII ECJ II, quoted above, reliance is actually placed on Haribo, a case of portfolio holdings, in support of the use of the FNR. The reliance may, as Mr David Ewart QC for HMRC submitted, be misplaced, achieving a coherence in the development of the jurisprudence that is more apparent than real - because the reference to FNR in Haribo was in the context of a simplified method permitted by the Austrian tax authorities to show the tax actually paid. But that is presently irrelevant. What matters is that the CJEU in FII ECJ II presented its development of the law in the context of non-portfolio holdings as being in line with, and supported by, its previous jurisprudence in the context of portfolio holdings. It is inconceivable that it contemplated any material distinction in the principles applicable to both. It follows that, subject to one reservation, the CJEUs jurisprudence establishes clearly that the credit for foreign dividends in the present case should be by reference to the FNR, rather than by reference to the actual or effective tax incurred overseas. The one reservation arises from the assumption made throughout the discussion in FII ECJ II, that, in the Commissions words (para 20 above): to exempt domestic dividends in effect amounts to giving credit for the full amount of tax at the statutory rate even where this full amount has not been paid; or in Judge Lenaerts words (para 23 above) that an exemption system does more than a system crediting tax actually paid by the distributing company. This assumption is readily understandable, if one also assumes that the domestic company which is the source of and distributes the dividend has an effective tax rate less than the nominal tax rate, while the receiving company which is exempted from tax would, but for the exemption, pay tax at the full nominal rate. There is then a benefit from the exemption, which would have no parallel if the credit in respect of overseas-sourced dividends was by reference only to the actual tax incurred overseas. However, in the UK domestic context, there appears to be no reason to think that companies receiving domestically-sourced dividends are any less able to reduce the effective tax rate they would have borne on such dividends than are the companies from which the dividend is sourced. In other words, the evidence appears to have been that all UK companies are generally taxed at an effective level below the nominal rate. That being so, the domestic exemption does not confer a benefit at the nominal rate, but at their effective rate. It follows that to give a credit for overseas dividends at the FNR may confer a benefit on overseas dividends, compared with domestic dividends. By way of example, given by HMRC, one can suppose an overseas waters edge company with a nominal tax rate of 20% and an effective rate of 10%, which makes a profit after tax of 100 and distributes a dividend of 100. The UK recipient company has a nominal rate of 30%, but an effective tax rate of 20%. One would expect the UK company to bear a 10% charge on the dividend to reflect the higher tax rate charged in the UK (and that is so, whether one is looking at and comparing the nominal or the effective tax rate in this connection). But a tax credit can necessarily only reduce the tax which would actually otherwise be charged. Here, since the UK companys effective tax rate is only 20%, the effect of giving credit to the UK company for the FNR of 20% is in fact to eliminate any UK tax charge. Does this reservation about the rationale and solution adopted by the CJEU mean that we should once again refer the case back to the CJEU, for it to reconsider once again whether its approach is appropriate? In our opinion, it does not. It is clear that the CJEU was well aware that the adoption of the FNR would not eliminate all inequities or incongruities: see the Commissions written observations, para 34, cited in para 22 above, the Advocate Generals question put to Mr Lyal and Mr Lyals answer cited in para 24 above and the CJEUs own judgment, para 64, cited in para 26 above. There could, depending on the incidence of nominal and effective tax rates, be swings and roundabouts in the equivalence achieved by a mixed system of domestic exemption combined with overseas credits. But the ideal alternative of a comparison between two tax systems to ensure equivalence (subject only to each states right to set its own nominal tax levels) was consciously rejected as wholly impractical. In these circumstances, such inequity as may arise from the reservation discussed in the previous three paragraphs is not in our view a reason for referring the matter yet again to the CJEU. The prospect that the CJEU would, at this stage in history, contemplate revising yet again its jurisprudence appears to us negligible to the point where it can be discarded. We turn finally to the two further issues which HMRC suggest should be taken into account, and should lead to or encourage the making of a reference. The short answer in relation to each is that permission to raise it before the Court of Appeal was specifically refused by that court: [2016] EWCA Civ 376; [2016] STC 1798. In these circumstances, there is no constitutional basis for consideration of either before the Supreme Court: Access to Justice Act 1999, section 54(4), Supreme Court Practice Direction No 1 para 1.2.5. Issue I at first instance might have been wide enough to embrace one or both of issues 4 CA and 6 CA, since it asked inter alia what the appropriate amount of any tax credit required was, but in fact neither issue was raised at the trial before Henderson J. Issue 6 CA was first raised six weeks after the trial by letter to the judge, who refused permission to appeal on it. Issue 4 CA only emerged as ground 2 in HMRCs Grounds of Appeal to the Court of Appeal. The Court of Appeal expressly refused permission to appeal to it on Issues 4 and 6 CA, and the declaration it made read simply that (para 99): the effect of the rulings of the CJEU is that the foreign dividend should be afforded equivalent treatment, taking the form of the imputation method according to which credit should be given for the relevant foreign tax at the effective rate [ie the actual tax paid] or the nominal rate (whichever is the higher), subject to a cap at the rate of the UKs nominal rate of ACT [ie the corporation tax rate or the rate of ACT as applicable]. This declaration does not address or require the Supreme Court to address either of Issues 4 and 6 CA. (In the event, the Supreme Court has not even been asked to address the question whether the Court of Appeal was right to declare that credit required to be given for the higher of the effective and nominal foreign rate, that issue being we were told of no present relevance, but reserved for a further instalment of the FII litigation.) Issue IV It is however appropriate at this point to deal with Issue IV which is before the Supreme Court. That is whether, if PAC had no entitlement under EU law to a credit by reference to the FNR, effect should, in the light of what is said to be the impossibility of showing the tax actually borne by its portfolio holdings, be given to the CJEUs judgments either: (a) by disapplying the DV charge; or (b) by allowing PAC to rely on FNRs (or consolidated effective tax rates) as a simplification or proxy for tax actually paid. The short answer to this issue is that it does not arise or need answering, having regard to our conclusion that PAC is entitled to credit in respect of overseas-sourced dividends by reference to the FNR. Issue II: Introduction PAC seeks restitution, on the ground of unjust enrichment, of an amount calculated on the basis of compound interest, in respect of each category of claim which has succeeded. The amounts on which interest is sought, and the periods over which it is submitted that interest should be compounded, are as follows: (a) unlawfully levied ACT which was subsequently set off against lawfully levied MCT, from the date of payment by PAC to the date of set- off; (b) all other unlawfully levied tax (including unlawfully levied ACT which was never set off against lawful MCT, and unlawfully levied ACT which was set off against unlawfully levied MCT), from the date of payment by PAC to the date of repayment by HMRC; and (c) date of set-off to the date of payment by HMRC. the time value of utilised ACT (resulting from (a) above), from the PAC submits that the interest should be compounded at conventional rates calculated by reference to the rates of interest, and rests, applicable to borrowings by the Government in the market during the relevant period, that being the approach favoured by a majority of the House of Lords in Sempra Metals Ltd v Inland Revenue Comrs (formerly Metallgesellschaft Ltd) [2007] UKHL 34; [2008] 1 AC 561. HMRC have accepted that compound interest is payable in respect of the utilised ACT falling within category (a) above, since that is what the House of Lords decided in Sempra Metals. PAC submits that the principles set out in Sempra Metals entail that the same approach should also apply to the amounts falling within categories (b) and (c) above. HMRC, on the other hand, submit that only simple interest should be awarded, in accordance with section 35A of the Senior Courts Act 1981 (the 1981 Act), inserted by the Administration of Justice Act 1982, section 15(1) and Schedule 1, Part I. An award of interest on that basis would, they argue, be compatible with the requirement under EU law that PAC should receive an adequate indemnity, in accordance with the decision of this court in Littlewoods Ltd v Revenue and Customs Comrs [2017] UKSC 70; [2017] 3 WLR 1401. Although the difference between simple and compound interest is modest in the present case, the point also arises in other cases which are pending against HMRC, and the total amount at stake, on HMRCs estimate, is of the order of 4-5 billion. The point is also one of considerable importance from a legal perspective, since it raises some fundamental issues in the law of unjust enrichment. The approach of the courts below In a careful judgment, Henderson J held that compound interest should be awarded in respect of all three categories of claim, on the basis that, applying the reasoning of the majority in Sempra Metals, PAC was entitled on the ground of unjust enrichment to compound interest on all its claims: [2013] EWHC 3249 (Ch); [2014] STC 1236, paras 242-246. His Lordship subsequently followed that decision in other proceedings, concerned with the recovery of VAT paid under a mistake: Littlewoods Retail Ltd v Revenue and Customs Comrs [2014] EWHC 868 (Ch); [2014] STC 1761, para 417. That paragraph was then expressly approved by the Court of Appeal in the Littlewoods proceedings: Littlewoods Ltd v Revenue and Customs Comrs [2015] EWCA Civ 515; [2016] Ch 373; [2015] STC 2014, paras 203-204. When the present case reached the Court of Appeal, it dismissed the appeal on this issue on the basis that it was bound by its previous decision in the Littlewoods case. So the only detailed consideration of this issue, in the context of the present case, has been that of Henderson J. It is only necessary to add that, following the decision of this court in the Littlewoods proceedings (Littlewoods Ltd v Revenue and Customs Comrs [2017] UKSC 70; [2017] 3 WLR 1401), which reversed the decision of the Court of Appeal, it is no longer argued that there is a right to compound interest under EU law. A preliminary point As a preliminary point, PAC submits that HMRC should not be permitted to advance an argument to the effect that the opportunity to use money mistakenly paid is not a benefit obtained at the expense of the person who made the mistaken payment. They point out that HMRC did not advance any argument along these lines at the trial before Henderson J in 2013. On the contrary, it was conceded in advance of the trial that PAC was entitled to compound interest in respect of the claims in category (a), following Sempra Metals, and that position was maintained in the agreed Statement of Facts and Issues. Although HMRC do not seek to withdraw that concession, PAC submits that the proposed argument challenges the reasoning in Sempra Metals, and therefore the basis on which the concession was made. Against this background, it is submitted that HMRC should not be permitted to advance this argument for the first time in this court. In so far as HMRC wish to advance submissions questioning the soundness of the reasoning in Sempra Metals, the court is not inclined to prevent them from doing so, in the particular circumstances of this case. As will be explained, there have been some significant developments in the law of unjust enrichment since the trial before Henderson J, and indeed since the present appeal was brought. In particular, the concept of a benefit being obtained at the expense of the claimant, and the related concept of a transfer of value, were considered by this court only relatively recently. In this appeal, PAC invites the court to extend the reasoning in Sempra Metals beyond the scope of that decision itself, albeit PAC submits that the extension is the logical consequence of that decision. The appeal therefore involves analysing the reasoning in Sempra Metals, and unavoidably requires the court to consider whether that reasoning is consistent with the approach which it has more recently adopted, so as to form part of a coherent body of law. As we explain later, there is indeed a difficulty involved in reconciling Sempra Metals with this courts more recent case law. Accordingly, even if HMRC had not wished to subject the decision in Sempra Metals to critical analysis, that is an exercise which this court could not have avoided. In addition, it is important to bear in mind that this appeal has to be decided in the context of a group litigation order, and also that the point of law which HMRC wish to argue is undoubtedly one of general public importance. We do not consider that allowing these matters of law to be argued involves unfairness to PAC. The essence of HMRCs argument was set out in the written case which they submitted in advance of the hearing of the appeal, although, as often happens, the argument was refined during the hearing. What did Sempra Metals decide? The issue in Sempra Metals was how effect should be given in domestic law to the judgment of the CJEU in the Metallgesellschaft case (Metallgesellschaft Ltd v Inland Revenue Comrs (Joined Cases C-397/98 and C-410/98) EU:C:2001:134; [2001] Ch 620; [2001] ECR I-1727) (Sempra Metals Ltd being the same company, under a new name, as Metallgesellschaft Ltd). The case concerned claims for compound interest in respect of unlawfully levied ACT which had been set off against lawful MCT: in other words, claims falling within category (a) above. The CJEU made it clear that it was for domestic law to determine the juridical basis of the claims: in particular, whether they lay in restitution or in damages. On the hypothesis that, under domestic law, the appropriate basis was restitution, the CJEU stated: 87 In such circumstances, where the breach of Community law arises, not from the payment of the tax itself but from its being levied prematurely, the award of interest represents the reimbursement of that which was improperly paid and would appear to be essential in restoring the equal treatment guaranteed by article 52 of the [EC] Treaty. 88. The national court has said that it is in dispute whether English law provides for restitution in respect of damage arising from loss of the use of sums of money where no principal sum is due. It must be stressed that in an action for restitution the principal sum due is none other than the amount of interest which would have been generated by the sum, use of which was lost as a result of the premature levy of the tax. Equally, on the hypothesis that the claim properly lay in damages, the argument that the claimants could not be awarded interest could not be accepted. Giving effect to the judgment of the CJEU, the lower courts held that the claimants were entitled to recover compound interest on the ACT in respect of the period between the date of payment and the date of set-off. They also expressed the view, obiter, that the same principles should apply to claims in respect of unutilised ACT, falling within category (b) above. HMRCs appeal to the House of Lords was dismissed ([2008] AC 561). For varying reasons, the House held, by a majority, that a claim would lie in unjust enrichment for restitution of compound interest on money which had been paid prematurely as the consequence of a mistake, and that the appropriate measure of restitution in the instant case was compound interest calculated on a conventional basis applicable to government borrowing. The House also held that compound interest was available as damages, where it was the measure of the loss foreseeably suffered by the claimant from the loss of the use of his funds. That aspect of the decision is not in issue in the present case and need not be considered. Lord Nicholls of Birkenhead and Lord Hope of Craighead, who were in the majority on the question of unjust enrichment, emphasised that the interest was not ancillary to a claim for the recovery of a principal sum: rather, the interest was itself the principal sum, claimed as restitution of the time value of money. They interpreted the CJEUs judgment in Metallgesellschaft as meaning that EU law required, as Lord Hope put it at para 9, that the companies must be provided with a remedy in domestic law which will enable them to recover a sum equal to the interest which would have been generated by the advance payments from the date of the payment of the ACT until the date on which the MCT became chargeable: see also, to the same effect, the speech of Lord Nicholls at para 60. In that regard, both Lord Hope and Lord Nicholls referred to para 88 of the judgment of the CJEU, cited above. Lord Nicholls identified the crux of the dispute, at paras 71-73, as being whether the provision English law made for the payment of interest satisfied the EU principle of effectiveness. Lord Hope and Lord Nicholls adopted similar analyses of the basis of the claim in unjust enrichment, at paras 33 and 102 respectively. Lord Hope described the Revenues enrichment at para 33 as the opportunity to turn the money to account during the period of the enrichment. Lord Nicholls analysed the issue in terms of Professor Birkss theory of unjust enrichment by subtraction (that is, at the expense of the claimant), and stated at para 102: The benefits transferred by Sempra to the Inland Revenue comprised, in short, (1) the amounts of tax paid to the Inland Revenue and, consequentially, (2) the opportunity for the Inland Revenue, or the Government of which the Inland Revenue is a department, to use this money for the period of prematurity. The Inland Revenue was enriched by the latter head in addition to the former. The payment of ACT was the equivalent of a massive interest free loan. Restitution, if it is to be complete, must encompass both heads. Restitution by the Revenue requires (1) repayment of the amounts of tax paid prematurely (this claim became spent once set off occurred) and (2) payment for having the use of the money for the period of prematurity. Since the enrichment which had to be undone was the opportunity to turn the money to account during the period before it was lawfully due, it followed that the measure of the enrichment did not depend on what HMRC actually did with the money during that period (Lord Hope at para 33, Lord Nicholls at para 117). In that connection, Lord Nicholls drew an analogy at para 116 with the award of user damages, although such awards are based on wrongdoing and are designed to compensate for loss: One Step (Support) Ltd v Morris-Garner [2018] UKSC 20; [2018] 2 WLR 1353, para 30. In the ordinary course, the market value of the benefit arising from having the use of money was said to be the cost the defendant would have incurred in borrowing the amount in question for the relevant period: a sum which, like all borrowings, would inevitably be calculated in terms of compound interest (Lord Nicholls at para 103). The court could however depart from the market value approach if it were established that it would produce an unjust outcome (Lord Hope at para 48, Lord Nicholls at para 119). Lord Hope and Lord Nicholls proceeded on the basis of a presumption that the innocent recipient of a mistaken payment has benefited from the use of the money, the value of the benefit being the market cost of borrowing the money over the relevant period. The onus is on the defendant to displace that presumption. The innocent recipient, rather than the mistaken payer, is thus exposed to the risks of litigation. Lord Nicholls acknowledged at para 125 that the decision might have serious consequences for public finances, because of the extended limitation period available in cases of mistake, but considered that the issue had been addressed by legislation: The seriously untoward consequences this may have for the Inland Revenue flow from the open-ended character of the extended limitation period prescribed by section 32(1)(c) of the Limitation Act 1980. Parliament has now recognised this extended period should not apply to payments of tax made by mistake: see section 320 of the Finance Act 2004. Lord Walker of Gestingthorpe stated that he was essentially in agreement with Lord Hope and Lord Nicholls (para 154), and that he too would dismiss the appeal, largely for the reasons which they give. He also observed that the crucial insight in their speeches was the recognition that income benefits were more accurately characterised as an integral part of the overall benefit obtained by a defendant who is unjustly enriched (para 178). He went on, however, to state that he must confess that his own inclination would be to extend the equitable jurisdiction to award compound interest, rather than to recognise a restitutionary remedy available as of right at common law (para 184). He added that he felt some apprehension about the suggested conclusion that compound interest should be available as of right, subject only to an exception for subjective devaluation. The other members of the Appellate Committee disagreed with the majority. Lord Scott of Foscote rejected the view that the mere possession of mistakenly paid money - and accordingly the ability to use it if minded to do so - is sufficient to justify not simply a restitutionary remedy for recovery of the money, but a remedy also for recovery of the wholly conceptual benefit of an ability to use the money (para 145). A restitutionary remedy could not in his view encompass the recovery of anything other than the money which the defendant had actually received. In reality, in his view, Sempra was asserting a claim for compensation for its loss of the use of the money, dressed up as a claim in restitution in order to take advantage of the more generous limitation period allowed by section 32(1)(c) of the Limitation Act 1980 (the 1980 Act). Lord Mance also noted the practical context of the issue. The basis on which Sempra principally put their claim was that they had paid the ACT under a mistake of law. On that basis, section 32(1)(c) of the 1980 Act would postpone the commencement of the limitation period until the time when Sempra discovered or could with reasonable diligence have discovered that the ACT was not due: a time which they identified with the date in 2001 when the CJEU issued its judgment in the Metallgesellschaft case. Lord Mance commented (para 200) that the appropriateness of an extended time limit in this context was questionable. As he noted, Lord Hoffmann had recognised in the Kleinwort Benson case (Kleinwort Benson Ltd v Lincoln City Council [1999] 2 AC 349, 401) that allowing recovery for mistake of law without qualification, even taking into account the defence of change of position, may be thought to tilt the balance too far against the public interest in the security of transactions, adding that the most obvious problem is the Limitation Act, which as presently drafted is inadequate to deal with the problem of retrospective changes in law by judicial decision. Like Lord Nicholls, Lord Mance noted that, as regards the future (although not as regards the instant case), section 320 of the Finance Act 2004 meant that section 32(1)(c) of the 1980 Act would no longer apply to mistakes of law relating to a taxation matter under the care and management of HMRC. Like Lord Walker, Lord Mance cautioned against a radical reshaping of the law, observing at para 205 that we must navigate using the reference points of precedent, Parliamentary intervention and analogy, and we should bear in mind the limitations of judicial knowledge and the assistance offered by a series of Law Commission reports. European law left it, in his view, to national law to provide an effective remedy and did not prescribe that this should be by way of compound, rather than simple, interest (paras 201-204). The common law had recognised a claim for money had and received, but not a claim for the use of money had and received. A claim of the latter kind faced a long line of authority over a period of nearly 200 years, including the recent decision of the House in Westdeutsche Landesbank Girozentrale v Islington London Borough Council [1996] AC 669 (paras 203-220). The common law rule had been recognised and effectively endorsed by the Law Revision Committee, whose recommendations on interest in their Second Interim Report, 1934 (Cmd 4546) were implemented by provisions of the Law Reform (Miscellaneous Provisions) Act 1934 (later replaced by section 35A of the 1981 Act) (paras 211-212), by the Law Commission in all its reports on the subject (paras 222-224), and most importantly by Parliament, which had legislated in recent times for the payment of interest, but invariably on a simple basis (paras 212 and 221). There were in addition policy reasons making it unwise to introduce an absolute right to compound interest in restitution. As the Law Commission had noted, compound interest evoked deep-seated fears, because it increased in an exponential rather than a linear way, especially during periods of high inflation (para 222). In the light of such concerns, the Law Commission had made a number of recommendations relating to the introduction of a right to compound interest on a restricted basis. Those recommendations had not been acted on (para 224). The decision of the House on the issues relevant to the present appeal can therefore be summarised as follows: (1) By a majority consisting of Lord Hope, Lord Nicholls and Lord Walker, the House held that the court had jurisdiction at common law (Lord Hope and Lord Nicholls) or at least in equity (Lord Walker) to make an award on the ground of unjust enrichment in respect of the time value of money which was paid prematurely as the consequence of a mistake. The basis of the award was that the benefit by which the recipient of the money was enriched was the time value of the money. The benefit was presumptively quantified as the market value of the use of the money during the period before it was lawfully due, that is, the cost of borrowing an equivalent amount in the market. (2) The same majority held that: in the instant case, the presumption that the Government had (a) benefited from the premature payment of the tax had not been displaced; but (b) the Government was in a different position from ordinary commercial borrowers, in that it could borrow at more favourable rates; and accordingly the claims should be quantified on a conventional basis (c) applicable to Government borrowing. Legal developments since Sempra Metals A number of relevant developments in the law have occurred since Sempra Metals. First, the jurisprudence of the CJEU has developed since its Metallgesellschaft judgment. As was noted above, that judgment described the sum due under EU law, where tax was paid prematurely, and on the hypothesis that the appropriate remedy in domestic law lay in restitution, as the amount of interest which would have been generated by the sum, use of which was lost as a result of the premature levy of the tax (para 88). More recent judgments have provided greater clarity. For example, in Littlewoods Retail Ltd v Revenue and Customs Comrs (Case C-591/10) EU:C:2012:478; [2012] STC 1714, the CJEU stated at para 27 that it is for the internal legal order of each member state to lay down the conditions in which such interest [that is, interest on amounts levied in breach of EU law] must be paid, particularly the rate of that interest and its method of calculation (simple or compound interest). The CJEU also made it clear, in relation to the principle of effectiveness, that national rules in relation to the calculation of interest should not lead to depriving the taxpayer of an adequate indemnity for the loss occasioned (para 29). In Littlewoods Ltd v Revenue and Customs Comrs [2017] 3 WLR 1401, this court held that an award of simple interest was sufficient to comply with that requirement, and that an award of compound interest on overpaid tax was therefore not required by the EU law principle of effectiveness. Recognition that an award of compound interest is not necessary in order to comply with the EU principle of effectiveness affects the context in which these issues have to be considered. Secondly, the Littlewoods case also revealed a conflict between the decision in Sempra Metals and prior legislation. Long before Sempra Metals was decided, Parliament had created a scheme for the repayment of overpaid VAT, currently set out in section 80 of the Value Added Tax Act 1994 (the 1994 Act), with provision for the payment of simple interest in section 78. That section requires HMRC to pay interest on the repaid tax if and to the extent that they would not be liable to do so apart from this section. Entitlement to interest under section 78 is subject to limitations which would be defeated if it were possible for taxpayers to bring a common law claim for interest on mistaken payments. Until Sempra Metals, it had been settled law for about 200 years that no such claim could be brought. In enacting section 78, Parliament legislated on that basis. In deciding Sempra Metals as it did, however, the House of Lords failed to have regard to the scheme which Parliament had established. Nor did it take account of section 826 of ICTA, which also provides for the payment of simple interest on overpaid tax, and covers a range of direct taxes, including ACT and MCT. These provisions are matched by corresponding provisions limiting the liability of taxpayers towards HMRC to simple interest on underpaid tax: see section 74 of the 1994 Act and section 826 of ICTA. The persuasiveness of the majoritys approach in Sempra Metals is diminished by their failure to have regard to these provisions. As Lord Hoffmann observed in Johnson v Unisys Ltd [2001] UKHL 13; [2003] 1 AC 518, para 37: judges, in developing the law, must have regard to the policies expressed by Parliament in legislation ... The development of the common law by the judges plays a subsidiary role. Their traditional function is to adapt and modernise the common law. But such developments must be consistent with legislative policy as expressed in statutes. The courts may proceed in harmony with Parliament but there should be no discord. Against the background of the 1994 Act, in particular, the effect of Sempra Metals, was to create discord of a serious character: it rendered section 78 a dead letter, if that provision were given its natural construction. This court therefore decided in Littlewoods that, in order for section 78 to have the effect which Parliament had intended, it was necessary to depart from its natural construction. Thus the approach of the majority in Sempra Metals led, as Lord Mance had predicted, to a dislocation in a related area of the law which the Appellate Committee had not considered. Thirdly, in Kleinwort Benson [1999] 2 AC 349 it was realised that allowing recovery of payments made under a mistake of law could create problems as the law of limitation then stood, since section 32(1)(c) of the 1980 Act would enable claims to be brought within six years of the mistake being discovered, no matter how long in the past the payment had been made. For that reason, Lord Browne-Wilkinson considered that the correct course would be for the House to indicate that an alteration in the law is desirable but leave it to the Law Commission and Parliament to produce a satisfactory statutory change in the law which, at one and the same time, both introduces the new cause of action and also properly regulates the limitation period (p 364). The majority, however, were unpersuaded that reform of the law of restitution should be delayed, and assumed that legislation could be enacted if Parliament considered it desirable to address the limitation question (see, for example, Lord Hoffmann at p 401). Parliament duly enacted such legislation. By the time of the decision in Sempra Metals, the majority therefore considered that the seriously untoward consequences for HMRC (as Lord Nicholls described them at para 125) of claims arising from mistaken payments of tax in the distant past were guarded against by section 320 of the Finance Act 2004, which provided that section 32(1)(c) of the 1980 Act should not apply in relation to a mistake of law relating to a taxation matter under the care and management of the Commissioners of Inland Revenue. What has become apparent since Sempra Metals, however, is that the problems in relation to limitation which arise from the retrospective effect of that decision, and the decision in Kleinwort Benson, are incapable of being fully addressed by legislation. Repeated attempts by Parliament to address the retrospective impact of those decisions by introducing a limitation period with retrospective effect have been held to be incompatible with EU law: section 80 of the Value Added Tax Act 1994, as originally enacted, in Fleming (trading as Bodycraft) v Revenue and Customs Comrs [2008] UKHL 2; [2008] 1 WLR 195; section 320 of the Finance Act 2004 in Test Claimants in the FII Group Litigation v Revenue and Customs Comrs (Case C-362/12) EU:C:2013:834; [2014] AC 1161; and section 107 of the Finance Act 2007 in Test Claimants in the FII Group Litigation v Revenue and Customs Comrs [2012] UKSC 19; [2012] 2 AC 337. This problem, of which the House of Lords was unaware at the time when Kleinwort Benson and Sempra Metals were decided, illustrates the risks of effecting major changes to the law of restitution by judicial decision. By applying the declaratory theory of adjudication, the law as altered by the decisions was deemed always to have applied, and the previously settled understanding of the law was treated as a mistake for the purposes of limitation. Consistently with that theory, in Kleinwort Benson the House of Lords held that a right of action had arisen when payments were made under a mistake of law, notwithstanding that no such right of action was recognised by the courts at that time. Similarly in Sempra Metals, the right of action in unjust enrichment arose when the defendant obtained the opportunity to use the money mistakenly paid, notwithstanding that no such right was understood to exist at that time. The tension inherent in the decisions is that the House adhered to the declaratory theory for the purpose of finding that a cause of action based on unjust enrichment had accrued in the past, based on a mistake of law capable of invoking section 32(1)(c) of the 1980 Act, while straining the premise of the theory, namely the need for judicial development of the law to be justifiable by reference to existing legal principles. The consequence was that the rights established by those decisions were deemed to have vested in the claimants before the decisions were reached, with the result that, under EU law, they could not be taken away by retrospective legislation excluding or restricting the operation of section 32(1)(c) without a reasonable transitional period during which claims could be made. The position would have been different if the changes had been effected by legislation, since legislation can, and normally does, take effect prospectively. Fourthly, decisions subsequent to Sempra Metals have demonstrated the degree of disruption to public finances which the decision in that case, taken together with Kleinwort Benson, is capable of causing. The decision in Kleinwort Benson enabled claims to be brought for the repayment of tax which had been paid in ignorance of the fact that the UK law under which it was levied was incompatible with EU law. Since the limitation period did not begin to run until the mistake was or could reasonably have been discovered, such claims could in principle be backdated to the UKs entry into the EU in 1973. Not only could the principal amounts go back, in principle, for a period of several decades, but they had earned interest over that period. If, following Sempra Metals, the interest was compounded over that period, the resultant claims were potentially enormous. The Littlewoods case, for example, concerned overpaid VAT on goods supplied to agents employed to make catalogue sales, as a form of commission paid in kind. Like the present appeal, it was a test case. The amount turning on the outcome of that appeal was estimated by HMRC at 17 billion. That was not the amount of the overpaid tax, or even the amount of the interest on the overpaid tax. It was the difference between compound interest and simple interest. In the present case, as we have explained, the total amount turning on the outcome is estimated by HMRC at 4-5 billion. Even in the context of public finances, these are very large sums. Fifthly, the law of unjust enrichment has developed since Sempra Metals in ways which cannot easily be reconciled with the reasoning of the majority in that case. The development of greatest significance has been a more detailed analysis of the at the expense of question, in Investment Trust Companies v Revenue and Customs Comrs [2017] UKSC 29; [2018] AC 275. It is necessary next to consider that issue. At the expense of assuming for the present that an enrichment arises from having the opportunity to use money mistakenly paid, the question whether it is obtained at the expense of the claimant can best be answered by reference to the analysis of that question in the Investment Trust case. Lord Reed explained at para 42 that the law of unjust enrichment is designed to correct normatively defective transfers of value, usually by restoring the parties to their pre-transfer positions. He went on at para 44 to endorse Lord Clydes dictum in Banque Financire de la Cit v Parc (Battersea) Ltd [1999] 1 AC 221, 237 that the principle of unjust enrichment: requires at least that the plaintiff should have sustained a loss through the provision of something for the benefit of some other person with no intention of making a gift, that the defendant should have received some form of enrichment, and that the enrichment has come about because of the loss. Lord Reed also explained at para 50 that, as a general rule, a cause of action based on unjust enrichment is only available in respect of a benefit which the claimant has provided directly to the defendant (the only true exception identified being subrogation following the discharge of a debt, which is arguably based on a different principle). A causal connection between the claimants incurring a loss (in the relevant sense) and the defendants receiving a benefit was not enough to establish a transfer of value. When money is paid by mistake, the claimant normally provides a benefit directly to the defendant: he pays him the money. He normally does so at his own expense: he is less wealthy by virtue of the payment. The transaction is normatively defective: the benefit is provided as the result of a mistake. In those circumstances, an obligation arises immediately under the law of unjust enrichment to reverse the enrichment by repaying the money (or an equivalent amount). The cause of action accrues when the money is mistakenly paid. The majority in Sempra Metals considered that there was also an additional and simultaneous transfer of value, comprising the opportunity to use the money, which also gave rise to a cause of action based on unjust enrichment. That enrichment had to be reversed by the payment of compound interest. This analysis has a number of questionable features, which can be illustrated by an example. If on 1 April the claimant mistakenly pays the defendant 1,000, with the result that the defendant is on that date obliged to repay the claimant 1,000, the defendants repayment of 1,000 on that date will effect complete restitution. Restitution of the amount mistakenly paid in itself restores to the claimant the opportunity to use the money: there is no additional amount due in restitution. That is because there has been only one direct transfer of value, namely the payment of the 1,000. The opportunity to use the money mistakenly paid can arise as a consequence of that transfer, but a causal link is not sufficient to constitute a further, independent, transfer of value. Contrary to the analysis of Lord Nicholls in Sempra Metals (at para 102), the recipients possession of the money mistakenly paid to him, and his consequent opportunity to use it, is not a distinct and additional transfer of value. The position is essentially the same if the 1,000 is repaid not on 1 April but on 1 May. There has been no transfer of value subsequent to 1 April, when the mistaken payment was made. The only transfer of value needing to be reversed remains the payment of the 1,000. The claimant can however be awarded, in addition to the 1,000, simple interest on that amount under section 35A of the 1981 Act. That is because the obligation which arose under the law of unjust enrichment on 1 April, upon the making of the mistaken payment, created a debt. Interest can normally be awarded on a debt under section 35A of the 1981 Act. That interest is intended to compensate the claimant for the loss of the use of the money to which he became entitled to restitution on 1 April. There is no right to interest on the basis of unjust enrichment: failure to pay a sum which is legally due is not a transfer of value, and does not give rise to an additional cause of action based on unjust enrichment. If there was no distinct cause of action for restitution of the opportunity to use the money on the date of the mistaken payment (as explained above), a cause of action based on unjust enrichment cannot have subsequently accrued, since no further defective transfer of value has taken place. The point can also be illustrated by an example used by HMRC. If D owes C 1,000 under a contract, a claim also lies against D for interest under section 35A, from the date when the contractual payment became due. There is no claim against D for interest on the ground of unjust enrichment (even if an unjust factor is present). That is because any benefit obtained by D from his failure to pay the debt on time is not obtained at the expense of C in the relevant sense. There has been no transfer of value from C to D. The latters opportunity to use the money which remains in his possession is the result of his failure to pay the contractual debt. The same analysis applies where the debt is imposed by the law of unjust enrichment, for example as the result of a mistaken payment of 1,000. Any benefit obtained by D as a consequence of his possession of the 1,000 is derived from his failure to pay that debt. It cannot be said to have been transferred from C to D. All this is consistent with a long-established understanding of, first, the nature of the cause of action based on a mistaken payment, and secondly, the basis on which interest is payable. As to the first of these, Lord Mansfield stated in the classic case of Moses v Macferlan (1760) 2 Burr 1005, 1010, that the defendant in an action for money had and received can be liable no further than the money he has received. That approach was followed in many later authorities, until Sempra Metals: see, to give only a few examples, Walker v Constable (1798) 1 Bos & P 306, 307 (The court were of opinion, on the authority of Moses v Macferlan, 2 Burr 1005, that in an action for money had and received the plaintiff could recover nothing but the net sum received without interest), Depcke v Munn (1828) 3 C & P 111 per Lord Tenterden CJ ( the courts have held again and again that interest cannot be recovered in an action for money had and received This has been decided so often, that I cannot now venture to allow the question to be agitated.), Johnson v The King [1904] AC 817 and the Westdeutsche case [1996] AC 669. As to the basis on which interest is payable, a clear explanation was provided by Lord Wright, a judge who was well aware of unjust enrichment (see, for example, Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd [1943] AC 32), and had also had to consider interest as a member of the Law Revision Committee which reported in 1934, mentioned earlier. In Riches v Westminster Bank Ltd [1947] AC 390, 400, he stated: the essence of interest is that it is a payment which becomes due because the creditor has not had his money at the due date. It may be regarded either as representing the profit he might have made if he had had the use of the money, or conversely the loss he suffered because he had not that use. The general idea is that he is entitled to compensation for the deprivation. Once it is understood that the claim to interest is not truly based on unjust enrichment but on the failure to pay a debt on the due date, the conclusion inevitably follows that interest can be awarded on the claims within categories (b) and (c) under section 35A of the 1981 Act: see BP Exploration Co (Libya) Ltd v Hunt (No 2) [1979] 1 WLR 783, and Sempra Metals at paras 104 (Lord Nicholls) and 175 (Lord Walker). On a literal reading of section 35A, no such interest could have been awarded on the claims under category (a). That is because section 35A applies only where there are proceedings for the recovery of a debt (or damages), and therefore does not apply where the defendant has repaid the debt (or has set it off) before the creditor has commenced proceedings for its recovery. An award of interest is nevertheless required in such circumstances by EU law, if an effective restitutionary remedy is to be available under English law in respect of San Giorgio claims: that was the point decided in Metallgesellschaft. It is unnecessary to decide in this appeal how an award of interest should be made available in those circumstances (and the court has heard no argument on the point). But there are a number of potential solutions. For the foregoing reasons, we therefore depart from the reasoning in Sempra Metals so far as it concerns the award of interest in the exercise of the courts jurisdiction to reverse unjust enrichment. As mentioned earlier, it is unnecessary for us to consider the reasoning in that case so far as it concerns the award of interest as damages, and nothing in this judgment is intended to question that aspect of the decision. Since the award of compound interest to PAC by the courts below was based on the application of the reasoning in Sempra Metals which we have disapproved, it follows that HMRC succeed on Issue II, and PACs claims to compound interest under categories (b) and (c) must be rejected. PACs claim to compound interest under category (a) would also have been rejected, if it had not been accepted by HMRC. Finally, in relation to this aspect of the appeal, it is worth adding that the view of the majority in Sempra Metals that the opportunity to use money mistakenly paid should be regarded as an enrichment also raises a number of questions, particularly in relation to the method by which, and the date or dates as at which, the enrichment is to be measured. In addition, if one stands back and considers the realism, and also the fairness, of the approach to enrichment adopted by the majority in Sempra Metals, the results which it produces are concerning. As Professor Burrows has written, in relation to the decision of Henderson J in the Littlewoods case, in his contribution to Commercial Remedies: Resolving Controversies, eds Virgo and Worthington (2017), p 266: if one were to step back from the complex detail, the result of Henderson J applying compound interest on all the mistaken payments from the date of receipt appears to be tantamount to saying that, had the Revenue not been paid those sums, it would have borrowed the same sums at a compound interest rate for five decades. Surely that cannot be right. These issues were not, however, discussed in argument in the present appeal, and in the circumstances it is inappropriate to consider them further. The remaining issues There remain two issues which are relevant to the computation of the amounts which EU law requires HMRC to repay. In order to understand those issues it is necessary to recollect how, under the legislation which was in force in the relevant years, ACT was charged on distributions by a UK-resident company and was set against the paying companys subsequent liability to MCT. Under section 14 of ICTA, ACT was charged when a UK-resident company paid a qualifying distribution, which included the payment of a dividend (section 209). Under section 231 of ICTA, when a UK-resident company made a qualifying distribution, the recipient of the distribution was entitled to a tax credit equal to the proportion of the amount of the distribution which corresponded to the rate of ACT in force when the distribution was made. Under section 238, when a UK-resident company made a qualifying distribution, the sum of the amount of that distribution together with the proportion of that amount which corresponded to the rate of ACT in force when the distribution was made was known as a franked payment (FP). Section 238 also provided that when a UK-resident company received a distribution, in respect of which it was entitled to receive a tax credit, the aggregate of the distribution and the amount of the tax credit was franked investment income (FII). When the recipient company itself made a qualifying distribution in the same accounting period as it received FII, it paid ACT only on the excess of FP over FII (section 241). The UK-resident company (company A) had to make a return and account to HMRC for the ACT quarterly by disclosing the FPs which it made and the FII which it received, foreign income dividends paid and received, and the ACT payable on the FPs and the foreign income dividends: paragraphs 1 and 3(1) of Schedule 13 to ICTA. The ACT which company A paid during an accounting period was then set against its liability (if any) to MCT on its profits in the accounting period by the operation of section 239 of ICTA, which we discuss below. Thus, if company A received a distribution from another UK-resident company (company B) it would not be liable to pay MCT on that distribution (section 208). If company A, having received a distribution from company B, itself made a distribution, it would be liable to pay ACT on the excess of its FP over its FII. When company A came to pay MCT on its profits in the same accounting period it would have been entitled to set off the ACT which it had paid (section 239). The illegality under EU law, which was caused by the UKs failure to match the exemption conferred on dividends received from UK-resident companies by an equivalent credit in respect of overseas-sourced dividends, is to be remedied by a credit for foreign dividends by reference to the FNR, as we have held under Issue I above. Applying the example above but with the receipt by company A of overseas- sourced dividends in place of UK-sourced dividends, under EU law the FNR credit would fall to be applied to its payment of MCT. Thus the MCT which company A paid was unlawful to the extent that the credit had not been given. If company A had itself paid a dividend, the FNR credit should have been applied to reduce the ACT which it had paid. With that introduction we turn to Issue III. Issue III Issue III, on which HMRC seek permission to appeal, is whether a claim for restitution lies to recover lawful ACT, which has been set against unlawful MCT. By the expression lawful ACT we refer to the element within an undifferentiated ACT charge which did not represent unduly levied tax on overseas- sourced dividends. Lawful ACT on the (UK-resident) Company As distribution refers to such ACT as is due after giving effect to (i) the exemption given to income from dividends of UK-resident companies and (ii) (in light of our answer to Issue I) the tax credit which EU law requires to be given to income from dividends from overseas companies. Unlawful MCT in this context refers to such part of the charge to MCT as is attributable to the failure to give the overseas-sourced dividends, which company A received, a tax credit at the FNR to achieve equivalence to the exemption which section 208 gave to dividends received from UK-resident companies. This issue was not argued in the courts below because Henderson J and the Court of Appeal, when considering this case, were bound by the Court of Appeals earlier decision in Test Claimants in the FII Group Litigation v Revenue and Customs Comrs [2010] EWCA Civ 103; [2010] STC 1251 (FII CA). In that judgment the Court of Appeal held that a taxpayer was entitled to reimbursement of lawful ACT, which HMRC had retained because it had been set against an unlawful MCT charge. The court held that such ACT related directly to the unlawful MCT because the CJEU treated ACT as an advance payment of MCT: FII CA paras 148- 151. The statutory provisions governing the set-off of ACT against MCT were as follows. Section 239(1) of ICTA provided for the automatic set-off of ACT against MCT, thereby reducing company As liability to pay MCT. It provided: advance corporation tax paid by a company (and not repaid) in respect of any distribution made by it in an accounting period shall be set against its liability to corporation tax on any profits charged to tax for that accounting period and shall accordingly discharge a corresponding amount of that liability. Where the tax-paying company did not have a sufficient liability to MCT on its profits to use up the ACT by way of set-off in the same accounting period, the unused ACT could be carried back under section 239(3) which provided: Where in the case of any accounting period of a company there is an amount of surplus advance corporation tax, the company may, within two years after the end of that period, claim to have the whole or any part of that amount treated for the purposes of this section (but not of any further application of this subsection) as if it were advance corporation tax paid in respect of distributions made by the company in any of its accounting periods beginning in the six years preceding that period and corporation tax shall, so far as may be required, be repaid accordingly. In this subsection surplus advance corporation tax in relation to any accounting period of a company, means advance corporation tax which cannot be set against the companys liability to corporation tax for that period because the company has no profits charged to corporation tax for that period The surplus ACT could also be carried forward automatically under section 239(4) which provided: Where in the case of any accounting period of a company there is an amount of surplus advance corporation tax which has not been dealt with under subsection (3) above, that amount shall be treated for the purposes of this section (including any further application of this subsection) as if it were advance corporation tax paid in respect of distributions made by the company in the next accounting period. Section 239(5) explained how the set-off operated under both subsections (1) and (4). It provided: Effect shall be given to subsections (1) and (4) above as if on a claim in that behalf by the company and, for that purpose, a return made by the company under section 11 of the Management Act containing particulars of advance corporation tax or surplus advance corporation tax which falls to be dealt with under those subsections shall be treated as a claim. Company A could also surrender its ACT to its subsidiary in accordance with section 240, with the result that the ACT would be treated as ACT paid by the subsidiary and set against the subsidiarys liability to pay MCT. HMRCs case is simple. They argue that if a taxpaying company included relevant details of ACT paid in its tax return, sections 239(1) and (5) mandated an automatic set-off of the ACT against the companys liability for MCT. If, on a proper understanding of the law, the company did not owe sufficient MCT in the relevant accounting period, the ACT remained surplus and available to be set off in the next accounting period under section 239(4). In other words, HMRC argue that the law treats an unlawful MCT charge as a nullity, with the result that there is no set off under section 239(1) and no enrichment of HMRC by the payment of the ACT, which remained available to offset the taxpaying companys lawful MCT in other accounting periods. PAC opposes the grant of permission to HMRC on this issue and submits that it is a detailed issue of computation which is likely only to affect the appeal in PACs case if PACs approach to Issue V is correct. If this court were to give permission to appeal, PAC advances three arguments. First, it submits that the courts approach should be governed by the principle that the taxpayer should be entitled to recover unduly levied tax. Secondly, it argues that, because the CJEU has characterised ACT as nothing more than a payment of corporation tax in advance (eg FII ECJ I para 88), ACT could only lawfully be charged where it is itself a pre-payment of a lawful charge to MCT. As a result, it contends that the correct analysis is that a payment of ACT, which is subsequently set against an excessive liability to MCT, is an advance payment of an excessive tax liability and is itself the payment of an excessive tax liability. As such, it is liable to be recovered in a claim in restitution. Alternatively, PAC contends that the payment of the ACT relates directly to the unlawfully levied MCT and so is recoverable in a claim in restitution. In support of those contentions PAC relies on dicta of the CJEU in FII ECJ I and FII ECJ II. PACs third argument is that, if it had been aware that it did not have any liability for a substantial part of the MCT, it would have not have paid the ACT. PAC was a subsidiary of Prudential plc and it had no subsidiaries of its own which generated profits giving rise to a liability to corporation tax against which PACs ACT could have been used. It would therefore have paid dividends to its parent company within a group income election so that the ACT was paid at the level of the parent company and would have been available for set-off against the MCT of other subsidiary companies within the group. This, it submits, would have been the only sensible course to avoid the ACT being stranded in PACs accounts. Analysis In our view it is appropriate to give HMRC permission to raise this issue as it is a point of law of general public importance in an appeal to this court in the context of a group litigation order. While PAC submits that it alone is likely to be affected by the determination of this issue, the court is not in a position to assess whether or not that is so. The matter also arises in the FII litigation. HMRC had applied for permission to appeal the Court of Appeals ruling on this issue in FII CA but the determination of that application was postponed by this court by orders dated 8 November 2010 and 9 May 2017. The issue, which will be of relevance to the final determination of the FII litigation, therefore comes to this court in this appeal before this court has addressed the application to appeal in that litigation. In addressing this issue, the starting point is to recall that an entitlement to repayment or restitution in this context requires that there has been an unlawful charge to tax as a result of incompatibility with EU law: San Giorgio. The question we are asked to consider is in substance: have HMRC unlawfully levied ACT by setting it against MCT which has been unlawfully charged? But there is a logically prior question, which is whether there has been any set-off. Company A may have received income which has funded its distribution from UK-resident companies and also from companies resident elsewhere in the EU. In this computational issue the court is not concerned with unlawful ACT, which has been charged on a distribution by company A derived from income which it has received from an overseas-resident company in the absence of sufficient credit for foreign tax on the latter companys distributions. We are concerned with ACT which is unquestionably lawful but which has purportedly been set against an unlawful MCT charge on company A. PAC relies on dicta in FII ECJ I and FII ECJ II to argue that this prima facie lawful charge on company As dividend is tainted by its being merely an advance payment of an unlawful MCT charge. But the CJEU, when it characterised ACT as constituting a form of advance payment of corporation tax (FII ECJ I para 88 and FII ECJ II paras 68 and 110), was well aware of the provisions of ICTA which allowed the taxpaying company to utilise the ACT which it had paid in different ways. Thus, in FII ECJ II at para 6, the CJEU stated: A company had the right to set the ACT paid in respect of a distribution made during a particular accounting period against the amount of mainstream corporation tax for which it was liable in respect of that accounting period, subject to certain restrictions. If the liability of a company for corporation tax was insufficient to allow the ACT to be set off in full, the surplus ACT could be carried back to a previous accounting period or carried forward to a later one, or surrendered to subsidiaries of that company, which could set it off against the amount for which they themselves were liable in respect of corporation tax. (The reference to the surrender of ACT to a subsidiary is a reference to section 240 of ICTA.) As we have shown, section 239 of ITCA did not confine the MCT, against which the ACT could be set, to MCT due for the same accounting period as that in which the ACT was paid (the same accounting period). If there was insufficient MCT due in the same accounting period, the surplus ACT was carried forward automatically to the next accounting period, unless company A elected to use it otherwise, such as by carry back under section 239(3). If the company did not so elect, and if in the same accounting period and subsequent accounting periods company A did not have sufficient MCT to use up the ACT which it had paid, or if Company A did not surrender the ACT under section 240, the ACT was, in PACs words, stranded. But that stranding of the ACT, were it to have occurred, would not affect the lawfulness of the ACT charge. In our view, HMRC are correct in their submission that, if an apparent charge to MCT was unlawful, that charge was a nullity. The ACT could not have been set against a nullity but remained available to be carried back if a claim were made under section 239(3) or for automatic set-off against lawful MCT in a subsequent accounting period under section 239(4) or otherwise to be utilised. Being so available, the lawful ACT did not directly relate to the unlawful MCT in the same accounting period in the sense that penalties and interest may relate to an unlawfully levied tax. Accordingly, HMRC in receiving payment of the lawful ACT did not receive unlawfully levied tax which gave rise to a San Giorgio claim. Further, PAC was obliged by ICTA to pay the lawful ACT. The payment of the ACT did not entail a defective transfer of value which falls to be corrected: the ACT was due when it was paid, and was available to PAC to utilise thereafter. PACs loss in the context of Issue III (ie in relation to lawful ACT) is the result of the levying of unlawful MCT, and, through the misunderstanding of the law which it shared with HMRC, of its not having been able to set the unutilised ACT against its liability for lawful MCT in the same or other accounting periods or otherwise to utilise the ACT to reduce its liability to tax. Its loss in that sense does not support a claim in restitution: Investment Trust Companies v Revenue and Customs Comrs, especially paras 41-45 per Lord Reed. We are informed that PACs corporation tax liabilities in its accounting periods from 1994 to 1998 are not finalised as PACs returns in those years are still open and that therefore it may be possible for PAC to carry forward unutilised ACT to set against its MCT liabilities in those periods. But, whether or not that is the case, in agreement with Henderson J in FII High Court 1 ([2008] EWHC 2893) we consider that an enquiry into whether, and if so how, surplus ACT would otherwise have been used within a group of companies cannot give rise to a claim in restitution but would form part of a claim for damages if the criteria for such a claim were met. We therefore, in agreement with Henderson J in the FII litigation, answer the question raised in Issue III (Does a claim in restitution lie to recover lawful ACT set against unlawful corporation tax?) in the negative. Issue V PAC seeks permission to cross-appeal if (as we have done) we grant HMRC permission to appeal on Issue III. Again, the issue arises in the context of a GLO and we are unable to assess its significance in other cases within the GLO. But it is closely connected with Issue III and has significant consequences for PACs claim for interest. It is appropriate that we address it in the context of this appeal. We therefore grant permission for the issue to be raised. Issue V comprises two related questions concerning the utilisation of ACT on a hypothesis that an undifferentiated fund of lawful and unlawful ACT was purportedly set off against an amount of MCT which was in part lawful and in part unlawful. The first question (Issue V(a)) which the parties have raised is: Where ACT from a pool which includes unlawful and lawful ACT is utilised against an unlawful corporation tax liability, is the unlawful ACT regarded as a pre-payment of the unlawful corporation tax liability or is the ACT so utilised regarded as partly lawful and unlawful pro rata? PAC contends that the unlawful ACT which company A has paid is to be regarded as utilised first against the unlawful MCT. HMRC have argued for a pro rata approach by which the unlawful MCT is regarded as having been met by the utilisation of lawful and unlawful ACT in the same proportion as the unlawful MCT bears to the overall MCT charge. The background is that in so far as unlawful ACT has been utilised against lawful MCT, HMRC have conceded that the time value of the prematurely-paid ACT is recoverable in compound interest, as explained earlier in the discussion of Issue II. In so far as the unlawful ACT has purportedly been utilised against unlawful MCT, the unlawful ACT which the taxpaying company has paid is recoverable together with interest under section 35A of the 1981 Act, as explained in relation to Issue II, as both the ACT charge and the MCT charge were nullities. Henderson J in his second judgment in this case ([2015] EWHC 118 (Ch); [2015] STC 1119) addressed this issue at paras 34-37. He expressed an initial inclination to adopt the pro rata approach as everyone at the time had assumed that the whole of both the ACT and the MCT had been lawfully charged. He decided however that PACs approach was correct because, if the unlawful ACT was regarded as a prepayment of the unlawful MCT, the end result reflected precisely the credit for foreign tax which EU law required, whereas on HMRCs approach company A would have an additional and unnecessary claim to recover the element of lawful ACT which had been utilised against the unlawful MCT. His ruling was made expressly on the basis that he was bound by the Court of Appeals ruling on Issue III above, a ruling which we have now overturned. The Court of Appeal (paras 113-127) disagreed with Henderson Js approach. It stated that the issue was how to determine the extent of the benefit for HMRC in money terms from the payment or bringing into account of an unlawful MCT charge for the purpose of determining the extent of HMRCs unjust enrichment. The court looked for a fair way of determining that enrichment in a situation where an undifferentiated fund of lawful and unlawful ACT had purportedly been set against an apparent liability to MCT, which in fact comprised both lawful and unlawful MCT. The court attached weight to the fact that both PAC and HMRC were unaware of the meaning and effect of the relevant EU law at the time; neither was to blame for the situation; both were disabled by their ignorance of the true state of affairs from applying their minds at the time to the allocation of lawful and unlawful ACT as between the lawful and unlawful elements of MCT. As a result, the court sought to strike a fair balance between their interests by adopting an objective standard. That standard was the pro-rating approach which Henderson J had earlier favoured in his judgment in Test Claimants in the FII Group Litigation v Revenue and Customs Comrs [2014] EWHC 4302 (Ch); [2015] STC 1471 (FII (High Court) Quantification), para 205. We are not able to reconcile the Court of Appeals ruling with our decision on HMRCs appeal on Issue III, which is inconsistent with the ruling in FII CA by which the Court of Appeal in this case was bound. As HMRC have submitted and we have held under that issue, section 239 has the effect that lawful ACT is not set against unlawful MCT, which is a nullity. The pro rata method, which involves unlawful MCT being met in part by unlawful ACT and in part by lawful ACT, cannot therefore work. Instead, lawful ACT, which was not utilised against lawful MCT, remained available to be claimed against lawful MCT in the same or other accounting periods. The unlawful ACT, which company A paid, was not set against the unlawful MCT charge in a given accounting period because both the unlawful ACT charge and the unlawful MCT charge are nullities. The principled answer is therefore that the unlawful ACT, which company A has paid, must be treated as having been utilised first against the unlawful MCT charge. Where there is no unlawful MCT against which to set the unlawful ACT which has been paid, the residual unlawful ACT is to be treated as utilised against lawful MCT. Because both of the unlawful charges are nullities, the unlawful ACT is itself recoverable, unless it has been set against a lawful MCT charge. When unlawful ACT has been set against lawful MCT, company A has a claim for interest on the ACT so used, as stated in para 78 above. The second question under Issue V relates to the carry back to an earlier quarter of domestic FII received in a later quarter in the same accounting period. To address this, it is necessary to explain the operation of paragraph 4 of Schedule 13 to ICTA. Rather than set out the provision we gratefully adopt the explanation of its effect which Henderson J gave in FII (High Court) Quantification at para 209: The effect of these rather densely worded provisions may be summarised by saying that FII received in a later quarterly return period must first be applied in franking any dividends paid by the company in that period, but that any surplus may then be carried back to frank unrelieved dividends paid in an earlier quarter, thus generating a repayment of ACT. If there has been a change of ACT rates in the meantime, the repayment is not to exceed the amount of the tax credit comprised in the FII which is carried back. If the excess FII was not so used in repayment of ACT paid in the earlier quarter, it was carried forward into the next annual accounting period to set against FPs in the same way (section 241(3)). Issue V(b) asks: Where domestic FII was carried back to an earlier quarter is it to be regarded as having been applied to relieve lawful and unlawful ACT pro rata or only lawful ACT? Henderson J in his second judgment in this case discussed the issue briefly in paras 40-43 after hearing full argument on the point. He decided, with considerable hesitation, that the FII was to be regarded as having been applied to relieve only lawful ACT in the earlier quarter because otherwise FII from UK-sourced dividends, which was entirely lawful, would be used to cancel out part of the credit which EU law requires on foreign income. In reaching this conclusion he departed from the view which he had reached on essentially the same issue in FII (High Court) Quantification at paras 207-211. The Court of Appeal disagreed and (paras 128-133) adopted an approach similar to that which it took on Issue V(a). Again, the court laid stress on the fact that at the time nobody appreciated that the ACT against which the FII was carried back might comprise both lawful and unlawful elements and no-one was to blame. The fair course therefore was to adopt the pro rata approach which the court had taken in relation to Issue V(a). The effect of that approach would be that the primary period of unjust enrichment of HMRC through receipt of the unlawful ACT would be brought to an end and HMRCs enrichment would be measured by the time value of the ACT payment. The court did not see this as cancelling out any part of the credit which EU law required on overseas-sourced dividends. In this appeal PAC renews the arguments which Henderson J favoured. The UK tax system was unlawful because credits were not given under section 231 for tax on overseas-sourced dividends in order to relieve an ACT liability. The use of carried-back FII to relieve unlawful ACT deprived company A of the credits which it should have had for the overseas-sourced dividends. The carried-back FII should therefore be regarded as having been applied to relieve only lawful ACT. HMRCs answer in their written case is that EU law does not mandate a form of credit for overseas-sourced dividends. They quote the statement of the CJEU in para 72 of FII ECJ II: As is clear from para 62 [of the present judgment], the obligation presently imposed on the resident company by national rules, such as those at issue in the main proceedings, to pay ACT when profits from foreign-sourced dividends are distributed is, in fact, justified only in so far as that advanced tax corresponds to the amount designed to make up the lower nominal rate of tax to which the profits underlying the foreign- sourced dividends had been subject compared with the nominal rate tax applicable to the profits of the resident company. HMRC, unexceptionably, interpret this statement as meaning that it is lawful to charge ACT on a dividend paid by company A only to the extent that it was lawful to charge MCT on the profits out of which that dividend was paid. But HMRC go on to say that the relief required was not in the form of a credit which was the equivalent of further FII. We do not accept HMRCs submission on Issue V(b) for the following three reasons. First, it follows from the answer which we have given on Issue I that we reject the contention that no particular form of credit is mandated by EU law. What the CJEU said in para 72 of FII ECJ II must be construed in the light of what it said in paras 61-65 which we have quoted in para 26 above. That in turn falls to be understood against the earlier ruling of the CJEU in FII ECJ I, which we have quoted in para 7 above. In other words, EU law requires a tax credit by reference to the FNR to which the profits of the overseas company have been subject. As a result, the UK can charge ACT in relation to company As dividends so far as they comprise profits from overseas-sourced dividends only to the extent that there is tax due in respect of those dividends after it has given company A that tax credit. Secondly, the consequence of this is that PAC is correct in its contention that HMRCs approach would result in depriving company A of the tax credits on overseas-sourced dividends which EU law mandates. Using the example which PAC gave in its written case, suppose that company A paid ACT of 100 in the first quarter when it had received overseas-sourced dividends which (if EU law had been applied correctly) would have entitled it to a credit of 25. If EU law had been applied correctly in that quarter, the ACT paid would have been 75. Suppose then that in the third quarter company A received FII for UK-sourced dividends which carried credits of 75 which it carried back to the first quarter. On PACs approach, the carried back FII would result in the repayment of all the ACT which had properly been paid. If, as on HMRCs approach, the 75 of FII, which is carried back from the third quarter, were utilised pro rata between the lawful and unlawful ACT which comprised the 100 paid in the first quarter, 18.75 (1/4 of the 75) would be attributed to the unlawful ACT, thereby cancelling to that extent the credit to which company A was entitled in EU law. Thirdly, we are not persuaded by the arguments as to fairness which influenced the Court of Appeal in relation to both of Issues V(a) and V(b). As unlawful ACT is a nullity, the principled answer is that domestic FII carried back to an earlier quarter is to be regarded as having been applied to relieve only lawful ACT so that any excess FII remained available for carry forward under section 241(3). We therefore answer Issue V(b) by holding that domestic FII which is carried back to an earlier quarter under paragraph 4 of Schedule 13 of ICTA is to be regarded as having been applied to relieve only lawful ACT. In further written submissions HMRC and PAC disagree on factual matters which may affect the working out of the rulings which we have made. This court is not in a position to resolve these matters. We will invite submissions in response to our judgment as to how our rulings may be applied. Conclusions For the foregoing reasons, we allow HMRCs appeal on Issues II and III, and dismiss it on Issue I. PACs proposed cross-appeal on Issue IV does not arise, as a result of its success on Issue I, and it also succeeds in its cross-appeal on Issue V(a). In relation to Issue V(b), the court holds that FII carried back to an earlier quarter is to be treated as having been applied to relieve only lawful ACT.

Prudential Assurance Company (PAC) is a test claimant in this litigation, which relates to periods running from 19902009 and concerns the tax treatment of UK resident companies that received dividends from portfolio shareholdings (i.e. where the investor holds less than 10% of the voting power in the company) in overseas companies. The key features of the tax system at the relevant time were as follows. On receiving dividends from a UK resident company, a UK resident recipient company was exempt from corporation tax under s.208 of the Income and Corporation Taxes Act 1988 (ICTA), and by s.231(1) ICTA, would receive a tax credit equal to the amount of advance corporation tax (ACT) that the distributing company had paid on the distribution. By s.238(1) ICTA, the dividend received and the tax credit together constituted franked investment income (FII) in the hands of the recipient company, which, by s.241 ICTA, could be used to eliminate or reduce its own liability to ACT on distributions (franked payments) to its own shareholders. In contrast, a UK resident company receiving dividends from an overseas company was subject to corporation tax under schedule D of ICTA (DV tax). Furthermore, it did not receive a tax credit on the dividends, which did not qualify as FII, although it could be entitled to some relief against double taxation under domestic rules, or conventions between the UK and other countries. PAC brought a claim to recover corporation tax and ACT levied contrary to EU law. Before PACs claim was heard, the Court of Justice of the European Union (CJEU) concluded in two decisions that the UKs treatment of overseas dividends was contrary to EU law in that it treated dividends received from overseas companies less favourably than dividends from UK resident companies.1 Following these decisions, the first instance judge gave two judgments in favour of PAC. The Court of Appeal dismissed HMRCs appeal against the judges conclusions on Issues I, II, III and IV below, and allowed in part their appeal on Issue V. It is common ground that PAC is entitled to an appropriate tax credit, and to repayment of any tax unlawfully charged. The current dispute concerns the amount to be awarded, which depends on issues of domestic and EU law. The Supreme Court unanimously dismisses HMRCs appeal on Issue I, allows HMRCs appeal on Issues II and III, and allows PACs cross appeal on Issue V. Lord Mance, Lord Reed and Lord Hodge give a joint judgment, with which Lord Sumption and Lord Carnwath agree. Issue I: does EU law require the tax credit to be set by reference to the overseas tax actually paid, as HMRC submit, or by reference to the foreign nominal tax rate (FNR), as PAC submits? 1 See the decision in Case C 446/04 Test Claimants in the FII Group Litigation and the Reasoned Order in Case C 201/05 Test Claimants in the CFC and Dividend Group Litigation v Revenue and Customs Comrs The Supreme Court dismisses HMRCs appeal on this issue. The CJEU jurisprudence, particularly Case C 35/11 FII ECJ II, clearly establishes that the credit for foreign dividends should be by reference to the FNR, rather than by reference to the actual or effective tax incurred overseas. There is no suggestion in the CJEU case law that any distinction is to be drawn in this respect between portfolio and non portfolio holdings [17 18, 27 28]. As a result of the Courts conclusion on Issue I, Issue IV (i.e. the construction of the domestic provisions if HMRC were to succeed on Issue I) does not arise [34]. Issue II: is PAC entitled to compound interest in respect of tax which was levied in breach of EU law, on the basis that HMRC were unjustly enriched by the opportunity to use the money in question? The Supreme Court allows HMRCs appeal on this issue. In Sempra Metals Ltd v Inland Revenue Comrs [2007] UKHL 34 a majority of the House of Lords held that a claim would lie in unjust enrichment for restitution of compound interest on money which was paid prematurely as the consequence of a mistake [43 55]. A number of developments since that decision indicate that it failed to have regard to tax legislation, created problems in the law of limitation, and caused disruption in public finances [56 67]. Furthermore, it is inconsistent with Investment Trust Companies v Revenue and Customs Comrs [2017] UKSC 29, which explained the requirement for a defective transfer of value by the claimant to the defendant. The recipients possession of money mistakenly paid to him, and his consequent opportunity to use it, is not a distinct transfer of value, additional to the payment of the money. Accordingly, there is no right to interest on the basis of unjust enrichment [68 74]. The Supreme Court therefore departs from the reasoning in Sempra Metals on this issue and rejects PACs claims to compound interest (except insofar as they were conceded by HMRC) [80]. Issue III: does a claim in restitution lie to recover lawful ACT which was set against unlawful mainstream corporation tax (MCT)?2 The Supreme Court allows HMRCs appeal on this issue, answering this question in the negative. When the lawful ACT was set against unlawful MCT, HMRC did not receive unlawfully levied tax, as required for a San Giorgio claim [98].3 If an apparent charge to MCT was unlawful, that charge was a nullity. The lawful ACT could not have been set against a nullity, but would remain available to be otherwise utilised [101 102]. Furthermore, the payment of the ACT did not entail a defective transfer of value which fell to be corrected, as required by Investment Trust Companies (above) [103]. Issue V(a): where ACT from a pool which includes unlawful and lawful ACT is utilised against an unlawful MCT liability, is the unlawful ACT regarded as a pre payment of the unlawful MCT liability or is the ACT so utilised regarded as partly lawful and unlawful pro rata? The Supreme Court allows PACs cross appeal on this issue. Unlawful ACT is treated as set first against unlawful MCT. Further, because unlawful MCT is a nullity, the unlawful ACT is recoverable unless it has been set against a lawful MCT charge [111]. Issue V(b): where domestic FII was carried back to an earlier quarter, is it to be treated as having been applied to relieve the lawful and unlawful ACT pro rata, or only lawful ACT? The Supreme Court allows PACs cross appeal on this issue. Domestic FII which is carried back to an earlier quarter is to be regarded as having been applied to relieve only lawful ACT. HMRCs pro rata approach would deprive a company of the tax credit at the FNR required under EU law [118 122].

The liability of employers for deaths caused by mesothelioma has pre occupied courts and legislators over recent years. The present appeals concern claims to pass the burden of this liability on to insurers, made either by employers or in the case of insolvent employers by the personal representatives of former employees using the mechanism of the Third Party (Rights against Insurers) Act 1930. The appeals concern employers liability insurance. This is in contrast with Bolton MBC v Municipal Mutual Insurance Ltd [2006] EWCA Civ 50, [2006] 1 WLR 1492 where public liability insurance was in issue. Employers liability focuses necessarily upon the relevant employment relationships and activities. Public liability relates to any of the insureds relationships and to activities affecting the world at large. Another feature of employers liability is that, under the Employers Liability (Compulsory Insurance) Act 1969 (the ELCIA), it has since 1 January 1972 been compulsory for every employer other than local authorities carrying on any business in Great Britain to insure, and maintain insurance, under one or more approved policies with an authorised insurer or insurers against liability for bodily injury or disease sustained by his employees, and arising out of and in the course of their employment in Great Britain in that business, but except in so far as regulations otherwise provide not including injury or disease suffered or contracted outside Great Britain The appeals arise because the relevant insurers maintain that the employers liability insurances which they issued respond (or, better, could only have responded) to mesothelioma which developed (or, possibly, manifested itself) as a disease during the relevant insurance periods all long past. In contrast, the relevant employers and personal representatives maintain that the insurances respond to mesothelioma which develops and manifests itself later; all that is required, they say, is exposure of the victim during the insurance period to asbestos in circumstances where the law attributes responsibility for the mesothelioma to such exposure. These alternative bases of response (or triggers of liability) have been loosely described as an occurrence (or manifestation) basis and an exposure (or causation) basis. It is in issue whether the ELCIA, after it came into force, mandated any particular basis of response. A secondary issue, arising if the insurances only respond on an occurrence basis, is whether the aetiology of mesothelioma justifies a conclusion that there was during the relevant insurance period an occurrence sufficient to trigger liability under the insurances. Burton J, [2008] EWHC 2692 (QB), concluded that the relevant insurances all responded on an exposure basis. The Court of Appeal, [2010] EWCA Civ 1096, by a majority (Rix and Stanley Burnton LJJ), upheld the judge in relation to some of the insurances (particularly those covering disease contracted during the relevant insurance period); but they concluded that others (particularly those covering disease sustained during the insurance period) responded only on an occurrence or manifestation basis. Smith LJ would have upheld the judges judgment in its entirety. The full judgments in both courts repay study. They have been of great assistance to this court and make it possible to go directly to the heart of the issues. Mesothelioma is a hideous disease that is inevitably fatal. In most cases, indeed possibly in all cases, it is caused by the inhalation of asbestos fibres: Sienkiewicz v Greif (UK) Ltd [2011] UKSC 10, [2011] 2 AC 229, para 1, per Lord Phillips. It is a cancer of the pleura, which are thin linings around the lungs and on the inside of the rib cage. It is usually undetectable until shortly before death. Its unusual features include what Burton J in this case at para 30 described as the unknowability and indescribability of its precise pathogenesis. In particular, it is impossible to know whether any particular inhalation of asbestos (at least any occurring more than ten or so years prior to diagnosability) played any or no part in such development. Because of this unusual feature, the law has developed a special rule. The special rule was the product of judicial innovation in Fairchild v Glenhaven Funeral Services Ltd [2002] UKHL 22; [2003] 1 AC 32 and in Barker v Corus UK Ltd [2006] UKHL 20; [2006] 2 AC 572. It was modified by statutory intervention in the form of the Compensation Act 2006, section 3. Leaving aside exposures occurring within the ten or so years prior to diagnosability, the rule can now be stated as being that when a victim contracts mesothelioma each person who has, in breach of duty, been responsible for exposing the victim to a significant quantity of asbestos dust and thus creating a "material increase in risk" of the victim contracting the disease will be held to be jointly and severally liable in respect of the disease. Burton Js findings in the present case justify certain further propositions, mostly also corresponding with the summary in Lord Phillips judgment in Sienkiewicz (para 19): (i) A significant proportion of those who contract mesothelioma have no record of occupational exposure to asbestos. The likelihood is that (vi) in their case the disease results from inhalation of asbestos dust that is in the environment. There is, however, a possibility that some cases of mesothelioma are "idiopathic", i.e. attributable to an unknown cause other than asbestos. (ii) The more fibres that are inhaled, the greater the risk of contracting mesothelioma. (iii) There is usually a very long period between the exposure to asbestos and the development of the first malignant cell. Typically this can be at least 30 years. (iv) For a lengthy period (perhaps another five years) after the development of the first malignant cell, there remains a possibility of dormancy and reversal, but at a point (Burton J thought a further five years or so before the disease manifested itself, and was thus diagnosable) a process of angiogenesis will occur. This involves the development by malignant cells of their own independent blood supply, so assuring their continuing growth. (v) The mechanism by which asbestos fibres cause mesothelioma is still not fully understood. It is believed that a cell has to go through 6 or 7 genetic mutations before it becomes malignant, and asbestos fibres may have causative effect on each of these. It is also possible that asbestos fibres have a causative effect by inhibiting the activity of natural killer cells that would otherwise destroy a mutating cell before it reaches the stage of becoming malignant. Mesothelioma currently claims about 3000 lives a year in the United Kingdom. This speaks to the common use of asbestos materials up to the 1960s and 1970s. In Annex I to his judgment Rix LJ set out the insuring clauses of the various forms of policy wording in use from time to time. Subject to re ordering to reflect the development of the language, Annex A to this judgment includes the same and some further wording. It can be seen that the Excess policies and the first two MMI policies promise to indemnify the insured employer against liability if at any time during the period of insurance (or of any renewal) any employee shall sustain under the earlier policies personal injury by accident or disease or under the later policies [any] bodily injury or disease in the case of the first Excess policy while engaged in the service of the Employer or in other cases arising out of and in the course of [his] employment by the insured employer. In the case of the Independent policy, the insurer, under the recital, promised to indemnify the employer during the period of insurance or of any renewal. The insuring clause itself contains no express limitation to any period. It promises indemnity against all sums for which the employer shall be liable for damages for such injury or disease if any employee shall sustain bodily injury or disease arising out of and in the course of his employment by the Insured in connection with the Contract specified or type of work described in the Schedule. The third MMI policy and the BAI policies were in more developed form. The former promises indemnity in respect of legal liability for sums payable as compensation for bodily injury or disease (including death resulting from such bodily injury or disease) suffered by any employee when such injury or disease arises out of and in the course of employment by the Insured and is sustained or contracted during the currency of this Policy. The latter promised indemnity against all sums which the Insured may become liable to pay to any Employee . in respect of any claim for injury sustained or disease contracted by such Employee during the period of insurance or any renewal. The insurers party to the present appeals have at all times represented only a small part of the employers liability insurance market. By far the larger part of the market consists of companies who until the late 1960s (when competition rules intervened) operated a tariff system which bound them to adopt a specified policy form and specified rates. Until 1948 tariff insurance was focused on Workmens Compensation Act claims, but in 1948 legislative changes (in particular the abolition by the Law Reform (Personal Injuries) Act 1948 of the doctrine of common employment) made a common law claim for future accruing causes of action much more attractive. It may well have been in anticipation of these changes that the tariff companies introduced a new form of policy in May 1948, still in widespread use today, providing indemnity if any employee shall sustain any personal injury by accident or disease caused during the period of insurance. Under this tariff wording, sustain looks to the occurrence of an accident or development of a disease at any time, while caused makes clear that the trigger to cover is that the accident or disease has been caused during the insurance period. The present insurers were non tariff companies, and have always been free to set their own wordings. From dates after the insurances the subject of this appeal, three of the insurers in fact ceased to use the wordings set out in Annex A, and themselves moved expressly to causation based wordings Excess in about 1976, Independent in the mid 1980s, and BAI in 1983. As a matter of insurance practice, however, until the decision in Bolton in 2006, all these wordings, whether tariff or non tariff and whether using the language caused, sustain or sustained or contracted, paid out on long tail claims (including the mesothelioma claims which became increasingly frequent in the 1980s) by reference to the date(s) of exposure. Where successive employers with different insurers had exposed a particular employee victim to asbestos, liability was in practice apportioned between the employers, and so insurers, broadly according to the extent of exposure for which each employer was responsible. The rival cases Insurers submit that all the wordings in Annex A require the injury or disease to occur during the period of insurance or of any renewal. In the alternative, if the use of the word contracted in the third MMI policy and the BAI policies or the different formulation of the Independent policy leads to any different conclusion in any of such cases, they submit that this leaves unaffected the clear meaning of the Excess and first two MMI policy wordings. The employers and interested employees contend that all these policies are to be understood as operating on an exposure or causation basis. The implications of these alternative interpretations are clear. On insurers primary contention, the policies set out in Annex A would not respond to current mesothelioma claims. It is unlikely that most of them would have responded to many, if any, mesothelioma claims, since it was only in the 1980s that such claims began to emerge to any great extent. Policies written on a causation basis since the dates indicated in paragraph 10 above would also not respond to current mesothelioma claims. Insurers response is that any insurance must be read according to its terms. Until 1 January 1972, when the ELCIA came into force, it was not obligatory for employers to have any form of employers liability insurance. Further, viewed on an occurrence or manifestation basis, the policies would pick up long tail claims arising from exposure occurring at any time in the past. In this connection, it is to be noted that various long tail diseases were well recognised perils from the era of Workmens Compensation legislation before 1948. Instances were scrotal cancer, pneumoconiosis and more specifically (from the time of Merewether and Prices 1930 Report on Effects of Asbestos Dust on the Lungs and Dust Suppression in the Asbestos Industry) asbestosis. All these would only develop over and could manifest themselves after considerable periods of years. Following upon the 1930 report, The Asbestos Industry Regulations 1931 (SI 1931/1140) were introduced to regulate factories handling and processing raw fibre, and in 1969 The Asbestos Regulations 1969 (SI 1969/690) extended this regulation more widely it appears in the light of an appreciation that mesothelioma could result from exposure to small quantities of asbestos dust (see In re T & N Ltd (No 3) [2006] EWHC 1447 (Ch), [2007] 1 All ER 851, para 118). The Court of Appeals conclusions The force of insurers case rests in the use of the word sustain, whether in connection with the phrase personal injury by accident or disease or bodily injury or disease or in the conjunction injury or disease . sustained or contracted or injury sustained or disease contracted. Rix and Stanley Burnton LJJ concluded that the word sustain looked prima facie at the experience of the suffering employee rather than its cause (paras 232 and 343). Insurances responding to injury or disease sustained during the insurance period would not, on this basis, cover mesothelioma sustained long afterwards. Rix LJ had some compunction about the result because of what he (though not Stanley Burnton LJ) felt was a tension with the commercial purpose of employers liability insurance in the extraordinary context of mesothelioma (para 235). Rix LJ would have liked to hold that mesothelioma sufferers sustained sufficient injury on exposure to asbestos to trigger the insurances in force at the date of such exposure, but felt bound by Bolton to conclude the contrary (paras 277 289). However, Rix LJ, though not Stanley Burnton LJ, considered that the particular wording of the Independent insurances did not explicitly require the injury or disease to be sustained during the insurance period, and could be read as covering the sustaining of injury at any time arising out of and in the course of employment during the insurance period (paras 300 and 350). Rix and Stanley Burnton LJJ differed as to the significance of the ELCIA extension provisions included in the Independent wording, the third MMI wording and the second BAI wording, as quoted in Annex A. Rix LJ thought that the ELCIA required employers to insure on a causation basis (paras 184 and 186) although, since he also expressed the view that an insurance arranged and maintained on a sustained basis could comply with the ELCIA, he may perhaps only have meant required in practice. At all events, he held that the ELCIA extension provisions covered liability incurred to the personal representatives of employees on a causation basis, while enabling insurers to recoup themselves so far as possible from the relevant employers in respect of liability they would not otherwise have had to meet (paras 292, 300 and 302). Stanley Burnton LJ did not agree that the ELCIA required causation wording (para 342), but considered that it required insurance to be taken out and maintained in respect of ex employees, or at least those who were or had been employed at any time after the coming into force of ELCIA (para 342; and see Rix LJs comments at paras 305 307). Rix, Smith and Stanley Burnton LJJ were all agreed that, where provision was made for disease contracted, this could and should be construed as introducing cover on a causation basis, even if or though wording such as injury (or disease) sustained could only respond on an occurrence basis. Analysis Annex A sets out the insuring clauses. Insurers case is, as I have said, rooted most strongly in the word sustain, particularly when it is used by itself, rather than in conjunction with a more ambivalent alternative in the phrase sustained or contracted. The natural meaning of the word sustain, taken in isolation and as defined in the Shorter Oxford English Dictionary from an appropriate date (1965, 3rd ed), is, with respect to injury, undergo, experience, have to submit to, or, possibly, to have inflicted upon one, suffer the infliction of. But the insurance cover granted (and no doubt required) extended expressly beyond injury by accident to embrace disease. This was achieved by less natural conjunctions, such as sustain [any] personal injury by accident or disease or sustain [any] bodily injury or disease. Conscious perhaps that the verb sustain does not fit naturally with the concept of disease, some companies (MMI in its third wording and BAI in its first and second wordings) introduced the different verb contracted in the formulations sustained or contracted or injury sustained or disease contracted. This use of contracted with respect to disease is considerably more natural, but is clearly open to an interpretation that it looks back to the initiating or causative factor of the disease, and (whatever the answer on that point) highlights a question whether any substantial difference exists in this connection between such wordings and other wordings referring more awkwardly to the sustaining of personal injury by disease or the sustaining simply of disease. To resolve these questions it is necessary to avoid over concentration on the meaning of single words or phrases viewed in isolation, and to look at the insurance contracts more broadly. As Lord Mustill observed in Charter Reinsurance Co Ltd v Fagan [1977] AC 313, 384, all such words must be set in the landscape of the instrument as a whole and, at p 381, any instinctive response to their meaning must be verified by studying the other terms of the contract, placed in the context of the factual and commercial background of the transaction. The present case has given rise to considerable argument about what constitutes and is admissible as part of the commercial background to the insurances, which may shape their meaning. But in my opinion, considerable insight into the scope, purpose and proper interpretation of each of these insurances is to be gained from a study of its language, read in its entirety. So, for the moment, I concentrate on the assistance to be gained in that connection. A first point, made very clearly below by Rix LJ (para 263), is that the wordings on their face require the course of employment to be contemporaneous with the sustaining of injury. This leaves open what is meant either by sustaining or by injury. Rix LJ thought that the Independent wording could be understood differently in effect, as if it had expressly read: If any person who is under a contract of service or apprenticeship with the Insured shall at any time sustain bodily injury or disease arising out of and in the course of his employment by the Insured during the policy period in connection with the Contract specified or type of work described in the Schedule . That interpretation assumes that sustain in this context equates with the occurrence, rather than causation, of the injury or disease, and only arises for consideration if that assumption is correct. A second point is that the insurance wordings demonstrate a close link between the actual employment undertaken during each insurance period and the premium agreed to be payable for the risks undertaken by insurers in respect of that period. Premium is linked expressly to actual wages, salaries and earnings during the insurance period under the Excess policies, the first MMI wording and the BAI policies. The second and third MMI wordings contemplate that premium may be linked to wages, salaries and earnings, and, to the extent that any inference regarding the general nature and scope of cover under these standard wordings can be drawn from such a link, it must be capable of being drawn whether or not premium was actually so linked in any particular case. As to the Contractors Combined Policy issued by the Independent, it is a probable inference that the estimates which were provided and were to be updated will have included, in respect of the employers liability cover in section 1, wages, salaries and other earnings paid. Finally, the Independent cover is linked to the actual contract or work which the employer is undertaking during the insurance period. These links are in my view significant. True, premium may sometimes be calculated on a rough and ready basis. Minor discrepancies between the premium calculation and the risk may be understandable: see e.g. Ellerbeck Collieries, Ld v Cornhill Insurance Co [1932] 1 KB 401, 418, per Greer LJ (who pointed out that any such discrepancy there was more apparent than real, since workmen not earning wages because off work would not actually be at risk of any fresh accident, even though they would remain susceptible to certification for disablement). Here the position is quite different. Great care is taken in all the policies to tie premium to the actual employment undertaken during the insurance period, and in the case of the Excess, Independent and MMI policies to tie cover to a business, contract or activities described in the schedule. The natural expectation is that premium is measured by reference to actual employment or work during the insurance period because it is the risks attaching to such employment or work which are being undertaken by insurers. At the very least, the drawing of this link makes improbable the contention advanced by some of the insurers that the present insurances were apt to pick up liabilities emerging during the insurance period which could be attributable to employment and activities undertaken and negligent conduct committed at times long past. The number of employees, their employment activities and the risks involved at those times could be very different. The significance which attaches to the employment current during the insurance period is underlined by legal and practitioner texts. As long ago as 1912, MacGillivray on Insurance (1st ed), pp 966 wrote: The nature and scope of the employers business must be clearly defined in the insurance policy, and workmen employed outside the scope of the assureds business as described in the policy will not be covered In the section on Employers Liability Insurance in Stone & Coxs Accident, Fire and Marine Year Book (1957), pp 688 689, the authors stressed the importance of identifying any special hazards, such as signs of careless management or lack of control or careless workmen, and observed: The surveying of Employers Liability risks has probably become more general than formerly. Apart from the question of the possibilities of accident, there is now the serious question of disability due to disease and in particular the disease known as pneumoconiosis. In 1974 MMI produced a Guide to Insurance Officers in Local Government, which it said that it would like to see on the desk of every insurance officer for ready reference at any time; this, after noting that employers liability was almost invariably dealt with by a separate policy and that its importance had been increased by the ELCIA, went on: "7. Premiums are usually based on wages and salaries this is not only a convenient yardstick but is logical since loss of earnings usually represents a substantial part of claims. Rates of premiums vary according to the nature of the work of the labour force, and the claims experience. 8. A feature of employers liability claims is the length of time which often elapses between the date of the accident and the final settlement, and the cost of servicing claims tends to be high. Injury caused at work during the period of insurance even though it may not be diagnosed till years afterwards can be a liability under the policy." I note in parenthesis that 1974 was the year in which MMI changed from a pure sustain form of wording to a form covering bodily injury or disease suffered, when sustained or contracted during the currency of the policy. Yet there is no suggestion in the Guide of any change in substance. It is in this light improbable that the present insurances can or should be read as offering cover in respect of ancient, as opposed to current, employment and activities. But there is a third point. If insurances in the present form only address risks arising from employment during the insurance period, then, on insurers case, there is a potential gap in cover as regards employers breaches of duty towards employees in one period which only lead to injury or disease in another later period. If the employment relationship spans both insurance periods and the employer remains insured with the same insurers in both periods, there may be no problem. The employee is employed at all relevant times and the insurance may be viewed as a single continuing contract. The policy wordings set out in Annex A, with their references to insurance during the period of insurance or during any subsequent renewal period, would support the latter view. But, even in the days of more stable long term employment and insurance relationships, employees could and would move employment or retire, or employers would cease business, or change insurers. On the basis that the insurances only cover risks arising from employment during the insurance period, there would be no cover unless the liability arose from and in the course of and involved injury or disease during the currency of the same employment and the same insurance (including any renewal). Fourthly, on insurers case, employers would as a result be vulnerable to any decision by insurers not to renew; and such a decision might arise from the simple performance by employers of their common law duty to disclose past negligence to insurers upon any renewal. Employers who discovered or came to appreciate that they had been negligent in the course of past activities in respects that had not yet led to any manifest disease (e.g. by exposing their employees to asbestos) would have such a duty. Insurers could then, on their own case, simply refuse any renewal or further cover. Employers could then have to disclose that refusal also to any further insurers to whom they made a proposal for cover. One response made by insurers to such problems is that they would not arise in the large bulk of cases. That is no doubt true. Most employers liability cases involve short tail claims: typically, an accident involving injury. It is not surprising if the language of the insurances fits more easily with situations in which cause and effect coincide in time. But, by the same token, this does not mean that the underlying risk being assumed was in either partys mind limited to circumstances in which a cause gave rise to an effect during one and the same insurance period. Rix LJ, in accepting that cover depended upon injury being sustained in the sense of experienced during the insurance period, was influenced by the thought that this was not an absurd or meaningless interpretation. The insurance could operate entirely successfully in some 99% of cases (para 235). In the light of this Courts recent decision in Rainy Sky SA v Kookmin Bank [2011] UKSC 50, [2011] 1 WLR 2900, para 30, this, in my view, gives too little weight to the implications of the rival interpretations and to the principle that where a term of a contract is open to more than one interpretation, it is generally appropriate to adopt the interpretation which is most consistent with business common sense. The 1% of cases in which there might be no cover could not be regarded as insignificant. Well before 1948, there was general awareness of the existence of long tail diseases which would only develop and manifest themselves after considerable periods of years (see para 12 above; and see also Cartledge v E Jopling & Sons Ltd [1963] AC 758). The connection between asbestos exposure and mesothelioma became generally known in the mid 1960s, following the publication in 1965 of Newhouse and Thompsons report on Mesothelioma of pleura and peritoneum following exposure to asbestos in the London area and a Sunday Times article. Yet on insurers case, the present insurances would not cover any situation where, after the termination of employment or the expiry of an insurance, injury or disease developed from an employers breach of duty to a relevant employee during an insurance period. A fifth point concerns the way in which the policies deal with the issue of extra territorial scope. The first Excess wording stands apart from the others in its treatment of that issue. Cover only exists in respect of any employee in the employers service who shall sustain any personal injury by accident or disease while engaged in the service of the employer in Great Britain, Northern Ireland, the Isle of Man or Channel Islands, in work forming part of the process in the employers business. As soon as one postulates a delay in time between the causation and experiencing of a disease, it becomes apparent that this wording could operate to very curious effect if sustain looks to the latter rather than the former. A disease (e.g. a cancer) experienced during employment could be covered although caused by pre employment exposure, while a disease caused by employment would not be covered if only experienced while working abroad. The natural inference to draw from the references to being engaged in the employers service and in work forming part of the employers business process is that it was envisaged that the accident or disease would and should arise out of such service and work, rather than merely occur during it. That points to an underlying focus on causation, even if the assumption was that in the majority of cases causation and experiencing of any injury by accident or disease would coincide. As to the other policies, at the very least, the way they deal with territorial issues throws doubt on any proposition that their wordings are so carefully or well chosen that a court should be careful to stick literally to whatever might be perceived as their natural meaning. They address territorial scope by specific exclusions, but the cover and the exclusions use different language. Thus, although the second and third Excess wordings cover liability to employees who sustain personal injury by accident or disease, the territorial exclusion is in respect only of accidents occurring outside Great Britain, etc, leaving it unclear how disease, whether caused or developing outside Great Britain, should be dealt with. The Independent wording also covers liability to employees who sustain bodily injury or disease, while the territorial exclusion is for injury, illness, loss or damage caused elsewhere than in Great Britain, etc. While the contrast in language is capable of lending some support to a view that sustain looks to experiencing, rather than to causation, an alternative possibility is that the two words were understood as having the same effect and that the cover was understood as focused on causation. The language of this exclusion thus cuts both ways, as Rix LJ recognised (para 297). A similar position applies to the contrast between injury or disease sustained and injury or disease caused outside Great Britain, etc. under the first two MMI wordings. Under the third wording, the language of the cover and the exclusion have been deliberately matched. Under the BAI wordings, however, there is an incongruity between cover for injury sustained or disease contracted and the exclusion in respect of liability for accidents . arising outside the United Kingdom. Again, this leaves the position in respect of disease unclear, and the difference between injury sustained and accidents arising can be read either as deliberate or as suggesting that no significance was attached to the difference or that the real concern was with causation. The history and Workmens Compensation Acts Much attention was, both below and before the Supreme Court, paid to the development of employees rights to compensation in respect of personal injury and disease, at common law and under the scheme of the Workmens Compensation Acts (WCAs). The WCAs were in force from 1897 until replaced in 1948 under the National Insurance (Industrial Injuries) Act 1946. The history and a number of the decisions under the WCAs were examined by Rix LJ in paras 126 to 165 of his judgment. He concluded that such an examination yields in the present context not a lot. To a considerable extent, I agree and I shall not repeat the whole exercise, but identify some potentially relevant aspects. Etymologically, some of the language presently in issue can be traced back to statutory language found in the Employers Liability Act 1880 and the WCA 1897. The 1880 Act modified the common law doctrine of common employment, by entitling employees to recover common law compensation for injury caused by specified matters for which employers were responsible, provided that they gave notice, within six weeks of sustaining the injury of its cause and the date at which it was sustained. The 1897 Act, applying to personal injury by accident arising out of and in the course of employment, also required notice to be given of the accident as soon as it occurred, stating the cause of the injury and the date at which it was sustained. These Acts therefore distinguished the causation and the sustaining of an injury, but not in any presently relevant context. Further, any reference to sustaining disappeared from the Workmens Compensation scheme in the 1906 Act, which amended the scheme to require a notice stating the cause of the injury and the date at which the accident happened. The 1906 WCA also expressly extended the scheme to cover certain diseases specified in section 8. In that context, it provided that, where a workman was certified as disabled or suspended from employment or died due to a disease and the disease is due to the nature of any employment in which the workman was employed at any time within the twelve months previous the date of the disablement or suspension, whether under one or more employers, then he or his dependants shall be entitled to compensation under this Act as if the disease or such suspension . were a personal injury by accident arising out of and in the course of that employment . Section 8(a) provided: The disablement or suspension shall be treated as the happening of the accident. Under section 8(c), the compensation was recoverable from the employer last employing the employee within the previous twelve months, providing the employee furnished that employer with particulars of all his other employers in the employment to the nature of which the disease was due. It was not necessary to prove that the disease actually arose from the last employment, merely to prove that the relevant employment gave rise to a risk of such a disease: Blatchford v Staddon and Founds [1927] AC 461. The 1906 Act may be regarded in this respect as involving an early statutory instance of the kind of liability recognised in Fairchild v Glenhaven Funeral Services Ltd [2002] UKHL 22, [2003] 1 AC 32 and Barker v Corus UK Ltd [2006] UKHL 20, [2006] 2 AC 572. However, failing such particulars, the last employer could excuse himself upon proving that the disease was not contracted whilst the workman was in his employment (section 8(c)(i)). The last employer might also join any other employer (within the last twelve months) and it was provided that upon proof that the disease was in fact contracted whilst the workman was in the employment of that other employer, that other employer shall be the employer from whom the compensation is to be recoverable (section 8(c)(ii)). Finally, section 8(c)(iii) provided that: if the disease is of such a nature as to be contracted by a gradual process, any other employer within the last twelve months was liable to make such contributions as might be agreed or determined by arbitration under the Act. Under this scheme, therefore, compensation for disease was initially based upon the nature of the employment and its potential for causing, rather than upon proof that it caused, such a disease. The paternal benevolence of the Legislature (as Visc Sumner put it in Blatchford: p 469) is well known, and if the price of that benevolence is paid by the last employer, who thus has to bear others burdens, that is nothing new in this kind of legislation. However, the last relevant employer could seek, in specified circumstances, to avoid or to pass on to another employer responsibility by proof that the disease was not actually contracted in his employment. Alternatively, in the case of a disease of such a nature as to be contracted by a gradual process, all relevant employers within the last twelve months would be liable to contribute. The scheme was, as I see it, concerned with either the risk of or actual causation, and in its use of the word contracted it appears to me to have been directing attention to the causation, rather than the mere experiencing or manifestation, of disease. The WCA scheme was the subject of further amendment by the 1925 Act. Section 43 superseded section 8 of the 1906 Act as regards scheduled diseases, while section 47 made specific provision for the introduction of a parallel scheme covering silicosis. Effect was given to this by inter alia the Metal Grinding Industries (Silicosis) Scheme which came into force in July 1927, making provision for obtaining compensation from the last employer within the previous three years, and giving such employer rights to look to other such employers within the last five years. An insurance covering employers liability in this connection was considered in Smith & Son v Eagle Star (1933) 47 Ll. L.R. 88, (1934) 48 Ll. L.R. 67. Mr Hill had been employed in processes giving rise to silicosis for some 20 years. For the last two of these years, from 31 March 1928 to 16 June 1930, he worked for Smith & Son. From 30 June 1927 to 17 June 1930, Smith & Son had an insurance against WCA liability in respect of any personal injury or disease which at any time during the continuance of this policy shall be sustained or contracted by any workmen . The policy was expressly extended to cover any liability in connection with any claim made by employees in respect of silicosis, and the decision of the Court of Appeal rested on this ground. But Scrutton LJ also examined the main policy language, and in particular what was meant by contracted. He noted that there has been a good deal of discussion in the Courts about a disease which is gradually contracted commencing at some stage and through the process going on increasing the disease until at last it results in total disablement (p 70), and concluded that the word was not to be read as first contracted, but in the sense of influenced or increased until it ultimately comes to total disablement. This, although not directly focusing on the first development of a disease from some earlier cause, suggests a flexible view of the word contracted, directed once again to the employments responsible for causing the disease. Confirmation that this was Scrutton LJs view can be found in the earlier case of Ellerbeck Collieries Ltd v Cornhill Insurance Co [1932] 1 KB 401. Two workmen who had been in the colliery companys service for many years were on respectively 11 and 12 March 1929 (dates they were actually off work) certified as suffering from miners nystagmus. The Cornhill had on 8 March 1929 issued the colliery company with a three month provisional cover note insuring in terms matching the wording of the insuring clause in the first Excess wording (i.e. against liability in respect of any employee who shall sustain any personal injury by accident or disease while engaged in the service of the employer). Failing a satisfactory survey, the cover note actually expired on 18 March 1929. The first point decided was whether the employees had sustained personal injury by accident or disease during the period of validity of the cover note (8 to 18 March 1929). It was held that they did. The judgments in the Court of Appeal are of interest for a number of reasons. First, both Scrutton LJ (p 408) and Greer LJ (p 417) approached the question of construction on the basis that the policy was intended to protect the employers against their liability to their workmen under the WCAs. Scrutton LJ added that it seems to me that the policy was intended to cover the liability of the employers for the results of industrial diseases caused by the employment (p 409). His description of the policy, covering in terms any employee sustaining personal injury by accident or disease in service, as intended to cover liability . for the results of diseases caused by the employment fits precisely with the analysis which I consider correct (paragraphs 18 28 above). Second, Scrutton LJ went on to refer to the difficulties in saying when an industrial disease, such as miners nystagmus or lead poisoning, begins, and in these circumstances the difficulty for an employee to pick the proper employer to sue. He described the way in which Parliament, by what became section 43 of the WCA 1925, had addressed such difficulties by providing a conventional and artificial means for enabling the workman to get compensation, leaving the various employers to fight out their proportion of the liability between themselves (p 409). He said that the last employer, liable under the WCA scheme, then claims on the insurance company on the ground that he is liable to make compensation for an injury by disease, and the date of the injury or disablement is by statute and certificate fixed as happening between the dates for which he is provisionally covered (p 411). On this basis, and in the light of the House of Lords decision in Blatchford, Scrutton LJ concluded that he was bound to hold that an accident has happened within the period of the provisional cover against the consequences of which the insurance company is bound to indemnify the employer (p 413). In short, the conventional and artificial provisions of the WCA defined what constituted an accident and when personal injury by accident or disease was sustained for the purposes of the insurance. Greer LJ, more shortly, adopted the same approach (p 418). Only Slesser LJ (p 421) expressed a reservation about the possibility that the artificial deeming provisions of section 43(a) of the WCA 1925 might only apply as between employee and employer, and that it might have been necessary to consider separately the date of the sustaining of injury as between the employer and the insurer, had there been any admissible evidence that the two employees had actually contracted the scheduled disease before the granting of the statutory medical certificate. Commercial purpose and practice Much general evidence was directed or elicited before Burton J in relation to the commercial purpose of the present insurances, and to practice relating to their operation in the years before the present issue arose. It was argued that there was, prior to the decision in Bolton, a universal usage of the insurance industry to pay out mesothelioma or similar claims under [employers liability] policies by reference to the date of inhalation/exposure whatever the wording, or an estoppel by convention to like effect. Burton J rejected the argument (paras 180 to 201, esp. para 201), for the reasons that, first, there was no evidence relating to years earlier than the 1980s which could be put down to any kind of arguable usage, second, any usage was not certain, not least because of the multiplicity of approaches to or bases for it and, third, it was not binding. It was not incorporated into the insurance contracts. No issue of estoppel by convention was pursued to the Court of Appeal (Rix LJ, para 24, and Stanley Burnton LJ, paras 332 and 335) and the issue of a universal custom was only pursued by Zurich Insurance Company (Rix LJ, para 24). By a multiplicity of approaches to or bases for insurers practice, Burton J was referring to evidence that insurers followed the practice they did in some cases because they believed that their contracts were to be interpreted on a causation/exposure basis, in others because they believed that the aetiology of diseases such as mesothelioma was such that injury was in fact sustained (in the sense of experienced) at the date of inhalation, while yet others may have failed to realise that their historically relevant wordings had been on a different basis to the causation wordings to which they had since switched or may have failed to address their minds to any relevant issue at all in relation to an insured who was usually a longstanding repeat client. Rix LJ (para 228) contented himself with agreeing with Burton Js reasoning on this aspect, while Stanley Burnton LJ noted and agreed in particular with Burton Js second reason, relating to the believed aetiology of mesothelioma (para 335). Smith LJ, on the other hand, treated the commonly held understanding that diseases such as mesothelioma involved injury at the date of inhalation as part of the factual matrix of all the insurance contracts (paras 322 323), and considered against that background that no difference in meaning should be held to exist between policies using sustained and causation wording, until the time when the two sides of the insurance industry should be considered to have appreciated that some diseases, including mesothelioma, do not occur until many years after exposure to the causative agent (para 327). She put that as around the time of the decision in Bolton, after which parties using a sustained wording must be taken to have meant only to cover injuries actually occurring during the policy period (para 327). The argument of a binding usage was not pursued before the Supreme Court, rightly so for the reasons given by the judge and the majority in the Court of Appeal. Equally, there has been no suggestion of estoppel by convention, along the lines recognised as possible in Chartbrook Ltd v Persimmon Homes Ltd [2009] UKHL 38, [2009] 1 AC 1101, para 47. However, on the issues of policy interpretation, Mr Stuart Smith QC for Zurich Insurance, maintained before the Supreme Court an argument that there was a consensus based on market practice, whereby, for one reason or another, such policies would respond to long tail diseases by reference to the date of exposure, and that this could constitute relevant background to their construction. Assuming that, short of a binding usage or estoppel by convention, a practice, if known to or shared by the relevant parties, could in some circumstances be relevant background (see e.g. Reardon Smith Line Ltd v Yngvar Hansen Tangen [1976] 1 WLR 989), still, in my opinion the argument fails in the present case. It fails in particular in the light of the judges findings, even in relation to policies made in and after the 1980s. A practice based on a mistaken understanding, by only some insurers, that the policies operated on a causation basis cannot be relevant background to the interpretation of every policy; on the judges findings other insurers do not appear to have understood that the policies operated on that basis. A practice based on a mistaken understanding by others in the market as to when long tail diseases could be said to have been experienced or to involve injury is likewise an unpromising start for construing all policies; if the understanding were good, it would mean that such diseases fell within the policies, even though the policy cover was restricted to injury or disease experienced during the policy period. The understanding would not therefore carry any imperative to read a sustained wording as meaning caused. Before the Supreme Court, both employers and employees continued to rely upon the evidence given at trial regarding the general purpose of employers liability insurance as part of the background to the interpretation of the present insurances. Rix LJ (paras 223 to 235) gave it some weight as such, but Stanley Burnton LJ thought that there was little if any assistance to be gained by reference to the commercial purpose of EL insurance, as this was simply to provide the cover defined in the policy (para 333). The Supreme Court was provided with a useful summary of the considerable volume of evidence relied upon in this connection. It consisted in general of answers given by insurers, two at least of them with experience going back to the 1940s. They were asked (frequently in response to leading though not inadmissible on that score questions in cross examination) about their or others views, understandings or perceptions as to the purpose of the policies, and the way in which these would or should respond, in relation to injuries arising from exposure in the course of activities during the policy period. In my judgment, Stanley Burnton LJ was right to reject such evidence as inadmissible. The parties cannot be asked what they meant by their contract, and, failing any binding usage, it is equally inadmissible to ask other persons operating in the market to give general evidence as to what they would have understood the parties to have meant by the words used in the context in which they were used. The evidence does not seem to have amounted to more than that. However, I do not agree with Stanley Burnton LJs suggestion that no useful conclusions can be drawn about the commercial purpose of the policies, save that it was to provide the defined cover. In my opinion, relevant conclusions about the general nature and purpose of the individual policies can be drawn in this case, just as they could in the case of the different (and wordier) instrument in issue in In re Sigma Finance Corporation [2009] UKSC 2, [2012] 1 All ER 571 (see especially paras 10, 12 and 37). They can be drawn from an overall consideration of the individual insurance wordings, and particularly from the features which tie cover to the employees and activities during the relevant policy period and the five points considered in paragraphs 18 to 28 above. Further, if the policies are on any view apt to cover employers liability for long tail diseases which initiate during, but only manifest themselves years after, the original policy period, one may look with scepticism at an interpretation which distinguishes this situation from other situations where a long tail disease is caused but does not strictly begin during the policy period, and only manifests itself years later. This is particularly so if a conclusion that the latter diseases fell outside the policy cover meant that they would or might well not fall within any subsequent employers liability policy. ELCIA 1969 Section 1 of the ELCIA provides: 1. (1) Except as otherwise provided by this Act, every employer carrying on any business in Great Britain shall insure, and maintain insurance, under one or more approved policies with an authorised insurer or insurers against liability for bodily injury or disease sustained by his employees, and arising out of and in the course of their employment in Great Britain in that business, but except in so far as regulations otherwise provide not including injury or disease suffered or contracted outside Great Britain (3) For the purposes of this Act (a) approved policy means a policy of insurance not subject to any conditions or exceptions prohibited for those purposes by regulations. 4. (1) Provision may be made by regulations for securing that certificates of insurance in such form and containing such particulars as may be prescribed by the regulations, are issued by insurers to employers entering into contracts of insurance in accordance with the requirements of this Act . (2) . the employer shall during the currency of the insurance and such further period (if any) as may be provided by regulations (a) comply with any regulations requiring him to display copies of the certificate of insurance for the information of his employees; . The only conditions or exceptions ever prohibited were certain exemptions from liability. Under section 3, the ELCIA did not however apply to local authority employers, such as most of MMIs insureds. Under section 4, provision might be made for certificates of insurance to be issued to employers, and in that event the employer was, obliged during the currency of the insurance and such further period (if any) as may be provided by regulations to comply with any regulations requiring him to display copies of the certificate of insurance for the information of his employees. In reaching his conclusions on the ELCIA (para 16 above), Rix LJ engaged in an impressive analysis, to which I would refer (paras 166 to 186). The only doubt this leaves is how, if the ELCIA requires a causation wording, an employer could properly insure on a wording which only covered injury sustained in the sense of experienced (see para 186 and paragraph 16 above). The scope of the ELCIA is, as Rix LJ indicated, open to three alternative analyses: that it requires cover in respect of (i) all future liability incurred during the insurance period, whenever the negligence or injury, or (ii) liability for all future injury or disease sustained (in the sense of experienced) by employees during the insurance period, whenever the negligence, or (iii) liability for all negligence or breach of statutory duty during the insurance period giving rise to liability as in (ii). The retrospectivity of cover involved in (i) and (ii) is unlikely to have been intended. The only one of the three possibilities not involving a degree of retrospectivity is (iii). A duty on every employer to insure, and maintain, insurance is consistent with a requirement to have the insurance in place during, though to maintain it after, the relevant insurance period. The provision, contemplated by section 4, for copies of insurance certificates to be issued by insurers and to be displayed by any employer for the information of his employees during the currency of the insurance and such further period as may be provided by regulations indicates, first, a desire to assure employees of their insurance protection during the relevant insurance period, and, secondly, an awareness that this assurance might need to remain in place after such insurance period; it is therefore suggestive of (iii), rather than (i) or (ii). As Rix LJ observed, it is only cover in accordance with (iii) that can give an employee the assurance that any injury or disease suffered as an employee and arising out of and in the course of [his] employment will be covered by insurance, the benefit of which would, if necessary, be available to him at the time under the Third Party (Rights against Insurers) Act 1930. An obligation to have a policy in force only at or by the time when injury is actually experienced would leave employees or ex employees at the mercy of compliance with the statute by their employers or ex employers at uncertain future dates. It would also leave such employees or ex employees at the mercy of employers who, for whatever reason, ceased to carry on business either in Great Britain or (for example due to insolvency) at all. Further, if injury or disease suffered or contracted bears the same meaning as insurers suggest that injury or disease sustained or contracted bears, then an employee, who had the misfortune to succumb to a disease abroad caused by his employment or previous employment in Great Britain, would not be covered (unless regulations intervened to ensure that he was). Stanley Burnton LJ thought that any issue as to the nature of the insurance required under ELCIA was resolved by its use of the word sustained, rather than caused. He went on to conclude that the ELCIA covered any injury sustained (in the sense of experienced) during a period of insurance, by anyone who was then or had at any previous time been an employee. However, that latter conclusion introduces a retrospectivity into the scope of the ELCIA, which, as already indicated, I think unlikely to have been intended. The statute could have used the tariff wording of causation instead of sustained. But in the statutory language the word sustained is not coupled with a phrase such as during the period of the insurance. Even if sustained means experienced in the context of the statute, the statute may require insurance on what is effectively a causation basis; the words sustained by his employees may well mean sustained at any future time by his current employees. The key to the meaning of the statutory language seems to me the combination of the phrases arising out of and in the course of their employment in Great Britain and not including injury or disease suffered or contracted outside Great Britain. Together, and for reasons given in the last two paragraphs, they indicate a statutory requirement to insure in respect of activities during the course of employment in Great Britain which may in the future give rise in or out of Great Britain to liability to the employees involved in such activities. In my judgment, therefore, the conclusion which gives proper effect to the protective purpose of the legislation is that the ELCIA requires insurance on a causation basis. The ELCIA extension provision to the Independent and second BAI wordings (see Annex A), as well as a similar extension provision to the MMI policy intended for insureds who were not local authorities, achieved this result expressly in relation to policies written subsequent to the coming into force of the ELCIA, at least for the purpose of ensuring that employees claims were covered by insurance. Any other subsequent insurances not containing that extension provision should, if possible, be read as providing the relevant employers cover required by statute. This is a powerful tool in the interpretation of such insurances. Bolton M.B.C. v Municipal Mutual Insurance Ltd The Court of Appeal in the present case was bound by its previous decision in Bolton MBC v Municipal Mutual Insurance Ltd [2006] EWCA Civ 50, [2006] 1 WLR 1492 on public liability policies. The majority regarded that case as, in effect, determining the meaning which must be put on the word sustained in the present employers liability policies: see paras 284, per Rix LJ, and 339, per Stanley Burnton LJ, who however also found the logic of Longmore LJs judgment convincing in relation to the latter type of policies. Smith LJ on the other hand considered that public liability and employers liability insurances gave rise to different considerations (para 328). In my opinion, that is right. Employers liability policies are subject to particular terms and considerations, analysed above (particularly in paragraphs 18 28 and, in the case of policies effected after the coming into effect of the ELCIA, paragraphs 41 46). These considerations are not or certainly not necessarily applicable to public liability insurances. The present case was concerned with employers liability not public liability insurances, and it may well be that not all the relevant facts relating to the latter are before us. We certainly have not heard full argument on the proper conclusions which may be drawn regarding the basis of liability or trigger generally applicable under the latter. In these circumstances, I would proceed on the basis that we are not bound by Bolton, that this does not involve any view about the correctness or otherwise of Bolton, but only that it is unnecessary to consider what the position generally may be under public liability policies. Assuming that, in relation to public liability insurance, the position generally is as stated in Bolton, that does not alter the conclusions which I reach. It merely means, in their light, that public liability insurance generally and the present employers liability policies operate on different bases, because of their different backgrounds, terms and purposes. Contracted There is no difficulty about treating the word contracted as looking to the causation or initiation of a disease, rather than to its development or manifestation. In relation to the two BAI wordings and the third MMI wording, this interpretation obtains strong support from the general nature and purpose of the relevant policies, derived from their immediate context and terms and analysed in paragraphs 18 to 28 and 41 above. To the limited extent that the WCA background may assist to inform the meaning of later policies, it can be seen overall as a legislative scheme which was concerned with either the risk of or actual causation (para 32 above). Even if, in the phrase sustained or contracted or injury sustained or disease contracted, the word sustained is to be understood as meaning experienced, that would reflect no more than the fact that the cause and effect of an injury commonly coincide; I would still unhesitatingly conclude, as did the Court of Appeal, that the word contracted used in conjunction with disease looks to the initiating or causative factor of the disease. Sustained The majority of the Court of Appeal considered that it was impossible to view policies with pure sustained wordings as operating by reference to the initiating or causative factor of a disease. They did so primarily by reference to the wording of the insuring clauses. In my view, as indicated in paragraphs 18 19 above, a broader approach is necessary. The general nature and purpose of these policies can be derived from their immediate context and terms, analysed in paragraphs 18 to 28 and 41 above. It is true, as Rix LJ said, that phrases such as injury sustained by an employee or an employee who shall sustain injury, in either case by accident or disease, appear to address the impact of the accident or disease on the employee. But the underlying focus of the insurance cover is on the employees and activities current during the insurance period. The cover would be potentially incomplete, and employers would be potentially exposed to uninsured risks, were sustained to be understood as meaning developed or manifested. This is so, even before the ELCIA came into force. Any policies written subsequent to the coming into force of the ELCIA either afford cover consistent with the Acts requirements by virtue of an ELCIA extension provision, or, to the extent that this is not the case, should be construed, if at all possible, as meeting employers obligations under that Act. In my view, such obligations included taking out insurance in respect of negligence during the insurance period affecting an employee in a manner giving rise to bodily injury or disease then or at any subsequent time. On this basis, I consider that, although the word sustained may initially appear to refer to the development or manifestation of such an injury or disease as it impacts employees, the only approach, consistent with the nature and underlying purpose of these insurances both before and after the ELCIA, is one which looks to the initiation or causation of the accident or disease which injured the employee. The disease may properly be said to have been sustained by an employee in the period when it was caused or initiated, even though it only developed or manifested itself subsequently. Disease sustained, read as meaning experienced or incurred Rix LJ was attracted by the submission that, even if sustaining disease meant experiencing or incurring it during the period of the insurance, long tail diseases could be said to have been sustained during the period of insurance in this sense. He asked rhetorically whether an employee who had inhaled asbestos had not sustained an injury in the form of an assault of the fibres, as a result of which he was worse off through having dangerous fibres in his lungs (para 280). He noted that, although there was at most trivial injury or damage, and nothing that could create actionable damage, nevertheless, when mesothelioma develops, it is the risk of mesothelioma created by the exposure which is the damage (see . Barker ) and it is the exposure, and the risk of mesothelioma, that is the damage (para 281). He only felt bound to reject this analysis (para 284) because of the Court of Appeals previous decision in Bolton. It may be that in the case of some long tail diseases, the victim can be said to have incurred or caught them at the same time as the initial ingestion or scratch giving rise to them. But it is clear that this is not the position with inhalation of asbestos in relation to either asbestosis or mesothelioma. No cause of action arises from exposure or inhalation alone: Rothwell v Chemical & Insulating Co Ltd [2007] UKHL 39, [2008] 1 AC 281. Further, for reasons which I develop in paragraphs 64 65 below, the exposure and risk are not by themselves damage in any sense known to the law. Damage is only incurred when mesothelioma develops. Only when it develops does the victim incur damage which is legally relevant, and even then this is not because any physical link necessarily exists or can be proved between the mesothelioma and the original exposure. The rule in Fairchild and Barker imposes liability for the mesothelioma upon persons who have exposed the victim to asbestos, and so created a risk of mesothelioma. But it is not a rule which, even as between employers and employees, deems the latter to have suffered injury or disease at the time of any exposure. And, even if it were viewed simply as a rule imposing retrospective liability on employers for exposing their employees to the risk of mesothelioma, the insurance policies do not insure risks of physical injury or disease, but only actual injury or disease. The application of the insurances in respect of mesothelioma At the outset of these appeals, the application of the insurances in respect of mesothelioma suffered by employees exposed to asbestos during their employment by an insured employer did not appear controversial. This changed after a question from Lord Phillips on day 4 of the hearing, followed by a later written note. All the same, the transcript pages containing any argument on the point numbered only 40 out of a total of some 1140. So far as Mr Edelman made any submissions on this point, in his written case or orally, they were to this effect: if the correct analysis of the Houses decision in Fairchild be that an employer who exposes an employee to asbestos is deemed to have caused that employees mesothelioma, then employers liability insurances held by the employer on a causation basis should respond; but, if the policies do not respond on a causation basis, there is no justification for treating the employee as having suffered injury or a disease during their currency, because employers cannot prove that any particular inhalation caused any injury. This led to some discussion, particularly with counsel for employers and employees, of the points which I have already addressed in paragraphs 50 52 above. The point now expressed forcefully by Lord Phillips in his judgment is that exposure to the risk of mesothelioma is the correct analysis of the Fairchild principle, at least as subsequently interpreted, and that such exposure can satisfy neither the concept of injury nor the concept of causation for the purposes of the policies. If that is right, then the present insurance claims must all fail. Indeed, the great bulk of insurance claims settled by other insurers (e.g. former tariff insurers) or by the present insurers under the causation policies they have issued in more recent years (paragraph 10 above) should presumably also have failed. The only exception may be the case of an employee exposed to asbestos in only one employment by an employer holding insurance throughout with only one insurer. In such a case it might (perhaps) be said that, whichever particular inhalation(s) may have been responsible for the employees mesothelioma, it (or they) must have been insured. Even then, the logic of the Supreme Courts reasoning in Fairchild and Sienkiewicz v Greif (UK) Ltd [2011] UKSC 10, [2011] 2 AC 229 might lead to the conclusion that causation was still unprovable in the light of the possibilities of environmental or idiopathic causation of mesothelioma. Rules regarding causation are created by the courts for the purpose of determining when liability arises in particular contexts. Normally, they reflect a common sense understanding of what is ordinarily understood when we speak of a cause in a particular context. In their leading work on Causation in the law (Clarendon Press, 2nd ed 1985) Professor H. L. A. Hart and Tony Honor examined both this understanding and its relationship to legal decision making. Generally, but not always, a cause must involve an act or omission that was at least a sine qua non of the injury in respect of which responsibility attaches (the but for test). But sometimes two separate acts or omissions may each independently have been sufficient to give rise to that injury (as when A and B simultaneously, but independently shoot C dead), and then we may as a matter of legal policy accept a weaker causal relationship for the imposition of responsibility: see p lxv in the preface to and p 123 of the 2nd edition. Other cases where causal requirements have been relaxed include Bonnington Castings Ltd v Wardlaw [1956] AC 613; there, materially contributing to part of an accumulation of dust which cumulatively led to pneumoconiosis gave rise to liability for the whole disease (although it has been suggested that some apportionment might now be possible in fact and law). Another relevant authority is McGhee v National Coal Board [1973] 1 WLR 1; there, liability for dermatitis was held to exist because the defendant had materially contributed to part of the claimants exposure to dirt, any part of which might, independently of any other, have given rise to the abrasion leading to the claimants dermatitis. It was recognised that this involved liability based on materially contributing to the risk of the injury. Lord Reid at p.4G H described the result as reached taking a broader view of causation, and Lord Wilberforce at p 5G viewed it as involving a conclusion as to the causal connection that had to exist between the default and the disease complained of. The contrary view (viz, that proof of risk was insufficient without proof that the risk caused or materially contributed to the disease) had a logic which Lord Wilberforce acknowledged, but rejected for policy and evidential reasons set out at p.6C F. In Fairchild, McGhee was seen as a precursor of the decision there reached. Putting aside the possibility of an idiopathic or environmental cause, a Fairchild type situation exists when (a) there are two separate potential causes exposing the claimant to the same risk, one involving an act or omission by the defendant, (b) either one of which causes would have been sufficient to give rise to the injury, and (c) one of which did so, but (d) neither of which can as a matter of probability be shown to have done so. Taking into account the later decisions in Barker v Corus and Sienkiewicz, the Fairchild principle extends to any case where there has been an act or omission exposing a person to asbestos, which exposure may have caused the mesothelioma, but which cannot be shown as a matter of probability to have done so. On that basis, the House held in Barker v Corus that each or any persons liability should only be proportionate to the extent that he had exposed another to the risk of mesothelioma. Parliament by the Compensation Act 2006 reversed that conclusion and made each such person liable in respect of the whole of the damage caused by the mesothelioma. Lord Phillips in his judgment addresses the basis of Fairchild in the light of Barker v Corus, the 2006 Act and Sienkiewicz. He accepts that, if Fairchild is now correctly to be understood as a special rule deeming employers who have exposed an employee to asbestos to have caused any subsequently suffered mesothelioma, then the insurance policies should apply (para 109). But he concludes that Fairchild must be understood as creating liability not for the disease, but for the creation of the risk of causing the disease. It follows in his view that employers and employees gain no assistance from the special rule in asserting that mesothelioma suffered by any person was caused or initiated in any particular policy period. On this basis, even though the insurances respond to injuries caused or initiated during their periods, the employers and employees fail for want of proof. It is not fruitful to repeat the exercise undertaken in Barker v Corus of examining in detail the significance of the speeches in Fairchild. The House was not agreed about this in Barker, but the majority speeches of Lords Hoffmann, Scott and Walker were at pains to reject any analysis of Fairchild as proceeding upon a fiction that each exposure had caused or materially contributed to the disease: see paras 31, 61 and 104; they each also referred to the liability created by Fairchild as being not for causing the disease, but for materially increasing the risk of the mesothelioma which was in fact suffered: paras 31, 36 and 40, 53, 61 and 113. Lord Rodger (dissenting) perceived the majority to be misinterpreting Fairchild by failing to acknowledge that it was based on an equation of materially increasing risk with materially contributing to causation, an equation which he thought had been accepted as sufficient causation in Bonnington Castings Ltd v Wardlaw [1956] AC 613 and McGhee v National Coal Board [1973] 1 WLR 1. It is on the apparently bright line distinction said to have been drawn by the majority in Barker between materially contributing to increasing the risk of, and causing, a disease that Lord Phillips now founds his judgment in these appeals. The Compensation Act 2006 applies where a person who has exposed someone to asbestos is liable in tort in connection with damage caused to the latter by mesothelioma whether by reason of having materially increased a risk or for any other reason (section 3(1)(d)). It makes the former person liable in respect of the whole of the damage (section 3(2)(a)). On its face, the Act assumes rather than creates the liability, and only alters the measure of recovery. That was the view expressed in Sienkiewicz by Lords Phillips, Rodger and Brown (paras 70, 131 and 183). However, on further analysis, the distinction identified in paragraphs 58 59 above proves more elusive. Even in Barker itself, Lord Walker described exposing the employee to the risk of mesothelioma as being equated with causing his injury and the result as an explicit variation of the ordinary requirement as to causation (para 104), and spoke of the rule as one by which exposure to the risk of injury is equated with legal responsibility for that injury (para 109). However, it is conceivable that he meant that the ordinary requirement of causation of the disease was entirely replaced by another liability creating rule. It is in the later authority of Sienkiewicz that the difficulty of drawing any clear cut distinction between creating a risk and causation of the disease becomes most apparent. Lord Phillips there stated that the rule in its current form was that the person responsible for the exposure and thus creating a material increase in risk of the victim contracting the disease will be held to be jointly and severally liable for causing the disease (para 1). Later, he said that the law was presently contained in Fairchild and Barker which had developed the common law by equating materially increasing the risk with contributing to the cause in specified and limited circumstances (para 70). That was the analysis of Fairchild advanced by Lord Rodger in Barker v Corus (paras 73 and 83) but rejected there by the majority. Lord Brown in Sienkiewicz spoke of a more relaxed approach to causation (para 178) and flexibility in the approach to causation (para 187). I referred to Fairchild and Barker as involving a special rule of causation (para 188), and Lord Kerr referred to them as involving a modification of the previously applicable legal rules in relation to the causation element in employers liability claims (para 196) and to adjustments in the burden of proof (paras 198 and 200). Lord Rodger was, on the other hand, loyal to the majority view in Barker by referring to liability as based on materially increas[ing] the risk (para 113), and Lord Dyson was cautious in speaking of materially increasing the risk of contracting the disease as sufficient to satisfy the causal requirements for liability (para 207). Lord Phillips has in para 123 set out a passage from an extra judicial commentary written by Lord Hoffmann in Perspectives on Causation (2011), p 8. In it, Lord Hoffmann describes the two ways in which the changes introduced by Fairchild and Barker could be characterised, one as changing the causal requirements for an action for damages for mesothelioma ; all that is necessary is to prove that the risk has been increased and that the specific exposure may have provided the actual agent; the other as creat[ing], exceptionally, a cause of action for the increased risk of mesothelioma, rather than for the disease itself. Lord Hoffmann notes that the House in Barker (Lord Rodger dissenting) adopted the second explanation of what had happened in Fairchild. But in the next sentence, not quoted by Lord Phillips, Lord Hoffmann went on: Parliament almost immediately reversed this decision by a statute giving effect to the first explanation, which had been advocated by Lord Rodger in his dissenting speech. Lord Hoffmanns extra judicial (or judicial) words cannot by themselves alter the true effect of a statute, but his comments do again show that the suggested distinction is more fluid than might at first appear. It is relevant to look more closely at what Barker decides. In Barker, Lord Hoffmann spoke of Fairchild as applying an exceptional and less demanding test for the necessary causal link between the defendants conduct and the damage (para 1) and of the requirement of a sufficient causal link between the defendants conduct and the claimants injury (para 17). In his note in Perspectives on Causation, he picked up this language with references to the causal requirements of the relevant rule and to the issues in cases of mesothelioma and analogous situations as involving the causal requirements for an action for damages for mesothelioma. Lady Hale in Barker also viewed the common law rules governing the measure of recovery as closely linked to the common laws approach to causation, and said that there was no reason in principle why the former rules should not be modified as the latter approach is courageously developed to meet new situations (para 122). In paras 123 and 124, she made clear that in her view the issue in Barker could be seen as arising from the expanded perceptions or developed concept of causation which the law had accepted. These citations all suggest that it is both possible and appropriate to characterise the position achieved by the common law after Barker v Corus as one concerned with the issue of the causal requirements or causal link, as between the defendants conduct and the disease, which the common law requires in order for there to be an action for mesothelioma. But analysis of the rule arrived at after Fairchild and Barker justifies further propositions. Despite the apparent clarity of the suggested distinction between liability for a risk and for a disease, no cause of action at all exists unless and until mesothelioma actually develops. Neither the exposure to asbestos nor the risk that this may one day lead to mesothelioma or some other disease is by itself an injury giving rise to any cause of action: see Rothwell v Chemical & Insulating Co Ltd [2007] UKHL 39, [2008] 1 AC 281; the House there decided that not even the emergence of pleural plaques marking the past exposure to asbestos constituted injury for the purpose of giving a cause of action. In order to fall within the principle in Fairchild and Barker, the development of mesothelioma is a pre condition: see Barker, per Lord Hoffmann (para 48) and Lord Scott (para 53). Lady Hale went further, stressing that she in fact agreed with Lord Rodgers view that the damage which is the gist of these actions is the mesothelioma and its physical and financial consequences. It is not the risk of contracting mesothelioma (para 120). In reality, it is impossible, or at least inaccurate, to speak of the cause of action recognised in Fairchild and Barker as being simply for the risk created by exposing someone to asbestos. If it were simply for that risk, then the risk would be the injury; damages would be recoverable for every exposure, without proof by the claimant of any (other) injury at all. That is emphatically not the law: see Rothwell and the statements in Barker itself, cited above. The cause of action exists because the defendant has previously exposed the victim to asbestos, because that exposure may have led to the mesothelioma, not because it did, and because mesothelioma has been suffered by the victim. As to the exposure, all that can be said (leaving aside the remote possibility that mesothelioma may develop idiopathically) is that some exposure to asbestos by someone, something or some event led to the mesothelioma. In the present state of scientific knowledge and understanding, there is nothing that enables one to know or suggest that the risk to which the defendant exposed the victim actually materialised. What materialised was at most a risk of the same kind to which someone, who may or may not have been the defendant, or something or some event had exposed the victim. The actual development of mesothelioma is an essential element of the cause of action. In ordinary language, the cause of action is for or in respect of the mesothelioma, and in ordinary language a defendant who exposes a victim of mesothelioma to asbestos is, under the rule in Fairchild and Barker, held responsible for and in respect of both that exposure and the mesothelioma. This legal responsibility may be described in various ways. For reasons already indicated, it is over simple to describe it as being for the risk. Another way is to view a defendant responsible under the rule as an insurer, but that too is hardly a natural description of a liability which is firmly based on traditional conceptions of tort liability as rooted in fault. A third way is to view it as responsibility for the mesothelioma, based on a weak or broad view of the causal requirements or causal link appropriate in the particular context to ground liability for the mesothelioma. This third way is entirely natural. It was adopted by Lords Reid and Wilberforce in McGhee, by Lord Hoffmann, Lady Hale and (possibly) Lord Walker in Barker and by Lord Hoffmann in his extra judicial commentary. It seems to have received the perhaps instinctive endorsement of a number of members of this Court, including myself, in Sienkiewicz. Ultimately, there is no magic about concepts such as causation or causal requirements, wherever they appear. They have the meanings assigned to them and understood in ordinary usage in their context. A logician might disagree with a reference to causation or a causal link in a particular context, but that is not the test of meaning: see Lord Wilberforces words in McGhee, p 6C F (cited in para 56 above). The present appeals concern the meanings we assign to the concept of causation, first in the context of considering employers liability to their employees and then in considering the scope of employers insurance cover with respect to such liability. It is instructive in this connection to look more closely at the Compensation Act 2006. Section 3(3) states that section 3(2) does not prevent (a) one responsible person from claiming a contribution from another, or (b) a finding of contributory negligence. Section 3(4) goes on to provide that [I]n determining the extent of contributions of different responsible persons in accordance with subsection (3)(a), a court shall have regard to the relative lengths of the periods of exposure for which each was responsible . Section 3(3) necessarily relates to the legal bases for claiming contribution or asserting contributory negligence, which are to be found in, respectively, the Civil Liability (Contribution) Act 1978 and the Law Reform (Contributory Negligence) Act 1945. The 1978 Act addresses the situation where two or more persons are liable in respect of the same damage (section 1(1)), while section 2(1) provides for contribution in such situations to be such as may be found by the court to be just and equitable having regard to the extent of that persons responsibility for the damage in question. Although under section 3(4) of the 2006 Act, the court must have regard to the relative lengths of the exposure for which each was responsible, the same damage which is a pre condition to the application of the 1978 Act must be the mesothelioma. It cannot be the risk created by the person by or from whom contribution is sought, because each person and exposure creates a separate risk, and no one person or exposure creates the total risk resulting from all exposures. The 2006 Act, by its reference to the 1978 Act, thus assumes that every person, who has exposed to asbestos a victim who later experiences mesothelioma, incurs responsibility for the mesothelioma. That language again fits an analysis whereby the rule in Fairchild and Barker identifies the appropriate weak or broad causal link between the exposure and the mesothelioma. A similar position applies under the 1945 Act. Under section 1(1), that Act applies [w]here any person suffers damage as the result partly of his own fault and partly of the fault of any other person or persons. In that event, the damages recoverable are to be reduced to such extent as the court thinks just and equitable having regard to the claimants share in the responsibility for the damage. The application of this section, as contemplated by the 2006 Act, is only possible on the basis that a mesothelioma sufferer may be said to have suffered the mesothelioma partly as the result . of the fault of anyone who has exposed him to asbestos. In other words, the rule in Fairchild and Barker must have been viewed by the drafters in my opinion entirely understandably as establishing a causal link, between the exposure and the mesothelioma, sufficient for it to be said that the mesothelioma was the result of each (and every) exposure. A similar view is also implicit in the provisions of the Act drafted on the basis that insurers who would commonly of course be employers liability insurers would be among the persons by or for whose benefit or against whom contribution would be sought in cases of multiple responsible persons: see section 3(7)(b) and (10)(a) of the 2006 Act. Those provisions necessarily assume that employers liability insurances, written generally on a causation basis, would respond to Fairchild/Barker type liability incurred by employers. Ultimately, the present appeals raise the questions how the present employers liability insurance policies respond as a matter of construction in circumstances within the rule in Fairchild and Barker. Where two contracts are linked, the law will try to read them consistently with each other. This is so with language in a bill of lading, incorporated from a charterparty: The Njegos [1936] P 90. A similar approach applies to language in a reinsurance incorporated from the insurance: Forsikringsaktieselskapet Vesta v Butcher [1989] AC 852 and Groupama Navigation et Transports v Catatumbo CA Seguros [2000] 2 Lloyds Reports 350, even though there is no guarantee that a reinsurance will in every possible circumstance that may develop pick up every liability that may be held to exist under an insurance: see Wasa International Insurance Co Ltd v Lexington Insurance Co [2009] UKHC 40, [2010] 1 AC 180. The intention under the present insurances must be taken to have been that they would respond to whatever liability the insured employers might be held to incur within the scope of the risks insured and within the period in respect of which they were insured. Thus, as Scrutton and Greer LJJ accepted in the Ellerbeck Collieries case (paragraph 34 above), an employers liability insurance could have been expected to respond to the conventional and artificial definition in the WCAs as to what constituted an accident and when personal injury by accident or disease was sustained for the purposes of employers liability to employees. Furthermore, if the common law during or even after the currency of an insurance develops in a manner which increases employers liability, compared with previous perceptions as to what the common law was, that is a risk which the insurers must accept, within the limits of the relevant insurance and insurance period. Eady J correctly identified this in Phillips v Syndicate 992 Gunner [2003] EWHC 1084 (QB), [2004] Lloyds Insurance and Reinsurance Reports 426, 429 (left). The declaratory theory does not presume the existence of an ideal system of the common law, which the judges from time to time reveal in their decisions. But it does mean that, when judges state what the law is, their decisions do . have a retrospective effect in the sense that the law as stated will, generally speaking, be applicable not only to the case coming before [them] but, as part of the common law, to other comparable cases which come before the courts, whenever the events which are the subject of those cases: Kleinwort Benson Ltd v Lincoln CC [1999] 2 AC 349, 378G H, per Lord Goff. The declaratory theory is a pragmatic tool, essential when cases can only come before the court some time, perhaps some years after the relevant events occurred, and when the law [must] be applied equally to all, and yet be capable of organic change (p 379A). A similar principle must, generally speaking, apply in relation to a statute such as the Compensation Act 2006, which changes or corrects the common law to what Parliament perceives to be a more appropriate result for the purposes of all future cases coming before the courts, whenever the events giving rise to them. In the case of that Act, the result was one which the courts might as a matter of common law well have themselves accepted (and which indeed Lord Rodger in his powerful dissent in Barker v Corus believed that the common law had accepted) in Fairchild. Concluding, as I have done, that the present insurances covered employers liability for injuries or diseases caused during the relevant insurance periods, the question is whether they cover employers liability for mesothelioma arising under the rule in Fairchild and Barker from having exposed employees to asbestos during such periods. It is not in dispute that, if the rule is characterised as a rule of deemed causation, then the policies must respond. A parallel example, so familiar that it is easy to overlook, is the vicarious liability to an employee, A, which rests on any employer, B, who has not himself been negligent but must answer vicariously for the negligence of another employee, C. We have no hesitation in saying that the employer B has in such a case caused the injury or disease suffered by A. But this is so in reality only because a rule of law requires us to equate the acts or omissions of C with those of B. The argument, accepted by Lord Phillips, is that the rule in Fairchild and Barker is not one of deemed causation of or, therefore, liability for the disease, but one of liability for the risk created by the exposure. For reasons which I have set out, I regard this distinction as too simple. The liability arises only because of the incurring of the disease and is for the disease. A condition of such liability is that the employer (negligently) exposed the victim to asbestos. The insurance policies, read as operating on a causation basis, are aimed at covering liability generated by employers activities during their insurance periods: see paragraphs 18 28 and 41 above; unless liability for mesothelioma flowing from negligent exposure during an insurance period is covered by the policies, this aspect of employers activities will not in practice be covered at all. In my view, these considerations justify a conclusion that, for the purposes of the insurances, liability for mesothelioma following upon exposure to asbestos created during an insurance period involves a sufficient weak or broad causal link for the disease to be regarded as caused within the insurance period. It would, I think, have been anomalous and unjust if the law by deeming there to have been causation of the disease could have created policy liability (which is common ground), but the law by insisting that the liability in respect of mesothelioma was for the risk of causation achieved a quite different result. As I have sought to show, it is not in any event accurate to treat the liability as being either solely or strictly for the risk. The risk is no more than an element or condition necessary to establish liability for the mesothelioma. The reality, reinforced by provisions in the 2006 Act, is that the employer is being held responsible for the mesothelioma. For this purpose, the law accepts a weak or broad causal link. The link is to exposure which may but cannot be shown on the ordinary balance of probabilities to have played a role in the actual occurrence of the disease. But for the purposes of the policies the negligent exposure of an employee to asbestos can properly be described as having a sufficient causal link or being sufficiently causally connected with subsequently arising mesothelioma for the policies to respond. The concept of a disease being caused during the policy period must be interpreted sufficiently flexibly to embrace the role assigned to exposure by the rule in Fairchild and Barker. Viewing the point slightly more broadly, if (as I have concluded) the fundamental focus of the policies is on the employment relationship and activities during the insurance period and on liability arising out of and in course of them, then the liability for mesothelioma imposed by the rule in my opinion fulfils precisely the conditions under which these policies should and do respond. Conclusion I would therefore dismiss the appeals by insurers so far as they concern the policies with contracted wordings. I would allow the appeals against insurers, and dismiss the appeal by the Independent, so far as they concern policies with sustained wordings. ANNEX A The policy wordings (dates are approximate) (1) Excess First Wording (late 1940s): Whereas . (hereinafter called The Employer) carrying on the business of . has made a proposal . this Policy witnesseth that in consideration of the payment of . as premium to the Company on the estimated total amount, as set forth in the Schedule hereto, of the wages, salaries, and other earnings of Employees, a description of whom is set forth in the said Schedule (which premium is subject to adjustment as hereinafter provided) the Company agrees to indemnify the Employer in the manner following, namely That if at any time during the period commencing on theday of19 , and ending on theday of19 (both days inclusive) and for such further period or periods as may be mutually agreed upon, any employee in the Employer's immediate service shall sustain any personal injury by accident or disease while engaged in the service of the Employer in Great Britain, Northern Ireland, the Isle of Man or the Channel Islands, in work forming part of or process in the business above mentioned, and in case the Employer shall be liable to damages for such injury, either under or by virtue of the Common Law, the Fatal Accidents Acts 1846 to 1908, or the Law Reform (Miscellaneous Provisions) Act 1934, the Company will indemnify the Employer The Schedule required a description of the insured companys employees and their estimated total wages, salary and other earnings. Condition 1 of the policy further provided that: the Employer shall truly record in a wages book the name of every employee and the amount of wages, salary and other earnings paid to him. Second Wording (late 1950s to 1960s): Whereas the Employer . carrying on the business described in the . Schedule has made . a written proposal and declaration, containing particulars and statements which it is hereby agreed are the basis of this Contract . and has paid the premium mentioned in the Schedule, which premium is subject to adjustment as hereinafter provided, this Policy witnesseth that if at any time during the period of the indemnity as stated in the Schedule or during any subsequent period for which the Company may accept premium for the renewal of this Policy any person of a description mentioned in the Schedule who is under a contract of service or apprenticeship with the Employer shall sustain personal injury by accident or disease arising out of and in the course of employment by the Employer in work forming part of the process in the business mentioned in the Schedule, the Company will indemnify the Employer against liability at law for damages in respect of such injury or disease The policy provided that the Company should not be liable under it in respect of accidents occurring elsewhere than in Great Britain, Northern Ireland, the Isle of Man or the Channel Islands. The policy provided that premiums were to be regulated by the amount of wages, salaries, or other earnings paid to employees by the employer during each period of insurance, with a wages book being kept open to inspection for that purpose and the employer supplying the correct amounts within one month of the expiry of each insurance period. Condition 1 and the Schedule were in similar form to those in the first wording. Third Wording (1970 to 1976) After a recital in the same form as the second wording, this wording provided: that if at any time during the period of the indemnity as stated in the Schedule or during any subsequent period for which the Company may accept premium for the renewal of this Policy any person of a description mentioned in the Schedule who is under a contract of service or apprenticeship with the Employer shall sustain personal injury by accident or disease arising out of and in the course of employment by the Employer in the business mentioned in the Schedule, the Company will indemnify the Employer against liability at law for damages in respect of such injury or disease Under the third wording, there was the same territorial limitation as under the second wording in relation to accidents occurring elsewhere than in Great Britain, etc. Premiums were also regulated by reference to wages, salaries, etc. and condition 1 and the Schedule were in the same terms as in the second wording. (2) Independent Sole wording in Issue (1972 to 1987): This was a Contractors Combined Policy, covering Employers Liability (section 1), Public Liability (section 2) and Loss of or Damage to Contract Works (section 3). It provided: NOW THIS POLICY WITNESSETH that during the Period of Insurance or during any subsequent period for which the Company may accept payment for the continuance of this Policy and subject to the terms, exceptions and conditions contained herein and or endorsed hereon, the Company will indemnify the Insured as hereinafter specified. SECTION 1 EMPLOYERS' LIABILITY If any person who is under a contract of service or apprenticeship with the Insured shall sustain bodily injury or disease arising out of and in the course of his employment by the Insured in connection with the Contract specified or type of work described in the Schedule the Company will indemnify the Insured against all sums for which the Insured shall be liable at law for damages for such injury or disease The Policy provided that the Company was not to be liable for injury, illness, loss or damage caused elsewhere than in Great Britain, the Isle of Man or the Channel Islands. As a result of the ELCIA 1969 making insurance in respect of employers liability compulsory, the Independent wording also contained the further provision (the ELCIA extension provision): "AVOIDANCE OF CERTAIN TERMS AND RIGHT OF RECOVERY The indemnity granted by section 1 of this Policy is deemed to be in accordance with the provisions of any law relating to compulsory insurance of liability to employees in Great Britain. It is agreed the Insured shall repay to the Company all sums paid by the Company which the Company would not have been liable to pay but for the provisions of such law. " The policy Schedule contains spaces for entry of first, annual and minimum premium, as well as of the name of the Principal for whom the insured is undertaking work, the details of the contract or type of work covered by the policy and its situation. Condition 7 provides that the premium is based on estimates provided by the Insured, for record keeping, for the supply of updated information as required by the Company within one month of the expiry of each insurance period and for adjustment of the premium on that basis. (3) MMI First Wording (1949 to 1958) the Company hereby agrees that if at any time during the period of insurance specified in the schedule or thereafter during any subsequent period for which the Insured shall agree to pay and the Company shall agree to accept a renewal premium of the amount specified in the said schedule, or of such other amount as the Company shall from time to time require, any person under a contract of service with the Insured shall sustain any personal injury by accident or disease arising out of and in the course of his employment by the Insured in their activities described in the schedule and if the Insured shall be liable to pay damages for such injury or disease then, subject to the terms and conditions contained herein or endorsed hereon, the Company shall indemnify the Insured against all sums for which the Insured shall be so liable The policy was expressed not to apply to or include liability in respect of injury or disease caused elsewhere than in Great Britain, Northern Ireland, the Isle of Man or the Channel Islands. Condition 5 regulated premiums by reference to wages, salaries, etc, and made provision for a wages book and adjustment to like effect to the Excess second wording. The policy Schedule provided for the classification of staff and employees according to departments and job description, with corresponding figures for estimated total remuneration. Second Wording (1958 to 1974) the Company hereby agrees that if at any time during the First Period of Insurance specified in the said Schedule or during any subsequent period for which the Insured shall agree to pay and the Company shall agree to accept a renewal premium of the amount specified as the Renewal Premium in the said Schedule or of such other amount as the Company shall from time to time require, any person under a contract of service with the Insured shall sustain any bodily injury or disease arising out of and in the course of his employment by the Insured in the Insured's activities described in the said Schedule and if the Insured shall be liable to pay damages for such injury or disease or for death resulting from such injury or disease then, subject to the terms, exceptions and conditions contained herein or endorsed hereon or set out in the Schedule to this Policythe Company will indemnity the Insured against all sums for which the Insured shall be so liable. Like the first wording, this wording contained a territorial exclusion of liability in respect of injury or disease caused elsewhere than in Great Britain, etc. The policy Schedule provided for the entry of the Estimates (if any) on which the premium is calculated, including in particular any such estimate of wages, salaries, etc. paid to staff, and cross referred to condition 7, which provided that, if the premium had been based on any estimates, an accurate record should be kept (of actual amounts), the insured should provide insurers with such particulars and information as might be required within one month of the expiry of the policy period and the premium adjusted accordingly. Third Wording (1974 to 1992) The Company agrees to indemnify the Insured in respect of all sums without limit as to amount which the Insured shall be legally liable to pay as compensation for bodily injury or disease (including death resulting from such bodily injury or disease) suffered by any person under a contract of service or apprenticeship with the Insured when such injury or disease arises out of and in the course of employment by the Insured and is sustained or contracted during the currency of this Policy. The policy Schedule contemplated a premium adjustable in accordance with condition 5, which in turn provided (in like manner to condition 7 of the second wording) for the adjustment of any premium so calculated by reference to actual amounts at the end of the policy period. (4) BAI First Wording (1953 to 1974) . the Company willindemnify the Insured against all sums of money which the Insured may become liable to pay to any Employee engaged in the direct service of the insured or any dependent of such Employee in respect of any claim for injury sustained or disease contracted by such Employee betweenandboth inclusive The policy carried the note: This policy does not cover the insureds liability for accidents to workmen arising outside the United Kingdom. Conditions 1 and 2 made elaborate provision for the regulation of premiums by the amount of wages, salaries, or other earnings paid to employees by the employer during each period of insurance, with pay sheets and books of account being kept open to inspection for that purpose and the employer making a return, and the premium being adjusted, subject to a minimum, at the end of each insurance period. Second Wording (1974 to 1983) the Company willindemnify the Insured against all sums of money which the Insured may become legally liable to pay in respect of any claim for injury sustained or disease contracted by any person engaged in and upon the service of the Insured and being in the Insured's direct employment under a Contract of Service or Apprenticeship between theday ofand theday ofboth inclusive This wording also excluded insurers from liability in respect of accidents to employees arising outside the United Kingdom. Like the Independent and third MMI wordings, the BAI second wording also included the ELCIA extension provision. Conditions 1 and 2 provided for the regulation and adjustment of premiums by reference to actual wages, salaries, etc. during each insurance period, in like terms to conditions 1 and 2 in the first wording. (5) Zurich The Municipal First Select wording (1993 to 1998) The INSURER will indemnify the INSURED in respect of all sums which the INSURED may become legally liable to pay as damages and claimants' costs and expenses in respect of Injury sustained during the Period of Insurance by any EMPLOYEE arising out of and in the course of employment by the INSURED in the BUSINESS within the Geographical Limits. The Municipal Second Select wording (1998 ) The INSURER will indemnify the INSURED in respect of all sums which the INSURED may become legally liable to pay as damages and claimants' costs and expenses in respect of Injury caused during the Period of Insurance to any EMPLOYEE arising out of and in the course of employment by the INSURED in the BUSINESS within the Geographical Limits. The tariff wording (1948 ) if any person under a contract of service or apprenticeship with the Insured shall sustain any personal injury by accident or disease caused during the period of insurance and arising out of and in the course of his employment by the Insured in the business above mentioned and if the Insured shall be liable to pay damages for such injury or disease the Association shall indemnify the Insured against all sums for which the Insured shall be so liable. LORD CLARKE Like other members of the Court, I agree with Lord Mance on the construction issue. Thus I agree that, for the purposes of the EL policies, mesothelioma is sustained or contracted when the process that leads to the disease is initiated as a result of the wrongful exposure of the employee to the asbestos fibre or fibres which cause the disease. I do not wish to add to Lord Mances reasoning on the construction issue. I do however wish to add some words of my own on the causation issue which sharply divides Lord Phillips and Lord Mance. I wish to say shortly why I prefer the conclusion of Lord Mance to that of Lord Phillips. As I see it, the effect of Fairchild, Barker and Sienkiewicz may be summarised in this way. An employer who, in breach of duty, has exposed an employee to asbestos is liable in damages if the employee subsequently suffers the disease. The employees cause of action is not that he was exposed to the risk of mesothelioma. He has no claim unless he in fact suffers the disease. It is the disease which represents the damage which completes the cause of action and it is only then that his cause of action accrues and the relevant time limit begins to run. It is axiomatic that, in order to succeed in tort, the employee must show a sufficient causal link between the breach of duty, namely the exposure to asbestos, and the disease which represents the damage, namely mesothelioma. The effect of the majority opinion in Barker is that, where there are two or more employers who have exposed the claimant to the risk of mesothelioma, they are not jointly and severally liable to the claimant for the whole of the consequences of the disease but only severally liable for an aliquot part. That decision was reversed by the Compensation Act 2006, so that such employers are jointly and severally liable for the whole of the consequences. The question in this appeal is whether the employers liability insurers are liable to indemnify the employers in respect of that liability. It would in my opinion be a remarkable result if they were not. Lord Phillips notes at para 109 that Mr Edelman QC accepted that, if the correct analysis of the special rule, which (using Lord Phillips definitions) was the result of the combined effect of the special approach in Fairchild and Barker and the Compensation Act 2006, was that the employers were deemed to have caused mesothelioma by exposing the employees to asbestos dust, the insurers would be liable. Lord Phillips accepts that that concession was correctly made. I agree, for the reasons he gives at paras 109 to 114. The question is therefore whether the correct analysis of the special rule is indeed that the employers were deemed to have caused the mesothelioma. I accept that in such a case the employee cannot show on the balance of probabilities that the employers negligence caused the disease. The effect of Fairchild and Sienkiewicz was however that the employer is liable where the exposure contributed to the risk that the employee would suffer the disease and where the employee in fact suffers the disease. That is not in dispute. Lord Phillips says at para 124 that the majority in Barker drew the vital distinction between being liable for contributing to the cause of the disease and being liable for the creation of the risk of causing the disease. He quotes para 2 of Lord Hoffmanns speech as follows: Is any defendant who is liable under the exception deemed to have caused the disease? On orthodox principles, all defendants who have actually caused the damage are jointly and severally liable. Or is the damage caused by a defendant in a Fairchild case the creation of a risk that the claimant will contract the disease? In that case, each defendant will be liable only for his aliquot contribution to the total risk of the claimant contracting the disease a risk which is known to have materialised. Lord Phillips further notes that at para 125 Lord Hoffmann advanced the thesis that the basis of liability was the wrongful creation of the risk or chance of causing the disease and that the damage that the defendant should be regarded as having caused was the creation of such risk or chance. See also the passages to like effect referred to by Lord Mance at para 61. I accept that Lord Hoffmann and others did indeed advance that view of Fairchild but it is I think important to note that it was in the context of the question whether, in a case of two or more employers, each was severally liable for a proportion of the consequences of the mesothelioma or whether each was jointly and severally liable for the whole. Lord Hoffmann cannot have intended to hold, without more, that the basis of liability was the wrongful creation of the risk or chance of causing the disease because there would be no liability at all but for the subsequent existence of the mesothelioma. It seems to me that, whether the majority in Barker were correct or not, there is no escape from the conclusion that, in all these cases, where it is not possible to show that the particular employer caused the claimant to suffer mesothelioma, the underlying question is who should be held responsible for causing the mesothelioma which in fact struck down the employee. None of the cases is authority for the proposition that causation is irrelevant. On the contrary, the quest is for the employer who can fairly be held liable for the consequences of the disease and therefore for the employer who can fairly be said to have caused the disease. The courts have embarked on similar quests over the years. Lord Mance has given a number of examples. As Lord Mance shows at para 56, they include Bonnington and McGhee, where Lord Reid was prepared to take a broad view of causation and Lord Wilberforce rejected a traditional approach for policy or evidential reasons. In my opinion the reasoning in Sienkiewicz is of some significance in this context. Lord Mance has given the relevant references in para 61. Thus, as Lord Mance observes, at para 61 Lord Phillips said that Fairchild and Barker had developed the common law by equating materially increasing the risk with contributing to the cause in specified and limited circumstances. Lord Mance further refers to Lord Brown speaking of a more relaxed approach to causation and flexibility in the approach to causation at paras 178 and 187. Lord Mance had himself referred to Fairchild and Barker as involving a special rule of causation at para 188, and Lord Kerr referred to them as involving a modification of the previously applicable legal rules in relation to the causation element in employers liability claims at para 196 and to adjustments in the burden of proof at paras 198 and 200. Again, as Lord Mance observes at para 61 above, Lord Dyson referred (at para 207) to materially increasing the risk of contracting the disease as sufficient to satisfy the causal requirements for liability (para 207). Both Mr Beloff QC and Mr Stuart Smith QC addressed these issues in their oral submissions. They both in effect submitted that the effect of Fairchild, Barker and Sienkiewicz was that the employers were deemed to have caused mesothelioma by exposing the employees to asbestos dust. They both recognised that the ordinary rule of causation could not apply and that some element of policy or doctrine was required in order to explain Fairchild. Mr Stuart Smith submitted that the effect of Fairchild was that each material exposure to asbestos dust is doctrinally held responsible for the mesothelioma. Mr Beloffs submission was to much the same effect. He relied upon a dictum of Lord Walker in Barker at para 109: A rule of law by which exposure to risk of injury is equated with legal responsibility for that injury entails the possibility that an employer may be held liable for an injury which was not in fact caused by that exposure (though in the present state of medical science, that fact can be neither proved nor disproved). The injury is of course the mesothelioma, which is necessary to complete the cause of action. On that basis it seems to me that Lord Walkers statement that the risk of injury is equated with legal responsibility for the injury is in effect to say that, by creating the risk of mesothelioma in the future, the employer is deemed to have caused the mesothelioma, if it should develop in the future. It appears to me that these conclusions are supported by Lord Mances analysis of section 3 of the Compensation 2006 at paras 67 and 68, with which I agree and to which I do not wish to add anything. Given Mr Edelmans concession that, if that is correct, the employers are liable under the policies (and this Courts acceptance of it) I would hold that the causation point does not assist the insurers. I would only add this. It appears to me that, once it is held that, on these facts, the employers are liable to the employees, it would be remarkable if the insurers were not liable under the policies. Rather as in AXA, the whole purpose of the policies was to insure the employers against liability to their employees. That purpose would be frustrated if the insurers submissions on this point were accepted. I agree with Lord Mance, for the reasons he gives at paras 69 73 that these policies respond to these claims. For these reasons, I too would dismiss the appeals by insurers so far as they concern the policies with contracted wordings. I would allow the appeals against insurers, and dismiss the appeal by the Independent, so far as they concern policies with sustained wordings. LORD DYSON I too agree with Lord Mance on the construction issue. As to the causation issue, I agree with the reasoning of Lord Mance and Lord Clarke. Accordingly, I would dismiss the appeals by insurers in so far as they concern the policies with contracted wordings. I would allow the appeals against insurers, and dismiss the appeal by the Independent, so far as they concern policies with sustained wordings. LORD PHILLIPS Introduction So called long tail industrial diseases have raised peculiar difficulties in the field of tort. These diseases result from the effect on the body of exposure to noxious substances. The effect can be long, drawn out and mysterious, in as much as medical science has not yet identified the precise mechanism, or chain of causation, by which the noxious substance causes the disease. Mesothelioma is a long tail disease in which the problems raised have been particularly acute. The problems arise in the application of principles of law that do not ordinarily give rise to difficulty. An employer will be liable in damages if by an act or omission that is negligent or in breach of statutory duty he causes physical harm to an employee. In the vast majority of cases there will be no difficulty in identifying the moment at which the negligence or breach of duty causes the physical harm, for the harm will take the form of an obvious injury. This is not the position in respect of mesothelioma. Asbestos dust, inhaled into the lungs, is the agency that causes mesothelioma, but as long as forty or fifty years may elapse before the effects on the body of dust inhaled culminate in symptoms of mesothelioma. Once the symptoms are felt, the disease will develop swiftly to bring about an inevitable and extremely unpleasant death. Where a victim of mesothelioma was exposed to asbestos dust over a period of years it is impossible, even with hindsight, to determine on balance of probabilities whether dust inhaled in a particular year caused or contributed to the development of the mesothelioma. It follows that, where the victim worked for a series of employers, each of whom exposed him to asbestos dust, it is impossible to prove on balance of probability that any particular employer caused or contributed to the victims mesothelioma. This means that the normal principles of the law of tort provide no remedy to the employee or his dependants. The manifest injustice of this position led the House of Lords in Fairchild v Glenhaven Funeral Services Ltd [2002] UKHL 22; [2003] 1 AC 32 and Barker v Corus UK Ltd [2006] UKHL 20; [2006] 2 AC 572 to create what I shall describe as a special approach to causation in respect of mesothelioma, whose effect was immediately varied by Parliament by section 3 of the Compensation Act 2006. I shall describe the composite result achieved by the House of Lords and Parliament as the special rule. I shall examine the nature of this special rule in due course. Its effect was, however, to place each employer in the same position as that employer would have been under at common law if it were proved, on balance of probability, that its negligence or breach of duty in exposing the employee to asbestos dust had contributed to causing the employees mesothelioma. These developments of the law of tort have formed the backdrop to the issue that has occupied almost all of the eight days that this Court has devoted to this appeal. I shall call this issue the construction issue. The construction issue relates to the true construction of a number of policies of insurance against employers liabilities (EL policies) with similar, but not identical, provisions as to the cover provided. The EL policies provided cover by reference to specific periods usually of a year. The central issue relates to the event or events that, on true construction of each policy, had to occur within the period of the policy in order to render the insurer liable to indemnify the employer in respect of liability for causing an employees mesothelioma. The policies provided cover in respect of diseases sustained or contracted during the period of the policy. The meaning of each of those words, in its context, lies at the heart of the construction issue. It does not seem that the construction issue initially received a great deal of consideration. Insurers treated the policies as if they covered an employer whose breach of duty within the period of the policy had contributed to causing the disease and regarded this requirement as satisfied if the employer was held liable because he had exposed the employee to asbestos dust during that period. Where more than one insurer was liable on this basis, they apportioned liability according to the period of exposure covered by each. The attitude of four of the five insurers party to this appeal changed as a result of the decision of the Court of Appeal in Bolton Metropolitan Borough Council v Municipal Mutual Insurance Ltd [2006] EWCA Civ 50; [2006] 1 WLR 1492. Those insurers are MMI, Excess, BAI and Independent, each of which is in run off. I shall describe them collectively as the insurers. Their opponents I shall describe collectively as the employers, although they embrace solvent employers, individuals claiming under the Third Party (Rights against Insurers) Act 1930, and Zurich, which has a community of interest with these. Bolton concerned the scope of cover of a public liability policy (PL policy) in relation to liability for causing mesothelioma. The policy provided cover in respect of an injury that occurs during the currency of the policy. The argument proceeded on the premise that the chain of causation of mesothelioma, once it was diagnosed, could be traced back to the initial inhalation of asbestos dust. The issue was whether the mesothelioma could properly be said to have occurred at the time of the initial inhalation. The Court of Appeal held that it could not. The injury only occurred, at earliest, at the stage of development of the disease at which malignancy occurred. This was, on the evidence, ten years, give or take a year, from the date on which it became possible to diagnose the existence of the tumour but very many years after the initial inhalation of asbestos dust. This decision led the insurers to take the point that a similar approach should be taken to the interpretation of the cover afforded by the EL policies. Mesothelioma was not, on true construction of the policies, sustained or contracted at the time of the initial inhalation of asbestos dust. It was only sustained or contracted at the much later stage when, as a consequence of the process initiated by asbestos dust, an actionable injury in the form of malignancy, developed. Before Burton J, the Court of Appeal and this Court the construction issue has been argued at great length and in great detail. I agree, as do the other members of the Court, with the conclusions reached by Lord Mance on the construction issue. These conclusions have application not merely to mesothelioma but to employers liabilities in relation to other long tail industrial diseases such as asbestosis and pneumoconiosis. For the purpose of EL policies, these diseases are sustained or contracted when the process that leads to the disease is initiated as a result of the wrongful exposure of the employee to the noxious substance that causes, or contributes to the cause or the extent of, the disease. Throughout the hearing of this appeal there has lurked a second issue. It has not been the subject of argument below, nor does it feature in the agreed Statement of Facts and Issues. This is, perhaps, because it relates to a point that does not arise out of Bolton. It has always been there for the taking, but insurers have not hitherto chosen to raise it, perhaps because its consequences are unattractive. It arises out of a problem that is similar to that which led the House of Lords to formulate the special approach in Fairchild and Barker. It is not possible for an employer to prove that an employees mesothelioma was, in fact, caused in whole or in part by any particular period of exposure to asbestos dust. Thus the employer cannot prove, on balance of probability, that the mesothelioma for which he has been held liable under the special rule was, in fact, initiated in any particular policy year. How, then, can he prove that his liability falls within the scope of the cover, even if the policy bears the construction contended for by the employers and upheld by this Court? How can he prove that his liability arises out of disease sustained or contracted within the policy period, giving these words the same meaning as initiated? I shall call this issue the causation issue. The causation issue and the judgments below Although the causation issue was not raised in argument below, it was dealt with, at least implicitly, in the judgments of both courts. Burton J at first instance, and Rix and Stanley Burnton LJJ in the Court of Appeal proceeded on the basis that, in the case of a mesothelioma victim, exposing the victim to asbestos dust could be treated as equivalent to causing his disease. This approach was based on the special rule. Thus Burton J at paras 42 to 58 summarised, without significant comment, what he described as the special mesothelioma jurisprudence as it was at the time of his judgment. This included Fairchild, Barker and the 2006 Compensation Act. He thereafter proceeded on the basis that exposing a mesothelioma victim to asbestos dust could be treated as having been equivalent to causing the victim to contract the disease. Thus, when summarising his conclusions at para 243 he said: I conclude, in relation to the policies in issue before me, that they respond, just as would policies with caused wording, to claims against insurers where employers are liable on the basis of inhalation by employees during the policy period. They respond, consistently with other EL policies, in respect of mesothelioma claims, on an exposure basis. For the purposes of these policies, injury is sustained when it is caused and disease is contracted when it is caused, and the policies fall to be so construed. Rix LJ drew a distinction between the meaning of contracted and sustained. Contracted referred to the time of the diseases causal origins para 245. He felt constrained by Bolton, however, to hold that no injury was sustained until the disease reached the malignant stage. Implicit in his judgment was the premise that exposure to asbestos dust during the period of the policy could be treated as the causal origin of the disease see for example his comments at para 244. A difficult passage in his judgment at paras 280 283, when considering the meaning of injury, suggests that this premise was founded on the special rule. Thus he was able to conclude that the disease was contracted at the time that the victim was exposed to asbestos dust albeit that injury was not sustained at that point. In a short judgment Stanley Burnton LJ adopted similar reasoning. He stated, at para 338: We are agreed that in any year in which there was substantial exposure to asbestos, mesothelioma was caused by that exposure during that year. The fact that the disease did not develop for some years does not break the chain of causation. Submissions on the causation issue The causation issue was not raised by the insurers as a discrete issue. It none the less surfaced in a passage of the written case for Excess that was addressing the employers case that personal injury by disease was sustained at the moment of inhalation of asbestos dust that triggered the process of sustaining personal injury by disease. One of the arguments advanced by Excess in answer to this submission read as follows: Medically and empirically, one cannot be said to have suffered an injury on a particular day because it cannot be known in (say) a 10 year occupational exposure period on which of the 3652 days the fatal dose was inhaled (and it may be on more than one). It is likely that any ingestion on a particular day was irrelevant to the development of the final condition. There has been a tendency on the part of the claimants to treat inhalation as a single event from which an unbroken line can be drawn to malignancy. It is not. Inhalation (and hence on this theory) injury may occur over several thousands of days. Each day does not bring injury. Any particular day cannot therefore be selected as injury day. To overcome problems of medical causation in a personal injury action against an employer, the House of Lords extended the McGhee principle to mesothelioma in Fairchild. However this was a rule of causation and not definition. There is no such rule in insurance policies which defines what amounts to an injury. The Supreme Court in Sienkiewicz stressed the limits of the Fairchild exception in no uncertain terms, and it is submitted that it would be quite wrong for it now to invade the law of contract. A liability policy responds only to indemnify against a liability (i.e. actionable injury). There is no such liability on inhalation. Injury occurs when the claimant has a personal injury by disease. Thus Excess took the point that the special rule could not properly be invoked to establish that, on true construction of the contracts of insurance, injury was sustained upon inhalation of asbestos dust. This passage appeared after a submission at para 209 that it was only possible to equate the inhalation of a culpable quantity of asbestos dust with sustaining personal injury by disease by, inter alia, creating a special rule governing the response of EL policies in respect of mesothelioma, and possibly other long tail diseases. This proved to be what counsel for the employers sought to do when invited by the Court to address the causation issue. They did so in short oral submissions that cannot, when taken together, have occupied more than half an hour of the eight day hearing. The relevant submissions made by Mr Beloff QC for Akzo and AMEC and the Local Authorities are reported at pp 120 122 of the transcript for 15 December 2011. He started by observing that we had to cut the Gordian knot. He suggested that we should do so by equating creation of a risk with causing bodily injury. This he submitted was permissible because the object of the policy was to provide cover to an employer who, in breach of duty to employees, caused them compensatable damage. Were this approach not adopted, it would be impossible to show that any of a number of insurers providing cover over a period of years was liable. The law should rebel against such a result. In support of this submission Mr Beloff cited a statement by Lord Walker of Gestingthorpe in Barker at para 109 suggesting that the special approach to mesothelioma equated the exposure to the risk of injury with legal liability for the injury. Mr Stuart Smith QC for Zurich dealt with the causation issue at rather greater length in a passage reported at pp 126 to 131 of the same transcript. He started by accepting that it was impossible to know when the metabolic changes that led to the development of mesothelioma in fact occurred. Fairchild dealt with this problem by creating a doctrinal rule under which each significant exposure to asbestos dust was held to be responsible for the mesothelioma. Thus doctrinally the process of developing mesothelioma started upon inhalation. This doctrinal framework for the application of the law of tort was that within which policies of insurance against tortious liability had to operate. Mr Stuart Smith agreed with this summary of his argument advanced by Lord Mance: If the law of tort treats someone, an employee, as having sustained a personal injury and treats the employer as liable to pay damages for such personal injury, then the policy answers. These submissions on behalf of the employers raise the following questions: i) Will the policies respond to fictional or doctrinal events that are deemed to have occurred under the special rule? If so: ii) Does the special rule deem that events have occurred to which the policies should respond? If not: iii) Can this Court properly reformulate the special rule in such a way as to require the policies to respond? Will the policies respond to fictional or doctrinal events? On the premise that he failed on the construction issue, Mr Edelman accepted that, if the correct analysis of the special rule was that the employers were deemed to have caused the mesothelioma by exposing the victims to asbestos dust, then the policies should properly respond. Because of the view that I take of the next two questions I do not need to decide whether the concession was properly made. I have, however, concluded that it was. The policies exist to provide protection against employers liability in tort. If the law of tort, whether laid down by the courts or by Parliament, resorts to legal or doctrinal fictions, it seems logical that the policies should respond as if the fictions were facts. A purposive approach to construction of the policies would lead to this result. Two examples illustrate this approach. Ellerbeck Collieries Ltd v Cornhill Insurance Co Ltd [1932] 1 KB 401 involved a policy of insurance against liability under the Workmens Compensation Act 1925. The terms of the policy entitled the employer to indemnity if at any time during the currency of the insurance any employee sustained any personal injury by accident or disease. The 1925 Act imposed a fictitious test for identifying when an industrial disease was sustained, namely the date on which a certifying surgeon issued a certificate that the employee was suffering from the disease. On the strength of a certificate issued within the currency of a policy of insurance an employer was held liable to two workmen who had, in fact, sustained the relevant disease before the period of the insurance began. The Court of Appeal held that this liability fell within the cover of the policy. The argument for applying the fictional date was a strong one because, as Greer LJ observed at p 417, the policy was intended to cover the employers liability under the Act. The parallel between Ellerbeck and the present case would have been stronger had the relevant policies been taken out after the special rule had been created. In Rothwell v Chemical & Insulating Co Ltd [2007] UKHL 39, [2008] AC 281 the House of Lords held that pleural plaques caused by exposure to asbestos dust did not constitute actionable injury because they produced no adverse physical effects. The Scottish Parliament responded to this decision by introducing the Damages (Asbestos related Conditions) (Scotland) Act 2009 (the Scottish Act). That Act provides by section 1 that asbestos related pleural plaques constitute a personal injury which is not negligible and that accordingly they constitute actionable harm for the purpose of an action for damages for personal injury. In AXA General Insurance Ltd v HM Advocate [2011] UKSC 46, [2011] 3 WLR 871 the Supreme Court rejected a challenge by insurers to the lawfulness of this Act. The Scottish Act effected a limited alteration to the common law in decreeing that asymptomatic pleural plaques constituted non negligible personal injury and thus actionable damage. Lord Mance at para 88 suggested that the main target of the legislation was employers insurers. He went on at para 89 to consider whether the Act would, in fact, alter the meaning to be given to bodily injury under a policy of insurance: A Scottish Act will not on the face of it change the legal effect of an English insurance contract, even in Scotland. However, depending upon the particular policy language, the scope of the concept of bodily injury under a worldwide policy may respond to different conceptions of bodily injury in different parts of the world. Here, the question would be whether it would respond to a development or change, such as that introduced retrospectively by the 2009 Act, in the conception of bodily injury. I say no more about the answer, which may be elicited in another context or suit. While Lord Mance left open the effect of the Scottish Act on the construction of policies of liability insurance, Lord Brown was in no doubt that the effect of the Scottish Act was to subject insurers to liabilities to which they would not have been subject prior to that Act. He referred at para 80 to the undoubted, and deliberate, impact of the legislation upon pending claims. Earlier, at para 77, he drew an analogy with the effect of the decision in Fairchild on EL insurers liability: Had the House of Lords in Rothwell decided that asymptomatic pleural plaques of themselves constitute a non negligible personal injury and thus actionable damage decided in other words that in this particular context the common law should develop in this admittedly novel way the appellants would doubtless have deplored the decision but they could certainly not have questioned its legitimacy. No doubt they would have resented the fact that, as a consequence of the decision, they would unexpectedly have had to pay out on claims resulting from the employees exposure to asbestos upwards of 20 years (quite likely up to 40 years) previously. But they could no more have advanced an [article 1, Protocol 1] challenge to this development of the law than they could have challenged the House of Lords decision some four years earlier in Fairchild v Glenhaven Funeral Services Ltd [2003] 1 AC 32 to adopt a less stringent than the usual but for test for establishing the necessary causal connection between an employers negligence and a claimants condition in, most notably, mesothelioma cases. Employers (and their liability insurers) necessarily take the risk of the common law developing in ways which may adversely affect them with regard to personal injury claims. In this passage Lord Brown assumed that the effect of Fairchild was to bring employers liabilities in respect of mesothelioma within the scope of the cover afforded by EL policies. I am about to consider whether he was correct in this. I agree, however, with the general principle expressed in the last sentence of the extract from his judgment that I have just cited. It is for this reason that I would give an affirmative answer to the first of the three questions posed at para 108 above. I turn to the second. What is the special rule? The employers submissions on the causation issue proceed on the premise that the special rule deems exposure to asbestos dust of an employee who is subsequently diagnosed with mesothelioma to have been a cause of the mesothelioma. I have reached the conclusion that that premise is unsound. In Sienkiewicz v Greif (UK) Ltd [2011] UKSC 10; [2011] 2 AC 229 I summarised the special rule as follows at para 1: When a victim contracts mesothelioma each person who has, in breach of duty, been responsible for exposing the victim to a significant quantity of asbestos dust and thus creating a material increase in risk of the victim contracting the disease will be held to be jointly and severally liable for causing the disease. This is certainly the effect of the special rule, but in order to discover the juridical basis of the rule it is necessary first to identify the basis of the special approach adopted by the House of Lords in Fairchild and Barker and then to consider the effect of section 3 of the Compensation Act, which adapted the special approach into the special rule. The special approach In Sienkiewicz, at para 70, I stated that Fairchild and Barker developed the common law by equating materially increasing the risk with contributing to the cause in specified and limited circumstances, which include ignorance of how causation in fact occurs. As I shall show, this was not an accurate summary of the special approach adopted in those cases. In Fairchild the House of Lords confronted the position where a mesothelioma victim had worked consecutively for a number of employers, each of which had exposed him to asbestos dust. One or more of these had caused his mesothelioma, but because of the limits of medical knowledge it was not possible, on balance of probability, to identify which. In these circumstances their Lordships adopted a special approach that enabled them to find that each of the employers was jointly and severally liable for the mesothelioma. In doing so they purported to be following a similar approach adopted by the House of Lords in McGhee v National Coal Board [1973] 1 WLR 1. They were not, however, all agreed as to the basis of that approach. Lord Hutton, at para 109, held that it was based on the drawing of a factual or legal inference leading to the conclusion that the breach of duty [in exposing the employee to asbestos dust] was a cause of the disease. The majority of the House did not agree. Lord Bingham said, at para 35: I prefer to recognise that the ordinary approach to proof of causation is varied than to resort to the drawing of legal inferences inconsistent with the proven facts. Lord Nicholls of Birkenhead said, at para 42: So long as it was not insignificant, each employer's wrongful exposure of its employee to asbestos dust, and, hence, to the risk of contracting mesothelioma, should be regarded by the law as a sufficient degree of causal connection. This is sufficient to justify requiring the employer to assume responsibility for causing or materially contributing to the onset of the mesothelioma when, in the present state of medical knowledge, no more exact causal connection is ever capable of being established." Lord Hoffmann at para 65 rejected the suggestion that the House in McGhee held that materially increasing the risk of the disease should be treated as equivalent to material contributing to the injury. He concluded: I would respectfully prefer not to resort to legal fictions and to say that the House treated a material increase in risk as sufficient in the circumstances to satisfy the causal requirements for liability. Lord Rodger of Earlsferry did not agree. His reasoning was close to that of Lord Hutton. He held, at para 168: Following the approach in McGhee I accordingly hold that, by proving that the defendants individually materially increased the risk that the men would develop mesothelioma due to inhaling asbestos fibres, the claimants are taken in law to have proved that the defendants materially contributed to their illness. What then happened has been summarised by Lord Hoffmann in Perspectives on Causation (2011) at p 8: There are two ways in which one could characterise this change in the substantive law of negligence. One is to say that the causal requirements for an action for damages for mesothelioma have been changed; all that is necessary is to prove that the risk has been increased and that the specific exposure may have provided the actual agent. The other is to say that the House created, exceptionally, a cause of action for the increased risk of mesothelioma rather than for the disease itself. In the former case, satisfying the new causal requirement would entitle the claimant to sue for the whole injury caused by contracting the disease. In the latter case, he would be able to sue only for the loss caused by the risk of his contracting the disease having been increased. That would be a proportion of the injury caused by the disease, depending on the extent to which the risk had also been created by other causes. In Barker v Corus the House of Lords (Lord Rodger of Earlsferry dissenting) adopted the second explanation of what had happened in Fairchild. I believe that this summary of the position is essentially correct. The majority in Barker were persuaded that justice would best be served if the special approach adopted in Fairchild were applied in such a way as to render each defendant who had wrongfully exposed the claimant to asbestos dust severally liable for that proportion of the mesothelioma that represented the proportion of the wrongful exposure attributable to that defendant. This was achieved by holding that the liability of each defendant resulted from adding to the risk that the employee would contract mesothelioma. It did not result from an implication that each defendant had actually contributed to the cause of the disease. At the start of his speech at para 2 Lord Hoffmann drew the vital distinction between being liable for contributing to the cause of the disease and being liable for the creation of the risk of causing the disease: Is any defendant who is liable under the exception deemed to have caused the disease? On orthodox principles, all defendants who have actually caused the damage are jointly and severally liable. Or is the damage caused by a defendant in a Fairchild case the creation of a risk that the claimant will contract the disease? In that case, each defendant will be liable only for his aliquot contribution to the total risk of the claimant contracting the disease a risk which is known to have materialised. Lord Hoffmann went on to adopt the latter analysis as the basis of liability in Fairchild. At para 31 he held that the majority in Fairchild had not proceeded upon the fiction that a defendant who had created a material risk of mesothelioma was deemed to have caused or materially contributed to the contraction of the disease. The creation of a material risk of mesothelioma was sufficient for liability. At para 35 he advanced the thesis that the basis of liability was the wrongful creation of the risk or chance of causing the disease and that the damage that the defendant should be regarded as having caused was the creation of such risk or chance. Liability for the mesothelioma that developed should be apportioned according to the contribution that each defendant made to the risk that mesothelioma would be contracted. Lord Scott of Foscote and Lord Walker of Gestingthorpe expressly agreed with both Lord Hoffmanns conclusion that liability for the mesothelioma fell to be apportioned and with his reasons for so concluding. Lord Scott held at para 53 that it was essential to keep firmly in mind that liability in Fairchild was not imposed on any of the defendant employers on the ground that the employers breach of contract had caused the mesothelioma. That causative link had not been proved against any of them. It was imposed because each, by its breach of duty, had materially contributed to the risk that the employee would contract mesothelioma. At para 61 he emphasised that the Fairchild principle was not based on the fiction that each defendant had actually caused the eventual outcome. It was based on subjecting the victim to a material risk. Lord Walker, having stated that he was in full agreement with Lord Hoffmanns reasons went on at para 104 to make a statement that was inconsistent with them, this being to the same effect as the statement relied on by Mr Beloff see para 106 above. Lord Walker stated that the decision in Fairchild equated exposing the victim to the risk of injury with causing his injury. This was the same mistake as I made in Sienkiewicz see para 117 above. Had this been the case, each defendant would have been jointly and severally liable for the injury. Lord Walker went on to say, however, that the result in Fairchild was achieved, not by some fiction, but as an explicit variation of the ordinary requirement as to causation. At para 113 he stated that Fairchild was decided by the majority, not on the fictional basis that the defendants should be treated as having caused the victims damage, but on the factual basis that they had wrongfully exposed him to the risk of damage. Lady Hale did not adopt Lord Hoffmanns thesis that the creation of risk constituted the damage for which each defendant was liable. In general, however, she agreed with the majority. She held that in Fairchild, for the first time in our legal history defendants were made liable for damage even though they might not have caused it at all. It was not said that the defendants had caused or materially contributed to the harm. All that could be said was that each had contributed to the risk of harm. In these circumstances it was sensible and fair to apportion liability for the harm in proportion to the contribution that each had made to the risk of harm. Lord Rodger of Earlsferry vigorously dissented from the reasoning of the majority and from the result in so far as it apportioned liability. He observed at para 71 that the majority were not so much reinterpreting as rewriting the key decisions in McGhee and Fairchild. At para 85 he stated that the new analysis that the House was adopting would tend to maximise the inconsistencies in the law. I have some sympathy with the observations of Lord Rodger. It would, I think, have been possible for the House in Barker to have defined the special approach in Fairchild as one that treated contribution to risk as contribution to the causation of damage. The important fact is, however, that the majority did not do so. They were at pains to emphasise that the special approach was not based on the fiction that the defendants had contributed to causing the mesothelioma. Liability for a proportion of the mesothelioma resulted from contribution to the risk that mesothelioma would be caused and reflected the possibility that a defendant might have caused or contributed to the cause of the disease. This was no obiter expression of opinion. It formed the basis of the substantive decision that liability was severable and not joint. The special rule The special approach rendered each employer who had wrongfully exposed a mesothelioma victim to asbestos dust liable for a proportion of the mesothelioma without creating any inference or legal fiction that the employer in question had actually contributed to causing the disease. Section 3 of the Compensation Act altered the position by imposing joint and several liability on those who were only severally liable under the special approach. Did the special rule that resulted involve a different basis of liability to that which formed the basis of the special approach? This question is considered by Jonathan Morgan in his interesting Chapter 4 of Perspectives on Causation headed Causation, Politics and Law: The English and Scottish Asbestos Saga. At p 79 he poses the following question: Has Parliament, by implication, therefore also reversed Lord Hoffmanns principled reinterpretation of Fairchild? Is the nature of Fairchild liability now after all for causing mesothelioma and not increasing risk? Mr Morgan gives a negative answer to this question, expressing the view that Barker has altered the jurisprudential basis of the Fairchild liability irrevocably. I agree that section 3 of the Compensation Act did not alter the jurisprudential basis of the special approach laid down by the House of Lords in Fairchild and Barker. All that it did was to alter the effect of the special approach by making each defendant jointly and severally liable for the whole of the injury sustained. Section 3(1) provides that the section applies where (c) because of the nature of mesothelioma and the state of medical science, it is not possible to determine with certainty whether it was the exposure [for which the defendant was responsible]or another exposure which caused the victim to become ill, and (d) the responsible person is liable in tort(whether by reason of having materially increased a risk or for any other reason). It is not possible to read section 3 as imposing a different basis of liability to that identified by the majority in Barker. The consequence of the special rule Having regard to its jurisprudential basis I cannot see how the employers can found upon the special rule as identifying the policy year or years in which a victims mesothelioma is initiated. The position is that it is impossible to prove on balance of probability when mesothelioma is initiated, or contracted, or sustained, giving each of those words the same meaning. The special rule does not fill the gap for it raises no implication or fictional assumption as to when mesothelioma is initiated. The consequence is that if claimants have to show that mesothelioma was initiated in a particular policy year in order to establish that insurers are liable they are unable to do so. Should this Court redefine the special rule in order to engage the EL policies? The special approach of the majority in Barker had the object of ensuring that employers who had wrongfully subjected their employees to asbestos dust should bear what the majority considered to be a fair share of responsibility for their wrongdoing. It does not seem likely that the majority gave consideration to the implications for the responsibility of EL insurers of the manner in which this object was achieved. Should this Court now redefine the special rule with the object of enabling claims to be brought under the EL policies? This would, I think, involve holding that the majority in Barker erred in their analysis and that the true basis of the special approach in Fairchild was that contribution to risk should be deemed to be contribution to causation. I would give a firm No to this question. The adoption of the special approach in Fairchild has provoked considerable criticism, both judicial and academic. An example of the former is to be found in the judgment of Lord Brown in Sienkiewicz. An example of the latter is Mr Morgans closely reasoned Chapter 4 of Perspectives on Causation. But the object of the special approach in Fairchild and Barker was at least to ensure that those who had breached the duties that they owed to their employees did not escape liability because of scientific uncertainty. It would be judicial law making of a different dimension to create a legal fiction as to the policy years in which cases of mesothelioma were initiated in order to render liable insurers who could not otherwise be shown to be liable. The Secretary of State has intervened in this appeal and has submitted that, should the claims of employees or their dependants not be met by insurers, they are likely to be a burden on the public purse. It is open to question whether this is a proper consideration, even when considering whether the special rule should be redefined for what are essentially reasons of policy. In any event it seems to me that the position is somewhat more complex than the Secretary of State suggests. The burden of claims in respect of mesothelioma on a scale that was never anticipated is reducing both employers and insurers to insolvency. If this Court were to redefine the special rule so as to impose liability for mesothelioma claims on EL insurers where it could not otherwise be made out, this would in many cases be at the expense of others with claims on the same insurers founded on facts and not legal fictions. The liabilities in respect of mesothelioma will increase the overall shortfall on the part of insurers and this is also likely to have implications for the public purse. So far as I am concerned, however, these considerations have little relevance. Even if there were a compelling case for contending that a means should be found to render EL insurers liable, my reaction would be that this was a matter for Parliament not the courts. It would be wrong in principle for this Court to depart from the reasoning of the majority in Barker for the sole purpose of imposing liability on EL insurers.

These appeals concern the obligations of insurance companies under various contracts of employers liability (EL) insurance. In particular, the appeals concern the scope of the insurers obligations to indemnify employers against their liabilities towards employees who have contracted mesothelioma following exposure to asbestos. Mesothelioma has an unusually long gestation period, which can be in excess of 40 years between exposure to asbestos and manifestation of the disease. The insurers maintain that the EL policies only cover mesothelioma which manifested as a disease at some point during the relevant policy period. In contrast, the employers submit that the insurance policies respond to mesothelioma caused by exposure to asbestos during the relevant policy period but which develops and manifests itself sometime later. The usual rule in negligence cases is that the claimant must establish on the balance of probabilities that the defendants negligence caused his injury or disease. In Fairchild v Glenhaven Funeral Services Ltd [2002] UKHL 22 and Barker v Corus UK Ltd [2006] UKHL 20 the House of Lords developed an exception to this general principle in cases involving mesothelioma caused by exposure to asbestos. The effect of this special rule is that an employer is liable where exposure to asbestos contributed to the risk that the employee would suffer mesothelioma and where the employee in fact develops the disease. The insurers submit that the special rule in Fairchild/Barker is not applicable when deciding, for the purposes of an EL insurance policy, whether an employees mesothelioma was caused by exposure to asbestos during a particular policy year. At first instance Burton J held that the policies should all be interpreted as having a causation wording. He therefore held that the liability trigger under the EL policy was when the employee inhaled the asbestos and not the date when the malignant lesion developed. A majority of the Court of Appeal (Rix and Stanley Burnton LJJ) upheld the judge in relation to some of the EL insurance policies (particularly those covering disease contracted during the relevant insurance period); however they concluded that other policies (particularly those covering disease sustained during the insurance period) responded only on an occurrence or manifestation basis. These appeals to the Supreme Court raise two issues: (i) On the correct construction of the EL policies, is mesothelioma sustained or contracted at the moment when the employee is wrongfully exposed to asbestos or at the moment when the disease subsequently manifests in the employees body? (ii) Does the special rule in Fairchild/Barker apply when determining whether, for the purposes of the EL policies, an employee sustained or contracted mesothelioma during a particular policy period? The Supreme Court dismisses the insurers appeal by a 4 1 majority; Lord Phillips dissenting on the second issue. Lord Mance gives the main judgment. To resolve the meaning of the EL policies it is necessary to avoid over concentration on the meaning of single words or phrases viewed in isolation, and to look at the insurance contracts more generally [19]. Several features point the way to the correct construction. First, the wordings of the policies on their face require the course of employment to be contemporaneous with the sustaining of the injury [20]. Second, the wordings demonstrate a close link between the actual employment undertaken during each period and the premium agreed by the parties for the risks undertaken by the insurers in respect of that period. Third, on the insurers case there is a potential gap in cover as regards employers breaches of duty towards employees in one period which only lead to disease or injury in another later period [24]. Fourth, on the insurers case employers would be vulnerable to any decision by the insurers not to renew the policy. A decision not to renew might arise from the employers complying with their duty to disclose past negligence upon any renewal. Employers who discovered that they had been negligent in the course of past activities in respects that had not yet led to any manifest disease would have such a duty. The insurers could then simply refuse any renewal or further cover [25]. Fifth, the way most of the policies deal with extra territorial issues throws doubt on any suggestion that the wordings are so carefully chosen that a court should stick literally to whatever might be perceived as their natural meaning [28]. Section 1 of the Employers Liability Compulsory Insurance Act 1969 also points the way to the correct interpretation. This states that every employer shall insure, and maintain insuranceagainst liability for bodily injury or disease sustained by his employees, and arising out of and in the course of their employment. In order to give proper effect to the protective purpose of that legislation, the Act requires insurance on a causation basis [47]. There is no difficulty in treating the word contracted as looking to the causation of a disease, rather than its development or manifestation. The word contracted used in conjunction with disease looks to the initiating or causative factor of the disease [49]. While the word sustained may initially appear to refer to the manifestation of an injury, the nature and underlying purpose of the EL insurances is one which looks to the initiation or causation of the accident or disease which injured the employee. Accordingly a disease may properly be said to have been sustained by an employee in the period when it was caused or initiated, even though it only developed or manifested itself later [50]. In relation to the second issue, the question is whether the EL policies cover employers liability for mesothelioma arising under the special rule in Fairchild/Barker [71]. Under that rule the law accepts a weak or broad causal link between the employers negligence and the employees mesothelioma. When construing the EL policies the concept of a disease being caused during the policy period must be interpreted sufficiently flexibly to embrace the role assigned to exposure by the Fairchild/Barker rule [74]. The purpose of the EL policies was to insure the employers against liability to their employees. Once it is held that the employers are liable to the employees, it would be remarkable if the insurers were not liable under the policies [88]. Accordingly, for the purposes of the EL policies, the negligent exposure of an employee to asbestos during the policy period has a sufficient causal link with subsequently arising mesothelioma to trigger the insurers obligation to indemnify the employer [74]. Lord Phillips dissents on the second issue. The special approach developed in Fairchild/Barker raises no implication or fictional assumption as to when mesothelioma is initiated. The consequence is that if claimants have to show that mesothelioma was initiated in a particular policy year in order to establish that insurers are liable they are unable to do so. This conclusion is not affected by section 3 of the Compensation Act 2009, which did not alter the jurisprudential basis of the Fairchild/Barker approach [132] [133].

This appeal gives the Supreme Court the opportunity to revisit the decision of the House of Lords in Stack v Dowden [2007] UKHL 17, [2007] 2 AC 432. That case, like this, was concerned with the determination of the beneficial interests in a house acquired in joint names by an unmarried couple who intended it to be their family home. Its reasoning was closely examined, in particular by Rimer LJ, in the present appeal: [2010] EWCA Civ 578, [2010] 1 WLR 2401. The fact that the Court of Appeal itself gave permission to appeal is a mark of the difficulties felt by the majority, not only with the reasoning but also with the outcome to which it led. The decision in Stack v Dowden has also attracted a good deal of comment from legal scholars, which we have read although it was not referred to by counsel (who took a sensibly economical approach to the presentation of the appeal). This ranges from qualified enthusiasm (K Gray & S Gray, Land Law, 6th ed (2009) para 7 072) to almost unqualified disapprobation (Swadling, The Common Intention Trust in the House of Lords: An Opportunity Missed (2007) 123 LQR 511; Dixon, The Never Ending Story Co Ownership After Stack v Dowden [2007] Conv 456). But counsel have not argued that Stack v Dowden was wrongly decided or that this court should now depart from the principles which it laid down. This appeal provides an opportunity for some clarification. Stack v Dowden Mr Stack and Ms Dowden lived together for 19 years, from 1983 to 2002. They did not marry but they had four children born between 1986 and 1991. Ms Dowden was a well qualified electrical engineer, and throughout the time when they lived together she worked full time (except for periods of maternity leave) for the LEB and its successor. Mr Stack was a self employed builder and decorator until 1987, after which he was employed by Hammersmith and Fulham LBC. They started living together in 1983 in a house acquired in Ms Dowdens sole name at the price of 30,000. The deposit of 8,000 was paid out of a building society account in Ms Dowdens sole name; there was a conflict of evidence as to whether Mr Stack had made any contributions to the account. The balance of 22,000 was raised on a mortgage for which Ms Dowden alone was responsible. She made the mortgage payments and paid other household outgoings. Mr Stack kept his finances separate (he had most of his post, including his bank statements, sent to his fathers address). They carried out extensive repairs and improvements to the house. The judge found that Mr Stack was responsible for most of this work but could not put a figure on its contribution to the sale value of the house. They moved house in 1993. Ms Dowden received over 66,000 from the sale of their first home. Their new home was bought for 190,000. Nearly 129,000 came from Ms Dowdens building society account and the balance from a bank loan secured on the house and on two endowment policies, one in joint names and one in Ms Dowdens sole name. The house was transferred into their joint names with no express declaration of trust, but a standard form provision that the survivor could give a good receipt. Mr Stack paid the mortgage interest and the premiums on the joint policy, to a total amount of nearly 34,000. The principal of the mortgage loan was repaid by a series of lump sum payments, to which Mr Stack contributed 27,000 and Ms Dowden over 38,000. The utility bills were in Ms Dowdens name and she paid all or most of them. There were some improvements to the property, but not on a large scale. The parties continued to maintain separate bank accounts and each made a number of separate investments. In short, there was a substantial disparity between their respective financial contributions to the purchase. The trial judge held that the proceeds of sale should be divided in equal shares. Although Ms Dowden had been the bigger earner, they have both put their all into doing the best for themselves and their family as they could. The Court of Appeal allowed Ms Dowdens appeal and divided the proceeds 65% to 35% as she had asked. The House of Lords (Lord Hoffmann, Lord Hope, Lord Walker, Lady Hale and Lord Neuberger) unanimously upheld that order, although Lord Neuberger did so for different reasons from the majority. The curious feature of the decided cases up until then had been that, once an intention to share ownership had been established, the courts had tended to adopt a more flexible and holistic approach to the quantification of the parties shares in cases of sole legal ownership than they had in cases of joint legal ownership. In the former, they had adopted a concept of the common intention constructive trust which depends upon the shared intentions of the parties. In the latter, they had tended to analyse the matter in terms of a resulting trust, which depends upon the laws presumption as to the intention of the party who makes a financial contribution to the purchase. This point was made by Lady Hale in Stack v Dowden, paras 64 and 65 (see also Peter Gibson LJ in Drake v Whipp [1996] 1 FLR 826, 827, cited in Stack v Dowden, para 29). The leading opinion in the House of Lords was that of Lady Hale. Lord Hoffmann, Lord Hope and Lord Walker all agreed with it, though Lord Hope and Lord Walker added some observations of their own. Lord Hope discussed Scots law, drawing attention to the importance in Scotland of the law of unjust enrichment. Lord Walker contributed what he referred to as an extended footnote, with a detailed commentary on Lord Diplocks speech in Gissing v Gissing [1971] AC 886. The conclusions in Lady Hales opinion were directed to the case of a house transferred into the joint names of a married or unmarried couple, where both are responsible for any mortgage, and where there is no express declaration of their beneficial interests. In such cases, she held that there is a presumption that the beneficial interests coincide with the legal estate. Specifically, in the domestic consumer context, a conveyance into joint names indicates both legal and beneficial joint tenancy, unless and until the contrary is proved: Lady Hale, at para 58; Lord Walker at para 33. Secondly, the mere fact that the parties had contributed to the acquisition of the home in unequal shares would not normally be sufficient to rebut the presumption of joint tenancy arising from the conveyance: It cannot be the case that all the hundreds of thousands, if not millions, of transfers into joint names . are vulnerable to challenge in the courts simply because it is likely that the owners contributed unequally to their purchase: Lady Hale, at para 68. Thirdly, the task of seeking to show that the parties intended their beneficial interests to be different from their legal interests was not to be lightly embarked upon. In family disputes, strong feelings are aroused when couples split up. These often lead the parties, honestly but mistakenly, to reinterpret the past in self exculpatory or vengeful terms. They also lead people to spend far more on the legal battle than is warranted by the sums actually at stake. A full examination of the facts is likely to involve disproportionate costs. In joint names cases it is also unlikely to lead to a different result, unless the facts are very unusual: Lady Hale, at para 68; also Lord Walker at para 33. Fourthly, however, if the task is embarked upon, it is to ascertain the parties common intentions as to what their shares in the property would be, in the light of their whole course of conduct in relation to it: Lady Hale, at para 60. It is the way in which this point was made which seems to have caused the most difficulty in the lower courts. The difficulty is well illustrated in Lord Wilsons judgment, at paras 85 to 87, which read the judgment in a way which we would not read it. It matters not which reading is correct. It does matter that any confusion is resolved. It was also accepted that the parties common intentions might change over time, producing what Lord Hoffmann referred to in the course of argument as an ambulatory constructive trust: Lady Hale, at para 62. An example, given in para 70, was where one party had financed or constructed an extension or major improvement to the property, so that what they had now was different from what they had first acquired. But of course there are other examples. The principal question in this case is whether this is one. At its simplest the principle in Stack v Dowden is that a common intention trust, for the cohabitants home to belong to them jointly in equity as well as on the proprietorship register, is the default option in joint names cases. The trust can be classified as a constructive trust, but it is not at odds with the parties legal ownership. Beneficial ownership mirrors legal ownership. What it is at odds with is the presumption of a resulting trust. A single regime? In an interesting article by Simon Gardner and Katherine Davidson, The Future of Stack v Dowden (2011) 127 LQR 13, 15, the authors express the hope that the Supreme Court will make clear that constructive trusts of family homes are governed by a single regime, dispelling any impression that different rules apply to joint names and single name cases. At a high level of generality, there is of course a single regime: the law of trusts (this is the second of Mustill LJs propositions in Grant v Edwards [1986] Ch 638, 651). To the extent that we recognise that a common intention trust is of central importance to joint names as well as single names cases, we are going some way to meet that hope. Nevertheless it is important to point out that the starting point for analysis is different in the two situations. That is so even though it may be necessary to enquire into the varied circumstances and reasons why a house or flat has been acquired in a single name or in joint names (they range, for instance, from Lowson v Coombes [1999] Ch 373, where the property was in the womans sole name because the man was apprehensive of claims by his separated wife, to Adekunle v Ritchie [2007] WTLR 1505, where an enfranchised freehold was in joint names because the elderly tenant could not obtain a mortgage on her own). The starting point is different because the claimant whose name is not on the proprietorship register has the burden of establishing some sort of implied trust, normally what is now termed a common intention constructive trust. The claimant whose name is on the register starts (in the absence of an express declaration of trust in different terms, and subject to what is said below about resulting trusts) with the presumption (or assumption) of a beneficial joint tenancy. The official Land Registry application form (TR1) for registration of a transfer was replaced on 1 April 1998 by a new form with a box enabling joint transferees to clarify the beneficial ownership of the property. That should help to avoid uncertainty but in practice it does not always do so (this is explained in detail in a case note: Anything to Declare? Express Declarations of Trust in Stack v Dowden [2007] Conv 364). We understand that the Land Registry does not propose to implement the recommendations for change made by an expert working party which it convened in response to Stack v Dowden: see Elizabeth Cooke, In the wake of Stack v Dowden: the tale of TR1 [2011] Fam Law 1142. The presumption of a beneficial joint tenancy is not based on a mantra as to equity following the law (though many non lawyers would find it hard to understand the notion that equity might do anything else). There are two much more substantial reasons (which overlap) why a challenge to the presumption of beneficial joint tenancy is not to be lightly embarked on. The first is implicit in the nature of the enterprise. If a couple in an intimate relationship (whether married or unmarried) decide to buy a house or flat in which to live together, almost always with the help of a mortgage for which they are jointly and severally liable, that is on the face of things a strong indication of emotional and economic commitment to a joint enterprise. That is so even if the parties, for whatever reason, fail to make that clear by any overt declaration or agreement. The court has often drawn attention to this. Jacob LJ did so in his dissenting judgment in this case: [2010] EWCA Civ 578, [2010] 1 WLR 2401, para 90. One of the most striking expressions of this approach is in the judgment of Waite LJ in Midland Bank plc v Cooke [1995] 4 All ER 562, 575. It is worth quoting it at some length, even though the case was a single name case and the couple were married (the husband was 19, and the wife a little older, at the time of the marriage): Equity has traditionally been a system which matches established principle to the demands of social change. The mass diffusion of home ownership has been one of the most striking social changes of our own time. The present case is typical of hundreds, perhaps even thousands, of others. When people, especially young people, agree to share their lives in joint homes they do so on a basis of mutual trust and in the expectation that their relationship will endure. Despite the efforts that have been made by many responsible bodies to counsel prospective cohabitants as to the risks of taking shared interests in property without legal advice, it is unrealistic to expect that advice to be followed on a universal scale. For a couple embarking on a serious relationship, discussion of the terms to apply at parting is almost a contradiction of the shared hopes that have brought them together. There will inevitably be numerous couples, married or unmarried, who have no discussion about ownership and who, perhaps advisedly, make no agreement about it. It would be anomalous, against that background, to create a range of home buyers who were beyond the pale of equitys assistance in formulating a fair presumed basis for the sharing of beneficial title, simply because they had been honest enough to admit that they never gave ownership a thought or reached any agreement about it. Gardner and Davidson make the same point at (2011) 127 LQR 13, 15 16: The context under discussion is one in which people will not normally formulate agreements, but (this is crucial) the very reason for this the parties familial trust in one another also warrants the laws intervention nonetheless. Unless the law reacts to such trust as much as to more individualistic forms of interaction, those who put their faith in the former rather than the latter will find their interests thereby exposed. Gardner has termed this a materially communal relationship: ie one in which, in practical terms, they pool their material resources (including money, other assets, and labour): An Introduction to Land Law, 2nd ed (2009) para 8.3.7.) The notion that in a trusting personal relationship the parties do not hold each other to account financially is underpinned by the practical difficulty, in many cases, of taking any such account, perhaps after 20 years or more of the ups and downs of living together as an unmarried couple. That is the second reason for caution before going to law in order to displace the presumption of beneficial joint tenancy. Lady Hale pointed this out in Stack v Dowden at para 68 (see para 12 above), as did Lord Walker at para 33: In the ordinary domestic case where there are joint legal owners there will be a heavy burden in establishing to the courts satisfaction that an intention to keep a sort of balance sheet of contributions actually existed, or should be inferred, or imputed to the parties. The presumption will be that equity follows the law. In such cases the court should not readily embark on the sort of detailed examination of the parties relationship and finances that was attempted (with limited success) in this case. The competing presumption: a resulting trust? 72, 73, footnote 6) William Swadling has commented: In an illuminating article, Explaining Resulting Trusts (2008) 124 LQR A resulting trust also traditionally arose where A and B contributed unequally to the purchase price and the title was conveyed to A and B as joint tenants, whereby A and B held as equitable tenants in common in proportion to their contributions (Lake v Gibson (1729) 1 Eq Cas Abr 290). In Stack v Dowden [2007] UKHL 17, a majority of the House of Lords held that this rule no longer applied in the case of matrimonial or quasi matrimonial homes. That is probably a reference to para 31 of Lord Walkers opinion. Lady Hales opinion does not in terms reach that conclusion. But the extended discussion from para 56 to para 70 (and in particular, the express disapproval of Walker v Hall [1984] FLR 126, Springette v Defoe [1992] 2 FLR 388 and Huntingford v Hobbs [1993] 1 FLR 736) is inconsistent with a resulting trust analysis in this context. It is not possible at one and the same time to have a presumption or starting point of joint beneficial interests and a presumption (let alone a rule) that the parties beneficial interests are in proportion to their respective financial contributions. In the context of the acquisition of a family home, the presumption of a resulting trust made a great deal more sense when social and economic conditions were different and when it was tempered by the presumption of advancement. The breadwinner husband who provided the money to buy a house in his wifes name, or in their joint names, was presumed to be making her a gift of it, or of a joint interest in it. That simple assumption which was itself an exercise in imputing an intention which the parties may never have had was thought unrealistic in the modern world by three of their Lordships in Pettitt v Pettitt [1970] AC 777. It was also discriminatory as between men and women and married and unmarried couples. That problem might have been solved had equity been able to extend the presumption of advancement to unmarried couples and remove the sex discrimination. Instead, the tool which equity has chosen to develop law is the common intention constructive trust. Abandoning the presumption of advancement while retaining the presumption of resulting trust would place an even greater emphasis upon who paid for what, an emphasis which most commentators now agree to have been too narrow: hence the general welcome given to the more promising vehicle of the constructive trust: see Gardner and Davidson at (2011) 127 LQR 13, 16. The presumption of advancement is to receive its quietus when section 199 of the Equality Act 2010 is brought into force. The time has come to make it clear, in line with Stack v Dowden (see also Abbott v Abbott [2007] UKPC 53, [2007] 2 All ER 432), that in the case of the purchase of a house or flat in joint names for joint occupation by a married or unmarried couple, where both are responsible for any mortgage, there is no presumption of a resulting trust arising from their having contributed to the deposit (or indeed the rest of the purchase) in unequal shares. The presumption is that the parties intended a joint tenancy both in law and in equity. But that presumption can of course be rebutted by evidence of a contrary intention, which may more readily be shown where the parties did not share their financial resources. Inference or imputation? In Stack v Dowden Lord Neuberger observed (paras 125 126): While an intention may be inferred as well as express, it may not, at least in my opinion, be imputed. That appears to me to be consistent both with normal principles and with the majority view of this House in Pettitt [1970] AC 777, as accepted by all but Lord Reid in Gissing v Gissing [1971] AC 886, 897H, 898B D, 900E G, 901B D, 904E F, and reiterated by the Court of Appeal in Grant v Edwards [1986] Ch 638 at 651F 653A. The distinction between inference and imputation may appear a fine one (and in Gissing v Gissing [1971] AC 886, at 902G H, Lord Pearson, who, on a fair reading I think rejected imputation, seems to have equated it with inference), but it is important. An inferred intention is one which is objectively deduced to be the subjective actual intention of the parties, in the light of their actions and statements. An imputed intention is one which is attributed to the parties, even though no such actual intention can be deduced from their actions and statements, and even though they had no such intention. Imputation involves concluding what the parties would have intended, whereas inference involves concluding what they did intend. Rimer LJ made some similar observations in the Court of Appeal in this case [2010] EWCA Civ 578, [2010] 1 WLR 2401, paras 76 77. Both observations had been to some extent anticipated as long ago as 1970 by Lord Reid in his speech in Gissing v Gissing [1971] AC 886, 897: Returning to the crucial question there is a wide gulf between inferring from the whole conduct of the parties that there probably was an agreement, and imputing to the parties an intention to agree to share even where the evidence gives no ground for such an inference. If the evidence shows that there was no agreement in fact then that excludes any inference that there was an agreement. But it does not exclude an imputation of a deemed intention if the law permits such an imputation. If the law is to be that the court has power to impute such an intention in proper cases then I am content, although I would prefer to reach the same result in a rather different way. But if it were to be held to be the law that it must at least be possible to infer a contemporary agreement in the sense of holding that it is more probable than not there was in fact some such agreement then I could not contemplate the future results of such a decision with equanimity. The decision of the House of Lords in Gissing v Gissing has been so fully analysed and discussed that it is almost impossible to say anything new about it. However it may be worth pointing out that their Lordships speeches were singularly unresponsive to each other. The only reference to another speech is by Viscount Dilhorne (at p 900) where he agreed with Lord Diplock on a very general proposition as to the law of trusts. The law reporter has managed to find a ratio for the headnote (at p 886) only by putting these two propositions together with some remarks by Lord Reid (at p 896) which have a quite different flavour. We can only guess at the order in which the speeches were composed, but the third and fourth sentences of the passage from Lord Reids speech, set out in the preceding paragraph, suggest that Lord Reid had read Lord Diplocks speech in draft, and thought that it was about an imputation of a deemed intention. This sort of constructive intention (or any other constructive state of mind), and the difficulties that they raise, are familiar in many branches of the law. Whenever a judge concludes that an individual intended, or must be taken to have intended, or knew, or must be taken to have known, there is an elision between what the judge can find as a fact (usually by inference) on consideration of the admissible evidence, and what the law may supply (to fill the evidential gap) by way of a presumption. The presumption of a resulting trust is a clear example of a rule by which the law does impute an intention, the rule being based on a very broad generalisation about human motivation, as Lord Diplock noted in Pettitt v Pettitt [1970] AC 777, 824: It would, in my view, be an abuse of the legal technique for ascertaining or imputing intention to apply to transactions between the post war generation of married couples presumptions which are based upon inferences of fact which an earlier generation of judges drew as to the most likely intentions of earlier generations of spouses belonging to the propertied classes of a different social era. That was 40 years ago and we are now another generation on. The decision in Stack v Dowden produced a division of the net proceeds of sale of the house in shares roughly corresponding to the parties financial contributions over the years. The majority reached that conclusion by inferring a common intention (see Lady Hales opinion at para 92, following her detailed analysis of the facts starting at para 86). Only Lord Neuberger reached the same result by applying the classic resulting trust doctrine (which involved, it is to be noted, imputing an intention to the parties). In deference to the comments of Lord Neuberger and Rimer LJ, we accept that the search is primarily to ascertain the parties actual shared intentions, whether expressed or to be inferred from their conduct. However, there are at least two exceptions. The first, which is not this case, is where the classic resulting trust presumption applies. Indeed, this would be rare in a domestic context, but might perhaps arise where domestic partners were also business partners: see Stack v Dowden, para 32. The second, which for reasons which will appear later is in our view also not this case but will arise much more frequently, is where it is clear that the beneficial interests are to be shared, but it is impossible to divine a common intention as to the proportions in which they are to be shared. In those two situations, the court is driven to impute an intention to the parties which they may never have had. Lord Diplock, in Gissing v Gissing [1971] AC 886, 909, pointed out that, once the court was satisfied that it was the parties common intention that the beneficial interest was to be shared in some proportion or other, the court might have to give effect to that common intention by determining what in all the circumstances was a fair share. And it is that thought which is picked up in the subsequent cases, culminating in the judgment of Chadwick LJ in Oxley v Hiscock [2005] Fam 211, paras 65, 66 and 69, and in particular the passage in para 69 which was given qualified approval in Stack v Dowden: the answer is that each is entitled to that share which the court considers fair having regard to the whole course of dealing between them in relation to the property. Chadwick LJ was not there saying that fairness was the criterion for determining whether or not the property should be shared, but he was saying that the court might have to impute an intention to the parties as to the proportions in which the property would be shared. In deducing what the parties, as reasonable people, would have thought at the relevant time, regard would obviously be had to their whole course of dealing in relation to the property. However, while the conceptual difference between inferring and imputing is clear, the difference in practice may not be so great. In this area, as in many others, the scope for inference is wide. The law recognizes that a legitimate inference may not correspond to an individuals subjective state of mind. As Lord Diplock also put it in Gissing v Gissing [1971] AC 886, 906: As in so many branches of English law in which legal rights and obligations depend upon the intentions of the parties to a transaction, the relevant intention of each party is the intention which was reasonably understood by the other party to be manifested by that partys words or conduct notwithstanding that he did not consciously formulate that intention in his own mind or even acted with some different intention which he did not communicate to the other party. This point has been developed by Nick Piska, Intention, Fairness and the Presumption of Resulting Trust after Stack v Dowden (2008) 71 MLR 120. He observes at pp 127 128: Subjective intentions can never be accessed directly, so the court must always direct itself to a consideration of the parties objective intentions through a careful consideration of the relevant facts. The point is that the imputation/inference distinction may well be a distinction without a difference with regard to the process of determining parties intentions. It is not that the parties subjective intentions are irrelevant but rather that a finding as to subjective intention can only be made on an objective basis. In several parts of the British Commonwealth federal or provincial legislation has given the court a limited jurisdiction to vary or adjust proprietary rights in the home when an unmarried couple split up. Most require a minimum period of two years cohabitation (or less if there are children) before the jurisdiction is exercisable. In England the Law Commission has made recommendations on similar lines (Law Com No 307, Cohabitation: The Financial Consequences of Relationship Breakdown, 2007), but there are no plans to implement them in the near future. In the meantime there will continue to be many difficult cases in which the court has to reach a conclusion on sparse and conflicting evidence. It is the courts duty to reach a decision on even the most difficult case. As the deputy judge (Mr Nicholas Strauss QC) said in his admirable judgment [2009] EWHC 1713 (Ch), [2010] 1 WLR 2401, para 33 (in the context of a discussion of fairness) that is what courts are for. That was an echo (conscious or unconscious) of what Sir Thomas Bingham MR said, in a different family law context, in Re Z (A Minor) (Identification: Restrictions on Publication) [1997] Fam 1, 33. The trial judge has the onerous task of finding the primary facts and drawing the necessary inferences and conclusions, and appellate courts will be slow to overturn the trial judges findings. The facts of this case The parties met in 1980. Ms Jones worked as a mobile hairdresser. Mr Kernott worked as a self employed ice cream salesman during the summer and claimed benefits during the winter if he could find no other work. The judge found that their incomes were not very different from one another. Ms Jones bought a mobile home in her sole name in 1981. Mr Kernott moved in with her (according to the agreed statement of facts and issues) in 1983. Their first child was born in June 1984. In May 1985 Ms Jones sold her mobile home and the property in question in these proceedings, 39 Badger Hall Avenue, Thundersley, Essex, was bought in their joint names. The purchase price was 30,000. This was relatively cheap because the house had belonged to the elderly mother of a client of Ms Jones. The deposit of 6000 was paid from the proceeds of sale of Ms Jones mobile home. The balance was raised by way of an endowment mortgage in their joint names. Mr Kernott paid 100 per week towards the household expenses while they lived at the property. Ms Jones paid the mortgage and other household bills out of their joint resources. In March 1986 they jointly took out a loan of 2000 to build an extension. Mr Kernott did some of the labouring work and paid friends and relations to do other work on it. The judge found that the extension probably enhanced the value of the property by around 50%, from 30,000 to 44,000. Their second child was born in September 1986. Mr Kernott moved out of the property in October 1993. The parties had lived there together, sharing the household expenses, for eight years and five months. Thereafter Ms Jones remained living in the property with the children and paid all the household expenses herself. Mr Kernott made no further contribution towards the acquisition of the property and the judge also found that he made very little contribution to the maintenance and support of their two children who were being looked after by their mother. This situation continued for some 14 and a half years until the hearing before the judge. The Badger Hall Avenue property was put on the market in October 1995 for 69,995, but was not sold. This may be some indication of its market value at that time but no more than that. At some date which is not entirely clear, the parties agreed to cash in a joint life insurance policy (not, of course, the endowment policy supporting the mortgage) and the proceeds were divided between them. The judge held that this was to enable Mr Kernott to put down a deposit on a home of his own. This he did in May 1996, when he bought 114 Stanley Road, Benfleet, for around 57,000 with a deposit of 2,800 and a mortgage of 54,150. The judge observed that he was able to afford his own accommodation because he was not making any contribution towards the former family home, nor was he making any significant contribution towards the support of his children. The judge also found that whilst the intentions of the parties may well have been at the outset to provide them as a couple with a home for themselves and their progeny, those intentions have altered significantly over the years to the extent that [Mr Kernott] demonstrated that he had no intention until recently of availing himself of the beneficial ownership in this property, having ignored it completely by way of any investment in it or attempt to maintain or repair it whilst he had his own property on which he concentrated. At the time of the hearing before the judge in April 2008, 39 Badger Hall Avenue was valued at 245,000. The outstanding mortgage debt was 26,664. The endowment policy supporting that mortgage was worth 25,209. On the basis that they had contributed jointly to the endowment for eight years and five months and that Ms Jones had contributed alone for fourteen and a half years, it was calculated that Mr Kernott was entitled to around 4712 of its value, which would leave Ms Jones with 20,497. 114 Stanley Road was valued at 205,000, with an outstanding mortgage of 37,968 (suggesting that this was a repayment rather than an endowment mortgage). If the whole of the endowment policy was used to discharge the mortgage, the net worth of 39 Badger Hall Avenue would be 243,545. If the mortgage on 114 Stanley Road was an ordinary repayment mortgage, the net worth of 114 Stanley Road would be 167,032. These proceedings Mr Kernott initiated correspondence with a view to claiming his interest in the property in 2006. Ms Jones began proceedings in the Southend County Court in October 2007, claiming a declaration under section 14 of the Trusts of Land and Appointment of Trustees Act 1996: (i) that she owned the entire beneficial interest in 39 Badger Hall Avenue; alternatively (ii) if Mr Kernott had any beneficial interest in 39 Badger Hall Avenue, that she also had a beneficial interest in 114 Stanley Road, and that these respective interests be determined by the court; and (iii) that either she be registered as sole proprietor of 39 Badger Hall Avenue, or that they be registered as joint proprietors of 114 Stanley Road. At the trial, which took place in April 2008, Ms Jones conceded that, in 1993 when the couple separated, there would not have been enough evidence to displace the presumption that their beneficial interests followed the legal title, so that they were then joint tenants in law and equity. She also conceded that she had no legal claim on 114 Stanley Road. Her contention was that its purchase, along with other events since their separation, was evidence that their intentions with respect to the beneficial interests in 39 Badger Hall Avenue had changed. The judge accepted that contention. In the light of Stack v Dowden and Oxley v Hiscock he had to consider what is fair and just between the parties bearing in mind what I have found with regard to the whole course of dealing between them. He concluded that the value of the property should be divided as to 90% for Ms Jones and 10% for Mr Kernott. On the figures given above, had the property been sold then, and the whole of the endowment policy used to defray the mortgage debt, that would have given her 219,190 and him 24,355 (giving him a total of 191,387 from the equity in his home and the sale of the property). Mr Kernott appealed to the High Court, arguing that the judge was wrong to infer or impute an intention that the parties beneficial interests should change after their separation and to quantify these in the way which he considered fair. The deputy judge, Mr Nicholas Strauss QC, after a careful review of the authorities, concluded that the change in intention could readily be inferred or imputed from the parties conduct: [2009] EWHC 1713 (Ch), [2010] 1 WLR 2401, para 47. In the absence of any indication by words or conduct as to how their shares should be altered, the appropriate criterion was what he considered to be fair and just: para 49. The judges assessment could be justified, given that their direct contributions were a little over 4:1 in Ms Jones favour and that the larger part of the capital gain on the property must have arisen after 1993. By not contributing to that property, Mr Kernott had been able to buy another property on which there was almost as great a capital gain. The parties could not be taken to have intended that he should have a significant part of the increased value of 39 Badger Hall Avenue as well as the whole of the capital gain from 114 Stanley Road: para 51. The Court of Appeal, by a majority, allowed Mr Kernotts appeal and declared that the parties owned the property as tenants in common in equal shares: [2010] EWCA Civ 578, [2010] 1 WLR 2401. Jacob LJ, who dissented, held that the judge had applied the right legal test and that there was a proper basis in the evidence for concluding that the parties must be taken to have intended that they should each have a fair and just share. He would not interfere with the judges assessment of the fair proportions. Rimer LJ, in the majority, held that there was nothing to indicate that the parties intentions had changed after their separation. A crucial part of his reasoning was his interpretation of the decision in Stack v Dowden: that it did not enable courts to find, by way of the imputation route, an intention where none was expressly uttered nor inferentially formed: para 77. Wall P also concluded that he could not infer an intention to change the beneficial interests from the parties conduct: paras 57, 58. Discussion It is always salutary to be confronted with the ambiguities which later emerge in what seemed at the time to be comparatively clear language. The primary search must always be for what the parties actually intended, to be deduced objectively from their words and their actions. If that can be discovered, then, as Mr Nicholas Strauss QC pointed out in the High Court, it is not open to a court to impose a solution upon them in contradiction to those intentions, merely because the court considers it fair to do so. In a case such as this, where the parties already share the beneficial interest, and the question is what their interests are and whether their interests have changed, the court will try to deduce what their actual intentions were at the relevant time. It cannot impose a solution upon them which is contrary to what the evidence shows that they actually intended. But if it cannot deduce exactly what shares were intended, it may have no alternative but to ask what their intentions as reasonable and just people would have been had they thought about it at the time. This is a fallback position which some courts may not welcome, but the court has a duty to come to a conclusion on the dispute put before it. In this case, there is no need to impute an intention that the parties beneficial interests would change, because the judge made a finding that the intentions of the parties did in fact change. At the outset, their intention was to provide a home for themselves and their progeny. But thereafter their intentions did change significantly. He did not go into detail, but the inferences are not difficult to draw. They separated in October 1993. No doubt in many such cases, there is a period of uncertainty about where the parties will live and what they will do about the home which they used to share. This home was put on the market in late 1995 but failed to sell. Around that time a new plan was formed. The life insurance policy was cashed in and Mr Kernott was able to buy a new home for himself. He would not have been able to do this had he still had to contribute towards the mortgage, endowment policy and other outgoings on 39 Badger Hall Avenue. The logical inference is that they intended that his interest in Badger Hall Avenue should crystallise then. Just as he would have the sole benefit of any capital gain in his own home, Ms Jones would have the sole benefit of any capital gain in Badger Hall Avenue. Insofar as the judge did not in so many words infer that this was their intention, it is clearly the intention which reasonable people would have had had they thought about it at the time. But in our view it is an intention which he both could and should have inferred from their conduct. A rough calculation on this basis produces a result so close to that which the judge produced that it would be wrong for an appellate court to interfere. If we take the value of the property as 60,000 in late 1993 (or 70,000 in late 1995) and the value in 2008 as 245,000, and share the 60,000 (or 70,000) equally between the parties, but leave the balance to Ms Jones, that gives him 30,000 (35,000) and her 215,000 (210,000), roughly 12% (14%) and 88% (86%) respectively. This calculation ignores the mortgage, which may be the correct approach, as in 2008 the mortgage debt was almost fully covered by the endowment policy which was always meant to discharge it. Introducing the mortgage liability in 1993 (or 1995) into the calculation would be to Mr Kernotts disadvantage, because at that stage the endowment policy would not have been sufficient to discharge the debt, so the equity would have been less. Further accounting On this approach, there is no scope for further accounting between the parties (which was obviously contemplated as a future possibility by Rimer LJ on his approach). Had their beneficial interests in the property remained the same, there would have been the possibility of cross claims: Mr Kernott against Ms Jones for an occupation rent, and Ms Jones against Mr Kernott for his half share in the mortgage interest and endowment premiums which she had paid. It is quite likely, however, that the court would hold that there was no liability to pay an occupation rent, at least while the home was needed for the couples children, whereas the liability to contribute towards the mortgage and endowment policy would accumulate at compound interest over the years since he ceased to contribute. This exercise has not been done. In a case such as this it would involve a quite disproportionate effort, both to discover the requisite figures (even supposing that they could be discovered) and to make the requisite calculations, let alone to determine what the ground rules should be. The parties legal advisers are to be commended for the proportionate approach which they have taken to the preparation of this case. Conclusion In summary, therefore, the following are the principles applicable in a case such as this, where a family home is bought in the joint names of a cohabiting couple who are both responsible for any mortgage, but without any express declaration of their beneficial interests. tenants both in law and in equity. (1) The starting point is that equity follows the law and they are joint (2) That presumption can be displaced by showing (a) that the parties had a different common intention at the time when they acquired the home, or (b) that they later formed the common intention that their respective shares would change. (3) Their common intention is to be deduced objectively from their conduct: the relevant intention of each party is the intention which was reasonably understood by the other party to be manifested by that partys words and conduct notwithstanding that he did not consciously formulate that intention in his own mind or even acted with some different intention which he did not communicate to the other party (Lord Diplock in Gissing v Gissing [1971] AC 886, 906). Examples of the sort of evidence which might be relevant to drawing such inferences are given in Stack v Dowden, at para 69. (4) In those cases where it is clear either (a) that the parties did not intend joint tenancy at the outset, or (b) had changed their original intention, but it is not possible to ascertain by direct evidence or by inference what their actual intention was as to the shares in which they would own the property, the answer is that each is entitled to that share which the court considers fair having regard to the whole course of dealing between them in relation to the property: Chadwick LJ in Oxley v Hiscock [2005] FAm 211, para 69. In our judgment, the whole course of dealing in relation to the property should be given a broad meaning, enabling a similar range of factors to be taken into account as may be relevant to ascertaining the parties actual intentions. (5) Each case will turn on its own facts. Financial contributions are relevant but there are many other factors which may enable the court to decide what shares were either intended (as in case (3)) or fair (as in case (4)). This case is not concerned with a family home which is put into the name of one party only. The starting point is different. The first issue is whether it was intended that the other party have any beneficial interest in the property at all. If he does, the second issue is what that interest is. There is no presumption of joint beneficial ownership. But their common intention has once again to be deduced objectively from their conduct. If the evidence shows a common intention to share beneficial ownership but does not show what shares were intended, the court will have to proceed as at para 51(4) and (5) above. The assumptions as to human motivation, which led the courts to impute particular intentions by way of the resulting trust, are not appropriate to the ascertainment of beneficial interests in a family home. Whether they remain appropriate in other contexts is not the issue in this case. judge. It follows that we would allow this appeal and restore the order of the I agree that the appeal should be allowed for the reasons given in the joint LORD COLLINS judgment of Lord Walker and Lady Hale. It is not surprising that the decision in Stack v Dowden [2007] UKHL 17, [2007] 2 AC 432 gave rise to difficulties. It was a decision which was responding to the increasing number of co habiting couples with joint interests in their homes, and to the fact that couples (whether married or unmarried) rarely make agreements about their respective shares in their homes, and to the enormous inflation in property prices which has made the division of ownership by reference to initial financial contributions artificial and potentially productive of injustice. The absence of legislative intervention (which continues despite the Law Commission Report on Cohabitation: the Financial consequences of Relationship Breakdown, 2007) made it necessary for the judiciary to respond by adapting old principles to new situations. That has not been an easy task. It is illustrated by the fact that in both Stack v Dowden and in this case the results at the highest appellate level have been unanimous but the reasoning has not. I would hope that this decision will lay to rest the remaining difficulties, and that it will not be necessary to revisit this question by reconsideration of the correctness of Stack v Dowden, by which this court is bound (subject to the application of Practice Statement (Judicial Precedent) [1966] 1 WLR 1234 regarding departure from previous decisions). It should not be necessary because the differences in reasoning are largely terminological or conceptual and are likely to make no difference in practice. But should it be necessary, the court (no doubt with a panel of seven or nine) would need much fuller argument (together with citation of the enormous critical literature which the decision has spawned) than was presented to the court on this appeal. There have been at least three causes of the difficulties with Stack v Dowden. The first is that the previous authorities were mainly concerned with a different factual situation, namely where the property was registered in the name of only one of the parties. Second, they did not in any event speak with one voice, particularly on that part of Stack v Dowden which has caused most difficulty, namely whether in this part of the law there is any useful distinction between inferred intention and imputed intention: contrast Gissing v Gissing [1971] AC 886 with Lloyds Bank v Rosset [1991] 1 AC 107. The third reason is that (despite it being trite that it is wrong to do so) Baroness Hales speech has been treated as if it were a statute, and ambiguities in it have been exploited or exaggerated, particularly the passage at para 60 in which she has been taken as having treated inferred intention and imputed intention as interchangeable, and the passage at para 61 in which she approved, or substantially approved, the reasoning of Chadwick LJ in Oxley v Hiscock [2005] Fam 211, para 69. The reasoning of Baroness Hale and Lord Walker, taken together, in Stack v Dowden was as follows: (1) When property is held in joint names, and without any express declaration of trust, the starting point is that the beneficial interest is held equally and there is a heavy burden on the party asserting otherwise: paras 14, 33, 54, 56, 68. (2) That is because it will almost always have been a conscious decision to put the property into joint names, and committing oneself to spend large sums of money on a place to live is not normally done by accident or without giving it thought: para 66. (3) Consequently it is to be expected that joint transferees would have spelled out their beneficial interests when they intended them to be different from their legal interests ([54]) and cases in which the burden will be discharged will be very unusual (para 68). (4) The contrary can be proved by looking at all the relevant circumstances in order to discern the parties common intention: [59]. (5) There is no presumption that the parties intended that the beneficial interest be shared in proportion to their financial contributions to the acquisition of the property: paras 31, 59 60 (thereby rejecting the approach of the resulting trust analysis as a starting point favoured by Lord Neuberger, dissenting, but not as to the result). (6) The search is to ascertain the parties shared intentions, actual, inferred or imputed, with respect to the property in the light of their whole course of conduct in relation to it: para 60. (7) The search was for the result which reflected what the parties must, in the light of their conduct, be taken to have intended, and it did not enable the court to abandon that search in favour of the result which the court itself considered fair: para 61. (8) The matters to be taken into account are discussed in detail at paras 33 34 and 68 70, and it is not necessary to rehearse them here. The crucial parts of Chadwick LJs summary of the principles in his magisterial judgment in Oxley v Hiscock [2005] Fam 211, paras 68 69 take their main inspiration from the speech of Lord Diplock in Gissing v Gissing [1971] AC 886 and the judgment of Nourse LJ in Anderson v Stokes [1991] 1 FLR 391, 400 401. For present purposes it is only necessary to note that his discussion is dealing with the case where a home is purchased in the sole name of one party in a co habiting couple, each of them has made some financial contribution to the purchase, and there is no declaration of trust as to the beneficial ownership. After a treatment of the way in which a common intention that each will have a beneficial interest can be inferred from discussions between the parties or, in the absence of discussion, from the fact that each has made contributions to the purchase price, Chadwick LJ moved at para 69 to a second question, namely what is the extent of the parties respective beneficial interests in the property?. It was in that context that he said: [I]n many such cases, the answer will be provided by evidence of what they said and did at the time of the acquisition. But, in a case where there is no evidence of any discussion between them as to the amount of the share which each was to haveand even in a case where the evidence is that there was no discussion on that pointthe question still requires an answer. It must now be accepted that the answer is that each is entitled to that share which the court considers fair having regard to the whole course of dealing between them in relation to the property. And, in that context, the whole course of dealing between them in relation to the property includes the arrangements which they make from time to time in order to meet the outgoings (for example, mortgage contributions, council tax and utilities, repairs, insurance and housekeeping) which have to be met if they are to live in the property as their home. It was in the light of the whole of Chadwick LJs reasoning that in Stack v Dowden Baroness Hale referred to the Law Commission Discussion Paper on Sharing Homes, para 4.27, and went on to say at para 61: First, it emphasises that the search is still for the result which reflects what the parties must, in the light of their conduct, be taken to have intended. Second, therefore, it does not enable the court to abandon that search in favour of the result which the court itself considers fair. In its context that was plainly a reference to the first stage of the enquiry, namely whether there was a common intention that the property be beneficially owned other than in line with the legal title. I agree, therefore, that authority justifies the conceptual approach of Lord Walker and Lady Hale that, in joint names cases, the common intention to displace the presumption of equality can, in the absence of express agreement, be inferred (rather than imputed: see para 31 of the joint judgment) from their conduct, and where, in such a case, it is not possible to ascertain or infer what share was intended, each will be entitled to a fair share in the light of the whole course of dealing between them in relation to the property. That said, it is my view that in the present context the difference between inference and imputation will hardly ever matter (as Lord Walker and Lady Hale recognise at para 34), and that what is one persons inference will be another persons imputation. A similar point has arisen in many other contexts, for example, the difference between implied terms which depend on the parties actual intention, terms based on a rule of law, and implied terms based on an intention imputed to the parties from their actual circumstances: Luxor (Eastbourne) Ltd v Cooper [1941] AC 108, 137, per Lord Wright. Or the point under the law prior to the Contracts (Applicable Law) Act 1990 as to whether (in the absence of an express choice) the proper law of the contract depended on an intention to be inferred from the circumstances or on the law which had the closest connection with the contract. Nor will it matter in practice that at the first stage, of ascertaining the common intention as to the beneficial ownership, the search is not, at least in theory, for what is fair. It would be difficult (and, perhaps, absurd) to imagine a scenario involving circumstances from which, in the absence of express agreement, the court will infer a shared or common intention which is unfair. The courts are courts of law, but they are also courts of justice. LORD KERR I agree that this appeal should be allowed. There are differences of some significance in the reasoning that underlies the joint judgment of Lord Walker and Lady Hale and that contained in Lord Wilsons judgment. I agree with Lord Collins that these are both terminological and conceptual. I am less inclined to agree, however, that the divergence in reasoning is unlikely to make a difference in practice. While it may well be that the outcome in many cases will be the same, whether one infers an intention or imputes it, that does not mean that the process by which the result is arrived at is more or less the same. Indeed, it seems to me that a markedly and obviously different mode of analysis will generally be required. Before elaborating briefly on that proposition, let me turn very shortly to the areas in which, as I see it, there is consensus among the other members of the court. The following appear to be the areas of agreement: (i) In joint names cases, the starting point is that equity follows the law. One begins the search for the proper allocation of shares in the property with the presumption that the parties are joint tenants and are thus entitled to equal shares; (ii) That presumption can be displaced by showing (a) that the parties had a different common intention at the time when they acquired the home or (b) that they later formed the common intention that their respective shares would change; (iii) The common intention, if it can be inferred, is to be deduced objectively from the parties conduct; (iv) Where the intention as to the division of the property cannot be inferred, each is entitled to that share which the court considers fair. In considering the question of what is fair the court should have regard to the whole course of dealing between the parties The areas of disagreement appear to be these: (a) is there sufficient evidence in the present case from which the parties intentions can be inferred? (b) is the difference between inferring and imputing an intention likely to be great as a matter of general practice? How far should the court go in seeking to infer actual intention as to shares? At para 33 above Lord Walker and Lady Hale have quoted the important judgment of Chadwick LJ in Oxley v Hiscock [2005] Fam 211 and at para 52(4) have said that, on the authority of what was said in para 69 of Oxley, where it is not possible to ascertain what the actual intention of the parties was as to the shares in which they would own the property, each is entitled to the share which the court considers fair having regard to the whole course of dealing between them in relation to the property. This, I believe, casts the test somewhat differently from the way that it was formulated by Chadwick LJ. At para 69 of Oxley he said this: in a case where there is no evidence of any discussion between them as to the amount of the share which each was to haveand even in a case where the evidence is that there was no discussion on that pointthe question still requires an answer. It must now be accepted that (at least in this court and below) the answer is that each is entitled to that share which the court considers fair having regard to the whole course of dealing between them in relation to the property Chadwick LJ did not confine the circumstances in which an intention is to be imputed to those where it was impossible to infer an intention. Rather, he considered that it was proper and necessary to impute it when there had been no discussion about the amounts of the shares that each was to have or where there was no evidence of such a discussion. Lord Walker and Lady Hale have pointed out that Oxley v Hiscock received qualified approval in Stack v Dowden [2007] 2 AC 432. It seems clear, however, that there was no approval of the notion that an intention should be imputed where there had been no discussion between the parties for in para 69 of her opinion in Stack Lady Hale listed several factors that required to be considered in divining the parties true intentions few of which would involve any verbal exchange whatever. It is hardly controversial to suggest that the parties intention should be given effect to where it can be ascertained and that, although discussions between them will always be the most reliable basis on which to draw an inference as to that intention, these are not the only circumstances in which that exercise will be possible. There is a natural inclination to prefer inferring an intention to imputing one. If the parties intention can be inferred, the court is not imposing a solution. It is, instead, deciding what the parties must be taken to have intended and where that is possible it is obviously preferable to the courts enforcing a resolution. But the conscientious quest to discover the parties actual intention should cease when it becomes clear either that this is simply not deducible from the evidence or that no common intention exists. It would be unfortunate if the concept of inferring were to be strained so as to avoid the less immediately attractive option of imputation. In summary, therefore, I believe that the court should anxiously examine the circumstances in order, where possible, to ascertain the parties intention but it should not be reluctant to recognise, when it is appropriate to do so, that inference of an intention is not possible and that imputation of an intention is the only course to follow. In this context, it is important to understand what is meant by imputing an intention. There are reasons to question the appropriateness of the notion of imputation in this area but, if it is correct to use this as a concept, I strongly favour the way in which it was described by Lord Neuberger in Stack v Dowden [2007] 2 AC 432 para 126, where he said that an imputed intention was one which was attributed to the parties, even though no such actual intention could be deduced from their actions and statements, and even though they had no such intention. This exposition draws the necessary strong demarcation line between attributing an intention to the parties and inferring what their intention was in fact. The reason that I question the aptness of the notion of imputing an intention is that, in the final analysis, the exercise is wholly unrelated to ascertainment of the parties views. It involves the court deciding what is fair in light of the whole course of dealing with the property. That decision has nothing to do with what the parties intended, or what might be supposed would have been their intention had they addressed that question. In many ways, it would be preferable to have a stark choice between deciding whether it is possible to deduce what their intention was and, where it is not, deciding what is fair, without elliptical references to what their intention might have or should have been. But imputing intention has entered the lexicon of this area of law and it is probably impossible to discard it now. While the dichotomy between inferring and imputing an intention remains, however, it seems to me that it is necessary that there be a well marked dividing line between the two. As soon as it is clear that inferring an intention is not possible, the focus of the courts attention should be squarely on what is fair and, as I have said, that is an obviously different examination than is involved in deciding what the parties actually intended. Is there sufficient evidence in the present case from which the parties intentions can be inferred? Lord Walker and Lady Hale have concluded that the failure of the parties to sell their home in Badger Hall Avenue in late 1995, leading as it did to the cashing in of the life insurance policy, meant that Mr Kernott intended that his interest in the Badger Hall Avenue property should crystallise then. That may indeed have been his intention but, for my part, I would find it difficult to infer that it actually was what he then intended. As the deputy High Court judge, Nicholas Strauss QC put it in para 48 of his judgment, the bare facts of his departure from the family home and acquisition of another property are a slender foundation on which to conclude that he had entirely abandoned whatever stake he had in the previously shared property. On the other hand, I would have no difficulty in concluding, as did Mr Strauss and as would Lord Wilson, that it was eminently fair that the property should be divided between the parties in the shares decreed by Judge Dedman. Like Lord Wilson, therefore, I would prefer to allow this appeal on the basis that it is impossible to infer that the parties intended that their shares in the property be apportioned as the judge considered they should be but that such an intention should be imputed to them. LORD WILSON In the light of the continued failure of Parliament to confer upon the courts limited redistributive powers in relation to the property of each party upon the breakdown of a non marital relationship, I warmly applaud the development of the law of equity, spear headed by Lady Hale and Lord Walker in their speeches in Stack v Dowden [2007] 2 AC 432, and reiterated in their judgment in the present appeal, that the common intention which impresses a constructive trust upon the legal ownership of the family home can be imputed to the parties to the relationship. In his speech of dissent (other than in relation to the result) in Stack v Dowden Lord Neuberger observed, at para 125, that the distinction between inference and imputation was important. He proceeded as follows: 126 An inferred intention is one which is objectively deduced to be the subjective actual intention of the parties, in the light of their actions and statements. An imputed intention is one which is attributed to the parties, even though no such actual intention can be deduced from their actions and statements, and even though they had no such intention. Imputation involves concluding what the parties would have intended, whereas inference involves concluding what they did intend. Almost 40 years earlier, in Pettitt v Pettitt [1970] AC 777, Lord Diplock sought to develop the law in a way similar to that achieved in Stack v Dowden. The action was between spouses and, analogously, was brought at a time when the divorce court lacked power to make a property adjustment order in relation to the matrimonial home. Lord Diplock said, at p 823F G: Unless it is possible to infer from the conduct of the spouses at the time of their concerted action in relation to acquisition or improvement of the family asset that they did form an actual common intention as to the legal consequences of their acts upon the proprietary rights in the asset the court must impute to them a constructive common intention which is that which in the courts opinion would have been formed by reasonable spouses. In Gissing v Gissing [1971] AC 886, 904E F, however, Lord Diplock accepted that in Pettitt he had been in the minority in suggesting that the common intention could be imputed. So he proceeded to analyse the case in terms of whether the necessary intention could be inferred; but he added ingeniously at p 909 C E that it might be possible to infer a common intention on the part of the spouses that their interests in the property should be in such proportions as might ultimately be seen to be fair! It is worthy of note, that in Pettitt Lord Reid had, at p 795D G, also been cautiously amenable to the idea of imputing the necessary intention but had, at p 797A B, expressed a firm preference for Parliamentary intervention; and that in Gissing, in the passage quoted by Lady Hale and Lord Walker at para 29 above, Lord Reid saw fit to reiterate those views notwithstanding that the argument in favour of a power to impute had for the time being already been lost. In Oxley v Hiscock [2005] Fam 211, paras 68 and 69 Chadwick LJ, pointed out that assertions that the family home was held under a constructive trust raised two questions. The home had been held in Mr Hiscocks sole name so, for Chadwick LJ, the first question was whether Mrs Oxley could establish that they had nevertheless had a common intention that she should have some beneficial share in it. In the present case, however, the home is held in the joint names of the parties so, for us, the first question is whether Ms Jones can establish that they nevertheless had (albeit not necessarily at the outset) a common intention that the beneficial shares of herself and Mr Kernott should be in some proportions other than joint and equal. The second question, which arises in the event only of an affirmative answer to the first, is to determine the proportions in which the beneficial shares are held. In relation to the second question Chadwick LJ concluded, in his summary at para 69, that, where there was no evidence of any discussion between the parties as to the proportions in which their beneficial shares in the family home were to be held, each was entitled to that share which the court considers fair having regard to the whole course of dealing between them in relation to the property; and he had made clear, at para 66, that such an entitlement arose because what the court is doing, in cases of this nature, is to supply or impute a common intention as to the parties respective shares (in circumstances in which there was, in fact, no common intention) on the basis of that whichis shown to be fair. Emboldened by developments in the case law since the decision in Gissing, and apparently in particular by the decision of the Court of Appeal in Drake v Whipp [1996] FLR 826, Chadwick LJ thus saw fit to reassert the power to impute. In Pettitt Lord Diplock had referred to reasonable spouses rather than to fairness; but reasonable spouses will intend only what is fair. The analysis by Chadwick LJ of the proper approach to the second question was correct. In paras 31 and 51(4) above Lord Walker and Lady Hale reiterate that, although its preference is always to collect from the evidence an expressed or inferred intention, common to the parties, about the proportions in which their shares are to be held, equity will, if collection of it proves impossible, impute to them the requisite intention. Before us is a case in which Judge Dedman, the trial judge, found and, was entitled on the evidence to find that the common intention required by the first question could be inferred. Thus the case does not require us to consider whether modern equity allows the intention required by the first question also to be imputed if it is not otherwise identifiable. That question will merit careful thought. In para 61 of her ground breaking speech in Stack v Dowden Lady Hale quoted, with emphasis, the words of Chadwick LJ in para 69 of Oxley v Hiscock, which I have quoted in para 83 above. Then she quoted a passage from a Discussion Paper published by the Law Commission in July 2002 and entitled Sharing Homes about the proper approach to identifying the proportions which were intended . Finally she added four sentences to each of which, in quoting them as follows, I take the liberty of attributing a number: [1.] That may be the preferable way of expressing what is essentially the same thought, for two reasons. [2.] First, it emphasises that the search is still for the result which reflects what the parties must, in the light of their conduct, be taken to have intended. [3.] Second, therefore, it does not enable the court to abandon that search in favour of the result which the court itself considers fair. [4.] For the court to impose its own view of what is fair upon the situation in which the parties find themselves would be to return to the days before Pettitt v Pettitt without even the fig leaf of section 17 of the 1882 Act. I leave on one side Lady Hales first sentence although, whereas Chadwick LJ was identifying the criterion for imputing the common intention, the context of the passage in the Discussion Paper suggests that the Law Commission was postulating a criterion for inferring it. On any view Lady Hales second sentence is helpful; and, by her reference to what the parties must, in the light of their conduct, be taken to have intended (as opposed to what they did intend), Lady Hale made clear that, by then, she was addressing the power to resort to imputation. Lady Hales fourth sentence has been neatly explained by Mr Nicholas Strauss QC, deputy judge of the Chancery Division, who determined the first appeal in these proceedings, at para 30 as being that, in the event that the evidence were to suggest that, whether by expression or by inference, the parties intended that the beneficial interests in the home should be held in certain proportions, equity would not impose different proportions upon them; and, at para 47 above, Lord Walker and Lady Hale endorse Mr Strausss explanation. The problem has lain in Lady Hales third sentence. Where equity is driven to impute the common intention, how can it do so other than by search for the result which the court itself considers fair? The sentence was not obiter dictum so rightly, under our system, judges below the level of this court have been unable to ignore it. Even in these proceedings judges in the courts below have wrestled with it. Mr Strauss observed, at para 31, that it was difficult to see how at that final stage of the inquiry the process could work without the courts supply of what it considered to be fair. In his judgment on the second appeal Lord Justice Rimer went so far as to suggest, at para 77, that Lady Hales third sentence must have meant that, contrary to appearances, she had not intended to recognise a power to impute a common intention at all. I respectfully disagree with Lady Hales third sentence. Lord Walker and Lady Hale observe, at para 34 above, that in practice the difference between inferring and imputing a common intention to the parties may not be great. I consider that, as a generalisation, their observation goes too far at least if the court is to take (as in my view it should) an ordinarily rigorous approach to the task of inference. Indeed in the present case they conclude, at paras 48 and 49, that, in relation to Chadwick LJs second question the proper inference from the evidence, which, if he did not draw, the trial judge should have drawn, was that the parties came to intend that the proportions of the beneficial interests in the home should be held on a basis which in effect equates to 90% to Ms Jones and to 10% to Mr Kernott (being the proportions in favour of which the judge ruled). As it happens, reflective perhaps of the more rigorous approach to the task of inference which I prefer, I regard it, as did Mr Strauss at [48] and [49] of his judgment, as more realistic, in the light of the evidence before the judge, to conclude that inference is impossible but to proceed to impute to the parties the intention that it should be held on a basis which equates to those proportions. At all events I readily concur in the result which Lord Walker and Lady Hale propose.

This case concerns the correct approach to calculating beneficial interests in property where the legal title to the property is held in joint names by an unmarried couple but there is no express statement of how it is to be shared. Ms Jones and Mr Kernott met in 1981. They had two children together. In 1985 they purchased a house in Thundersley, Essex in their joint names. The price paid was 30,000 with a 6,000 deposit paid exclusively by the proceeds of sale from Ms Joness previous home. No declaration was made as to how the beneficial interest in the property was to be held. The mortgage and upkeep on the house was shared between them. In 1986 they jointly took out a loan of 2000 to build an extension. Mr Kernott did some of the work himself. The relationship deteriorated and in 1993 Mr Kernott moved out. From that point onwards Ms Jones lived in the Thundersley property with both children. In 1996 Mr Kernott bought his own house in Benfleet, Essex. Over the years, the value of the Thundersley property increased and in 2006 Mr Kernott indicated that he wished to claim a beneficial share in it. In response, Ms Jones, in 2007, applied to the county court for a declaration under section 14 of the Trusts of Land and Appointment of Trustees Act 1996 that she owned the entire beneficial interest in the property. By 2008 the property was valued at 245,000. The county court judge noted that the house was first purchased to set up a family home. It was bought in joint names and a presumption arose that they intended to jointly share the beneficial ownership of it as well. Up until 1993 there was no evidence to rebut that presumption. Ms Jones claimed however that in the 14 and a half years following there was evidence that their common intention had changed. Mr Kernott had ceased to make contributions towards the running of the house and had made only very limited contributions towards the support of their children. Furthermore it was mostly during that latter period that the value of the property had increased. The judge held that their common intention had indeed changed. In reliance upon the decision of the House of Lords in Stack v Dowden [2007] UKHL 17, [2007] 2 AC 432, he held that once the initial presumption of joint beneficial ownership is displaced and there is no further clear evidence as to the division of shares in the property it falls upon the court to infer or impute an intention to the parties as to the division of the property that they, as reasonable and fair people, would have intended. He decided that Mr Kernott was entitled to only a 10% share. Mr Kernott appealed to the High Court arguing that it was wrong for the court to infer or impute a change of common intention and further wrong for the judge, in effect, to substitute a division that he considered to be fair as between the parties. Mr Nicholas Straus, QC sitting as a High Court judge dismissed his appeal. Mr Kernott appealed to the Court of Appeal which, by a majority (Jacob, LJ dissenting), allowed his appeal. The Supreme Court unanimously allows the appeal and restores the order of the county court. Lord Walker and Lady Hale give the lead judgment. Lord Collins agrees with Lord Walker and Lady Hale and adds some reflections of his own. Lord Kerr and Lord Wilson agree in the result but reach it by a different route. Lord Walker and Lady Hale: The principle recognised in Stack v Dowden is that where people purchase a family home in their joint names the presumption is that they intend to own the property jointly in equity also [15]. The starting point is different in cases where the property is bought in the name of one party only. The presumption of joint beneficial ownership arises because (i) purchasing property in joint names indicates an emotional and economic commitment to a joint enterprise and (ii) the practical difficulty of analysing respective contributions to the property over long periods of cohabitation [19 22]. The presumption may be rebutted by evidence that it was not, or ceased to be, the common intention of the parties to hold the property jointly. This may more readily be shown where the parties did not share their financial resources [25]. In the absence of clear evidence of intention, a question arises as to when the court can infer such intention and when the court can, instead, impute an intention. An inference is drawn where an actual intention is objectively deduced from the dealings of the parties; an imputation is one attributed to the parties by the court [26 27]. The search is primarily to ascertain the parties actual intentions, expressed or inferred but if it is clear that the beneficial interests are shared but impossible to infer a common intention as to the proportions in which they are shared, the court will have to impute an intention to them which they may never have had [31]. The following principles apply: (i) the starting point where a family home is bought in joint names is that they own the property as joint tenants in law and equity; (ii) that presumption can be displaced by evidence that their common intention was, in fact, different, either when the property was purchased or later; (iii) common intention is to be objectively deduced (inferred) from the conduct and dealings between the parties; (iv) where it is clear that they had a different intention at the outset or had changed their original intention, but it is not possible to infer an actual intention as to their respective shares, then the court is entitled to impute an intention that each is entitled to the share which the court considers fair having regard to the whole course of dealing between them in relation to the property; and (v) each case will turn on its own facts; financial contributions are relevant but there are many other factors which may enable the court to decide what shares were either intended or fair [51]. On the facts of this case the county court judge held that the parties intentions as regards the Thundersley property had changed after their separation. It was a logical inference that they intended [Mr Kernotts] interest in Badger Hall Avenue should crystallise in 1995, when they took the house off the market, cashed in an insurance policy, so that Mr Kernott was able to buy a house in his own name [48]. The calculation of their shares on this basis produced a result so close to that produced by the judge that it would be wrong for an appellate court to interfere. Lord Collins agrees with Lord Walker and Lady Hale, holding that the differences in reasoning set out below are largely terminological and conceptual and are likely to make no difference in practice. [58]. Lord Kerr holds that the divergence in reasoning might, in practice, make a difference [67]. The question concerns how far the court should go in seeking to infer intention and when it is justified in imputing it. It is preferable to give effect to the parties intentions where possible but the courts should not be reluctant to recognise when it is not and to impute an intention accordingly. In agreement with Lord Wilson it is not possible to infer the intention in this case but the division that the judge made is a fair one as between the parties and should stand. Lord Wilson considers that on the facts of this case, it is impossible to infer the intentions of the parties and the court can only impute to the parties an intention that the house be held in fair proportions along the lines of those set out by the county court judge [89].

Between 2003 and 2008, John Worboys, the driver of a black cab in London, committed a legion of sexual offences on women. The first respondent in these proceedings (who has been referred to throughout as DSD) was among his first victims. She was attacked in 2003. The second respondent (NBV) became Worboys victim in July 2007. Many others were attacked by him between 2003 and 2007 and, sadly, yet more after NBV was assaulted. DSD and NBV brought proceedings against the Commissioner of the Metropolitan Police Service (MPS) for the alleged failure of the police to conduct effective investigations into Worboys crimes. The claims were brought under sections 7 and 8 of the Human Rights Act 1998 (HRA). The combined effect of these provisions (so far as this case is concerned) is to allow a person who claims that a public authority has acted in a way which is incompatible with their rights under the European Convention for the Protection of Human Rights and Fundamental Freedoms (ECHR) to bring proceedings against the public authority and to be awarded damages. The kernel of DSD and NBVs claims is that the police failures in the investigation of the crimes committed by Worboys constituted a violation of their rights under article 3 of ECHR. This provides that [n]o one shall be subjected to torture or to inhuman or degrading treatment or punishment. They succeeded in that claim before Green J, who delivered judgment on the liability issues on 28 February 2014, (Neutral Citation [2014] EWHC 436 (QB)). In a second judgment handed down on 23 July 2014, (Neutral Citation [2014] EWHC 2493 (QB)), Green J awarded compensation to DSD and NBV against MPS. An appeal by MPS was dismissed by the Court of Appeal (Lord Dyson MR, Laws and Kitchin LJJ) on 30 June 2015, (Neutral Citation [2015] EWCA Civ 646): [2016] QB 161). MPS has appealed to this court. The Secretary of State for the Home Department (SSHD) intervened, making written and oral submissions. A number of other parties intervened. Liberty intervened, as did jointly the organisations Rape Crisis, England and Wales, the End Violence Against Women Coalition, Southall Black Sisters and the Nia Project. They made helpful written submissions and valuable oral submissions. In this appeal MPS accepts that both respondents were subjected to serious sexual assault by Worboys. It further accepts that there were significant errors by the police in each of the investigations into the crimes committed against them. MPS has said that, whatever the outcome of this appeal, MPS will not seek to recoup any of the compensation and consequential costs which have been paid. DSD and NBV have recovered compensation from Worboys and each of them has received an award from the Criminal Injuries Compensation Authority (CICA). The principal issue It is accepted that HRA imposes a general duty to investigate ill treatment amounting to a violation of article 3 of ECHR. The main area of dispute is the nature of that duty. That issue has a number of themes. They can be summarised as follows: Is it a public duty or one owed to individual victims of the breach of Is it a systems or an operational duty? (i) article 3? (ii) (iii) Does the duty to investigate breaches of article 3 in relation to a particular individual arise only when it is alleged that state authorities are complicit in the breach? (iv) If the duty comprehends an obligation to investigate breaches of article 3, even if there is no involvement of state agents, is there a right to claim compensation against the state? (v) Should the fact that a victim can obtain redress against an offender or make a claim under the CICA scheme affect consideration of the availability of a right to compensation under HRA? (vi) In this context, is it relevant that UK courts have, so far, refused to recognise a common law duty of care on the police in relation to the manner in which officers prevent and investigate crime? (vii) Finally, it is suggested that it would require the clearest statement in consistent decisions of the European Court of Human Rights (ECtHR) Grand Chamber to the effect that a positive duty was owed by the state to individuals who suffered treatment contrary to article 3 at the hands of another individual before holding that the investigative duty of the state was animated. If ECtHR jurisprudence is found to be less than clear, the appropriate course was to allow the government to deploy its arguments in Strasbourg R (Ullah) v Special Adjudicator [2004] 2 AC 323. Many of these themes overlap and blend into one another and it is impossible to consider them other than compendiously, not least because that is how they are treated in many of the relevant authorities, both domestic and European. It is necessary at the outset, however, to recognise that examination of the nature of the duty is a multi faceted exercise. The nature of the duty owed under HRA the arguments The appellant argues that the duty of the police to investigate, detect and prosecute crime is of a communal nature; one which is owed to the public at large, not to individual citizens. It is submitted that the general rule is that no private law duty is owed to victims of crime. This is because it has been deemed that it would not be fair, just and reasonable to impose such a duty. The consistent theme of judicial decisions on the liability of the police at common law has been, the appellant suggests, that there are overwhelming public policy reasons that no such liability should be recognised. The Court of Appeal in the present case had emphasised the importance of consistency between the common law and HRA. It would be anomalous, the appellant contends, for there to be different bases of duty owed by the police at common law and under HRA. Many of the public policy considerations which militated against the recognition of such a duty at common law apply with equal force to the duty to investigate that arises under article 3 of HRA. It is accepted that there is a duty to investigate allegations of ill treatment which amount to a violation of article 3 but it is suggested that this duty can be enforced through the disciplinary regime, under the independent oversight of the Independent Police Complaints Commission. The existence of this regime, the appellant says, reflects the public nature of that duty. Insofar as article 3 of ECHR imposes a positive obligation to respond to ill treatment by a member of the public who is not a state agent, that obligation, the appellant submits, is to put in place the legal structures required to ensure that a proper inquiry can be conducted. It does not extend to the operational content of an individual inquiry. The investigative obligation in relation to individual cases arises only where state agents are complicit in the alleged ill treatment. The SSHD submits that the origin of the investigative duty is Assenov v Bulgaria (1998) 28 EHRR 652 where ECtHR stated that an effective official investigation was required where there was an arguable claim of serious ill treatment by the police or other such agents of the state unlawfully and in breach of article 3 para 102. It is therefore argued that the principled foundation for the implication of an investigative duty is to underpin the effectiveness of the express prohibition set out in article 3. That prohibition could only apply, the SSHD argues, to agents of the state, not to private individuals. The respondents riposte to these arguments is that the state has a duty under article 3 to conduct an effective investigation into crimes which involve serious violence to an individual. This is a positive, protective obligation to take measures designed to ensure that individuals within its jurisdiction are not subject to the treatment which article 3 prohibits. The duty is not an abstract one owed to the public at large but can be invoked by an individual who demonstrates that the states failure to fulfil its obligation has led to her or his suffering treatment prohibited by the article. The respondents submit that the appellants argument about the need for consistency between the common law position and the availability of a claim under HRA is, properly analysed, one of justiciability. They point out that the appellant accepts that there is a domestic law duty to investigate effectively serious criminal offences. It is accepted that there were several deficiencies in the investigation of these offences. The decision by Parliament to enact HRA effectively disposes of the issue of justiciability. The incorporation of ECHR into domestic law made available to an individual a remedy for a breach by the state of the article 3 protective obligation. This was entirely in line with the jurisprudence of ECtHR. In any event, the respondents argue, the public policy considerations which have been held to underlie the exemption from liability at common law do not translate to the position under HRA. As Lord Brown of Eaton under Heywood held in Van Colle v Chief Constable of Herts Police; Smith v Chief Constable of Sussex Police [2009] AC 225, para 138, Convention claims have quite different aims from civil actions. On the appellants argument that the duty of the state under article 3 is confined to putting in place legal structures to prohibit such ill treatment as is forbidden by the article, the respondents claim that this is unsustainable, again in light of the decision in Van Colle. That decision was premised on the existence of an operational duty to protect against a real and immediate risk of serious violence. The relevant case law on the nature of the duty In MC v Bulgaria (2005) 40 EHRR 20 the applicant complained that she had been raped by two men when she was 14 years old. The men in question were interviewed but it was concluded that they had not used threats or violence and there was no evidence of resistance on the part of the complainant. The district prosecutor therefore issued a decree terminating the proceedings. The complainants application to ECtHR rested on the twin assertions that Bulgarian law did not provide effective protection against rape and sexual abuse as only cases where the victim had actively resisted were prosecuted, and that the authorities had not properly investigated her allegations. It is important to recognise that the court found that the failure properly to investigate her allegations constituted violation of her rights under articles 3 and 8 of ECHR. As I shall discuss below, the appellant has concentrated on the first of the assertions made by the applicant in MC. The second aspect of her complaint that there was not a proper investigation of her allegations is a distinct and unconnected ground on which the court decided that article 3 had been breached. In para 151 of MC ECtHR observed that, in a number of cases, article 3 of ECHR gives rise to a positive obligation to conduct an official investigation. The court expressly said that such positive obligations cannot be considered in principle to be limited solely to cases of ill treatment by state agents. It concluded that the authorities had failed to explore the surrounding circumstances para 177. On that account, there was a violation of the states positive obligation under article 3 para 187. This was a duty owed to the applicant personally and she was awarded compensation para 194. A significant passage from the courts judgment is to be found in para 153: the court considers that states have a positive obligation inherent in articles 3 and 8 of the Convention to enact criminal law provisions, effectively punishing rape and to apply them in practice through effective investigation and prosecution. (Emphasis supplied) The binary nature of the positive obligation arising under these articles was noted by Green J in para 163 of his judgment: effective systems and operational duties: There were two relevant aspects. First, whether the state of Bulgarian law on rape was so flawed as to amount to a breach of the states positive obligation under articles 3 and 8 (the systemic failings). Secondly, to consider whether the alleged shortcomings in the investigation were, also, so flawed as also to amount to a breach of the states obligations under the same articles (the operational failings). Under the heading general approach the court explained that the duty to create a corpus of law and the duty to apply them in practice through investigation and punishment were separate Lord Hughes has suggested (in para 117 of his judgment) that the statement in para 153 of ECtHRs judgment, that article 3 carries an obligation in some circumstances to investigate third party offending leaves only uncertainties about its source and thus its extent. What is not in the least uncertain, however, is that, if the relevant circumstances are present, there is a duty on the part of state authorities to investigate where non state agents are responsible for the infliction of the harm. That cannot be characterised as other than an operational duty. The debate must focus, therefore, not on the existence of such a duty but on the circumstances in which it is animated. It is suggested (para 119 of Lord Hughes judgment) that Calvelli and Ciglio v Italy (2002) (Application No 32967/96) does not provide authority for the second proposition in para 151 of MC, namely, that positive obligations to investigate cannot be considered in principle to be limited solely to cases of ill treatment by state agents. It should be observed, however, that part of the applicants complaint in that case related to the unexplained delay in the proper investigation of their representations that the doctor who was ultimately charged with manslaughter was responsible for the death of their child see para 43 of the judgment. In other words, an operational failure. At para 54, the court said this: In the instant case, the court notes that the criminal proceedings instituted against the doctor concerned became time barred because of procedural shortcomings that led to delays, particularly during the police inquiry and judicial investigation. The rejection of the applicants case in Calvelli and Ciglio was not because ECtHR considered that the duty to investigate was confined to an obligation to provide a sufficient investigative structure, as Lord Hughes puts it in the final sentence of para 119 of his judgment. To the contrary, the Strasbourg court held that, because of the applicants entitlement to issue proceedings in the civil courts and the fact that they entered into a settlement agreement with the doctors insurers, they had waived their rights to pursue criminal proceedings (para 54). Nothing in the courts judgment supports the suggestion that it was founded on a view that the extent of the ancillary duty under article 2 was to provide a sufficient investigative structure rather than a duty not to be negligent in the way in which the inquiry was conducted. The court made that unequivocally clear in para 56 of its judgment where it said that because the applicants had denied themselves the best means of elucidating the extent of the doctors responsibility for the death of their child, it was unnecessary to examine whether the time bar on bringing proceedings prevented the doctor from being prosecuted. The coming into force of the time bar had, of course, been contributed to by the operational failure of the state authorities to conduct investigations more expeditiously. Lord Hughes has described the statement in para 152 of MC as tentative see para 121 of his judgment. It seems to me clear, however, that the court was there recording that, hitherto, ECtHR had not excluded the prospect that it would be held that actions by non state agents would give rise to positive obligations on the part of the state under articles 2 and 3 of ECHR. MC provided the occasion to proclaim that such a positive obligation existed. In order to be an effective deterrent, laws which prohibit conduct constituting a breach of article 3 must be rigorously enforced and complaints of such conduct must be properly investigated. There is a clear line of Strasbourg authority for the duty to properly investigate reported offences and allegations of ill treatment, which is summarised with approval at para 172 of OKeeffe v Ireland (35810/09): The Court recalls the principles outlined in CAS v Romania (cited above, paras 68 70) to the effect that article 3 requires the authorities to conduct an effective official investigation into alleged ill treatment inflicted by private individuals which investigation should, in principle, be capable of leading to the establishment of the facts of the case and to the identification and punishment of those responsible. That investigation should be conducted independently, promptly and with reasonable expedition. The victim should be able to participate effectively. It has been suggested (Lord Hughes at para 123) that ECtHR in MC made it clear that it regarded the deficiencies in the investigation as the consequence of, and part and parcel with, the flawed approach of the Bulgarian system generally to the issue of lack of consent. At para 179 the court said this: It is highly significant that the reason for that failure [to conduct a proper investigation] was, apparently, the investigators and the prosecutors opinion that since what was alleged to have occurred was a date rape, in the absence of direct proof of rape, such as traces of violence and resistance or calls for help, they could not infer proof of lack of consent and, therefore, of rape from an assessment of all the surrounding circumstances. That approach transpires clearly from the position of the investigator and, in particular, from the Regional Prosecutors decision of May 13, 1997 and the Chief Public Prosecutors decision of June 24, 1997. In my view, the court was not suggesting in this passage that the deficiencies in the investigation were somehow subsumed into the shortcomings of the Bulgarian law. Nor was it suggested that deficiencies in investigation had to be accompanied in all circumstances by systemic defects. In MC, the lack of assiduity in the investigation could be explained because of the inadequacy of that law but it does not follow that deficiencies in investigation, if they are sufficiently egregious, cannot of themselves constitute a violation of article 3. Cases decided after MC make that unambiguously clear. I will discuss those cases presently. Concentrating for the moment on MC, however, Lord Hughes suggests that his thesis, that deficiencies in investigation were part and parcel of the flawed approach of the Bulgarian system generally, was supported by the words of para 168 which he quotes at para 122 of his judgment. In para 168, ECtHR said that it was not concerned with allegations of errors or isolated omissions in the investigation. The court accepted that it could not replace the domestic authorities assessment of the facts of the case nor could it decide on the alleged perpetrators criminal responsibility. These statements must be seen in context. The Strasbourg court is a supra national body. There are obvious limitations on its opportunity to examine deficiencies in investigation. National courts are not so constrained. This case provides the perfect example. Green J heard detailed evidence of the errors that had been made by police in the investigation of Worboys crimes. He was in a position to form a judgment as to the impact of those errors on the respondents cases. And it was open to him to find, as he correctly did, that the errors were so serious that a violation of article 3 was established. I cannot accept a suggestion that, to give rise to a breach of article 3, deficiencies in investigation had to be part and parcel of a flawed approach of the system generally. I accept, however, that simple errors or isolated omissions will not give rise to a violation of article 3 at the supra national and the national levels. That is why, as I point out below, only conspicuous or substantial errors in investigation would qualify. The Strasbourg court disavowed any close examination of the errors in investigation because it was a supra national court. It left that to national courts. But, my reference to ECtHRs disinclination to conduct such a close examination is not intended to suggest that minor errors in investigation will give rise to a breach of the Convention right on the national plane. To the contrary, as I make clear in paras 53 and 72 below, errors in investigation, to give rise to a breach of article 3, must be egregious and significant. As I hope is now clear, not every error in investigation will give rise to a breach of article 3. But the difficulty in defining those errors which qualify should not prompt capitulation to the notion that there has to be some form of structural deficiency before egregious errors in the investigation of the offences, such as occurred in this case, can amount to a breach of article 3. That proposition is strongly supported by consideration of cases decided after MC and I turn now to those cases. The case of Szula v United Kingdom (2007) 44 EHRR SE19 involved a complaint of sexual and physical abuse brought by a minor during the time that he was in a residential approved school. The applicants claim was deemed inadmissible but this was because it was concluded that there was no indication that the authorities showed any lack of diligence or expedition in the investigation of his allegations. Implicit in that finding was that, had there been such an indication, the applicants case would have been admissible. It has been suggested that this case is an example of the court having looked for evidence of a structural defect or culpable disregard or an absence of good faith in the administration of the domestic system (para 26). I do not agree. In that case the court expressly recognised that the criminal law prohibited the physical and sexual abuse alleged by the applicant. True it is that the court, after reviewing steps taken by police and prosecuting authorities, also said (in para 1 of its judgment): While that sequence of events was somewhat unfortunate, the court does not consider that it discloses any culpable disregard, discernible bad faith or lack of will on the part of the police or prosecuting authorities as regards properly holding perpetrators of serious criminal offences accountable pursuant to domestic law. It is unquestionably clear that these observations were made in relation to the discharge by the police and the prosecuting authorities of their operational duties. There is no hint in the judgment that this was in any way related to a structural defect. As I have said, the court had examined the criminal law system and not found it wanting. I cannot accept, therefore, that the quoted passage had anything whatever to do with a systemic or structural failure. It was plainly pertinent and only pertinent to a review of the operational actions and decisions of the police and prosecuting authorities. The fact that the court considered it necessary to conduct such a review, when no systemic defect was present, is important, however. It can only have been necessary if the court considered that a purely operational failing, entirely unrelated to any structural defect, could have given rise to a violation of article 3. In Secic v Croatia (2009) 49 EHRR 18 (31 May 2007), ECtHR considered a complaint of ineffective criminal investigation of a racially motivated physical assault. The court again repeated the statement from MC that article 3 may give rise to a positive obligation to conduct an official investigation para 53. The court stated that the obligation on the state to conduct an official investigation is one of means, not result, referring to the article 2 cases of Menson v United Kingdom (2003) 37 EHRR CD 220 and Yasa v Turkey (1999) 28 EHRR 408. At para 54, however, it observed that the authorities had to take all reasonable steps available to them to secure the evidence concerning the incident and that the authorities must act with promptness and reasonable expedition. Having considered the investigations conducted by the police, ECtHR concluded, at para 59, that the failure of the state authorities to further the case or obtain any tangible evidence with a view to identifying and arresting the attackers over a prolonged period of time indicates that the investigation did not meet the requirements of article 3 of the Convention. It therefore found that article 3 had been breached and that the applicant was entitled to be compensated. Lord Hughes has cited this case as an example where there were plain overtones of structural State deficiencies in relation to the investigation of allegations of racially motivated or discriminatory violence (para 126). The applicants submissions are set out in paras 38 42 of the courts judgment. None of these submissions touched on any structural or systemic deficiency in Croatian law or procedure. To the contrary, the applicant complained that Croatian law provided for many processes and police methods which the police had failed to follow. He also complained that they had failed to apply to a Croatian court for an order compelling a journalist to reveal the name of an interviewee who might have been able to shed light on the attack on him. Such an application could have been made under section 30 of the Media Act. No complaint was made about any inadequacy in that provision. All of the applicants complaints were in relation to the operational failings of the police. The Croatian governments submissions are set out in paras 43 48 of the Strasbourg courts judgment. Apart from claiming that the applicants ill treatment did not reach the threshold required for a breach of article 3 and that the positive obligation under that article arose only where the state had been made aware of acts which it was reasonable to expect them to prevent, all the governments submissions were focused on a defence of the operational decisions and actions of the police. The question of systemic deficiencies was simply not in play in this case. That is obvious also from the courts decision. At para 53 the court said that article 3 may give rise to a positive obligation to conduct an official investigation. This was not, in principle, limited to cases of ill treatment by state agents. And at para 54 the court said this: the court reiterates that the scope of the obligation by the state is one of means, not of result; the authorities must have taken all reasonable steps available to them to secure the evidence concerning the incident. A requirement of promptness and reasonable expedition of the investigation is implicit in this context. The complaint of lack of promptness related solely to police inaction. Nothing about any structural or systemic deficiency was instanced. And the remainder of the courts judgment focused entirely on the operational failings of the police. For my part, therefore, I have not been able to find any overtones of structural state deficiencies in the report of this case. Beganovi v Croatia (Application No 46423/06) 25 June 2009 was a case in which the applicant had been assaulted by three individuals. Although ECtHR acknowledged (in para 69 of its judgment) that no direct responsibility can attach to a member state under ECHR for the acts of private individuals, it stated (in paras 70 and 71): 70. even in the absence of any direct responsibility for the acts of a private individual under article 3 of the Convention, State responsibility may nevertheless be engaged through the obligation imposed by article 1 of the Convention. In this connection the Court reiterates that the obligation on the High Contracting Parties under article 1 of the Convention to secure to everyone within their jurisdiction the rights and freedoms defined in the Convention, taken together with article 3, requires States to take measures designed to ensure that individuals within their jurisdiction are not subjected to torture or inhuman or degrading treatment or punishment, including such ill treatment administered by private individuals (see A v United Kingdom, cited above, para 22). 71. In order that a state may be held responsible it must be shown that the domestic legal system, and in particular the criminal law applicable in the circumstances of the case, fails to provide practical and effective protection of the rights guaranteed by article 3 (see X and Y cited above cited above, para 30, and A v United Kingdom, cited above, opinion of the Commission, para 48). (Emphasis supplied) The court made clear that, as well as examining the impugned regulations and practices, and in particular the domestic authorities compliance with the relevant procedural rules, it would also consider the manner in which the criminal mechanisms were implemented in the instant case para 74. At para 75, ECtHR set out the minimum standards applicable in respect of the duty to investigate. They included that the investigation be independent, impartial and subject to public scrutiny, and that the authorities act with diligence and promptness. It also reiterated that for an investigation to be considered effective, the authorities must take whatever reasonable steps they can to secure the evidence concerning the incident, including, inter alia, a detailed statement concerning the allegations from the alleged victim, eyewitness testimony, forensic evidence and, where appropriate, additional medical reports. The failings in fact identified in this case arose at the post investigative stage and ECtHR confirmed the principle that the requirement for effective criminal law provisions extends to the trial phase of proceedings para 77. The ECtHR decided that the state authorities did not fulfil their positive obligations under article 3. Violation of that article was found. Compensation was awarded to the applicant. The various elements of an effective investigation identified by the court should be noted. It must be independent. It requires to be prompt. Evidence must be secured. Failure to adhere to these standards renders the state liable to the individual affected by that failure. In the case of Vasilyev v Russia (Application No 32704/04) 17 December 2009 the applicant and his friend were seriously assaulted and robbed. Although police officers attended the scene, no investigation into the circumstances of the assault were conducted. The police officers claimed to have considered that the applicant and his friend were intoxicated, so they moved them from the position where they had been found and left them. A number of criminal investigations were subsequently instituted, largely on the initiative of the applicants mother. It was decided to suspend the proceedings because the perpetrators could not be identified. This decision was reversed and restored on a number of occasions. The two police officers who had attended the scene were prosecuted for failing to fulfil their legal duty to protect victims of offences. They were acquitted. The applicant did not lay blame on the state authorities for the attack; nor was it suggested that they knew or ought to have known that the applicant was at risk of physical violence at the hands of third parties. The court explicitly found, however, that this did not absolve the state from obligations under article 3. At para 99, it said that what the article required was that the authorities conduct an effective investigation into the alleged ill treatment even if such treatment has been inflicted by private individuals. It elaborated on this statement at para 100: For the investigation to be regarded as effective, it should in principle be capable of leading to the establishment of the facts of the case and to the identification and punishment of those responsible. This is not an obligation of result, but one of means. The authorities must have taken the reasonable steps available to them to secure the evidence concerning the incident, including, inter alia, eyewitness testimony, forensic evidence, and so on. Any deficiency in the investigation which undermines its ability to establish the cause of injuries or the identity of the persons responsible will risk falling foul of this standard, and a requirement of promptness and reasonable expedition is implicit in this context (see, among many authorities, Mikheyev v Russia, no 77617/01, para 107 et seq, 26 January 2006, and Assenov and Others v Bulgaria, judgment of 28 October 1998, Reports 1998 VIII, paras 102 et seq). It was held that there had been a violation of article 3 under its procedural limb in that the investigation into the assault on the applicant was ineffective. He was awarded compensation. A similar approach to that in the cases already discussed is found in later decisions of ECtHR such as Milanovic v Serbia (Application No 44614/07) 14 December 2010, CAS v Romania (2015) 61 EHRR 18 and BV v Croatia (Application No 38435/13) 21 January 2016. The statement of the applicable principles concerning the procedural obligations in CAS v Romania (which reflected the exposition of those in the cases considered in detail above) was expressly endorsed by the Grand Chamber in OKeefe v Ireland (2014) 59 EHRR 15. These propositions have been reiterated by the second section of ECtHR most recently in BV v Belgium (Application No 61030/08) 2 May 2017. At para 56 the court stated that the obligation to carry out an effective investigation cannot be limited to cases of ill treatment by agents of the state. A clear and constant line of authority? In R (Ullah) v Special Adjudicator [2004] 2 AC 323, Lord Bingham of Cornhill, at para 20, quoted with approval the statement of Lord Slynn of Hadley in R (Alconbury Developments Ltd) v Secretary of State for the Environment, Transport and the Regions [2003] 2 AC 295, para 26, where he said: Your Lordships have been referred to many decisions of the European Court of Human Rights on article 6 of the Convention. Although the Human Rights Act 1998 does not provide that a national court is bound by these decisions it is obliged to take account of them so far as they are relevant. In the absence of some special circumstances it seems to me that the court should follow any clear and constant jurisprudence of the European Court of Human Rights. The respondents argue that the authorities which I have reviewed above constitute clear and constant jurisprudence to the effect that the state has a duty under article 3 to conduct an effective investigation into crimes which involve serious violence to an individual. In order that the protective right under the article be practical and effective, the respondents also assert that failure to conduct such an investigation gives rise to a right to hold the state to account by, among other things, a claim for compensation on the part of a person who was a victim of the article 3 violation and the states failure to discharge its obligations under the article. The appellant counters this argument, claiming that the Strasbourg courts extensive case law (including decisions of the Grand Chamber) refers back to Assenov as the authoritative source of the obligation, derived from article 3, to investigate allegations of ill treatment by state agents. It is suggested that Assenov explicitly limits the investigative duty to cases where the ill treatment has been perpetrated by the police or other such agents of the state unlawfully and in breach of article 3 (para 102). This approach, it is claimed, has been followed by decisions of the Grand Chamber in such cases as Gfgen v Germany (2011) 52 EHRR 1 and El Masri v The Former Yugoslav Republic of Macedonia (2012) 57 EHRR 25. It is to be noted, of course, that Assenov was a case where the claim was based on allegations against state agents, namely, the Bulgarian police. When, therefore, the court expressed the view, which it did in para 102 of its judgment, that, where an individual raises an arguable claim that he has been seriously ill treated by the police or other such agents of the State unlawfully and in breach of article 3, that provision requires by implication that there should be an effective official investigation, it did not address the question whether such a duty arose where the perpetrators of the ill treatment were not state agents. It did not need to do so. The issue simply did not arise in that case. Likewise, in Gfgen the complaint was made concerning the applicants ill treatment by police. So also in El Masri the applicant claimed that he had suffered ill treatment at the hands of state agents and that they had been actively involved in his subsequent rendition by CIA agents. Statements in the judgments in both cases which echo that in Assenov quoted in the preceding paragraph do not sound on the question whether ill treatment by individuals other than state agents can give rise to the duty to investigate under article 3. Those decisions do not impinge upon, much less derogate from, the authority of the cases decided by ECtHR between 2005 and 2017 discussed in paras 16 to 28 above. I consider that those cases amount to clear and constant case law of the Strasbourg court. And I have concluded that they establish that the state is obliged under article 3 to conduct an effective investigation into crimes which involve serious violence to persons, whether that has been carried out by state agents or individual criminals. Further, in order that the protective right should be practical and effective, an individual who has suffered ill treatment contrary to article 3 has a right to claim compensation against the state where there has been a failure by state authorities to conduct a sufficient investigation into the crime. At para 127 of Lord Hughes judgment, he suggests that the proper test for the positive obligation to investigate reports of past violence under article 3 is whether the state has a proper structure of legal provision designed to punish it when it occurs and has administered [it] in good faith and with proper regard for the gravity of the behaviour under consideration. It is not clear whether this formulation excludes any investigation of operational failings on the part of state authorities such as the police. Conceivably, I suppose, a failure to administer the proper structure of criminal legal provisions might entail an examination of the way in which police conducted their inquiries into a particular case. But, importantly, the duty to administer is qualified in Lord Hughes exposition by the stipulation that the administration of the structure of legal provision, if it is to fall foul of the test, must be shown to have been conducted in bad faith or without proper regard for the gravity of the behaviour involved. This places an obvious limitation on the scope of any review of the operational actions and decisions of the police. There is no suggestion in this case, for instance, that the police acted in bad faith. It might possibly be said that there were instances of the police failing to have regard for the gravity of the crimes which the respondents complained of but I am unsure whether this would fulfil Lord Hughes test because the failure to have due regard to the gravity of the crime must take place in the context of the administration of the proper structure of legal provisions. It is true, as Lord Hughes says in para 140, that there were structural errors. But I cannot agree with his statement that the various detailed failings in the conduct of the inquiry were largely attributable to this flawed structural approach. Green J dealt with the operational failures in these two cases in a long passage of his judgment between paras 285 and 313. Some of these were related by him to lack of training but many were not. Significantly, the judge found that if the operational failings had not occurred, the police officers involved in the investigation would have taken steps which would have been capable of identifying and arresting Worboys. It is unnecessary to list all the operational failings. These are set out in admirable and clear detail by the trial judge in his judgment. It is sufficient to refer to a sample of these to explain why I do not accept that these were largely attributable to a flawed structural approach. (i) Reception staff failed to record relevant names, addresses and vehicle registration details. If these had been recorded, it was perfectly feasible to believe, the judge found, that Worboys might have been apprehended earlier or might even have been deterred from further offending; (ii) Failure to interview promptly a witness known as Kevin. He could have identified Worboys and could have given evidence that might have led to his arrest; (iii) Failure to collect CCTV evidence. Worboys had driven his taxi to a police station. The timing of his arrival at and departure from the police station was known. If police officers had checked the CCTV footage, they could have identified the registration number and this would have led them to Worboys; (iv) Between 2003 and 2008 many complaints were made to police which should have been sufficient to trigger the arrest of Worboys. The failure to make the link between these complaints was due not only to a lack of training but also to a failure to adhere to procedures; (v) Failure to conduct searches. None of these failures can be described as a failure in training or in the structures that were in place for the investigation of serious crime at the material time. Many other operational failures, none of which can be ascribed to a flawed structural approach were found by Green J to have occurred. These were considered by him to have contributed in a significant way to his finding that a breach of article 3 had been established. If I have understood Lord Hughes formulation of the relevant test correctly, none of them was relevant to that conclusion. The prospect of every complaint of burglary, car theft or fraud becoming the subject of an action under the Human Rights Act has been raised. I do not believe that this is a serious possibility. All of the cases in this area involve conspicuous and substantial shortcomings in the conduct of the police and prosecutorial investigation. And, as this case illustrates, frequently, operational failures will be accompanied by systemic defects. The recognition that really serious operational failures by police in the investigation of offences can give rise to a breach of article 3 cannot realistically be said to herald an avalanche of claims for every retrospectively detected error in police investigations of minor crime. A systems or an operational duty? The appellant argued that MC v Bulgaria should not be taken as authority for the proposition that how the state carried out its investigative duty at an operational level required to be examined in order to determine whether article 3 had been breached. That case, it was said, involved a systemic problem with Bulgarian law in relation to sexual offences. Under that law, it was not sufficient, in a rape prosecution, to show that a complainant had not consented to sexual intercourse. It was necessary to show that she was incapable of defending herself, or that she had been compelled by force or threats or that she had been brought to a state of defencelessness. The case was therefore primarily concerned with the system of laws in Bulgaria, the appellant claimed, and the court did not find a breach of article 3 because of any particular failing in the investigation in isolation, but because the legal system itself was deficient. The appellant claims that nothing in the judgment says in positive terms that article 3 gives rise to an obligation to investigate in cases where the state is not complicit in ill treatment. I do not accept these arguments. As pointed out in para 18 above, the Strasbourg court in MC clearly specified that the states duty had two aspects. The first was to enact criminal law provisions which would effectively punish rape. The second, distinct but definite obligation was to carry out proper investigation and prosecution so that the laws could be applied effectively. It should be noted that the applicants complaint in that case had two separate aspects, described in para 109 of the judgment as follows: The applicant complained that Bulgarian law and practice did not provide effective protection against rape and sexual abuse as only cases where the victim had resisted actively were prosecuted and that the authorities had not investigated the events of July 31 and August 1, 1995 effectively. (Emphasis supplied) The second aspect of her complaint was elaborated on in para 117 of the judgment where it is recorded that she alleged that the investigation had not been thorough and complete. The crucial issue of the timing of all the movements of the men and the applicant during the night in question had not been investigated. The courts conclusions on the second aspect of the applicants complaint were unmistakable. At paras 176 178 it said: 176. The court recognises that the Bulgarian authorities faced a difficult task, as they were confronted with two conflicting versions of the events and little direct evidence. The court does not underestimate the efforts invested by the investigator and the prosecutors in their work on the case. 177. It notes, nonetheless, that the presence of two irreconcilable versions of the facts obviously called for a context sensitive assessment of the credibility of the statements made and for verification of all the surrounding circumstances. Little was done, however, to test the credibility of the version of the events proposed by P and A [the alleged rapists] and the witnesses called by them. In particular, the witnesses whose statements contradicted each other, such as Ms T and Mr M, were not confronted. No attempt was made to establish with more precision the timing of the events. The applicant and her representative were not given the opportunity to put questions to the witnesses whom she accused of perjury. In their decisions, the prosecutors did not devote any attention to the question whether the story proposed by P and A was credible when some of their statements called for caution, such as the assertion that the applicant, 14 years old at the time, had started caressing A minutes after having had sex for the first time in her life with another man. 178. The court thus considers that the authorities failed to explore the available possibilities for establishing all the surrounding circumstances and did not assess sufficiently the credibility of the conflicting statements made. Plainly, therefore, the court made a separate finding in relation to the inadequacy of the police investigation. This finding was entirely freestanding of its conclusions in relation to the systemic deficiencies in the Bulgarian law in relation to rape. That approach has been consistently followed in the cases examined above. It is incontestably clear, therefore, that the positive obligation to conduct a proper inquiry into behaviour amounting to breach of article 3 may constitute a violation of the states duty under the article. Is state complicity a prerequisite? The answer to the argument that the positive obligation to investigate is animated only where there is state involvement in the acts said to breach article 3 can be simply supplied by reference to the passage from para 151 of MC quoted at para 17 above. The statement that positive obligations are not solely confined to cases of ill treatment by state agents could not be clearer. In fact, of course, statements to like effect appear repeatedly in ECtHR jurisprudence see, for instance, para 70 of Beganovi quoted at para 37 above; Vasilyev where the applicant expressly disavowed any accusation of blame on the state authorities for the attack on him; and para 83 of Milanovic (mentioned at para 43 above) where the court said: In general, actions incompatible with article 3 of the Convention primarily incur the liability of a Contracting State if they were inflicted by persons holding an official position. However, the obligation on the High Contracting Parties under article 1 of the Convention to secure to everyone within their jurisdiction the rights and freedoms defined in the Convention, taken in conjunction with article 3, also requires states to take measures designed to ensure that individuals within their jurisdiction are not subjected to ill treatment administered by other private persons (see A v United Kingdom, judgment of 23 September 1998, para 22, Reports of Judgments and Decisions 1998 VI; Z and Others v United Kingdom [GC], no 29392/95, para 73 75, ECHR 2001 V; E and Others v United Kingdom, no 33218/96, 26 November 2002). Likewise, in CAS v Romania where there was no question of state involvement in the sexual abuse of the first applicant, the court was unambiguous in its finding that this was not a prerequisite to a breach of article 3. At para 69, it said: the absence of any direct state responsibility for acts of violence that meet the condition of severity such as to engage article 3 of the Convention does not absolve the state from all obligations under this provision. In such cases, article 3 requires that the authorities conduct an effective official investigation into the alleged ill treatment even if such treatment has been inflicted by private individuals. I am satisfied, therefore, that ECtHR has consistently held that it is not required that there be state involvement in the acts alleged to amount to breach of article 3. The appellants argument based on that proposition must be rejected. Compensation The themes outlined in para 6 (iv) and (v) above may be taken together. They can be dealt with briefly. Compensation is by no means automatically payable for breaches of the article 3 duty to investigate and prosecute crime. As Lord Bingham pointed out in R (Greenfield) v Secretary of State for the Home Department [2005] 1 WLR 673, para 8, in many cases the Strasbourg court has treated the finding of the violation as, in itself, just satisfaction under article 41 (although that was said in the context of article 6 breaches). It is well settled, however, that the award of compensation for breach of a Convention right serves a purpose which is distinctly different from that of an order for the payment of damages in a civil action. As Lord Brown said in Van Colle at para 138: Convention claims have very different objectives from civil actions. Where civil actions are designed essentially to compensate claimants for their losses, Convention claims are intended rather to uphold minimum human rights standards and to vindicate those rights. That is why time limits are markedly shorter. It is also why section 8(3) of the [HRA] provides that no damages are to be awarded unless necessary for just satisfaction Laws LJ said in para 68 of his judgment in the Court of Appeal, that the inquiry into compliance with the article 3 duty is first and foremost concerned, not with the effect on the claimant, but with the overall nature of the investigative steps to be taken by the State. I agree with that. The award of compensation is geared principally to the upholding of standards concerning the discharge of the states duty to conduct proper investigations into criminal conduct which falls foul of article 3. In paras 72 78 of his judgment, Laws LJ set out the systemic and operational failures of the appellant, quoting extensively from the judgment of Green J as to the first of these. That catalogue of failures was considered to warrant the award of compensation to the respondents, irrespective of the fact that they had received damages from both Worboys and CICA. I cannot find any flaw in the judges decision to award that compensation nor in the Court of Appeals decision to uphold that decision. The relevance of the circumstance that there is no common law duty of care In Van Colle and Smith, two associated cases heard together, the complaint was that police had failed to follow up reports of threats to kill. In Van Colle, the alleged failure had resulted, it was claimed, in the killing of the individual who was the subject of the threats. In Smith, the victim was seriously injured. The first case was brought solely under HRA, alleging violation of article 2. It failed on its facts. In Smith, no HRA claim was made. The appellant relied solely on the common law, alleging negligence by the police. The House of Lords rejected the argument that the common law should now be developed to reflect the Strasbourg jurisprudence about the positive obligation arising under articles 2 and 3 of the Convention (para 136). A similar approach was taken by the majority in this court in Michael v Chief Constable of South Wales Police [2015] AC 1732. As Laws LJ, in the Court of Appeal in this case, pointed out, the essence of the argument on behalf of the appellants in those cases was that the common law rule (that police owe no general duty of care. to identify or apprehend an unknown criminal, nor. a duty of care to individual members of the public who might suffer injury through the criminals activities Hill v Chief Constable of West Yorkshire Police [1989] AC 53) should be moderated so as to accommodate the ECHR para 30. As he observed, the converse is contended for in this appeal. The appellant and the Secretary of State argue that the exemption from liability of the police at common law should be extended to claims advanced under HRA so that the two systems should be in harmony. There are two reasons for rejecting the argument. In the first place, the bases of liability are different, as mentioned at para 44 above. In as much as it was considered that the common law duty should not be adapted to harmonise with the perceived duty arising under ECHR, so should the latter duty remain free from the influence of the pre HRA domestic law. Alternatively, it requires, at least, to be considered on its own merits, without the encumbrance of the corpus of jurisprudence under common law. Secondly and more importantly, no assumption should be made that the policy reasons which underlay the conclusion that an exemption of police from liability at common law apply mutatis mutandi to liability for breach of Convention rights. In Michael much of the debate as to whether police owed a duty to an individual member of the public centred on the question whether there was a sufficient proximity of relationship between the claimant and the police force against whom action was taken. No such considerations arise in the present context. The issue here is simple. Did the state through the police force fail to comply with its protective obligation under article 3? The other principal argument advanced on behalf of the police in Michael was that it would not be fair, just and reasonable to impose liability on them for failings in individual cases. This is a concept with which the common law, with its innate flexibility, can cope but it is not one which can easily be accommodated in Convention jurisprudence. The police either have a protective duty under article 3 or they do not. The presence of the duty cannot depend on ones conception of whether it is fair, just or reasonable for it to exist. Lord Hughes has said (in para 130 of his judgment) that law enforcement and the investigation of crime involve a complex series of judgments and discretionary decisions; that they concern the choice of lines of inquiry, the weighing of evidence and the allocation of finite resources. All of that is unexceptionable. But the claim that to re visit such matters step by step by way of litigation would inhibit the robust operation of police work divert resources from current inquiries [and act as a deterrent] not a spur to law enforcement is unsupported by any evidence. In the first place, none of the cases cited above required a painstaking, minute examination of decisions taken by police. Nothing in the Strasbourg jurisprudence suggests that this would be appropriate, much less that it would be even admissible, as the basis for advancing a claim under article 3. Carrying out police investigations efficiently should not give rise to a diversion of resources. On the contrary, it should lead to more effective investigation of crime, the enhancement of standards and the saving of resources. There is no reason to suppose that the existence of a right under article 3 to call to account egregious errors on the part of the police in the investigation of serious crime would do other than act as an incentive to avoid those errors and to deter, indeed eliminate, the making of such grievous mistakes. The statement made by Lord Hughes (in para 130) about the undesirability of the investigation of terrorist activity and the delicate and difficult decisions it involves being subject to review would be a powerful factor, if it were a possible consequence of following the jurisprudence of ECtHR in this area. But, in my view, it is not. Nothing in that case law supports the notion that a charter has been created for the examination of every judgment or choice of strategy made. As I have said, only obvious and significant shortcomings in the conduct of the police and prosecutorial investigation will give rise to the possibility of a claim. There is no reason to suppose that courts will not be able to forestall challenges to police inquiries based on spurious or speculative claims. Should the question be left to Strasbourg? It was strongly argued, particularly on behalf of the Secretary of State, that the question whether a liability such as that contended for by the respondents arises was one on which ECtHR should be invited to pronounce. The sub text to this argument appeared to be that, where Strasbourg has not yet spoken, national courts should not venture forth. This argument carries echoes of those which found favour in such cases as R (Al Skeini) v Secretary of State for Defence (The Redress Trust intervening) [2007] UKHL 26; [2008] AC 153, and Ambrose v Harris Procurator Fiscal [2011] UKSC 43; [2011] 1 WLR 2435. In Al Skeini Lord Brown suggested that where ECtHR had not spoken, our courts should hold back, explaining that, if it proved that Convention rights have been denied by too narrow a construction, the aggrieved individual can have the decision corrected in Strasbourg. And in R (Smith) v Oxfordshire Assistant Deputy Coroner (Equality and Human Rights Commission intervening) [2010] UKSC 29; [2011] 1 AC 1 Lord Phillips followed a similar line. The difficulty with the argument is that it fails to address the circumstance that the courts of this country, constituted as they are as public authorities, must give effect to (or refuse to give effect to) Convention rights as a matter of domestic law. The HRA introduced to the law of the United Kingdom the European Convention on Human Rights and Fundamental Freedoms by making the Convention part of national law so that the rights became domestic rights. Because the rights are domestic, they must be given effect according to the correct interpretation of the domestic statute. As Lord Hoffmann said In re G (Adoption: Unmarried Couple) [2008] UKHL 38; [2009] AC 173, para 34 [the courts] first duty is to give effect to the domestic statute according to what they consider to be its proper meaning, even if its provisions are in the same language as the international instrument which is interpreted in Strasbourg. The so called mirror principle (whereby pronouncements by national courts on Convention rights should precisely match those of Strasbourg) is often attributed to Lord Binghams statement in Ullah at para 20 where he said The duty of national courts is to keep pace with the Strasbourg jurisprudence as it evolves over time: no more but certainly no less. As explained in para 232 of R (Keyu) v Secretary of State for Foreign and Commonwealth Affairs [2015] UKSC 69; [2016] AC 1355, Lord Bingham was careful to refer to the interpretation of the Convention (as opposed to the interpretation of HRA). Despite this, his opinion in that case has been used in a number of subsequent judgments to support the proposition that the content of domestic rights under HRA should not, as a matter of principle, differ from that pronounced by Strasbourg. Indeed, his judgment has been construed as indicating that, unless ECtHR has given clear guidance on the nature and content of a particular Convention right, the national courts of the United Kingdom should refrain from recognising the substance of a claimed entitlement under ECHR see, for instance, Al Skeini, Smith and Ambrose, referred to in para 74 above. In more recent cases, a departure from the mirror principle can be detected. Thus, in Rabone v Pennine Care NHS Foundation Trust (INQUEST intervening) [2012] UKSC 2; [2012] 2 AC 72 it was held that there was a positive obligation to protect the life of a mentally ill young woman who had been admitted to hospital informally because of serious attempts to take her own life. This decision was reached notwithstanding the fact that there was no authority from ECtHR to that effect. In Surrey County Council v P (Equality and Human Rights Commission intervening) [2014] UKSC 19; [2014] AC 896, para 62 Lord Neuberger said that where there was no Strasbourg authority which dealt precisely with the issues before this court, this court could rely on principles expressed by ECtHR, even if only indirectly relevant, and apply them to the cases which it had to decide. And in Moohan v Lord Advocate (Advocate General for Scotland intervening) [2014] UKSC 67; [2015] AC 901 Lord Wilson suggested that there had been a retreat from the Ullah principle which had led the court to substantially modify it. At para 105 he said: where there is no directly relevant decision of the ECtHR with which it would be possible (even if appropriate) to keep pace, we can and must do more. We must determine for ourselves the existence or otherwise of an alleged Convention This seems to me to be inescapably correct. Reticence by the courts of the UK to decide whether a Convention right has been violated would be an abnegation of our statutory obligation under section 6 of HRA. This section makes it unlawful for a public authority, including a court, to act in a way which is incompatible with a Convention right. As it happens, of course, I consider that the jurisprudence of the Strasbourg court is clear and constant on the issues which this court has to decide. Even if it were not, however, I would firmly reject the suggestion that the decision of this court on whether the respondents enjoy a right under the HRA to claim compensation against the appellant should be influenced, much less inhibited, by any perceived absence of authoritative guidance from ECtHR. Conclusion For these reasons and for those given in the judgment of Lord Neuberger, with which I agree, I would dismiss the appeal. LORD NEUBERGER: (with whom Lady Hale agrees) The claimants, DSD and NBV, succeeded before Green J in establishing that they were entitled to damages from the defendant, the Commissioner of the Police of the Metropolis, as a result of failures by the police properly to investigate serious sexual assaults which had been perpetrated against them. The claims were founded on the propositions that (i) article 3 of the European Convention on Human Rights carries with it an obligation on the state to carry out an effective investigation when it receives a credible allegation that serious harm has been caused to an individual, and (ii) there were serious defects in the police investigation of the assaults on the claimants. The Court of Appeal upheld the decision, and this court takes the same view. However, we disagree on one issue. That issue is whether a person in the claimants position needs to establish that the serious defects in the investigation in question were attributable to failures of a structural nature (also referred to as systems, or systemic, failures), and not to purely operational failures (ie failings on the part of the individual police officers responsible for conducting the specific investigation). We do not need to decide this issue in order to resolve the appeal, but I agree that we should do so. It has been fully and helpfully argued by the parties and the interveners, the competing arguments have been admirably expounded by Lord Kerr and Lord Hughes, and it seems to me to be an important issue which should be decided if possible. The competing arguments have been fully set out in the judgments of Lord Kerr and Lord Hughes. Lord Kerr favours the wider approach, namely that a claimant need only establish serious defects in the investigation into her particular case, irrespective of whether they are systemic or operational failures. Lord Hughes prefers the narrower approach, the effect of which is that a claimant has to establish serious failings of a systemic nature, and that failings of a purely operational nature will not suffice, at least where the perpetrator of the alleged assault was not a state agent. In agreement with Lord Kerr, I am of the view, that serious failures which are purely operational will suffice to establish a claim that an investigation carried out pursuant to an article 3 (or indeed an article 2) duty infringed that duty. So far as the Strasbourg jurisprudence is concerned, I consider that the judgments to which we have been referred support the wider approach. The investigatory duty was identified in Assenov v Bulgaria (1998) 28 EHRR 652, para 102, where the court said that article 3, read with article 1, requires by implication that there should be an effective official investigation into cases where an individual raises an arguable claim that he has been seriously ill treated by the police or other such agents of the state unlawfully and in breach of article 3. I also note that the wider approach appears to have been adopted by the Grand Chamber in the article 2 case of Mustafa Tun and Fecire Tun v Turkey [2015] ECHR 383 see at paras 183 209. I accept of course that those decisions were concerned with cases of ill treatment by state agents, and that the approval of the principle in other decisions of the Grand Chamber (eg Gfgen v Germany (2010) 52 EHRR 1 and El Masri v The Former Yugoslav Republic of Macedonia (2012) 57 EHRR 25) were also concerned with such cases. I also accept that the standard which a court should apply when considering whether the investigatory duty has been satisfied may well be more stringent in cases where the alleged ill treatment was caused by state agents than in cases where it was caused by others. However, I see no basis for holding that the duty is different in kind in the two types of case. While in a number of Strasbourg court decisions, it is stated that the duty extends to cases where the alleged ill treatment was caused by third parties, there is no suggestion that the nature of the duty to investigate is different in kind in the two types of case. Thus, in the recent case of BV v Belgium (Application No 61030/08) 2 May 2017, para 56 the court stated that the obligation to carry out an effective investigation cannot be limited to cases of ill treatment by agents of the state, without suggesting that there was any difference in the basic nature of the duty. It is true that in Beganovi v Croatia [2009] ECHR 992, para 69, the court said that the scope of the States positive obligations might differ between cases where treatment contrary to article 3 of the Convention has been inflicted through the involvement of state agents and cases where violence is inflicted by private individuals. However, even without considering other decisions of the Strasbourg court, that seems to me to be a very small peg on which to hang a contention that the two cases require approaches which differ in nature. In any event, when that observation was repeated in Vasilyev v Russia [2009] ECHR 2078, para 100, the court immediately went on to make the point that the requirements as to an official investigation are similar, and that was a point repeated in a number of subsequent decisions see eg Koky v Slovakia [2012] ECHR 994, para 215, Amadayev v Russia [2014] ECHR 704, para 70, and MC and AC v Romania [2016] ECHR 359, para 111. Indeed, I note that in Beganovi itself, when considering whether the investigatory duty had been complied with in a case where the alleged perpetrator had been a non state agent, the court said in para 74 that it should consider whether or not the impugned regulations and practices, and in particular the domestic authorities compliance with the relevant procedural rules, as well as the manner in which the criminal law mechanisms were implemented in the instant case, were defective to the point of constituting a violation of the respondent states positive obligations under article 3. And the subsequent analysis of the facts in paras 80 86, which led the court to conclude that there had been a violation in that case, focussed very much on the operational failures. That approach appears to be supported by other Strasbourg court decisions involving the investigatory duty in relation to acts of serious ill treatment by non state agents. There is no suggestion in MC v Bulgaria (2005) 40 EHRR 20 that that duty is restricted to having effective systems in place: at para 153, the court referred to the duty of a state to enact criminal law provisions effectively punishing rape and to apply them in practice through effective investigation and prosecution. In para 167, the court seems to me to have been referring to both systemic and operational failures when it mentioned significant flaws in the impugned legislation and practice and its application in the case at hand, combined with the alleged shortcomings in the investigation (and see para 179). The finding of inadmissibility in Szula v United Kingdom (2007) 44 EHRR SE19 appears to me to have been based on the assumption that operational failures would, in principle, suffice to found a claim see para 1. To the same effect, in ei v Croatia (2007) 49 EHRR 18, the court said in para 54 that the police should have taken all reasonable steps available to them to obtain relevant evidence, which, as a matter of ordinary language, naturally refers to operational steps. In para 59 the court concluded that what appear to me to have been operational, rather than structural, failures (summarised in paras 56 58) enabled the article 3 claim to succeed. In Beganovi, para 75, the court made the point that the duty to investigate involved the authorities [having to] take whatever reasonable steps they can to secure the evidence concerning the incident which covers operational matters at least as much as systems. Vasilyev is another case where the court described the duty in terms which are, at least in my view, significantly more consistent with the wider approach, namely that the authorities [should] conduct an effective investigation involving the reasonable steps available to them (paras 99 and 100). In the 2016 case of Chernaya v Ukraine [2016] ECHR 1117, which involved an injury inflicted by a non state agent, the court reiterated in para 25 that [t]he minimum standards of effectiveness laid down by the Courts case law include the requirements that the investigation be independent, impartial and subject to public scrutiny, and that the competent authorities must act with exemplary diligence and promptness again focusing on the operational aspects of the particular investigation. Of course, this Court is not required to follow Strasbourg jurisprudence, even in a case such as this where there is a clear and consistent approach adopted in a significant number of chamber decisions. Dialogue between the United Kingdom Supreme Court (and indeed other courts in the United Kingdom) and the Strasbourg court has proved to be beneficial to the development of human rights law in this jurisdiction and, I hope, in Strasbourg. Accordingly, if it appears to us that the narrower approach is even only probably correct, the fact that the Strasbourg court has consistently taken a different view should not necessarily stand in the way of our coming to a contrary conclusion. In this case, the notion that we can take such a course can fairly be said to be supported by the fact that, although it is inconsistent with the views expressed in a number of decisions of the Strasbourg court, the notion that the narrower approach is correct has not, so far as I can see, been specifically raised in that court. But there must be a good reason for our taking such a course, and in this case, at least in my view, there is not. Indeed, in my view, there are good reasons for favouring the wider approach. First, one starts with the proposition that, given that it is rightly accepted on all sides that the authorities have an investigatory duty, it would be of little value unless it was a duty to investigate effectively. Provided that courts bear clearly in mind the difficulties involved in policing modern societies, the unpredictability of human conduct and the operational choices which must be made in terms of priorities and resources and the need to interpret the duty in a way which does not impose an impossible or disproportionate burden on the authorities (Osman v United Kingdom (1998) 29 EHRR 245, para 116), I find it hard to understand why an investigation which is seriously defective in purely operational terms should, in effect, be held to satisfy the investigatory duty. Secondly, I cannot see any basis in its jurisprudence to suggest that it is likely that the Strasbourg court would think it right to limit the extent of the investigatory duty to systemic, as opposed to operational, failures. It is true that in A v United Kingdom (1998) 27 EHRR 611, having held that article 3, together with article 1, requires States to take measures designed to ensure that individuals within their jurisdiction are not subjected to torture or inhuman or degrading treatment or punishment, the court concluded that then current statutory provisions did not provide adequate protection to the applicant against treatment or punishment contrary to article 3 and that the failure to provide adequate protection constitutes a violation of article 3 (paras 21 and 24). However, that conclusion merely reflected the factual basis and arguments in the case. If the statute did not provide adequate protection, there was a systemic failure, and it was both unnecessary and pointless to consider the operational aspects of the legal system. However, clearly to my mind, it does not follow that, if the statutory provisions had complied with article 3, but the legal processes had been defective, the United Kingdom would have been acquitted of infringing article 3. Indeed, the courts summary of the law in A v United Kingdom, para 22 contains nothing to suggest that the states obligation there being discussed should be limited to systemic matters. Similarly, while the court in Osman, para 116, was concerned to ensure that the investigatory duty was not interpreted or applied unrealistically, there is no indication in that paragraph that it was intending to limit the duty to the provision of a satisfactory framework, irrespective of how ineptly it operated in a particular case. Indeed, such an approach would seem to me to be inconsistent with how the Strasbourg court approaches cases generally, namely by reference to the specific facts of the particular case. Thirdly, there are forensic considerations. In that connection, I would start by rejecting the notion that it could be right for a court to dismiss a claim that an investigation was seriously defective simply because the relevant police procedures as set out in official documents were satisfactory. It would not merely be formalistic, but both unjust and unrealistic, to hold that an investigation, which was seriously systematically defective in practice, nonetheless complied with the article 3 investigatory duty simply on the grounds that, while the systemic defects occurred in practice, they did not reflect the systems as laid down officially. Whether the wider or the narrower approach is correct, the court must surely consider the real, not the hypothetical. Once that is accepted, I consider that the narrower approach could present a court with difficult practical, categorisation, and apportionment issues. Whichever approach applies, a court must inevitably start by considering the failures in the particular case. On the wider approach, the court would simply ask whether those failures were sufficiently serious to represent an infringement of the investigatory duty. On the other hand, on the narrower approach, the court would have to consider which of the failures were operational and which were systemic, and that, as I see it, is where problems would often start. Serious operational failures by individual officers would frequently throw up arguable systemic issues, such as systems of supervision or even of appointment of those officers. And, in order to decide whether the operational failures were systemic in origin, the court might often have to embark on an inquiry whether, for instance, the failures were redolent of what happened in other investigations. That could involve a potentially time consuming and expensive inquiry into other investigations, as well as arguments as to the number and types of investigation, if any, to which the inquiry should be restricted. The question whether the defective investigation was attributable to systemic, rather than purely operational, failures could also involve difficult issues of categorisation and inference. For instance, in many cases it may be hard to decide whether a particular failure is operational or systemic, or whether the operational failures in an investigation or a set of investigations entitle the court to infer a systemic failure. And what happens if, as may very often be the case, there are some operational failures which are purely operational and some which are attributable to structural failures? I do not consider that my view is undermined by the reasoning expressed or conclusions reached in Hill v Chief Constable of West Yorkshire Police [1989] 1 AC 53, Brooks v Comr for the Police for the Metropolis [2005] 1 WLR 1495, Van Colle v Chief Constable of Hertfordshire Police; Smith v Chief Constable of Sussex Police [2009] AC 225 and Michael v Chief Constable of South Wales Police [2015] AC 1732. Those cases establish that, absent special factors, our domestic law adopts the view that, when investigating crime, the police owe no duty of care in tort to individual citizens. That is because courts in this country consider that the imposition of such a duty would, as Lord Hughes puts it, inhibit the robust operation of police work, and divert resources from current inquiries; it would be detrimental, not a spur, to law enforcement. That view is entirely defensible, but, at least in the absence of concrete evidence to the contrary, so is the opposite view that the imposition of such a duty, provided that it is realistically interpreted and applied, would serve to enhance the effectiveness of police operations. It is therefore understandable that human rights law, with its investigatory duty under article 2 and 3, differs from domestic tort law in holding that it is right to impose an investigatory duty on the police. Just as the majority of this Court accepted in Michael, at paras 123 128, that the domestic tortious test for liability should not be widened to achieve consistency with the human rights test, so should the human rights test for liability not be narrowed to achieve consistency with the domestic, tortious test. Finally, I turn to an argument which I have already touched on, namely that the wider interpretation involves placing too great a burden on public authorities, in particular on the police. This concern was recognised in relation to the similar article 2 obligation on the police in Osman v United Kingdom (1998) 29 EHRR 245, para 116, where, as I have mentioned, the Strasbourg court said that the obligation must be interpreted in a way which does not impose an impossible or disproportionate burden on the authorities (and see to the same effect CN v United Kingdom (2012) 56 EHRR 24, para 68). The point was developed in MC v Bulgaria, where at para 168, the Strasbourg court made it clear that, when considering whether an investigation had satisfied article 2, a court should not be concerned with allegations of errors or isolated omissions in the investigation. As the Grand Chamber said in Tun v Turkey, para 176, the nature and degree of scrutiny which satisfy the minimum threshold of the investigations effectiveness depend on the circumstances of the particular case. The court in that case went on to find shortcomings in the investigation, but held that there had been no infringement of article 2, because they were not serious or decisive (paras 189 and 195), and it concluded in para 209 that there were no such shortcomings as might call into question the overall adequacy and promptness of the investigation. And in Beganovi v Croatia, para 78, the Strasbourg court emphasised that it should only conclude that the investigatory duty had been infringed in cases of manifest disproportion between the gravity of the act and the results obtained at domestic level (citing the earlier decisions of Nikolova and Velichkova v Bulgaria, (2009) 48 EHRR 40, para 62, and Atalay v Turkey [2008] ECHR 850, para 40, which are to the like effect). It is because of the concern expressed in Osman, para 116, that it is important to emphasise that only serious defects in any investigation can lead to the conclusion that there has been an infringement of article 2 or article 3. Accordingly, I conclude that a claim based on serious defects in the performance of the investigatory duty under article 3 (and equally under article 2) can succeed even if defects are all of a purely operational, as opposed to a systemic, nature. For these reasons, which are little more than a summary of those given by Lord Kerr, with whose judgment I agree, I would therefore dismiss this appeal. LORD HUGHES: I agree that the appeal of the Metropolitan Police in this case should be dismissed. It seems to me, however, important that the ambit of the positive duties which arise under article 3 ECHR should be subject to examination, if not that an exhaustive definition should be attempted. The context in which this case comes to this court needs to be remarked. It is unusual. The treatment under consideration is the very serious offence of rape of victims who were exploited after putting themselves in apparently trustworthy hands (a black cab driver) and who had then been rendered helpless by stupefaction. There has been no dispute from the beginning that there were notable general failings in the police approach to investigation into the kind of complaint which both claimants made. They affected both the initial complaint by DSD in 2003, at least from the time of the morning after the event, at which stage she first realised that she had been sexually attacked, and the later complaint by NBV in 2007. The findings recorded by the judge in a meticulous judgment were almost entirely to the same effect as, and were grounded upon, the polices own conclusions, following detailed internal reports, about the deficiencies of their approach to the possibility of drug induced rape. The consequences were extremely serious. Because the first incident reported was not approached properly, the attacker remained undetected and became a serial rapist. Although only a small proportion (ten) of his many attacks were reported to the police at the time, it is now known that he raped more than 100 women, employing a similar method. His modus operandi was highly specific. Once anyone put two or more of the reported incidents side by side, the inference that there was a single serial offender was irresistible. Once that was done, early in 2008, the rapist was arrested, and compelling evidence against him found, within eight days. That could and should have been done years earlier. Recognising the substantial justice of the complaints, the police have made it clear that in the event that their appeal should be successful, they do not seek repayment of the compensation ordered by the judge. But the elementary justice of the complainants cases makes it all the more important that the ambit of the duty should be considered. Otherwise indignation at their experiences may lead to an over wide formulation passing unnoticed, with detrimental results for the criminal justice system. The origin of the positive duties Article 3 ECHR says this: No one shall be subjected to torture or to inhuman or degrading treatment or punishment. It is elementary that, as Laws LJ pointed out in the Court of Appeal in the present case, the obligations created by the Convention lie upon the party States and upon no one else. The Convention governs the relationship between the State and the citizen. It creates no duties for individuals. Article 1 is explicit. It is on the states that it imposes the obligation to secure to those within their jurisdiction the rights and freedoms defined in the Convention. It is perfectly clear that the primary case of behaviour which is a breach of article 3 is where torture or inhuman or degrading treatment is meted out by the state against a person within its jurisdiction. Even without the origins of the Convention in the aftermath of the Second World War, the very use of the expressions torture and inhuman or degrading treatment is sufficient demonstration of that; these are typically descriptions of State misbehaviour. And the same is demonstrated by the words subjected to. If the State inflicts such treatment, it has subjected the citizen to it. Anything beyond that is a judicial gloss on the Convention, well established as that gloss may now be. In fact, there have been developed two glosses. Similar glosses have been applied to the primary obligation in article 2, concerning the right to life, and it may be to other rights. The first gloss was explained by the Strasbourg court in Assenov v Bulgaria (1998) 28 EHRR 652, in which there was an allegation of police violence towards a suspect in custody. It builds on the primary obligation of the state not itself to inflict prohibited treatment on the individual. If that primary obligation stood alone, it might well be ineffective because the State organ which inflicts such treatment may deny it or cover it up. It will be effective only if, when there is a reason to think that such ill treatment may have been inflicted by a state organ, there is an ancillary positive obligation to take steps to investigate the allegation and to bring to book those who are found to be responsible. At para 102 the court set out the reason for this obligation: The court considers that where an individual raises an arguable claim that he has been seriously ill treated by the police or other such agents of the State unlawfully and in breach of article 3, that provision, read in conjunction with the States general duty under article 1 of the Convention to secure to everyone within their jurisdiction the rights and freedoms in [the] Convention, requires by implication that there should be an effective official investigation. This obligation, as with that under article 2, should be capable of leading to the identification and punishment of those responsible. If this were not the case, the general legal prohibition of torture and inhuman and degrading treatment and punishment, despite its fundamental importance, would be ineffective in practice and it would be possible in some cases for agents of the State to abuse the rights of those within their control with virtual impunity. (Emphasis supplied) The same rationale was explained (in the context of the ancillary article 2 positive obligation to investigate State responsibility for death in custody) by Lord Bingham in R (Amin) v Secretary of State for the Home Department [2004] 1 AC 653, para 31. The purpose of the duty is, he said: to ensure so far as possible that the full facts are brought to light; that culpable and discreditable conduct is exposed and brought to public notice; that suspicion of deliberate wrongdoing (if unjustified) is allayed; that dangerous practices and procedures are rectified; and that those who have lost their relative may at least have the satisfaction of knowing that lessons learnt from his death may save the lives of others. The reference to culpable and discreditable conduct was plainly to such conduct on the part of State organs. The nature of the obligation was neatly summed up by Jackson J in R (Wright)v Secretary of State for the Home Department [2001] EWHC Admin 520, [2001] UKHRR 1399, in terms repeated by Sedley LJ in R (AM) v Secretary of State for the Home Department [2009] EWCA Civ 219: that an article 2 or article 3 investigation is required in order to maximise future compliance with those articles. The second gloss is different and is the one in question in the present case. It concerns ill treatment not by the state but by an individual or other third party actor. Plainly a citizen may be subjected to inhuman or degrading treatment (or torture) by a fellow citizen. It has become commonplace to speak of this as a breach of article 3, but it is not. An individual cannot be in breach of the Convention. In the ordinary way, if treatment falling within article 3 is applied by A to B, then A may have subjected B to it, but the state has not. The States responsibility is simply not engaged. But it may be if, and only if, the State fails to take steps to afford its protection to B against As misbehaviour. In that event, it is still not a case of the state subjecting the individual to inhuman or degrading treatment, but by judicial gloss the article is read as carrying with it an unspoken but implicit positive obligation upon the State to afford its protection. This second gloss has the potential to extend considerably wider than the first. Whilst the first is concerned to give effect to the primary obligation of the state not itself to subject people to inhuman or degrading treatment, the second reaches into the question of what the state is bound to do in relation to the acts of people for whose behaviour it is not responsible. When one comes to this question, there are considerations which do not apply to the first gloss. Even in the most law abiding of states, that sometimes serious harm will be inflicted by one individual upon another, in the context of all manner of disputes and in pursuit of many different objectives, is a regrettably unavoidable feature of life. No one suggests that the state is bound to guarantee that this will not happen. Indeed, some steps which an authoritarian state might be inclined to take with a view to preventing it (such as preventive detention without conviction or other court order, house arrest, intensive surveillance and the like) might themselves be infringements of other fundamental rights afforded to the citizen. That consideration apart, the systems which states adopt for the protection of those within their boundaries do not have to be the same. It has never been suggested that it is the function of the Convention to monitor every act of enforcement or policing of the varied domestic legal requirements, nor the content of those requirements, so long as they provide sufficiently for the protection of the individual against third party behaviour which meets the high threshold of severity contemplated by article 3. Otherwise, what would be involved would not be a gloss on the primary obligation imposed by article 3, nor would the positive obligation be in any sense ancillary to that primary obligation. Rather, the duty would be of a completely different character to the primary obligation, and would entail wholesale assimilation of, and judicial control of, the legal systems of independent states. The positive obligation constituted by this second gloss relating to the protection of citizens from third party ill treatment requires first that the state have a legal framework for the prohibition of conduct passing the article 3 threshold, and thus afford the protection of its legal system against such behaviour. A v United Kingdom (1998) 27 EHRR 611 was an example of a legal system which failed to provide sufficient protection to children against the infliction of serious harm via corporal punishment, until the former English defence of reasonable chastisement was altered. Such cases concern the structure of a states system. The more difficult question is whether the implied positive obligation recognised by the second gloss extends beyond the structure of the states system to its operation in an individual case. The Strasbourg court confronted this in Osman v United Kingdom (1998) 29 EHRR 245, where the complaint was that the police force had failed sufficiently to heed reports suggesting that an obsessive might be a danger to an individual, who had then been attacked and almost killed (and his father killed). The context was the equivalent gloss on article 2, but the principles are the same as for article 3. The court concluded that the implied positive obligation to protect could apply but in narrow circumstances of a real and immediate risk to the life of an identified individual by a third party, of which risk the State either knew or ought to have known. If such an immediate threat exists, then the States obligation is to do what can reasonably be expected of it which might reasonably have avoided the risk; it is not limited to a duty to avoid gross negligence. As Lord Bingham observed in Van Colle v Chief Constable of Hertfordshire Police; Smith v Chief Constable of Sussex Police [2008] UKHL 50; [2009] AC 225 at para 29, it is quite apparent that every ingredient of this carefully drafted test is of importance. It defines the restricted circumstances in which a duty arises under the Convention to take reasonable operational steps to forestall known specific threats to the safety of an individual from eventuating. The court in Osman made clear the reason why this test is restrictive. It lies in the realities of law enforcement and policing. At para 116 it said this: For the Court, and bearing in mind the difficulties of policing modern societies, the unpredictability of human conduct and the operational choices which must be made in terms of priorities and resources, such an obligation must be interpreted in a way which does not impose an impossible or disproportionate burden on the authorities. Accordingly, not every claimed risk to life can entail for the authorities a Convention requirement to take operational measures to prevent that risk from materialising. Another relevant consideration is the need to ensure that the police exercise their powers to control and prevent crime in a manner which fully respects the due process and other guarantees which legitimately place restraints on the scope of their action to investigate crime and bring offenders to justice, including the guarantees contained in articles 5 and 8 of the Convention. This duty recognised in Osman is a duty to take reasonable steps not to enforce the law or to punish a perpetrator, but to prevent serious violence from occurring to an individual when the threat of it is sufficiently specific. It is an expansion of the second gloss beyond the requirement for structures and systems to render serious violence unlawful, but it is carefully narrow in extent. The House of Lords faithfully applied Osman in Van Colle v Chief Constable of Hertfordshire Police. What has happened since is that the second gloss has been further extended beyond prevention of anticipated violent crime to a duty to investigate reported past violence. The usually identified origin of this further extension is MC v Bulgaria (2005) 40 EHRR 20. There is no doubt that the formulation adopted in that case has been often repeated, usually word for word, in later cases. In that sense there is, no doubt, a consistent line of authority. The difficulty is that much remains unclear, indeed unexplained. Unclear remain the rationale for the extension, the issue whether it can be derived from Osman and/or Assenov or if not why departure from the principles of those cases is justified, and the extent of the duty as extended. MC v Bulgaria concerned a complaint of rape made by a 14 year old against two young men of her acquaintance with whom she had spent an evening and night travelling around in their car. They had been arrested on the day that she made her complaint to the police, a few days after the alleged event. Their case was that she had consented. There were multiple clashes of evidence between the complainant on the one hand and those she accused, plus other witnesses, on the other. But the prosecutors investigation had been closed on the grounds that neither force (physical or psychological) nor threats of the same, nor physical resistance by the complainant, had been established. The point of the case was the courts rejection of that criterion for rape, which was at the time consistently adopted by the Bulgarian authorities, and was asserted by the Government to be the rule: see paras 122 and 166. Thus there was a breach of article 3 (and indeed of article 8) because the Bulgarian structures or system for the criminalisation of rape did not sufficiently protect an individuals sexual autonomy; absence of consent must be the criterion, rather than the use of force. That sufficiently demonstrated a breach of article 3 in the same way as in A v United Kingdom. The court, however, went on to draw attention to deficiencies in the prosecutors investigation of the complaint. At the outset of its judgment it made the following statement of principle, which has subsequently been adopted, often word for word, in later cases. 151. In a number of cases article 3 of the Convention gives rise to a positive obligation to conduct an official investigation. Such positive obligations cannot be considered in principle to be limited solely to cases of ill treatment by state agents. 152. Further, the Court has not excluded the possibilities that the states positive obligation under article 8 to safeguard the individuals physical integrity may extend to questions relating to the effectiveness of a criminal investigation. 153. On that basis the Court considers that states have a positive obligation inherent in articles 3 and 8 of the Convention to enact criminal law provisions effectively punishing rape and to apply them in practice through effective investigation and prosecution. (Emphasis supplied) The emphasised passage in para 153 is expressed as a summary of the three propositions in paras 151 and 152. As to those, authority is cited for each of them. The authority cited for the first sentence of 151 is Assenov (at para 102). For the second sentence of 151 it is Calvelli and Ciglio v Italy. For the third proposition, in 152, it is Osman at para 128. Whilst these paragraphs show that the court asserts that article 3 carries an obligation in some circumstances to investigate third party offending, they leave only uncertainties about its source and thus its extent. As has been seen, Assenov does indeed show that article 3 gives rise to a positive obligation in a number of cases to conduct an official investigation. But those cases are ones where the investigation is into suspected state involvement in ill treatment and is necessary if the primary obligation on the State is not to be ineffective. That rationale does not apply to cases of third party offending and MC v Bulgaria does not say anything about the difference between the two situations. Given the explanation in Assenov of the reasons why an ancillary positive obligation has been devised by judicial gloss, the difference is fundamental. Calvelli and Ciglio was a case of alleged medical negligence in the course of the delivery of a baby who died shortly afterwards. It had been treated by the Italian authorities as a case of possible criminal manslaughter. The doctor had been convicted but his conviction was eventually set aside by the Court of Cassation on the grounds that he had wrongly been convicted in his absence. A re trial was ordered but by then the limitation period had expired. The claimants asserted that there had been no effective system of investigation and trial because owing to delays the limitation period had expired and the doctor had not been convicted. The Court held that there had been no violation of article 2. The obligation discussed was the duty to run a system which provided sufficient remedies: see paras 49 54. That is the A v United Kingdom duty. There had been no breach of it because in the field of medical negligence a civil rather than a criminal process can suffice and here there had been sufficient remedies in (1) a right to damages (which had been pursued and then settled by the claimants without a finding of liability against the doctor, thus waiving an entitlement to pursue the case to such a finding) and (2) disciplinary regulation of doctors. True, there was complaint of delay made, but there was no examination in this case of the question what duty existed to investigate the doctors actions. The nearest that the court got to that question was the observation that remedies must be effective and not exist in theory only. It is not easy to see how this case generated the second sentence of para 151 in MC v Bulgaria, but if it did it is more consistent with an obligation to provide a sufficient investigative structure than with a duty not to be negligent in the detailed inquiry. As to para 152 of MC v Bulgaria, para 128 of Osman (a) is concerned with whether there had been a breach of article 8 and (b) simply re states the finding that the police did not know, nor ought to have known, of a real and immediate threat to the safety of the complainant. Of course it is true that in order to establish whether a sufficiently real and immediate threat to the safety of the complainant exists, it will in some cases be necessary for the police to investigate the complaint. But that does not alter the fact that the carefully limited duty recognised in Osman is concerned not with an obligation to investigate a past event, but with an obligation to prevent a future one. The tentative tone of para 152 is also to be noted. No more is said than that the possibility of the positive obligation extending to a duty to mount an effective investigation is not excluded. No further reasoning is shown for the progression from that to the much more positive statement in para 153. It is not clear why that more positive statement follows from the previous two paragraphs, even if those two had been themselves firmly grounded on the authority cited. The court in MC v Bulgaria was moreover at pains to set some limit to the permissible review of the investigation. At paras 167 168 it said this: 167. In the light of the above, the courts task is to examine whether or not the impugned legislation and practice and its application in the case at hand, combined with the alleged shortcomings in the investigation, had such significant flaws as to amount to a breach of the respondent states positive obligations under articles 3 and 8 of the Convention. 168. The issue before the court is limited to the above. The court is not concerned with allegations of errors or isolated omissions in the investigation; it cannot replace the domestic authorities in the assessment of the facts of the case; nor can it decide on the alleged perpetrators criminal responsibility. The court identified, at para 177, deficiencies in the investigation. It concluded that the conflicting assertions were not sufficiently sensitively assessed, and that inquiries which could have been made into timings, which might have shown which version was correct, were not made. It also criticised the fact that the complainant had not had the opportunity to confront and question the witnesses relied upon by the accused. Lastly, the investigators had not, it was said, sufficiently taken into account the unlikelihood that a 14 year old would make advances to the second man only minutes after losing her virginity to the first. But at para 179, set out by Lord Kerr at para 25 above, the court made it clear that it regarded the deficiencies in the investigation as the consequence of, and part and parcel with, the flawed approach of the Bulgarian system generally to the issue of lack of consent. It was because of the criterion of force/resistance that the investigation did not go into matters which otherwise it should have done. This must be the explanation for the observations about investigation, for otherwise it is very difficult to see that the criticisms made could found a breach of article 3 given the words of paras 167 and 168. Those paragraphs make it clear that the gloss on article 3 is not a vehicle for the second guessing via the Convention of the ordinary domestic process of assessment of conflicting evidence. Of course it is true that the Strasbourg court is a supra national one, but there is no sign that the limit on concern with errors or isolated omissions is restricted to that court as distinct from a national court when the latter is applying the Convention; on the contrary, the limit is expressed to be one which determines when there is a breach of article 3 and this plainly is the same for all courts examining that question. Nor can it be the case that a system which does not involve pre trial confrontation of witnesses, as some Code Napoleon systems do, but other systems, including all the United Kingdom ones, do not, is ipso facto in breach of article 3. What has happened since MC v Bulgaria is that the formulation cited above has been repeated, or in some cases summarised. It is plain that in several of them the summary has been to the effect that whenever there is an allegation of ill treatment passing the article 3 threshold, by whomever committed, there is an obligation on the state to conduct an effective investigation. But in none of these cases has the basis for, and thus the ambit of, any obligation to investigate third party violence ever been addressed. Reference back to MC v Bulgaria, and to its reliance on Assenov, Calvelli and Osman is frequently made, but never examined and the uncertainties mentioned above have not been confronted. In some cases, there is additional reliance on a series of Turkish cases: Ay [2005] ECHR 167, Ali & Aysu Duran [2008] ECHR 289, Mehmet [2008] ECHR 269, Celik [2004] ECHR 548 and Bati [2008] ECHR 246. But all of these were cases of allegations of serious police torture or ill treatment of suspects; the citation of such cases illustrates the manner in which the difference between the first gloss and the second has not received attention. In most cases the injunction that the court is not concerned with errors or isolated omissions is similarly repeated. In some, the court appears to have looked accordingly for evidence of a structural defect, alternatively culpable disregard or an absence of good faith, in the administration of the domestic system: see for example Szula v United Kingdom (2007) 44 EHRR SE19 and BV v Croatia (Application No 38435/13) 21 January 2016. But this is not always the case. The injunction notwithstanding, in some of the cases the criticisms of the investigation have been very particular. In some, there are plain overtones of structural State deficiencies in relation to the investigation of allegations of racially motivated or discriminatory violence: examples include Secic v Croatia (2009) 49 EHRR 18, Beganovi v Croatia [2009] ECHR 992, and Milanovic v Serbia [2010] ECHR 2029, but this was not given as a reason for the decisions. In others, such as Vasilyev v Russia [2009] ECHR 2078, the nub of the allegation was serious misbehaviour by the police, in that case by dumping the injured men in the street in the aftermath of a third party assault. But in some, the court has found itself simply pronouncing on whether the investigation was sufficiently careful. An example appears to be CAS v Romania (2015) 61 EHRR 18, where the complaint was of sexual abuse of a boy in his home by a visitor or neighbour. It is possible that the basis of the decision was a conclusion that, as in some other cases, the state did not take allegations of sexual abuse seriously enough, but that is not said. The court found a breach of article 3 not only in delay, which did not prevent the prosecution of the specific individual identified, but also in what it described as a failure sufficiently to evaluate conflicting testimony, supported by the fact that when that individual accused was acquitted, the police did not look for anyone else. That is very close to, if not indistinguishable from, a view that the outcome of the trial was wrong, and moreover that if it was wrong that could itself amount to a breach of article 3. Beganovi is another case in which (at para 77) the court appears to have held that the positive obligation under article 3 may extend into examination of the conduct of the trial. Such instances, which may be atypical, leave unanswered the question what is meant by the principle that a breach of article 3 is not constituted by a bona fide decision in the course of investigation or law enforcement which is afterwards held to have been an error. Occasionally in the Strasbourg cases, the general statement of principles includes the seminal passage from Osman v United Kingdom (para 116) which is set out at para 112 above. In most of them it does not. But it is surely clear that these considerations relating to the practical business of policing, to the operational choices which have to be made as to priorities and to the allocation of finite resources, must apply with equal if not greater force to the investigation of allegations of past third party violence as they do to reports of threats of future violence. These considerations point firmly to the proper test for the ancillary positive obligation under article 3 to investigate reports of past violence being whether the state has a proper structure of legal and policing provision designed to punish it when it occurs and has administered that structure in good faith and with proper regard for the gravity of the behaviour under consideration. They do not point towards a test of ex post facto assessment of whether the investigation was careless or made mistakes which ought not to have been made, nor to a finding that there has been a breach of the right not to suffer torture, or inhuman or degrading treatment, when the complaint is that an investigation could and should have been done better. The threshold of behaviour This is the more so when one considers the range of behaviour which is treated as triggering the ancillary positive obligation under article 3. It is clear, and regularly emphasised, that treatment must pass a minimum of severity before it falls within article 3. It is also clear, and routinely stated, that what that minimum amounts to is relative and varies according to the circumstances of the case, such as the nature and context of the punishment, the manner and method of its execution, its duration, its physical and mental effects, and in some instances the sex age and state of health of the victim. That statement derives from an early corporal punishment case, Costello Roberts v United Kingdom (1995) 19 EHRR 112, para 30. It was repeated in A v United Kingdom at para 20 and in many subsequent judgments. It is no doubt plain that in the case involving breach of the states primary obligation not to inflict inhuman or degrading treatment on its citizens, almost any physical injury perpetrated upon a citizen by a State official, typically the police, will cross the article 3 threshold. Save where necessary in the course of resisted arrest or the prevention of crime, there is simply no place in policing for causing injury of any kind to a suspect. The practice of the Strasbourg court in relation to third party violence might have built upon the relative nature of the threshold in order to limit the ancillary positive obligation to very serious violence but it has not done so. In Milanovic v Serbia numerous cuts combined with feelings of fear and helplessness were regarded (at para 87) as triggering the ancillary positive obligation. In BV v Croatia (at paras 153 and 121) injuries to the head and contusions to the body were treated likewise. It is plain from the cases that the threshold is regarded as falling, in English terms, somewhere on the scale of actual bodily harm. To that must be added rape and child sexual abuse; whether indecent assault passes the threshold remains unclear but it is perhaps likely that it may. So also one would think must be added false imprisonment (for example by relatives), violent disorder, most terrorist offences and many other crimes. It follows that the great majority of violent and sexual offences will trigger the ancillary positive obligation, and that potentially the investigation of all such offences might lead to an action under section 6 of the Human Rights Act, querying the adequacy of the police treatment of the case. It might also be noted that the application of the judicial glosses to the other rights protected by the Convention has not, as yet, received detailed consideration. But it is difficult to see why, if they are sound, they may not in principle be applied equally to other rights. In Siliadin v France [2005] ECHR 545 the Court held that the second gloss applied to article 4 at least as far as the obligation to put in place legal prohibition of forced labour was concerned, but an obligation in relation to investigation was not in issue. Some third party behaviour in relation to modern slavery might indeed be considerably more serious than actual bodily harm in a fight outside a club. Some of the cases clearly contemplate that third party infringement of article 8 rights may trigger the ancillary positive obligation: see in CAS v Romania at para 72, and Szula v United Kingdom at para 1. The possible application of that ancillary positive obligation to third party interference with the right to enjoyment of ones possessions under Article 1 Protocol 1 has yet, it seems, to be considered. But in principle, the state has a duty to protect this right in its citizens, as it has in relation to all the other rights under the Convention. If so, the prospect may exist of the response to every complaint of burglary, car theft or fraud becoming the subject of an action under the Human Rights Act. English domestic law and its relevance English law recognises a public legal duty owed by the police to enforce the law. The police enjoy a wide measure of discretion as to how to go about it, what inquiries to make, and when and whom to prosecute, but a structural failure to enforce a particular part of the law is amenable to direction by the court via judicial review on the application of any interested party: R v Comr of Police of the Metropolis, Ex p Blackburn [1968] 2 QB 118. Such a public duty is real, not abstract. That is consistent with the implied positive obligation recognised by the Strasbourg court in cases such as A v United Kingdom. English law also recognises the liability of the police to individuals where a tortious duty of care is broken, as it may be where they have directly or indirectly occasioned physical harm: Knightley v Johns [1982] 1 WLR 349 is a simple example. Further, it has a statutory scheme for the independent investigation of complaints about the police, and a different statutory scheme for the compensation of citizens who are injured through the criminal acts of others. What English law does not recognise is a duty of care in tort owed by the police to individual citizens and sounding in damages in relation to the detection of crime and the enforcement of the law. The reasons for this absence of private law duty of care were fully explained by the House of Lords in Hill v Chief Constable of West Yorkshire Police [1989] AC 53, and confirmed by that court in Brooks v Comr for the Police of the Metropolis [2005] 1 WLR 1495, [2005] UKHL 24 and in Van Colle v Chief Constable of Hertfordshire Police [2008] UKHL 50, [2009] AC 225; Smith v Chief Constable of Sussex Police [2008] UKHL 50, [2009] AC 225; and by this court in Michael v Chief Constable of South Wales Police [2015] AC 1732, [2015] UKSC 2. They find convincing expression in the first three cases in the separate speeches of Lords Keith, Steyn, Hope, Phillips, Carswell and Brown and were supported also by Lord Bingham despite his solitary dissent on the extent of the particular duty (of prevention) under consideration in Smith. A convenient summary is perhaps afforded by the judgment of Lord Phillips in Smith at para 97: I do not find it possible to approach Hill and Brooks as cases that turned on their own facts. The fact that Lord Steyn applied the decision in Hill to the facts of Brooks, which were so very different, underlines the fact that Lord Steyn was indeed applying a core principle that had been unchallenged for many years. That principle is, so it seems to me, that in the absence of special circumstances the police owe no common law duty of care to protect individuals against harm caused by criminals. The two relevant justifications advanced for the principle are (i) that a private law duty of care in relation to individuals would be calculated to distort, by encouraging defensive action, the manner in which the police would otherwise deploy their limited resources; (ii) resources would be diverted from the performance of the public duties of the police in order to deal with claims advanced for alleged breaches of private law duties owed to individuals. The point that he [Lord Steyn] was making in Brooks, in support of the core principle in Hill, was that the principle had been enunciated in the interests of the whole community. Replacing it with a legal principle which focuses on the facts of each case would amount, in Lord Steyns words, to a retreat from the core principle. We must be careful not to allow ourselves to be persuaded by the shortcomings of the police in individual cases to undermine that principle. That was the very thing that he was warning against, because of the risks that this would give rise to. As Ward LJ said in Swinney v Chief Constable of Northumbria Police Force [1997] QB 464, 487, the greater public good outweighs any individual hardship. As Lord Hope explained in the same case at para 75: These reasons are powerful, repeated and carefully considered. They are grounded in public policy and have something in common with the considerations explained by the Strasbourg court in Osman v United Kingdom at para 116 (see above at para 112). In the briefest of terms, law enforcement and the investigation of alleged crime involve a complex series of judgments and discretionary decisions. They concern, amongst many other things, the choice of lines of inquiry, the weighing of evidence thus far assembled and the allocation of limited resources as between competing claims. To re visit such matters step by step by way of litigation with a view to private compensation would inhibit the robust operation of police work, and divert resources from current inquiries; it would be detrimental to, not a spur to, law enforcement. It is not carrying out the impugned investigation efficiently which is likely to lead to diversion of resources; on the contrary. It is the re investigation of past investigations in response to litigation which is likely to do so. Moreover, whilst there may exist a mechanism by way of summary judgment for stopping short such a re investigation if the litigation be spurious in the sense of demonstrably bad on the papers, other claims, and particularly those which turn out to be speculative, cannot thus be halted. In short, the public duty would be inhibited by a private duty of such a kind. A contemporary example can be seen in terrorist activity. It is well known that large numbers of possible activists are, to some extent or other, known to the police or security services. The most delicate and difficult decisions have to be made about whom to concentrate upon, whose movements to watch, who to make the subject of potentially intrusive surveillance and so on. It is in no sense in the public interest that, if a terrorist attack should unfortunately occur, litigation should become the forum for a review of the information held about different suspects and of the decisions made as to how they were to be dealt with. Nor is it difficult to see that it is by no means necessarily in the public interest that there should be pressure on the authorities, via the prospect of litigation, to ratchet up the surveillance of additional persons. The long standing controversy over police use of powers of stop and search, for instance in relation to the carrying of knives by youths, affords another example. It may be noted that in his separate opinion on Osman in the commission, Sir Nicholas Bratza recognised the force of these considerations: (1998) 29 EHRR at 298. As he pointed out, the difficulties highlighted by the House of Lords in Hill were well illustrated by the facts of Osman. The allegations there made by the claimant would, he said, involve an investigation not only into issues of fact but into acutely difficult questions of policy and discretion. The relevance of the position at which English law has arrived, after long consideration at the highest level, is not that English law can control the operation of the ECHR. But it is to highlight the delicate balance between the duty of the State to the public generally and its relationship to individuals in particular cases of reported or anticipated crime. That delicate balance is as applicable to the ambit of the implied ancillary positive obligation under articles 2, 3 and maybe others as it is to an action in tort in the domestic courts. When taken together with the uncertainties as to the nature and extent of the implied positive obligation as found by the second gloss on those articles, it points clearly to the undesirability of any assertion of a detailed review of the course of a particular criminal investigation by way of the Convention. It is one thing to say that a state must take seriously its protective obligation, must put in place structures which enforce the law and must not then ignore them. It is quite another to say that by way of the Convention every police investigation should be examined in detail to see whether it should have been done better, and that compensation should be paid out of the limited police resources, at the expense of other necessary expenditure on current cases, if the decision is that it should have been. These important public considerations have nowhere been examined or put into the balance in any of the Strasbourg cases on the second gloss, from MC v Bulgaria onwards. It can properly be said that the distinction between structural and operational defects may at times be difficult to make. It is, however, no more difficult than the distinction which it is suggested must be made, if operational negligence suffices, between errors which amount to breaches of article 3 and those which do not. To say that the errors must be serious and significant in order to amount to a breach of article 3 is surely more to present than to solve the difficulty. Nor is such a restriction clearly to be found anywhere in the line of Strasbourg cases relied upon. If the test is not to be simply a falling below the standard to be expected of the police, and thus the same as negligence, it is not easy to see what it is. The English cases make a clear distinction between the objectives served by a tortious duty to compensate and a Convention based duty to uphold the prohibition on inhuman or degrading treatment: see for example Lord Brown in Van Colle at para 138. In substance, the Convention based duty is not aimed at compensation but at upholding and vindicating minimum human rights standards. It is, substantially, to insist on performance of a public duty. It is now said that this distinction justifies the acceptance of a general duty under article 3 to investigate any report of past behaviour passing the threshold of that article, because such will not impinge on the common law position as firmly established in the cases beginning with Hill. The error in this argument is to seek to have it both ways. One cannot both uphold the distinction and effectively eliminate it by employing a Convention claim to serve substantially the same purpose as an action in tort. That it will do if the wide ambit of the ancillary article 3 duty is accepted, and if compensation routinely follows a finding that a criminal investigation should have been better conducted. True it is that the limitation period differs, but this will not remove the disadvantages to policing which were identified in the English cases. It may be that there is a more relaxed approach to causation in a Convention based claim, but that if anything only increases the prospect of such a claim becoming a substitute for a claim in tort. There is no doubt some difference of approach to the calculation of compensation, but the present case is a good illustration of the marginal, if not imperceptible, nature of the distinction in outcome see the judges scrupulous quantum judgment at paras 33, 130 and 143. If, on the other hand, the positive duty under article 3 is recognised to conform to the public duty, to put in place structures to outlaw the prohibited behaviour and to operate them in good faith, the Convention based claim will afford the possibility of some compensation where the English common law rules do not, but will not result in wholesale substitution of the Convention for a duty in tort. The claimants argument For the claimants Ms Kaufmann QC mounts an elegant argument. It is that the positive obligation to investigate past third party crime for which she contends is simply analogous to the Osman duty to protect from threatened violent crime. Just as the latter arises when there is a real and immediate risk of prescribed behaviour, so she contends the former arises when there is a credible report that the prescribed behaviour has already occurred. Elegant as the argument is, the two situations are not analogous. There is a clear distinction between protection from an immediately anticipated danger and inquiry into a past event. The carefully limited Osman duty arises because there is an immediate risk of death or serious injury to an identified individual, communicated to the State. By contrast, a crime of violence committed by A against B will only occasionally carry a risk of repetition, whether against B or against others; there is generally no immediate danger to an identified person. It is no doubt possible to categorise the duty to investigate reports of third party crime as deriving from the states duty to protect its citizens, in the same way as does its duty to have in place structures which make such behaviour unlawful. So viewed, the duty to investigate each reported crime can be said to be an application of cases such as A v United Kingdom. But the reality is that there is a marked and vital distinction, even if it is sometimes of degree, between structural failure to outlaw the behaviour and operational failings in the investigation of particular reports. The present case The judges findings as to what went wrong are not disputed, and were in any event largely based on the very critical internal police reports, as well as on that of the Independent Police Complaints Commission. What went wrong involved plain structural errors. The Metropolitan Police had a written policy for recognising and dealing with cases of drug induced rape but it was institutionally treated as mere form and there was no proper training in its application. The complaints made by the claimants were simply not accorded the kind of weight which they demanded because of generic failures to treat them with sufficient care and gravity. Moreover there was pressure internally to write off cases of the kind here encountered. The various detailed failings in the conduct of the inquiry were largely attributable to this flawed structural approach. They included those set out by Lord Kerr at para 51. There is, as explained at the outset, no appeal as to quantum. In those circumstances, this is a case which falls within the ancillary positive duty under article 3, as it ought to be interpreted. It is for that reason that I agree that the appeal in the present case ought to be dismissed. LORD MANCE: I have read with benefit the three judgments prepared in this case by Lord Kerr, Lord Neuberger and Lord Hughes. The result is not in doubt, but there is a significant difference between Lord Kerr and Lord Neuberger on the one hand and Lord Hughes on the other regarding the extent to which the Convention rights, as domesticated by the Human Rights Act 1998, should be seen as imposing on the State an operational duty to investigate serious offences the commission of which there is no reason to attribute to state agents. If there is such a duty, then I do not see that it can or should be confined to the victim of the offence in question. Part of its purpose must be not only to punish, but also to deter and to prevent the occurrence of further such offences, and, if a third person suffers foreseeably as a result of a failure properly to investigate, that third person appears to me, potentially at least, to be a victim. There is much force in Lord Hughes analysis and critique in relation to the question whether any such general duty exists. What has happened in the Strasbourg jurisprudence is, unfortunately, not unprecedented. The European Court of Human Rights starts from a solidly rationalised principle, but then extends it to situations to which the rationale does not apply, without overt recognition of the extension, without formulating any fresh rationale and relying on supposed authority which does not actually support the extension. Further, the European Court of Human Rights has not in the present context really focused at any stage on the implications for policing of the general duty which it has suggested. These have been discussed domestically in a number of common law cases, and include the risks of defensive policing and of police priorities being affected by the perceived risk of being sued, as well as the significant financial implications of exposing the police to all those potentially affected by any failure in police investigative work: see eg Michael v Chief Constable of South Wales Police [2015] UKSC 2; [2015] AC 1732, paras 121 122. In these circumstances, while appreciating the pressures under which the European Court of Human Rights operates, and the difficulties of maintaining coherence and discipline in a court consisting in the first instance of multiple chambers, an approach, careful to identify, rationalise and justify any significant development of principle, would save domestic litigants and courts time, effort and expense. The starting point is the positive duty on the State under article 3 not to subject anyone to torture or to inhuman or degrading treatment or punishment. One (solidly rationalised) principle which the Court has derived from that duty, by way of gloss, is an ancillary positive duty to conduct an effective official investigation where an individual raises an arguable case that he has been seriously ill treated by the police or other such agents of the State unlawfully and in breach of article 3: Assenov v Bulgaria (1998) 28 EHRR 652, para 102; the basis for this being that: If this were not the case, the general legal prohibition of torture and inhuman and degrading treatment and punishment, despite its fundamental importance, would be ineffective in practice and it would be possible in some cases for agents of the state to abuse the rights of those within their control with virtual impunity. This is a coherent gloss, derived from the rationale of article 3. It was repeated in Sevtap Veznedaroglou v Turkey (Application No 32357/96), para 32, cited in Jacobs, While and Overys The European Convention on Human Rights (OUP, 2014) where this rationalisation is cited as the basis of any positive investigative duty. The Supreme Court in R (Smith) v Oxfordshire Assistant Deputy Coroner [2010] UKSC 29; [2011] 1 AC 1, expressed a similar understanding of the parallel ancillary investigative duty capable of arising under article 2 (providing that Everyones right to life shall be protected by law): the investigative obligation under article 2 arose only in circumstances where there was ground for suspicion that the state might have breached a substantive obligation under article 2, and the death of a soldier on active service did not of itself raise a presumption of such a breach: see headnote, holding (2). At paras 200 212, I examined both the Strasbourg and the domestic jurisprudence on this point, including the analysis of the point by the House of Lords in the prior authority of R (Middleton) v West Somerset Coroner [2004] 2 AC 182, para 3 per Lord Bingham, and R (Gentle) v Prime Minister [2008] AC 1356, para 6, per Lord Bingham. The investigative duty was in short parasitic. At para 210, I examined the various specific situations in which the European Court of Human Rights had held that there was sufficient State involvement to give rise to a substantive obligation to protect, combined with a parasitic duty to investigate after the event: killings by State agents and deaths of persons in custody or mental health detainees, deaths of conscripts, as well as situations where under the principle in Osman v United Kingdom (1998) 29 EHRR 245, the State was on notice of a specific and immediate threat to someones life and bound accordingly to take protective steps. In para 211, I pointed out the distinction between the procedural investigative obligation arising in such circumstances and the general substantive obligation under article 2 to establish an appropriate regulatory, investigatory and judicial system. To my mind, Lord Hughes analysis fits perfectly with what the House and the Supreme Court then understood to be the law under article 2, and I believe would also have thought the law to be under article 3, since there is no reason to differentiate in this respect between them. The case of MC v Bulgaria (2005) 40 EHRR 20 was not even cited in R (Smith) and there is reason to believe that its potential significance under these articles was not appreciated until much more recently: see paras 149 and 150 below. It is at this point that the European Court of Human Rights extended a solidly rationalised principle to situations to which the rationale did not apply. What it did in MC v Bulgaria (2005) 40 EHRR 20, para 151, was to cite Assenov, para 102, in support of propositions that: In a number of cases article 3 of the Convention gives rise to a positive obligation to conduct an official investigation. Such positive obligations cannot be considered in principle to be limited solely to cases of ill treatment by state agents. The other case cited in support of the second sentence was Calvelli and Ciglio v Italy (Application No 32967/96), where the Court remarked that procedural shortcomings had led to a time bar in relation to any criminal proceedings against the (private) doctor involved, but that the complainants had been able to commence civil proceedings, which, but for the fact that they chose to settle them, would in the special circumstances of the instant case, have satisfied the positive obligations arising under article 2: para 55. This reasoning and decision do not directly address the subject matter of either sentence cited above, and offer negligible support for any departure from the rationale of any investigative obligation stated in Assenov. It is also consistent with a requirement that there should be a sufficient system for redress. On this authority has however been piled a weight of subsequent Strasbourg caselaw, including some recent Grand Chamber authority, to the effect that the investigative duty is not, or not necessarily, confined to cases of suspected misdoing or default by State agents. Lord Kerr and Lord Neuberger have examined this caselaw. While its foundations or rationale may be shaky, I cannot ignore at any rate the clear terms in which the conclusion has now so often been expressed, to the effect that the States positive investigative obligation can arise even where the relevant offence is not arguably attributable to any State agent. There are however some caveats that I would make, based on such explanations as the Court has given as to the working of this extended duty: i) The Court has reiterated that the scope of the States positive obligations might differ between cases where treatment contrary to article 3 of the Convention has been inflicted through the involvement of State agents and cases where violence in inflicted by private individuals: see eg Beganovi v Croatia [2009] ECHR 992, para 62, Vasilyev v Russia [2009] ECHR 2078, para 100 and other cases cited by Lord Neuberger in para 88. This must mean something in practice, even though the Court went on to say that the requirements as to an official investigation are similar. ii) The Court has also repeatedly emphasised that it is not concerned with allegations of errors or isolated omissions in the investigation. A statement to that effect appears in the seminal authority of MC v Bulgaria, para 168, and is repeated in CAS v Romania (2015) 61 EHRR 18, para 69, BV v Croatia (Application No 38435/13) and BV v Belgium (Application No 61030/08), paras 55 61. In place of what was once understood to be a distinction between casual errors of judgments or acts of negligence, consisting of operational as opposed to systematic failures by state servants or agents, there is now a distinction to be drawn between simple errors or isolated omissions in the investigation and more serious failings. In this connection, I agree with Lord Hughes, para 123, that there is no basis for treating this qualification on the scope of the positive investigative duty under article 3 as confined to Strasbourg as a supra national court, and as irrelevant to the English domestic courts interpretation of article 3. I had understood Lord Kerr to suggest the contrary, but he has clarified in paras 27 to 30 that this is not the case. iii) In paras 27 to 30, Lord Kerr expresses a conclusion that the only shortcomings relevant when it comes to the operational duty to conduct an investigation are those which are conspicuous or substantial, or really serious, or egregious or obvious and significant. Lord Hughes considers that this is more to present than to solve the difficulty, and that no such restriction is clearly to be found anywhere in the line of Strasbourg cases relied on: para 136. But a distinction between mere shortcomings and more serious failures is at least consistent with the Courts statements of principle set out in the previous subparagraph, and appears in the reasoning in Mustafa Tun v Turkey (Application No 24104/05), paras 189, 192 and 195. It is also consistent with the Courts more general jurisprudence, to the effect that: ill treatment must attain a minimum level of severity if it is to fall within the scope of article 3. The assessment of this minimum is, in the nature of things, relative; it depends on all the circumstances of the case, such as the nature and context of the treatment, the manner and method of its execution, its duration, its physical or mental effects and, in some instances, the sex, age and state of health of the victim See Kudla v Poland [2000] 35 EHRR 198, para 91; and also A, B and C v Ireland (2011) 53 EHRR 13, paras 164 165. It is evident from the way the Court explains the assessment of the minimum level of severity that it is not going to be easy to predict where it falls in any individual case. iv) The investigative duty currently under consideration should not be confused with, and cannot be treated as part of, an Osman type duty on the state to act in the face of a real and immediate threat imperilling the life or bodily well being of a potential victim. That would involve mining and extending a separate strand of Strasbourg caselaw. In some cases, it would mean there was no investigative duty at all, if no real and immediate threat was apparent to anyone, or anyone other than the original victim, following the original offence. The investigative duty which the Strasbourg case law, in my opinion, now recognises is not tied down by any such restriction. It arises from the fact of the offence. I endorse what Lord Hughes says on this aspect in his paras 137 138. Finally, I do not accept that Lord Binghams well known cautionary remarks in R (Ullah) v Special Investigator [2004] UKHL 26; [2004] 2 AC 323 were confined to the international level (whatever relevance that would mean they had domestically). They were, and have correctly been understood in later authority, such as R (Al Skeini) v Secretary of State for Defence [2007] UKHL 26; [2008] AC 153, as guidance relating to the general approach which domestic courts should take. The general aim of the Human Rights Act was to align domestic law with Strasbourg law. Domestic courts should not normally refuse to follow Strasbourg authority, although circumstances can arise where this is appropriate and a healthy dialogue may then ensue: see eg R v Horncastle [2009] UKSC 14; [2010] 2 AC 373; Manchester City Council v Pinnock [2010] UKSC 45; [2011] 2 AC 104, para 48 and Chester v Secretary of State for Justice [2031] UKSC 63, [2014] 1 AC 271, paras 27 28. Conversely, domestic courts should not, at least by way of interpretation of the Convention rights as they apply domestically, forge ahead, without good reason. That follows, not merely from Ullah, but, as Lord Hoffmann said in In re G (Adoption: Unmarried Couple) [2008] UKHL 38; [2009] 1 AC 173, para 36, from the ordinary respect attaching to the European Court of Human Rights and the general desirability of a uniform interpretation of the Convention in all member states. There are however cases where the English courts can and should, as a matter of domestic law, go with confidence beyond existing Strasbourg authority: see eg Rabone v Pennine Care NHS Foundation Trust [2012] UKSC 2; [2012] 2 AC 72. If the existence or otherwise of a Convention right is unclear, then it may be appropriate for domestic courts to make up their minds whether the Convention rights should or should not be understood to embrace it. Further, where the European Court of Human Rights has left a matter to States margin of appreciation, then domestic courts have to decide what the domestic position is, what degree of involvement or intervention by a domestic court is appropriate, and what degree of institutional respect to attach to any relevant legislative choice in the particular area: see In re G, paras 30 38, per Lord Hoffmann, para 56, per Lord Hope and paras 128 130, per Lord Mance.

Between 2003 and 2008, John Worboys, the driver of a black cab in London, committed sexual offences against many women. The respondents were two of his victims and both reported their assault to the police. DSD was one of Worboys first victims. She was attacked in 2003. After her assault Worboys was not identified as her assailant. In NBVs case, following an attack in 2007, Worboys was quickly arrested as a suspect but released without charge. Following a review of sexual assault cases by police in February 2008, cases were identified which involved a particular modus operandi by the perpetrator. This resulted in a police media appeal. This led to DSD and NBV being identified as his victims. Many other women were also identified as being victims of his attack. Worboys was eventually convicted of 19 counts of sexual assault, including the assault on NBV. Both women brought proceedings against the police, alleging failure to conduct effective investigations into Worboys crimes. They claimed that these failures constituted a violation of their rights under article 3 of the European Convention on Human Rights (ECHR), which provides that no one shall be subjected to torture or inhuman or degrading treatment or punishment. The main issue was to what extent article 3 imposes a positive obligation on states effectively to investigate reported crimes perpetrated by private individuals. The High Court and the Court of Appeal held that a positive obligation to investigate did exist and that, in this case, this obligation had been breached. Compensation was awarded to the respondents. The Commissioner of Police of the Metropolis appealed to the UK Supreme Court, although it was accepted that, whatever the outcome of the appeal, recoupment of any of the compensation paid would not be sought. The Supreme Court unanimously dismisses the appeal. Lord Kerr gives the main judgment, with which Lady Hale agrees. Lord Neuberger agrees with Lord Kerr but also gives a judgment with which Lady Hale agrees. Lord Hughes and Lord Mance give separate judgments with differing reasons but agreeing with the outcome. The main area of dispute is the nature of the positive obligation imposed by article 3 of the ECHR, particularly the issue of whether the obligation relates only to systemic failures or whether it also includes operational failures [6]. Lord Kerr examines the ECHR case law supporting the existence of the positive obligation under article 3 and concludes that there is an operational duty to conduct a proper inquiry into behaviour amounting to a breach of article 3 [20, 54 58]. In order to be an effective deterrent, laws which prohibit conduct constituting a breach of article 3 must be rigorously enforced and complaints of such conduct must be properly investigated [24]. Deficiencies in investigations do not have to be part of a flawed approach of the system generally for a breach of article 3 to arise. It is clear, however, that errors must be serious in order to give rise to such a breach [29 30]. The ECtHR case law demonstrates a clear and constant line of authority to the effect that the state has a duty to conduct an effective investigation into crimes involving serious violence to the individual [44 48]. It has consistently been held that the positive obligation to investigate effectively is not solely confined to cases of ill treatment by state agents [59 62]. Lord Neuberger agrees with Lord Kerr that serious failures which are purely operational will suffice to establish a claim. ECtHR case law supports this approach. There is no basis in that case law for the suggestion that the investigatory duty should be limited to systemic, as opposed to operational, failures [85, 93]. Lord Hughes differs from this view in that he considers there is a positive obligation to ensure that there are appropriate legal structures in place but that there is no operational obligation. ECtHR case law leaves uncertainty as to the source and extent of the investigative duty [117]. The proper test for the positive obligation under article 3 to investigate reports of past violence is whether the state has a proper structure of legal and policing provision designed to punish it when it occurs and has administered that structure in good faith and with proper regard for the gravity of the behaviour under consideration. The test is not whether the investigation was careless or involved mistakes which ought not to have been made [127]. There is a breach of the positive obligation in this case as there were plain structural errors [140]. Lord Kerr considers that the fact that the police do not have a common law duty of care in tort does not extend to claims advanced under the Human Rights Act 1998 (HRA). The bases of liability are different and no assumption should be made that the policy reasons which underlie the exemption of police from common law liability apply in the same way to liability for breach of HRA obligations. The existence of a duty to investigate effectively does not depend on whether it is fair, just or reasonable to impose one [67 70]. Lord Hughes takes a different view and examines the public policy reasons why English law does not recognise a duty of care owed in tort by the police to individual citizens. Law enforcement and the investigation of alleged crime involve a complex series of judgments and discretionary decisions to re visit such matters step by step by way of litigation with a view to private compensation would inhibit the robust operation of police work. English law cannot control the operation of the ECHR, but there is a delicate balance to be struck and it is undesirable to permit detailed review of a particular criminal investigation by way of the ECHR, which is why the positive obligation should be confined to structural failings [131 132, 134]. Lord Mance considers that the distinction between operational and systemic failures has been replaced by a distinction between simple errors/isolated omissions and more serious failings, and emphasises that the positive obligation under article only relates to more serious failings [151].

This appeal raises the issue whether, as the appellants contend, a claimant who is seeking to maintain an action in passing off need only establish a reputation among a significant section of the public within the jurisdiction, or whether, as the courts below held, such a claimant must also establish a business with customers within the jurisdiction. It is an issue on which there is conflicting jurisprudence in the common law world, and it is of particularly acute significance in the age of global electronic communication. The factual background The claim in these proceedings relates to internet protocol television (IPTV), which is a way of delivering TV or video content over the internet. There are two main types of IPTV, closed circuit and over the top. Closed circuit IPTV uses dedicated bandwidth on the providers network. It requires the subscriber to have a set top box to receive the service, the signal for which is encrypted. In many respects, closed circuit IPTV services are akin to traditional cable broadcasts. However, in addition to linear television broadcasts, IPTV services typically include catch up facilities and other forms of video on demand. Over the top (OTT) IPTV involves the signal being delivered via a standard broadband connection. OTT IPTV can be viewed (with appropriate software applications) on any device with a broadband connection. The appellant claimants, Starbucks (HK) Ltd and PCCW Media Ltd, are members of a substantial group based in Hong Kong headed by PCCW Ltd, and I will refer to group members compendiously as PCCM. Since 2003, PCCM has provided a closed circuit IPTV service in Hong Kong. The service was launched under the name NOW BROADBAND TV, but in March 2006 the name was changed to NOW TV, under which it has operated ever since. By 2012, after PCCM had spent substantial sums on marketing, NOW TV had become the largest pay TV operator in Hong Kong, with around 1.2m subscribers, covering over half the households in Hong Kong. Having started with 23 channels it now has around 200, and many of the programmes are PCCMs, quite a few of them under brand names using the word NOW. Although the name of the channel has always been English, all PCCMs programmes are in Mandarin or Cantonese, but the channel also carries some English language programmes (including Sky News and Manchester Uniteds channel, MUTV). Ninety per cent of PCCMs pay TV revenue comes from subscriptions, the balance coming from advertising. People in the United Kingdom cannot receive PCCM's closed circuit service. No set top boxes for it have been supplied in the UK, no subscription has been registered to a subscriber with a UK billing address, and there is no evidence of any subscriptions having been paid for with credit or debit cards with billing addresses in the UK. Consistently with this, PCCM has never held an Ofcom licence for broadcasting in the UK. However, a number of Chinese speakers permanently or temporarily resident in the UK in 2012 were aware of the NOW TV service through exposure to it when residing in or visiting Hong Kong. On the findings made by the trial judge, UK residents could also become acquainted with the NOW TV service in three other ways by 2012. First, since July 2007, the Chinese language content had been accessible free of charge via PCCMs own websites. Secondly, programmes and trailers from the NOW TV service had been available free of charge on PCCMs channel on the YouTube website. Thirdly, a few of PCCMs programmes from its NOW TV service had been available as videos on demand on various international airlines, three of which flew into the UK, but none of whose in flight magazines made reference to NOW TV. PCCM had been giving consideration to expanding its NOW TV subscription service internationally, including into the UK, since some time in 2009, when it began discussions with a potential UK partner, and those discussions had been continuing during 2012. In June 2012, PCCM had launched a NOW player app in the UK, both on its website and via the Apple App Store, in order to warm up the market for the launch of PCCMs NOW TV on the platform of its proposed UK partner. The app and the channels were to be targeted at the Chinese speaking population in the UK. By October 2012, just over 2,200 people in the UK had downloaded the app. Meanwhile, on 21 March 2012, the three respondent defendants, British Sky Broadcasting Group PLC, British Sky Broadcasting Ltd and Sky IP International Ltd, who are all part of the British Sky Broadcasting Group, and have been referred to throughout these proceedings as Sky, announced that they intended to launch a new IPTV service under the name NOW TV, as an OTT service. They subsequently effected that launch in beta form in mid July 2012. The development of Skys NOW TV service had begun with a presentation to their operating executives in late March 2011, and, after consulting an external branding organisation, Sky chose the name Sky Movies NOW in September 2011. However, further consideration suggested that it would be unwise to include the word Sky in the name of the new service, and a consumer research agency was instructed to address the naming issue. The agency recommended simply using the word Now, and Sky decided to follow that advice, while including the phrase Powered by Sky in the branding. The instant proceedings On 19 April 2012, PCCM began these proceedings, seeking to prevent Sky from using the name NOW TV in connection with its OTT IPTV service in the UK, on the grounds that the use of that name amounted to passing off. (There was also a claim that it infringed a trade mark registered in the name of PCCM. That claim was dismissed by the courts below and is not pursued in this appeal.) The claim came before Arnold J, and in the course of his judgment, he found that a substantial number of Chinese speakers permanently or temporarily resident in the UK were acquainted with PCCMs NOW TV service through exposure to it when residing in or visiting Hong Kong. He also found that PCCMs NOW TV service had acquired a reputation amongst members of the Chinese speaking community in the UK, based on their exposure to it via PCCMs NOW TV channel on the YouTube website and PCCMs NOW TV websites (together the websites) as well as the showing of PCCMs programmes on international flights. Arnold J held that this reputation was modest but more than de minimis. However, Arnold J dismissed PCCMs claim. He rejected the argument that it was sufficient for PCCM to identify a body of people in the UK who associated the mark NOW TV with its IPTV service in Hong Kong: they were not customers in the UK, and therefore did not represent goodwill in the jurisdiction. He also considered that the mere accessibility of PCCMs material in the UK via the websites did not give rise to a protectable goodwill, stating that the key question is whether the viewers of PCCMs programmes in the [UK] were customers for its service so as to give rise to a protectable goodwill in the UK [2012] EWHC 3074 Ch, [2013] FSR 29, para 147. Two paragraphs later, he said that the contention that viewers in the UK of PCCMs programmes on the websites represented goodwill would, as he put it, stretch the concept of customer to breaking point. As he explained, if it were otherwise, hundreds of television channels worldwide would have customers, and hence protectable goodwill, in the UK, as a result of the YouTube website. In para 150 of his judgment, he concluded that the reality was that PCCM's primary purpose in making programme content available via YouTube, its own websites and international airlines was to promote its Hong Kong business by encouraging people to subscribe in Hong Kong. Therefore, he held that PCCMs customers were its viewers in Hong Kong, but not viewers in the UK, and so its business had goodwill in Hong Kong but not in the UK, so that the passing off claim failed. Arnold J nonetheless added in para 158 that, if he had found PCCM to have a protectable goodwill in the UK, he would have accepted that there was a likelihood that a substantial number of UK viewers who were previously familiar with PCCMs NOW TV would wrongly believe that Skys NOW TV emanated from the same or a connected source. Arnold J gave PCCM permission to appeal against his decision on the passing off claim. PCCMs appeal to the Court of Appeal was dismissed for reasons given by Sir John Mummery, with whom Patten and Pitchford LJJ agreed [2013] EWCA Civ 1465, [2014] FSR 20. The Court of Appeal essentially agreed with Arnold Js analysis as briefly summarised in para 11 above. In the circumstances, they did not need to deal with the issues raised in Skys respondents notice, in which it was contended that Arnold J had erred in finding that (i) the reputation of PCCM's NOW service in the UK was more than de minimis, and (ii) internet users visiting PCCMs website could access any video content from the UK at any relevant time. With the permission of this Court, PCCM now appeals against the decision of the Court of Appeal, upholding Arnold Js dismissal of its passing off claim. The issue on this appeal As Lord Oliver of Aylmerton explained in Reckitt & Colman Products Ltd v Borden Inc [1990] 1 WLR 491, [t]he law of passing off can be summarised in one short general proposition no man may pass off his goods as those of another. As he immediately went on to say, a claimant, or a plaintiff as it was then, has to establish three elements in order to succeed in a passing off action: First, he must establish a goodwill or reputation attached to the goods or services which he supplies in the mind of the purchasing public by association with the identifying get up (whether it consists simply of a brand name or a trade description, or the individual features of labelling or packaging) under which his particular goods or services are offered to the public, such that the get up is recognised by the public as distinctive specifically of the plaintiffs goods or services. Secondly, he must demonstrate a misrepresentation by the defendant to the public (whether or not intentional) leading or likely to lead the public to believe that goods or services offered by him are the goods or services of the plaintiff. Whether the public is aware of the plaintiffs identity as the manufacturer or supplier of the goods or services is immaterial, as long as they are identified with a particular source which is in fact the plaintiff. Thirdly, he must demonstrate that he suffers or that he is likely to suffer, damage by reason of the erroneous belief engendered by the defendants misrepresentation that the source of the defendants goods or services is the same as the source of those offered by the plaintiff. It is common ground that, in order to succeed, a claimant in a passing off action has to establish its claim as at the inception of the use complained of. Although there is no decision of the House of Lords specifically to that effect, it is supported by a number of Court of Appeal decisions, perhaps most clearly from Anheuser Busch Inc v Budejovicky Budvar NP [1984] FSR 413, 462, and it appears to me that it must be right. Accordingly, as the Judge accepted, PCCM had to establish the three elements (or, on one view of PCCMs case on the first element, an updated version of the three elements) identified by Lord Oliver, in relation to the NOW TV mark for IPTV services as at 21 March 2012, the date when Sky went public about its imminent intention to launch its IPTV service in the UK under the name NOW TV. Subject to the issues raised by Sky in their respondents notice, and based on the conclusions reached by the Judge, PCCM established the second and third of the three elements identified by Lord Oliver. The argument on this appeal has therefore focussed on the first element, namely the requirement that PCCM must establish what Lord Oliver referred to as a goodwill or reputation attached to the goods or services which he supplies in the mind of the purchasing public by association with the relevant get up, viz. the mark NOW TV with PCCMs IPTV service. The Judge and the Court of Appeal thought that it was not enough for PCCM to establish that it had a reputation among a significant number of people in this country, if it had no goodwill in this country. Thus, they considered that the fact that there were people in this country who associated NOW TV with PCCMs product would not satisfy the first element, if those people were not or had not been customers for PCCMs product in this country. They also considered that the fact that people in this country had been exposed to PCCMs NOW TV products via the websites and the showing of PCCMs programmes on international flights did not make them customers for the purpose of establishing goodwill in this country. On behalf of Sky, Mr Hobbs QC, who appeared with Mr Purvis QC and Mr Hollingworth, supported these conclusions. Mr Silverleaf QC, who appeared with Ms Pickard for PCCM, argued that the courts below were wrong, and in particular that (i) it was sufficient for PCCM to succeed in its passing off claim that it had established a reputation for the NOW TV name in connection with its IPTV service among a significant number of people in this country, even if they were not customers of PCCMs IPTV services in this country, but in Hong Kong, and (ii) in any event, PCCM had customers in this country, because a significant number of people were PCCMs customers in this country by virtue of having been exposed to PCCMs programmes on the websites and on international flights. The House of Lords and Privy Council authorities and Anheuser Busch In the course of their excellent arguments, each counsel referred to a number of judgments to support their respective cases. A degree of caution is appropriate when considering these earlier cases, for two reasons. First, in many (but not all) of the cases, the precise issue which this appeal raises was not being considered, and therefore the judges may not have had that issue in the forefront of their minds or have received full argument in connection with it. Secondly, (despite certifying in its notice of appeal that PCCM would not be inviting this Court to depart from any decision of the House of Lords) Mr Silverleaf argued that we should, if necessary, develop the law so that it accords with their case: thus, it would not automatically be enough to conclude that the reasoning in a previous decision of the House of Lords effectively disposes of this appeal. Nonetheless, it does appear that the courts in the United Kingdom have consistently held that it is necessary for a claimant to have goodwill, in the sense of a customer base, in this jurisdiction, before it can satisfy the first element identified by Lord Oliver. That this has been the consistent theme in the cases can be well established by reference to a series of House of Lords decisions, and a decision of the Judicial Committee of the Privy Council, over the past century. In AG Spalding & Bros v AW Gamage Ltd (1915) 32 RPC 273, 284, Lord Parker of Waddington said that the nature of the right the invasion of which is the subject of [a] passing off action was a right of property in the business or goodwill likely to be injured by the misrepresentation, and, at least unless the concept of goodwill is given a significantly wider meaning than that which it naturally has, it would not extend to a mere reputation. Thus, in Inland Revenue Commissioners v Muller & Cos Margarine Ltd [1901] AC 217, 235, Lord Lindley explained that goodwill is inseparable from the business to which it adds value, and, in my opinion, exists where the business is carried on. As he went on to explain, goodwill can have a distinct locality even within a particular jurisdiction. Observations of Lord Macnaghten, Lord James of Hereford and Lord Brampton at pp 224, 228 and 231 233 respectively were to much the same effect. Although the observations were made in the context of a revenue case, they purported to be general statements about the meaning of goodwill. In T Oertli AG v EJ Bowman (London) Ltd [1959] RPC 1, the House of Lords unanimously upheld a decision of the Court of Appeal, where Jenkins LJ had said that it was of course essential to the success of any claim in respect of passing off based on the use of a given mark or get up that the plaintiff should be able to show that the disputed mark or get up has become by user in this country distinctive of the plaintiffs goods see at [1957] RPC 388, 397. In another passing off case, Star Industrial Co Ltd v Yap Kwee Kor [1976] FSR 256, 269, Lord Diplock, giving the advice of the Privy Council, referred to and relied on the observations of Lord Parker in Spalding. Lord Diplock explained that [g]oodwill, as the subject of proprietary rights, is incapable of subsisting by itself, having no independent existence apart from the business to which it is attached. He went on to explain that it is local in character and divisible, so that if the business is carried on in several countries a separate goodwill attaches to it in each. In Erven Warnink BV v J Townend & Sons (Hull) Ltd [1979] AC 731, 752, Lord Fraser of Tullybelton quoted Lord Diplocks observations in Star Industrial with approval. At pp 755 756, he went on to identify five facts which it was essential for a plaintiff to establish in a passing off action, of which the first was that his business consists of, or includes, selling in England a class of goods to which a particular trade name applies. In the same case, Lord Diplock at p 742, citing Spalding, identified five characteristics which must be present in order to create a valid cause of action for passing off, which included caus[ing] actual damage to a business or goodwill of the [plaintiff]. Viscount Dilhorne, Lord Salmon and Lord Scarman agreed with both speeches. In the passage in his speech in Reckitt & Colman, quoted in para 15 above, Lord Oliver referred to a goodwill or reputation in the mind of the purchasing public, and at p 510, Lord Jauncey of Tullichettle referred to a requirement that the plaintiffs goods have acquired a reputation in the market and are known by some distinguishing feature. Lord Bridge of Harwich (with undisguised reluctance, albeit not in connection with the point at issue), Lord Brandon of Oakbrook and Lord Goff of Chieveley agreed with both speeches. The ratio of the decision of the Court of Appeal in Anheuser Busch was indisputably that, in order to support a passing off claim, the claimant must establish goodwill in the form of customers for its goods or services within the jurisdiction. In that case the importation from the United States of bottled beer under the plaintiffs BUDWEISER mark for use and sale in US military and diplomatic establishments within the UK and other European countries did not entitle the plaintiff to establish what Lord Oliver later stated was the first element of a passing off claim in relation to the UK, at any rate outside those establishments. Oliver LJ (later of course Lord Oliver) said at p 470 that the sales of 5,000,000 cases of bottles over 12 years in US diplomatic and military establishments in European countries were sales for a very special market having no connection with the market in the countries in which the consumption actually took place; having said that, he accepted that there could well be a localised goodwill within the diplomatic and military establishments. He also emphasised that the fact that the BUDWEISER mark may have had a reputation among a significant number of people in the UK did not assist the plaintiff as it involved confus[ing] goodwill, which cannot exist in a vacuum, with mere reputation, adding that reputation which may, no doubt, and frequently does, exist without any supporting local business, does not by itself constitute a property which the law protects. OConnor and Dillon LJJ expressed similar views at pp 471 472 and 476 respectively. PCCMs case PCCM contends that, particularly in an age of global electronic communication and relatively quick and cheap travel, it is inconsistent with commercial reality and unrealistic in terms of practicality to treat the reputation or goodwill associated with a mark for a particular product or service as limited to jurisdictions in which there is a business with customers for the product or service, and incapable of extending to jurisdictions in which the mark is simply associated with the particular product or service as a matter of reputation. More specifically, PCCM argues that, in any event, on the facts found by Arnold J, it had a sufficient goodwill or reputation in the mind of the purchasing public [in the United Kingdom] by association with the identifying get up of NOW TV attached to its products and services, namely its IPTV service, to satisfy the first element, as identified by Lord Oliver, of its passing off claim. On behalf of PCCM, Mr Silverleaf contended that the notion that goodwill should be limited to jurisdictions where the claimant had business is wrong in principle: the question of where the claimant had goodwill was a matter of fact and evidence, not a matter of law. Further, in the present age of international travel and the presence of the internet, he argued that it would be anachronistic and unjust if there was no right to bring passing off proceedings, particularly in relation to an electronically communicated service, in a jurisdiction where, as a matter of fact, the plaintiffs mark had acquired a reputation. He suggested that the mere fact that the customers are in Hong Kong when they enjoy the service should not undermine PCCMs case that they have such a reputation here which deserves to be protected. He also submitted that the law would be arbitrary if PCCM had no right to bring passing off proceedings despite having a reputation in this country simply because users did not pay when they viewed PCCMs programmes free on the websites. Mr Silverleaf contrasted what he suggested was the slight difference between the present case and cases such as Sheraton Corporation of America v Sheraton Motels Ltd [1964] RPC 202. In that case, Buckley J held that a United States hotel company had a sufficiently arguable case for saying that it had goodwill in the UK to justify an interlocutory injunction against use of its mark; the goodwill was based on the fact that customers living in the United Kingdom booked rooms in the plaintiffs hotels through the plaintiffs London office or through UK based travel agents. So far as authorities are concerned, Mr Silverleaf suggested that there was no decision of the House of Lords which was inconsistent with this analysis, and, if we concluded that there was, we should depart from it. He accepted that some of the reasoning of the Privy Council in Star Industrial and the decision and reasoning of the Court of Appeal in Anheuser Busch were inconsistent with PCCMs argument, but rightly said that we were not bound by them. He also relied on some decisions of the English courts to which I have not so far referred, some decisions of courts in other common law jurisdictions, and the economic and practical realities of the early 21st century. Lord Diplocks suggestion in Star Industrial that, if business is carried on in more than one country there is a separate goodwill in each country, has been questioned in more than one domestic case. Thus, in two first instance decisions, Graham J suggested that the geographical boundaries of any goodwill should be a question of fact in each case, rather than one of law see Baskin Robbins Ice Cream Co v Gutman [1976] FSR 545, 547 548 and Maxims Ltd v Dye [1977] 1 WLR 1155, 1159, 1162. Megarry V C in Metric Resources Corporation v Leasemetrix Ltd [1979] FSR 571, 579 also expressed some doubt about Lord Diplocks view on this point. And Lord Diplocks analysis was described as not being an exactly accurate rendering of what was said in Inland Revenue Commissioners v Muller's Margarine by Lloyd LJ (with whom Jacob and Stanley Burnton LJJ agreed) in Hotel Cipriani Srl v Cipriani (Grosvenor Street) Ltd [2010] EWCA Civ 110, [2010] RPC 485, para 99, although Lloyd LJ clearly considered that the actual decision in Star Industrial was correct. As he concluded, however, in para 106, Anheuser Busch was binding authority for the proposition that an undertaking which seeks to establish goodwill in relation to a mark for goods cannot do so, however great may be the reputation of his mark in the UK, unless it has customers among the general public in the UK for those products. So far as Anheuser Busch is concerned, as I have already indicated, the fact that the decision proceeded on the basis that a plaintiff in a passing off action must have goodwill, in the form of customers, in the jurisdiction did not represent any departure from an approach already approved by the House of Lords. As Oliver LJ pointed out at p 464, Lord Diplock in Erven Warnink at p 744 stated that a plaintiff must have used the descriptive term long enough on the market in connection with his own goods and have traded successfully enough to have built up a goodwill for his business, and, as Oliver LJ then observed, this emphasises the point that goodwill (as opposed to mere reputation) does not exist here apart from a business carried on here. As Oliver LJ went on to say, the same feature emerges with even greater clarity from the decision of the Privy Council in Star Industrial. And Dillon LJ in Anheuser Busch at pp 475 476 cited Spalding, Star Industrial and Inland Revenue Commissioners v Muller to make the same point. A number of first instance, mostly interlocutory, cases were cited by Mr Silverleaf to support his argument that there is or should be no requirement that a claimant in a passing off action should be able to establish goodwill, as opposed to mere reputation, in the jurisdiction concerned. I do not think that any of the decisions in question assists PCCM. In La Socit Anonyme des Anciens tablissements Panhard et Levassor v Panhard Levassor Motor Company Ltd [1901] 2 Ch 513, it is true that the French motor car manufacturer plaintiffs, as Farwell J put it at p 516, did not sell directly in England. However, as he went on to explain, their cars were brought and imported into England, so that England was one of their markets. As Dillon LJ put it in Anheuser Busch at pp 477 478, the French plaintiffs there had a market for their cars with the general public in this country through the importers who had obtained licences from the third parties who had relevant patent rights and the reputation, when the cars were imported into this country, enured to the French plaintiffs. Nor does Sheraton help PCCM. As explained in para 29 above, the US hotel company had a booking office and agents in London, so it had customers in England. In Suhner & Co AG v Suhner Ltd [1967] RPC 336, Plowman J made no conclusive finding that the plaintiff had goodwill in the UK, but it is clear that its goods had been sold here see at pp 337 338. In Globelegance BV v Sarkissian [1974] RPC 603, Templeman J reviewed many of the authorities at pp 609 613, and clearly accepted that it was necessary to have custom in this country, concluding that [p]ure advertisement is clearly insufficient [but taking] bookings [is] sufficient [as is] carrying out orders in this country. He then decided that the activities of the plaintiff in that case, selling patterns to a department store, who then used the patterns to make up dresses which were sold under the plaintiffs mark, was enough. In a significant number of other cases at first instance, it is clear that, well before the Court of Appeal decision in Anheuser Busch, Chancery Judges considered that a plaintiff had to establish at least an arguable case that it had business in the UK before it could obtain an interlocutory injunction against passing off. Before turning to them, it is instructive to refer to Maxwell v Hogg (1867) LR 2 Ch 307, which appears to have been the first case in which an English court specifically decided that mere reputation, without customers, was not enough to found a passing off claim. The Court of Appeal held that the plaintiffs advertising campaign in respect of a proposed new newspaper called Belgravia with a view to imminent publication did not give him any right to enjoin the defendant from publishing a newspaper with the same name. Turner LJ, after mentioning the inconvenience of a plaintiff who had not even used the mark being able to restrain someone else from doing so, said at p 312 that the plaintiff had neither given, nor come under any obligation to give, anything to the world; so that there is a total want of consideration for the right which he claims. Cairns LJ at pp 313 314, explained that the plaintiff had no right of property for which he could claim protection, as there has been no sale, or offering for sale, of the articles to which the name is to be attached. More recent cases which support Skys case include the decisions of Pennycuick J in Alain Bernardin et Cie v Pavilion Properties Ltd [1967] RPC 581, Brightman J in Amway Corporation v Eurway International Ltd [1974] RPC 82, and Walton J in Athletes Foot Marketing Associates Inc v Cobra Sports Ltd [1980] RPC 343. In Alain Bernardin, Pennycuick J held that the plaintiffs could not obtain an injunction against the use of the mark CRAZY HORSE in the UK, even though they could establish a reputation here for its cabaret in Paris under that name. The plaintiffs problem was that they could not identify any business done in the UK, either directly or indirectly (to use Farwell Js expression in Panhard), in connection with their Crazy Horse Saloon in Paris, and the mere distribution of advertisements was not enough (hence Templeman Js observation in Globelegance [1974] RPC 603). In other words, there does not seem to have been any evidence of any customers in England of the plaintiffs Paris establishment as opposed to people in England who visited that establishment when they were in Paris (see at p 582). Mr Silverleaf pointed out that the reasoning of Pennycuick J caused Sir Nicolas Browne Wilkinson V C some concern in Pete Waterman Ltd v CBS United Kingdom Ltd [1993] EMLR 27, 53 55. At pp 53 54, Sir Nicolas said that Pennycuick Js reasoning was based on the proposition that even if the foreign trader has customers here he cannot protect his reputation unless he has conducted some business here, whereas the Vice Chancellor thought that the law was or should be that [i]f there is a use by the foreign trader in this country of his name for the purposes of his trade, the piracy of that name is an actionable wrong. But, as Mr Hobbs pointed out, the decision in Alain Bernardin would have been the same if the test identified by the Vice Chancellor had been applied. Turning now to the cases in other jurisdictions, PCCM contends that decisions of the courts of Ireland, Canada, New Zealand, Australia, South Africa, Hong Kong and Singapore are consistent with its argument that a claimant does not have to establish goodwill, in the sense of actual customers, within the jurisdiction, in order to establish a claim for passing off. In C&A Modes v C&A (Waterford) Ltd [1978] FSR 126, the Supreme Court of Ireland held that the plaintiffs C&A department store in Belfast was entitled to mount a claim in passing off in the Irish Republic. At p 139, Henchy J was clearly unhappy about the decision in Alain Bernardin, and said that there were in the Irish Republic sufficient customers of [the] plaintiffs business [in Belfast] to justify his claim. At pp 140 141, Kenny J rejected the argument that a passing off claim should be limited to cases where the plaintiff had acquired some of its goodwill in the Republic by user or trading in this country, and pointed out that the plaintiff in that case had customers in the Republic, where it had carried out extensive advertising on television and radio and in the newspapers. He also said that the decision in Alain Bernardin was wrong. OHiggins CJ agreed with Henchy J. I do not find this decision of much assistance in this case. As Walton J said in Athletes Foot at p 356, these judgments (at least arguably in the same way as the judgment in Pete Waterman) show a misapprehension of the reasoning in Alain Bernardin: if there had been customers of the Crazy Horse business in England, in the sense in which there were customers of the Sheraton Hotels business in England, the decision in [Alain Bernardin] surely must have been the other way. The Canadian case relied on by PCCM, Orkin Exterminating Co Inc v Pestco Co of Canada Ltd (1985) 19 DLR (4th) 90, is of no assistance. Although the plaintiffs business was conducted in the USA, it enjoyed thousands of Canadian clients who used its pest control services for their properties in Canada. At p 101 of his judgment in the Court of Appeal in Ontario, Morden JA specifically relied on the fact that the plaintiff had goodwill including having customers in Canada, although he did express disquiet about Lord Diplocks notion in Star Industrial that goodwill had to be divided up nationally. The New Zealand decision referred to by PCCM, Dominion Rent A Car Ltd v Budget Rent A Car Systems (1970) Ltd [1987] 2 TCLR 91, does not take matters much further. The ultimate decision was that both parties were entitled to use the name BUDGET in connection with their respective car hire businesses in New Zealand, and that turned on the facts. At p 101, Cooke P said that he did not think that Lord Diplock in Star Industrial should be understood as saying that goodwill should be automatically divisible between jurisdictions, describing it as unnecessarily myopic to restrict this process to national boundaries. The furthest Cooke P went in the direction PCCM argues for was at pp 101 102, where he said that he thought that an Australian companys reputation and goodwill can extend to New Zealand (and vice versa), but, importantly, he added and, at least if there is a sufficient business connection with this country, will be entitled to protection here. At pp 106 107, he said that the rental vehicle business in Australasia cannot be divided into two mutually exclusive groups of customers, those who hire vehicles for driving in Australia and those who hire vehicles for driving in New Zealand. Obviously the same persons may do both, thereby rejecting the contention that the defendant only had customers in New Zealand and the plaintiff in Australia. In his judgment, Somers J said at p 116 that a plaintiff in a passing off action must show an invasion of that intangible right of property compendiously described as goodwill which can only exist in New Zealand when attached to a business having some connection with this country. At p 120, Casey J quoted with apparent approval the view of Lord Fraser in Erven Warnink. Richardson J was in general agreement with Cooke P and Somers J, and McMullin J was in general agreement with Cooke P. Support for PCCMs case may however be found in the decision of the Federal Court of Australia in ConAgra Inc v McCain Foods (Aust) Pty Ltd (1992) 106 ALR 465, given by Lockhart J, with whom Gummow and French JJ agreed (and gave judgments of their own). After a very full review of the common law authorities (including those I have discussed above) on pp 473 501, Lockhart J said at p 504 that it was no longer valid, if it ever was, to speak of a business having goodwill or reputation only where the business is carried on, relying on [m]odern mass advertising [which] reaches people in many countries of the world, [t]he international mobility of the world population and the fact that [t]his is an age of enormous commercial enterprises. He also said at p 505 that, in his view, the hard line cases in England conflict with the needs of contemporary business and international commerce. He concluded on the next page that it is not necessary that a plaintiff, in order to maintain a passing off action, must have a place of business or a business presence in Australia; nor is it necessary that his goods are sold here, saying that it would be sufficient if his goods have a reputation in this country among persons here, whether residents or otherwise. Two points should be noted about this decision. First, the passing off claim nonetheless failed because the plaintiff was held to have an insufficient reputation in Australia. Secondly, the High Court of Australia has not considered this issue. The approach of the Supreme Court of South Africa in Caterham Car Sales & Coachworks Ltd v Birkin Cars (Pty) Ltd [1998] 3 All SA 175 (A) is to similar effect see at para 16. Indeed, at para 19, ConAgra was cited with approval. However, once again, the claim failed on the ground of insufficiency of reputation. As to Hong Kong, PCCM points out that, in Ten Ichi Co Ltd v Jancar Ltd [1989] 2 HKC 330, Sears J in the High Court on an application for an interlocutory injunction seems to have held that mere reputation was enough to found a passing off claim following an earlier Hong Kong High Court decision. However, more recently, the Court of Final Appeal in In re Ping An Securities Ltd (2009) 12 HKCFAR 808, para 17, cited Lord Oliver in Reckitt & Colman to support the (admittedly undisputed) proposition that a plaintiff must establish a goodwill (in the country or region) in a business in the supply of goods or services under the relevant get up in order to maintain a claim in passing off. Finally, Singapore. In Jet Aviation (Singapore) Pte Ltd v Jet Maintenance Pte Ltd [1998] 3 SLR(R) 713, para 45, PCCM contends that Warren LH Khoo J in the High Court appears to have followed ConAgra. I am not at all sure that he did: see at para 42. However, it is unnecessary to decide that question, because more recently, the Court of Appeal considered the issue in an impressively wide ranging judgment in Staywell Hospitality Group Pty Ltd v Starwood Hotels & Resorts Worldwide Inc [2013] SGCA 65, [2014] 1 SLR 911. After briefly considering most of the authorities to which I have referred (including the decision of Arnold J in this case), Sundaresh Menon CJ, giving the judgment of the court, explained at para 135 that the Singapore courts had largely followed Star Industrial, holding that a foreign trader which does not conduct any business activity in Singapore cannot maintain an action in passing off here, and that this draws a clear distinction between goodwill and reputation. However, as he explained in the next paragraph, this hard line approach has been softened in one respect in Singapore (citing CDL Hotels International Ltd v Pontiac Marina Pte Ltd [1998] 1 SLR(R) 975, para 58) namely where the plaintiff has started pre business activities, such as embark[ing] on massive advertising campaigns before the commencement of trading to familiarise the public with the service or product. Sundaresh Menon CJ explained at para 138 that this was consistent with two English decisions, WH Allen & Co v Brown Watson Ltd [1965] RPC 191 and British Broadcasting Corporation v Talbot Motor Co Ltd [1981] FSR 228, a view which derives some support from the judgment of Dillon LJ in Marcus Publishing plc v Hutton Wild Communications Ltd [1990] RPC 576, 584. Discussion Although I acknowledge that PCCMs case is not without force (as is well demonstrated by the reasoning in the judgments in ConAgra), I have reached the conclusion that this appeal should be dismissed on the same ground on which it was decided in the courts below. In other words, I consider that we should reaffirm that the law is that a claimant in a passing off claim must establish that it has actual goodwill in this jurisdiction, and that such goodwill involves the presence of clients or customers in the jurisdiction for the products or services in question. And, where the claimants business is abroad, people who are in the jurisdiction, but who are not customers of the claimant in the jurisdiction, will not do, even if they are customers of the claimant when they go abroad. It seems to have been the consistent view of the House of Lords and Privy Council from 1915 to 1990 that a plaintiff who seeks passing off relief in an English court must show that he has goodwill, in the form of customers, in the jurisdiction of the court. While it can be said that, in none of the cases discussed in paras 21 25 above was that point the main focus of attention, it nonetheless seems clear that that is what a succession of respected judges, many of whom had substantial experience in this area, considered to be the law. That conclusion is underlined by the reasoning and conclusion in the judgments in Anheuser Busch, and indeed the first instance judgments discussed in paras 32 36 above. It is of course open to this court to develop or even to change the law in relation to a common law principle, when it has become archaic or unsuited to current practices or beliefs. Indeed it is one of the great virtues of the common law that it can adapt itself to practical and commercial realities, which is particularly important in a world which is fast changing in terms of electronic processes, travel and societal values. Nonetheless, we should bear in mind that changing the common law sometimes risks undermining legal certainty, both because a change in itself can sometimes generate uncertainty and because change can sometimes lead to other actual or suggested consequential changes. In addition to domestic cases, it is both important and helpful to consider how the law has developed in other common law jurisdictions important because it is desirable that the common law jurisdictions have a consistent approach, and helpful because every national common law judiciary can benefit from the experiences and thoughts of other common law judges. In the present instance, the Singapore courts follow the approach of the UK courts, whereas the courts of Australia (subject to the High Court holding otherwise) and South Africa seem to favour the approach supported by PCCM. The position is less clear in other Commonwealth jurisdictions. In the United States of America, the approach appears to be consistent with that of the courts below in this case. Thus in Grupo Gigante SA De CV v Dallo & Co Inc (2004) 391 F 3d 1088 the Court of Appeals for the 9th circuit said at p 1093 that priority of trademark rights in the United States depends solely upon priority of use in the United States, not on priority of use anywhere in the world. Earlier use in another country usually just does not count. Accordingly it does not appear to me that there is anything like a clear trend in the common law courts outside the UK away from the hard line approach manifested in the UK cases discussed in paras 21 26 and 32 36 above. Particularly in the light of what has been said in some of the cases discussed above, it appears that there are two connected issues which justify further discussion, namely (i) clarification as to what constitutes sufficient business to give rise to goodwill as a matter of principle, and (ii) resolution of the judicial disagreement as to the jurisdictional division of goodwill described by Lord Diplock in Star Industrial. As to what amounts to a sufficient business to amount to goodwill, it seems clear that mere reputation is not enough, as the cases cited in paras 21 26 and 32 36 above establish. The claimant must show that it has a significant goodwill, in the form of customers, in the jurisdiction, but it is not necessary that the claimant actually has an establishment or office in this country. In order to establish goodwill, the claimant must have customers within the jurisdiction, as opposed to people in the jurisdiction who happen to be customers elsewhere. Thus, where the claimants business is carried on abroad, it is not enough for a claimant to show that there are people in this jurisdiction who happen to be its customers when they are abroad. However, it could be enough if the claimant could show that there were people in this jurisdiction who, by booking with, or purchasing from, an entity in this country, obtained the right to receive the claimants service abroad. And, in such a case, the entity need not be a part or branch of the claimant: it can be someone acting for or on behalf of the claimant. That is why, as explained in Athletes Foot, the decision in Panhard et Levassor and the observations in Pete Waterman are compatible with the decision in Alain Bernardin. As to Lord Diplocks statement in Star Industrial that, for the purpose of determining whether a claimant in a passing off action can establish the first of Lord Olivers three elements, an English court has to consider whether the claimant can establish goodwill in England, I consider that it was correct. In other words, when considering whether to give protection to a claimant seeking relief for passing off, the court must be satisfied that the claimants business has goodwill within its jurisdiction. It would be wrong to suggest that there is a rule of law that, whatever the point at issue, goodwill has to be divided between jurisdictions, not least because (unsurprisingly) we have not had an exhaustive analysis of all the circumstances in which goodwill may have to be considered by the court. However, it seems to me that, when it comes to a domestic, common law issue such as passing off, an English court has to consider the factual position in the UK. That is well illustrated by the fact that, even if PCCMs argument was accepted and it was enough for a claimant merely to establish a reputation, that reputation would still have to be within the jurisdiction. The notion that goodwill in the context of passing off is territorial in nature is also supported by refusal of judges to accept that a court of one jurisdiction has power to make orders in relation to the goodwill in another jurisdiction. I have in mind the decisions of the House of Lords in Lecouturier v Rey [1910] AC 262, 265 per Lord Macnaghten, with whom Lord Atkinson and Lord Collins agreed, and at pp 269 272 per Lord Shaw of Dunfermline, and the Privy Council in Ingenohl v Wing On & Co (Shanghai) Ltd (1927) 44 RPC 343, 359 360, per Viscount Haldane giving the advice of the Board. The territorial approach to goodwill is also apparent in the context of trade marks in RJ Reuter Co Ltd v Mulhens [1954] Ch 50, 89 and 95 96 (per Lord Evershed MR and Romer LJ respectively) and Adrema Werke Maschinenbau GmbH v Custodian of Enemy Property [1957] RPC 49, 54 55 and 59 (per Lord Evershed MR and Jenkins LJ). It is also worth mentioning that article 6 of the Paris Convention for the Protection of Industrial Property 1883 (last revised 1967 and last amended 1979) states, in para (1) that registration of trademarks shall be determined in each country by its domestic legislation, and in para (3) that a duly registered mark is to be regarded as independent of marks registered in other countries of the Union. My view on the two issues discussed in paras 49 53 above is supported by a brief extract from Lord Frasers speech in Erven Warnink at p 755, where he said that the meaning of the name in countries other than England is immaterial because what the court is concerned to do is to protect the plaintiffs' property in the goodwill attaching to the name in England and it has nothing to do with the reputation or meaning of the name elsewhere. Indirect support for this approach is also to be found in decisions of the Court of Justice of the European Union, which has emphasised in a number of decisions the need for genuine use of a mark, namely to guarantee the identity of the origin of the goods or services for which it is registered, in order to create or preserve an outlet for those goods or services, and that this means real commercial exploitation of the mark in the course of trade, particularly the usages regarded as warranted in the economic sector concerned as a means of maintaining or creating market share for the goods or services protected by the mark to quote from Leno Merken BV v Hagelkruis Beheer BV (Case C 149/11) EU:C:2012:816, para 29. Further, it is relevant to note that the CJEU has also held that the mere fact that a website [advertising or selling the product or service concerned] is accessible from the territory covered by the trade mark is not a sufficient basis for concluding that the offers for sale displayed there are targeted at consumers in that territory L'Oreal SA v eBay International AG (Case C 324/09) EU:C:2011:474 [2011] ECR I 6011, para 64. It is also of interest that, even in the context of the single market, the CJEU has accepted that because of linguistic, cultural, social and economic differences between the Member States, a sign which is devoid of distinctive character or descriptive of the goods or services concerned in one Member State is not so in another Member State see Junited Autoglas Deutschland GmBH & Co KG v Office for Harmonisation in the Internal Market (Trade Marks and Designs) (Case T 297/13) EU:T:2014:893, para 31, citing Matratzen Concord AG v Hukla Germany SA (Case C 421/04) EU:C:2006:164 [2006] ECR I 2303, para 25. Professor Wadlow has, in my judgment, correctly summarised the position in The Law of Passing off Unfair Competition by Misrepresentation 4th ed, 2011, para 3 131: The reason why goodwill is territorial is that it is a legal proprietary right, existing or not in any jurisdiction according to whether the laws of that jurisdiction protect its putative owner. Goodwill in the legal sense is therefore something more than bare reputation . The distinction between goodwill in the legal sense and reputation in the everyday sense is like that between copyright and the underlying literary work. It may be surprising, and even inconvenient, that at the moment a literary work is reduced to writing tens or hundreds of legally distinct copyrights may simultaneously come into existence all over the world, but the nature of copyright as a legal right of property arising in any given jurisdiction from national legislation, common law or self executing treaty means that it must be wrong to speak as if there were a single international copyright. This analysis can be said with some justification to involve some fine distinctions, and on some occasions to lead to some difficult questions of fact and to result in some decisions which could appear rather harsh. However, any decision as to what a claimant must show in order to establish the first element of Lord Olivers trilogy of elements or requirements will involve fine distinctions, and will sometimes involve difficult or harsh cases. I am unconvinced that if we accept the conclusion of the courts below, supported by Sky, it would be likely to lead to more arguable unfairnesses or difficulties than if we adopted PCCMs case. It is also necessary to bear in mind the balancing exercise underlying the law of passing off, which Somers J described in Dominion Rent A Car at p 116 as a compromise between two conflicting objectives, on the one hand the public interest in free competition, on the other the protection of a trader against unfair competition by others. More broadly, there is always a temptation to conclude that, whenever a defendant has copied the claimants mark or get up, and therefore will have benefitted from the claimants inventiveness, expenditure or hard work, the claimant ought to have a cause of action against the defendant. Apart from the rather narrower point that passing off must involve detriment to the claimant, it is not enough for a claimant to establish copying to succeed. All developments, whether in the commercial, artistic, professional or scientific fields, are made on the back of other peoples ideas: copying may often be an essential step to progress. Hence, there has to be some balance achieved between the public interest in not unduly hindering competition and encouraging development, on the one hand, and on the other, the public interest in encouraging, by rewarding through a monopoly, originality, effort and expenditure the argument which is reflected in Turner LJs observation at p 312 in Maxwell v Hogg to the effect that a plaintiff who has merely advertised, but not marketed, his product, has given no consideration to the public in return for his claimed monopoly. In the instant case, the assessment of the appropriate balance between competition and protection, which arises in relation to any intellectual property right, must be made by the court, given that passing off is a common law concept. If it was enough for a claimant merely to establish reputation within the jurisdiction to maintain a passing off action, it appears to me that it would tip the balance too much in favour of protection. It would mean that, without having any business or any consumers for its product or service in this jurisdiction, a claimant could prevent another person using a mark, such as an ordinary English word, now, for a potentially indefinite period in relation to a similar product or service. In my view, a claimant who has simply obtained a reputation for its mark in this jurisdiction in respect of his products or services outside this jurisdiction has not done enough to justify granting him an effective monopoly in respect of that mark within the jurisdiction. I am unpersuaded that PCCMs case is strengthened by the fact that we are now in the age of easy worldwide travel and global electronic communication. While I accept that there is force in the point that the internet can be said to render the notion of a single international goodwill more attractive, it does not answer the points made in paras 51 59 above. Further, given that it may now be so easy to penetrate into the minds of people almost anywhere in the world so as to be able to lay claim to some reputation within virtually every jurisdiction, it seems to me that the imbalance between protection and competition which PCCMs case already involves (as described in paras 60 62 above) would be exacerbated. The same point can be made in relation to increased travel: it renders it much more likely that consumers of a claimants product or service abroad will happen to be within this jurisdiction and thus to recognise a mark as the claimants. If PCCMs case were correct, it would mean that a claimant could shut off the use of a mark in this jurisdiction even though it had no customers or business here, and had not spent any time or money in developing a market here and did not even intend to do so. A rather different factor which militates against PCCMs case is section 56 of the Trade Marks Act 1994 which gives effect to article 6(bis) of the Paris Convention) and is concerned with well known marks. By virtue of subsection (1), section 56 applies to a mark which is owned by a person who is domiciled or has a business in a Convention country and which is well known in the United Kingdom. Section 56(2) entitles such a person to restrain by injunction the use in the United Kingdom of a trade mark which, or the essential part of which, is identical or similar to his mark, in relation to identical or similar goods or services, where the use is likely to cause confusion. This provision is significant in the present context because it substantially reduces the likelihood of the sort of harsh results referred to at the start of para 60 above. It means that, where a mark which is used abroad and has a reputation in this country, it still can be protected if it satisfies section 56(1), even if the proprietor of the mark cannot establish any customers or sufficient goodwill in this jurisdiction. A more radical argument was advanced by Sky based on section 56 of the 1994 Act, namely that, by that section, the legislature decided on the circumstances in which mere reputation in this country should be enough to justify protection being accorded to a mark used in another country, and that the courts should not extend the common law further than Parliament has thought it right to go. As Mr Hobbs put it, if Parliament has decided that domestic reputation is enough in the case of a well known mark, it is not for the courts to extend the principle to marks which are not well known. Another, perhaps starker, way of putting the point is that, if PCCMs case is correct, it is hard to see what purpose section 56 of the 1994 Act would have. I see considerable force in that argument, but it is unnecessary to rule on it, and I prefer not to do so. Finally, a point which I would leave open is that discussed in the judgment of Sundaresh Menon CJ in Staywell (see para 46 above), namely whether a passing off claim can be brought by a claimant who has not yet attracted goodwill in the UK, but has launched a substantial advertising campaign within the UK making it clear that it will imminently be marketing its goods or services in the UK under the mark in question. It may be that such a conclusion would not so much be an exception, as an extension, to the hard line, in that public advertising with an actual and publicised imminent intention to market, coupled with a reputation thereby established may be sufficient to generate a protectable goodwill. On any view, the conclusion would involve overruling Maxwell v Hogg, and, if it would be an exception rather than an extension to the hard line, it would have to be justified by commercial fairness rather than principle. However, it is unnecessary to rule on the point, which, as explained in para 46, has some limited support in this jurisdiction and clear support in Singapore. Modern developments might seem to argue against such an exception (see para 63 above), but it may be said that it would be cheap and easy, particularly for a large competitor, to spike a pre marketing advertising campaign in the age of the internet. It would, I think, be better to decide the point in a case where it arises. Assuming that such an exception exists, I do not consider that the existence of such a limited, pragmatic exception to the hard line could begin to justify the major and fundamental departure from the clear, well established and realistic principles which PCCMs case would involve. In this case, PCCMs plans for extending its service into the UK under the NOW TV mark were apparently pretty well advanced when Sky launched their NOW TV service, but the plans were still not in the public domain, and therefore, even if the exception to the hard line is accepted, it would not assist PCCM. Conclusion For these reasons, I conclude that PCCMs appeal should be dismissed. Its business is based in Hong Kong, and it has no customers, and therefore no goodwill, in the UK. It is true that, according to the Judge, there are a significant number of people who are, temporarily or in the longer term, members of the Chinese community in the UK, with whom the mark NOW TV is associated with PCCMs IPTV service. In so far as they are customers of PCCM, they are customers in Hong Kong, and not in the UK, because it is only in Hong Kong that they can enjoy the service in question, and the service is not marketed, sold or offered in the UK. The people in the UK who get access to PCCMs NOW TV programmes via the websites, or on various international airlines, are not PCCM customers at any rate in the UK, because there is no payment involved (either directly by the people concerned or indirectly through third party advertising), and the availability of PCCMs product in these outlets simply was intended to, and did, promote PCCMs Hong Kong business. Basically, it simply amounted to advertising in the UK, and, as explained above, a reputation acquired through advertising is not enough to found a claim in passing off. Given that we are dismissing the appeal, it is unnecessary to consider Skys other arguments to support this conclusion which were the same as those which it would have raised before the Court of Appeal in its respondents notice (see para 13 above). If we had allowed PCCMs appeal, because the Court of Appeal understandably did not address those issues we would have remitted the case to the Court of Appeal to consider them.

Internet protocol television (IPTV) is a way of delivering TV or video content over the internet. IPTV can be closed circuit or over the top. The appellants (PCCM) are a substantial group of companies based in Hong Kong which has provided a closed circuit IPTV service in Hong Kong since 2003. Since 2006 the service has been marketed and delivered under the name NOW TV. By 2012, NOW TV had become the largest pay TV operator in Hong Kong, with around 1.2 million subscribers, covering over half the households in Hong Kong. People in the UK cannot receive this closed circuit service, and no subscribers for its Hong Kong IPTV service have been recruited in the UK. However, a number of Chinese speakers permanently or temporarily resident in the UK in 2012 were aware of the NOW TV service through exposure to it when residing in or visiting Hong Kong, or from viewing NOW TV programmes on YouTube and other websites in the UK. The appellants have been considering expanding its NOW TV subscription service internationally since 2009. In June 2012 it launched a NOW player app in the UK on its website and via the Apple Store, targeted at the Chinese speaking population in the UK. Meanwhile, in March 2012, the respondents (Sky) announced that they intended to launch a new over the top IPTV service under the name NOW TV. The service was launched in beta form in mid July 2012. In April 2012, PCCM began proceedings seeking to prevent Sky from using the name NOW TV in connection with Skys IPTV service in the UK on the grounds that the use of the name amounted to passing off. The law of passing off prevents one trader from passing off its goods or services as the goods and services of another. At first instance, the judge found that a substantial number of Chinese speakers permanently or temporarily resident in the UK were acquainted with PCCMs NOW TV service. He also found that PCCMs NOW TV service had acquired a reputation amongst members of the Chinese speaking community in the UK and that this reputation was modest but more than de minimis. However he held that the key question was whether the viewers of PCCMs programmes in the UK were customers for its service and that, for the purposes of passing off, it was not enough for PCCM to establish that it had a reputation among a significant number of people in this country if it had no goodwill in this country. This led him to dismiss PCCMs claim. PCCMs appeal to the Court of Appeal was dismissed and PCCM now appeals to the Supreme Court. The Supreme Court unanimously dismisses the appeal. Lord Neuberger (with whom all the other Justices agree) delivers the judgment of the Court. Courts in the UK have consistently held that it is necessary for a claimant to have actual goodwill, in the sense of a customer base, in this jurisdiction before it can satisfy this requirement for the law of passing off [20 25]. Where the claimants business is abroad, people who are in the jurisdiction, but who are not customers of the claimant in the jurisdiction, will not do, even if they are customers of the claimant when they go abroad [47 48]. An examination of the approach in other Common Law jurisdictions suggests that the Singapore courts follow the approach of the UK courts, whereas the Courts of Australia and South Africa seem to favour the approach supported by PCCM; there does not appear to be a clear trend in the common law courts outside the UK away from the approach taken in the UK cases [50]. Goodwill in the context of passing off is territorial in nature and an English court has to consider the factual position in the UK. It is clear that mere reputation is not enough; the claimant must have significant goodwill in the form of customers in the jurisdiction. However, it is not necessary to have an establishment or office in this country [52 55]. The law of passing off involves striking a balance between the public interest in free competition and the protection of the trader against unfair competition; if it were enough for a claimant merely to establish reputation in the jurisdiction, without a significant number of people who are customers within the jurisdiction to maintain a passing off action, this would tip the balance too much in favour of protection [61 62], particularly in this modern era of global electronic communication [63]. It follows that PCCMs appeal should be dismissed. Its business is based in Hong Kong, and it has no customers, and therefore no goodwill, in the United Kingdom. The people in the UK who get access to PCCMs NOW TV programmes via the websites are not PCCM customers in the UK, because there is no payment involved and the availability of PCCMs product was intended to promote PCCMs Hong Kong business; as such it amounted to advertising in the UK which is insufficient to maintain a claim in passing off [67].

A refugee who has been granted a right of lawful presence in the receiving state needs the assurance that this right will not be withdrawn, with the result that he or she may again become an uprooted person in search of refuge. That assurance is given by article 32(1) of the Geneva Convention relating to the Status of Refugees (1951) (Cmd 9171) and the New York Protocol (1967) (Cmnd 3906), which provides: The Contracting States shall not expel a refugee lawfully in their territory save on grounds of national security or public order. This provision is to be contrasted with article 33(1), which provides: No Contracting State shall expel or return (refouler) a refugee in any manner whatsoever to the frontiers of territories where his life or freedom would be threatened on account of his race, religion, nationality, membership of a particular social group or political opinion. Every refugee has the protection of article 33. The protection of article 32 is more generous. Its effect is that, once a refugee has been admitted or his presence has been legalised and so long as entitlement to refugee status continues, he is entitled to stay indefinitely in the receiving state. He can only forfeit that right by becoming a risk to national security or by disturbing the public order. But he requires to have been afforded a certain degree of attachment to the receiving state before this privilege becomes available. The question that this case raises is the extent of the attachment that is needed to attract that protection. Does the protection of article 32 extend to a refugee who has been temporarily admitted to the United Kingdom according to the rules of its domestic law and has engaged with the processes that its legislation provides to determine his status, but has not yet been given leave to enter or to remain here? In other words, does article 32 apply only to a refugee who has been given the right lawfully to stay in the contracting state, as its domestic law would answer that question? Or must the words lawfully present in the territory be given an extended and autonomous meaning, so as to ensure that a refugee who has not yet been given a right to remain in the territory is afforded protection under article 32 that extends beyond the basic obligation under article 33 not to expel or return (refouler) to a territory where his life or freedom would be threatened for a Convention reason? Should they be given this extended meaning to prevent his removal to a country where he will not be able to enjoy the full extent of the rights that the Convention extends to a refugee? The facts The appellant is of Eritrean nationality. But she has never lived in Eritrea. She was born on 2 July 1981 and was formerly resident in Ethiopia. She came to the United Kingdom on 3 July 1998. Immediately on her arrival in this country she claimed protection as a refugee. Her reason was that she feared persecution in both Eritrea and Ethiopia. Her claim was registered, and she was granted temporary admission into the United Kingdom under paragraph 21 of Schedule 2 to the Immigration Act 1971. Paragraph 16 of Schedule 2 provides that a person liable to examination and removal upon his arrival in the United Kingdom may be detained under the authority of an immigration officer pending his examination and pending a decision to give or refuse him leave to enter. Paragraph 21 of the Schedule provides that a person liable to detention under paragraph 16 may, under the written authority of an immigration officer, be temporarily admitted to the United Kingdom without being detained. Section 11(1) of the 1971 Act provides that a person who has not otherwise entered the United Kingdom shall be deemed (for the purposes of that Act) not to do so as long as he is detained, or temporarily admitted or released while liable to detention under the powers conferred by Schedule 2 to the Act. The appellants status has not changed since the date of her arrival more than 13 years ago. Her temporary admission has been extended from time to time, and she remains liable to detention. The latest notification of temporary admission was issued to her on 17 October 2011. She was told that she must reside at the address given on the notification form and she was to report to an immigration official on 22 December 2011 and then on the fourth Thursday every two months. She was also told that she was not allowed to work or engage in any business unless she had been explicitly granted permission to do so. These instructions assume that, as she has been given temporary admission only and is still liable to be detained, she is not entitled to the rights that articles 18 and 26 of the Convention afford to refugees who are lawfully in this countrys territory: see para 23, below. The appellant claimed in a statement made shortly after her arrival that she had a well founded fear of persecution if she were to be returned to Ethiopia. This was because she was afraid that Ethiopia would send her to Eritrea. In a later statement she said that she feared persecution in Eritrea because she had not taken part in the war between Eritrea and Ethiopia. Her claims for asylum and humanitarian protection were refused in a letter dated 1 November 2004. In a notice of refusal of leave to enter dated 5 November 2004 she was informed that the Secretary of State proposed to give directions for her removal to Eritrea. She appealed to an adjudicator. In a decision that was promulgated on 14 February 2005 the adjudicator said that he was satisfied that she would be at serious risk of persecution or ill treatment because of her religion as a born again Christian if she were to be removed to Eritrea. But he was not satisfied that she would be considered as a draft evader or a deserter. He dismissed her appeal on the basis that she could safely be returned to Ethiopia. The appellant sought permission to appeal to the Immigration Appeal Tribunal. This was on the basis that the adjudicator, having found her to be of Eritrean nationality, should have allowed her appeal as he found that she had a well founded fear of persecution in Eritrea. On 23 January 2006 her appeal came before the Asylum and Immigration Tribunal, as the Immigration Appeal Tribunal had now become. It was conceded on behalf of the Secretary of State that her appeal should have been allowed, as the proposal that had been communicated to the appellant on 5 November 2004 was that directions were to be given for her removal to Eritrea. In his determination, which was promulgated on 1 February 2006 and forwarded to the appellants representatives on 20 February 2006, the senior immigration judge said that the tribunal was satisfied that the adjudicator had erred in law. But, using the adjudicators clear and reasoned findings of fact, which were not challenged, the tribunal found that the appellant was a refugee and that she was entitled to international protection as her fear of persecution for a Convention reason in Eritrea was well founded. It also found that her removal to Eritrea would be unlawful as it would lead to her ill treatment contrary to her protected rights under article 3 of the European Convention on Human Rights. The Secretary of State did not appeal against this decision. On 24 August 2006 the Secretary of State issued a fresh reasons for refusal letter and served a new notice of decision to refuse the appellant leave to enter. Notwithstanding the fact that the appellant had already been recognised to be a refugee from Eritrea, she was told that this time her asylum and human rights claims had been examined on the basis that she was an Ethiopian national. She was refused leave to enter the United Kingdom, and she was notified that it was proposed to give directions for her removal to Ethiopia. The letter stated that, in the light of all the evidence available, it had been concluded that the appellant had not established a well founded fear of persecutions in Ethiopia and did not qualify for asylum, that her asylum claim was refused and that it had been recorded as determined on 1 November 2004. It also stated that it had been concluded that her removal would not be contrary to the United Kingdoms obligations under the ECHR. The appellant lodged an appeal against this decision in order to protect her position. But her primary position is that she is entitled to the status of a refugee on the basis of the determination by the Asylum and Immigration Tribunal of 1 February 2006. On 25 September 2006 the appellant commenced these proceedings for judicial review of the decision of 24 August 2006. She seeks a mandatory order requiring the Secretary of State to implement the decision of the AIT granting her leave to remain in the United Kingdom as a refugee, and an order quashing the decision in the letter of 24 August 2006 refusing her leave to remain and proposing that directions be given for her removal to Ethiopia. The Ethiopian appeal has been adjourned pending the outcome of these proceedings. In a letter dated 13 November 2006 which was annexed to his Summary Grounds of Defence the Secretary of State informed the appellants solicitors that he was no longer proceeding on the basis that the appellant was an Ethiopian national. He was proceeding on the basis that she was an Eritrean national. But he maintained his position that the appellant could safely be removed to Ethiopia for the reasons given in the letter of 24 August 2006. The appellant was granted permission to apply for judicial review by Pitchford J on 27 February 2007. On 19 December 2008 Nicola Davies QC, sitting as a deputy judge of the High Court, quashed the decision declining to grant the appellant refugee status and ordered the Secretary of State to recognise her as a refugee and grant her leave to remain: [2008] EWHC 3162 (Admin). In para 22 of her judgment she said: I am satisfied that a determination of the refugee status of the claimant in accordance with article 1 of the Refugee Convention was made by an appropriate tribunal, the AIT. The decision is binding upon the defendant and affords the claimant the protection of article 32(1). Accordingly I grant the relief sought by the claimant. In reaching this decision the deputy judge applied the following observation of Lord Brown of Eaton under Heywood in Szoma v Secretary of State for Work and Pensions [2005] UKHL 64, [2006] 1 AC 564, para 24: The term refugee in article 32(1) of the Refugee Convention can only mean someone already determined to have satisfied the article 1 definition of that term (as for example in article 23 although in contrast to its meaning in article 33). Were it otherwise there would be no question of removing asylum seekers to safe third countries and a number of international treaties, such as the two Dublin Conventions (for determining the EU state responsible for examining applications lodged in one member state) would be unworkable. As she saw it, therefore, the effect of the tribunals determination that the appellant was a refugee of itself meant that she had a right to stay in this country under article 32. The Court of Appeal (Sir Anthony May P, Longmore and Stanley Burnton LJJ) reversed the judges decision [2010] EWCA Civ 643, [2010] 1 WLR 2858. In para 48 of his judgment Stanley Burnton LJ said that he would hold: that article 32 applies only to a refugee who has been granted leave to enter and to stay in the United Kingdom. I would reject the contention that temporary admission or leave to enter for the purpose of the determination of a claim for asylum (or any other ground for claiming a right to stay) renders a stay lawful for the purpose of article 32. The purpose of article 32 is to give security of residence to a refugee who has been given the right to live in the contracting state in question. He declined to apply Lord Browns statement in Szoma v Secretary of State for Work and Pensions. In para 45 he acknowledged that the decision in that case was binding authority of the meaning of lawfully present in the United Kingdom in paragraph 4 of Part 1 of the Schedule to the Social Security (Immigration and Asylum) Consequential Amendments Regulations 2000 (SI 2000/636), which was the provision under consideration in that case. But he said that it was clear that Lord Brown was not deciding any question of removability under the 1971 Act. He also held that the appeal that was determined by the tribunal was not a status appeal under section 83 of the Nationality, Immigration and Asylum Act 2002, but an appeal against an immigration decision under section 82 of that Act. So it could not have the effect of a direction to the Secretary of State to grant asylum: para 58. The legislative provisions As the Secretary of States argument is that the answer to the question whether a refugee is lawfully in the territory must be determined solely with reference to domestic law, the provisions of domestic law which are relevant to the appellants case form an important part of the background. The leading provision is section 11(1) of the Immigration Act 1971, which provides: A person arriving in the United Kingdom by ship or aircraft shall for purposes of this Act be deemed not to enter the United Kingdom unless and until he disembarks, and on disembarkation at a port shall further be deemed not to enter the United Kingdom so long as he remains in such area (if any) at the port as may be approved for this purpose by an immigration officer; and a person who has not otherwise entered the United Kingdom shall be deemed not to do so as long as he is detained, or temporarily admitted or released while liable to detention, under the powers conferred by Schedule 2 to this Act. In R v Secretary of State for the Home Department, Ex p Bugdaycay [1987] AC 514, the House of Lords applied that provision to the case of Mr Musisi, an asylum seeker of Ugandan nationality who had come to this country from Kenya and had been refused leave to enter the United Kingdom. It held that, even if he were properly to be treated as a refugee from Uganda, this would not present an obstacle to his return to Kenya. The argument that he was protected by article 32 because his status as a refugee meant that he was lawfully in the territory was rejected. Lord Bridge of Harwich said at p 526: The United Kingdom was already a party to the Convention when the Act was passed and it would, to my mind, be very surprising if it had the effect contended for. But I am satisfied that the deeming provision enacted by section 11(1) makes Mr Collinss submission on this point quite untenable. Then there are the provisions which set out the procedure that is to be adopted. Paragraph 2 of Schedule 2 to the 1971 Act provides for the examination of persons who have arrived in the United Kingdom by immigration officers for the purpose of determining whether, if he is not patrial, he may or may not enter the United Kingdom without leave and, if he may not, he should be given leave or should be refused leave. Paragraph 16(1) provides: A person who may be required to submit to examination under paragraph 2 above may be detained under the authority of an immigration officer pending his examination and pending a decision to give or refuse him leave to enter. Paragraphs 21(1) and (2) provide (as amended by section 10 of and paragraph 10 of the Schedule to the Immigration Act 1988): (1) A person liable to detention or detained under paragraph 16 above may, under the written authority of an immigration officer, be temporarily admitted to the United Kingdom without being detained or be released from detention; but this shall not prejudice a later exercise of the power to detain him. (2) So long as a person is at large in the United Kingdom by virtue of this paragraph, he shall be subject to such restrictions as to residence, as to his employment or occupation and as to reporting to the police or an immigration officer as may from time to time be notified to him in writing by an immigration officer. Immigration and asylum appeals are provided for in Part V of the Nationality, Immigration and Asylum Act 2002. Sections 82 and 83, as amended by sections 26(2) and 26(3) of the Asylum and Immigration (Treatment of Claimants, etc) Act 2004, and section 84 provide for a general right of appeal, for a right of appeal in the case of an asylum claim and for the grounds of appeal respectively. Section 82(1) provides that where an immigration decision is made in respect of a person he may appeal to the tribunal. A definition of the expression immigration decision is provided in section 82(2). It includes, so far as relevant: (a) refusal of leave to enter the United Kingdom, (b) refusal of entry clearance (g) a decision that a person is to be removed from the United Kingdom by way of directions under section 10(1)(a), (b) or (c) of the Immigration and Asylum Act 1999 (c 33) (removal of person unlawfully in United Kingdom) Section 83 provides that a person may appeal to the tribunal against the rejection of his asylum claim. Section 84(3) provides that an appeal under section 83 must be brought on the grounds that removal of the appellant from the United Kingdom would breach the United Kingdoms obligations under the Refugee Convention. The expression asylum claim is defined in section 113, as substituted by section 12 of the Immigration, Asylum and Nationality Act 2006, as a claim made by a person that to remove the person from or require him to leave the United Kingdom would breach the United Kingdoms obligations under the Refugee Convention. At the relevant time paragraph 334 of the Statement of Changes in Immigration Rules (1994) (HC 395) provided An asylum applicant will be granted asylum in the United Kingdom if the Secretary of State is satisfied that: (i) he is in the United Kingdom or has arrived at a port of entry in the United Kingdom; and (ii) he is a refugee, as defined by the [Refugee] Convention and Protocol; and (iii) refusing his application would result in him being required to go (whether immediately or after the time limited by any existing leave to enter or remain) in breach of the Convention and Protocol, to a country in which his life or freedom would be threatened on account of his race, religion, nationality, political opinion or membership of a particular social group. Section 2 of the Asylum and Immigration Act 1993, which has as its side note the words Primacy of the Convention, provides: Nothing in the immigration rules (within the meaning of the 1971 Act) shall lay down any practice which would be contrary to the Convention. The Refugee Convention By article 1A(2) of the Convention the term refugee applies to any person who as a result of events occurring before 1 January 1951 and owing to well founded fear of being persecuted for reasons of race, religion, nationality, membership of a particular social group or political opinion, is outside the country of his nationality and is unable or, owing to such fear, is unwilling to avail himself of the protection of that country; or who, not having a nationality and being outside the country of his former habitual residence as a result of such events, is unable or, owing to such fear, is unwilling to return to it. The rights that attach to the status of refugee under the Convention depend in each case on the possession of some degree of attachment to the contracting state in which asylum is sought. Drawing on the way the hierarchy of attachment has been described by Professor Hathaway, Rights of Refugees under International Law (Cambridge, 2005), pp154 160, under the heading Attachment to the Asylum State, the appellants written case provides a helpful analysis. An examination of the Convention shows that it contemplates five levels of attachment to the contracting states, which from the weakest to the strongest may be set out as follows: a. subject to the contracting states jurisdiction (articles 3, 5, 7(1), 7(3), and (4), 9, 12, 16(1) and (3), 17(3), 20, 22, 24(3) and (4), 29, 30, 33 and 34); b. physical presence [sur leur territoire] (articles 4, 27 and 28(1)); c. lawful presence [se trouvant rgulirement sur leur territoire] (articles 18, 26 and 32); d. lawful stay [rsidant rgulirement sur leur territoire ] (articles 7(2), 10, 15, 17, 19, 21, 23, 24(1) (3), 25 and 28); and e. habitual residence [o il sa rsidence habituelle] (articles 14 and 16(2)). The level of attachment which article 32 requires is commonly referred to by the commentators as lawful presence: eg Hathaway, Rights of Refugees in International Law, 657. Article 32 provides: 1. The Contracting States shall not expel a refugee lawfully in their territory save on grounds of national security or public order. 2. The expulsion of such a refugee shall be only in pursuance of a decision reached in accordance with due process of law. Except where compelling reasons of national security otherwise require, the refugee shall be allowed to submit evidence to clear himself, and to appeal to and be represented for the purpose before competent authority or a person or persons specially designated by the competent authority. 3. The Contracting States shall allow such a refugee a reasonable period within which to seek legal admission into another country. The Contracting States reserve the right to apply during that period such internal measures as they may deem necessary. Articles 18 and 26 require the same level of attachment. Article 18, which is headed self employment, provides: The Contracting States shall accord to a refugee lawfully in their territory treatment as favourable as possible and, in any event, not less favourable than that accorded to aliens generally in the same circumstances, as regards the right to engage on his own account in agriculture, industry, handicrafts and commerce and to establish commercial and industrial companies. Article 26, which is headed freedom of movement, provides: Each Contracting State shall accord to refugees lawfully in its territory the right to choose their place of residence to move freely within its territory, subject to any regulations applicable to aliens generally in the same circumstances. The issues The dispute between the parties is as to whether the appellant is entitled to the protection of article 32 of the Convention, which precludes the contracting states from expelling a refugee who is lawfully in their territory save on grounds of national security or public order. At first sight the question at issue is a relatively narrow one, directed to the meaning of the phrase lawfully in their territory. For the Secretary of State Miss Giovannetti QC submits that the appellant is not, and never has been, lawfully in the United Kingdom for the purposes of that article. Nor will she be lawfully in the United Kingdom for its purposes if she loses the Ethiopian appeal. There will be no obstacle to her removal should that event occur and she were to lose her article 3 case too. The question is to be determined solely by reference to the domestic law of the state in question. The effect of the relevant legislation is that a refugee is not lawfully present in the United Kingdom if she does not have leave to enter or remain in this country. So the Secretary of State will be free to bring her temporary admission to an end if her appeal against the directions for her removal to Ethiopia is dismissed. Mr Drabble QC for the appellant, on the other hand, invites the court to look at the issue much more broadly. The basic thrust of his argument, which he did not develop in this form before the Court of Appeal, is that it would be contrary to the proper construction and spirit and intendment of the Convention to hold that the appellant was not lawfully present in the United Kingdom and that the Secretary of State was free to bring her lawful presence to an end by issuing directions for her removal to Ethiopia. He takes his stand on the principle that the Convention is an international instrument which falls to be interpreted in accordance with the general rule of interpretation that article 31(1) of the Vienna Convention on the Law of Treaties 1969 (Cmnd 4140) sets out, that A treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose. This approach, he said, should lead one to conclude that article 32 had a broader purpose than a study of its language, if taken on its own, might suggest. Its purpose was to ensure that a refugee who had been admitted to the appeal process of a contracting state, and had been found to be a refugee by the operation of that process, was not removed to a country that could not provide the full panoply of rights to which a refugee was entitled under the Convention. The way that Mr Drabble has invited us to approach the issue suggests that it would be helpful to take it in two stages. The first is to examine the language of article 32 and to determine, provisionally, whether the words that it uses, taken by themselves, can accommodate the situation in which the appellant finds herself. The second is to consider whether, if they cannot, the object and purpose of the Convention require the words to be read and given effect more broadly so as to afford the appellant the protection which she seeks against her removal to Ethiopia. Two points need to be stressed, however. First, it was no part of Mr Drabbles case that an exception should be made for the appellant simply because of the inordinate length of time that it is taking for her case to work its way through the appeal process. He said that the mere passage of time was not the sole or main reason why she should have the benefit of article 32, although the stage which the proceedings had reached was relevant. The issue whether the mere passage of time is an obstacle to her removal is for another day. So Mr Drabbles argument, if sound, will apply to all refugees who have been given temporary permission to remain and have been admitted to the appeal process of the contracting state. I do not see how his argument can be limited in its effect to the case of this particular appellant. The second point is that Mr Drabble was not aware of any other case in which the Secretary of State has insisted on removing a person to a country, such as Ethiopia, which did not satisfy the general criteria of a safe country. This case therefore breaks new ground. He said that he was not aware of any other case like this, as the Secretary of State was not known ever to have claimed that Ethiopia satisfied the general criteria for a safe third country. He finds some support for his argument that the class of beneficiary referred to in article 32 should be broadly interpreted in Professor James C Hathaways work, The Rights of Refugees under International Law (Cambridge, 2005), pp 177 179 and 667 668 and in the wide ranging discussion of the issue in Atle Grahl Madsen, The Status of Refugees in International Law (Leiden, 1972), vol II, paras 215 216 where the point is made that, while a refugee who is lawfully in a territory according to municipal law is clearly entitled to the benefit of those provisions of the Convention whose applicability is subject to this test, persons may be considered to be lawfully there although they are not formally so, while at the same time not lawfully there for other purposes: pp 359 360. But I do not find anything in the passages to which we were referred that shows that their approach has universal acceptance, and there is no judicial authority that is directly in point. The argument has to be examined, therefore, as raising an issue of principle. "Lawfully in their territory" As Lord Bingham of Cornhill said in R (European Roma Rights Centre) v Immigration Officer at Prague Airport (United Nations High Commissioner for Refugees intervening) [2004] UKHL 55, [2005] 2 AC 1, para 15, the Refugee Convention, like most international conventions, represented a compromise between competing interests. On the one hand there was the need to ensure humane treatment of the victims of oppression. On the other there was the wish of sovereign states to maintain control over those seeking entry to their territory: Applicant A v Minister for Immigration and Ethnic Affairs (1997) 190 CLR, 225, 247 248, 274; Rodriguez v United States (1987) 480 US 522, 525 526. There is no doubt that the Convention should be given a generous and purposive interpretation, bearing in mind its humanitarian objects and the broad aims reflected in its preamble, which states: The high contracting parties Considering that the Charter of the United Nations and the Universal Declaration of Human Rights approved on 10 December 1948 by the General Assembly have affirmed the principle that human beings shall enjoy fundamental rights and freedoms without discrimination, Considering that the United Nations has, on various occasions, manifested its profound concern for refugees and endeavoured to assure refugees the widest possible exercise of these fundamental rights and freedoms, Considering that it is desirable to revise and consolidate previous international agreements relating to the status of refugees and to extend the scope of and protection accorded by such instruments by means of a new agreement, Considering that the grant of asylum may place unduly heavy burdens on certain countries, and that a satisfactory solution of a problem of which the United Nations has recognised the international scope and nature cannot therefore be achieved without international co operation, Expressing the wish that all states, recognising the social and humanitarian nature of the problem of refugees, will do everything within their power to prevent this problem from becoming a cause of tension between states, Noting that the United Nations High Commissioner for Refugees is charged with the task of supervising international convention, providing for the protection of refugees, and recognising that the effective co ordination of measures taken to deal with this problem will depend upon the co operation of states with the High Commissioner Support for this approach is to be found in article 31(1) of the Vienna Convention on the Law of Treaties to which Mr Drabble referred: see para 25, above. Reflecting principles of customary international law, it requires a treaty to be interpreted in the light of its object and purpose. So it must be interpreted as an international instrument, not a domestic statute. It should not be given a narrow or restricted interpretation. But it must be remembered too that, however generous and purposive its approach to interpretation may be, the courts task remains one of interpreting the document to which the contracting parties have committed themselves by their agreement. As Lord Bingham was at pains to emphasise in the Roma Rights case, at para 18, it must interpret what the parties have agreed to. It has no warrant to give effect to what they might, or in an ideal world would, have agreed. One should not overlook the fact that article 31(1) of the Vienna Convention also states that a treaty should be interpreted in accordance with the ordinary meaning to be given to the terms of the treaty in their context. So the starting point of the construction exercise should be the text of the Convention itself: Adan v Secretary of State for the Home Department [1999] 1 AC 293, per Lord Lloyd of Berwick at p 305; Januzi v Secretary of State for the Home Department [2006] UKHL 5, [2006] 2 AC 426, para 4. A treaty must be interpreted in good faith. But this is not to be taken to be a source of obligation where none exists, as the International Court of Justice has repeatedly emphasised: In re Border and Transborder Armed Actions (second phase) (Nicaragua v Honduras) [1988] ICJ Rep 69, para 94; In re Land and Maritime Boundary between Cameroon and Nigeria (Cameroon v Nigeria) [1988] ICJ Rep 175, para 39. As a general principle of law it has only marginal value as a source of rights and duties: see the Roma Rights case, para 62. There is no want of good faith if the Convention is interpreted as meaning what it says and the contracting states decline to do something that its language does not require them to do. Everything depends on what the Convention itself provides. The context in which the word lawfully appears in article 32 is important too. The phrase in which it appears contemplates that the refugee is not merely present in the territory of the contracting state, but that he is there lawfully. This implies that his presence is not just being tolerated. On the contrary, it is to be assumed that he has a right to be there. As to the source of that right, the power to admit, exclude and expel aliens was among the earliest and most widely recognised powers of the sovereign state: Roma Rights, para 11. The Convention itself shows that it has come to be recognised that there is a right and indeed a duty in sovereign states to give refuge to aliens who are fleeing from persecution and to refuse to surrender them to the authorities in their home states. But states the world over consistently have exhibited great reluctance to give up their sovereign right to decide which persons will, and which will not, be admitted to their territory and be given a right to settle there: Hyndman, Refugees under International Law with a Reference to the Concept of Asylum (1986) 60 ALJ 148, 153, in a passage quoted by Lord Bingham in the Roma Rights case, para 19. The approach which our own domestic law takes to this issue was explained by Lord Mustill in T v Secretary of State for the Home Department [1996] AC 742, 754: Neither under international nor English municipal law does a fugitive have any direct right to insist on being received by a country of refuge. Subject only to qualifications created by statute this country is entirely free to decide, as a matter of executive discretion, what foreigners it allows to remain within its boundaries. There is no indication in the travaux prparatoires that the other states who were party to the framing of the Convention were minded to surrender control over those seeking entry to their territory. On the contrary, Nehemiah Robinsons analysis of the Commentary on the 1951 Convention and the most important documents which had a bearing on its interpretation, Convention relating to the Status of Refugees, its History, Contents and Interpretation (New York, 1953), pp 110 111, led him firmly to the contrary conclusion: Lawfully in the country was understood to refer to refugees either lawfully admitted or whose illegal entry was legalized but not to refugees who, although legally admitted or legalized, have overstayed the period for which they were admitted or were authorised to stay or who have violated any other condition attached to their admission or stay. Referring to this passage, the UNHCR states in Lawfully Staying A Note on Interpretation (1988) that its conclusion from the travaux is that the lawfulness of the stay is to be judged against national rules and regulations governing such a stay: para 8. The Michigan Guidelines on Protection Elsewhere, which were adopted on 3 January 2007 at a colloquium of which Professor James Hathaway was the convener, appear to contradict this approach. They state in para 5: Lawful presence must be defined by the sending state in good faith and in accordance with the requirements of international law. Lawful presence is in any event established not later than such time as a decision is reached on the admissibility of the protection claim. This passage shows, as do Professor Hathaways own writings, that some of the current thinking on the subject has developed substantially from that which appears to have been the guiding force when the wording of the Convention were under discussion over 60 years ago. But I agree with Lord Dyson that there is no consensus among the commentators that lawful presence should be given an autonomous meaning or what that meaning should be: para 63, below. So we must take our guidance from what the framers of the Convention must be taken to have agreed to, as understood by the UNCHR. The problem to which its note was addressed was that created by the practice of some states simply to tolerate a stay for long periods without regularising the status of the refugee. The UNHCR recommended that a judgment as to lawfulness should take into account all the prevailing circumstances, including the fact that the stay in question is known and not prohibited tolerated, in other words because of the precarious circumstances of the person: para 23. That is not the point that needs to be considered here. The national rules and regulations are being applied in this case, and it is clear that the appellant has not yet been given leave to enter or to remain in the United Kingdom. She is still liable to be detained and, in the words of section 11(1) of the 1971 Act, she is deemed not to have entered this country. There is, of course, no question of the appellant being expelled from the United Kingdom while the processes of appeal that are afforded by the 2002 Act remain open to her and have not been brought to an end. It might be thought, in these circumstances, that the Secretary of State could have no objection to it being held that, because she has been granted temporary admission pending her examination or removal, the appellant was lawfully in the territory within the meaning of article 32(1) so long as it was clear that she will cease to be lawfully present once her temporary admission comes to an end. Mr Drabble made it clear that he would be content with that interpretation, subject to the qualification that the protection of article 32 would remain available after the removal of her temporary admission to prevent her being removed to a country which could not provide the full panoply of rights to which a refugee was entitled under the Convention. But, as Miss Giovannetti explained, there is no basis in domestic law for holding that the appellant is entitled to be present in this country. To give her the protection of article 32 at this stage would have far reaching consequences. As Nehemiah Robinson explained in his Commentary, p 157: The prohibition of the expulsion of refugees lawfully in the country means in substance that, once a refugee has been admitted or legalized, he is entitled to stay there indefinitely and can forfeit this right only by becoming a national security risk or by disturbing public order and having these grounds established in accordance with the procedure prescribed in para 2. So one should be cautious about saying that, just because in practice the appellant is not at risk of removal for the time being, she is here lawfully within the meaning of that article. Furthermore, the proper interpretation of the word lawfully is of wider significance. This can be seen from the use of the same phrase lawfully in their territory in articles 18 and 26. A refugee who is lawfully present in the territory of a contracting state is entitled to the same treatment as regards self employment as is accorded to aliens generally who are in the same circumstances: article 18. He must also be accorded the right to choose his place of residence and to move freely within the territory, subject to any regulations that are applicable to aliens generally in the same circumstances: article 26. The notifications that have been issued to the appellant from time to time, which require her to reside at an address notified to her by an immigration officer, to report to an immigration official every two months and not to work or engage in any business unless she has explicitly been granted permission to do so, make it plain that she is not being accorded the rights referred to in these articles. They are rights the granting of which a sovereign state could be expected to reserve to itself, in just the same way as it would wish to reserve to itself the decision as to whether a refugee should be granted permission to enter in its territory. The fact that Mr Drabbles interpretation of the word lawfully in article 32 would apply to these articles too, so that the appellant could not be denied the rights that they afford to refugees lawfully in the territory, is a further indication that much caution is needed before that conclusion is drawn. It seems unlikely that the contracting states would have agreed to grant to refugees the freedom to choose their place of residence and to move freely within their territory before they themselves had decided, according to their own domestic laws, whether or not to admit them to the territory in the first place. Mr Drabble did not seek to rely on Lord Browns observations in Szoma v Secretary of State for Work and Pensions [2006] 1 AC 564, para 24, that in R v Secretary of State for the Home Department, Ex p Bugdacay [1987] AC 514 Lord Bridge has decided the case of In re Musisi rightly but for the wrong reasons, and that the term refugee in article 32(1) of the Refugee Convention must be taken to mean someone who has been determined to have satisfied the article 1 definition of that term. I think that he was right not to do so. The ancient maxim verba accipienda sunt secundum subjectam materiam (words are to be understood according to the subject matter with which they deal) provides the best guide to the meaning that should be given to what Lord Brown said in this paragraph. As Stanley Burnton LJ said in the Court of Appeal, Lord Brown was not deciding any question of irremovability under the 1971 Act in Szomas case: [2010] 1 WLR 2858, para 45. He was concerned with quite different legislation: see para 5. I am confident that, if his mind had been directed to the issue which arises under the 1971 Act, he would have been less ready than he was, in the context of that case, to hold that Lord Bridges analysis in Bugdacay of the effect of section 11(1) of the 1971 Act was wrong. For my part, I think that Lord Bridges analysis was right and it is directly in point in this case: see para 14, above. I would endorse Sedley LJs way of reconciling the decision in Szoma with what Lord Bridge said in Bugdacay in JA (Ivory Coast) v Secretary of State for the Home Department [2010] Imm AR 381, para 20, where he said: Illegal entrants who are temporarily admitted rather than detained may thus be lawfully present here in the restricted sense material to the decision in Szomas case, but they remain without an entitlement to be here. For these reasons I would hold, provisionally, that the word lawfully in article 32(1) must be taken to refer to what is to be treated as lawful according to the domestic laws of the contracting state. The "panoply of rights" argument The essence of this argument is that there must be implied into article 32 a proposition that the article itself has not expressed. This is not, perhaps, an impossible conclusion to draw. But the general rule is that the parties to an international agreement are not to be treated as having agreed something that they did not agree, unless it is clear by necessary implication from the text or from uniform acceptance by states that they would have agreed or have subsequently done so: Januzi v Secretary of State for the Home Department [2006] 2 AC 426, para 4. It is generally to be assumed that the parties have included the terms they wish to include and on which they were able to agree, omitting other terms which they did not wish to include or on which they were not able to agree: Brown v Stott [2003] 1 AC 681, 703. It is not open to the court to give effect to what, in an ideal world, the parties would have agreed to as a matter of obligation binding on all states parties to the Convention. One should bear in mind too that there may be a profound gap between what commentators, however respected, would like the article to mean and what it has actually been taken to mean in practice: R(Hoxha) v Special Adjudicator [2005] UKHL 19, [2005] 1 WLR 1063, para 5. Mr Drabble submitted that it was not enough to give the appellant the protection against refoulement that article 33 provides. What she needed, and was entitled to in view of the fact that the United Kingdom had accorded her substantial recognition as a refugee, was the assurance that she would not be removed to a third country that was not able to provide her with the full panoply of rights she would get as a refugee under the Convention. Article 32(1) had to be read in that sense. Her presence here was to be taken, for this purpose, to be lawful and it could not be brought to an end unless to do this would fit in with the purpose of the Convention as a whole. He accepted that removal to another member state of the European Union under Council Regulation (EC) No 343/2003, which replaced the Dublin Convention 1990 and was designed to give effect to a common policy on asylum throughout the EU (see R (Yogathas) v Secretary of State for the Home Department [2002] UKHL 36, [2003] 1 AC 920, para 27), would not be objectionable, and article 32(1) was not to be construed as making the removal under that system of a refugee who had been temporarily admitted to the United Kingdom pending a decision to give or refuse him leave to enter impermissible. So there would be no breach of article 32(1) if the refugee were to be returned immediately to another Dublin Convention country or to a country whose status as a safe country was not in doubt. But removal to a third country such as Ethiopia was a quite different matter. Mr Drabble relied on the discussion of the meaning to be given to lawful presence by Professor Hathaway, Rights of Refugees under International Law, pp 173 184 in support of his argument. Support for his approach, as matter of principle, is also to be found elsewhere. In Ng v Canada, UN Doc CCPR/C/49/469/1991 (7 January 1994), para 14.2 the Human Rights Committee established under article 28 of the International Covenant on Civil and Political Rights said: If a State party extradites a person within its jurisdiction in such circumstances that as a result there is a real risk that his or her rights under the Covenant will be violated in another jurisdiction, the State party itself may be in violation of the Covenant. This proposition may be applied equally to the responsibility that attaches to States parties under the Refugee Convention, as Catherine Phuong, The concept of effective protection in the context of irregular secondary movements and protection in regions of origin, Global Migration Perspectives No 26, April 2005, has suggested. At p 9 of her paper, having acknowledged her debt to Professor Hathaway for this thought in footnote 38, she states: It would surely defeat the purpose of the Convention if a state avoided its duties by merely transferring a refugee to another jurisdiction without ensuring that the receiving state protects the rights acquired by the refugee in the sending state. Refugees ought not to be deprived of the protection of their rights as defined in the 1951 Refugee Convention by virtue of the fact that another state has assumed responsibility for their protection. Mr Drabble also relied on a passage in Lord Clydes speech in Horvath v Secretary of State for the Home Department [2001] 1 AC 489 where he said at p 508: What [the Convention] seeks to achieve is the preservation of those rights and freedoms for individuals where they are denied them in their own state. Another state is to provide a surrogate protection where protection is not available in the home state. The Convention assumes that every state has the obligation to protect its own nationals. But it recognises that circumstances may occur where that protection may be inadequate. The purpose of the Convention is to secure that a refugee may in the surrogate state enjoy the rights and freedoms to which all are entitled without discrimination and which he cannot enjoy in his own state. I am inclined to think, with respect, that the proposition in the last sentence of this passage was perhaps too widely expressed. In my own speech, at p 495, I said that the purpose of the Convention was to afford protection and fair treatment for those for whom neither is available in the home country and that, if the principle of surrogacy was applied, the criterion must be whether the alleged lack of protection in the home state was such as to indicate that it was unable or unwilling to discharge its duty to establish and maintain a system for the protection against persecution of its own nationals. Also, the issue in that case was very different from that which we are being asked to consider here. The allegation was that the applicant was at risk of violence at the hand of non state agents whose actions the home state was unable or unwilling to control. The question whether, leaving that problem aside, the home state was in a position to provide the full panoply of rights under the Convention was not in issue. This case is not subject to the provisions of Council Directive 2004/83/EC of 29 April 2004 on minimum standards for the qualification and status of third country nationals or stateless persons as refugees or as persons who otherwise need international protection and the content of the protection granted (the Qualification Directive). The Directive was designed to give effect to the Tampere conclusion which provided that there should be a Common European Asylum System, based on a full and inclusive application of the Convention as supplemented by the New York Protocol, and that the system should include the approximation of rules on the recognition of refugees and the content of refugee status. It goes further in some respects than the Refugee Convention because, for example, it requires a residence permit to be issued as soon as possible where an applicant qualifies as a refugee: article 24(2). This Directive entered into force on 20 October 2004, and member states were required by article 38 to bring into force such laws, regulations and administrative provisions necessary to comply with it before 10 October 2006. The most recent decision to remove the appellant was dated 24 August 2006, before the date for its transposition. Mr Drabble did not develop the argument of which he had given notice in his written case that the appellant was entitled to rely on its provisions against the Secretary of State. But its provisions are of interest, because they show that the principle which he was urging upon this court is undergoing a process of development among the Member States of the European Union. This process was taken a step further by article 27(1) of Council Directive 2005/85/EC of 1 December 2005 on minimum standards on procedures in Member States for granting and withdrawing refugee status (the Minimum Standards Directive) which applies to applications for asylum lodged after 1 December 2007. It provides: Member States may apply the safe third country concept only where the competent authorities are satisfied that a person seeking asylum will be treated in accordance with the following principles in the third country concerned: (a) life and liberty are not threatened on account of race, religion, nationality, membership of a particular social group or political opinion; (b) the principle of non refoulement in accordance with the Geneva Convention is respected; (c) the prohibition of removal in violation of the right to freedom from torture and cruel, inhuman or degrading treatment as laid down in international law is respected; and (d) the possibility exists to request refugee status and, if found to be a refugee, to receive protection in accordance with the Geneva Convention. This provision sets out what the Member States must be taken to have agreed are the full panoply of rights that the person seeking asylum must be afforded if the principles on which articles 32 and 33 of the Refugee Convention are based are to receive effect. But it is one thing to acknowledge, as I would readily do, the force of these principles, to expect that the Secretary of State will, even in this case, give effect to them and to express the hope too that they will be taken into account if it becomes necessary for the appellant to pursue her Ethiopian appeal. It is another to find a basis in them for giving a different meaning to the words lawfully in their territory in article 32 of the Convention than the contracting states appear to have had in mind when they agreed to them, which is what Mr Drabble appeared to be urging the court to do on this branch of his argument. I do not think that article 32 is capable of being expanded in the way that was being suggested. The United Kingdom was entitled to design its rules as to what was needed for a refugee to come within its terms under domestic law, as were all the other states who have undertaken to be bound by the Convention, on the basis of the ordinary meaning of the words of the article in their context and in the light of their object and purpose, as article 31(1) of the Vienna Convention indicates. Phrases such as these are entitled to be read in accordance with the principle of legal certainty. They ought not to be taken to have their meaning changed or expanded unless this is expressly agreed to or is shown to have been recognised generally among the contracting states. The weakness in Mr Drabbles argument was that he was unable to show how this could be done without breaching these fundamental principles. Conclusion For these reasons, I am not persuaded that there are sound grounds for departing from my provisional view that the word lawfully in article 32(1) must be taken to refer to what is to be treated as lawful according to the domestic laws of the contracting state. I think, in agreement with the Court of Appeal and with Lord Dyson, that this is what the framers of the Convention intended by the use of this word in this context. I would dismiss the appeal. LORD DYSON The appellant is a national of Eritrea. She was born in Ethiopia and lived there continuously until she departed for the United Kingdom arriving on 3 July 1998. On arrival, she claimed protection as a refugee on the grounds of a fear of persecution in Eritrea and Ethiopia. The Secretary of State granted her temporary admission pursuant to paragraph 21 of Schedule 2 to the Immigration Act 1971 (the 1971 Act). The somewhat tortuous subsequent history has been described by Lord Hope. It is sufficient to say that her claims were refused by the Secretary of State on 1 November 2004. By a decision promulgated on 1 February 2006, the Asylum and Immigration Tribunal allowed her appeal and held that her fear of persecution in Eritrea on Refugee Convention grounds was well founded. Her status as a refugee was thereby established. The Secretary of State did not appeal against this decision. On 24 August 2006, she served a new notice of decision to refuse the appellants application for leave to enter on the grounds of a fear of persecution in Ethiopia and on the following day gave notice of her intention to give directions for the removal of the appellant to Ethiopia. The appellant appealed these decisions, but on 25 September 2006, she started judicial review proceedings seeking an order that she be given leave to enter/remain in the United Kingdom as a refugee pursuant to the tribunals decision of 1 February 2006 and an order quashing the removal directions to Ethiopia. The appeal has been adjourned pending the outcome of the judicial review proceedings. Two questions arise in these proceedings. The first is whether the appellant is lawfully in the United Kingdom within the meaning of article 32(1) of the Refugee Convention where she has been granted temporary admission, has submitted an asylum application, has been admitted to the states appeal process and has been found to be a refugee by operation of that appeal process. The second is whether, if the appellants presence in the United Kingdom is lawful but she loses her appeal against the removal directions to Ethiopia, the Secretary of State can terminate the temporary admission, thereby bringing the lawful presence to an end. In summary, Mr Drabble QC submits that the meaning of the phrase lawfully in their territory in article 32(1) is to be determined not only by reference to the domestic law of the Contracting State. The normative requirements of the Convention must also be taken into account and on that basis the appellants presence in the United Kingdom is lawful within the meaning of article 32(1) because she has temporary admission and has been permitted to embark on a substantive procedure to determine the question of whether she is entitled to refugee status and has been found to be a refugee. As regards the second question, Mr Drabble submits that, whatever the outcome of the Ethiopian appeal, the Secretary of State cannot terminate the appellants lawful presence in the United Kingdom by bringing the temporary admission to an end and removing her to a territory where (i) she would be at risk of persecution (so as to place the Secretary of State in breach of article 33) and (ii) she would not be able to enjoy the full rights vouchsafed by the Convention (what were referred to in argument as the panoply of rights). Ms Giovannetti QC submits that the question whether a person is lawfully in the territory of a Contracting State is to be determined exclusively by reference to the domestic law of that state. As a matter of domestic law, a person is not lawfully in the United Kingdom if she does not have leave to enter or remain, but has merely been granted temporary admission pending examination of her case or pending removal: see section 11(1) of the 1971 Act which Lord Hope has set out at para 14 above. As regards the second question, Ms Giovannetti submits that, if the appellants appeal against the removal directions is dismissed, then the Secretary of State will be free to terminate or not renew her temporary admission and there can at that stage be no question of the appellants presence in the United Kingdom being lawful within the meaning of article 32(1). The meaning of lawfully in their territory in article 32(1) The general approach to the interpretation of the Convention is not in doubt: see the discussion by Lord Hope at paras 29 to 31 above. In summary, it is to be interpreted in good faith in accordance with the ordinary meaning of its terms read in their context and in the light of the object and purpose of the Convention. The starting point is the language. It is generally to be assumed that the parties to the Convention included the terms that they wished to include and on which they were able to agree and omitted other terms which they did not wish to include or on which they were unable to agree. They are not to be treated as having agreed to something they did not agree, unless it is clear by necessary implication from the text or from uniform acceptance by states that they would have agreed or have subsequently done so. Some provisions of the Convention have an autonomous single meaning. Thus, in R v Secretary of State for the Home Department, ex p Adan [2001] 2 AC 477, the House of Lords held that there was a single autonomous meaning of the term refugee in article 1A(2). The meaning of this term cannot vary according to the differing interpretations of the Contracting States. It is not to be ascertained by reference to their domestic law. But there is no single autonomous meaning of the phrase lawfully in the territory in article 32(1). There is no international standard by reference to which lawful presence can be determined. That is not surprising. The power to admit, exclude and expel aliens is a widely recognised power of the sovereign state: a person has no right to live elsewhere than in his country of nationality and has no right to claim asylum: see the authorities to which Lord Hope refers at paras 32 and 33 above. Lord Bingham referred to this as a familiar, uncontentious and fundamental principle in Januzi v Secretary of State for the Home Department [2006] 2 AC 426 at para 6. Of all the commentators, Professor Hathaway provides perhaps the strongest support for the case advanced by Mr Drabble. But even he acknowledges (with qualifications) the important part played by domestic law in determining lawful presence within the meaning of article 32(1) in his discussion in The Rights of Refugees under International Law (Cambridge, 2005). He says at pp 177 178: As a starting point, the logic of deference to national legal understandings of lawful presence is clearly sensible. Not only is it correct that there is no uniform and comprehensive international standard by reference to which lawful presence can be determined but, as the debates cited above regarding temporary admission confirm, the drafters did generally intend for the third level of attachment to be determined by reference to national standards. Yet there is no indication that this deference was intended to be absolute, a proposition whichif carried to its logical conclusioncould result in refugees never being in a position to secure more than rights defined by the first two of the five levels of attachment agreed to by state parties Interpretation of the notion of lawful presence should therefore look primarily to domestic legal requirements, interpreted in the light of the small number of international legal understandings on point, in particular those reached by the drafters of the Refugee Convention. Deference to domestic law cannot therefore be absolute. At a minimum, the domestic meaning of lawful presence should not be adopted for refugee law purposes where to do so would be at odds with the normative requirements of the Refugee Convention. What is the position under United Kingdom domestic law? Without statutory intervention, it might be difficult to decide whether a person who has been granted temporary admission pending determination of her application for asylum is lawfully present in the territory. It is not self evident that she is not lawfully present in these circumstances. After all, she is physically present in the territory and her presence has been authorised by the state, admittedly for a limited period. But the power to grant temporary admission is conferred by Schedule 2 para 21 of the 1971 Act. It was open to Parliament to define its legal effect and it did so in section 11(1) of the 1971 Act. In Bugdaycay v Secretary of State for the Home Department; In re Musisi [1987] AC 514, Lord Bridge rejected the argument that, because Mr Musisi had been granted temporary admission pending the determination of his application for leave to enter, he was lawfully present within the meaning of article 32(1). The effect of section 11(1) of the 1971 Act was that he was deemed not to have entered the United Kingdom at all. The reasoning of Lord Bridge (although not the result) was said to have been wrong by the House of Lords in Szoma v Secretary of State for Work and Pensions [2006] 1 AC 564 at para 24. Like Lord Hope, I agree with Lord Bridges reasoning and would hold, for the reasons given by Stanley Burnton LJ, that the criticism of it in Szoma was not well founded. The position in domestic law is, therefore, now clear: the appellant is not lawfully present in the United Kingdom. There is nothing in the language of article 32 itself which suggests that lawful presence should not be judged by reference to domestic law. Moreover, there is support elsewhere in the Convention for the view that the grant of temporary admission pending the determination of an application for asylum does not give rise to lawful presence within the meaning of article 32(1). The phrase lawfully in [a] territory is also used in articles 18 and 26. Article 18 provides that the Contracting States shall accord to a refugee lawfully in their territory treatment as favourable as possible and, in any event, not less favourable than that accorded to aliens generally in the same circumstances as regards the right to engage on his own account in agriculture, industry, handicrafts and commerce and to establish commercial and industrial companies. Article 26 provides that each Contracting State shall accord to refugees lawfully in its territory the right to choose their place of residence to move freely within its territory, subject to any regulations applicable to aliens generally in the same circumstances. It is most unlikely that the Contracting States intended that refugees who apply for asylum and are given temporary admission while their application is being considered should be accorded rights of this kind. It seems to me far more likely that they intended such rights to be given to refugees who have established some real right to stay in the territory. I agree with what Lord Hope says at para 36. More generally, an interpretation of article 32(1) which defers the question of lawful presence to the domestic law of the territory of refuge is consistent with the fundamental principle that the power to admit and expel is a power of the sovereign state. Nor do I find it surprising that the generous protection afforded by article 32 should be confined to those whose claims for asylum have succeeded. The fundamental objective of the Convention is to protect persons who have a well founded fear of persecution for the reasons stated in the article 1A(2) definition. Article 33 (the duty of non refoulement) is an essential part of that protection. That is the principal duty owed to refugees. This is the point made by Lord Bingham in R (Yogathas)v Secretary of State for the Home Department [2003] 1 AC 920 at para 9: The second consideration is that the Convention is directed to a very important but very simple and very practical end, preventing the return of applicants to places where they will or may suffer persecution. Legal niceties and refinements should not be allowed to obstruct that purpose. It can never, save in extreme circumstances, be appropriate to compare an applicants living conditions in different countries if, in each of them, he will be safe from persecution or the risk of it. It is true that, where a person is recognised as a refugee and is granted asylum, the signatory states are under a duty to discharge many other obligations under the Convention. But the existence of the article 32(1) duty, which is plainly owed to refugees who have been granted asylum, does not detract from the fact that the overriding aim of the Convention is to provide refugees with protection against persecution. Article 33 applies to refugees whether they are lawfully present in the territory or not. It applies to any refugee to whom the Convention applies. It provides the protection that lies at the heart of the Convention. Article 32(1) does not provide protection to a refugee against the risk of persecution. It provides protection against expulsion in any circumstances except on grounds of national security or public order. It undoubtedly provides this additional protection to the refugee who has been granted asylum. Bearing in mind the fundamental object of the Convention, it is not surprising that it was intended by the Contracting States that this degree of protection was not to be accorded to a refugee who has been given temporary permission to remain in a territory pending the determination of her claim to asylum. If a refugee who is claiming asylum is to be protected from the risk of persecution, she needs the protection afforded by article 33. She does not need the additional protection afforded by article 32(1). We were shown various passages in the travaux prparatoires. But in my view, they contain no clear indication that the parties to the Convention intended that the benefit of article 32(1) should be conferred on refugees who have not been granted asylum. There is no consensus among the commentators that lawful presence within the meaning of article 32(1) should be given an autonomous Convention interpretation or what that meaning should be. For that reason, I do not think that it is profitable to set out their differing views in any detail. I have already referred to what Professor Hathaway says. As we have seen, he suggests that lawful presence should be determined primarily by reference to domestic law, but modified if necessary to reflect the normative requirements of the Convention. I do not know how this would work in practice. It seems to me that this is a difficult interpretation and one which would be likely to give rise to much uncertainty and dispute. A different view is expressed in Goodwin Gill and McAdam The Refugee in International Law (3rd edition) (2007) at p 524 525 where the editors say that in principle there appears to be no reason why the temporarily present refugee should not be subject to the same regime of deportation as applies to aliens generally. They suggest: On balance, article 32 may be interpreted as a substantial limitation upon the States power of expulsion, but with its benefits confined to lawfully resident refugees, that is, those in a State on a more or less indefinite basis. Professor Hathaway disagrees with this view. He says (loc cit at p 173, footnote 97) that it is no more than an assertion and that no legal argument is offered to justify this clear deviation from the express provisions of the Convention, relying instead on a bald appeal to the importance of achieving consistency with relevant state practice. In my view, if it had been intended to restrict the power of the Contracting States to decide whether a refugee is lawfully present in its territory, this would surely have been stated explicitly. Where the Convention limits the power of a state to expel a refugee, it says so in terms: see articles 32 and 33. There are no circumstances in which a refugee may be expelled in breach of article 33. But if a refugee is to enjoy the additional protection afforded by article 32(1), she must be lawfully present in the territory. As to what that means, I see no warrant for interpreting the article as prohibiting the expulsion of a refugee who is not lawfully present on the basis of domestic law, but whose expulsion would contravene Convention norms. Whether a refugee would have the benefit of the panoply of Convention rights in a territory to which she is expelled cannot have any bearing on the question whether she is lawfully present in the territory from which she is being expelled. In any event, Professor Hathaway and Mr Drabble are seeking to add a further restriction to the power to expel a refugee which cannot be found in article 32(1) or 33. Applying the principles of interpretation to which I refer at para 5 above, I find it impossible to say that it is clear by necessary implication from the text that the Contracting States would have agreed to such an additional restriction to the power of expulsion. I should add that Mr Drabble concedes that there is no breach of article 32(1) in immediately returning (i) an individual who arrives in the United Kingdom after residing in an obviously safe third country and (ii) an individual who can be sent to another Dublin Convention country so that her status can be investigated there. I agree with this concession. But it is difficult to see, on Mr Drabbles argument, why such individuals are not lawfully present in the United Kingdom. They are likely to have been given temporary admission and their cases will have been considered. I do not see why lawfulness of their presence is any different from that of others who are granted temporary admission, but whose cases are more difficult to determine. For all these reasons, I would therefore hold that there is nothing in article 32(1) which requires us to disapply section 11(1) of the 1971 Act and say that a refugee who is given temporary admission pending determination of her status is lawfully in the United Kingdom. Termination of temporary admission If (as I have held) the appellant is not lawfully present in the United Kingdom within the meaning of article 32(1), clearly she does not enjoy the protection afforded by that provision. It is rightly conceded by Ms Giovannetti that to attempt to remove the appellant from the United Kingdom before the application for asylum (including any appeals) has run its course would be improper. She has no intention of doing that. But if the appeal against the removal directions to Ethiopia is dismissed, the appellant will not be able to invoke article 32(1) as a reason for avoiding expulsion, although she may well have other grounds for doing so. Conclusion For these reasons as well as those given by Lord Hope, I would dismiss this appeal.

The Appellant is a national of Eritrea. But she was born in Ethiopia on 2 July 1981, where she lived continuously until she departed for the United Kingdom in July 1998. On arrival, she claimed protection as a refugee on the grounds of a fear of persecution in Eritrea. She also claimed that she could not go back to Ethiopia because her life would be in danger there. The Secretary of State granted her temporary admission under paragraph 21 of Schedule 2 to the Immigration Act 1971 (the 1971 Act). Her status has not changed since her arrival in 1998. Her temporary admission has been extended from time to time, and she remains liable to detention under paragraph 16 of Schedule 2 to the 1971 Act. Her claim that she was a refugee was refused by the Secretary of State on 1 November 2004, and she was informed that the Secretary of State proposed to give directions for her removal to Eritrea. The Appellant appealed. By a decision of 1 February 2006, the Asylum and Immigration Tribunal allowed her appeal and held that her fear of persecution in Eritrea on Refugee Convention grounds was well founded. Her status as a refugee was thereby established. The Secretary of State did not appeal against this decision. On 24 August 2006 the Secretary of State served a new notice of decision refusing the Appellants application for leave to enter on the grounds of a fear of persecution in Ethiopia and gave notice of her intention to give directions for the removal of the Appellant to Ethiopia. The Appellant appealed these decisions, but at the same time started judicial review proceedings seeking an order that she be given leave to enter/remain in the UK as a refugee pursuant to the tribunals decision of 1 February 2006 and an order quashing the removal directions to Ethiopia. The appeal has been adjourned pending the outcome of these judicial review proceedings. The judge in the Administrative Court granted the relief sought, but her decision was reversed by the Court of Appeal. The appellant now appeals to this court, arguing that she is entitled to protection under article 32 of the Refugee Convention and cannot therefore be removed to Ethiopia. The Supreme Court unanimously dismisses the appeal. The judgments are given by Lord Hope and Lord Dyson. Article 33 of the 1951 Refugee Convention prohibits any contracting state from expelling or returning (refouler) a refugee in any manner whatsoever to the frontiers of territories where his life or freedom would be threatened on account of his race, religion, nationality, membership of a particular social group or political opinion. Every refugee has the protection of that provision. The more generous protection of Article 32, however, is afforded to a more restricted category of persons. Article 32(1) provides that The Contracting States shall not expel a refugee lawfully in their territory save on grounds of national security or public order. The effect of this is that, once a refugee has been admitted or his presence has been legalised and so long as he retains his status as a refugee, he is entitled to stay indefinitely in the receiving state. He can only forfeit that right by becoming a risk to national security or by disturbing the public order. The question in this case is whether Article 32 applies only to a refugee who has been given the right under domestic law lawfully to stay in the contracting state, or whether the words lawfully present in the territory must be given an extended and autonomous meaning, so that a refugee who has not yet been given a right to remain in the territory is afforded protection under Article 32 that extends beyond the basic obligation under Article 33 not to expel or return to a territory where his life or freedom would be threatened for a Convention reason [1 2]. The first step in this case is to examine the language of Article 32 and to determine, provisionally, whether the words that it uses, taken by themselves, can accommodate the situation in which the Appellant finds herself. The second is to consider whether, if they cannot, the object and purpose of the Convention require the words to be read and given effect more broadly so as to afford the Appellant the protection which she seeks against her removal to Ethiopia [26]. There is some academic support for the Appellants argument that the class of beneficiary referred to in Article 32 should be broadly interpreted, but this approach is not universally accepted, and there is no judicial authority that is directly in point. The argument has to be examined, therefore, as raising an issue of principle [28]. There is no doubt that the Convention should be given a generous and purposive interpretation [30]. However, it must be remembered that the Courts task is to interpret the document to which the contracting parties have committed themselves by their agreement. It has no warrant to give effect to what they might, or in an ideal world would, have agreed [31]. The context in which the word lawfully appears in Article 32 is important. The phrase in which it appears contemplates that the refugee is not merely present in the territory of the contracting state, but that he is there lawfully. It implies that his presence is not just being tolerated, but he has a right to be there [32]. There is no consensus among the commentators that lawful presence should be given an autonomous meaning or what that meaning should be. We must therefore take our guidance from what the framers of the Convention must be taken to have agreed to, as understood by the UN High Commissioner for Refugees [34 & 63]. That is, that the lawfulness of the stay is to be judged against national rules and regulations governing such a stay [33]. In this case, the relevant national rule is section 11(1) of the 1971 Act, which provides that a person who has not otherwise entered the UK shall be deemed not to do so as long as he is detained, or temporarily admitted or released while liable to detention, under the powers conferred by Schedule 2 to the Act. Under that provision, the Appellant is deemed not to have entered this country [34 & 57]. There is no question of the Appellant being expelled from the UK while the statutory processes of appeal remain open to her and have not been brought to an end. But one should be cautious about saying that, just because in practice the Appellant is not at risk of removal for the time being, she is here lawfully within the meaning of Article 32, as that would have far reaching consequences [35]. Furthermore, the same phrase lawfully in their territory is used in Articles 18 and 26 in relation to self employment and free movement [36]. It seems unlikely that the contracting states would have agreed to grant to refugees the freedom to choose their place of residence and to move freely within their territory before they themselves had decided, according to their own domestic laws, whether or not to admit them to the territory in the first place [37 & 57]. For these reasons, the word lawfully in Article 32(1) must be taken to refer to what is to be treated as lawful according to the domestic laws of the contracting state [40]. This interpretation is consistent with the fundamental principle that the power to admit and expel foreign nationals is a power of the sovereign state [58]. Counsel for the Appellant submitted that, in view of the fact that the UK had recognised her as a refugee, the Appellant was entitled to the assurance that she would not be removed to a third country that was not able to provide her with the full panoply of rights she would get as a refugee under the Convention. Article 32(1) had to be read in that sense [41 42]. However, whether a refugee would have the benefit of the panoply of Convention rights in a territory to which she is expelled cannot have any bearing on the question whether she is lawfully present in the territory from which she is being expelled. This would be to infer a different meaning from the words lawfully in their territory than the contracting states appear to have had in mind when they agreed to them [47 & 64]. There are thus no sound grounds for departing from the view that lawfully in Article 32(1) must be taken to refer to what is to be treated as lawful according to the domestic laws of the contracting state. This is what the framers of the Convention intended by the use of this word in this context [49].

This appeal is about compulsory acquisition of private property by local authorities under the Town and Country Planning Act 1990 (the 1990 Act) in connection with the development or re development of land. It raises for the first time, in the context of compulsory acquisition, a number of controversial issues which have arisen in the context of planning permission, including these: how far a local authority may go in finding a solution to problems caused by the deterioration of listed buildings; to what extent a local authority may take into account off site benefits offered by a developer; and what offers (if any) made by a developer infringe the principle or policy that planning permissions may not be bought or sold. The Raglan Street site is a semi derelict site situated immediately to the west of, and just outside, the Wolverhampton Ring Road, which encircles the Wolverhampton City Centre retail, business and leisure core. Sainsburys Supermarkets Ltd (Sainsburys) owns or controls 86% of the site and Tesco Stores Ltd (Tesco) controls most of the remainder. Sainsburys and Tesco each wish to develop the Raglan Street site. Outline planning permission has been granted to Tesco, and the local authority has resolved to grant outline planning permission to Sainsburys. Tesco controls a site in the Wolverhampton City Centre known as the Royal Hospital site, which is about 850 metres away from the Raglan Street site on the other side of the City Centre. The Royal Hospital site is a large site with a number of listed buildings which are in poor condition. It has been an objective of Wolverhampton City Council (the Council) over several years to secure the regeneration of the Royal Hospital site. Tescos position has been that it was not financially viable to develop the Royal Hospital site in accordance with the Councils planning requirements and its space requirements on the site for the Primary Care Trust. It offered to link its scheme for the Raglan Street site with the re development of the Royal Hospital site and said that this would amount to a subsidy at least equal to the loss it would sustain in carrying out the Royal Hospital site development. The Council accepted that the Royal Hospital site would not be attractive to developers if it were restricted to the Councils scheme. Even on optimistic assumptions, there did not appear to be a level of profit available which would make the site an attractive proposition when weighed against the risks. Development was unlikely to take place for the foreseeable future unless Tescos proposals were brought forward through a cross subsidy from the Raglan Street site. In January 2008 the Council approved in principle the making of a compulsory purchase order (CPO) under section 226(1)(a) of the 1990 Act in respect of the land owned by Sainsburys at the Raglan Street site to facilitate a development of the site by Tesco. In resolving to make the CPO, the Council took into account Tescos commitment to develop the Royal Hospital site (and indeed passed a resolution which indicated that one of the purposes of the CPO was to facilitate the carrying out of the Royal Hospital site development). Sainsburys wishes to develop the Raglan Street site and claims that it is illegitimate for the Council, in resolving to make a CPO of the Sainsburys land on the Raglan Street site, to have regard to the regeneration of the Royal Hospital site to which Tesco will be committed if it is able to develop the Raglan Street site. Elias J dismissed the claim by Sainsburys for judicial review of the Councils decision, and the Court of Appeal dismissed an appeal in a judgment of Sullivan LJ, with whom Ward and Mummery LJJ agreed: [2009] EWCA Civ 835. Compulsory purchase Section 226 of the 1990 Act (as amended) provides: (1) A local authority to whom this section applies shall, on being authorised to do so by the Secretary of State, have power to acquire compulsorily any land in their area (a) if the authority think that the acquisition will facilitate the carrying out of development, re development or improvement on or in relation to the land, or (b) which is required for a purpose which it is necessary to achieve in the interests of the proper planning of an area in which the land is situated. (1A) But a local authority must not exercise the power under paragraph (a) of subsection (1) unless they think that the development, re development or improvement is likely to contribute to the achievement of any one or more of the following objects (a) the promotion or improvement of the economic well being of their area; (b) the promotion or improvement of the social well being of their area; (c) the promotion or improvement of the environmental well being of their area. CPOs made by a local authority under section 226 must be confirmed by the Secretary of State. If the owner of the land which is the subject of a CPO objects to the order, the Secretary of State will appoint an independent inspector to conduct a public inquiry. The inspectors report and recommendation will be considered by the Secretary of State when a decision whether or not to confirm the CPO is taken. Where land has been acquired by a local authority for planning purposes, the authority may dispose of the land to secure the best use of that or other land, or to secure the construction of buildings needed for the proper planning of the area: section 233 (1). Compulsory acquisition by public authorities for public purposes has always been in this country entirely a creature of statute: Rugby Joint Water Board v Shaw Fox [1973] AC 202, 214. The courts have been astute to impose a strict construction on statutes expropriating private property, and to ensure that rights of compulsory acquisition granted for a specified purpose may not be used for a different or collateral purpose: see Taggart, Expropriation, Public Purpose and the Constitution, in The Golden Metwand and the Crooked Cord: Essays on Public Law in Honour of Sir William Wade QC, (1998) ed Forsyth and Hare, 91. Denning MR said: In Prest v Secretary of State for Wales (1982) 81 LGR 193, 198 Lord I regard it as a principle of our constitutional law that no citizen is to be deprived of his land by any public authority against his will, unless it is expressly authorised by Parliament and the public interest decisively so demands and Watkins LJ said (at 211 212): The taking of a person's land against his will is a serious invasion of his proprietary rights. The use of statutory authority for the destruction of those rights requires to be most carefully scrutinised. The courts must be vigilant to see to it that that authority is not abused. It must not be used unless it is clear that the Secretary of State has allowed those rights to be violated by a decision based upon the right legal principles, adequate evidence and proper consideration of the factor which sways his mind into confirmation of the order sought. Recently, in the High Court of Australia, French CJ said (in R & R Fazzolari Pty Ltd v Parramatta City Council [2009] HCA 12, at [40], [42], [43]): Private property rights, although subject to compulsory acquisition by statute, have long been hedged about by the common law with protections. These protections are not absolute but take the form of interpretative approaches where statutes are said to affect such rights. The attribution by Blackstone, of caution to the legislature in exercising its power over private property, is reflected in what has been called a presumption, in the interpretation of statutes, against an intention to interfere with vested property rights The terminology of presumption is linked to that of legislative intention. As a practical matter it means that, where a statute is capable of more than one construction, that construction will be chosen which interferes least with private property rights The facts It was originally envisaged by Tesco that the Royal Hospital site would be a suitable location for a scheme which made provision for a superstore whilst retaining and restoring much of the fabric of the former Royal Hospital buildings. In January 2001, Sainsburys applied for outline planning permission to redevelop the Raglan Street site for a mixed use development comprising retail uses, residential, leisure, parking and associated highway and access works. The application was called in by the Secretary of State and, following a public inquiry, planning permission was granted on November 12, 2002. In early 2005 Sainsburys informed the Council that it no longer intended to develop the Raglan Street site, because it had agreed to sell its interests in the Raglan Street site to Tesco, which was developing a revised scheme. Sale documentation was agreed and engrossments circulated for execution. In addition, Tesco acquired interests in the Raglan Street site owned by third parties. On June 28, 2005 the Councils Cabinet (Resources) Panel reported on the proposed Tesco scheme, and said that the grant of permission would be linked to obligations relating to the Royal Hospital site. The Panel approved in principle the use of compulsory purchase powers to assemble the Raglan Street site should the need arise. This was on the then understanding that the interests of Sainsburys would be transferred to Tesco by agreement and that any CPO would be required only to acquire minor interests within the site. On November 3, 2005 Tesco entered into a conditional sale agreement with the Council, which provided for the sale of the Councils interest in the Raglan Street site to Tesco and for the Council to use its compulsory purchase powers, if necessary, to facilitate the acquisition of outstanding interests in the site. The agreement also imposed an obligation on Tesco to carry out and complete works of demolition and repairs at the Royal Hospital site before the commencement of works at the Raglan Street site. This agreement was replaced in July 2009 by a conditional agreement for lease. Following exchange of the agreement with the Council and its acquisition of third party interests in the Raglan Street site, Tesco sought an exchange of its agreement with Sainsburys. This did not happen because Sainsburys decided that it did in fact wish to redevelop the Raglan Street site, and to submit a fresh planning application for re development of the site. In accordance with its obligations in the agreement with the Council, Tesco submitted planning applications to the Council for the development of both the Royal Hospital site (in April 2006) and the Raglan Street site (in July 2006). In October 2006, Sainsburys submitted a planning application for a new scheme for re development of the Raglan Street site. Both applications for the re development of the Raglan Street site proposed a supermarket with parking and a petrol filling station, private flats, sheltered housing and small commercial units. The main differences between the schemes were that the Tesco supermarket was more than 50% larger than Sainsburys, and the Sainsburys scheme proposed retail warehouses and a leisure centre. Outline planning permission was recommended for both schemes. On December 6, 2006 the Councils Cabinet noted that Tesco and Sainsburys were unable to agree on how the site should be developed and resolved to approve in principle the use of CPO powers in relation to the Raglan Street site if necessary, subject to a further report to Cabinet setting out all relevant factors including the criteria for selecting the preferred re development scheme. Each of the applications by Sainsburys and Tesco for development of the Raglan Street site came before the Councils Planning Committee on March 13, 2007 when it was resolved to grant both applications subject to various requirements. In the report to Committee concerning the application by Tesco, the Case Officer said: Initially Tesco indicated that they wished the development of the Royal Hospital site to be linked to the grant of permission for the development of Raglan Street. However, when their agents were asked how such a linkage could legitimately be made, they were unable to make a suggestion. There is therefore no such linkage for Committee to consider. Tescos application for planning permission for development of the Raglan Street site was therefore considered without reference to the benefits of re development of the Royal Hospital site. Planning permission for the Tesco proposal at the Raglan Street site was granted on July 22, 2009, which was also the date of a new conditional agreement for lease between the Council and Tesco replacing the conditional agreement for sale of November 3, 2005. The agreement gives the Council an option to purchase Tescos interest in the Royal Hospital building. One of the terms is that, once certain works have been carried out by Tesco, then Tesco will make a balancing payment to the Council which is to be used solely in connection with the completion of the Royal Hospital building works: Sch. 1. On June 27, 2007, in order to decide whose land to acquire compulsorily to facilitate the development of the Raglan Street site, the Councils Cabinet resolved to invite both Sainsburys and Tesco to demonstrate the extent to which their respective development proposals met the Councils objectives for the Raglan Street area. It also resolved that Sainsburys and Tesco be advised that the Councils preferred outcome remained that the parties would negotiate with each other to resolve the impasse. On January 30, 2008 a report was presented to the Councils Cabinet which, having set out the statutory background and relevant advice in ODPM Circular 06/2004, Compulsory Purchase and the Crichel Down Rules, stated: The remaining sections of this report consider the two Schemes against the legal and policy tests set out in the Act and the Circular and compare them with each other. There is no doubt that both the Tesco and Sainsburys schemes would fulfil the statutory purpose of facilitating the carrying out of development, re development or improvement on or in relation to the land. The report noted that both schemes for the Raglan Street site were acceptable in planning terms. The report went on to describe the circumstances relating to the development of the Royal Hospital site by Tesco. Tesco was no longer seeking planning permission for a retail store on the site. The Council had promoted a proposal by Tesco for a mixed use development comprising housing, offices, primary care centre and administrative offices, retail, financial services and professional offices and food and drink uses, together with associated parking. It would provide accommodation for a Primary Care Centre and offices for the Primary Care Trust. The report said that Tescos position was that a Royal Hospital site development in accordance with the Councils aspirations was not viable and that the return to a developer in a scheme according with the Councils aspirations (including 20% affordable housing content) would involve a substantial loss, which would mainly be caused by the refurbishment of the listed building element for the Primary Care Trust. The scheme would be viable only through a cross subsidy from the development of the Raglan Street site. The report went on to say that whilst there was disagreement between Tesco and Sainsburys about the viability of the Royal Hospital site development, it was clear that Tesco was unlikely to carry out its scheme unless it was selected as the operator of the store at Raglan Street and were thus able to cross subsidise the Royal Hospital site development. The report concluded: both Schemes would bring appreciable planning benefits and would promote and improve the economic, social and environmental well being of the City. However, the Tesco Scheme enjoys a decisive advantage in that it will enable the development of the RHS to be brought forward in a manner that is consistent with the Councils planning objectives for that site. Making a CPO for the Tesco Scheme will therefore result in a significantly greater contribution to the economic, social and environmental well being of the Councils area than would making a CPO for the Sainsburys Scheme. On this basis, and subject to the satisfactory resolution of the matters identified in the Recommendations set out at the beginning of this report, there is a compelling case in the public interest to make a CPO to enable the Tesco Scheme to proceed. In accordance with the recommendation made in the report, the Councils Cabinet resolved to approve the principle of the making of a CPO of land owned by Sainsburys to facilitate the carrying out of (i) Tescos development proposals for the Raglan Street site and (ii) a mixed use retail, office and residential development of the Royal Hospital site, subject to, amongst other matters, Tesco producing satisfactory evidence of a commitment to the carrying out of the development of the Royal Hospital site before consideration be given to a resolution to authorise the making of the CPO. The Cabinet decision of January 30, 2008 was referred to the Councils Scrutiny Board and on February 19, 2008 the Board resolved that the report be received and noted. The issues In the absence of agreement between Sainsburys and Tesco, the only way in which the Raglan Street site can come forward for re development is through the exercise of compulsory purchase powers. Section 226(1)(a) provides that the local authority has power to acquire compulsorily any land in its area if it thinks that the acquisition will facilitate the carrying out of development, re development or improvement on or in relation to the land. A local authority may use its powers of compulsory purchase to assemble a site for development by a preferred developer: Standard Commercial Property Securities Ltd v Glasgow City Council (No 2) [2006] UKHL 50, 2007 SC (HL) 33, at [6]. It is common ground that the compulsory acquisition of the outstanding interests in the Raglan Street site would facilitate the carrying out of development, re development or improvement on the land under either the Tesco scheme or the Sainsburys scheme such that the test in section 226(1)(a) is met. So also it is common ground that both schemes of re development on the Raglan Street site would promote and improve the economic, social and environmental well being of the city and therefore satisfy the requirement in section 226(1A) that a local authority must not exercise the power unless it thinks that the development, re development or improvement is likely to contribute to the achievement of the well being objects set out in the subsection. It is also agreed that the re development of the Royal Hospital site as proposed would bring well being benefits to the Councils area, but Sainsburys says that, contrary to the approach of the Court of Appeal, those well being objects are not within section 226(1A), because they do not flow from the proposed re development of the Raglan Street site. The issues on this appeal are these: (1) Whether, on a proper construction of section 226(1A), the Council was entitled to take into account, in discharging its duty under that subsection, a commitment by the developer of a site part of which was to be the subject of a CPO to secure (by way of cross subsidy) the development, re development or improvement of another (unconnected) site and so achieve further well being benefits for the area. (2) Whether the Council was entitled, in deciding whether and how to exercise its powers under section 226(1)(a), to take into account such a commitment by a developer. On the first issue, relating to the interpretation and application of section 226(1A), the Court of Appeal, differing from Elias J, found in favour of the Council and Tesco. On the second issue, relating to section 226(1)(a), Elias J found in favour of the Council and Tesco, but the Court of Appeal did not find it necessary to decide the point because of its conclusion on section 226(1A). The judgments of Elias J and the Court of Appeal Section 226(1A) Elias J decided that, contrary to the argument of the Council and Tesco, on a proper construction of section 226(1A), the Royal Hospital site benefits did not fall within its ambit. They would have been well being benefits in relation to a CPO of that site, but in order to fall within section 226(1A) in relation to the development of the Raglan Street site, the benefits must flow from the development of the Raglan Street site alone, since that was the site covered by the CPO. The fact that a link between the two developments could be achieved by an agreement under section 106 of the 1990 Act did not entitle the Council to treat what were in reality well being benefits resulting from development of the Royal Hospital site as if they were generated by development of the Raglan Street site. The Court of Appeal held that the Council was entitled to take the Royal Hospital site benefits into account because they fell within section 226(1A). Whilst section 226(1)(a) focused the local authoritys attention on what was proposed to take place on the CPO site itself and required the authority to be satisfied that the CPO would facilitate the re development of the CPO site, section 226(1A) required it to look beyond the benefits that would accrue on the CPO site and to consider whether and to what extent the re development of the CPO site would bring well being benefits to a wider area. If the carrying out of the re development of a CPO site was likely to act as a catalyst for the development or re development of some other site or sites, then such catalytic effects were capable of falling within the scope of section 226(1A). The financial viability of a proposed re development scheme would be a highly material factor, and the proposed re development of a CPO site might have to be cross subsidised. It would be surprising if the potential financial implications of redeveloping the CPO site, including the possibility of cross subsidy as a result of facilitating its re development, were immaterial for the purposes of any consideration of the extent to which the carrying out of the re development would be likely to contribute to wider well being benefits. The possibility of one development cross subsidising another highly desirable development was capable of being a material consideration in the determination of a planning application under section 70(2) of the 1990 Act: R v Westminster City Council, ex parte Monahan [1990] 1 QB 87. The proposed cross subsidy was a material consideration in the light of the Councils obligation under section 226(1A) to take wider, off site well being benefits into account and in the light of the significance of financial viability and economic well being in the CPO context. Section 226(1)(a) Elias J held that for the purposes of section 226(1)(a), when choosing between two developments either of which would in principle be facilitated by a CPO, the Council was entitled to have regard to all the benefits which would flow from the development when determining in whose favour the CPO should be exercised, including any off site benefits achieved by means of an agreement linking the development of the Raglan Street site to development of the Royal Hospital site. The Court of Appeal decided that it was not necessary to rule on the alternative submission by the Council and Tesco that the Royal Hospital site benefits were material considerations under section 226(1)(a) in any event. The CPO context There is no doubt that where a body has a power of compulsory acquisition which is expressed or limited by reference to a particular purpose, then it is not legitimate for the body to seek to use the power for a different or collateral purpose: Simpsons Motor Sales (London) Ltd v Hendon Corporation [1964] AC 1088, at 1118, per Lord Evershed. In Galloway v Mayor and Commonalty of London (1866) LR 1 HL 34, 43, Lord Cranworth LC said that persons authorised to take the land of others cannot be allowed to exercise the powers conferred on them for any collateral object; that is, for any purposes except those for which the Legislature has invested them with extraordinary powers. In Clunies Ross v Commonwealth of Australia (1984) 155 CLR 193, 199 the High Court of Australia said that the statutory power to acquire land for a public purpose could not be used to advance or achieve some more remote public purpose, however laudable. See also Campbell v Municipal Council of Sydney [1925] AC 338, 443 (PC). So also the familiar rules on the judicial control of the exercise of legislative powers apply in the CPO context as elsewhere: see e.g., among many others, Hanks v Minister of Housing and Local Government [1963] 1 QB 999 (Megaw J); Prest v Secretary of State for Wales (1982) 81 LGR 193 (CA) (as explained in de Rothschild v Secretary of State for Transport (1988) 57 P & CR 330); Chesterfield Properties plc v Secretary of State for the Environment (1997) 76 P & CR 117 (Laws J). Nor can it be doubted that off site benefits may be taken into account in making a CPO. Standard Commercial Property Securities Ltd v Glasgow City Council (No 2) [2006] UKHL 50, 2007 SC (HL) 33 was a decision on the Scottish compulsory purchase provisions in the Town and Country Planning (Scotland) Act 1997, which are similar to, but not identical with, the equivalent provisions in the 1990 Act. Section 191 provided in substance that where land is acquired or appropriated by a planning authority for planning purposes, the authority might dispose of such land to any person to secure the best use of the land, and that the land could not be disposed of otherwise than at the best price or on the best terms that could reasonably be obtained. The property in question was in a run down part of Bath Street and Buchanan Street, Glasgow. Proposals for re development of the site by the developer contained a strong element of planning gain. The issue was whether the planning authority, exercising its compulsory purchase powers to redevelop a site, had acted ultra vires by entering into a back to back agreement with the developer in which the Council had agreed to transfer the land to the developer in return for the developer indemnifying the Council for the money expended in assembling the site and making it available. In effect the developer was to be put in the same position as if it had itself exercised the power of compulsory acquisition: [14]. It was held that the words best terms permitted disposal for a consideration which was not the best price, and so terms that would produce planning benefits and gains of value to the authority could be taken into account as well as terms resulting in cash benefits. It was accepted that the local authority could use its powers to assemble the site for development by a preferred developer: [6]. Lord Hope (at [39]) and Lord Brown (at [70]) also accepted that account could be taken by a planning authority of the wider, off site planning gains which would result from the exercise of its compulsory purchase powers. But these were benefits directly related to the site, and directly flowing from the development, and the decision does not help in the solution of the present appeal. Other contexts All parties, especially Sainsburys, relied on authorities relating to planning applications, and in particular on those relating to the extent to which conditions attached to a planning permission must relate to the development; and the extent to which off site benefits (whether under a section 106 agreement or not) are other material considerations to which the authority must have regard under section 70(2) of the 1990 Act in deciding whether to grant or refuse planning permission (or to impose conditions). In the Court of Appeal Sullivan LJ did not think that a read across from the limitations on the exercise of the section 70(2) power was appropriate in the context of section 226. In summary, Sainsburys position was (a) the cases on the legitimate scope of planning conditions were relevant, from which it followed that the only off site benefits which could be taken into account were those which fairly and reasonably related to the development in relation to which the CPO power was being exercised, that is the Raglan Street development; (b) the cases on section 70(2) also proceeded on the basis that there had to be a connection between the benefits and the permitted development; (c) a potential cross subsidy was relevant only where there was a composite development. The position of the Council and Tesco was that the Court of Appeal was right to say that there should not be a read across from the planning permission cases to CPO cases, but in any event the authorities showed that financial considerations, including off site benefits through cross subsidies, were relevant, and were essentially a matter for evaluation by the planning authority. It is necessary to note, at the outset, the relevant legal differences between this case and the cases in which similar questions have previously arisen. The first is that there is a difference between the exercise of powers of compulsory acquisition and the exercise of powers to control development and grant planning permission, which is rooted in the deep seated respect for private property reflected in the decisions cited above. The second is that both compulsory acquisition and planning control are solely creatures of statute, and that while the provisions which are relevant on this appeal are contained in one statute, the 1990 Act, the statutory provisions are different. The relevant provisions of section 226 have been set out above, and it is only necessary to repeat that section 226(1)(a) gives the local authority power to acquire compulsorily if the authority think that the acquisition will facilitate the carrying out of development, re development or improvement on or in relation to the land and does not contain, by contrast with section 70(2) on planning applications, any express reference to the authority having regard to any other material considerations. Nevertheless the policies underlying planning permission and acquisition for development purposes are similar, and considerable assistance can be obtained from the learning in the case law on planning permissions. Fairly and reasonably relate and material considerations In Pyx Granite Co Ltd v Ministry of Housing and Local Government [1958] 1 QB 554 (reversed on other grounds [1960] AC 260) Lord Denning said (at 572) in relation to what is now section 70(1)(a) of the 1990 Act: Although the planning authorities are given very wide powers to impose such conditions as they think fit, nevertheless the law says that those conditions, to be valid, must fairly and reasonably relate to the permitted development. Pyx Granite had the right to quarry in two areas of the Malvern Hills. The company required permission to break fresh surface on one of the sites. Conditions attached to the planning permission relating to such matters as the times when machinery for crushing the stone could be used and the control of dust emissions were held valid. The facts do not appear fully in the judgments, but it seems that the equipment was on the part of the land under the control of the company which was not the land in respect of which the application for permission related, but they could properly be regarded (for the purposes of the Town and Country Planning Act 1947, section 14) as expedient in connection with the permitted development. Lord Denning said (at 574): It would be very different if the Minister sought to impose like conditions about plant or machinery a mile or so away. Lord Dennings formula that the conditions must be fairly and reasonably related to the development was approved in Newbury District Council v Secretary of State for the Environment [1981] AC 578, 599 (Viscount Dilhorne), 607 (Lord Fraser), 618 (Lord Scarman), 627 (Lord Lane). Viscount Dilhorne said (at 599): It follows that the conditions imposed must be for a planning purpose and not for any ulterior one, and that they must fairly and reasonably relate to the development permitted. Also they must not be so unreasonable that no reasonable planning authority could have imposed them As Lord Hoffmann said in Tesco Stores Ltd v Secretary of State for the Environment [1995] 1 WLR 759, 772, as a general statement this formulation has never been challenged. See e.g. Grampian Regional Council v Secretary of State for Scotland, 1984 SC (HL) 58, at 66. In the Newbury case itself it was held that the Secretary of State was entitled to come to the conclusion that a condition imposed by a local authority requiring the removal of existing substantial buildings was not sufficiently related to a temporary change of use for which permission was granted. The effect of the adoption of the Pyx Granite/Newbury formula was to put severe limits on the powers of planning authorities: Tesco Stores Ltd v Secretary of State for the Environment [1995] 1 WLR 759, 772 3. Conditions requiring off site roadway benefits were held to be unreasonable in, for example, Hall & Co Ltd v Shoreham by Sea UDC [1964] 1 WLR 240 (ancillary road condition held to be Wednesbury unreasonable); Bradford Metropolitan City Council v Secretary of State for the Environment (1986) 53 P & CR 55 (where it was suggested that it would make no difference if they were included in a section 106 agreement); cf. Westminster Renslade Ltd v Secretary of State for the Environment (1983) 48 P & CR 255 (not legitimate to refuse a planning application because it did not contain provisions for the increase of the proportion of car parking space subject to public control: the absence of a benefit not a reason for refusing planning permission where the benefit could not have been lawfully secured by means of a condition). Section 70(2) of the 1990 Act provides that in dealing with an application for planning permission, the local planning authority shall have regard to the provisions of the development plan, so far as material to the application, and to any other material considerations. There are two decisions of the Court of Appeal, and a decision of the House of Lords, which have a bearing on the questions on this appeal: R v Westminster City Council, ex parte Monahan [1990] 1 QB 87 (CA); R v Plymouth City Council, ex parte Plymouth and South Devon Co operative Society (1993) 67 P & CR 78 (CA); Tesco Stores Ltd v Secretary of State for the Environment [1995] 1 WLR 759 (HL). They deal with one or more of the following questions: the extent to which financial considerations are material considerations in planning decisions; what connection (if any) is required between the development site and off site benefits for the purpose of material considerations; and the respective roles of the planning authorities and the courts in determining what considerations are relevant and what connection with off site benefits is necessary. R v Westminster City Council, ex parte Monahan and R v Plymouth City Council, ex parte Plymouth and South Devon Co operative Society are both cases in which Lord Dennings fairly and reasonably relate formula in relation to conditions was extended to, or discussed in connection with, the issue of material considerations under section 70(2). In that context the decisions have been superseded by the decision in the Tesco case, but they contain valuable discussion by some distinguished members of the Court of Appeal on questions of some relevance to the determination of this appeal. In Monahan Lord Dennings formula was discussed in a case involving enabling development, i.e. development which is contrary to established planning policy, but which is occasionally permitted because it brings public benefits which have been demonstrated clearly to outweigh the harm that would be caused. The decision also discusses the question of the extent to which the provision of off site benefits by the developer may be material. In Plymouth one of the issues was the extent to which off site planning benefits promised by a section 106 agreement were material considerations. R v Westminster City Council, ex parte Monahan In R v Westminster City Council, ex parte Monahan [1990] 1 QB 87 the Royal Opera House, Covent Garden Ltd, applied for planning permission and listed building consents to carry out a re development, the central objective of which was to extend and improve the Opera House by reconstruction and modernisation to bring it up to international standards, and to develop the surrounding area consistently with that project. Parts of the site were proposed to be used for the erection of office accommodation, which would be a departure from the development plan. The planning authority granted permission for the whole proposed development on the basis that the desirable improvements to the Opera House could not be financed unless the offices were permitted. The applicants sought judicial review of that decision on the ground, inter alia, that the fact that a desirable part of a proposed development would not be financially viable unless permission were given for the other part was not capable of being a material consideration for the purposes of what is now section 70(2) of the 1990 Act in granting planning permission for the development as a whole. It was held that financial considerations which fairly and reasonably related to the development were capable of being material considerations which could be taken into account in reaching that determination; and that the local planning authority had been entitled, in deciding to grant planning permission for the erection of the offices, to balance the fact that the improvements to the Opera House would not be financially viable if the permission for the offices were not granted against the fact that the office development was contrary to the development plan. On this appeal Sainsburys accepts that in the context of section 70(2) the possibility of one development cross subsidising another desirable development is capable, in limited circumstances, of being a material consideration, and that Monahan is such a case, where both developments formed part of one composite development. The Council and Tesco say that Monahan supports their position because the Court of Appeal held the consequence of the financial viability of the proposed opera house development to be a relevant factor in the planning authoritys determination. Kerr LJs reasoning was essentially this: (1) in composite or related developments (related in the sense that they can and should properly be considered in combination) the realisation of the main objective may depend on the financial implications or consequences of others; (2) provided that the ultimate determination is based on planning grounds and not on some ulterior motive, and that it is not irrational, there would be no basis for holding it to be invalid in law solely on the ground that it has taken account of, and adjusted itself to, the financial realities of the overall situation; (3) financial considerations may be treated as material in appropriate cases: Brighton Borough Council v Secretary of State for Environment (1978) 39 P & CR 46; Sosmo Trust Ltd v Secretary of State for the Environment [1983] JPL 806. He concluded (at 117) by agreeing with Webster Js conclusion at first instance. Webster J had said: It seems to me to be quite beyond doubt [but] that the fact that the finances made available from the commercial development would enable the improvements to be carried out was capable of being a material consideration, that is to say, that it was a consideration which related to the use or development of the land, that it related to a planning purpose and to the character of the use of the land, namely the improvements to the Royal Opera House which I have already described, particularly as the proposed commercial development was on the same site as the Royal Opera House and as the commercial development and the proposed improvements to the Royal Opera House all formed part of one proposal. The fairly and reasonably related to the development formula was applied by Kerr LJ (at 111), and Staughton LJ (at 122) (who also agreed that there was a composite or related development). There was some discussion in the Monahan decision of the limits of what could be taken into consideration, by reference to two hypothetical examples. The first example (which Kerr LJ said was an extreme example) was the case of the development of an undesirable office block in Victoria which was said to be necessary to generate the finance for a desirable development in Covent Garden. Kerr LJ said that a combination of this nature would be unlikely to be properly entertained as a single planning application or as an application for one composite development, and that such a case would involve considerations of fact and degree rather than of principle: at 117. Nicholls LJ dealt with this point by saying (at 121): The second hypothetical example, the swimming pool at the other end of the city, was dealt with by Staughton LJ (at 122): I am not persuaded by this reductio ad absurdum argument. Circumstances vary so widely that it may be unsatisfactory and unwise to attempt to state a formula which is intended to provide a definitive answer in all types of case. All that need be said to decide this appeal is that the sites of the commercial development approved in principle are sufficiently close to the opera house for it to have been proper for the local planning authority to treat the proposed development of the office sites, in Russell Street and elsewhere, and the proposed improvements to the opera house as forming part of one composite development project. As such it was open to the planning authority to balance the pros and cons of the various features of the scheme. It was open to the authority to treat the consequence, for the opera house works, of granting or withholding permission for offices as a material consideration in considering the part of the application which related to offices. The other extreme arises from the axiom of Lloyd LJ in Bradford City Metropolitan Council v Secretary of State for the Environment [1986] 1 EGLR 199, 202G that planning permission cannot be bought and sold. Suppose that a developer wished to erect an office building at one end of the town A, and offered to build a swimming pool at the other end B. It would in my view be wrong for the planning authority to regard the swimming pool as a material consideration, or to impose a condition that it should be built. That case seems to me little different from the developer who offers the planning authority a cheque so that it can build the swimming pool for itself provided he has permission for his office development. Where then is the line to be drawn between those extremes? In my judgment the answer lies in the speech of Viscount Dilhorne in Newbury District Council vs Secretary of State for the Environment [1981] AC 578, 599, which Kerr LJ has quoted. Conditions imposed must fairly and reasonably relate to the development permitted, if they are to be valid. So must considerations, if they are to be material. The ratio of the decision in Monahan is that where there are composite or related developments (related in the sense that they can and should properly be considered in combination), the local authority may balance the desirable financial consequences for one part of the scheme against the undesirable aspects of another part. In R v Plymouth City Council, ex parte Plymouth and South Devon Co operative Society (1993) 67 P & CR 78, at 88, Hoffmann LJ observed that the Monahan decision concerned what was treated as a single composite development, and held that there was a sufficient nexus between the office development and the Opera House improvements to entitle the planning authority to say that the desirability of the latter fairly and reasonably related to the former, because of (1) the financial dependency of the one part of the development on the other and (2) their physical proximity. The Monahan decision demonstrates, if demonstration were necessary, that financial considerations may be relevant in planning decisions. In Sosmo Trust Ltd v Secretary of State for the Environment [1983] JPL 806 (cited on this point with approval by Kerr LJ in Monahan at 116) Woolf J accepted that the consequences of the financial viability or lack of financial viability of a development were a potentially relevant factor: the true question was not whether a development would be viable but what the planning consequences would be if it were not viable: see at 807. See also Sovmots Investments Ltd v Secretary of State for the Environment [1977] QB 411, 425, per Forbes J (for further proceedings see [1977] QB 411; [1979] AC 144). R v Plymouth City Council, ex parte Plymouth and South Devon Co operative Society Ltd The restrictive approach of the courts to conditions was one of the factors which led planning authorities to rely on planning obligations in attempting to secure planning gain. This led directly to the question whether planning authorities were entitled to treat benefits secured by way of a planning obligation as a material consideration in deciding whether to grant planning permission. In R v Plymouth City Council, ex parte Plymouth and South Devon Co operative Society Ltd (1993) 67 P & CR 78 it was held that the planning authority could (against the opposition of the Co op) take into account offers by Tesco and Sainsburys to enter into section 106 agreements providing for substantial off site benefits. The off site benefits included an offer by Sainsburys of a payment of 1 million for infrastructure which would enable a separate site to be made available for industrial use, and an offer by Tesco of a park and ride facility on another site. The Co ops position was that a consideration was only material to the question of whether to grant planning permission, if it was necessary to the grant of permission, i.e. overcame some objection to the proposed development which would otherwise mean that permission could not be granted. It was held that although the benefits had to be planning benefits and fairly and reasonably relate to the development, they did not have to be necessary. This is a decision in which there was a connection between the development and the off site benefits. All members of the court (Russell, Evans and Hoffmann LJJ) accepted (at 82, 84, 87 88) that the off site benefits related to the superstore development applications. The offer of 1 million by Sainsburys for infrastructure would help to compensate for the reduction in the pool of resources for employment land. The park and ride facility offered by Tesco would counteract the increase in traffic caused by the superstore development: at 82 83; 90 91. Tesco Stores Ltd v Secretary of State for the Environment But, although it has not been expressly over ruled and the result would be the same today, the reasoning of the Plymouth decision can no longer stand, based as it was on the fairly and reasonably related to the development test: see at pp. 81 82, 87, 89 90. In Tesco Stores Ltd v Secretary of State for the Environment [1995] 1 WLR 759 there were rival plans for the development of superstores on different sites in Witney, Oxfordshire, by Tesco and Sainsburys (in conjunction with Tarmac). At an inquiry into proposals to alter the Witney local plan by building a new link road to relieve traffic congestion and a food superstore in the town centre, the inspector approved the proposal for a link road and rejected that for a town centre superstore. Tesco offered to provide full funding for the link road. The Secretary of State allowed the Sainsburys/Tarmac appeal, and dismissed Tescos application: the funding offer was not fairly and reasonably related in scale to the development; although there was a tenuous relationship between the funding of the link road and the proposed foodstore because of a slight worsening of traffic conditions (a 10% increase) the link was not needed. But if it were to be taken into account, then because of the tenuous nature of the connection, the partial contribution was too limited to affect the ultimate decision. The House of Lords confirmed that the Secretary of State had fulfilled his duty by taking the offer into account but according it very little weight. It was held that a planning obligation offered under section 106 of the 1990 Act by a developer was a material consideration for the purposes of section 70(2) of the Act if it was relevant to the development; and that the weight to be given to such an obligation was a matter entirely within the discretion of the decision maker. Tescos offer to fund the link road was sufficiently related to the proposed development to constitute a material consideration under section 70(2). For the purposes of this appeal, the importance of this decision is the light it throws on the nature of the necessary link between the development and the off site benefit. The House of Lords held that the Pyx Granite/Newbury test for planning conditions was not applicable in the context of the question whether section 106 obligations were material considerations under section 70(2). Lord Keith of Kinkel said (at 764, 770): Sir Thomas Bingham MR in the course of his judgment in this case said that material in [section 70(2)] meant relevant, and in my opinion he was correct in this. It is for the courts, if the matter is brought before them, to decide what is a relevant consideration. If the decision maker wrongly takes the view that some consideration is not relevant, and therefore has no regard to it, his decision cannot stand and he must be required to think again. But it is entirely for the decision maker to attribute to the relevant considerations such weight as he thinks fit, and the courts will not interfere unless he has acted unreasonably in the Wednesbury sense An offered planning obligation which has nothing to do with the proposed development, apart from the fact that it is offered by the developer, will plainly not be a material consideration and could be regarded only as an attempt to buy planning permission. If it has some connection with the proposed development which is not de minimis, then regard must be had to it. But the extent, if any, to which it should affect the decision is a matter entirely within the discretion of the decision maker and in exercising that discretion he is entitled to have regard to his established policy. All members of the appellate committee agreed with Lord Keiths opinion, and the ratio of the decision is that for the purposes of section 70(2) any benefit whose connection with the development is more than de minimis will be a material consideration, but that the weight to be given to any particular material consideration is entirely a matter for the decision maker. It has often been said that planning permissions should not be bought or sold: see Bradford Metropolitan City Council v Secretary of State for the Environment (1986) 53 P & CR 55, 64, per Lloyd LJ (on which see Plymouth at 84, per Evans LJ; Monahan at 122, per Staughton LJ; Tesco, at 765, per Lord Keith of Kinkel, and 782, per Lord Hoffmann); and accepted as a matter of policy in ODPM Circular 05/2005, Planning Obligations, para B6 (reflecting its predecessors): The use of planning obligations must be governed by the fundamental principle that planning permission may not be bought or sold. It is therefore not legitimate for unacceptable development to be permitted because of benefits or inducements offered by a developer which are not necessary to make the development acceptable in planning terms Responding to the point that the approach in the Plymouth decision leads to the prospect of the sale and purchase of planning permissions, Lord Hoffmann contrasted cases in which there was a sufficient connection between the development and a planning obligations and those in which they were quite unconnected. He said (at 782): This reluctance of the English courts to enter into questions of planning judgment means that they cannot intervene in cases in which there is sufficient connection between the development and a planning obligation to make it a material consideration but the obligation appears disproportionate to the external costs of the development. R vs Plymouth City Council, Ex parte Plymouth and South Devon Co operative Society Ltd, 67 P & CR 78, was such a case, leading to concern among academic writers and Steyn LJ in the present case that the court was condoning the sale of planning permissions to the highest bidder. My Lords, to describe a planning decision as a bargain and sale is a vivid metaphor. But I venture to suggest that such a metaphor (and I could myself have used the more emotive term auction rather than competition to describe the process of decision making process in the Plymouth case) is an uncertain guide to the legality of a grant or refusal of planning permission. It is easy enough to apply in a clear case in which the planning authority has demanded or taken account of benefits which are quite unconnected with the proposed development. But in such a case the phrase merely adds colour to the statutory duty to have regard only to material considerations. In cases in which there is a sufficient connection, the application of the metaphor or its relevance to the legality of the planning decision may be highly debatable. I have already explained how in a case of competition such as the Plymouth case, in which it is contemplated that the grant of permission to one developer will be a reason for refusing it to another, it may be perfectly rational to choose the proposal which offers the greatest public benefit in terms of both the development itself and related external benefits. Conclusions There is no doubt that in the light of the report of January 30, 2008, the Council had purportedly resolved in principle to make the CPO for the purpose of facilitating both the development of the Raglan Street site and that of the Royal Hospital site. That would be sufficient to vitiate the resolution. But Elias J and the Court Appeal accepted that there would be no point in quashing the resolution on that ground alone, since a more felicitously worded resolution could be passed if the benefits to be derived from the development of the Royal Hospital site were relevant under section 226(1)(a) or section 226(1A). What can be derived from the decisions in the planning context, and in particular the Tesco case, can be stated shortly. First, the question of what is a material (or relevant) consideration is a question of law, but the weight to be given to it is a matter for the decision maker. Second, financial viability may be material if it relates to the development. Third, financial dependency of part of a composite development on another part may be a relevant consideration, in the sense that the fact that the proposed development will finance other relevant planning benefits may be material. Fourth, off site benefits which are related to or are connected with the development will be material. These principles provide the answer to the questions raised in Monahan about the development in Victoria or the swimming pool on the other side of the city. They do not, as Kerr LJ thought, raise questions of fact and degree. There must be a real connection between the benefits and the development. Given the similar context, there is no reason why similar principles should not apply to compulsory acquisition for development purposes provided that it is recognised that, because of the serious invasion of proprietary rights involved in compulsory acquisition, a strict approach to the application of these principles is required. There must be a real, rather than a fanciful or remote, connection between the off site benefits and the development for which the compulsory acquisition is made. What is the connection in the present case? The expression cross subsidy has been much used by Tesco and the Council. The expression bears a special meaning in this case. Its most common use is in the competition field, where it usually connotes improper allocation of costs in different product or geographic markets, which may result in predatory pricing or other anti competitive activity. Here all it means is that Tesco says that (a) the Councils requirements for the Royal Hospital site have the result that Tesco cannot develop it profitably; and (b) Tesco will undertake its development if it can develop the Raglan Street site. Tesco says that the consequence of (a) and (b) is that the Raglan Street site development will cross subsidise the Royal Hospital site development. But the only connections between the proposed Raglan Street site and Royal Hospital site developments are that (a) Tesco says that it will develop the latter if it can develop the former; (b) it has contractually agreed to perform building works on the Royal Hospital site if it acquires the Raglan Street site. The commercial effect will be that the deficiency on the Royal Hospital site will be made up, or cross subsidised, by the Raglan Street site development. Nothing in the papers before the Court suggests that this will be done by any direct subvention from the income or capital proceeds of the Raglan Street site, but this would not in any event make a difference. It is entirely a matter for Tesco how it funds any loss from, or presents any lower return from, the Royal Hospital site. This is only a connection in the sense that either (a) the Council is being tempted to facilitate one development because it wants another development; or (b) Tesco is being tempted to undertake one uncommercial development in order to obtain the development it wants. The crucial question is whether that is a connection which the Council is entitled to take into consideration under section 226(1)(a) or section 226(1A). To take the latter first, Elias J was right to hold that section 226(1A) was not the crucial provision for the purposes of this case. It does not answer the prior question of what matters can be taken into consideration. The power of compulsory acquisition must be capable of being exercised under section 226(1)(a) before the limitation in section 226(1A) applies. Once it applies the local authority must think that the development will contribute to the achievement of the well being benefits. Section 226(1A) does not permit the Council to take into account a commitment by the developer of a site part of which was to be the subject of a CPO to secure the development, re development or improvement of another (unconnected) site and so achieve further well being benefits for the area. The Council was entitled to come to the view for the purposes of section 226(1A) that the Raglan Street site development would contribute to well being in its area, but not on the basis of the benefits which would derive from the Royal Hospital site development. The Raglan Street site development will not, in any legally relevant sense, contribute to the achievement of the well being benefits flowing from the Royal Hospital site development. But that matters little since the crucial question is whether the Council was entitled to take it into account under section 226(1)(a). There can be no doubt that, even if there is no express reference in section 226(1)(a) to the local authority taking into account material considerations (by contrast with section 70(2)), only relevant matters may be taken into account. For the reasons given above, the claimed financial connection between the two sites was not such as to amount to a relevant matter. It is true, as Sullivan LJ said (at [34]), that the financial viability of a proposed re development scheme would be a highly material factor, and that a proposed re development of a CPO site might have to be cross subsidised. But Sullivan LJ was wrong to conclude that it followed that a cross subsidy from a CPO site to another site was a material consideration. The fact that a conditional agreement for sale linked the obligation to carry out works on the Royal Hospital site was not a relevant connection. Nor do I consider, despite the views of Lord Phillips and Lord Hope to the contrary, that a different result on this appeal is required by the fact that Sainsburys and Tesco were in competition for the site, and that the Council is proposing to dispose of the land to Tesco under section 233. They accept that the Council was not entitled to take the benefits from the Royal Hospital site development into account in making the CPO, but consider that the opportunity for re development of the Royal Hospital site would be a relevant matter to be taken into account by the Council in exercising the power of disposal to Tesco under section 233. First, as a matter of principle it is impossible to put into separate compartments the exercise by the Council of its power of compulsory purchase of Sainsburys property, and the exercise of the Councils power to dispose of Sainsburys property to Tesco, and then to conclude that the Royal Hospital site development may not be taken into account for the former, but can be taken into account for the latter. It is wrong for the Council to deprive Sainsburys of its property because the Council will derive from disposal of that property benefits wholly unconnected with the acquisition of the property. Second, although it is plain that the power of compulsory purchase may be used to assemble a site for a preferred developer, there is nothing in Standard Commercial Property Securities Ltd v Glasgow City Council (No 2) [2006] UKHL 50, 2007 SC (HL) 33 which supports the proposition that unconnected benefits may be taken into account by a local authority in deciding whether property should be compulsorily acquired for the purpose of disposing of it to a preferred developer. The background to the appeal was a competition between developers for the right to develop a run down part of Buchanan Street, Glasgow. Two developers in particular were keen to develop the site, Atlas Investments and Standard Commercial, each of which owned part of the site. The Council, when inviting all the owners and occupiers of the land on the site to submit proposals for re development, said that successful submissions should seek a mix of activities and functions which would bring added activity to the area outside normal retailing hours, and encouraged applicants to allocate a budget to the cost of integrating public art into the development and include improvements to the relevant areas of adjoining streets, and so contribute to the transformation of Glasgow City Centre. Those were the wider planning gain benefits to which Lord Hope referred in his opinion: [39]. Similarly Lord Brown (at [70]) referred to the Councils desire to obtain economic and social benefits for Glasgow. But it is clear from Lord Hopes opinion in that decision, as he accepts in his judgment on this appeal, that the benefits which the developers were invited to confer were related to the site, and the immediately adjoining area. There is nothing in the decision to support the conclusion that in this case the promise to develop the Royal Hospital site would have been a material consideration in a disposal under section 233. I would therefore allow the appeal, and make an order declaring that the opportunity for re development of the Royal Hospital site is not a lawful consideration in deciding whether to make a CPO in relation to the Raglan Street site. LORD WALKER In agreement with Lady Hale, Lord Mance and Lord Collins, I would allow this appeal. I agree with the reasons set out in the full judgment of Lord Collins, supported by the shorter judgments of Lady Hale and Lord Mance. But in view of the difference of opinion within the Court I will try to summarise my reasons in my own words. This appeal is concerned with compulsory acquisition of land for planning purposes (that being the general ambit of both paragraphs (a) and (b) in section 226(1) of the Town and Country Planning Act 1990 the 1990 Act). The land is to end up, not in public ownership and used for public purposes, but in private ownership and used for a variety of purposes, mainly retail and residential. Economic regeneration brought about by urban redevelopment is no doubt a public good, but private to private acquisitions by compulsory purchase may also produce large profits for powerful business interests, and courts rightly regard them as particularly sensitive. To the authorities mentioned by Lord Collins in paras 9 to 11 of his judgment might be added the famous split of the United States Supreme Court in Kelo v City of New London, Connecticut 545 US 469 (2005), discussed in Gray & Gray, Elements of Land Law, 5th Edition (2009) paras 11.2.6 and 11.2.7. The case of Fazzolari Pty Ltd v Parramatta City Council (2009) 237 CLR 603 mentioned by Lord Collins was also in substance largely a private to private acquisition, although the local authority used a declaration of trust to give the acquisition a better appearance. Where a local authority is considering exercising powers of compulsory purchase for planning purposes, planning considerations must be central to the decision making process. The public purse is to be protected against improvidence, but the local authority should not be exercising its powers in order to make a commercial profit. In Standard Commercial Property Securities Ltd v Glasgow City Council 2007 SC (HL) 33, Lord Brown, at para 75, described that proposition as deeply unattractive. Section 233 of the 1990 Act differs from its Scottish counterpart in that subsection (3) expressly contemplates a disposal for a consideration less than the best that can reasonably be obtained, though only with the consent of the Secretary of State. But both in Scotland and in England a back to back arrangement (under which the local authority makes neither a commercial loss nor a commercial gain from its participation, using section 226 powers, in a scheme of comprehensive urban redevelopment) is standard practice. The dominant aim is betterment in planning terms. That to my mind is why the issue of what would be material considerations for the purposes of deciding an application for planning permission is also relevant to a decision to exercise powers of compulsory acquisition under section 226. The quality of the proposed redevelopment of the site is of crucial importance. Its larger impact on the authoritys area is also an essential element in the decision making process, because of section 226 (1A). In common with all the members of the Court I consider that section 226(1A) has the effect of imposing an extra requirement which is a necessary but not a sufficient condition for the exercise of powers under 226(1). Section 226(1A) does not qualify, still less act as a substitute for, the requirements of the preceding subsection. But the exercise of powers of compulsory acquisition, especially in a private to private acquisition, amounts to a serious invasion of the current owners proprietary rights. The local authority has a direct financial interest in the matter, and not merely a general interest (as local planning authority) in the betterment and well being of its area. A stricter approach is therefore called for. As Lord Collins says in his conclusions at para 71 of his judgment, a real (rather than a fanciful or remote) connection must be shown between any off site benefits and the proposed redevelopment for which a compulsory purchase order is proposed. Lord Brown has posed a rhetorical question in para 182 of his judgment. After referring to the Standard Commercial case he has commented, it is surely implicit in that decision and indeed in the respective legislative requirements in both England and Scotland in effect to get what I called the best overall deal available that, by the same token as a cash bidding match would have been possible, so too would have been an offer of other benefits, however extraneous. Why ever not? With great respect to Lord Brown I think that he has answered his own question in the passage of his speech in Standard Commercial at para 75: I find deeply unattractive the proposition that, almost inevitably at the expense of some beneficial aspect of the development scheme, the authority should be seeking to make a profit out of the exercise of its statutory powers of acquisition. A cash bidding match, or the exaction of extraneous benefits, has superficial attractions as a tie breaker, especially if there are two contenders, both with very deep pockets, like Tesco and Sainsbury. The merits of their respective schemes are closely matched, as appears from the summary in para 11 of the officers recommendation document dated 30 January 2008. It is true that the Tesco scheme is said in the summary to offer more jobs, but the Sainsbury scheme might create an unspecified number of extra jobs through re use or development of its St Georges Parade site (para 6.6). The Tesco scheme would be delivered by a well resourced operator but the detailed consideration of delivery (para 7) ranked the two contenders as equally capable. Tescos only apparently decisive advantage was (para 11.3) the offer of cross funding for the RHS development. Since their proposals are such that there is little, if anything, to choose between them in planning terms, why should not the local authority look to some substantial extraneous benefit which one contender offers, rather than having to make the difficult choice of a winner between contenders whose proposals are equally satisfactory on planning grounds? The answer is simply that it is not the right way for a local authority to make a decision as to the exercise of its powers of compulsory purchase, any more than it could choose a new chief executive, from a short list of apparently equally well qualified candidates, by holding a closed auction for the office. As Lord Keith said in Tesco Stores Ltd v Secretary of State for the Environment [1995] 1 WLR 759, 770, An offered planning obligation which has nothing to do with the proposed development, apart from the fact that it is offered by the developer, will plainly not be a material consideration and could be regarded only as an attempt to buy planning permission. The fact that an exercise of powers of compulsory acquisition and a back to back disposal to a developer are prearranged is unobjectionable (see Lord Rodger in Standard Commercial at para 53). But that does not mean that the proper consideration of the exercise of powers of compulsory acquisition under section 226 of the 1990 Act can be telescoped into the exercise of powers of disposal under section 233. On this point I am in full agreement with the judgment of Lady Hale. For these reasons I would allow this appeal and make the declaration proposed by Lord Collins. LADY HALE I agree that this appeal should be allowed, for the reasons given by Lord Collins, together with the further reasons given by Lord Walker and Lord Mance. Lord Phillips and Lord Hope also agree with the reasoning of Lord Collins, on the points upon which he differs from Lord Brown, but they disagree in the result. As I understand it, they consider that the extraneous benefit offered by Tesco, although it would not normally be a relevant consideration in the compulsory purchase decision, would be a relevant consideration when the Council came to dispose of the land under section 233(1) of the Town and Country Planning Act 1990. Accordingly, as in practice the decisions may be taken simultaneously, that consideration can be read back into the decision compulsorily to purchase the Sainsbury land under section 226(1). For the reasons given by Lord Mance, I find it difficult to accept that proposition. It puts the cart before the horse. The council have nothing to dispose of unless they have acquired the land, whether voluntarily or compulsorily. They can only acquire the land compulsorily under section 226(1)(a) if the authority think that the acquisition will facilitate the carrying out of development, redevelopment or improvement on or in relation to the land. The matters to be taken into account in making that decision have to be relevant to that purpose. I agree, as Lord Mance puts it at para 98 of his judgment, that the considerations admissible in relation to compulsory purchase are no wider than those admissible in relation to the grant of planning permission. Although the grant of planning permission is a useful analogy, it is a different exercise. The considerations material to that exercise are also material, but in a rather different way, to the compulsory purchase decision. Thus, under the former version of section 226(1) (quoted by Lord Phillips at para 121 of his judgment), the considerations which would be material to the grant of planning permission for development on the land were also material to whether the land was suitable for development. That was a sine qua non for compulsory purchase to secure development. This seems obvious. It cannot be proper to deprive a person compulsorily of his land in order to secure something which will not be allowed to take place. Under the new version of section 226(1), the permissibility of some development (together with a reasonable prospect of its actually taking place) should be a sine qua non for compulsory acquisition in order to facilitate it. The question does not arise in this case, because we are agreed that the extraneous benefit to the Royal Hospital site would not be relevant to the grant of planning permission for this site, any more than it is relevant to the compulsory purchase decision. Acquiring the whole of the Raglan Street site would facilitate the development of that site (although it is worth noting that Sainsbury have so much of the site that they could carry out a development, albeit a less satisfactory one, without further compulsory acquisition). Persuading Tesco to carry out a wholly unrelated development upon another site elsewhere in the city, desirable though that may be for the City and people of Wolverhampton, does nothing to facilitate the development of the Raglan Street site. Rather, it is the other way round. It is difficult to understand why the fact that Sainsbury also wish to develop the Raglan Street site should make any difference. If it would not be permissible to take into account the extraneous benefit when deciding compulsorily to purchase land from an unwilling owner who did not himself wish to develop it, it seems even less permissible to take it into account as against an unwilling owner who does. In the former situation, a development which would not otherwise take place would be facilitated; in the latter, it would not be facilitated because the development would take place in any event. (I might comment that Sainsbury would probably never have found themselves in this mess if they had not twice changed their mind about whether to develop this site.) The case of Standard Commercial Property Securities Ltd v Glasgow City Council [2006] UKHL 50, 2007 SC (HL) 33 is entirely consistent with this view. A council can agree to assemble a site for development, using their compulsory purchase powers if necessary, and to sell it to their chosen developer. It makes sense, but it is not essential, to conduct the two exercises in tandem. But the considerations relevant to the selection of the developer in that case were all relevant to the development of that site. The selection criteria adopted (and carefully graded) by the council were all directly related to the quality of the development of the site and the feasibility of the would be developers carrying it out (see Lord Hope, at para 22). There were no subsidiary planning obligations involved, still less any wholly extraneous benefits offered. In any event, the battle was not about the selection criteria, but about whether the proposed terms of disposal were the best obtainable and there was no evidence that they were not. Even if it were permissible to take a wholly extraneous benefit into account when deciding to whom to sell the land, it does not follow that it is permissible to take that benefit into account when deciding compulsorily to deprive a person of their land. Finally, I agree that section 226(1A) operates as a limitation on the power defined by section 226(1)(a). It is therefore necessary first to consider whether the acquisition will facilitate the development of the land; and only if it will do that, to consider whether the development itself will contribute to the promotion or improvement of the economic, social or environmental well being of the area. LORD MANCE I consider that this appeal should be allowed. I agree with the reasons given by Lord Collins, supplemented by those given by Lord Walker and Lady Hale, and wish to add only a few comments on one aspect, relating to the basis upon which Lord Phillips and Lord Hope (and Lord Brown in an alternative) come in their judgments to an opposite result. Like Lord Phillips (paras 134 135), I agree with Lord Collinss conclusion that a planning authority, when considering a planning application, is only entitled to take into account a planning obligation which the applicant offers if that obligation has some connection with the relevant development, apart from the fact of its offer. I also consider that there is a useful analogy between the grant of planning permission and the exercise of a power of compulsory purchase under section 226(1)(a) of the Town and Country Planning Act 1990, and that the considerations admissible in relation to the latter power are, in the respect mentioned in the previous sentence, no wider than those admissible in relation to the former. In this case, the (decisive) attraction of Tescos proposal in respect of the Raglan Street site consisted of Tescos offer to use the profits to subsidise the wholly unconnected development by it of the Royal Hospital site, elsewhere in Wolverhampton, which the City Council wished to see take place. Lord Phillips accepts in para 138, for reasons which I have summarised in the previous paragraph, that, had Sainsbury been here simply an owner who was unwilling to sell his land, it would not have been legitimate for Wolverhampton City Council to take this attraction into account in deciding to exercise its powers of compulsory purchase to facilitate Tescos scheme in respect of the Raglan Street site. Likewise, he accepts (para 140) that, if Sainsbury and Tesco had been seeking in competition with each other to develop a site in the ownership of a third party, then, too, it would not been admissible for the City Council to decide compulsorily to purchase the third party site because of the attraction of Tescos offer to develop a wholly unconnected site. However, Lord Phillips and Lord Hope consider that it makes all the difference that, in this case, Sainsbury and Tesco were in competition for the same site (in fact owned or controlled as to 86% by the former and 14% by the latter). I cannot accept that distinction. On its logic, it should make no difference if Sainsbury owned and wanted itself to develop the whole Raglan Street site: Tesco, if it wanted to develop that site, could, by offering to devote part of the profits to the Royal Hospital project, still legitimately induce the City Council compulsorily to purchase Sainsburys property in order to sell it to Tesco for the Raglan Street development. Lord Phillipss reference (para 147) to the fact that the compulsory purchase of land owned by one or the other is involved as really peripheral in a case where there are rival developers goes far towards accepting this conclusion. Alternatively, if some way of avoiding this conclusion exists, the logic must still be that Tesco, by acquiring only one house on the proposed Raglan Street site, could alter fundamentally the considerations admissible in relation to a decision whether compulsorily to purchase Sainsburys property, rather than Tescos, in order to facilitate the development of the Raglan Street site. In either case, I do not think it right to describe as motivated by commercial rivalry (para 147) the wish of a landowner in Sainsburys position to develop its own land or its wish to have any decision to compulsorily purchase its land for the benefit of some other developer made by reference to factors having at least some connection with its land. The error in my view lies in divorcing the exercise of the power of compulsory purchase from the property to which it relates. Two different exercises of that power are here in issue relating to two different pieces of land. When a planning authority exercises compulsory purchase powers to promote a particular development, it does this in relation to specific property and only so far as necessary. In the present case, if Sainsburys scheme is preferred on its admissible planning merits, then only Tescos property will be compulsorily purchased, and vice versa. The Councils first decision is therefore which development it prefers, and that will determine whose property is compulsorily purchased. The Councils decision which development it prefers must be taken having regard to considerations which are admissible in the context of the development for which property is to be compulsorily purchased. Thus, when deciding whether compulsorily to purchase Sainsburys property, it was not admissible to have regard to Tescos offer relating to the unconnected development of the Royal Hospital site. If the Raglan Street site had already been in Council ownership, and there were two interested developers, the Council could of course take into account under section 233 any inducement offered by either whether in terms of price or some unconnected benefit (such as an undertaking to develop the Royal Hospital site) as Lord Hope says in para 155. But that is for the very reason that the only relevant decision would then relate to the disposal of the Councils own property. Where the Council is deciding whether compulsorily to purchase third party property under section 226(1)(a), the interests of the third party mean that the Council must have regard only to considerations which are admissible in the context of the development for which such property is required. Standard Commercial Property Securities Ltd v Glasgow City Council [2006] UKHL 50; 2007 SC (HL) 33, to which Lord Phillips and Lord Hope refer, does not in my view support the conclusion which they reach. It was a case where the Glasgow City Council took its decision which development to prefer on grounds which related scrupulously to the merits of the proposed development, without reference to unconnected factors: see e.g. paras 21 to 23, per Lord Hope, para 50, per Lord Rodger and para 73, per Lord Brown. There was, as Lord Hope notes in para 155 in his present judgment, a strong element of planning gain involved in the potential development. But it was planning gain related to the development, not to some entirely unconnected development, so that the case has no analogy with the present. The issue before the House arose because all potential developers were required to provide an indemnity for Glasgow City Councils costs in effecting the compulsory purchase: paras. 22, 50 and 73; and it was this feature which the losing developer criticised. There was some discussion of the possibility that the rival developers might have been invited to enter a bidding match in terms of the price to be paid: para. 41, per Lord Hope, para. 62, per Lord Rodger and paras. 72 73, per Lord Brown. In paras. 41 and 72, Lord Hope and Lord Brown both expressed their difficulty in understanding how such a bidding match would work. At most, one might read into the discussion in Standard Commercial Property a tacit assumption that such a bidding match might have been permissible if possible, but that does not make the case authority on a point which was evidently not argued in that case, any more than it was in fact argued on the present appeal. The focus in Standard Commercial Property was on whether the terms on which the Glasgow City Council was proposing to dispose of the property, once compulsorily acquired, met the requirements of s.191(3) of the Town and Country Planning (Scotland) Act 1997. S.191(1) provided that that any land acquired and held for planning purposes could be disposed of to such person, in such manner and subject to such conditions as might appear expedient to secure purposes mentioned in s.191(2), viz the best use of that or other land, etc. S.191(3) provided that any land so disposed of should only be disposed of at the best price or on the best terms that can reasonably be obtained. The requirements of s.191(1) and (2) on the one hand and of s.191(3) on the other were, as Lord Hope said at para. 34 separate and distinct. The issue before the House was, as Lord Hope made clear throughout paras. 31 42, simply whether the proposed terms of disposal fell within s.191(3). It is material to think about the consequences if Standard Commercial Property were to be treated as any sort of authority that a planning authority may, when deciding whether compulsorily to acquire property belonging to one landowner (A), have regard to the price offered for the land by potential developer (B). There would seem to be no logical reason to limit these consequences to situations where (A) and (B) are in competition, or to situations where the potential development extends beyond (A)s property and includes some property already owned by (B). If, in any situation, (B) were to offer to re purchase (A)s property from the planning authority on terms giving the planning authority a profit, once the planning authority acquired it by compulsory purchase from (A), why would that be illegitimate? Yet (A) would have little or no means of countering such an inducement. (A) could not offer any corresponding profit in respect of land which it already owned. And it could not be legitimate for (A) to offer the local authority a share in the profit it hoped to make from developing its own land, in order to induce the local authority to refrain from compulsorily purchasing its land for the benefit of (B). That would amount to buying a local authoritys exercise of its discretion. It might be suggested that if, as here, (B) owned some land which it was desired to include in an overall development, then (A) might counter (B)s offer in respect of (A)s land, by offering the planning authority a profit on the re sale of (B)s land, if it were compulsorily to acquire that land rather than (A)s. Apart from the evident inappropriateness of any such bidding war, (B)s relevant land holding might (as here) be much smaller in area, and, unless it is supposed that (A) could legitimately offer a ludicrously high price for (B)s land, the financial attraction for the planning authority of (A)s offer could not match that of (B)s. So far, I have spoken only in terms of a bidding match relating to the price to be paid by the developer for the property to be compulsorily purchased. That was the only situation to which any discussion at all was addressed in Standard Commercial Property. The present case concerns the further question whether a proposed developer could influence the exercise by a planning authority of a discretion (viz. whose property compulsorily to purchase and for the benefit of which of two potential developers) by offering some benefit wholly unconnected with any property the subject of the proposed development. In this context, it seems to me even clearer that Standard Commercial Property cannot lend support to Tescos case on this appeal. For these reasons, I do not regard Standard Commercial Property as justifying a conclusion that, as soon as rival developers are competing to develop a single site, part owned by each, considerations become material which would be immaterial if the whole site had been owned by one of them or by a third party. If the discussion in the judgments in that case lends any support to Tescos case, the point did not arise for decision and was not argued there, any more than it was on the appeal in the present case. As a matter of principle, in my opinion, there is no basis on which the fact that Sainsbury and Tesco were, in a broad sense, rival developers in respect of the same overall site, can or should alter fundamentally the considerations admissible when the City Council came to consider which development it should prefer, and which property it should, therefore, compulsorily acquire to facilitate such development. Any such decision fell to be made by reference, and only by reference, to considerations having some connection with the proposed development, and not by reference to any entirely unconnected inducement which might be held out by one of the rival developers. Like Lord Collins, Lord Walker and Lady Hale, I would therefore allow Sainsburys appeal. LORD PHILLIPS Introduction The facts of this appeal are set out in detail in the judgment of Lord Collins. In essence they are simple. The issue that they raise is not. As every shopper knows Sainsbury and Tesco are rivals. Each owns a chain of supermarkets. Each is anxious to open a supermarket on a site at Wolverhampton (the Site). To this end Sainsbury has acquired 86% of the site and Tesco has acquired 14%. These figures ignore, as shall I for it has no materiality, the fact that Wolverhampton City Council (the Council) owns a very small part of the Site. Sainsbury and Tesco have each prepared a development plan for the Site. The plans are very similar. Tesco has obtained planning permission for its plan and Sainsbury is in a position to do the same. The Council is anxious that one or other development plan should be implemented, for it will be likely to contribute to the well being of the area. The problem is that neither of the rivals is prepared to give way, and in so doing to sell its portion of the Site to the other. To resolve this impasse the Council is prepared to use its powers of compulsory purchase to buy the land of one of the rivals and sell it to the other. Those powers are conferred by the following sections of the Town and Country Planning Act 1990 (the Act). 226. Compulsory acquisition of land for development and other planning purposes. (1) A local authority to whom this section applies shall, on being authorised to do so by the Secretary of State, have power to acquire compulsorily any land in their area (a) if the authority think that the acquisition will facilitate the carrying out of development, re development or improvement on or in relation to the land or; (b) which is required for a purpose which it is necessary to achieve in the interests of the proper planning of an area in which the land is situated. (1A) But a local authority must not exercise the power under paragraph (a) of subsection (1) unless they think that the development, re development or improvement is likely to contribute to the achievement of any one or more of the following objects (a) the promotion or improvement of the economic well being of their area; (b) the promotion or improvement of the social well being of their area; (c) the promotion or improvement of the environmental well being of their area. 233. Disposal by local authorities of land held for planning purposes. (1) Where any land has been acquired or appropriated by a local authority for planning purposes and is for the time being held by them for the purposes for which it was so acquired or appropriated, the authority may dispose of the land to such person, in such manner and subject to such conditions as appear to them to be expedient in order (a) to secure the best use of that or other land and any buildings or works which have been, or are to be, erected, constructed or carried out on it (whether by themselves or by any other person), or (b) to secure the erection, construction or carrying out on it of any buildings or works appearing to them to be needed for the proper planning of the area of the authority. (3) The consent of the Secretary of State is required where the disposal is to be for a consideration less than the best that can reasonably be obtained It is common ground, and rightly so, that the statutory requirements of section 226 are satisfied, so that the Council has statutory power compulsorily to purchase the land owned by either of the rivals. There is little, if anything, to choose between the rival development plans. The Council has, however, decided to prefer Tesco. Its intention is compulsorily to purchase Sainsburys land and to sell this to Tesco. Its reason for this decision is as follows. Tesco own another site in Wolverhampton, the Royal Hospital site (RHS). This is run down and crying out for regeneration. The Council wishes Tesco to redevelop this in a way which Tesco contends is uneconomic. Tesco has, however, agreed to enter into an obligation to redevelop the RHS in accordance with the Councils wishes provided only that the Council prefers Tesco in the competition for the development of the Site. This obligation has been described as involving a cross subsidy of the RHS redevelopment from the Site development. The Council has regarded this obligation as decisive in preferring Tesco to Sainsbury in the competition for the development of the Site. The issue raised by this appeal is whether Tescos undertaking to develop the RHS in accordance with the Councils wishes is a matter to which the Council can properly have regard when deciding upon a scheme for developing the Site that involves the compulsory purchase of Sainsburys land. RHS redevelopment The RHS is about half a mile away from the Site, on the other side of the city centre. When Tesco applied for planning permission for the development of the Site, it sought initially to link this with the redevelopment of the RHS. It was, however, unable to demonstrate any connection between the two, and ultimately accepted that there was no linkage for the Planning Committee to consider. The reality is that there is no connection between the development of the Site and the RHS development other than Tescos agreement to proceed with the latter if granted the former. The cross subsidy I am puzzled by the nature of the so called cross subsidy. Under what is commonly described as a back to back agreement Tesco has agreed to indemnify the Council in relation to the cost to the Council of compulsorily purchasing Sainsburys 86% of the Site. Tesco has further agreed to re develop the RHS at what Tesco contends will be a commercial loss. Tesco states that it will be able to afford this because of the cross subsidy that will be available if it is permitted to develop the Site. It is thus implicit that Tesco anticipates that development of the Site will result in an economic benefit that will enable it to entertain a loss making venture. That economic benefit should, however, be reflected in the price that Tesco, as a willing buyer, would be prepared to pay to Sainsbury, as a willing seller, if Sainsburys land were to be sold directly to Tesco in an open market transaction. That, as I understand the position, is precisely the amount to which Sainsbury will be entitled from the Council as compensation for the compulsory acquisition of their land see Waters v Welsh Development Agency [2004] UKHL 19, [2004] 1 WLR 1304, at paras 17 and 18. If Tesco has to pay the Council this amount under the back to back agreement it is not easy to see how there will remain to Tesco any surplus economic benefit to fund a loss making venture at the RHS. Be this as it may, that is precisely what Tesco has agreed to do. Accordingly I approach this appeal on the basis that the compulsory purchase of Sainsburys land will procure for the Council the benefit, not merely of the development of the Site, but of the re development of the RHS under the obligation that Tesco has agreed to assume. I shall describe this, by way of shorthand, as the RHS benefit. An analysis of the issues The basic issue raised by this appeal is whether the RHS benefit is a legitimate, or material, consideration to which the Council can have regard when deciding whether to acquire Sainsburys land by compulsory purchase in the particular context of the competition that exists between Sainsbury and Tesco for this development. This basic issue subdivides into two separate questions: ii) i) Would the RHS benefit be a material consideration in deciding whether compulsorily to purchase Sainsburys land if Sainsbury was not competing for the development? Is the RHS benefit a material consideration in deciding whether to award the development to Sainsbury or Tesco? If the first question is answered in the affirmative, the second question must necessarily also be answered in the affirmative. A negative answer to the first question will not, however, necessarily require a negative answer to the second. Would the RHS benefit be a material consideration in deciding whether compulsorily to purchase Sainsburys land if Sainsbury was not competing for the Development. The statutory power of compulsory purchase can only lawfully be used for the purpose for which the power has been conferred. In Galloway v London Corpn (1866) LR 1 HL 34 at p. 43 Lord Cranworth LC said: The principle is this, that when persons embarking in great undertakings, for the accomplishment of which those engaged in them have received authority from the Legislature to take compulsorily the lands of others, making to the latter proper compensation, the persons so authorized cannot be allowed to exercise the powers conferred on them for any collateral object; that is, for any purposes except those for which the Legislature has invested them with extraordinary powers. Section 226(1)(a) and 226(1A) confers the power compulsorily to purchase land, but to justify the exercise of that power the council must be able to show that this is clearly in the public interest: I regard it as a principle of our constitutional law that no citizen is to be deprived of his land by any public authority against his will, unless it is expressly authorised by Parliament and the public interest decisively so demands (my emphasis), per Lord Denning MR in Prest v Secretary of State for Wales (1982) 81 LGR 193 at p. 198. In this case it is common ground that the requirements of section 226 are satisfied and that if (i) there was no competing scheme and (ii) Tesco was not prepared to provide the RHS benefit, the public interest would none the less justify the compulsory purchase of Sainsburys land in order to enable Tesco to carry out the development. If, however, this were not the case, would the offer by Tesco of the RHS benefit be a material consideration to which the council could have regard when deciding whether the exercise of their power of compulsory purchase was justified? The ambit of section 226(1A). Section 226(1A) of the Act sets out preconditions to the exercise of the power of compulsory purchase. The development facilitated by the compulsory purchase must be likely to contribute to the improvement of the economic, social or environmental well being of the area. The Court of Appeal held that because the compulsory purchase of Sainsburys land would result in the RHS benefit which, in its turn, would contribute to the economic, social or well being of the area, this, of itself, satisfied section 226(1A). It necessarily followed that the RHS benefit was a material consideration to which the council could have regard when considering the compulsory purchase of Sainsburys land. This finding differed from that of Elias J at first instance. I consider that Elias J was correct and the Court of Appeal wrong. The reasoning of the Court of Appeal appears from the following passages of the only reasoned judgment, which was delivered by Sullivan LJ: 26. Though convoluted, subsection 226(1A) is expressed in deliberately broad terms: likely to contribute to the achievement of[the well being]objects. It is not prescriptive as to the manner in which the carrying out of redevelopment upon a CPO site might make a contribution to such wider benefits. Mr Lockhart Mummery accepted that one of the more obvious ways in which the carrying out of redevelopment on a CPO site might, at least in principle, be capable of bringing economic/social/environmental benefits to a wider area would be if the redevelopment was likely to act as the catalyst for the development or redevelopment of some other site or sites within the authoritys area. 27. Such a catalytic effect might be direct, e.g. because redeveloping the CPO site would be likely to enable the occupier of another, run down site in the authoritys area to relocate onto the CPO site, thus enabling the run down site to be redeveloped. Or it might be indirect, e.g. because the increased attractiveness after redevelopment of a hitherto run down CPO site was likely to make other sites in the area more attractive for development or redevelopment. It was common ground that such catalytic effects were capable of falling within the scope of section 226(1A). 28. In the present case the Report makes it plain that the Defendant was satisfied that facilitating the carrying out of the Interested Partys scheme for the redevelopment of the RSS would, by reason of the proposed cross subsidy, act as the catalyst for the redevelopment of the RHS site in a manner which would contribute to the economic social and environmental well being of its area. 29. In my judgment subsection 226(1A) is concerned with all of the consequences that are likely to flow from the process of the carrying out of redevelopment on the CPO site, and these are not confined to what might be described as the impact of there being new bricks and mortar on the redeveloped site. Thus, disturbance during the redevelopment process and the need to relocate existing occupiers on the one hand, and the job opportunities that would be created during the carrying out of the redevelopment on the other, would both be capable of being relevant (the one negative, the other positive) for the purposes of section 226(1A). In these passages Sullivan LJ equates the development in section 226 (1A) with the process of the carrying out of redevelopment. I think that this is questionable. He describes the Site development as acting as a catalyst for the RHS redevelopment, by reason of the cross subsidy. This is a misuse of language. Section 226(1A) focuses primarily, if not exclusively, on whether the development will be likely to enhance the economic, social or environmental well being of the area once it is completed. The subsection cannot be satisfied by an agreement by a developer to fund a second development that has no physical, geographical or other connection with the development that the compulsory purchase is designed to facilitate. This conclusion gives effect to the natural meaning of the language of section 226(1A). In the Court of Appeal Mr Lockhart Mummery QC for Sainsbury submitted that the same conclusion should be reached by applying, by analogy, decisions on what constitute material considerations in the context of planning applications. Sullivan LJ held that these decisions could not be so applied, at least directly, and Mr King QC for the Council and Mr Katkowski QC for Tesco have supported his approach. Both Lord Brown and Lord Collins have relied on decisions in relation to planning applications in reaching their conclusions, albeit that they have differed as to their effect. Is the analogy between compulsory purchase and planning permission in the present context a fair one? The analogy between compulsory purchase and planning permission. I agree with Lord Brown and Lord Collins that it is appropriate in this case to draw an analogy, when considering whether the RHS benefit is a material consideration, with certain decisions relating to the grant of planning permission. The issue in this case is whether it is legitimate, when considering the benefits that will flow from a development that is the object of compulsory purchase, to have regard to a particular benefit offered by the developer. The relevant planning cases deal with the question of when it is legitimate, when considering a planning application, to have regard to benefits offered by the developer. Each case raises the question of what can legitimately be considered when assessing how the public interest is affected by the development of land. The analogy is obvious. There is a further point. Section 226 of the Act was amended by the Planning and Compulsory Purchase Act 2004, which inserted subsection (1A). In its previous form it included, by section 226(2)(c), a requirement that a local authority, when considering whether land was suitable for development, redevelopment or improvement, should have regard to any other considerations which would be material for the purpose of determining an application for planning permission for development on the land. While this provision was deleted by the 2004 Act it none the less illustrates the fact that the test of materiality in relation to planning permission can also be relevant in the context of compulsory purchase. The planning obligation offered by Tesco in the present case is the RHS benefit. Could that have constituted a material consideration on Tescos application for planning permission, notwithstanding that it had no other connection with the proposed development of the Site? Considerations that are material to the grant of planning permission The history of planning permission shows an ambivalence on the part of the legislature, the executive and the judiciary in respect of the extent to which it is legitimate for a local authority to exact planning gain from a developer as a condition of the grant of planning permission. Lord Hoffmann traced this history in some detail at pp. 771 to 777 of his speech in Tesco Stores Ltd v Secretary of State for the Environment [1995] 1 WLR 759. I shall attempt a rather shorter summary, at least in relation to the earlier part of the history. At the beginning of the 20th Century, apart from some public health legislation, there were no planning controls over the use that an individual could make of his own land. A comprehensive system of planning control over the use of land was first introduced by the Town and Country Planning Act 1947. Since then there have been a series of legislative changes seeking, inter alia, to balance the private rights of owners of land against the public interest in the control of the environment, culminating with the Planning Act 2008, which allows for a new Community Infrastructure Levy. A particular problem has been the extent to which it is legitimate to require developers to take responsibility for the off site consequences of their developments. For present purposes, the most significant provision in force is section 70 of the Town and Country Planning Act 1990. This provides: 70. Determination of applications: general considerations. (1) Where an application is made to a local planning authority for planning permission (a) subject to sections 91 and 92, they may grant planning permission, either unconditionally or subject to such conditions as they think fit; or (b) they may refuse planning permission. (2) In dealing with such an application the authority shall have regard to the provisions of the development plan, so far as material to the application, and to any other material considerations. Some of the relevant authorities deal with the criteria of the material considerations to which subsection (2) requires the local authority to have regard. Others relate to the scope of the power to impose conditions. In relation to each of these, the following observations of Lord Denning in Pyx Granite Co Ltd v Ministry of Housing and Local Government [1958] 1 QB 554 at p. 572 are relevant: The principles to be applied are not, I think, in doubt. Although the planning authorities are given very wide powers to impose such conditions as they think fit, nevertheless the law says that those conditions, to be valid, must fairly and reasonably relate to the permitted development. The planning authority are not at liberty to use their powers for an ulterior object, however desirable that object may seem to them to be in the public interest. As Lord Hoffmann observed in Tesco at p. 772 As a general statement, this formulation has never been challenged. A decision that is particularly relevant in relation to material considerations is R v Westminster City Council, Ex p Monahan [1990] 1 QB 87. The facts of that case have been set out and analysed by Lord Collins at paras 51 to 59 of his judgment. In short the Court of Appeal held that it was a material consideration, when considering a composite development, that one part of it, which was undesirable having regard to relevant planning considerations, would provide a necessary cross subsidy for the development of the other part, which was highly desirable. Lord Collins in his analysis at para 58, identifies the fact that the case concerned composite or related developments as a relevant part of the Court of Appeals reasoning. At para 70 he identifies the need for such a connection or relationship as being a requirement of law. Lord Brown, in para 176 of his judgment, disagrees. He comments that it was expressly recognised that no discernable legal principle would have supported the need for such a connection. I align myself with Lord Collins analysis. The passage from the judgment of Nicholls LJ, quoted by Lord Brown and Lord Collins at paras 169 and 56 of their respective judgments, and the passage from the judgment of Staughton LJ quoted by Lord Collins at para 57, demonstrate that each of those judges saw the need for a relationship between the undesirable and the desirable developments other than the simple fact that the one would subsidise the other. The suggestion by Kerr LJ that the significance of the distance between developments involved considerations of fact and degree rather than of principle does not withstand analysis. If the distance matters, then the reason why it matters must be a matter of principle. The relevant principle appears to me to be that a cross subsidy between two developments cannot be considered unless there is some independent reason for considering the two developments together. Whether that is a rational principle is another matter. If it is acceptable that an undesirable development should be permitted in order to subsidise a desirable development it is not easy to see why there should be an inflexible requirement that one should be in proximity to, or have some other nexus with, the other. A close nexus between the subject matter of a planning condition and the development in relation to which it is imposed has been required by the courts. Lord Hoffmann in Tesco at p. 772 referred to the triple requirement for a valid planning condition laid down by the House of Lords in Newbury District Council v Secretary of State for the Environment [1981] AC 578: i) ii) iii) It must be for a planning purpose and not for any ulterior one; It must fairly and reasonably relate to the permitted development; It must not be Wednesbury unreasonable: [1948] 1 KB 233. Lord Hoffmann went on to refer to the Shoreham case [1964] 1 WLR 240 as illustrating the very strict way that the courts gave effect to these requirements, so that conditions requiring contribution to the external costs generated by a development were not permitted. As Lord Hoffmann explained, this gave rise to the introduction of planning agreements, which were replaced in their turn by planning obligations. Section 106 of the Act provides: Planning Obligations. (1) Any person interested in land in the area of a local planning authority may, by agreement or otherwise, enter into an obligation (referred to in this section and sections 106A and 106B as a planning obligation), enforceable to the extent mentioned in subsection (3) (a) restricting the development or use of the land in any specified way; (b) requiring specified operations or activities to be carried out in, on, under or over the land; (c) requiring the land to be used in any specified way; or (d) requiring a sum or sums to be paid to the authority. This section is in very general terms and, in particular, no express restriction or qualification is placed on the undertaking to pay money to the authority. In these circumstances two separate questions arise. The first is whether, and if so what, implicit restrictions exist as to the nature of planning obligations that can lawfully be incurred. The second is the extent to which planning obligations that have been undertaken are material considerations to which the authority must have regard under section 70 of the Act. There are two relevant decisions that relate to the latter question. The first is R v Plymouth City Council, Ex p Plymouth and South Devon Co operative Society Ltd (1993) 67 P & CR 78. Lord Brown has set out the facts of this case at para 170 of his judgment. The issue was whether generous planning obligations (benefits) offered by Tesco and Sainsbury, there as here rival applicants for a development, were material considerations to which the planning authority could have regard, notwithstanding that they went well beyond anything that the authority would have been able properly to require by way of planning conditions as being necessary. The Court of Appeal applied the Newbury triple requirement, but held that there was no requirement that the benefits should be necessary, albeit that they had, fairly and reasonably, to relate to the development. As to that requirement, this was satisfied in the case of financial contributions to works off site designed to accommodate demands generated by the development. In that case Lord Hoffmann remarked at p. 90: Materiality is an entirely different matter, because there is a public interest in not allowing planning permissions to be sold in exchange for benefits which are not planning considerations or do not relate to the proposed development. He was subsequently in Tesco at p. 778 to say that the parallel between the Newbury triple requirement and the materiality of planning obligations was by no means exact. This brings me to the Tesco case, which is the most important decision in the context of this appeal. Once again the material facts have been summarised by Lord Brown and Lord Collins at paras 173 and 63 66 of their respective judgments. What Tesco established was that the second test in Newbury does not apply to planning obligations. These, to constitute material considerations, do not have fairly and reasonably to relate to the relevant development. It is enough if they have a connection to it that is not de minimis. The requirement for such a connection none the less remains. Lord Brown has concluded at para 174 of his judgment that this connection is satisfied by an offer to cross subsidise another development that is otherwise unconnected with the development for which planning permission is sought. He comments that such an offer could not sensibly be regarded as an attempt to buy planning permission, a phrase he takes from the judgment of Lord Keith at p. 770. Lord Brown differs from Lord Collins, who concludes at para 70 that the authorities, and Tesco in particular, establish that there must be a real connection between benefits undertaken by a planning obligation and the development to which the planning application relates. Here I align myself once again with Lord Collins. Lord Browns conclusions are at odds with the passage in Lord Keiths judgment from which he has borrowed a phrase. The full passage reads: An offered planning obligation which has nothing to do with the proposed development, apart from the fact that it is offered by the developer, will plainly not be a material consideration and could be regarded only as an attempt to buy planning permission (Emphasis mine). All members of the Committee agreed with the judgment of Lord Keith. Lord Brown has quoted a passage from the judgment of Lord Hoffmann at p. 779C D in which he says that section 106 does not require that the planning obligation should relate to any particular development, and Lord Keith made a similar observation at p. 769B. These observations related, however, to the legality, not the materiality, of planning obligations. My conclusion in relation to the effect of the authorities is as follows. When considering the merits of an application for planning permission for a development it is material for the planning authority to consider the impact on the community and the environment of every aspect of the development and of any benefits that have some relevance to that impact that is not de minimis that the developer is prepared to provide. An offer of benefits that have no relation to or connection with the development is not material, for it is no more than an attempt to buy planning permission, which is objectionable in principle. Tesco was right, on its application for planning permission, to drop any attempt to link the development of the Site with the RHS development. These principles can properly be applied, by analogy, to a simple case where a local authority is considering whether the public interest justifies the compulsory purchase of land for the purpose of facilitating a development. The development itself must be justified in the public interest and it would be wrong in principle for the local authority to be influenced by the offer by the chosen developer to provide some collateral benefit that has no connection of any kind with the development in question. Thus if, in this case, Sainsbury was not a rival seeking to develop the Site but simply an owner who was unwilling to sell his land, it would not be right to treat Tescos offer of the RHS benefit as a consideration that was material to the decision of whether or not to purchase Sainsburys land. Is the RHS benefit a material consideration in deciding whether to award the development to Sainsbury or Tesco? The principle that permits a planning authority to have regard to planning gain that has some connection with a proposed development, but not to planning gain that has no such connection, is not entirely rational. It becomes less rational in a situation where two developers are competing for the grant of planning permission in circumstances where the grant to one or the other is justifiable, but not to both. That was believed to be the position in Plymouth, although ultimately planning permission was granted to both the rivals, being once again Sainsbury and Tesco. In Plymouth each of the rivals was anxious to be permitted to build a supermarket. In competing for planning permission each offered to embellish its development with an array of expensive add ons, described by Lord Brown at para 170 of his judgment. These no doubt enhanced the attraction of each of the rival schemes from the viewpoint of the public and the local authority. But the possibility must exist that the cost of these embellishments might have been spent to better advantage in providing alternative planning gain in the local authoritys area that had no connection with the proposed development. The reality is that the rivals were, to use a description adopted by Lord Hoffmann in Tesco, competing for the development as in an auction. If an auction is to be permissible there might be something to be said for permitting the local authority to identify, for consideration by the rival bidders, its most urgent planning needs, whether or not connected with the development. I make this observation only by way of a stepping stone to considering the more complicated issue raised by the facts of this case. The Councils decision involves the exercise of two statutory powers. The first is the power of compulsory purchase conferred by section 226 of the Act. The second is the power to sell the land compulsorily purchased, which is conferred by section 233. The purposes of the sale of the land described in section 233 differ from the purposes of the purchase described in section 226. Had the Site been in the ownership of a third party who was unwilling to sell it, and had Tesco and Sainsbury been competing to develop it, the Council would have had two separate decisions to make. First whether compulsorily to purchase the land. Secondly to which of the two rivals to sell it for the purpose of the development. The law that I have analysed suggests that, when making the first decision under section 226, the Council would have been bound to disregard benefits that might be obtainable from either of the developers that were unconnected to the development. But in choosing to which of the two rivals to sell the land for development under section 233 the Council would have been entitled, and perhaps bound, to negotiate the best deal available. The terms of section 233 would seem wide enough to have permitted the Council to treat as material Tescos offer to throw into the bargain the RHS benefit. These conclusions receive some support from Standard Commercial Property Securities Ltd v Glasgow City Council [2006] UKHL 50; 2007 SC (HL) 33. Lord Collins has set out some of the complicated facts of this case at para 40 of his judgment. That case had these features in common with the present. Glasgow City Council wished to develop a run down area of the city, parts of which were owned by rival developers. The Council had decided compulsorily to purchase the entire Site and to sell it on back to back terms to one of the rival developers. The other developer challenged the deal on the basis that back to back terms did not represent the best deal. This the Council were bound to achieve under section 191 of the Scottish Act, which closely resembles section 233 of the Act. Lord Collins rightly remarks that there was in that case no offer of benefits unconnected to the development, but I do not think that this robs it of all relevance. Of significance is that in that case, as in this, the council first decided in principle that the facts justified the use of its powers of compulsory purchase, before turning to choose between the rival developers. It is also significant that the House of Lords held that, at the stage of choosing the developer, the Council was not simply concerned with achieving the object of the compulsory purchase, but was also entitled to have regard to purely commercial considerations. Lord Hope described the position as follows at para 34: section 191 seeks to do two things. On the one hand it seeks to regulate those aspects of the transaction which are intended to secure the purposes set out in subsection (2). These purposes are to secure the best use of the land and the proper planning of the area. On the other it seeks in addition to protect the public purse in the manner indicated by subsection (3). These are separate and distinct requirements, although they must both be read in the light of what section 191 seeks to achieve. The prohibition in subsection (3) directs attention to one issue, and to one issue only. This is the commercial implications of the transaction for the planning authority. It is to the best commercial terms for the disposal of the land, not to what is best designed to achieve the overall planning purpose, that the authority must direct its attention at this stage. But the words best terms permit disposal for a consideration which is not the best price. So terms that will produce planning benefits and gains of value to the authority can be taken into account as well as terms resulting in cash benefits. I can summarise the position as follows. (1) In deciding whether to exercise its powers of compulsory purchase for the purpose of development the Council is not permitted to have regard to unconnected benefit that it may derive from the carrying out of the development, but: (2) in deciding who shall carry out the development and, thus, to whom the land will be sold for that purpose, the Council is entitled, and perhaps bound, to have regard to unconnected benefit offered by the developer. The problem is how to have regard to these principles in a case such as the present where the rival developers each owns part of the Site needed for the development. I have concluded that the proper approach should be as follows. The Council should first decide, in the case of each of the rivals, whether compulsory purchase of his land would be approved to enable the development to proceed, disregarding any unconnected benefit that might accrue and on the premise that he was simply an unwilling seller rather than a rival developer. In the result of an affirmative answer being given in each case, the Council should then decide which developer to prefer having regard to all considerations material to that choice, including the amount of the Site already owned by each developer and any benefits offered by either developer, whether or not connected to the development. The fact that this may, in effect, involve an auction between the two developers for the benefit of the community does not seem to me to be inherently objectionable. In the present case this is what the Council did. The Council was not influenced by the RHS benefit when deciding in principle to use its power of compulsory purchase. In deciding to purchase whatever land was necessary for the development of the Site the Council had regard only to the proper objects of compulsory purchase. The choice of developers necessarily also determined which land would be compulsorily purchased, but the decision had already been taken to purchase whatever land would be necessary having regard to the choice of developer. To summarise, the RHS benefit was not a consideration that was material to the decision to use the power of compulsory purchase, but it was very material to the decision which developer to select, and this in its turn determined whose land was to be compulsorily purchased. In these circumstances I have reached the conclusion that the RHS benefit was a consideration that was material to the decision that determined simultaneously the developer and the land to be purchased. It cannot be said that the decision compulsorily to purchase Sainsburys land was influenced by a consideration that was not material. The decision that I have reached at laborious length was felicitously stated by Elias J in a single paragraph and I propose to conclude my judgment by quoting this: In my judgment when deciding which development should receive their support, the Council could have regard to all the benefits accruing from the proposed development, including any off site benefits achieved by way of a section 106 agreement. It seems to me that there are really two stages in the process. First, can a CPO lawfully be made in favour of a particular development? That must be determined by focusing solely on the benefits flowing from the development itself and the RHS benefits could not be taken into account at that stage. Second, if the power can lawfully be exercised, but there is more than one potential party in whose favour it could be exercised, to which development should the Council lend its support? At that stage I can see no reason why the Council should not have regard to its wider interests. It has established that there is in principle a proper basis in law for interfering with the rights of either of two (or more) owners of land on the site by compulsorily purchasing their interests; I see no reason why it should not select which landowner should be so affected by considering the overall benefits to the Council which the respective developments would provide. The reality in this case is that the real issue is which developer should be preferred by the Council, which is in the position of being able to choose between the two. The fact that the compulsory purchase of land owned by one or the other is involved is really peripheral. Each purchased its land in the hope of being able to use it for the purpose of the development. Each shares the intention that its land should be used for the development. In resisting the compulsory purchase of its land each is motivated by commercial rivalry, not by any objection to the land being used for the proposed development. It would be unfortunate if the rigid application by analogy or principles of planning law were to rob the local community of the additional benefit of the redevelopment of the RHS. I have not found it necessary to reach such a result. For these reasons I would dismiss this appeal. LORD HOPE Reduced to its essentials, this case is about two decisions that the Council took to facilitate the development at Raglan Street. The first was whether they should exercise their powers of compulsory acquisition to enable the development. The second was as to the choice of developer. The first decision was taken in the exercise of the powers conferred on the Council by section 226 of the Town and Country Planning Act 1990, as amended. The second, as Lord Phillips has said (see para 140, above), was about the exercise of two statutory powers. I put it in this way, as I think Lord Phillips does too, simply to indicate the context in which each of these powers was being exercised. The cart and the horse if I may adopt Lady Hales analogy (see para 91) go together, like a horse and carriage, at this stage of the exercise. The site was not in the sole ownership, or under the sole control, of either developer. They were in competition with each other for its development, so the exercise of compulsory powers to acquire the interest in the land vested in one or other of them was inevitable. Just as inevitable is the fact that the purpose of the exercise of those powers was to enable the Council to dispose of the interest that was to be acquired to the preferred developer. Section 226 is concerned with the acquisition of the interest in the land, not its disposal. The power to dispose of land that has been acquired or appropriated is set out in section 233 of the 1990 Act. The compulsory acquisition of land can only be permitted if it is within the powers of the statute. Great care must be taken to see that those powers are not resorted to unless the statute permits this and that the acquisition is necessary for the purpose that the statute contemplates. The issue on this part of the case is whether the Council were entitled to take into account, in discharging their duty under section 226(1A) to consider the well being benefits for the area, Tescos commitment to secure by way of cross subsidy the development of the Royal Hospital site. For the reasons that Lord Phillips and Lord Collins give, I would hold that they were not entitled to do so. Section 226(1)(a) provides that the authority have power to acquire land compulsorily if they think that it will facilitate the carrying out of development, re development or improvement on or in relation to the land. The reference to the land in this paragraph is to the land which is to be the subject of the compulsory purchase order. Section 226(1A) places a limitation on the exercise of the power under section 226(1)(a). These two provisions must be read together. The contribution by the development, re development or improvement that section 226(1A) refers to must be on the land that the authority is proposing to acquire compulsorily. The situation in this case is that there was no physical connection of any kind between the two sites. Development of the Royal Hospital site could not contribute anything to the carrying out of development on the Raglan Street site in any real sense at all. They were not part of the same land. There is no doubt that the development of the Royal Hospital site would bring well being benefits to the Councils area of the kind that section 226(1A) refers to. But to fall within that subsection they had to be benefits that flowed from the Raglan Street development, not anywhere else. It follows that the Council were not entitled to conclude that the work which Tesco were willing to undertake on the Royal Hospital site would contribute to the well being of the area resulting from its development of the site at Raglan Street for the purposes of section 226(1A). At first sight that might seem to be the end of the case. The report which was presented to the Councils Cabinet on 30 January 2008 stated that the Tesco and Sainsburys schemes for the Raglan Street site would both fulfil the purpose referred to in section 226(1)(a). Addressing itself to the choice that had to be made between the two schemes, it went on to describe the circumstances relating to the development of the Royal Hospital site by Tesco and to refer to the decisive advantage which Tesco enjoyed over Sainsburys if the development of that site was taken into account. It concluded by recommending that there was a compelling case in the public interest to make a compulsory purchase order to enable the Tesco scheme to go ahead. As regards the exercise of the power to acquire the land compulsorily, if looked at in isolation, this was to stray into forbidden territory. In my opinion however it would be unrealistic to stop there. The legality of the use of compulsory powers to enable the Raglan Street development to proceed has not been called into question. As the report said, both schemes satisfied the requirements of section 226(1)(a), and it has never been doubted that the carrying out of either of them on that site would contribute to the achievement of the well being of the area. If the land had been in the ownership of a third party, there would have been no need to say more. The reason why the report went further was the Council had to make a choice between the two developers. Although the report did not say so in terms, it is plain that the assumption on which it was proceeding was that, having acquired the land, the Council would dispose of it to the preferred developer. The surrounding circumstances show that it was never the Councils intention to develop the land themselves or to retain it in their ownership. This part of the report was as much concerned with the exercise of the power to dispose of the land as with the exercise of the power to acquire it. The power of disposal under section 233 confers a wide discretion on the local authority. They may dispose of the land to such person, in such manner and subject to such conditions as appear to them to be expedient to secure the best use of that or other land or the proper planning of their area. Like section 191 of the Town and Country Planning (Scotland) Act 1997 which is in very similar terms, that is its primary objective: see Standard Commercial Property Securities Ltd v Glasgow City Council 2007 SC (HL) 33, para 32. It was held in that case that the council, when considering whether to use compulsory powers in conjunction with a sale of the land under a back to back agreement to the preferred developer, were entitled to have regard to the wider benefits that were expected to flow from the contribution that the preferred developer would make to the redevelopment, the proposals for which were to contain a strong element of planning gain. There was to be a requirement to include improvements to other areas of the urban block within which the site to be acquired compulsorily was situated: see paras 38, 39. The value of the planning gain was something that the council was entitled to take into account in its assessment of whether the disposal was achieved on the best commercial terms. The focus in that case was on the terms on which the council proposed to make the assembled site available to the preferred developer. Its facts differ from those in the present case, so I am not to be taken as suggesting that it provides direct authority for the view which I take here. But it does illustrate the extent of the power of disposal that is conferred by this section on the local authority, and it shows how the authority may legitimately have regard to the way the land will be disposed of before it decides to acquire it compulsorily: taking them both together, like the horse and carriage to which I referred earlier. The council decided to use its compulsory powers to purchase the site with a view to its disposal by means of a back to back agreement to achieve the development. The site was part of an urban block within which properties owned by the first petitioners and the second respondents were situated. Each had their own interests and their own agendas which were in competition with each other and, as in this case, their proposals had to be evaluated. The preferred developer was expected to achieve a scheme that would enhance the wider area within which the site itself was situated. Regard was to be had to benefits which it would provide that were extraneous to the site itself, and extraneous too to each of the properties that were to be acquired compulsorily. Among other things, it was to commit itself to supporting an order for regulating traffic on adjacent streets and to provide details of a financial commitment to the areas environmental enhancement. The whole thing was seen as a single package. The acquisition of the properties and their disposal to a developer who would achieve these benefits were each part of the same exercise: for a more complete account of the facts, see 2005 SLT 144, paras 1 16. I would take from that case the proposition that it is legitimate for the acquiring and disposing authority which has to choose between competing proposals for development to have regard to planning benefits that lie outside the perimeter of the site itself. It has not been suggested that it would have been an improper use of the section 233 power for the Council to take account of Tescos commitment to develop the Royal Hospital site in the assessment as to whether a disposal of the land to Tesco was preferable to disposing of it to Sainsburys. I can see no reason why that should be so if the land was already in the Councils ownership and they were faced with a competition between two or more developers who had no interest in the land at all. It was not possible in this case for the Council to take these two decisions separately, each without reference to the other. The choice as to whose land to acquire was inevitably linked to the choice of the developer to whom the land was to be disposed of when it was acquired. Section 226 does not concern itself with choices of that kind. To say that it prohibits them would be to read a limitation into the section which is not there. It would unduly inhibit the exercise of the power of compulsory acquisition in a case such as this, where a site that is in need of development is in divided ownership, the owners are in competition with each other for its development and there are sound planning reasons beyond those that section 226(1A) refers to for regarding the proposal of one developer as preferable to that of the other. I would not regard the opportunity that this particular situation gives for achieving planning gain in the wider public interest as transgressing the rule that the power of compulsory purchase can only be used for the purpose for which the power has been conferred. The contrary view risks making it impossible for projects for urban renewal which can only be achieved by using compulsory powers to assemble the site for redevelopment to include measures for improvements in the public interest which lie outside the sites perimeter. As Lord Phillips says (see para 147), it would be unfortunate if a rigid application of the compulsory purchase principles to proposals of that kind were to rob the community of such benefits. For these reasons, and those of Lord Phillips with which I agree and in respectful agreement too with what Elias J said at first instance [2009] EWHC 134 (Admin), para 38, I would dismiss the appeal. LORD BROWN Are a local planning authority, when deciding how to exercise their compulsory purchase powers, precluded in all circumstances, as a matter of law, from taking into account public planning benefits (however substantial and obvious) which would result, not directly from the development to be facilitated by the proposed land acquisition, but rather from a contractual obligation attaching to that development? That, crucially, is the issue arising on this appeal. Take the facts of this very case, already fully recounted in the judgment of Lord Collins, but which may conveniently and sufficiently be summarised as follows. Two rival supermarket chains, Sainsburys and Tesco, each own part of a site which is ripe for development (the Site). Each wishes to develop the Site as a supermarket and each has (or is about to obtain) planning permission for such development. There is really nothing to choose between their respective proposals. Neither is willing to sell its share of the Site to the other. In these circumstances it is agreed by all that the local planning authority (Wolverhampton) must inevitably exercise their compulsory purchase powers under section 226 of the Town and Country Planning Act 1990 (as amended) (the 1990 Act). The question then becomes: who should be chosen to carry out the development of the Site and whose land, therefore, should be compulsorily acquired for the purpose? Should Sainsburys land be acquired so that Tesco may develop the Site or vice versa? The issue more particularly arising is whether, in deciding to choose Tesco as the developer, Wolverhampton acted unlawfully in taking into account Tescos commitment, if chosen, to redevelop the Royal Hospital site, another site in Wolverhamptons area some half a mile away (the RHS), redevelopment which Wolverhampton are anxious to promote but which Tesco would not be prepared to undertake save by way of cross subsidy? It so happens that one of the two rival chains (Sainsburys) owns 86% of the site, the other (Tesco) 14%. But it is not suggested that this disparity between their respective interests affects the question of law at issue. The same question would arise even if each owned exactly half the site. Plainly the disparity is itself a material consideration and one, indeed, which ultimately could prove decisive in Sainsburys favour. For present purposes, however, as Mr Lockhart Mummery QC for Sainsburys expressly acknowledged, it can be ignored. Section 226 of the 1990 Act provides so far as material: 226(1) A local authority to whom this section applies shall, on being authorised to do so by the Secretary of State, have power to acquire compulsorily any land in their area (a) if the authority think that the acquisition will facilitate the carrying out of development, redevelopment or improvement on or in relation to the land; . (1A) But a local authority must not exercise the power under paragraph (a) of subsection (1) unless they think that the development, re development or improvement is likely to contribute to the achievement of any one or more of the following objects (a) being of their area; (b) of their area; (c) well being of their area. the promotion or improvement of the social well being the promotion or improvement of the environmental the promotion or improvement of the economic well For present purposes the effect of those provisions in combination can be summarised quite simply as follows: A local authority can (subject to confirmation by the Secretary of State) compulsorily acquire land if they think, first, that this will facilitate its development (section 226 (1)(a)) and, secondly, that this development is likely to contribute to the economic and/or social and/or environmental well being of their area (section 226(1A)). In the present case it seems to me self evident that both of these pre conditions are fully satisfied in respect of each proposed development scheme so that Wolverhampton have a discretion to make whichever CPO they regard to be appropriate, whether of Sainsburys land or of Tescos land. The question, I repeat, is whether, in choosing whose land to acquire, Wolverhampton can take into account the additional benefit to their area which would result from Tescos commitment, if they are enabled to develop the Site, also to develop the RHS. It was the Court of Appeals conclusion below that Wolverhampton were indeed legally entitled to take account of the proposed cross subsidy which would enable (and commit) Tesco to redevelop the RHS and that this entitlement arose directly under section 226(1A). This subsection, the Court of Appeal held (para 33), imposes on local planning authorities an express obligation to have regard to such off site, or external benefits. Elias J at first instance had held to the contrary (para 35) that, to fall within section 226(1A), well being benefits had to be generated by the development of the Site itself, not by some contractually linked external development. In the only reasoned judgment in the Court of Appeal, Sullivan LJ (at paras 42 and 44) agreed with Elias J that, to fall within section 226(1A) the benefit in question must flow from the re development of [the Site]. However . [t]he likelihood of the re development of a CPO site leading, whether because of cross subsidy or for any other reason, to the development or re development of other sites in the authoritys area is precisely the kind of wider benefit that subsection (1A) requires the authority to consider. [Section 226 (1A)] ensures that wider well being benefits are not ignored, but are always treated as material considerations . I have to say that on this particular issue, in common with the majority of this Court, I prefer Elias Js view to that of the Court of Appeal. That, however, does not seem to me the real issue in the case. Section 226(1A), I repeat, does no more than specify a precondition (additional to that in section 226(1)(a)) which has to be satisfied before any power of compulsory acquisition can be exercised. No one doubts that it was satisfied here. Wolverhampton accordingly had a discretion under the section. The critical question then arising is whether the further public benefit which Tesco was offering was or was not a material consideration which Wolverhampton could take into account when deciding how to exercise that discretion. Elias J held that it was. The Court of Appeal, having concluded (wrongly as I believe) that this further benefit had to be regarded as material by virtue of section 226(1A), chose not to deal with the question whether the benefit would in any event have been a material consideration, section 226(1A) apart. As to this Sullivan LJ merely observed that section 226(1A) does not purport to cut down the considerations that are capable of being material under subsection 226(1)(a). And that at least must be right: to stipulate, as section 226(1A) does, that the authority must not exercise their compulsory purchase powers unless they think that the development itself is likely to contribute to the well being of their area (whether because it will act as a catalyst for other development or provide employment or stimulate other beneficial activity in the area or whatever else) is by no means to stipulate that, the condition being satisfied, this exhausts all the considerations to which the authority can have regard and they must shut their mind to all other possible external benefits which the exercise of their compulsory purchase powers would bring. In addressing the question whether such external benefits are capable of being material considerations in the exercise of compulsory purchase powers under section 226(1)(a), it seems to me helpful to begin by examining what the position would be in the broadly analogous situation of a planning authority considering rival applications for planning permission. Suppose that the competition between the rival supermarket chains was not, as here, as to which should be preferred as developers of a single site by reference to the exercise of the authoritys powers of compulsory purchase, but rather as to which should be granted planning permission assuming that each owned a suitable site but there was room in the area only for one supermarket the very situation which arose in Tesco Stores Ltd v Secretary of State for the Environment [1995] 1 WLR 759 (between, as it happens, the same competing developers as here). Would an offer such as that made here by Tesco to develop the RHS (probably by way of a planning obligation under section 106 of the 1990 Act) be a material consideration within the meaning of section 70(2) of the 1990 Act? If it would, then it is difficult to see why it should not be material also for section 226 (1)(a) purposes. If, on the other hand, it would not, then the Court would need to be persuaded that wider financial benefits are to be regarded as material considerations when exercising compulsory purchase powers than when determining planning applications. Before going to the House of Lords decision in Tesco itself it is instructive to take note of two earlier Court of Appeal authorities R v Westminster City Council ex parte Monahan [1990] 1 QB 87 (Monahan) and R v Plymouth City Council ex parte Plymouth and South Devon Cooperative Society Ltd (1993) 67 P & CR 78 (Plymouth) the essential backdrop to the speeches in Tesco. Lord Collins having dealt with these at some length, I content myself with the briefest summary of each. Monahan was the Royal Opera House case in which the planning authority were held entitled to have granted permission for an office development notwithstanding that it involved a major departure from the development plan because that would cross subsidise the refurbishment of the listed opera house. Nicholls LJ recorded (p.121) that counsel for the planning authority (Mr Sullivan QC) frankly accepted that he could discern no legal principle which distinguished between (a) what happens within one building, (b) what happens on two adjoining sites and (c) what happens on two sites which are miles away from each other but continued: All that need be said to decide this appeal is that the sites of the commercial development approved in principle are sufficiently close to the opera house for it to have been proper for the local planning authority to treat the proposed development of the office sites . and the proposed improvements to the Opera House as forming part of one composite development project. As such it was open to the planning authority to balance the pros and cons of the various features of the scheme. As to what the position would have been had the proposed office block been in Victoria, Kerr LJ similarly suggested that all such cases would . involve considerations of fact and degree rather than of principle. Plymouth (like Tesco which followed it) involved competitive planning applications by Sainsburys and Tesco, the Councils original intention having been to allow one store only to be built. Each company was therefore invited to say why it should be preferred and both were told that the Council would take into account any community benefits offered (provided they were justifiable in land use planning terms the Councils published policy). Sainsburys offer included the construction of a tourist information centre on the site, an art gallery display facility, a work of art in the car park, a bird watching hide overlooking the river, an 800,000 contribution to the establishment of a park and ride facility in the neighbourhood, and up to 1 million for infrastructure works to make a different site suitable for industrial use. Tesco offered financial contribution to a crche, a wildlife habitat, a water sculpture, and in addition it offered to sell the Council a site for a park and ride facility. Both offers were by way of section 106 agreements. In the event, both applications were granted, doubtless to the satisfaction of Sainsburys and Tesco but not that of the Co operative Society who promptly challenged both planning permissions on the ground that the Council had taken into account immaterial considerations. The Co operative Society argued that not merely must a community benefit offered under a section 106 agreement satisfy the three tests laid down by the House of Lords in Newbury District Council v Secretary of State for the Environment [1981] AC 578 (following Pyx Granite Co Ltd v Ministry of Housing and Local Government [1958] 1 QB 554) by which the legality of a section 70 condition is to be judged namely (i) that it has a planning purpose, (ii) that it fairly and reasonably relates to the permitted development and (iii) that it is not Wednesbury unreasonable but it must also be necessary in the sense of overcoming what would otherwise have been a planning objection to the development. In the leading judgment rejecting this argument and stating that the only question is whether [the section 106 agreement] fairly and reasonably related to the development, Hoffmann LJ said (90) that the only benefits which gave pause for thought were the two substantial sums offered by Sainsburys as a contribution to work to be done away from the site. The park and ride facility, however, would tend to reduce both traffic heading for the store and use of Sainsburys own car park by people not actually shopping there. As for the 1 million offer, this was not simply to pay the council 1 million. It was to contribute up to 1 million to the actual cost of infrastructure works undertaken by the council within a period of two years at a specific site. (91). As we shall shortly see, the supposed requirement that section 106 offers, like imposed section 70 conditions, have to fairly and reasonably relate to the permitted development (a requirement held satisfied in Plymouth) did not survive the decision of the House of Lords in Tesco to which I now come. Tesco (like Plymouth at the initial stage) concerned rival applications by Sainsburys and Tesco to develop their respective sites (Sainsburys in conjunction with Tarmac), there being room in Witney for one store only. Notwithstanding that Tescos application included an offer of 6.6 million to fund in its entirety a new link road, the Secretary of State (who had to decide which of the two proposals to allow) chose to grant Sainsburys application. Tesco appealed on the ground that the Secretary of State had failed to take account of a material consideration, namely their 6.6 million offer. Albeit the appeal failed, it did so not on the basis that the offer was an immaterial consideration but rather because, although material, the Secretary of State had been entitled to give it little or no weight and to prefer Sainsburys proposal because the Secretary of State thought its site marginally more suitable (Lord Hoffmann, 783). The following features of Tesco seem to me of particular importance: (1) The 6.6 million offer was held to be a material consideration notwithstanding that the Secretary of State shared his inspectors view that the relationship between the proposed new development and the funding of the link road was tenuous (the development being likely to result only in slight worsening of traffic conditions). (2) The only reasoned speeches were given by Lord Keith of Kinkel (with whom the other members of Committee agreed) and Lord Hoffmann. Both of them recognised that, contrary to the Court of Appeals assumption in Plymouth, the second Newbury test has no application to section 106 agreements. As Lord Hoffmann observed (779C D): [S]ection 70(2) does not apply to planning obligations. The vires of planning obligations depends entirely upon the terms of section 106. This does not require that the planning obligation should relate to any particular development. As the Court of Appeal held in Good v Epping Forest District Council [1994] 1 WLR 376, the only tests for the validity of a planning obligation outside the express terms of section 106 are that it must be for a planning purpose and not Wednesbury unreasonable. Nevertheless, for a planning obligation to be a material consideration which can legitimately be taken into account in granting planning permission, it has to have some connection with the proposed development which is not de minimis (Lord Keith, 770B); it cannot be quite unconnected with the proposed development (Lord Hoffmann, 782D). (3) Were it otherwise, said Lord Keith (770A), it could be regarded only as an attempt to buy planning permission. Lord Hoffmann put it rather differently (782D E). The metaphor of bargain and sale, he suggested, although vivid: is an uncertain guide to the legality of a grant or refusal of planning permission. It is easy enough to apply in a clear case in which the planning authority has demanded or taken account of benefits which are quite unconnected with the proposed development. But in such a case the phrase merely adds colour to the statutory duty to have regard only to material considerations. In cases in which there is a sufficient connection, the application of the metaphor or its relevance to the legality of the planning decision may be highly debatable. I have already explained how in a case of competition such as the Plymouth case, in which it is contemplated that the grant of permission to one developer will be a reason for refusing it to another, it may be perfectly rational to choose the proposal which offers the greatest public benefit in terms of both the development itself and related external benefits. In Tesco itself, Lord Hoffmann then observed (782G H), the Secretary of State had in substance accepted the argument that Tescos offer to pay for the whole road was wholly disproportionate and it would be quite unfair if [Sainsburys] was disadvantaged because it was unwilling to match this offer. That, said Lord Hoffmann, is obviously defensible on the ground that although it may not maximise the benefit for Witney, it does produce fairness between developers. However, Lord Hoffmann continued (783A C), so too was Tescos argument (that only if they offered the whole cost of the link road would it be constructed) a perfectly respectable one. Importantly, he then said this: [T]he choice between a policy which emphasises the presumption in favour of development and fairness between developers, such as guided the Secretary of State in this case, and a policy of attempting to obtain the maximum legitimate public benefit, which was pursued by the local planning authority in the Plymouth case, lies within the area of discretion which Parliament has entrusted to planning authorities. It is not a choice which should be imposed upon them by the courts. (4) (5) Lord Hoffmann had earlier (780F G) emphasised the distinction to be made between materiality and weight: The law has always made a clear distinction between the question of whether something is a material consideration and the weight which it should be given. The former is a question of law and the latter is a question of planning judgment, which is entirely a matter for the planning authority. Provided that the planning authority has regard to all material considerations, it is at liberty (provided that it does not lapse into Wednesbury irrationality) to give them whatever weight the planning authority thinks fit or no weight at all. The fact that the law regards something as a material consideration therefore involves no view about the part, if any, which it should play in the decision making process. Let me in the light of those authorities return to the question I posed at para 168: would an offer such as Tesco made to Wolverhampton, had it been made in a planning context have been, as a matter of law, a material consideration? To my mind the correct answer to that question should be yes, although plainly the weight (if any) to be given to it would be entirely for the planning authority. And the reason the answer should be yes is quite simply because such an offer could not sensibly have been regarded as an attempt to buy planning permission (Lord Keith); on the contrary, it would in my view have had a sufficient connection with the proposed development (Lord Hoffmann), not de minimis (Lord Keith). The proposition that planning consent cannot be bought or sold, although stated nearly a quarter of a century ago to be axiomatic (by Lloyd LJ in City of Bradford Metropolitan Council v Secretary of State for the Environment (1987) 53 P & CR 55, 64), needs to be understood for what it is, essentially a prohibition against the grant of a planning permission for what would otherwise be unacceptable development induced by the offer of some entirely unrelated benefit. What it is not is a prohibition against, for example, the grant of permission for a development which is contrary to local planning policy on the basis that it needs to be economically viable to ensure that the site does not remain derelict see Sosmo Trust Ltd v Secretary of State for the Environment [1983] JPL 806, where, indeed, Woolf J held that no Secretary of State could reasonably have regarded the economic factor in that case as irrelevant. Nor, of course, did the principle prevent office development being permitted in Monahan essentially because the proposed refurbishment of the Opera House was financially dependant upon it. Monahan, it must be noted, is not authority for the proposition that, but for the development there forming part of one composite development project, the office building would not have been permitted. As was expressly recognised, no discernible legal principle would have supported such a view. In any event Monahan is not binding on this Court. That aside, Tesco later established that offers such as that in Monahan to refurbish the Opera House do not have to fairly and reasonably relate to the permitted development (as at the time of Monahan would have been supposed). Had Tesco in the present case offered (uneconomically) to redevelop the RHS to the benefit of the public in consideration of some planning advantage elsewhere in Wolverhamptons area, it is difficult to see why Wolverhampton would have been legally obliged to refuse. Still less does the principle prevent rival developers, in competitive situations such as arose in Plymouth and Tesco, seeking to outbid each other as to the external benefits their proposals would bring with them as both those cases amply demonstrate. It is surely one thing to say that you cannot buy a planning permission (itself, as I have sought to show, only in a narrow sense an absolute principle); quite another to say that in deciding as between two competing developers, each of whose proposals is entirely acceptable on planning grounds, you must completely ignore other planning benefits on offer in your area. Let it be assumed, however, contrary to my view but as I understand every other member of this Court to have concluded, that, had the present issue arisen in the context of rival applications for planning permission, Tescos offered redevelopment of the RHS would have had to be characterised as a wholly unconnected planning benefit and so not a material consideration under section 70. That majority view, as Lord Phillips himself points out at paragraph 139, is not entirely rational even in a non competitive planning context; less rational still where two developers are competing for the grant of planning permission in circumstances where the grant to one or the other is justifiable, but not to both. Is that approach nonetheless to apply equally in the present context or, as I contemplated at paragraph 168, is the position that wider financial benefits are to be regarded as material considerations when exercising compulsory purchase powers than when determining planning applications? The Court of Appeal thought that the case for regarding Tescos RHS offer as a material consideration was stronger in the CPO context than had it been made in a planning context. They thought this, first, because of the wide (to my mind over wide) construction they put upon section 226(1A) itself (para 33); secondly, because they regarded financial viability as yet more important in the CPO context than in the planning context (paras 34 40); and, thirdly, because, whereas planning authorities (subject only to the Secretary of States call in powers) are free to grant any planning permissions they wish, CPOs must be confirmed by the Secretary of State (who can therefore prevent any misuse of the local authoritys compulsory acquisition powers) (para 41). Whilst I have difficulty with that reasoning, I nevertheless agree with Lord Phillips and Lord Hope that, even assuming that Tescos RHS offer would not have been a material consideration had Wolverhampton been determining a planning application, it was nonetheless material in the context of the decisions the Council were in fact required to take here. These were, first, whether Wolverhampton should compulsorily acquire land to facilitate the development of the Site (for which both rival developers had the requisite planning permission) and, if so, second, whose land should be acquired should it be Tescos land to enable Sainsburys to develop the Site or vice versa (ie who should be the preferred developer)? I understand all of us to agree that Wolverhampton were amply entitled to exercise their section 226 power of compulsory acquisition here: as I noted at paras 164 and 165 above, self evidently both the section 226(1)(a) and the section 226(1A) conditions were satisfied and the development of the Site was only going to take place if Wolverhampton did indeed exercise this power. As Lord Hope observes, however, this power could not be exercised until Wolverhampton had also decided the second question before them: which of the two developers to choose. There seems to me no basis in authority or reason for holding that in reaching this second decision Wolverhampton were required to ignore the off site benefit (unconnected though I am now assuming it to be) on offer from Tesco. I would on the contrary hold it to be a material consideration for the purposes of deciding which of the rival developers to prefer and whose land, therefore, should be the subject of compulsory purchase under section 226. That is precisely what was held at first instance here and I can but echo Lord Phillips plaudits for the passage in Elias Js judgment which he quotes in full at paragraph 146. It is essentially on this basis, rather than by reference to Wolverhamptons power of disposal of acquired land under section 233, that for my part I would hold Tescos offer to have been a material consideration (even assuming that it would not have been so in the planning context). I think it difficult for Tesco to invoke section 233 here. True, section 233 would to my mind plainly entitle a planning authority to have regard to an off site benefit such as Tesco offered here in deciding how to exercise their section 233 power. (Although, as Lady Hale and Lord Mance point out, no wholly extraneous benefits were offered or considered in Standard Commercial Property Securities Ltd v Glasgow City Council [2007] SC (HL) 33, it is surely implicit in that decision and, indeed, in the respective legislative requirements in both England and Scotland in effect to get what I called there (para 68) the best overall deal available that, by the same token as a cash bidding match would have been possible, so too would have been an offer of other benefits, however extraneous. Why ever not? I do not regard this as inconsistent with what I said at paragraph 75 of my judgment in Standard Commercial quoted by Lord Walker at para 85: my quarrel there was with the disappointed developers submission that the planning authority should itself have initiated a bidding war. It is quite another thing to say that they are precluded by law from accepting offers of money or other extraneous benefits when they come to dispose of a compulsorily acquired development site.) My difficulty with section 233, however, is, as Lady Hale points out, that it puts the cart before the horse. Unless and until the Secretary of State confirms a section 226 compulsory purchase order, the local authority has no land to dispose of. I do not see the Council here, therefore, as entitled to have regard to their section 233 powers when exercising their section 226 powers. I would be concerned also that on this approach the Council might be statutorily obliged to accept Tescos offer in order to obtain the best overall deal available instead of merely being required to regard it as a material consideration, it being a matter for the Council (and, in subsequent confirmation proceedings, the Secretary of State) to give it such weight, if any, as they thought right. (Indeed, as I observed earlier (at para 162), it might be that the Secretary of State, unlike Wolverhampton, will regard Sainsburys substantial larger interest in the site as the determining factor here rather as the Secretary of State in the Tesco case, thought it only fair to Sainsburys to give no weight to Tescos wholly disproportionate 6.6m offer to fund the link road (see para 173(4) above). That, however, in this case as in that, would be entirely a matter for the planning authorities, not for this Court.) All that said, I do not regard section 233 as central to either Lord Phillips or Lord Hopes reasoning in this case. Still less did it colour Elias Js approach; indeed, section 233 finds no mention whatever in his judgment. Really what it all comes to is this. It is irrational and unsatisfactory that (in the view of the majority) Tescos offer here would have had to be ignored in a competitive planning context. It is quite unnecessary and (as Lord Phillips and Lord Hope observe) would be unfortunate if this irrationality were carried over into the compulsory purchase context within which the present issue arises. In the result I would answer the question I posed in paragraph 160: no, not even if the benefits are wholly unconnected with the proposed development, and dismiss this appeal. As indicated, I would do so essentially for the reasons given by Elias J at first instance rather than those given by the Court of Appeal.

The Town and Country Planning Act 1990 gives a power to local authorities to acquire compulsorily any land in their area if the authority thinks that the acquisition will facilitate the carrying out of development on the land and if it thinks that the development is likely to contribute to the well being of the overall area for which it is responsible. This appeal concerned the proper approach to the exercise of that power in relation to land known as the Raglan Street site which lies immediately to the west of, and just outside, the Wolverhampton Ring Road. Sainsburys Supermarkets Ltd (Sainsburys) owns or controls 86% of this site. Tesco Stores Ltd (Tesco) controls most of the remainder. Sainsburys and Tesco each wished to develop on the land and it was decided to grant outline planning permission to each of them for that purpose. It was clear that, unless the local authority used its compulsory purchase powers in respect of the site, neither of the proposed developments could take place. So Sainsburys and Tesco each sought to persuade the local authority that the power should be exercised in its favour. Tesco controls a site in Wolverhampton City Centre called the Royal Hospital site (RHS). The RHS is in poor condition, and for many years it has been an objective of the local authority to secure the regeneration of the site. Tesco considered that it was not financially viable for it to develop the RHS without subsidy from elsewhere. But in seeking to persuade the local authority that it should exercise the compulsory purchase power in its favour in respect of the Raglan Street site, Tesco promised the local authority (by means of a contractual planning obligation) that it would regenerate the RHS. Tesco explained that promise on the basis that its development at Raglan Street would represent a subsidy at least equal to the loss it would sustain in carrying out the RHS development. The local authority decided that it would make a compulsory purchase order in respect of the part of the Raglan Street site owned by Sainsburys in order to facilitate Tescos proposal. In so doing, it took into account and indeed regarded as decisive in Tescos favour that Tesco had promised to regenerate the RHS. The issue in this appeal was whether it was lawful for the local authority to have done so. The Supreme Court held, by a majority of 4 to 3, that, on the facts of this case, it was unlawful for the local authority to take into account Tescos commitment to regenerate the RHS in resolving to make the compulsory purchase order in respect of the Raglan Street site. The majority judgments: (Lord Walker, Lady Hale, Lord Mance and Lord Collins) Lord Collins (giving the leading judgment on behalf of the majority): Principles derived from cases concerning the matters which may lawfully be taken into account in determining planning applications apply equally to compulsory acquisition for development purposes provided it is recognised that, because of the serious invasion of property rights involved in compulsory acquisition, a strict approach to the application of those principles is required. One of these principles is that it is legitimate for a local authority to take into account off site benefits of a proposed development provided that such benefits are related to or connected with the development itself. In compulsory acquisition, as in planning cases, there must be a real rather than fanciful or remote connection between the off site benefits and the development for which the compulsory acquisition is made (see paragraphs [70] [71]). In the present case, there was only a connection between the proposed development on the Raglan Street site and the benefits from the development of the RHS in the sense that the Council was being tempted to facilitate one development because it wanted another development, or that Tesco was being tempted to undertake one un commercial development in order to obtain the development it wanted (para [72]). The claimed financial connection between the two sites was not such as to amount to a relevant matter, notwithstanding the fact that Tesco was prepared to commit to undertake the regeneration of the RHS by agreement with the local authority (para [75]). Lord Walker (agreeing with Lord Collins, Lady Hale and Lord Mance): A local authority should not be exercising its powers of compulsory purchase in order to make a commercial profit; the dominant aim must be betterment in planning terms (para [82]). In a case such as this where a private interest in land is purchased in favour of another private (i.e. Tescos) interest, the local authority has a direct financial interest in the matter, and a strict approach is called for (para [84]). The reason why, in a case where there is little to choose in planning terms between two rival developers of a site, the local authority must not look to some extraneous benefit which one contender offers, is simply that it is not the right way for a local authority to make a decision as to the exercise of its powers of compulsory purchase, any more than it could choose a new chief executive from a short list of apparently equally well qualified candidates by holding a closed auction for the office (para [87]). Lady Hale (agreeing with Lord Collins, Lord Walker and Lord Mance): Acquiring the whole of the Raglan Street site would facilitate the development of that site. But persuading Tesco to carry out a wholly unrelated development upon another site elsewhere in the city, desirable though that may be for the City and people of Wolverhampton, does nothing to facilitate the development of the Raglan Street site. Rather, it is the other way round (para [93]). Lord Mance (agreeing with Lord Collins, Lord Walker and Lady Hale): A planning authority, when considering a planning application, is only entitled to take into account a planning obligation which the applicant offers if that obligation has some connection with the relevant development, apart from the fact of its offer. There is a useful analogy between the grant of planning permission and the exercise of a power of compulsory purchase under the Town and Country Planning Act 1990, and the considerations admissible in relation to the latter power are no wider than those admissible in relation to the former (para [98]). The minority judgments: (Lord Phillips, Lord Hope, Lord Brown) Lord Phillips: Agreed with Lord Collins and Lord Brown that it was appropriate in this case to draw an analogy with certain decisions relating to the grant of planning permission (para [120]). The effects of those decisions was this: when considering the merits of an application for planning permission for a development it is material for the planning authority to consider the impact on the community and the environment of every aspect of the development and of any benefits that have some relevance. An offer of benefits that have no relation to or connection with the development is not material (para [137]). These principles could properly be applied, by analogy, to a simple case where a local authority is considering whether the public interest justifies the compulsory purchase of land for the purpose of facilitating a development. The development itself must be justified in the public interest and it would be wrong in principle for the local authority to be influenced by the offer by the chosen developer to provide some collateral benefit that has no connection of any kind with the development in question (para [138]). But that analysis did not apply to the present case, in which Sainsburys and Tesco were in competition for the development of the Raglan Street site. The local authority had two decisions to make. The first was whether it should exercise its compulsory purchase powers at all. In taking that first decision the local authority was not entitled to take into account any benefit unconnected to the development proposed. The second was to decide to which of the rivals to sell the land (under a different power in the same Act). In that second decision the local authority was entitled and perhaps bound to have regard to any unconnected benefit offered by the developer (paras [140] and [142]). In this case, the local authority was not, in fact, influenced by the RHS benefit when deciding in principle to use its power of compulsory purchase. The RHS benefit was, however, very material to the decision as to which developer to select, and this in turn determined whose land was to be compulsorily acquired. In these circumstances the RHS benefit was a consideration that was material to the decision that determined simultaneously the developer and the land to be purchased. It therefore could not be said that the decision compulsorily to purchase Sainsburys land was influenced by a consideration that was not material (paras [143] [145]). Lord Hope (agreeing with Lord Phillips): It is plain that the local authority was proceeding on the assumption that, having acquired the land, it would then dispose of it to the preferred developer. The authority was concerned as much with the exercise of the power to dispose of the land as with the exercise of the power to acquire it (para [154]). In this case, the choice as to whose land to acquire was inevitably linked to the choice of the developer to whom the land was to be disposed of when it was acquired. The local authority took those decisions together and was entitled to do so. To hold otherwise would unduly inhibit the exercise of the power of compulsory acquisition in a case such as this, where a site that is in need of development is in divided ownership, the owners are in competition with each other for its development, and there are sound planning reasons for regarding the proposal of one developer as preferable to that of the other (para [158]). Lord Brown: Had an offer such as that made by Tesco to the local authority been made in the planning context it would have been a material consideration in the determination of a planning application because it would have had a sufficient connection with the proposed development which was not de minimis or so minimal as to be immaterial. This was the effect of the planning cases (para [174]). But even if, contrary to that view, the RHS benefit would not have been material in the determination of a planning application, it was nonetheless material in the context of the decisions which the local authority had to take here (para [178] and [180]). The authoritys power of compulsory purchase could not be exercised until the authority had also decided the second question before them: which of the two developers to choose. In reaching that second decision the authority was entitled to take into account the off site benefit, even if it was not connected with the development proposed. It was a material consideration for the purposes of deciding which of the rival developers to prefer and whose land, therefore, should be the subject of compulsory purchase (para [182]).

This appeal is all about the Secretary of States right to recover certain social security benefits. As everyone knows, a large amount of public money is spent upon a whole range of such benefits. Entitlement to these in all cases requires first a claim and then an award. Inevitably on occasion overpayments occur. Sometimes more is paid than the sum awarded. For example, following an award, say, of 60 a claimant may be sent by mistake a cheque for 120 or two cheques each for 60. These cases present no difficulty. Everyone agrees that unauthorised payments of this kind are recoverable by the Secretary of State as money paid by mistake. The problem arises rather when overpayments are made in accordance with an award but the award itself is higher than it should be. It is common ground that before any question can arise as to recovering the sums overpaid in these cases the mistaken award must first be revised. And it is common ground too that following such revision the Secretary of State is entitled to recover any overpayment resulting from misrepresentation or the non disclosure of a material fact. All this is expressly provided for by section 71 of the Social Security Administration Act 1992 (the 1992 Act). But does section 71 provide an exclusive code for recovery? That is the question. In short, what is in issue in this appeal is whether in other cases of mistakenly inflated awards most obviously in cases arising from official error (as it is called in Regulations to which I shall come) the Secretary of State is entitled to recover the sums overpaid. This question arises, for example, where a claimant has notified a change of circumstances (such as that he has begun full time work or that his child has left the household) and by mistake the Department overlooks (or delays actioning) the notification and continues making benefit payments at the same rate; or, indeed, where there is simply an erroneous calculation of the award. In cases like that is the Secretary of State permitted to seek recovery of such overpaid benefits at common law or is the exclusive route to recovery that provided by section 71 of the 1992 Act? The judge at first instance, Michael Supperstone QC, sitting as a deputy High Court Judge, found in favour of the Secretary of State [2009] EWHC 341 (Admin), [2009] 3 All ER 633. The Court of Appeal (Sedley, Lloyd and Wilson LJJ) [2009] EWCA Civ 1058, [2010] 1 WLR 1886 allowed the Child Poverty Action Groups appeal and declared: where a benefit falling within section 71(11) of the Social Security Administration Act 1992 is paid pursuant to the machinery contained in Part I Chapter II of the Social Security Act 1998, it can only be reclaimed from the claimant under section 71 of that Act (or some other specific statutory provision). The Secretary of State now appeals to this Court. The circumstances in which the question arose for decision can be briefly told. At some unspecified date (seemingly in about 2006) the Secretary of State adopted a practice of writing to benefit claimants who he considered had been overpaid, but where there had been no misrepresentation or non disclosure, indicating that the Department had a common law right of action to recover the overpayment. The letters were in substantially standard form accompanied by a document headed Questions you might have about the overpayment and asserted essentially that a mistake had been made, that too much of the relevant benefit had been paid and that the law allows us to ask you to pay back money that should not have been paid (or words to like effect). From March 2006 to February 2007 some 65,000 such letters were sent. Although no common law claim for repayment was ever in fact brought in the courts, the letters led, we are told, to the recovery of substantial sums for example, just over 4m in the year 2007/8. The Child Poverty Action Group, however, an organisation with a long history of bringing legal test cases on behalf of social security claimants, thought the letters were based on a false legal premise and so brought this challenge to seek appropriate declaratory relief. Thus it was that the issue came before the courts. It is convenient at this point to set out the more material parts of section 71 of the 1992 Act (as amended). Section 71 appears in Part III of the Act under the title Overpayments and Adjustments of Benefit Misrepresentation etc: 71. Overpayments general. (1) Where it is determined that, whether fraudulently or otherwise, any person has misrepresented, or failed to disclose, any material fact and in consequence of the misrepresentation or failure (a) a payment has been made in respect of a benefit to which this section applies; or (b) any sum recoverable by or on behalf of the Secretary of State in connection with any such payment has not been recovered, the Secretary of State shall be entitled to recover the amount of any payment which he would not have made or any sum which he would have received but for the misrepresentation or failure to disclose. (2) Where any such determination as is referred to in subsection (1) above is made, the person making the determination shall in the case of the Secretary of State or the First tier Tribunal, and may in the case of the Upper Tribunal or a court (a) determine whether any, and if so what, amount is recoverable under that subsection by the Secretary of State, and (b) specify the period during which that amount was paid to the person concerned. (3) An amount recoverable under subsection (1) above is in all cases recoverable from the person who misrepresented the fact or failed to disclose it. (5A) Except where regulations otherwise provide, an amount shall not be recoverable under subsection (1) unless the determination in pursuance of which it was paid has been reversed or varied on an appeal or has been revised under section 9 or superseded under section 10 of the Social Security Act 1998. (8) Where any amount paid, other than an amount paid in respect of child benefit or guardians allowance, is recoverable under (a) subsection (1) above; it may, without prejudice to any other method of recovery, be recovered by deduction from prescribed benefits. (9) Where any amount paid in respect of a couple is recoverable as mentioned in subsection (8) above, it may, without prejudice to any other method of recovery, be recovered, in such circumstances as may be prescribed, by deduction from prescribed benefits payable to either of them. (10) Any amount recoverable under the provisions mentioned in subsection (8) above (a) if the person from whom it is recoverable resides in England and Wales and the county court so orders, shall be recoverable by execution issued from the county court or otherwise as if it were payable under an order of that court; . Section 71(11) lists the various benefits to which the section applies. It is unnecessary to reproduce it here. It is important to note that when the 1992 Act was passed, indeed at all times before 1998, the adjudication of awards and the payment of awards were constitutionally separate functions. Adjudication officers (and, before them, other independent officers) were responsible for all decisions concerning the making of awards, the Secretary of State for their payment. By sections 1 and 8 of the Social Security Act 1998 (the 1998 Act), however, the functions of adjudication officers were transferred to the Secretary of State who thereupon became the primary decision maker in relation to the making of awards as well as remaining responsible for their payment. Prior to this merger of functions there had been provision for the revision of awards on a review (as well as the reversal or variation of awards on appeal). The 1998 Act introduced new provisions enabling the Secretary of State (by section 9) to revise, and (by section 10) to supersede, his section 8 decisions. This explains the language of section 71(5A). Essentially the same provision, however, had been made in section 71(5) which it replaced. As already noted, there could be no question of the Secretary of State ever seeking to recover an overpayment until the relevant award in one way or another had been formally corrected. These sections can be seen to reflect other provisions too in the governing legislation: regulation 17(1) of the Social Security (Claims and Payments) Regulations 1987 (SI 1987/1968) which imposes a statutory duty on the Secretary of State to pay the benefit awarded for an indefinite period, and section 17 of the 1998 Act by which the Secretary of States decision is declared to be final. The next matter to note is that the 1992 Act was a consolidating statute. The immediate forerunner of section 71 had been section 53 of the Social Security Act 1986 which in turn had replaced both section 20 of the Supplementary Benefits Act 1976 governing the recovery of overpayments of the main non contributory benefits and section 119 of the Social Security Act 1975 which governed the recovery of overpayments of contributory benefits. Section 119 had provided a defence if the claimant showed that he had exercised due care and diligence to avoid overpayment. All the other provisions had adopted the test of misrepresentation or failure to disclose that is now re enacted in section 71(1). The final point to note from the statutory material is the express provision made by regulation 3(5)(a) of the Social Security and Child Support (Decisions and Appeals) Regulations 1999 (SI 1999/991) (the 1999 Regulations) for a decision of the Secretary of State under section 8 or 10 of the 1998 Act to be revised with retrospective effect at any time if, inter alia, it arose from an official error. Against this basic statutory background the Court of Appeal reached essentially the following conclusions. The statutory scheme provides for the revision of awards of benefit ab initio and once an award has been revised it is final in its revised form. Downward revision shows that the claimant was not, in fact, entitled to the whole of the payments received. It is rational for the legislature to make provision for the consequences and it is by section 71 alone that it has done so. Under section 71 no amount is recoverable unless the relevant determination has been successfully appealed, revised under section 9 or superseded under section 10. Section 71(1) then sets out the (sole) circumstances in which the Secretary of State is entitled to recover an overpayment made pursuant to an award. These include only cases where the original award was obtained by misrepresentation or non disclosure, and exclude cases of receipt even knowing receipt of an overpayment due to a mistaken award. When section 71 was enacted, adjudication was separate from administration. The established statutory scheme had always been understood to be exhaustive of the rights, obligations and remedies of both the individual and the state, and both then and since, awards have been conclusive of the obligation to pay and of the right to receive payment. In such a context it is unsurprising that the power of recovery when an award is modified should be prescribed by Parliament and not at large. Section 71 has not excluded any power of recovery that was previously available but has created a power of recovery where otherwise there is none. Mr Eadie QC for the Secretary of State disputes those conclusions. He contends that the Crowns common law right to recover benefits overpaid by mistake of fact or law is not excluded by the legislation either expressly (so much is clear) or by necessary implication. There is, submits Mr Eadie QC, nothing inconsistent between the express right of recovery in cases of misrepresentation and non disclosure provided for by section 71(1) and the common law right to seek recovery in other cases. The statutory right applies only to a limited class of cases and, where it does apply, it confers greater rights on the Secretary of State than would be available at common law. It does not allow the recipient of the benefit to rely (as would a common law claim) on a defence of change of position. And it allows recovery (a) from the person who misrepresented the fact or failed to disclose it (section 71(3)), (b) by deduction from prescribed benefits (section 71(8)), and (c) in certain circumstances from the prescribed benefits payable to either member of a couple (section 71(9)). All this is no doubt understandable: it is logical for Parliament to prescribe an easier route to recovery of overpayments against those actually responsible by misrepresentation or non disclosure for the making of the mistaken awards in the first place. But non constat that this should be the only route to recovery. After all, the misrepresentation or non disclosure might have been entirely innocent and the moral case for repayment against the recipient of an award inflated by official error might actually be stronger. The error might have been plain, obvious and major and the recipient well aware of it but determined to take advantage of it none the less. Such a view is supported too by regulation 3(5)(a) of the 1999 Regulations. Why make provision for the retrospective revision of mistaken awards arising from official error if it is not possible then to remedy the mistake? True, if the error disadvantages the claimant and he is underpaid, the error can be remedied retrospectively. But if the error leads to overpayment and the Child Poverty Action Group are right, there can be no recovery against the recipient. This would represent a lacuna in the scheme. Mr Eadie in addition seeks to pray in aid what he submits is the analogous decision of the House of Lords in Deutsche Morgan Grenfell Group plc v Inland Revenue Comrs [2006] UKHL 49, [2007] 1 AC 558 (DMG) by which the taxpayer was held entitled at common law to recover an overpayment of tax notwithstanding a statutory provision comprehensively dealing with overpayments in the case of anyone who has paid [income tax or capital gains] tax charged under an assessment (section 33 of the Taxes Management Act 1970). Given that section 33 did not apply in that case because there had been no valid assessment, the taxpayer was held permitted to bring a common law restitution claim. It is Mr Eadies submission that by the same token, given that the Secretary of State here cannot recover under section 71(1) save in cases of misrepresentation or non disclosure, he should in other cases be entitled to seek recovery at common law. I have not found this an altogether easy case and, like Sedley LJ in the court below, regard the arguments as closely balanced. In the end, however, with Mr Drabble QCs help, I have come to the same conclusion as the Court of Appeal, namely that section 71 constitutes a comprehensive and exclusive scheme for dealing with all overpayments of benefit made pursuant to awards. Essentially my reasoning is as follows. As everyone agrees, no question of the recovery of any overpayment can arise until the award has been corrected. So far as recovery under section 71(1) is concerned, this indeed is expressly stipulated by section 71(5A) (and section 71(5) before it). But it would be surprising to find a common law right to restitution on grounds of mistake to be similarly constrained and more surprising still to find no relevant provision (akin to section 71(1)) giving effect to such a right. As already noted, when section 71 was enacted, there was a division of functions between the adjudication of awards and their payment. Since the Secretary of State paid the benefit awarded pursuant to a statutory duty, there could be no question of his having made a mistake of fact or law in making the payment. Thus, as the Court of Appeal noted, section 71 and its predecessor sections created a power of recovery when otherwise there would have been none. This explains too why section 71 contains no express exclusion of any common law right of recovery: there simply was none and it is hardly surprising that no such exclusion was inserted in 1998 when the adjudicatory and payment functions merged. What, in short, is striking about section 71 is not its omission of an express exclusion of common law rights but rather its omission of any provision recognising or giving effect to any such rights. As is well known, common law restitution claims are, at the best of times, far from straightforward. Not the least of their difficulties, a difficulty at its most pronounced in the context of social security benefit claimants, is the defence of change of position. Part III of the 1992 Act provides, of course, not just for an express entitlement to recover overpaid benefits in cases of misrepresentation or non disclosure, but also for the whole process of determining the facts relevant to such entitlement, including making provision for appeals to a tribunal. It seems to me inconceivable that Parliament would have contemplated leaving the suggested common law restitutionary route to the recovery of overpayments available to the Secretary of State to be pursued by way of ordinary court proceedings alongside the carefully prescribed scheme of recovery set out in the statute. Such an arrangement, moreover, would seem to me to create well nigh insoluble problems. Could there, for example, be parallel recovery proceedings against the maker of the misrepresentation under section 71(3) and against the recipient of the benefit at common law in the courts? And in the event of successful claims, could there then be deduction from prescribed benefits under section 71(8) against the misrepresentor (or possibly against the other member of a couple under section 71(9)) as well as execution against the actual recipient under the ordinary processes of law? With regard to Mr Eadies point that a stronger moral argument for recovery of overpayments may exist in cases of the knowing receipt of mistaken awards than, say, in cases of innocent misrepresentation, I would pose these questions. First, this being so, why would Parliament not prescribe the same stronger recovery powers for these cases as for cases of misrepresentation and non disclosure and include them within the statutory recovery scheme? Secondly, why would Parliament not make express provision for this separate category of cases, similarly prescribing the conditions for the Secretary of States entitlement to recovery, such as that the claimant knew that he had been overpaid and/or that he had not changed his position? The answer to both must surely be that in the case of recipients of social security benefits Parliament from first to last has taken the view that only those who themselves brought about the overpayments should be liable to reimburse them and that in their cases reimbursement should be made easily enforceable. Such a scheme is entirely rational. For better or for worse those benefiting from official errors are not subject to recovery proceedings. I am persuaded that section 71 does indeed necessarily exclude whatever common law restitution rights the Secretary of State might otherwise have. The title to Part III of the Act, Overpayments and Adjustments of Benefit, not merely suggests but to my mind provides for a comprehensive and exclusive scheme for both the correction and consequences of mistaken benefit awards. As for Mr Eadies reliance on the DMG line of cases with regard to the tax regime, for my part I find the suggested analogy unconvincing. This is not for the reasons suggested by the Court of Appeal (see in particular Lloyd LJs judgment at paras 33 35), namely that DMG involved an overpayment to the state whereas the present case involves an overpayment by the state; that, I would agree with Mr Eadie, is neither a logical nor a principled distinction. Rather it is because, whereas section 33 of the Taxes Management Act 1970 only purported to deal with overpayments of tax charged under an assessment, leaving other overpayments to be dealt with outside the statutory scheme, section 71 deals with the overpayment of benefit pursuant to erroneous awards in all cases and, by necessary implication, deals too with the conditions for the recovery of such overpayments. this appeal. In the result, I would endorse the Court of Appeals declaration and dismiss SIR JOHN DYSON SCJ The issue that arises on this appeal is whether the Secretary of State is entitled to recover at common law overpaid social security payments that were made pursuant to a decision made under section 8(1)(a) of the Social Security Act 1998 (the 1998 Act), or whether the right to recovery provided for in section 71 of the Social Security Administration Act 1992 (the 1992 Act) is the exclusive route to recovery. It is not in dispute that this raises a question of statutory interpretation. The answer to the question requires in the first place an understanding of the relevant statutory history. The salient features of the history are these. The immediate precursor to section 71 of the 1992 Act (a consolidating Act) was section 53 of the Social Security Act 1986 (the 1986 Act) whose terms were not materially different from those of the later provision. Before 1986, the rule governing the recovery of overpayments of contributory benefits was contained in section 119 of the Social Security Act 1975 and the rule governing the recovery of the main means tested non contributory benefit (supplementary benefit) was contained in section 20 of the Supplementary Benefits Act 1976. Of critical importance is the fact that until the 1998 Act, there was a division between the adjudicating authorities responsible for fact finding, decisions on legal issues and the quantification of the award on the one hand, and the body responsible for payment on the other. From 1986 onwards, the former was carried out by an adjudication officer and the latter by the Secretary of State. It was only in the 1998 Act that the Secretary of State was made responsible for both the decision on the claim for benefit and the payment of the amount of the award. It follows that the interpretation of section 53 of the 1986 Act and section 71 of the 1992 Act must be considered against the background that at the time of those enactments there was no possibility of mistake on the part of the Secretary of State in the calculation of the award, since he played no part in its calculation. The only possibility of mistake on the part of the Secretary of State lay in the payment of the amount awarded to be paid. It is common ground (and rightly so) that, if the Secretary of State overpaid by mistake, the amount of the overpayment could be recovered by a common law claim in restitution. Section 53(4) of the 1986 Act and section 71(5A) as it now is of the 1992 Act show that the overpayments with which these statutes are concerned are those which result from changes to an award. In deciding whether Parliament intended in 1986 and again in 1992 that the statutory provisions were to be an exhaustive code for recovery of overpayments by the Secretary of State, it is in my view relevant to recognise that at the time of those enactments there was no realistic possibility that the Secretary of State could recover overpayments of benefit in a common law action. By 1986, the law of unjust enrichment or restitution was by no means in its infancy. It was well understood that a person was in principle entitled to recover at common law money paid under a mistake of fact. But under the statutory scheme then in force, there would have been no relevant mistake on which the Secretary of State could have founded such a claim. Mr Eadie QC suggests that it might have been arguable in a case where there had been a mistake in the calculation of the award that a Secretary of State who paid such an award was operating under the mistake that the award was correct and/or that an analogy could properly be drawn with the position that applies where a court judgment is reversed. I acknowledge that such arguments might be advanced today, although I doubt whether they would succeed even now, after the considerable developments that have taken place in recent years in this area of the law. But it seems to me highly unlikely that Parliament would have had such arguments in mind in 1986 or 1992. In my view, the correct premise on which to proceed is that section 53 of the 1986 Act and section 71 of the 1992 Act were drafted on the basis that, as the law then stood, the Secretary of State was not entitled at common law to recover overpayments resulting from errors in the calculation of the award. At first sight, therefore, one might think that this should lead to the conclusion that the statutory provisions for recovery of overpayments were intended to be exhaustive of the right to recovery. There was no common law right to recovery. A statutory right to recovery was introduced. By definition, therefore, the statutory right to recovery was intended to be exhaustive. That was the view of the Court of Appeal as expressed at paras 25 and 27 of the judgment of Sedley LJ and I agree with it. At para 27, he pithily summarised the argument that Mr Drabble QC has repeated in this court which is not that section 71 has excluded any power of recovery that was previously available, but that it has created a power of recovery where otherwise there is none. But Mr Eadie has another string to his bow. He submits that, even if at the time of the enactment of sections 53 and 71 the Secretary of State had no right to recover at common law, it does not follow that, if there were a change in circumstances so that such a right to recover were to arise in the future, it would be precluded by the statutory provisions. As I understand it, Mr Eadie does not contend that the meaning of sections 53 and 71 could change over time. In this context, that would obviously be an untenable proposition. The position would of course be otherwise if section 71 were later amended expressly or by necessary implication. But that is not suggested here. Mr Eadies argument is directed to the true meaning of section 71 in its unamended form but he submits that it cannot be construed as having prospectively excluded by necessary implication a right which was not in contemplation at the time when it was enacted. In other words, Parliament cannot be taken to have excluded the possibility of a common law right to recovery arising in the future under a differently framed decision making scheme. I cannot accept this argument. I proceed on the hypothesis that, as I have already said, at the time when the statutory scheme for recovery of overpayments was enacted, there was no non statutory route for recovery. The statutory scheme was exhaustive at that time. It carefully delineated the boundaries. They were limited to recovery of payments made pursuant to an award by the adjudicating authorities which was in error by reason of a misrepresentation or failure to disclose any material fact. Simple error on the part of the adjudicating authorities was excluded. I would not go so far as to say that Parliament can be taken to have excluded the possibility of a common law right to recovery under a differently framed decision making scheme. That would be to go too far, since it would depend on the terms of the differently framed scheme. But I see no basis for holding that Parliament intended to allow a common law right of recovery in circumstances where the only material difference between the pre 1998 Act scheme and the 1998 scheme is that under the latter the Secretary of State determined the awards. Under the pre 1998 Act scheme, the section 71 code precluded common law claims for mistake, so that the Secretary of State could not recover overpayments where an award was erroneous for one of the statutory reasons. That code was continued after the 1998 Act without any material change. The only difference now was that the Secretary of State was responsible for the calculation of the award. The inevitable inference is that post the 1998 Act, Parliament intended the same exclusive code to continue. There is no basis for holding that the change in the identity of the decision maker, which was not accompanied by any change in the statutory criteria for recovery of overpayments, was intended to open the door any wider to recovery than it previously had been. In my view, that is sufficient to dismiss this appeal. But I need to deal with a further argument advanced by Mr Eadie. This proceeds on the basis that, contrary to the view that I have expressed, in 1986 and 1992 the Secretary of State had a common law right to recover overpayments under ordinary common law restitutionary principles. He accepts that this right could be displaced by statute, but that could only be done expressly or by necessary implication. It is common ground that there was no express abrogation of the right. Nor, Mr Eadie submits, was it abrogated by necessary implication. There are many examples of cases where the court has considered whether the provisions of a statute have impliedly overridden or displaced the common law. In each case, it is a question of construction of the statute in question whether it has done so. Deutsche Morgan Grenfell Group plc v Inland Revenue Commissioners [2006] UKHL 49, [2007] 1 AC 558 concerned a claim for compensation in respect of the payment of advance corporation tax which had been demanded contrary to the EC Treaty. One of the issues was whether section 33 of the Taxes Management Act 1970 excluded any common law claim on the grounds of mistake. Lord Hoffmann said at para 19: But the question is in the end one of construction. When a special or qualified statutory remedy is provided, it may well be inferred that Parliament intended to exclude any common law remedy which would or might have arisen on the same facts. To similar effect, at para 135 Lord Walker said: When Parliament enacts a special regime providing special rights and remedies, that regime may (but does not always) supersede and displace common law rights and remedies (or more general statutory rights and remedies). Whether it has that effect is a question of statutory construction. A similar issue arose in Revenue and Customs Commissioners v Total Network SL [2008] UKHL 19, [2008] AC 1174. There the question was whether the statutory scheme for recovery of VAT under the Value Added Tax Act 1994 was exclusive so as to preclude the right at common law to claim damages for unlawful means conspiracy. The House of Lords were split as to the result, but not, I think, as to the correct approach to the problem. Lord Hope said at para 31 that the statutory scheme was comprehensive and does not admit the use by the commissioners of means for collecting VAT which are not provided for by the statute. Lord Scott at para 60 said that an intention to bar common law claims could not be attributed to the legislature when enacting the VAT scheme. Lord Walker (paras 105 to 110) did not agree that the statutory code was comprehensive and exhaustive of the commissioners powers of collection of VAT. Lord Mance (para 130) said that for a statutory scheme to supersede or displace common law rights and remedies, the statute must positively be shown to be inconsistent with the continuation of the ordinary common law remedy otherwise available. He concluded (para 136) that he saw no inconsistency or even incongruity between the statute and the common law remedy in tort. Lord Neuberger identified a number of features of the statutory scheme which both substantively and procedurally were inconsistent with the position in relation to a common law claim. In other words, he explicitly applied the same inconsistency criterion as Lord Mance but, on the facts, reached the opposite conclusion. It will be seen that in these two cases, the court did not apply a test of necessary implication. Mr Eadie derives that test from the context of human rights or the principle of legality explained by Lord Hoffmann and Lord Steyn in R v Secretary of State for the Home Department, Ex p Simms [2000] 2 AC 115. He relies, for example, on R (Morgan Grenfell & Co Ltd) v Special Commissioner of Income Tax [2002] UKHL 21, [2003] 1 AC 563, where the question was whether section 20 of the Taxes Management Act 1970 overrode legal professional privilege. The House of Lords held that it did not do so. Lord Hoffmann emphasised that legal professional privilege was a fundamental human right long established in the common law. At para 8 he said that an intention to override fundamental human rights must be expressly stated or appear by necessary implication. He referred to the discussion of this principle by Lord Steyn and himself in Ex p Simms and other cases. Lord Hobhouse made the same point. Having referred to Ex p Simms, he said (at para 44) that the principle of statutory construction stated in that case was not new and had long been applied in relation to the question whether a statute is to be read as having overridden some basic tenet of the common law. The protection given by the common law to those entitled to claim legal professional privilege is a basic tenet of the common law as had been reaffirmed by B (A Minor) v Director of Public Prosecutions [2000] 2 AC 428. It is in the context of such a common law right that the passage at para 45 which is relied on by Mr Eadie is to be understood. Lord Hobhouse said: A necessary implication is not the same as a reasonable implication as was pointed out by Lord Hutton in B (A Minor) v Director of Public Prosecutions [2000] 2 AC 428, 481. A necessary implication is one which necessarily follows from the express provisions of the statute construed in their context. It distinguishes between what it would have been sensible or reasonable for Parliament to have included or what Parliament would, if it had thought about it, probably have included and what it is clear that the express language of the statute shows that the statute must have included. A necessary implication is a matter of express language and logic not interpretation. In the case of B (A Minor), the question at issue was whether liability for an offence contrary to section 1(1) of the Indecency with Children Act 1960 was strict or required the proof of mens rea. It was held by the House of Lords that mens rea was an essential element of every criminal offence unless Parliament expressly or by necessary implication provided to the contrary. In so holding, they were doing no more than applying a well established common law presumption or requirement. Lord Steyn explicitly referred at page 470F to this presumption as the paradigm of the principle of legality. The context in the present case, however, is quite different. The question whether the Secretary of State can recover overpayments of benefit does not involve any fundamental human rights of the Secretary of State nor does it engage the principle of legality. I do not accept the submission that the respondents have to surmount the high hurdle erected by Lord Hutton in B (A Minor) or Lord Hobhouse in Morgan Grenfell. Rather the question is whether, as a matter of statutory interpretation, section 71 is an exclusive code for recovery of overpayments. That question is to be answered not by applying any presumptions or by saying that the common law remedy in restitution is not displaced unless, in Lord Hobhouses words, as a matter of logic, it cannot co exist with the statutory regime for recovery. The importance of the tax cases is that they show that the test is whether in all the circumstances Parliament must have intended a common law remedy to co exist with the statutory remedy. Lloyd LJ sought to distinguish the tax cases to which I have referred on the grounds that payments by the state to a person have nothing to do with the tax regime. He said that the difference between recovery of a social security benefit wrongly paid to a claimant on the one hand and of tax paid by a taxpayer on the other is substantial and significant. Of course, I accept that they are different, but like Lord Brown I do not consider that the difference is material to the question whether Parliament intended a statutory code to displace common law rights and remedies. There is nothing in the reasoning in the tax cases to indicate that the courts were applying a rule which was peculiar to tax cases. Indeed, for example, Lord Mance at para 130 of Total Network SL referred to non tax cases such as Marcic v Thames Water Utilities Ltd [2003] UKHL 66, [2004] 2 AC 42 and Johnson v Unisys Ltd [2001] UKHL 13, [2003] 1 AC 518 as being illustrative of the principle that he had articulated. If the two remedies cover precisely the same ground and are inconsistent with each other, then the common law remedy will almost certainly have been excluded by necessary implication. To do otherwise would circumvent the intention of Parliament. A good example of this is Marcic where a sewerage undertaker was subject to an elaborate scheme of statutory regulation which included an independent regulator with powers of enforcement whose decisions were subject to judicial review. The statutory scheme provided a procedure for making complaints to the regulator. The House of Lords held that a cause of action in nuisance would be inconsistent with the statutory scheme. It would run counter to the intention of Parliament. The question is not whether there are any differences between the common law remedy and the statutory scheme. There may well be differences. The question is whether the differences are so substantial that they demonstrate that Parliament could not have intended the common law remedy to survive the introduction of the statutory scheme. The court should not be too ready to find that a common law remedy has been displaced by a statutory one, not least because it is always open to Parliament to make the position clear by stating explicitly whether the statute is intended to be exhaustive. The mere fact that there are some differences between the common law and the statutory positions is unlikely to be sufficient unless they are substantial. The fact that the House of Lords was divided in Total Network SL shows how difficult it may sometimes be to decide on which side of the line a case falls. The question is whether, looked at as a whole, a common law remedy would be incompatible with the statutory scheme and therefore could not have been intended by co exist with it. I agree with Lord Brown that, for the reasons he has given, section 71 was intended to be an exhaustive code. Some of the difficulties that he has highlighted at para 14 of his judgment are similar to those mentioned by Lord Neuberger in Total Network SL. As Lord Millett put it in Unisys at para 80 of his speech, the co existence of two systems, overlapping but varying in matters of detailwould be a recipe for chaos. That is a powerful reason for supposing that Parliament intended the statutory code contained in section 71 of the 1992 Act to be exhaustive. For these reasons, as well as those given by Lord Brown, I would dismiss this appeal. LORD RODGER As Lord Brown and Sir John Dyson have explained, until 1998 there was no real possibility of the Secretary of State making a mistake in the calculation of an award that would have founded a common law claim for money paid under a mistake. Precisely for that reason, when originally enacted, section 71 of the Social Security Administration Act 1992 (the 1992 Act) could never have been intended to exclude such a claim. It is therefore, at first sight, surprising if that section has the effect of excluding a claim of that kind which might otherwise have become available when the system was altered in 1998. When it enacted section 71 in 1992, Parliament intended it to be the only basis for the Secretary of State to recover a benefit payment that had been wrongly calculated. The question is whether, when it enacted the Social Security Act 1998, it changed its view. The only provision in that Act which suggests that Parliament may have changed its mind is section 9(3). It provides that, where the Secretary of State revises a decision, the decision is to take effect as from the date on which the original decision took (or was to take) effect. If the respondents approach is correct, in a case where the revision is downwards in favour of the Secretary of State, Parliaments decision to give the revision retroactive effect seems to have no practical effect. That consideration has caused me real difficulties. Section 9(3) creates the problem, however; it does not solve it. If, by enacting section 9(3), Parliament intended the Secretary of State to be able to bring a common law claim for restitution, realistically, it could have been expected to amend section 71 of the 1992 Act. It did not do so. If, on the other hand, Parliament overlooked the possibility of such a claim, then the appropriate conclusion must be that section 71 was to continue to provide the only basis for recovering a benefit that had been wrongly calculated. With some hesitation, therefore, I have come to the conclusion, for the reasons given by Lord Brown and Sir John Dyson, that section 71 should be interpreted as excluding a common law remedy in this situation. Whether a remedy should be available in these cases is a matter for Parliament, not for this Court. LORD PHILLIPS For the reasons given by Lord Brown and Sir John Dyson, which are in perfect harmony, I would dismiss this appeal. I have read and agree with the judgments of Lord Brown and Sir John LORD KERR Dyson. For the reasons that they have given I too would dismiss the appeal.

This appeal concerns the question whether, in cases of social security benefit awards mistakenly inflated due to a calculation error, the Secretary of State is entitled to recover sums overpaid under the common law of unjust enrichment or whether section 71 of the Social Security Benefits Act 1992 (the 1992 Act) provides the only route to recovery. Section 71 allows the Secretary of State to recover any overpayment resulting from misrepresentation or the non disclosure of a material fact by the benefits claimant. The background to this appeal is the Secretary of States practice (adopted in about 2006) of writing to benefit claimants who he considered have been overpaid, but where there had been no misrepresentation or non disclosure, indicating that his Department had a common law right of action to recover the overpayment. Although no common law claim for repayment was ever in fact brought in the courts, the letters led to the recovery of substantial sums, for example, just over 4m in 2007 8. The Child Poverty Action Group brought this legal test case on behalf of social security claimants to challenge the Secretary of States practice on the basis that it is based on a false legal premise. One of the salient features of the history of the social security benefits legislation is the fact that prior to the Social Security Act 1998 (the 1998 Act) there was a division between the functions of adjudication which involved the quantification of the award and the payment of the award. Until the 1998 Act, the Secretary of State was responsible for the payment function only and therefore at the time of enactment of section 71 of the 1992 Act there was no possibility of mistake on the part of the Secretary of State in the calculation of the award, since he played no part in the calculation. The only possibility of mistake lay in the payment of the award. Since the 1998 Act the Secretary of State had been responsible both for the calculation and the payment of the awards. Both parties agreed that where the Secretary of State overpays by mistake, for instance by sending a cheque for 120 following an award of 60, the amount of the overpayment can be recovered as money paid by mistake. The overpayments with which this appeal is concerned are those made as a result of a mistake in calculating the award. The Supreme Court unanimously dismissed the appeal. Lord Brown and Sir John Dyson gave lead judgments; Lord Rodger gave a concurring judgment. It held that section 71 of the 1992 Act provides the only route to recovery of social security benefits overpayments to the exclusion of any common law rights. Both Lord Brown and Sir John Dyson agreed with the respondents argument that, rather than excluding any common law rights to recovery, section 71 and its predecessors created a power of recovery when otherwise, due to the division of adjudication and payment functions up until 1998, there would have been none: [13], [22]. Lord Brown noted that it would seem inconceivable that Parliament would have contemplated leaving the common law restitutionary recovery available to the Secretary of State alongside the carefully prescribed scheme of section 71. He found it striking that Parliament had not made express provisions for recovery of mistaken overpayments alongside provisions for misrepresentation and non disclosure. Lord Brown thus concluded that section 71 does necessarily exclude any common law restitutionary claim the Secretary of State might otherwise have: [14] [15]. Sir John Dyson dismissed the Secretary of States argument that section 71 cannot be taken to have excluded prospectively the possibility of a common law right to recovery arising in the future. In his view, the change in the identity of adjudicator of the social security benefits awards in 1998, which was not accompanied by any change in the statutory criteria for recovery of overpayments, was not intended to open the door to recovery any wider than it previously had been: [23] [25]. Whilst noting that the appeal could be dismissed on that basis alone, Sir John Dyson went on to consider whether, if, contrary to the finding of the Court, the common law right to recovery did exist by the time section 71 and its predecessors were introduced, that right was impliedly displaced by statute. Having discussed the authorities at [27] [30], Sir John Dyson concluded that the test is not one of necessary implication but instead that of statutory interpretation, namely, whether, looked at as a whole, a common law remedy would be incompatible with the statutory scheme and therefore could not have been intended to co exist with it: [31], [34]. Sir John Dyson concluded that, for the reasons given by Lord Brown, he too agreed that section 71 was intended to be an exhaustive route to recovery of wrongly calculated benefits: [35]. Lord Rodger noted that section 9(3) of the 1998 Act, which provides that any revision of the award takes effect from the date of the original award, would have no practical effect in cases of downward revisions resulting from a mistake in favour of the Secretary of State. He concluded that while section 9(3) creates a problem, it does not solve it. Thus the question of whether a remedy should be available in cases of mistaken awards is a matter for Parliament: [39].

The appellant Shaun Docherty fell to be sentenced in the Crown Court for offences of serious violence. He was on any view a high risk of further, and perhaps worse, serious violence. At the time when he was sentenced the statutory scheme for the sentencing of offenders who represent a future public danger was in the course of change. The scheme provided for by the Criminal Justice Act 2003 (the CJA 2003), as amended, was being replaced by a different one under the Legal Aid, Sentencing and Punishment of Offenders Act 2012 (LASPO). The transitional provisions made by the Commencement Order for LASPO preserved the old scheme sentences if the conviction was before the prescribed commencement date. Docherty was convicted before that date and was accordingly sentenced, after it, to an indeterminate sentence of imprisonment for public protection (IPP) under the scheme of the CJA 2003, although that form of sentence was in the course of being abolished for the future. In his appeal against sentence he contended that the Commencement Order containing the transitional provisions was, to the extent that it preserved IPP for him, unlawful. He submitted that this was so for one or more of three reasons: (a) because the new scheme was less severe than the earlier one, and therefore to apply the earlier was unlawful as contrary to an international principle of lex mitior, which is binding on the English court via article 7 of the European Convention on Human Rights (ECHR), as explained by the Strasbourg court in Scoppola v Italy (No 2) (2010) 51 EHRR 12 (Scoppola); or (b) because the purpose of LASPO was to remove IPP from the armoury of sentencing, and therefore transitional provisions which preserved it to any extent were outside the authority given by that statute; or (c) because to impose an IPP on him, but not on a person convicted after the LASPO commencement date, amounted to unlawful discrimination against him, contrary to article 14 of the ECHR, read with article 5. The facts Docherty was born in April 1978. By the time he came to be sentenced in December 2012 on the occasion now under scrutiny he was 34 years of age. He had been convicted on 16 previous occasions of some 28 offences. There was a clear pattern of aggressive offending, usually fuelled by alcohol, supplemented in some cases by cannabis. His offences included affray, other public order offences, criminal damage and, most significantly, violent offences causing injury to others. In 1997 he was convicted of two violent offences, one of unlawful wounding (section 20 Offences against the Person Act 1861) and the other of causing grievous bodily harm with intent (section 18 of the same Act). They were separate incidents. In the first, he had punched and kicked another man to the head and body. In the second, he had forced his way into the flat of his stepfather in what he later said was a punishment expedition in revenge for suggested misbehaviour by that man towards Dochertys mother. He had broken the others jaw in two places and inflicted cuts to his head. For these two offences he was sentenced to five years imprisonment. On 12 July 2012 he started an altercation with two drinking companions, Cook and Lord. He persisted although Lord avoided confrontation. He slapped Cook in the face. When the other two sought to leave, he went and fetched a vegetable paring knife and, on his return, stabbed Cook in the back of the neck, the back and chest, some of the wounds inflicted as Cook tried to crawl away. There were at least six stab wounds in all and the knife was left embedded in his chest. Lord had tried to protect Cook, but Docherty stabbed him also in the face and head. Cooks kidneys were damaged and he was in hospital for four days. Lord sustained a deep penetrating wound to the scalp together with other injuries to the head, arms and hands. Both victims were significantly affected by what had happened to them. These events gave rise to two counts of wounding with intent to do grievous bodily harm, contrary to section 18 Offences against the Person Act 1861. In due course Docherty admitted them and pleaded guilty in the Crown Court. Between release from the five year sentences imposed in 1997 and the commission of these new and more serious offences, he had been either convicted or cautioned for drunken disorder or violence in 2004 (twice), 2005, 2006 (twice), 2007, 2009 and 2010, and then on four different occasions between late May and the beginning of July of 2012. Two of these incidents were relatively minor, involving arriving very drunk at the police station either threatening that he would knock someone out if not taken home or reporting that he had broken a number of windows. The police domestic violence unit had, however, also been called out to three further incidents of drunken aggression on his part. Reports from the probation officer and a consultant forensic psychiatrist confirmed that what lay behind this pattern of behaviour was long standing alcohol abuse. There was no mental health disability. Docherty was aware of his alcohol problem, and from time to time expressed remorse. His sister had written a letter supportive of him and expressing faith in his underlying goodness of heart. But it was clear that he was not in control of himself. Moreover, the probation officers assessment was that he tended to use violence as a means to gain compliance from others and to solve problems. So his was a case of injuries thus far inflicted which were grave and it was largely a matter of chance that they had not been graver, or indeed fatal. He posed the risk of further attacks, with similar or worse consequences; the probation officer described that risk as very high. The statutory maximum sentence for the offences of which Docherty was convicted is, and has been for well over a century, life imprisonment. The judge passed a sentence of IPP on 20 December 2012. He specified five years and four months as the period which had to pass before the Parole Board could consider release on licence. That was done under the rules for the construction of an IPP sentence which are set out in para 9 below. The sentence meant that Docherty will be eligible for consideration for parole after five years and four months, thus in 2018, but before such release on licence can occur the Parole Board will have to be satisfied that it is no longer necessary for the protection of the public that he be detained. There is no complaint that, if IPP was available, the sentence was either excessive or incorrectly calculated. The change in the law The CJA 2003 had introduced a new scheme of preventive sentencing for dangerous offenders, there defined as those who are convicted of specified offences and who present a significant risk to the public of serious harm (death or serious personal injury) from further serious offending. That Act was by no means the first to address the sentencing of offenders posing a future risk. An early example was a system of preventive detention for habitual criminals (section 10 of the Prevention of Crime Act 1908), and different provisions were made by statute from time to time thereafter. Immediately before 2003, the solution adopted to the problem was the authorisation of determinate sentences for the dangerous which were longer than commensurate, ie longer, on grounds of future risk, than would be appropriate simply to the facts of the current offence (section 2(2)(b) Criminal Justice Act 1991). The CJA 2003 removed that power and substituted a new scheme. It consisted, for dangerous adult offenders, of a menu of three possible sentences alongside ordinary determinate or non custodial sentences: (1) life imprisonment where the offence creating section provided that as the maximum available, (2) IPP and (3) an extended sentence. There were broadly equivalent sentences for those under 18. IPP was a new form of sentence. The judge was required to specify a minimum period before which there could be no eligibility for parole. In effect he had to identify what the hypothetical determinate sentence for the offence would have been if commensurate, that is calculated purely by reference to the gravity of the offence and the responsibility of the offender, without consideration of future risk. Then the judge had to specify half that term as the period before parole was possible (half, because the hypothetical prisoner sentenced to a determinate sentence would, under the CJA 2003, serve half his term in prison and the second half on licence). After the specified minimum period had been served, the IPP prisoner was eligible for release providing that the Parole Board was satisfied that it was no longer necessary for the protection of the public that he be detained. These release provisions were for most practical purposes the same as (although not quite identical to) those which applied and still apply to life sentences: see R v Lang [2005] EWCA Crim 2864; [2006] 2 Cr App R (S) 3, at para 8. But IPP was available, if the offender met the statutory test of serious danger to the public, for those specified offences which did not otherwise carry life imprisonment as well as for those which did. The extended sentence provided for by the CJA was broadly similar to previous forms of sentence with the same name. It consisted of a commensurate determinate term plus an elongated period of licence beyond that which would normally attend that length of sentence. As is now well documented, there ensued considerable difficulty in the administration of IPP sentences. As originally framed, the CJA 2003 created a presumption of dangerousness and made the sentence mandatory. This led to a large number of IPP sentences being passed, including many for offences which did not otherwise carry life imprisonment. Some IPP sentences, passed according to the statutory rules, had quite short specified minimum periods. All those thus sentenced had to be treated in prison in the same way as those sentenced to life imprisonment, because the test for release was the same. There were far too many IPP prisoners for the rehabilitative systems of the prisons to cope with. This resulted in decisions both domestically and in the Strasbourg court that the duty to provide reasonable facility to the prisoner to reform himself and to demonstrate that he was no longer a public danger was too often not discharged: see James, Lee and Wells v United Kingdom (2013) 56 EHRR 12, R (James, Lee and Wells) v Secretary of State for Justice [2009] UKHL 22; [2010] 1 AC 553, and R (Kaiyam) v Secretary of State for Justice [2014] UKSC 66; [2015] AC 1344. The prison administration of life prisoners was distorted. From 2008, modifications were made by the Criminal Justice and Immigration Act of that year to the conditions for imposing an IPP sentence, which reduced the numbers. But in due course the decision was made to abolish altogether that form of sentence for the future, and this was accomplished by Parliament in LASPO. By section 123 of LASPO the sections of the CJA 2003 providing for both IPP and the 2003 model of extended sentence (and for their equivalents for those under 18) were repealed. LASPO did not, however, simply remove IPP from the sentencing armoury. It substituted one menu of preventive sentencing for another, just as previous legislation had done. Insofar as it is new, the scheme has been inserted into the CJA 2003 as new sections of that Act. Overall, it comprises three elements. (i) A life sentence, where that is the statutory maximum for the offence committed, if the court is of the opinion that there is a significant risk to members of the public of serious harm occasioned by the commission by the defendant of further offences specified in Schedule 15 and the gravity of the offence(s) is such as to call for such a sentence section 225(2); this part of the scheme is unaltered from the 2003 regime. (There might be cases where a discretionary life sentence is justified for an offence outside Schedule 15 if its gravity and the danger presented by the defendant are sufficient see the discussion in R v Saunders [2013] EWCA Crim 1027; [2014] Cr App R (S) 258, para 11 it is not necessary to discuss this possibility in the present case). (ii) A new obligatory life sentence, unless its imposition would be unjust in the circumstances, if the defendant is now convicted for a second time of one of a defined group of violent or sexual offences (Schedule 15B), where both the previous and current offences have been met by, or would call for, determinate terms of ten years or more, or their equivalent section 224A. This is entirely new. If the conditions are met, it may, even if not frequently owing to the levels of determinate term required, lead to the passing of a life sentence for offences which otherwise have a statutory maximum well below life imprisonment examples include several forms of sexual offence, contrary to sections 9 12 and 48 50 of the Sexual Offences Act 2003, and offences of child pornography contrary to section 1 of the Protection of Children Act 1978, all of which are listed in Schedule 15B. (iii) A new form of extended sentence under section 226A. Although the expression is not used in the statute, the Ministry of Justice appears to have adopted the label Extended Determinate Sentence (EDS) for this latest model of extended sentence, and this is certainly a convenient means of distinguishing it from its predecessors. For similar reasons the CJA 2003 model of extended sentence, as amended in 2008 and now abolished by LASPO, has had bestowed on it the label EPP (extended sentence for public protection). The new EDS is discretionary and, like the former EPP, consists of a commensurate determinate term plus an additional period of licence beyond the usual licence for the remainder of the custodial term which follows early release. The superficial similarity of the two conceals, however, significant differences between them. EPP (as amended from 2008 onwards) and EDS share the following features. (a) The basic condition for the imposition of both is that the defendant is being dealt with for a specified offence, which means one contained in Schedule 15 to the CJA 2003 (section 224), and that he presents a significant risk to the public of serious harm through the commission of further such offences; (b) Both are constructed of custodial term and extension of licence period; (c) In both cases the total of those two periods must fall within the statutory maximum for the offence; (d) For both, the custodial term is measured by what would be the commensurate determinate term if an extended sentence were not being passed; (e) It is a condition for the imposition of both that the custodial term is four years or more or that there is a qualifying previous conviction (though not identical in each case: see para 14(ii) below); (f) For both, the extension periods have a maximum of five years for violent offences and eight years for sexual offences; and (g) For both, the criterion by which the length of the extension period is to be fixed is the period (within the maximum) required for the purpose of protecting the public from serious harm occasioned by the commission of further specified offences. But there are significant differences between the two. (i) EPP could be imposed only for an offence committed after the commencement of the CJA 2003 (4 April 2005), but EDS is expressly made available by section 226A(1) for an offence whenever committed. EDS but not EPP is thus available when sentencing so called historic cases, especially those of sexual abuse, which are often uncovered many years after the event. (ii) EPP was available only (unless the custodial term would be at least four years) where the defendant has previously been convicted of an offence listed in Schedule 15A to the CJA 2003, but EDS is available when he has previously been convicted of one listed in Schedule 15B. Those two lists are not the same, and neither is the same as Schedule 15. The EDS list in Schedule 15B is appreciably wider and covers many offences for which EPP was not available. These include many sexual offences (sections 7, 9, 10, 11, 14, 15, 25, 26, 48 and 49 Sexual Offences Act 2003), a number of terrorist offences, of which there are none in the EPP list in Schedule 15A, the very common offence of possessing (etc) indecent photographs of children contrary to section 1 Protection of Children Act 1978 and an entirely new category of offence consisting of abolished offences which amounted to the same as listed ones (no doubt inserted because of point (i) above); moreover two of the sexual offences which are listed in both Schedules (sections 4 and 47 Sexual Offences Act 2003) are, for the purposes of EPP, confined to cases where the defendant would be eligible for life imprisonment, but that restriction is removed from the EDS list in Schedule 15B. In short, EPP and EDS are not available for the same offences. (iii) An EDS extension period must be for at least one year (for offences committed after the commencement of amendments brought about by the Offender Rehabilitation Act 2014 on 1 February 2015), but there was no minimum length for an EPP extension period. (iv) Within the sentence imposed, there are very significant differences in the rules for early release. For EPP (as amended in 2008) release was automatic at half the custodial term. By new section 246A, the rules for EDS are that there can be no early release before two thirds of the custodial term has been served, and if either the offence was a Schedule 15B offence or the custodial term was ten years or more, (and, after 13 April 2015, in all cases: section 4 of the Criminal Justice and Courts Act 2015) there can be early release only on the recommendation of the Parole Board. Thus an EDS prisoner must serve two thirds in prison and may have to serve the whole of the custodial term imposed by the court. It follows that the temptation to summarise the effect of LASPO as replacing IPP with EDS ought to be resisted. IPP, if it is replaced by anything, is replaced by the new obligatory life sentence under section 224A, but this latter is available for a very much more restricted group of defendants and offences. EDS is similarly constructed to EPP, but different in availability and effect. Meanwhile, there remains, unaltered, for offences where the statutory maximum sentence is life imprisonment, that sentence (section 225(2)). It is, however, clearly true that the wider availability of EDS, in comparison with EPP, is premised on the disappearance of IPP and the narrower availability of the new obligatory life sentence. That is an illustration of the necessity to consider the CJA 2003 and LASPO schemes as a whole in each case. The reality is that no sentence is a direct replacement for a former one. The 2003 regime as a whole has been replaced by the LASPO regime as a whole. When the question arises which sentence, if any, of the ones newly prescribed, will fit a particular offence, it will not be answered by referring back to the previous regime, but must be tackled afresh. One example of this proposition is afforded by the guideline decision of the Court of Appeal (Criminal Division) in Attorney Generals Reference No 27 of 2013 (Burinskas) [2014] EWCA Crim 334; [2014] 1 WLR 1409. This makes it clear that courts may well have to consider life sentences in future (where the offence carries such a sentence) in cases where previously the necessity to do so did not in practice arise because an IPP sentence was virtually indistinguishable from it: see in particular paras 15 to 18 and the example provided by the different statutory context of R v DP [2013] EWCA Crim 1143, discussed in Burinskas at 21. In both Burinskas and the earlier case of Saunders successive Lords Chief Justice were at pains to emphasise that EDS cannot be regarded simply as a replacement for IPP. LASPO: commencement and transitional provisions The general rule of English law, not confined to the criminal law, is that a statute is prospective rather than retrospective in effect unless it distinctly says otherwise: see for example the discussion in a very different context in Wilson v First County Trust Ltd (No 2) [2003] UKHL 40; [2004] 1 AC 816 at 19, 98, 152 and 186. The presumption against retrospective operation applies equally to repeals. Section 16 of the Interpretation Act 1978, re enacting a provision which was formerly contained in section 38 of the Interpretation Act 1889, provides: (1) where an Act repeals an enactment, the repeal does not, unless the contrary intention appears, (b) affect the previous operation of the enactment repealed or anything duly done or suffered under that enactment; (c) affect any right, privilege, obligation or liability acquired, accrued or incurred under that enactment; (d) affect any penalty, forfeiture or punishment incurred in respect of any offence committed against that enactment; (e) affect any investigation, legal proceeding or remedy in respect of any such right, privilege, obligation, liability, penalty, forfeiture or punishment; and any such investigation, legal proceeding or remedy may be instituted, continued or enforced, and any such penalty, forfeiture or punishment may be imposed, as if the repealing Act had not been passed. As to the operative date, ordinarily thus for prospective effect, it is standard practice for UK statutes either to prescribe a commencement date in the body of the Act or, more frequently, to provide for such date(s) to be appointed by the Secretary of State by order, that is to say by delegated legislation. This standard practice is recognised by, inter alia, section 4 of the Interpretation Act. It is particularly necessary where a single statute legislates on a range of unconnected topics, as LASPO does. Section 151 of LASPO contains this standard form of provision. By section 151(5), also in standard form, different dates may be appointed for different purposes and the Order may make transitional, transitory or saving provision. The commencement order in question here is Number 4 (SI 2012/2906), made on 17 November 2012. Some of the provisions of LASPO contain explicit statements as to the chronology of events to which they apply. One of them is the new section 226A, inserted into the CJA 2003, which creates the EDS sentence: 226A Extended sentence for certain violent or sexual offences: persons 18 or over (1) This section applies where (a) a person aged 18 or over is convicted of a specified offence (whether the offence was committed before or after this section comes into force) [emphasis supplied] The new section 226A may be contrasted with the new section 224A (which creates the new obligatory life sentence). The latter says: 224A Life sentence for second listed offence (1) This section applies where a person aged 18 or over is convicted of an (a) offence listed in Part 1 of Schedule 15B, (b) comes into force, and [emphasis supplied] the offence was committed after this section The obvious reason for the difference is to be found in article 7 ECHR (see below) or an analogous principle well established in English legislative practice. Section 224A (new obligatory life) creates for some offenders (those whose offence does not otherwise carry a maximum of life imprisonment) a sentence which may be heavier than was available under the old CJA 2003 regime, since life is, technically at least, heavier than IPP. By contrast, section 226A (EDS) does not, for although the mechanics of EDS operate more severely on offenders than those of EPP did, still EDS is not more severe than was available under the old regime; in particular it is not more severe than IPP or (where the offence carries it) life. Moreover, the release conditions applied to a sentence are not part of the penalty for the purposes of article 7: R (Uttley) v Secretary of State for the Home Department [2004] 1 WLR 2278 and Uttley v UK in Strasbourg, Application No 36946/03, and see para 47 below. This is thus an example of invariable English practice conforming to article 7 ECHR. Both the new sections distinguish events according to whether they fall before or after this section comes into force. The Commencement Order then supplied the dates. By article 2 of that Order much of the Act, including, by 2(e), the part which deals with the sentencing of dangerous offenders (Chapter 5 of Part 3), was brought into force on 3 December 2012. By articles 3 4 a number of sentencing provisions outside Chapter 5 were, however, stipulated not to come into force in relation to offences committed, or breaches of community orders occurring, before that date. These sentencing provisions are all ones by which the court is given somewhat more severe powers than it had under the previous legislation. So, by article 3, sections 65, 71, 72 and 81 are not commenced in relation to offences prior to 3 December 2012; these are provisions for new aggravating factors affecting sentence or for new restrictive orders such as curfew requirements to be added to sentences. Similarly a new power to extend the length of a community order is, by article 5, to apply only to orders first made after the commencement date. These are again plainly provisions designed to ensure, in compliance with article 7 ECHR, that no greater punishment is imposed than was available at the time of the offence. Article 6 of the Commencement Order (2012 No 2906 (c 114)) is directly in point in this case. It provides: Saving provision in relation to persons convicted before 3 December 2012. 6. The coming into force of the following provisions of the Act is of no effect in relation to a person convicted before 3 December 2012 section 123 (abolition of certain sentences for (a) dangerous offenders); [equivalent provisions for offenders under 18 and for those subject to armed service law] The effect of article 6(a) is clear: IPP and EPP disappear from the judicial armoury on 3 December 2012 except for anyone already convicted but not yet sentenced. The effect of section 224A is also clear: the new obligatory life sentence is only available where the offence (and thus inevitably the conviction) falls after 3 December 2012. There was a dispute between the parties as to the effect of section 226A(1)(a). The appellant and the Secretary of State submitted that it clearly meant that EDS became available for anyone convicted after 3 December 2012, whenever the offence was committed, but was not available for someone convicted before that date even if his sentencing was, in the ordinary course of court process, adjourned until after that date, for example for reports. This approach reads is convicted in section 226A(1)(a) as is hereafter convicted. By contrast, the Crown Prosecution Service advanced the submission that the section could be read as making EDS available to anyone sentenced after the commencement date, whenever convicted. This involves reading is convicted in section 226A(1)(a) as has been convicted or stands convicted. It may be true that, taken alone, the words is convicted could, as a matter merely of grammar, sustain either sense. But there is not much doubt that the ordinary meaning is the former. If has been convicted had been meant, it would have been more natural to use those words. Next, the Act like any other is forward looking. To adopt the CPS reading would give the statute a retrospective element despite the absence of any explicit provision to that effect, contrary to the ordinary approach to statutory construction. Moreover, section 226A(1) contains an express provision making it applicable whatever the date of the offence. If it was also meant to apply whatever the date of conviction, one would have expected it to say so: expressio unius, exclusio alterius. The suggested construction would also, perhaps more importantly, involve reading the same words is convicted in a different sense in adjacent provisions of the same statute. The same expression is convicted appears in several other places in LASPO, and indeed in other statutes. Within LASPO, in section 224A(1) those words can only mean is hereafter convicted because the offence has to come after commencement, and hence also the conviction. The same is true of section 142 which creates two new public order offences of carrying offensive weapons aggravated by an immediate risk of serious harm. In the case of both, a custodial sentence is ordinarily then required where a person is convicted (of the offence). Similarly, section 146 amends the Scrap Metals Act 1964 which in turn by section 4 gives the court power where a person is convicted of offences, to impose an hours restriction on his trading; LASPO creates a new offence and uses the same expression to extend that power to conviction also for it. The fact that in those sections the Secretary of States and appellants meaning is compelled by the context does not alter the consequence that, on the CPS argument, the same words would mean different things in different places. Nor does it displace the force of the point that when LASPO means to speak of convictions hereafter to come it is is convicted which is the expression used. It is also true that in the course of a debate in the House of Lords on the bill which became LASPO, Lord McNally, speaking for the Government, incorporated in responses to proposed amendments the following: The Government took the view from an early stage that IPPs must be replaced, and we have brought forward proposals in the Bill to do so. Once those provisions are commenced, no further IPPs can be imposed, even for previous offending. That is a major step forward. We are now concerned with those who have or will receive an IPP sentence prior to abolition (Committee stage: House of Lords Debates 9 February 2012 at col 443, emphasis added) This passage is, however, of no legitimate help in construing section 226A(1). The minister was not considering the clause which became that section, nor any question of commencement date. He was responding to pleas by various members of the House to incorporate extra provisions converting past IPP sentences into some other form. Understandably, in rejecting retrospective conversion, he drew attention to the prospective nature of the abolition of IPP. His words do not come near to meeting the conditions in which a ministerial statement can be invoked as an aid to statutory construction under Pepper v Hart [1993] AC 593. Once the introduction of EDS was, by section 226A(1)(a), made to apply only to those convicted after the commencement of LASPO, the provisions of article 6(a) of the Commencement Order follow. The old regime was continued for the doubtless very small cohort of offenders, of whom Docherty is one, who had been convicted before the commencement date and had still to be sentenced when that date arrived. The combined effect of section 224A, 226A and article 6(a) is thus, for a person convicted as the appellant was of an offence carrying life imprisonment: if offence, conviction and sentence are all before 3 December 2012 (i) the old regime applies; Life, IPP and EPP are available; (ii) if offence and conviction were before 3 December 2012, but sentence comes after that date, there are available: life, IPP and EPP but not section 224A obligatory life nor EDS; this is the appellants category; if the offence was before 3 December 2012, but both conviction and (iii) sentence come after that date, neither IPP nor EPP, nor section 224A obligatory life are available; but life and EDS are; (iv) if offence (and therefore conviction and sentence) all come after 3 December 2012, the old regime of IPP and EPP is not available, and all three elements of the new are, thus life, section 224A obligatory life, and EDS. In addition of course, for all categories, a determinate sentence and non custodial sentences are or were available. In summary, the timetable so far as is relevant to the present issues, was: 1 May 2012 (but commencement to be LASPO Royal Assent: prescribed by Order) 12 July 2012 Offences: Conviction (guilty plea entered): 13 November 2012 17 November 2012 Commencement Order made: Commencement date: 3 December 2012 20 December 2012. Sentence passed: The appellants argument in the present case essentially accepts that article 6(a) and section 226A(1)(a) were designed to go together. His case is, however, that it was unlawful for the Commencement Order to preserve IPP and EPP for those convicted before 3 December 2012. Article 6(a), he says, should be struck down. His first and principal basis for that argument is article 7 ECHR as interpreted by the Strasbourg court in Scoppola v Italy (No 2) [2010] EHRR 12, to which it is now necessary to turn. Article 7: lex gravior and lex mitior Article 7(1) ECHR provides: No punishment without law (1) No one shall be held guilty of any criminal offence on account of any act or omission which did not constitute a criminal offence under national or international law at the time when it was committed. Nor shall a heavier penalty be imposed than the one that was applicable at the time the criminal offence was committed. The language follows closely that of article 11(2) of the Universal Declaration of Human Rights, adopted by the General Assembly of the United Nations in 1948. As pointed out by the minority judgment at O 111 in Scoppola (see below), it reflects a fundamental principle of criminal law: Nullum crimen nulla poena sine praevia lege poenali: no one is to be convicted or punished without a pre existing criminal law in force. The second sentence of article 7(1) gives effect to the so called lex gravior principle (no heavier penalty). Quite separate is a principle termed lex mitior. This is conveniently stated in article 15 of the UN International Covenant on Civil and Political Rights (ICCPR) (Treaty Series No 6 of 1977). Article 15 is in the same terms as article 7 ECHR but contains an additional sentence: If, subsequent to the commission of the offence, provision is made by law for the imposition of a lighter penalty, the offender shall benefit thereby. As pointed out in the dissenting judgment of the minority in Scoppola (No 2) at O 111, this represents a norm of a different order from the principle of no punishment without law. Whilst the lex gravior principle is a fundamental and essential condition of freedom, lex mitior expresses a choice that reflects the development of a social process in the context of criminal law. It circumscribes the scope of criminal law by preserving benefits accruing to defendants as a result of substantive laws subsequent to the commission of the offence and applicable while the case was pending. The difference between the two principles is underlined by the fact that whereas lex gravior prohibits applying to a case a rule which was not the law when the acts under judgment were committed, lex mitior, when it operates, actually requires such a rule to be applied. An additional sentence containing this lex mitior principle (benefit of a more lenient penalty) was considered and rejected when article 7 ECHR was adopted in 1950. As far as appears from the material before us, article 15 of the ICCPR was the first international instrument to give it formal effect, in 1966. Subsequently similar wording appeared in article 9 of the American Convention on Human Rights (adopted on 22 November 1969, and coming into force on 18 July 1978); and also much later (in December 2000) in article 49 of the Charter of Fundamental Rights of the European Union, which applies when EU law is in question, although it does not insert the second sentence into the general domestic law of member states. Notwithstanding these international developments, in 1978, in X v Germany Application No 7900/77, the European Commission of Human Rights declared inadmissible a claim that article 7 guaranteed the right to a more lenient penalty provided for in a law subsequent to the offence. It rejected an argument that article 7 should be treated as containing the principle derived from the equivalent article of the ICCPR. The Court reached the same conclusion on the same arguments in Petit v UK Application No 35574/97, 5 December 2000 and Zaprianov v Bulgaria Application No 41171/98, 6 March 2003. As recorded in the dissenting judgment in Scoppola at O 117, the court held categorically in Zaprianov that Article 7 does not guarantee the right to have a subsequent and favourable change in the law applicable to an earlier offence. In 2005 the subject was considered by the Court of Justice of the European Communities in the case of Berlusconi, (Joined Cases C 387/02, C 391/02 and C 403/02) [2005] ECR I 3565, in the context of Italian laws on the publication of annual company accounts. Charges had been laid alleging the deliberate falsification of accounts. The offences were alleged to have taken place at a time in the 1980s or 1990s when the prescribed punishment on conviction was one to five years. By an Italian presidential decree of 2002 the penalty was very greatly reduced; the minimum disappeared and a maximum of 18 months was imposed. There were also alterations to the definitions of the offences, and to the limitation periods, which were very favourable to the defendants, to the extent that it might not be possible to prosecute at all. The Tribunale in Milan had felt able to describe the new penalties as derisory. The issue referred to the CJEU was whether the new, much more lenient, rules failed to meet the requirements of the relevant European Directives on the subject, under which penalties had to be appropriate in the sense of providing effective sanction and dissuasion. The Italian Criminal Code contained an express lex mitior provision: if the law in force when an offence was committed differed from later law, the applicable law was that which was more favourable to the accused. Lex mitior was raised by the defendants as a barrier to any decision that the new regime failed to comply with European law. The short answer of Advocate General Kokott (paras AG162 and 165) was that it was no such barrier; the principle is based upon fairness and it cannot prevail against the obligation of the state under the Directives to provide effective penalties. The court, however, declined (at para 71) to answer that question because it held (paras 72 73) that a Directive cannot be relied upon directly against an individual to increase the penalty to which he is liable. En route to her advice, the Advocate General recognised at paras AG 156 157 that the principle of retroactive application of more lenient penalties is recognised not only nationally, in Italy and elsewhere in the EU, but also internationally. She recorded, at note 129, that so far as she had been able to ascertain, lex mitior was not expressly recognised either in the UK or Ireland, although it was in all other EU states. In its turn, the court accepted (at para 68) that such principle represented part of the constitutional tradition common to member states. It did not consider either the content of such principle nor how general the tradition was, given the reservation which the Attorney General had expressed, but, on its conclusion, lex mitior did not arise. In Scoppola (No 2) the majority of the Grand Chamber at Strasbourg held that article 7 ECHR is now to be read as if it contained the additional sentence providing for lex mitior. It so held notwithstanding the drafting history and the previous decisions of commission and court to the contrary. In para 107 it held that article 7 does not exclude inserting the addition, which plainly it does not. In para 109 it went further and held that a lex mitior principle is implicit in that article. The latter is a more difficult proposition; if it were wholly accurate none of the debate at the time of drafting would have been necessary. However, in substance, the majority founded its change of view upon the proposition (at para 106) that: since the X v Federal Republic of Germany decision a consensus has gradually emerged in Europe and internationally around the view that application of a criminal law providing for a more lenient penalty, even one enacted after the commission of the offence, has become a fundamental principle of criminal law. It is also significant that the legislation of the respondent state had recognised that principle since 1930. At paras 103 and 105, the Court cited as evidence of such a consensus the ICCPR, the American Convention on Human Rights, the Charter of Fundamental Rights of the European Union, the statute of the International Criminal Court, the practice of the Court for former Yugoslavia and the French Cour de Cassation, and it referred to the decision of the CJEU in Berlusconi. Scoppola had murdered his wife and injured a son on 2 September 1999. At the time of the murder, the offence carried life imprisonment, it would seem as a mandatory penalty rather than as a maximum. In December 1999 Italy introduced a new abbreviated procedure, for which a defendant could elect; it involved fewer procedural rules from which he might otherwise benefit, but if he chose to elect for it the prescribed penalty became 30 years instead of life. He did elect for it, was convicted on 24 November 2000, and was sentenced accordingly to 30 years. That same day, although coming into effect only after the sentencing was over, a further change in the sentencing law was made, as a result of which someone in the position of the defendant was liable to life imprisonment, albeit without daytime isolation, on the grounds that there were cumulative or continuous offences. There ensued an appeal by the prosecution and such a sentence was substituted. The issue was whether that entailed an infringement of his Convention rights. The court held unanimously that there had been an infringement of article 6, because when he elected for the summary procedure Scoppola had foregone rights which otherwise he would have had in return for the limitation on punishment; accordingly it was a breach of article 6 to go back on that quid pro quo. The sentence of life imprisonment was accordingly a Convention breach independently of the article 7 point. Nevertheless, the latter was an equally central part of the decision of the court. The court explained the rationale for lex mitior in para 108. It is that it is wrong to impose a penalty which the state by later legislation has recognised to be excessive. The court said this: 108. In the courts opinion, it is consistent with the principle of the rule of law, of which article 7 forms an essential part, to expect a trial court to apply to each punishable act the penalty which the legislator considers appropriate. Inflicting a heavier penalty for the sole reason that it was prescribed at the time of the commission of the offence would mean applying to the defendants detriment the rules governing the succession of criminal laws in time. In addition, it would amount to disregarding any legislative change favourable to the accused which might have come in before the conviction and continuing to impose penalties which the state and the community represents now consider excessive However, some of what the court went on to say in both that paragraph and the ensuing paras 109 and 119 might suggest at least a possibility that the principle should have the effect of requiring a court not only to apply a more lenient penalty currently recognised as appropriate to the crime, but also to select, from all the penalty rules which have existed over the period from the commission of the crime to the date of sentencing, the one most favourable to the defendant. In para 108 the court continued: The court notes that the obligation to apply, from among several criminal laws, the one whose provisions are the most favourable to the accused is a clarification of the rules on the succession of criminal laws, which is in accord with another essential element of article 7, namely the foreseeability of penalties. [emphasis supplied] In para 109 it said: 109. In the light of the foregoing considerations, the court takes the view that it is necessary to depart from the case law established by the Commission in the case of X v Federal Republic of Germany and affirm that article 7(1) of the Convention guarantees not only the principle of non retrospectiveness of more stringent criminal laws but also, and implicitly, the principle of retrospectiveness of the more lenient criminal law. That principle is embodied in the rule that where there are differences between the criminal law in force at the time of the commission of the offence and subsequent criminal laws enacted before a final judgment is rendered, the courts must apply the law whose provisions are most favourable to the defendant. [emphasis supplied] And in para 119 it said of Scoppola himself: It follows that the applicant was given a heavier sentence than the one prescribed by the law which, of all the laws in force during the period between the commission of the offence and delivery of the final judgment, was most favourable to him. [emphasis supplied] There is a very clear difference between (1) a principle which prevents a court from imposing a penalty above and outside the range currently provided for by the State as appropriate to the crime and (2) a principle which requires the court to seek out and apply the most favourable rule which has existed at any intervening time since the offence was committed, even if it has since been abandoned. The first would fall within the rationale of confining the court to a range currently considered appropriate for the offence; the latter would not. The difference between the two is not adverted to, still less explored, in the judgment in Scoppola. It is, accordingly, by no means clear that the court intended to expand its incorporation of lex mitior into article 7 by including the latter proposition. The arguably wider statements just described need to be read in the Italian domestic context in which they arose. The eventual sentence under question (passed on appeal) might not have been more severe than would have been applicable at the time the offence was committed (both were life imprisonment), but it was more severe than was provided for by the law in force at the time of his trial and sentence. The Italian Criminal Code contains, as noted in Berlusconi, an express lex mitior provision couched in terms which would give a defendant in the position of Scoppola the benefit of (at least) the law operative at the time of trial and sentence. As will be seen below, there could be no question of English law adopting, between trial and appeal, a new more severe penalty regime. However that may be, there is no discussion in Scoppola of the difference between the two principles identified in para 40 above. Clearly, on this point, Berlusconi is of no assistance, since lex mitior was not applicable to the decision and the question of its extent therefore did not arise. Lex mitior: English practice As Advocate General Kokott correctly noted in Berlusconi English law does not identify a rule by the name of lex mitior. Nor, although that principle appears in a few constitutional instruments in the common law world, such as the Canadian Charter, the New Zealand Bill of Rights and the State of Victorias Charter of 2006, can it be said that it is recognised by name generally in jurisdictions based on the common law. It is clearly adopted only piecemeal in the USA, whilst being wholly rejected by some 22 states see Western, University of Michigan Public Law and Legal Theory Research Paper No 455, March 2015. But Englands longstanding common law practice is to recognise the principle, at least in the narrower form justified in Scoppola as abstaining from imposing a sentence now recognised as excessive. English criminal courts sentence according to the law and practice prevailing at the time of sentence, whenever the offence was committed, subject only to scrupulous observance of the lex gravior principle of article 7, namely that no sentence must be imposed which exceeds that to which the defendant was exposed at the time of committing the offence. The Scottish practice is the same. With the exception of the mandatory life sentence for murder, the sentence for English criminal offences is not prescribed by statute. The statute prescribes the maximum. Sentence within that maximum is a matter for the judgment of the judge according to the individual aggravating and mitigating factors relating to the offence and to the offender. Nor, with very few exceptions, does the statute prescribe a minimum sentence. English sentencing statutes do not, as many laws in other countries do, fix a range between top and bottom points within which a sentence must fall. Guidance is given as to the assessment of the gravity of offences, and as to the likely range of sentence, by both the Court of Appeal (Criminal Division) when hearing individual appeals, and, now, by the Sentencing Council, which publishes general guidelines. But the judge remains the arbiter of when justice requires him to depart from the guidelines: see for example the explicit provision to that effect in the legislation relating to Sentencing Council guidelines, by way of section 125(1) of the Coroners and Justice Act 2009. Thus: (a) if the maximum sentence has been increased by statute since the offence was committed, the English court cannot sentence beyond the maximum which applied at the time of the offence, because that is the sentence to which the defendant was at that time exposed (lex gravior); (b) if the maximum sentence has been reduced by statute since the offence was committed, the English court will sentence within the now current maximum; in R v Shaw [1996] 2 Cr App R (S) 278 the statute reducing the maximum sentence (for theft) was held as a matter of construction to apply to past as well as to future offences, but in R v H (J) (Practice Note) [2011] EWCA Crim 2753; [2012] 1 WLR 1416, a guideline case dealing principally with the sentencing of cases of historic sexual abuse, Lord Judge CJ stated the general approach at para 47(b): Similarly, if maximum sentences have been reduced, as in some instances, for example theft, they have, the more severe attitude to the offence in earlier years, even if it could be established, should not apply. (c) if sentencing practice as to the assessment of the gravity of an offence has moved downwards since the offence was committed, the court should sentence according to the now current view, and if it did not do so the sentence would be vulnerable to reduction by the Court of Appeal on the grounds that it was manifestly excessive; (d) if a new sentencing option which is arguably less severe is added by statute or otherwise to the menu of available sentences after the commission of the offence but before the defendant falls to be sentenced, that new option will be available to the court in his case, unless the statute expressly otherwise directs; in the Canadian case of The Queen v Johnson 2003 SC 46 the menu of sentencing options for those presenting a future risk had had added to it a new, and for some offenders a possibly less severe, option of post custody supervision in the community; this was applied to the defendant although his offence had been committed before the change in the law; if such circumstances were to occur in England the result would be the same. (e) appeals against sentence to the Court of Appeal are not conducted as exercises in re hearing ab initio, as is the rule in some other countries; on appeal a sentence is examined to see whether it either erred in law or principle or was manifestly excessive, and those questions are determined by reference to the law and practice obtaining at the time that the sentence was passed by the trial judge: see R v Graham [1999] 2 Cr App R (S) 312 and R v Boakye [2012] EWCA Crim 838 discussed at para 53 below; accordingly the situation which arose in Scoppola out of a change in the law between sentence and appeal could not raise a similar difficulty here; (f) moreover, except in very limited cases the Court of Appeal has no power to increase a sentence on appeal (Criminal Appeal Act 1968 section 11(3)); in the exceptional case where it can do so on the application of the Attorney General, its power is limited to putting itself in the position of the trial judge and asking whether on the rules then applying he passed an unduly lenient sentence; for this reason also if the circumstances of Scoppola were to occur in England there could be no question of the trial judges 30 year sentence being replaced on appeal by a life sentence; (g) similarly, in the separate case of sentences for minor offences which are appealable from the Magistrates Court to the Crown Court, an appeal lies only at the suit of the defendant; although the Crown Court re sentences ab initio and can thus pass a more severe sentence than did the magistrates, the practice, if such a step is contemplated, is to give notice of this risk to enable the defendant to abandon his appeal if he wishes; once again therefore the kind of sequence of events which obtained in Scoppola would not occur. English practice does not, however, attempt to examine all intervening rules or practices which have obtained over the period between the offence and the sentencing process with a view to finding whether at any time there has been a more favourable practice. To that extent it does not accord with any wider expression of lex mitior, if such was indeed suggested in Scoppola by the second half of para 108, the last sentence of 109 and the words of 119 (see para 38 above). Nor is there any reason for such an extension. Sentencing legislation and practice may well go up and down as public policy is held by legislators to change, or current responsible views on particular offending are perceived by courts to develop. But there is no injustice to a defendant to be sentenced according either to the law as it existed at the time of his offence or, if more lenient, according to the law as it exists when he is convicted and sentenced. To insist that a defendant should not be sentenced on a basis now authoritatively regarded as excessive is one thing. It is quite another to say that he should be sentenced according to a practice which did not obtain when he committed the offence and does not obtain now, merely because for some time in the interim, however short, a different practice was adopted which has now been abandoned as wrong. This can be illustrated by a provision of the Criminal Justice Act 1991. Parliament having, by section 2(2)(a) of that Act, introduced the concept of the commensurate sentence measured only by the seriousness of the offence, went on to provide by section 29, controversially, that an offence could not be considered to be more serious than otherwise it would by reason either of the defendants previous offending or his failure to respond to past sentences. Consistently with the English practice explained above, that provision, which operated to the advantage of most defendants, was applied immediately to all those coming before the courts, whenever their offences had been committed. But the rule was rapidly found to be unrealistic and wrong, requiring habitual criminals such as sexual predators or fraudsters to be treated as if they were first offenders. Parliament reversed it by section 66 of the Criminal Justice Act 1993. It is not English law that every defendant whose offence was committed before the commencement of section 29 of the 1991 Act is now entitled to be sentenced on the basis that, however often he had done the same thing before, his crime has to be treated as if it were a first offence, simply because for the two years 1991 1993 that section had been in force. The sections brief stay on the statute book after the offence was committed can have had no conceivable impact on such a defendant and should have nothing to do with his sentencing in 2016. It seems unlikely that the Strasbourg court, which was not in Scoppola considering any such scenario, would hold otherwise. The lex mitior principle should not be held to extend to such a proposition. The well settled aspects of English legislative and judicial practice set out above in relation to the penalties provided for need to be distinguished from the exercise of the sentencing judges discretion within the maximum permitted at any time. The sentence to which a defendant was exposed, at the time of his offence, is, by English law, a sentence up to the maximum then permitted. It is well recognised that the multifarious factors which fall to be considered when fixing a sentence will inevitably vary in weight as time passes. New aggravating or mitigating factors will be recognised from time to time, or the weight accorded to such factors will alter. The long term damage to victims of sexual abuse, for example, is very much better understood now than it was 30 years ago. Very large numbers of crimes of persistent sexual abuse committed many years ago are now coming before the courts, principally because victims are belatedly feeling able to reveal them. New investigation techniques, such as DNA testing, may also identify various types of offender, by no means only sexual offenders, years after the event. The discovery of a recent offence may not infrequently lead to the revelation that the offender has been committing similar offences for many years. Although a court sentencing today for an offence committed many years ago must confine itself within the maximum which was available by statute at the time of the offence, it is not required, nor should it be, to apply an outdated assessment to the gravity of the conduct. Nor, if the impact of the offending on the victim has been greatly increased by years of suppression in consequence of the manner of abuse, should the court ignore that fact. The basic rule, as carefully explained by Lord Judge CJ in R v H (supra) is that the applicable maximum is that in force at the time of the offence, but it is positively wrong for a court in 2016 to attempt to evaluate the particular offence by hypothesising that it is sitting in (say) 1984. That it is the maximum sentence which matters to lex gravior is the approach which has been consistently adopted. In Coeme v Belgium [2000] ECHR 250, considering the lex gravior rule in article 7, the Strasbourg court held (at para 145) that article 7 required that it be shown that when the offenders act was done there was in force a legal provision making it punishable and that the punishment imposed did not exceed the limits fixed by that provision. (emphasis supplied). That was the meaning of the expression penalty applicable in article 7. In R (Uttley) v Secretary of State for the Home Department [2004] 1 WLR 2278 the House of Lords applied the same approach. All the law lords expressly rejected the contention that that article is concerned with the penalty which the court could in practice have been expected to impose. As Lord Rodger pointed out at para 42, that would involve speculative excursions into the realm of the counterfactual. What matters is the maximum penalty permitted. The same approach was expressly adopted by the Strasbourg court when application was made to it in that same case: Uttley v UK Application 36946/03. This learning is confirmed in Scoppola. At para 95 the court held, citing Coeme: The court must therefore verify that at the time when an accused person performed the act which led to his being prosecuted and convicted there was in force a legal provision which made that act punishable, and that the punishment imposed did not exceed the limits fixed by that provision. [emphasis supplied] And at para 98 it reiterated the rule that the court, like the Commission before it, draws a distinction between a measure that is in substance a penalty and a measure, such as one relating to the regime for early release, which concerns the execution or enforcement of the penalty. In countries, unlike England, where sentencing laws prescribe a range between a minimum and a maximum, the raising of the minimum has an effect comparable to the raising of the maximum: both constrain the court by creating a more severe regime, thus engaging the rule against lex gravior. Such a situation came before the Strasbourg court in Maktouf v Bosnia & Herzegovina (2014) 58 EHRR 11. The effect of the change was to alter the range for the defendant Maktouf (an accomplice) from 1 15 to 5 20 years. For the defendant Damjanovich (a principal) the range was altered from 5 15 to 10 20. Maktouf was expressly sentenced to the new minimum of five years, but the court could not go below that figure as previously it could have done. Damjanovich was sentenced to 11 years, just one year above the new minimum, and the Court was satisfied that if the old range had been treated as governing the case he might well have received less. Accordingly there were breaches of the lex gravior rule in article 7, although it did not follow that lower sentences ought to have been imposed: that was a matter for the sentencing court. What the Strasbourg court appears to have been contemplating was the possibility that in order to maintain the differential between Damjanovicj and someone else who had committed the same offence but in a less grave manner, the court might have had to raise his sentence a little above the new minimum, thus to leave room below it for the less grave example of similar offending. It was not suggesting that the revision of the minimum prevented a contemporaneous assessment of the gravity of his offence. There was no reason why that assessment should not have been undertaken according to the practice at the time of sentencing, as it appears that it was, and as would occur in England. Thus the ECtHR was concerned with altered statutory constraints operating on the sentencing court, of which one, the new minimum, might have (but had not necessarily) prevented the court from sentencing as it otherwise would have done. Similar considerations might apply in the present case if IPP was not legitimately available to the judge (as to which see below). But there is nothing in this which is inconsistent with the English practice in relation to historic offences as explained in R v H (J), and no question of either the lex gravior or the lex mitior principles requiring the court to undertake the hypothetical exercise of imagining itself sentencing many years ago. That exercise would be both artificial and unjust. Phased commencement and anticipation New legislation frequently calls for carefully planned and phased commencement. That is a fact by no means confined to sentencing legislation, but that field is certainly no exception. New sentencing regimes may require quite extensive administrative adjustments, for example to the organisation of the probation service or the prisons. They may also, and in England and Wales often do, entail complex adjustments to the associated rules for early release, as do the new EDS provisions in LASPO. Phased introduction of sentencing changes is perfectly sensible. The decision about what to introduce when can be complex and may well admit of more than a single solution, but there is nothing unlawful about leaving it to the minister charged by the statute with making the necessary commencement orders. Some sentencing changes may be relatively simple. A change in the maximum sentence may be one. The Canadian case of The Queen v Johnson is an example of a more sophisticated change of regime, and would no doubt have entailed putting in place new offender management administrative arrangements; it was nevertheless comparatively simple because the existing options remained with a fresh one added. That may be contrasted with a case such as the present. If regime A, consisting of options 1, 2 and 3, is to be replaced by regime B, consisting of options 1, 4 and 5, and the new options are positively inconsistent with the old, commencement and transition are likely to require careful handling. The wish to provide for lex mitior may collide with the greater imperative not to impose lex gravior. If one or more of the new options cannot be brought into force in relation to past offences, in order to avoid infringement of lex gravior, it may be necessary to defer repeal of one or more of the old options until there is a coherent scheme in place. The objects of sentencing include of course fairness to the offender, but they also include proper punishment, the deterrence of crime and, most significantly, the protection of the public from dangerous offenders. In the transition from the scheme of the CJA 2003 to that of LASPO several of these difficulties arose. First, the new obligatory life sentence was more severe for some offenders than what went before. Second, the new EDS, despite its nominal similarity to EPP, affected different offenders. EDS and EPP could not sensibly co exist, and not simply because the prospect of the court having to consider two possible regimes is alarming. There would be an unacceptable risk of unfairness and of arbitrariness. For example, a great many sexual offences can be charged under several different sections of the Sexual Offences Act 2003. The same act of sexual abuse of a child under 13 can easily fall within both sections 7 and 8. But whilst if charged under section 8 it qualifies for both an EPP and an EDS, if charged under section 7 EPP would not be available but EDS would. Two defendants, differently charged for essentially the same behaviour, might have to be sentenced differently, whilst a single defendants sentencing regime would vary for the same conduct according to which charge had been preferred. Even if it were possible to postulate a rule that the more lenient sentence had to be applied, this would not solve the problem of potentially unfair differential between similar defendants where either only one sentence is available for each, or one defendant could be subject to both, and another to only one. The reality is that all changes in sentencing law or practice have to start somewhere. It is perfectly rational, indeed sensible, for a date to be fixed and for the sentencing of any offender which takes place after that date to be governed by the new rule/practice, whenever the offence was committed, in accordance with the usual English approach and subject only to avoiding lex gravior. That is the practice now adopted by the Sentencing Council when promulgating new guidelines. Such guidelines are issued on the explicit basis that they are to become applicable from a stated date, as soon after publication as it is practicable for courts and practitioners to be equipped with and digest copies. The new guidelines are made applicable to any sentence passed after that date, whenever the offence was committed. In 2012 a guideline for drug offences included the recommendation that the offences of some couriers from abroad, where they were vulnerable and exploited by others, ought not to be treated as quite so grave as other drug importation cases. The guideline was stated to operate for sentences from 27 February 2012, whenever the offence had been committed. It had been preceded in the usual way by a public consultation, in which this change, like others, had been canvassed as a possibility. A number of previously sentenced defendants who said they were in this category (although they were not) abstained from appealing their sentences until after the new guideline was published. Their offences and sentences had been between 2008 and 2011; all the appeals were very much beyond the time limit. In R v Boakye [2012] EWCA Crim 838 the Court of Appeal held that even if these cases had been within the new assessment of gravity, it was not possible retrospectively to re visit unappealed sentences. That was to apply well established law: see R v Graham [1999] 2 Cr App R (S) 312, where the court had considered a reference to the court by the Criminal Cases Review Commission long after sentence and following a change in sentencing practice. Rose LJ had there said, at p 315: A defendant sentenced lawfully, in accordance with the prevailing tariff, and when all factors relevant to sentence were known to the sentencing judge, can, in our view, hardly be described as the victim of [a miscarriage of justice]. Secondly, an alteration in the statutory maxima or minima penalty between sentence and reference cannot, in our view, give rise to legitimate grievance. Whilst a court will faithfully give effect to a change in a sentencing regime from the time that it is introduced, it is not permissible for it to anticipate its commencement. That way lies chaos. Sometimes, indeed, changes which are legislated for in statute are never brought into force. That was the case with a raft of new provisions for intermittent custody enacted by the Criminal Justice Act 2003. The present appeal amounts to a claim by Docherty to anticipate the commencement of the change of regime, to the extent that he wishes the disappearance of IPP to be effective for him before the Commencement Order (by article 6(a)) abolishes it. He can no more do that than it would be possible for him to contend that IPP should be treated as unavailable for every court from the day that LASPO received the Royal Assent on 1 May 2012. Anticipation of a change which is yet to take effect is no part of lex mitior. Lex mitior, as explained in Scoppola at para 108, prevents the imposition of a sentence which the system has now adjudged, by a change of law, to be excessive. But if the change has yet to be made, that judgment has not yet been given effect; it is in prospect only. The fixing of the date for the change is part of the change itself. If a conscious decision has been made not yet to commence the new law/practice, it cannot yet be said that society now considers excessive the old. And it may well consider, rationally, that a penalty shall be regarded as excessive for the future but not for the past. Conclusion: lex mitior There are real difficulties in interpreting the decision in Scoppola, both with the insertion of a new sentence into article 7 when such was deliberately left out at the time of drafting, and with its extent if it is to be considered inserted. As to the first, the decision is the considered view of the Grand Chamber. It is not necessary to revisit the controversy because English practice recognises lex mitior in its ordinary form, namely the principle that an offender should be sentenced according to the law and practice prevailing at the time of his sentence, subject to not exceeding the limits (ie in England normally the maximum) provided for at the time the offence was committed. If it were necessary to investigate the second difficulty, and the possibility that a defendant is entitled to insist on being sentenced according to any more favourable law or practice which has at any time obtained between the commission of the offence and the passing of sentence, that extended rule is not clearly adopted by the Grand Chamber, appears not to be within the stated rationale for the principle of lex mitior, and would entail unwarranted consequences. Such an extended concept of the principle should, with great respect, not be applied. Given these conclusions, the various other examples, to which we were referred, of express inclusions in national and international instruments of an additional sentence stating the lex mitior rule, do not take the matter any further forward. Unlike ECHR article 7 they are not part of domestic English law. They do not in any event shed any light on the second question examined above, as to the extent of the lex mitior principle, assuming it is to be read into article 7. Application to the present case If the new LASPO regime had been commenced for a defendant in Dochertys position at the time he fell to be sentenced, then in accordance with English practice, it would have been applicable to him, notwithstanding that his offence had been committed before the change in the law. But the new regime was not in force for his case. It was the subject of legitimate phased introduction. For the reasons set out in para 54 above, lex mitior does not entitle Docherty to anticipate the statutory commencement of LASPO. The case made on his behalf was, both in the Court of Appeal [2014] EWCA Crim 1197; [2014] 2 Cr App R 76, and before this court, that he ought to have been sentenced to EPP. That exposes the flaw in the argument, for it would seek to insist on the benefit of (accelerated) removal of one part of the old regime (IPP) whilst at the same time claiming the preservation of another part of it (EPP). The Court of Appeal also upheld the sentence of IPP on an additional basis. It accepted that the principle of lex mitior should be followed, without needing to resolve the possible debate as to its extent. But it adverted to the fact that Dochertys offences were punishable by a maximum of life imprisonment. It correctly rejected the conclusion that that maximum was, by itself, enough to show that no question of lex mitior arose. It by no means follows that every case which would have been met by IPP will now be met by a life sentence: see for example the case of Smith dealt with in Burinskas at para 138 of the transcript at [2014] EWCA Crim 334. But the Court of Appeal went on to hold that the lex mitior principle did not apply if there was a reasonable possibility that, had IPP not been legitimately applicable, Docherty would have been sentenced to life. Since there was the real possibility that such a sentence would have been passed, that was held to constitute a further reason for dismissing the appeal. The Court of Appeal was plainly right that the judge might, if IPP had not been available, have passed a life sentence. He said that he did not need to do so, because IPP was available to him, and he expressly remarked that the position may well change with the changes in the law. Burinskas (para 16 above) has since shown that to have been a far sighted observation. But if lex mitior had meant that IPP, although technically available, should not have been passed, the sentence of IPP passed would fall to be quashed as wrong in principle or manifestly excessive unless in its absence a life sentence would have been the correct sentence and thus lex mitior could not have availed Docherty. On this hypothesis, whether or not a life sentence would, absent IPP, have been the correct sentence would fall to be determined by the Court of Appeal itself. It would not be sufficient that life might well have been the judges sentence. This did not, however, arise. Article 6(a) ultra vires? The appellants alternative argument is that once the decision had been made, for good reasons, to abandon IPP as a form of sentence, it was unlawful, as contrary to the clear purpose of LASPO, to preserve it for anyone who had yet to be sentenced after that Act was commenced. For that reason, he contends, article 6(a) of the Commencement Order, at least insofar as it preserved IPP, was not properly made within the purpose for which such an order can be made under the power given by LASPO. It offends the Padfield principle (Padfield v Minister of Agriculture, Fisheries and Food [1968] AC 997). This alternative argument founders on the same rock as the argument from lex mitior. There is nothing irrational, and therefore nothing contrary to the statutory purpose, in phased commencement. It is no more permissible for the appellant to use this argument to anticipate the planned commencement of LASPO than it is to deploy lex mitior to do so. Discrimination The suggested discrimination is said to arise as between a defendant in the position of the appellant, and a defendant who committed an identical offence on a similar date, but who was convicted on 4 December 2012. It is certainly true that the effect of the Commencement Order is that IPP is available to be imposed in the case of the appellant but not in the case of that comparator. The appellant submits that this discriminates objectionably against him on grounds of other status, namely either (i) his status as a convicted person prior to 3 December or (ii) his status as a prisoner who is subject to an indeterminate sentence. Assuming for the sake of argument that status as a prisoner subject to a particular regime can in some circumstances amount to sufficient status to bring article 14 into question (Clift v UK [2010] ECHR 1106), it cannot do so if the suggested status is defined entirely by the alleged discrimination; that was not the case in Clift. For that reason, the second suggested status cannot suffice. As to the first, even if it be assumed in the appellants favour that the mere date of conviction can amount to a sufficient status, which is doubtful, the differential in treatment is clearly justified. All changes in sentencing law have to start somewhere. It will inevitably be possible in every case of such a change to find a difference in treatment as between a defendant sentenced on the day before the change is effective and a defendant sentenced on the day after it. The difference of treatment is inherent in the change in the law. If it were to be objectionable discrimination, it would be impossible to change the law. There are any number of points which may be taken as triggering the change of regime. The point of conviction is clearly one, and the point of sentence is another. Neither is, by itself, irrational or unjustified. Disposal It follows that the several challenges to the sentence of IPP fail and the appeal must be dismissed.

The appellant Shaun Docherty was convicted on 13 November 2012 of serious violent offences under s.18 of the Offences against the Person Act 1861. He had displayed a clear pattern of aggressive offending and posed a high risk of serious further violence. The nature of Dochertys offences was such that he fell under the scheme of preventative sentencing for dangerous offenders, defined by the Criminal Justice Act 2003 (CJA 2003) as those who are convicted of specified offences and who present a significant risk to the public of serious harm from further serious offending. The statutory maximum sentence for the offences of which Docherty was convicted is, and has been for well over a century, life imprisonment. The scheme under the CJA 2003 included inter alia a possible indeterminate sentence of imprisonment for public protection (IPP). This required the judge to specify a minimum period to be served before the IPP prisoner could be eligible for release on licence, providing that the Parole Board was satisfied that it was no longer necessary for the protection of the public that he be detained. The CJA 2003 also provided a form of extended sentence known as an extended sentence for public protection (EPP). That scheme was later replaced by the Legal Aid, Sentencing and Punishment of Offenders Act 2012 (LASPO), which introduced new discretionary and mandatory life sentences and a new form of extended determinate sentence (EDS), while abolishing IPP and EPP. A Commencement Order specified the commencement date as 3 December 2012 for the new scheme, and included transitional provisions that IPP and EPP would still be available for anyone convicted but not yet sentenced before 3 December 2012, as in the case of the Appellant. The Appellant was sentenced to IPP on 20 December 2012, with a specified minimum period of five years and four months. The Appellant contended that he ought to have been sentenced instead to EPP, and that the Commencement Order was unlawful to the extent that its transitional provisions preserved IPP for him. He argued the Order was unlawful for three reasons. Firstly, the new scheme was less severe, so to apply the harsher, earlier scheme was contrary to an international principle of lex mitior binding on English courts by virtue of article 7 of the European Convention on Human Rights (ECHR). Secondly, because the purpose of LASPO was to remove IPP as a sentencing option, preserving it to any extent was outside the authority given by LASPO. Thirdly, it was unlawful discrimination contrary to Article 14 ECHR to impose IPP on him but not on a person convicted after the specified commencement date. The Court of Appeal dismissed all of the Appellants arguments and the Appellant appealed to the Supreme Court. The Supreme Court unanimously dismisses Mr Dochertys appeal. Lord Hughes gives the judgment, with which the rest of the Court agrees. The Commencement Order setting out transitional provisions for the introduction of LASPO was lawful. It did not breach Article 7 ECHR, it was legitimately made and was rational, and if it was discriminatory (which was doubtful) then it was justifiably so. With the exception of a mandatory life sentence for murder, English criminal sentencing is a matter for the judge. Statute prescribes the statutory maximum, within which the judge may sentence, taking into account the relevant guidelines. The judge must sentence according to the law and practice prevailing at the time of sentence, regardless of when the offence was committed. Thus if the maximum sentence has been reduced by statute since the offence was committed, the court will sentence within that now current maximum, or if sentencing practice has moved downward, the court should sentence in line with that. Article 7 ECHR requires that there be no punishment without law. This has always said, explicitly, that no sentence may be imposed which exceeds that to which the defendant was exposed at the time of committing the offence (lex gravior). Since the statutory maximum for the Appellants offences was the same at the time of offence and sentence, the principle of lex gravior is not offended. The principle of lex mitior, in contrast, is that if provision is made by law for a lighter penalty, subsequent to the commission of the offence, the offender shall benefit from that lighter penalty. The Strasbourg court has held in 2010 in Scoppola v Italy (No 2) (2010) 51 EHRR 12 that Article 7 also requires compliance with this principle. There are some difficulties in establishing the exact meaning which the court gave to lex mitior, but it is not necessary to resolve them because it is clear that the English practice of sentencing according to current law and practice, subject to the statutory maximum obtaining at the time of the offence (if lower) complies with it. The Strasbourg court cannot have meant that it is necessary to examine all intervening rules or practices between the offence and the sentencing process, and to sentence according to whichever is the most favourable. That would not accord with good reason or with the rationale of lex mitior, or with the English practice. Lex mitior is in any event of no assistance to Docherty because it does not involve anticipating the commencement of a new and more favourable sentencing scheme [42 49]. The reading of the provisions of the Commencement Order, together with the provisions of LASPO is clear: IPP and EPP disappear from the sentencing armoury on 3 December 2012, except for anyone already convicted but not yet sentenced, as in the case of the Appellant. There was no breach of Article 7 ECHR. In any event, the Appellants argument that he should benefit from the accelerated removal of IPP from the old scheme but claim the preservation of another part of it (EPP) is inconsistent [58]. Further, there was nothing contrary to LASPOs statutory purpose in the Commencement Orders transitional provisions. s.151 of LASPO enables such an order to be made, and that it may make transitional provisions. The phased commencement of the new sentencing scheme was both legitimate and rational. The Appellants discrimination argument also fails. It is doubtful whether being subjected to a different sentencing regime to another prisoner, due to a different date of conviction, could amount to a sufficient status to bring it within the anti discrimination provision of Article 14 ECHR. Even if it could, the differential treatment is clearly justified by the need for all sentencing changes to start somewhere [61 63].

This appeal concerns the proper ambit of the offence of aggravated trespass contrary to section 68 of the Criminal Justice and Public Order Act 1994 (the 1994 Act). That section provides, so far as material: (1) A person commits the offence of aggravated trespass if he trespasses on land and, in relation to any lawful activity which persons are engaging in or are about to engage in on that or adjoining land, does there anything which is intended by him to have the effect (a) of intimidating those persons or any of them so as to deter them or any of them from engaging in that activity, (b) of obstructing that activity, or (c) of disrupting that activity (2) Activity on any occasion on the part of a person or persons on land is lawful for the purposes of this section if he or they may engage in the activity on the land on that occasion without committing an offence or trespassing on the land The present case concerns trespassers who wished to make a protest, as do some other reported cases upon this section. But the offence is not limited to such people. Those who trespass and obstruct the activity of others might include many in different situations, such as for example business rivals or those engaged in a personal dispute, as maybe between neighbours. By definition, trespass is unlawful independently of the 1994 Act. It is a tort and committing it exposes the trespasser to a civil action for an injunction and/or damages. The trespasser has no right to be where he is. Section 68 is not concerned with the rights of the trespasser, whether protester or otherwise. References in the course of argument to the rights of free expression conferred by article 10 of the European Convention on Human Rights were misplaced. Of course a person minded to protest about something has such rights. But the ordinary civil law of trespass constitutes a limitation on the exercise of this right which is according to law and unchallengeably proportionate. Put shortly, article 10 does not confer a licence to trespass on other peoples property in order to give voice to ones views. Like adjoining sections in Part V of the 1994 Act, section 68 is concerned with a limited class of trespass where the additional sanction of the criminal law has been held by Parliament to be justified. The issue in this case concerns its reach. It must be construed in accordance with normal rules relating to statutes creating criminal offences. Under the section there are four elements to this offence: i) the defendant must be a trespasser on the land; ii) there must be a person or persons lawfully on the land (that is to say not themselves trespassing), who are either engaged in or about to engage in some lawful activity; iii) iv) which is intended by him to intimidate all or some of the persons on the land out of that activity, or to obstruct or disrupt it. the defendant must do an act on the land; The present case concerns the second element and in particular the meaning of any lawful activity. Given that by subsection (2) an activity is lawful if those on the land may engage in it without committing a criminal offence, what connection if any is required between any offence which may be committed and the activity which the defendant is said to have intentionally disrupted (etc)? Is any offence committed on the land, however remote from or incidental to the occupants activity, or however technical, a bar to the conviction of the invading trespasser? The defendants mounted a non violent but determined protest in a London shop. They objected to the shop because its wares were connected with an Israeli owned business in the West Bank. The shop specialised in selling beauty products derived from Dead Sea mineral material. Not all the products sold in the shop originated from the Dead Sea but the vast majority did. The defendants objection was grounded in the facts that (i) those products were produced by an Israeli company, in an Israeli settlement adjacent to the Dead Sea in the West Bank, that is to say in the Occupied Palestinian Territory (OPT) and (ii) the factory was said to be staffed by Israeli people who had been encouraged by the Government of Israel to settle there. The defendants arrived at the shop on a trading day, equipped with a heavy concrete tube. With the help of colleagues they connected their arms through the tube anchored by a chain secured by a padlock to which they said they had no key. The district judge found that they had no intention of buying anything; rather, their intention was to disrupt the shops trading. When asked to leave they failed to do so. They succeeded in their aim because the manager concluded that trading was impossible and closed the shop. She called the police. The police found the defendants polite and co operative except in refusing to free themselves. It was necessary for tools to be used to break through the concrete. When the defendants had thus been released, they were arrested and in due course charged with the offence contrary to section 68. The Crown case was that the lawful activity which they had intentionally disrupted was retail selling. The defendants had no defence to elements (i), (iii) and (iv) of the offence. They contested the charge on the basis that the activity being carried on in the shop was not lawful. They asserted that it involved the commission of criminal offences for one or more of four reasons. i) The company running the shop was guilty of aiding and abetting the transfer by the Israeli authorities of Israeli citizens to a territory (the OPT) under belligerent occupation; the transfer was said to be contrary to article 49 of the Fourth Geneva Convention of August 1949, and aiding and abetting it to be an act ancillary to a war crime, made a criminal offence in England and Wales by sections 51 and 52 of the International Criminal Court Act 2001. ii) The products sold in the shop were criminal property, as the product of this offence of aiding and abetting a war crime; accordingly the company running the shop, which at least suspected this, was guilty of the offence of using or possessing criminal property, contrary to section 329 of the Proceeds of Crime Act 2002. iii) The products had been imported into the UK as if covered by an EC Israeli Association Agreement, which conferred certain tax or excise advantages. But the European Court of Justice has ruled that products originating in the OPT do not qualify for this treatment. Accordingly, it was said, the company running the shop was guilty of the offence of cheating the Revenue. iv) The products sold in the shop were labelled Made by Dead Sea Laboratories Ltd, Dead Sea, Israel. This was said to be false or misleading labelling because the OPT is not recognised internationally or in the UK as part of Israel. Accordingly the company running the shop was guilty of one or both of two labelling offences, contrary to the Consumer Protection from Unfair Trading Regulations 2008 (SI 2008/1277) or the Cosmetic Products (Safety) Regulations 2008 (SI 2008/1284). The district judge convicted the defendants in the magistrates court. Their appeal by case stated was dismissed by the Divisional Court of Queens Bench. One part of the district judges reasoning was not upheld by the Divisional Court, for he had held that only the activity of a natural person fell within section 68, and that neither the shop manageress nor the sales assistants were even arguably guilty of any offence. The Divisional Court rightly held that section 68 plainly included a company within the expression person engaging in (lawful activity). Its conclusions on that issue are not challenged and no more need be said about it. The live issue relates to the meaning of the expression lawful activity and in particular to when the commission of a criminal offence by the occupant whose activity is targeted by the trespasser has the effect of making unlawful the occupants activity. The question certified by the Divisional Court was: Should the words lawful activity in section 68 Criminal Justice and Public Order Act 1994 be limited to acts or events that are integral to the activities at the premises in question? Lawful activity The meaning of the expression lawful activity in section 68(2) has received some previous attention from the courts. Three propositions were not in dispute in argument in the present case. i) Section 68 is concerned only with a criminal offence against the law of England and Wales. The House of Lords so held in R v Jones (Margaret) [2006] UKHL 16, [2007] 1 AC 136. Thus a defendant trespassing at a military base was not entitled to assert that the ordinary activities of the base were unlawful because the UK Government was, or might be, committing an act of international aggression in preparing to despatch military hardware to Iraq. ii) In a prosecution under section 68 the Crown is not required to disprove the commission of every criminal offence which could conceivably be committed by the occupant(s) of the land. A specific offence or offences must be identified by the defendant and properly raised on the evidence. The Divisional Court so held in Ayliffe v Director of Public Prosecutions [2005] EWHC 684 (Admin), [2006] QB 227, see particularly para 50. Thus a bare assertion by trespassers at military bases that the Government may have aided and abetted a war crime did not raise the issue. iii) Where, however, the issue of a relevant specific criminal offence by the occupant(s) of the land is fairly raised by evidence, the onus lies upon the Crown to disprove it to the criminal standard of proof, in order for it to prove, to that standard, that the defendant trespasser has committed the offence contrary to section 68. This follows from Ayliffe and from the language of the statute. Two other cases give some assistance on the question of whether any criminal offence committed by the occupants has the effect of making the activity unlawful. In Hibberd v Director of Public Prosecutions (unreported) 27 November 1996 the Divisional Court was concerned with a trespasser who set out to stop the clearance of land for the construction of a new by pass. He gave evidence that one or more of the tree fellers was using a chainsaw but not wearing gloves and suggested that that raised the real possibility that he was committing an offence contrary to the Management of Health and Safety at Work Regulations 1992 (SI 1992/2051) in not using equipment provided for him by his employers. Without investigating whether any such offence was or was not made out, the Divisional Court held that even if it had been it could not affect the lawful nature of the activity which the defendant had disrupted, namely the clearance of the site. That was lawful in the sense that it was properly authorised. The activity of the occupants could not be defined simply to extend to the actions of the particular chainsaw operator(s) spotted. Two years later in Nelder v Director of Public Prosecutions The Times, 11 June 1998 a different Divisional Court considered the case of hunt saboteurs who set out to disrupt a hunt. They adduced evidence that at the outset of the hunt, two whippers in had strayed from the land over which the hunt had permission to ride and had taken the hounds onto adjacent land where they had no such permission. The trespassing defendants had actively disrupted the actions of all the hunt, not confined to the strayers, and had continued to do so after the latter had rejoined the main body of hunters. In this case the relevant part of section 68 was the concluding words of section 68(2), trespassing occupants rather than occupants committing a criminal offence, but the two limitations upon the concept of lawful activity are clearly in similar case. The court held that the fact that some few members of the hunt had acted unlawfully by trespassing on adjoining land did not affect the lawfulness of the activity which the defendants had disrupted. Simon Brown LJ offered the suggestion that it might have been otherwise if either the hunts central objective had been to hunt over land where it had no authority to be, or the defendants had confined their disruption to activity by the strayers. Each of those cases illustrates the problem posed by the wording of section 68(2). Part of the difficulty arises from the use of the word may in the definition of lawful activity: Activityis lawfulif he or they may engage in the activitywithout committing an offence or trespassing on the land. For the Crown, Mr Penny revived, although not at the heart of his submissions, the argument previously ventilated in Ayliffe, that this means that an activity remains lawful even if an offence is committed, providing that the activity could have been accomplished without the offence. It may be noted that if that were the correct construction it would have provided a complete answer to the appeals in both Hibberd and Nelder. Although this might on the face of the statutory language be a possible construction, it would deprive the defence of most of its force; it would mean that even if the occupants were engaged in a thorough going criminal act which represented their central purpose in being on the land, the defence would not operate if they could have altered the way they did things so as to do them lawfully. It would have the effect of treating as lawful something which was anything but lawful, and of examining not the activity which was actually carried out, but an activity which was not. That construction was rejected by the Divisional Court in Ayliffe at para 52, and also by the Divisional Court in the present case, at para 29. The true meaning of section 68 must be found despite the use of the word may, which was perhaps employed because the section has to apply to activity by the occupant which has not yet commenced. The true meaning lies in examining the activity which was (or was to be) carried out on the land. In argument in the present case, neither side contended that every criminal offence committed on the land provides the defendant with an escape from the section. For the appellants, Mr Southey QC accepted that if, for example, it had turned out that in the present case there was an employee in the shop who was paid something less than the national minimum wage, that would not render the activity of the shop unlawful for the purposes of section 68. Such a merely collateral offence would not provide the defendants with a fortuitous defence. His proposed solution to the problem was that the section defines activity by reference to the particular feature of the occupants acts against which the defendant was protesting or objecting. So, he contended, if the defendant made his objection to low wages, the fact that the whole of the rest of the shops activity was entirely lawful would matter not, but unless this was the defendants focus, the collateral offence against wage regulation would be irrelevant. That, however, is to turn section 68 upside down. True it is that section 68(1) requires the defendants act to be done with the intention of disrupting (etc) the lawful activity of the occupant, but it calls first for a finding as to the lawful activity, and only then asks whether that is what the defendant intended to disrupt (etc). The section cannot be read in the way suggested. Mr Southeys contention suggests an enquiry not into what the defendant intends, for he clearly intends to disrupt the whole activity, but rather into his motive or ulterior purpose for intending it. Moreover, this suggested construction is open to an objection similar to that lying against the one rejected in Ayliffe (para 11 above); it would direct the court away from the activity actually carried out by the occupants, in this case into the mind of the defendant. Just as the argument rejected in Ayliffe would enable the Crown or the occupant to choose which activity to rely upon, however remote from what he was actually doing, so this construction would bestow a similar bounty upon the defendant. The intention of the section is plainly to add the sanction of the criminal law to a trespass where, in addition to the defendant invading the property of someone else where he is not entitled to be, he there disrupts an activity which the occupant is entitled to pursue. Section 68(2) therefore must mean that the additional criminal sanction is removed when the activity which is disrupted is, in itself, unlawful, which may be either because the occupant is himself trespassing, or because his activity is criminal. Mr Southeys realistic concession is correct, for not every incidental or collateral criminal offence can properly be said to affect the lawfulness of the activity, nor to render it criminal. It will do so only when the criminal offence is integral to the core activity carried on. It will not do so when there is some incidental or collateral offence, which is remote from the activity. The decisions in Hibberd and Nelder are both consistent with this approach. The certified question ought thus to be answered Yes. This was the general approach of the Divisional Court in this case, as the terms of the certified question show. However, as may occur in an extempore judgment, some of its language ranged more widely than required. To the extent that it spoke in para 29 of the defence being confined to the case where the activity is patently unlawful, that latter expression needs to be understood to mean that the criminal offence must be integral to the core activity of the occupant and not collateral to or remote from it. It does not mean that the illegality must be so obvious as not to call for more than the barest enquiry. The Divisional Court was also concerned at the potential breadth of enquiry which might be required of the court of trial, usually the magistrates court, especially where, as here, the defence raises potentially far reaching questions concerning international political events. That found expression in para 27 as follows: As Waller LJ said in Ayliffeit is enough for the prosecution to show that the activity in question is apparently lawful. If then the defendant seeks to raise an issue to the contrary within the section 68 proceedings he mustdo so by reference to facts or events inherent in the activity itself. He cannot rely on the assertion of extraneous facts whose effective investigation would travel into contexts and controversies which are markedly remote from what is actually being done by way of the activities in question. It is correct that section 68(2) does not arise in the case of an apparently lawful activity unless and until it is raised on the evidence (Ayliffe). It is also correct that a criminal offence, if raised on the evidence, will be relevant to section 68(2) only if it is integral to the core activity in question. But if it is, it may yet involve investigation of extraneous events. The Divisional Court expressly, and correctly, accepted at para 30 that guilt of a war crime might in theory at least qualify. Other less grave alleged offending may also involve investigation of the assertion that it has occurred. It does sometimes fall to magistrates to examine matters of complexity and occasionally of international import; so long as the issue is not a non justiciable one such as the nations foreign policy as in Jones, there is no inhibition on their doing so and they will no doubt constitute themselves appropriately if necessary. Nor should the court of trial be inhibited from doing so, if the case requires it, by consideration of the fact that a finding may be made against the occupant of the land, such as the shopkeeper here, who is not a party to the trial. The only finding that might be made is that the Crown has not made out its case because there appears to have been an activity on the land which is not proved to have been lawful. That is not a conviction of the absent shopkeeper, nor in any sense a finding binding upon him. Decisions may sometimes have to be made in all manner of criminal proceedings which involve consideration of the actions of non parties an obvious case is where the defendant blames a third party for the offence. The application of these principles to the present case demonstrates that the conclusions of both the district judge and the Divisional Court were correct and that the defendants were rightly convicted. The war crime argument Section 51 of the International Criminal Court Act 2001 renders genocide, a war crime and a crime against humanity domestic offences against the criminal law of England and Wales. It applies wherever the offence was committed if the offender was resident in the UK. Section 52 of the same Act does the same for conduct ancillary to such a crime, and such conduct includes, via section 55, aiding, abetting, counselling or procuring the commission of the principal offence. A war crime is defined in article 8(2)(b) of Schedule 8 to the Act to include: (viii) the transfer, directly or indirectly, by the Occupying Power of parts of its own civilian population into the territory it occupies That offence derives, as the defendants said, from the Fourth Geneva Convention of August 1949 relating to the protection of civilians in time of war. If therefore a person, including the shopkeeper company, had aided and abetted the transfer of Israeli civilians into the OPT, it might have committed an offence against these provisions. There was, however, no evidence beyond that a different company, namely the manufacturing company, had employed Israeli citizens at a factory in the West Bank and that the local community, which held a minority shareholding in that manufacturing company, had advertised its locality to prospective Israeli settlers. It is very doubtful that to employ such people could amount to counselling or procuring or aiding or abetting the Government of Israel in any unlawful transfer of population. Such an employer might be taking advantage of such a transfer, but that is not the same as encouraging or assisting it. Even if that company could have been aiding and abetting such transfer, that cannot amount to an offence by the separate retailing company, whatever the corporate links between the two companies. And even if the companies had been the same, such a crime of assistance was not an integral part of the activity carried on at the shop, which was retail selling. On the contrary, it was antecedent to, and remote from, the selling. The selling was perfectly lawful. The defendants, for their own reasons, elected to trespass and to stage a sit in which was intended to (and did) stop that lawful activity in its tracks. They thereby committed the offence under section 68. The supplemental contention that the shopkeeper company was committing a money laundering offence fails for the same reasons. The suggested money laundering is the possession and use (by selling) of the products of the West Bank factory. Those products were said to be criminal property because they were the benefit of the criminal conduct of the factory owning company and thus within section 326(4) of the Proceeds of Crime Act 2002. If, however, there was no aiding and abetting of the unlawful movement of population, the products of the factory could not be property obtained by or in return for criminal conduct (section 242 of the Proceeds of Crime Act 2002). Even if there had been aiding and abetting, and assuming that it could properly be said that the shopkeeping company suspected this to be the case, the criminal property offence could not be said to be integral to the activity of selling; it was on any view a collateral matter which did not render selling unlawful. The cheating the Revenue argument For similar reasons it is clear that even if the shops stock had been imported into the UK under favourable terms reserved for goods properly deriving from Israel as distinct from those produced in the OPT (as to which there is no evidence), this could not render their subsequent sale in the shop unlawful. At most, it means that the importer is liable to repay the Revenue any duty which ought to have been paid but was not. This is a classic example of a collateral, and in this case an antecedent and remote, offence which does not affect the lawfulness of the core activity of the shop, namely retail selling. On the assumption that it was committed by the shop company, it would provide the defendants with no defence to the offence under section 68. The argument from labelling offences The principal offence relied upon was one contrary to the Consumer Protection from Unfair Trading Regulations 2008. These were made to transpose the EU Unfair Commercial Practices Directive 2005/29/EC. The relevant offence is under regulation 9, and consists of engaging in a commercial practice which is a misleading action as defined by regulation 5. In its turn, regulation 5 provides that a commercial practice is a misleading action if (inter alia): (2)(a) it contains false information and is therefore untruthful in relation to any of the matters in paragraph (4) or if it or its overall presentation in any way deceives or is likely to deceive the average consumer in relation to any of the matters in that paragraph, even if the information is factually correct; and (b) it causes or is likely to cause the average consumer to take a transactional decision he would not have taken otherwise. The paragraph 4 relevant matters include the geographical or commercial origin of the product. Thus the argument before the district judge was that the products sold in the shop were mislabelled as to geographical origin in that they were labelled as Made by Dead Sea Laboratories Ltd, Dead Sea, Israel. That amounted, it was said, to representing that they came from Israel when they did not, because they came from the OPT. This regulation does not, it should be observed, make the selling of mislabelled goods an offence. If the offence is committed, the seller is guilty, but the sale is not itself an offence; rather it is the application of the misleading description. That suggests that the offence is collateral to the activity of selling, rather than integral to it. However, of the offences postulated by the defendants, this one comes closest to the core activity of selling undertaken by the shop on the occasion of the defendants trespass. In the event, it is not necessary to resolve the question whether this offence is integral to the activity of selling or not. The district judge found that even if the other elements of the offence were made out the additional condition required by regulation 5(2)(b) could not be established. There was no basis for saying that the average consumer would be misled into making a transactional decision (ie into buying the product) when otherwise she would not have done, simply because the source was described as being constitutionally or politically Israel when actually it was the OPT: the source was after all correctly labelled as the Dead Sea. The district judge found that: Whether or not the information given is falseI consider that the number of people whose decision whether or not to buy a supposedly Israeli product would be influenced by knowledge of its true provenance would fall far below the number required for them to be considered as the average consumer. If a potential purchaser is someone who is willing to buy Israeli goods at all, he or she would be in a very small category if that decision were different because the goods came from illegally occupied territory. That finding was clearly open to the district judge on the evidence and is fatal to the contention that the offence was committed. The Cosmetic Products (Safety) Regulations 2008 were made to transpose a different EU Directive (76/768/EEC as amended). Regulation 12(1)(a) provides that no person shall supply a cosmetic product unless the following information is displayed in indelible and legible lettering: the name or style and the address or registered office of the manufacturer or the person responsible for marketing the cosmetic product who is established within the EEA. Where the cosmetic product is manufactured outside the EEA, the country of origin must also be specified. As the district judge found, the objective of these Regulations is clearly safety of the consumer. They require the provision of information about the manufacturer, so that the consumer knows whom to pursue in the event of complaint. Within the EEA the name of the manufacturer is enough. If the manufacturer is outside the EEA, then the country must also be identified. These products were accurately labelled as coming from the Dead Sea and it is not suggested that the manufacturer was not identified. The alleged inaccuracy relates to the political status of the Dead Sea area from which they are identified as coming. As the district judge rightly said, the Regulations are not directed at disputed issues of territoriality, however important those may be in other contexts. It is doubtful that any offence under these Regulations was shown, but if it was, there can be no doubt that it was not integral to the activity of the shop in selling the products, but at most collateral to it. Conclusion Should the words lawful activity in section 68 Criminal Justice and Public Order Act 1994 be limited to acts or events that are integral to the activities at the premises in question? It should be answered yes. The appeal must in consequence be dismissed. It follows that of the postulated offences all were either not demonstrated to have been committed by the occupants of the shop at the time of the defendants trespass or were at most collateral to the core activity of selling rather than integral to that activity. The occupants of the shop were, accordingly, engaged in the lawful activity of retail selling at the time and section 68(2) provided no defence to the defendants. The certified question was as follows:

Ahava was a shop in Covent Garden, London, which mainly sold beauty products processed from Dead Sea mineral materials. The products were factory produced by an Israeli company, in an Israeli settlement located in the West Bank and therefore within the Occupied Palestinian Territory (OPT). It was said that the factory was staffed by Israeli citizens encouraged by the Government of Israel to settle there. Mr Richardson and Ms Wilkinson (the Defendants) sought to disrupt the activities of Ahava. On 2 October 2010 they entered the shop (together with other helpers) carrying a concrete tube. They connected their arms through the tube anchored by a chain, secured by a padlock to which they claimed to have no key. They were asked to leave the shop by an Ahava employee, but failed to do so. The employee called the police and, after some time, closed the shop. Tools were used to release the Defendants from the tube. On their release, they were arrested for aggravated trespass contrary to section 68 Criminal Justice and Public Order Act 1994 (the 1994 Act). That offence criminalises the conduct of a person A who (i) trespasses on land, (ii) where there is a person or persons B lawfully on the land who is engaged in or about to engage in a lawful activity, (iii) and A does an act on the land, (iv) intended by A to intimidate all or some Bs from engaging in that activity, or to obstruct or disrupt that activity. In the magistrates court, the Defendants contested the charge on point (ii). They argued that Ahavas activities were not lawful since they involved the commission of one or more of four criminal offences. Firstly, they said that Ahava was guilty of aiding and abetting the transfer by Israeli authorities of Israeli citizens to the OPT, a territory under belligerent occupation. This was argued to be contrary to Article 49 of the Fourth Geneva Convention 1949, which constituted a war crime. Ahavas actions in aiding and abetting the transfer, if true, would constitute an offence under sections 51 52 of the International Criminal Court Act 2001 (the war crimes offence). Secondly, they said that since Ahava was aiding and abetting a war crime, Ahava must know or suspect that the products sold in the shop were the products of that offence. Ahava was therefore, they argued, guilty of the offence of using or possessing criminal property (the criminal property offence). Thirdly, they argued that the products had been imported into the UK purportedly under the EC Israeli Association Agreement, which conferred tax or excise advantages. However, since the Court of Justice of the European Union has ruled that products originating in the OPT do not fall under this Agreement, they asserted that Ahava was guilty of the offence of cheating the revenue (the revenue offence). Fourthly, they emphasised that the products sold were labelled Made by Dead Sea Laboratories Ltd, Dead Sea, Israel. The OPT is not recognised as part of Israel. Therefore, they argued, Ahava was guilty of labelling offences under the Consumer Protection from Unfair Trading Regulations 2008 and the Cosmetic Products (Safety) Regulations 2008 (the labelling offences). The district judge in the magistrates court convicted the Defendants. They appealed, on the grounds above, to the Divisional Court. The Divisional Court upheld the conviction, but certified as a matter of general public importance the question whether the words lawful activity in section 68 of the 1994 Act should be limited to acts or events integral to the activities at the premises in question. The Supreme Court unanimously dismisses the appeal. An activity is unlawful for the purposes of section 68 only if it involves a criminal offence integral to the core activity carried on, not when any criminality is only incidental, collateral to, or remote from the activity. Applying that to the facts of this case, none of the offences alleged by the Defendants are integral to Ahavas activities. The judgment of the Court is given by Lord Hughes. The effect of section 68 of the 1994 Act is to add the sanction of the criminal law to particular acts which already constitute the civil wrong of trespass. It is not specifically aimed at individuals wishing to protest, and is to be construed in accordance with the normal rules of statutes creating criminal offences [2 4]. In order to argue that an activity is not lawful, the Defendant has to show a specific criminal offence against the law of England and Wales, which is properly raised on the evidence before the court. Once that evidential burden has been satisfied, the burden of proof lies on the Crown to disprove that offence to the criminal standard [9]. The Defendants had accepted that a merely collateral offence would not suffice to prove the defence. They argued that the activity could be defined as the particular feature of Bs acts against which A was protesting or objecting: if that particular feature was unlawful, this would suffice for section 68. This, however, turns the section upside down. To apply the section, it is necessary first to consider what Bs lawful activity is, and then to ask whether that is the activity which A intends to disrupt. The Defendants argument involves considering As motive, rather than As intent: A intends to disrupt the whole activity [12]. The true purpose of section 68 is to add the sanction of the criminal law to a trespass where A disrupts an activity that B is entitled to pursue. The no lawful activity defence must therefore apply when the criminal offence is integral to the core activity carried on, not merely incidental or collateral to that activity [13]. However, if a criminal offence integral to the core activity is raised, the court must consider that question even if it involves assessing extraneous facts, or the conduct of third parties [14 15]. Applying those principles to this case, none of the offences raised by the Defendants are made out. The war crimes offence: The only evidence raised by the Defendants was that a different company (the manufacturing company) had employed Israeli citizens at a West Bank factory and that the local community, which held a minority shareholding in that manufacturing company, had advertised the settlement to prospective settlers. It is very doubtful that the manufacturing companys actions could amount to aiding and abetting the transfer of Israeli citizens to the OPT, but even if it did, this could not amount to an offence by Ahavas retailing arm. Moreover, any such assistance is not an integral part of the activity carried out by Ahava, which was retail selling [17]. The criminal property offence: If, for the reasons above, there is no aiding and abetting of any unlawful movement of population, the products cannot be the products of a criminal offence. In any event, the criminal property offence cannot be said to be integral to the activity of selling [18]. The revenue offence: This is a purely collateral offence. Even if proven, the importer is only liable to repay to the Revenue duty which should have been paid [19]. The labelling offences: These are the principal offences relied on. The first Regulation criminalises misleading commercial practices, including labelling. However, it is necessary to show that, as a result of the misleading labelling, the average consumer would buy something that he/she otherwise would not have done. In this case the district judge had found that a consumer willing to buy Israeli products would be very unlikely not to buy Israeli products because they were produced in the OPT. Therefore, the offence could not have been committed [20 22]. The second Regulation criminalises the supply of cosmetic products which do not state (among other things) the country of origin. The aim of this is clearly to protect consumers, and stating that the products derive from the Dead Sea is sufficient: the Regulation is not aimed to reflect disputed questions of territoriality. Even if an offence had been shown, it would not have been integral to the sale activity [23].

In 1680, in the city of Rheims, Jean Baptiste De La Salle founded an Institute known as the Brothers of the Christian Schools (the Institute). The members of the Institute are lay brothers of the Catholic Church. They are now to be found in many countries, including the United Kingdom. Their Rules, approved by Papal Bull in 1724, provided that they should make it their chief care to teach children, especially poor children, those things which pertain to a good and Christian life. That has remained the mission of the Institute and the mission and apostolate of each brother. This appeal is concerned with the legal implications of acts of physical and sexual abuse committed, or alleged to have been committed, by brothers who were, or should have been, pursuing that mission at a residential institution at Market Weighton for boys in need of care called St Williams (the school) The Institute is, in civil law, an unincorporated association of its members. It has, however, corporate features, including a hierarchy of authority. Steps have been taken on behalf of the Institute to create legal bodies that are capable of owning property and entering into legal relations in pursuance of the Institutes mission. Some of these are reflected in the identity of the individual defendants who have been described collectively as the De La Salle Defendants. Expert evidence was given as to the nature and status of the Institute as a matter of canon law. These matters have not been explored before this Court. The preliminary issue with which this Court is concerned is whether the Institute is responsible in law for the alleged acts of sexual and physical abuse of children at St Williams committed by its members. To a large extent this preliminary issue has been canvassed as if the Institute were a corporate body having separate legal identity. I shall refer to the Institute as if this were the case, although it will be necessary in due course to grapple with the nature of the Institute. This appeal requires this Court to review the application of the principles of vicarious liability in the context of sexual abuse of children. Unhappily this is today not an unusual context and it is one in which vicarious liability has received recent consideration not merely by other courts in the United Kingdom, but at the highest level in Canada and Australia. The claims in this group action are brought by 170 men in respect of abuse to which they allege that they were subjected at St Williams between 1958 and 1992. The claims are brought against two groups of defendants. The first group consists of the Middlesbrough Defendants. They took over the management of the school in 1973 and inherited, under statute, the liabilities of the managers of the school before that date. They, or those they represent, concluded contracts of employment with the brother teachers. They were held at first instance to be vicariously liable for acts of abuse by those teachers and no longer challenge that liability. By this appeal they seek, however, to challenge the judges finding, confirmed by the Court of Appeal, that the second group of defendants, the De La Salle Defendants, were not also vicariously liable for the acts of abuse committed by members of the Institute. The claimants are content to look to the Middlesbrough Defendants for their relief and anxious not to risk liability in respect of the costs of the appeal to this Court. Accordingly they have played no part in the appeal. This case is almost a carbon copy of McE v De La Salle Brothers [2007] CSIH 27; 2007 SC 566, in which a similar preliminary issue was tried. In that case a single pursuer claimed damages in respect of physical abuse to which he had been subjected by Brother Benedict, a De La Salle brother, while at a school in Scotland. The claim was however a test case as there were pending some 150 additional cases where abuse was alleged at the hands of brothers at that school. The Court of Session held that there was no basis upon which the allegation of vicarious liability on the part of the Institute could succeed and the claim was accordingly dismissed. The facts No significant challenge has been made in respect of the facts found by the judge of first instance, His Honour Judge Hawkesworth QC, sitting as a judge of the High Court and these have formed the basis of the Statement of Agreed Facts and Issues. The Institute The head of the Institute is the Superior General in Rome, elected by the General Chapter of the brothers, which is itself made up of elected representatives of all brothers. For the purposes of administration the Institute is divided into districts called Provinces, each headed by a Provincial. At different times there has been a London Province, an English Province and a Great Britain Province. Within a province the brothers live in communities, each headed by a Director. The brothers are bound together by lifelong vows of chastity, poverty and obedience and by detailed and very strict rules of conduct (the Rule). The Rule has its origin in the rules approved by the Pope in 1724, but these were amended from time to time. During the period to which this action relates the relevant rules were the Common Rules of 1947. The vow of obedience carries the obligation to obey the superiors of the Institute, including the Provincial and the Director of the community. Each brother undertakes to go wherever I may be sent and to do whatever I may be assigned by the [Institute] or its superior The Rule is highly particular and governs all aspects of the life and conduct of a brother including such matters as the taking of communal meals and other required communal activities. It contains provisions governing how the children taught are to be treated, including a chapter on correction or punishment which prohibits touching a child or corporal punishment. One chapter deals with chastity and this includes a provision that They shall not touch their pupils through playfulness or familiarity, and they shall never touch them on the face. There is a requirement to advertise to each other any faults of which they are conscious and extreme reserve is required, for example in speaking to women. Pursuant to the vow of poverty, any brother who is employed to teach by an outside body has to hand over all his earnings to the Institute. In England this duty is performed by entering into a deed of covenant to pay the earnings to a charitable trust. The pleadings disclose that there is a 1947 Trust relating to property held in connection with first the London province and subsequently the Great Britain province, and a 1953 trust relating to property held in connection with the England province. Judge Hawkesworth at paras 30 and 31 recorded that Brother Thomas gave evidence that the DLS trust had substantial funds derived from the sale of its properties and from the covenanted funds of the brothers employed in education at St Williams and elsewhere. The Institute provides the brothers with the wherewithal to live and looks after them after their retirement. The Institute owns schools, presumably through its charitable trusts. Where it does so the teaching is provided by a community of brothers who will usually live within the school. The Director of the community almost always acts as the headmaster of the school. However the Institute never owned St Williams. St Williams In paras 25 to 34 of the leading judgment in the Court of Appeal [2010] EWCA Civ 1106 Hughes LJ has set out the history of St Williams, as found by Judge Hawkesworth. It was founded in or about 1865 by a group of Catholic benefactors who placed the school in the ownership of a charitable trust. It was managed by a group of local people as a reformatory school for boys. They entrusted the running of the school to a religious congregation called the Rosminians. They did not prove satisfactory and, in 1912 the managers replaced them with the Institute, under a formal agreement made with the Superior General of the Institute. This agreement effectively delegated the running of the school to the Institute. Thereafter, up to 1933, the school was entirely staffed by brothers of the Institute. These were members of a community whose bedrooms and refectory were within the school grounds. Most of the brothers in the community worked in the school, but there were some who did not. The Director of the community was almost always the headmaster of the school. In 1933 the regime changed pursuant to provisions of the Children and Young Persons Act 1933. St Williams became an approved school, for the detention of boys up to the age of 17 who had been convicted of custodial offences. Under the 1933 Act, and the Approved School Rules 1933 made under it, the staff became the direct statutory responsibility of the managers. All teaching staff had to be employed by them under written contracts and the headmaster was made responsible to the managers for the efficient conduct of the school. The managers at this time, as described by the judge, at para 25, were a self perpetuating group of like minded people, linked by their Catholic faith, who would be appointed subject to the Bishops approval. From this time the managers began to employ lay teachers in addition to the brothers and the proportion of brother teachers to lay teachers fluctuated but generally diminished. In 1954 there were 5 brother teachers and 5 lay teachers. The regime changed again in 1973 when the provisions of the Children and Young Persons Act 1969 took effect. St Williams then became an assisted community home for children in the care of the local authority. Under section 42 of the 1969 Act the responsibility for managing St Williams was vested in the voluntary organisation responsible for its management, equipment and maintenance or the responsible organisation. The Middlesbrough Diocesan Rescue Society (MDRS) undertook this role, replacing the previous managers. The MDRS was an unincorporated association consisting of the Catholic bishop of the diocese, as President, and priests appointed by him. On 28 July 1982 the Catholic Child Welfare Society (Diocese of Middlesbrough) (CCWS), an incorporated charitable company, replaced the MDRS as the responsible organisation. After 1973 the proportion of brother teachers to lay staff diminished further. After 1976 there were never more than two brother teachers and for much of the time there was only one, while there were as many as a dozen lay teachers. Some of these lived on the site in premises apart from those of the dwindling community of brothers. Other lay teachers lived in the town. At all times the managers chose to leave it to the Institute, in the form of the relevant Provincial, to designate a brother to act as headmaster of the school. In 1976 the headmaster, Brother Reginald, retired. With the agreement of the MDRS the Provincial replaced him with Brother James, who had been a brother teacher and housemaster at St Williams since 1968. Brother James is now Mr Carragher, having been expelled from the Institute. This expulsion followed his dismissal in disgrace from the post of headmaster in 1990 because it had been discovered that he had been guilty of systematic sexual abuse of the boys in his care. In 1993 Mr Carragher pleaded guilty to a number of offences of sexual abuse and was sentenced to 7 years imprisonment. In 2004, after a 10 week trial, he was found guilty of 21 counts of serious sexual offences against boys, spanning a period of some 20 years, and sentenced to 14 years imprisonment. Some of the claimants allege that they were abused by Mr Carragher. Others allege abuse by other brothers. Of the 150 claimants on whose behalf particulars have been given, 146 allege that they were abused by members of the Institute. After the dismissal of Mr Carragher the number of boys at the school dwindled. The Institute disengaged from the school and it finally closed in 1994. Control The undertaking by each brother to go wherever he might be sent meant that the Institute controlled where it was that the brothers taught. The Institute could not, of course, control whether schools owned by third parties engaged brothers as teachers. It could, however, control whether a brother worked in a school that was prepared to engage him. Because the managers of St Williams were always keen to have a brother as headmaster of the school, the Institute in effect determined who the headmaster of the school should be. Thus in 1963 the Provincial informed the managers of the school that Brother Dominic would replace Brother Vincent as headmaster and this was accepted. In 1965, by decision of the Superior General in Rome responsibility for St Williams was transferred from the English province to the London province. This resulted in the three brothers, including the headmaster and the deputy headmaster, resigning and being replaced by other brothers. The managers, with a degree of reluctance, accepted this. It is an agreed fact that If a brother was sent to a school managed by a third party, the Institutes control over his life remained complete. He remained bound by his vows, and every year the Provincial made an annual visit of inspection of the community and the brothers living in it, which embraced their role within the school. An overview of the issues The law of vicarious liability is on the move. On 12 July 2012, shortly before the hearing of the appeal in this case, the Court of Appeal handed down its judgments in JGE v The Trustees of the Portsmouth Roman Catholic Diocesan Trust [2012] EWCA Civ 938. That case was concerned with the preliminary issue of whether the Diocesan Trust could be vicariously liable for acts of sexual abuse committed by a parish priest in the diocese. The court held, by a majority, that he could. Before us Mr Leggatt QC, for the Middlesbrough Defendants, suggested that the Court would no doubt wish to read the judgments in full. He was right to do so. The hearing of that case before the Court of Appeal lasted but a day, but the impressive leading judgment of Ward LJ evidences consideration of case law and academic writings that goes far beyond the material to which counsel can have had time to refer in that short hearing. At paras 20 and 21 of his judgment Ward LJ traces the origin of vicarious liability back to the middle ages, but rightly identifies that the law upon which he and I cut our teeth rendered the employer, D2, liable for the tortious act of the employee, D1, provided that the act in question was committed in the course of the employees employment. Thus, in a case about vicarious liability, the focus was on two stages: (1) was there a true relationship of employer/employee between D2 and D1? (2) was D1 acting in the course of his employment when he committed the tortious act? Since Ward LJ and I cut our teeth the courts have developed the law of vicarious liability by establishing the following propositions: i) It is possible for an unincorporated association to be vicariously liable for the tortious acts of one or more of its members: Heatons Transport (St Helens) Ltd v Transport and General Workers Union [1973] AC 15, 99; Thomas v National Union of Mineworkers (South Wales Area) [1986] Ch 20, 66 7; Dubai Aluminium Co Ltd v Salaam [2002] UKHL 48; [2003] 2 AC 366. ii) D2 may be vicariously liable for the tortious act of D1 even though the act in question constitutes a violation of the duty owed to D2 by D1 and even if the act in question is a criminal offence: Morris v CW Martin & Sons Ltd [1966] 1 QB 716; Dubai Aluminium; Brinks Global Services v Igrox [2010] EWCA Civ; [2011] IRLR 343. iii) Vicarious liability can even extend to liability for a criminal act of sexual assault: Lister v Hesley Hall [2001] UKHL 22; [2002] 1 AC 215. iv) It is possible for two different defendants, D2 and D3, each to be vicariously liable for the single tortious act of D1: Viasystems (Tyneside) Ltd v Thermal Transfer (Northern) Ltd and others [2005] EWCA Civ 1151; [2006] QB 510. None of these developments of the law of vicarious liability has been challenged by Lord Faulks QC, who has represented the Institute. I consider that he was right not to challenge them, for they represent sound and logical incremental developments of the law. They have, however, made it more difficult to identify the criteria that must be demonstrated to establish vicarious liability than it was 50 years ago. At para 37 of his judgment in this case Hughes LJ rightly observed that the test requires a synthesis of two stages: The first stage is to consider the relationship of D1 and D2 to see i) whether it is one that is capable of giving rise to vicarious liability. ii) Hughes LJ identified the second stage as requiring examination of the connection between D2 and the act or omission of D1. This is not entirely correct. What is critical at the second stage is the connection that links the relationship between D1 and D2 and the act or omission of D1, hence the synthesis of the two stages. Both stages are in issue in the present case. There is an issue as to whether the relationship between the Institute and the brothers teaching at St Williams was one that was capable of giving rise to vicarious liability. There is also an issue as to whether the acts, or alleged acts, of sexual abuse were connected to that relationship in such a way as to give rise to vicarious liability. It is the Institutes case that the relationship of the individual brothers to the Institute, considered as a body, is insufficiently close to give rise, of itself, to vicarious liability on the part of the Institute for sexual abuse by brother teachers. Only a body managing a school and employing a brother in that school as a teacher, will have a sufficiently close relationship to that brother teacher to be vicariously liable for his wrongdoing. That is why the Middlesbrough Defendants are liable and the De La Salle Defendants are not, as held by the courts below. It is the Middlesbrough Defendants case, as developed by Mr Leggatt, that the courts below have failed to give effect to the principles properly to be derived from the relevant authorities, particularly those dealing with vicarious liability for sexual abuse. The necessary closeness of connection between the relationship between the Institute and the brothers and the abuses committed by the brothers is provided by the fact that the Institute sent the brothers to St Williams to further the purpose of the Institute, clothed with the status of members of the Institute, and thereby significantly increased the risk that brothers would sexually abuse the children with whom they were in close physical proximity. This is indeed a synthesis of stage 1 the relationship of the brothers with the Institute and stage 2 the connection between that relationship and the acts of abuse. A closer view of the issues I turn then to the central issue that divides the parties. Is the relationship between the individual brothers who taught at the school and the Institute such as to give rise to vicarious liability on the part of the Institute for acts of sexual abuse committed in the school? The Institute accepts that the relationship between the brother teachers and the Middlesbrough Defendants has given rise to vicarious liability on the part of the latter, but contends that this is because the Middlesbrough Defendants entered into contracts of employment with the brothers and managed and controlled both them and the school. The Institute contends that the relationship between the brothers and the Institute lacks these critical features. The Institute further contends that it cannot be held to be vicariously liable in addition to the Middlesbrough Defendants unless the criteria for dual liability laid down by the Court of Appeal in Viasystems are demonstrated. It contends that these criteria are not demonstrated. Hughes LJ reached a similar conclusion. His judgment focussed largely on the extent to which the brothers were under the control of the Institute, and he concluded that this was insufficient to give rise to vicarious liability. The Middlesbrough Defendants rely on the recent decisions on vicarious liability for sexual abuse as demonstrating that the relationship of employer/employee is not an essential prerequisite. They submit that the closeness of the relationship between brothers and the Institute, the fact that the brothers were sent out to further the object of the institute, namely to teach boys, and the fact that this created a risk of sexual abuse of the boys by the brothers, sufficed to render the Institute vicariously liable for the abuse committed by the brothers. The nature of the Institute Before considering stage 1 of the test for vicarious liability I must address the problem of the Institute. Hughes LJ held, and Lord Faulks now accepts, that it is possible for vicarious liability to arise out of the relationship between one member of an unincorporated association and the other members, at least where the former acts on behalf of the others. He held, however, at para 57 that there was not a sufficiently close connection between the brothers of the Institute scattered all over the world and the torts committed by the brother teachers at St Williams to give rise to vicarious liability. This raises the question of whether it is right to treat the De La Salle Defendants as being simply an unincorporated band of brothers scattered around the world. A similar problem perplexed Ward LJ in JGE. The issue in that case was whether there was vicarious liability for sexual abuse committed by a Roman Catholic priest. He observed at para 5 that there had been other occasions on which the Church had been called on to answer for the acts of its clergy and that JGE was the first occasion on which the Church had challenged the allegation that it was the employer of its clergy. The issue had always before been simply whether the acts of abuse had been committed in the course of that employment. The defendants against whom the claim was brought were the Trustees of the Portsmouth Roman Catholic Diocesan Trust. Ward LJ observed at para 8 that because English law did not recognise the Catholic Church as a legal entity in its own right but saw it as an unincorporated association with no legal personality, the diocese usually established a charitable trust to enable it to own and manage property and otherwise conduct its financial affairs in accordance with domestic law. At para 18 Ward LJ remarked that there had been understandable confusion as to whom to sue and that the case had proceeded effectively against the Bishop, though it was the trustees who would be covered by the relevant insurance should liability be established. He added that intuitively one would think that, as a priest is always said to be a servant of god, the Roman Catholic Church itself would be the responsible defendant, but the Roman Catholic Church could not be a party as it had no legal personality. In those circumstances Ward LJ treated the Bishop as being the person whose vicarious liability was in issue. There are parallels between this aspect of JGE and the present case. The choice of defendants suggests that the claimants may well have been in doubt as to whom they should sue, as they have adopted something of a scatter gun approach. Of the 35 defendants on the pleadings, the action has proceeded against 13. Of these I select as a typical De La Salle defendant the 10th defendant, Patrick Joseph Campbell sued on his own behalf and as a former trustee of the 1947 trust and as representing all persons (other than any other party to the claim) who were at any time relevant to the claimants claims: i) members of the Order ii) members of the English Province or the Great Britain Province iii) responsible for the supervision management or direction of brothers carrying on the work of the England Province or the Great Britain Province, or iv) Trustees of the 1947 trust before 14 July 1992. I can appreciate Hughes LJs difficulty in accepting that a De La Salle brother in Australia could be vicariously liable for the sexual assault by a brother at St Williams. Indeed, there is something paradoxical in the concept of an attempt to hold vicariously liable a world wide association of religious brothers, all of whom have taken vows of poverty and so have no resources of their own. So far as individual defendants are outside the jurisdiction this might also have given rise to an interesting question of conflict of laws. This is, however, a long way from the realities of these proceedings and Lord Faulks has not taken any point on the nature of the Institute. It is open to the claimants on the pleadings to seek to establish vicarious liability on the part of an unincorporated association made up at the relevant times of the brothers world wide, or of members of the London Province, or of the England Province, or of the Great Britain Province. At the end of the day what is likely to matter will be access to the funds held by the trusts, or to insurance effected by the trustees. Whether one looks at the picture world wide, or within Great Britain, the salient features are the same. The Institute is not a contemplative order. The reason for its creation and existence is to carry on an activity, namely giving a Christian education to boys. To perform that activity it owns and manages schools in which its brothers teach, and it sends its brothers out to teach in schools managed by other bodies. The Institute is, for administrative purposes divided into Provinces, each administered by its Provincial. To carry out its activities it has formed trusts that have recognised legal personality. The trusts are funded in part from the earnings of those brothers who receive payment for teaching. The trust funds are used to meet the needs of the brothers and the financial requirements of the teaching mission. It seems to me more realistic to view the brothers of the Province from time to time responsible for the area in which Market Weighton lies as members of the relevant unincorporated association rather than the Order as a whole, but I doubt if it makes any difference in principle. Because of the manner in which the Institute carried on its affairs it is appropriate to approach this case as if the Institute were a corporate body existing to perform the function of providing a Christian education to boys, able to own property and, in fact, possessing substantial assets. Stage 1: the essential elements of the relationship Vicarious liability is a longstanding and vitally important part of the common law of tort. A glance at the Table of Cases in Clerk & Lindsell on Torts, 20th ed (2010) shows that in the majority of modern cases the defendant is not an individual but a corporate entity. In most of them vicarious liability is likely to be the basis upon which the defendant was sued. The policy objective underlying vicarious liability is to ensure, insofar as it is fair, just and reasonable, that liability for tortious wrong is borne by a defendant with the means to compensate the victim. Such defendants can usually be expected to insure against the risk of such liability, so that this risk is more widely spread. It is for the court to identify the policy reasons why it is fair, just and reasonable to impose vicarious liability and to lay down the criteria that must be shown to be satisfied in order to establish vicarious liability. Where the criteria are satisfied the policy reasons for imposing the liability should apply. As Lord Hobhouse pointed out in Lister at para 60 the policy reasons are not the same as the criteria. One cannot, however, consider the one without the other and the two sometimes overlap. The relationship that gives rise to vicarious liability is in the vast majority of cases that of employer and employee under a contract of employment. The employer will be vicariously liable when the employee commits a tort in the course of his employment. There is no difficulty in identifying a number of policy reasons that usually make it fair, just and reasonable to impose vicarious liability on the employer when these criteria are satisfied: i) The employer is more likely to have the means to compensate the victim than the employee and can be expected to have insured against that liability; ii) The tort will have been committed as a result of activity being taken by the employee on behalf of the employer; iii) The employees activity is likely to be part of the business activity of the employer; iv) The employer, by employing the employee to carry on the activity will have created the risk of the tort committed by the employee; v) The employee will, to a greater or lesser degree, have been under the control of the employer. The significance of control In days gone by, when the relationship of employer and employee was correctly portrayed by the phrase master and servant, the employer was often entitled to direct not merely what the employee should do but the manner in which he should do it. Indeed, this right was taken as the test for differentiating between a contract of employment and a contract for the services of an independent contractor. Today it is not realistic to look for a right to direct how an employee should perform his duties as a necessary element in the relationship between employer and employee. Many employees apply a skill or expertise that is not susceptible to direction by anyone else in the company that employs them. Thus the significance of control today is that the employer can direct what the employee does, not how he does it. Control and the transfer of vicarious liability There is one area of the law of vicarious liability where control has been of critical importance. I must explore it because it is relevant on the facts of this case. It has long been recognised that there are circumstances in which vicarious liability for the tortious act of a workman can be transferred from his employer to a third person who is using the employees services under a contract, or other arrangement, with his employer see Donovan v Laing, Wharton & Down Construction Syndicate Ltd [1893] 1 QB 629. The circumstances in which such a transfer could take place were considered by the House of Lords in Mersey Docks and Harbour Board v Coggins & Griffith (Liverpool) Ltd [1947] AC 1. Their Lordships imposed a test that was so stringent as to render a transfer of vicarious liability almost impossible in practice. It may well be that that was their intention. The negligence in question was that of the driver of a crane, which had been hired, together with the services of the driver, by the drivers employer to a firm of stevedores. Viscount Simon at pp10 and 11 said that a heavy burden of proof lay on the general or permanent employer to shift responsibility for the negligence of servants engaged and paid by such employer to the hirer for the time being who had the benefit of the services rendered. This could only be achieved where the hirer enjoyed the right to control the way in which the act involving negligence was done. The inquiry should concentrate on the relevant negligent act and then ask whose responsibility it was to prevent it. Lord Macmillan at p 14, Lord Porter at p 17 and Lord Uthwatt at pp 22 23 applied the same test. Mersey Docks remained the leading case in this area of the law at the time of the decision in Viasystems where, unusually for a case of such importance, only two members of the Court of Appeal sat on the appeal. Modern construction enterprises often involve a chain of contractors and sub contractors working together to a common end, and such a situation can lead to a dispute between them as to who is vicariously liable for the negligence of a workman employed on the project. That was the position in Viasystems. The claimants engaged the first defendants to install air conditioning in their factory. The first defendants sub contracted ducting work to the second defendants. The second defendants contracted with the third defendants to provide fitters and fitters mates on a labour only basis. They were working under the supervision of a self employed fitter contracted to the second defendants. One of the fitters mates in a moment of folly crawled through a section of ducting and negligently fractured the fire protection filter system, flooding the factory. At first instance the third defendants were held vicariously liable for the damage caused and the second defendants held not to be vicariously liable. The Court of Appeal raised the question of whether it was possible in law to have dual vicarious liability and, after considering the authorities, decided that, although for 180 years courts had always proceeded on the basis that only one defendant could be vicariously liable for a tortious act, there was no case that bound the court so to find. Academic writers favoured the possibility of dual vicarious liability and, on the facts of the case, this was the principled solution. At para 16 May LJ, applying Mersey Docks, held that the enquiry should concentrate on the relevant negligent act and then ask whose responsibility it was to prevent it. Who was entitled, and perhaps theoretically obliged, to give orders as to how the work should or should not be done? The answer on the facts of the case was both the second and the third defendants. There was dual control and thus there should be dual vicarious liability. Rix LJ reached the same conclusion, but his reasoning was not the same. At para 55 he commented that the basis of vicarious liability was, generally speaking, that those who set in motion and profit from the activities of their employees should compensate those who are injured by such activities, even when performed negligently. Liability was extended to the employer on the practical assumption that because he could spread the risk through pricing and insurance, he was better organised and able to bear the risk and was, at the same time, encouraged to control the risk. Dealing with the test of control, Rix LJ observed at paras 59 and 64 that the right to control the method of doing work had long been an important and sometimes critical test of the master/servant relationship. The courts had, however, imperceptibly moved from using the test of control as determinative of the relationship of employer and employee to using it as the test of vicarious liability of a defendant. At para 79 he questioned whether the doctrine of vicarious liability was to be equated with control. Vicarious liability was a doctrine designed for the sake of the claimant, imposing a liability incurred without fault because the employer was treated at law as picking up the burden of an organisational or business relationship which he had undertaken for his own benefit. Accordingly, what one was looking for was: a situation where the employee in question, at any rate for relevant purposes, is so much a part of the work, business or organisation of both employers that it is just to make both employers answer for his negligence. The brothers who taught at the school were not contractually employed by the Institute; they were contractually employed by or on behalf of the Middlesbrough Defendants. By this appeal the Middlesbrough Defendants seek to establish dual vicarious liability. The question arises of whether the approach of May LJ or that of Rix LJ should be applied in determining whether the Institute is also vicariously liable for the brothers torts. The test that May LJ applied was that applied in Mersey Docks. I do not consider that there is any justification for applying this stringent test when considering whether there is dual vicarious liability. Where two defendants are potentially vicariously liable for the act of a tortfeasor it is necessary to give independent consideration to the relationship of the tortfeasor with each defendant in order to decide whether that defendant is vicariously liable. In considering that question in relation to each defendant the approach of Rix LJ is to be preferred to that of May LJ. Two subsequent decisions of the Court of Appeal, Hawley v Luminar Leisure Ltd [2006] EWCA Civ 18; [2006] Lloyd's Rep IR 307 and Biffa Waste Services Ltd v Maschinenfabrik Ernst Hese GmbH [2008] EWCA Civ 1257; [2009] QB 775 applied the test of control when holding only one of two defendants to be vicariously liable. It is arguable that the facts of each case could have supported a finding of dual vicarious liability. At paragraph 35 above I have identified those incidents of the relationship between employer and employee that make it fair, just and reasonable to impose vicarious liability on a defendant. Where the defendant and the tortfeasor are not bound by a contract of employment, but their relationship has the same incidents, that relationship can properly give rise to vicarious liability on the ground that it is akin to that between an employer and an employee. That was the approach adopted by the Court of Appeal in JGE. JGE was specifically concerned with stage 1 of the test of vicarious liability. The claimant alleged that when, as a young girl, she was resident in a childrens home run by the first defendants, an order of nuns, she was sexually abused by a visiting Roman Catholic priest who had been appointed by the second defendant trust, which stood in the place of, and could be equated with, the diocesan bishop. A preliminary issue was ordered as to whether the relationship between the priest and the trust was one that was capable of giving rise to vicarious liability. Although this issue was restricted to the stage 1 test MacDuff J at first instance held that it could not be considered in isolation from stage 2, as the test of vicarious liability involved a synthesis of the two stages. In a lucid and bold judgment he held that the relationship could give rise to vicarious liability: see E v English Province of Our Lady of Charity [2011] EWHC 2871 (QB); [2012] 2 WLR 709. There was no contract of employment between the trust and the priest. As the headnote summarised the evidence, there were no terms, conditions, wages or right of dismissal except through the church in Rome and effectively no control over a priest once appointed since, although he was subject to canon law and owed the bishop obedience, he was free to conduct his ministry as he saw fit without interference from the bishop, whose role was advisory not supervisory. But at paras 35 and 36 MacDuff J queried the relevance of these matters when the question was whether, in justice, the trust should be responsible for the tortious acts of the man appointed and authorised by it to act on its behalf. The crucial features were that the priest was appointed in order to do the work of the church with the full authority to fulfil that role, being provided with the premises, the pulpit and the clerical robes. He was directed into the community and given free rein to act as representative of the church. He had been trained and ordained for that purpose and his position of trust gave him great power. In the Court of Appeal [2012] EWCA Civ 938 Ward LJ essentially adopted the reasoning of MacDuff J. He did so, however, on the footing that what MacDuff J had identified as the crucial features created a relationship between the priest and the bishop that was akin to employment. When considering vicarious liability it was not appropriate to apply tests of employment laid down by the courts when dealing with unfair dismissal, or taxation, or discrimination. Nor was control any longer to be treated as the critical touchstone of employment, albeit that it was an important consideration. The question of control should not be approached merely by enquiring whether an employer could tell the workman how to do his work, but in terms of whether the workman was under the management of and accountable to an employer. It was necessary to identify whether the workman was working on behalf of an enterprise or on his own behalf and, if the former, how central the workmans activities were to the enterprise and whether these activities were integrated into the organisational structure of the enterprise. In applying these criteria Ward LJ acknowledged the assistance that he had derived from an article by Professor Richard Kidner, Vicarious Liability: for whom should the employer be liable? (1995) 15 LS 47. Ward LJ concluded that the relationship of the bishop and the priest was so close in character to one of employer/employee that it was just and fair to hold the employer vicariously liable (para 73). He was accountable to the bishop in as much as he owed him reverence and obedience and could be dismissed from his office by him in the event of gross breach of his duties under Canon law. His activities in ministering to the souls of the faithful were central to the objectives of the organisation the Roman Catholic Church, which in its organisational structure looked like a business. He was part and parcel of that organisation and wholly integrated in it. In his work he behaved more as if he was an employee than someone in business on his own account (paras 73 to 79). Davis LJ delivered a concurring judgment. He also concluded that the relationship between the bishop and the priest was sufficiently akin to employment to be capable of giving rise to vicarious liability. The bishop had a degree of control over the priest. The priests activity of visiting the residential home where the claimant lived was carried out in furtherance of the bishops aims and purposes, namely perpetuating the works of Christ in the diocese. Tomlinson LJ dissented. He agreed with the passage in Lord Milletts speech in Lister that I have quoted at para 71 below, but held that it could not be transposed so as to treat a priest as carrying on his work for the benefit of the bishop. In JGE the claimant is also seeking to establish vicarious liability on the part of the charity which ran the home in which the abuse is alleged to have taken place. The Court of Appeal did not consider that the possibility of dual vicarious liability affected the test to be applied. In summary, in JGE MacDuff J found the bishop vicariously liable for the acts of the priest notwithstanding that the relationship between them was significantly different from a contract of employment (para 35). In the Court of Appeal, Ward and Davis LJJ found it possible to describe the relationship between the bishop and the priest as being akin to employment. Ward LJ achieved this by treating the ministry of the Roman Catholic Church as a business carried on by the bishop, by finding that the priest carried on that business under a degree of control by the bishop and by finding that the priest was part and parcel of the organisation of the business and integrated into it. Ward and Davis LJJ distinguished the decision of the Court of Appeal in the present case. Ward LJ did so implicitly and Davis LJ for reasons that I do not find persuasive. The truth is that the case for finding vicarious liability is much stronger in the present case than it was in JGE. In the context of vicarious liability the relationship between the teaching brothers and the Institute had many of the elements, and all the essential elements, of the relationship between employer and employees: The institute was subdivided into a hierarchical structure and i) conducted its activities as if it were a corporate body. ii) The teaching activity of the brothers was undertaken because the Provincial directed the brothers to undertake it. True it is that the brothers entered into contracts of employment with the Middlesbrough Defendants, but they did so because the Provincial required them to do so. iii) The teaching activity undertaken by the brothers was in furtherance of the objective, or mission, of the Institute. iv) The manner in which the brother teachers were obliged to conduct themselves as teachers was dictated by the Institutes rules. The relationship between the teacher brothers and the Institute differed from that of the relationship between employer and employee in that: The brothers were bound to the Institute not by contract, but by their i) vows. ii) Far from the Institute paying the brothers, the brothers entered into deeds under which they were obliged to transfer all their earnings to the Institute. The Institute catered for their needs from these funds. Neither of these differences is material. Indeed they rendered the relationship between the brothers and the Institute closer than that of an employer and its employees. Hughes LJ held at para 54 that the brothers no more acted on behalf of the Institute than any member of a professional organisation who accepts employment with that status is acting on behalf of the organisation when he does his job. I do not agree with this analysis. The business of the Institute was not to train teachers or to confer status on them. It was to provide Christian teaching for boys. All members of the Institute were united in that objective. The relationship between individual teacher brothers and the Institute was directed to achieving that objective. For these reasons I consider that the relationship between the teaching brothers and the Institute was sufficiently akin to that of employer and employees to satisfy stage 1 of the test of vicarious liability. There is a simpler analysis that leads to the conclusion that stage 1 was satisfied. Provided that a brother was acting for the common purpose of the brothers as an unincorporated association, the relationship between them would be sufficient to satisfy stage 1, just as in the case of the action of a member of a partnership. Had one of the brothers injured a pedestrian when negligently driving a vehicle owned by the Institute in order to collect groceries for the community few would question that the Institute was vicariously liable for his tort. Stage 2: The connection between the brothers acts of abuse and the relationship between the brothers and the Institute. Where an employee commits a tortious act the employer will be vicariously liable if the act was done in the course of the employment of the employee. This plainly covers the situation where the employee does something that he is employed to do in a manner that is negligent. In that situation the necessary connection between his relationship with his employer and his tortious act will be established. Stage 2 of the test will be satisfied. The same is true where the relationship between the defendant and the tortfeasor is akin to that of an employer and employee. Where the tortfeasor does something that he is required or requested to do pursuant to his relationship with the defendant in a manner that is negligent, stage 2 of the test is likely to be satisfied. But sexual abuse can never be a negligent way of performing such a requirement. In what circumstances, then, can an act of sexual abuse give rise to vicarious liability? Vicarious liability for sexual abuse The extension of statutory periods of limitation coupled with the identification of the serious psychiatric injury that is often caused by child abuse has led to something of a proliferation of claims by adults for personal injury caused by sexual abuse in their childhood. Unhappily in quite a number of cases the abuse was perpetrated by a priest or a member of a religious order. Such cases can raise problems both at stage 1 and at stage 2 of the analysis. Although the law in this area is developing, there are some priests who do not serve under contracts of employment and the question then arises of whether the priest has a relationship with any body that can give rise to vicarious liability on the part of the body. If there is such a body, the second question is whether there is a connection between the priests relationship with that body and the sexual abuse committed by the priest that can make that body vicariously liable for the priests actions. JGE was such a case, albeit that the preliminary issue focussed on stage 1. In dealing with stage 2 I propose to start with two Canadian cases on sexual abuse, where the tortfeasors were lay employees, so that no issue arose in relation to stage 1. These cases have had a significant influence on the English jurisprudence. Bazley v Curry (1999) 174 DLR (4th) 45 was one of two decisions involving child abuse given by the Supreme Court of Canada on the same day. A not for profit organisation, D2, ran two residential care facilities for the treatment of emotionally troubled children. They unwittingly employed a paedophile, D1, who sexually abused one of the children in the home. The court, in a judgment delivered by McLachlin J, held D2 vicariously liable for the abuse. The issue related to stage 2. Could acts of sexual abuse properly be the subject of vicarious liability and, if so, on what basis? The court held that this question should be directly addressed in the light of considerations of policy. Two particular principles of policy were identified. The first was that where an employer puts into the community an enterprise carrying with it certain risks and those risks materialise and cause injury it is fair that, having created the enterprise and the risk, the employer should bear the loss. The second was that holding the employer vicariously liable might have a deterrent effect, causing employers to exercise a greater degree of care in relation to the appointment and supervision of employees. So far as the legal test of liability was concerned, para 42 of the judgment summarised the position as follows: there must be a strong connection between what the employer was asking the employee to do (the risk created by the employers enterprise) and the wrongful act. It must be possible to say that the employer significantly increased the risk of the harm by putting the employee in his or her position and requiring him to perform the assigned tasks. Markesinis and Deakins Tort Law, 6th ed (2007) describe this as the enterprise risk approach. The court had no difficulty in finding that the test was satisfied in Bazley, for D1s duties under his employment by D2 included bathing the children and putting them to bed, In Jacobi v Griffiths (1999) 174 DLR (4th) 71, the other decision reached on the same day, the court applied the same test but, by a majority, reached a different conclusion on the facts. In that case D1 was employed by D2 to run a youth club. D1 sexually abused two children whom he had met in the club, but the abuse did not take place on the clubs premises or in connection with club activities. The majority held that there was not the strong connection between D1s employment at the club and his acts of abuse that was necessary to give rise to vicarious liability. The Canadian Supreme Court returned to the theme in John Doe v Bennett [2004] 1 SCR 436, a case whose facts are closer to those with which we are concerned, and even closer to those of JGE. On this occasion the court was presided over by McLachlin CJ, who gave the judgment of the court. A Roman Catholic priest had sexually assaulted boys in his parishes. The relevant issue was whether the diocesan Episcopal corporation sole, which was equated with the bishop, was vicariously liable. The priest was not employed by the corporation sole or the bishop. The court held, however, at para 27 that the relationship between a bishop and a priest in a diocese was akin to an employment relationship, inasmuch as the priest took a vow of obedience to the bishop, the bishop exercised extensive control over the priest, including the power of assignment, the power to remove the priest from his post and the power to discipline him. At para 17 the court stated that the justification for vicarious liability was that as the person responsible for the activity or enterprise in question, the employer or principal should be held responsible for loss to third parties that result from the activity or enterprise. At para 20 the court put forward a variation on this theme: Vicarious liability is based on the rationale that a person who puts a risky enterprise into the community may fairly be held responsible when those risks emerge and cause loss or injury to members of the public (my emphasis). Applying Bazley, the court held that the necessary connection between the employer created or enhanced risk and the wrong complained of was established. The Bishop provided the priest with the opportunity to abuse his power, this opportunity being incidental to the functions of a parish priest. The priests wrongful acts were strongly related to the psychological intimacy inherent in his role as priest. Finally, in his remote parishes the status of a priest carried with it immense power. The court declined, on the ground of inadequacy of the record, to consider whether the Roman Catholic Church itself was vicariously liable for the priests wrongdoing. In conclusion of this review of the Canadian authorities it is of interest to note that 11 days after the English Court of Appeal held in Viasystems that it was possible in law to have dual vicarious liability for a single tortious act, McLachlin CJ, giving the judgment of the Supreme Court, reached the same conclusion in Blackwater v Plint (2005) 258 DLR (4th) 275. Applying the test in Bazley, the court held both the Government of Canada and the United Church of Canada vicariously liable for sexual assaults committed by a dormitory supervisor in a school which they jointly managed and controlled. In Lister v Hesley Hall Ltd [2002] 1 AC 215 the House of Lords, reversing previous authority, held the owners and managers of a school vicariously liable for sexual assaults committed by the warden of a boarding house, employed by them. Although the result was unanimous the reasoning of the House was not identical. Lord Steyn at para 27 referred to Bazley and Jacobi as luminous and illuminating judgments which would henceforth be the starting point for consideration of similar cases. He held, however, that it was not necessary to express views on the full range of policy considerations examined in those decisions. At para 10 he stated that those cases enunciated a principle of close connection and at para 28 he said that the question was whether the wardens torts were so closely connected with his employment that it would be fair and just to hold the employers vicariously liable. He gave an affirmative answer to that question, observing that the sexual abuse was inextricably interwoven with the carrying out by the warden of his duties at the school. Lord Clyde also referred with approval to the Canadian decisions. He held at para 48 that their essence lay in the recognition of a sufficient connection between the acts of the employee and the employment. At para 50 he found that connection in the fact that the wardens position brought him into close contact with the boys and the fact that the defendants had delegated to the warden the general duty to look after and care for the boys. Lord Hutton agreed with the speech of Lord Steyn. Lord Millett began his judgment with a review of academic writings about the nature of vicarious liability. These identified the underlying policy that an employer ought to be liable for those torts which could fairly be regarded as reasonably incidental risks to the type of business carried on. Lord Millett commented at para 65 that the relevant passages: are not to be read as confining the doctrine to cases where the employer is carrying on business for profit. They are based on the more general idea that a person who employs another for his own ends inevitably creates a risk that the employee will commit a legal wrong. If the employers objectives cannot be achieved without a serious risk of the employee committing the kind of wrong which he has in fact committed, the employer ought to be liable. The fact that his employment gave the employee the opportunity to commit the wrong is not enough to make the employer liable. He is liable only if the risk is one which experience shows is inherent in the nature of the business. At para 70 he also stated that it was critical that attention should be directed to the closeness of the connection between the employees duties and his wrongdoing and, in that context, referred with approval to the Canadian decisions. As to the test of closeness, Lord Millett placed importance on the employees act being an abnegation of a specific duty imposed upon him by his employment. At para 83, referring again to the Canadian decisions, he said: Experience shows that in the case of boarding schools, prisons, nursing homes, old peoples homes, geriatric wards, and other residential homes for the young or vulnerable, there is an inherent risk that indecent assaults on the residents will be committed by those placed in authority over them, particularly if they are in close proximity to them and occupying a position of trust. This suggests an endorsement of the Canadian Supreme Courts approach to treating the creation of risk as a basis for the imposition of vicarious liability in cases of abuse. Lord Hobhouse agreed with Lord Steyn (para 63). At para 55 he, like Lord Millett, singled out schools, prisons and hospitals as being places where vicarious liability was likely to be incurred, but in doing so he treated vicarious liability as being based on an assumption of a duty of care by the employer the performance of which is then entrusted to the employee. At para 60 he drew a distinction between the reasons of policy that justified vicarious liability and the legal criteria that gave rise to this. He expressed the view that creation of risk fell into the former rather than the latter category. It is not easy to deduce from Lister the precise criteria that will give rise to vicarious liability for sexual abuse. The test of close connection approved by all tells one nothing about the nature of the connection. Lord Clyde and Lord Hobhouse found it significant that the tortfeasors employment involved exercising care for the victim. Only Lord Millett expressly endorsed the importance that the Canadian decisions attached to the creation of risk. This has, however, been identified as of significance in most of the cases that have followed. The reasoning in Lister was applied by the House of Lords in a commercial context. In Dubai Aluminium Co Ltd v Salaam [2002] UKHL 48; [2003] 2 AC 366 the relevant issue was whether dishonest conduct by a solicitor could involve the firm in liability under section 10 of the Partnership Act 1890 as having been carried on in the ordinary course of the business of the firm. Giving the leading speech Lord Nicholls held that it was necessary to apply the legal policy underlying vicarious liability, which he stated at para 21: is based on the recognition that carrying on a business enterprise necessarily involves risks to others. It involves the risk that others will be harmed by wrongful acts committed by the agents through whom the business is carried on. When those risks ripen into loss, it is just that the business should be responsible for compensating the person who has been wronged. This has strong echoes of the enterprise risk approach of the Canadian Supreme Court and, indeed, Lord Nicholls went on at para 23 to cite with approval from the judgment of McLachlin CJ in Bazley. When considering the stage 2 test of the ordinary course of employment he suggested at para 23 that the wrongful conduct must be so closely connected with the acts the employee was authorised to do that the wrongful conduct might fairly and properly be regarded as done in the ordinary course of employment. The authorities on vicarious liability for unauthorised wrongful acts were reviewed by Lord Steyn when giving the advice of the Board in Bernard v Attorney General for Jamaica [2004] UKPC 47; [2005] IRLR 398. He endorsed the close connection test, observing at para 23 that the principle of vicarious liability was not infinitely extendable. At para 18 he held that a relevant factor was the risks to others created by an employer who entrusts duties, tasks and functions to an employee. He added that this strand in the reasoning in Lister was best expressed in the passage from the speech of Lord Millett that I have quoted at para 72 above. In Brown v Robinson [2004] UKPC 56, a differently constituted Board of the Privy Council at para 11 of the advice delivered by Lord Carswell endorsed the view expressed by Lord Hobhouse in Lister that risk, while it might be a strong policy consideration, was not a criterion of vicarious liability. In Majrowski v Guys and St Thomas NHS Trust [2006] UKHL 34 Lord Nicholls, with whom Lady Hale, Lord Carswell and Lord Brown agreed, again stressed the importance of the creation or augmentation of risk in relation to the doctrine of vicarious liability. Maga v Archbishop of Birmingham and another [2010] EWCA Civ 256; [2010] 1 WLR 1441 is a case that bears a factual resemblance to JGE. The difference is that employment was conceded. A claim was brought against the Birmingham Archdiocese of the Roman Catholic Church in respect of sexual abuse that had been committed by a priest, employed by the Archdiocese, upon the claimant when a boy. The claimant was not a Catholic and the grooming that preceded the sexual abuse occurred in the course of youth work carried on by the priest for the benefit of Catholics and non Catholics alike. Nonetheless the Court of Appeal unanimously held that vicarious liability was established. Giving the leading judgment Lord Neuberger MR applied the close connection test, identifying a number of factors that led to the test being satisfied. He further held that the material increase of risk test applied in the Canadian cases was also satisfied. Longmore LJ, concurring, also applied the close connection test, observing at para 86 that McLachlin Js exposition of the law in Bazley, including the material increase in risk test, was highly relevant to the position of the priest. For completion I should add that the High Court of Australia, when considering whether a school authority could be vicariously liable for sexual assault committed on a pupil by a teacher, has shown a bewildering variety of analysis: New South Wales v Lepore [2003] HCA 4; 212 CLR 511. Only Gleeson CJ and Kirby J were prepared to consider following the approach of the Canadian and English decisions. Discussion Sexual abuse of children is now recognised as a widespread evil and the Criminal Records Bureau was established under Part V of the Police Act 1997 to reduce the risk of this by enabling screening of those seeking positions involving greater contact with young people and vulnerable adults. In Lister at para 48 Lord Clyde said that cases of sexual abuse by an employee should be approached in the same way as other cases in the context of vicarious liability. None the less the courts have been tailoring this area of the law by emphasising the importance of criteria that are particularly relevant to this form of wrong. In this way the courts have succeeded in developing the law of vicarious liability so as to ensure that a remedy for the harm caused by abuse is provided by those that should fairly bear that liability. Where those who have abused children have been members of a particular church or religious order and have committed the abuse in the course of carrying out activities in that capacity claimants have had difficulty in establishing the conventional relationship of employer/employee. What has weighed with the courts has been the fact that the relationship has facilitated the commission of the abuse by placing the abusers in a position where they enjoyed both physical proximity to their victims and the influence of authority over them both as teachers and as men of god. The precise criteria for imposing vicarious liability for sexual abuse are still in the course of refinement by judicial decision. Sexual abuse of children may be facilitated in a number of different circumstances. There is currently concern at the possibility that widespread sexual abuse of children may have occurred within the entertainment industry. This case is not concerned with that scenario. It is concerned with the liability of bodies that have, in pursuance of their own interests, caused their employees or persons in a relationship similar to that of employees, to have access to children in circumstances where abuse has been facilitated. Starting with the Canadian authorities a common theme can be traced through most of the cases to which I have referred. Vicarious liability is imposed where a defendant, whose relationship with the abuser put it in a position to use the abuser to carry on its business or to further its own interests, has done so in a manner which has created or significantly enhanced the risk that the victim or victims would suffer the relevant abuse. The essential closeness of connection between the relationship between the defendant and the tortfeasor and the acts of abuse thus involves a strong causative link. These are the criteria that establish the necessary close connection between relationship and abuse. I do not think that it is right to say that creation of risk is simply a policy consideration and not one of the criteria. Creation of risk is not enough, of itself, to give rise to vicarious liability for abuse but it is always likely to be an important element in the facts that give rise to such liability. This case In this case both the necessary relationship between the brothers and the Institute and the close connection between that relationship and the abuse committed at the school have been made out. The relationship between the brothers and the Institute was much closer to that of employment than the relationship between the priest and the bishop in JGE. The Institute was subdivided into a hierarchical structure and conducted its activities as if it were a corporate body. The brothers were subject to the directions as to their employment and the general supervision of the Provincial, their superior within that hierarchical structure. But the relationship was not simply one akin to that of employer and employee. The business and mission of the Institute was the common business and mission of every brother who was a member of it. That business was the provision of a Christian education to boys. It was to achieve that mission that the brothers joined and remained members of the Institute. The relationship between the Institute and the brothers enabled the Institute to place the brothers in teaching positions and, in particular, in the position of headmaster at St Williams. The standing that the brothers enjoyed as members of the Institute led the managers of that school to comply with the decisions of the Institute as to who should fill that key position. It is particularly significant that the Institute provided the headmasters, for the running of the school was largely carried out by the headmasters. The brother headmaster was almost always the Director of the Institutes community, living on the school premises. There was thus a very close connection between the relationship between the brothers and the Institute and the employment of the brothers as teachers in the school. Living cloistered on the school premises were vulnerable boys. They were triply vulnerable. They were vulnerable because they were children in a school; they were vulnerable because they were virtually prisoners in the school; and they were vulnerable because their personal histories made it even less likely that if they attempted to disclose what was happening to them they would be believed. The brother teachers were placed in the school to care for the educational and religious needs of these pupils. Abusing the boys in their care was diametrically opposed to those objectives but, paradoxically, that very fact was one of the factors that provided the necessary close connection between the abuse and the relationship between the brothers and the Institute that gives rise to vicarious liability on the part of the latter. There was a very close connection between the brother teachers employment in the school and the sexual abuse that they committed, or must for present purposes be assumed to have committed. There was no Criminal Records Bureau at the time, but the risk of sexual abuse was recognised, as demonstrated by the prohibition on touching the children in the chapter in the Rule dealing with chastity. No doubt the status of a brother was treated by the managers as an assurance that children could safely be entrusted to his care. The placement of brother teachers in St Williams, a residential school in the precincts of which they also resided, greatly enhanced the risk of abuse by them if they had a propensity for such misconduct. This is not a borderline case. It is one where it is fair, just and reasonable, by reason of the satisfaction of the relevant criteria, for the Institute to share with the Middlesbrough Defendants vicarious liability for the abuse committed by the brothers. I would allow this appeal.

The Institute of the Brothers of the Christian Schools (the Institute) was founded in 1680 with the mission to teach children, and its members are lay brothers of the Catholic Church. The question arising in this appeal is whether the Institute is responsible in law (vicariously liable) for alleged acts of sexual and physical abuse of children by its members between 1952 and 1992 at St Williams, a residential institution at Market Weighton for boys in need of care (the School). The Institute did not own the School, which was founded in 1865 by a group of Catholic benefactors and run locally as a reformatory school for boys. In 1933 it became an approved school for boys convicted of custodial offences under a group of managers. Brothers from the Institute taught at the School alongside lay teachers and a brother always acted as headmaster of the School. In 1973 the School became an assisted community home for children in the care of the local authority, managed by the Middlesbrough Diocesan Rescue Society until 1982, and thereafter by the Catholic Child Welfare Society (Diocese of Middlesbrough). In 1990 the headmaster of the School, Brother James, was expelled from the Institute after it was discovered he was guilty of systematic sexual abuse of boys in his care. In 1993 and 2004 he was convicted of numerous counts of serious sexual offences against boys over a period of 20 years. The School was closed in 1994. Claims have been brought by 170 men in respect of abuse to which they allege they were subjected at the School, by Brother James and by other brothers. The claims are against two groups of defendants. The first group consists of the managers of the school from 1973, who inherited the statutory liabilities of the former managers and entered into contracts of employment with the brother teachers (the Middlesbrough Defendants). The second group consisted of members of the Institute (the Institute Defendants). As a preliminary issue, the High Court held that the Institute Defendants were not vicariously liable for the acts of abuse committed by brothers at the School. The Court of Appeal upheld that ruling. The Middlesbrough Defendants appealed to the Supreme Court. The Supreme Court unanimously allows the appeal. It holds that it is fair, just and reasonable for the Institute Defendants to share with the Middlesbrough Defendants vicarious liability for sexual abuse committed by the brothers. The judgment is given by Lord Phillips, with whom the other Justices agree. The law of vicarious liability had developed recently to establish a number of important propositions: It is possible for unincorporated associations (such as the Institute) to be vicariously liable for the wrongful acts of its members It is possible to be vicariously liable even if the wrongdoers act is in breach of the duty he owes to the person liable and even if the act was the criminal offence of sexual assault; and It is possible for two or more different defendants each to be vicariously liable for a single wrongful act [20] The criteria to be demonstrated to establish vicarious liability involved a synthesis of two stages: first, whether the relationship between the member and the Institute was one which was capable of giving rise to vicarious liability; and secondly examination of the connection that linked the relationship between them with the members wrongful act or omission [21]. Both were in issue in this case. The Institute relied on the fact that the Middlesbrough Defendants entered into contracts of employment with the brothers and managed and controlled both them and the School, and contended that the absence of these critical features meant that the relationship between the brothers and the Institute could not give rise to vicarious liability. The Institute was an unincorporated association but because of the manner in which it carried on its affairs Lord Phillips considered that it was appropriate to approach the case as if it was a corporate body existing to perform the function of providing a Christian education, able to own property and other assets through charitable trusts [33]. When two sets of defendants are potentially vicariously liable for the act of a wrongdoer it was necessary to give independent consideration to the relationship with each set in order to decide whether they should be liable [45]. The relationship between the Institute and the teaching brothers at the School had all of the essential elements of that between employer and employee. The teaching activity was undertaken because the brothers were so directed by the Institute; it was in furtherance of the mission of the Institute and the manner in which the brother teachers were obliged to conduct themselves was dictated by the Institutes rules. The fact that they were bound to the Institute by their vows rather than contract, and transferred all their earnings to the Institute, did not make a material difference [56 58]. Thus the first stage of the test for vicarious liability was satisfied. Stage 2 of the test is usually satisfied when a wrongdoer does something he has been required or requested to do pursuant to his relationship with the defendant in a manner that is negligent. But sexual abuse can never be a negligent way of performing such a requirement. Where abusers have been members of a church or religious order, what has weighed with the courts has been the fact that the relationship has facilitated the commission of the abuse by placing the abusers in a position where they enjoyed both physical proximity to their victims and the influence of authority over them as teachers and men of god [84]. The necessary close connection between the relationship between the defendant and the wrongdoer is established where a defendant, whose relationship with the abuser put it in the position to use the abuser to carry on its business, did so in a way which created or significantly enhanced the risk of abuse [86]. In this case the Institute placed the brothers in teaching positions and in particular the position of headmaster, responsible for running the School. The boys living on the premises were particularly vulnerable, not just as children in a school but because they were virtually prisoners and would have difficulty making credible allegations of abuse because of their personal histories [92]. The status of a brother was no doubt treated by the managers as an assurance that children could safely be entrusted to his care. The placement of brother teachers in a residential school thus greatly enhanced the risk of abuse by them if they had a propensity for such misconduct. This was not a borderline case and it was fair just and reasonable for the Institute to share vicarious liability in this case with the Middlesbrough Defendants [94].

These appeals raise issues as to the respective duties of the Secretary of State and the First tier Tribunal, on an appeal against refusal of an application to vary leave to enter or remain under the Immigration Act 1971, more particularly as to the operation of the so called one stop procedures. The Master of the Rolls (para 40), echoing words of Jackson LJ, described the law in this field as an impenetrable jungle of intertwined statutory provisions and judicial decisions. It is difficult to disagree, although on this occasion the judiciary must share some of the blame. The Patels Mr Patel and his wife arrived from India in the United Kingdom on 24 March 2009. He had been granted leave to enter as a working holiday maker until 6 March 2011, and she as his dependent wife. Their only child was born here in 2010. On 26 February 2011, they applied for further leave to remain in the UK, relying on article 8 of the European Convention on Human Rights, and rule 395C of the Immigration Rules. Their application was refused by the Secretary of State on 30 March 2011. That refusal was neither combined with, nor followed by, a decision to remove the family from the United Kingdom. They had a right of appeal to the First tier Tribunal, but that was dismissed on 14 July 2011. The merits of the refusal on the issues there raised are no longer in dispute. On further appeal to the Upper Tribunal they took a new point. This was that, in the light of the decision of the Court of Appeal in R (Mirza) v Secretary of State for the Home Department [2011] EWCA Civ 159, [2011] Imm AR 484, followed in Sapkota v Secretary of State for the Home Department [2011] EWCA Civ 1320, [2012] Imm AR 254, the Secretary of States failure to make a removal decision at the same time as, or shortly after, the decision to refuse leave to remain was unlawful. This argument, which failed before the Upper Tribunal and the Court of Appeal, is the principal issue in this court. Mr Alam Mr Alam, a citizen of Bangladesh, entered the country on 26 August 2007, as a Tier 4 student with leave to remain until 12 April 2011. On 1 April 2011 he applied for leave to remain to continue his studies. On 20 April 2011 the Secretary of State refused his application on the basis that he had not produced the required documentation. The bank statements submitted with his application were more than a month old, and therefore did not, as required by the guidance under the Points Based System, show that he had held the necessary level of funds for a consecutive period ending no more than one month before the application. By the time of the hearing before the tribunal, on 10 June 2011, he had produced the appropriate bank statements. The tribunal held that, for the purposes of his appeal under the rules, this new material was excluded from consideration by section 85A of the Nationality, Immigration and Asylum Act 2002 (which had come into effect between the date of his appeal and the date of the hearing). However, the immigration judge held that this did not prevent him taking it into account in the appeal under article 8 of the Convention, on the basis that, since he clearly meets the requirements of the rules, it was not proportionate to the aims of immigration control to refuse his application. The Upper Tribunal reversed that decision, holding that the judge had erred in treating the new evidence as showing effective compliance with the rules for the purpose of article 8. The tribunal accepted that the appellant having been in the country undertaking studies for some four years had thereby formed some sort of protected private life for the purposes of article 8. But no other aspect of his life in this country was relied on. His family ties were all with his native Bangladesh, to which he wished to return after his studies. Although the new evidence was not directly relevant under article 8, it took account of the unusual circumstances in which the right to prove compliance with the rules had been lost: I have considered the circumstances in which the claimant has failed to meet the Rules: viz. that he is one of a necessarily fixed class whose ability to prove compliance with the Rules has changed by operation of law since he began his appeal proceedings. Those circumstances do, to some extent, diminish the State's interest in removing the claimant, merely in order to maintain the integrity of the Rules. If the claimant's article 8 rights had been any stronger, I might well have concluded in the circumstances that his removal in consequence of the immigration decision would be disproportionate. As it is, however, I consider that the balance falls to be struck in favour of the Secretary of State. (para 22) Mr Anwar Mr. Anwar, a citizen of Pakistan, entered on 26 February 2010 with leave to remain as a student until 1 April 2011. On 31 March 2011 he applied to extend his leave as a Tier 4 student to enable him to complete his course. The application was supported by a Confirmation of Acceptance for Studies (CAS), which recorded that he had been assessed by reference to a document entitled ACCA examination Financial Accounting (F3). The F3 document itself was not included with the application. On 10 May 2011 the Secretary of State refused the application because, contrary to the relevant guidance, it had not included a document referred to in the CAS, and accordingly no points had been awarded for the CAS. On his appeal to the First tier Tribunal the appellant produced the relevant document, claiming that it had in fact been sent with his application form. The tribunal allowed his appeal, but their decision was set aside by the Upper Tribunal, which held that on the balance of probabilities he had not sent the relevant document with his application. That factual finding is not now in dispute. Although there was a reference to the European Convention in the grounds of appeal to the First tier tribunal, no separate appeal on human rights grounds was pursued at the hearing before either tribunal. The Court of Appeal heard the appeals of Mr Alam and Mr Anwar together, and dismissed them both on 13 July 2012. The arguments were wide ranging, summarised by Sullivan LJ under eight grounds. Most are no longer in issue. The issues According to the agreed statement, the following issues are said to arise in the appeals to this court: Patel i) Whether there is an obligation on the Secretary of State to issue a decision to remove at the same time as or immediately after refusing an individuals application for variation of leave to remain in the United Kingdom. ii) Whether there is an obligation on the Secretary of State to issue a one stop notice under section 120 of the 2002 Act when refusing an individuals application for variation of leave to remain in the United Kingdom. iii) Whether the Secretary of States refusal to vary an individuals leave to remain in the United Kingdom is unlawful if it is issued in isolation from a one stop notice or a decision to remove. Alam/Anwar iv) Whether the conclusion of the majority in AS (Afghanistan) v Secretary of State for the Home Department [2009] EWCA Civ 1076, [2011] 1 WLR 385, that an appeal to the FTT covers not only any ground before the Secretary of State when she made the decision under appeal but also any grounds raised in response to a one stop notice issued under section 120 of the 2002 Act, even if they had not been the subject of any decision by the Secretary of State and did not relate to the decision under appeal, is correct. v) Whether the statements and evidence filed by Mr Alam and Mr Anwar to the FTT amounted to additional grounds under section 120 of the 2002 Act which the FTT was obliged to consider and determine, notwithstanding the bar in section 85A of that Act. vi) In an article 8 case, when balancing the demands of fair and firm immigration control against the disruption to the family or private life of a person if removed for non compliance with the Immigration Rules, whether the nature and degree of the non compliance is significant or, as the Court of Appeal has held (in Miah v Secretary of State for the Home Department [2012] EWCA Civ 261; [2013] QB 35), irrelevant. While these issues were agreed between the parties, and they conveniently identify the main matters on which we heard submissions, it will be necessary to consider in due course the extent to which they do properly arise for decision on these appeals. For example, the question of an obligation to serve notices under section 120 (issue (ii)) does not arise in any of the three cases, since such notices were in fact served in all of them. The statutory provisions The Immigration Act 1971, and the rules made under it, constitute the principal statutory framework for the control of immigration, and the Secretary of States functions in that respect. Both the statute and the rules have been subject to frequent amendment and addition. The issues in the present appeals turn principally on the provisions of the Nationality, Immigration and Asylum Act 2002 which established a new statutory code relating to appeals against immigration decisions, including the so called one stop notices under section 120. In relation to the Secretary of States powers of removal, it will be necessary also to consider the Immigration and Asylum Act 1999 section 10, and the Immigration, Asylum and Nationality Act 2006 section 47. The starting point is section 3 of the 1971 Act. It provides that a person who is not a British citizen may not enter the United Kingdom except with leave under the Act. Where leave is given for a limited period, it may be varied by restricting, enlarging or removing the limit on its duration (section 3(3)). Section 3C (added by the 2002 Act) is entitled Continuation of leave pending variation decision. It applies where a person with limited leave applies, before the leave expires, for a variation of the leave. Subsection (2) has the effect that the leave is extended during any period when (a) the application for variation is neither decided nor withdrawn, (b) an appeal under section 82(1) of the 2002 Act could be brought while the appellant is in the United Kingdom, or an appeal brought while the appellant is within the United Kingdom is pending. By section 3C(4), a person may not make a further application for variation of his leave while it is extended under this section, but that does not prevent a variation of the application already made. It is common ground that such a variation may include grounds unrelated to those in the initial application. This provision needs to be understood also in the context of section 92 of the 2002 Act. That makes clear that for most categories of immigration decision, other than asylum or human rights claims made from within the United Kingdom and those decisions listed in subsection (2), an appeal must be brought from outside the country. Section 3C provides a limited exception for applications to extend existing leave made before its expiry. Section 82(1) of the 2002 Act confers a right of appeal to the tribunal in respect of an immigration decision. By section 82(2) immigration decision is defined as including (inter alia) a refusal to vary leave to enter or remain if the result of the refusal is that the person has no leave to remain (para (d)); and a decision that a person is to be removed by way of directions under either section 10 of the 1999 Immigration and Asylum Act or section 47 of the Immigration, Asylum and Nationality Act 2006 (paras (g), (ha)). Section 84 enumerates the possible grounds of appeal which include: (a) that the decision is not in accordance with immigration rules; (c) that the decision is unlawful under section 6 of the Human Rights Act 1998 as being incompatible with the appellants Convention rights; (e) that the decision is otherwise not in accordance with the law; (f) that the person taking the decision should have exercised differently a discretion conferred by immigration rules; (g) that removal of the appellant from the United Kingdom in consequence of the immigration decision would breach the United Kingdoms obligations under the Refugee Convention or would be unlawful under section 6 of the Human Rights Act 1998 as being incompatible with the appellants Convention rights. Section 85 is headed Matters to be considered. Its present form, along with section 85A, is derived from amendments made by the UK Borders Act 2007, which were brought into effect, subject to transitional provisions, on 23 May 2011. It provides: (1) An appeal under section 82(1) against a decision shall be treated by the Tribunal as including an appeal against any decision in respect of which the appellant has a right of appeal under section 82(1). (2) If an appellant under section 82(1) makes a statement under section 120, the Tribunal shall consider any matter raised in the statement which constitutes a ground of appeal of a kind listed in section 84(1) against the decision appealed against. (3) Subsection (2) applies to a statement made under section 120 whether the statement was made before or after the appeal was commenced. (4) On an appeal under section 82(1), 83(2) or 83A(2) against a decision the Tribunal may consider evidence about any matter which it thinks relevant to the substance of the decision, including evidence which concerns a matter arising after the date of the decision. (5) But subsection (4) is subject to the exceptions in section 85A. The exceptions in section 85A include the following: (3) Exception 2 applies to an appeal under section 82(1) if (a) the appeal is against an immigration decision of a kind specified in section 82(2)(a) or (d), (b) the immigration decision concerned an application of a kind identified in immigration rules as requiring to be considered under a Points Based System, and (c) the appeal relies wholly or partly on grounds specified in section 84(1)(a), (e) or (f). (4) Where Exception 2 applies the Tribunal may consider evidence adduced by the appellant only if it (a) was submitted in support of, and at the time of making, the application to which the immigration decision related, (b) relates to the appeal in so far as it relies on grounds other than those specified in subsection (3)(c), (c) is adduced to prove that a document is genuine or valid, or (d) is adduced in connection with the Secretary of States reliance on a discretion under immigration rules, or compliance with a requirement of immigration rules, to refuse an application on grounds not related to the acquisition of points under the Points Based System. This provision, which is relevant to the Alam and Anwar appeals, needs a little unravelling. It is not in dispute that exception 2 applied to both appeals, because the applications had fallen to be considered under the Points Based System. Accordingly, (under subsection (4)(a)) the tribunal was unable to consider the new evidence in support of the case under the rules. It could only consider it (under subsection (4)(b)) in so far as it related to grounds other than those specified in (3)(c), that is grounds other under section 84(1)(a), (e) or (f). Such other grounds include the human rights grounds under section 84(1)(c) and (g). Accordingly, consideration of the new evidence so far as relevant to such grounds, in particular article 8 of the Convention, was not excluded. Section 86 deals with the determination of the appeal. The tribunal is required to determine any matter raised as a ground of appeal and any matter which section 85 requires it to consider. It must allow the appeal in so far as it thinks that a decision against which the appeal is brought or is treated as being brought was not in accordance with the law. It may also allow the appeal on the grounds that a discretion exercised in making such a decision should have been exercised differently (section 86(3)(b)), but refusal to depart from the immigration rules is not treated as the exercise of a discretion for these purposes (section 86(6)). One stop notice Section 120 of the 2002 Act applies to a person (a) who has made an application to enter or remain in the UK, or (b) in respect of whom an immigration decision has been taken or may be taken. By subsection (2): The Secretary of State or an immigration officer may by notice in writing require the person to state: (a) his reasons for wishing to enter or to remain in the United Kingdom, (b) any grounds on which he should be permitted to enter or remain in the United Kingdom, and (c) any grounds on which he should not be removed from or required to leave the United Kingdom. There is no express provision dealing with the form of the response, nor imposing on the Secretary of State any express duty to consider it or determine the issues raised by it. Under section 85(2) as already noted, the tribunal, hearing an existing appeal under section 82(1), is required to consider any matter raised in the section 120 statement if it constitutes a ground of appeal of a kind listed in section 84(1) against the decision appealed against. Furthermore, by section 96, the section 120 notice opens the way for the Secretary of State to issue a certificate limiting the scope for subsequent appeal. Thus section 96(2) precludes an appeal against an immigration decision (the new decision) in respect of a person where the Secretary of State or an immigration officer certifies: (a) that the person received notice under section 120 by virtue of a decision other than the new decision, (b) that the new decision relates to an application which relies on a matter that should have been, but has not been raised in a statement made in response to that notice, and (c) that, in the opinion of the Secretary of State or the immigration officer, there is no satisfactory reason for that matter not having been raised in a statement in response to that notice. Removal decisions The Secretary of States powers of removal are defined by section 10 of the 1999 Act and section 47 of the 2006 Act. The former provides that a person who is not a British citizen may be removed from the United Kingdom, in accordance with directions given by an immigration officer, if (a) having only a limited leave to enter or remain, he does not observe a condition attached to the leave or remains beyond the time limited by the leave; By subsection (9) the reasonable costs of complying with the direction must be met by the Secretary of State. Section 47 of the 2006 Act, as originally enacted, provided: (1) Where a persons leave to enter or remain in the United Kingdom is extended by section 3C(2)(b), the Secretary of State may decide that the person is to be removed from the United Kingdom, in accordance with directions to be given by an immigration officer if and when the leave ends. Again the costs of compliance must be met by the Secretary of State (section 47(4)). For completeness, I note that on 8 May 2013 (after the time relevant for the present appeals) a new form of the section was inserted, providing for notice of a pre removal decision (which includes the decision on an application to vary leave to remain) to be given at the same time as the removal direction under section 47. This change was designed to deal with a practical problem arising from Sapkota which had been highlighted by a subsequent decision of the Upper Tribunal (upheld by the Court of Appeal). It is not directly material to the present appeals. The Patel appeals There is no dispute now as to the merits of the refusal of leave to remain in the Patel cases, under either the rules or the Convention. The sole issue is one of law relating to the form in which the decision was made, more particularly its segregation (the word used in some of the cases) from the decision to direct removal. The failure to issue such a direction, it is said, was not only unlawful in itself, but also undermined the validity of the previous decision to refuse leave to remain. A similar issue in relation to service of a section 120 notice, although identified in the agreed statement, does not arise on the facts of the case, since such a notice was in fact served. In support of this argument, Mr Malik relies principally on the decisions of the Court of Appeal in the cases of Mirza [2011] Imm AR 484 and Sapkota [2012] Imm AR 254 to which I have already referred. It was held, in summary, (in Mirza) that a policy of separating the refusal of leave to remain from the decision to remove was contrary to the policy and objectives of the 2002 Act to deal compendiously with all issues on the lawfulness of a persons residence in the United Kingdom; and consequently (in Sapkota) that an unjustified deferral of the removal decision would mean that the actual immigration decision was not in accordance with the law. Those judgments, and the subsequent Court of Appeal authorities, are discussed in detail in the judgment of the Master of the Rolls in the present case. Without disrespect to the judges involved in those decisions, or to Mr Maliks determined arguments in support of them, I do not propose to add materially to the voluminous discussion which this issue has already generated. It is sufficient to say that I am in entire agreement with the reasons of the Court of Appeal for not following them. The powers to issue removal directions under section 10 of the 1999 Act and section 47 of the 2006 Act (like the power to issue notices under section 120 of the 2002 Act) are just that powers. Their statutory purpose is as part of the armoury available to the Secretary of State for the enforcement of immigration control. Any extra protection provided to an appellant is incidental. Neither section can be read as imposing an obligation to make a direction in any particular case, still less as providing any link between failure to do so and the validity of a previous immigration decision. As Burnton LJ said in the Court of Appeal [2013] 1 WLR 63, para 73: This language is clearly and unequivocally the language of discretion, not duty, and it is simply not open to the court to interpret it as imposing a duty. For the court to do so is to amend the legislation, not to interpret it. The contrary argument depends to my mind on a misapplication of the so called Padfield principle (Padfield v Minister of Agriculture, Fisheries and Food [1968] AC 997). Under that principle, it is clear that discretionary powers conferred by statute must not be used in such a way as to thwart or run counter to the policy or objects of the Act (per Lord Reid, at p 1030C D)). It can no doubt be said that one of the purposes of the 2002 Act was to reduce the scope for repeat appeals, and that, as Laws LJ observed, the legislation leans in favour of what are called one stop appeals (JM (Liberia) v Secretary of State for the Home Department [2006] EWCA Civ 1402; [2007] Imm AR 293, para 23). It may be also, as Mr Malik submits, that the exercise of the Secretary of States powers has the incidental effect in some cases of adding to the range of matters an appellant is able to raise by way of appeal during the period that his leave is extended under section 3C. However, neither such general observations nor such incidental effects can be translated into an overriding policy requiring the Secretary of State to act in a particular way, nor into a right for the appellant to insist that he does so. It is to be borne in mind also that exercise of the powers to direct removal, which alone are at issue in the Patel case, is likely to involve both public cost and personal hardship or indignity. The Secretary of State does not thwart the policy of the Act if she proceeds in the first instance on the basis that unlawful overstayers should be allowed to leave of their own volition (as on the evidence the great majority do). The Upper Tribunal observed in the present case, commenting on its concerns at the implications of the decision in Sapkota: For every person whose real claim is one outside the Rules, there are many who merely want a decision in accordance with the Rules and would either voluntarily depart or make a fresh application if that appeal were to be unsuccessful. Further, the developing jurisprudence of the Upper Tribunal has moved beyond the proposition that human rights only arise on removal decisions, to cases where variation of leave applications may need to take into account a wide variety of aspects of private life under article 8 rights, thereby enabling an independent assessment of this claim to remain without the person concerned running the risk of breaking the law. (para 32) It follows that the Secretary of State was under no duty in the Patels case to issue removal directions at the time of the decision to refuse leave to remain, and that the actual decision was not invalidated by the failure to do so. In so far as the decisions of the Court of Appeal in the cases of Mirza and Sapkota indicate the contrary, they were in my view wrongly decided. It is unnecessary to consider whether the Court of Appeal was entitled as a matter of precedent to depart from them. No such inhibition affects this court. The Alam/Anwar appeals I have set out above the agreed issues said to arise in these appeals. The practical problem faced by the appellants arises from their failure to produce relevant information as required under the Points Based System at the relevant time. Each appellant was able to adduce the relevant evidence in response to the section 120 notice, but was barred by exception 2 of section 85A from relying on it directly in support of his appeal. The issue in short is whether an indirect route could be found to achieve a favourable result. The proposed route depends on using the evidence before the tribunal in support of a putative appeal against the refusal of leave to remain, relying not on the rules, but on human rights grounds (article 8 of the Convention), and thus taking it outside the scope of exception 2. This in turn depends on two propositions: first, that the tribunal was obliged to consider the new evidence in that context (scope of appeal), and secondly, that, if it had done so, the evidence that the rules could have been complied with would significantly improve the human rights case under article 8 (merits of appeal). I would accordingly dismiss the Patel appeals. Scope of appeal The first issue was the subject of detailed discussion in AS (Afghanistan) v Secretary of State for the Home Department [2011] 1 WLR 385. The Court of Appeal by a majority held that section 85(2) was to be construed as imposing a duty on the tribunal to consider any potential ground of appeal raised in response to a section 120 notice, even if it was not directly related to the issues considered by the Secretary of State in the original decision. In AQ (Pakistan) v Secretary of State for the Home Department [2011] EWCA Civ 833; [2011] Imm AR 832), it was held that majoritys approach did not require consideration of events subsequent to the Secretary of States decision. That issue does not arise in the present cases, where the new evidence related to material which was available at the time of the decisions. Turning to the judgments in AS itself, it would be difficult to expand on or improve the depth of legal and contextual analysis to be found in the judgments of all three judges. The fact that the analysis led such experienced judges to opposite conclusions suggests that the path to enlightenment will not be found by attempting a similar exercise in this judgment. The problem lies in the drafting of the relevant provisions, which defies conventional analysis. It is not only obscure in places and lacking in detail, but contains pointers in both directions. On the one hand, the words against the decision appealed against in section 85(2) suggest a focus on the content of the original decision. As Arden LJ said: A ground of appeal is not a ground of appeal against the decision appealed against if it would not, if accepted, lead to its reversal, as opposed to its being superseded by a new decision on the new evidence that leave to enter or remain should be granted. (para 30) On the other hand the first ground of appeal under section 84(1) is that the immigration decision is not (not was not) in accordance with the Rules; and in considering that question the tribunal is specifically empowered (subject to the exceptions in section 85A) to have regard to evidence concerning a matter arising after the date of appeal. Moore Bick LJ (with whom Sullivan LJ agreed) thought that the reference to the decision appealed against did not imply a limitation to the original grounds. Having decided that the decisions referred to sections 85(1) and (2) were immigration decisions of the kind identified in section 82(1), he said at para 79: . the natural meaning of these provisions is to impose on the tribunal a duty to consider matters raised by the appellant insofar as they provide grounds for challenging a substantive decision of a kind identified in section 82 that affects his immigration status. On the face of it they do not restrict that duty to considering grounds that relate to the reasons for that decision or to the original grounds of appeal. There was a similar lack of agreement on the effect of section 85(4), and in particular of the reference to matters relevant to the substance of the decision appealed against. That seems a curiously ambiguous term, which can fairly be read as referring either to the substantive effect of the decision or to the substantive reasons underlying it. Arden LJ took the latter view, which she saw as supporting her interpretation of section 85(2) (paras 31 2). At para 30 she adopted as plainly correct the approach of the Asylum and Immigration Tribunal (EA (Nigeria) v Secretary of State for the Home Department [2007] UKAIT 00013), which had read these words as meaning that the new evidence had to be relevant to the decision actually made, and had added at para 6 that: a decision on a matter under the Immigration Rules is a decision on the detailed eligibility of an individual by reference to the particular requirements of the rule in question in the context of an application that that person has made. Sullivan LJ took the opposite view, seeing section 85(4) as consistent with his view that the tribunals consideration was not limited to the grounds considered by the Secretary of State: Since section 85(2) is concerned with statements of additional grounds which must include any reasons why an appellant should be allowed to remain, and which are expressly not confined to the reasons why he should be allowed to remain under rule x of the Rules, I am not persuaded that the reference to the decision appealed against must be a reference to the decision to refuse to vary leave to remain under rule x, rather than the decision to refuse to vary leave to remain, being one of the immigration decisions as defined by section 82 (2). Such an approach to section 85 (2) would be consistent with the reference in section 85 (4) to the substance of the decision. (para 113) Moore Bick LJ thought that section 85(4) itself had little bearing on the issues before the court, since it was concerned only with the evidence which the tribunal could consider (para 83). However, his understanding of the word substance in this context, agreeing with that of Sullivan LJ, is apparent from his earlier discussion of the appropriate response to a section 120 notice. He saw its purpose as to impose on the appellant a duty to put forward any grounds he may have for challenging the substance of the decision made against him, rather than simply the grounds on which it was made (para 80, emphasis added). The broader approach of the majority seems to me to gain some support from the scheme of section 3C, under which (as is common ground) the initial application for leave to remain, if made in time, can later be varied to include wholly unrelated grounds without turning it into a new application or prejudicing the temporary right to remain given by the section. Thus the identity of the application depends on the substance of what is applied for, rather than on the particular grounds or rules under which the application is initially made. The same approach can be applied to the decision on that application, the identity or substance of which in the context of an appeal is not dependent on the particular grounds first relied on. It is of interest that, at an earlier stage, the broader approach seems to have accorded with the reading of those responsible within the Home Office for advice to immigration officers. The Immigration Directorates Instructions, issued in September 2006, noted that it was not possible under section 3C to make a second application, but continued: On the other hand, it is possible to vary the grounds of an application already made, even by introducing something completely new. A student application can be varied so as to include marriage grounds. If an application is varied before a decision is made, the applicant will be required to complete the necessary prescribed form to vary his application. If an application is varied post decision, it would be open to the applicant to submit further grounds to be considered at appeal Once an application has been decided it ceases to be an application and there is no longer any application to vary under section 3C(5). So any new information will fall to be dealt with during the course of the appeal rather than as a variation of the original application. (para 3.2 emphasis added) The same approach is supported by the current edition of Macdonalds Immigration Law & Practice 8th ed (2010) para 19.22 (under the heading The tribunal as primary decision maker). The only implicit criticism made of the majority approach in AS is that it did not go far enough. They observe that even without a section 120 notice the tribunal should be free to consider any matter including a matter arising after the decision which is relevant to the substance of the decision regardless of whether a one stop notice has been served. The substance of the decision is not the decision makers reasoned response to the particular application or factual situation that was before it but is one of the immigration decisions enumerated in section 82 and a matter includes anything capable of supporting a fresh application to the decision maker Whether or not such an extension of the majoritys reasoning can be supported, that passage indicates that the broader approach in itself is not controversial. In the end, although the arguments are finely balanced, I prefer the approach of the majority in AS. Like Sullivan LJ, I find a broad approach more consistent with the coherence of this part of the Act. He noted that the standard form of appeal, echoing the effect of the section 120 notice, urged appellants to raise any additional ground at that stage, on pain of not being able to do so later, and observed: . it seems to me that appellants would have good reason to question the coherence of the statutory scheme if they were then to be told by the AIT that it had no jurisdiction to consider the additional ground that they had been ordered by both the Secretary of State and the AIT to put forward. (para 99) Merits of appeal The second issue is the materiality to the human rights case of evidence that the appellant could in fact have complied with the rules, even though he failed to do so. The argument is that, if it is shown that the appellant could have met the substantive requirements of the rules, the failure to do so should be regarded as purely formal, and that accordingly, in the proportionality balance required by article 8, the objectives of immigration control should carry relatively less weight. A variant of this argument, referred to as the near miss principle, is that the degree of failure to meet the requirements of the rules may be relevant in the proportionality balance. Support for such an approach is said to be found in the judgment of Sedley LJ (agreed by Rimer and Sullivan LJJ) in Pankina v Secretary of State for the Home Department [2010] EWCA Civ 719; [2011] QB 376. The main issue in that case was the extent to which it was permissible for mandatory criteria relevant to the Points Based System to be contained in guidance rather than rules submitted to Parliament under section 3(2) of the 1971 Act. That issue has since been considered in the Supreme Court in R (Alvi) v Secretary of State for the Home Department (Joint Council for the Welfare of Immigrants intervening) [2012] UKSC 33; [2012] 1 WLR 2208 and R (New College London Ltd) v Secretary of State for the Home Department (Migrants Rights Network intervening) [2013] UKSC 51, [2013] 1 WLR 2358. However Sedley LJ also considered the application of article 8 under such a system. He said at paras 45 46: There appears to me, in this situation, to be no escape from the proposition that in exercising her powers, whether within or outside the rules of practice for the time being in force, the Home Secretary must have regard and give effect to applicants' Convention rights. This will mean in most cases evaluating the extent and quality of their family and private life in the United Kingdom and the implications, both for them and for the United Kingdom, of truncating their careers here. That in turn will require consideration of the significance of the criteria by which their eligibility has been gauged and found wanting. It is one thing to expect an applicant to have the necessary academic and linguistic qualifications: here a miss is likely to be as good as a mile. It is another for an applicant to fall marginally or momentarily short of a financial criterion which in itself has no meaning: its significance is as a rough and ready measure of the applicant's ability to continue to live without reliance on public funds. Having 800 in the bank, whether for three continuous months or simply at the date of application, is no doubt some indication of this; but people who are able to meet the test may fall on hard times after obtaining indefinite leave to remain, and others who fail it would, if allowed to remain, never become a charge on public funds. The Home Office has to exercise some common sense about this if it is not to make decisions which disproportionately deny respect to the private and family lives of graduates who by definition have been settled here for some years and are otherwise eligible for Tier 1 entry. If the Home Secretary wishes the rules to be blackletter law, she needs to achieve this by an established legislative route. The court can be seen in that passage to have endorsed the view that, at least in relation to financial criteria, a near miss (a marginal or momentary shortfall) might affect the consideration of proportionality under article 8. That view did not affect the results in any of the cases before it. In the only one to which it might have been relevant (Mrs Maleckia), it was held that there was in any event no prospect of success under article 8 (para 53). Mr Malik also relies on other cases, before and since, which have adopted a similar approach without reference to Pankina. In SB (Bangladesh) v Secretary of State for the Home Department [2007] EWCA Civ 28, the court when allowing an appeal against the tribunals decision on other grounds agreed with them that the fact that the appellant only just failed to qualify for admission was a fact to be counted in her favour. Ward LJ, at para 30, adopted the observation of Collins J in Lekstaka v Immigration Appeal Tribunal [2005] EWHC 745 (Admin) para 38 that: one is entitled to see, whether in all the circumstances, this case falls within the spirit of the Rules or the policies, even if not within the letter. Ward LJ added: That seems to us to be the right approach. As Simon Brown L.J. said in Ekinci at paragraph 16: Even if strictly he fails to qualify so that the ECO would be prohibited from granting leave to enter, given the obvious article 8 dimension to the case the ECO would refer the application to an Immigration Officer who undoubtedly has a discretion to admit someone outside the Rules. And if entry were to be refused at that stage, then indeed a section 59 right of appeal would certainly arise in which, by virtue of section 65(3), (4) and (5) the adjudicator would have jurisdiction to consider the appellant's human rights. (I note in passing that those comments of Simon Brown LJ were made with reference to the rather different appeal provisions of the Immigration and Asylum Act 1999, and were directed specifically to a case with an obvious article 8 dimension.) More recently, in R (Mansoor) v Secretary of State for the Home Department [2011] EWHC 832 (Admin), Blake J, sitting on this occasion in the Administrative Court, held that on the facts the interference with the applicants family life was such as to make it disproportionate under article 8 to remove her, notwithstanding that she was unable to satisfy a relevant criterion in the rules. He said, at para 35 (without specific reference to Pankina): the terms of the immigration rules are not a legitimate aim in their own right A judgment needs to be made as to how significant the aim, and how far the removal of the particular claimant in the circumstances of her case is necessary to promote that aim. The mere fact a genuine spouse lawfully admitted with her British citizen husband and settled children can no longer meet one requirement of the rules through no fault of her own is unlikely to amount to a weighty reason to justify interference with family life here that is otherwise to be respected. The opposite approach is supported by the judgment of Stanley Burnton LJ (agreed by Maurice Kay and Lewison LJJ) in Miah v Secretary of State for the Home Department [2013] QB 35. In that case the applicant was refused leave to remain as a Tier 2 (General) Migrant at a time when he was two months short of the five years continuous residence necessary to support a case for indefinite leave to remain under the rules. It was argued that, in assessing whether his removal should be permitted under article 8.2 of the Convention, the weight to be given to the maintenance of immigration controls should be diminished because he had missed satisfying the rules by only a small margin. Burnton LJ observed that, as formulated in the skeleton submissions of Mr Malik (appearing for the appellant in that case as in the present), the argument was not so much near miss as sliding scale, by virtue of which There is an inverse relationship between the degree to which there is compliance with the rules and the immigration policy imperative which demands that unsuccessful applicants be removed (paras 9 10). In rejecting that argument, Burnton LJ referred to a passage in the speech of Lord Bingham in Huang v Secretary of State for the Home Department [2007] 2 AC 167, in which he discussed the long established and central role of the immigration rules in determining those to whom leave to enter or remain should be granted. Although the near miss argument as such was not in issue in that case, Burnton LJ thought it inconsistent with Lord Binghams approach. He said at para 14: I find Lord Bingham's reference in para 6 to rules, to be administratively workable, [requiring] that a line be drawn somewhere and in para 16 to the general administrative desirability of applying known rules if a system of immigration control is to be workable, predictable, consistent and fair as between one applicant and another; the damage to good administration and effective control if a system is perceived by applicants internationally to be unduly porous, unpredictable or perfunctory to be helpful and generally inconsistent with a near miss principle. He referred to two previous Court of Appeal judgments (not cited in Pankina) in which similar arguments had been rejected: Mongoto v Secretary of State for the Home Department [2005] EWCA Civ 751, and R (Rudi) v Secretary of State for the Home Department [2007] EWCA Civ 1326. In the latter case, citing Mongoto, I said of the near miss argument: 28. This argument is, in my view, based on a misconception. The Secretary of State is of course entitled to have a policy. The promulgation of the policy normally creates a legitimate expectation that it will be applied to those falling within its scope unless there is good reason for making an exception. So much is trite law. It is also trite law that the existence of the policy does not excuse the decision maker from due consideration of cases falling outside it. However, the law knows no near miss principle. There is no presumption that those falling just outside the policy should be treated as though they were within it, or given special consideration for that reason. Faced with the conflict between the approach taken in these authorities and that of Pankina Burnton LJ had no difficulty in preferring the former, which he regarded as binding on the court (paras 21 25). He could see no principled basis for distinguishing, as Sedley LJ had proposed, between rules to which the near miss principle did and did not apply. In particular he disagreed with Sedley LJ that a financial criterion has in itself no meaning, and could therefore be distinguished from other rules, such as those relating to academic qualifications, in respect of which a miss is as good as a mile. In conclusion he said at paras 25 26: Finally, quite apart from authority, I prefer the approach stated in Mongotos case and Rudis case. A rule is a rule. The considerations to which Lord Bingham referred in Huangs case require rules to be treated as such. Moreover, once an apparently bright line rule is regarded as subject to a near miss penumbra, and a decision is made in favour of a near miss applicant on that basis, another applicant will appear claiming to be a near miss to that near miss. There would be a steep slope away from predictable rules, the efficacy and utility of which would be undermined. For these reasons, I would dismiss the appeal in relation to the near miss argument. In my judgment, there is no near miss principle applicable to the Immigration Rules. The Secretary of State, and on appeal the tribunal, must assess the strength of an article 8 claim, but the requirements of immigration control are not weakened by the degree of non compliance with the Immigration Rules. The difference between the two positions may not be as stark as the submissions before us have suggested. The most authoritative guidance on the correct approach of the tribunal to article 8 remains that of Lord Bingham in Huang. In the passage cited by Burnton LJ Lord Bingham observed that the rules are designed to identify those to whom on grounds such as kinship and family relationship and dependence leave to enter should be granted, and that such rules to be administratively workable, require that a line be drawn somewhere. But that was no more than the starting point for the consideration of article 8. Thus in Mrs Huangs own case, the most relevant rule (rule 317) was not satisfied, since she was not, when the decision was made, aged 65 or over and she was not a widow. He commented at para 6: Such a rule, which does not lack a rational basis, is not to be stigmatised as arbitrary or objectionable. But an applicant's failure to qualify under the rules is for present purposes the point at which to begin, not end, consideration of the claim under article 8. The terms of the rules are relevant to that consideration, but they are not determinative. Thus the balance drawn by the rules may be relevant to the consideration of proportionality. I said much the same in Rudi. Although I rejected the concept of a near miss principle, I did not see this as inconsistent with the Collins Js words in Lekstaka: Collins J's statement, on which the court relied [in SB], seems unexceptionable. It is saying no more, as I read it, than that the practical or compassionate considerations which underlie the policy are also likely to be relevant to the cases of those who fall just outside it, and to that extent may add weight to their argument for exceptional treatment. He is not saying that there arises any presumption or expectation that the policy will be extended to embrace them. (para 31(ii)) (My reference to exceptional treatment needs to be read now in the light of Huang para 20 in which Lord Bingham made clear that, contrary to previous Court of Appeal case law, there was no separate test of exceptionality.) Although the context of the rules may be relevant to the consideration of proportionality, I agree with Burnton LJ that this cannot be equated with a formalised near miss or sliding scale principle, as argued for by Mr Malik. That approach is unsupported by Strasbourg authority, or by a proper reading of Lord Binghams words. Mrs Huangs case for favourable treatment outside the rules did not turn on how close she had come to compliance with rule 317, but on the application of the family values which underlie that rule and are at the heart also of article 8. Conversely, a near miss under the rules cannot provide substance to a human rights case which is otherwise lacking in merit. It is important to remember that article 8 is not a general dispensing power. It is to be distinguished from the Secretary of States discretion to allow leave to remain outside the rules, which may be unrelated to any protected human right. The merits of a decision not to depart from the rules are not reviewable on appeal: section 86(6). One may sympathise with Sedley LJs call in Pankina for common sense in the application of the rules to graduates who have been studying in the UK for some years (see para 47 above). However, such considerations do not by themselves provide grounds of appeal under article 8, which is concerned with private or family life, not education as such. The opportunity for a promising student to complete his course in this country, however desirable in general terms, is not in itself a right protected under article 8. The present appeals I have discussed the respective arguments on this point in some detail because of its general importance and the conflicting statements found in some of the judgments. However, I can deal relatively shortly with the two cases before us. The near miss argument was not advanced in the same form before the Court of Appeal, apparently because it was thought to be precluded by Miah. Even if otherwise well founded, it is not in my view available to Mr Anwar, since no separate human rights grounds were advanced on his behalf before either tribunal. So the issue as to whether the tribunal would have been obliged to consider them, and with what effect, did not arise. In Mr Alams case the human rights case was considered at both levels, but ultimately failed before the Upper Tribunal on its merits. The Upper Tribunal fairly gave some weight to the unusual circumstances in which he had lost his ability to rely on the new evidence (as a result of a change in the rules after the start of the appeal). But there was little or nothing to weigh on the other side of the balance, apart from the time he had spent in this country as a student under the rules. It would be surprising if that status, derived entirely from the rules, was sufficient in itself to add weight to a case for favourable treatment outside the rules. I see no error in the approach of the Upper Tribunal. Conclusion For these reasons, I would dismiss all three appeals. LORD MANCE (with whom Lord Kerr, Lord Reed and Lord Hughes agree) I would also dismiss these appeals for the reasons given by Lord Carnwath. Anything that we say about AS (Afghanistan) v Secretary of State for the Home Department [2009] EWCA Civ 1076, [2011] 1 WLR 385 is obiter, since in the case of Anwar no separate human rights ground was advanced in either tribunal and in the case of Alam the Upper Tribunal held correctly that there is nothing in any human rights point that was raised. If we were to disagree with the majority approach in AS, that would raise a problem of precedent for lower courts, but since I would on balance also favour leaving the majority view undisturbed, that problem does not arise. In fact, it appears that the whole area of appeals is likely to be reshaped by the Immigration Bill 2013 (HC Bill 110), so that the majority approach in AS and any view we express about the correct approach are likely to become irrelevant in future cases. The issue arising under section 85(2) of the Nationality, Immigration and Asylum Act 2002 which was addressed in AS is undoubtedly a difficult and very arguable one, and the arguments for and against the rival approaches are comprehensively discussed in AS. As I see it, the essential question was well defined by Sullivan LJ at paras 111 113. It is whether the decision appealed against to which section 85(2) refers is the generic decision to refuse leave to remain (i.e. in the present cases, within section 82(2)(d)), or the particular decision to refuse leave under a particular head, for example under a particular rule of the Immigration Rules or on a Human Rights ground. The majority approach in AS does not mean that section 85(2) enables an appellant, who has sought leave to remain, to go outside the scope of a leave to remain application by adding or substituting an appeal under a different head of section 82(2), e.g. by asserting a wrongful refusal of entry clearance or of a certificate of entitlement: see sections 82(2)(b) or (c)). To that extent, it seems to me that the majority approach is not open to the criticism that it amounts to re reading section 85(2) as if it used the words against a decision of a kind listed in section 82(2) or omitted the words against the decision appealed against altogether. Where the Secretary of State chooses to give a section 120(2) notice, the aim is to flush out any new (a) reasons for wishing to enter or remain and/or (b) grounds for being permitted to enter or remain and/or (c) grounds for not being removed or required to leave the UK. The statement in response need not repeat reasons or grounds set out in the existing application or decision which is the occasion for giving the notice: section 120(3). When section 85(2) requires the Tribunal to consider any matter raised in the [section 120] statement which constitutes a ground of appeal of a kind listed in section 84(1) against the decision appealed against, it is therefore referring to new reasons or grounds not previously covered by the decision appealed against. So long as they [constitute] a ground of appeal of a kind listed in section 84(1), they can be relied upon. By inference, it can be said, it is or becomes legitimate to treat them as constituting a ground of appeal, even though they were not raised before or decided by the Secretary of State. So, instead of relying on the Immigration Rules to justify leave to remain, an appellant can rely on a Human Rights ground, as Alam sought to do. And in AS itself, it would follow that the majority was correct to hold that an appellant could invoke a different Immigration Rule to justify leave to remain in the case of AS herself: that she qualified under the International Graduate Scheme, rather than as a person intending to establish herself in business, in the other case of NV, on the basis that she had ten years residence, rather than on the basis that she was a student. Section 3C(4) of the 1971 Act certainly provides some forceful arguments to the contrary of the majority conclusion in AS. But I am inclined to think that Moore Bick and Sullivan LJJ deal sufficiently in their paras 84 86 and 102 with the problem of reconciling their conclusion with section 3C(4). Essentially, it is up to the Secretary of State to decide whether to serve a section 120 notice. It is true that the majority approach to section 85(2) means that an applicant may open up issues which would otherwise be closed, at least until conclusion of the existing appeal (after which the applicant, if unsuccessful in the appeal, would be an overstayer). But it does at the same time close down some further applications which the appellant might, whether as an overstayer or from abroad, make. The fact that the Tribunal will, in a wider area, become primary decision maker appears to me relatively indecisive, bearing in mind that it anyway acts as decision maker in some significant areas. The overlap argument advanced by Sullivan LJ at para 106 also seems to me relevant, if one is considering the advantages and disadvantages of each solution. help identify at what level of detail that decision is to be considered. On the other hand, I am not persuaded that there is anything in the substance point based on section 85(4). Moore Bick LJ (para 83), rather than Sullivan LJ (para 113) was in my view right on this. Section 85(4) is dealing only with evidence which goes to the substance (heart) of the decision, but does not

These appeals concern refusals of leave to remain. Mr Patel and his wife, Mrs Patel (the Patels), arrived from India in the UK on 24 March 2009. Mr Patel had been granted leave to enter as a working holiday maker until 6 March 2011, and Mrs Patel had been granted leave as his dependent wife. Their only child was born here in 2010. On 26 February 2011, the Patels applied for further leave to remain, relying on article 8 (right to respect for family and private life) of the European Convention on Human Rights (the Convention), and rule 395C of the Immigration Rules (the rules). Their application was refused by the Secretary of State on 30 March 2011. That refusal was neither combined with, nor followed by, a decision to remove the family from the UK. The Patels argued that the Secretary of States failure to make a removal decision at the same time as, or shortly after, the decision to refuse leave to remain was unlawful. This argument was unsuccessful in both the Upper Tribunal and the Court of Appeal. Mr Alam, a Bangladeshi citizen, entered the UK on 26 August 2007 as a Tier 4 student with leave to remain until 12 April 2011. On 1 April 2011 he applied for leave to remain to continue his studies, and on 20 April 2011 the Secretary of State refused his application on the basis that he had not produced the required documentation. The bank statements submitted with his application were more than a month old and therefore did not show the necessary level of funds for a consecutive period ending no more than one month before the application. Mr Alam produced the appropriate bank statements by the First tier tribunal hearing, at which it was held that, whilst this new material was excluded from consideration by section 85A of the Nationality, Immigration and Asylum Act 2002 (the 2002 Act, which had come into effect between the date of his appeal and the date of his hearing), this material could be taken into account in the appeal under article 8 of the Convention. The tribunal concluded that, since Mr Alam met the requirements of the rules, it would be disproportionate to refuse his application. The Upper Tribunal reversed this decision, holding that Mr Alams article 8 rights were not sufficiently strong to make his removal disproportionate. Mr Anwar, a Pakistani citizen, entered the UK on 26 February 2010 with leave to remain as a student until 1 April 2011. He applied to extend his leave as a Tier 4 student to enable him to complete his course. This application was supported by a Confirmation of Acceptance for Studies (CAS). On 10 May 2011 the Secretary of State refused the application because it had not included a document referred to in the CAS. On his appeal to the First tier Tribunal Mr Anwar produced the relevant document. The First tier Tribunal allowed his appeal, but this decision was set aside by the Upper Tribunal. Although there was a reference to the Convention in the grounds of appeal to the First tier Tribunal, no separate appeal on human rights grounds was pursued at the hearing before either tribunal. The Court of Appeal heard the appeals of Mr Alam and Mr Anwar together and dismissed them both. The Supreme Court unanimously dismisses all three appeals. Lord Carnwath, with whom the rest of the Court agrees, gives the majority judgment. In the Patel appeal the Court holds that the Secretary of State was under no duty to issue removal directions at the time of the decision to refuse leave to remain, and that the actual decision was not invalidated by her failure to do so. In the Alam and Anwar appeals, although the First tier tribunal was obliged under section 120 of the 2002 Act to consider the new evidence filed, this evidence did not significantly improve their respective cases under article 8 of the Convention. The sole issue in the Patel appeal relates to the segregation of the decision to refuse leave to remain from the decision to direct removal. The Patels argued, relying on the Court of Appeal decisions in Mirza [2011] Imm AR 484 and Sapkota [2012] Imm AR 254, that the failure to issue such a direction was not only unlawful in itself, but also undermined the validity of the previous decision to refuse leave to remain [25 26]. The Court agrees with the Court of Appeals reasons for not following the decisions in Mirza and Sapkota. Neither section 10 of the 1999 Immigration and Asylum Act nor section 47 of the Immigration, Asylum and Nationality Act 2006, which define the Secretary of States powers of removal, can be read as imposing an obligation to make a direction in any particular case, still less as providing any link between failure to do so and the validity of a previous immigration decision [27]. The Secretary of State was under no duty in the Patels case to issue removal directions at the time of the decision to refuse leave to remain, and the actual decision was not invalidated by failure to do so. Insofar as the decisions of the Court of Appeal in Mirza and Sapkota indicate the contrary, they were wrongly decided [30]. The Alam and Anwar appeals raise the issue of whether the statements and evidence filed by Mr Alam and Mr Anwar to the First tier Tribunal amounted to additional grounds under section 120 of the 2002 Act, which the First tier Tribunal was obliged to consider and determine notwithstanding the bar in section 85A of that Act [10]. Whether the evidence before the tribunal in support of a putative appeal against the refusal of leave to remain can be taken on human rights grounds depends on two propositions: that the tribunal was obliged to consider the new evidence in that context, and secondly, that, if it had done so, the evidence that the rules could have been complied with would significantly improve the human rights case under article 8 [33]. In Mr Anwars case no separate human rights grounds were advanced on his behalf before either tribunal and so the issue as to whether the tribunal would have been obliged to consider them, and if so to what effect, does not arise [58]. On the first proposition, the Court holds (agreeing with the majority in AS(Afghanistan) v Secretary of State [2011] 1 WLR 385) that section 85(2) of the 2002 Act imposes a duty on the tribunal to consider any potential ground of appeal raised in response to a section 120 notice, even if it does not directly relate to the issues considered by the Secretary of State in the original decision [34 44]. On the second proposition, in Mr Alams case the human rights case was considered but failed before the Upper Tribunal. Some weight was given to the circumstances in which he lost his ability to rely on the new evidence, but against this there was only the time he had spent in this country as a student under the rules. It would be surprising if that status, derived entirely from the rules, was sufficient in itself to add weight to a case for favourable treatment outside the rules. The Court holds that there was no error in the Upper Tribunals approach [59].

The appellant, VTB Capital plc (VTB), is incorporated and registered, and authorised and regulated as a bank, in England. It is majority owned by JSC VTB Bank (VTB Moscow), a state owned bank based in Moscow. The first, second and fourth respondents are, respectively, Nutritek International Corp (Nutritek), Marshall Capital Holdings Ltd (Marcap BVI), both British Virgin Islands companies, and Mr Konstantin Malofeev, a Russian businessman resident in Moscow said to be the ultimate owner and controller of both, as well as of the third respondent, Marshall Capital LLC (Marcap Moscow), a Russian company which has not been served. The present case arises from a Facility Agreement dated 23 November 2007 (the Facility Agreement) entered into between VTB and a Russian company, Russagroprom LLC (RAP), under which VTB advanced some US$225,050,000 to RAP. The advance was primarily to enable RAP to buy six Russian dairy companies and three associated companies (the dairy companies) from Nutritek. After making three interest payments (and no payments of capital), RAP defaulted on the loan in November 2008. VTB believes the security provided for the loan to be worth only in the region of US$32m to US$40m. VTBs case is that it was induced in London to enter into the Facility Agreement, and an accompanying interest rate swap agreement, by misrepresentations made by Nutritek, for which the other respondents are jointly and severally liable. The misrepresentations alleged are, first, that RAP and Nutritek were not under common control, and second, that the value of the dairy companies was much greater than they were in fact worth. VTBs case is that the misrepresentations were fraudulent. In order to bring proceedings in tort in England against any of the respondents, VTB required permission to effect service on them out of the jurisdiction. Permission was obtained from Master Winegarten on 11 May 2011. The first, second and fourth respondents were served, and applied to set aside the service. In response, VTB applied for leave to amend its particulars of claim to add a contractual claim, seeking to hold the respondents liable for breach of the Facility Agreement and interest rate swap, on the basis that RAPs corporate veil could in the circumstances be pierced and the respondents held liable as persons behind the borrowing. The respondents application to set aside succeeded and VTBs application to amend failed before Arnold J, and the Court of Appeal upheld his decision on both points, albeit by reasoning in some respects different. As to service out, it is common ground, in the light of the decisions below, that VTB has a serious issue to be tried in tort against each of the respondents, and a good arguable case that its tort claims fall within CPR Part 6, PD 6B, para 3.1(9)(a), on the basis that they led to VTB sustaining damage within the jurisdiction. But both courts below held that VTB failed to show that England was clearly or distinctly the appropriate forum for resolution of VTBs tort claims. As to piercing the corporate veil, both courts have held that, although such a principle exists, no basis exists in the present circumstances for applying it to hold the respondents liable on a Facility Agreement or interest rate swap, into which they are alleged to have induced VTB to enter by deceit. VTB now appeals by permission of the Supreme Court on both points, which I will consider in turn. Appropriate forum the basis of the claims Both the alleged misrepresentations on which VTB relies originated in Russia, but they reached VTB in London (very probably via VTB Moscow), and were relied upon by VTB there when it gave formal agreement to the Facility Agreement and interest rate swap there. Further, VTB sustained its loss by disbursing money in and from London, although, as will appear, it was in fact covered by VTB Moscow against any loss which it might otherwise make on the loan. In these circumstances, I address the question of the appropriate forum on the basis that, contrary to the conclusion of the judge and Court of Appeal, the law governing the alleged tort of deceit is English rather than Russian law. In summary, this is because England is the place where the events constituting the tort occurred, within the meaning of section 11(1) of the Private International Law (Miscellaneous Provisions) Act 1995 and the respondents have not shown under section 12 that the significance of the factors connecting the tort with Russia is such that it is substantially more appropriate for Russian rather than English law to apply to determine the issues arising in this case. Whether the same applies to the alleged tort of conspiracy was not the focus of detailed submissions on this appeal and appears to me more doubtful. The conspiracy was to commit the deceit, but since both are based on a common design allegedly formed in Russia, that is a point that cuts both ways. I am however content to proceed on the basis that the conspiracy was, like the deceit, governed by English law, since ultimately in my view it makes no difference to the result. It is relevant in the light of the above to examine the pleaded basis for the allegations of deceit and conspiracy. Each of these alleged torts depends upon an allegation that the first respondent, Nutritek, made false representations as part of a common design and conspiracy with the other respondents to defraud VTB: amended particulars of claim, paras 27(f) and (g). They acted in concert pursuant to a common design: amended particulars of claim, para 67(a). The nominal owner of Nutritek was the second respondent, Marcap BVI. Marcap BVI through another company owned and controlled Marshall Capital LLC (Marcap Moscow), and it is pleaded that Marcap through Marcap BVI had de facto control of and beneficially owned in part Nutritek (amended particulars of claim, para 68(a); see also para 55) and that The whole transaction under which VTB was defrauded was co ordinated by Marcap (para 68(d)). Marcap is defined as the Marshall Capital group of companies (para 3). These pleaded formulations no doubt point to the reality that the affairs of Nutritek were controlled in Moscow, by Marcap Moscow through Marcap BVI, and, consistently with this, Marcap Moscows offices and personnel feature prominently in the history of the transaction: see e.g. amended particulars of claim, paras 30 and 69 and para 19 below. It follows that, even though the tort of deceit was itself committed in England, the alleged tortious responsibility of all the respondents depends upon its being established that they were party to a common design. On the facts of this case, it is also clear that any common design is alleged to have been and must have been formed in Russia. That is where Mr Malofeev and Marcap Moscow are based and it is Marcap who co ordinated the transaction under which the fraud allegedly occurred and through Mr Malofeev as Marcap BVIs agent that the Court of Appeal held that there was a good arguable case against Marcap BVI: see judgment, para 127. As to Nutritek that was, like Marcap BVI, a British Virgin Islands company, but it was principally owned by two Russian companies (see amended particulars of claim, para 2(a)), it was managed in Russia, no doubt through Marcap Moscow, and the approach relating to the proposed sale and facility agreement was made on its behalf to VTB Moscow by Mr Malofeev. The principal witnesses from all three respondents who have been served in relation to the alleged torts will come from Russia. The conclusion that the alleged tort of deceit is governed by English law is very relevant to the question of the appropriate forum, and I am prepared to assume that the alleged tort of conspiracy is also governed by English law. However, assuming English law to govern both alleged torts, no one suggests that this is decisive of the appropriate forum. For reasons I have already indicated, the common design on which VTBs tortious claims depend is thoroughly Russian. The legal principles regarding appropriate forum The appeal was originally presented to the Supreme Court as raising a significant issue regarding the nature and extent of the relevance of the governing law and the way in which this should be expressed. The suggestion was that a conclusion that the tort was committed in England gave rise to a strong presumption in favour of an English forum. It was submitted that the Court of Appeal had unjustifiably diluted this. It appears clear that it was only before the Court of Appeal that the suggestion was evidently first advanced. The judges judgment makes no reference at all to the line of authority represented by Cordoba Shipping Co Ltd v National State Bank, Elizabeth, New Jersey (The Albaforth) [1984] 2 Lloyds Rep 91, to which so much significance is now attached. The appellants skeleton argument before the Court of Appeal raises the point, but does not in any way criticise the judge for not mentioning it again indicating that the different counsel representing the appellant at that stage had not relied upon it. The locus classicus in relation to issues of appropriate forum at common law is Spiliada Maritime Corpn v Cansulex Ltd [1987] AC 460, where Lord Goff of Chieveley gave the leading speech. He identified as the underlying aim in all cases of disputed forum, to identify the forum in which the case can be suitably tried for the interests of all the parties and for the ends of justice (p 480G). But he also identified the important distinction in the starting point and onus of proof between cases where permission is required to serve proceedings out of the jurisdiction and situations where service is possible without permission: p 480G H. The present case falls into the former category. In cases within that category, permission was not to be granted under the former rules of court unless it shall be made sufficiently to appear to the court that the case is a proper one for service out (RSC Ord 11, r 4(2)), and, as Lord Goff noted, the jurisdiction being exercised may be exorbitant (p 481A D). On this basis, Lord Goff concluded that: The effect is, not merely that the burden of proof rests on the plaintiff to persuade the court that England is the appropriate forum for the trial of the action, but that he has to show that this is clearly so (p 481E). Lord Goff went on to explain that caution was necessary in respect of the word exorbitant caution that explains his statement that the jurisdiction to serve out may be exorbitant. He noted (p 481F 482B) that the circumstances in which permission to serve out may be granted: are of great variety, ranging from cases where, one would have thought, the discretion would normally be exercised in favour of granting leave (e.g., where the relief sought is an injunction ordering the defendant to do or refrain from doing something within the jurisdiction) to cases where the grant of leave is far more problematical. In addition, the importance to be attached to any particular ground invoked by the plaintiff may vary from case to case. For example, the fact that English law is the putative proper law of the contract may be of very great importance .; or it may be of little importance as seen in the context of the whole case. In these circumstances, it is, in my judgment, necessary to include both the residence or place of business of the defendant and the relevant ground invoked by the plaintiff as factors to be considered by the court when deciding whether to exercise its discretion to grant leave; but, in so doing, the court should give to such factors the weight which, in all the circumstances of the case, it considers to be appropriate. The modern rules reflect more precisely Lord Goffs statement of general principle, in providing that permission is not to be given unless the court is satisfied that England and Wales is the proper place in which to bring the claim: CPR, rule 6.37(3). In the present case, the appellants rely upon words of Robert Goff LJ, as he was, in an earlier Court of Appeal case: Cordoba Shipping Co Ltd v National State Bank, Elizabeth, New Jersey (The Albaforth) [1984] 2 Lloyds Rep 91, and the acceptance of that case as consistent with The Spiliada by the House of Lords in the later case of Berezovsky v Michaels [2000] 1 WLR 1004. In The Albaforth Robert Goff LJ deduced from earlier case law that (p 96): where it is held that a Court has jurisdiction on the basis that an alleged tort has been committed within the jurisdiction of the Court, the test which has been satisfied in order to reach that conclusion is one founded on the basis that the Court, so having jurisdiction, is the most appropriate Court to try the claim, where it is manifestly just and reasonable that the defendant should answer for his wrongdoing. This being so, it must usually be difficult in any particular case to resist the conclusion that a Court which has jurisdiction on that basis must also be the natural forum for the trial of the action. If the substance of an alleged tort is committed within a certain jurisdiction, it is not easy to imagine what other facts could displace the conclusion that the Courts of that jurisdiction are the natural forum. Certainly, in the present case, I can see no factors which could displace that conclusion. In Berezovsky v Michaels a challenge to the consistency of this approach with The Spiliada was rejected by Lord Steyn in a speech with which the other two members of the majority agreed: speaking of a line of authority in which the approach taken in The Albaforth had been followed, he said (p 1014A F): The express or implied supposition in all these decided cases is that the substance of the tort arose within the jurisdiction. In other words the test of substantiality as required by Kroch v Rossell [1937] 1 Al1 ER 725 was in each case satisfied. Counsel for Forbes argued that a prima facie rule that the appropriate jurisdiction is where the tort was committed is inconsistent with the Spiliada case [1987] AC 460. He said that Spiliada admits of no presumptions. The context of the two lines of authority must be borne in mind. In Spiliada the House examined the relevant questions at a high level of generality. The leading judgment of Lord Goff of Chieveley is an essay in synthesis; he explored and explained the coherence of legal principles and provided guidance. Lord Goff of Chieveley did not attempt to examine exhaustively the classes of cases which may arise in practice, notably he did not consider the practical problems associated with libels which cross national borders. On the other hand, the line of authority of which The Albaforth is an example was concerned with practical problems at a much lower level of generality. Those decisions were concerned with the bread and butter issue of the weight of evidence. There is therefore no conflict. Counsel accepted that he could not object to a proposition that the place where in substance the tort arises is a weighty factor pointing to that jurisdiction being the appropriate one. This illustrates the weakness of the argument. The distinction between a prima facie position and treating the same factor as a weighty circumstance pointing in the same direction is a rather fine one. For my part the Albaforth line of authority is well established, tried and tested, and unobjectionable in principle. Kroch v Rossell [1937] 1 All ER 725 was a case in which a foreigner describing himself as a gentlemen of no occupation claimed that he had been libelled in Le Soir, a publication with a daily circulation in Paris of about a million and a half, and in London of well under 50. He failed to establish any English reputation or connection, save temporary presence here to start the proceedings. Not surprisingly, the Court of Appeal thought that any breach here was technical and of no substance. It described the principles governing permission as requiring an examination of the circumstances to identify where the action should be better tried, in terms which foreshadowed Lord Goffs approach in The Spiliada. Berezovsky v Michaels was concerned with an alleged libel of a Russian businessman in a magazine with sales of 785,000 in the USA, 1,900 in England and 13 in Russia. But, in contrast with the position in Kroch v Rossell, the claimant had significant connections with and reputation to protect in England. On the basis that the English tort was a separate one, for the pursuit of which England was prima facie the appropriate forum on the approach taken in The Albaforth, the majority in the House upheld the Court of Appeals conclusion that England was the appropriate forum for its pursuit. The Albaforth line of authority is no doubt a useful rule of thumb or a prima facie starting point, which may in many cases also prove to give a final answer on the question whether jurisdiction should appropriately be exercised. But the variety of circumstances is infinite, and the Albaforth principle cannot obviate the need to have regard to all of them in any particular case. The ultimate over arching principle is that stated in The Spiliada, and, if a court is not satisfied at the end of the day that England is clearly the appropriate forum, then permission to serve out must be refused or set aside. The history of the transaction In the present case, there are two elements of the deceit by which VTB claims that it was deceived into entering into the facility agreement: the first goes to the ownership of the buyers, RAP; the second goes to the financial position of the dairy enterprises being sold to RAP. A large part of the evidence on these aspects by which VTB obtained permission to serve out of the jurisdiction on 11 May 2011 consisted of statements from Mr Konstantin Tulupov and Mr Vadim Muraviev, both of Moscow. There was further evidence in support of the application for permission to serve out, all from other Russian witnesses: see para 191 of Arnold Js judgment, quoted in para 41 below. Mr Tulupov was until October 2008 employed at JSC, VTB Moscow as a director within the Investment Business Acquisition and Leverage Finance Team in Moscow. Mr Muraviev had no personal involvement in events but was when he made his statement in April 2011 the Head of the Division of Distressed Debt Settlement at VTB Moscow and made his statement on the basis of a series of interviews had on 1 February 2011 with various staff members of VTB, namely Colin Magee, VTBs then general counsel, Julia Ferris, director at VTBs legal counsel department, Peter Yates, VTBs head of credit portfolio management and administration and Martin Pasek, managing director of structuring at VTB. Mr Tulupov explains that he was the project manager in respect of the facility agreement between VTB and RAP, a transaction that was both high risk but offered potentially significant benefits for VTB and VTB Moscow (para 8). As such he would (para 70) attend meetings with and obtain information from potential borrowers, draft proposed terms of any loan to submit to VTB Moscows credit committee, liaise with VTB where it was to be the lender of record, deal with any matters raised by VTB Moscows credit committee, have the conduct of matters arising after any loan was made, although where VTB was the lender of record the performance of the loan was also monitored by it and in all these matters report to his managing director, Mr Konstantin Ryzhkov, and at times also to his superior, one of two senior vice presidents, Mr Vassily Kirpichev and Mr Alexander Yastrib, who in turn reported to the deputy president, Mr Levin. During the course of the present transaction, Mr Ryzhkov also became head of the investment business acquisition and leverage finance team of VTB in London (according to Mr Muraviev from 1 September 2007). Mr Tulupov in para 8 deals with the two bases of the present claim. He states that the value of the shareholding and cash flow of the dairy companies was of considerable importance to VTB and VTB Moscow, since it represented the only real security of value, and for this reason they wanted an independent valuation and relied upon that provided by Ernst & Young dated September 2007. As to the alleged representation regarding ownership of RAP, he said: G. Whilst it was entirely a matter for the Credit Committee of VTB Moscow, if VTB Moscow had known that the proposal for the sale by Nutritek was to a company under common control, it is likely VTB Moscow would have approached the proposal differently. In particular, I believe that it is likely to have viewed the proposal as one seeking asset finance rather than acquisition finance. Amongst one of the many additional matters that would have been considered (and to which I will briefly refer later in this statement) would be the provision of additional security; H. Given that it was disclosed to VTB Moscow at the outset that Nutritek was controlled by Marcap, which I understood was a family of funds controlled by Mr Konstantin Malofeev . then Marcap was the obvious target to provide that security. This was particularly the case, when it was known to VTB Moscow that Nutritek urgently needed to raise funds to pay certain credit linked notes (CLN) and that some of the monies raised by the sale of the Dairy Companies were being used to pay them. It would have been noteworthy if Marcap refused to provide security for the risk that VTB and VTB Moscow were taking. Mr Tulupov proceeds at some length to set out the history of the transaction, starting with a meeting in Moscow where the proposed transaction was explained to Mr Ryzhkov and Mr Tulupov by Mr Malofeev and a Mr Provotorov, following which Mr Tulupov on about 18 July 2007 engaged Mr Johnston of Dewey & LeBoeuf, London to draw up finance documentation for a loan to an unknown borrower who Mr Malofeev and Mr Provotorov said they had in mind to approach to buy the dairy companies. VTBs director, Ms Bragina, responsible for investment business acquisition and leverage finance at VTB, was copied into the email and a party to the conference call by which Mr Tulupov instructed Mr Johnston. A subsequent enquiry by Mr Johnston of Mr Tulupov as to the identity of any borrower led to the answer, that the potential purchaser is controlled by a group of individuals with whom, Marcap assures, you cant have any conflict of interest. Mr Johnston described this as evasive and said that VTB would need to do a KYC (know your customer) clearance on the borrower. Arnold Js judgment records (para 14) that Mr Tulupov had a further meeting with Mr Provotorov and Mr Leonov in Moscow in late July, after which he emailed them with two versions of a term sheet, copying in Mr Malofeev, Mr Ryzhkov and Ms Bragina. A third Moscow meeting involving Mr Tulupov, Mr Malofeev, accompanied by Mr Provotorov and probably also by Mr Yuri Leonov, took place at Marcap Moscows offices in early October, when Mr Malofeev identified RAP as the potential buyer and borrower. But, according to Mr Tulupov, nothing was said to suggest that the sale would be to anything other than an independent third party, and that it would have been apparent to Mr Malofeev and his colleagues that what was being discussed was acquisition finance, rather than a balance sheet loan. A third term sheet was emailed by Mr Tulupov to the previous recipients, but not on this occasion copied to Ms Bragina. It identified VTB as the lender and recorded that additional commission was to be earned through a derivative tied to the shares and there was to be an interest rate swap to hedge interest and currency risks. VTB was commonly lender of record on such transactions, because it could offer more sophisticated lending structures and because English law offers greater protection in the event of default, but in such cases VTB Moscow would lend the relevant monies to VTB, as here, under a 100% participation agreement, although, in addition VTB was in this case itself involved in providing the interest rate swap agreement. In these circumstances, from an early stage, Mr Tulupov also worked with his counterpart at VTB, Ms Bragina, copying her into emails. Mr Tulupovs role was thereafter to obtain, check and distribute the information required by the various departments of VTB Moscow, to obtain their reports and opinions, to draw these together in a Deal Description and Draft Credit Committee Decision, to have these documents signed and approved by Mr Ryzhkov and then submitted to the Credit Committee of VTB Moscow, after approval by which the decision would still need to be reviewed by both the Managing Board of VTB Moscow given the size of the loan and VTB as both the Lender of Record and the party entering into the Interest Rate Swap Agreement (para 34). In performing his role, Mr Tulupov liaised principally with Mr Leonov, but also with Mr Provotorov and Ms Tyurina and in relation to Nutritek with Mr Skuratov, all in Moscow. One of the documents obtained in this process was the Ernst & Young report of 2007 on the dairy companies. A draft Deal Description and draft Credit Committee Decision were prepared with the assistance of Dewey & LeBoeuf for VTB/VTB Moscow and of Clifford Chance for RAP and were then signed off by Mr Yastrib, Mr Ryzhkov and Mr Tulupov, before being reviewed and approved on 31 October 2007 at a meeting of VTB Moscows credit committee, attended by Mr Novikov, Mr Yu, Mr Belov, Mr Kuzmenko, Mr Yastrib, Mr Shipilov, Mr Krasnoselsky and Mrs Bozhaeva. The approval recorded that the committee had, after taking into consideration a good financial situation of the Borrower classified the debt as Quality Category 1. The approval was subject to conditions. These included the provision of a report for the assessment of the market value of the Shares and Stakes, a reference to the Ernst & Young report already provided, a further copy of which was provided by RAP and Mr Leonov on 7 November 2007 (and circulated by Mr Tulupov to Ms Bragina and Mr Magee, albeit in Russian, on 12 November). They also included further approval of the proposal by VTB Moscows management board and VTB. Mr Tulupov recites that these approvals were obtained, the former by a formal board resolution, and that he was not involved in the latter, although he says that it was apparent from his discussions with Mr Ryzhkov and Ms Bragina that they relied upon the false representations when approving the loan. This refers to the Ernst & Young report of 2007, but it can hardly refer to any representation relating to the ownership of RAP, since Mr Tulupov goes on to say that, once approval to the credit line had been obtained from VTB and VTB Moscow, steps were taken to implement the conditions precedent which clearly included confirming the beneficial ownership of RAP as is apparent from the emails of 6 and 8 November which are exhibited to his statement. None of the conditions precedent is, however, explicitly directed to obtaining such confirmation (even though one of them required the provision to VTB and VTB Moscow of the decisions of the authorised management bodies of RAP approving the acquisition). As to the emails to which Mr Tulupov refers, these are from Ms Bragina, reporting to various colleagues in VTB (including Mr Yates) and copying to Mr Ryzhkov and Mr Tulupov, information that RAPs beneficiary and 90% shareholder (with the other 10% being owned by his management team) was a Mr Vladmir Alginin, and giving some details of his recent business career. These emails are also relied upon by Mr Tulupov as an example of the involvement of Ms Bragina, who has left VTB and whose whereabouts cannot now apparently be ascertained. However, it seems clear that all they show is that Ms Bragina was passing on internally information which she had herself received from another unidentified source. VTBs very unspecific plea is that this was information provided to VTB and VTB Moscow by the management of Nutritek: amended particulars of claim, para 51. There is no indication that Ms Bragina had any direct contact with the management of Nutritek, and the substantial likelihood must be that any information which reached her came from VTB Moscow. VTB Moscows management board approved the transaction on 13 November, and an application was signed by Ms Bragina and Mr Thunem on behalf of VTB for credit facilities. The application recorded that RAP had approached VTB Moscow for the debt financing of its proposed acquisition of the dairy companies, and that under the proposed structure VTB was to act as lender of record, but VTB Moscow was to fully fund the transaction and fully undertake the credit risk under the transaction in accordance with the participation agreement. It also recorded that the market value of the dairy company shares had been determined by Ernst & Young. On 19 November a similar application was signed off by Ms Wooi, Mr Yates and Mr Manning on behalf of VTB in respect of the interest rate swap. It however recorded the structure risk as potentially high, but acceptable, on the basis that the transaction was considered unsecured, and the security package (RAPs shares in the dairy companies) of little tangible value, the financial risk as high, on the basis that, according to the historical balance sheets the price being paid for the companies appeared to be significantly above the book value of the assets. As to ownership risk, it recorded that no formal information could be found confirming that Mr Alginin was RAPs beneficial owner as IB [investment banking] have advised, that they were requesting formal proof as a condition precedent to drawdown, and to make the ownership risk medium. There is no indication that this point was followed up, even in relation to the interest rate swap, and it is not part of VTBs case in respect of the loan that it relied upon any later representation regarding RAPs ownership or Mr Alginin. Mr Tulupov continued to be the means by which the transaction was progressed, and sent VTBs mandate letter, updated term sheet and fee letter to RAP for signature on 16 November. On 23 November 2007, the facility agreement was completed, being signed for VTB by Mr Ryzhkov as managing director, head of acquisition and leveraged finance and by Ms Bragina as director, acquisition and leveraged finance. The interest rate swap agreement was completed on 28 November, being signed for VTB by Mr Ryzhkov as managing director and by Mr Steve Humphries as senior manager operations. The 100% funded participation agreement between VTB and VTB Moscow was completed on the same date. Mr Thunem, then head of global markets at, but no longer with, VTB and Mr Ianovski signed for VTB. Under it, VTBs liability to repay any sum funded by VTB Moscow was limited to any amount that it received from RAP (or any other obligor under the loan facility). All these agreements were subject to English law, and included provisions recognising England as an appropriate forum in the event of any dispute. Mr Muravievs second hand account of the history in his statement is understandably shorter. But, having spoken to Mr Yates, because both Ms Bragina and Mr Thunem had left, he understood that: A. Once the decision had been taken by VTB Moscow to enter into the Participation Agreement, there was no need for the matter to be decided by the Credit Committee of [VTB]; B. Instead, it was sufficient for the loan to proceed if the proposed transaction had been approved by Mr Ryzhkov, given his senior position within both [VTB] and JSC VTB, and the ACF [Advance Credit Facility] dated 13 November 2007 was signed off by the appropriate authorised signatories; C. Mr Ryzhkov approved the transaction and indeed he signed the Facility Agreement together with Ms Bragina on behalf of [VTB]; . Notwithstanding the position taken by Credit Risk in the ACF dated 15 November 2007 that Credit Risk consider this transaction as unsecured as the security package has little tangible value, in granting the loan and approving the ISA, [VTB] did rely heavily on the representations that had been made as to: i. the past financial performance of the Dairy Companies and the forecast performance; ii. the 2007 E&Y 2007 Valuation of the Dairy Companies based upon those figures, and iii. The SPA representing a commercial transaction between two separate entities, namely RAP and Nutritek. It was entirely unaware that they were under the common control of Marshall Capital Group of Companies and believed them to be under separate control based on the information that had been provided by Nutritek. Mr Muraviev concluded by saying: 11. Having spoken to Mr Yates, Colin Magee, Julia Ferris and Martin Pasek I am informed that and believe that if [VTB] had known that RAP and Nutritek were under the common control of Marshall BVI or that the representations identified above and contained in the 2007 E&Y Valuation were false then it would not have entered into the Facility Agreement or the ISA or permitted the draw down of the Tranche A monies. The issues Numerous judicial statements establish that it is incumbent on a defendant challenging the jurisdiction so far as possible to identify the issues concerned and to state as clearly as possible how they arise or may arise in the proceedings: see e.g. Limit (No 3) Ltd v PDV Insurance Co [2005] EWCA Civ 383, [2005] 2 All ER (Comm) 347, 366, para 72, per Clarke LJ; Dicey, Morris & Collins, The Conflict of Laws (15th ed), para 11 143. In the present case, the basic issues were in my view established by the evidence and submissions adduced below. The respondents deny that false representations were made, deny that they were party to any that were made, deny that any reliance was placed on any that were made and, for good measure, rely upon the participation agreement as showing that VTB, as opposed to VTB Moscow, did not suffer any loss. The last point was strongly argued in the courts below, as showing that VTB had no good arguable case in respect of which it could properly seek permission to serve out of the jurisdiction, but the Supreme Court refused permission to re argue the point before it. The case must therefore be considered on the basis that the claim is properly arguable, but that this defence is among those that the respondents will advance to it. It is however essentially a point of law, in relation to which there is no reason to think that the answer would be any different in Russia to here. All the points mentioned in the previous paragraph were treated as issues in the courts below. In relation to one respondent, Marcap BVI, Arnold J concluded that there was no serious issue to be tried. But in relation to Nutritek and Mr Malofeev he concluded that VTB had a real prospect of establishing deceit, despite issues argued before him as to the incurring of any loss, the making of any false representations and reliance. The Court of Appeal considered that, even in respect of Marcap BVI, a serious issue to be tried existed, while setting aside service on all three respondents on the ground that England was not the appropriate forum. A suggestion that the respondents should have advanced a positive case to support their denial of any involvement in the alleged deceit appears to me to go too far. Even where jurisdiction is established, a defendant is entitled to deny involvement in or liability for an alleged deceit, without advancing a positive explanation as to why he was not party to an alleged lie or conspiracy or as to how assets acquired proved, without any prior knowledge on his part, to be worth so much less than independent accountants had valued them as being. Further, no suggestion or objection appears to have been made below to the case being argued, as it was, on the basis that all the issues were properly raised by the respondents general denials. On the other hand, there may be particular points, in relation to which, in the absence of any positive case from a defendants side, it is not possible to conclude that any evidence will be called by the defence. That may in turn preclude bringing into account the convenience or otherwise of adducing in England or Russia any such evidence from the defence side as might be supposed to exist on such points, had any positive case been raised on them. It is also clear, from such material as the Court has before it in relation to the issue regarding the worldwide freezing order, that VTB has been given a considerable understanding by Mr Malofeev himself of the nature of his case regarding the discrepancy between the position indicated by the Ernst & Young report of 2007 and the position as it materialised not very long after the completion of the transaction. Mr Michaelson, partner at SJ Berwin acting for Mr Malofeev recorded in his tenth statement of 18 October 2011 (paras 38 to 42) that Nutrinvestholding (Nutriteks parent) had at Mr Malofeevs instance instructed Ernst & Young to prepare a further report dated 26 February 2010, to determine precisely what accounting practices and transactions were taking place within the Nutritek business and that the report does not implicate Mr Malofeev. Mr Michaelson went on to refer to the obvious inconsistency between Mr Malofeev commissioning the Report and at the same time being responsible for any wrongdoing identified (para 43). The judgments below Arnold J addressed the question of the appropriate forum in paras 186 to 195: 186. Stage I. The factors that may be taken into account in determining which is the natural forum for the action include: (a) the personal connections which the parties have to the countries in question; (b) the factual connections which the events relevant to the claim have with those countries; (c) factors affecting convenience or expense such as the location of the witnesses or documents; and (d) the applicable law. 187. Counsel for VTB submitted that England was the natural forum because (i)VTB is English, (ii) the misrepresentations were relied upon in England, (iii) the money was lent and the loss sustained in England, (iv) the Facility Agreement, ISA, the Participation Agreement and the SPA contain English law and English jurisdiction or arbitration clauses and (v) the applicable law is English law. I do not consider that any of these factors points strongly to England being the natural forum in the present case. So far as (i) is concerned, VTB is controlled by VTB Moscow. As to (ii), as explained above, it seems to me that VTB's reliance was wholly secondary to that of VTB Moscow. In relation to factor (iii), the loss was sustained because Russian assets provided inadequate security. As to (iv) and (v), the English law clauses are immaterial once it is concluded, as I have, that the law applicable to the tort is Russian law. The English jurisdiction and arbitration clauses are a pointer to England, but not a strong one given that the claim is a tort claim not a contract claim. 188. Counsel for the defendants submitted that the following factors pointed to Russia being the natural forum. First, the connections of the parties to Russia. VTB is controlled by VTB Moscow, which is Russian. Furthermore, the litigation is being managed by VTBDC, which is also Russian. MarCap Moscow and Mr Malofeev are Russian. It is common ground that Nutritek was managed from Russia, and VTB's case is that Mr Malofeev controls both Nutritek and MarCap BVI. Furthermore, it is VTB's case that Mr Malofeev orchestrated the fraud, primarily through MarCap Moscow. 189. Secondly, the connections of the events constituting the torts to Russia. The transaction was introduced to VTB Moscow at meetings between Russian individuals in Russia. The negotiations mainly took place in Russia. The misrepresentations were made and mainly received in Russia. The more important misrepresentation concerned the performance of the Dairy Companies, which are Russian companies. The 2007 E&Y Valuation was a valuation by Ernst & Young's Moscow office and was based on information provided by Nutriteks Russian management. The misrepresentations were primarily relied upon by VTB Moscow acting through its Credit Committee and Management Board in Russia. It was VTB Moscow and VTBDC which primarily dealt with RAPs default and enforcing the security. The secured assets were in Russia. The discovery of the fraud took place in Russia. Although the loss was sustained by VTB in England, as discussed above the ultimate economic impact is in Russia. 190. Thirdly, most of the witnesses are Russian and many of the documents are in Russian and located in Russia. So far as the witnesses are concerned, there are a considerable number of relevant Russian witnesses from VTB Moscow, VTBDC, Ernst & Young, Nutritek (Mr Skuratov and the managers of the Dairy Companies), MarCap Moscow (Mr Leonov, Mr Provotorov, Ms Tyurina and Mr Popov as well as Mr Malofeev) and RAP (Ms Kremneva and Mr Pankov). Other potential Russian witnesses include Mr Sazhinov and Mr Alginin. By contrast, there are relatively few material witnesses from VTB. The two most important ones appear to be Ms Bragina and Mr Ryzhkov. Both have left VTB (as has Mr Thunem). It appears that Mr Ryzhkov is in Russia, while VTB's evidence is that Ms Bragina is believed to be in England. Although Mr Ryzhkov has been contacted about the matter, it does not appear that Ms Bragina had been. 191. As counsel for the defendants pointed out, it is striking that all of VTB's witness statements in support of its application for permission to serve out, other than one from its solicitor, were made by Russian witnesses. In addition to the statements of Mr Tulupov and Mr Chernenko, these consisted of: i) a statement made by Andrey Puchkov, Deputy Chairman of VTB Moscow, which among other matters dealt with VTB Moscow's reliance on the misrepresentations alleged, Mr Puchkov having been present at the Management Board meeting on 13 November 2007 at which the transaction was approved; ii) a statement made by Vadim Muraviev, Head of the Division of Distressed Debt Settlements at VTB Moscow, who gave evidence as to VTB's reliance on the misrepresentations alleged based on interviews with four English employees of VTB including Mr Magee and Mr Pasek; and iii) a statement made by Denis Zemlyakov, General Director of VTBDC, who gave evidence concerning RAP's default and the enforcement of the security. 192. In addition, VTB relied on two draft statements from Alexander Buryan and Irina Leonova, who were employed by RAP as Vice President and Chief Accountant. Furthermore, since then a number of statements have been made by Arthur Klaos of VTBDC, in the most recent of which Mr Klaos relays information provided to him by (among others) Mr Ryzhkov and Alexander Yastrib (at the time Senior Vice President of VTB Moscow and now a board member of the Bank of Moscow). 193. While the four VTB employees interviewed by Mr Muraviev are evidently material witnesses to VTB's claim (although Mr Magee and Mr Yates appear to have had more involvement in the transaction than Mr Pasek or the fourth employee Julia Ferris), it is clear that they are of secondary importance compared to Ms Bragina and Mr Ryzhkov, let alone Mr Tulupov and his colleagues in Moscow. If the claim is tried in England, witnesses located in Russia will not be compellable except by means of letters rogatory. Even if they are prepared to give evidence voluntarily, they may not be prepared to come in person, necessitating evidence being given by videolink. Even if they are prepared to come in person, they are likely to require interpreters. As for the documents, many of these have required or will require translation. It is true that the agreements are mainly in English, and that these are important documents, but these and other documents in English form a relatively small proportion of the relevant documents even at this stage of the proceedings. 194. Fourthly, counsel for the defendants submitted that the applicable law was not a strong factor in favour of England even if it was English law. It is clear from the expert evidence before the court (as to which, see below) that the Russian courts can receive expert evidence as to English law. Furthermore, the key issues in the case are likely to be factual rather than legal. In the event, of course, I have concluded that the applicable law is Russian law, which supports the conclusion that Russia is the natural forum. 195. In my judgment, taking all the factors considered above into account, the natural forum is Russia. The Court of Appeal before which reliance was, for the first time, placed on the suggested presumption arising from The Albaforth (see para 14 above) dealt with the issue of appropriate forum as follows: 164. We have already commented that the judge may have erred in his interpretation of the test adumbrated in the Spiliada case. Instead of asking first whether England was the natural forum and then, even if it is not, asking whether England is nevertheless the appropriate forum for other reasons, there is only one overall question to be answered: has VTB established that England is clearly or distinctly the appropriate forum? 165. In our view the judge was correct to conclude that VTB has failed to do so. The steps leading to our conclusions are as follows: first, we will assume (based on our discussion above) that the fact that VTB has sustained its loss resulting from the torts in England raises a prima facie case that England is the appropriate forum in which to try the disputes. Secondly, however, we have to take account of all the other factors identified by both sides in order to determine whether VTB has satisfied the court that England is clearly or distinctly the appropriate forum. 166. Thirdly, in that regard, we have concluded, on the basis of the material presently before us, that the applicable law of the torts is Russian law. That cannot be a concluded view. Wherever a trial takes place, it can be challenged. But that point works both ways. Even if we had concluded that the applicable law of the torts was English law, this would not have been a factor that would weigh heavily in making England the appropriate forum, precisely because if the defendants wished to allege and plead that the applicable law was Russian law, both sides would have had to prepare for a trial on that basis. If the case were to be heard in England, both sides would have to prepare expert evidence on Russian law; and, doubtless, the obverse would be so if the case were to be heard in Russia. This is not a case, such as we think Lord Goff of Chieveley contemplated in Spiliada at 481G, where the law of the contract is a known certainty. In this case the applicable law of the torts remains very much in issue. Moreover, there was no serious challenge to the judge's view (at para 194) that the key issues in the case are likely to be factual rather than legal. 167. Fourthly, we have to give due weight to all the other factors (apart from those where we have found the judge erred) which the judge took into account and which have not been challenged on appeal. These are set out at paras 188 and 189 of the judgment and, as we have indicated in relation to the applicable law point, we think that these indicate that the centre of gravity of these disputes is in Russia, not England. Fifthly, VTB has not challenged the judges conclusion that VTB had failed to show that there was a real risk that it would not obtain substantial justice in Russia for any of the reasons it advanced before him. 168. Accordingly, the judge was correct to set aside Chief Master Winegarten's order granting VTB permission to serve the proceedings on Nutritek, Marcap BVI and Mr Malofeev out of the jurisdiction. The factors relevant to the appropriate forum I turn therefore to consider the appropriate forum and the relevant factors. The first question is whether there is any basis for regarding the judges or the Court of Appeals conclusion as flawed in any way which would require this Court as a second appellate court to revisit the exercise of the discretion to give permission for service out of the jurisdiction. The second question, if there is any such basis, is what conclusion this Court should reach on the issue as to the appropriate forum. The Court of Appeal re exercised the discretion, because it believed that Arnold J had erred in his interpretation of Lord Goffs speech in The Spiliada. It said that he had adopted a two stage approach instead of recognising that, in a service out case, there was a single burden on a claimant to show that England was clearly or distinctly the appropriate forum (paras 128 131 and 164; and see The Spiliada, p 481D E). But the two part approach was the one which Lord Goff identified as appropriate in cases where service is effected within the jurisdiction, so that the claimant starts with the advantage of having achieved a legitimate basis for jurisdiction without leave, and it is for the defendant to show that some other country is the appropriate forum: see The Spiliada, pp.476F. Any error therefore favoured VTB as claimant. Any error, if error there was, does not in any event impact on the force and weight of the judges analysis in the paragraphs quoted above. Further, the way the judge answered his two part test shows that he could not conceivably have come to any conclusion other than that the claimant had failed to show (clearly or at all) that England was the appropriate forum. He expressed his conclusion, at stage 1 of the two part test which he (wrongly) adopted, as being that Russia was the natural forum (para 195) before going on at stage 2 to reject any suggestion that substantial justice could not be obtained in Russia (para 196 to the conclusion at para 222). Once one concludes that Russia is the natural forum, where there is no risk that substantial justice cannot be obtained, it is really impossible to conclude that England is clearly the appropriate forum. The Court of Appeal itself held that the judge was correct to conclude that VTB had failed to establish that England was clearly or distinctly the appropriate forum (para 165). However, it itself fell into error in my view in its treatment of the governing law. (a) Governing law The Court of Appeal was wrong to regard Russian law as governing the alleged torts, but it acknowledged that possibility and it dealt with the alternative, that English law governed them. However, in relation to this alternative, it was in my opinion also wrong to approach the matter on the basis that it made no difference which law governed, because each side would have in any event to prepare evidence on both legal systems in whichever country the case was tried. The governing law, which is here English, is in general terms a positive factor in favour of trial in England, because it is generally preferable, other things being equal, that a case should be tried in the country whose law applies. However, that factor is of particular force if issues of law are likely to be important and if there is evidence of relevant differences in the legal principles or rules applicable to such issues in the two countries in contention as the appropriate forum. Neither of these considerations here applies. VTBs claims are for deceit and for conspiracy. The conspiracy alleged is to obtain finance by the deceit. Accepting that the governing law of both alleged torts is, to English legal eyes, English, there is nothing to show that Russian law would reach any different conclusion. Parties are able to plead and rely on English law in Russian courts. But, even if there were reason to think that a Russian court would regard Russian law as governing the alleged torts, there is nothing to suggest that Russian law does not recognise and impose tortious liability for deceit, and for conspiracy to commit a deceit, on bases for material purposes equivalent to those which would be recognised under English law. It is unlikely that it does not, and no evidence has been adduced that it does not. It would have been for VTB to adduce evidence on all these points, if it could, in support of its case that England was the appropriate forum. Although Arnold J wrongly concluded Russian law governed the alleged torts, he also considered the exercise of his discretion on an opposite basis, namely that English law applied, and, as I understand him, accepted the submission that this would not be a strong factor in favour of England, as well as saying that it was clear that the Russian courts could if necessary hear evidence of English law: see judgment, para 194 quoted above. His judgment therefore addresses the position on a correct hypothesis. Even if, contrary to my view, the judges conclusion as to the appropriate forum was limited by an assumption that Russian law governed the alleged torts, I cannot conceive, in the light of what he said in para 194, that it would have made any difference to his conclusion if he had concluded that English law governed. The key issues in this litigation will on the face of it be factual not legal. (b) Place of commission of tort For reasons already given, I proceed on the basis that this was London in relation to the claim in deceit, and that the conspiracy, being to commit the same deceit, should be regarded as effectively ancillary. But I also note that, Mr Ryzhkov as managing director of VTBs acquisition department was the first signatory of the Facility Agreement for VTB, and he was based in Moscow. It may well be that his signature was sent or collected electronically from Moscow. Even if that were so, he is in Russia, and on any view an important potential witness. The place of commission is a relevant starting point when considering the appropriate forum for a tort claim. References to a presumption are in my view unhelpful. The preferable analysis is that, viewed by itself and in isolation, the place of commission will normally establish a prima facie basis for treating that place as the appropriate jurisdiction. But, especially in the context of an international transaction like the present, it is likely to be over simplistic to view the place of commission in isolation or by itself, when considering where the appropriate forum for the resolution of any dispute is. The significance attaching to the place of commission may be dwarfed by other countervailing factors. Here the common design on which the respondents tortious responsibility is based was formed in Russia. Further, both the alleged representations emanated from Russia, in the form of the Ernst & Young 2007 report and the information that Mr Alginin was the effective beneficial owner of RAP. The history of the transaction which I have set out indicates that the transaction was introduced, pursued and approved predominantly in Moscow. It is difficult to avoid the conclusion that VTB was effectively following suit on decisions taken there. Further, significant aspects of the facts which are said to have rendered the representations untrue existed in Russia: particularly, the dairy companies businesses and financial positions, but also, presumably, the factual control which Mr Malofeev is said to have exercised directly or through Marcap Moscow over RAP. VTB, as a London based bank, must have had to go through some formal decision making processes, or it would not have been party to the facility agreement at all. However, it did not need to put the loan proposal through its own credit committee, once it had been through VTB Moscows credit committee (para 34 above). Further, the main documents emanating from VTB, the two credit applications of 13 and 15 November, date from well after the matter was approved by VTB Moscows credit committee on 31 October and are contemporaneous with the approval of 13 November by VTB Moscows management board. Finally, no formal record of any decision making or approval by VTB itself exists, save in the form of Mr Ryzhkovs and Ms Braginas signatures on the facility agreement. All this is however unsurprising when the transaction was effectively negotiated and decided upon in Moscow, and the funding and credit risk in respect of the loan was being fully assumed by VTB Moscow. Arnold J was not referred to The Albaforth, but in my view his approach in paras 186 to 195, cited above, was consistent with the proper application of the overriding principles of The Spiliada by which he correctly directed himself. It is true that at an earlier point in his judgment, when determining the governing law of the alleged torts to be Russian, he wrongly identified Russia as their place of commission (paras 134 to 135). But, as I have already said, in para 187 he also considered the exercise of the discretion to serve out on the opposite hypothesis, namely that English law governed the torts. Had he had cited to him The Albaforth, I do not see how it could or should, in the light of the other factors that he correctly identified, have led him to any different result than that to which he in fact came. It is clear that in his view the other factors pointed very powerfully towards Russia as the natural forum for resolution of the issues. Further, the Court of Appeal, before which The Albaforth was relied upon, did not regard it decisive in the circumstances of this case (para 166 et seq). It erred in treating Russian law as governing the alleged torts, but went on largely to eliminate the significance of this error by treating it as irrelevant which law governed. It should have treated English law as governing the torts and have recognised this as one factor generally tending to favour English jurisdiction. But, for reasons explained in paras 46 to 49 above, it was in this case a factor of very little if any real potency. Had the Court of Appeal approached the potential relevance of the governing law on a correct basis, it is in my view clear that it would in this case also have made no difference to its ultimate conclusion. The Supreme Court is, in these circumstances, being asked to re exercise the discretion exercised at two stages below in the light of points made about their reasoning of no real significance, which it is clear would not have altered the decision in either court. (c) The factual focus VTBs case is that deceitful representations emanated from the respondents in Russia, but were communicated to VTB, and relied upon by VTB, in London where VTB also suffered its loss. This analysis is important when considering where the tort was committed and what law governs it. But a wider view is necessary when considering the appropriate forum. The respondents denials of any liability raise as issues whether the representations were inaccurate, whether, if so, any or all of the respondents knew of their inaccuracy and whether they joined together by common design to make the alleged representations and what impact any inaccuracy of such representations had. Taking the Ernst & Young 2007 report, the factual focus will be on the dairy companies and on the respondents understanding of their affairs and financial position, matters which are clearly likely to be more appropriately examined in Russia, where the companies, their records and any relevant company witnesses are. Ernst & Young examined the companies through their Moscow office, and the same is probably true of VTBs expert accountants, Deloittes. It is clear (para 40 above) that Mr Malofeevs case is that he was as unaware as Ernst & Young of the financial inaccuracy of their report. Secondly, relevance may attach to the impact which the Ernst & Young report had on those to whom it was first presented in Moscow. As to the ownership of RAP, the plan, which VTB has produced showing Mr Malofeevs alleged connection with and/or control of RAP, shows an international picture. On many aspects of the plan, evidence about the alleged corporate and personal links could be adduced as easily in England as in Russia. But any evidence from Mr Malofeev, who is said to have been in control of a web of interlinking companies as shown on the plan, would more conveniently be heard in Russia. The judge noted, however, the respondents did not adduce before him any positive case challenging VTBs contention that Mr Malofeev ultimately controlled RAP as well as Nutritek. That does not mean that this is not in issue. But it does mean that, in the absence of any positive challenge, the convenience or otherwise of Mr Malofeev giving evidence on it in England or Russia can be put on one side. On the other hand, the issue relating to reliance is one on which VTB will clearly have to adduce the relevant evidence from its side. Again, it is likely that the relevant evidence will come in large measure from Russia and Russian witnesses. The informality of the alleged representation regarding RAPs ownership and regarding Mr Alginin, and the apparent failures to follow it up by obtaining more formal confirmation, is striking. It is likely to lead to questions as to how much, if any, weight was placed upon any such representation by VTB or VTB Moscow. Ms Bragina cannot now be located and is not shown to have remained in England, and the representations said to be evidenced by her two emails in November 2007 seem, as already stated, likely to have come to her via VTB Moscow: see amended particulars of claim, para 51 and para 31 above, by a process which is obscure. The impact or lack of impact which it had on those to whom it was first presented in Moscow is thus likely to be a very relevant subject of examination in the litigation, on the basis that the substantial decision making process took place in Moscow, with VTB following in very large measure suit. (d) Witnesses This is a factor at the core of the question of appropriate forum. It was covered fully and helpfully by Arnold J in the course of considering the natural forum in paras 188 to 195 of his judgment, set out in full above. In summary, it is clear that the issues and evidence will be focused overwhelmingly on matters which happened in and concern Russia, and that the oral and documentary evidence, on both factual and expert matters, is likewise likely to be overwhelmingly Russian and to be found in Russia, where it could be heard in Russian without translators. (e) Aim of the alleged torts The alleged torts were designed to induce VTB to enter into a facility agreement with RAP which was subject to English law and an agreement (for the benefit of VTB only) that the courts of England should have non exclusive jurisdiction and be the most appropriate and convenient forum: clause 35.1. The purpose of the facility agreement was in turn to fund RAPs purchase of the dairy companies from the first respondent, Nutritek International Corpn. I am inclined to agree with Arnold J (para 187) that the fact that the facility agreement was subject to English law is not relevant. He discounted it because of his view, erroneous on the basis on which I approach the case, that the tort claims were subject to Russian law. But, in my view, even though the tort claims are subject to English law, it bears scarcely if at all on the appropriateness of the forum for their resolution that they were designed to induce another English law contract. No issue arises about the interpretation of the facility agreement. On the other hand, the fact that the alleged torts were designed to induce the making of a loan facility agreement, under which England was accepted as the most appropriate and convenient forum is a potentially relevant factor. It links with and reinforces the fact that, if there was any such deceit and/or conspiracy as alleged, the same were directed at VTB in London. But it is a factor which Arnold J did take into account (para 187). He saw it as a pointer to England, but not a strong one given that the claim is a tort claim not a contract claim. I agree with this balanced view. But, even if it understates the significance of the pointer, it does so only slightly and not in a way which can, in my view, possibly justify this Court in interfering with the judges conclusion. There is certainly general attraction in a conclusion that persons committing deceit should answer in the jurisdiction which is not merely that where their deceitfulness manifested itself, but also a jurisdiction agreed to be appropriate under the contract which they are by such deceit inducing. But that formulation, by omitting the word allegedly, begs the question where the issue whether any such deceit occurred and induced the loan should most appropriately be determined. All that has been established at this stage is that there is a serious issue to be tried in other words, that VTB has a reasonable prospect of success in respect of VTBs tort claims. The question where such claims are appropriately to be tried has to be answered in the light of all the circumstances, including the nature of the issues to be tried and the evidence which would be involved. The alleged torts were committed in England under English law, but the fundamental matters in dispute whether there was any such deceit, whether the respondents were party to it, and what, if any impact, any falsely made representations had on VTB are, as I have shown, heavily focused in this case on Russia and Russian witnesses. (f) Fair trial? There is, as the Court of Appeal mentioned in para 167, no suggestion that this matter could not or would not receive a fair and proper trial in Moscow. Conclusions On the issues relating to the appropriate forum which the courts below addressed, the reasoning of Arnold J and the Court of Appeal was, subject to differences which I have identified, largely concurrent. The Court of Appeal erred in its approach to the significance of the law governing the alleged torts, but Arnold J, although he erred in regarding the governing law as Russian, also, as I read para 194 of his judgment, expressed his view as to the appropriate exercise of his discretion on the assumed opposite basis, that English law applied. For reasons which I have set out in paras 54 and 55 above, neither Arnold Js error as to the governing law of the alleged torts, nor the Court of Appeals failure to recognise the potential significance of the governing law of such torts, can have been decisive in relation to the concurrent conclusions which they both reached. In short, Arnold Js analysis and exercise of his discretion cannot in my view be faulted in any substantial respect, and I see no basis on which this Court would be justified in setting aside his exercise of his discretion and re exercising the discretion for ourselves, still less in arriving at a different conclusion from his. The case is one in which an appellate court should refrain from interfering, unless satisfied that the judge made a significant error of principle, or a significant error in the considerations taken or not taken into account. However, if it were incumbent on us to re exercise the discretion regarding service out, I would myself arrive at the same conclusion as the judge and the Court of Appeal. Once again in summary, the major part of the factual subject matter involves Russia, and it is clear that the great bulk of evidence on both sides will have to come from Russian witnesses. The location in law of the alleged torts is of much diminished relevance, on examination of their circumstances and place in which they are said to have originated, the process by which they are said to have reached and impacted on VTB and the evidence which would be involved in undertaking such examination. The fact that any deceit was intended to induce an English law contract which provided for English jurisdiction is relevant, but cannot determine the appropriate forum in which to decide whether there was in fact any such deceit or conspiracy. In my opinion, the Russian connection is of such strength and importance in this case that, despite the existence of some factors favouring England, the appellant is quite unable to discharge the onus on it of showing that England is clearly or distinctly the appropriate forum for determination of the issues in this case. The proposed contractual claim based on piercing the corporate veil I agree with Lord Neubergers judgment on this aspect and would accordingly uphold the Court of Appeals decision to refuse VTB permission to amend to raise a contractual claim based on piercing the corporate veil and treating the defendants liable for breach of the Facility Agreement and/or associated interest rate swap. The Freezing Order Like Lord Wilson (paras 159 to 160), I am concerned that a freezing order should have been in force for some 14 months despite concurrent decisions below concluding that jurisdiction should not be exercised and, at least in the view of the judge, that, irrespective of whether jurisdiction should be exercised, the freezing order originally granted should not be continued. On any view, this position reinforces Lord Neubergers comments in paras 81 to 93 with which I would associate myself. Conclusion I would in the light of my above conclusions dismiss this appeal on both the issues of jurisdiction and amendment and order that the freezing order be discharged. LORD NEUBERGER Introductory This appeal raises two main questions which arise out of a claim brought in the High Court by VTB Capital PLC (VTB) against (i) Nutritek International Corp (Nutritek), (ii) Marshall Capital Holdings Ltd, (iii) Marshall Capital LLC, and (iv) Konstantin Malofeev (together the defendants), based on the torts of deceit and conspiracy. The first main question is whether the permission granted ex parte to VTB to serve the proceedings out of the jurisdiction on the defendants should be set aside. The second main question is whether VTB should be allowed to raise an additional claim, by way of amendment to its statement of case, based on piercing the corporate veil. Arnold J and the Court of Appeal each concluded that the answer to the first question was yes, and to the second question was no see, respectively [2011] EWHC 3107 (Ch), and [2012] EWCA Civ 808. VTB appeals against both conclusions. The first question turns on whether the English court is the appropriate forum for the hearing of VTBs claim. The second question turns on whether VTB has an arguable case on piercing the corporate veil. The background facts have been fully set out in paras 165 to 180 of Lord Clarkes judgment, in paras 19 to 40 of Lord Mances judgment, (as well as in paras 9 to 37 in the judgment of Lloyd LJ in the Court of Appeal, and in paras 4 to 56 of Arnold Js judgment). I shall discuss both questions on the basis that they arise between VTB and Mr Malofeev, because (subject to the point that Marcap Capital LLC has not been served), it appears to be common ground that (i) the position of the other three defendants in relation to the first question is no different from his, (ii) the position of Marshall Capital Holdings Ltd and Marshall Capital LLC (together Marcap) in relation to the second question is no different from his. The first question: the appropriate forum: three general points In very summary terms: (i) VTBs substantive case is that it was induced by deceitful misrepresentations, for which the defendants were responsible, to enter into certain agreements (the agreements) with various parties, in particular Russagropom LLC (RAP), under which VTB agreed to lend, and thereafter did lend, money to RAP; (ii) VTB obtained permission ex parte to effect service of proceedings, claiming damages for deceit and conspiracy, on the defendants out of the jurisdiction, and the defendants then applied to set aside service on the ground that Russia, rather than England, was the appropriate forum for the issues to be determined. In a case such as this, permission to serve out of the jurisdiction should only be granted if the court is satisfied that England and Wales is the proper place in which to bring the claim see CPR 6.37(3). It was common ground that this means that VTB could only succeed on the first question if it was able to establish that, in the words of Lord Goff of Chieveley in Spiliada Maritime Corporation v Cansulex Ltd [1987] AC 460, 481, the courts of England and Wales (hereafter England) are clearly the appropriate forum for the trial of the action. When a court is called upon to decide whether an action should proceed in this, as opposed to another, jurisdiction, it is being asked to decide a procedural issue at a very early stage. Where, as is now the position in this case, it is common ground that the parties would have a fair trial in the competing jurisdiction, the exercise will normally involve the court weighing up a number of different factors, and deciding where the balance lies. Whilst the same considerations will not always apply to applications for permission to serve out and applications for stays of proceedings, the argument on this appeal has highlighted three general points in relation to each type of exercise. The first point is that hearings concerning the issue of appropriate forum should not involve masses of documents, long witness statements, detailed analysis of the issues, and long argument. It is self defeating if, in order to determine whether an action should proceed to trial in this jurisdiction, the parties prepare for and conduct a hearing which approaches the putative trial itself, in terms of effort, time and cost. There is also a real danger that, if the hearing is an expensive and time consuming exercise, it will be used by a richer party to wear down a poorer party, or by a party with a weak case to prevent, or at least to discourage, a party with a strong case from enforcing its rights. Quite apart from this, it is simply disproportionate for parties to incur costs, often running to hundreds of thousands of pounds each, and to spend many days in court, on such a hearing. The essentially relevant factors should, in the main at any rate, be capable of being identified relatively simply and, in many respects, uncontroversially. There is little point in going into much detail: when determining such applications, the court can only form preliminary views on most of the relevant legal issues and cannot be anything like certain about which issues and what evidence will eventuate if the matter proceeds to trial. This concern is not new. In Cherney v Deripaska [2009] EWCA Civ 849, paras 6 and 7, Waller LJ said that whilst he appreciate[d] that litigants do often feel strongly about the place where cases should be tried disputes as to forum should not become state trials. He also lamented the mountain of material the Court faced in that case, and suggested that it would have been better for both parties and better use of court time if they had expended their money and their energy on fighting the merits of the claim. In Friis v Colburn [2009] EWHC 903 (Ch), paras 3 and 5, having set aside an order for service out of the jurisdiction, Peter Smith J referred to the fact that the claimants costs schedule was 215,280.50, following a hearing which, he said, had been strung out by unrealistic stances and unnecessarily prolonged and complicated submissions which seem[ed] to achieve nothing other than create fogs of irrelevancy. In that connection, the present case is striking, as Arnold J explained in para 3 of his judgment. The hearing before him lasted six days, after two days pre reading. He was faced with more than 27 bundles of documents, written evidence, and exhibits, and 14 bundles of authorities. One of the witnesses had made twelve witness statements, and further materials were added on a daily basis. (The hearing was not limited to the application to set aside permission to serve out: it included an application to amend, and applications to continue and to discharge a freezing order; however, no more than half the material and time can have been devoted to those aspects.) Since the hearing of this appeal, the Court of Appeal has given judgment in Alliance Bank JSC v Aquanta Corporation [2012] EWCA Civ 1588, a case involving similar issues to those in this appeal. At para 4 of Tomlinson LJs judgment in that case, he referred to the fact that the first instance hearing of the application to set aside permission to serve out, on the grounds that England was an inappropriate forum (as well as raising some other points), lasted eleven days, and the hearing in the Court of Appeal appears to have lasted four days. In Spiliada [1987] AC 460, 465, Lord Templeman expressed the hope that in a dispute over jurisdiction, the judge will be allowed to study the evidence and refresh his memory of [the principles] in the quiet of his room without expense to the parties; that he will not be referred to other decisions on other facts; and that submissions will be measured in hours and not days. That was a rather optimistic aspiration, not least when one bears in mind the understandable desire of lawyers to do, and to be seen by their clients to be doing, everything they can to advance their clients case, especially where the dispute over jurisdiction may well be determinative of the outcome. However, particularly with the benefit of procedural reforms, which have been introduced, or are in the process of being introduced, following reports from Lord Woolf and Lord Justice Jackson, the judiciary is now encouraged to exercise far greater case management powers than 25 years ago. Accordingly, judges should invoke those powers to ensure that the evidence and argument on service out and stay applications are kept within proportionate bounds and do not get out of hand. The second point is, in a sense, a sub set of the first point, and concerns the extent to which a defendant who is challenging the jurisdiction of the English court should identify the nature of his case. In my view, the position is reasonably clear. As a matter of principle, a defendant is entitled to keep his powder dry: he can simply put the claimant to proof of its case. In general at least, that is true at any point of the proceedings. The mere fact that the defendant is challenging jurisdiction does not somehow impose a duty on him to specify his case. The onus is on the claimant to satisfy the court that there is a serious issue to be tried on the merits of the claim, and not on the defendant to satisfy the court that he has a real prospect of successfully defending it. However, if the defendant chooses to say nothing, then it would be quite appropriate for the court to proceed on the basis that there is no more (and no less) to the proceedings than will be involved in the claimant making, or trying to make, out its case. Of course, in many instances, the defendant will be able to say that, although he has not submitted a draft statement of case, or produced a witness statement, setting out the details of his case, its nature is clear from correspondence, common sense, or even submissions. Consistent with my observations on the first point, I would not want to encourage a defendant to go into great detail as to his case in a long document with many exhibits, but if he is wholly reticent about his case, he can have no complaint if the court does not take into account what points he may make, or evidence he may call, at any trial. I agree with Lord Clarke that a defendant could exhibit draft points of defence, but in many cases, it may be disproportionate to expect him to incur the costs of doing so before it has been decided whether the claim is to proceed at all. The third point was expressed by Lord Bingham in Lubbe v Cape plc [2000] 1 WLR 1545, 1556. He said, in the context of an application for a stay of proceedings on grounds of forum non conveniens, that [t]his is a field in which differing conclusions can be reached by different tribunals without either being susceptible to legal challenge. The jurisdiction to stay is liable to be perverted if parties litigate the issue at different levels of the judicial hierarchy in the hope of persuading a higher court to strike a different balance in the factors pointing for and against a foreign forum. Precisely the same applies in many cases involving permission to serve out. As Mr Mark Hapgood QC, who appeared for Mr Malofeev, said, appellate courts should be vigilant in discouraging appellants from arguing the merits of an evaluative interlocutory decision reached by a judge, who had to balance the various factors relevant to the appropriate forum, when the complaint is, in reality, that the balance should have been struck differently. Lord Templeman in Spiliada, at 465 said that the determination of the appropriate forum is pre eminently a matter for the trial judge, because Commercial Court judges are very experienced in these matters, and [a]n appeal should be rare and the appellate court should be slow to interfere. This case was in the Chancery Division, whose judges entertain such issues less commonly than their Commercial Court colleagues, but their experience and expertise are such that the same conclusion applies. As Tomlinson LJ said at para 117 of his judgment in Alliance Bank, an appellate court should hesitate long before interfering with the judges assessment on such an issue. The first question: the appropriate forum: the instant appeal Lord Mance and Lord Clarke have each fully considered the first question in their respective judgments, and have come to different conclusions. Given that the first question is so fact specific, and is the subject of two full judgments in this court (not to mention two full judgments below), it would not be appropriate for me to go into the facts and issues canvassed between the parties. Lord Mance in paras 41 and 42 of his judgment has set out the passages in the judgments of Arnold J and the Court of Appeal respectively, which contain the centrally relevant reasoning of those tribunals on the first question which we have to decide. At least on the face of it, those passages each involve a classical interlocutory weighing up exercise with which an appellate court should be slow to interfere. Of course, that does not detract from the point that the Court of Appeal will consider any argument that the judge took into account any irrelevant or mistaken material, or omitted some relevant material, which could well have influenced the conclusion reached, or that the case is one of those even more unusual cases where the judges conclusion was one that no reasonable judge could have reached. It is worth emphasising that, as Lord Wilson says, the exercise carried out by the judge and by the Court of Appeal on the first question was not the exercise of a discretion but an evaluative, or a balancing, exercise, with which, as Lord Goff said in Spiliada at 465 an appellate court should be slow to interfere (also reflected in Lord Binghams observation in Lubbe quoted in para 92 above). In my view, there are no good grounds upon which this court should interfere with the decision of the Court of Appeal on the first question, and I also consider that there were no good grounds upon which the Court of Appeal could have interfered with the decision of Arnold J on that question. In that connection, there are one or two points worth mentioning. First, were the Court of Appeal correct to hold that Arnold J went wrong in a way which justified them reconsidering his conclusion? In my view, they were right to say in paras 131 and 129 of their judgment that he should have asked himself the single question identified in para 80 above, whereas he approached the issue through two slightly different questions. However, I am unconvinced that this represented an error of significance. The nub of Arnold Js reasoning, quoted by Lord Mance in para 41 above, shows, to my mind, that the judge ultimately adopted the right approach to the question which he had to resolve. Secondly, there is the governing law. For the reasons given by Lord Clarke and Lord Mance, I agree that the law governing the alleged tort of deceit is English law. As for the alleged tort of conspiracy, this is less clear, because the conspiracy to commit the deceit was based on a common design allegedly formed in Russia. However, like Lord Mance, I am content to proceed on the basis that English law applies. In connection with the relevant governing law, therefore, it is clear that Arnold J and the Court of Appeal went wrong in holding that Russian law was the governing law. It seems to me, however, that that error cannot, at least of itself, justify this court interfering with the Court of Appeals decision, or, indeed, with Arnold Js decision, on the first question. That is because the Court of Appeal said in terms in para 166 of its judgment that it would have reached the same decision even if the law governing the deceit and conspiracy claims was English law, and Arnold J in his judgment appears to me to have taken the same view at his para 194. Thirdly, there is an argument based on the jurisdiction clauses contained in the agreements, which VTB contends it entered into as a result of the alleged deceits and conspiracy. Clause 35 of the Facility Agreement (clause 35) provided, in clause 35.1, that the courts of England have nonexclusive jurisdiction to settle any dispute arising out of or in connection with this Agreement, that no Party would argue that the courts of England [were not] the most appropriate and convenient courts to settle such disputes, but that clause 35.1 was for the benefit of [VTB] only. Clause 35.3 entitled VTB to refer any dispute which may arise out of or in connection with this Agreement to final and binding arbitration in London. The accompanying related agreements also contained jurisdiction clauses in favour of the English courts, and although their terms were not identical to clause 35, the differences are not significant for present purposes, so I shall confine my remarks to clause 35. On behalf of VTB, Mr Mark Howard QC argued that the fact that the defendants had procured, by fraudulent misrepresentations, the entry of VTB into a contract containing a provision such as clause 35, was a powerful pointer to England being the proper place to bring [a] claim that it was induced by deceit to do so, particularly as the individual alleged to be responsible for the deceit was also involved in negotiating the contract. At the end of para 187 of his judgment, Arnold J described clause 35 as a pointer to England, but not a strong one given that the claim is a tort claim not a contract claim. The Court of Appeal did not in terms address this point, as the approval in their para 167 of Arnold Js balancing exercise only refers to his paras 188 and 189. However, by expressly agreeing with his approach, it seems unlikely that they did not take into account the point which he made at the end of his para 187. In my view, Arnold J was right in his view that clause 35 was a factor in favour of VTBs case on the first question, but he was also right to say that it was not a particularly strong factor. As Rix J said in relation to a similar point in Credit Suisse First Boston (Europe) Ltd v MLC (Bermuda) Ltd [1999] 1 All ER (Comm) 237, 252, it would be far fetched to suggest that a provision such as clause 35 could be invoked by VTB to require a claim it brings solely against non parties to be heard in London, even if the claim relates to the agreement containing the clause. However, that is not a reason for concluding that clause 35 cannot be a factor, or, to use Arnold Js word, a pointer, in connection with the first question. There may well be circumstances in which such a factor is a powerful one. An example is to be found in the decision of the New South Wales Court of Appeal in Global Partners Fund Ltd v Babcock & Brown Ltd (in liquidation) [2010] NSWCA 196 see especially at paras 71 to 80. I do not consider that that decision helps VTB: for a number of reasons, it was a very different case. In this case, it is true that, at least on the unchallenged evidence on behalf of VTB, Mr Malofeev was involved, and may have been instrumental in, negotiating the agreements in question, and he can therefore be said to have approved, or at least have had knowledge of, their terms, including clause 35. It is also true, again on VTBs case, that Mr Malofeev can be said to have encouraged VTB to enter into those agreements, which include clause 35. To that extent, it can come as no surprise to him that VTB wish to litigate a claim which, at least on its case, arises out of those agreements, in London. However, clause 35 is not an exclusive jurisdiction provision: it merely gives VTB what is in effect an option to sue the other parties to the agreements in England in respect of any claim arising out of or in connection with those agreements. The present proceedings do not involve VTB suing any party to the agreements, although it may be that they could fairly be said to include any claim arising under the agreements. The fact that RAP was content to be sued under the agreements in England does not mean that Mr Malofeev would have been content to have been sued in tort here. The fact that VTB apparently wanted to have the right to sue RAP here does not mean that it would have wanted to have the same right against Mr Malofeev (e.g. RAP may have been believed to have assets here). I accept that it would be different if VTB had a claim under the agreements against RAP to which its claim against Mr Malofeev was somehow connected. There is obvious force in Mr Hapgood QCs point that, if Mr Malofeev is to be treated as having had notice of clause 35 and its implications, it goes no further than helping VTB in suing him in this jurisdiction in proceedings which include a claim brought under the agreements against one or more of the parties to the agreements. However, I do not consider that the fact there are no such claims destroys VTBs reliance on clause 35 of any validity, but it severely weakens it. I acknowledge the authority of Professor Briggs and the force of his views, as described by Lord Clarke at paras 221 and 222. However, I do not accept that Mr Malofeev engineered VTB entering into clause 35. There is no evidence that he even knew of its existence, and, anyway, it is plain from its terms that the clause was wanted by VTB and is purely for its benefit. In so far as it is said that Mr Malofeev engineered VTB entering into the agreement which happened to include clause 35, it seems to me unsafe to proceed on the assumption that Mr Malofeev was guilty of deceit: that would be the central substantive issue in these proceedings. What I do accept is that the existence of the clause in an agreement, in which Mr Malofeev was in some respects involved (to use a neutral word) in negotiating, renders it hard for him to contend that England is an inappropriate forum for the proceedings which are connected with the agreement, but I do not see it going much further than that on its own. To hold otherwise would, I think, involve effectively treating Mr Malofeev as bound by the clause. Finally, is this a case where the conclusion reached below on the first question was outside the ambit of permissible decisions as canvassed by Lord Bingham in Lubbe and quoted in para 92 above? In my view, it is not. While there is a powerful case for saying that England is the appropriate forum, as Lord Clarkes judgment shows, I think that it is also clear there is a powerful argument to the contrary, as is demonstrated by Lord Mances judgment (supported by the reasoning of Arnold J and the Court of Appeal). It is unnecessary to spend time on what is a hypothetical question, namely what decision I would have reached on this issue if I had been the appropriate decision maker. It is sufficient for me to conclude, as I do, essentially for the reasons given more fully by Lord Mance and Lord Wilson, that Arnold J and the Court of Appeal each reached a conclusion on the first question which (i) they were respectively entitled to reach on the basis of applying the relevant principles to the facts of this case, and (ii) was not vitiated by any error, because, to the extent that there was any error, it did not invalidate the conclusion, both because the error would not have caused them to change their conclusions and because that would have been a reasonable view to take. The second issue: piercing the corporate veil: VTBs case VTB seeks to amend its pleaded case to contend that Mr Malofeev and Marcap should be treated as being jointly and severally liable with RAP for breaches of two of the agreements, namely the Facility Agreement and the associated ISA (the two agreements) and/or otherwise subject to remedies to enforce the two agreements. On the documents, the parties to the two agreements were (i) RAP, (ii) the original guarantors, namely, Migifa, owner of all the shares in RAP, and Brentville, owner of all the shares in Migifa, and (iii) VTB. It is (unsurprisingly) therefore common ground that Mr Malofeev was not party to either of the two agreements. However, VTBs contention is that it is entitled to pierce the veil of incorporation of RAP, as a result of which Mr Malofeev (and Marcap) should be held liable under the two agreements together with RAP and/or otherwise subject to remedies to enforce the two agreements. According to VTBs proposed amended particulars of claim, as expanded in the written and oral argument before us, its case on this issue may be summarised as follows: to (iii) The two agreements appeared (i) Mr Malofeev controlled RAP and Nutritek; (ii) RAP was specifically formed for the purpose of entering into the two agreements, which it duly did and thereby obtained the benefit of the loans of over US$225,050,000 made available to RAP by VTB thereunder; involve, and were misrepresented to VTB to involve, a loan to RAP to enable it to purchase the shares in certain Dairy Companies owned by Nutritek, whereas their true purpose, as Mr Malofeev knew, was to transfer those shares between the two companies at an inflated price; In particular, Mr Malofeev was responsible for inducing VTB to enter into the two agreements by virtue of Nutriteks misrepresentations as to the control, trading performance, and value of the Dairy Companies, and, in particular, representing that they were not controlled by Mr Malofeev or Marcap; (v) Mr Malofeev accordingly improperly used RAP as the corporate vehicle to enter into the two agreements, and (iv) (vi) obtain[ed] thereby the loans, which involved the fraudulent misuse of the company structure; In particular, Mr Malofeev used RAPs separate legal status to disguise the ownership and control ultimately exercised over RAP by [Mr Malofeev and Marcap], which disguise duly misled VTB into believing that there was a genuine arms length transaction at a genuinely negotiated price; (vii) In these circumstances, the corporate veil of RAP should be lifted, exposing Mr Malofeev as the puppeteer behind it to remedies to enforce the terms of the [two agreements], so that Mr Malofeev is jointly and severally liable with RAP under the two agreements in respect of VTBs losses. For Mr Malofeev, it was contended that this line of argument is bound to fail on two alternative grounds. The first is that we should hold that, whatever has been said about it in previous cases, the court cannot in fact pierce the corporate veil, and that the cases which suggest it can are wrong, although the decisions in those cases may often be justified on another basis. The second argument is that, even if the court can in principle pierce the veil, it cannot do so in this case, because VTBs argument represents an illegitimate and unprincipled extension of the circumstances in which the veil can be pierced. The second issue: piercing the corporate veil: the principle of piercing the veil I turn first to consider the argument that there are no circumstances in which the court should pierce, or lift, the corporate veil. The terms piercing and lifting appear throughout the authorities, sometimes interchangeably. As Toulson J observed in Yukong Line Ltd of Korea v Rendsburg Investments Corpn of Liberia (No 2) [1998] 1 WLR 294, 305, it may not matter what language is used as long as the principle is clear; but there lies the rub. Staughton LJ in Atlas Maritime Co SA v Avalon Maritime Ltd (No 1) [1991] 4 All ER 769, 779G, expressly separated the two, on the basis that pierc[ing]is reserve[d] for treating the rights or liabilities or activities of a company as the rights or liabilities or activities of its shareholders, whereas lift[ing] [is] to have regard to the shareholding in a company for some legal purpose. In Ben Hashem v Al Shayif [2008] EWHC 2380 (Fam) [2009] 1 FLR 115, a case which included a claim that a company was no more than one mans alter ego, Munby J said, at para 150, that in this context the expressions are synonymous. For present purposes, I shall use the phrase piercing in preference to lifting. It is the more familiar expression and it is the expression which all counsel have used. It is unnecessary to decide whether, in truth, there is a difference in this context between piercing and lifting the corporate veil. We were referred to a number of cases where courts have either granted relief on the basis of piercing the corporate veil, or where courts have proceeded on the assumption, or concluded, that there is power to do so. The only case in that connection in the House of Lords, or Supreme Court, to which we were referred, was Woolfson v Strathclyde Regional Council 1978 SLT 159, a case where, on the facts, the House of Lords had no difficulty in rejecting an argument that the corporate veil could be pierced. At 1978 SLT 159, 161, Lord Keith suggested that the court could only take such a course where special circumstances exist indicating that [the involvement of the company] is a mere faade concealing the true facts. There is obvious attraction in the proposition that the court can pierce the veil of incorporation on appropriate facts, in order to achieve a just result. However, the spirited and sustained attack mounted against the proposition by Mr Michael Lazarus, who appeared for Marshall Capital Holdings Ltd, is worthy of serious consideration. The brief discussion of the principle in Woolfson does not justify the contention that it was somehow affirmed or approved by the House: Lord Keiths remarks were obiter, and the power of the court to pierce the corporate veil does not appear to have been in issue in that case. The most that can be said about Woolfson from the perspective of VTB is that the House was prepared to assume that the power existed. The starting point for the argument that the principle does not exist is the well known decision in Salomon v A Salomon & Co Ltd [1897] AC 22. There is great force in the argument that that case represented an early attempt to pierce the veil of incorporation, and it failed, pursuant to a unanimous decision of the House of Lords, not on the facts, but as a matter of principle. Thus, at 30 31, Lord Halsbury LC said that a legally incorporated company must be treated like any other independent person with its rights and liabilities appropriate to itself , whatever may have been the ideas or schemes of those who brought it into existence. He added that it was impossible to say at the same time that there is a company and there is not. The notion that there is no principled basis upon which it can be said that one can pierce the veil of incorporation receives some support from the fact that the precise nature, basis and meaning of the principle are all somewhat obscure, as are the precise nature of circumstances in which the principle can apply. Clarke J in The Tjaskemolen [1997] 2 Lloyds Rep 465, 471 rightly said that [t]he cases have not worked out what is meant by piercing the corporate veil. It may not always mean the same thing (and to the same effect, see Palmers Company Law, para 2.1533). Munby J in Ben Hashem seems to have seen the principle as a remedial one, whereas Sir Andrew Morritt V C in Trustor AB v Smallbone (No 2) [2001] 1 WLR 1177 appears to have treated the principle as triggered by the finding of a faade. The faade mentioned by Lord Keith is often regarded as something of a touchstone in the cases e.g. per Munby J in Ben Hashem, para 164, and per Sir Andrew Morritt V C in Trustor, para 23. Words such as faade, and other expressions found in the cases, such as the true facts, sham, mask, cloak, device, or puppet may be useful metaphors. However, such pejorative expressions are often dangerous, as they risk assisting moral indignation to triumph over legal principle, and, while they may enable the court to arrive at a result which seems fair in the case in question, they can also risk causing confusion and uncertainty in the law. The difficulty which Diplock LJ expressed in Snook v London and West Riding Investments Ltd [1967] 2 QB 786, 802, as to the precise meaning of sham in connection with contracts, may be equally applicable to an expression such as faade. Mr Lazarus argued that in all, or at least almost all, the cases where the principle was actually applied, it was either common ground that the principle existed (Gilford Motor Co Ltd v Horne [1933] Ch 935, Re H (restraint order: realisable property) [1996] 2 BCLC 500, and Trustor) and/or the result achieved by piercing the veil of incorporation could have been achieved by a less controversial route for instance, through the law of agency (In re Darby, Ex p Brougham [1911] 1 KB 95, Gilford, and Jones v Lipman [1962] 1 WLR 832), through statutory interpretation (Daimler Company Ltd v Continental Tyre and Rubber Company (Great Britain) Ltd [1916] 2 AC 307, Merchandise Transport Ltd v British Transport Commission [1962] 2 QB 173, Wood Preservation Ltd v Prior [1969] 1 WLR 1077, and Re A Company [1985] BCLC 333), or on the basis that, as stated by Lord Goff in Goss v Chilcott [1996] AC 788, 798, money due to an individual which he directs to his company is treated as received by him (Gencor ACP Ltd v Dalby [2000] 2 BCLC 734, and Trustor). In summary, therefore, the case for Mr Malofeev is that piercing the corporate veil is contrary to high authority, inconsistent with principle, and unnecessary to achieve justice. I see the force of this argument, but there are points the other way. I am not convinced that all the cases where the court has pierced the veil can be explained on the basis advanced by Mr Lazarus. Further, as Mr Howard QC said, the fact is that those cases were decided on the basis of piercing the veil. More generally, it may be right for the law to permit the veil to be pierced in certain circumstances in order to defeat injustice. In addition, there are other cases, notably Adams v Cape Industries plc [1990] Ch 433, where the principle was held to exist (albeit that they include obiter observations and are anyway not binding in this court). It is also difficult to explain the first instance decision in Kensington International Ltd v Republic of the Congo [2005] EWHC 2684 (Comm), [2006] 2 BCLC 296 on any basis other than the principle (but I am not at all sure that the case was rightly decided see Continental Transfert Technique Ltd v Federal Government of Nigeria [2009] EWHC 2898 (Comm), paras 27 29). Further, the existence of the principle is accepted by all the leading textbooks see Palmer op. cit, Gore Browne on Companies at paras 7[3] to 7[6], Gower and Davies on Principles of Modern Company Law (8th ed) at paras 8 5 to 8 14, and Farrars Company Law (4th ed), pp 69 78. In answer to the contention that the approach of the courts to the issue of piercing the veil is unprincipled, there is real force, at least on the face of it, in the fact that it cannot be invoked merely where there has been impropriety. As Munby J put it in Ben Hashem, paras 163 164, it is necessary to show both control of the company by the wrongdoer(s) and impropriety, that is, (mis)use of the company by them as a device or faade to conceal their wrongdoing at the time of the relevant transaction(s). In its recent decision in La Gnrale des Carrires et des Mines v F G Hemisphere Associates LLC [2012] UKPC 27, para 24, the Judicial Committee of the Privy Council, in a judgment given by Lord Mance, was prepared to assume that the appellant was right in contending that it was open to a court in this jurisdiction to pierce the corporate veil, but it is to be noted that this was not challenged by the respondent. In para 27, reference was made to Case concerning Barcelona Traction, Light and Power Company, Ltd [1970] ICJ 3, in which, it was said, [T]he International Court of Justice referred (para 56) to municipal law practice to lift the corporate veil for instance, to prevent the misuse of the privileges of legal personality, as in certain cases of fraud or malfeasance, to protect third persons such as a creditor or purchaser, or to prevent the evasion of legal requirements or of obligations. However, at para 27, Lord Mance pointed out that Barcelona Traction concerned international legal considerations, indicating that there may not always be a precise equation between factors relevant to the lifting of the corporate veil under domestic and international law. In my view, it is unnecessary and inappropriate to resolve the issue of whether we should decide that, unless any statute relied on in the particular case expressly or impliedly provides otherwise, the court cannot pierce the veil of incorporation. It is unnecessary, because the second argument raised on behalf of Mr Malofeev, to which I shall shortly turn, persuades me that VTB cannot succeed on this issue. It is inappropriate because this is an interlocutory appeal, and it would therefore be wrong (absent special circumstances) to decide an issue of such general importance if it is unnecessary to do so. The second issue: piercing the corporate veil: why it cannot succeed in this case I therefore approach this question in the same way as the Court of Appeal, namely by considering whether, assuming in VTBs favour that the court can pierce the veil of incorporation on appropriate facts, the basis on which VTB seeks to pierce the veil can be justified in the present case. I do so on the basis that this issue is to be resolved by reference to English law. It seems to me, however, that there may be a choice of law question to be addressed in cases which concern the piercing of the veil of a foreign incorporated company. That question is whether the proper law governing the piercing of the corporate veil is the lex incorporationis, the lex fori, or some other law (for example, the lex contractus, where the issue concerns who is considered to be party to a contract entered into by the company in question). The ultimate conclusion may be that there is no room for a single choice of law rule to govern the issue: see Tham Piercing the corporate veil: searching for appropriate choice of law rules [2007] LMCLQ 22, 27. However, given that it has been common ground throughout these proceedings that the issue is to be resolved pursuant to English law, it is inappropriate to say more about this issue. In so far as VTB invokes the principle of piercing the veil of incorporation, its case involves what, at best for its point of view, may be characterised as an extension to the circumstances where it has traditionally been held that the corporate veil can be pierced. It is an extension because it would lead to the person controlling the company being held liable as if he had been a co contracting party with the company concerned to a contract where the company was a party and he was not. In other words, unlike virtually all the cases where the court has pierced the corporate veil, VTB is claiming that Mr Malofeev should be treated as if he were, or had been, a co contracting party with RAP under the two agreements, even though neither Mr Malofeev nor any of the contracting parties (including VTB) intended Mr Malofeev to be a party. The notion that the principle can be extended to such a case receives no support from any case save for a very recent decision of Burton J, Antonio Gramsci Shipping Corporation v Stepanovs [2011] EWHC 333 (Comm), [2011] 1 Lloyds Rep 647 (which he followed in his later decision in Alliance Bank JSC v Aquanta Corporation [2011] EWHC 3281 (Comm) [2012] 1 Lloyds Rep 181, which was considered by the Court of Appeal at [2012] EWCA Civ 1588). None of the other decisions relied on by VTB in this connection is, on analysis, of assistance to its case. In Gilford, Mr Horne had undertaken not to compete with his former employer, and a company, in which only he and his wife were shareholders, and which he formed after leaving his employment, was enjoined from competing. He effectively broke his undertaking by trading through the company, in the same way as if it had been carrying on the competing business through his wife as indeed had happened in Smith v Hancock [1894] 2 Ch 377, 385, a case relied on by the Court of Appeal in Gilford. Thus, the decision in Gilford had nothing to do with the fact that a company was involved, and therefore, as a matter of logic, the decision cannot have been based on piercing the corporate veil a point made by Toulson J in Yukong Line at 308, and rightly accepted by Arnold J and the Court of Appeal in this case. The same point (as was said in Yukong Line) applies to Jones v Lipman, which I do not find an entirely easy case. After agreeing to sell a property to a purchaser, the vendor sold the same property to a company owned by him and his wife, and the purchaser obtained an order for specific performance against the company. On the judges reasoning, it would have equally been entitled to do so if, instead of the company, the property had been transferred to the vendors wife. Another view of Jones is that the sale by the vendor to the company was treated as a sham transaction. In both Gencor and Trustor, the court pierced the corporate veil in order to impose liability on a company, effectively owned and controlled by the wrongdoer, for money which he had misappropriated from the claimant and diverted to the company. There was no question of the wrongdoer being treated as contractually liable under a contract to which the company, rather than he, was a party. Even the doubtful decision in Kensington did not involve going so far as to hold that the person sheltering behind the veil was liable as if he was a contracting party under a contract entered into by the company. The fact that there has been no case (until Gramsci) where the power to pierce the corporate veil has been extended in the way for which VTB contends in these proceedings does not necessarily mean that VTBs case, in so far as it is based on piercing the veil, must fail. However, given that the principle is subject to the criticisms discussed above, it seems to me that strong justification would be required before the court would be prepared to extend it. Once one subjects the proposed extension to analysis, I consider that it is plain that it cannot be sustained: far from there being a strong case for the proposed extension, there is an overwhelming case against it. First, it is not suggested by VTB that any of the other contracting parties under the two agreements is not liable. Indeed, as mentioned above, VTBs proposed pleaded case is that Mr Malofeev is jointly and severally liable with RAP. Even accepting that the court can pierce the corporate veil in some circumstances, the notion of such joint and several liability is inconsistent with the reasoning and decision in Salomon. A company should be treated as being a person by the law in the same way as a human being. The fact that a company can only act or think through humans does not call that point into question: it just means that the law of agency will always potentially be in play, but, it will, at least normally, be the company which is the principal, not an agent. On VTBs case, if the agency analogy is relevant, the company, as the contracting party, is the quasi agent, not the quasi principal. Subject to some other rule (such as that of undisclosed principal), where B and C are the contracting parties and A is not, there is simply no justification for holding A responsible for Bs contractual liabilities to C simply because A controls B and has made misrepresentations about B to induce C to enter into the contract. This could not be said to result in unfairness to C: the law provides redress for C against A, in the form of a cause of action in negligent or fraudulent misrepresentation. In any event, it would be wrong to hold that Mr Malofeev should be treated as if he was a party to an agreement, in circumstances where (i) at the time the agreement was entered into, none of the actual parties to the agreement intended to contract with him, and he did not intend to contract with them, and (ii) thereafter, Mr Malofeev never conducted himself as if, or led any other party to believe, he was liable under the agreement. That that is the right approach seems to me to follow from one of the most fundamental principles on which contractual liabilities and rights are based, namely what an objective reasonable observer would believe was the effect of what the parties to the contract, or alleged contract, communicated to each other by words and actions, as assessed in their context see e.g. Smith v Hughes (1871) LR 6 QB 597, 607. In his argument, Mr Howard QC relied by analogy with the law relating to undisclosed principals. In my view, the analogy tells against VTBs argument. The existence of the undisclosed principal rule has long been regarded as an anomaly, as discussed in Bowstead & Reynolds on Agency, 19th ed (2010), para 8 070, and as observed by Dillon LJ in Welsh Development Agency v Export Finance Co Ltd [1992] BCLC 148, 173. As the Court of Appeal said in this case at para 89, it would be inappropriate to extend an anomaly save where it would be unjust and unprincipled not to do so. To adapt what Lord Hoffmann said in OBG Ltd v Allan [2007] UKHL 21, [2008] AC 1, paras 103 and 106, an anomaly created by the judges to solve a particular problem is an insecure base on which to justify an extension to a principle, especially when that principle can itself be said to be anomalous. Quite apart from this, it seems to me that the facts relied on by VTB to justify piercing the veil of incorporation in this case do not involve RAP being used as a faade concealing the true facts. In my view, if the corporate veil is to be pierced, the true facts must mean that, in reality, it is the person behind the company, rather than the company, which is the relevant actor or recipient (as the case may be). Here, on VTBs case, the true facts relate to the control, trading performance, and value of the Dairy Companies (if one considers the specific allegations against Mr Malofeev), or to the genuineness of the nature of the underlying arrangement (which involves a transfer of assets between companies in common ownership). Neither of these features can be said to involve RAP being used as a faade to conceal the true facts. It was suggested, however, by Mr Howard QC that the case against Mr Malofeev involves him abusing the corporate structure, and that that is sufficient to justify piercing the corporate veil. However, in my view, abuse of the corporate structure (whatever that expression means) adds nothing to the debate, at least in this case. It may be another way of describing use of the company as a faade to conceal the true facts (in which case it adds nothing to Lord Keiths characterisation in Woolfson), or it may be an additional requirement before the corporate veil will be pierced: otherwise, it seems to me that it would be an illegitimate extension of the circumstances in which the veil can be pierced. It is true that in many civil law systems, abuse of rights is a well recognised concept, and it may be appropriate for a domestic court to apply such a principle in relation to some areas of EU law. However, it was not suggested to us that it should be applied as a new or separate ground in domestic law for treating Mr Malofeev as contractually liable to VTB, or that it would assist VTB in this case. Accordingly, in agreement with the Court of Appeal and for substantially the same reasons, I consider that VTBs contention represents an extension to the circumstances in which the court will pierce the corporate veil, and on analysis it is an extension which is contrary to authority and contrary to principle. The proposed extension is all the more difficult to justify given that it is not needed to enable VTB to seek redress from Mr Malofeev. It is clear that, if VTB establishes that it was induced to enter into the agreements by the fraudulent statements which he is alleged to have made, then Mr Malofeev will be liable to compensate VTB. The measure of damages may be different, but that is not a particularly attractive reason for extending the principle in a new and unprincipled way. And I am not at all attracted by the notion that the principle should be invoked simply to enable VTB to justify the proceedings being heard in this jurisdiction, if they otherwise could not be. That would be precious close to its application being permitted to pull itself up by its own bootstraps. It follows from this analysis that I doubt that the decision in Gramsci can be justified, at least on the basis of piercing the corporate veil. In agreement with the Court of Appeal and Arnold J, I think that the reasoning in that case involved a misinterpretation of the basis of the decisions in Gilford and Jones. It seems to me that the conclusion in Gramsci was driven by an understandable desire to ensure that an individual who appears to have been the moving spirit behind a dishonourable (or worse) transaction, action, or receipt, should not be able to avoid liability by relying on the fact that the transaction, action, or receipt was effected through the medium (but not the agency) of a company. But that is not, on any view, enough to justify piercing the corporate veil for the purpose of holding the individual liable for the transaction, action, or receipt, especially where the action is entering into a contract. For these reasons, I agree with the Court of Appeal in concluding that, assuming that there is jurisdiction to pierce the corporate veil on appropriate facts, VTBs proposed pleaded case does not give rise to arguable grounds for contending that this jurisdiction could be invoked in the present case. I would therefore refuse VTB permission to amend its pleaded case to raise such a claim. Conclusion I would therefore dismiss VTBs appeal on both main issues. I have referred to the issues I have been discussing as the main issues, because there is another series of issues relating to a freezing order which VTB obtained. Following its discharge by Arnold J, VTB wishes this freezing order to be reinstated. There is also a temporary freezing order, which VTB obtained pending the determination of this appeal. In the light of the fact that this appeal is being dismissed, it seems to me clear that the discharged freezing order must remain discharged and the temporary freezing order must now be discharged as well. I should add that I agree with what Lord Wilson says about the freezing orders. LORD WILSON I agree with Lord Mance and Lord Neuberger that the appeal should be dismissed. As their judgments, and, on the other hand, those of Lord Clarke and Lord Reed, well demonstrate, the rival arguments in relation to forum are evenly balanced. VTB has three main points: (a) The location of the alleged torts in England. It is worthwhile to remember, however, that, in one sense, the bringing of the transactions into England was pure chance. In July 2007 VTB Moscow informed Mr Malofeev and MarCap that the proposed lender would be either itself or VTB; and in October 2007 it informed them that it would be VTB. They had no objection; but the placement of the lending into the hands of its English subsidiary was effected entirely at the election of, and for the convenience of, VTB Moscow. (b) The English jurisdiction clause in the facility agreement and indeed also in the interest rate swap agreement. If Mr Malofeev controlled the borrowing party to the agreements, namely RAP, and so can be considered responsible for its contractual concession that VTB should have the right to demand that disputes arising out of them be resolved in the courts of England, he can hardly complain if allegations of his and his companies fraudulent inducement of VTB to enter into them are also resolved here. But two riders fall to be attached. The first is whether the court can at this stage proceed on the basis that Mr Malofeev controlled RAP. The court must not for this purpose assume what VTB needs to prove; yet the fact is that, while not admitting control of RAP, Mr Malofeev has, to date, not actively challenged it. The second is that the test to be applied pursuant to the decision in the Spiliada case, [1987] AC 460, mandates a much wider inquiry than into whether Mr Malofeev would have no ground for complaint about the continuation of the proceedings in England. (c) The government by English law of VTBs claims in tort, as held unanimously by this court and as explained in judgments above with which I agree. A spectre of considerable practical inconvenience is raised around the receipt by a Russian judge of evidence of English law and around his application of it to such facts as he were to find. On the other hand the legal framework of VTBs case does not appear to be complex or controversial and Arnold J was entitled to conclude that the key issues in the case were likely to be factual rather than legal. Although, therefore, I discern a practical element in the third of VTBs main points, I have no doubt that, over all, considerations of practicality militate strongly in favour of a Russian forum. The apparently relevant witnesses are Russian, speak Russian and seem almost entirely to be resident in Russia and so beyond the reach of an English witness summons; and the relevant documentation, in particular relating to both the actual and the represented profitability of the dairy companies, was written in Russian. On the one hand, therefore, there are VTBs points, which primarily go to theory, to policy and, yes, perhaps to a limited extent to justice. On the other hand there are the defendants points, which primarily go to practicality. The forum issue required Arnold J not (in my view) to exercise a discretion but, rather, to reach an evaluative judgment upon whether, in the light of these and the many other points pressed upon him by each side, England was clearly the more appropriate forum. [T]he appellate court should be slow to interfere (Lord Goff in the Spiliada case, at p 465); and I agree with Lord Mance at para 68 and with Lord Neuberger at para 96 that the errors which the Court of Appeal identified in the judgment of Arnold J (in particular his adoption of the two part test apt to an application for stay) were, on analysis, of materiality insufficient to justify a re evaluation of its own. Furthermore, notwithstanding its own error about the governing law of the torts, alongside which, however, one must weigh its assertion that an English governing law would not have led it to a different conclusion, I agree with Lord Neubergers alternative conclusion at para 98 that there are no grounds for interfering with the Court of Appeals own evaluative conclusion. To be honest, a disposal of the forum part of the appeal on the above basis is, in the light of this courts intended function in the resolution of controversial and important issues of law, a banal disposal; and, in retrospect, a question arises whether it is appropriate for there to have been a massive second appeal to this court on the forum issue. In its notice of appeal VTB identified the requisite issue of general public importance relative to the issue in one sentence: the appellant says that if a defendant has committed a wrong in England, there is a presumption, and a strong one, that he ought to answer for that wrong in England. But, while he was careful not entirely to abandon his preference for the language of presumption, Mr Howard conceded, early in his opening address, that it was irrelevant whether such was a presumptive position, a starting point or a prima facie conclusion; a little later in his address, he added that the issue was not really about a label, such as that of presumption, but about approach; and he scarcely pressed the difficult suggestion that there was anything in the jurisprudence even in The Albaforth, [1984] 2 Lloyds Rep 91 to raise a formal, legal presumption that the forum should follow the location of the tort. I am doubtful whether the committee would have granted permission to appeal on the forum issue if it had realised that VTBs case would develop into little more than an invitation to re evaluate all the relevant factors for and against the English forum. VTBs application for permission to amend its particulars of claim so as to include claims against Mr Malofeev and the two MarCap companies as additional parties to the facility and interest rate swap agreements logically falls for consideration before that of the forum issue. For, had it been granted, the jurisdiction clauses in the agreements would have been directly in play. VTB frankly concedes that its primary purpose in making the proposed claims in contract was, by reference to such clauses, to establish the English jurisdiction pursuant to article 23(1) of Council Regulation EC 44/2001 (the Judgments Regulation); and that its secondary purpose was thereby to be enabled to claim more substantial sums, particularly by way of interest, than would be payable as damages in tort. In the event, however, for the reasons given by Lord Neuberger in paras 126 to 148, the Court of Appeal was right to dismiss VTBs appeal against the refusal of Arnold J to permit the amendment: for there was no good arguable case that the three specified defendants could be unveiled as additional parties to the agreements with VTB. In that this court welcomes blue sky thinking, I do not criticise Mr Lazarus for his over arching attempt to persuade it that English law recognises no principle that the corporate veil may ever be lifted. In my view, however, and notwithstanding the difficulty of being able to define within one sentence the circumstances in which the law will perhaps lift the corporate veil, such was a highly ambitious submission. But this is not the place at which to embark on an attempted subjection of it to critical examination. In that, by a majority, VTBs appeal is to be dismissed, the worldwide freezing order against Mr Malofeev must fall to be discharged. But the continuation of the order to date represents a highly unsatisfactory state of affairs. The order was first made, without notice, in August 2011 and was continued, on notice, in September 2011. On 29 November 2011, in the light of his conclusion in favour of the Russian forum, Arnold J declined further to continue the order, save for one week in order to enable VTB to approach the Court of Appeal. But importantly, as Lord Clarke has explained in para 163, Arnold J also ruled that, even had he allowed the English proceedings to continue by declining to set aside the order for service out of the jurisdiction, it would have been wrong, for each of two reasons, for the freezing order to continue. VTB, to whom Arnold J had granted permission to appeal against his refusal to permit the amendment, secured permission from the Court of Appeal also to appeal against his decision in relation to forum and his independent refusal to continue the freezing order; and, on a holding basis, the court continued that order until determination of the appeal. In the light of its dismissal of VTBs appeal in relation to forum, the Court of Appeal concluded that there was no basis on which the freezing order could continue in any event; and, although it expressed doubts about the first reason given by Arnold J for his independent refusal to continue the freezing order, it did not address his second reason and made no order on that part of VTBs appeal. It continued the freezing order for ten days only in order to enable VTB to approach this court, which further continued it until its determination of this appeal. In the light of this courts dismissal, by a majority, of the appeal in relation to forum, it can now be seen that Mr Malofeev has continued to be subject to a worldwide freezing order for some 14 months beyond the time when it was proper for such an order to have continued. For in November 2011 Arnold J rightly decided that the proceedings should take place in Russia; and the freezing order should then have expired. It was extended only because of the pendency of two successive appeals which can now be seen both to have failed. Such a state of affairs is bad enough. But what makes it worse is that, as I have explained, Arnold J also ruled as long ago as November 2011 that, irrespective of its dependence on the continuation of the English proceedings, the freezing order should not be continued; and his ruling has not been set aside by the Court of Appeal. In retrospect the Court of Appeal should have determined VTBs appeal against that ruling. Had it, for example, dismissed its appeal, this court would be unlikely to have permitted it to appeal against the dismissal and so the freezing order would no doubt at last have come to an end. One cannot quarrel with the logic behind the conventional continuation of a freezing order pending an appeal against a refusal to make an order upon its continued existence depends. But what turns out to have been the protracted wrongful continuation of the freezing order is another indication of the inappropriateness of a further appeal to this court in circumstances such as the present. The degree of economic inhibition caused to a person in the position of Mr Malofeev by a worldwide freezing order made in England remains to be seen. At first sight, however, he is entitled to complain that it was an oppressive restraint on his economic activities. Whether he is correct to say that it has caused considerable prejudice to him will no doubt be the subject of inquiry in his application, already issued but so far stayed, for VTB to be ordered to compensate him for his losses pursuant to its cross undertaking attached to the freezing order. LORD CLARKE (dissenting) Introduction In this action the appellant claimant, VTB Capital plc (VTB), which was formerly called VTB Bank Europe plc, sought and obtained permission to serve proceedings out of the jurisdiction on the defendant respondents on the ground that the defendants had committed the torts of deceit and conspiracy in England. Save for the third defendant, which has not been served with the proceedings, the defendants applied to have that permission set aside on the ground that VTB had failed to show that England was in all the circumstances clearly and distinctly the appropriate forum to determine the dispute. That application succeeded before Arnold J (the judge): [2011] EWHC 3107 (Ch). VTBs appeal to the Court of Appeal failed: [2012] EWCA Civ 808. The Supreme Court subsequently gave permission to appeal on that issue, which has (not entirely correctly) been described in argument as the jurisdiction issue. That is the first issue in this appeal. The second issue arises out of an application made by VTB to amend its particulars of claim to add a claim for breach of contract. Its case involves a consideration of the principles relevant to what is sometimes called piercing the corporate veil. Both the judge and the Court of Appeal refused that application. Although both courts accepted that it is possible in some circumstances to pierce the corporate veil, they both held that VTB had no arguable case that this is such a case. Under this head the defendants seek to uphold the decision of the Court of Appeal, not only on the particular facts, but also on the basis that there are no circumstances in which the court can pierce the corporate veil. The third issue arises out of a world wide freezing order (WFO) granted to VTB against Mr Malofeev on 5 August 2011 by Roth J. Mr Malofeev applied to discharge the order on the grounds (a) that there was no risk of dissipation of assets and (b) that there had been material non disclosure before Roth J. Arnold J subsequently declared that the WFO should be discharged on the ground that the court had refused to exercise jurisdiction over the claim. He also said that he would in any event have discharged and refused to re grant the WFO on the grounds relied upon by Mr Malofeev. The WTO was however renewed pending an appeal to the Court of Appeal and subsequently to this court. Jurisdiction Service out of the jurisdiction the principles The relevant principles are not in dispute. They have been stated and restated many times. They were correctly stated in the Court of Appeal in this case by Lloyd LJ, with whom Rimer and Aikens LJJ agreed, at paras 98 to 101. Lloyd LJ put them thus in paras 99 and 100: 99. The three basic principles were recently restated by Lord Collins of Mapesbury in giving the advice of the Privy Council in AK Investment CJSC v Kyrgyz Mobile Tel Ltd [2011] UKPC 7, 1 CLC 205 at paragraphs 71, 81 and 88. They can be summarised as follows: first, the claimant must satisfy the court that, in relation to the foreign defendant to be served with the proceedings, there is a serious issue to be tried on the merits of the claim, i.e. a substantial question of fact or law or both. This means that there has to be a real, as opposed to a fanciful, prospect of success on the claim. Secondly, the claimant must satisfy the court that there is a good arguable case that the claim against the foreign defendant falls within one or more of the classes of case for which leave to serve out of the jurisdiction may be given. These are now set out in paragraph 3.1 of Practice Direction 6B. Good arguable case in this context means that the claimant has a much better argument than the foreign defendant. Further, where a question of law arises in connection with a dispute about service out of the jurisdiction and that question of law goes to the existence of the jurisdiction (eg whether a claim falls within one of the classes set out in paragraph 3.1 of Practice Direction 6B), then the court will normally decide the question of law, as opposed to seeing whether there is a good arguable case on that issue of law. 100. Thirdly, the claimant must satisfy the court that in all the circumstances England is clearly or distinctly the appropriate forum for the trial of the dispute and that in all the circumstances the court ought to exercise its discretion to permit service of the proceedings out of the jurisdiction. This requirement is reflected in rule 6.37(3) of the CPR, which provides that The court will not give permission [to serve a claim form out of the jurisdiction on any of the grounds set out in paragraph 3.1 of Practice Direction 6B] unless satisfied that England and Wales is the proper place in which to bring the claim. The facts The underlying facts and issues under this head are set out in the agreed statement of facts and issues (the SFI), from which I can take the salient events. VTBs case is that the key step in the fraud was VTBs advancing a sum of US$195,000,000 in London to the account of a borrower in London, which was in turn paid to a seller of a business to its account in London, all done subject to a loan agreement and other related agreements governed by English law and containing English jurisdiction clauses. VTB claims that it has suffered a loss in excess of US$185,000,000. The judge and the Court of Appeal both held that VTB has a good arguable case that its claims are claims in tort within paragraph 3.1(9)(a) of CPR Part 6, Practice Direction 6B, on the ground that damage was sustained within the jurisdiction and that VTB has a good arguable case in tort against Mr Malofeev. However they held that permission to serve out of the jurisdiction should be set aside because VTB has failed to show that England was clearly or distinctly the appropriate forum to determine the disputes. The first issue in this appeal is whether they were entitled so to hold. VTBs case on the facts may be summarised in this way. VTB is a bank incorporated and registered in England. It is a member of the London Stock Exchange, and it is authorised and regulated by the Financial Services Authority for the conduct of investment business in the United Kingdom. It is majority owned by JSC VTB Bank (VTB Moscow), which is a state owned bank. It is one of three strategic business arms of the VTB Group, the others being the corporate and retail businesses. It entered into a facility agreement, dated 23 November 2007 (the facility agreement), with a Russian company, Russagroprom LLC (RAP). Pursuant to the facility agreement, sums totalling US$225,050,000 were advanced to RAP, primarily to enable RAP to buy six Russian dairy companies and three associated companies (the dairy companies) from the first respondent (Nutritek), a company registered in the British Virgin Islands (BVI). After making three interest payments (and no payments of capital), RAP defaulted on the loan in November 2008. VTBs case is that the value of the security provided for the loan was no more than a figure in the region of US$32m to US$40m. VTBs case is that it was induced in London to enter into the facility agreement and an accompanying interest rate swap agreement, by misrepresentations made by Nutritek, for which the other respondents are jointly and severally liable. The two alleged misrepresentations were: first, that RAP and Nutritek were not under common control, and second, that the value of the dairy companies was much greater than their true worth. It is VTBs case that the misrepresentations were fraudulent. The ostensible primary purpose of the facility agreement was to fund the acquisition of the dairy companies from Nutritek by RAP. RAP entered into a Share Purchase Agreement (SPA) with Nutritek dated 27 November 2007, whereby RAP purchased shares in a newly incorporated BVI company, Newblade Ltd (Newblade), which in turn owned the dairy companies. VTB put before the judge a structure chart, setting out in a diagram the complex web of offshore companies through which, on VTBs case, Mr Malofeev ultimately controlled each of Nutritek, the second respondent (Marcap BVI), the third defendant (Marcap Moscow), and RAP. Marcap Moscow has not been served with the proceedings, and has not taken part in any of the hearings to date. Mr Malofeev is an international businessman who resides in Moscow. The Court of Appeal found that there was a good arguable case that Mr Malofeev operated a complex web of companies in a number of jurisdictions. It is VTBs case that he was at all material times the controller and a principal beneficial owner of the BVI companies, Nutritek and Marcap BVI, as well as Marcap Moscow and RAP. RAP was incorporated in Russia on 21 May 2007 as a special purpose vehicle. In November 2007 its immediate parent company was Migifa Holdings Ltd (Migifa), a company incorporated in Cyprus. Migifas parent company was Brentville Ltd (Brentville), a company incorporated in the BVI. It is VTBs case that RAP was ultimately owned and controlled by Mr Malofeev, through a web of offshore companies. As the judge found at para 59, this has not been the subject of challenge by Mr Malofeev, who has advanced no positive case on the issue of the ultimate ownership and control of RAP. See also the Court of Appeal, at para 34. It is VTBs case that, in July 2007 in Moscow, Mr Malofeev personally introduced the VTB Group to the scheme, whereby Nutritek sold its interests in the dairy companies to RAP under the SPA. He stated that a decision had been taken to sell Nutriteks interest in the dairy business and that a purchaser had been identified. He said that a purchaser would have to find banking facilities in order to make the purchase. Mr Tulupov of VTB Moscow was the project manager in respect of the proposed transaction, where his role included liaising with VTB in respect of the project. At an early stage, it was contemplated that either VTB Moscow or VTB would become the lender in connection with the intended transaction. On 18 July 2007, he instructed the London office of Dewey LeBoeuf, Greene & Macrae (DLGM) in relation to the proposed transaction. On the next day, a conference call took place between representatives of VTB Moscow, VTB (Marina Bragina, in London) and Marcap Moscow (Mr Alexander Provotorov and Mr Yury Leonov). It is apparent from a draft term sheet of 8 October 2007 that by early October that year, the proposed structure of the transaction was that the lender was to be VTB (funded by a participation agreement with VTB Moscow) and the borrower was to be RAP. It is VTBs case that, from about this time it was VTB which was to be the particular target for the fraud. The loan amount was to be in excess of US$220m towards an acquisition cost of US$250m. Work started to prepare the documentation for the transaction. The facility agreement was to be governed by English law and VTB was to be the lender in the transaction. Mr Tulupov explains in his statement that the attraction of the lender being VTB was that (i) VTB in the London market was able to provide more sophisticated lending structures than VTB Moscow (owing to internal Russian banking requirements) and (ii) English law offered more protection in the case of default. On 31 October 2007, VTB Moscows Credit Committee approved the proposed transaction. It is VTBs case that, separately from this, and in connection specifically with the ability of VTB to decide to enter into the facility agreement, VTB, as an FSA regulated entity, had its own processes and procedures before lending moneys. The key figures at VTB in this process included (1) Konstantin Ryzhkov, who was VTBs Head of Acquisition and Leverage Finance from 1 September 2007 to 27 October 2008 and who was also a managing director at VTB Moscow, (2) Marina Bragina, who held the equivalent post in VTB to that held by Mr Tulupov in VTB Moscow, (3) Steve Thunem, Head of Debt Capital Markets, (4) Juliet Wooi, a credit risk analyst, (5) Peter Yates, Head of Credit Risk, (6) Peter Manning, Chief Risk Officer, as per Board Approved Delegated Credit Approval Authorities and (7) K Ianovski, Head of Structured Finance and Syndication. As regards the ownership of RAP, VTB relies upon two emails dated 6 and 8 November 2007 by Ms Bragina of VTB to others within VTB and VTB Moscow which recorded information from Nutritek or from Marcap Moscow. The first email states that RAP was incorporated on 21 May 2007 (in error written as 2002) as an SPV for a Nutritek dairy division acquisition and further states that RAP has no other operations and that RAPs beneficiary is a Mr Vladimir Alginin. The second email was in response to a list of questions put to Ms Bragina previously. The key passage states as follows, in the form of the question followed by the answer: Confirm that [RAP] is 100% owned by Alginin. As per the info just received from Nutritek management, Mr Alginin has a 90% share [RAP], the remaining 10% share belongs to the management team. As to the dairy companies, there was a valuation report produced by the Moscow office of Ernst & Young Valuation LLC (E&Y), valuing the dairy companies at US$366m. This report, which is dated 5 September 2007 and is in Russian, was received by Mr Tulupov on 8 November 2007 and was discussed in several conversations with Ms Bragina and Mr Ryzhkov. Based on Mr Tulupovs evidence, VTBs case is that it attached considerable importance to the report, as did VTB Moscow. By a document headed Application for Credit Facilities, dated 13 November 2007, VTB approved the proposed transaction. It was signed on 16 November 2007 by Ms Bragina and Mr Thunem, both of VTB. VTB took the decision to enter into a separate interest swap agreement (the ISA), by a further application for credit facilities, dated 15 November 2007, and signed by Juliet Wooi, Mr Yates and Mr Manning on 19 November 2007. Further particulars relating to VTBs case as to reliance on the information provided by Nutritek concerning the ostensibly arms length relationship between Nutritek and RAP, and concerning the value of the dairy companies, are found in the witness statement of Mr Muraviev. The transaction was completed over the period 23 to 28 November 2007, during which period a number of agreements were entered into by the various parties. The principal agreements entered into as part of the overall transaction were thus as follows: the facility agreement, between VTB and RAP, the SPA between RAP, Nutritek and Newblade dated 27 November 2007, the ISA between VTB and RAP dated 28 November 2007 and the participation agreement between VTB and VTB Moscow dated 28 November 2007 (the participation agreement). The key provisions of the facility agreement are set out by the Court of Appeal at Appendix 1 of its judgment. They included that its governing law is English law (clause 34) and that the courts of England and Wales have non exclusive jurisdiction to settle any dispute arising out of, or in connection with the facility agreement, or, at VTBs option, arbitration in London (clauses 35.1.1 and 35.3). It was further expressly agreed in clause 35.1.2 that the courts of England and Wales were the most appropriate convenient courts to settle such disputes and that no party would argue otherwise (clause 35.1.2). The other agreements referred to above also contain both a choice of law clause in favour of English law, and a jurisdiction agreement in favour of the courts of England and Wales. As stated above, both the judge and the Court of Appeal held that VTB had a good arguable case that it entered into the facility agreement in reliance on the two misrepresentations, the first relating to the representation that RAP and Nutritek were not under common control, and the second as to the value of the dairy companies. On 28 November 2007, RAPs account with VTB in London was credited with US$208,700,000.00. This sum represented the Tranche A payment under the facility agreement. On the same day, US$195,000,000 of those monies were transferred to Nutriteks account with VTB in London, at RAPs direction. The monies were thereafter removed from Nutriteks account, so that by 7 December 2007 no funds remained in Nutriteks account with VTB in London. Some of the monies were transferred to various creditors of Nutritek, while at least US$62 million went to a Nutritek bank account in Switzerland. VTB says that it does not know where the funds went after that, and none of the respondents has put forward evidence as to where the funds went thereafter. As noted by the judge at para 54, some further moneys lent by VTB as part of Tranche B under the facility agreement were utilised to pay interest due under it. This involved the use of another BVI company Madinter Associates Ltd (Madinter), which enabled interest to be paid in respect of the principal loan until but not including the payment due in November 2008, since when no payment of interest or principal due under the facility agreement has been made. VTB sent a first notice of default from its London office to RAP on 15 December 2008 and a second notice of default on 14 January 2009. From August 2009, VTB began to enforce its security. In due course, VTB took control over Newblade, Migifa and eventually RAP. VTB currently estimates the value of the assets of the dairy companies as less than US$40m, and probably no more than US$32m. VTBs claims VTBs claims are concisely described by the judge at paras 57 to 63. It says that it was induced to enter into the facility agreement and the ISA, and to advance sums totalling US$225,050,000 to RAP, by two fraudulent misrepresentations. First, it claims that (together with VTB Moscow) it relied on representations made primarily by Nutritek to the effect that the SPA was a sale between companies that were under separate control. It contends that these representations were false and must have been known by Nutritek to be false when made. VTB knew at the time that Mr Malofeev through MarCap Moscow had de facto control of Nutritek. As the judge put it, what it says it did not know at the time, but has since discovered, is that Mr Malofeev through MarCap BVI also controlled RAP. Thus RAP and Nutritek were under common control at the date of the facility agreement and of the SPA and it was not therefore a commercial transaction carried on at arm's length. The judge held at para 59 that it was not necessary to go into detail concerning the basis of VTBs contention that Mr Malofeev ultimately controlled RAP as well as Nutritek, since it had not been the subject of challenge before him. Secondly, VTB claims that both it and VTB Moscow relied upon the 2007 E&Y valuation of the dairy companies and that that valuation was based on false financial figures and unsupportable forecasts provided to E&Y by Nutritek. In this regard, VTB relies upon an opinion obtained from Deloitte LLP dated 11 April 2011, which analysed the figures provided by Nutritek to E&Y and compared them with the financial information provided by the dairy companies from their own accounting records, which represents the true trading position, as well as information from other sources. It is said that it is apparent from Deloitte's opinion that Nutritek very substantially overstated the true performance figures for the dairy companies. It is VTBs case that the extent of the overstatement is such that it could only have been deliberate. The judge summarised the position in paras 61 and 62. The false representations are alleged to have been made principally by Nutritek. It is VTBs case that they were made pursuant to a conspiracy between a number of persons including MarCap BVI, MarCap Moscow and Mr Malofeev. Given the significant role they played in introducing the business opportunity to VTB and the conduct of the negotiations, VTB says that Mr Malofeev and MarCap Moscow were the prime movers in the conspiracy to deceive VTB. In this part of the case VTB pleaded causes of action against the defendants in deceit and unlawful means conspiracy, the unlawful means being the fraudulent misrepresentations. In deceit, VTBs case against MarCap BVI, MarCap Moscow and Mr Malofeev is that they are jointly liable with Nutritek on the basis that the misrepresentations were made pursuant to a common design between them. As stated in his judgment at para 144, before the judge the respondents accepted that, if English law is the applicable law, VTB has established that VTB has a real prospect of success in its claims for deceit and conspiracy and thus that there is a serious issue to be tried save in three specific respects as follows. The first, the no loss point, was that VTB had no real prospect of establishing that it had suffered loss as a result. The judge discussed the no loss point in considerable detail between paras 145 and 169. He rejected the respondents case. The respondents reargued the no loss point in the Court of Appeal, again on the basis of English law. They again failed, for the reasons given in the judgment of the Court of Appeal at paras 107 to 121. The second point was that VTB has no real prospect of establishing either that Marcap BVI was jointly liable in deceit or that it participated in the alleged conspiracy. The judge considered that submission between paras 170 and 176 and accepted it. However, the Court of Appeal held that he was wrong to do so for the reasons they gave at paras 122 to 127. The third point was that VTB has no real prospect of establishing either that Mr Malofeev is jointly liable in respect of the deceit alleged or that he participated in the alleged conspiracy. The judge rejected that submission between paras 177 and 183. He therefore concluded that there was a serious issue to be tried between VTB and Mr Malofeev. The respondents did not reargue this point in the Court of Appeal. In this court the respondents did not seek to reopen these issues. It follows that, if English law is the relevant law, VTB has a real prospect of succeeding against the respondents on the merits. As summarised thus far, the position is that, at any rate on the basis that English law is the applicable law, VTB has established the first and second of the principles set out in para 164 above. There is a serious issue to be tried on the merits in the case of each of VTBs claims in tort and VTB has a good arguable case that it sustained damage within the jurisdiction within the meaning of paragraph 3.1(9)(a) of Practice Direction 6B, which is the relevant provision by reason of CPR 6.36. It follows that the remaining question is whether the third principle is satisfied. I will consider that question under the heading forum conveniens. Forum conveniens As stated above, the question is whether VTB has satisfied the court that England is clearly or distinctly the appropriate forum for the trial of the dispute and that in all the circumstances the court ought to exercise its discretion to permit service of the proceedings out of the jurisdiction on the basis that England is the proper place in which to bring the claim. As the Court of Appeal noted at para 101, on the basis of Lord Goffs classic speech in Spiliada Maritime Corporation v Cansulex Ltd [1987] AC 460, 475 484, the underlying principle is that, the task of the court is to identify the forum in which the case can be suitably tried for the interests of all the parties and for the ends of justice: Sim v Robinow (1892) 19 R 665, 668. Only two fora have been canvassed in this case; they are England and Russia. Both the judge and the Court of Appeal held that VTB had failed to discharge the onus of proof and that the centre of gravity of the case was Russia and not England. I recognise of course that this is an interlocutory appeal, that a comparison between England and Russia involves a number of different considerations and that, in these circumstances, an appellate court should not interfere with a decision of a lower court unless satisfied that it has erred in principle. However, as appears below, it is my view that the Court of Appeal did make a number of errors of principle, which entitles, indeed requires, this court to reach its own independent conclusions. There are a number of points that seem to me to be relevant on this part of the case. First, it appears to me that it is important for the court to know what issues are likely to arise at the trial of the action on the merits. Only when the issues are identified will it be possible to compare the two jurisdictions. This principle is now stated in Dicey, Morris & Collins on The Conflict of Laws, 15th ed (2012), para 11 143, in which, having stated the general principles much as above, the editors say that, in practice, the defendant should identify the issues which are appropriate to be tried in the foreign court. In the footnote to that sentence the editors referred to Limit (No 3) Ltd v PDV Insurance Co [2005] EWCA Civ 383, at para 73 and Sawyer v Atari Interactive Inc [2005] EWHC 2351 (Ch), [2006] ILPr 129, at para 54. See also Islamic Republic of Pakistan v Zadari [2006] EWHC 2411 (Comm), at para 138 and Novus Aviation Ltd v Onur Air Tasimacilik AS [2009] EWCA Civ 122. Lawrence Collins J or Lawrence Collins LJ is the author of the relevant passage in each of those cases except the Limit (No 3) case, in which I admit to being the author. I adhere to the view I expressed in that case, now supported by Dicey. As Eder J put it in Mujur Bakat Sdn Bhd v Uni Asia General Insurance Berhad [2011] EWHC 643 (Comm), at para 9 , in considering whether or not England is the most appropriate forum, it is necessary to have in mind the overall shape of any trial and, in particular what are, or what are at least likely to be, the issues between the parties and which will ultimately be required to be determined at any trial. These were originally set out in two letters I stress that I do not mean that a defendant must set out his evidence in great detail, whether of foreign law or of fact. The purpose of the exercise is simply to state what the issues of fact are likely to be, so that the court can gauge whether England is clearly or distinctly the appropriate forum for the trial of the issues. This is of some importance in this case because no evidence was put before the court on the merits of the claims by or on behalf of Mr Malofeev. Moreover, Mr Hapgood QC submitted to the court in the course of the argument that Mr Malofeev was perfectly entitled to say and he does say to VTB, You are accusing me of being a swindler, you get on and prove it. Mr Hapgood added that the matter proceeded in both courts below on the clear understanding that VTB will have to prove its case. As he put it, they will have to prove all five ingredients of a claim for fraudulent misrepresentation and a sixth ingredient in the case of conspiracy. It appears from what Mr Hapgood said that, at any rate at present, he has no positive case. It is of course true that a defendant in the position of Mr Malofeev is not bound to advance a positive case but, in the absence of a positive case, the focus of the court can only be on the ingredients of the claim. It should not speculate about the nature of any positive case that might be advanced in the future. It was suggested in the course of the argument that the defendants could not plead a case or put forward a positive case because of the risk that they would submit to the jurisdiction. There is, in my opinion, no such risk. There is no reason why defendants should not put in a draft defence or evidence on the express basis that they are doing so without prejudice to their case on jurisdiction. I note in passing that it is the duty of the parties under CPR 1.3 to help the court to further the overriding objective, which is to deal with cases justly. The second point is the question whether English law is the applicable law. It is common ground that the applicable law falls to be determined by the provisions of the Private International Law (Miscellaneous Provisions) Act 1995 (the 1995 Act) and not by the European Parliament and Council Regulation 864/2007/EC on the law applicable to non contractual regulations, known as the Rome II Regulation. This is because the claims relate to damage which occurred after 20 August 2007 and before 11 January 2009. Sections 11 and 12 of the 1995 Act provide, so far as relevant, as follows: Choice of applicable law: the general rule. 11(1) The general rule is that the applicable law is the law of the country in which the events constituting the tort or delict in question occur. (2) Where elements of those events occur in different countries, the applicable law under the general rule is to be taken as being (c) , the law of the country in which the most significant element or elements of those events occurred. (b) (a) Choice of applicable law: displacement of general rule. 12(1) If it appears, in all the circumstances, from a comparison of the significance of the factors which connect a tort or delict with the country whose law would be the applicable law under the general rule; and the significance of any factors connecting the tort or delict with another country, that it is substantially more appropriate for the applicable law for determining the issues arising in the case, or any of those issues, to be the law of the other country, the general rule is displaced and the applicable law for determining those issues or that issue (as the case may be) is the law of that other country. (2) The factors that may be taken into account as connecting a tort or delict with a country for the purposes of this section include, in particular, factors relating to the parties, to any of the events which constitute the tort or delict in question or to any of the circumstances or consequences of those events. The judge discussed the question of applicable law between paras 119 and 143 and concluded that the applicable law was Russian law. He did so by reference to both section 11(2)(c) and section 12. In para 158 the Court of Appeal expressed the tentative conclusion that, under section 11(2)(c), the applicable law was English law but also said that they were not convinced that VTB had by far the better of the argument. They held however that, under section 12, it was substantially more appropriate for the applicable law for determining the issues concerned to be that of Russia. VTB says that both the judge and the Court of Appeal were wrong and that the applicable law is English law. The question under section 11(2)(c) is in which country did the events constituting the tort occur. In para 148 the Court of Appeal set out six principles as reflecting the correct approach to section 11(2)(c) as follows: (l) Section 11 of the I995 Act sets out the general rule for ascertaining the applicable law of a tort. It adopts a geographical approach to that question. (2) Where the elements of the events constituting the tort or delict occur in different countries and the cause of action relates to something other than personal injury or damage to property, then section 11(2)(c) requires an analysis of all the elements of the events constituting the tort in question. (3) In carrying out that exercise, it is the English law constituents of the tort that matter. (4) The analysis requires examination of the intrinsic nature of the elements of the events constituting the tort. It does not, at this stage, involve an examination of the nature or closeness of any tie between the element and the country where that element was involved or took place. This latter exercise is only relevant if section 12 is invoked. (5) Once the different elements of the events and the country in which they occurred have been identified, the court has to make a value judgment regarding the significance of each of those elements. Significance means the significance of the element in relation to the tort in question, rather than trying to judge which involves the most elaborate factual investigation. (6) Under section 11(2)(c), (ie in relation to causes of action other than in respect of personal injury or damage to property where the elements of the events constituting the tort occur in different countries) the applicable law of the tort in question will be that of the country where the significance of one element or several elements of events outweighs or outweigh the significance of any element or elements found in any other country. Those principles were derived from four cases: Morin v Bonhams & Brooks Ltd [2004] 1 Lloyds Rep 702 (CA); Dornoch Ltd v Mauritius Union Assurance Co Ltd [2006] Lloyds Rep IR 127 (Aikens J) and [2006] 2 Lloyds Rep 475 (CA); Trafigura Beheer BV v Kookmin Bank Co [2006] 2 Lloyds Rep 455 (Aikens J); and Fiona Trust & Holding Corpn v Privalov [2010] EWHC 3199 (Comm) (Andrew Smith J). In this court those propositions were rightly accepted as correct. The Court of Appeal added at para 150, in relation both to section 11(2)(c) and to section 12, that two further and important points emerged from Dornoch. The first was that, if, as here, the exercise is being carried out at an interlocutory stage as part of an overall exercise to determine whether the English court should have jurisdiction to determine the claim in tort in question, the court cannot finally determine the applicable law of the tort. The second was that it is quintessentially for the judge to make an assessment of the significance of the elements of the events constituting the tort for the purposes of section 11(2)(c) and that the Court of Appeal would not interfere with that assessment unless it was satisfied that the judge made such an error in his assessment as to require the Court of Appeal to make its own assessment. It referred to the judgment of Tuckey LJ at paras 46 and 47, with which Sir Mark Potter P and May LJ agreed. The Court of Appeal held at paras 154 to 157 that the judge had made such an error in the case of section 11(2)(c) and reached a different conclusion. In my opinion, if the principles set out above are applied, the Court of Appeal was entitled to interfere with the conclusion reached by the judge. As Mance LJ put it in Morin at para 21, section 11 directs attention to the intrinsic nature of the element(s) of the tort. The Court of Appeal said at para 157 that they judged that the most important elements of the facts constituting the tort of deceit are, by their intrinsic nature, the reliance on the misrepresentations by VTB and the loss suffered by VTB. I agree. The events constituting the tort of deceit are indeed the making of the misrepresentations which were known to be untrue, reliance on the misrepresentations and the loss sustained as a result. All those occurred in England. The misrepresentations were made to VTB in England, VTB relied upon them in England and incurred its loss in England. In my opinion that is plain. It is true in the case of both misrepresentations: even though the dairy representations were initially made in Russia, the critical representations which induced VTB to enter into the facility agreement were made in London and relied upon in London. As to the alleged conspiracy, the essence of the case is that the representations were made as part of a common design. To my mind, it does not matter for the purposes of section 11(2)(c) because the essence of VTBs case remains based upon the representations made to it in London and relied upon in London by VTB entering into the facility agreement, together with the loss sustained in London. In Dornoch Aikens J was concerned with alleged misrepresentations in a proposal form. The proposal form was completed in Mauritius and given to brokers in Mauritius and then sent to London, where it was presented to reinsurers. Aikens J held that the representation contained in the proposal form was made in Mauritius and London. The presentation to the reinsurers was made and relied upon in London. Aikens J held at para 106 that the intention that the reinsurers should rely upon the proposal form continued to operate in London and the reliance, which he regarded as the most significant element, took place in London. The position is the same here. The reliance by entering into the facility agreement took place in London. Para 107 is also of some assistance. Aikens J said: The antecedent facts concerning the true situation in MCB are important, but it is what is done with those facts that really matters so far as the tort of fraudulent misrepresentation or deceit is concerned. In short, it is (on the assumptions I have made) MCBs decision not to tell the facts as they are and to continue to mislead that matters most, not the true facts themselves. In these circumstances there was in my opinion no room for a tentative conclusion that English law is the applicable law under the general rule set out in section 11. It is plainly the applicable law under the general rule. I turn to section 12. At para 149 the Court of Appeal identified these further four principles: (7) The exercise to be conducted under section 12 is carried out after the court has determined the significance of the factors which connect a tort or delict to the country whose law would therefore be the applicable law under the general rule. (8) At this stage there has to be a comparison between the significance of those factors with the significance of any factors connecting the tort or delict with any other country. The question is whether, on that comparison, it is substantially more appropriate for the applicable law to be the law of the other country so as to displace the applicable law as determined under the general rule. (9) The factors which may be taken into account as connecting a tort or delict with a country other than that determined as being the country of the applicable law under the general rule are potentially much wider than the elements of the events constituting the tort in section 11. They can include factors relating to the parties connections with another country, the connections with another country of any of the events which constitute the tort or delict in question or the connection with another country of any of the circumstances or consequences of those events which constitute the tort or delict. (10) In particular the factors can include (a) a pre existing relationship of the parties, whether contractual or otherwise; (b) any applicable law expressly or impliedly chosen by the parties to apply to that relationship, and (c) whether the pre existing relationship is connected with the events which constitute the relevant tort or delict. In every case to which the 1995 Act applies in which the court has considered the general rule under section 11, the court must consider whether the general rule is displaced under section 12. There is an illuminating discussion of the general approach in para 35 148 of the 15th edition of Dicey. The editors say that the application of the displacement rule in section 12 first requires, taking account of all the circumstances, a comparison of the significance of the factors which connect the tort with the country the law of which would be applicable under the general rule (in this case English law) and the significance of any factors connecting the tort with another country (here Russia). The word tort is italicised in the text in Dicey. The editors say that secondly, it then has to be asked, in the light of the comparison, whether it is substantially more appropriate for the applicable law for determining the issues arising in the case, or any of those issues, to be the law of that other country. The editors note that the general rule has been displaced on very few occasions. They further observe that, although section 12 applies in all cases to which section 11 applies, it would seem that the case for displacement is likely to be most difficult to establish in the case of section 11(2)(c) because the application of that provision itself requires the court to identify the country in which the most significant element or elements of the tort are located. Importantly they stress the use of the word substantially, which they describe as the key word, and conclude that the general rule should not be dislodged easily, lest it be emasculated. The party seeking to displace the law which applies under section 11 must show a clear preponderance of factors declared relevant by section 12(2) which point to the law of the other country. That approach is borne out by the cases. The idea that substantially was the key word was derived from the judgment of Waller LJ in Roerig v Valiant Trawlers Ltd [2002] EWCA Civ 21, [2002] 1 WLR 2304, at para 12(v). The principles were considered in more detail by Brooke LJ in R (Al Jedda) v Secretary of State for Defence [2006] EWCA Civ 327, [2007] QB 621 at paras 103 and 104, where he noted that the 1995 Act derived from a report of the Law Commission, from which he quoted. He added that Lord Wilberforce, who was a member of the House of Lords Committee which considered the Bill, had expressed the view that it would be a very rare case in which the general rule under section 11 would be displaced: Prima facie there has to be a strong case. In para 163 the Court of Appeal concluded that, if the applicable law was English law under the general rule in section 11(2)(c), the factors relied upon by the judge in his paras 188 and 189 led them to the conclusion that English law was displaced by Russian law by section 12. In paras 188 and 189, the judge had said this: 188. Counsel for the defendants submitted that the following factors pointed to Russia being the natural forum. First, the connections of the parties to Russia. VTB is controlled by VTB Moscow, which is Russian. Furthermore, the litigation is being managed by VTBDC, which is also Russian. MarCap Moscow and Mr Malofeev are Russian. It is common ground that Nutritek was managed from Russia, and VTBs case is that Mr Malofeev controls both Nutritek and MarCap BVI. Furthermore, it is VTB's case that Mr Malofeev orchestrated the fraud, primarily through MarCap Moscow. 189. Secondly, the connections of the events constituting the torts to Russia. The transaction was introduced to VTB Moscow at meetings between Russian individuals in Russia. The in Russia. The negotiations mainly misrepresentations were made and mainly received in Russia. The more important misrepresentation concerned the performance of the Dairy Companies, which are Russian companies. The 2007 E&Y Valuation was a valuation by Ernst & Youngs Moscow office and was based on information provided by Nutritek's Russian management. The misrepresentations were primarily relied upon by VTB its Credit Committee and Moscow acting Management Board in Russia. It was VTB Moscow and VTBDC which primarily dealt with RAP's default and enforcing the security. The secured assets were in Russia. The discovery of the fraud took place in Russia. Although the loss was sustained by VTB in England, as discussed above the ultimate economic impact is in Russia. took place through The Court of Appeal recognised in para 163 that they had concluded at para 154 that the judge did not appear to have taken account of the fact that the representations were passed on to or confirmed to VTB in London, that VTB had its own procedures that had to be completed satisfactorily before it could enter into the facility agreement and that, although there was an economic impact on VTB Moscow, VTB suffered loss as soon as the transfer of funds by it to RAP was made in London. Notwithstanding those conclusions, the Court of Appeal reached these conclusions at para 163: in our view the factors identified in the judgment at paras 188 and 189, even after discounting the point about primary reliance on the representations in Russia and the securities being in Russia, are of considerable significance. On the material that is before us, taking all those factors into account we have concluded that the centre of gravity of these torts lies in Russia. Therefore, for present purposes, we have decided that a comparison of the significance of the section 11(2)(c) factors, assuming that they would lead to the applicable law being English, with the significance of the other factors connecting the torts with Russia, leads to the conclusion that it is substantially more appropriate for the applicable law for determining the issues concerning the torts to be that of Russia. It seems to me that in that paragraph the Court of Appeal did not pay sufficient regard to the fact that in his paras 188 and 189 the judge was not considering section 12 of the 1995 Act but the broader question of forum conveniens. Further, the Court of Appeal focused, not upon the particular tort or torts but upon much wider considerations. As Dicey observes, section 12(1) expressly focuses upon the particular torts. Here the tort or torts as a result of which VTB suffered loss in London were committed as a result of VTB entering into a contract or contracts in London in reliance upon representations made to it in London. I entirely accept that some of the other considerations were capable of being relevant under section 12(2), but I can see no basis upon which it can properly be held that the general rule, under which English law was plainly the applicable law, should be displaced by Russian law on the basis that it is substantially more appropriate for the applicable law for determining the issues to be the law of Russia. In short, the claimant here is an English entity which was induced to enter into the facility agreement in England and suffered loss in England when it discharged its obligations under it. The position would no doubt have been entirely different if the claimant had been VTB Moscow. For these reasons, I would hold that the Court of Appeal erred in principle in concluding that the applicable law was Russian law, that under the general rule in section 11(2)(c) of the 1995 Act the applicable law was English law and that the general rule was not displaced in favour of Russian law by section 12. I turn to consider what significance the conclusions that (a) the torts were committed in England and (b) the applicable law is English law have on the question whether England is the proper place in which to bring the claim. As stated above, this involves asking whether England is clearly or distinctly the appropriate forum for the trial of the dispute or (which amounts to the same thing) the forum in which the case can be most suitably tried for the interests of all the parties and for the ends of justice. In my opinion neither consideration is conclusive but, together with the terms of the facility agreement, they afford strong grounds for concluding that the answer to those questions is in the affirmative. It was submitted by Mr Howard QC on behalf of VTB that there is a presumption that that is the case where, in a tort case, the tort is committed within the jurisdiction. In my opinion, that is to put it too high. It is undoubtedly a relevant factor but how strong a factor will depend upon the circumstances. It is true that courts have sometimes used the expression presumption. On the other hand they sometimes talk in terms of a prima facie case. Yet other expressions have been used. For example, in Distillers Co (Biochemicals) Ltd v Thompson [1971] AC 458 the alleged tort was a negligent failure to warn a pregnant woman of the dangers of taking a drug which contained thalidomide. The tort was committed in New South Wales, where the plaintiff had bought the drug. In the Privy Council, Lord Pearson said at p 468 that it was manifestly just and reasonable that a defendant should have to answer for his wrongdoing in the country where he did the wrong. As in all the cases, the particular phrase chosen depended upon all the circumstances of the case. In The Albaforth [1984] 2 Lloyds Rep 91, which was much discussed in the course of the argument, the claim was for damages for negligent misrepresentation contained in a telex received and acted upon in England. Ackner LJ said that the jurisdiction in which a tort has been committed is prima facie the natural forum for the determination of the dispute. The other member of the Court of Appeal was Robert Goff LJ. It is of some significance in the present case that he quoted with approval a statement by Lord Denning MR in Diamond v Bank of London and Montreal [1979] QB 333 at 346 to the effect that the tort of negligent misrepresentation was committed at the place where the representation was received and acted upon. Robert Goff LJ did not then use the expression prima facie forum but said at p 96 that the cases showed that, where the jurisdiction of the court is based on the fact that the tort was committed within the jurisdiction, that court, having jurisdiction, is the most appropriate court to try the claim, where it is manifestly just and reasonable that the defendant should answer for his wrongdoing. He added that, that being so, it was not easy to see what other facts could displace the conclusion that the courts of that jurisdiction are the natural forum. That is to my mind so even if significant parts of the evidence derive from elsewhere. Berezovsky v Michaels [2000] 1 WLR 1004 was a libel case in which an internationally disseminated libel had been published in England. Lord Steyn, giving the principal judgment for the majority in the House of Lords, who were himself, Lord Nolan and Lord Hobhouse, quoted (at p 1013) the two passages from The Albaforth set out above and referred to Distillers Co (Biochemicals) Ltd v Thompson [1971] AC 458, 468E per Lord Pearson, Metall und Rohstoff AG v Donaldson Lufkin & Jenrette Inc [1990] 1 QB 391 in the Court of Appeal (subsequently overruled in Lonrho plc v Fayed [1992] 1 AC 448 on other aspects of the case) and Schapira v Ahronson [1999] EMLR 735. Lord Steyn added that the implied supposition in these cases was that the substance of the tort arose within the jurisdiction. He added at p 1014D E: Counsel accepted that he could not object to a proposition that the place where in substance the tort arises is a weighty factor pointing to that jurisdiction being the appropriate one. This illustrates the weakness of the argument. The distinction between a prima facie position and treating the same factor as a weighty circumstance pointing in the same direction is a rather fine one. For my part the Albaforth line of authority is well established, tried and tested, and unobjectionable in principle. I would hold that Hirst LJ correctly relied on these decisions. The Court of Appeal considered this issue at paras 140 to 144. They expressly referred to the statements of principle in The Albaforth, noting that neither Ackner nor Robert Goff LJJ referred to a presumption. They then referred to the statements of Lord Steyn in Berezovsky v Michaels noted above, adding that, although Lord Hope dissented (as did Lord Hoffmann), he agreed with the reasons given by Lord Steyn for accepting that Hirst LJ was right to rely on The Albaforth line of authority. They further noted that Lord Hope said at p 103 that he would reject the argument that the application of the Spiliada test did not admit of the application in that case of the principle that the jurisdiction in which the tort is committed is prima facie the natural forum for the dispute. The Court of Appeal concluded at para 144 that the most that could be extracted from the House of Lords decision in Berezovsky was that, where a tort is committed within the jurisdiction, that jurisdiction is prima facie the natural forum for the resolution of claims arising from it. However they added two points to which they attached importance. The first was that it had not been stated that this principle applies where the loss is sustained in the jurisdiction but other elements of the tort occur elsewhere. The second was that the statements made in the Berezovsky case can only describe, at best, a prima facie position, and that they cannot detract from the overall test which has to be applied, namely that permission to serve out of the jurisdiction will only be granted if the claimant demonstrates that England is clearly or distinctly the appropriate forum for the resolution of the dispute. They concluded that there is no presumption in favour of England being either the natural or the appropriate forum in this case. I agree with the Court of Appeal that the cases do not go so far as to say that there is such a presumption but they do recognise that it is likely to be a strong or weighty factor: see further paras 231 to 232 below. While it is true that the principle in The Albaforth has not been expressly stated to apply where the loss is sustained in the jurisdiction but other elements of the tort occur elsewhere, the application of the principle in that very case was in respect of the tort of negligent misrepresentation which was held to be committed in England as the place where the representation was received and acted upon. The same is true of the alleged fraudulent representations here. The second factor which seems to me to be of real significance is that, for the reasons set out above, the applicable law under the 1995 Act is English law. It is not in dispute that it is a potentially relevant factor. The correct approach was, as ever, encapsulated by Lord Goff in Spiliada at p 481H: the importance to be attached to any particular ground [of RSC Ord 11, r 1(1)] invoked by the plaintiff may vary from case to case. For example, the fact that English law is the putative proper law of the contract may be of very great importance (as in BP Exploration Co (Libya) Ltd v Hunt [1976] 1 WLR 788, where, in my opinion, Kerr J rightly granted leave to serve proceedings on the defendant out of the jurisdiction); or it may be of little importance as seen in the context of the whole case. See also Dicey, 15th ed, para 12 034. The significance of the conclusion that English law is the applicable law is that it is generally appropriate for a claim in tort governed by English law to be adjudicated upon by an English court. The same would of course be true mutatis mutandis if the claim in tort were governed by Russian law. In that case the natural court to determine liability would be a Russian court. It was no doubt for that reason that the defendants have throughout persisted in arguing that the applicable law is Russian law. In the instant case, it is not clear what, if any, role Russian law might play at a trial. It seems most unlikely to play a role if the action proceeds in England. Although I recognise that it would be open to the defendants to reopen the issue of applicable law for determination at trial, it is difficult to imagine circumstances in which they would have a real prospect of persuading a judge to reach a different conclusion from that arrived at in this court. If the action proceeds in Russia it is possible that Russian law will play a role because the respondents have reserved their right to rely upon Russian law but, since they have given no indication as to the nature of the case they might wish to run, it is not possible to express a view as to its possible effect on a trial in Russia. In these circumstances it seems to me that, given that VTB has shown that the applicable law of the tort is English law and that the respondents have asserted no positive case to the contrary even if the action were to proceed in Russia, this is a strong factor in favour of England as the natural forum. A further important factor is, as I see it, the fact that the facility agreement which, on VTBs case, it was induced to enter into, contained, not only clause 34, which provided that the agreement was governed by English law, but also clause 35.1, which provided that the courts of England had non exclusive jurisdiction to settle any dispute arising out of the agreement, that the English courts were the most appropriate and convenient to settle the disputes, that no party would argue to the contrary and that the clause was for the benefit of VTB alone. Clause 35.3 also gave VTB the right to refer a dispute to arbitration in London. The fact that those clauses were included in the agreement which, on VTBs case, it was fraudulently induced to enter into, seems to me to be a strong pointer to the conclusion that the natural forum for the resolution of the dispute is England. If VTB had not enforced its security by acquiring RAP, it would have been able to sue RAP in England and to add the present respondents as necessary or proper parties to the action against RAP. I appreciate that the respondents are not parties to the facility agreement and that it is therefore said that these clauses are irrelevant. However, VTBs submission derives support from Professor Briggs recent article entitled The subtle variety of jurisdiction agreements, [2012] LMCLQ 364, in which he discusses the Court of Appeal decision in the present case (at pp 370 371): In VTB Capital plc v Nutritek International Corpn it appears to have been accepted without substantial argument that if the hidden person were not a party to the substantive contract containing the jurisdiction clause he could not be affected by a jurisdiction agreement contained in that contract. This conclusion, with respect, should not be accepted without further reflection. For even if the lifting of the veil does not allow a contractual claim, otherwise lying against the company, to be made against the veiled person, there may be other bases for seeking to establish his personal liability. Fraud will be the most likely one That being so, the question becomes whether the jurisdiction clause in the companys contract may be utilised to establish or sustain jurisdiction against the alleged fraudster. This is a question which requires more of an answer than a simple assertion that a jurisdiction agreement is only ever effective in relation to a contracting party. For one thing, the jurisdiction clause is separable from the substantive contract, and the absence of a contractual claim against the fraudulent defendant need not entail the irrelevance of a jurisdiction agreement which he engineered. For another even if he is not contractually bound to the jurisdiction, it should not be challenging to contend that the court which he signed his company up to, in circumstances of fraud, is also the proper place in which to assert any available claim of substantive liability against him. I agree with Professor Briggs. In particular I agree with him that it is significant that where a person fraudulently engineers a contract, not only subject to English law but also subject to an English jurisdiction clause, the proper (or natural) place in which to assert a claim for substantive liability against him, whether in contract or tort, is England. The same would of course be true mutatis mutandis if the agreed law and jurisdiction were that of another state. Mr Howards submission on behalf of VTB is that the principal grounds for concluding that England is the natural forum for this action are therefore these. Although a significant number of preliminary events occurred in Russia, the critical ingredients of all the torts took place in England. In particular, the representations were made to VTB in England, where they were intended to be relied upon because it was VTB that was intended to enter into the facility agreement, which was governed by English law and contained an English jurisdiction clause. VTB did enter into the agreement and, pursuant to its terms large sums of money were drawn down and, as the judge and the Court of Appeal held, VTB suffered its loss in England. As explained above, it is substantially for these reasons that English law is the law applicable to the torts. In these circumstances, England is clearly or distinctly the appropriate forum for the trial of the dispute. I would accept those submissions. The judge and the Court of Appeal rejected that approach on the basis that the centre of gravity of the torts lies in Russia. They did so on the basis of the evidence that there was considerable activity in Moscow before VTB was chosen as the lender. It is said that all the evidence referable to that period would be in Russia. There is some force in that but the difficulty facing the respondents is that they have not identified what classes of evidence they might wish to adduce about what. It is therefore appropriate, as counsel for the respondents himself indicated, to approach the case on the basis that VTB will be put to proof of its claims. The nature of VTBs claims is summarised in paras 181 to 184 above. VTB hopes to be able to call Ms Bragina and others from VTB, although it is right to say that Ms Bragina has left VTB and it is no longer in contact with her. There is some documentary evidence available in London and Moscow. I see no difficulty in any of the VTB witnesses who are now in Moscow or elsewhere coming to London to give evidence. The evidence will no doubt focus on the alleged representations. As to the allegation that it was represented that Nutritek and RAP were not under common control, there is evidence in the emails referred to in para 174 above. It is not known whether it is said on behalf of the respondents that no such representations were made or, if they were made, by whom they were made (and with whose knowledge and on whose behalf) and whether they were true. Since the respondents have not indicated the nature of their case, it is not known what evidence they might wish to adduce on this part of the case. For example, it is not known whether Mr Malofeev accepts that he controlled both Nutritek and RAP as alleged, although (as stated at para 170 above), the judge found that the allegation that RAP was ultimately owned and controlled by Mr Malofeev through a web of offshore companies had not been the subject of challenge by him. Mr Malofeev is an international business man who is said to control a series of offshore companies. There is no evidence that either he or any other witness could not readily come to London. It may equally be said that there is no reason why any witness could not go to Moscow. So, on the first alleged misrepresentation, there seems to me to be no reason to depart from the view expressed earlier, namely that the natural forum for the resolution of the issues is England. The same is true of the second alleged representation. The issues may essentially be whether the facts relating to the dairy companies were fairly given to E&Y in Moscow. Much of the information is no doubt in Russian and, if detailed evidence is required, it may be in Russia. However, Deloittes LLP in London have made a report in English on which VTB relies dated 11 April 2011, which analysed the figures provided by Nutritek to E&Y and compared them with the financial information provided by the dairy companies from their own accounting records, which represent the true trading position, as well as information from other sources. It is said that it is apparent from Deloitte's opinion that Nutritek very substantially overstated the true performance figures for the dairy companies. It is VTB's case that the extent of the overstatement is such that it could only have been deliberate. It seems likely to me that any issues under this head could be determined in England or Russia. In all the circumstances, given that VTB is the claimant and not VTB Moscow, I do not agree with the Court of Appeal that the centre of gravity of the torts is in Russia. I would hold that VTB has shown that England is clearly or distinctly the appropriate forum for the reasons summarised in para 223 above. I would therefore allow the appeal on the forum non conveniens point. I would only add this in the light of the judgments of Lord Mance and Lord Neuberger which I have seen since I prepared my own draft. Subject to the general point that one of the underlying principles of the CPR is that the parties should co operate with each other and the court in order that cases are resolved justly, which must surely include the necessity for each party to put his cards on the table, I do not disagree with the general points made by Lord Neuberger in the early parts of his judgment. None of the points I have made above is inconsistent with them. Thus, as I see it, even if the burden of proof is on the claimant, the defendant must indicate, at least in general terms what positive case he wishes to advance at a future trial, whether in England or elsewhere. This should be done shortly and concisely. In the instant case no attempt was made to do it at all. I entirely agree with Lord Neuberger that, where a judge has made no error of principle and the only challenge that can be advanced against his or her decision depends upon persuading an appellate court to balance the various factors differently, an appellate court should not interfere unless the balance struck by the judge can be shown to be plainly wrong. The question is whether this is such a case or whether this is a case in which, as VTB says, both the judge and the Court of Appeal made errors of principle and that, permission to appeal to this Court having been granted, it becomes its responsibility to strike the balance. In my opinion, this case is in the second category. As to the position before the judge, the Court of Appeal held that he had wrongly approached the question as a two stage question. However I agree with Lord Mance and Lord Neuberger that, even if he did, he ultimately posed the correct question. The position as to choice of law is different. The judge erred in law in concluding that Russian law was the applicable law by reference to both section 11(2)(c) and section 12 of the 1995 Act. The Court of Appeal correctly held that he was wrong under section 11(2)(c) but it too was wrong in so far as it held that the applicable law was Russian law under section 12. In my opinion, as discussed in paras 195 to 210 above, those were errors of principle. Moreover, as explained in para 219, they were significant errors, as evidenced by the importance attached to the applicable law point by both sides. Both sides naturally took the view that whichever was the applicable law provided a strong pointer to the forum conveniens. As Lord Mance puts it at para 46, it is generally preferable, other things being equal, that a case should be tried in the country whose law applies. There are to my mind two other important respects in which the courts below failed to apply the correct principles. They are the correct approach to the significance of, first, the place where the tort was committed and, secondly, the fact that the facility agreement contained an English jurisdiction clause. As to the first, it is only fair to the judge to note that VTB did not refer to The Albaforth or the other cases following it which I have discussed in paras 212 to 217 above. Although there is reference in the cases to the proposition that the place of the tort is prima facie the natural forum and although of course (as ever) all depends upon the circumstances, in the passage quoted from The Albaforth at para 213 above, Robert Goff LJ expressed the view that, where the jurisdiction of the court was based on the fact that the tort was committed within the jurisdiction, that court was the most appropriate court to try the claim on the basis that it was manifestly just and reasonable that the defendant should answer there for his wrongdoing. Robert Goff LJ there echoed (at p 96) the expression used by Lord Pearson in the Distillers case at p 468: see para 212 above. Finally, as I read the speech of Lord Steyn in Berezovsky (quoted at para 214 above), the majority of the House of Lords approved the proposition that there is no real distinction between treating the place of the tort as a prima facie pointer and treating it as a weighty factor. It is in my opinion a weighty factor here, where the alleged representations (if made) were deliberate acts which were committed within the jurisdiction, which were intended to be relied upon within the jurisdiction, which were in fact relied upon within the jurisdiction and which caused VTB to sustain loss within the jurisdiction. I stress again that this is a claim by VTB and not by VTB Moscow and VTB is not suing upon a tort committed in Moscow. Albeit for understandable reasons, this point was not considered by the judge. It follows, as I see it, that he did not take it into account, even in the alternative, in carrying out the balancing exercise. In the Court of Appeal the effect of the authorities was in my judgment down played. It is not to my mind a fair conclusion based on the authorities that the statements made in Berezovsky can only describe, at best, a prima facie position, at any rate unless one keeps well in mind the reasoning of Lord Goff and Lord Pearson referred to above. Although it is fair to say that the Court of Appeal did refer to the passage from the speech of Lord Steyn in Berezovsky quoted above, there is no hint that they treated this consideration as a weighty factor. For the reasons I have given they should have done so. The second respect in which in my opinion the courts below erred in principle relates to the relevance of the English jurisdiction agreement in the facility agreement. The judge merely said in para 187 that the English jurisdiction and arbitration clauses are a pointer to England but not a strong one, given that the claim is a tort claim not a contract claim. He does not explain why the fact that the claim is a tort claim leads to the conclusion that the pointer to England is not a strong one. He does not address the force of the submissions made on behalf of VTB. For the reasons given in paras 220 to 212 above, this is in my opinion a strong factor, on the basis that, as Professor Briggs observed, where a person fraudulently engineers a contract, not only subject to English law but also subject to an English jurisdiction clause, the proper (or natural) place in which to assert a claim for substantive liability against him, whether in contract or tort, is England. The Court of Appeal did not expressly address this point. Lord Neuberger says that they must have agreed with the judge. That may be so but, given that the judge gave no reasons for his view, it seems to me to be of little assistance to the respondents. With respect to him, Lord Neuberger does not as I see it address this way of putting the case, which is much narrower than that addressed by Lord Neuberger in paras 105 and 106. In so far as he does address the point, I strongly prefer the opinion of Professor Briggs. In all the circumstances I remain of the view that both the judge and the Court of Appeal erred in principle in more than one respect, that it is now for this Court to reach its own conclusion on the question whether England is clearly or distinctly the appropriate forum for the trial of the dispute or (which amounts to the same thing) the forum in which the case can be most suitably tried for the interests of all the parties and for the ends of justice. For the reasons I have given, my conclusion is that it is. In so far as it is suggested by Lord Neuberger and Lord Wilson that this approach is to assume what VTB has to prove, namely that Mr Malofeev was guilty of deceit, I respectfully disagree. The approach I favour does not assume that VTB will succeed but is based upon the fact that it has been held that VTB has at least a good arguable case on each of these factors: (1) the tort alleged was committed in England; (2) English law is the applicable law under the 1995 Act; (3) the respondents made fraudulent representations which induced VTB to enter into the facility agreement which is not only subject to English law but also subject to an English jurisdiction clause; and (4) the loss sustained as a result of lending money in England pursuant to the facility agreement was incurred in England. In all these circumstances England is clearly and distinctly the proper (or natural) place in which to assert a claim for damages for fraudulent representation against the respondents. I recognise that, as pointed out by Lord Mance there are many factors which connect the underlying dispute with Russia but many of them are evidential and, indeed, many of them treat the claim as if it were a claim by VTB Moscow or the VTB Group, which it is not. As Lord Wilson observes, the defendants points primarily go to practicality, but it seems to me that a trial could perfectly well take place in England or Russia but that England is the natural forum for the reasons I have given. In all the circumstances I would allow the appeal on the forum non conveniens point. Piercing the corporate veil I agree with Lord Neuberger that this is not a case in which it would be appropriate to pierce the corporate veil on the facts. I would however wish to reserve for future decision the question what is the true scope of the circumstances in which it is permissible to pierce the corporate veil. That includes the question whether Antonio Gramsci Shipping Corpn v Stepanovs [2011] EWHC 333 (Comm), [2011] 1 Lloyds Rep 647 was correctly decided. The WFO Since the appeal is to be dismissed, I agree with Lord Neuberger that the discharged freezing order should remain discharged and that the temporary WFO should be discharged as well. LORD REED (dissenting) In relation to the first question in this appeal, namely whether the permission granted ex parte to VTB to serve the proceedings out of the jurisdiction should be set aside, I have reached the same conclusion as Lord Clarke. I do not question the general points made by Lord Neuberger at paragraphs 79 to 93 of his judgment. Nevertheless, it appears to me that the courts below erred in law in their approach to this question. In particular, as explained by Lord Clarke, they erred (i) in concluding that the applicable law was Russian law rather than English law and (ii) in failing to attach appropriate weight to the fact that the alleged tort was committed in England, in accordance with the line of authority including The Albaforth [1984] 2 Lloyds Rep 91 and Berezovsky v Michaels [2000] 1 WLR 1004. These errors, particularly when considered cumulatively, appear to me to have been material. I recognise that the Court of Appeal stated (para 166) that, even if it had concluded that the applicable law was English law, this would not have been a factor that would weigh heavily, precisely because if the defendants wished to allege and plead that the applicable law was Russian law, both sides would have had to prepare for a trial on that basis. The fact of the matter is however that the defendants have not pleaded, or indicated any intention to plead, that the applicable law is Russian law. Since the approach of the courts below was flawed in principle, it appears to me that this court has no alternative but to reconsider the question on a proper basis. Having done so, I have reached the same conclusion as Lord Clarke, essentially for the reasons stated at paragraphs 223 to 227 of his judgment. In relation to the second question, namely whether VTB should be allowed to amend its statement of case so as to add a claim of damages for breach of contract, based upon piercing the corporate veil, I agree that permission should be refused, for the reasons given by Lord Neuberger. Since the appeal is being dismissed, I also agree that the discharged freezing order should remain discharged, and that the temporary freezing order should also be discharged.

In 2007, VTB Capital plc (VTB), an English incorporated bank, entered into agreements (the agreements) with Russagroprom LLC (RAP), a Russian company. Under the agreements, VTB loaned US$225,050,000 to RAP, primarily to enable RAP to buy six Russian dairy companies and three associated companies (the dairy companies) from Nutritek International Corp (Nutritek). In 2008, RAP defaulted on the loan. VTB claims that it was induced in London to enter into the agreements by misrepresentations made by Nutritek. Mr Konstantin Malofeev, a Russian businessman resident in Moscow, is said to be the ultimate owner and controller of Nutritek, Marshall Capital Holdings Ltd (Marcap BVI), and Marshall Capital LLC (Marcap Moscow). VTB claims that Marcap BVI, Marcap Moscow, and Mr Malofeev are jointly and severally liable for these alleged misrepresentations. To bring proceedings in England, VTB required permission to serve proceedings out of the jurisdiction, because the intended defendants were not resident, or otherwise to be found, within the jurisdiction. After being served, Nutritek, Marcap BVI and Mr Malofeev applied to Mr Justice Arnold for the service to be set aside, largely because England was not considered to be the appropriate forum. In addition to opposing this application, VTB sought to amend its pleaded case to contend that RAPs corporate veil should be pierced with the effect that Mr Malofeev, Marcap BVI and Marcap Moscow would be treated as jointly and severally liable with RAP for breaches of, and/or otherwise subject to remedies to enforce, two of the agreements. Mr Justice Arnold found against VTB on both issues, and, while holding that he had gone wrong in certain respects on the first of those issues, the Court of Appeal dismissed VTBs appeal. VTB appeals on both issues to the Supreme Court. In the meantime, it obtained a worldwide freezing injunction against Mr Malofeevs assets pending the determination of the legal proceedings (the freezing injunction). There are three issues before the Supreme Court: (i) whether the permission granted to VTB to serve the proceedings out of the jurisdiction should remain set aside (the jurisdiction appeal); (ii) whether VTB should be allowed to amend its pleaded case to include the claim based on piercing the corporate veil (the corporate veil appeal); and (iii) whether the freezing injunction should be discharged. The Supreme Court (i) by a majority of three to two (Lord Clarke and Lord Reed dissenting), dismisses the jurisdiction appeal, so that VTB may not serve out of the jurisdiction; (ii) unanimously dismisses the corporate veil appeal, so that VTB is not permitted to amend its pleaded case to include a claim on piercing the corporate veil; and (iii) unanimously discharges the freezing injunction obtained by VTB against Mr Malofeevs assets. The jurisdiction appeal It is incumbent on a defendant challenging jurisdiction to identify the issues concerned and to state as clearly as possible how they arise or may arise in the proceedings [36]. This does not require the defendant to advance a positive case [39]. A defendant is entitled to keep his powder dry in relation to his evidence [90]. Hearings concerning appropriate forum should not involve masses of documents and long argument. It is self defeating if, in order to determine the question of jurisdiction, parties prepare for and conduct a hearing which approaches the putative trial itself [82]. In a case such as this, if a court is not satisfied that England is clearly the appropriate forum in which to bring a claim, then permission to serve out must be refused or set aside [18]. Where a judge has exercised his or her judgment to determine whether England is the appropriate forum, an appellate court should refrain from interfering with that decision, unless satisfied that the judge made a significant error [69]. In this case, the majority consider that there are no grounds which justify interfering with the judges decision, or, if the Court of Appeal was entitled to re exercise the power, interfering with the Court of Appeals decision, on this issue. Whilst the conclusion of the lower courts that Russian law governed the alleged torts was wrong, the correct conclusion that English law governed would not have made any difference. Not only did the judge and the Court of Appeal say as much, but the governing law is a factor of very little, if any, real potency, because the key issues in this litigation will on the face of it be factual not legal [45] [49],[54] [55],[100] [101]. The issues, oral and documentary evidence are focused on Russian witnesses and overwhelmingly on matters which happened in and concern Russia, where they could be considered without translation [62],[66],[154]. The issue of governing law cannot have been decisive in the judges decision [68]. Whilst agreements relevant to VTBs claims contained non exclusive jurisdiction clauses in favour of England, such clauses in this case are, as the judge said, not particularly strong factors in favour of English jurisdiction [65] [66],[105],[111]. There is therefore no basis on which the Supreme Court would be justified in re exercising the power to decide for itself the jurisdictional issue [69],[98],[113],[156]. The minority agree that, where the only challenge that can be advanced depends upon persuading an appellate court to balance the various jurisdictional factors differently, an appellate court should not interfere [229]. They consider, however, that a number of errors of principle were made in the exercise of the power to decide the jurisdictional issue, which require the Supreme Court to reach its own independent conclusion [191],[231],[241]. This is primarily because it is generally appropriate for a claim in tort governed by English law to be adjudicated upon by an English court [219],[233], and the non exclusive jurisdiction clauses also point in the direction of England [221] [222],[234] [235]. In coming to that independent conclusion, the minority consider that England is the appropriate forum for the trial of the dispute [227],[236] [237]. The corporate veil appeal VTB may not amend its pleaded case to include a claim on piercing the corporate veil of RAP in order to attach liability to Mr Malofeev, Marcap BVI, and Marcap Moscow, because VTBs proposed case does not give rise to arguable grounds for contending that the jurisdiction to pierce the corporate veil can be invoked [72],[148],[158],[238],[243]. This is an interlocutory appeal, and so it is unnecessary and inappropriate to resolve the issue of whether, unless any statute relied on in the particular case expressly or impliedly provides otherwise, the court is entitled to pierce the veil of incorporation [130],[158],[238]. On the assumption that the court can pierce the corporate veil on appropriate facts, VTBs case involves an extension to the circumstances where it has traditionally been held that the corporate veil can be pierced [131]. This extension would mean that the person controlling the company could be held liable as if he had been a co contracting party with the company concerned to a contract where the company was a party but he was not, and where neither he nor any of the contracting parties intended him to be [132]. Such an extension would be contrary to authority and contrary to principle [133] [147]. Moreover, the extension is not needed to enable VTB to seek redress from Mr Malofeev: if VTB establishes that it was induced to enter into the agreements by the fraudulent statements which he is alleged to have made, then Mr Malofeev will be liable to compensate VTB [146]. The freezing injunction The worldwide freezing order against Mr Malofeev is discharged, because VTB has not been granted permission to serve proceedings on him [74],[150],[159],[239],[244].

The issue in this case is whether and in what circumstances a judge who has announced her decision is entitled to change her mind. The issue arises in the context of fact finding hearings in care proceedings in a family court, but it could obviously arise in any civil or family proceedings. So a subsidiary question is whether the principles are any different in that context. One difference is that section 1(2) of the Children Act 1989 requires that any court hearing a case in which a question about the upbringing of a child arises is to have regard to the general principle that delay in determining it is likely to prejudice the welfare of the child. This court heard the appeal on 21 January 2013. The final hearing to determine the future of the child in question was fixed to take place the following week. Accordingly, we announced our decision to allow the appeal at the end of the hearing, with judgment to follow. The facts The proceedings concern a little girl whom I shall call Susan, who was born on 8 July 2010, and her elder half brother whom I shall call Terry, who was born on 30 January 2006. On 21 September 2010, Susan was taken to hospital by her mother and found to have suffered a number of fractures to her ribs, clavicle and long bones, as well as some bruising to her face and head. Care proceedings were brought in respect of both children three days later. Susan was placed in foster care, where she has remained ever since. Terry was initially removed from his home with his maternal grandparents, but was returned to them after a few days, and has remained with them ever since. On 15 November 2010, Judge Penna directed that the case be listed for a fact finding hearing to determine the nature and extent of Susans injuries, their causation whether accidental or non accidental, and if non accidental, the identity of the perpetrator or perpetrators. That hearing began on 31 May 2011. Unfortunately, it became necessary to adjourn the hearing on the second day, because of the mothers mental health. She suffers from a serious mental illness and was unable to cope with giving evidence in the ordinary way. The hearing was resumed on 26 September 2011, with the mother giving evidence via a video link, but she was also unable to cope with this. On 29 September the judge concluded that the mother lacked the capacity to take part in the proceedings and invited the Official Solicitor to act as her litigation friend. This he agreed to do on 20 October 2011. The fact finding hearing resumed on 22 November and concluded on 25 November 2011. The mother gave no more evidence but the father gave evidence over two days. Thus the father was cross examined but the mother was not. The judge also heard oral evidence from various family members and from the paediatric sister at the time of Susans admission to hospital, the health visitor, and the mothers community psychiatric nurse. She had written reports from the medical witnesses about the nature and causation of Susans injuries. By that stage it was common ground that these were non accidentally caused and that the only possible perpetrators were the mother and the father. The judge also had written psychiatric reports about the mothers mental condition. After the conclusion of the evidence, the parties made written submissions. The local authority, in a noticeably balanced account of the evidence, submitted that it was not possible to identify a sole perpetrator on the evidence. The mother argued that the father was sole perpetrator and the father argued that the mother was sole perpetrator. The childrens guardian took a neutral stance. The judge gave her first judgment orally on 15 December 2011. When it was partially transcribed much later (the recording started after the judge had begun to deliver judgment but we are told that nothing of substance has been missed), the judgment was headed Preliminary Outline Judgment approved by the Court. The transcript consists of only 15 paragraphs. It does not deal at all with the specifics of the injuries to the child, their nature, or their timing. It concentrates on the stresses upon the family caused by financial problems, the mothers mental illness, and caring for a young baby who cried often and was not easy to feed. It concluded that the pressures upon the father, who took the lions share of the responsibility for looking after Susan, became intolerable and he snapped. So the finding was that the father was the perpetrator, although the judge took care to stress that under ordinary circumstances he was a loving and competent parent and had a valuable role to play in his daughters life. The judge also stated that if any party would be assisted by the provision of detail in relation to specific points, she would address them. At that hearing and by email the following day, counsel for the father asked her to address a number of matters in an addendum to her judgment: the context in which both mother and father had given their evidence; the mothers opportunity to have perpetrated the injuries; the inconsistencies in the mothers account; the mothers lack of parenting skills and what she did when the baby cried and the father was not there. This accords with the guidance given in In re A (Children) (Judgment: Adequacy of Reasoning) (Practice Note), [2011] EWCA Civ 1205, [2012] 1 WLR 595. At para 16, Munby LJ stressed that: . it is the responsibility of the advocate, whether or not invited to do so by the judge, to raise with the judge and draw to his attention any material omission in the judgment, any genuine query or ambiguity which arises on the judgment, and any perceived lack of reasons or other perceived deficiency in the judges reasoning process. The order drawn up as a result of the judgment of 15 December recorded that the Court provided a summary judgment in respect of the fact finding hearing where the father was seen to have caused the injuries to [the child]. It went on to order the next steps in the case, including an experts meeting before a further directions hearing on 23 January 2012, with the final hearing provisionally booked for 20 February 2012. Unbeknown to anyone at the time, that order was not formally sealed by the Manchester County Court until 28 February 2012. The local authoritys care plan was for Susan to be placed with the maternal grandparents where her half brother Terry was already living. At the directions hearing on 23 January 2012, it was recorded that the court would use three days of the hearing beginning on 20 February to determine whether Susan should be placed in the grandparents care. The judge ordered that a perfected judgment would be distributed by 9 February and deemed to have been handed down on the date of distribution. However, on 15 February, the judge delivered a bombshell in the shape of a written perfected judgment. This expanded upon the earlier judgment in some respects: it gave an account of the injuries, concluded that they were non accidental, that one of the parents must have been the perpetrator, that the same parent was likely to have inflicted all the injuries, that Susan had been injured during the course of the day before she was taken to hospital or the two or three days beforehand, and that she had been injured on (at least) one occasion before that. However, it reached a different conclusion from the conclusion reached in December: Given the uncertain nature of the evidence after the passage of so much time I am unable to find to the requisite standard which of the parents it was who succumbed to the stress to which the family was subject. It could have been either of them who injured [Susan] and that is my finding. At the hearing on 20 February, counsel for the mother asked the judge to explain why she had changed her mind and not given the parties an opportunity to make further submissions before doing so. She delivered a short extempore judgment apologising to the parties, although she did not view the development of this matter as a complete change of direction and the scenario which I posited when giving my view in December remains a possibility. She went on, the decision I reached had to be reached on the balance of probabilities and when I considered the matter carefully I could not exclude the mother because I was not sufficiently satisfied that no time had arisen when she had been alone with the child and might have caused some injury. The order made on 20 February recorded that The mother through her counsel, supported by the other parties, sought clarification of the reasons behind the courts determination that it could not identify a sole perpetrator as between the mother and the father in its judgment of 15 February 2012, compared with the conclusion indicated in the preliminary judgment of 15 December 2011. It was ordered that the hearing listed for 23 February should be for case management, with a view to a further assessment of the father as a carer for Susan, rather than for considering the placement with the maternal grandparents. The mother, the Official Solicitor still acting as her litigation friend, was granted permission to appeal against the February judgment. The Grounds of Appeal complained, firstly, that the second judgment was flawed and/or unjust. No adequate reasons have been provided to account for the change of decision and to place the mother back into the pool of possible perpetrators, and secondly, that no opportunity to make further representations was afforded to the mother beforehand. Before the appeal hearing, the mother and the childrens guardian proposed that the case should be remitted to the judge for amplification and clarification of her change of mind. The local authority and the father argued that it had been adequately explained. No one was suggesting that the December findings be restored without more ado. At the outset of the appeal hearing on 14 June 2012, the court suggested to the mothers counsel that she should be arguing that the judge was functus officio after the December judgment had been recorded in a perfected order. Only after inquiries were made of the Manchester Civil Justice Centre did it emerge that the order had not in fact been sealed until 28 February. Nevertheless, the Court of Appeal, by a majority, not only allowed the mothers appeal but ordered that the findings of 15 December 2011 stand as the findings of fact as to the perpetration of the injuries, the judgment of 15 February 2012 was quashed, and all reference to it excised from the orders made on 20 and 23 February. The father now appeals to this court. With the support of the local authority, the childrens guardian and (tellingly) the maternal grandparents, he argues that the judge was entitled to change her mind and the February judgment should be restored. The mother, now acting on her own behalf, opposes this. Given the passage of time, no party is suggesting that the case be remitted, either for further clarification of the judges reasoning or for a rehearing. The judge has now recused It has long been the law that a judge is entitled to reverse his decision at any herself and the final hearing took place before His Honour David Gee in the week beginning 28 January 2013. The parties written submissions to this court spent some time discussing whether the majority in the Court of Appeal decided (a) that the judge had no jurisdiction to change her mind; or (b) that she had such a jurisdiction but should not have exercised it on the facts of this case. For reasons which will later appear, I believe that they must have meant (b), although there are passages, particularly in the judgment of Sir Stephen Sedley which are more consistent with (a). But we do not need to discuss what they really meant, as those are the very issues before this court. Rimer LJ dissented. He held that the judge did have jurisdiction and was entitled to exercise it in the way that she did. The jurisdiction time before his order is drawn up and perfected. The modern story begins with the Judicature Acts 1873 (36 & 37 Vict c 66) and 1875 (38 & 39 Vict c 77), which amalgamated the various common law, chancery and doctors commons jurisdictions into a single High Court and created a new Court of Appeal for England and Wales. In In re St Nazaire Company (1879) 12 Ch D 88, the Court of Appeal decided that there was no longer any general power in a judge to review his own or any other judges orders. Sir Richard Malins V C had permitted a petition to proceed which sought to vary an earlier order which he had made and which had been unsuccessfully appealed to the Court of Appeal. The Court of Appeal held that he had no power to do so. Sir George Jessel MR explained that the Judicature Acts had changed everything. Before they came into force, the Lord Chancellor, Vice Chancellor and Master of the Rolls had power to rehear their own decisions and, indeed, the decisions of their predecessors. He remarked that the hope of every appellant was founded on the change of the judge: p 98. (An example of Jessel MR revisiting one of his own orders is In re Australian Direct Steam Navigation (Millers Case) (1876) 3 Ch D 661). But such an application was in the nature of an appeal and jurisdiction to hear appeals had now been transferred to the Court of Appeal. Thesiger LJ added that, whatever may have been the practice in the High Court of Chancery before the Judicature Act as to the review of their decisions or the rehearing of their decisions, nothing can be clearer than that there was nothing analogous to that in the Common Law Courts 12 Ch D 88, 101. The courts conclusions harmonised the practice in all Divisions of the newly amalgamated High Court. Nothing was said in In re St Nazaire about the position before the judges order was perfected. In re Suffield and Watts, Ex p Brown (1888) 20 QBD 693, a High Court judge had made an order in bankruptcy proceedings which had the effect of varying a charging order which he had earlier made under the Solicitors Act 1860 (23 & 24 Vict c 127). All the members of the Court of Appeal, citing In re St Nazaire, agreed that he had no power to do this once his order had been drawn up and perfected. Unlike the bankruptcy jurisdiction, the Solicitors Act gave no power of variation. As Fry LJ put it, at p 697: So long as the order has not been perfected the judge has a power of re considering the matter, but, when once the order has been completed, the jurisdiction of the judge over it has come to an end. Strictly speaking, the reference to what may be done before the order is perfected was obiter, but that this was the law was established by the Court of Appeal no later than the case of Millensted v Grosvenor House (Park Lane) Ld [1937] 1 KB 717, where the judge had revised his award of damages before his order was drawn up and the court held that he was entitled to do so. Thus there is jurisdiction to change ones mind up until the order is drawn up and perfected. Under the Civil Procedure Rules (rule 40.2(2)(b)), an order is now perfected by being sealed by the court. There is no jurisdiction to change ones mind thereafter unless the court has an express power to vary its own previous order. The proper route of challenge is by appeal. On any view, therefore, in the particular circumstances of this case, the judge did have power to change her mind. The question is whether she should have exercised it. Exercising it As Wilson LJ pointed out in Paulin v Paulin [2009] EWCA Civ 221, [2010] 1 WLR 1057, para 30(c), Until 1972 the courts made no attempt to narrow the circumstances in which it would be proper for a judge to exercise his jurisdiction to reverse his decision prior to the sealing of the order. He referred to In re Harrisons Share Under a Settlement [1955] Ch 260, in which the judge recalled an order approving the variation of a settlement on behalf of infant, unborn and unascertained persons, because after he had pronounced it but before it was formally drawn up the House of Lords had decided that there was no power to make such an order. The Court of Appeal rejected the submission that the order could only be corrected for manifest error or omission (as can a perfected order under the slip rule): When a judge has pronounced judgment he retains control over the case until the order giving effect to his judgment is formally completed: pp 283 284. The court went on to say that This control must be . exercised judicially and not capriciously but that was all. The court clearly contemplated that people might act upon an order before it was drawn up, but they did so at their own risk. In 1972, however, the Court of Appeal decided In re Barrell Enterprises [1973] 1 WLR 19, in which it refused to allow the re opening of an unsuccessful appeal in which judgment had been given some months previously dismissing the appeal but the order had for some reason never been drawn up. Russell LJ, giving the judgment of the court, stated, at pp 23 24, that: When oral judgments have been given, either in a court of first instance or on appeal, the successful party ought save in the most exceptional circumstances to be able to assume that the judgment is a valid and effective one. The cases to which we were referred in which judgments in civil courts have been varied after delivery (apart from the correction of slips) were all cases in which some most unusual element was present. There was no such justification in that case. In Paulin [2010] 1 WLR 1057, 1070, Wilson LJ also pointed out that the limitation thus placed on the proper exercise of the jurisdiction was not universally welcomed. In Pittalis v Sherefettin [1986] 1 QB 868, Dillon LJ had in effect emasculated [it] into insignificance by pointing out that it was exceptional for a judge to be satisfied that the order he had previously pronounced was wrong. In Stewart v Engel [2000] EWCA Civ 362, [2000] 1WLR 2268, the Court of Appeal unanimously held that the power to recall orders before perfection had survived the coming into force of the Civil Procedure Rules 1998. However, for some reason (probably the submissions of counsel) they termed this the Barrell jurisdiction. By a majority, they affirmed the Barrell limitation, which Sir Christopher Slade said must apply a fortiori where the judgment is a formal written judgment in final form, handed down after the parties have been given the opportunity to consider it in draft and make representations on the draft: pp 2274, 2276. Clarke LJ dissented on this point. He did not think that the court was bound by Barrell to look for exceptional circumstances. He clearly took as a starting point the overriding objective in the Civil Procedure Rules of enabling the court to deal with cases justly. He considered that the judge had been right to direct himself that the examples given by Neuberger J in In re Blenheim Leisure (Restaurants) Ltd (No 3), The Times, 9 November 1999, a plain mistake by the court, the parties failure to draw to the courts attention a plainly relevant fact or point of law and the discovery of new facts after judgment was given were merely examples: How the discretion should be exercised in any particular case will depend upon all the circumstances: [2000] 1WLR 2268, 2285 . Other formulations of the Barrell principle have been suggested. In Cie Noga DImportation et dExportation SA v Abacha [2001] 3 All ER 513, Rix LJ, sitting in the Commercial Court, referred at para 42 to the need to balance the concern for finality against the proper concern that courts should not be held by their own decisions in a straitjacket pending the formality of drawing up the order. He went on, at para 43: Provided that the formula of exceptional circumstances is not turned into a straitjacket of its own, and the interests of justice and its constituents as laid down in the overriding principle are held closely to mind, I do not think that the proper balance will be lost. Clearly, it cannot be in every case that a litigant should be entitled to ask the judge to think again. Therefore, on one ground or another the case must raise considerations, in the interests of justice, which are out of the ordinary, extraordinary or exceptional. An exceptional case does not have to be uniquely special. Strong reasons is perhaps an acceptable alternative to exceptional circumstances. It will necessarily be in an exceptional case that strong reasons are shown for reconsideration. In Robinson v Fernsby [2003] EWCA Civ 1820, [2004] WTLR 257 May LJ commented that that expression [exceptional circumstances] by itself is no more than a relatively uninformative label. It is not profitable to debate what it means in isolation from the facts of a particular case (para 94). Peter Gibson LJ commented, at para 120: With one possible qualification it is in my judgment incontrovertible that until the order of a judge has been sealed he retains the ability to recall the order he has made even if he has given reasons for that order by a judgment handed down or orally delivered. Such judicial tergiversation is in general not to be encouraged, but circumstances may arise in which it is necessary for the judge to have the courage to recall his order. If . the judge realises that he has made an error, how can he be true to his judicial oath other than by correcting that error so long as it lies within his power to do so? No doubt that will happen only in exceptional circumstances, but I have serious misgivings about elevating that correct description of the circumstances when that occurs as exceptional into some sort of criterion for what is required . The possible qualification was when the judgment has been reasonably relied upon by a party who has altered his position irretrievably in consequence. Thus one can see the Court of Appeal struggling to reconcile the apparent statement of principle in Barrell [1973] 1 WLR 19, coupled with the very proper desire to discourage the parties from applying for the judge to reconsider, with the desire to do justice in the particular circumstances of the case. This court is not bound by Barrell or by any of the previous cases to hold that there is any such limitation upon the acknowledged jurisdiction of the judge to revisit his own decision at any time up until his resulting order is perfected. I would agree with Clarke LJ in Stewart v Engel [2000] 1 WLR 2268, 2282 that his overriding objective must be to deal with the case justly. A relevant factor must be whether any party has acted upon the decision to his detriment, especially in a case where it is expected that they may do so before the order is formally drawn up. On the other hand, in In re Blenheim Leisure (Restaurants) Ltd, Neuberger J gave some examples of cases where it might be just to revisit the earlier decision. But these are only examples. A carefully considered change of mind can be sufficient. Every case is going to depend upon its particular circumstances. Exercising the discretion in this case If that be the correct approach, was this judge entitled to exercise her discretion as she did? Thorpe LJ concluded (at para 56) that she was bound to adhere to the conclusion in her December judgment, having recited (at para 55) the clarity of the conclusion reached, the general assumption that the order had been perfected, the general implementation of her conclusion, her adherence to it at the hearing on 23 January, and the absence of any change in the circumstances and the general slackness that left the order unsealed. He was also somewhat puzzled as to why the result of her change of mind was seemingly to elevate the father from low to first consideration as the primary carer, albeit the rationality of that elevation is not clear to me, given that he remained a suspected perpetrator (para 56). Sir Stephen Sedley held that something more than a change in the judges mind was required, because it will only be exceptionally that the interests of finality are required to give way to the larger interests of justice (paras 79, 80). Rimer LJ, on the other hand, held that the judge was honouring her judicial oath by correcting what she had come to realise was a fundamental error on her part. the judge would be presented with real difficulty in her future conduct of this case were she required to proceed with it on the basis of a factual substratum that she now believes to be wrong. The court should not be required to make welfare decisions concerning a child on such a false factual basis. It could not be in the interests of the child to require a judge to shut his eyes to the reality of the case and embrace a fiction. The Court of Appeal were, of course, applying an exceptionality test which in my view is not the correct approach. They were, of course, right to consider the extent to which the December decision had been relied upon by the parties, but in my view Rimer LJ was also correct to doubt whether anyone had irretrievably changed their position as a result. The care plan may have been developed (we do not have the details of this) but the childs placement had yet to be decided and she had remained where she was for the time being. The majority were, of course, also right to stress the importance of finality, but the final decision had yet to be taken. I agree with Rimer LJ that no judge should be required to decide the future placement of a child upon what he or she believes to be a false basis. Section 1(1) of the Children Act 1989 provides that where a court determines any question with respect to the upbringing of a child the welfare of the child shall be its paramount consideration. While that provision does not apply to procedural decisions made along the way, it has to govern the final decision in the case. Mr Charles Geekie QC, on behalf of the mother, argues that even if the judge was entitled to change her mind, she was not entitled to proceed in the way that she did, without giving the parties notice of her intention and a further opportunity of addressing submissions to her. As the court pointed out in Re Harrisons Share Under a Settlement [1955] Ch 260, 284, the discretion must be exercised judicially and not capriciously. This may entail offering the parties the opportunity of addressing the judge on whether she should or should not change her decision. The longer the interval between the two decisions the more likely it is that it would not be fair to do otherwise. In this particular case, however, there had been the usual mass of documentary material, the long drawn out process of hearing the oral evidence, and very full written submissions after the evidence was completed. It is difficult to see what any further submissions could have done, other than to re iterate what had already been said. For those reasons, therefore, we ordered that the fathers appeal against the decision of the Court of Appeal be allowed. No party had sought to appeal against the judges decision of 15 February 2012, so the welfare hearing should proceed on the basis of the findings in the judgment of that date. We were pleased subsequently to learn that agreement has now been reached that Susan should be placed with her half brother and maternal grandparents under a care order and, after a settling in period, have visiting and staying contact with her father and her paternal family. The local authority plan to work with both families with a view to both mother and father having unsupervised contact in the future and it is hoped that the care order will be discharged after a period of one to two years. But what if the order had been sealed? On the particular facts of this case, that is all that need be said. But what would have been the position if, as everyone thought was the case, the order made by the judge on 15 December 2011 had been formally drawn up and sealed? Whatever may be the case in other jurisdictions, can this really make all the difference in a care case? The Court of Appeal, despite having themselves raised the point, do not appear to have thought that it did. Sir Stephen Sedley said that it seemed to be of little or no consequence that the order recording the first judgment had not been sealed or that a final order in the case remained to be made (para 74). Both Thorpe and Rimer LJJ held that the relevant order in care proceedings is the final care order made at the end of the hearing. They expressly agreed with Munby LJ in In re A (Children: Judgment: Adequacy of Reasoning) [2011] EWCA Civ 1205, [2012] 1 WLR 595, para 21. This was a case in which the mother challenged the adequacy of the judges reasons for finding her complicit in the sexual abuse of her daughter in a fact finding hearing in care proceedings. Having quoted my observation in In re B (Children: Care Proceedings: Standard of Proof) (CAFCASS intervening) [2009] AC 11, para 76, that a split hearing is merely part of the whole process of trying the case and once completed the case is part heard, Munby LJ continued, at para 21: Consistently with this, the findings at a fact finding hearing are not set in stone so as to be incapable of being revisited in the light of subsequent developments as, for example, if further material emerges during the final hearing: see In re M and MC (Care: Issues of Fact: Drawing of Orders) [2003] 1 FLR 461, paras 14, 24. This court has since agreed with that proposition. In Re S B (Children)(Care Proceedings: Standard of Proof) [2009] UKSC 17, [2010] 1 AC 678, all seven justices agreed that: It is now well settled that a judge in care proceedings is entitled to revisit an earlier identification of the perpetrator if fresh evidence warrants this (and this court saw an example of this in the recent case In re I (A Child) (Contact Application: Jurisdiction) (Centre for Family Law and Practice intervening) [2010] 1 AC 319). (para 46) There are many good reasons for this, both in principle and in practice. There are two legal issues in care proceedings. First, has the threshold set by section 31(2) of the 1989 Act been crossed? Secondly, what does the paramount consideration of the childs welfare require to be done about it? Much of the evidence will be relevant to both parts of the inquiry. It may be very helpful to separate out some factual issues for early determination, but these do not always neatly coincide with the legal issues. In this case, for example, there was no dispute that the threshold had been crossed. Nevertheless, it was convenient to attempt to identify who was responsible for the childs injuries before moving on to decide where her best interests lay. In such a composite enquiry, the judge must be able to keep an open mind until the final decision is made, at least if fresh evidence or further developments indicate that an earlier decision was wrong. It would be detrimental to the interests of all concerned, but particularly to the children, if the only way to correct such an error were by an appeal. This is reinforced by the procedural position. As Munby LJ pointed out in In re A [2012] 1 WLR 595, para 20, in the context of a fact finding hearing there may not be an immediate order at all. It was held in In re B (A Minor) (Split Hearings: Jurisdiction) [2000] 1 WLR 790 that the absence of an order is no bar to an appeal. Nevertheless, it would be very surprising these days if there were no order. In Re M and MC (Care: Issues of Fact: Drawing of Orders) [2002] EWCA Civ 499, [2003] 1 FLR 461, the Court of Appeal ruled that the central findings of fact made at a fact finding hearing should be the subject of recitals to an order issued there and then. But this is merely a recital in what is, on any view, an interlocutory order. Both the Civil Procedure Rules and the Family Procedure Rules make it clear that the courts wide case management powers include the power to vary or revoke their previous case management orders: see CPR r 3.1(7) and rule 4.1(6) of the Family Procedure Rules 2010 (SI 2010/2955). This may be done either on application or of the courts own motion: CPR r 3.3(1), rule 4.3(1). It was the absence of any power in the judge to vary his own (or anyone elses) orders which led to the decisions in In re St Nazaire 12 Ch D 88 and In re Suffield and Watts, Ex p Brown 20 QBD 693. Where there is a power to vary or revoke, there is no magic in the sealing of the order being varied or revoked. The question becomes whether or not it is proper to vary the order. Clearly, that power does not enable a free for all in which previous orders may be revisited at will. It must be exercised judicially and not capriciously. It must be exercised in accordance with the over riding objective. In family proceedings, the overriding objective is enabling the court to deal with cases justly, having regard to any welfare issues involved: rule 1.1(1) of the Family Procedure Rules. It would, for the reasons indicated earlier, be inconsistent with that objective if the court could not revisit factual findings in the light of later developments. The facts of in In re M and MC [2003] 1 FLR 461 are a good example. At the fact finding hearing, the judge had found that Mr C, and not the mother, had inflicted the childs injuries. But after that, the mother told a social worker, whether accurately or otherwise, that she had inflicted some of them. The Court of Appeal ruled that, at the next hearing, the judge should subject the mothers apparent confession to rigorous scrutiny but that, if he concluded that it was true, he should alter his findings. The question is whether it makes any difference if the later development is simply a judicial change of mind. This is a difficult issue upon which the arguments are finely balanced, not least because the difference between a change of circumstances and a change of mind may not be clear cut. On the one hand, given that the basis of the general rule was the lack of a power to vary the original order and there undoubtedly is power to vary these orders, why should it make any difference in principle if the reason for varying it is that, on mature reflection, the judge has reached a different conclusion from the one he reached earlier? As Rimer LJ said in the current case at para 71, it cannot be in the best interests of the child to require the judge to conduct the welfare proceedings on the basis of a false substratum of fact. That would have been just as true if the December order had been sealed as it was when it had not. In this respect, children cases may be different from other civil proceedings, because the consequences are so momentous for the child and for the whole family. Once made, a care order is indeed final unless and until it is discharged. When making the order, the welfare of the child is the courts paramount consideration. The court has to get it right for the child. This is greatly helped if the judge is able to make findings as to who was responsible for any injuries which the child has suffered. It would be difficult for any judge to get his final decision right for the child, if, after careful reflection, he was no longer satisfied that his earlier findings of fact were correct. Mr Geekie, on behalf of the mother, also argued that the sealing of the order could not invariably be the cut off point. If a judge is asked, in accordance with the guidance given in English v Emery Reimbold & Strick Ltd (Practice Note) [2002] EWCA Civ 605 [2002] 1 WLR 2409, as applied to family cases in In re A [2012] 1 WLR 595, to elaborate his reasoning and in doing so realises that his original decision was wrong, should he not, as part of that process, be entitled or even required to say so? The answer to this point may very well be that the judge should indeed have the courage to admit to the Court of Appeal that he has changed his mind, but that is not the same as changing his order. That is a matter for the Court of Appeal. One argument for allowing a judicial change of mind in care cases is to avoid the delay inevitably involved if an appeal is the only way to correct what the judge believes to be an error. On the other hand, the disconcerting truth is that, as judges, we can never actually know what happened: we were not there when whatever happened did happen. We can only do our best on the balance of probabilities, after which what we decide is taken to be the fact: In re B (Children) (Care Proceedings: Standard of Proof) [2008] UKHL 35, [2009] AC 11, para 2. If a judge in care proceedings is entitled simply to change his mind, it would destabilise the platform of established facts which it was the very purpose of the split hearing to construct; it would undermine the reports, other evidence and submissions prepared on the basis of the earlier findings; it would throw the hearing at the second stage into disarray; and it would probably result in delay. Furthermore, if a judge were entitled to change his mind, a party would presumably be entitled to invite him to do so. No doubt most judges would do their best to have no truck with the invitation. But could the party be prevented from pressing for the exercise of the jurisdiction on the basis that, in his first judgment, the judge had failed to weigh certain evidence sufficiently or at all? In effect the judge would be invited to hear an appeal against himself. There is a distinction between an appeal and a variation for cause. This is the principle underlying the basic rule that an order is final once sealed. The point does not arise in this case and it was not fully developed in the arguments before us. The arguments outlined above are so finely balanced that we shall refrain from expressing even a provisional view upon it. In our view the preferable solution would be to avoid the situation arising in the first place. A concluding comment courage and intellectual honesty to admit ones mistakes. The best safeguard against having to do so is a fully and properly reasoned judgment in the first place. A properly reasoned judgment in this case would have addressed the matters raised in counsels email of the 16 December. It would have identified the opportunities of each parent to inflict each of the injuries by reference to the medical evidence about the nature, manner of infliction and timing of those injuries and to the parents and other evidence about their movements during the relevant periods. It would have addressed the credibility of the evidence given by each parent, having regard in this case to the problems presented by the mothers mental illness. Had she done this, the judge might well have been able to explain why it was that she concluded that it was the father who had more than once snapped under the tension. But she did not do so, and it is a fair inference that it was the task of properly responding to the questions raised by counsel for the father which caused her to reconsider her decision. No doubt the judge was anxious, given the vicissitudes which had beset the fact finding hearing, to deliver her first judgment quickly so that the welfare hearing fixed for the following February could be maintained. But the subsequent history demonstrates all too clearly that this was a false economy. Had that judgment been properly reasoned, none of this would have happened. Furthermore, if the judge had not changed her mind, the father would have had the opportunity of appealing against her findings to the Court of Appeal. One extraordinary result of the Court of Appeals order in this case was that the findings against the father were restored without his having had the opportunity which he should have had of mounting a proper appeal against them. As Peter Gibson LJ pointed out in Robinson v Fernsby [2004] WTLR 257, para 120, judicial tergiversation is not to be encouraged. On the other hand, it takes

The issue in this appeal is whether and in what circumstances a judge who has announced her decision in civil or family proceedings is entitled to change her mind. It arose in this case in care proceedings in a family court. The proceedings concern a child (S) and her half brother (T). Care proceedings were commenced in respect of both children after S was taken to hospital with serious injuries. A fact finding hearing was ordered to determine whether Ss injuries were non accidental and, if so, the identity of the perpetrator. The hearings lasted over several days, spread over several months because of the mothers mental health. It became common ground that the injuries were non accidental and the only possible perpetrators were the mother and father. On 15 December 2011 the judge, Judge Penna, gave a short oral judgment (the December judgment) finding that the father was the perpetrator and she invited submissions if the parties wanted further detail. She gave directions for the filing of expert evidence before a final hearing provisionally booked for 20 February 2012. Her order was not in fact formally sealed by the court until 28 February 2012. Before that, on 15 February 2012, the judge delivered a written perfected judgment (the February judgment) which reached a different conclusion from her oral judgment, holding that she was unable to determine whether it was the mother or the father who had caused the injuries to section As a result, she proposed to give directions for an assessment of the father as a carer for S at the next hearing. The mother was granted permission to appeal against the February judgment. The Court of Appeal by a majority allowed her appeal, quashed the February judgment and ordered that the findings of the December judgment as to the perpetration of the injuries to S should stand. The father brought an appeal to the Supreme Court with the support of the local authority, the childrens guardian, and their maternal grandparents (with whom T had been residing). The Supreme Court unanimously allows the appeal. It gave its decision to the parties at the conclusion of the oral hearing of the appeal on 21 January 2013 and now provides its written judgment. This is given by Lady Hale, with whom all the Justices agree. The Supreme Court restores the February judgment and the welfare hearing has already proceeded on the basis of the findings in that judgment. It has long been the law that a judge is entitled to reverse his decision at any time before his order is drawn up and perfected. In the absence of express power to vary or discharge his own orders, any general power for a judge to review his order once perfected was abolished by the Judicature Acts 1873 and 1875 but the power to reconsider the matter before an order was perfected survived [17 18]. Thus until the December order was sealed, the judge in this case did have the power to change her mind and the question for the appeal court was whether she should have exercised it [19]. The overriding objective in the exercise of this power must be to deal with the case justly. Contrary to the practice previously adopted, it is not reserved for exceptional circumstances and would in every case depend on its particular facts. It would be relevant whether any party has acted upon the decision to his detriment especially in a case where it was expected that they may do so before the order is formally drawn up [27]. In this case, the parties had not irretrievably changed their position as a result of the December judgment. Ss placement had yet to be decided and she remained where she was for the time being. Finality was important but here a final decision had yet to be taken. No judge should be required to decide the future placement of a child upon what he or she believes to be a false basis [29]. The judge had heard very full submissions on the evidence and it was not necessary to invite further submissions before changing her findings in this particular case [30]. If, unlike the facts of this case, the order had already been sealed by the time the judge changed her mind, what would be the position? In care proceedings the fact finding hearing is merely part of the whole process of trying the case [34]. During that process the judge must be able to keep an open mind until the final decision has been made, at least if fresh evidence or further developments indicate that an earlier decision was wrong. It would be detrimental to the interests of all concerned and particularly the children if the only way to correct such an error were by an appeal [35]. The Civil Procedure Rules and the Family Procedure Rules make it clear that the courts wide case management powers include the power to vary or revoke previous case management orders, and the issue was whether it was proper to vary an order, rather than whether that order had been sealed [37]. The power had to be exercised judicially and not capriciously and in accordance with the overriding objective [38]. However, if the later development was simply a judicial change of mind, the arguments were finely balanced. Children cases may be different from other civil proceedings because the consequences were so momentous for the child and for the whole family. The court had to get it right for the child [41]. On the other hand, the purpose of the fact finding hearing was to create a platform of established facts which would be undermined, throwing the later hearings into disarray, if a judge could be urged to change his mind and in effect hear an appeal against himself [44]. As the point did not arise in this case, the court declined to express a view [45]. The Supreme Court reflected that the problem which arose in these proceedings would have been avoided by having a full and reasoned judgment from the judge in the first place, which would have identified the reasons for her initial conclusion that the father had been the perpetrator, and from which the father could have appealed. That would have avoided the situation here, where the findings against the father were restored without his having an opportunity for a proper appeal [46].

Between August 2005 and April 2011 Mr Smith, the respondent, who is by trade a plumbing and heating engineer, did work for Pimlico Plumbers Ltd (Pimlico), the first appellant, which conducts a substantial plumbing business in London. Mr Mullins, the second appellant, owns Pimlico. in an employment tribunal (the tribunal). He alleged In August 2011 Mr Smith issued proceedings against Pimlico and Mr Mullins (a) that he had been an employee of Pimlico under a contract of service within the meaning of section 230(1) of the Employment Rights Act 1996 (the Act) and as such he complained, among other things, that Pimlico had dismissed him unfairly contrary to section 94(1) of it; and/or (b) that he had been a worker for Pimlico within the meaning of section 230(3) of the Act and as such he complained that Pimlico had made an unlawful deduction from his wages contrary to section 13(1) of it; and (c) that he had been a worker for Pimlico within the meaning of regulation 2(1) of the Working Time Regulations 1998 (SI 1998/1833) (the Regulations) and as such he complained that Pimlico had failed to pay him for the period of his statutory annual leave contrary to regulation 16 of them; and (d) that he had been in Pimlicos employment within the meaning of section 83(2)(a) of the Equality Act 2010 (the Equality Act) and as such he complained that both Pimlico and Mr Mullins had discriminated against him by reference to disability contrary to section 39(2) of it and had failed to make reasonable adjustments in that regard contrary to section 39(5) of it. By a judgment dated 16 April 2012 delivered by Employment Judge Corrigan (the judge), the tribunal decided that Mr Smith had not been an employee of Pimlico under a contract of service; and, by a judgment dated 21 November 2014 delivered by Judge Serota QC, the Employment Appeal Tribunal (the appeal tribunal) dismissed Mr Smiths cross appeal against that decision. He has not sought further to challenge it. The result is that he cannot proceed with the complaints referred to in para 2(a) above. Nevertheless, by that same judgment dated 16 April 2012, the tribunal made three further decisions: (a) that Mr Smith had been a worker for Pimlico within the meaning of section 230(3) of the Act; (b) that he had been a worker for Pimlico within the meaning of regulation 2(1) of the Regulations; and (c) that he had been in Pimlicos employment within the meaning of section 83(2)(a) of the Equality Act. Were the decisions on these three threshold issues to be upheld, the result would be that Mr Smith could proceed with the complaints referred to in para 2(b), (c) and (d) above. Indeed the tribunal made directions for their substantive consideration. Pimlico brought an appeal against the tribunals three further decisions to the appeal tribunal, which dismissed it by that same judgment dated 21 November 2014. Pimlico thereupon brought an appeal against the appeal tribunals decision to the Court of Appeal, which on 10 February 2017, by substantive judgments delivered by Sir Terence Etherton MR and Underhill LJ and by a judgment of Davis LJ which agreed with both of them, dismissed it ([2017] ICR 657). Today this court determines Pimlicos yet further appeal, which is in form a challenge to the decision of the Court of Appeal but which is in substance a further inquiry into the entitlement of the tribunal to have made the three decisions referred to in para 4 above. Pimlico argues that the tribunals reasoning in support of them was inadequate and it asks the court to set them aside and to direct the tribunal to reconsider the three threshold issues. It follows that the tribunal held that, although Mr Smith was not an employee under a contract of service, he was an employee within the meaning of section 83(2)(a) of the Equality Act. It is regrettable that in this branch of the law the same word can have different meanings in different contexts. But it gets worse. For, as I will explain, different words can have the same meaning. As long ago as 1875 Parliament identified an intermediate category of working people falling between those who worked as employees under a contract of service and those who worked for others as independent contractors. For in that year it passed the Employers and Workmen Act, designed to give the county court an enlarged and flexible jurisdiction in disputes between an employer and a workman; and, by section 10, it defined a workman as, in effect, a manual labourer working for an employer under a contract of service or a contract personally to execute any work or labour. From 1970 onwards Parliament has taken the view that, while only employees under a contract of service should have full statutory protection against various forms of abuse by employers of their stronger economic position in the relationship, there were self employed people whose services were so largely encompassed within the business of others that they should also have limited protection, in particular against discrimination but also against certain forms of exploitation on the part of those others; and for that purpose Parliament has borrowed and developed the extended definition of a workman first adopted in 1875. Thus in 1970 Parliament passed the Equal Pay Act which obliged employers to offer to any woman whom they employed terms equal to those upon which they employed men for the same or equivalent work; and, by section 1(6)(a), it defined the word employed as being under a contract of service or of apprenticeship or a contract personally to execute any work or labour. Then, in section 167(1) of the Industrial Relations Act 1971, we find the birth of the modern worker, defined there as a person who works (a) under a contract of employment, or (b) under any other contract whereby he undertakes to perform personally any work or services for another party to the contract who is not a professional client of his . Now we have section 230(3) of the Act, in which a worker is defined to include not only, at (a), an employee under a contract of service but also, at (b), an individual who has entered into or works under any other contract whereby the individual undertakes to perform personally any work or services for another party to the contract whose status is not by virtue of the contract that of a client or customer of any profession or business undertaking carried on by the individual Other subsections of section 230, to which thankfully it will be unnecessary to refer, proceed to extend the words employee, employment and employed to the situation of a worker falling within subsection (3)(b) and conveniently described as a limb (b) worker. Regulation 2(1) of the Regulations defines a worker in terms identical to those in section 230(3) of the Act. On its face section 83(2)(a) of the Equality Act defines employment in terms different from those descriptive of the concept of a worker under section 230(3) of the Act and under regulation 2(1) of the Regulations. For it defines it as being either under a contract of employment or of apprenticeship or under a contract personally to do work. Comparison of the quoted words with the definition of a limb (b) worker in section 230(3) of the Act demonstrates that, while the obligation to do the work personally is common to both, the Equality Act does not expressly exclude from the concept a contract in which the other party has the status of a client or customer. As it happens, however, this distinction has been held to be one without a difference. Part 5 of the Equality Act, which includes section 83, primarily gives effect to EU law. Article 157(1) of the Treaty on the Functioning of the European Union requires member states to ensure application of the principle of equal pay for male and female workers for equal work or work of equal value. In Allonby v Accrington and Rossendale College (Case C 256/01) [2004] ICR 1328 the Court of Justice of the European Communities, at paras 67 and 68, interpreted the word workers in what is now article 157(1) as persons who perform services for and under the direction of another person in return for which [they receive] remuneration but excluding independent providers of services who are not in a relationship of subordination with the person who receives the services. In Hashwani v Jivraj [2011] UKSC 40, [2011] 1 WLR 1872, the Supreme Court applied the concepts of direction and subordination identified in the Allonby case to its interpretation of a contract personally to do work in the predecessor to section 83(2)(a). In Bates van Winkelhof v Clyde & Co LLP [2014] UKSC 32, [2014] 1 WLR 2047, Lady Hale observed at paras 31 and 32 that this interpretation of the section yielded a result similar to the exclusion of work for those with the status of a client or customer in section 230(3) of the Act and in regulation 2(1) of the Regulations. She added, however, at para 39 that, while the concept of subordination might assist in distinguishing workers from other self employed people, the Court of Appeal in that case had been wrong to regard it as a universal characteristic of workers. Notwithstanding murmurs of discontent in the submissions on behalf of Mr Smith, this court is not invited to review its equation in the Bates van Winkelhof case of the definition of a worker in section 230(3) of the Act with that of employment in section 83(2)(a) of the Equality Act. I therefore proceed on the basis that the three decisions of the tribunal referred to at para 4 above stand or fall together; and that it is conceptually legitimate as well as convenient to treat all three of them as having been founded upon a conclusion that Mr Smith was a limb (b) worker within the meaning of section 230(3) of the Act. MR SMITHS AGREEMENTS WITH PIMLICO Mr. Smith made two written agreements with Pimlico, the first dated 25 August 2005 and the second (which replaced the first) made on 21 September 2009 and wrongly dated 21 September 2010. No one has argued that, for the purposes of these proceedings, the agreements have different legal consequences. In places they are puzzling. In his judgment in the appeal tribunal Judge Serota QC concluded that, on the one hand, Pimlico wanted to present their operatives to the public as part of its workforce but that, on the other, it wanted to render them self employed in business on their own account; and that the contractual documents had been carefully choreographed to serve these inconsistent objectives. But the judge rightly proceeded to identify a third objective, linked to the first, namely to enable Pimlico to exert a substantial measure of control over its operatives; and this clearly made development of the choreography even more of a challenge. The first agreement was on a printed form but there were manuscript amendments. The print described it as a contract; but the manuscript substituted the word agreement. Against Mr Smiths name the print explained that it was name of contracted employee; but the manuscript added the prefix sub to the word contracted. Against the date of 25 August 2005 the print explained that it was date of commencement of employment; but the manuscript deleted the word employment. The agreement provided that its terms were as set out in a manual entitled Company Procedures & Working Practices (the manual) but since, as I will explain, the manual was again incorporated into the second agreement, it is convenient to address it in that context. In the second agreement, drafted so as to refer to Pimlico as the Company and to address Mr Smith as you, the terms material to the issue before the court were as follows: You shall provide such building trade services as are within your (a) the Company may terminate [the agreement immediately] if you commit an act of gross misconduct or do anything which brings the Company into disrepute (b) skills in a proper and efficient manner . (c) You shall provide the Services for such periods as may be agreed with the Company from time to time. The actual days on which you will provide the Services will be agreed between you and the Company from time to time. For the avoidance of doubt, the Company shall be under no obligation to offer you work and you shall be under no obligation to accept such work from the Company. However, you agree to notify the Company in good time of days on which you will be unavailable for work. (d) You warrant that you will be competent to perform the work which you agree to carry out [and] you will promptly correct, free of charge, any errors in your work which are notified to you by the Company . (e) If you are unable to work due to illness or injury on any day on which it was agreed that you would provide the Services, you shall notify the Company (f) You acknowledge that you will represent the Company in the provision of the Services and that a high standard of conduct and appearance is required at all times. While providing the Services, you also agree to comply with all reasonable rules and policies of the Company from time to time and as notified to you, including those contained in the Company Manual. (g) . you shall be paid a fee in respect of the Services equal to 50% of the cost charged by the Company to the client in relation to labour content only, provided that the Company shall have received clear funds from the client . (h) If an invoice remains unpaid [by the client] for more than one month, the fee payable to you will be reduced by 50%. If an invoice remains unpaid for more than six months, you will not receive a fee for the work. (i) security contributions to the appropriate authorities. You will provide all your own tools, equipment, materials and other (j) items as shall be required for the performance of the Services, except where it has been agreed that equipment or materials will be provided through the Company. The Company may, at a rental price to be agreed with you, provide a vehicle for use in providing the Services If you provide your own materials , you will be entitled to up to 20% trade mark up (pre VAT) on such materials provided [their] cost is at least 3,000 (pre VAT) [and otherwise] up to 12.5% . (k) You will have personal liability for the consequences of your services to the Company and will maintain suitable professional indemnity cover to a limit of 2m You will account for your income tax, value added tax and social (l) You shall at all times keep the Company informed of your other activities which could give rise to a direct or indirect conflict of interest with the interests of the Company, provided that you shall not be permitted at any time to provide services to any Customer other than under this Agreement. (m) you will not for three months following [termination of the agreement] be engaged in any Capacity with any business which is in competition with [the business of the Company nor] for 12 months solicit the business of [any customer of the Company nor] be involved with the provision of goods or services to [him] in the course of any business which is in competition with [that of the Company]. You are an independent contractor of the Company, in business on (n) your own account. Nothing in this Agreement shall render you an employee, agent or partner of the Company and the termination of this Agreement shall not constitute a dismissal for any purpose. (o) This Agreement contains the entire agreement between the parties The manual was incorporated into the second agreement by virtue of the term recited at para 18(f) above. It obliged him to comply with the manual [w]hile providing the Services. My view is that the quoted words are apt to have made the manual govern all aspects of Mr Smiths operations in relation to Pimlico; in any event, however, the case proceeded before the tribunal on the basis that even after 2009 the manual remained as much a part of the contract as, on any view, it had previously been. Its relevant provisions are as follows: (a) [Y]our appearance must be clean and smart at all times The Company logo ed uniform must always be clean and worn at all times. (b) Normal Working Hours consist of a five day week, in which you should complete a minimum of 40 hours. (c) required, time off or period of unavailability. Adequate notice must be given to Control Room for any annual leave (d) Engineers on call between 12.00pm (midnight) 6.00am will qualify for the 100% rate, providing the office has not taken the job booking [or] for the 50% rate if the office takes the job booking. (e) On Call Operatives will be given preference for: Overtime. Better jobs. Newer vans. (f) Any Operative requiring assistance on any job must inform the customer of the additional charges involved . and obtain the customers approval for such charges. (g) Callbacks [for remedial work] must be treated as a matter of absolute priority by all Operatives. No further work will be allocated to any Operative until his Callbacks are attended to Until all issues have been settled and all callbacks resolved any outstanding money will be held back for the last month . No payment will be made to that Operative, unless the customer is completely satisfied Any claim made against the Company as a result of the Operatives incompetence/negligence will be passed on to the Operative and his Insurers. (h) No payment will be made to the Operative until payment in full has been received by the office A 50% deduction will be made from the Operatives percentage if payment is received by the office later than one month from the job date Invoices which remain unpaid after six months from the date of the job will be written off. (i) ID card must be carried when working for the Company. (j) Operatives will be issued with a mobile telephone system The mobile telephone charges, plus VAT, will be deducted from wages on a monthly basis. Pimlico Plumbers ID Cards are issued to every Operative Your (k) Any individual undertaking private work for or as a result of contacts gained during your working week and contravening the signed contract will be dismissed immediately (l) Operatives who fail to observe the rules outlined in this working practice manual in respect of procedures or conduct, will be given a warning and may thereafter be subject to instant dismissal. (m) Wages will be paid directly into the Operatives designated bank or building society account (n) The following standard rate of Van Rental Charges, payable monthly in advance, allows Operatives to work on a Self employed basis: 120.00 + VAT. This figure will increase if the Operative is involved in consistent vehicle damage. PERSONAL PERFORMANCE? If he was to qualify as a limb (b) worker, it was necessary for Mr Smith to have undertaken to perform personally his work or services for Pimlico. An obligation of personal performance is also a necessary constituent of a contract of service; so decisions in that field can legitimately be mined for guidance as to what, more precisely, personal performance means in the case of a limb (b) worker. Express & Echo Publications Ltd v Tanton [1999] ICR 693 was a clear case. Mr Tanton contracted with the company to deliver its newspapers around Devon. A term of the contract provided: In the event that the contractor is unable or unwilling to perform the services personally he shall arrange at his own expense entirely for another suitable person to perform the services. The Court of Appeal held that the term defeated Mr Tantons claim to have been employed under a contract of service. Nevertheless, in his classic exposition of the ingredients of a contract of service in Ready Mixed Concrete (South East) Ltd v Minister of Pensions and National Insurance [1968] 2 QB 497, Mackenna J added an important qualification. He said at p 515: Freedom to do a job either by ones own hands or by anothers is inconsistent with a contract of service, though a limited or occasional power of delegation may not be He cited Atiyahs Vicarious Liability in the Law of Torts (1967), in which it was stated at p 59 that it seems reasonably clear that an essential feature of a contract of service is the performance of at least part of the work by the servant himself. Where, then, lie the boundaries of a right to substitute consistent with personal performance? Mr Smiths contracts with Pimlico, including the manual, gave him no express right to appoint a substitute to do his work. There were three passing references in the manual to his engagement of other people, of which the most explicit was the reference, quoted at para 19(f) above, to his requiring assistance. The evidence was indeed that some of Pimlicos operatives were accompanied by an apprentice or that they brought a mate to assist them. But assistance in performance is not the substitution of performance. Equally the tribunal found that, where a Pimlico operative lacked a specialist skill which a job required, he had a right to bring in an external contractor with the requisite specialism. But again, since in those circumstances the operative continued to do the basic work, he is not to be regarded as having substituted the specialist to perform it. But the tribunal found that Mr Smith did have a limited facility to substitute. For he had accepted that, if he had quoted for work but another more lucrative job had subsequently arisen, he would be allowed to arrange for the work to be done by another Pimlico operative. The tribunal rejected Pimlicos contention that there was a wider facility to substitute and concluded that there was no unfettered right to substitute at will. The Court of Appeal interpreted the tribunals findings to be that Mr Smiths facility to substitute another Pimlico operative to perform his work arose not from any contractual right to do so but by informal concession on the part of Pimlico. In circumstances in which the contract provided no express right to substitute and included a clause that it contained the entire agreement between the parties, there is much to be said for such an analysis. In the absence of escape from it by the construction of a collateral contract, an entire agreement clause is likely to be effective in preventing extraneous contractual terms from arising: MWB Business Exchange Centres Ltd v Rock Advertising Ltd [2018] UKSC 24, para 14. But the Court of Appeals analysis does not sit easily with some of the words chosen by the tribunal to describe the facility; and in what follows, I will assume (without deciding) that it is the product of a contractual right. Having found that Mr Smith had the right to substitute another Pimlico operative to perform his work, the tribunal unfortunately saw fit to turn its attention to the terms of a revised contract between Pimlico and its operatives which was introduced following the termination of Mr Smiths contract. The tribunal quoted two of the new terms. One of them gave the operative a right to assign or subcontract his duties subject to the prior consent of the Company. The other obliged him either to perform his duties personally or to engage another Pimlico contractor to do it. The two terms appear to be inconsistent, unless they can be reconciled on the basis that Pimlicos prior consent would always be necessary but would not be given unless the assignee of the duties were to be another Pimlico operative. At all events the two new terms led the judge to comment: In my view this clarifies that [Mr Smith] was contracted to provide work personally with, at most, only a limited power to substitute either to other internal operatives or with the prior consent of [Pimlico]. My view, with respect, is that the two new terms did not clarify anything at all. The judges qualification reflected in the words at most seems to indicate an element of uncertainty on her part about their meaning. At all events her comment leads Pimlico to argue either that the judge found Mr Smith to have been entitled to substitute not only another Pimlico operative but also, with its consent, any other plumber or that her findings are so confused that the exercise should be directed to be conducted again. So Pimlico there put before the tribunal an irrelevant contract, cast in highly confusing terms, and now complains that the tribunals interpretation of them was highly confused. Irrespective of whether a wider right of substitution would have been fatal to Mr Smiths claim, this court can in my view be confident that the tribunal found, and was entitled to find, that Mr Smiths only right of substitution was of another Pimlico operative. Such is the judges express finding both in the central part of her judgment and again in her conclusion. Ambiguous terms of a contract to which Mr Smith was not a party cannot widen it. So the question becomes: was Mr Smiths right to substitute another Pimlico operative inconsistent with an obligation of personal performance? It is important to note that the right was not limited to days when, by reason of illness or otherwise, Mr Smith was unable to do the work. His own example of an opportunity to accept a more lucrative assignment elsewhere demonstrates its wider reach. The judge concluded that the right to substitute another Pimlico operative did not negative Mr Smiths obligation of personal performance. She held that it was a means of work distribution between the operatives and akin to the swapping of shifts within a workforce. In challenging the tribunals conclusion Pimlico relies heavily on the decision of the Court of Appeal in Halawi v WDFG UK Ltd (t/a World Duty Free) [2014] EWCA Civ 1387, [2015] 3 All ER 543. Mrs Halawi had been working as a beauty consultant in a duty free outlet at Heathrow airport, managed by World Duty Free. It was the latters practice to grant space in the outlet to cosmetic companies, in which consultants in the uniform of the companies would sell their products. Shiseido, a Japanese cosmetic company, took space in the outlet; and Mrs Halawis role was to sell Shiseidos products there. But her contract was not with Shiseido, still less with World Duty Free. Her contract, or rather her service companys contract, was with a management services company which sold her services on to Shiseido; and then there was a contract between Shiseido and World Duty Free for an accounting between them referable to sales. Notwithstanding the absence of a contract between it and Mrs Halawi, World Duty Free controlled the outlet and in a handbook purported to impose certain rules upon those who worked there. One was that, instead of working personally, a consultant could appoint a substitute provided that she had both an airside pass and the approval of World Duty Free to work in an outlet. In due course World Duty Free withdrew its approval of Mrs Halawi to work in the outlet and thereby prevented her from continuing to do so; but she was held not to be entitled to bring a claim of unlawful discrimination against World Duty Free in that regard. The primary answer to Mrs Halawis claim, most clearly given by the appeal tribunal but apparently adopted by the Court of Appeal, was that she had no contract with World Duty Free of any sort. But the Court of Appeal saw fit also to hold, secondly, that the necessary degree of subordination of Mrs Halawi to World Duty Free was absent: and, thirdly, that her power of substitution (which Pimlico suggests to be analogous to Mr Smiths right to substitute another operative) negatived any obligation of personal performance. But her so called power of substitution was not a contractual right at all. World Duty Frees declaration that Mrs Halawi might appoint a substitute reflected its understandable lack of interest in personal performance on her part under her contract with her own service company and/or under its contract with the management services company. Its interest was only that someone sufficiently presentable and competent to have secured its approval to work in an outlet, and of course in possession of an airside pass, should attend on behalf of Shiseido each day. In my view Mrs Halawis case is of no assistance in perceiving the boundaries of a right to substitute consistent with personal performance. The case of Mirror Group Newspapers Ltd v Gunning [1986] ICR 145 concerned the right to distribute that companys Sunday newspapers around Sheffield. Mrs Gunnings father had held the distributorship but, on his retirement, the company refused to renew it in her favour. She alleged that its refusal was discriminatory and to that end she needed to establish that her fathers contract had required personal performance of it on his part. In allowing the companys appeal the Court of Appeal held at pp 151 and 156 that Mrs Gunning had failed to show that the dominant purpose of her fathers contract had been that he should perform it personally; instead the purpose had been that the companys Sunday newspapers should be efficiently distributed around Sheffield. But in James v Redcats (Brands) Ltd [2007] ICR 1006 Elias J, as president of the appeal tribunal, convincingly suggested at paras 65 to 67 that an inquiry into the dominant purpose of a contract had its difficulties; that, even when a company was insistent on personal performance, its dominant purpose in entering into the contract was probably to advance its business; and that the better search might be for the dominant feature of the contract. In the Hashwani case, cited in para 14 above, Lord Clarke of Stone cum Ebony, at paras 37 to 39, referred to the suggestions of Elias J in the James case with approval but stressed that, although it might be relevant to identify the dominant feature of a contract, it could not be the sole test. The sole test is, of course, the obligation of personal performance; any other so called sole test would be an inappropriate usurpation of the sole test. But there are cases, of which the present case is one, in which it is helpful to assess the significance of Mr Smiths right to substitute another Pimlico operative by reference to whether the dominant feature of the contract remained personal performance on his part. The terms of the contract made in 2009 are clearly directed to performance by Mr Smith personally. The right to substitute appears to have been regarded as so insignificant as not to be worthy of recognition in the terms deployed. Pimlico accepts that it would not be usual for an operative to estimate for a job and thereby to take responsibility for performing it but then to substitute another of its operatives to effect the performance. Indeed the terms of the contract quoted in para 18 above focus on personal performance: they refer to your skills, to a warranty that you will be competent to perform the work which you agree to carry out and to a requirement of a high standard of conduct and appearance; and the terms of the manual quoted in para 19 above include requirements that your appearance must be clean and smart, that the Pimlico uniform should be clean and worn at all times and that [y]our [Pimlico] ID card must be carried when working for the Company. The vocative words clearly show that these requirements are addressed to Mr Smith personally; and Pimlicos contention that the requirements are capable also of applying to anyone who substitutes for him stretches their natural meaning beyond breaking point. The tribunal was clearly entitled to hold, albeit in different words, that the dominant feature of Mr Smiths contracts with Pimlico was an obligation of personal performance. To the extent that his facility to appoint a substitute was the product of a contractual right, the limitation of it was significant: the substitute had to come from the ranks of Pimlico operatives, in other words from those bound to Pimlico by an identical suite of heavy obligations. It was the converse of a situation in which the other party is uninterested in the identity of the substitute, provided only that the work gets done. The tribunal was entitled to conclude that Mr Smith had established that he was a limb (b) worker unless the status of Pimlico by virtue of the contract was that of a client or customer of his. CLIENT OR CUSTOMER? It is unusual for the law to define a category of people by reference to a negative in this case to another persons lack of a particular status. It usually attempts to define positively what the attributes of the category should be. In Byrne Bros (Formwork) Ltd v Baird [2002] ICR 667 at para 16 Mr Recorder Underhill QC (as Underhill LJ then was) described as clumsily worded the requirement that the other party be neither a client nor a customer. It is hard to disagree. In determining whether Pimlico should be regarded as a client or customer of Mr Smith, how relevant was it to discern the extent of Pimlicos contractual obligation to offer him work and the extent of his obligation to accept such work as it offered to him? The answer is not easy. Clearly the foundation of his claim to be a limb (b) worker was that he had bound himself contractually to perform work for Pimlico. No one has denied that, while he was working on assignments for Pimlico, he was doing so pursuant to a contractual obligation to Pimlico. Does that not suffice? Is it necessary, or even relevant, to ask whether Mr Smiths contract with Pimlico cast obligations on him during the periods between his work on its assignments? In the event both of the specialist tribunals and the Court of Appeal all chose, albeit with difficulty, to wrestle with whether Mr Smiths contract with Pimlico was an umbrella contract, in other words was one which cast obligations on him during the periods between his work on assignments for Pimlico; or whether it was a contract which cast obligations on him only during his performance of such successive assignments as were offered to him by Pimlico and accepted by him. The difficulty arose again from Pimlicos apparently inconsistent contractual provisions. The 2009 contract provided (see para 18(c) above): the Company shall be under no obligation to offer you work and you shall be under no obligation to accept such work from the Company. But the manual stated (see para 19(b) above): Normal Working Hours consist of a five day week, in which you should complete a minimum of 40 hours. Pimlico suggests that, to the extent that its contract and its manual are inconsistent, the former should prevail. But the tribunal found that a purposive construction of the two provisions enabled them to be reconciled. It found, in accordance with Mr Smiths evidence, that Pimlico had no obligation to provide him with work on any particular day and if there was not enough work [it] would not have to provide him with work and he would not be paid. The Court of Appeal construed this finding, in my view legitimately, as being that, if by contrast it did have enough work to offer to Mr Smith, Pimlico would be obliged to offer it to him. In other words Pimlicos contractual obligation was to offer work to Mr Smith but only if it was available; indeed, if the work was available, it would seem hard to understand why in the normal course of events Pimlico would not be content to be obliged to offer it to him. Mr Smiths contractual obligation by contrast was in principle to keep himself available to work for up to 40 hours on five days each week on such assignments as Pimlico might offer to him. But his contractual obligation was without prejudice to his entitlement to decline a particular assignment in the light (for example) of its location; and of course it did not preclude Pimlico from electing, as seems to have occurred, not to insist on his compliance with the obligation in any event. So the tribunal found, legitimately, that there was an umbrella contract between Mr Smith and Pimlico. It is therefore unnecessary to consider the relevance to limb (b) status of a finding that contractual obligations subsisted only during assignments. The leading authority in this respect is now Windle v Secretary of State for Justice [2016] ICR 721, in which Underhill LJ suggested at para 23 that a persons lack of contractual obligation between assignments might indicate a lack of subordination consistent with the other party being no more than his client or customer. The energetic submission of Ms Monaghan QC on behalf of Mr Smith that, on the contrary, it might indicate a greater degree of subordination to that other party must await appraisal on another occasion. Mr Smith correctly presented himself as self employed for the purposes of income tax and VAT. His accounts for the six years ending on 5 April 2011 were put in evidence. Mr Smith clearly took advantage of the facility to purchase materials himself for use on each assignment and to charge the customer, albeit funnelled through Pimlico, 20% more than he had paid for them. His accounts for the year ended 5 April 2011 showed turnover of about 131,000, cost of materials of about 53,000 and, following deduction of motor and other expenses, a net pre tax profit of about 48,000. These accounts are the starting point for Pimlicos submission that the tribunal fell into appealable error in holding that its status was not that of a client or customer of Mr Smith. By reference to what considerations should an inquiry into the existence or otherwise of this status be conducted? In Hospital Medical Group Ltd v Westwood [2012] EWCA Civ 1005, [2013] ICR 415, Maurice Kay LJ observed at para 20 that there was no single key with which to unlock the words of the statute in every case. How could there be? If there was a single key, it would amount to a gloss. But there are in particular two authorities which may prove to be of some assistance in the conduct of the inquiry. The first is the judgment of Langstaff J, sitting with others in the appeal tribunal in Cotswold Developments Construction Ltd v Williams [2006] IRLR 181. At para 53 he said a focus upon whether the purported worker actively markets his services as an independent person to the world in general (a person who will thus have a client or customer) on the one hand, or whether he is recruited by the principal to work for that principal as an integral part of the principals operations, will in most cases demonstrate on which side of the line a given person falls. The second is the judgment of Lord Clarke in the Hashwani case cited at para 14 above. A contractual provision for disputes to be resolved by arbitration provided that all the arbitrators should be members of the Ismaili community. One party proposed to appoint Sir Anthony Colman, a retired High Court judge, as one of the arbitrators. He was not a member of the Ismaili community. Would an arbitrator be a worker, entitled to protection from discrimination on religious grounds? There was no doubt that an arbitrator would be obliged to perform his work personally. But there was a further question, which we in the present case are casting as an inquiry into the status of Pimlico as a client or customer. In para 34 Lord Clarke, with whom the other members of the court agreed, identified the question (already summarised in para 14 above) as being whether, on the one hand, the person concerned performs services for and under the direction of another person in return for which he or she receives remuneration or, on the other hand, he or she is an independent provider of services who is not in a relationship of subordination with the person who receives the services. At para 40 Lord Clarke proceeded to address that question in relation to the obligations of an arbitrator. He concluded that an arbitrator would not be subject to the direction of, nor be subordinate to, those with whom he contracted and so would not be a worker entitled to protection against discrimination. To these two authorities, Pimlico would add a third, namely the decision of the Court of Justice of the European Union (the CJEU) in FNV Kunsten Informatie en Media v Staat der Nederlanden (Case C 413/13) [2015] All ER (EC) 387. A Dutch union negotiated terms for the minimum remuneration of self employed musicians when engaged as substitutes to play in Dutch orchestras. But were the terms anti competitive under EU law? Not (so held the CJEU) if the musicians were false self employed, being a concept which seems to equate to that of a limb (b) worker. The court held: 33. a service provider can lose his status of an independent trader if he does not determine independently his own conduct on the market, but is entirely dependent on his principal, because he does not bear any of the commercial risks arising out of the latters activity and operates as an auxiliary within the principals undertaking It follows that the status of worker within the meaning 36. of EU law is not affected by the fact that a person has been hired as a self employed person under national law, for tax, administrative or organisational reasons, as long as that person acts under the direction of his employer as regards, in particular, his freedom to choose the time, place and content of his work , does not share in the employers commercial risks and, for the duration of that relationship, forms an integral part of that employers undertaking, so forming an economic unit with that undertaking The CJEUs examples of relevant considerations are helpful but should be applied cautiously. In Percy v Board of National Mission of the Church of Scotland [2005] UKHL 73, [2006] 2 AC 28, the question was whether Ms Percy, a former minister of the Church of Scotland, was entitled to claim that the Church had unlawfully discriminated against her on grounds of sex. The appellate committee held that she was a worker so was entitled to present her claim. Lady Hale observed at para 146 that [t]he fact that the worker has very considerable freedom and independence in how she performs the duties of her office does not take her outside the definition. In support of its contention that it was a client or customer of Mr Smith, Pimlico makes four substantial points: (a) Without prejudice to his overall obligation (which Pimlico has to accept for this purpose) to make himself available to accept work, if offered, for up to 40 hours each week, Mr Smith was entitled to reject any particular offer of work, whether because of the location or timing of it or for any other reason. (b) Subject to that overall obligation, Mr Smith was free to take outside work albeit not if offered by Pimlicos clients. In a concluding paragraph the tribunal observed that he did not elect to take outside work; but, as Pimlico rightly objects, the analysis must be of his contractual entitlement rather than of his election not to exercise it. (c) Pimlico reserved no right to supervise, or otherwise interfere with, the manner in which Mr Smith did his work. (d) There were financial risks, as well as advantages, consequent upon Mr Smiths work for Pimlico. He was bound by the estimate for the price of the work which he had given to the client. Pimlico did not pay him, not even for any materials which he had supplied, until the client had paid it; if a client paid more than one month late, its payment to him was halved; and, if a client failed to pay within six months, it paid him nothing, not even for his materials, and irrespective of whether the client made payment thereafter. If a client complained about his work, even about work done by another Pimlico operative whom he had substituted to do it, it was Mr Smith who was responsible for remedying it and who received no payment referable to it until he had done so. On the other hand, there were features of the contract which strongly militated against recognition of Pimlico as a client or customer of Mr Smith. Its tight control over him was reflected in its requirements that he should wear the branded Pimlico uniform; drive its branded van, to which Pimlico applied a tracker; carry its identity card; and closely follow the administrative instructions of its control room. The severe terms as to when and how much it was obliged to pay him, on which it relied, betrayed a grip on his economy inconsistent with his being a truly independent contractor. The contract made references to wages, gross misconduct and dismissal. Were these terms ill considered lapses which shed light on its true nature? And then there was a suite of covenants restrictive of his working activities following termination. Accurate though it would be, it would not be a proper disposal of this issue to describe this courts own conclusion to be that Pimlico cannot be regarded as a client or customer of Mr Smith. The proper disposal is, of course, for it to declare that, on the evidence before it, the tribunal was, by a reasonable margin, entitled so to conclude. At the end of its submissions Pimlico appends a thin point, into which not even Mr Linden QC on its behalf has proved able to inject substance, namely that the tribunal had failed to address the factors upon which, in relation to this second issue, Pimlico had in particular relied. The complaint turns out to be little more than that the judge had not in her conclusion repeated references to factors which she had addressed earlier. I will not lengthen this judgment by elaborating upon the poverty of this particular complaint. CONCLUSION I would dismiss Pimlicos appeal. The result of doing so would be that the substantive claims of Mr Smith as a limb (b) worker could proceed to be heard in the tribunal.

The Respondent, Mr Gary Smith, is a plumbing and heating engineer. Between August 2005 and April 2011 Mr Smith worked for the First Appellant Pimlico Plumbers Ltd a substantial plumbing business in London which is owned by the Second Appellant, Mr Charlie Mullins. Mr Smith had worked for the company under two written agreements (the second of which replaced the first in 2009). These agreements were drafted in quite confusing terms. In August 2011 Mr Smith issued proceedings against the Appellants before the employment tribunal alleging that he had been unfairly dismissed, that an unlawful deduction had been made from his wages, that he had not been paid for a period of statutory annual leave and that he had been discriminated against by virtue of his disability. The employment tribunal decided that Mr Smith had not been an employee under a contract of employment, and therefore that he was not entitled to complain of unfair dismissal (a finding that Mr Smith does not now challenge), but that Mr Smith (i) was a worker within the meaning of s.230(3) of the Employment Rights Act 1996, (ii) was a worker within the meaning of regulation 2(1) of the Working Time Regulations 1998, and (iii) had been in employment for the purposes of s.83(2) of the Equality Act 2010. These findings meant that Mr Smith could legitimately proceed with his latter three complaints and directions were made for their substantive consideration at a later date. The Appellants appealed this decision to an appeal tribunal and then to the Court of Appeal, but were unsuccessful. They consequently appealed to the Supreme Court. The Supreme Court unanimously dismisses the appeal. Lord Wilson gives the judgment with which Lady Hale, Lord Hughes, Lady Black and Lord Lloyd Jones agree. The tribunal was entitled to conclude that Mr Smith qualified as a worker under s.230(3)(b) of the Employment Rights Act 1996 (and by analogy the relevant provisions of the Working Time Regulations 1998 and the Equality Act 2010), and his substantive claims can proceed to be heard. Conceptually, it is both legitimate and convenient to treat the three positive findings of the tribunal as having been founded upon a conclusion that Mr Smith was a worker within the meaning of s.230(3)(b) of the Employment Rights Act 1996 (otherwise known as a limb (b) worker) [15]. This was because regulation 2(1) of the Working Time Regulations defines worker in identical terms to s.230(3)(b), and case law has suggested that the meaning of employment in s.83(2) of the Equality Act is also essentially the same [12 15]. Proceeding on that basis, if Mr Smith was to qualify as a limb (b) worker under s.230(3)(b) then it was necessary for him to have undertaken to personally perform his work or services for Pimlico Plumbers, and that the company be neither his client nor his customer. When considering whether Mr Smith had undertaken to provide a personal service, it was relevant that when working for Pimlico Mr Smith had a limited facility (not found in his written contracts) to appoint another Pimlico operative to do a job he had previously quoted for but no longer wished to undertake [24 5]. However, it is helpful to assess the significance of this right to substitute by considering whether the dominant feature of the contract remained personal performance on his part. In this case the terms of the contract (which referred to your skills etc.) are clearly directed to performance by Mr Smith personally, and any right to substitute was significantly limited by the fact that the substitute had to come from the ranks of those bound to Pimlico in similar terms. Consequently, the tribunal was entitled to hold that the dominant feature of Mr Smiths contract with the company was an obligation of personal performance [32 34]. On the issue of whether Pimlico Plumbers was a client or customer of Mr Smith, the tribunal had legitimately found that there was an umbrella contract between the parties, i.e. one which cast obligations on Mr Smith even when he was between assignments for Pimlico. It was therefore not necessary to consider what impact a finding that there was no umbrella contract (and therefore that the contractual obligations subsisted only during the actual assignments) would have had on the limb (b) analysis [37, 41]. Instead, one had to look at the wording of the written contractual documents to determine whether Pimlico was a client or customer of Mr Smith. On the one hand, Mr Smith was free to reject a particular offer of work, and was free to accept outside work if no work was offered by any of Pimlicos clients. He also bore some of the financial risk of the work, and the manner in which he undertook it was not supervised by Pimlico. However, there were also features of the contract which strongly militated against recognition of Pimlico as a client or customer of Mr Smith. These included Pimlicos tight control over Mr Smiths attire and the administrative aspects of any job, the severe terms as to when and how much it was obliged to pay him, and the suite of covenants restricting his working activities following termination [47 48]. Accordingly, the tribunal was entitled to conclude that Pimlico cannot be regarded as a client or customer of Mr Smith [49].

On 20 October 2010, following a trial before a judge and jury at Belfast Crown Court, Angeline Mitchell was convicted of the murder on 11 May 2009 of Anthony Robin. Ms Mitchell and Mr Robin had been partners and had lived together for about three years. They had separated some time before May 2009 but they continued occasionally to meet and spend time together. On 10 May 2009 they met at a Belfast hotel at about 3pm. They had something to eat and they drank alcohol there during the remainder of the afternoon and into the evening. They then went to Mr Robins flat in Fitzroy Avenue, Belfast, where they continued to drink alcohol. A friend of Mr Robin, Michael McGeown, and Mr McGeowns girlfriend, Jacqueline Cushnan, were also staying at the flat. All four watched a film on television together and then played some music. At about 12.15am on 11 May 2009. Mr Robin received a telephone call from the home of a former partner, Rosena Oliver. She and Mr Robin were the parents of two sons, Anthony junior and Thomas. The sons lived with their mother. After receiving the telephone call, Mr Robin went to Ms Olivers home. Ms Mitchell accompanied him. While they were there, Anthony junior was arrested by police officers. Apparently, this was because of a dispute that he had had with his mother. It was then decided that Mr Robin and Ms Mitchell should return to the flat at Fitzroy Avenue and that they should bring the younger son, Thomas, with them. On their return to the flat, Mr Robin and Ms Mitchell discussed Anthony juniors arrest with Mr McGeown and Ms Cushnan for a short time. After that Mr McGeown and Ms Cushnan went to bed. Ms Mitchell continued to talk to Mr Robin about his sons arrest and repeatedly told him that he should go to the police station to which Anthony junior had been taken. He told her to mind her own business. Exchanges between them became more heated. There is a dispute as to what happened next but it is accepted that, at some stage, Ms Mitchell obtained a knife. It is also accepted that she stabbed Mr Robin. He sustained five knife wounds, one of which caused his death. This was a wound to the left side of the chest which was approximately 20 centimetres deep. Other wounds suffered by Mr Robin were to the left side of the scalp, to the right parietal area of the scalp and to the upper thoracic region of the back. Mr Robins son, Thomas, claimed to have witnessed the attack on his father. He said that he saw Ms Mitchell going with a knife at Mr Robin and that he was crying out as she did so. Thomas said that his father turned away from Ms Mitchell and she continued to attack him. When questioned by police at the scene of the killing, Ms Mitchell claimed that there had been a fight between Mr Robin and a Swedish girl who had just left the flat. After speaking to others present, however, police officers arrested Ms Mitchell on suspicion of the attempted murder of Mr Robin. She was cautioned. In response she said that she had tried to help Mr Robin and now she was getting the blame. The trial During her trial, the story about the Swedish girl was not repeated. Ms Mitchell did not dispute that she had stabbed Mr Robin but said that she had acted in self defence. She also claimed that she had been provoked and that she did not have the intention to kill or cause really serious harm to Mr Robin. Before the trial began, the prosecution had intimated an intention to apply to the judge for permission to lead evidence of Ms Mitchells previous bad character. This was said to be for the purpose of showing that she had a propensity to use knives in order to threaten and attack others. None of the episodes to which the proposed evidence related had resulted in a conviction. In relation to two of the incidents, it was agreed between the prosecution and the defence that statements settled between them should be read to the jury. The first of these involved an incident in 2003. The agreed statement contained the following sentence, During the course of a dispute about mobile telephones, Angeline Mitchell chased Andrew McAuley and James People with two knives and tried to stab them. The second agreed statement related to an incident in December 2007 and was in these terms: On 7 December 2007 a dispute arose between Donna Clarke and Angeline Mitchell whilst both were present at flat two, 78 Fitzroy Avenue. During that dispute Angeline Mitchell produced a knife and was disarmed. Angeline Mitchell then obtained two knives and during a struggle stabbed Lorraine Gallagher in the left calf and the left thigh. She also stabbed Donna Clarke in the right leg. As well as allowing the agreed statements to be read to the jury, the trial judge permitted the prosecution to adduce evidence of five other incidents involving Ms Mitchell. Two of these related to attempts to attack Michael McGeown with a knife. Two concerned the concealment of knives to prevent possible use of them by her. Evidence was also given about a conversation between Ms Mitchell and Mr McGeown in which she was alleged to have told him that she was going to stab Mr Robin and that before she did so, she would stab Mr McGeown because she knew that he would try to intervene and go to Mr Robins aid. Despite having authorised her legal advisers to agree that the statements be read to the jury, in the course of giving evidence, Ms Mitchell did not accept that events had occurred in the way described in the statements. The judge dealt with this part of her evidence in the following passage from his charge to the jury: Now, when the accused was in the witness box she appeared to renege on [the statements] and didnt agree that these things had happened or had happened in that way, or that she had stabbed these people. And she refused to accept any fault on her part in connection with these On the question of how the jury should treat the bad character evidence, it is agreed that the judge did not direct them on whether they required to be satisfied of the truth of the evidence. Nor did he indicate to the jury that they had to be satisfied that the bad character evidence had established the particular propensity on the part of Ms Mitchell which the prosecution had alleged. It appears that counsel who appeared for the prosecution and the defence at the trial did not invite the judge to give any particular form of direction on these topics. Perhaps understandably, therefore, his charge contained no reference to these matters. This is what he said to the jury about the evidence: that [evidence] may or may not help you. Take it into account or leave it out of account as you consider appropriate. But do not make an assumption because a person behaves that way that that means that shes guilty of murder and had the necessary intent just because of those events. The appeal Some three years and three months after her trial, Ms Mitchell applied for leave to appeal against her conviction. An extension of time within which to appeal was granted on 6 March 2014 and subsequently Maguire J gave Ms Mitchell permission to appeal on one ground only viz that the trial judge had failed to direct the jury properly on the purpose of the bad character evidence or the standard of proof to which the jury had to be satisfied before any member of the jury could take the bad character evidence into account in any way. She was refused leave to appeal on other grounds. Ms Mitchell renewed her application for leave to appeal on those grounds but that application was refused by the Court of Appeal in Northern Ireland (Girvan, Coghlin and Gillen LJJ) on 30 April 2015. The grounds on which leave to appeal was refused have not featured in the appeal before this court and nothing need be said about them. The Court of Appeal allowed Ms Mitchells appeal on the single ground on which she had been given leave to appeal and quashed her conviction. Subsequently they ordered that she should face a retrial. This took place in April 2016. Ms Mitchell pleaded not guilty to murder on the ground of diminished responsibility and pleaded guilty to manslaughter. She was acquitted of murder and sentenced to ten years imprisonment for the manslaughter of Mr Robin. Gillen LJ, who delivered the judgment of the Court of Appeal, said, at para 50 of his judgment, that the correct legal position had been stated by the authors of the 2015 edition of Archbold, Criminal Pleading Procedure and Practice at para 13 68: Where non conviction evidence is being relied on to establish propensity and the evidence is disputed, the jury must be directed not to rely on it unless they are sure of its truth: R v Lafayette [2009] Crim LR 809 and R v Campbell [2009] Crim LR 822, CA. This passage does not distinguish between two distinct but potentially overlapping issues: the need, on the one hand, to establish to the requisite criminal standard the facts said to provide evidence of propensity and, on the other, the existence of such a propensity. Should the jury be directed that they have to be satisfied beyond reasonable doubt of the veracity and accuracy of the individual facts which, it is claimed, provide evidence of misconduct on the part of the defendant? Alternatively, is the real issue not this: what requires to be proved is that the defendant did have a propensity? Or must both issues be addressed? Subsidiary questions arise which will be discussed later in this judgment. These include: should a preliminary evaluation be carried out by the jury of the truth and accuracy of the matters alleged before the question of the existence of propensity is examined or is the proper approach to consider all the evidence about the various instances of misconduct before deciding whether (i) they have been individually established; and (ii) particular instances of misconduct can serve as supportive of evidence in relation to other incidents. The Court of Appeal in this case referred to two decisions of the English Court of Appeal which, it was suggested, supported the statement in Archbold. The first was R v Ngyuen [2008] EWCA Crim 585; [2008] 2 Cr App R 9. In that case only one incident of previous misconduct was involved, so that proof of propensity might be said to have merged with proof of the facts involved in that incident. The second case was R v ODowd [2009] EWCA Crim 905; [2009] 2 Cr App R 16. Three alleged incidents of previous misconduct were involved in ODowd. The Court of Appeal in that case, at para 65, paraphrased with approval a statement by Moses LJ in R v DM [2008] EWCA 1544; [2009] 1 Cr App R 10 that the jury would need to consider with as much detail and concentration all the facts in relation to the three allegations as they would in relation to the offences of which the appellant was charged. It concluded, at para 83, that because it had proved necessary to scrutinise the evidence concerning the three disputed allegations the trial had been unnecessarily prolonged and rendered unduly complex. The convictions were therefore quashed. This was essentially a decision prompted by the view that the trial judge should not have admitted the evidence because allowing it to be given made the jurys task too difficult. Beatson Js judgment certainly assumed that the jury was required to examine separately the question whether facts relevant to each incident of misconduct had been established But to say that the jury must examine the evidence of each previous incident relied upon does not answer the question asked in this case, namely whether it must consider in independent compartments whether each such incident has been proved to the criminal standard, or whether it is enough that, having examined all the evidence, it is satisfied that a propensity to behave as charged has been established. Both Ngyuen and ODowd will be considered in greater detail below. It is sufficient to say at this stage that the Court of Appeals endorsement of them in this case would appear to indicate their approval of an approach which involves the individual consideration of the facts of each specific instance of misconduct said to establish a propensity on the part of the defendant. The correctness of that approach will also be considered. The Court of Appeal was asked by the Crown to give permission to appeal to this court and to certify a question for this courts opinion. Permission to appeal was refused but the following question was certified: Is it necessary for the prosecution relying on non conviction bad character evidence on the issue of propensity to prove the allegations beyond a reasonable doubt before the jury can take them into account in determining whether the defendant is guilty or not? The way in which this question is framed reinforces the impression that the Court of Appeal considered that the facts of each incident said to establish propensity had to be proved to the criminal standard before the jury could have regard to it. The hearing in this court Mr McCollum QC, who appeared for the prosecution (the appellant before us), submitted that evidence in relation to propensity did not call for any special examination by the jury. In particular, it should not be placed in a special compartment requiring consideration in isolation from other evidence in the case. It was in the nature of this form of trial that all relevant evidence should be assessed by the jury so as to allow them to determine whether they had been brought to the point of conviction of the defendants guilt. It was inimical to that fundamental aspect of jury trial that a particular issue be segregated from the generality of the evidence and a pre emptive decision be made in relation to that issue, before the question of the guilt or innocence of the accused was tackled. Dealing with all the evidence together was, Mr McCollum said, not only the principled way to proceed, it was necessary in order to avoid the unsatisfactory situation encountered in the ODowd case where a number of incidents required the jury to conduct what was in effect a series of individual trials. Moreover, there was nothing in the legislation authorising the admission of bad character evidence (in this case the Criminal Justice (Evidence) (Northern Ireland) Order 2004 (SI 2004/1501)) which expressly or by necessary implication required the incidents which are said to have constituted evidence of propensity to be proved beyond reasonable doubt. For Ms Mitchell (the respondent in this court) Mr ODonoghue QC claimed that before the enactment of the 2004 Order the common law rule was that where evidence of bad character was disputed, it had to be proved beyond a reasonable doubt before it could be taken into account by a court or jury. That rule was not abolished by the 2004 Order, he suggested; to the contrary, the Order clearly contemplated that it was the function of the jury to evaluate the evidence of bad character in a conventional way. Facts supporting the claim that the defendant had a particular propensity had to be proved beyond reasonable doubt. It was inconceivable, Mr ODonoghue argued, that a jury could entertain a reasonable doubt as to the accuracy or veracity of the evidence said to underpin such a propensity and, nevertheless, accept that evidence as sufficient to establish its presence. The law before the 2004 Order At common law, as a general rule, evidence of the bad character of an accused person was not admissible in a criminal trial. There were exceptions to this. One of these was similar fact evidence. An early and notable example of the admission of this type of evidence was the case of Makin v Attorney General for New South Wales [1894] AC 57. In that case, the Lord Chancellor, Lord Herschell, while acknowledging the general rule that the prosecution may not adduce evidence that tended to show that an accused person was guilty of criminal acts other than those with which he had been charged, stated that, in appropriate circumstances it was legitimate to allow evidence to be admitted which was relevant to an issue in the case. Thus, in Makin where the accused had been charged with the murder of an infant who had been given into their care by the childs mother after payment of a fee, evidence that several other infants had been received by the accused persons from other mothers and that their bodies were found buried in gardens of houses occupied by the prisoners, was admissible. Makin, together with the later cases of R v Kilbourne [1973] AC 729, R v Boardman [1975] AC 421 and Director of Public Prosecutions v P [1991] 2 AC 447, established the common law rule that, in order to be admissible, similar fact evidence had to go beyond simply demonstrating a criminal tendency (or propensity). It had to show sufficient pattern of behaviour, underlying unity or nexus to exclude coincidence and thus have probative force in proving the indicted allegation. In Scotland the same distinction was long recognised: see Moorov v HM Advocate 1930 JC 68. Clearly, the evidence in Makin was relevant in that, if accepted, it had, at least, the potential to show that the defendants were more likely to have killed the child. The decision in that case does not address the issue which is central to this appeal, however, since the question of how evidence of similar facts, if properly admitted, should be treated, did not arise. The case is of interest only as part of the background to the exception to the general common law rule that evidence of antecedent misconduct is not admissible unless shown to be directly relevant to an issue in the trial. Since, as I shall discuss below, evidence of propensity or similar fact evidence is, essentially, extraneous to that which is directly probative of the accuseds guilt of the charges on which he stands trial, the case can be made that it should be subject to the conventional criminal standard requirement of proof beyond reasonable doubt. And, it may be said, this is especially so where the claims in relation to similar fact evidence or propensity are disputed. In R v Armstrong [1922] 2 KB 555 the accused, a solicitor, was charged with the murder of his wife by giving her arsenic. His defence was that he had not administered the poison, although he admitted that he had arsenic which, he said, he used as a weed killer. He claimed that his wife had either committed suicide or had taken the arsenic by accident. The prosecution was permitted to call evidence that another solicitor, a Mr Martin, had visited the accuseds home eight months after his wifes death and had suffered an episode of arsenic poisoning that evening. The purpose of calling evidence about the attempt to poison Mr Martin was, the prosecution said, to rebut the suggestion that Mrs Armstrong had either committed suicide or taken the arsenic by accident. The trial judge, Darling J. directed the jury that, unless it was proved that Armstrong had given arsenic to Martin with intent to injure him, the evidence had no bearing whatever upon this case. That direction was not disapproved by the Court of Appeal when it affirmed the accuseds conviction. It was argued on behalf of the present respondent, therefore, that this case supported the proposition that the common law rule was that the prosecution had to prove to the criminal standard the truth of all similar fact evidence irrespective of the purpose for which it was admitted. This claim must be viewed against the background that Armstrong involved a single instance of similar fact evidence. If there was doubt about the truth or accuracy of the evidence relating to the Martin episode, one can readily understand why it would have to be disregarded by the jury. The purpose of introducing the evidence was to show that Armstrong was prepared to use arsenic on another individual. If the jury was not convinced that he had administered poison to Mr Martin, self evidently, that incident could not be used as proof of a propensity on the part of Armstrong to use arsenic to poison others. What of the situation where there are several disparate instances of alleged antecedent conduct, said to demonstrate propensity or evidence of similar facts? Must each incident be the subject of a compartmentalised examination designed to determine whether the constituent elements of each have been established beyond reasonable doubt? Or should consideration of these various instances partake of a rounded evaluation to see whether, taken as a whole, the antecedent evidence establishes a propensity or that the alleged similar facts may properly be described as such and that they tend to support the prosecutions case that the defendant is guilty of the charges which he or she faces? It will be necessary to explore these issues later in this judgment. Hints of a different approach can be detected in R v Kilbourne [1973] AC 729. In that case the respondent was convicted of sexual offences against two groups of boys. The trial judge directed the jury that they would be entitled to take into account the uncorroborated evidence of the second group as supporting evidence given by the first group. At p 741, Lord Hailsham of St Marylebone LC said: A considerable part of the time taken up in argument was devoted to a consideration whether such evidence of similar incidents could be used against the accused to establish his guilt at all, and we examined the authorities in some depth from Makin v Attorney General for New South Wales [1894] AC 57, through Lord Sumners observations in Thompson v The King [1918] AC 221, to Harris v Director of Public Prosecutions [1952] AC 694. I do not myself feel that the point really arises in the present case. Counsel for the respondent was in the end constrained to agree that all the evidence in this case was both admissible and relevant, and that the Court of Appeal was right to draw attention [1972] 1 WLR 1365, 1370 to the striking features of the resemblance between the acts alleged to have been committed in one count and those alleged to have been committed in the others and to say that this made it more likely that John was telling the truth when he said that the appellant had behaved in the same way to him. In my view this was wholly correct. With the exception of one incident. each accusation bears a resemblance to the other and shows not merely that [Kilbourne] was a homosexual, which would not have been enough to make the evidence admissible, but that he was one whose proclivities in that regard took a particular form [1972] 1 WLR 1365, 1369. I also agree with the Court of Appeal in saying that the evidence of each child went to contradict any possibility of innocent association. As such it was admissible as part of the prosecution case, and since, by the time the judge came to sum up, innocent association was the foundation of the defence put forward by the accused, the admissibility, relevance, and, indeed cogency of the evidence was beyond question. The word corroboration by itself means no more than evidence tending to confirm other evidence. In my opinion, evidence which is (a) admissible and (b) relevant to the evidence requiring corroboration, and, if believed, confirming it in the required particulars, is capable of being corroboration of that evidence and, when believed, is in fact such corroboration. The primary issue in Kilbourne was, of course, whether evidence which required, as a matter of law, corroboration could be verified by other evidence which itself, again as a matter of law, had to be corroborated. The case is interesting in the present context, however, because of the assertion by Lord Hailsham LC that evidence which is admissible and relevant, if believed, could properly be taken into account as corroborative of the case against the accused. Counsel for the respondent in this appeal accepted that the use of the phrases if believed and when believed in the passage quoted did not suggest that Lord Hailsham LC was proposing that proof beyond reasonable doubt of each of the other incidents was required. But, nor did it mean, he suggested, that it could be left to the jury to treat the evidence, once admitted, in whatever manner they chose. The jury was required, he submitted, to make some evaluation of the truth of the similar fact evidence and the speech of Lord Hailsham LC was not necessarily inconsistent with that evidence having to meet a requirement of proof beyond reasonable doubt before it could play a part in their deliberations. Lord Hailsham LC dealt again with the issue of similar fact evidence in R v Boardman [1975] AC 421. He made a passing reference (at p 453) to its being a matter for the jury to decide on the degree and weight to attach to such evidence, if admitted. This does not provide much in the way of authoritative guidance as to the standard of proof to be applied to similar fact evidence. Likewise, in R v Scarrott [1978] QB 1016 Scarman LJ referred to the need for similar fact evidence to be believed and the need for the jury to accept the evidence. These allusions cannot begin to constitute a statement of commanding clarity as to how a jury should assess such evidence. Consideration of these authorities (and R v Z [2000] 2 AC 483 to which the respondent also referred) leads inevitably to the conclusion that before the enactment of the 2004 Order (and its England and Wales counterpart, the Criminal Justice Act 2003) there was no clear, definitive statement on the issue now raised as to how juries should treat evidence of similar facts or propensity. The 2004 Order Article 4(1) of the 2004 Order (mirroring section 99 of the 2003 Act) abolished the common law rules governing the admissibility in criminal proceedings of evidence of bad character. The Order significantly expanded the circumstances in which bad character evidence could be admitted and the rules which previously restricted admission of such evidence now have no part to play in the decision as to whether it should be received. Article 6(1) sets out a number of what have come to be known as gateways for the admission of evidence of a defendants bad character. It provides: 6(1) In criminal proceedings evidence of the defendants bad character is admissible if, but only if all parties to the proceedings agree to the it is important explanatory evidence, it is relevant to an important matter in issue (a) evidence being admissible, (b) the evidence is adduced by the defendant himself or is given in answer to a question asked by him in cross examination and intended to elicit it, (c) (d) between the defendant and the prosecution, (e) it has substantial probative value in relation to an important matter in issue between the defendant and a co defendant, (f) by the defendant, or (g) persons character. the defendant has made an attack on another it is evidence to correct a false impression given Article 8 deals specifically with propensity. It relates back to gateway (d) of article 6(1). Article 8(1) provides: Matter in issue between the defendant and the prosecution 8. (1) For the purposes of article 6(1)(d) the matters in issue between the defendant and the prosecution include (a) the question whether the defendant has a propensity to commit offences of the kind with which he is charged, except where his having such a propensity makes it no more likely that he is guilty of the offence; (b) the question whether the defendant has a propensity to be untruthful, except where it is not suggested that the defendants case is untruthful in any respect. (2) Where paragraph (1)(a) applies, a defendants propensity to commit offences of the kind with which he is charged may (without prejudice to any other way of doing so) be established by evidence that he has been convicted of an offence of the same description as the one with (a) which he is charged, or (b) which he is charged. an offence of the same category as the one with (3) Paragraph (2) does not apply in the case of a particular defendant if the court is satisfied, by reason of the length of time since the conviction or for any other reason, that it would be unjust for it to apply in his case. (4) For the purposes of paragraph (2) (a) two offences are of the same description as each other if the statement of the offence in a complaint or indictment would, in each case, be in the same terms; (b) two offences are of the same category as each other if they belong to the same category of offences prescribed for the purposes of this article by an order made by the Secretary of State. (5) A category prescribed by an order under paragraph (4)(b) must consist of offences of the same type. (6) Only prosecution evidence is admissible under article 6(1)(d). Thus mere propensity to commit offences of the kind charged may now be admissible. It may be proved by convictions for offences of the same description or category, but also by other evidence, such as that of complainants or observers, or by past admissions where there has not been a conviction. In this case the grounds on which the admission of evidence of the respondents bad character was sought to be introduced were stated to be that (i) it was relevant to an important matter between the defendant and the prosecution (article 6(1)(d)). The important matter was said to include the propensity of the respondent to use knives to wound others; (ii) it was important explanatory evidence of the character of the respondent (article 6(1)(c)); (iii) it corrected a false impression given by the respondent about herself (article 6(1)(f)); and (iv) it was admissible because the respondent had attacked the character of another person, namely, the victim, Anthony Robin. We have not seen the trial judges ruling on the application to admit evidence of bad character. The Court of Appeal dealt with the matter shortly in para 28 where Gillen LJ observed that counsel for the respondent had accepted that the prosecution was entitled to call evidence of her bad character under article 6(1)(d) and 6(1)(g). He also said that Mr ODonoghue had accepted that it was at least arguable that the evidence [of bad character] may have been capable of establishing that the [respondent] had a propensity to arm herself with a knife and to use the knife for the purpose of and with the intention of inflicting serious bodily harm. If admission had been solely under articles (c), (f) or (g), it would have been necessary to consider at the end of the evidence whether propensity had become a legitimate issue, and how the jury should be directed as to the use which could be made of it. But whether or not it was also admitted under article 6(1)(f), this evidence was plainly admissible under article 6(1)(d), and thus propensity to offend as charged was a relevant matter which the Crown could seek to establish. It was no part of the respondents case that the evidence was wrongly admitted. What the respondent does assert, however, is that the law before the enactment of the 2003 Act and the 2004 Order was that the prosecution was required to prove to the criminal standard the truth and accuracy of evidence said to constitute similar facts or propensity. For the reason given in para 31 above, I do not accept that claim. The respondent is unquestionably right in the submission that neither the 2003 Act nor the 2004 Order stipulates that only the common law rules as to the admissibility of bad character evidence have been abrogated. Common law rules as to how such evidence should be evaluated have not been affected, the respondent says. But, for the reasons earlier given, there are no clear rules on that question. The debate as to how evidence of bad character admitted under the relevant legislation should be regarded by the jury is not assisted by a consideration of the common law position. It is common case between the parties that the legislation concerning the admission of bad character evidence is silent on the question of whether that evidence must meet the requirement of proof beyond reasonable doubt before it can be taken into account. On one view, this is indicative of a legislative intention that this species of evidence should not be subject to a special regime of independent proof. That it should simply combine with the other evidence in the case for evaluation as to whether the guilt of the accused has been established to the requisite standard. The contrary view is that whether someone has a propensity to engage in activity such as that which constitutes the crime charged or whether they have been involved in acts of a similar nature stands apart from direct evidence of their actual involvement in the crime charged. On that account, so the argument runs, the question whether they have such a propensity or have been involved in events claimed to comprise similar facts, calls for consideration separate from the evidence which directly implicates the accused in the offence for which they are being tried. Propensity the correct question/what requires to be proved? A distinction must be recognised between, on the one hand, proof of a propensity and, on the other, the individual underlying facts said to establish that a propensity exists. In a case where there are several incidents which are relied on by the prosecution to show a propensity on the part of the defendant, is it necessary to prove beyond reasonable doubt that each incident happened in precisely the way that it is alleged to have occurred? Must the facts of each individual incident be considered by the jury in isolation from each other? In my view, the answer to both these questions is no. In the case of Ngyuen [2008] 2 Cr App R 9 the appellant had been convicted of murder. On 23 December 2005 in a public house in Woolwich he had struck the victim in the neck with a glass and this caused fatal injuries. The prosecution alleged that this had been a deliberate attack. The appellant claimed that he was acting in self defence. On 7 December 2005 he had been involved in a similar incident at a different public house which was called The Great Harry. On that occasion he had broken a glass and used it to cause injuries to three men. The Crown applied for leave to admit evidence of the incident in The Great Harry. In acceding to that application, the judge said that the jury will have to be sure of the facts before they can use them, applying the criminal burden and standard of proof. In directing the jury about the earlier incident, she said that the prosecution relied on three relevant matters that the appellant had deliberately broken a glass; that he used it with the intention of causing really serious harm; and that he had done so unlawfully. The judge then said, If you are not sure of any of those facts, the events in The Great Harry are irrelevant to your deliberations on the charge of murder. The propriety of the judges charge was confirmed by the Court of Appeal. It should be noted, of course, that no challenge to its wording was made by the prosecution or the defence. The appeal, so far as concerns the judge, was based on the claim that she had been wrong to admit the evidence of The Great Harry incident and that the direction on that incident, although fair, was too much for the jury to apply faithfully and conscientiously. It is significant that the only bad character evidence in Ngyuen related to a single previous incident. In order to be convinced that the appellant in that case was possessed of the propensity which the prosecution alleged, it is not surprising that the judge considered that it was necessary for the jury to be persuaded that The Great Harry incident had taken place as alleged. If the jury needed to be sure that the appellant had the alleged propensity (and I am of the view that this was certainly required, if they were to take it into account), how could they, in the circumstances of that particular case, be brought to the necessary point of conviction unless they were convinced that the incident had indeed taken place in the manner that the Crown said that it had? Otherwise, there was simply no factual basis on which to found a conclusion that a propensity existed. The proper issue for the jury on the question of propensity in a case such as Ngyuen and the present appeal is whether they are sure that the propensity has been proved. In Ngyuen the only way in which they could be sure was by being convinced that the sole incident said to show propensity had been proved to the criminal standard. That does not mean that in cases where there are several instances of misconduct, all tending to show a propensity, the jury has to be convinced of the truth and accuracy of all aspects of each of those. The jury is entitled to and should consider the evidence about propensity in the round. There are two interrelated reasons for this. First the improbability of a number of similar incidents alleged against a defendant being false is a consideration which should naturally inform a jurys deliberations on whether propensity has been proved. Secondly, obvious similarities in various incidents may constitute mutual corroboration of those incidents. Each incident may thus inform another. The question impelled by the Order is whether, overall, propensity has been proved. As I have said, the existence of a propensity must be proved to the conventional criminal standard. I do not accept the appellants argument that it does not call for special treatment, if by that it is meant that the existence of a propensity need not be established beyond reasonable doubt. This issue stands apart from the evidence which speaks directly to the defendants guilt or innocence of the offences charged. Evidence about a propensity or tendency to commit a specific type of crime or engage in a particular species of misconduct is not in pari materia with testimony that touches on the actual events said to constitute the particular crime involved. It is right, therefore, that the jury should be directed that before they take this into account, they must be convinced that propensity has been proved. That is not to say that the jury must be unanimous on the question of whether it exists. As the judge said in Ngyuen, jurors are at liberty to follow their own evidential track. But the jury should be directed that, if they are to take propensity into account, they should be sure that it has been proved. This does not require that each individual item of evidence said to show propensity must be proved beyond reasonable doubt. It means that all the material touching on the issue should be considered with a view to reaching a conclusion as to whether they are sure that the existence of a propensity has been established. In the case of R v Lafayette [2008] EWCA Crim 3238; [2009] Crim LR 809 the defendant was convicted of murder, having stabbed his victim with a knife. He claimed that the victim had produced the knife and that, in self defence, he had grabbed the victims hand and accidentally caused the knife to enter his body. Cross examination of some of the eye witnesses called by the prosecution about their criminal records led to an application by the prosecution for permission to cross examine the defendant about his own previous convictions including one in 2003 for criminal damage to a window in a flat occupied by his partner. The application was granted. The partner had made a statement to the police that during this incident he had threatened to slit her throat. He had not been charged with making that threat. He denied having made it. As it happened, his partner gave evidence on the defendants behalf on his trial for murder. She was asked about the threat alleged to have been made in 2003. She claimed that she was not able to remember it. On the appeal against his conviction for murder, counsel for Lafayette accepted that the jury would have been entitled to conclude that the partner had adopted the written statement that she had made in 2003 in which reference to the threat to kill had been made. The Court of Appeal said (in para 36 of its judgment) that the judge should have directed the jury that they should not rely on the allegation that he had threatened to kill his partner unless they were sure that [he] had made the threat. One can understand why this conclusion was reached. A very specific threat had been imputed to the defendant and the evidence about it was, at best, equivocal. The incident to which the evidence related was not similar to other instances of criminal conduct which were referred to by the Crown, in support of its claim that the defendant had a general propensity to crimes of violence. If the judgment of the Court of Appeal can be interpreted as suggesting that the jury should consider this item of evidence completely separately from other alleged incidents of violence in the defendants past and should leave it entirely out of account unless satisfied that all aspects of the incident were proved to the criminal standard, I would not agree with it. The evidence relating to the threat required to be considered by the jury along with other evidence which was called to establish propensity and a determination ought to have been made on whether all that testimony, taken in combination, proved the claimed propensity. Each item of evidence in relation to individual instances of alleged propensity must be examined and conclusions on the primary facts should be reached but, in its deliberations as to whether propensity has been proved, the jury should consider the evidence on the subject as a whole rather than in individual compartments. The practical difficulties in dealing with each avowed instance of bad character tending to show propensity or similar facts are well demonstrated in the case of ODowd [2009] 2 Cr App R 16. In that case the trial of a single defendant on charges relating to one victim lasted six and a half months. He had been convicted of falsely imprisoning, raping, sexually assaulting and poisoning a woman. The Court of Appeal stated that a major reason for the length of the trial was the introduction of bad character evidence. This concerned three allegations of rape, two of which related to events that had occurred 22 and 17 years before the indicted charges. The first of the allegations resulted in an acquittal, the second in a conviction and the third was stayed on the ground of abuse of process. Interestingly, it had originally been argued on behalf of the defendant that the trial judge was wrong to have directed the jury that the bad character allegations were capable of mutually supporting the truth of other allegations. Beatson J, who delivered the judgment of the court, dealt with that argument in para 6 of his judgment: The second ground upon which leave to appeal was granted concerned the judges directions as to the use the jury could make of the bad character evidence. This ground has two limbs. The first concerns the direction that the bad character allegations were capable of mutually supporting the truth of the other allegations. [Counsel] did not pursue the first limb. He was right not to do so. It was unarguable in the light of the decisions of this court in [R v Wallace [2007] 2 Cr App R 30; R v DM [2009] 1 Cr App R 10, and R v Freeman [2009] 1 WLR 2723]. In light of what I have said at para 43 above, I obviously agree with this. It would be misleading and confusing for a jury to be instructed that they should ignore the significance of one incident tending to show propensity when they come to form their views about another. Indeed, it would be unrealistic to expect that they perform the counter intuitive intellectual exercise of segregating various incidents for separate consideration without considering the possible impact of one on the other. Decisions about propensity should not be the product of a review of facts about separate episodes in hermetically sealed compartments. In para 32 of his judgment Beatson J set out the case made by the defendant that the evidence of bad character should not be admitted. He said this: At the pre trial hearing the defence submitted that admitting evidence of the bad character allegations by the three women would make a simple case complicated and would expand it out of all proportion and would be unjust. It would expand the case because the appellant denied the allegations, two of which had not resulted in a conviction, and the Crown would have to prove them. It would be unjust to admit the allegations because the defence would be handicapped in dealing with them. What Beatson J characterised as the most serious difficulty in acceding to the Crowns application to have the bad character evidence admitted was described in para 55 of his judgment. He said that proof of the alleged misconduct would require the trial of three collateral or satellite issues as part of the trial . This perceived difficulty led to the Court of Appeals conclusion (at para 65) that a trial of those collateral issues was required. It was in this context that the statement of Moses LJ in DM (referred to in para 16 above) was quoted with approval. Beatson J said that the jury would have to be sure those allegations were true before relying on them in relation to the index offence. Because, in effect, the trial was lengthened by a considerable period because of the perceived need to conduct what were in effect three mini trials, the Court of Appeal considered that the fairness of the proceedings was irredeemably compromised and the convictions were quashed. I can understand why the Court of Appeal reached the decision that it did. Three trials of the earlier incidents were in fact conducted and the appellate court had to deal with that unalterable fact. But I am of the clear view that it was inappropriate for the jury to be directed that it had to examine in insulated compartments the evidence in relation to each previous incident and that it had to be sure that each incident had been proved before it could take any account of it. It was, of course, necessary to lead evidence of the three incidents. The jury should have been directed to consider whether the sum of that evidence established to the criminal standard that the defendant was possessed of the propensity which was alleged. The evidence in relation to those incidents should have been considered cumulatively, not as separate aspects of the case for a propensity, isolated one from the other. ODowd nevertheless illustrates an important consideration which must be borne in mind by trial judges when determining applications to adduce evidence of propensity under articles 6(1)(d) and 8(1)(a). The jury is not asked to return a verdict on any previous allegations relied upon, and indeed should be reminded that the defendant is not on trial for them. It should be told to focus on the indicted offence(s). Reliance on cumulative past incidents in support of a case of propensity may indeed illuminate the truth of the currently indicted allegations, but excessive recourse to such history may skew the trial in a way which distracts attention from the central issue. Article 6(3) requires the judge to consider actively whether the effect of admitting the bad character evidence will have such an adverse effect on the fairness of the trial that it ought to be excluded. That species of adverse effect can arise through the sheer weight of disputed evidence on other uncharged allegations. And that can happen even though the jury will in due course be directed to consider propensity cumulatively, if the volume of evidence received is sufficiently strong to support a conviction. It is a truism that satellite litigation is often inimical to efficient trial. Conclusions In so far as the Court of Appeal in the present case has suggested that each incident claimed by the prosecution to show a propensity on the part of the defendant required to be proved to the criminal standard. I would not agree with it. For the reasons that I have given, the proper question to be posed is whether the jury is satisfied that a propensity has been established. That assessment depends on an overall consideration of the evidence available, not upon a segregated examination of each item of evidence in order to decide whether it has been proved beyond reasonable doubt. It is necessary to emphasise, however, that propensity is, at most, an incidental issue. It should be made clear to the jury that the most important evidence is that which bears directly on the guilt or innocence of the accused person. Propensity cannot alone establish guilt and it must not be regarded as a satisfactory substitute for direct evidence of the accuseds involvement in the crime charged. It is clear in the present case, however, that the trial judge failed to give adequate directions as to how the question of propensity should be approached by the jury. On that account the conviction was unsafe and it was properly quashed. The current Bench Books for Northern Ireland and England and Wales contain specimen directions which might be considered to suggest that juries require to be directed that they need to be satisfied of the truth of every allegation of propensity before they may take it into account. For the reasons that I have given, I consider that such a suggestion is misconceived. It will be for the authors of those works to reflect on whether an amendment to the relevant sections of the Bench Books is required.

The respondent Ms Mitchell was convicted of the murder on 11 May 2009 of her former partner Anthony Robin. At the trial, she did not dispute that she had stabbed Mr Robin, but said she had acted in self defence. She also claimed that she had been provoked and that she did not have the intention to kill him or cause him really serious harm. The prosecution applied to adduce evidence of Ms Mitchells previous bad character for the purpose of showing that she had a propensity to use knives in order to threaten and attack others. The evidence related to two incidents in 2003 and 2007 in which she was said to have threatened and stabbed others with knives. None of the previous alleged incidents had resulted in a conviction. It was agreed between the prosecution and the defence that statements which contained details of the earlier incidents would be read out during the trial. The judge directed the jury to take [this evidence] into account or leave it out of account as you consider appropriate, but not to make any assumptions based on it as to Ms Mitchells guilt. On appeal, Ms Mitchell argued that the trial judge had failed to direct the jury properly on the purpose of the bad character evidence or the standard of proof to which the jury had to be satisfied before they could take it into account. The Court of Appeal allowed her appeal, quashed the conviction and ordered a re trial. At the re trial Ms Mitchell pleaded guilty to manslaughter and was acquitted of murder. The prosecution appealed to the Supreme Court against the quashing of the murder conviction. The Court of Appeal certified the following question of law: Is it necessary for the prosecution relying on non conviction bad character evidence on the issue of propensity to prove the allegations beyond a reasonable doubt before the jury can take them into account in determining whether the defendant is guilty or not? The Supreme Court unanimously dismisses the appeal and upholds the decision of the Court of Appeal to quash Ms Mitchells conviction for murder. In his judgment Lord Kerr (with whom Lord Clarke, Lord Hughes, Lord Toulson and Lord Hodge agree) clarifies how juries should treat evidence of similar facts or propensity. The prosecution argued that evidence in relation to propensity did not call for any special examination by the jury. It should be considered along with all the other relevant evidence so as to allow the jury to determine whether the defendants guilt was established to the criminal standard. It was not necessary that the issue of propensity be segregated from the generality of the evidence and a pre emptive decision made in relation to that issue, before the question of guilt or innocence of the accused was tackled [19]. The respondent argued that facts supporting the claim that the defendant had a particular propensity had to be proved beyond reasonable doubt. It was inconceivable that a jury could have a reasonable doubt as to the accuracy or veracity of the evidence said to underpin such a propensity and, nevertheless, accept that evidence as sufficient to establish its presence. [21] The Court recognises that there is a distinction between, on the one hand, proof of a propensity and, on the other, the individual underlying facts said to establish that a propensity exists. In a case in which several incidents are relied on by the prosecution to show a propensity on the part of the defendant, it is not necessary to prove beyond reasonable doubt that each incident happened in precisely the way that it is alleged to have occurred. Nor must the facts of each individual incident be considered by the jury in isolation from each other [39]. The proper issue for the jury in a case such as this is whether they are sure, beyond reasonable doubt, that the propensity has been proved. The jury is entitled to and should consider the evidence about propensity in the round [43]. This is both because the improbability of a number of similar incidents being false is a consideration for the jury and secondly because obvious similarities in various incidents may constitute mutual corroboration for those incidents. Nevertheless, the existence of propensity must be proved to the criminal standard. The Court rejects the prosecutions argument that propensity does not call for special treatment. The jury should be directed that if they are to take propensity into account, they should be sure that it has been proved. This does not require that each individual item of evidence said to show propensity must be proved beyond reasonable doubt. It means that all the material touching on the issue should be considered with a view to reaching a conclusion as to whether they are sure that the existence of a propensity has been established [44]. There is no need for the jury to consider each incident in hermetically sealed compartments [49]. In so far as the Court of Appeal in the present case suggested that each incident claimed by the prosecution to show a propensity on the part of the defendant required to be proved to the criminal standard, it was wrong. The proper question is whether the jury is satisfied that a propensity has been established. That assessment depends on an overall consideration of the evidence available, not upon a segregated examination of each item of evidence in order to decide whether it has been proved beyond reasonable doubt [54]. The trial judge failed to give adequate directions as to how the question of propensity should be approached by the jury, however. On that account the conviction was unsafe and had been properly quashed [56]. The Court emphasises, however, that propensity is, at most, an incidental issue. It should be made clear to the jury that the most important evidence is that which bears directly on the guilt or innocence of the accused person. Propensity cannot alone establish guilt [55].

This appeal concerns the interpretation of service charge contribution provisions in the leases of a number of chalets in a caravan park in South Wales. The facts The facts may be summarised as follows (although they are more fully set out by Lord Carnwath in paras 81 to 103). Oxwich Leisure Park is on the Gower Peninsular, and contains 91 chalets, each of which is let on very similar terms. The five leases which we have seen were granted between 1978 and 1991, either for a premium (of less than 20,000) or in return for the lessee constructing the chalet. Each of the 91 chalets was let on a lease which was for a term of 99 years from 25 December 1974 and reserved a rent of 10 per annum increasing by 5 for each subsequent period of 21 years. Para (2) of the recital of each lease contains the statement that the chalets on the Leisure Park were intended to be subject to leases upon terms similar in all respects to the present demise. Clause 3 of each lease contains various covenants by the lessee, and it is introduced by the words: The lessee hereby covenants with the lessor and with and for the benefit of the owners and lessees from time to time during the currency of the term hereby granted of the other plots on the estate so far as the obligations hereinafter mentioned are capable of benefitting them The covenants that follow concern use, repair, alienation and the like. Crucially for present purposes, clause 3(2) is a covenant to pay an annual service charge. Each lease also contains covenants by the lessor. One such covenant is to provide services to the Park, such as maintaining roads, paths, fences, a recreation ground and drains, mowing lawns, and removing refuse. The lessor also covenants in clause 4(8) that leases of other chalets shall contain covenants on the part of the lessees thereof to observe the like obligations as are contained herein or obligations as similar thereto as the circumstances permit. Twenty five of the chalets are said by the respondent, the current owner of the Leisure Park and the landlord under the leases, to be subject to leases containing a service charge provision in clause 3(2), which requires the lessee to pay for the first year of the term a fixed sum of 90 per annum, and for each ensuing year a fixed sum representing a 10% increase on the previous year ie an initial annual service charge of 90, which increases at a compound rate of 10% in each succeeding year. The issue on this appeal is whether the respondents interpretation of clause 3(2) in those 25 leases is correct. Of the 25 leases in question, 21 were granted between 1977 and 1991. Prior to the grant of most of those 21 leases, the other 70 chalets had been the subject of leases granted from the early 1970s. In each of those 70 leases, clause 3(2) was a covenant by the lessee: To pay to the Lessor without any deduction in addition to the said rent a proportionate part of the expenses and outgoings incurred by the Lessor in the repair maintenance renewal and the provision of services hereinafter set out the yearly sum of Ninety Pounds and value added tax (if any) for the first three years of the term hereby granted increasing thereafter by Ten Pounds per Hundred for every subsequent three year period or part thereof. The effect of this clause, at least on the face of it, is that the initial service charge of 90 per annum was to be increased on a compound basis by 10% every three years, which is roughly equivalent to a compound rate of 3% per annum. The 21 leases referred to in para 6 have two slightly different versions of clause 3(2), but the clause can be set out in the following form (with the words shown in bold included in 14 of the 21 leases, but not in the other seven): To pay to the Lessor without any deductions in addition to the said rent as a proportionate part of the expenses and outgoings incurred by the Lessor in the repair maintenance renewal and renewal of the facilities of the Estate and the provision of services hereinafter set out the yearly sum of Ninety Pounds and Value Added tax (if any) for the first Year of the term hereby granted increasing thereafter by Ten Pounds per hundred for every subsequent year or part thereof. To complicate matters a little further, the service charge clause in four of these 21 leases (being three of the seven which did not include the words in bold in the preceding quotation), had the word for before the yearly sum of Ninety Pounds. These four leases also included a proviso to the effect that, so long as the term hereby created is vested in the [original lessees] or the survivor of them, clause 3(2) would be treated as being in the form set out in para 6 above. This proviso has ceased to have effect as these four leases are no longer vested in the original lessees. Finally, the service charge clause in four of the 70 leases referred to in para 6 above were varied pursuant to deeds of variation executed between October 1998 and August 2002 so as to be identical to that set out in para 7 above, including the words in bold. The issues between the parties As already explained, the respondent, the current landlord, contends that the service charge provisions in clause 3(2) of the 25 leases referred to in paras 6 to 9 above have the effect of providing for a fixed annual charge of 90 for the first year of the term, increasing each subsequent year by 10% on a compound basis. The appellants, the current tenants under 24 of the 25 leases, primarily contend that the respondents construction results in such an increasingly absurdly high annual service charge in the later years of each of the 25 leases that it cannot be right. They argue that, properly read, each service charge clause in the 25 leases requires the lessee to pay a fair proportion of the lessors costs of providing the services, subject to a maximum, which is 90 in the first year of the term, and increases every year by 10% on a compound basis. In other words, the appellants argue that, in effect, the words up to should be read into the clause set out in para 7 above, between the words the provision of services hereinafter set out and the yearly sum of Ninety Pounds. The appellants also have an alternative contention, based on the provisions of recital (2), the opening words of clause 3 and the provisions of clause 4(8) of their leases, namely that the lessor cannot recover more by way of service charge than could be recovered under each of the first 70 leases. The evidence Apart from the documents themselves and the published Retail Price Index (RPI) for each of the years 1970 2010, there is no evidence as to the surrounding circumstances in which the 21 leases were executed, other than the fact that the four leases referred to in para 8 above were granted to individuals connected with the lessor. Following a request from the court, we were also told that three of the four deeds of variation referred to in para 9 above were entered into with the lessors daughter as lessee. I do not find it surprising that we have not been provided with any further evidence. So far as the wording of clause 3(2) is concerned, there may have been letters or notes of discussions in connection with the original drafting and granting (and, in the four cases referred to in para 9 above, the amending) of the leases. But, even if such notes or letters had survived, I very much doubt that they would have thrown any light on what was intended to be the effect of the drafting of the various forms of clause 3(2). Even if they had done, they would probably have been inadmissible as I strongly suspect that they would merely have shown what one party thought, or was advised, that the clause meant. If such documents had shown what both parties to the lease in question intended, they would probably only have been admissible if there had been a claim for rectification. As to the possibility of other material, I am unconvinced that, even if it existed, evidence of the original level of services, the original cost of the services or any investigations made on behalf of a potential lessee in relation to the original services and their cost would have assisted on the issue of what clause 3(2) of any of the 25 leases meant. The provisions for increase at the end of clause 3(2) of each lease were plainly included to allow for inflation, and the only evidence which appears to me to be potentially relevant would be contemporary assessments of the actual and anticipated annual rate of inflation, and, as already mentioned, we have the RPI for each of the years in question. Interpretation of contractual provisions Over the past 45 years, the House of Lords and Supreme Court have discussed the correct approach to be adopted to the interpretation, or construction, of contracts in a number of cases starting with Prenn v Simmonds [1971] 1 WLR 1381 and culminating in Rainy Sky SA v Kookmin Bank [2011] UKSC 50; [2011] 1 WLR 2900. When interpreting a written contract, the court is concerned to identify the intention of the parties by reference to what a reasonable person having all the background knowledge which would have been available to the parties would have understood them to be using the language in the contract to mean, to quote Lord Hoffmann in Chartbrook Ltd v Persimmon Homes Ltd [2009] UKHL 38, [2009] 1 AC 1101, para 14. And it does so by focussing on the meaning of the relevant words, in this case clause 3(2) of each of the 25 leases, in their documentary, factual and commercial context. That meaning has to be assessed in the light of (i) the natural and ordinary meaning of the clause, (ii) any other relevant provisions of the lease, (iii) the overall purpose of the clause and the lease, (iv) the facts and circumstances known or assumed by the parties at the time that the document was executed, and (v) commercial common sense, but (vi) disregarding subjective evidence of any partys intentions. In this connection, see Prenn at pp 1384 1386 and Reardon Smith Line Ltd v Yngvar Hansen Tangen (trading as HE Hansen Tangen) [1976] 1 WLR 989, 995 997 per Lord Wilberforce, Bank of Credit and Commerce International SA (in liquidation) v Ali [2002] 1 AC 251, para 8, per Lord Bingham, and the survey of more recent authorities in Rainy Sky, per Lord Clarke at paras 21 30. For present purposes, I think it is important to emphasise seven factors. First, the reliance placed in some cases on commercial common sense and surrounding circumstances (eg in Chartbrook, paras 16 26) should not be invoked to undervalue the importance of the language of the provision which is to be construed. The exercise of interpreting a provision involves identifying what the parties meant through the eyes of a reasonable reader, and, save perhaps in a very unusual case, that meaning is most obviously to be gleaned from the language of the provision. Unlike commercial common sense and the surrounding circumstances, the parties have control over the language they use in a contract. And, again save perhaps in a very unusual case, the parties must have been specifically focussing on the issue covered by the provision when agreeing the wording of that provision. Secondly, when it comes to considering the centrally relevant words to be interpreted, I accept that the less clear they are, or, to put it another way, the worse their drafting, the more ready the court can properly be to depart from their natural meaning. That is simply the obverse of the sensible proposition that the clearer the natural meaning the more difficult it is to justify departing from it. However, that does not justify the court embarking on an exercise of searching for, let alone constructing, drafting infelicities in order to facilitate a departure from the natural meaning. If there is a specific error in the drafting, it may often have no relevance to the issue of interpretation which the court has to resolve. The third point I should mention is that commercial common sense is not to be invoked retrospectively. The mere fact that a contractual arrangement, if interpreted according to its natural language, has worked out badly, or even disastrously, for one of the parties is not a reason for departing from the natural language. Commercial common sense is only relevant to the extent of how matters would or could have been perceived by the parties, or by reasonable people in the position of the parties, as at the date that the contract was made. Judicial observations such as those of Lord Reid in Wickman Machine Tools Sales Ltd v L Schuler AG [1974] AC 235, 251 and Lord Diplock in Antaios Cia Naviera SA v Salen Rederierna AB (The Antaios) [1985] AC 191, 201, quoted by Lord Carnwath at para 110, have to be read and applied bearing that important point in mind. Fourthly, while commercial common sense is a very important factor to take into account when interpreting a contract, a court should be very slow to reject the natural meaning of a provision as correct simply because it appears to be a very imprudent term for one of the parties to have agreed, even ignoring the benefit of wisdom of hindsight. The purpose of interpretation is to identify what the parties have agreed, not what the court thinks that they should have agreed. Experience shows that it is by no means unknown for people to enter into arrangements which are ill advised, even ignoring the benefit of wisdom of hindsight, and it is not the function of a court when interpreting an agreement to relieve a party from the consequences of his imprudence or poor advice. Accordingly, when interpreting a contract a judge should avoid re writing it in an attempt to assist an unwise party or to penalise an astute party. The fifth point concerns the facts known to the parties. When interpreting a contractual provision, one can only take into account facts or circumstances which existed at the time that the contract was made, and which were known or reasonably available to both parties. Given that a contract is a bilateral, or synallagmatic, arrangement involving both parties, it cannot be right, when interpreting a contractual provision, to take into account a fact or circumstance known only to one of the parties. Sixthly, in some cases, an event subsequently occurs which was plainly not intended or contemplated by the parties, judging from the language of their contract. In such a case, if it is clear what the parties would have intended, the court will give effect to that intention. An example of such a case is Aberdeen City Council v Stewart Milne Group Ltd [2011] UKSC 56, 2012 SCLR 114, where the court concluded that any approach other than that which was adopted would defeat the parties clear objectives, but the conclusion was based on what the parties had in mind when they entered into the contract (see paras 17 and 22). Seventhly, reference was made in argument to service charge clauses being construed restrictively. I am unconvinced by the notion that service charge clauses are to be subject to any special rule of interpretation. Even if (which it is unnecessary to decide) a landlord may have simpler remedies than a tenant to enforce service charge provisions, that is not relevant to the issue of how one interprets the contractual machinery for assessing the tenants contribution. The origin of the adverb was in a judgment of Rix LJ in McHale v Earl Cadogan [2010] EWCA Civ 14, [2010] 1 EGLR 51, para 17. What he was saying, quite correctly, was that the court should not bring within the general words of a service charge clause anything which does not clearly belong there. However, that does not help resolve the sort of issue of interpretation raised in this case. Discussion: interpretation of clause 3(2) When one turns to clause 3(2) of each of the 91 leases of the chalets in Oxwich Park, the natural meaning of the words used, at least until one considers the commercial consequences, seems clear. The first half of the clause (up to and including the words hereinafter set out) stipulates that the lessee is to pay an annual charge to reimburse the lessor for the costs of providing the services which he covenants to provide, and the second half of the clause identifies how that service charge is to be calculated. The fact that the second half of the clause results in the service charge being a fixed sum, rather than a sum dependent on the costs to the lessor of providing the contractual services is readily explicable. As stated in Wonnacotts The History of the Law of Landlord and Tenant in England and Wales (2012), p 106, clauses which provide for charges which vary with the costs of providing services have resulted, at least since around 1960, in more trouble between landlord and tenant than anything else. Further, legislation which started to come into force in 1972 has rendered it progressively more difficult for an amateur landlord (to use Wonnacotts expression) to recover a disputed service charge calculated on such a basis. The fact that the second half of the clause goes on to provide for a fixed increase in the annual sum is also readily explicable: the parties assumed that the cost of providing the services in sterling terms would increase, or, to put the same point another way, they assumed that the value of money would fall. Davis LJ concisely explained the thinking behind the clause in the course of his judgment in the Court of Appeal, [2013] EWCA Civ 902, para 52: Lack of correspondence between outlay and receipt is the almost inevitable consequence of such a clause if the parties have elected for a fixed charge formula. It has a similarity with a liquidated damages clause: it represents the parties estimate at the outset for the future with neither guarantee nor even expectation of entire coincidence with the eventual outcome. But the advantage is certainty. The parties know from the outset where they stand. Moreover, it is a surrounding circumstance legitimately to be taken into account here that the leases were made at a time of inflation in some years, very significant inflation which the parties, objectively and commercially speaking, could be expected to want to confront. They chose to do so by this particular formula of increase. In those seven leases where the word as is not included, I suppose that it might be said that this is not clear unless words such as quantified in the sum of were included in order to link the two halves of the clause, but that is, to my mind, a really pedantic argument. Although perfectionist drafting might suggest the inclusion of such words, it seems to me that the absence of such words cannot fairly be invoked to suggest ambiguity or a lack of clarity. The reasonable reader of the clause would see the first half of the clause as descriptive of the purpose of clause 3(2), namely to provide for an annual service charge, and the second half as a quantification of that service charge. It is true that the first part of the clause refers to a lessee paying a proportionate part of the cost of the services, and that, unless inflation increases significantly in the next 50 years, it looks likely that the service charge payable under each of the 25 leases may exceed the cost of providing services to the whole of the Leisure Park. However, if, as I believe is clear, the purpose of the second part of the clause is to quantify the sum payable by way of service charge, then the fact that, in the future, its quantum may substantially exceed the parties expectations at the time of the grant of the lease is not a reason for giving the clause a different meaning. As already explained, the mere fact that a court may be pretty confident that the subsequent effect or consequences of a particular interpretation was not intended by the parties does not justify rejecting that interpretation. However, given the way things have turned out, it is tempting to latch onto the absence of words such as quantified in the sum of, and to see the two halves of clause 3(2) as mutually inconsistent in their effect. This would be on the ground that the first half of the clause requires the lessee to pay a proportionate part of the cost to the lessor of providing services, whereas the latter half requires the lessee to pay a sum which could exceed the whole of that cost. On that basis, it might be said that the court can reject or modify one half to give effect to the real intention of the parties see eg Walker v Giles (1848) 6 CB 662. However, as explained in para 24 and 25 above, this argument would, in my view, involve the court inventing a lack of clarity in the clause as an excuse for departing from its natural meaning, in the light of subsequent developments. Were it not for the percentage increases of 10% per annum specified in the 25 service charge clauses which are being considered on this appeal, coupled with the subsequent history of inflation in the United Kingdom, that would be the end of it. Thus, it seems to me that the original 70 leases (referred to in para 6 above), with a clause 3(2), which provided for increases of about 3% per annum (at a time when inflation was running at a significantly higher rate), should plainly be interpreted in the way in which the respondent contends. However, the consequences of the annual sum of 90 being increased annually by 10% on a compound basis are plainly unattractive, indeed alarming, to a lessee holding a chalet under one of the 25 leases. If one assumes a lease granted in 1980, the service charge would be over 2,500 this year, 2015, and over 550,000 by 2072. This appears to be an alarming outcome for the lessees, at least judging by how things look in 2015, because annual inflation in the last 15 years has hardly ever been above 4%, indeed has been under 3% for ten of those years, and has notoriously been falling recently almost to the point of turning negative, whereas the service charge over that period has increased, and will continue to increase, by 10% per annum. The appellants argue that these figures illustrate the extreme unlikelihood of the parties to the 21 leases (or to the four subsequent deeds of variation), and in particular the lessees, having intended to agree that the original 90 service charge would be automatically increased by 10% annually on a compound basis. Accordingly, they contend, the latter half of clause 3(2) should be interpreted as imposing a maximum on the annual service charge recoverable by the lessor. In other words, the effect of the clause is said to be that the lessor is entitled to an appropriate percentage of the annual cost of providing the contracted services, subject to a maximum which was initially 90, but which increases by 10% compound annually. Despite the unattractive consequences, particularly for a lessee holding a chalet under one of the 25 leases, I am unconvinced by this argument. It involves departing from the natural meaning of clause 3(2) in each of those leases, and it involves inserting words which are not there. Further, the appellants argument involves attributing to the parties to the 25 leases an intention that there should be a varying service charge and that the lessor (or some other unspecified person) should assess the total costs of the services and determine the appropriate proportion of the cost of the contractual services to allocate to each chalet. Although I accept that it has an element of circularity, it appears to me that the average reader of clause 3(2) would have thought that those are exercises which the clause seems to have been designed to avoid. Although there are one or two very small errors in the drafting, I do not consider that anything has gone significantly wrong with the wording of clause 3(2) of any of the 25 leases. As already explained, I would reject the notion that, on a natural reading, the two parts of the clause do not relate to each other, or appear to say different things, even in the seven cases where the word as is not included: as the Court of Appeal said, the first half imposes a liability for an annual service charge and the second half explains how it is to be assessed. I do not think that the reference to part of a year in the closing words of the clause (para 7 above refers), or the inclusion of an unnecessary for (para 8 above refers), in some of the 25 leases can possibly justify departing from the natural meaning of clause 3(2). At best the reference to part of a year is meaningless. However, given that the 99 year term of each lease ran from Christmas 1974, all of them would have ended part way through a year, as they would also have been very likely to do if surrendered or forfeited. Furthermore, the fact that some clauses refer not merely to repair maintenance and renewal, but also to renewal of facilities on the Estate seems to me to be irrelevant to the issue on this appeal. Quite apart from the fact that the effect of clause 3(2) appears clear in each lease as a matter of language, I am far from convinced by the commercially based argument that it is inconceivable that a lessee would have agreed a service charge provision which had the effect for which the respondents contend, at least in the 1970s and much of the 1980s. Although I would have expected most solicitors to have advised against it, and imprudent though it undoubtedly has turned out to be (at least so far), a lessee could have taken the view that a fixed rate of increase of 10% per annum on a fixed initial service charge, at a time when annual inflation had been running at a higher rate for a number of years (well over 10% per annum between 1974 and 1981, indeed over 15% per annum for six of those eight years; although it was less than 10% per annum after 1981), was attractive or at least acceptable. If inflation is running at, say 10% per annum, it is, of course, very risky for both the payer and the payee, under a contract which is to last around 90 years, to agree that a fixed annual sum would increase automatically by 10% a year. They are taking a gamble on inflation, but at least it is a bilateral gamble: if inflation is higher than 10% per annum, the lessee benefits; if it is lower, the lessor benefits. On the interpretation offered by the appellants, it is a one way gamble: the lessee cannot lose because, at worst, he will pay the cost of the services, but, if inflation runs at more than 10% per annum, the lessor loses out. The fact that a court may regard it unreasonable to suppose that any economist will be able to predict with accuracy the nature and extent of changes in the purchasing power of money over many decades (to quote Gibbs J in Pennant Hills Restaurants Pty Ltd v Barrell Insurances Pty Ltd [1981] HCA 3, (1981) 145 CLR 625, 639) is nothing to the point. People enter into all sorts of contracts on the basis of hopes, expectations and assessments which no professional expert would consider prudent, let alone feel able to predict with accuracy. I have little doubt that many fortunes have been both made and lost (and sometimes both) by someone entering into such a contract. In terms of commercial justification, the analysis in paras 34 and 35 above becomes more difficult to invoke the further one moves on from 1981, the last year when inflation was above 10% per annum, although in 1990 it almost hit that figure. Accordingly, while I think the analysis comfortably applies to the 21 leases referred to in paras 6 to 8 above, which were granted between 1977 and 1990, it is unconvincing in relation to the four leases whose service charge provisions were amended around 2000, as mentioned in para 9 above. It seems rather extraordinary that a lessee under a lease which provided for an increase in a fixed service charge at the rate of 10% over three years should have agreed to vary the lease so that the increase was to be at the rate of 10% per annum, at a time when inflation was running at around 3% per annum. However, I do not accept that this justifies reaching a different result in relation to any of the four leases which were varied in 2000. Three of them are relatively easily explicable, as the lessee who agreed the variation was closely connected with the lessor. The fact that they were subsequently assigned is, I accept, remarkable, but that later fact cannot affect the interpretation of the deeds. As to the fourth deed, it was, on any view, an improvident variation to have agreed, but, as already explained, that is not enough to justify the court rewriting the contract under the guise of interpreting it. Further, given that, at least in my view, there could be no ground for suggesting that the original clause 3(2) in the three leases (providing as it did for an annual increase of around 3%) had any effect other than that for which the respondent contends, it is particularly difficult to suggest that the substituted clause, which changed the annual increase to 10%, but was otherwise identically worded (save that it included the word as and was therefore even clearer), should have a different effect. I note in this connection that, at a time when inflation was running at well over 10% per annum from 1974 to 1980 (possibly excepting 1984), the lessor was granting leases which provided, in effect, for increases in the 90 at the rate of about 3% per annum (para 6 above refers). Of course, that cannot be taken into account when interpreting any of the 25 leases, but it shows the lessor was prepared to take what appears to have been an unwise decision which was not entirely dissimilar from the unwise decision which, in my view, the lessees under the 25 leases took. I do not think that this is a case where the approach adopted by this court in Aberdeen City Council can assist the appellants. Unlike that case, this is not a case where one of the parties has done something which was not contemplated by the contract. It is clear that the 10% per annum increase in clause 3(2) was included to allow for a factor which was out of the control of either party, namely inflation. In my judgment, there is no principle of interpretation which entitles a court to re write a contractual provision simply because the factor which the parties catered for does not seem to be developing in the way in which the parties may well have expected. It also appears to me that there is a degree of inconsistency in the appellants case. That case is, of course, ultimately based on the unlikelihood of a lessor and lessee of a single chalet agreeing that an initial annual service charge of 90 should be increased at a rate which could well lead to the annual charge being an absurdly high figure possibly more than the cost of providing the services for the whole Leisure Park. But it is also rather unlikely (albeit less unlikely, I accept) that they will have agreed a ceiling on the annual service charge which would become so absurdly high that it would be meaningless. In other words, it can be said with some force that the appellants solution to the problem which they identify does not actually address the problem: it merely changes its commercial consequences. I should add that, subject to the point dealt with in the next section of this judgment, I am unconvinced that any assistance can be gained from the differences between the various forms of clause 3(2). It seems to me positively unlikely that the lessees under the later 21 leases would have been aware of the terms of clause 3(2) of the earlier 70 leases. But, even if they had been so aware, it seems to me that it would assist the respondents case, not that of the appellants. That is because, given that it appears clear that the second half of clause 3(2) in the earlier 70 leases operated to quantify the service charge, then it seems to me (as explained in the last sentence of para 39 above) that it is very unlikely that the parties can have intended the almost identically worded second half of clause 3(2) in the later 21 leases to have a very different effect from that in the earlier 70 leases. In his judgment at para 116, Lord Carnwath rightly points out that, even after he assigns the lease, the original lessee is bound for the duration (at least if it was granted before 1996). However, I do not see what that adds in this case: on any view, these leases involve long term commitments on both sides. I agree with his view in para 117 that a prospective lessee of a flat in a block or the like (as here) will normally be likely to have less negotiating freedom as to the terms than in relation to a free standing property. But so will the lessor, and either is free to walk away if he regards the terms as unsatisfactory. I am also unconvinced that the remedies available (whether in common law or under statute) to the parties in the event of a breach in connection with services or service charge, as discussed in Lord Carnwaths para 121 123, assists on the issue we have to decide. We are concerned with what a service charge clause means, not how it is being operated. Finally on this first point, Lord Carnwath makes some remarks about service charge provisions in his para 119. There will, I suspect, be many cases where his observations are very much in point: indeed, they may well be normally in point. However, the lessor has no duty to be fair when negotiating the terms of a lease (any more than the lessee does), although it may well be in his interest to be (or at least to appear to be) fair. But, whosever interpretation is correct, clause 3(2) was self evidently not a normal service charge clause: on the respondents case, the landlord might get more or less than the costs of providing the services; on the appellants case, the landlord might get less than the costs of providing the services. Discussion: the effect of clause 4(8) and the terms of the other leases The appellants, at the invitation of the court, argued that clause 4(8), which as explained in para 4 above required leases of chalets to be granted subject to identical or similar obligations, substantially mitigated the effect of clause 3(2) of their leases. They contended that clause 4(8), when read together with the opening words of clause 3 and para (2) of the recital to each lease, referred to in paras 3 and 4 above, enable them to limit the service charge which the landlord could otherwise recover under clause 3(2). The appellants argument in this connection proceeds in two steps. First, as a result of clause 4(8), the opening words of clause 3, and para (2) of the recital in each of their leases, a term was implied into their leases to the effect that clause 3(2) was in the same terms as clause 3(2) of the leases of chalets which had already been granted ie the 70 leases referred to in para 6 above. Secondly, in those circumstances the lessor is now precluded from recovering more by way of service charge than would be recoverable under the terms of the service charge provisions in the 70 leases ie 90 plus 10% compounded every three years. While this argument has obvious attraction, I would reject it. The purpose of clause 4(8), the opening words of clause 3, and recital (2) was, I would accept, to create what is sometimes referred to as a building scheme, but, at least in the present context is more accurately described as a letting scheme. Such a scheme, which is recognised and given effect to by equity, has to be apparent from the terms of the relevant leases (or, very unusually, from a side agreement entered into by each lessee with the lessor). A letting scheme involves properties within a given area being let on identical or similar terms, normally by the same lessor, with the intention that the terms are to be enforceable not only by the lessor against any lessee, but as between the various lessees even by an earlier lessee of one property against a later lessee of another property. There is plainly a strong case for saying the combination of para (2) of the recital, the opening words of clause 3 and the provisions of clause 4(8) establishes that there is such a scheme in relation to the chalets in the Leisure Park. Accordingly, I am prepared to assume that there was envisaged that there would be a degree of reciprocity and mutual enforceability between the lessees of chalets when it came to the covenants they entered into. However, in my view, the appellants reliance on the scheme in order to limit the service charges recoverable under clause 3(2) of their leases faces a number of problems. First, it seems to me to be unclear whether a provision such as clause 3(2) could be or was subject to the scheme. There is room for argument whether a letting scheme can only extend, like freehold schemes, to restrictive covenants, or whether it can also extend to positive covenants (on the basis that positive covenants between lessor and lessee are enforceable as between their respective successors, whereas only restrictive covenants are enforceable as against successors of covenantors in relation to freeholds). Even if a leasehold scheme can extend to positive covenants, it is also questionable whether a lessees covenant to pay a service charge, or any other sum of money to the lessor, can be within the ambit of a scheme. Secondly, in so far as they are dealing with the provisions of leases of other chalets, clause 4(8), and (arguably) the opening words of clause 3 and recital (2) appear to refer to future lettings, not to past lettings. It is quite a bold step to imply a term as to what has happened in the past from an express provision which is limited to the future. Having said that, there is considerable practical force in the contention that the scheme contemplated by the three provisions could only work if leases of all the chalets, past, present and future, were on the same terms. Thirdly, even if the appellants argument based on an implied term was otherwise correct, there would still be considerable force in the contention that it would not exonerate the appellants from complying with their obligations under clause 3(2). It seems clear that, where there is a letting scheme, a tenant can enjoin the landlord from letting a property within the scheme area on terms which are inconsistent with the scheme. However, as far as I am aware, there is no case where the landlord has been held liable to a tenant in damages (or otherwise) for having let a property within the scheme area on such terms, prior to the grant of the tenants lease. Fourthly, even if these arguments are all rejected, the closing words of clause 4(8) clearly permit a degree of variation between the terms of the leases of different chalets. If the second part of clause 3(2) is intended to reflect the level of projected inflation, then the parties may well have regarded it as almost inevitable that any annual or triennial adjustment would vary from time to time. On that basis, there may be no breach of any implied term anyway. However, it is unnecessary to address the four points identified in paras 51 54 above, because, in my judgment, there is a fatal flaw in the appellants argument based on an implied term. In effect, the appellants case is that the implied term in each of the 21 leases is that the lessor was not asking anything of the lessee which had not been, or would not be, required of lessees of other chalets, whether their leases were in the past or the future. However, it seems to me that, assuming everything else in the appellants favour, that would not be the correct term to imply. As I see it, if there is an implied term along the lines argued for, it is that the already existing 70 leases of chalets contain a clause 3(2) identical with that in the appellants leases ie that the 70 existing leases have service charges which increase at the compound rate of 10% per annum as in the 21 leases. In so far as it relates to the 70 existing leases, the implied term suggested by the appellants is inconsistent with both (a) an express term of the appellants leases, namely clause 3(2) itself, and (b) what is implied in relation to future leases. As to point (a), the appellants suggested implied term means that clause 3(2) involves a 10% increase every three years, whereas there is an express term to the effect that the 10% increase is every year; and it is a fundamental principle that one cannot imply a term which is inconsistent with an express term. As to point (b), any reader of an appellants lease who was asked what future leases of chalets would contain by way of a service charge provision would answer that it would be the same as that in the instant lease ie 90 pa subject to an increase of 10% per annum compounded; and the implied term applicable to future leases should be the same as that applicable to past leases. If the appellants are right in their contention that there is an implied term, the term which I would favour (as set out at the end of para 55 above) runs into neither of these difficulties. It amounts to saying that, as clause 3(2) of an appellants lease means that the service charge is to be 90 pa increasing by 10% pa compounded, there is a term implied into the lease that that is what the existing leases provide and it is what future leases will provide. If, as the appellants contend, there is an implied term, but that is its correct characterisation, it is difficult to see how it can help them. An appellant can say that the fact that the 70 existing leases contain a different clause 3(2) means that there is a breach of the implied term, but it is hard to see what damage or other injury has been suffered if the respondent now insists on enforcing clause 3(2) of their leases against the appellants. If an appellant could show that the value of his lease was reduced because the lessor had not granted the first 70 leases with the same clause 3(2) as was in the appellants lease, the consequent reduction in the value of that lease could well be the appropriate measure of damages. But I cannot at the moment see on what basis the breach can assist an appellant in resisting the full financial consequences of the clause 3(2) he entered into. I should add that, if, contrary to my view expressed in para 43 above, the lessees under the later 21 leases would have been aware of the terms of clause 3(2) of the earlier 70 leases (as Lord Carnwath suggests), it would negative any reliance which the lessees under the 21 leases could place on clause 4(8), as just discussed. This is because the later lessees would have known of, and accepted, the departure from the original clause 3(2). Conclusion Accordingly, in agreement with the reasons given by Lord Hodge in this court, Davis LJ in the Court of Appeal and Morgan J in the High Court, I would dismiss this appeal, and I do not consider that the appellants are assisted by the additional argument raised in this court. I should, however, make five final points. First, the Court of Appeal suggested that the only way the lessees under the 25 leases could escape from their problems would be by surrendering or suffering forfeiture. In case this is misinterpreted, it is right to point out that surrender is consensual between lessee and lessor, and forfeiture involves unilateral action by a lessor, and so neither course can be forced on the lessor. Secondly, I have considerable sympathy with Lord Carnwaths conclusion that the appeal should be allowed (not least because it is a much more satisfactory outcome in common sense terms, particularly viewed as at today), and I acknowledge that his reasons are as powerful as his conclusion allows. However, for the reasons I have given, I cannot agree with him. Thirdly, the fact that four leases were granted to associates of the lessor with the proviso described in para 8 above, and that three of the deeds of variation described in para 9 above were entered into with a lessee who was a close relation of the lessor, is worthy of comment. It suggests that the lessor or her advisers may have appreciated the potential disadvantages of the clause now contained in the 25 leases. However, I do not see how it can assist the lessees on the issue in these proceedings, namely the interpretation of the clause in the 25 leases. Fourthly, as Lord Carnwath records in para 155 below, it appears that the respondent realistically recognises the unsatisfactory situation in which the lessees under the 25 leases find themselves, and is prepared to agree appropriate amendments to their leases. I hope that a fair and just amendment can be agreed. Finally, as Lord Carnwath also points out in paras 90 93 below, there are various statutory provisions which protect tenants against unreasonable service charges, but none of them apply here. The present case suggests that there may be a strong case for extending such provisions to cases such as the present, even though they involve a fixed sum payable by way of service charge. But that is a policy issue for Parliament, and there may be arguments either way. LORD HODGE: (agrees with Lord Neuberger) I agree that the appeal must be dismissed for the reasons which Lord Neuberger sets out. But it is a highly unsatisfactory outcome for the chalet tenants who are affected by the annual escalator of the service charge. It is not clear whether there are many long leases containing fixed service charges with escalators which are beyond the reach of statutory regulation. If there are, there may be a case for Parliament to consider extending the provisions that protect tenants against unreasonable service charges. Mr Morshead QC for the appellants submitted in his written case that what was important was (a) that the risk [of inflation falling and remaining substantially below 10%] would have been obvious to the officious, reasonable bystander who must be imagined interrogating the actual parties and (b) that no reasonable person in the position of the parties, looking at the leases in their entirety and in context, would understand them to have intended that the tenants should assume that risk. He envisaged that in a hypothetical dialogue the officious bystander would warn the parties of the risks of their proposed contract and they would make it clear that that was not their intention. In the course of the debate we were referred directly or by reference to several cases concerning the remediation of a mistake by construction or the implication of a term. In my view they do not give the support that Mr Morshead needs. In Homburg Houtimport BV v Agrosin Private Ltd (The Starsin) [2004] 1 AC 715 the mistaken omission of words in a clause was apparent because the bill of lading had been modelled on a standard clause. The person who had transposed the standard clause into the bill of lading had omitted a phrase in the standard clause in which the same word had appeared at the end of two consecutive phrases. The mistake was clear and it was apparent what correction was called for (paras 22 and 23 per Lord Bingham). In Chartbrook Ltd v Persimmon Homes Ltd [2009] 1 AC 1101 a definition, which contained a grammatical ambiguity, made no commercial sense if interpreted in accordance with the ordinary rules of syntax. The background to the deal and the internal context of the contract showed that there was a linguistic mistake in the definition, which the court was able to remove by means of construction. In his speech Lord Hoffmann (at p 1114) referred with approval to the judgment of Carnwath LJ in KPMG LLP v Network Rail Infrastructure Ltd [2007] Bus LR 1336. In that case, which concerned a rent review clause in a lease, it was clear from the terms of the clause that its wording did not make sense. The court was assisted by an earlier agreement which set out the then intended clause containing a parenthesis, of which only part had remained in the final lease. It was not clear whether the parties had mistakenly deleted words from the parenthesis, which they had intended to include, or had failed to delete the parenthesis in its entirety. But that uncertainty as to the nature of the mistake, unusually, did not matter as the outcome was the same on either basis. In Aberdeen City Council v Stewart Milne Group Ltd [2011] UKSC 56, 2012 SCLR 114 the internal context of the contract provided the answer. The sale contract provided for the payment to the vendor of a further sum on disposal of the land by the purchaser. Two of the methods of disposal required the parties to ascertain the market value of the property on disposal in calculating the additional payment and the other used the gross sales proceeds in calculating that payment. The purchaser sold the site at an under value to an associated company, a circumstance which on the face of the contract the parties had not contemplated. The courts at each level interpreted the provision, which used the gross sales proceeds in the calculation, as requiring a market valuation where there was a sale which was not at arms length. They inferred the intention of the parties at the time of the agreement from the contract as a whole and in particular from the fact that the other two methods of disposal required such a valuation. While this line of reasoning was criticised by Professor Martin Hogg ((2011) Edin LR 406) on the ground that it protected a party from its commercial fecklessness, it seems to me to be the correct approach in that case as the internal context of the contract pointed towards the commercially sensible interpretation. The context, whether internal to the contract or otherwise, provides little assistance in this case. Beyond the words of the relevant clauses, there is the context of the other provisions of each of the 25 individual leases which are at issue. They are long leases, having a term of 99 years. The court in interpreting the leases can and should take into account the great difficulty in predicting economic circumstances in the distant future and ask itself whether the parties really intended to do so. The court also can and should take into account the economic circumstances which prevailed at the time each lease was entered into. It is clear from the table which Lord Carnwath has set out in para 100 of his judgment that between 1974 and 1988 the use of a 10% annual escalator achieved a result which was not far off the diminution of the value of money in the difficult economic circumstances that then prevailed. The future was and is unknown. Little else is known and I do not think that it is appropriate to speculate about the extent to which lessees would have known the terms of earlier leases. In my view there is much to be said for the practice, which Lord Drummond Young and other judges have encouraged in Scotland, of requiring parties to give notice in their written pleadings both of the nature of the surrounding circumstances on which they rely and of their assertions as to the effect of those facts on the construction of the disputed words: MRS Distribution Ltd v DS Smith (UK) Ltd 2004 SLT 631, para 14. Such notice of relevant facts, which are either admitted or proved at trial, would avoid disputes on appeal such as whether the affected lessees were aware of the earlier leases. While there are infelicities in the language of the relevant clauses in some of the leases and no clear explanation of minor changes in drafting, I am not persuaded that the meaning of the language is open to question when full weight is given to the very limited factual matrix with which the courts have been presented in this case. We are invited to construe that which reads on a first consideration as a fixed service charge with an escalator to deal with future inflation, as a variable service charge which is subject to a cap to which the escalator applies. I find that very difficult. In my view there is nothing in the relevant context to support the construction of the clause as creating a cap, other than the view, which events have fully justified, that it was unwise of the lessees to agree to a fixed service charge with an escalator based on an assumption that the value of money would diminish by 10% per year. This conclusion is not a matter of reaching a clear view on the natural meaning of the words and then seeing if there are circumstances which displace that meaning. I accept Lord Clarkes formulation of the unitary process of construction, in Rainy Sky SA v Kookmin Bank [2011] 1 WLR 2900, para 21: [T]he exercise of construction is essentially one unitary exercise in which the court must consider the language used and ascertain what a reasonable person, that is a person who has all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract, would have understood the parties to have meant. In doing so the court must have regard to all the relevant surrounding circumstances. If there are two possible constructions, the court is entitled to prefer the construction which is consistent with business common sense and to reject the other. This unitary exercise involves an iterative process by which each of the rival meanings is checked against the provisions of the contract and its commercial consequences are investigated (Re Sigma Finance Corp ([2009] UKSC 2) [2010] 1 All ER 571, para 12 per Lord Mance). But there must be a basis in the words used and the factual matrix for identifying a rival meaning. The role of the construct, the reasonable person, is to ascertain objectively, and with the benefit of the relevant background knowledge, the meaning of the words which the parties used. The construct is not there to re write the parties agreement because it was unwise to gamble on future economic circumstances in a long term contract or because subsequent events have shown that the natural meaning of the words has produced a bad bargain for one side. The question for the court is not whether a reasonable and properly informed tenant would enter into such an undertaking. That would involve the possibility of re writing the parties bargain in the name of commercial good sense. In my view, Mr Morsheads formulation (para 67 above), on which his case depends, asks the court to re write the parties leases on this illegitimate basis. Nor is this a case in which the courts can identify and remedy a mistake by construction. Even if, contrary to my view, one concluded that there was a clear mistake in the parties use of language, it is not clear what correction ought to be made. The court must be satisfied as to both the mistake and the nature of the correction: Pink Floyd Music Ltd v EMI Records Ltd [2010] EWCA Civ 1429, para 21 per Lord Neuberger MR. This is not an unusual case, such as KPMG (above) in which a mistake was obvious on the face of the contract and the precise nature of the correction had no effect on the outcome. My conclusion that the court does not have power to remedy these long term contracts so as to preserve the essential nature of the service charge in changed economic circumstances does not mean that the lessees predicament is acceptable. If the parties cannot agree an amendment of the leases on a fair basis, the lessees will have to seek parliamentary intervention. LORD CARNWATH: (dissenting) Preliminary comments The contractual provisions in this case pose unusual interpretative challenges, which may call for unusual solutions. The leases with which we are concerned are of 25 chalets within Oxwich Leisure Park, in South Wales. It is an estate of 91 such chalets first developed in 1974. It is in an attractive holiday location close to Oxwich Beach on the Gower Peninsular. The challenges arise from a combination of factors. The intention, stated in the preamble to each lease, was that they should be upon terms similar in all respects . Yet we are faced with five forms of service charge provision, agreed over a period of some 20 years, the variations in which at first sight defy rational analysis. As interpreted by the Court of Appeal, they would lead over the course of the leases to supposedly proportionate service charges becoming wholly disproportionate to the costs of the relevant services, to extreme and arbitrary differences between the treatment of different groups of leases within the estate, and to the prospect in the foreseeable future of potentially catastrophic financial consequences for the lessees directly concerned. It does not help that, remarkably, the case has come to us with minimal evidence to explain the circumstances, or factual matrix, in which these variations were agreed at different times, or even simply to add some context or colour to the bare legal and statistical analysis. That applies even to the most recent, and most surprising, of the transactions, effected as recently as 2000, and to which Mrs Arnold the present respondent was herself a party. Nor have we been told anything about how the clauses have been operated in practice at any time: for example how the estate has been managed and what costs incurred by the lessor, what service charge payments have been demanded of the various categories of lessee, and what has happened to any surplus. It is to be borne in mind also that in the early 1970s (when this clause was first devised) variable service charge provisions were a relatively new and modern addition to the law, prompted in part by rapidly increasing prices (see Mark Wonnacott, The History of the Law of Landlord and Tenant in England and Wales (2012) p 105; Hyams v Titan Properties Ltd (1972) 24 P & CR 359). Since then, it is said in the same history (ibid p 106), service charges have caused more trouble between landlord and tenant than anything else, but they have in turn been regulated by statute to such an extent as to make it all but impossible for an amateur landlord to recover (a service charge) in the event of a dispute. Whether or not that extreme view is justifiable, the need for special measures to safeguard the interests of lessees has been acknowledged by the legislature, which has thus for the most part relieved the courts of responsibility for developing a common law response to the problems. As I shall explain, these leases are a rare example of a category of residential lease which has slipped through the statutory net. That is of no direct relevance to the legal issues before us, save that it may help to explain why no ready solutions are to be found in the authorities. Furthermore, in so far as policy has a part to play in the development of the common law, it may be legitimate to seek guidance in the approaches adopted by the legislature in analogous contexts (see Johnson v Unisys Ltd [2003] 1 AC 518 para 37, per Lord Hoffmann). The leases The first lease was granted on 26 October 1974. Of the others most were granted during the 1970s, and are not directly involved in the present dispute. The 25 with which we are concerned were granted (or varied) in the period from 1980 to 2000. Whenever granted, all the leases (with one immaterial exception) were expressed as being for terms of 99 years starting from 25 December 1974, and for a yearly rent of 10, increasing by 5 for every subsequent period of 21 years. Each lease began with a preamble which described the lessor as the owner of the land edged pink on the attached lay out plan (the estate) and stated: (2) It is intended to erect chalets on the estate and to grant leases upon terms similar in all respects to the present demise. The lessees covenants (clause 3) limited the use to that of a holiday residence of a single family from March to October (clause 3(12)). It seems from the examples before us that the earliest leases were granted in return for lessees covenants to construct chalets in accordance with plans approved by the lessors (eg chalet 40 lease dated 9 August 1977, clause 3(3)). Later chalets, presumably after erection of chalets by the lessor or others, were granted without such a covenant but for a premium (eg 13,000 for chalet 76 lease dated 22 September 1980; 16,500 for chalet 96 lease dated 1 July 1985). Otherwise no issue arises on the lessees covenants other than clause 3(2) relating to service charges, to which I will come. The lessors in turn covenanted to provide various common services. They included constructing and maintaining the roads and footways (unless or until becoming maintainable at public expense), mowing lawns, maintaining a recreation ground, keeping fences and drains in good repair, issuing regulations, and arranging refuse collection and a regular patrol to discourage vandalism during the unoccupied period (clause 4). By clause 4(viii) the lessors covenanted: (viii) That the Leases granted by the Lessors of all other plots on or comprised in the estate shall contain covenants on the part of the Lessees thereof to observe the like obligations as are contained herein or obligations as similar thereto as the circumstances permit. Five leases have been selected for the purpose of showing the different versions of clause 3(2) relevant to the dispute. The principal difference is between the original leases, granted between 1974 and 1980, in which an initial service charge figure of 90 is increased by 10% every three years (the triennial formula), and later leases in which it is increased by 10% every year (the annual formula). The five versions were applied as follows (the selected lease in each case is indicated in brackets): i) Version 1 (Chalet 40, dated 9 August 1977) This was the original version, applied to 70 leases granted mainly during the 1970s. The first was granted on 26 October 1974. The rest followed at a steady rate over the next six years at an average of just over 12 per year, until 1980 when seven were granted in this form, the last on 9 July 1980. Four of these leases (granted between August 1977 and July 1980) were varied in 2000 to incorporate the annual formula (see version 5 below). ii) Version 2 (Chalet 76, dated 22 September 1980) This version applied to 14 leases granted between August 1980 and February 1983, the first being dated 11 August 1980. iii) Version 3 (Chalet 96 dated 1 July 1985) This applied to three leases granted between July 1985 and January 1988. iv) Version 4 (Chalet 29 dated 22 March 1991) This applied to four leases granted between December 1988 and March 1991. v) Version 5 (Deed of variation dated 20 August 2000) This applied to four leases previously subject to version 1. The lessors for the first three selected leases in this list were Mr A and Mr B Lewis; for version 4, Mrs J Short; and for version 5, Mrs Arnold, the present respondent. In the result the triennial formula now applies to 66 leases on the estate, the annual formula to 25. dispute: i) I now set out the five clauses, emphasising the parts which are material to the Version 1 triennial (1974 1980) To pay to the Lessors without any deductions in addition to the said rent a proportionate part of the expenses and outgoings incurred by the Lessors in the repair maintenance renewal and the provision of services hereinafter set out the yearly sum of Ninety Pounds and value added tax (if any) for the first three years of the term hereby granted increasing thereafter by Ten Pounds per Hundred for every subsequent Three year period or part thereof. ii) Version 2 annual (1980 1983) To pay to the Lessors without any deductions in addition to the said rent as a proportionate part of the expenses and outgoings incurred by the Lessors in the repair maintenance and renewal of the facilities of the Estate and the provisions of services hereinafter set out the yearly sum of Ninety pounds and Value Added tax (if any) for the first year of the term hereby granted increasing thereafter by ten pounds per hundred for every subsequent year or part thereof. Apart from the change from the triennial to the annual 10% rate, other differences are the lengthening of the expression renewal and the provision of services to renewal of the facilities of the Estate and the provisions (sic) of services, and the inclusion of as before a proportionate part. iii) Version 3 annual (1985 1988) To pay to the Lessor without any deductions in addition to the said rent a proportionate part of the expenses and outgoings incurred by the Lessor in the repair maintenance renewal and the provision of services hereinafter set out the yearly sum of Ninety Pounds and Value Added tax (if any) for the first Year of the term hereby granted increasing thereafter by Ten Pounds per hundred for every subsequent year thereof. Changes from version 2 are: reversion to the expression renewal and the provision of services, the omission of as before a proportionate part, and the omission at the end of or part (thereof). iv) Version 4 annual subject to triennial proviso (1988 1991) To pay to the Lessor without any deductions in addition to the said rent a proportionate part of the expenses and outgoings incurred by the Lessor in the repair maintenance renewal and the provision of services hereinafter set out for the yearly sum of Ninety Pounds and value Added tax [if any] for the first year of the term hereby granted increasing thereafter by Ten Pounds per Hundred for every subsequent year thereof. This version was subject to a proviso: Provided always and it is hereby expressly agreed that whilst the term hereby created is vested in the said William Richard Short and the said Janice Short or the survivor of them then maintenance shall be calculated as follows: To pay to the Lessor without any deduction in addition to the said rent a proportionate part of the expenses and outgoings incurred by the Lessor in the repair maintenance renewal and the provision of services hereinafter set out the yearly sum of Ninety Pounds and value added tax (if any) for the first three years of the term hereby granted increasing thereafter by Ten Pounds per Hundred for every subsequent three year period or part thereof. The main clause is identical to version 3 save for the insertion of for before the yearly sum. The proviso had the effect of substituting temporarily the triennial formula as in version 1, but that has ceased to be operative following the disposal of the lease by the Shorts. v) Version 5 varied from triennial to annual (2000) In four of the original 1970s version 1 leases (triennial), a Deed of Variation dated 20th August 2000, at the same time as revising the extent of land demised, substituted with effect from the beginning of the lease a new clause 3(2) in the form of version 2 (annual formula). Although we have been invited to consider all five versions, the most important for the purposes of interpretation are the first (October 1974) and the second (August 1980), and the circumstances surrounding them. The first is not directly in issue but set the drafting pattern, and provided the background to what followed. The second saw the first incorporation of the controversial annual formula. The later versions are of more limited relevance, save in so far as they throw some light on how the clauses were interpreted in practice, or help to illustrate the relative merits of the rival interpretations. The statutory provisions By sections 18 19 of the Landlord and Tenant Act 1985, a service charge (as defined) payable by a tenant of a dwelling, is limited to an amount which reflects the costs reasonably incurred in the provision of services. The controls originally applied only to flats but were extended by amendment in 1987 to include dwellings as defined (Landlord and Tenant Act 1987 section 60). It is not in dispute, in these proceedings at least, that the chalets are dwellings for this purpose. The issue is whether the charges are service charges as defined by section 18(1): service charge means an amount payable by the tenant of a dwelling as part of or in addition to the rent (a) which is payable, directly or indirectly, for services, repairs, maintenance, improvements or insurance or the landlord's costs of management, and (b) the whole or part of which varies or may vary according to the relevant costs. The lessees submit that properly interpreted the clause imposes an obligation to pay a proportionate part of the costs incurred, subject only to an upper limit or cap determined by reference to the formula in the second part of the clause. On this footing it is an amount which varies or may vary according to the relevant costs (section 18(1)(b)). The respondent submits that charge is outside the statutory definition because the annual amount is fixed by that formula, without any reference to the costs actually incurred by the lessor. If the lessees are right, the amount of the charge is limited to the amounts reasonably incurred. If the lessor is right, there is no statutory limit or other control. Other safeguards for lessees were introduced by the 1987 Act, but none covers the present situation. Thus it introduced a new right for any party to a long lease (not only the lessee) of a flat to apply to the court (now the first tier tribunal) for an order varying a lease on the grounds that it fails to make satisfactory provision in respect of various matters, one being the computation of service charges, but this did not apply to other forms of dwelling such as in this case. There is a more general provision, for application by a majority of parties for variation of a number of leases under a single lessor (section 75), but again it applies only to flats. On the other hand, section 40, which allows similar applications for variation of insurance provisions, applies to dwellings in general. It is difficult to detect any legislative purposes for these distinctions. The present case illustrates the potentially unfortunate consequences for parties to those rare forms of residential lease which for no apparent reason fall outside any of the protections given by the legislative scheme. For completeness, I note also that no issue arises in the present proceedings as to the possible application of other more general protections relating to unfair contractual terms. Sections 2 to 4 of the Unfair Contract Terms Act 1977 do not in any event apply to contracts relating to the creation or transfer of interests in land (Schedule 1, paragraph 1(b)). No such limitation appears in the Unfair Terms in Consumer Contracts Regulations 1999 (SI 1999/2083), which give effect in this country to EC Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts. The Directive was first transposed in 1994 Regulations (SI 1994/3159) which were later replaced by the 1999 Regulations. The 1994 Regulations came into effect on 1 July 1995, and therefore would not it seems apply to contracts concluded before that date (regulation 1; Chitty on Contracts para 37 087). Accordingly, it could be relevant if at all only to version 5 (2000). The proceedings We know very little about the background to the present dispute. It first reached the courts in September 2011 in the form of an application by the appellant lessees to the county court for pre action disclosure. The application was said to be in anticipation of a representative application to resolve an ambiguity in the service charge clause, which appears to result in a variable service charge but on the other hand create a fixed service charge. It also spoke of the lessees concerns that the sums collected by way of service charge were exceeding the amount of legitimate expenditure by such a substantial amount as to produce a credit balance that should be held in a service charge trust account; and also that the lessor had disposed of the former clubhouse for the park to provide accommodation for her daughter. They sought disclosure of information about the sums collected as service charge and the amounts expended since 2005. An order for disclosure was made on 20 September 2011, but was quickly met by an application by the lessor for declaratory relief relating to the interpretation of the service charge clause, following which the disclosure order was stayed pending the determination of these proceedings. The application sought in particular a declaration that on the true interpretation of the service charge clause, the sum payable was not a service charge within the meaning of section 18 of the Landlord and Tenant Act 1985. In the county court, HHJ Jarman QC determined the issue in favour of the lessees. But his decision was reversed on appeal to Morgan J, whose judgment was upheld by the Court of Appeal (Richards, Davis and Lloyd Jones LJJ). The lessees appeal to this court with permission granted by the court itself. The issue between the parties has throughout been very narrow: that is, whether the figure of 90 as inflated is to be read as a fixed amount, or as an upper limit or cap. That in turn depends on whether it is permissible and appropriate to read in such words as limited to (Judge Jarmans words) or up to before the reference to ninety pounds. As Mr Morshead submits in his printed case: There is no need to undertake an elaborate drafting exercise. The necessary effect can be achieved by implying the words up to before the words Ninety pounds; and, in versions 2 and 5, deleting the word as. Giving the single judgment in the Court of Appeal, Davis LJ rejected that approach, holding in substantial agreement with Morgan J that the addition of these words would involve subverting the proper process of construction of the language actually used and would in truth involve the court rewriting the bargain the parties have made. (para 45) He rejected the argument that this interpretation would consign the first part of the clause to mere surplusage. Its function was to identify the character of the payment to be made. The words a proportionate part were apt for a situation where other lessees also are contributing to the overall service charge, which is in consequence to be apportioned between them. Although he accepted that the word incurred was the language of actual outlay, it was entirely explicable when one appreciates that this part of the sub clause identifies the character of the payment being made (paras 48 49). He also pointed to other difficulties in Mr Morsheads interpretation, in particular the problems of calculating a proportionate amount, and the lack of any protection for the lessor if the inflation regularly exceeded 10% (para 53). Inflation calculations The judge was shown without objection two sets of tables, one showing the annual Retail Price Index (RPI) from 1948 to 2012, taken from figures published by the Office of National Statistics (the inflation table); the other, the effect of the increases of service charge compounded over the period of the leases in accordance with respectively the annual and the triennial formula (the compounding table). As I understand it, the information in these tables is accepted as forming part of the factual matrix against which it is appropriate to judge the parties contractual intentions at the relevant dates. There are some minor but apparently immaterial differences between the hard copy and electronic versions of the compounding table; I have used the latter. It is helpful to focus on the rates which would have been in immediate contemplation of the parties at dates when each of the five versions was first agreed: that is, 26 October 1974 (the date of the first lease on the estate incorporating version 1, rather than the 1977 lease which was used as an example at the hearing); 11 August 1980 (the first version 2 lease); 1 July 1985 (version 3); 1 December 1988 (the first version 4 lease); 20 August 2000 (version 5). The table below includes also the rate in contemplation at the date of the county court hearing (June 2012), and in the last year of the lease (2072). The figures in the compounding table are given for 25 December 1974, the commencement of the lease period, and for the same date in each subsequent year. For illustrative purposes I have taken the rate for the year commencing after each of the identified dates (ie 25 December next following each such date), which would have been the rate applicable to the first complete year under each new lease. The resulting figures (rounded) for annual service charges at each such years: 1974 1980 1985 1988 2000 2012 2072 Triennial 90 109 132 145 212 311 1,900 Annual 90 159 257 342 1,073 3,366 1,025,004 [Actual inflation] 90 219 310 350 557 794 N/A [The last column shows for purposes of comparison the equivalent figures implied by actual inflation, arrived at by increasing the initial 90 by the recorded price increases over the period from 1974 to each of the selected years. Though not in evidence before us, those figures have been taken from the inflation calculator on the Bank of Englands website, and are used for illustration only.] The rate of price increase during the 1970s can also be contrasted with the pattern in the previous and subsequent decades. Average annual inflation in the 1950s and 1960s was of the order of 3.5 4%. (It had averaged 2.5% in the 50 years from 1900 to 1950.) It then rose sharply to 6.4% in 1970 and 9.3% in 1973, followed by a much steeper rise to 16% in 1974 and an annual peak of 24.2% in 1975. It dropped to 8.3% in 1978 before rising again to 16% in 1980. The annual rate fell to 12% in 1981, and then to around 5 6% in the period 1983 85 (immediately before version 3), 4 5% in 1986 1988 (before version 4), and 3% in 2000 (version 5). It has remained at, or below, that low level ever since. The compounding table enables comparisons to be drawn between the contributions made respectively by the 66 triennial and the 25 annual leases over different periods, if the lessor is correct. For example, on the 1988 figures, the triennial leases would have contributed a total of 8,712 (66 x 132), slightly more than the total contribution of the annual leases (8,550 = 25 x 342). On the basis of the figures in the third column, the combined total (17,262) was still much lower than the figure required to keep pace with actual inflation since 1974 (91 x 350 = 31,850). The figures at or about the time of the hearing show a very different picture. On the 2012 figures the triennial leases would have been contributing a total of 18,612 (66 x 282) compared to 84,150 (25 x 3,366) contributed by the annual leases. The total amount (102,762) was now substantially more than that required to keep pace with inflation (91 x 794 = 72,254). (These figures differ slightly from those in the submitted tables due to rounding.) The table also shows the amounts that, on the lessors interpretation, would be payable under each formula over the whole period from 24 December 2013 to the end of the term (2072). The total amount payable during that period under each annual lease would be 11,238,016, compared to 53,386 payable for the same period under each triennial lease. Inflation and the factual matrix There is no difficulty in principle in taking account of the calculations in the compounding table, which require no outside information, and could have been carried out by the parties (or a reasonable observer) at any of the relevant dates. On the Court of Appeals interpretation, the figures show increases which appear extraordinary in themselves, in the light of modern conditions of low inflation. No less importantly, they result in dramatically increasing, and ultimately grotesque, differences between the amounts payable by the two different groups of lessees on the same estate. This consequence could and should have been anticipated at the time, certainly by the lessors who were parties to both groups of leases and responsible for maintaining reasonable equivalence between them. The use to be made of the historic inflation figures raises rather different questions. By agreeing to their use, the parties impliedly ask us to assume that the figures up to and including those for each of the relevant years (or the then most recently published figures) would been have been known to the parties at the time, and therefore must be taken as part of the relevant factual matrix. This is no doubt a reasonable working assumption to indicate the general trend as known to the public. It is however highly artificial to be asked to take account of the bare statistics, without reference to the political and economic circumstances which surrounded them, so far as they were common knowledge at the time. We are not required to assume total ignorance of current events, in the parties or their reasonable observers. It would not have been difficult to obtain information about contemporary perceptions of the direction of inflation, whether from official reports of the time, or from reports in the South Wales press. Even without such evidence, we are entitled in my view to assume knowledge of some of the key events: for example, of the dramatic rise in oil prices at the end of 1973 and again in 1979, each followed by a sharp increase in inflation in the following year; and also of the election in 1979 of a new Conservative government committed to controlling inflation. We are not required to assume that predictions about future inflation were made in a vacuum. We are also entitled, as part of the factual matrix, to take account of the nature and circumstances of the estate, as they would have been perceived by potential purchasers. It was planned as a holiday estate close to a popular beach. Potential buyers were likely to come from people already familiar with the area from previous visits with their families. It is fair to assume also that they would have regarded the acquisition of a holiday chalet, not simply as source of pleasure, but also as a long term investment for them and their families. They would have been keen to avoid undue financial burden or risk. It would be strange if they had not taken the opportunity to talk to existing residents about their own experiences of the estate and its management, and of the associated costs. This will become relevant when considering what knowledge of previous terms should be attributed to the first version 2 lessees. Approach to interpretation In an unusual case such as this, little direct help is to be gained from authorities on other contracts in other contexts. As Tolstoy said of unhappy families, every ill drafted contract is ill drafted in its own way. However, the authorities provide guidance as to the interpretative tools available for the task. The general principles are now authoritatively drawn together in an important passage in the judgment of Lord Clarke JSC in Rainy Sky SA v Kookmin Bank [2011] 1 WLR 2900, paras 14 30. As that passage shows, there is often a tension between, on the one hand, the principle that the parties common intentions should be derived from the words they used, and on the other the need if possible to avoid a nonsensical result. The former is evident, as Lord Clarke emphasised, in the rule that where the parties have used unambiguous language, the court must apply it (para 23). However, in view of the importance attached by others to the so called natural meaning of clause 3(2), it is important to note that Lord Clarke (paras 20 23) specifically rejected Patten LJs proposition that unless the most natural meaning of the words produces a result so extreme as to suggest that it was unintended, the court must give effect to that meaning. In Lord Clarkes view it was only if the words used by the parties were unambiguous that the court had no choice in the matter. He illustrated the other side of the coin by quotations from Lord Reid in Wickman Machine Tools Sales Ltd v L Schuler AG [1974] AC 235, 251: The fact that a particular construction leads to a very unreasonable result must be a relevant consideration. The more unreasonable the result, the more unlikely it is that the parties can have intended it, and if they do intend it the more necessary it is that they shall make that intention abundantly clear. and Lord Diplock in Antaios Cia Naviera SA v Salen Rederierna AB (The Antaios) [1985] AC 191, 201: If detailed and syntactical analysis of words in a commercial contract is going to lead to a conclusion that flouts business common sense it must yield to business common sense. As a rider to the last quotation, Lord Clarke cited the cautionary words of Hoffmann LJ (Co operative Wholesale Society Ltd v National Westminster Bank plc [1995] 1 EGLR 97, 99): This robust declaration does not, however, mean that one can rewrite the language which the parties have used in order to make the contract conform to business common sense. But language is a very flexible instrument and, if it is capable of more than one construction, one chooses that which seems most likely to give effect to the commercial purpose of the agreement. I agree with Mr Morshead (questioning in this respect the approach of Davis LJ, para 35) that it may be unnecessary and unhelpful to draw sharp distinctions between problems of ambiguity and of mistake, or between the different techniques available to resolve them. In Chartbrook Ltd v Persimmon Homes Ltd [2009]1 AC 1101, para 23, Lord Hoffmann cited with approval a passage of my own (in KPMG LLP v Network Rail Infrastructure Ltd [2007] Bus LR 1336, para 50) where I discussed the role of what is sometimes called interpretation by construction. I criticised the tendency to deal separately with correction of mistakes and construing the paragraph as it stands, as though they were distinct exercises, rather than as aspects of the single task of interpreting the agreement in its context, in order to get as close as possible to the meaning which the parties intended. Lord Hoffmann added: What is clear from these cases is that there is not, so to speak, a limit to the amount of red ink or verbal rearrangement or correction which the court is allowed. All that is required is that it should be clear that something has gone wrong with the language and that it should be clear what a reasonable person would have understood the parties to have meant. (para 25) Another permissible route to the same end is by the implication of terms necessary to give business efficacy to the contract. I refer again to Lord Hoffmanns words, this time in Attorney General of Belize v Belize Telecom Ltd [2009] UKPC 10, [2009] 1 WLR 1988, para 22, explaining the two important points underlined by that formulation: The first, conveyed by the use of the word business, is that in considering what the instrument would have meant to a reasonable person who had knowledge of the relevant background, one assumes the notional reader will take into account the practical consequences of deciding that it means one thing or the other. In the case of an instrument such as a commercial contract, he will consider whether a different construction would frustrate the apparent business purpose of the parties. The second, conveyed by the use of the word necessary, is that it is not enough for a court to consider that the implied term expresses what it would have been reasonable for the parties to agree to. It must be satisfied that it is what the contract actually means. Aberdeen City Council v Stewart Milne Group Ltd [2011] UKSC 56 is a useful recent illustration in this court of how these various principles may be deployed, to enable the court to achieve a commercially sensible result in the face of apparently intractable language. A contract for the sale of development land gave the council the right to an uplift (described as the profit share) in certain defined circumstances, one being the sale of the property by the purchaser. The issue was the calculation of the profit share, which the contract defined as a specified percentage of the estimated profit (defined by reference to open market value) or the gross sale proceeds. The issue was how the definition should be applied in the case of a sale by the purchaser to an associated party at an undervalue. The court held in agreement with the lower courts that, in that event, notwithstanding the apparently unqualified reference to gross sale proceeds, the calculation should be based on open market value. In a concurring judgment, with which all the members of the court agreed, Lord Clarke referred to his own judgment in Rainy Sky as indicating the ultimate aim, that is: to determine what the parties meant by the language used, which involves ascertaining what a reasonable person would have understood the parties to have meant; the relevant reasonable person being one who has all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract. (para 28) As he pointed out, on the face of it the reference in the contract to the gross sale proceeds was a reference to the actual sale proceeds received by the appellants. It was not easy to conclude as a matter of language that the parties meant, not the actual sale proceeds, but the amount the appellants would have received on an arm's length sale at market value of the property; nor was it easy to conclude that the parties must have intended the language to have that meaning. He referred to the comment of Baroness Hale in the course of the argument that: unlike Rainy Sky, this is not a case in where there are two alternative available constructions of the language used. It is rather a case in which, notwithstanding the language used, the parties must have intended that, in the event of an on sale, the appellants would pay the respondents the appropriate share of the proceeds of sale on the assumption that the on sale was at a market price. He thought the problem should be solved by implying a term to the effect that, in the event of a sale which was not at arms length in the open market, an open market valuation should be used. As he explained: If the officious bystander had been asked whether such a term should be implied, he or she would have said of course. Put another way, such a term is necessary to make the contract work or to give it business efficacy. He preferred the use of an implied term to a process of interpretation, although the result is of course the same. (paras 30 33) As Mr Morshead observes, the result in Aberdeen City could probably have been explained equally as a case of correction by interpretation. In any event, this example provides support for his proposition that, where an ordinary reading of the contractual words produces commercial nonsense, the court will do its utmost to find a way to substitute a more likely alternative, using whichever interpretative technique is most appropriate to the particular task. Residential leases Long residential leases are an exceptional species of contract, and as such may pose their own interpretative problems. In no other context is a private individual expected to enter into a financial commitment extending for the rest of his or her life, and probably beyond. The original lessee may have been unaware that (at least under contracts before the Landlord and Tenant (Covenants) Act 1995) he was taking on a personal legal commitment which could continue even after he had disposed of any interest in the property itself (Norwich Union Life Insurance Society v Low Profile Fashions Ltd (1991) 64 P & CR 187). So far as it relates only to ground rent, the commitment is unlikely to be burdensome, and it may be readily accepted as a necessary incident of a valuable property interest. Service charges are a different matter, since the amounts may be substantial, and, apart from statute, the lessee is likely to have no direct control over the lessors expenditure. Where the lease is for one of a number of units in a managed building or estate, provision has to be made for expenditure by the lessor on common services and maintenance, and for the cost to be shared between the lessees. Substantial equivalence of rights and obligations under such leases is normally important for all parties, both for the good management of the building or estate, and for harmony among those living within it. Equivalence can only be achieved by the lessor, who alone is party to them all. After the first lease has been negotiated and granted, later incoming lessees will usually have little choice in practice but to accept the covenants in the form dictated by the lessor. Their reasonable expectation will be that all have been granted in like terms, both in terms of covenants and in terms of sharing financial responsibility for services, with a view to ensuring fair distribution of the overall cost. Often that expectation and the lessors responsibility for achieving it, will be expressed in the terms of the lease (as here, in the preamble and clause 4(viii)). Mr Daiches submits, correctly in my view, that the effect of such words is to create a letting scheme, or local law, of negative obligations mutually enforceable in equity between all occupiers of the properties on the estate. He cites authorities such as In re Dolphins Conveyance [1970] Ch 654, which related to an estate of freehold properties. Examples of the same principle as applied to leasehold developments are given in the textbooks (see Megarry & Wade Law of Real Property 8th ed (2012), para 32 079). As I understand his argument, he asks us to infer that a clause such as 4(viii) has to look to the future not the past, and that accordingly it is not to be construed as containing any implied representation as to previous leases. I cannot agree. In my view, the existence of such a scheme reinforces the view that each lessee has a legitimate interest in the form and content of all leases within the development, whenever granted. Even if, as in clause 4(viii), the lessors responsibility is expressed as an obligation in respect of future leases, it should in its context (including the preamble) be read also as containing an implied representation that leases previously granted are also in substantially the same form. Provision for services is normally dealt with by reciprocal covenants, positive in form: by the lessor to arrange and pay for the carrying out of the necessary services, and by the lessees to pay their respective shares of the costs so incurred. There is no common format for such service charge covenants, and they can and do vary greatly between different buildings or estates. Unlike negative covenants, it seems that they are not mutually enforceable as such, but the expectation is that they will have been drafted to ensure that the lessees financial obligations are shared fairly between them all. Again this is in the interests of good management and harmony within the development for both lessor and lessees. Differences may be necessary to cater for differences in size of the individual units or other features, but otherwise they will normally be in a standard form in all the leases. In the courts below there was some discussion of the restrictive approach said to be appropriate to service charge provisions (McHale v Earl Cadogan [2010] 1 EGLR 51, para 17 per Rix LJ). I agree, if by this it is meant that the court should lean towards an interpretation which limits such clauses to their intended purpose of securing fair distribution between the lessees of the reasonable cost of shared services. Support for this approach is to be found also in the disparity in practice between the potential remedies available to each party for breach by the other. A lessor who fails to maintain services at the level thought appropriate by the lessees is in principle open to enforcement action in court. But the practical effect of such action for the lessees is uncertain in the absence of a precise definition of what he is required to provide. If there has been a complete breakdown of services, they may be able to obtain injunctive relief or appointment of their own manager. In less extreme circumstances the form of remedy or the extent of any damages may be difficult to define. By contrast, the lessors remedies for breach of the service charge clause are all too clear. In the Court of Appeal, Davis LJ was apparently content to assume that the charges might in extremis, force some of these lessees into surrender or forfeiture (para 57). However, if by this he intended to imply that either escape route would be available to the lessees other than by agreement with the lessors, he would have been wrong. Apart from any special provision, the lessees obligation, once the service charge has been determined, will have crystallised into a contractual obligation to pay a fixed amount. That is in principle enforceable by a simple action through the courts, and ultimately by forfeiture and bankruptcy. The legislature intervened long ago to provide some statutory relief against forfeiture (Law of Property Act 1925, section 146). But that provides no protection against enforcement of the personal liability to pay the contractual amount. As already explained, the scope for abuse has been recognised by the legislature in the special provision made for controlling variable charges as defined in the 1987 Act. Fixed service charges do not normally give rise to the same risk of abuse. The lessee is given the certainty of a fixed financial commitment, and the lessor has the advantage of simplified administration. Provision is needed to deal with price inflation. But if this is fixed by reference to an independent formula, such as an official inflation index, there is no significant risk to either party. The approach adopted in this case seems highly unusual, if not unique. Even where the legislature has not intervened, the courts have a responsibility in my view to ensure that such clauses are interpreted as far as possible not only to give effect to their intended purpose, but also to guard against unfair and unintended burdens being placed on the lessees. Interpretation of clause 3(2) Against that general background, I come to consider the construction of clause 3(2) in its various versions. At first sight, the main principles seem reasonably clear: i) The intention was that all the leases should be on terms as similar as the circumstances permit, and that it was the lessors responsibility to achieve such equivalence (necessarily, since only they would be party to all of them) (preamble (2); clause 4(8)) ii) The commercial purpose of clause 3(2) was to enable the lessor to recover from the lessees the costs incurred by him in maintaining the estate on their behalf, the payment by each lessee being intended to represent a proportionate part of the expenses so incurred. iii) Although there was a general description of the services which the lessor was contractually obliged to provide, the extent of those services was not precisely defined by the lessors covenants (clause 4), which left to them a large measure of discretion as to the amounts to be spent in practice. In themselves, these features are typical and uncontroversial. It is at the next stage, in giving effect to those principles, that the clause becomes problematic. It is clear to my mind that something has gone wrong with the drafting, at least in the original wording, as it appeared in the 1974 version, and (apart from the change of inflation formula) was repeated in 1985 and 1988. The clause imposes an obligation to pay, but contains two different descriptions of the payable amount: by reference, first, to a proportionate part of the expenses and outgoings incurred by the Lessor in the repair maintenance renewal and the provision of services , and secondly, to a yearly sum determined by reference to a fixed formula. There are two linguistic problems. First, there is no grammatical connection to show the relationship between the two descriptions. Secondly, they are mutually inconsistent. A figure can be determined as a proportionate part of some other variable amount, or it can be a yearly sum, fixed by a predetermined formula; but it cannot be both. There is an inherent ambiguity which needs to be resolved. In the Court of Appeal Davis LJ thought that the first part of the clause was designed simply to identify the character of the payment to be made (para 48). I find that unconvincing. If the intention was to indicate no more than the purpose of the payment, one would have expected some such general words as by way of contribution to the services, not a detailed and specific formula. Conversely, if the character of the contributions was to be that of payments determined by reference to a fixed formula and nothing else, the description in the first part was neither accurate nor useful. Proportionality had no part to play in such a fixed calculation, nor any relation to reality after 1980 if the courts interpretation is correct. Nor is it easy to explain the purpose of the specific reference to expenses and outgoings incurred by the lessor on a defined range of services, unless it was intended to play some material part in the calculation. At this point it is convenient to note the minor differences of wording in some later versions. A change such as the omission of the words or part in version 3 can readily be dismissed as a copying error. Others give more room for argument. It would be tempting to read more significance into the word as, which appears for the first time in the important 1980 version 2. Grammatically, it may be said (with Davis LJ para 54), the insertion of the word as implies that the operative text is in the second part of the clause, the first part being merely descriptive. There are two difficulties with that explanation. First, for the reasons I have given, neither the reference to proportionality nor the detail of the formula in the first part is compatible with that limited sense. Secondly, there are linguistic indications the other way. The word as did not survive into any of the later versions, except the 2000 deed of variation (version 5), which seems to have been copied directly from version 2. Version 2 itself also saw the introduction of a new reference to expenditure on the renewal of the facilities of the estate, which is hard to explain if the detail of the first part had no practical significance. Version 4 added to the mystery by adopting a different connecting word for, this time in front of the second description (for the yearly sum of ninety pounds). That is even more difficult to interpret, but if anything it seems to imply that it was the first part of the clause which was the primary description. In the end I conclude that no persuasive guidance, one way or the other, is to be derived from these minor changes. There are only two realistic possibilities for the second part of the clause, which are those respectively adopted by Judge Jarman, on the one hand, and Morgan J and the Court of Appeal, on the other. Either it is a fixed amount which in effect supplants any test of proportionality under the first part; or it is no more than an upper limit to the assessment of a proportionate amount. I reject the theoretical alternative that it was designed as a lower limit for the benefit of the lessors. That interpretation would have made no sense at all in relation to version 1, agreed at a time when the possibility of inflation falling below 3% would have occurred to no one as a risk requiring special provision, particularly for the lessor who unlike the lessees was in control the level of his own expenditure. There is thus no doubt that this part of the clause was originally designed for the benefit of the lessees, and I see no reason to think that its purpose had radically changed by the time of version 2. Davis LJ was concerned as to the practicalities of determining the proportionate amount of the qualifying expenditure. Morgan J (para 51) described it as workable but not ideal. I do not see any great difficulty. The relevant items are precisely defined. The lessor has simply to demonstrate (to the lessees and if necessary to the court) that the expenditure has been properly incurred on those items, and that it has been divided proportionately between the lessees. I note that in Hyams v Titan Properties (see para 82 above), which was decided two years before the first of these leases, the court had to fix the terms of a new business lease under the Landlord and Tenant Act 1954 taking account of rapid price inflation. Buckley LJ recorded that the modern practice generally accepted was to make service charges payable on a proportional basis. In that case (where there were nine units) the court approved a clause requiring the tenant to pay one ninth of the cost of providing the services under the covenant in addition to the rent payable under the lease. There was no suggestion that this formulation was defective in the absence of specific machinery to settle the figure. The first half of clause 3(2) follows the same model, allowing for the fact that the precise number of units was probably not known at the outset, so that it was not possible to put in a specific fraction. The use of the same figure of 90 in all the leases (whatever its precise purpose) would have been a strong indication that equal shares were intended. I turn therefore to consider the two alternatives as applied to each of the five versions in its own context. In the words of the authorities, we must inquire what a reasonable person would have understood the parties to have meant, that person being one who had all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract, and who would have also taken into account the practical consequences of deciding that it means one thing or the other. Where necessary the reasonable observer can be invited notionally to take on the more active role of officious bystander, in order to interrogate the parties as to their common intentions. The five versions in context Version 1 (October 1974 July 1980) It is impossible to do more than guess at the common intentions of the parties to the first lease in relation to this part of clause 3(2). It is hard at first sight to see any rational basis for selecting a rate of 10% every three years, at a time when annual inflation was running at around twice that rate. At little over 3% per year, it was a little low even by reference to the inflation of the two previous decades, although it was in line with the historic long term average. In such inflationary conditions, there is no difficulty in understanding why it was acceptable to the lessees. It is the lessors thinking which needs explaining. We know nothing of the first lessors (the Lewises). They may perhaps have been builders, themselves involved in the development of the estate, and so more able to absorb the initial costs of maintenance in their other expenditure. If so, to make the estate attractive to purchasers, they may have gambled on being able to bear the price increases during the early years, in the expectation of inflation falling to more reasonable levels in the near future. (Comparable optimism seems to have been reflected in their view of ground rent, which was to be increased by only 50% every 21 years.) In any event, their apparent generosity would be more explicable if, as may have been the case, the figure of 90 was based not simply on an estimate of current costs, but gave a reasonable margin for anticipated inflation in the short term. That possibility is borne out to some extent by the fact that the triennial formula survived, apparently without question, for six years of high inflation. If so, it is certainly possible that, even during that period, it was treated as a cap, the contributions being based on a share of actual expenditure from year to year. (Unlike Morgan J para 32 I see no basis, in the absence of evidence, for any positive inference that service charges were paid, then or later, in accordance with the lessor's interpretation.) Since version 1 is not in issue, it is unnecessary to decide between the alternative interpretations at this stage. Version 1 does however provide the necessary background to the contentious versions which came later. It makes clear that the inclusion of a specific figure for inflation was designed originally for the benefit of the lessees not the lessor. It may also enable one to discount any intention on the part of the Lewises at least to take unfair advantage of their lessees. Version 2 (August 1980 February 1983) As I have said, the fact that it took the Lewises six years to react to the apparent disparity between the triennial formula and actual inflation suggests that, one way or another, they were able to maintain expenditure within the initial figure for some time. The change of heart may well have been triggered by the renewed jump in inflation in 1979, which reached its peak in summer 1980, although it is notable that the last version 1 lease was granted as late as July 1980. If the Court of Appeal is right, there was then in August 1980 a dramatic change in their thinking, from the exaggerated optimism which had prevailed over the last six years, to such abject pessimism about the future of the economy that they thought it reasonable to assume continuing 10% inflation for the remaining 93 years of the leases, and to expect their purchasers to share that assumption. If that is the correct interpretation, they would have been contemplating an impossibility, even for economists. In Pennant Hills Restaurants Pty Ltd v Barrell Insurances Pty Ltd [1981] HCA 3, (1981) 145 CLR 625, 639 Gibbs J spoke of the reasons for making no allowance for inflation in awards for future loss: It is unreasonable to suppose that any economist will be able to predict with accuracy the nature and extent of changes in the purchasing power of money during a period extending for several decades ahead. Whether inflation increases or is brought under control depends upon political and economic events and decisions at home and abroad as to whose occurrence it is not possible to do more than conjecture. Predictions as to the economic future in 30 years time may perhaps be made by a soothsayer but expert evidence cannot rationally be given on such a subject. (cited with approval by Lord Hope in Helmot v Simon [2012] UKPC 5, para 45) If that is unreasonable for an economist, how much less likely is it as an explanation of the thinking of the lessors or lessees of these modest holiday chalets in August 1980? The improbability becomes even more striking when one compares the figures for the new and old groups of lessees. It is true that, even as a cap, the annual formula would result in the new lessees paying more initially than the existing lessees (159 in 1980, compared to 109 under version 1). But over the period of the lease the differences become grotesque. On the Court of Appeals interpretation the parties were accepting, as a mathematical certainty, that by the end of the lease period each lessees service charges would have totalled over 11m, more than 200 times the amounts payable by the existing lessees. Put the other way, if the assumed prediction were correct, the lessees of more than two thirds of the chalets on the estate would by then have contributed 200 times less than the figure necessary for the lessors expenditure to keep pace with inflation. Even from the lessors point of view, that scenario implied commercial disaster. Whatever the lessors state of mind, it beggars belief that the new lessees would have been content to proceed on that basis. It is particularly improbable for a person of ordinary means investing perhaps limited savings in a holiday home. It is simply inconceivable that such a potential purchaser would have been willing to accept a prediction of continuing inflation at that level for over 90 years, and to take that as a basis for undertaking a contractual obligation lasting for the rest of his life and beyond without any escape route. There has been some discussion before us as to whether the lessees would have known of the comparable clauses in the previous leases. Mr Daiches asks us (and through us the reasonable observer) to proceed on the basis that the new lessees in 1980 would have been unaware of the triennial formula used in the previous leases, and says that is the basis on which the case has been approached hitherto. I am unwilling to make that assumption, which I regard as wholly unrealistic. It is not on any view an assumption that can be made in respect of versions 4 and 5, where the change was apparent on the face of the documents (see below). Even without direct information in the documents, a potential purchaser in 1980 could be expected to have wanted to satisfy himself about the existing arrangements within the estate, and would have had a legitimate interest in doing so. Absent bad faith, it is hard to see any reason why the lessor would have wished or felt able to hide information about the previous leases. In any event, it could readily have been discovered by talking to other lessees within the estate. In Lord Clarkes words, it would have been background knowledge reasonably available to the parties in the circumstances of the contract. I would accordingly approach the interpretation of version 2 on the assumption that both parties (like their reasonable observer) would have been aware of the proposed change from the triennial formula, and that they are to be taken as having accepted the change for what they regarded as good reasons. On the basis that it was intended as a cap, the lessees thinking is understandable. They would have needed persuasion to take the leases on less generous terms than their predecessors. On the other hand, they would have understood that any assumptions made in 1974 about the prospects of an early fall in inflation had been falsified by events. They would have understood also that the lessor would find it difficult to support reasonable expenditure on services without some adjustment. We do not of course know what if anything may have been said about increasing future contributions from the existing lessees to ensure fair distribution. But from their own point of view, with current inflation at or around 20%, substitution of a limit of ten per cent might have been seen by them as an acceptable compromise for the immediate future, while allowing for a return to more normal levels in the medium term. That may not be a complete explanation, but it is at least plausible, unlike the alternative. As in the Aberdeen Council case, we can imagine the responses of lessor and lessee to questioning by the officious bystander as to the purpose of the clause. Did they really intend to enter into a contract which had the extraordinary long term implications outlined in the previous paragraphs? I find it hard to conceive of any other response than of course not; it is a cap not a fixed amount. The alternative would have seemed absurd and unreasonable to both, as much to the lessor as to the lessees. The Court of Appeal thought they were applying the natural meaning of the clause, and that it was not the task of the court to relieve the lessees of a bad bargain entered into in different circumstances, albeit possibly without having done their arithmetic. For the reasons I have given, I am not convinced that the natural meaning is that adopted by the Court of Appeal, at least once one discounts the inclusion of the word as in version 2, or that, even if it is, it relieves the court of the obligation to seek a sensible result. On the other side of the coin, I agree with Mr Morshead that bad bargain is a gross understatement of the implications of their interpretation, which as he says were from the outset not only stark but disastrous. Nor do I see any reason to assume that these contracting parties, treated (in Lord Hoffmanns words) as alive to the practical consequences of the alternative interpretations, should have been ignorant of the ordinary principles governing compound interest. Version 3 (1985) By this time inflation had fallen significantly to around 5 6%. Pessimistic thoughts about the future direction of inflation for the foreseeable future would have largely dissipated. If it was difficult in 1980, it would surely be impossible now, for the reasonable observer to imagine the parties committing themselves, even in the medium term, to a fixed inflation figure of almost double the current rate. As a cap, it would hardly have attracted attention. Version 4 (1988) By this time annual inflation had fallen to less than 5%. The annual formula produced a figure more than double that implied by the triennial formula, but one closely comparable to that resulting from actual inflation since 1974 (342 compared to 350, in the table at para 100 above). If the then lessor, Mrs Short, was still charging her pre 1980 lessees by reference to the lower triennial rate, it raises a question of how she was covering her own expenditure on services, in circumstances where two thirds of the leases were contributing at only half the rate implied by inflation since 1974. That may suggest either that she was able in practice to keep expenditure to a level significantly below that implied by inflation, or possibly that in order to maintain services at a reasonable level some of the pre 1980 lessees had been persuaded to pay more than their strict obligation. The only novel feature of this version is that it was subject to a proviso in effect substituting the triennial formula during the tenure of the named lessees. It appears to have escaped notice in the courts below that the example used for this version was in a lease between the lessor, Mrs J Short, and herself and a Mr W R Short (her husband) as joint lessees. Since the hearing it has been confirmed that she had the same interest in the other three proviso leases granted between 1988 and 1991. They were clearly not arms length transactions. We know nothing about Mrs Short, or her thinking. It is difficult to understand how this special personal protection could have been reconciled with her obligation to the other post 1980 leases (under clause 4(viii)) to ensure that the covenants in these leases were as similar as the circumstances permit. It is even more difficult, at least on the Court of Appeals interpretation, to understand how she would have explained the change to her future assignees, who were to lose that protection. The contrast between the two versions could not have been drawn more clearly to their attention. On the basis that the revised percentage figure was no more than a cap, they may plausibly have been content to accept an obligation to keep pace with inflation, in line with other post 1980 lessees. The alternative assumes that, at time when inflation rates were less than 5% and apparently falling, they knowingly accepted a continuing obligation to pay service charges increasing at twice that rate for the rest of the term. On any view that is absurd. Version 5 (2000) By this time inflation had fallen to about 3%. The clause 3(2) figure was by now more than five times greater under the annual formula than under the triennial formula. As Mr Daiches accepts, the parties to these transactions were fully aware of the differences between the two versions. In those circumstances, whatever the changes in the extent of their holdings, there is on the face of it no rational explanation for four lessees agreeing not only to the loss of the protection of version 1, but to the substitution of a permanent obligation to pay service charges increasing at a rate three times the then current rate of inflation. Since these variations were agreed only 15 years ago, and since by this time the respondent, Mrs Arnold, was herself directly involved, it might have been thought that she at least would be able to throw some light on these extraordinary transactions. After the hearing, the parties were put on notice of the courts concern on this point, and invited to comment. It has emerged that three out of the four variations were agreed between Mrs Arnold and her daughter, Mrs Fraser (signed under a power of attorney by Mrs Arnolds son). The fourth was a Mrs Pace, of whom no information has been provided, save that she is apparently still the owner of the chalet, and she is named as one of the defendants in these proceedings. If there was in Mrs Arnolds thinking a rational explanation for these particular variations, she has not taken the opportunity to disclose it. Instead of such direct evidence, Mr Daiches remarkably asks us to imagine a series of inferences drawn by the parties (including his client and her daughter) and the reasonable observer. They would have inferred, he says, that version 1 lessees were paying less than the rates required by inflation and that there were in consequence historic shortfalls in the lessors service charge income; and that the multiplier was to be increased, not only to take account of actual inflation since 1974, and to reflect the fact that it might once again rise to levels above that implied by the triennial formula, but also to compensate the lessor both for past shortfalls, and for the risk that he or she might not be able to persuade other lessees to agree to similar increases in the future. With respect to Mr Daiches I have to say that, even in this extraordinary case, I find these submissions quite astonishing. Given that his client and her daughter were the principal parties to these transactions, why on earth should the court be expected to draw inferences as to what was in their minds? Why should we speculate as to the extent of any historic shortfalls, when she presumably has access to the actual accounts, and has resisted the lessees requests for disclosure? What evidence is there that by 2000 anyone was seriously concerned about an imminent risk of return to double digit inflation? Finally, what possible reason would these lessees have had for wishing to compensate the lessor for the past or future financial consequences of imperfections in leases for which they were not responsible? With regard to the only independent party, Mrs Pace, Mr Daiches asks us to note that her variation was agreed shortly after the sale of the lease to her by the respondent herself. It should not be difficult, he says, to infer that the purchase price paid by her to the respondent reflected her agreement to increase the multiplier. Although she is apparently one of the appellants represented by Mr Morshead, he has not volunteered any specific explanation on her behalf. He merely points to the difficulty of imagining any price reduction or other inducement sufficient to compensate her for the devastating implications of the multiplier if it operates as Mrs Arnold contends. In the absence of further evidence from either side, it is impossible to draw any clear conclusions about the purpose of these curious transactions. It is enough to observe that, viewed objectively, they are at least consistent with an interpretation which limits the lessees future exposure to actual inflation, within a defined limit. On the lessors interpretation, as with version 4, they make no sense at all. Conclusion The true explanation for these wretchedly conceived clauses may be lost in history, but the problems for the parties are all too present and deeply regrettable. No doubt in recognition of such considerations, Mr Daiches, on behalf of Mrs Arnold, indicated that his client fully understands the appellants predicament and is sympathetic to it, and that if the appeal fails there would have to be a re negotiation of the leases for pragmatic if not for legal reasons. She wished it to be stated openly that she is willing for the appellants leases to be renegotiated on terms that would, among other things, involve the leases being varied by substituting an adjustment linked to the Consumer Price Inflation index instead of the current fixed adjustment of 10% per annum. Although on its face this indication seems helpful and realistic, it is not clear what it would mean in practical terms. It rightly acknowledges that the problems may well be incapable of truly satisfactory resolution by conventional legal analysis. The main obstacle may be that hinted at in Mr Daiches post hearing submission. That is the need to find some way of making good the shortfall resulting from the unrealistically low contributions required from more than two thirds of the lessees under the pre 1980 leases. Even if the lessees interpretation prevails, it will still leave an unhappy imbalance between these lessees, and the version 1 lessees, who will be left paying substantially less than their proportionate share. Whatever the strict legal position, the other lessees may perhaps be persuaded that they have a common interest in the good management of the estate, and at least a moral obligation to contribute their fair share of its costs. A long running dispute of this kind can hardly be conducive to the atmosphere appropriate to a holiday location, even for those not directly involved. It is to be hoped that some way can be found of bringing them into the discussions. On any view, the case seems to cry out for expert mediation, if it has not been attempted before, preferably not confined to the present parties. If thought appropriate, one possibility might be an application by consent to the President of the First Tier Tribunal (Property Chamber Residential Property) to appoint as mediator a senior judge of that tribunal, with the benefit of that tribunals experience of dealing with service charge issues under statute. However, that must be a matter for the parties not this court. It is necessary therefore to return to the essential question: what in the view of a reasonable observer did clause 3(2) mean? It will be apparent from my detailed analysis that I regard the consequences of the lessors interpretation as so commercially improbable that only the clearest words would justify the court in adopting it. I agree with HH Judge Jarman QC that the limited addition proposed by the lessees does not do such violence to the contractual language as to justify a result which is commercial nonsense. For these reasons, in respectful disagreement with the majority, I would have allowed the appeal and restored the order of HH Judge Jarman QC.

Oxwich Leisure Park contains ninety one chalets, each of which is let for a period of 99 years from 25 December 1974 on very similar terms. The Appellants are the current tenants under 25 of the leases. 21 of these leases were granted between 1978 and 1991. Clause 3(2) of each lease contains a covenant to pay a service charge. Each lease also contains covenants by the lessor. One such covenant is to provide services to the Park, such as maintaining roads, paths, fences, a recreation ground and drains, mowing lawns, and removing refuse. The lessor also covenants in clause 4(8) that leases of other chalets shall contain covenants on the part of the lessees thereof to observe the like obligations as are contained herein or obligations as similar thereto as the circumstances permit. The Respondent, the current landlord, argues that the service charge provision in clause 3(2) requires the lessee to pay an initial annual service charge of 90, which increases at a compound rate of 10% for the first 70 chalets to be let, every three years, but for the last 21 chalets to be let, every year. The service charge provisions in four of the 70 leases were subsequently varied so that the increases were yearly rather than every three years. The language of the clause 3(2) differs in small respects between the leases, but a typical example is a covenant to To pay to the Lessor without any deduction in addition to the said rent a proportionate part of the expenses and outgoings incurred by the Lessor in the repair maintenance renewal and the provision of services hereinafter set out the yearly sum of Ninety Pounds and value added tax (if any) for [the first three years OR the first year] of the term hereby granted increasing thereafter by Ten Pounds per Hundred for every subsequent [three year period OR year] or part thereof. The issue on this appeal is whether the Respondents interpretation of clause 3(2) in those 25 leases, where the increase is to be every year, is correct. The Supreme Court holds that the Respondent is correct and therefore dismisses the tenants appeal by a majority of 4 1 (Lord Carnwath dissenting). Lord Neuberger (with whom Lord Sumption and Lord Hughes agree) gives the lead judgment and Lord Hodge gives a concurring judgment. When interpreting a written contract, the court must identify the intention of the parties by reference to what a reasonable person having all the background knowledge which would have been available to the parties would have understood them to be using the language in the contract to mean, focussing on the meaning of relevant words in their documentary, factual and commercial context. However, subjective evidence of any partys intentions must be disregarded [14 15]. In the present case, while reliance must be place on commercial common sense, this should not undervalue the importance of the language of the provision [17]. Commercial common sense cannot be invoked by reference to facts which arose after the contract was made; it is only relevant to ascertaining how matters would or could have been perceived as at the date of the contract. The fact that an arrangement has worked out badly or even disastrously is not a reason for departing from the natural meaning of the language; neither is the fact that a certain term appears to be very imprudent. It is not the function of the court interpreting a contract to relieve a party from the consequences of imprudence or poor advice [19 20]. Moreover, there exists no special principle of interpretation that service charge clauses are to be construed restrictively [23]. The natural meaning of clause 3(2) is clear; the first half of the clause provides that the lessee is to pay an annual charge to reimburse the lessor for the costs of providing the services which he covenants to provide, and the second half of the clause identifies how that service charge is to be calculated, namely as a fixed sum, with a fixed annual increase. This choice is readily explicable; the parties assumed that the cost of providing the services would increase, and they wished to avoid arguments as to the cost of the service and the apportionment between the tenants. The reasonable reader of the clause would see the first half of the clause as descriptive of the purpose of clause 3(2), namely to provide for an annual service charge, and the second half as a quantification of that service charge [24 27]. In the case of the 21 (now 25) leases which provide for an annual increase in the service, it is true that this has an alarming consequence; if one assumes a lease granted in 1980, the service charge would be over 2,500 this year, 2015, and over 550,000 by 2072. However, despite such consequences, this is not a convincing argument for departing from the natural meaning of clause 3(2) [30 32]. Although there are one or two small errors in the drafting, nothing has gone significantly wrong with the wording of the clause in any of the 25 leases [34]. Moreover, during the 1970s and much of the 1980s, annual inflation had been running at a higher annual rate than 10% for a number of years; the clause could be viewed as a gamble on inflation for both parties [35 36]. In relation to the leases which were varied between 1998 and 2002, it is extraordinary that a lessee under a lease which provided for an increase in a fixed service charge at the rate of 10% over three years should have agreed to vary the lease so that the increase was to be at the rate of 10% per annum, at a time when inflation was running at around 3% per annum. However, this does not justify reaching a different result [39 40]. The purpose of clause 4(8) and the opening words of clause 3 may well have been to create a letting scheme such that properties within a given area are intended to be let on identical or similar terms, normally by the same lessor, so that the terms are to be enforceable not only by the lessor against any lessee, but as between the various lessees [47 49]. The Appellants case is that there is an implied term in each of the 21 leases granted between 1977 and 1991 such that the lessor is not asking anything of the lessee which had not been required of lessees of other chalets, whether their leases were in the past or future. Even assuming that there is such a scheme, this would not be a correct term to imply. A term that the already existing 70 leases have services charges which increase at the compound rate of 10% p.a. as in the existing 21 leases would be inconsistent with an express term of the appellants leases [50 56]. Accordingly, the appeal should be dismissed [60 65]. In his dissenting judgment, Lord Carnwath considers that the commercial purpose of clause 3(2) was to enable the lessor to recover from the lessees the costs of maintaining the estate on their behalf, the payment by each lessee being intended to represent a proportionate part of the expenses incurred. He is of the view that the clause contained an inherent ambiguity between the two halves of the clause. [125 126]. There are only two realistic possibilities for the meaning of the second part of the clause; either it is a fixed amount which supplants any test of proportionality under the first part or it is no more than an upper limit to the assessment of a proportionate amount [128]. Lord Carnwath considers the consequences of the lessors interpretation to be so commercially improbable that only the clearest words would justify adopting it. For this reason he would have allowed the appeal [158 159].

This is litigation on a large scale. Between May 2005 and February 2009, Mr Mukhtar Ablyazov was the chairman and controlling shareholder of the claimant, a bank incorporated in Kazakhstan. It is alleged that during this period, he embezzled some US$6 billion of the Banks funds. In February 2009, the Bank was nationalised and Mr Ablyazov was removed from office. He fled to England, where he ultimately obtained asylum. In August 2009, the Bank began proceedings against him in the Commercial Court, alleging misappropriation of its funds. Other proceedings followed, in the Commercial Court and the Chancery Division. Mr Ablyazov was ultimately the defendant in eleven actions brought by the Bank against him, either alone or in conjunction with alleged associates. At the outset of the litigation, the Bank obtained a disclosure order requiring Mr Ablyazov to identify and disclose the whereabouts of his assets and a worldwide freezing order preventing him from dealing with them. Subsequently, in August 2010, the High Court appointed receivers over all of Mr Ablyazovs assets. Later that year, the Bank obtained a number of search and disclosure orders. These yielded a haul of documents revealing a large number of undisclosed assets and a network of undisclosed companies through which Mr Ablyazov had sought to put them out of the reach of the Bank. In 2011, the Bank applied for an order committing Mr Ablyazov for contempt of court. Teare J gave judgment on that application on 16 February 2012. He held that Mr Ablyazov had failed to disclose his assets in breach of the disclosure order, that he had disposed of certain of them in breach of the freezing order and the receivership order, and that he had given false evidence and forged documents in an attempt to cover his tracks. Teare J sentenced him to 22 months imprisonment. However, by the time that the judgment was handed down, the bird had flown. Mr Ablyazov fled the country on receipt of the judges draft judgment. He spent some time in prison in France pending the resolution of an application by Russia for his extradition, which ultimately failed. His present whereabouts are unknown. On 29 February 2012, Teare J ordered that Mr Ablyazovs defences in the Commercial Court actions should be struck out unless he gave full disclosure of his assets and surrendered himself to the tipstaff. He did neither of these things, and default judgments were subsequently obtained against him in four of the actions for sums exceeding US$4.6 billion and in a fifth for damages to be assessed. Very little has been recovered. The present proceedings were commenced in July 2015. The defendants are Mr Ablyazov and his son in law Mr Khrapunov, who is domiciled in Switzerland. Mr Ablyazov has taken no part in these proceedings, and the present appeal is concerned only with the position of Mr Khrapunov. The Banks case against him is that he has at all times been aware of the freezing order and the receivership order, and that in about 2009 he entered into a combination or understanding with Mr Ablyazov to assist him in dissipating and concealing his assets. For present purposes, it may be assumed that they entered into it in England where Mr Ablyazov was then living. Teare J found that there was sufficient evidence to that effect, and the point has not been contested before us. It is alleged that both before and after Mr Ablyazovs flight abroad Mr Khrapunov actively participated in the agreed scheme, both on Mr Ablyazovs instructions and from time to time on his own initiative. He is said to have been instrumental in extensive dealings in the assets of Swiss, Belizean and Russian companies controlled by Mr Ablyazov and in laying a trail of false documents to conceal what had become of them. This is relied upon as constituting the tort of conspiracy to cause financial loss to the Bank by unlawful means, namely serial breaches of the freezing order and the receivership order. The present appeal arises out of an application by Mr Khrapunov contesting the jurisdiction of the English court. The application is made on two grounds. The first is that there is no such tort as the Bank asserts, because contempt of court cannot constitute unlawful means for the purpose of the tort of conspiracy. This, Mr Samek QC submits on his behalf, is because means are unlawful for this purpose only if they would be actionable at the suit of the claimant apart from any combination. Contempt of court, he submits, is not actionable as such. There is therefore no good arguable case on which to found jurisdiction. The second ground is that, Mr Khrapunov being domiciled in Switzerland, there is no jurisdiction under the Lugano Convention unless the claim falls within the special jurisdiction conferred by article 5(3) on the courts of the place where the harmful event occurred. The only event said to have happened in England is the conspiratorial agreement. Mr Khrapunov contends that the event that was harmful was not the conspiratorial agreement but the acts done pursuant to it. They were done outside England. The cause of action Conspiracy is one of a group of torts which tend to be loosely lumped together as economic torts, the others being intimidation, procuring a breach of contract and unlawful interference with economic and other interests (sometimes called the intentional harm tort). Along with tortious misrepresentation (fraudulent or negligent), passing off, slander of title and infringement of intellectual property rights, the economic torts are a major exception to the general rule that there is no duty in tort to avoid causing a purely economic loss unless it is parasitic upon some injury to person or property. The reason for the general rule is that, contract apart, common law duties to avoid causing pure economic loss tend to cut across the ordinary incidents of competitive business, one of which is that one mans gain may be another mans loss. The successful pursuit of commercial self interest necessarily entails the risk of damaging the commercial interests of others. Identifying the point at which it transgresses legitimate bounds is therefore a task of exceptional delicacy. The elements of the four established economic torts are carefully defined so as to avoid trespassing on legitimate business activities or imposing any wider liability than can be justified in principle. Some of the elements of the torts, notably intention and unlawful means are common to more than one of them. But it is dangerous to assume that they have the same content in each context. In OBG Ltd v Allan [2008] AC 1, Lord Hoffmann drew attention to some of the confusions and category errors which have resulted from attempts by judges and scholars to formulate a unified theory on which these causes of action can be explained. Lord Hoffmann was not directly concerned with the tort of conspiracy, but of all the economic torts it is the one whose boundaries are perhaps the hardest to define in principled terms. The modern tort of conspiracy was developed in the late 19th and early 20th century, as a device for imposing civil liability on the organisers of strikes and other industrial action, once the Conspiracy and Protection of Property Act 1875 had provided that combinations in furtherance of trade disputes should no longer be indictable as crimes. It is an anomalous tort because it may make actionable acts which would be lawful apart from the element of combination. The ostensible rationale, that acts done in combination are inherently more coercive than those done by a single actor, has not always been found persuasive, least of all when the single actor may be a powerful corporation. There is much to be said for the view expressed by Lord Walker in Revenue and Customs Comrs v Total Network SL [2008] 1 AC 1174, para 78, that an unarticulated factor in the development of the tort was the conviction of late Victorian judges that large scale collective action in the political and economic sphere by those outside the traditional governing class was a potential threat to the constitution and the framework of society. Nonetheless, the tort of conspiracy has an established place in the law of tort and its essential elements have been clarified by a series of modern decisions of high authority, most of them in contexts far removed from the modern torts origin in the law relating to industrial disputes. It has been recognised since the decision of the House of Lords in Quinn v Leathem [1901] AC 495 that the tort takes two forms: (i) conspiracy to injure, where the overt acts done pursuant to the conspiracy may be lawful but the predominant purpose is to injure the claimant; and (ii) conspiracy to do by unlawful means an act which may be lawful in itself, albeit that injury to the claimant is not the predominant purpose. In Lonrho Plc v Fayed [1992] 1 AC 448, Lord Bridge, with whom the rest of the Appellate Committee agreed, reviewed the earlier authorities and summarised the position as follows, at pp 465 466: Where conspirators act with the predominant purpose of injuring the plaintiff and in fact inflict damage on him, but do nothing which would have been actionable if done by an individual acting alone, it is in the fact of their concerted action for that illegitimate purpose that the law, however anomalous it may now seem, finds a sufficient ground to condemn their action as illegal and tortious. But when conspirators intentionally injure the plaintiff and use unlawful means to do so, it is no defence for them to show that their primary purpose was to further or protect their own interests; it is sufficient to make their action tortious that the means used were unlawful. We shall call these two forms of conspiracy a lawful means and an unlawful means conspiracy respectively. The terminology is not exact, because a cause of action in conspiracy may be based on a predominant intention to injure the claimant whether the means are lawful or unlawful. But it seems to us to be more satisfactory than using terms which appear to distinguish between conspiracies to injure and other conspiracies. As we shall show, all actionable conspiracies are conspiracies to injure, although the intent required may take a variety of different forms. Conspiracy is both a crime, now of limited ambit, and a tort. The essence of the crime is the agreement or understanding that the parties will act unlawfully, whether or not it is implemented. The overt acts done pursuant to it are relevant, if at all, only as evidence of the agreement or understanding. It is sometimes suggested that the position in tort is different. Lord Diplock, for example, thought that the tort, unlike the crime, consists not of agreement but of concerted action taken pursuant to agreement: Lonrho Ltd v Shell Petroleum Co Ltd [1982] AC 173, 188. This is true in the obvious sense that a tortious conspiracy, like most other tortious acts, must have caused loss to the claimant, or the cause of action will be incomplete. It follows that a conspiracy must necessarily have been acted on. But there is no more to it than that. The critical point is that the tort of conspiracy is not simply a particular form of joint tortfeasance. In the first place, once it is established that a conspiracy has caused loss, it is actionable as a distinct tort. Secondly, it is clear that it is not a form of secondary liability, but a primary liability. This point had been made by Lord Wright in Crofter Hand Woven Harris Tweed Ltd v Veitch [1942] AC 435, 462: the plaintiffs right is that he should not be damnified by a conspiracy to injure him, and it is in the fact of the conspiracy that the unlawfulness resides. It was reaffirmed by the House of Lords in Revenue and Customs Comrs v Total Network SL [2008] AC 1174, paras 102 (Lord Walker), 116 (Lord Mance), 225 (Lord Neuberger). Third, the fact of combination may alter the legal character and consequences of the overt acts. In particular, it may give rise to liability which would not attach to the overt acts in the absence of combination. This latter feature of the tort was what led Lord Wright in Crofter, loc cit, to say that it was in the fact of the conspiracy that the unlawfulness resides. He was speaking of a lawful means conspiracy, but as Lord Hope pointed out in Revenue and Customs Comrs v Total Network SL at para 44, the same applies to an unlawful means conspiracy, at any rate where the means used, while not predominantly intended to injure the claimant, were directed against him. There is clearly much force in his observation at para 41 that if a lawful means conspiracy is actionable on proof of a predominant intention to injure, harm caused by a conspiracy where the means used were unlawful would seem no less in need of a remedy. What is it that makes the conspiracy actionable as such? To say that a predominant purpose of injuring the claimant in the one case and the use of unlawful means in the other supply the element of unlawfulness required to make a conspiracy tortious simply restates the proposition in other words. A more useful concept is the absence of just cause or excuse, which was invoked by Bowen LJ in Mogul Steamship Co v McGregor Gow & Co (1889) 23 QBD 598, 614, by Viscount Cave LC in Sorrell v Smith [1925] AC 700, 711 712, and by Viscount Simon LC with the support of his colleagues in Crofter Hand Woven Harris Tweed Ltd v Veitch [1942] AC 435, 441 444 (cf Viscount Maugham at pp 448, 449 450, Lord Wright at pp 469 470, and Lord Porter at p 492). A person has a right to advance his own interests by lawful means even if the foreseeable consequence is to damage the interests of others. The existence of that right affords a just cause or excuse. Where, on the other hand, he seeks to advance his interests by unlawful means he has no such right. The position is the same where the means used are lawful but the predominant intention of the defendant was to injure the claimant rather than to further some legitimate interest of his own. This is because in that case it cannot be an answer to say that he was simply exercising a legal right. He had no interest recognised by the law in exercising his legal right for the predominant purpose not of advancing his own interests but of injuring the claimant. In either case, there is no just cause or excuse for the combination. Conspiracy being a tort of primary liability, the question what constitute unlawful means cannot depend on whether their use would give rise to a different cause of action independent of conspiracy. The real test is whether there is a just cause or excuse for combining to use unlawful means. That depends on (i) the nature of the unlawfulness, and (ii) its relationship with the resultant damage to the claimant. This was the position reached by the House of Lords in Revenue and Customs Comrs v Total Network SL [2008] AC 1174. The Appellate Committee held that a criminal offence could be a sufficient unlawful means for the purpose of the law of conspiracy, provided that it was objectively directed against the claimant, even if the predominant purpose was not to injure him. The facts of Total Network were that the Commissioners had sued Total for participating in a number of VAT frauds. They alleged an unlawful means conspiracy, the unlawful means consisting of the commission by some of the other conspirators of the common law offence of cheating the revenue. The question whether such a cause of action existed was considered on the assumption that there was no predominant intention to injure the Commissioners and that the commission of the offence gave rise to no cause of action at the suit of the Commissioners independently of the alleged conspiracy. In the result, the House declined to apply to unlawful means conspiracies the condition which it had held in OBG Ltd v Allan [2008] AC 1 to apply to the tort of intentionally harming the claimant by unlawful acts against third parties, namely that those acts should be actionable at the suit of the third party. They held that the means were unlawful for the purpose of founding an action in conspiracy, whether they were actionable or not. The leading speech was delivered by Lord Walker, with whom Lord Scott, Lord Mance and Lord Neuberger agreed. Lord Hope, without agreeing so in terms, proposed an analysis of this point which was consistent with Lord Walkers. The first point to be derived from the speeches concerns intention. The distinction between cases where there is and cases where there is not a predominant intention to injure the claimant, is an inadequate tool for determining liability because it does not exhaust the possibilities. The emphasis in the authorities on cases in which the predominant purpose was to injure the claimant has diverted attention from the fact that both lawful means and unlawful means conspiracies are torts of intent. But the nature of the intent required differs as between the two. This is because a conspiracy may be directed against the claimant notwithstanding that its predominant purpose is not to injure him but to further some commercial objective of the defendant. This point had been made, some years earlier, by the Supreme Court of Canada in Canada Cement LaFarge Ltd v British Columbia Lightweight Aggregate Ltd [1983] 1 SCR 452. After a careful analysis of the (mainly English) authorities, Estey J, delivering the judgment of the Court, concluded at pp 471 472 that whereas the law of tort does not permit an action against an individual defendant who has caused injury to the plaintiff, the law of torts does recognize a claim against them in combination as the tort of conspiracy if: (1) whether the means used by the defendants are lawful or unlawful, the predominant purpose of the defendants conduct is to cause injury to the plaintiff; or, (2) where the conduct of the defendants is unlawful, the conduct is directed towards the plaintiff (alone or together with others), and the defendants should know in the circumstances that injury to the plaintiff is likely to and does result. In situation (2) it is not necessary that the pre dominant purpose of the defendants conduct be to cause injury to the plaintiff but, in the prevailing circumstances, it must be a constructive intent derived from the fact that the defendants should have known that injury to the plaintiff would ensue. In both situations, however, there must be actual damage suffered by the plaintiff. Likewise, in Total Network, Lord Walker, at para 82, recognised the clear distinction between the requirement of predominant purpose under one variety of the tort of conspiracy and the lower requirement of intentional injury needed for the other variety. These two varieties of intention were to be contrasted with a situation in which the harm to the claimant was purely incidental because the unlawful means were not the means by which the defendant intended the harm to the claimant: see paras 93, 95. As an example of the latter situation, Lord Walker cited Lonrho Ltd v Shell Petroleum Co Ltd (No 2) [1982] AC 173. The defendants in that case were alleged to have acted in breach of the statutory order imposing sanctions on Southern Rhodesia, but the order was not the instrument for the intentional infliction of harm (para 95). Lord Mance in Total Network (para 119) was, we think, making the same point, by reference to the example of a pizza delivery business which obtains more custom, to the detriment of its competitors, by instructing its drivers to ignore speed limits and jump red lights. Addressing the character of the unlawfulness required, Lord Walker derived from the authorities the proposition that unlawful means, both in the intentional harm tort and in the tort of conspiracy, include both crimes and torts (whether or not they include conduct lower on the scale of blameworthiness) provided that they are indeed the means by which harm is intentionally inflicted on the claimant (rather than being merely incidental to it). (para 93, and cf para 95) He concluded, at paras 94 95: From these and other authorities I derive a general assumption, too obvious to need discussion, that criminal conduct engaged in by conspirators as a means of inflicting harm on the claimant is actionable as the tort of conspiracy, whether or not that conduct, on the part of a single individual, would be actionable as some other tort In my opinion your Lordships should clarify the law by holding that criminal conduct (at common law or by statute) can constitute unlawful means, provided that it is indeed the means (what Lord Nicholls of Birkenhead in OBG Ltd v Allen [2008] AC 1, para 159 called instrumentality) of intentionally inflicting harm. Lord Hope arrived at the same conclusion, at paras 43 and 44, where addressing the facts of the case before him, he observed that although there was no predominant intention to injure the Commissioners, the means used by the conspirators were directed at the claimants themselves: a conspiracy is tortious if an intention of the conspirators was to harm the claimant by using unlawful means to persuade him to act to his own detriment, even if those means were not in themselves tortious. The reasoning in Total Network leaves open the question how far the same considerations apply to non criminal acts, such as breaches of civil statutory duties, or torts actionable at the suit of third parties, or breaches of contract or fiduciary duty. These are liable to raise more complex problems. Compliance with the criminal law is a universal obligation. By comparison, legal duties in tort or equity will commonly and contractual duties will always be specific to particular relationships. The character of these relationships may vary widely from case to case. They do not lend themselves so readily to the formulation of a general rule. Breaches of civil statutory duties give rise to yet other difficulties. Their relevance may depend on the purpose of the relevant statutory provision, which may or may not be consistent with its deployment as an element in the tort of conspiracy. For present purposes it is unnecessary to say anything more about unlawful means of these kinds. The unlawful means relied upon in this case are criminal contempt of court albeit that the offence is punishable in civil proceedings. The Bank does not of course contend that the defendants predominant purpose in hiding Mr Ablyazovs assets was to injure it. Their predominant purpose was clearly to further Mr Ablyazovs financial interests as they conceived them to be. At the same time, damage to the Bank was not just incidental to what they conspired to do. It was necessarily intended. The freezing order and the receivership order had been made on the application of the Bank for the purpose of protecting its right of recovery in the event of the claims succeeding. The object of the conspiracy and the overt acts done pursuant to it was to prevent the Bank from enforcing its judgments against Mr Ablyazov, and the benefit to him was exactly concomitant with the detriment to the Bank as both defendants must have appreciated. In principle, therefore, we conclude the cause of action in conspiracy to injure the Bank by unlawful means is made out. We say in principle, because there remains an issue as to whether an action for conspiracy to commit a contempt of court is consistent with public policy. To that question we now turn. The alleged preclusionary rule The Bank argued that contempt of court, at least where it arises from breach of a court order made at the instance of the claimant, is actionable as such, even apart from any element of combination. It relies exclusively on conspiracy, presumably for jurisdictional reasons. The only thing said to have happened in England is the conspiratorial agreement. The overt acts all occurred abroad. But the Bank submits that because contempt of court is actionable as such, it necessarily constitutes unlawful means for the purposes of the tort of conspiracy. The courts below described this submission as extreme and rejected it. We do not propose to address it, because it follows from the above analysis that it is irrelevant. The unlawfulness of the means to be used to carry out the conspiracy does not depend on its actionability as an independent tort. However, Mr Samek, who appeared for Mr Khrapunov, raised the issue in support of his own case. He submitted that not only is there no right of action for contempt of court as such, but the absence of such a cause of action reflects a principle of public policy that persons in contempt of court should not be exposed to anything other than criminal penalties at the discretion of the court. He called this the preclusionary rule. It follows, he says, that even if a non actionable crime can in principle constitute unlawful means for the purpose of the law of conspiracy, a claim for civil damages founded on a contempt of court is contrary to public policy, however the cause of action may be framed. There is a certain amount of authority to support the existence of a right to recover civil damages for contempt of court. The early cases, which go back to the 14th century, are summarised in Arlidge, Eady and Smith on Contempt, 5th ed (2017), paras 14.171 175. However, decisions made before the development of the action on the case are unlikely to be of much assistance in elucidating the modern law. More germane are Couling v Coxe (1848) 6 CB 703, where damages were awarded against a witness who declined to comply with a subpoena as a result of which the plaintiff lost his case; Fairclough & Sons v The Manchester Ship Canal (1897) 41 SJ 225, where Lord Russell CJ held that there had been no breach of the injunction relied upon in that case, but considered that an inquiry as to damages might have been ordered had there been one; and In re Mileage Conference Group of the Tyre Manufacturers Conference Ltds Agreement [1966] 1 WLR 1137, 1162, where Megaw J suggested, obiter, that a penal order against a contemnor might include a direction for the payment of damages. The point was left open in the majority judgments of the Court of Appeal in Chapman v Honig [1963] 2 QB 502, and was held to be sufficiently arguable to preclude a striking out order by Mustill J in The MESSINIAKI TOLMI [1983] 1 Lloyds Rep 666, 671. The authorities against the existence of a right to damages are In re Hudson [1966] 1 Ch 209, N v Agrawal [1999] PNLR 939 and Customs and Excise Comrs v Barclays Bank plc [2007] 1 AC 181. In In re Hudson a wife claimed against the estate of her ex husband an account of sums due pursuant to an undertaking given by him in previous divorce proceedings to pay her a third of his income. There was no evidence that the undertaking gave effect to any underlying contractual settlement. Buckley J refused to order an account because there was no enforceable right. The reason, he held, at p 214, was that the only sanction for breach of an undertaking would be the imprisonment of the culprit or sequestration of his assets or a fine on the ground of his contempt of court. An undertaking given to the court, unless the circumstances are such that it has some collateral contractual operation between the parties concerned, confers no personal right or remedy upon any other party. The giver of the undertaking assumes thereby an obligation to the court but to nobody else. N v Agrawal was a claim for damages against a medical practitioner by a woman who claimed to have been raped. Her case was that the defendant had failed to appear to give evidence against the alleged rapist at his trial, as a result of which the judge held that there was no case to answer and she suffered psychological injury. The Court of Appeal held that there was no duty of care. In the course of his judgment, Stuart Smith LJ briefly observed that contempt of court does not itself give rise to a cause of action. He cited Chapman v Honig in support of this statement, although the point had in fact been expressly left open in that case. Much the most significant judicial statements, however, are those made by the Appellate Committee of the House of Lords in Customs and Excise Comrs v Barclays Bank plc. Barclays Bank had negligently allowed a payment to be made out of an account in respect of which a freezing order had been made on the application of the Commissioners. The Bank was not in contempt of the order because the payment was inadvertent. The issue was whether, having been notified of the order, it owed the Commissioners a duty of care. The House held that it did not. Although the point does not appear to have been argued and there was only limited citation of the relevant authorities, three members of the committee drew an analogy with contempt of court, which they considered not to be actionable as a tort. Lord Bingham said, at para 17: the Mareva jurisdiction has developed as one exercised by court order enforceable only by the courts power to punish those who break its orders. The documentation issued by the court does not hint at the existence of any other remedy. This regime makes perfect sense on the assumption that the only duty owed by a notified party is to the court. Lord Hoffmann said, at para 39: There is, in my opinion, a compelling analogy with the general principle that, for the reasons which I discussed in Stovin v Wise [1996] AC 923, 943 944, the law of negligence does not impose liability for mere omissions. It is true that the complaint is that the bank did something: it paid away the money. But the payment is alleged to be the breach of the duty and not the conduct which generated the duty. The duty was generated ab extra, by service of the order. The question of whether the order can have generated a duty of care is comparable with the question of whether a statutory duty can generate a common law duty of care. The answer is that it cannot: see Gorringe v Calderdale Metropolitan Borough Council [2004] 1 WLR 1057. The statute either creates a statutory duty or it does not. (That is not to say, as I have already mentioned, that conduct undertaken pursuant to a statutory duty cannot generate a duty of care in the same way as the same conduct undertaken voluntarily.) But you cannot derive a common law duty of care directly from a statutory duty. Likewise, as it seems to me, you cannot derive one from an order of court. The order carries its own remedies and its reach does not extend any further. Lord Rodger said, at para 62: Punishment for contempt of court is the remedy which the law provides for the addressees failure to comply with an injunction such as a freezing order. Finally, at para 101 Lord Mance, expressing himself in more guarded terms in the context of the Banks argument that the law of contempt provided sufficient protection for the Commissioners, said this: But contempt requires proof to a standard commensurate with the seriousness of the offence, and the sanctions available to the court are not directed primarily at compensation, but at the imposition of a penalty. It is true that, with sensible ingenuity, a sanction can sometimes be tailored in such a way as to encourage the restoration of an asset which has been improperly released from a freezing order or perhaps even compensation: see eg the order made by Colman J in Z Bank v D1 [1994] 1 Lloyds Rep 656, 668. But a civil remedy for breach of a duty of care would be a much more satisfactory and complete protection than potential contempt proceedings for a claimant like the commissioners. These are powerful dicta, but we do not think that the last word has necessarily been said on this subject in this court. It is unnecessary to resolve the question now, because we consider that the case against a right of action for breach of a court order cannot be based on any preclusionary rule of public policy. When judges like Buckley J and Lord Bingham, Lord Hoffmann and Lord Rodger say that the sole remedy for contempt is a criminal penalty, they are not stating a principle of public policy let alone a preclusionary rule. They are simply asserting that no private law right is engaged by a contempt. There is a world of difference between the mere absence of a relevant right and a rule of law precluding such a right even if the elements to support it otherwise exist. There are rules of law relating to the conduct of legal proceedings which clearly are based on a public policy precluding claims. A witness, for example, is absolutely immune from civil liability for things said in evidence or in circumstances directly preparatory to giving evidence. An action against him for negligence or defamation would fail. If it were framed in conspiracy, it would still fail, as it did in Marrinan v Vibart [1963] 1 QB 234. This is because the objection to such an action is not the absence of the necessary elements of a cause of action, but a special immunity based on a public policy that a witness should be able to give evidence without fear of adverse legal consequences other than prosecution for perjury or perverting the course of justice. The public policy is engaged by any attempt to found a claim on what the defendant did as a witness, irrespective of the legal label applied to it. Mr Samek made a valiant but ultimately unconvincing attempt to bring the present case within these principles. His submission, in summary, was that the principles on which the law of contempt was founded required the Court to have control over the consequences of a contempt, which it would not have if a right of action existed. That was because a right of action would make damages for contempt a matter of right, and might even lead to a claim for them being heard in a foreign court. We are unmoved by these concerns. It is a commonplace of the law that the same act may give rise to criminal and civil liability. It necessarily follows that in such cases the sentence for the crime will be discretionary but the civil consequences will not. Thus a person may be given immunity in a criminal trial for burglary, for example because he agrees to give evidence against others involved, but that will not protect him against civil liability to the owner of the goods stolen. There is ample authority for the proposition, which is perhaps obvious, that breach of an order of the court is actionable where it gives effect to an underlying private law obligation which is itself actionable, although the result is to produce exactly the result that Mr Samek finds objectionable: see Midland Marts Ltd v Hobday [1989] 1 WLR 1148, Parker v Rasalingham (Lawrence Collins QC, unreported, 3 July 2000); and Independiente Ltd v Music Trading On line (HK) Ltd [2008] 1 WLR 608. It is conceivable, although not very likely, that if there were a cause of action for contempt of court, it might fall to be heard in a foreign court, but we do not regard that as problematical and even if it were we cannot conceive that the appropriate response is that such a claim should not be entertained even in England. At first sight, there is more to be said for the argument that a right of action for conspiring to breach a freezing order injunction would expose foreigners to liability notwithstanding the standard proviso in such orders that their terms do not affect or concern anyone outside the jurisdiction of this court. But the proviso is irrelevant to the position of a party in contempt, such as Mr Ablyazov, who is by definition subject to the jurisdiction of the court. A claim in conspiracy will normally allege conspiracy with the respondent to a court order to breach his obligations under the order, as it does in this case. We conclude that the Banks pleaded allegations disclose a good cause of action for conspiracy to injure it by unlawful means. Jurisdiction The Lugano Convention on Jurisdiction and the Recognition and Enforcement of Judgments in Civil and Commercial Matters 2007, by which both Switzerland and the United Kingdom are bound, lays down a general rule (article 2) that a person should be sued in his or her state of domicile. However, it provides for special jurisdiction in further provisions including articles 5 and 6. Before Teare J, the Bank sought to rely on article 6 which provides that a person domiciled in a state bound by the Convention may also be sued, where he is one of a number of defendants, in the courts for the place where any one of them is domiciled, provided the claims are so closely connected that it is expedient to hear and determine them together to avoid the risk of irreconcilable judgments resulting from separate proceedings. The judge rejected a submission on behalf of the Bank that it could rely on article 6 against Mr Khrapunov on the basis that at the relevant date in July 2015 Mr Ablyazov was domiciled in England. The judge held that once Mr Ablyazov had fled this jurisdiction he had no intention of returning and was not domiciled here. There was no appeal against that conclusion. The judge also rejected a submission on behalf of the Bank, founded on R v Barnet London Borough Council, Ex p Nilish Shah [1983] 2 AC 309, that Mr Ablyazov should, nevertheless, be taken still to be domiciled in England because he was in breach of an obligation under the worldwide freezing order prohibiting him from leaving the jurisdiction. The Court of Appeal rejected an appeal against that ruling and there is no appeal to this court on this point. It follows that we are concerned only with article 5. Article 5 of the Lugano Convention provides so far as relevant: A person domiciled in a state bound by this Convention may, in another state bound by this Convention, be sued: (3) in matters relating to tort, delict or quasi delict, in the courts for the place where the harmful event occurred or may occur. This provision is substantially identical to those in article 5(3) of the Brussels Convention, article 5(3) of the Brussels Regulation (Council Regulation (EC) No 44/2001) and article 7(2) of the Brussels I Regulation (Regulation (EU) No 1215/2012). In Handelskwekerij G J Bier BV v Mines de Potasse dAlsace SA (Bier) (Case C 21/76) [1978] QB 708 the Court of Justice held that article 5(3) of the Brussels Convention must be understood as intended to cover both (a) the place where the damage occurred and (b) the place of the event giving rise to it, with the result that the defendant may be sued at the option of the claimant either in the courts for the place where the damage occurred or in the courts for the place of the event which gives rise to and is at the origin of that damage (p 731F G). Before Teare J and in the Court of Appeal the Bank relied on both limbs of article 5(3). The Banks argument that the damage occurred in England was based on the contention that its worldwide freezing order and its judgments against Mr Ablyazov were located here and had been reduced in value by the alleged conduct in relation to assets in other jurisdictions. The judge rejected this argument. He considered that the element of damage proximate to the harmful event was the Banks inability or reduced ability to execute against those assets in the places where they were located. This conclusion was upheld by the Court of Appeal. The Bank did not initially seek to challenge this decision by a cross appeal. However, following a ruling by Lord Mance on 20 December 2017 that the Bank needed permission to cross appeal in order to raise arguments based on limb (a) of article 5(3), the Bank sought permission to cross appeal out of time on 21 December 2017. Mr Khrapunov filed a notice of objection on 3 January 2018. Permission to cross appeal on this point was refused on 18 January 2018. The Bank submitted that the event giving rise to the damage was the conspiracy itself, which was hatched in England. Teare J rejected this submission, because he considered that the cause of the damage was not the conspiracy but its implementation. He considered that it was likely to have been implemented by the decisions that Mr Ablyazov took and the instructions that he gave. These things occurred in England until 16 February 2012 when Mr Ablyazov fled the jurisdiction, but not thereafter. The Court of Appeal disagreed. They held that the event giving rise to the damage was the conspiratorial agreement in England. It is well established that the special jurisdiction provisions in Brussels/Lugano scheme are derogations from the general rule conferring jurisdiction on the courts of the place of the defendants domicile. As a result, they must be strictly interpreted. As Lord Hodge recognised in AMT Futures Ltd v Marzillier mbH [2017] 2 WLR 853 (at para 13), these heads of special jurisdiction can be justified because they reflect a close connection between the dispute and the courts of a contracting State, other than that in which the defendant is domiciled, and thereby promote the efficient administration of justice and proper organisation of the action: see, generally, Dumez France SA and Tracoba Sarl v Hessische Landesbank (Helaba) (Case C 220/88) [1990] ECR I 49, para 17; Marinari v Lloyds Bank plc (Case C 364/93) [1996] QB 217, para 16; Kronhofer v Maier (Case C 168/02) [2004] 2 All ER (Comm) 759; [2005] 1 Lloyds Rep 284; [2004] ECR I 6009, para 15. Moreover, the special jurisdictions, and article 5(3) in particular, have of necessity been the subject of a series of decisions by the Court of Justice, which has developed and illuminated the underlying principles in a way which assists in their application. However, before turning to consider these authorities in relation to article 5(3) it is necessary to say something about the respective roles of the Convention regime and the relevant domestic law. The expression place where the harmful event occurred in article 5(3) requires an autonomous interpretation in order to ensure its effectiveness and uniform application (Coty Germany GmbH v First Note Perfumes NV (Case C 360/12) [2014] Bus LR 1294, paras 43 45). There is no basis for interpreting article 5(3) by reference to national rules of non contractual liability, for such an approach would be incompatible with the object of the Convention which is to provide a clear and certain attribution of jurisdiction (Rosler v Rottwinkel GmbH (Case C 241/83) [1986] QB 33, para 23; Marinari v Lloyds Bank plc at paras 18, 19. See also Melzer v MF Global UK Ltd (Case C 228/11) [2013] QB 1112.). It is against this background that the appellant criticises the Court of Appeal for having focused on acts giving rise to liability as opposed to damage. However, the requirement of an autonomous interpretation does not mean that the component elements of the cause of action in domestic law are irrelevant. On the contrary they have a vital role in defining the legally relevant conduct and thus identifying the acts which fall to be located for the purposes of article 5(3). In particular, whether an event is harmful is determined by national law. To take an example raised during the hearing of the appeal, if a firearm is manufactured in State A and fired in State B the place of the event giving rise to the damage within article 5(3) is likely to differ depending on whether the basis of the complaint in national law is negligent manufacture of the firearm, or its negligent handling by the gunman. In the same way, the place of the event giving rise to the damage may vary depending on whether the cause of action is an unlawful means conspiracy or a free standing tortious act. Thus in Shevill v Presse Alliance SA (Case C 68/93) [1995] 2 AC 18 the Court of Justice emphasised (at paras 34 41) that the sole object of article 5(3) of the Brussels Convention is to allocate jurisdiction by reference to the place or places where an event considered harmful occurred. It does not specify the circumstances in which the event giving rise to the harm may be considered harmful to the victim or the evidence which the claimant must adduce to enable the court seised to rule on the merits of the case. This is because these are matters for the national court applying the substantive law determined by its own rules of private international law, national conflict of laws rules, provided that the effectiveness of the Convention is not thereby impaired. Accordingly, in Shevill, the fact that damage was presumed in libel actions under the applicable national law, so that the claimant did not have to adduce evidence of the existence and extent of that damage, did not preclude the application of article 5(3) in determining which courts had jurisdiction. From an early stage in the development of the jurisprudence on article 5(3) of the Brussels Convention, the Court of Justice in applying the second limb of the Bier test, has emphasised the notion of the originating event. In Bier itself the Court observed that liability in tort, delict or quasi delict can only arise if a causal connection can be established between the damage and the event in which that damage originates (at para 16) and went on to formulate the two limbs as permitting the exercise of jurisdiction either in the courts for the place where the damage occurred or in the courts for the place of the event which gives rise to and is at the origin of that damage (at para 25). In Shevill the Court, having repeated that paragraph from Bier, concluded (at para 24) that in the case of a libel by a newspaper article distributed in several contracting states, the place of the event giving rise to the damage can only be the place where the publisher of the newspaper in question is established, since that is the place where the harmful event originated and from which the libel was issued and put into circulation. Similarly, in Wintersteiger AG v Products 4U Sondermaschinenbau GmbH (Case C 523/10) [2013] Bus LR 150, the Court of Justice held that where a display on a search engine website of an advertisement used a keyword identical to a national trade mark which it was alleged to infringe, it was the activation by the advertiser of the technical process displaying the advertisement and not the display of the advertisement itself which should be considered to be the event giving rise to the alleged infringement of trade mark. In Hejduk v EnergieAngentur NRW GmbH (Case C 441/13) [2015] Bus LR 560, the claimant, a professional photographer domiciled in Austria, brought proceedings in Austria against the defendant, a company registered in Germany, alleging infringement of copyright in that it had placed some of her photographs on its website without her consent. The Court of Justice held (at paras 24 25) that where the alleged tort consists in the infringement of copyright by placing photographs online on a website, the activation of the process for the technical display of the photographs on that website must be regarded as the causal event and that, accordingly, the acts or omissions giving rise to the damage were localised where the defendant had its seat, since that is where the company took and carried out the decision to place photographs online on a particular website. Kolassa v Barclays Bank plc (Case C 375/13) [2016] 1 All ER (Comm) 733 concerned proceedings in Austria, where the claimant was domiciled, against Barclays bank alleging breach of obligations relating to a prospectus and information for investors. The Court of Justice observed with regard to limb (b) of article 5(3) that there was nothing to show that the decisions regarding the arrangements for the investments proposed by the bank and the contents of the relevant prospectuses were taken in Austria or that those prospectuses were originally drafted and distributed anywhere other than the member state in which the bank had its seat. Turning to the decisions of domestic tribunals on the point, in Domicrest Ltd v Swiss Bank Corpn [1999] QB 548 the claimant, an English company, alleged negligent mis statement as to the effect of a payment order, made by the defendant bank in Switzerland to the claimant in England. Rix J held that the place of the event giving rise to the damage for the purpose of limb (b) of article 5(3) was Switzerland where the statement originated. Having referred to Dumez, Shevill and Marinari, Rix J observed that each in its own way emphasised that to look to the later consequences would be to run the risk of favouring the forum actoris, contrary to the objectives of the Brussels Convention. He considered that he was not free to apply the broad test involving identifying where the substance of the cause of action in tort arose, which had been adopted by Steyn J in Minster Investments Ltd v Hyundai Precision & Industry Co Ltd [1988] 2 Lloyds Rep 621 at p 624, prior to those three decisions of the Court of Justice, but was required to limit himself to the more structured formula adopted and applied in those decisions. He continued (at p 567H): Applying that formula, it seems to me that the place where the harmful event giving rise to the damage occurs in a case of negligent mis statement is, by analogy with the tort of defamation, where the mis statement originates. It is there that the negligence, even if not every element of the tort, is likely to take place; and for that and other reasons the place from which the mis statement is put into circulation is as good a place in which to found jurisdiction as the place where the mis statement is acted on, even if receipt and reliance are essential parts of the tort. For these purposes it seems to me that there is no difference between a written document and an oral or other instantaneous communication sufficient to distinguish between such cases. Although it may be argued that in the case of instantaneous communications and perhaps especially in the case of telephone conversations the mis statement occurs as much where it is heard as where it is spoken, nevertheless it remains true as it seems to me that it is the representors negligent speech rather than the hearers receipt of it which best identifies the harmful event which sets the tort in motion. To prefer receipt and reliance as epitomising the harmful event giving rise to the damage in the case of negligent mis statement is, I think, to ignore the fact that the plaintiff also has the option of suing in the courts of the place where the damage occurs which is quite likely to be at the place of receipt and reliance. This reasoning and conclusion have been expressly approved by the Court of Appeal in ABCI v Banque Franco Tunisienne [2003] 2 Lloyds Rep 146, per Mance LJ at para 41. They have also been applied in a series of first instance decisions. (Alfred Dunhill Ltd v Diffusion Internationale Maroquinerie de Prestige SARL [2002] 1 All ER (Comm) 950, at p 957; Newsat Holdings Ltd v Zani [2006] 1 All ER (Comm) 607 , at paras 41 44; and London Helicopters Ltd v Heliportugal LDA INAC [2006] 1 All ER (Comm) 595 , at paras 28 35). In our opinion, this approach accords with the principles to be derived from the decisions of the Court of Justice. Although the precise terminology employed by Rix J is not derived from the decisions of the Court of Justice, it is an accurate statement of the law. We do not accept that it detracts from the need to consider the causative impact of the candidate events by improperly focussing on the acts which were first in time. This criticism misrepresents the effect of the decisions of the Court of Justice considered above, which does not require a comparative consideration of the causative impact of different events. On the contrary, the Court of Justice emphasises the relevant harmful event which sets the tort in motion, thereby providing a greater degree of certainty in the application of the Convention. This gives effect to an important policy of the Brussels/Lugano scheme, recognised in Bier at para 21, by promoting a helpful connecting factor with the jurisdiction of a court particularly near to the cause of the damage. In Cartel Damage Claims (CDC) Hydrogen Peroxide SA v Akzo Nobel NV (Case C 352/13) [2015] QB 906, the European Commission had decided that several companies had participated in a single and continuous infringement of the prohibition of cartel agreements. It was not possible to point to a single jurisdiction in which the cartel had been formed since it consisted of a number of collusive agreements which had been concluded during meetings at various places throughout Europe. Several customers of these companies alleged that they had suffered loss by reason of the cartel and they assigned their potential claims to the applicant, a Belgian company. The applicant brought proceedings in Germany for damages and disclosure against six of the companies which were incorporated in various member states. The German court referred to the Court of Justice a series of questions, including one relating to jurisdiction under article 5(3), Brussels Regulation. Having observed (at para 39) that the rule of special jurisdiction is based on the existence of a close link between the dispute and the courts of the place where the harmful event occurred or may occur, the Court continued: 43. With regard to the place of the causal event, it must be pointed out at the outset that, in circumstances such as those in the present case, the buyers were supplied by various participants in the cartel within the scope of their contractual relations. However, the event giving rise to the alleged loss did not consist in a potential breach of contractual obligations, but in a restriction of the buyers freedom of contract as a result of that cartel in the sense that that restriction prevented the buyer from being supplied at a price determined by the rules of supply and demand. 44. In those circumstances, the place of a causal event of loss consisting in additional costs that a buyer had to pay because a cartel has distorted market prices can be identified, in the abstract, as the place of the conclusion of the cartel. Once concluded, the participants in a cartel ensure through action or forbearance that there is no competition and that prices are distorted. Where the place of a cartels conclusion is known, it would be consistent with the aims outlined in para 39 above for the courts of that place to have jurisdiction. The Court concluded that this reasoning was impossible to apply to a cartel which could not be located in a single jurisdiction. It then stated its conclusion in the following terms. 50. It follows that jurisdiction by virtue of article 5(3) of Regulation No 44/2001 to adjudicate, on the basis of the causal event and with regard to all of the perpetrators of an unlawful cartel which allegedly resulted in loss, depends upon the identification, in the jurisdiction of the court seised of the matter, of a specific event during which either that cartel was definitively concluded or one agreement in particular was made which was the sole causal event giving rise to the loss allegedly inflicted on a buyer. In other words, the Court concluded that it was the formation of the cartel and not its implementation which was the event giving rise to the damage. We consider that the Court of Appeal correctly identified the place where the conspiratorial agreement was made as the place of the event which gives rise to and is at the origin of the damage. As Sales LJ explained (at para 76), in entering into the agreement Mr Khrapunov would have encouraged and procured the commission of unlawful acts by agreeing to help Mr Ablyazov to carry the scheme into effect. Thereafter, Mr Khrapunovs alleged dealing with assets the subject of the freezing and receivership orders would have been undertaken pursuant to and in implementation of that agreement, whether or not he was acting on instructions from Mr Ablyazov. The making of the agreement in England should, in our view, be regarded as the harmful event which set the tort in motion. Disposal For these reasons, we would dismiss Mr Khrapunovs appeal.

From 2005 to 2009 Mr Mukhtar Ablyazov was the chairman and controlling shareholder of the respondent, a bank incorporated in Kazakhstan. He was removed from office when the bank was nationalised in 2009. He fled to England where he obtained asylum. The bank brought various claims against him in the High Court. The bank alleged that he had embezzled some US$6 billion of its funds. At the outset of the litigation, the bank obtained an order requiring Mr Ablyazov to identify and disclose the whereabouts of his assets and a worldwide freezing order preventing him from dealing with them. In 2010 the High Court appointed receivers over his assets. It later transpired that Mr Ablyazov had failed to disclose large numbers of undisclosed assets, which he had sought to place beyond the reach of the claimants through a network of undisclosed companies. In 2011 the bank consequently obtained an order committing Mr Ablyazov for contempt of court. He was sentenced to 22 months imprisonment. By the time the judgment had been handed down, however, Mr Ablyazov had fled the country. His whereabouts are unknown. Default judgments in the sum of US$4.6 billion have been obtained against him, but very little has been recovered. In 2015 the bank brought the present claim against Mr Ablyazov and his son in law, Mr Khrapunov, who lives in Switzerland. The bank alleged that Mr Khrapunov, being aware of the freezing and receivership orders, entered into a combination or understanding with Mr Ablyazov to help dissipate and conceal his assets. The judge found that it was sufficiently established for the purposes of this application that they entered into it in England. Mr Khrapunov is said to have been instrumental in the dealings of assets held by foreign companies and in concealing what became of those assets. His actions are said to constitute the tort of conspiracy to cause financial loss to the bank by unlawful means, namely serial breaches of the freezing and receivership orders in contempt of court. This appeal concerns only the position of Mr Khrapunov, who unsuccessfully applied to contest the jurisdiction of the High Court. The Court of Appeal dismissed his appeal. The Supreme Court unanimously dismisses the appeal. Lord Sumption and Lord Lloyd Jones give the lead judgment, with which Lord Mance, Lord Hodge and Lord Briggs agree. Mr Khrapunovs first argument was that contempt of court cannot constitute the required unlawful means for the tort of conspiracy to cause loss by unlawful means, because contempt is not a wrong which by itself entitles a claimant to sue the contemnor: it is not actionable. Therefore, he argued, there was no good, arguable case against him on which to found jurisdiction [5]. The tort of conspiracy can be divided into lawful means conspiracy and unlawful means conspiracy, although that terminology is inexact. A person has a right to advance his own interests by lawful means, even if the foreseeable consequence is damage to the interests of others. Where he seeks to do so by unlawful means, he has no such right. The same is true where the means are lawful but the predominant intention of the defendant is to injure the claimant, rather than to further some legitimate interest of his own. In either case, there is no just cause or excuse for the combination with others. Conspiracy being a tort of primary liability, rather than simply a form of joint liability, the question what constitutes unlawful means cannot depend on whether their use would give rise to a different cause of action independent of conspiracy. The correct test is whether there is a just cause or excuse for the defendants combining with each other to use unlawful means. That depends on (i) the nature of the unlawfulness; and (ii) its relationship with the resultant damage to the claimant [8 11]. Unlike various other legal duties, compliance with the criminal law is a universal obligation. The unlawful means relied on in this case are contempt of court, which is a criminal offence. For that purpose, the defendant must have intended to damage the bank. The damage to the bank need not have been the predominant purpose, but it must be more than incidental. The defendants predominant purpose in this case was to further Mr Ablyazovs financial interests as they conceived them to be. But the damage to the bank was necessarily intended. Their aim was to prevent the bank from enforcing its claims against Mr Ablyazov, and both defendants must have appreciated that the benefit to him was exactly concomitant with the detriment to the bank. The damage was not just incidental [15 16]. It was argued on behalf of Mr Khrapunov that the existence of a claim for conspiracy to commit contempt of court would be inconsistent with public policy because it would substitute a remedy as of right for one which depended on the discretion of the court. The Court is satisfied that there is no such public policy [18 23]. The matters alleged by the bank, if proved, would amount to the tort of conspiracy to injure by unlawful means [24]. Mr Khrapunovs second argument was that the English courts lacked jurisdiction by reason of the general rule, in article 2 of the Lugano Convention to which both the UK and Switzerland are parties, that a person should be sued in the Convention state in which he or she is domiciled. The sole currently relevant exception to that rule is article 5(3), which allows a claim in tort in the Convention state where the harmful event occurred or may occur. Article 5(3) is substantially identical to article 5(3) of the Brussels Regulation (Council Regulation (EC) No 44/2001). The Court of Justice of the European Union (CJEU) has interpreted the latter to cover both: (a) the place where the damage occurred and (b) the place of the event giving rise to it [26 28]. As an exception to the general rule, article 5(3) must be interpreted strictly. Although there is no basis for interpreting it by reference to national rules of non contractual liability, those national rules are relevant. They define the legally relevant conduct and whether an event is harmful. The CJEU has repeatedly focused on the relevant harmful event which sets the tort in motion. This gives effect to an important policy of the Brussels/Lugano scheme by promoting a connecting factor with the jurisdiction of a court which is particularly close to the cause of the damage. In Cartel Damage Claims (CDC) Hydrogen Peroxide SA v Akzo Nobel NV (Case C 352/13) [2015] QB 906 the CJEU identified the formation of a cartel, not its implementation, as the event giving rise to the damage [31 40]. The Court of Appeal correctly identified the place where the conspiratorial agreement was made as the place of the event which gives rise to and is at the origin of the damage. In entering into the agreement, Mr Khrapunov would have encouraged and procured the commission of unlawful acts by agreeing to help Mr Ablyazov to carry the scheme into effect. Thereafter, Mr Khrapunovs alleged dealing with the assets the subject of the court order would have been undertaken pursuant to and in implementation of that agreement. The making of the agreement should be regarded as the harmful event which set the tort in motion [41].

From 4 April 2005 until 3 December 2012, English law provided for the imposition of sentences of imprisonment for public protection (IPP). This is another case in which courts have had to address the practical and legal issues resulting from this innovation. To impose a sentence of IPP the court had (inter alia) to be of the opinion that there is a significant risk to members of the public of serious harm occasioned by the commission by [the offender] of further specified offences (Criminal Justice Act 2003, section 225(1)(b)). When imposing it, the court was required to specify a minimum period (the tariff period) after the expiry of which the prisoner was eligible for review by the Parole Board who could direct his release on licence (Powers of Criminal Courts (Sentencing) Act 2000, section 82A). The Parole Board was required not to direct release unless satisfied that it is no longer necessary for the protection of the public that the prisoner should be confined (Crime (Sentences) Act 1997, section 28(6)(b)). The case is before the Supreme Court as an application for permission to appeal, with the appeal to follow if permission be granted. Having heard the submissions, I consider that it raises issues of importance which merit the Courts consideration and would therefore grant permission. On that basis, there are two grounds of appeal before the Supreme Court. The first focuses on the relationship between the criteria for the court to impose a sentence of IPP and for the Parole Board to direct release on licence. The appellant submits that they must, though differently worded, be read as involving the same substantive test. The Parole Board and the Secretary of State submit that the difference in wording represents a difference in substance. The second ground of appeal is that, even if the criteria differ in substance, the Parole Board in fact applied a wrong test when deciding whether to order the appellants release. Although Mr Hugh Southey QC for the appellant accepts that this ground is now largely, if not entirely, academic in view of the appellants release, he submits that the court should address it to clarify the test for release. For reasons which follow, I would dismiss the appeal on both grounds. The factual background During an altercation outside a public house on 19 May 2006 the appellant, then aged 28, punched a man, who fell backwards, struck his head on the ground and died on the next day. The appellant was convicted of manslaughter. The judge, HHJ Findlay Baker, concluded that the appellant was dangerous. He was forceful and physically very strong, had indicated that he regarded it as his right to respond with violence to any tendered or threatened towards him, had uncontrolled heavy drinking and cocaine taking problems, and had shown no commitment to change these. Accordingly, on 31 January 2007 the judge imposed a sentence of IPP, with a tariff of 2 years 108 days, which expired on 19 May 2009. He said that, had it not been appropriate to impose IPP, a sentence of six years imprisonment would have been appropriate. Deducting half of that, and the time spent on remand, gave the tariff. A Parole Board review took place only on 10 May 2010, when the Board concluded that Mr Sturnham had made significant progress, but still presented a low risk of re offending and a medium risk of serious harm. It declined to order release, but recommended transfer to open conditions which took place on 12 August 2010. Mr Sturnham issued proceedings for judicial review, claiming that the Parole Board had applied the wrong test and also claiming damages for the delay in holding the review. These proceedings were the subject of judgments given by Mitting J on 14 March 2011, [2011] EWHC 938 (Admin), and the Court of Appeal on 23 February 2012, [2012] EWCA Civ 452; [2012] 3 WLR 476. The claim for damages was ultimately disposed of in the Supreme Court by decision on 1 May 2013, [2013] UKSC 23; [2013] 2 WLR 1157, restoring Mitting Js award at first instance of 300 damages for six months undue delay. The former claim is now before the court, having been dismissed by both Mitting J and the Court of Appeal. The result of the present appeal no longer has direct significance for Mr Sturnhams detention. He was released on licence pursuant to a Parole Board decision dated 7 September 2011. But it had a live general significance for the Parole Board at the date when the appeal was considered by the Court of Appeal (23 February 2012) and it may have a continuing significance in other cases, including potentially for prisoners serving life sentences. The legislation IPP was a child of the Criminal Justice Act 2003. Section 225(1) to (3) of that Act identified the circumstances in which IPP was appropriate (until 13 July 2008 without, but thereafter subject to, any residual discretion on the sentencers part) by differentiating those in which it required a discretionary life sentence to be imposed. Release after the tariff period was provided for by the insertion into the Crime (Sentences) Act 1997 of a reference to IPP so as to make IPP subject to the same statutory regime of review by and release by direction of the Parole Board as applicable to mandatory and discretionary life sentences. As enacted and in force when Mr Sturnham was sentenced, section 225 read, so far as material: 225 Life sentence or imprisonment for public protection for serious offences (1) This section applies where (a) a person aged 18 or over is convicted of a serious offence committed after the commencement of this section, and (b) the court is of the opinion that there is a significant risk to members of the public of serious harm occasioned by the commission by him of further specified offences. (2) If (a) the offence is one in respect of which the offender would apart from this section be liable to imprisonment for life, and (b) the court considers that the seriousness of the offence, or of the offence and one or more offences associated with it, is such as to justify the imposition of a sentence of imprisonment for life, the court must impose a sentence of imprisonment for life. (3) In a case not falling within subsection (2), the court must impose a sentence of imprisonment for public protection. (4) A sentence of imprisonment for public protection is a sentence of imprisonment for an indeterminate period, subject to the provisions of Chapter 2 of Part 2 of the Crime (Sentences) Act 1997 as to the release of prisoners and duration of licences. (5) An offence the sentence for which is imposed under this section is not to be regarded as an offence the sentence for which is fixed by law. Section 225 falls to be read with section 224 and Schedule 15. Section 224 provided, so far as material: 224 Meaning of specified offence etc (1) An offence is a specified offence for the purposes of this Chapter if it is a specified violent offence or a specified sexual offence. (2) An offence is a serious offence for the purposes of this Chapter if and only if (a) it is a specified offence, and (b) it is, apart from section 225, punishable in the case of a person aged 18 or over by (i) imprisonment for life, or (ii) imprisonment for a determinate period of ten years or more. (3) In this Chapter relevant offence has the meaning given by section 229(4); serious harm means death or serious personal injury, whether physical or psychological; specified violent offence means an offence specified in Part 1 of Schedule 15; specified sexual offence means an offence specified in Part 2 of that Schedule. Schedule 15 contained a very substantial list of over 150 different offences, starting with manslaughter, kidnapping, false imprisonment, threats to kill and malicious wounding. Notably, however, it did not include murder, for the obvious reason that murder would carry a mandatory life sentence. Section 229 explains the concept of risk (or dangerousness) relevant under section 225: 229 The assessment of dangerousness (1) This section applies where (a) a person has been convicted of a specified offence, and (b) it falls to a court to assess under any of sections 225 to 228 whether there is a significant risk to members of the public of serious harm occasioned by the commission by him of further such offences. (2) If at the time when that offence was committed the offender had not been convicted in any part of the United Kingdom of any relevant offence or was aged under 18, the court in making the assessment referred to in subsection (1)(b) (a) must take into account all such information as is available to it about the nature and circumstances of the offence, (b) may take into account any information which is before it about any pattern of behaviour of which the offence forms part, and (c) may take into account any information about the offender which is before it. (4) In this Chapter relevant offence means (a) a specified offence. As to release by the Parole Board on licence, sections 28 and 34 of the Crime (Sentences) Act 1997 read, so far as material: 28 Duty to release certain life prisoners (1A) This section applies to a life prisoner in respect of whom a minimum term order has been made; and any reference in this section to the relevant part of such a prisoners sentence is a reference to the part of the sentence specified in the order. (5) As soon as (a) a life prisoner to whom this section applies has served the relevant part of his sentence, (b) the Parole Board has directed his release under this section, it shall be the duty of the Secretary of State to release him on licence. (6) The Parole Board shall not give a direction under subsection (5) above with respect to a life prisoner to whom this section applies unless (a) the Secretary of State has referred the prisoners case to the Board; and (b) the Board is satisfied that it is no longer necessary for the protection of the public that the prisoner should be confined. (7) A life prisoner to whom this section applies may require the Secretary of State to refer his case to the Parole Board at any time (a) after he has served the relevant part of his sentence; and (b) where there has been a previous reference of his case to the Board, after the end of the period of two years beginning with the disposal of that reference; and (c) where he is also serving a sentence of imprisonment or detention for a term, after he has served one half of that sentence; and in this subsection previous reference means a reference under subsection (6) above or section 32(4) below. (8A) In this section minimum term order means an order under (a) subsection (2) of section 82A of the Powers of Criminal Courts (Sentencing) Act 2000 (determination of minimum term in respect of life sentence that is not fixed by law), or (b) subsection (2) of section 269 of the Criminal Justice Act 2003 (determination of minimum term in respect of mandatory life sentence). 34 Interpretation of Chapter II (1) In this Chapter life prisoner means a person serving one or more life sentences; (2) In this section life sentence means any of the following imposed for an offence, whether committed before or after the commencement of this Chapter, namely (a) a sentence of imprisonment for life; (b) a sentence of detention during Her Majestys pleasure or for life under section 90 or 91 of the Powers of Criminal Courts (Sentencing) Act 2000; and (c) a sentence of custody for life under section 93 or 94 of that Act, (d) a sentence of imprisonment for public protection under section 225 of the Criminal Justice Act 2003 Section 225 accordingly applied whenever the sentencing court was of the opinion that there is a significant risk to members of the public of serious harm occasioned by the commission by [the offender] of further specified offences. It offered two mutually exclusive courses in such a case. Under section 225(2) the court was required to pass a sentence of imprisonment for life if (a) the offence was one in respect of which the offender would apart from section 225 be liable to imprisonment for life, and (b) it considered that the seriousness of the offence, or of the offence and one or more offences associated with it, is such as to justify the imposition of a sentence of imprisonment for life. Alternatively, if either of (a) or (b) was not satisfied, the court was obliged to impose a sentence of IPP. The case law background Prior to the 2003 Act, the criteria for imposition of a discretionary life sentence consisted, broadly, of the commission of a very serious offence and a conclusion that the offender was a serious danger to the public and likely to remain so for an indeterminate period. In R v Hodgson (1967) 52 Cr App R 113, 114 the Court of Appeal put the matter as follows: When the following conditions are satisfied, a sentence of life imprisonment is in our opinion justified: (1) where the offence or offences are in themselves grave enough to require a very long sentence; (2) where it appears from the nature of the offences or from the defendant's history that he is a person of unstable character likely to commit such offences in the future; and (3) where if the offences are committed the consequences to others may be specially injurious, as in the case of sexual offences or crimes of violence. Further guidance was given by Lord Lane CJ in R v Wilkinson (1983) 5 Cr App R (S) 105, 108 109. He said that a discretionary life sentence should be reserved for the most exceptional circumstances, and for the most part for offenders who were incapable of being dealt with under the Mental Health Act 1959, yet who are in a mental state which makes them dangerous to the life or limb of members of the public and in respect of whom It is sometimes impossible to say when that danger will subside. The reference in Hodgson to future offending being likely was read in a mathematical sense of more probable than not by counsel for the appellant and it seems the Divisional Court in R v Parole Board, Ex p Bradley [1991] 1 WLR 134, 143F, 144H, 145F G and (in particular) 146A C. But likely is a word of open meaning, and I regard any attempt to state or apply a test of mathematical probability in this context as inappropriate. The formulation good grounds for believing that the offender may remain a serious danger to the public for a period which cannot be reliably estimated at the date of sentence was, in my view rightly, preferred in the later case of Attorney Generals Reference No 32 of 1996 (R v Whittaker) [1997] 1 Cr App R(S) 261, 264. By the same token, the Court of Appeal was right, in the context of IPP, to regard it as wholly unhelpful to attempt to redefine significant risk in terms of numerical probability, whether as more probable than not or by any other percentage of likelihood: R v Pedley [2009] EWCA Crim 840, [2009] 1 WLR 2517, para 19. Other authority also indicates that the criteria for imposing a discretionary life sentence are in some measure inter related. In R v Chapman [2000] 1 Cr App R 77, 85 Lord Bingham CJ approved Whittaker and said: In most of those cases there was no express departure from the criteria laid down in R v Hodgson, and certainly no doubt has to our knowledge ever been cast on the authority of that decision, which was very recently re affirmed in Attorney General's Reference No 32 of 1996 (R v Whittaker). In Attorney General's Reference No 34 of 1992 (R v Oxford) (1993) 15 Cr App R(S) 167, R v Hodgson was indeed specifically relied on as laying down principles which were described as not in dispute. It is in our judgment plain, as the court has on occasion acknowledged, that there is an interrelationship between the gravity of the offence before the court, the likelihood of further offending, and the gravity of further offending should such occur. The more likely it is that an offender will offend again, and the more grave such offending is likely to be if it does occur, the less emphasis the court may lay on the gravity of the original offence. There is, however, in our judgment no ground for doubting the indispensability of the first condition laid down for imposition of an indeterminate life sentence in R v Hodgson, re affirmed, as we say, in the more recent Attorney General's Reference No 32 of 1996 (R v Whittaker). It moreover seems to this court to be wrong in principle to water down that condition since a sentence of life imprisonment is now the most severe sentence that the court can impose, and it is not in our judgment one which should ever be imposed unless the circumstances are such as to call for a severe sentence based on the offence which the offender has committed. We accordingly find ourselves in sympathy with all the submissions made by Mr Fitzgerald, which are as we conclude soundly based in law. That being the common law position relating to the imposition of a discretionary life sentence, the next question is the effect of section 225(2) and (3). In R v Lang [2005] EWCA Crim 2864; [2006] 1 WLR 2509, para 8 Rose LJ said: It is not clear whether Parliament, when referring in sections 225(2)(b) and 226(2)(b) to the seriousness of an offence or offences being such as to justify imprisonment or detention for life, thereby making such a sentence mandatory, was intending to adopt this court's criteria for the imposition of a discretionary life sentence; see R v Chapman [2000] 1 Cr App R(S) 377, or was seeking to introduce a new, more restrictive, criterion for seriousness relating it solely to the offence rather than, also, to the dangerousness of the offender. On the basis that Parliament is presumed to know the law, we incline to the former view. The point did not however arise for decision. Subsequently in R v Kehoe [2008] EWCA Crim 819; [2009] 1 Cr App R(S) 41, para 17 the Court of Appeal expressed the view that: When, as here, an offender meets the criteria of dangerousness, there is no longer any need to protect the public by passing a sentence of life imprisonment for the public are now properly protected by the imposition of the sentence of imprisonment for public protection. In such cases, therefore, the cases decided before the Criminal Justice Act 2003 came into effect no longer offer guidance on when a life sentence should be imposed. We think that now, when the court finds that the defendant satisfies the criteria for dangerousness, a life sentence should be reserved for those cases where the culpability of the offender is particularly high or the offence itself particularly grave. It is neither possible nor desirable to set out all those circumstances in which a life sentence might be appropriate, but we do not think that this unpremeditated killing of one drunk by another, at a time when her responsibility was diminished, and after she was provoked, can properly be said to be so grave that a life sentence is required or even justified. Accordingly, we quash the life sentence and substitute a sentence of imprisonment for public protection. To the extent that this passage in Kehoe suggests that section 225(2) involves a raising of the threshold for imposition of a discretionary life sentence, it is difficult to see in what that can really have consisted. But it is on any view clear that, in cases of significant risk to the public of serious harm by the commission of further specified offences, section 225(3) introduced a new form of indeterminate sentence, based on actual offending which was either of a kind for which a life sentence was not available or not of such seriousness as to justify the imposition of a life sentence. The amendments made to the Crime (Sentences) Act 1997 had the effect of fitting the new form of sentence of IPP into a pre existing framework established for mandatory or discretionary life sentences. In the light of decisions such as Thynne, Wilson and Gunnell v United Kingdom (1990) 13 EHRR 666 and Stafford v United Kingdom (2002) 35 EHRR 1121 and R (Noorkoiv) v Secretary of State for the Home Department [2002] 1 WLR 3284, the role of considering whether it was no longer necessary for the protection of the public that the prisoner should be confined after the expiry of the tariff period (or minimum term) fell upon the Parole Board under section 28(6)(b) in relation to all these types of sentence. Two clear differences did however exist between sentences of IPP and life sentences: the licence period in respect of an IPP could be brought to an end ten years after release (section 31A of the Crime (Sentences) Act 1997, as inserted by Schedule 18, paragraph 2, to the Criminal Justice Act 2003); and a minimum term of whole life could not be imposed in respect of IPP (Schedule 18, paragraph 4, to the 2003 Act). Since sentences of IPP were fitted into a larger framework, it is relevant to consider how that framework operated. The Criminal Justice Act 1967, section 61(1) provided merely that the Secretary of State may, if recommended to do so by the Parole Board, release on licence a person serving a sentence of imprisonment for life. In R v Secretary of State for the Home Department, Ex p Benson (The Independent, 16 November 1988) and in Ex p Bradley, the Divisional Court considered the nature and level of risk by reference to which the Parole Board should measure whether continuing detention was justified. In Benson Lloyd LJ said that the decision whether to recommend or release on licence depended on whether there was a risk of repetition of the sort of offence for which the life sentence was originally imposed, in other words risk to life or limb, including in that category a non violent rape. In Bradley the court was concerned with the extent of the risk relevant to sentencing and to release on licence. In rejecting Mr Edward Fitzgeralds submission that the two must equate, the court said (p 145F H): the sentencing court recognises that passing a life sentence may well cause the accused to serve longer, and sometimes substantially longer, than his just deserts. It must thus not expose him to that peril unless there is compelling justification for such a course. That compelling justification is the perception of grave future risk amounting to an actual likelihood of dangerousness. But of course the courts perception of that future risk is inevitably imprecise. It is having to project its assessment many years forward and without the benefit of a constant process of monitoring and reporting such as will be enjoyed by the Parole Board. When at the post tariff stage the assessment comes to be made by that board they are thus much better placed to evaluate the true extent of the risk which will be posed by the prisoners release. And they are a more expert body, custom built by Parliament for the purpose. Given those considerations, and given too that their recommendation for release on licence, if accepted by the Secretary of State, will have immediate effect in terms of endangering public safety quite unlike the decision of the trial judge whose sentence would in any event have protected society for an appreciable time it seems to us perfectly appropriate for the Parole Board to apply some lower test of dangerousness, i.e. one less favourable to the prisoner. The court went on to say of the level of risk relevant at the release stage, that it must indeed be substantial , but this can mean no more than that it is not merely perceptible or minimal, that it must be unacceptable in the subjective judgment of the Parole Board and that the Parole Board must have in mind all material considerations, scrutinising ever more anxiously whether the level of risk is unacceptable, the longer the time the offender has spent in prison post tariff (p 146D F, and see R v Parole Board, Ex p Wilson [1992] QB 740, 747E G). In Ex p Wilson Mr Fitzgerald sought initially to renew the submission, rejected in Ex p Bradley, that the test which the Parole Board should apply for continuing detention should be likelihood of re offending. On reflection, he abandoned the challenge and accepted the correctness of Ex p Bradley, and the Court of Appeal commented that in its judgment he was right to do so (p 747A). Section 34(4)(b) of the Criminal Justice Act 1991 introduced a statutory definition of the Parole Boards function in relation to release of a discretionary life prisoner, using language subsequently reproduced in section 28(6)(b) of the Crime (Sentences) Act 1997. The Parole Board was not to give a direction with respect to a discretionary life prisoner unless satisfied that it is no longer necessary for the protection of the public that the prisoner should be confined. The approach established at common law by Ex p Bradley and Ex p Wilson was, in R v Parole Board, Ex p Lodomez (1994) 26 BMLR 162, held applicable under the statutory test introduced by section 28(6)(b). Leggatt LJ in the Divisional Court in Ex p Lodomez recorded his view that it was unhelpful to invent alternative versions of the statutory test (p 184). The first ground In the present case, the Court of Appeal applied to sentences of IPP the approach taken in Ex p Bradley with regard to discretionary life sentences. The appellants first ground of appeal is that IPP is distinguishable in principle from a life sentence and that it was wrong to apply Ex p Bradley to IPP. Alternatively, if that submission be rejected, then it is submitted Ex p Bradley was wrong and should be over ruled. The appeal has been conducted on both sides on the basis that a substantial distinction exists between the test of significant risk to members of the public applicable under section 225(1)(b) and the test no longer necessary for the protection of the public as understood and applied to discretionary life sentences by Ex p Bradley. But I have already indicated my view that Ex p Bradley went too far in equating significant risk with mathematical likelihood and that good grounds would represent a more acceptable elaboration. As to the phrase no longer necessary for the protection of the public, the Divisional Court considered that the level of risk which it involved must remain undefined, but offered two observations. First, it seemed inevitable that the risk must be substantial, which the Divisional Court thought can mean no more than that it is not merely perceptible or minimal (p 146). Second, it must be sufficient to be judged unacceptable in all the circumstances in the subjective judgment of the Parole Board, and, third, in exercising their judgment as to the level of risk acceptable the Parole Board must have in mind all relevant considerations. A possible difficulty about the Divisional Courts first observation is that the equation of substantial risk with any risk that is not merely perceptible or minimal tends to change the focus or starting point in a way which may influence the conclusion. It is preferable to concentrate on the statutory language and not to paraphrase. This applies to the assessment both of significant risk under section 225(1)(b) of the 2003 Act and of whether detention is no longer necessary for the protection of the public under section 28(6)(b) of the 1997 Act. In relation to the first ground of appeal, Mr Southey relies upon the exceptional nature of a life sentence, imposed, the Divisional Court said in Ex p Bradley, only where there was compelling justification [consisting in] the perception of grave future risk amounting to an actual likelihood of dangerousness (p 145). However, as indicated in paragraphs 14 and 21 above, the distinction under section 225 between circumstances calling for a discretionary life sentence and for IPP may depend more upon the seriousness of the offence actually committed than upon any difference in the offenders assessed dangerousness. The threshold criterion of dangerousness for the purposes of applying section 225 (significant risk to members of the public of serious harm occasioned by the commission by him of further specified offences) was the same in each case. Mr Southey argues that discretionary life sentences and IPP are or may also be different in two other respects. One is that it was wrong to speak of an onus on an offender serving IPP to disprove his dangerousness. Although the default position is that detention will continue unless the Board is satisfied that it is no longer necessary for the protection of the public that the prisoner should be confined, the Parole Board is an investigative body which will make up its own mind on all the material before it: see R v Lichniak [2002] UKHL 47, [2003] 1 AC 903, para 16, per Lord Bingham, and In re McClean [2005] UKHL 46; [2005] UKHRR 826, paras 74 78, per Lord Carswell. Mr Southey suggests that the position may be different in relation to an offender serving a life sentence, while at the same time wishing to reserve the argument that it should not be. If there is in this respect a difference (which I doubt), I regard it as immaterial to the issues which the Supreme Court has to decide on this appeal. The other respect turns on reasoning of the Supreme Court in R v Smith (Nicholas) [2011] UKSC 37, [2011] 1 WLR 1795. This is relied upon as establishing that, when considering whether to impose a sentence of IPP, the sentencing court was not making a predictive judgment of risk at the expiry of the tariff period. If that is right, then there was a marked distinction between the criteria governing imposition of a discretionary life sentence (as hitherto understood) and a sentence of IPP. The reasoning in Ex p Bradley relies at least in part upon the predictive assessment in relation to the post tariff period which a sentencing court makes when considering whether to impose a discretionary life sentence, and the distinction between that assessment and the contemporary evaluation of the Parole Board at the post tariff review stage. Counsel for the Parole Board and for the Secretary of State did not in their written cases or oral submissions take issue with the reasoning in R v Smith. But I am far from satisfied that it can be regarded as the last word. There is nothing in the language of section 225(1)(b) to suggest any distinction between the nature of the assessment required for the purposes of considering whether to impose a discretionary life sentence and a sentence of IPP. On the contrary, the same kind of assessment of risk was on the face of it required for both, with the distinction between them for the purposes of the section focusing, according to section 225(2) and (3), on the seriousness of the actual offence committed. Further, in a number of other cases, the predictive approach appears to have been assumed to be correct in relation to the imposition of a sentence of IPP. In R v Johnson [2006] EWCA Crim 2486, [2007] 1 WLR 585, Sir Igor Judge P said (para 10) that It does not automatically follow from the absence of actual harm caused by the offender to date [i.e. to the date of sentencing], that the risk that he will cause serious harm in the future is negligible. More clearly, in R (Walker) v Secretary of State for Justice [2009] UKHL 22, [2010] 1 AC 553, Lord Judge CJ referred repeatedly to the predictive assessment to be made when sentencing as to the risk of dangerousness at the expiry of the tariff period: see paras 102, 103 and 108. Citing Sir Igor Judges words in para 10 in Johnson, Hughes LJ in R v Pedley [2009] EWCA Crim 840, [2009] 1 WLR 2517 also referred to the imposition of a sentence of IPP as depending upon an assessment of future risk: see paras 16, 20 and 21. In R v Smith (Nicholas), the primary issue was whether it was legitimate to pass a sentence of IPP for armed robbery and possession of a firearm on a career criminal who had already been recalled to prison to serve the remainder of a previous life sentence also imposed for armed robbery and having a firearm with intent. The submission was that, because he could not be released from that life sentence unless and until the Parole Board was satisfied that it was no longer necessary for the protection of the public that he should be detained, there could not be said to be any significant risk to members of the public of serious harm occasioned by the commission by him of further specified offences so as to justify IPP. Counsel supported this submission by arguing that the sentencing judges duty was to consider whether he [the offender] will pose a significant risk when he has served his sentence (para 14). Lord Phillips, giving the judgment of the court, addressed the submission on the same basis, and rejected it, saying: 15. If this is the correct construction of section 225(1)(b) it places an unrealistic burden on the sentencing judge. Imagine, as in this case, that the defendants conduct calls for a determinate sentence of 12 years. It is asking a lot of a judge to expect him to form a view as to whether the defendant will pose a significant risk to the public when he has served six years. We do not consider that section 225(1)(b) requires such an exercise. Rather it is implicit that the question posed by section 225(1)(b) must be answered on the premise that the defendant is at large. It is at the moment that he imposes the sentence that the judge must decide whether, on that premise, the defendant poses a significant risk of causing serious harm to members of the public. It is notable that, although Pedley was cited in argument (though not in the judgment), Walker does not appear to have been referred to in Smith at all. Nor does the reasoning in Smith address the relationship between discretionary life sentences and IPP or consider what basis there could be for requiring a different approach to the assessment of risk under the latter, when compared with the former. An important part of the rationale of a discretionary life sentence is, on the authorities, an assessment of future risk; such a sentence may be appropriate because It is sometimes impossible to say when that danger will subside; or the offender may remain a serious danger to the public for a period which cannot be reliably estimated at the date of sentence" (see Wilkinson and Whittaker, cited in paras 16 and 17 above). While the Divisional Court in Ex p Bradley placed too much emphasis in my view on mathematical probability, it was unquestionably right to consider that a sentencing judge deciding whether to impose a discretionary life sentence was required to assess risk on a predictive basis. The natural inference would be that a parallel approach was expected to be applied to the new sentence of IPP, when fitted into the pre existing framework governing discretionary life sentences. There is nothing unrealistic about asking a sentencing judge to assess whether an offender presents a risk for a period which cannot reliably be estimated and may well continue after the tariff period. Logically, it is also difficult to see why it was necessary at all in Smith to address the question whether the sentencing judges assessment was of present risk or predictive. If the fact that the offender was in prison was relevant at all, it would exclude any present as much as any future risk of the offences to which he was evidently prone. The point which required decision was that, when deciding whether to order IPP, any concurrent prison sentence was to be ignored and the offender was to be assumed to be at liberty. More generally, unless the judgment required in the case of IPP is predictive, it must logically follow that, even though the fixed (tariff) period would in the judges view be sufficient to eliminate any further future risk before the tariff expired, the judge would still be required (even after the time when the imposition of IPP became discretionary) to impose a sentence of IPP, although convinced that there was no point in doing so. The concept of a long determinate sentence sufficient to eliminate future risk would be largely superseded. In these circumstances, I have grave reservations about the reasoning in para 15 in Smith even in relation to sentences of IPP. But, since it was not challenged on this appeal and is not in my opinion ultimately decisive, I say no more on this. In support of the appellants case on the first ground, Mr Southey is able to point to a number of statements in the cases. In R (Bayliss) v Parole Board [2008] EWHC 3127 (Admin); [2009] EWCA Civ 1016, Cranston J and the Court of Appeal were content to proceed on the basis accepted by counsel that the test for release from IPP mirrored the test for imposition of a sentence of IPP. In Pedley Hughes LJ held that a sentence of IPP was Convention compatible, because inter alia it was proportionate to the risk of serious harm, particularly since when the tariff sentence attributable to the instant offence has been served, the system provides for release once that significant risk no longer exists (para 22). In Ex p Walker when that case was in the Court of Appeal, [2008] EWCA Civ 30; [2008] 1 WLR 1977, Lord Phillips CJ described the primary object of IPP as being to detain in prison serious offenders who pose a significant risk to members of the public of causing serious harm by further serious offences until they no longer pose such a risk (para 35). None of these statements was however based on any detailed examination of the present issue, and I have come to the conclusion that they are wrong, so far as they suggest that the test which the Parole Board must apply when considering whether to direct release from IPP is precisely the same as that which the sentencing judge had to apply in order to pass a sentence of IPP in the first place. I set out my reasons in the following paragraphs. On the same basis, as well as in the light of what I have said in para 36 above, I also reject the submission that Ex p Bradley was wrongly decided. First, the two tests are, both in their terms and in their default position, substantially different. Imposition depends upon the court being positively satisfied of a significant risk to members of the public of serious harm occasioned by the commission of further specified offences. Release depends upon the Parole Board being satisfied that it is no longer necessary for the protection of the public that the prisoner should be confined. Second, the test for release applied under the 2003 Act to a sentence of IPP was the test for discretionary life sentences encapsulated in statutory form first in section 34(4)(b) of the 1991 Act, and later in section 28(6)(b) of the 1997 Act, and since also applied to mandatory life sentences. Those drafting and enacting the 1991 Act must be taken to have been aware of the decision in Ex p Bradley (decided on 4 April 1990). Those drafting and enacting the 1997 Act must be taken to have been aware of and accepted the line of authority consisting of Ex p Bradley, Ex p Wilson and Ex p Lodomez. Parliament therefore accepted a difference in the tests for imposing and for release from a discretionary life sentence. In introducing a sentence of IPP into the same framework for release as applies to discretionary life sentences, Parliament must on the face of it have intended to apply to sentences of IPP the same test for release as for discretionary life sentences, again even though that differed from the test for imposition. Third, the phrase no longer necessary for the protection of the public in the test for release does not import any reference to the threshold risk justifying the imposition of the sentence. The sentence imposed will itself operate as a complete protection of the public against any real risk during the tariff period. The phrase does no more than raise the question whether continued detention, after the tariff period, is any longer necessary to achieve that protection. Fourth, I see no inconsistency or incongruity in a scheme involving a higher initial threshold of risk for the imposition of a life sentence or a sentence of IPP, but requiring a somewhat lower risk to be established in order for the convicted offender to be eligible for release. This is so even if a sentencing judge deciding whether to impose a sentence of IPP was not engaged in the predictive exercise held in Ex p Bradley to be required when a court considers whether to impose a discretionary life sentence. Those who cross the initial threshold have notice from the case law that they are at peril of being held to protect the public against a more general and lesser level of risk. The threshold consists of the commission of a serious offence coupled with the existence of a significant risk of the commission of further specified offences. A person who has not committed a serious offence cannot be detained, even if he presents a significant risk of the commission of specified offences: that is because the threshold has not been crossed. But where the threshold is crossed, it does not follow that the objective of detention beyond the tariff period is confined to the elimination of any significant risk (whether that means whatever significant risk was identified when the sentence of IPP was imposed or any significant risk which may at the end of the tariff period be thought to exist). The objective may well be the more general protection of the public for as long as necessary. This, on the face of it, is also what the statutory test for release under section 28(6)(b) states. Fifth, the appellants case is that an offender serving a sentence of IPP should not continue to be detained after the tariff period, if he can show that there is no significant risk to members of the public of serious harm occasioned by the commission by him of further specified offences. The appellant does not carry the logic of his case to the point of suggesting that the risk must be of the commission of the same kind of specified offences as those for which he was originally sentenced. But, assuming that the test for release were to be whether there was or was not a risk of further specified offences of whatever kind, even though not of the same kind as those for which he was originally sentenced, still it would appear to follow that an offender who was known to present a risk to his partners life because of her unfaithfulness during his imprisonment could not continue to be detained. This is because murder is not a specified offence, which is because it carries a mandatory life sentence. That in turn reflects the fact that the schedule of specified offences was designed to meet the requirements for imposition of a sentence of IPP. It was not intended to operate as part of the test for release from IPP. What matters when release is being considered is whether the prisoner presents a continuing risk to life or limb, including a non violent rape, from which the public needs protection by way of his continuing detention (see para 23 above). Sixth, it would seem logically also to follow by extension, on the appellants case, that an offender serving a life sentence should not continue to be detained after the tariff period, if he can show that there no longer exists the same severe risk of serious re offending that justified the life sentence in the first place. That would mean that an offender serving a life sentence would be entitled to release despite a risk of re offending that would justify an offender serving IPP continuing to be detained. If this difficulty is sought to be avoided by distinguishing between offenders serving life sentences and those serving sentences of IPP, that brings the argument back to the second point. It is implausible to think that any such distinction was intended. Seventh, I do not accept Mr Southeys submission that the provisions of the European Convention on Human Rights require a different interpretation to be put on the statutory language to that which would otherwise apply. The submission is that the Convention requires that any decision to maintain detention becomes illegitimate if based on grounds that had no connection with the objectives of the legislature and the court or on an assessment that was unreasonable in terms of those objectives: Van Droogenbroeck v Belgium (1982) 4 EHRR 443, para 40, M v Germany (2009) 51 EHRR 976, para 88 and James v United Kingdom (2012) 56 EHRR 399, para 195. In the last case, the European Court accepted in para 198 that there was a sufficient causal connection between the imposition of a sentence of IPP, because the offender was considered to pose a risk to the public, and his deprivation of liberty in the post tariff period, when his release was contingent on [him] demonstrating to the Parole Boards satisfaction that [he] no longer posed such a risk. It was not concerned with the question whether the minimum level of risk at each stage was required to be identical in order to comply with the Convention. In principle, I see no reason why it should be. There was and is no reason why the objectives of the statutory scheme should not involve a high threshold for imposition of a discretionary life sentence or sentence of IPP, but a high level of security against risk for release (in other words, a lower threshold for continuing detention) after the tariff period. The provisions whereby IPP was introduced into law and related to or assimilated with the position regarding discretionary life sentences must be read as a whole. So read, in my view, the natural conclusion is that this is what Parliament intended. I see nothing in the Convention inconsistent with such an approach. I would therefore dismiss this appeal on the first ground. The second ground The second ground arises from a complaint by Mr Sturnham that the Parole Board in determining whether to direct his release took into account a direction by the Secretary of State to the effect that the appropriate test was whether the Board was satisfied that his level of risk was no more than minimal. In R (Girling) v Parole Board [2006] EWCA Civ 1779; [2007] QB 783 the Court of Appeal held that the Secretary of State had no power to give such a direction, and accordingly it was wrong of the Parole Board to act on it. Mitting J was shown a copy of an internal Parole Board document dated July 2010, in which the Parole Board had itself adopted the more than minimal test internally in guidance issued to its members. He recorded that there was no direct challenge to that guidance bearing in mind its date. But he added that, if the Board had followed it, he would not be prepared to say that it was an unlawful test, but that Beyond that it would not be wise for me to go, given that the issue has not been fully ventilated (para 32). He dismissed the actual ground of appeal on the basis that there was nothing to show that the Board had taken that part of the Secretary of States direction into account. The Court of Appeal upheld the judges decision on the latter ground. Before the Supreme Court, Mr Southey barely addressed the complaint that the Parole Board wrongly guided itself by reference to directions which the Secretary of State had no power to give, and has not established any reason for this court to do other than uphold the decisions below on that aspect. The appeal on the second ground should therefore also be dismissed. In so far as Mr Southey invited us to try to define more closely the meaning of section 28(6)(b), I would decline the invitation and repeat that it is preferable to concentrate on the statutory language, rather than to seek to paraphrase it. Conclusion Having granted permission to appeal as stated in paragraph 3, I would therefore dismiss the appellants appeal on both grounds as stated in paragraphs 49 and 52.

This case concerns the proper test to be applied by the Parole Board when determining whether to direct the release of a person subject to a sentence of imprisonment for public protection (IPP). On 19 May 2006 the appellant punched a man during a fight outside a pub. The man fell backwards, struck his head on the ground and died the next day. The appellant was duly convicted of manslaughter. The judge concluded that the appellant was dangerous; he was forceful, physically strong and considered that he had the right to respond with violence to any tendered or threatened towards him. Accordingly the judge decided to impose a sentence of imprisonment for public protection on the basis that there was a significant risk to members of the public of serious harm occasioned by the commission by [the offender] of further specified offences (Criminal Justice Act 2003, section 225(1)(b)). The judge fixed a minimum term (tariff period) of 2 years 108 days. The tariff period expired on 19 May 2009. Following the expiry of this tariff period it was the responsibility of the Parole Board to decide whether the appellant should be released on licence. In conducting this assessment the Parole Board are required not to order release unless satisfied that it is no longer necessary for the protection of the public that the prisoner should be confined (Crime (Sentences) Act 1997, section 28(6)(b)). The Parole Board review took place on 10 May 2010. The Parole Board concluded that the appellant had made significant progress but continued to present a low risk of re offending and a medium risk of serious harm. As a result the Parole Board declined to order release. The appellant issued proceedings for judicial review, claiming (a) that the Parole Board had applied the wrong test; and (b) damages for the delay of almost one year in holding the review. The claim for damages was disposed of by the Supreme Court by judgment dated 1 May 2013, [2013] UKSC 23. Consequently, only the claim that the wrong test was applied remains for determination. Subsequent to the commencement of the judicial review proceedings, the Parole Board directed that the appellant be released on licence. As a result the present appeal has no direct significance for the appellants detention. Nonetheless, the matter was of significance for the Parole Board when it came before the Court of Appeal and may have a continuing significance in future cases. Consequently, the appellant seeks permissions to appeal to the Supreme Court. The Supreme Court grants permission to appeal but unanimously dismisses the appeal. The judgment of the Court is given by Lord Mance. Section 225(3) of the Criminal Justice Act 2003 (the 2003 Act) introduced a new form of indeterminate sentence, imprisonment for public protection, based on offending which was either of a kind for which a life sentence was not available or not of such seriousness as to justify a life sentence [21]. Sentences of IPP were fitted into the pre existing framework established for mandatory or discretionary life sentences [22], under which the criteria for imposition of a discretionary life sentence were, broadly, the commission of a very serious offence and a conclusion that the offender was a serious danger to the public and likely to remain so for an indeterminate period. In imposing a discretionary life sentence the court makes, at least in part, a predictive judgment as to the risk the offender will pose in the post tariff period [32]. Nothing in section 225(1)(b) of the 2003 Act suggests a distinction between the approach required when imposing a discretionary life sentence and when imposing a sentence of IPP [33]. It is difficult to square the reasoning in R v Smith (Nicholas) [2011] UKSC 37 that no such predictive judgment is involved when imposing a sentence of IPP with other case law or to see why Smith needed to address that point. The reasoning in Smith is thus questionable, but since it was not challenged on this appeal and is not ultimately decisive, no more need be said about it. [34 38]. The suggestion in R v Parole Board, Ex parte Bradley [1991] 1 WLR 134, 143F, 144H, 145F G and 146A C that the reference to future offending being likely involves a test of mathematical probability is unsound. It is not helpful to define significant risk in terms of numerical probability, whether as more probable than not or by any other percentage of likelihood [17]. A test of good grounds is more appropriate [28]. The test to be applied by the Parole Board when considering whether to direct release on licence from IPP is not the same as the test applied by the sentencing judge when imposing the sentence of IPP in the first place [39]. The two tests are, both in their terms and in their default position, substantially different [41]. By introducing a sentence of IPP into the framework applicable to discretionary life sentences, Parliament must on the face of it have intended that release from a sentence of IPP should be subject to the like test as release from a discretionary life sentence [42]. There is no reason why the statutory scheme should not involve a high threshold for imposition of a sentence of IPP than for continuing detention post tariff [44, 48]. The European Convention on Human Rights does not require a different result. Strasbourg case law accepts a sufficient causal connection between the imposition of a sentence of IPP and the deprivation of the offenders liberty in the post tariff period when release is contingent on him demonstrating to the Parole Board that he no longer poses a risk [48]. There was not basis for interfering with the decisions below that the appellant had not established that the Parole Board wrongly took into account directions by the Secretary of State on the test to apply, which the Secretary of State had no power to give [50 53].

This judgment is given in unusual circumstances. The Secretary of State, as respondent to these appeals, has applied pursuant to rule 34(2) of the Supreme Court Rules 2009 for these appeals to be allowed by consent. The appellants of course agree. However, this court took the view that we could not make an order allowing the appeals and setting aside the orders in the courts below without understanding the reasons for doing so and their impact upon the point of law of general public importance raised by the appeals. The Secretary of State has supplied those reasons, with which this court agrees. This judgment is accordingly based upon them. Although there are only two appeals before this court, these cases were heard in the Court of Appeal along with a third case, that of Mr Kaziu, which was decided on the same basis: R (Kaziu) v Secretary of State for the Home Department [2015] EWCA Civ 1195, [2016] 1 WLR 673. The Secretary of State therefore accepts that the principles adopted in this judgment should also apply to him. The issue is whether the misrepresentations made by the appellants in their applications for United Kingdom citizenship made the grant of that citizenship a nullity, rather than rendering them liable to be deprived of that citizenship under sections 40 and 40A of the British Nationality Act 1981. The facts Mr Hysaj was born Dinjan Hysaj in Albania in 1977. He came to this country and claimed asylum in July 1998. He gave his true name, but claimed to have been born in 1981 and thus to be a child at the time of his asylum claim. He also falsely claimed that he was a citizen of the Federal Republic of Yugoslavia from Kosovo, and that he had been persecuted there. He was accepted as a refugee and given indefinite leave to remain (ILR) here in 1999. In 2004 he applied for and was granted naturalisation as a British citizen, using the same false details as he had used in his asylum claim. Thus he obtained British citizenship in his own name but using a false date of birth, a false nationality and a false place of birth. Mr Bakijasi was born Agron Bakijasi in Albania on 22 October 1972. He came to this country and claimed asylum in 1999. He gave a false name, Agron Adjini, a false date of birth, and falsely claimed to be a citizen of the Federal Republic of Yugoslavia from Kosovo, and that he had been persecuted there. His asylum claim was refused on the basis that it was safe for him to return to Kosovo. But his later application for ILR, using the same false details, was granted under the Family ILR exercise in September 2005. Using the same false details, he applied for and was granted naturalisation as a British citizen in November 2006. Thus he obtained British citizenship using a false name, a false date of birth, a false nationality and a false place of birth. When these frauds came to light, the Secretary of State decided that, in each case, the grant of citizenship was a nullity, so that the appellants were not, and never had been, British citizens. They had therefore remained at all times on ILR, which had been validly granted to them. She did so on the basis of binding Court of Appeal authority. In these judicial review proceedings, that decision was upheld, albeit with some reluctance, by Ouseley J in the High Court ([2014] EWHC 832 (Admin), [2015] 1 WLR 945) and by the Court of Appeal ([2015] EWCA Civ 1195, [2016] 1 WLR 673). Sales LJ described the interpretation given by the binding Court of Appeal authorities as problematic in various respects (para 64). The legislation Section 6(1) of the British Nationality Act 1981 provides that: If, on an application for naturalisation as a British citizen made by a person of full age and capacity, the Secretary of State is satisfied that the applicant fulfils the requirements of Schedule 1 for naturalisation as such a citizen under this subsection, he may, if he thinks fit, grant to him a certificate of naturalisation as such a citizen. Section 40 of the 1981 Act makes provision for the Secretary of State to deprive a person of citizenship obtained by registration or naturalisation if satisfied that the registration or naturalisation was obtained by means of fraud, false representation or concealment of a material fact. On the face of it, fraud or false representation would include the sort of misrepresentations as to identity made by the appellants, so that, if the Secretary of State sees fit, they could be deprived of their citizenship under that provision. Section 40A makes provision for a right of appeal against most such deprivations to the First tier Tribunal. The previous case law There are four relevant decisions in the Court of Appeal before this one but none in the House of Lords or Supreme Court. For convenience, the applicant for citizenship is referred to as X and the identity in which he applied for citizenship is referred to as Y. In R v Secretary of State for the Home Department, Ex p Sultan Mahmood [1981] QB 58, decided in 1978, X impersonated Y, a real person, who was his dead brother in law and cousin, to obtain registration as a British citizen under section 5A of the British Nationality Act 1948. Roskill LJ held that there were three possible effects of the purported grant. First, it might have been a grant to Y; but it could not have been, because Y was dead. Second, it might have been a grant to X; but it could not have been, because the Secretary of State had no knowledge of X, believing him to be Y. Third, it might have been of no effect at all; as it could not be the first or the second, it could only be a nullity. Accordingly, X had never become a citizen of the United Kingdom. The next case, decided in 1980, was R v Secretary of State for the Hone Department, Ex p Parvaz Akhtar [1981] QB 46. X was registered as a citizen by his purported father, Z, in the name of Y, under section 7(1) of the 1948 Act, which allows for the registration of a minor child of a British citizen. X was not the son of Z. Applying Mahmood, the Court of Appeal held that the Secretary of State had no power or intention to register X or any Y other than an actual son of Z. Accordingly, X never became a citizen of the United Kingdom. Next came R v Secretary of State for the Home Department, Ex p Ejaz [1994] QB 496. X applied for citizenship in her real name under section 6(2) of the 1981 Act, which provides for the naturalisation of a person who is married to a British citizen. Later, it turned out that Xs husband was not, and never had been, a British citizen, having been granted a British passport in a false identity. The Court of Appeal declined to hold that the grant of citizenship was a nullity, pointing to the uncertainty and injustice which could be caused by holding that a person had never been a citizen, which could have effects upon third parties such as children, and was highly undesirable in matters of status. Deprivation of citizenship, on the other hand, did not have such retrospective effect. Then came Bibi v Entry Clearance Officer, Dhaka [2007] EWCA Civ 740, [2008] INLR 683. X had obtained entry to the United Kingdom by assuming the identity of Y, another real person who had been granted an employment voucher to enable him to enter. After living here for five years, X was registered as a British citizen in the name of Y. The appellants were the wife and four children of X and claimed a right of abode in the United Kingdom based on the purported citizenship of X. The Court of Appeal held that, because X had applied for citizenship in a false identity, Mahmood and Akhtar applied and there never was a grant of citizenship to him. As the Secretary of State points out, these cases demonstrate a gradual expansion of the nullity approach since Mahmood. Thus, Mahmood established that if X adopts the identity of Y, another real person, and Y has the characteristics required to obtain citizenship, the purported grant of citizenship to X in the identity of Y is a nullity. Akhtar decided that if X adopts the identity of Y, where Y is not a real person but a false identity created by X (or someone else for him) having the characteristics required to obtain citizenship, the purported grant of citizenship to X as Y is a nullity. Bibi decided that, if X adopts the identity of Y, another real person, and X acquires the characteristics needed to obtain citizenship by using the identity of Y, the purported grant of citizenship to X as Y is a nullity. The present case went a stage further than Bibi and decided that if X adopts the identity of Y, where Y is a false identity created by X and X acquires the characteristics needed to obtain citizenship by using the identity Y, the purported grant of citizenship to X as Y is a nullity. The Secretary of States position Having reviewed the matter after permission to appeal was granted in this case on 27 February 2017, the Secretary of State has come to the conclusion that the law took a wrong turning after Mahmood. The Mahmood type of case involves two real people, X and Y. X impersonates Y for the purpose of applying for citizenship. Y has the characteristics required for citizenship. Y is considered by the Secretary of State and is granted citizenship. But Y has never applied for it, may not want it, or may even be dead. Thus it cannot be said that citizenship has been granted either to Y or to X. Accordingly there was no grant of citizenship. Mahmood, in the Secretary of States view, remains good law. By contrast, in the later cases, X uses a false identity created by him (or someone on his behalf) and in that identity he acquires the characteristics needed to obtain citizenship. X applies for citizenship using the false identity Y. But X meets the requirements for citizenship albeit having acquired them by using the false identity Y. X is considered for citizenship by the Secretary of State in identity Y and is granted citizenship in that identity. In such a case, in the Secretary of States view, the grant of citizenship is valid, albeit that the person may later be deprived of it under section 40. Ejaz was rightly decided but Akhtar and Bibi were wrongly decided. Those cases, and the Court of Appeals decision in this case, were based on the principle that there is a category of fraud as to identity which is so serious that a purported grant of citizenship is of no effect. But, argues the Secretary of State, the courts have not articulated any clear or principled definition of the types of fraud which will be so serious as to have this consequence. In the current cases, for example, neither appellant pretended to be someone he was not. Mr Hysaj used his real name but put forward a false date of birth, nationality and place of birth in gaining his ILR and gained citizenship on the basis of the ILR that he himself had obtained. Mr Bakijasi used a false name in gaining his ILR but otherwise gained citizenship in the same way. Ouseley J held that the key characteristics of identity for this purpose were the name, date of birth, and nationality or the country and place of birth, because this was the information on the certificate. But he also held that there had to be fraud innocent mistakes or misunderstandings were not enough (paras 46, 47). Such uncertainty means that the law is difficult to apply in practice. It also has a number of illogical and unsatisfactory consequences. Thus it is not clear when the use of a false identity to obtain citizenship by one person will lead to the nullification of the grant of citizenship to those making a derivative claim, whether as a spouse or child. It is not easy to reconcile Akhtar, Ejaz and Bibi. Logically, as Ouseley J pointed out in this case (para 55) either all derivative citizenship should be of no effect if the citizenship from which it is derived is of no effect, or the nullity should be confined to the person who obtained citizenship using the false identity. As Ouseley J also pointed out (para 69) the logic of the position then adopted by the Secretary of State would also nullify the grant of ILR, but the Secretary of State has never contended for this. IN THE SUPREME COURT ON APPEAL FROM THE COURT OF APPEAL (CIVIL DIVISION) BETWEEN: SC/2016/0209 SC/2016/0211 THE QUEEN on the application of DINJAN HYSAJ AGRON BAKIJASI and DRAFT ORDER SECRETARY OF STATE FOR THE HOME DEPARTMENT Appellants Respondent UPON the Respondent accepting that the Appellants are British citizens by naturalisation under section 6(1) of the British Nationality Act 1981 (the 1981 Act), and that that citizenship remains valid unless and until a formal deprivation order is made pursuant to section 40(3) of the 1981 Act AND UPON the Respondent accepting that her decisions, dated 13 February 2013 and 27 June 2013, that the Appellants British citizenships were nullities (i.e. that the Appellants were not, and had never been, British citizens) were wrong in law AND UPON the Respondent agreeing to withdraw the said decisions dated 13 February 2013 and 27 June 2013 AND UPON the Respondent accepting that the elder child of Mr Dinjan Hysaj, born in Albania on 23 November 2010, is a British citizen by virtue of section 2(1) of the 1981 Act AND UPON the Respondent accepting that the younger child of Mr Hysaj, born in the United Kingdom on 19 September 2015, is a British citizen by virtue of section 1(1) of the 1981 Act AND UPON the Respondent accepting that the elder child of Mr Bakijasi, born in the United Kingdom on 23 August 2003, and registered as a British citizen on 11 October 2006, is a British citizen by virtue of section 1(3) of the 1981 Act AND UPON the Respondent accepting that the younger child of Mr Bakijasi, born in the United Kingdom on 14 June 2007, is a British citizen by virtue of section 1(1) of the 1981 Act IT IS ORDERED BY CONSENT THAT: 1. The appeals be allowed. 2. The Order of the Court of Appeal dated 26 November 2015 be set aside. 3. The Respondent do pay the Appellants reasonable costs of the claim, the appeal to the Court of Appeal and the appeal to the Supreme Court on standard basis, to be assessed, if not agreed. 4. The Appellants publicly funded costs be subject to a detailed assessment. 5. The Respondent make a payment to each Appellant on account of that Appellants costs, equivalent to 25% of the relevant Appellants total bill of costs, such payment to be made within 28 days of the relevant bill of costs being served on the Respondent. This court agrees with the reasoning now put forward by the Secretary of State. It follows that the decisions of the Court of Appeal in Akhtar and Bibi must be overruled and that this appeal must be allowed by consent in terms of the detailed order proposed.

The appellants made false representations in their applications for United Kingdom citizenship. The issue in these appeals is whether those misrepresentations made the subsequent grant of citizenship to them a nullity rather than rendering them liable to be deprived of that citizenship under sections 40 and 40A of the British Nationality Act 1981 (BNA). Mr Hysaj is an Albanian citizen. He claimed asylum in the UK in July 1998, falsely stating he was born in Kosovo, was therefore a citizen of the Federal Republic of Yugoslavia (FRY), and that he was under 18. He was accepted as a refugee and given indefinite leave to remain (ILR). Mr Hysaj was granted naturalisation as a British citizen in 2004. Mr Bakijasi was also born in Albania. He sought asylum under a false name and date of birth, gave a false place of birth in Kosovo and falsely claimed FRY nationality. He was eventually granted ILR under the same false details, and then granted naturalisation as British citizen in 2006. When these frauds came to light the Secretary of State, on the basis of binding Court of Appeal case law, decided that in both cases the grant of citizenship was a nullity, so that the appellants were not and had never been British citizens, albeit that they remained on ILR. The appellants challenged the decisions, submitting that the earlier cases were wrongly decided. The High Court and Court of Appeal, which were also bound by this case law, upheld the Secretary of States decisions. Permission to appeal was granted by the Supreme Court on the ground that the appeals gave rise to an arguable point of law of general public importance. Unusually, the Secretary of State applied pursuant to rule 34(2) of the Supreme Court Rules for the appeals to be allowed by consent, supported with reasons. The Supreme Court unanimously allows the appeals by consent. It agrees with the reasons provided by the Secretary of State and holds that misrepresentations in an application for UK citizenship renders the applicant liable to be deprived of that citizenship pursuant to s 40 BNA. Lady Hale gives the only substantive judgment. S 40 BNA makes provision for the Secretary of State to deprive a person of citizenship if satisfied that the grant was obtained by means of fraud, false representation or concealment of a material fact. There is a right of appeal to the First tier Tribunal against most such deprivations in s 40A [7]. The original decision adopting the nullity approach, rather than a deprivation of citizenship, involved the purported grant of British citizenship to someone who was impersonating another real person (R v Secretary of State for the Home Department ex p Mahmood [1981] QB 58). Subsequent cases, including R v Secretary of State for the Home Department ex p Akhtar [1981] QB 46, Bibi v Entry Clearance Officer, Dhaka [2007] EWCA Civ 740 and the present ones, expanded this approach to persons adopting a false identity through which the characteristics needed to obtain citizenship were acquired [8 14]. The Secretary of State considers that the law took a wrong turning after Mahmood, and the nullity approach should only apply in impersonation cases [15]. The subsequent cases were based on the principle that there is a category of fraud as to identity which is so serious that a purported grant of citizenship is of no effect, but had not articulated a clear definition of such fraud. This uncertainty means the law is difficult to apply in practice and also gives rise to a number of illogical and unsatisfactory consequences. The same principle would also appear to nullify the grant of ILR, but the Secretary of State has never contended for this [16 18]. The Supreme Court agrees with this reasoning. It follows that the decisions of the Court of Appeal in Akhtar and Bibi must be overruled and the present appeals allowed by consent [19].

The anti deprivation rule and the rule that it is contrary to public policy to contract out of pari passu distribution are two sub rules of the general principle that parties cannot contract out of the insolvency legislation. Although there is some overlap, they are aimed at different mischiefs: Goode Perpetual Trustee and Flip Clauses in Swap Transactions (2011) 127 LQR 1, 3 4. The anti deprivation rule is aimed at attempts to withdraw an asset on bankruptcy or liquidation or administration, thereby reducing the value of the insolvent estate to the detriment of creditors. The pari passu rule reflects the principle that statutory provisions for pro rata distribution may not be excluded by a contract which gives one creditor more than its proper share. The anti deprivation rule What is now described as the anti deprivation principle dates from the 18th century, although the expression deprivation has been in use in this context only since the decision of Neuberger J in Money Markets International Stockbrokers Ltd v London Stock Exchange Ltd [2002] 1 WLR 1150. In 1812 Lord Eldon LC confirmed that a term which is adopted with the express object of taking the case out of reach of the Bankrupt Laws is a direct fraud upon the Bankrupt Laws from which a party cannot benefit: Higinbotham v Holme (1812) 19 Ves Jun 88, 92. Classic statements of the principle include these: the law is too clearly settled to admit of a shadow of doubt that no person possessed of property can reserve that property to himself until he shall become bankrupt, and then provide that, in the event of his becoming bankrupt, it shall pass to another and not to his creditors. (Whitmore v Mason (1861) 2 J & H 204, 212, per Sir William Page Wood V C) a simple stipulation that, upon a mans becoming bankrupt, that which was his property up to the date of the bankruptcy should go over to some one else and be taken away from his creditors, is void as being a violation of the policy of the bankrupt law (Ex p Jay; In re Harrison (1880) 14 Ch D 19, 25, per James LJ). In the case of personal bankruptcy, section 306(1) of the Insolvency Act 1986 Act (the 1986 Act) provides that a bankrupts estate vests in the trustee in bankruptcy immediately upon his appointment and section 283(1) provides that a bankrupts estate comprises all property belonging to or vested in the bankrupt at the commencement of the bankruptcy; andany property which by virtue of any of the following provisions of this Part is comprised in that estate or is treated as falling within the preceding paragraph. In the case of corporate insolvency, the insolvent company continues to be owner of its property but holds it on trust for the creditors in accordance with the provisions of the 1986 Act: Ayerst v C & K (Construction) Ltd [1976] AC 167. For companies, section 436 defines Property so that it: includes money, goods, things in action, land and every description of propertyand also obligations and every description of interest, whether present or future or vested or contingent, arising out of, or incidental to, property The pari passu principle In the case of personal bankruptcy, by section 328 of the 1986 Act, subject to preferential payments, and with the exception of certain deferred debts, all other debts are to be paid equally. For companies, section 107 provides that, subject to the provisions relating to preferential payments, the companys property in a voluntary winding up [should] on the winding up be applied in satisfaction of the companys liabilities pari passu. By rule 4.181 of the Insolvency Rules 1986 (SI 1986/1925) similar provision is made for a winding up by the court. In such a winding up, the liquidator must secure that the assets of the company are got in, realised and distributed to the companys creditors and, subject to that, he must take into his custody or under his control all the property and things in action to which the company is entitled (sections 143 and 144 of the 1986 Act). In British Eagle International Airlines Ltd v Cie Nationale Air France [1975] 1 WLR 758 the House of Lords by a bare majority (reversing Templeman J and a unanimous Court of Appeal [1974] 1 Lloyds Rep 429, with Russell LJ delivering the judgment of the court) decided that a clearing house arrangement between a large number of airline companies relating to debts arising as between them was ineffective as against the liquidator of one of the companies, British Eagle. All members of the House upheld the principle that contracting out of the pari passu provisions of what was then section 302 of the Companies Act 1948 was contrary to public policy and void. The difference between the majority and minority related largely (but not exclusively) to the question whether the arrangement resulted in no debt being due. The conclusion of the majority in the House of Lords was that, insofar as the arrangement purported to apply to debts which existed when the members of the company passed the resolution to go into creditors voluntary liquidation, it would have amounted to contracting out of the statutory requirement that the assets owned by the company at the date of its liquidation should be available to its liquidator, who should use them to meet the companys unsecured liabilities pari passu, under what is now section 107 of the 1986 Act. The ratio of the decision was accurately stated by Peter Gibson J in Carreras Rothmans Ltd v Freeman Mathews Treasure Ltd [1985] Ch 207, 226, as being that where the effect of a contract is that an asset which is actually owned by a company at the commencement of its liquidation would be dealt with in a way other than in accordance with [the statutory pari passu rule] . then to that extent the contract as a matter of public policy is avoided. The distinction between the two sub rules is by no means clear cut. Several decisions which are regarded as decisions on the anti deprivation rule could also be characterised as cases in which the parties sought to disturb pari passu distribution. Ex p Mackay; Ex p Brown; In re Jeavons (1873) LR 8 Ch App 643 is usually regarded as an anti deprivation case. It involved two transactions: the first was the sale of a patent for improvements in the manufacture of armour plates by Mr Jeavons to Brown & Co and Cammell & Co in consideration of the companies paying royalties; the second was a secured loan of 12,500 from the companies to Mr Jeavons. The parties agreed that (1) the companies would keep half the royalties towards satisfying the debt, and (2) in the event of Mr Jeavons bankruptcy, they could also keep the other half of the royalties until the debt had been fully paid. It was held that provision (1) was valid against Mr Jeavons trustee, but provision (2) was not. James LJ said (at p 647) that provision (1) represented a good charge upon one moiety of the royalties, because they are part of the property and effects of the bankrupt, but provision (2) is a clear attempt to evade the operation of the bankruptcy laws as it provide[d] for a different distribution of his effects in the event of bankruptcy from that which the law provides. Mellish LJ said (citing Higginbotham v Holme 19 Ves Jun 88, 92) that the case fell within the principle that: . a person cannot make it a part of his contract that, in the event of bankruptcy, he is then to get some additional advantage which prevents the property being distributed under the bankruptcy laws . (p 648) What James and Mellish LJJ said cannot be applied unconditionally, since a different distribution and additional advantage can be obtained by lawful charges between debtor and creditor and by subordination agreements between creditors, and the same applies to what Lord Cross of Chelsea said about contracting out generally. The reference, therefore, by James LJ to a different distribution of his effects in the event of bankruptcy from that which the law provides is an early expression of the pari passu principle. That is perhaps why the decision was the only prior relevant decision discussed in Lord Cross sole speech for the majority in British Eagle. He said (at 780): In Ex p Mackay 8 Ch App 643, the charge on [the] second half of the royalties wasan animal known to the law which on its face put the charge[e] in the position of a secured creditor. The court could only go behind it if it was satisfied as was indeed obvious in that case that it had been created deliberately in order to provide for a different distribution of the insolvents property on his bankruptcy from that prescribed by the law. Lord Morris of Borth y Gest, in his dissenting speech, agreed that Ex p Mackay was a case where the relevant provisions were a clear attempt to evade the operation of the bankruptcy laws, or a device for defeating the bankruptcy laws (p 770). By the time that International Air Transport Association v Ansett Australia Holdings Ltd [2008] HCA 3, (2008) 234 CLR 151 was decided by the High Court of Australia the rules of the clearing house scheme had been modified following the British Eagle decision so as to exclude any liability or right of action for payment between member airlines. The High Court decided by a majority (Kirby J dissenting) that the rule changes were effective to make the IATA the sole creditor of Ansett, and that the revised system did not have the effect of administering debts due to an insolvent company otherwise than in accordance with the mandatory pari passu rule. In their joint judgment Gummow, Hayne, Heydon, Crennan and Kiefel JJ also referred to Ex p Mackay and suggested that Lord Cross speech in British Eagle was based in part on the anti deprivation principle; and that there was no need for recourse to the rule that a contract which is contrary to public policy is void, because the statute was an overriding one which applied according to its terms: at paras 74 and 76. There is much to be said for the observation that recourse to public policy is unnecessary for the application of the mandatory statutory pari passu principle. There is little difference in practice between declaring a contractual provision invalid or ineffective because it is inconsistent with the statute and declaring it contrary to public policy for the same reason, but this is not the occasion for the decision in British Eagle to be reconsidered. Although it must be said that the decision of the minority and of the lower courts makes more sense commercially than that of the majority, there was no real disagreement on the applicable principles. But it does not follow from the fact that it is difficult in some cases to draw the line between the two categories that there are no relevant differences. The anti deprivation rule applies only if the deprivation is triggered by bankruptcy, and has the effect of depriving the debtor of property which would otherwise be available to creditors. The pari passu rule applies irrespective of whether bankruptcy or liquidation is the trigger. There is a question whether the bona fides of the parties is equally relevant to the application of the two principles. These points will be taken up below. This is a case in which only the anti deprivation principle is potentially applicable. The Noteholders are creditors of the Issuer. There is no question of disturbance of the pari passu rule as between the creditors of Lehman Brothers Special Financing Inc (LBSF). What is said, in effect, is that the parties have unlawfully extracted an asset belonging to LBSF, namely its first charge on the Collateral, and passed it to the Noteholders. Anti avoidance provisions There are anti avoidance provisions for personal and corporate insolvency. They are relevant on this appeal because of an argument that the anti deprivation rule dates from a time when there were anti avoidance provisions which, if they existed at all, were in their infancy, and that consequently the need for the rule needs to be re visited in the light of legislative developments. For personal bankruptcies, section 284 of the 1986 Act provides that where a person is adjudged bankrupt, any disposition of property made by that person in the period from the day of the presentation of the petition for the bankruptcy order is void except to the extent that it is or was made with the consent of the court, or is or was ratified by the court. There are claw back provisions dealing with the setting aside of transactions at an undervalue and preferences in sections 339 340 of the Act. For companies, section 127 provides that any disposition of the companys property made after the commencement of the winding up is, unless the court otherwise orders, void. Sections 238 and 239 enable a liquidator to apply to the court for an order to restore the position where the company has entered into a transaction at an undervalue, or has done anything which, in the event of the companys insolvent liquidation, would put a creditor (or guarantor) of the company in a better position than he would otherwise be in. By section 423 the court may set aside transactions entered into at an undervalue at any time if they were entered into for the purpose of putting assets beyond the reach of a person who is making, or may at some time make, a claim against him, or of otherwise prejudicing the interests of such a person in relation to the claim. II Background Prior to the events which form the background to this appeal, the Lehman Brothers group was the fourth largest investment bank in the United States. On 15 September 2008, Lehman Brothers Holdings Inc (LBHI), the parent company of the Lehman Brothers group, applied to the US Bankruptcy Court for the Southern District of New York for protection under Chapter 11 of the United States Bankruptcy Code. This appeal concerns the effect of the security arrangements in a complex series of credit swap transactions under which, in effect, investors gave credit protection to Lehman Brothers by reference to the performance of a basket of underlying obligations. The Lehman Brothers vehicles used for what was called the Dante Programme (named after the first special purpose vehicle (SPV) used in the programme) were LBSF and SPVs incorporated in jurisdictions chosen for tax reasons. The programme was what was called a synthetic debt repackaged note issuance programme. At the time of the Lehman Brothers collapse in September 2008 there were 19 SPVs being used as Note issuers in the programme with a total of about 180 series of Notes with an aggregate principal amount of $12.5 billion. LBSF filed for Chapter 11 protection in the United States Bankruptcy Court for the Sothern District of New York on 3 October 2008. The documentation is complex, but, in broadest outline, the transactions in the representative example series before the court on this appeal were these: (1) Lehman Brothers set up an SPV (the Issuer) in a suitable jurisdiction (in the representative example, Saphir Finance plc, incorporated in the Republic of Ireland). (2) Investors (the Noteholders) subscribed for Notes issued by the Issuer. The Notes were floating rate medium term Notes (with a seven year maturity) with a margin of 1.3% over Australian dollar denominated 3 month bills. (3) The Issuer used the subscription moneys to purchase government bonds or other secure investments (in the representative, triple A rated floating rate Rabo Australia Ltd Notes guaranteed by Rabobank Nederland) (the Collateral). (4) The Collateral was vested in a Trustee (in the present case BNY Corporate Trustee Services Ltd) (the Trustee). (5) LBSF entered into a credit default swap agreement with the Issuer under which LBSF would pay the Issuer the amounts due by the Issuer to the Noteholders in exchange for the payment by the Issuer to LBSF of sums equal to the interest received on the Collateral. (6) The amount by which the sum payable under the swap agreement by LBSF exceeded the yield on the Collateral represented what has been described as the premium for credit protection insurance provided by the Noteholders. (7) The amount payable by LBSF to the Issuer on the maturity of the Notes (or on early redemption or termination) was the initial principal amount subscribed by the Noteholders less amounts (if any) calculated by reference to the Credit Events occurring during a specified period by reference to one or more reference entities. In return, LBSF would receive the proceeds of the Collateral. (8) The payment due from LBSF at maturity of the swap agreement (and also the outstanding principal amount of the Notes) could be reduced (in extreme circumstances to zero) during the term of the swap agreement (and the Notes) if Credit Events occurred and were notified in accordance with the terms of the swap agreement. (9) Credit protection or insurance is a misnomer because there was no requirement for LBSF to have any direct exposure to the reference portfolio (substantially the same 260 reference entities in the two tranches before the Court on the appeal): it was expressly provided that the swap did not constitute a contract of insurance and that payments would be due in the event of Credit Events without proof of economic loss to LBSF. (10) There was in effect an excess because the notified Credit Events would lead to a reduction only if they exceeded a stated subordination amount. In the representative example before the Court A$70m was the amount of the issue, the subordination amount was A$126m, and the Offering Circular indicated that the Notes would be reduced to zero when the cumulative losses on the reference portfolio reached A$196m. (11) If Credit Events did not occur the Noteholders were due to receive the full amount of the Notes, and LBSF was to put the Issuer in funds to redeem the Notes. (12) If Credit Events occurred, the amounts payable by LBSF and the principal amount due on the Notes were to be reduced from time to time as and when such Credit Events occurred and were notified. (13) Consequently the performance of the Notes was linked to the performance of the obligations of the reference entities. In effect, LBSF was speculating that sufficient Credit Events would occur for it to be required to pay less than the Noteholders had invested and to net a substantial part of the Collateral; and the Noteholders were speculating that the credit reference portfolio was safe and that any Credit Events within it would not burn through the net amount of the subordination amount. (14) The Collateral was charged by the Issuer in favour of the Trustee to secure its obligations to LBSF under the swap agreement and to the Noteholders under the terms and conditions of the Notes. (15) The claims of LBSF and the Noteholders were limited to the Collateral and they had no right of recourse against the Issuer. (16) The respective priorities of LBSF under the swap agreement and the Noteholders were described as Swap Counterparty Priority and Noteholder Priority. (17) The respective priorities of LBSF and the Noteholders depended on whether there had been an Event of Default under the swap agreement, which included the institution by LBSF (or LBHI as LBSFs Credit Support Provider under the swap agreement) of proceedings in insolvency or bankruptcy (such as filing for Chapter 11 protection). (18) If there were no such Event of Default, then LBSF would have priority in relation to the Collateral, but if there were an Event of Default in respect of which LBSF (or LBHI) was the Defaulting Party, the Noteholders would have priority over LBSF. The central issue in the proceedings and the appeal is the validity of those provisions for alteration of priority. The practical importance of the question is that under the terms of the swap, in the event of its early termination, it was to be unwound with certain Unwind Costs payable either to LBSF or to the Issuer. The Unwind Costs represented the market assessment of the amount either LBSF or the Issuer were expected to receive under the swap were it to run to maturity. The commercial purpose was to reflect the value of the swap in the market place as at the point of termination. Since, following the financial crisis, many more Credit Events were expected to occur in the future, the Unwind Costs (representing a payment for the future losses) would be due to LBSF. If Swap Counterparty Priority subsists LBSF would be entitled to recourse to the Collateral towards satisfaction of its claims. But if the Noteholders have priority, the Collateral would be exhausted in repayment of the Notes where Credit Events did not occur before termination so as to reduce the amount due on the Notes and to make some of the Collateral available to LBSF. III The litigation The first 29 respondents (which will for convenience be called the Belmont respondents after the first respondent, Belmont Park Investments Pty Ltd, or the Noteholders, depending on the context) are Australian companies, institutions, authorities and charities who are Noteholders in ten series of Notes, nine of which are involved in this appeal. After 15 September 2008, periodic payments due to the Noteholders were not made. The same applied in respect of other Note series under the Dante Programme, including two series held by Perpetual Trustee Co Ltd (Perpetual). The total outstanding under those nine series of Notes is approximately A$250.23m (approximately 155m) of which the Belmont respondents account for approximately A$91.1m. The contractual documentation differs between the various Belmont series, but the parties are content for the court to consider the Saphir 2004 4 Note documentation as, for relevant purposes, representative, and the documentation before the court has included the documents relating to two tranches. The facts set out below relate to those tranches. There are minor differences in relation to some other series, but they are immaterial for present purposes. On 15 September 2008, LBHI filed for Chapter 11 protection under the US Bankruptcy Code, and on 3 October 2008, LBSF filed for Chapter 11 protection. Later in 2008 or in March/April 2009, following directions by the Noteholders, the Trustee caused the Issuer to terminate the swap agreement. The swap termination notices served in respect of the Notes relied on the event of default constituted by LBSFs Chapter 11 filing and reserved all rights, claims and defences in relation to all other Events of Default. On 6 May 2009, the Trustee issued Condition 10 notices declaring the Notes to be due and payable at their Early Redemption Amount. LBSFs position was that the effect of the provisions for a change in priority on default was unlawfully to deprive LBSF of property to which it is entitled in its bankruptcy, because they purported to modify the priority which was enjoyed over Collateral by LBSF in favour of the Noteholders after an insolvency event; and changed the allocation of Unwind Costs in favour of the Noteholders to exclude payment to LBSF. In May and June 2009 respectively Perpetual and the Belmont respondents issued Part 8 Claims in England against the Trustee for orders designed to procure the realisation of the Collateral held by the Trustee in respect of each of the series of Notes held by them respectively and the application of the Collateral and its proceeds in favour of the Noteholders in priority to any claim of LBSF as Swap Counterparty in accordance with the contractual provisions. LBSF was subsequently joined as a party. Proceedings were also commenced (but not by the Belmont respondents) against the Trustee by LBSF (and other Lehman entities) in the United States Bankruptcy Court for the Southern District of New York claiming a declaration that the provisions in the Note issues held by Perpetual modifying LBSFs rights to a priority distribution solely as a result of a Chapter 11 filing were unenforceable because they were clauses which sought, in breach of the United States Bankruptcy Code, to modify contractual relationships due to a filing of a bankruptcy petition (ipso facto clauses). On 28 July 2009 Sir Andrew Morritt C found that the contractual provisions were effective as a matter of English law and, in particular, did not offend the anti deprivation rule; alternatively, if the provisions were capable of offending the anti deprivation rule, the rule was not engaged because an alternative Event of Default (the Chapter 11 filing by LBHI) had occurred prior to the Chapter 11 filing by LBSF, and consequently the Chapter 11 filing did not deprive LBSF of any property: Perpetual Trustee Co Ltd v BNY Corporate Trustee Services Ltd [2009] EWHC 1912 (Ch), [2009] 2 BCLC 400. On 6 November 2009 Sir Andrew Morritt Cs judgment was upheld by the Court of Appeal ([2009] EWCA Civ 1160, [2010] Ch 347). Following communications between the High Court in England and the Bankruptcy Court in New York, it was agreed that, in order to limit potential conflict between decisions in the two jurisdictions, relief would be limited to declaratory relief: Perpetual Trustee Co Ltd v BNY Corporate Trustee Services Ltd [2009] EWHC 2953 (Ch), [2010] 2 BCLC 237; Re Lehman Brothers Holdings Inc, 422 BR 407 (US Bankruptcy Court, SDNY, 2010). In January 2010 Judge Peck, sitting in the US Bankruptcy Court for the Southern District of New York, granted summary judgment in favour of LBSF on its application for a declaration that the provisions in the Perpetual documentation were ineffective because they were in breach of the US Bankruptcy Code: Re Lehman Brothers Holdings Inc, 422 BR 407 (US Bankruptcy Court, SDNY, 2010). Permission was granted by this court to LBSF to appeal from the decision of the Court of Appeal. The Trustee was given leave by the United States District Court to appeal from Judge Pecks decision. But before the appeal to the United States District Court, or the appeal to this court, were heard, the proceedings in relation to the Notes held by Perpetual were settled and the appeals were withdrawn. This appeal consequently concerns the Notes held by the Belmont respondents only. IV The contractual provisions All of the documents are expressly governed by English law. The relevant provisions of the documentation are set out in an appendix to the judgments on this appeal, but for present purposes the following account of the crucial provisions should be sufficient. The Notes are governed by: (1) a Principal Trust Deed (the Principal Trust Deed) between Dante Finance plc (Dante), the first issuer under the programme, and the Trustee under which the Dante Programme was established, which has effect in relation to any specific Note issue as amended by the Supplemental Trust Deed and Drawdown Agreement relating to that issue; (2) a Supplemental Trust Deed and Drawdown Agreement (the Supplemental Trust Deed) made between the Issuer, the Trustee (together with its associated custodian and paying agent), LBSF (described as the swap counterparty) and the Lehman company which arranged the Dante Programme, Lehman Brothers International (Europe); and (3) the Terms and Conditions of the Notes (the Terms and Conditions) which appeared in a schedule to the Principal Trust Deed and which were also supplemented or amended by additional terms were attached to the prospectus sent to potential investors. The credit default swap agreement (the Swap Agreement) is constituted by: (1) an ISDA Master Agreement, including the Schedule (and Credit Support Annex) (the ISDA Master Agreement) between Dante and LBSF (to which the Issuer subsequently acceded); and (2) a Swap Confirmation between LBSF and the relevant Issuer. The Principal Trust Deed Clause 5.5 of the Principal Trust Deed provides that: . the security . shall become enforceable if (i) any amount due in respect of the Notes is not paid or delivered when due or (ii) a Swap Agreement terminates with sums due to the Swap Counterparty [ie, LBSF]. Clause 6.1 of the Principal Trust Deed provides that moneys received, otherwise than in connection with the realisation or enforcement of the security, are to be held by the Trustee, after payment of the Trustees costs, on trust to pay, first, the amounts due to LBSF, the Noteholders and others pari passu, and, secondly, the amounts due to the Issuer. Clause 6.2 of the Principal Trust Deed directs the Trustee: . [to] apply all moneys received by it under the Principal Trust Deed and the relevant Supplemental Trust Deed in connection with the realisation or enforcement of the security as follows and goes on to provide that Swap Counterparty Priority means that the claims of LBSF are payable in priority to the claims of the Noteholders, whereas Noteholder Priority means the converse, in each case after providing for payment of certain specified costs and charges. The priority which is to apply in any particular case is that specified in the Supplemental Trust Deed. The Supplemental Trust Deed Clause 5.2 contains a charge by the Issuer as continuing security in favour of the Trustee over the Collateral and other property representing it from time to time. Clause 5.3 provides that such security is granted to the Trustee as trustee for itself and/or the holders of Notes and [LBSF] the Custodian and the Paying Agents as continuing security (i) for the payment of all sums due under the Trust Deed and the Notes, (ii) for the performance of the Issuer's obligations (if any) under the Swap Agreement . Clause 5.5 provides that: The Trustee shall apply all moneys received by it under this Deed in connection with the realisation or enforcement of the Mortgaged Property as follows: Swap Counterparty Priority unless an Event of Default (as defined in the Swap Agreement) occurs under the Swap Agreement and the Swap Counterparty is the Defaulting Party (as defined in the Swap Agreement) . in which case Noteholder Priority shall apply. Clause 8.3 provides: [LBSF] hereby agrees that, if an Event of Default (as defined in the ISDA Master Agreement) occurs under the Swap Agreement and [LBSF] is the Defaulting Party (as defined in the ISDA Master Agreement) . and Unwind Costs are payable by the Issuer to [LBSF], the Issuer shall apply the net proceeds from the sale or realisation of the Collateral (1) first in redeeming the Notes in an amount as set out in the Conditions and (2) thereafter, in payment of such Unwind Costs to [LBSF]. Terms and Conditions The second paragraph of Condition 44 (Condition 44.2) provides: if an Event of Default (as defined in the ISDA Master Agreement ) occurs under the Swap Agreement and [LBSF] is the Defaulting Party (as defined in the ISDA Master Agreement) , the Early Redemption Amount payable on each Note is to be equal to: (i) such Notes pro rata share of the proceeds from the sale or realisation of the Collateral plus (ii) (but only if payable to the Issuer) the amount of any applicable Unwind Costs divided by the total number of Notes outstanding; provided that if the amount determined pursuant to sub paragraphs (i) and (ii) above results in an Excess Amount (as defined above), such Excess Amount shall be payable by way of an additional payment of interest on each Note. In the event that Unwind Costs are payable by the Issuer to the Swap Counterparty, the Issuer shall apply the net proceeds from the sale or realisation of the Collateral as aforesaid (1) first in redeeming each Note in an amount equal to its Outstanding Principal Amount as of the Early Redemption Date plus the Accrued Early Redemption Interest Amount and (2) thereafter, in payment of such Unwind Costs to the Swap Counterparty. The ISDA Master Agreement Section 5 of the ISDA Master Agreement defines an Event of Default as being: [t]he occurrence [of certain specified events] at any time with respect to [LBSF], or if applicable, any Credit Support Provider of LBSF. According to paragraph 9(iv) of the Swap Confirmation, the Credit Support Provider is LBHI, the ultimate parent of LBSF. The defined Events of Default include (i) failure to pay any sums due under the ISDA Master Agreement (if such failure is not remedied after three local business days notice of such failure), and (ii) the institution by LBSF or by LBHI of any proceedings seeking a judgment of insolvency or bankruptcy or any other relief under any bankruptcy or insolvency law or other similar law affecting creditors rights . Section 6 of the ISDA Master Agreement deals with early termination and provides that: If at any time an Event of Default with respect to a party (the Defaulting Party) has occurred and is then continuing, the other party . may, by not more than 20 days notice to the Defaulting Party specifying the relevant Event of Default, designate a day not earlier than the day such notice is effective as an Early Termination Date in respect of all outstanding Transactions . V The decisions of Sir Andrew Morritt C and the Court of Appeal LBSFs position LBSFs position is, in summary, that the rights under the Swap Agreement and the rights created over the Collateral to secure them were property of LBSF within the meaning of the Insolvency Act 1986 and formed part of LBSFs insolvent estate. At the time of its filing for bankruptcy on 3 October 2008 (and at the Early Termination Date), LBSF was in the money under each of the Swap Agreements. LBSF had existing contractual rights which, on final maturity or if the Issuer elected to terminate the Swap Agreement early, would result in a right to payment to LBSF from the Issuer. That was so whether or not LBSF was the Defaulting Party under the Swap Agreement. It was illegitimate to provide for the alteration of those rights in reliance on LBSFs bankruptcy so as to deprive LBSF of the benefit of its first priority right of recourse to the Collateral. When the Issuer elected to terminate the Swap Agreements it did so expressly in reliance upon LBSF having filed for bankruptcy on 3 October 2008. That termination gave rise to a debt payable by the Issuer to LBSF and which is charged on the Collateral. The effect of the disputed clauses was to deprive LBSF of property to which it was entitled in its bankruptcy: Clause 5.5 of the Supplemental Trust Deed removed the senior ranking rights which LBSF had to the proceeds of sale of the Collateral and instead LBSF was given second ranking rights which ranked behind the claims of the Noteholders in some instances, and even further behind the Portfolio Manager in other transactions; by Condition 44.2 of the Terms and Conditions of the Notes, the amount due to LBSF in respect of its claim under the terminated Swap Agreement was disregarded when determining what the Issuer should pay to Noteholders on early redemption of the Notes. The result of the offending provisions was that the Collateral was treated as being freed from the charge to secure the debt to LBSF and was simply divided up among the Noteholders in proportion to their original subscriptions. The fundamental change brought about by the operation of these clauses depends upon the Issuer having elected to terminate the Swap Agreement in reliance on LBSFs bankruptcy. The security for the obligations owed to LBSF under the Swap Agreement cannot validly be altered in reliance on LBSFs bankruptcy, and offends against the anti deprivation rule. Consequently, the provisions are void and unenforceable under English law. On the Noteholders alternative case, that the Event of Default occurred on 15 September 2008, when LBHI filed for Chapter 11 protection, LBSF says that Clause 5.5 and the concepts of Swap Counterparty Priority and Noteholder Priority only have relevance in relation to events taking place after the Collateral has been sold. The parties could not have intended any permanent changes in the operation of Clause 5.5 and Condition 44.2 to have occurred unless and until the service of a notice by the Non defaulting Party to terminate the Swap Agreement. Sir Andrew Morritt C Sir Andrew Morritt C decided that Clause 5.5 of the STD was not contrary to public policy. The Collateral was bought by the Issuer with the money subscribed by the Noteholders. It was not derived directly or indirectly from LBSF. The court should not be astute to interpret commercial transactions so as to invalidate them, particularly when doubt might be cast on other long standing commercial arrangements. As long as the Swap Agreement was being performed it was appropriate for LBSF to have security for the obligations of the Issuer in priority to security in respect of the Issuer's obligations to the Noteholders, but the intention of all parties was that the priority afforded to LBSF was conditional on LBSF continuing to perform the Swap Agreement. Such beneficial interest by way of security as LBSF had in the Collateral was, as to its priority, always limited and conditional, and could never have passed to a liquidator or trustee in bankruptcy free from those limitations and conditions as to its priority. Alternatively, LBSF was a Defaulting Party on 15 September 2008 when LBHI filed for Chapter 11 protection, and the anti deprivation rule was not engaged if deprivation occurred on a ground other than bankruptcy of the entity alleged to be unlawfully deprived. Court of Appeal In the Court of Appeal [2009] EWCA Civ 1160, [2010] Ch 347 Lord Neuberger of Abbotsbury MRs conclusion that the provisions were valid relied to a large extent on the fact that the Collateral was acquired with money provided by the Noteholders and that the change in priorities was included to ensure that the Noteholders were repaid out of those assets: at para 67. In particular he relied on these matters (at para 61 et seq): (a) so long as there was no risk of default, the Noteholders were prepared for LBSF to have priority when it came to unwinding the transaction; (b) the scheme provided, and was sold on the basis that, if LBSF or LBHI defaulted so that they could not, or did not, pay the interest and the capital on the Notes, then it would be the Noteholders who would have priority both in relation to repayment and in relation to the Unwind Costs; (c) the effect of the flips would not be to entitle the Noteholders to more than they had subscribed, and, if there was no shortfall, LBSF would not have been out of pocket as a result of the flips. The right granted to LBSF was a security right over assets purchased with the Noteholders money, and, from the very inception, the priority, and the extent of the benefits, enjoyed by LBSF in respect of the security were contingent upon there being no Event of Default. He agreed with Sir Andrew Morritt Cs conclusion on the LBHI point. Longmore LJ agreed with Lord Neuberger MR. Patten LJ thought that the anti deprivation rule did not apply because (at paras 135 136): The reversal of the order of priority under clause 5.5 was always a facet of the security designed to regulate the competing interests over the collateral of LBSF and the noteholders. To say that its operation in the event of the company's bankruptcy constitutes the removal of an asset from the liquidation is to confuse the security itself with the operation of its terms in the events prescribed by the charge. LBSF retains the same asset as it had before its bankruptcy and is free to deal with any recoveries for the benefit of its general creditors in accordance with the applicable statutory regime. Condition 44 is said to have the effect of increasing the amount payable to noteholders in the event of LBSF being the defaulting party under the swap agreement by diverting to the noteholders moneys which would otherwise have been payable to it in order to discharge the issuers' liability for unwind costs. Although the amount of the security available to meet LBSFs claims is obviously reduced in the event of a shortfall in the value of the security over what it would have been had no event of default occurred, that is simply a function of the change in priority which was always a feature of the security which the company enjoyed. Lord Neuberger MR, while not disagreeing, had some reservations about this approach (paras 66 68), particularly because the authorities did not support the view that arrangements which were an original feature of the transaction were insulated from the anti deprivation rule. VI The principles Lord Neuberger MR rightly pointed out in his judgment (at para 32) in these proceedings that it was not easy to identify the precise nature or limits of the anti deprivation rule. He was echoing what he had said as Neuberger J in Money Markets International Stockbrokers Ltd v London Stock Exchange Ltd [2002] 1 WLR 1150, para 87, a decision which contained the first full judicial analysis of the principles: at paras 117 118. The rule has existed for nearly 200 years, and it is therefore necessary to look at the development of the rule to see what its nature and limits are. All but one of the relevant cases prior to the decision of the House of Lords in British Eagle International Airlines Ltd v Cie Nationale Air France [1975] 1 WLR 758 on the pari passu principle are cases of personal bankruptcy. The principal decisions are Whitmore v Mason (1861) 2 J & H 204 (Sir William Page Wood V C); Ex p Mackay; Ex p Brown; In re Jeavons (1873) LR 8 Ch App 643 (CA); Ex p Jay; In re Harrison (1880) 14 Ch D 19 (CA); Ex p Newitt; In re Garrud (1881) 16 Ch D 522 (CA); Ex p Barter; Ex p Black; In re Walker (1884) 26 Ch D 510 (CA); In re Detmold; Detmold v Detmold (1889) 40 Ch D 585 (North J); Borlands Trustee v Steel Bros & Co Ltd [1901] 1 Ch 279 (Farwell J); In re Johns, Worrell v Johns [1928] Ch 737 (Tomlin J); Bombay Official Assignee v Shroff (1932) 48 TLR 443 (PC); and In re Apex Supply Co Ltd [1942] Ch 108 (Simonds J) (the sole liquidation case). The anti deprivation rule applied The anti deprivation rule was applied to invalidate contractual provisions in the following decisions. In none of them did it matter whether the provision was in a contract from the inception of the relationship. Whitmore v Mason 2 J & H 204 is a classic case of the application of the anti deprivation rule. It was concerned with a provision in a partnership deed that, in the event of the bankruptcy or insolvency of a partner, an account was to be taken, and the bankrupt partner was to lose his interest in the partnership assets (mines in Portugal) at a market valuation (save that his interest in a mining lease was to be excluded from the valuation). Sir William Page Wood V C accepted the assignees argument ( at p 207) that the exclusion of the lease was void because it was an attempt to evade the rule in bankruptcy, which provides that, upon an act of bankruptcy being committed, all the property of the bankrupt vests in his assignees, and held that, insofar as it related to the lease, the provision was void as being in fraud of the bankrupt laws (at p 213), because the law is too clearly settled to admit of a shadow of doubt that no person possessed of property can reserve that property to himself until he shall become bankrupt, and then provide that, in the event of his becoming bankrupt, it shall pass to another and not to his creditors. (p 212) So also in Ex p Mackay LR 8 Ch App 643, 648, discussed above, the agreement that the lender could keep the royalties in the event of the borrowers bankruptcy was an unlawful additional advantage. This, like several of the other decisions, is really about an unsuccessful attempt to create a charge. It was applied in Ex p Williams; In re Thompson (1877) LR 7 Ch D 138 (sham rent intended to give lender additional security of distraining on chattels). In Ex p Jay 14 Ch D 19 a clause in an agreement for a lease between a landowner and a builder (under which the builder was to build 40 houses on land in Waltham Cross) provided that, until the lease had actually been granted, in the event that the builder was in default of any of his obligations or became bankrupt, any materials on the land should be forfeited to the landowner. A few weeks later the builder granted a charge over the materials, but it was not registered as a bill of sale. At a time before the builder had completed the development or any lease had been granted, and when the builder was not in default of any of his obligations, he was made bankrupt. A dispute arose between his trustee in bankruptcy and the landowner over a quantity of building materials which the builder had brought onto the land. The Court of Appeal held that the provisions of the agreement purporting to forfeit such building materials to the landowner were void as being a violation of the policy of the bankruptcy law, and that the building materials were the property of the trustee. In Ex p Barter 26 Ch D 510 a shipbuilding contract provided that, if at any time the builder should cease working on the ship for 14 days, or should allow the time for completion and delivery of the ship to expire for one month without it having been completed and ready for delivery, or in the event of the bankruptcy or insolvency of the builder, the buyer could cause the ship to be completed, and could employ materials belonging to the builder as should be then on his premises. It was held that the clause was void as against the trustee in his bankruptcy as being an attempt to control the user after bankruptcy of property vested in the bankrupt at the date of the bankruptcy, and as depriving the trustee of the right to elect whether he would complete the ship or not as might seem most advantageous for the creditors under the bankruptcy. This decision is an application of a general principle that the bankrupts property vests in the trustee, and its user cannot be contractually controlled. In re Johns, Worrell v Johns [1928] Ch 737, concerned an arrangement between mother and son, whereby the amount repayable by the son in respect of periodic loans made by the mother (which could not exceed 650, and might be as little as 10, in all) was to increase from 650 to 1,650 (plus interest) in the event of the sons bankruptcy. Tomlin J said that the principle was that a person cannot make it a part of his contract that, in the event of bankruptcy, he is then to get some additional advantage which prevents the property being distributed under the bankruptcy laws (quoting Ex p Williams; In re Thompson 7 Ch D 138, 143) and described the agreement as a deliberate device to secure that more money should come to the mother if the son went bankrupt, than would come to her if he did not; and, that being so, the device is bad (p 748). The agreement would also have offended the pari passu principle, because the claim of the mothers estate in the insolvent estate would have increased. The principle not infringed The anti deprivation principle did not apply in the following decisions. These decisions are particularly important for the light which they throw on the limits of the principle. Ex p Newitt 16 Ch D 522 was decided by the same Court of Appeal which had decided Ex p Jay a year earlier. This was also a case of a bankrupt builder. The provision for forfeiture operated on breach and not on bankruptcy, and was held to be valid. The bankrupt builder had broken the terms of his agreement with the landowner and it was provided in the agreement that the chattels would be forfeited to the landowner as and for liquidated damages, whereas in Ex p Jay the builder was not in breach of contract, and the right to forfeit was expressed to be triggered, inter alia, on the builder becoming bankrupt. James LJ said (at p 531) Another point taken before us, which does not appear to have been really argued before the judge of the county court, was this that the seizure was not made in sufficient time, that it was not made before the filing of the liquidation petition. To my mind it is immaterial at what particular moment the seizure was made. The broad general principle is that the trustee in a bankruptcy takes all the bankrupts property, but takes it subject to all the liabilities which affected it in the bankrupts hands, unless the property which he takes as the legal personal representative of the bankrupt is added to by some express provision of the bankrupt law. There is no such provision applicable to the present case. The building agreement provides, in effect, that in a certain event certain property of the builder may be taken by the landowner in full satisfaction of the agreement. It appears to me analogous to a sale of property with a power of repurchase in a certain event. The relevance of this decision lies in the effect of a provision for forfeiture on an event other than bankruptcy which takes place after bankruptcy, and it will be necessary to revert to it. In In re Detmold 40 Ch D 585 a marriage settlement provided that income on the property in the settlement (originating from the husband) should pass to the wife for life in the event of an alienation by, or the bankruptcy of, the husband. The provision was held valid against the husbands trustee in bankruptcy, on the ground that it had been triggered by the alienation effected as the result of the appointment of a judgment creditor as receiver (by way of equitable execution) of the income on the property in the settlement, prior to the commencement of the bankruptcy two months later. In re Detmold is an illustration of a provision held valid because, though it worked a deprivation, it did so prior to the onset of bankruptcy even though it was also expressed to operate on bankruptcy. In Borlands Trustee v Steel Bros & Co Ltd [1901] 1 Ch 279 Mr Borland was a shareholder in Steel Brothers & Co Ltd. Its articles of association contained pre emption rights, the effect of which was that on a shareholder becoming bankrupt, he had, on receiving a transfer notice from the directors, to transfer his shares to a manager or assistant at a fair value calculated in accordance with the articles. Mr. Borlands trustee in bankruptcy claimed that the transfer articles were void because, among other reasons, the articles constituted a fraud upon the bankruptcy laws, and could not prevail when bankruptcy had supervened, since the effect was that the trustee in bankruptcy was forced to part with the shares at something less than their true value, with the result that the asset was not fully available for creditors. The argument was rejected. Farwell J started with the principle that a simple stipulation that upon a mans becoming bankrupt that which was his property up to the date of the bankruptcy should go over to some one else and be taken away from his creditors, is void as being a violation of the policy of the bankrupt law (at p 290, quoting Ex p Jay 14 Ch D 19, 25). The basis of the decision was that there was a commercial arrangement. The provisions were inserted bona fide and constituted a fair agreement for the purposes of the business of the company and were binding equally upon all persons who came in as shareholders. There was no suggestion of fraudulent preference of one over another. There was nothing obnoxious to the bankruptcy law in a clause which provided that if a man became bankrupt he should sell his shares. The price was a fixed sum for all persons alike, and no difference in price arose in the case of bankruptcy. The purpose was that there should be in the company, if it were so desired, none but managers and workers in Burma. There was nothing repugnant in the way in which the value of the shares was to be ascertained. It would have been different if there were any provision in the articles compelling persons to sell their shares in the event of bankruptcy at something less than the price that they would have otherwise obtained, since such a provision would be repugnant to the bankruptcy law (p 291). In Bombay Official Assignee v Shroff 48 TLR 443 the bankrupt had been a registered broker in the Bombay Brokers Hall, an unincorporated association. The rules of that association permitted only those holding a card to enter the hall and conduct business. The rules also allowed the directors to declare a member a defaulter. Following the bankrupts failure to pay funds owing to other members, he was declared a defaulter, his card and right of membership was forfeited. About a week later, he was declared bankrupt. The official assignee contended (relying on Whitmore v Mason 2 J & H 204 and In re Borlands Trustee [1901] 1 Ch 279) that his card and/or right of membership of the association or the value thereof vested in him as the assignee in the insolvency, because among other reasons, if the effect of the rules be that the proceeds of sale of the insolvent's card do not enure for the benefit of the general body of his creditors the rules are contrary to the law of insolvency. Lord Blanesburgh, speaking for the Board, said (at p 446): It being agreed that the rules of this association are entirely innocent of any design to evade the law of insolvency, it may be that even these cases, although cases of a company and a partnership, are more favourable to the [association] than to the [official assignee] [T]he real answer to this contention of the [official assignee] [is] in the nature and character of the association as they have described it whereby in the case of a defaulting member who is expelled from the association no interest in his card remains in himself, and none can pass to his assignee, whether his expulsion does or does not take place before the commencement of his insolvency. The decision of the Privy Council was applied by Neuberger J in Money Markets International Stockbrokers Ltd v London Stock Exchange Ltd [2002] 1 WLR 1150. The claimant was a member of the stock exchange and defaulted on its obligations. Under provisions in the articles of association of the stock exchange its share was transferred away and the claimant lost its membership. Neuberger J held the anti deprivation rule did not apply because the share was incapable of uncontrolled transfer and was closely connected with a right in respect of which a deprivation provision was effective, viz membership of the exchange. In In re Apex Supply Co Ltd [1942] Ch 108 a hire purchase agreement provided that if the hirer should go into liquidation, and the owner should retake possession, the hirer would pay a sum by way of compensation for depreciation. Applying Ex p Mackay and In re Johns, Simonds J held that the provision for the payment of compensation was not a fraud on the bankruptcy laws as giving the owner company an undue advantage in the event of the hirer company going into liquidation. The provision was not a deliberate device to secure that more money went to the creditor: it would be extravagant to suggest that this clause is aimed at defeating the bankruptcy laws or at providing for a distribution differing from that which the bankruptcy laws permit (at p 114). The limits of the anti deprivation rule Good faith and commercial arrangements The first question is whether absence of good faith, or an intention to obtain an advantage over creditors in the bankruptcy, is an essential element for application of the principle. From the earliest days of the rule, it has been based on the notion of a fraud, or a direct fraud (Lord Eldon LC in Higinbotham v Holme 19 Ves Jun 88, 92), on the bankruptcy laws, and that decision was taken to be authority for the proposition that where a person settles property in such a way that his interest determines on his bankruptcy that is evidence of an intention to defraud his creditors: In re Stephenson; Ex p Brown [1897] 1 QB 638, 640, per Vaughan Williams J. The overall effect of the authorities is that, where the anti deprivation rule has applied, it has been an almost invariably expressed element that the party seeking to take advantage of the deprivation was intending to evade the bankruptcy rules; but that where it has not applied, the good faith or the commercial sense of the transaction has been a substantial factor. By contrast, in the leading pari passu principle case, British Eagle [1975] 1 WLR 758, it was held by the majority that it did not matter that the clearing transaction was a sensible commercial arrangement not intended to circumvent the pari passu principle. Although Lord Morris of Borth y Gest (at p 763) placed weight in his dissenting speech on the fact that there was no trace in the scheme of any plan to divert money in the event of a liquidation his conclusion was not based on the absence of bad faith. The basis of his reasoning was that transactions had taken place and services had been rendered on the basis that clearance would follow; it was not open to the liquidator to seek to alter ex post facto the contractual arrangements pursuant to which the airlines had supplied services to British Eagle; and the effect of the clearing was that no sum was due: p 763 764. To take first the cases in which the anti deprivation rule was held to apply: in Whitmore v Mason 2 J & H 204 the exclusion of the lease on bankruptcy of the partner was void and Sir William Page Wood V C said that no one can be allowed to derive benefit from a contract that is in fraud of the bankrupt laws (p 213). In Ex p Mackay LR 8 Ch App 643, 647, James LJ said that the provision was an ineffective charge and was a clear attempt to evade the operation of the bankruptcy laws as it provide[d] for a different distribution of his effects in the event of bankruptcy from that which the law provides. As Lord Cross of Chelsea said of Ex p Mackay in British Eagle [1975] 1 WLR 758, 780: The court could only go behind [the transaction] if it was satisfied as was indeed obvious in that case that it had been created deliberately in order to provide for a different distribution of the insolvents property on his bankruptcy from that prescribed by the law; and Lord Morris agreed that Ex p Mackay was a case where the relevant provisions were a clear attempt to evade the operation of the bankruptcy laws, or a device for defeating the bankruptcy laws (p 770). In Ex p Jay 14 Ch D 19, the case of the housebuilders materials, there was no mention of evasive intent, but that was probably because it was obvious that the intention was to ensure that the property did not go to the trustee. In In re Johns, Worrell v Johns (the case of the increase of the debt on bankruptcy) the agreement was described [1928] Ch 737, 748) as a deliberate device to secure that more money should come to the mother, if the son went bankrupt, than would come to her if he did not By contrast, where the anti deprivation rule was held not to apply, good faith and the commercial sense of the transaction have been important factors. In Borlands Trustee v Steel Bros & Co Ltd [1901] 1 Ch 279 (the case of pre emption rights on bankruptcy) Farwell J relied specifically on the fact that the provisions were inserted bona fide and constituted a fair agreement for the purposes of the business of the company, and that there was no suggestion of fraudulent preference. So also in Bombay Official Assignee v Shroff 48 TLR 443 (forfeiture of membership of the Bombay Brokers Hall) Lord Blanesburgh (at p 446) referred to the fact that it had been agreed that the rules of the association were entirely innocent of any design to evade the law of insolvency Again, in In re Apex Supply Co Ltd [1942] Ch 108 (the hire purchase case) Simonds J accepted that the provision was not a deliberate device to secure that more money went to the creditor and that it would be extravagant to suggest that this clause is aimed at defeating the bankruptcy laws or at providing for a distribution differing from that which the bankruptcy laws permit. (p 114). Thus there is an impressive body of opinion from some of the most distinguished judges that, in the case of the anti deprivation rule, a deliberate intention to evade the insolvency laws is required. That conclusion is not affected by the decision in British Eagle [1975] 1 WLR 758. The pari passu rule is clear. Parties cannot contract out of it. That is why, by contrast with the anti deprivation cases, Lord Cross was able to accept (p 772) that the clearing house was a commercial arrangement which was for the mutual advantage of the airlines, but that the power to go behind agreements, the result of which were repugnant to the insolvency legislation, was not confined to cases in which the dominant purpose was to evade its operation. It was irrelevant that the airlines had good business reasons for entering into the arrangements and did not direct their minds to the question how the arrangements might be affected by the insolvency of one or more of [them] (p 780). That does not mean, of course, that a subjective intention is required, or that there will not be cases so obvious that an intention can be inferred, as in Ex p Jay. But it does suggest that in borderline cases a commercially sensible transaction entered into in good faith should not be held to infringe the anti deprivation rule. Although he did not accept that absence of good faith was a necessary element, Neuberger J suggested in Money Markets International Stockbrokers Ltd v London Stock Exchange Ltd [2002] 1 WLR 1150, para 103 that if a deprivation provision, which might otherwise be held to be valid, could be shown to have been entered into by the parties with the intention of depriving creditors of their rights on an insolvency, then that might be sufficient to justify holding invalid the provision when it would not otherwise have been held invalid. Anti deprivation rule does not apply if the deprivation takes place for reasons other than bankruptcy By contrast with the pari passu principle, it is well established that if the deprivation takes place for reasons other than bankruptcy, the anti deprivation rule does not apply. In British Eagle [1975] 1 WLR 758 the clearing house system was ineffective to avoid the pari passu principle, even though it applied throughout irrespective of whether the airlines went into liquidation. But the position is different with regard to the anti deprivation rule, which is intended to operate only where provision is made for deprivation on bankruptcy. Thus in Ex parte Jay 14 Ch D 19 (the case of the builders materials) both Brett and Cotton LJJ accepted (p 26) that if forfeiture had taken place on the builders breach (as the provision envisaged) then it would have been valid: It appears that there was no default on the debtors part up to the filing of the petition, and the [owner] cannot, therefore, succeed except by virtue of the provision for forfeiture on bankruptcy, and according to the authorities such a stipulation is void (Brett LJ) and One of the two events is not hit by the decided cases(Cotton LJ). In Ex p Barter 26 Ch D 510 (shipbuilding materials) the contract provided for events other than bankruptcy in which the property could be seized, but it was held that it was the bankruptcy which was the basis of the powers of control exercised by the buyers: p 519. So also in In re Detmold 40 Ch D 585 (marriage settlement providing that income on the property in the settlement, originating from the husband, should pass to the wife for life in the event of an alienation by, or the bankruptcy of, the husband) the provision was held valid against the husbands trustee in bankruptcy, on the ground that it had been triggered by the alienation effected as the result of the appointment of a judgment creditor as receiver (by way of equitable execution) of the income on the property in the settlement: [T]he limitation of the life interest to the settlor was validly determined by the fact that, in consequence of the order appointing the receiver, he ceased to be entitled to receive the income. This took place before the commencement of the bankruptcy, and, therefore, the forfeiture is valid as against the trustee in the bankruptcy (p 588 per North J). In Ex p Newitt 16 Ch D 522 (as has been seen, like Ex p Jay, a case of a bankrupt builder) the provision for forfeiture was on breach and not on bankruptcy and was held to be valid. The controversial point in the case is that the forfeiture took place after bankruptcy, but it is not clear when the breach occurred. In the present case the Court of Appeal expressed the view (obiter) that the anti deprivation rule would apply in such circumstances and that once bankruptcy commences, deprivation on any grounds would be impermissible: paras 93 94 and 161 163 per Lord Neuberger MR and Patten LJ. They considered (echoing what Neuberger J had said in Money Markets International Stockbrokers Ltd v London Stock Exchange Ltd [2002] 1 WLR 1150, para 105) that the decision in Ex p Newitt 16 Ch D 522 could not survive British Eagle. Whether Ex p Newitt was correctly decided does not arise for decision on this appeal. It was cited, with apparent approval, by Harman J in Jennings Trustee v King [1952] Ch 899, 911. It was not mentioned in any of the phases of the litigation in British Eagle [1975] 1 WLR 758 other than in the dissenting speech of Lord Morris (at p 771), who used it in support of the proposition that a right in a contract is not defeated by the commission of an act of bankruptcy before the contractual right is exercised. The view of the majority was that the netting off in the clearing house which occurred after the liquidation was ineffective, and consequently the majority must be taken to have rejected the proposition. But it does not follow that the principle identified by Lord Morris is no longer good law in the context of the anti deprivation rule. On the facts of Ex p Newitt, however, the pari passu principle as well as the anti deprivation principle may have been engaged, and it may be that the right to forfeiture after bankruptcy or liquidation was not the type of equity to which a trustee or liquidator would take subject. In either of those cases, the forfeiture would not have been effective. Determinable and defeasible interests and flawed assets The law reporter, Mr Clement Swanston, summarised some of the early cases in a note to his report of the decision of Lord Eldon LC in Wilson v Greenwood (1818) 1 Swans 471, 485, and his summary was quoted with approval in Whitmore v Mason 2 J & H 204, 209 210 by Sir William Page Wood V C, by the Court of Appeal in Ex p Barter 26 Ch D 510, 519, and by Stirling J in Mackintosh v Pogose [1895] 1 Ch 505, 511. Mr Swanston said: The general distinction seems to be, that the owner of property may, on alienation, qualify the interest of his alienee, by a condition to take effect on bankruptcy; but cannot, by contract or otherwise, qualify his own interest by a like condition, determining or controlling it in the event of his own bankruptcy, to the disappointment or delay of his creditors In Whitmore v Mason 2 J & H 204, 212 Sir William Page Wood V C distinguished the exclusion of the lease on the partnership account to be taken on bankruptcy from the ordinary condition in a demise of land, that in the event of the tenant becoming bankrupt the land shall revert to the landlord. This reflected the old rule that a provision for forfeiture of a lease on winding up did not contravene the principle since it was merely a qualification of the lessees estate: Roe d Hunter v Galliers (1787) 2 Term Rep 133. A provision of this kind is common form in most leases and is recognised by sections 146(7), (9) and (10) of the Law of Property Act 1925. By providing for limited relief against the operation of such clauses, the legislation implicitly endorses the validity of such provisions at common law. The lease cases show that such a provision is regarded by the law as effective to bring the lease to an end whether the lease is expressed (a) to run until bankruptcy or (b) as a lease with a proviso for forfeiture in that event. The result has not depended upon linguistic differences of expression, and section 146(7) of the 1925 Act proceeds on the basis that no difference is to be drawn between the two situations. So also licences of intellectual property expressed to determine (or to be determinable on notice) on bankruptcy of the licensee are valid; and interests under protective trusts granted by the settlor to a beneficiary until the beneficiarys bankruptcy: Lewin on Trusts, 18th ed (2008), para 5 135; and section 33 of the Trustee Act 1925. The distinction for the purposes of insolvency law is between an interest determinable on bankruptcy/liquidation and an absolute interest which is made defeasible on bankruptcy/liquidation by a condition subsequent. A determinable interest is an interest the quantum of which is limited by the stipulated event, so that the occurrence of that event marks the end of the duration of the interest, whereas a defeasible interest is one which is granted outright and then forfeited. As Professor Sir Roy Goode points out in his comment (2011) 127 LQR 1, 8 on the decision of the Court of Appeal in this case, the difference between a determinable interest, limited to last until bankruptcy, and an interest forfeitable on bankruptcy as a condition subsequent, turning as it does on fine verbal distinctions, has been categorised as little short of disgraceful to our jurisprudence when applied to a rule professedly founded on considerations of public policy (quoting In re Kings Trust (1892) 29 LR Ir 401, 410, per Porter MR, a case on the rule against repugnancy, which is offended by forfeiture but not by termination). Professor Sir Roy Goode rightly accepts (ibid) that the principle that a determination clause is not an attempt to remove an asset from the company but simply a delineation of the quantum of the asset or the duration of the transferees entitlement is too well established to be dislodged otherwise than by legislation. That is particularly so for these reasons. It would go far beyond the judicial function to hold that the distinction is indefensible. To hold that both types of determination are contrary to the anti deprivation principle would be thoroughly destructive of commercial expectations in many areas. So also to say that both types of determination are valid would at a stroke do away with a 200 year old principle, which could only be justified if the mischief which the anti deprivation rule seeks to remedy were adequately covered by statute. No doubt to some extent the anti avoidance provisions go some way to dealing with the mischief, but they cover different ground and contain time limitations which do not constrain the common law rule. But it does not follow that any proprietary right which is expressed to determine or change on bankruptcy is outside the anti deprivation rule, still less that a deprivation which has been provided for in the transaction from the outset is valid. If it were so, then the anti deprivation rule would have virtually no content. This is the flawed asset theory, the idea that, where it is an inherent feature of an asset from the inception of its grant that it can be taken away from the grantee (whether in the event of his insolvency or otherwise), the law will recognise and give effect to such a provision. If that theory were generally applicable, it would represent such an easy way of avoiding the application of the principle, that the principle would be left with little value: Money Markets International Stockbrokers Ltd v London Stock Exchange Ltd [2002] 1 WLR 1150, at paras 91 92, per Neuberger J. The theory is also inconsistent with most of the cases in which the principle has been applied: see especially Whitmore v Mason 2 J & H 204; Ex p Mackay LR 8 Ch App 643; Ex p Jay 14 Ch D 19; Ex p Barter 26 Ch D 510. To the extent that this idea underpins Patten LJs judgment in the present case (which is by no means certain), it should not be accepted because it would empty the basic rule of any substantive content. For the same reason the answer cannot be found by characterising or describing the right as limited by the condition. If it were possible to characterise LBSFs right as a right to be repaid in priority to the Noteholders when there was not at the date of termination an Event of Default in relation to which it was the Defaulting Party then it would have been possible so to characterise the rights in cases in which the rule has been applied: eg an interest in the partnership mine if not bankrupt (Whitmore v Mason); or a right to royalties if not bankrupt (Ex p Mackay). Acquisition of property with own assets said: In Whitmore v Mason 2 J & H 204, 214 215 Sir William Page Wood V C If his co partners had advanced a definite sum of money on account of his share, then the property might have been considered to the extent of the money so advanced by them, as identically their money; but this has not been done. Sir William Page Wood V Cs statement was based on a marriage settlement case, Lester v Garland (1832) 5 Sim 205, which confirmed a long line of cases which had established that the wifes portion would be protected in the event of the husbands bankruptcy: A variety of cases, beginning with the case of Lockyer vs Savage [(1732) 2 Str 947], which was decided about 100 years ago, have established that, though there cannot be a settlement of the husbands own estates so as to make his life interest cease in the event of his becoming a bankrupt, in order that the benefit of the estate might be given to the wife or children of the marriage, yet the wifes estate may be so settled. (p 222) As Stirling J put it in Mackintosh v Pogose [1895] 1 Ch 505, 511: it has long been established that if husband and wife both bring property into such a settlement [viz, a marriage settlement], a trust of the income of the wifes property in favour of the husband until his bankruptcy is good, while a similar trust of the income of the husbands property is bad . The basis of the rule was that the courts treated the property of the husband as being in substance the property of the wife [and] as the identical property brought by her into settlement (at 514 515). In Higinbotham v Holme 19 Ves Jun 88, 92 93, Lord Eldon LC distinguished the case of the settlement by the bankrupt husband on himself of a life interest, from, firstly, the case of the wifes property limited until the bankruptcy of her husband; that is, where she reserves a power over her own property, and, secondly, the case of a lease made determinable by the bankruptcy of the lessee: that is a reservation by the owner of the property of a power over it. The marriage settlement cases are not far removed from the category of determinable and defeasible interests or flawed assets, but they do suggest that the source of the assets is an important element in determining whether there has been a fraud on the bankruptcy laws. Lord Neuberger MRs conclusion [2010] Ch 347, para 64 was that Whitmore v Mason is authority for the view that the anti deprivation rule may have no application to the extent that the person in whose favour the deprivation of the asset takes effect can show that the asset, or the insolvent persons interest in the asset, was acquired with his money. That conclusion is supported by the very frequent formulation of the anti deprivation rule in terms of the bankrupts own property. Thus in Holmes v Penney (1863) 3 K & J 90, 102, Sir William Page Wood V C stated the general principle as being that a trader cannot, even for valuable consideration, settle his own property in such a manner as that he should take an interest in it until his bankruptcy, and afterwards, it should be held in trust for his wife and children. (emphasis added) and there are many similar references in the older cases to the settlement or disposition of the bankrupts own property: eg In re Detmold 40 Ch D 585, 588 per North J; In re Stephenson [1897] 1 QB 638, 640 per Vaughan Williams J; In re Halstead, Ex P Richardson [1917] 1 KB 695, 709 per Warrington LJ. The anti deprivation rule of course only applies where the bankrupts own property is in issue, and these dicta do not show that the rule has no application where the source of the bankrupts asset is the person to whom it is to go on bankruptcy. Nor would it be right for there to be a general and universally applicable exception to the general rule based simply on the source of the assets. But if the source of the assets is the person to whom they are to go on bankruptcy that may well be an important, and sometimes decisive, factor in a conclusion that the transaction was a commercial one entered into in good faith and outside the scope of the anti deprivation rule. Provision operating on insolvency (as distinct from bankruptcy/liquidation) This point does not arise for decision on this appeal. The only potentially relevant Events of Default are the Chapter 11 filings by LBSF and LBHI. The point was considered in Whitmore v Mason 2 J & H 204, where it was held that it did not matter that under the partnership deed the account was to be taken in the event of bankruptcy or insolvency, and insolvency had occurred before any act of bankruptcy: A bankrupt is usually insolvent before he commits an act of bankruptcy. First he becomes insolvent, and then bankrupt; and if that construction were to prevail the bankrupt laws might, in all cases, be defeated. (p 215) Executory contracts It is a very common provision in commercial contracts that performance may be withheld in the case of the other partys bankruptcy or liquidation. In Lomas v JFB Firth Rixson Inc [2010] EWHC 3372 (Ch) interest swap counterparties withheld payments due to Lehman Brothers International (Europe) in reliance on a provision of the ISDA Master Agreement that a partys payment obligations were subject to the condition precedent that there was no continuing Event of Default with respect to the other party. On the question whether the anti deprivation principle applied, Briggs J considered that the authorities justified a distinction between (a) cases where the asset of the insolvent company was a chose in action representing the quid pro quo for something already done, sold or delivered before the onset of insolvency; and (b) cases where the right in question consists of the quid pro quo (in whole or in part) for services yet to be to be rendered or something still to be supplied by the insolvent company in an ongoing contract. He held that in the former situation the court would more readily hold that the anti deprivation rule applied. This decision was distinguished in Folgate London Market Ltd v Chaucer Insurance plc [2011] EWCA Civ 328, where there was a contractual provision for a right of indemnity to be terminated in the event of liquidation: it was a naked attempt to provide that the obligation to pay was to be extinguished if payment would be available for creditors generally in the event of insolvency: para 22. The Swap Agreement in the present case is subject to the same provision, but its effect is not in issue in these proceedings. Accordingly the important and difficult question of the extent to which payment obligations in executory contracts are affected by the anti deprivation rule does not arise on this appeal, and since it is a live issue in other proceedings it is best not to express a view on it, except to say that accrued property rights such as debts must be at least capable of being caught by the rule. VII Conclusions It would go well beyond the proper province of the judicial function to discard 200 years of authority, and to attempt to re write the case law in the light of modern statutory developments. The anti deprivation rule is too well established to be discarded despite the detailed provisions set out in modern insolvency legislation, all of which must be taken to have been enacted against the background of the rule. As has been seen, commercial sense and absence of intention to evade insolvency laws have been highly relevant factors in the application of the anti deprivation rule. Despite statutory inroads, party autonomy is at the heart of English commercial law. Plainly there are limits to party autonomy in the field with which this appeal is concerned, not least because the interests of third party creditors will be involved. But, as Lord Neuberger stressed [2010] Ch 347, para 58, it is desirable that, so far as possible, the courts give effect to contractual terms which parties have agreed. And there is a particularly strong case for autonomy in cases of complex financial instruments such as those involved in this appeal. No doubt that is why, except in the case of a blatant attempt to deprive a party of property in the event of liquidation (Folgate London Market Ltd v Chaucer Insurance plc [2011] EWCA Civ 328), the modern tendency has been to uphold commercially justifiable contractual provisions which have been said to offend the anti deprivation rule: Money Markets International Stockbrokers Ltd v London Stock Exchange Ltd [2002] 1 WLR 1150; Lomas v JFB Firth Rixson Inc [2010] EWHC 3372 (Ch); and the judgments of Sir Andrew Morritt C and the Court of Appeal in these proceedings. The policy behind the anti deprivation rule is clear, that the parties cannot, on bankruptcy, deprive the bankrupt of property which would otherwise be available for creditors. It is possible to give that policy a common sense application which prevents its application to bona fide commercial transactions which do not have as their predominant purpose, or one of their main purposes, the deprivation of the property of one of the parties on bankruptcy. Except in the case of well established categories such as leases and licences, it is the substance rather than the form which should be determinant. Nor does the fact that the provision for divestment has been in the documentation from the beginning give the answer, nor that the rights in property in question terminate on bankruptcy, as opposed to being divested. Nor can the answer be found in categorising or characterising the property as property subject to divestment on bankruptcy. If the anti deprivation principle is essentially directed to intentional or inevitable evasion of the principle that the debtors property is part of the insolvent estate, and is applied in a commercially sensitive manner, taking into account the policy of party autonomy and the upholding of proper commercial bargains, these conclusions on the present appeal follow. The answer is not to be found in the Noteholders argument that (a) LBSFs property was a beneficial interest under a trust, of which it was one of a number of beneficiaries (Clause 5.3 of the STD) and that (b) LBSF retains its beneficial interest under the trust to this day. The fact that the security interests were held by the Trustee is not determinative. The court has to look to the substance of the matter, which is that LBSF had a security interest, the content and extent of which altered when it filed for Chapter 11 protection. Nor is it to be found in the fact that the potential for change in priority was in the documentation from the beginning, nor in the flawed asset argument or variant of it, that the security interest, or the right under the trust to have the trust property administered in accordance with Swap Counterparty Priority, was inherently qualified or limited, because it applied only for so long as there had been no Event of Default under the Swap Agreement for which the Swap Counterparty was the Defaulting Party. The answer is to be found in the fact that this was a complex commercial transaction entered into in good faith. Although, as a matter of law, the security was provided by the Issuer out of funds raised from the Noteholders, the substance of the matter is that the security was provided by the Noteholders and subject to a potential change in priorities. The security was in commercial reality provided by the Noteholders to secure what was in substance their own liability, but subject to terms, including the provisions for Noteholder Priority and Swap Counterparty Priority, in a complex commercial transaction entered into in good faith. There has never been any suggestion that those provisions were deliberately intended to evade insolvency law. That is obvious in any event from the wide range of non insolvency circumstances capable of constituting an Event of Default under the Swap Agreement. The Offering Circular Supplement emphasised that, in addition to the Notes being credit linked to the reference portfolio, Noteholders would also have exposure to the Collateral, and impairment of the Collateral might result in a negative rating action on the Notes. The document went on: Purchasers of Notes should conduct such independent investigation and analysis regarding the Issuer, the security arrangements and the Notes as they deem appropriate to evaluate the merits and risks of an investment in the Notes. In particular, purchasers should note that the credit risk of the Notes includes that of the Collateral, the Swap Counterparty and the Reference Entities and that the Notes allow a purchaser to obtain the stated coupon in exchange for assuming such credit risk. The coupon and Initial Principal Amount may be at risk if one or more Credit Events occur and in certain circumstances the Notes may redeem at zero. There were three main risks for Noteholders: (1) Credit Event risk, that is, the risk that Credit Events might occur and be notified under the Swap Agreement, reducing the amount payable by the Issuer; (2) Collateral risk, being the risk that the Collateral might default or decline in value (a more likely eventuality in modern conditions than it might have seemed in 2004); and (3) LBSF risk, being the risk that LBSF might not be in a position to provide sufficient funds to the Issuer for it to pay the Noteholders interest or principal. The documents were intended to regulate the delicate relationship between Noteholders risk and LBSFs risk. The Noteholder Priority provisions were intended to deal with LBSF risk. The fact that, in certain circumstances, the change in priority would lead to a (possibly unanticipated) benefit to the Noteholders and to the loss of LBSFs security rights in the Collateral in respect of Unwind Costs does not unravel this highly complex transaction. These transactions were designed, arranged and marketed by the Lehman group. The investors who bought the Notes were in the main not banks. In the case of the Belmont Noteholders they were Australian local authorities, pension funds, private investment companies and private individuals. There was evidence that the fact that the Noteholders would have priority over the Collateral in the event of LBSFs insolvency was a very material factor in obtaining Triple A credit ratings which enabled Lehman to market the Notes. For these reasons Sir Andrew Morritt C and the Court of Appeal were right to find that the key provisions were valid and enforceable. VIII The LBHI point This point does not arise in view of the conclusion that the Noteholders are right on the main point. LBHI filed for Chapter 11 relief on 15 September 2008. If that was an Event of Default on that date for the purposes of Clause 5.5 of the STD and Condition 44 of the Terms and Conditions, then Noteholder Priority replaced Swap Counterparty Priority and Condition 44.2 replaced Condition 44.1. If that occurred before, and not because of, LBSFs filing for Chapter 11 relief, the anti deprivation rule would not be engaged because the change in LBSFs priority would not have been because of its filing, but because of LBHIs filing. The anti deprivation rule has no application where an entity is deprived by a person of its property prior to bankruptcy and on grounds which do not depend upon bankruptcy. Sir Andrew Morritt C and the Court of Appeal accepted that the Noteholders were right on this point. LBSFs position was as follows: (1) Clause 5.5 of the STD and Condition 44.2 of the Terms and Conditions, and the concepts of Swap Counterparty Priority and Noteholder Priority, only had relevance in relation to events taking place after the Collateral has been sold. (2) Condition 44.2 of the Notes prescribed how the Early Redemption Amount payable to Noteholders on an Early Redemption Date was to be calculated. (3) But Early Redemption could only take place after service of a notice by the Issuer following termination of the swap transaction or service of a notice by the Issuer to accelerate the Notes following an Event of Default. (4) On the true interpretation of the arrangement, the parties could not have intended any permanent changes in the operation of Clause 5.5 and Condition 44.2 to have occurred unless and until the service of a notice by the non Defaulting Party to terminate the Swap Agreement. (5) Clause 5.5 and Condition 44.2 operated with respect to the payments which would be due to LBSF and the Noteholders on early termination of the swap transaction and Early Redemption of the Notes. (6) Neither of those events would occur automatically upon an Event of Default occurring under the Swap Agreement: each required the service of a notice by the Issuer terminating the Swap Agreement. (7) Part 1(h) of the Schedule to the ISDA Master Agreement contained the option for the contracting parties to select Automatic Early Termination (AET) of their Swap Agreement. (8) If AET was selected, termination of the swap was deemed to occur automatically on the occurrence of a specified number of Events of Default, including bankruptcy. (9) The AET option was not taken in respect of any of the Swap Agreements in issue in this case. (10) The result was that the mere happening of an Event of Default based upon bankruptcy was plainly not intended to, and did not, result in the automatic termination of the Swap transaction. (11) Parties to a swap agreement need to know, with certainty, a number of fundamental matters. They need, for example, to know whether or not the transaction is still operative or has been terminated; if it has been terminated, they need to know with certainty when it terminated, and which of them is the Defaulting Party and which is not. (12) In the absence of AET, it is the service of a notice under section 6(a) which fixes those rights and obligations. In my judgment, Sir Andrew Morritt C and the Court of Appeal were right on this point. The combined effect of section 5 of the ISDA Master Agreement and paragraph 9(iv) of the Swap Confirmation is that the institution by LBHI (a Credit Support Provider) of proceedings for Chapter 11 relief is an Event of Default. The direction to the Trustee in Clause 5.5 of the STD is to apply Noteholder Priority if an Event of Default has occurred under the Swap Agreement and the Swap Counterparty is the Defaulting Party. For this purpose LBSF is the Defaulting Party: section 6(a) of the ISDA Master Agreement. Condition 44.2 of the Terms and Conditions provides that if an Event of Default has occurred under the Swap Agreement and the Swap Counterparty is the Defaulting Party, then, where Unwind Costs are payable by the Issuer to the Swap Counterparty, the Issuer is to apply the Collateral proceeds first in redeeming the Notes. Consequently the priorities were fixed on the happening of the Event of Default. There is nothing in the documents to require a notice of termination for this purpose, by contrast with the procedure in clause 6(a) of the ISDA Master Agreement for early termination. Under clause 5.5 of the Principal Trust Deed the security became enforceable when any amount due in respect of the Notes was not paid. LBSF in effect asks the court to write in a further condition that notice of termination has been given in respect of that Event of Default. This would be unnecessary and contrary to principle. The fact that it might make more commercial sense (to LBSFs benefit) should yield to the following considerations: first, the documents were prepared and marketed by Lehman Brothers, who could reasonably have been expected to ensure that their interests were adequately protected. Secondly, the Notes were bearer instruments intended to be widely marketed, and it is particularly important in such circumstances for the documents themselves to be capable of being relied on in the market. In this connection it is worthy of note that the Offering Circular Supplement itself (under Security Arrangements) substantially repeated clause 5.5 of the STD. Noteholders were entitled to rely on the documents as presented to them. I would therefore dismiss the appeal. LORD WALKER I gratefully acknowledge Lord Collins summary of the complicated documentation in this case, and his comprehensive survey of the authorities on the anti deprivation rule. Between them Lord Collins in his judgment in this Court, and Lord Neuberger of Abbotsbury MR in his judgment in the Court of Appeal (Perpetual Trustee Co Ltd v BNY Corporate Trustee Services Ltd [2010] EWCA Civ 1160, [2010] Ch 347) have analysed the cases most thoroughly. What emerges from the analysis is that the rule is a general principle of public policy which (in the traditional phrase) prevents a fraud on the insolvency statutes: as Lord Rodger of Earlsferry put it in R v J [2004] UKHL 42, [2005] 1 AC 562, para 64, The notion of a fraud upon an Act, acting in fraudem legis, is ancient. Although the outer limits of the doctrine remain notoriously difficult to define, this case at least falls squarely within its scope. There is a good deal of common ground between Lord Collins and Lord Neuberger. Where they differ in their analysis I respectfully prefer the view taken by Lord Collins, and I am hesitant about adding anything that might in any way obscure the clarity of his judgment. What follows should be read as no more than footnotes. The outer limits of the anti deprivation rule are indeed difficult to define. There are some reasonably well demarcated areas in which it is clear that the principle does not apply. One is the grant of a lease, in which the reservation of a power of re entry and forfeiture in the event of bankruptcy is standard practice, is unquestionably valid, and is recognised by statute. This is noted by Lord Collins (paras 84 and 85) and Lord Neuberger MR (para 64), citing Whitmore v Mason (1861) 2 J & H 204, 209 210, and Ex p Barter; Ex p Black; In re Walker (1884) 26 Ch D 510, 519 520. Another area in which the principles are well established is in the law of trusts. This was, in the early days of the anti deprivation rule, the area in which most of the relevant cases were decided, the earliest notable decision being that of Lord Eldon LC in Higinbotham v Holme (1812) 19 Ves Jun 88, where by a marriage settlement the husband conveyed land which he owned to trustees in trust for himself for life unless he shall embark in trade, and in the life of his wife become bankrupt (as happened a few years later). Lord Eldon LC stated (at pp 92 93), It is not competent to a party, giving a consideration for a contract, that is a direct fraud upon the Bankrupt Laws, to have the benefit of it. I cannot assimilate this to the case of the wifes property limited until the bankruptcy of her husband; that is, where she reserves a power over her own property; or to the case of a lease made determinable by the bankruptcy of the lessee: that is a reservation by the owner of the property of a power over it . But (as Lord Eldon implies in that passage) a settlor can validly settle his own property so as to confer on another person an interest terminable on the bankruptcy of that other person. That also has received statutory recognition in the statutory protective trusts in section 33 of the Trustee Act 1925, subsection (3) of which provides that the section does not operate to validate any trust which would, if contained in the instrument creating the trust, be liable to be set aside. A further much more limited exception has been made for assets (in particular, shares in an incorporated professional or business association) which are closely linked with professional or business activities for which bankruptcy is a disqualification: Bombay Official Assignee v Shroff (1932) 48 TLR 443; Money Markets International Stockbrokers Ltd v London Stock Exchange Ltd [2002] 1 WLR 1150. It is hard to see how much of the old learning about marriage settlements can be applied to a highly sophisticated commercial transaction such as that now before the court. But the old cases leave us in no doubt that among the landed gentry in the 18th and 19th centuries (especially before the Married Womens Property Act 1882) marriage, if not a commercial transaction, had financial implications which were taken very seriously. In Lester v Garland (1832) 5 Sim 205, for instance, the wife (who was under 21) was entitled under her uncles will to a legacy of 1,000 contingently on attaining full age, and the legacy would on her marriage vest in her husband; this legacy, and a further 4,000 paid by her father to her husband, was treated as if it had been settled by the wife, and not by the husband, so as to accelerate the wifes interest in that part of the settled property on his bankruptcy. The Court of Chancery was there looking at what happened as a matter of substance rather than form. Lester v Garland was considered in a commercial context in Whitmore v Mason 2 J & H 204. In that case the bankrupt, Mr Smith, had been a partner in a firm that had a 50 year lease of mines in Portugal. Mr Smith had paid in one thirteenth of the firms capital of 6,500. The impugned provision of the partnership deed directed that on a partners bankruptcy his interest in the lease should be discounted in the taking of a partnership account. It is instructive to look at the report of counsels arguments. The argument for the partners was that partnership deeds were exceptional, and that such a provision was frequently inserted in them. Mr Rolt QC argued In forming a partnership each partner is making a bargain with the rest, and is entitled to stipulate for such advantages as he can obtain from the rest; and he referred by way of analogy to a lease (p 209). After the Vice Chancellor had made a discouraging reference to Wilson v Greenwood (1818) 1 Swans 471 Mr Giffard QC, following, argued that even on the rule as stated in Mr Swanstons note to Wilson v Greenwood (at p 485) the rule would allow two co partners, part owners of a mine, to limit their shares to each other until bankruptcy, and then over; and the limitation over would be valid. (p 210) That is the context of the Vice Chancellors dictum at pp 214 215: If his co partners had advanced a definite sum of money on account of his share, then the property might have been considered to the extent of the money so advanced by them, as identically their money; but this has not been done. The Vice Chancellor had already rejected Mr Giffards over ingenious argument. His dictum implies that it might have been different if Mr Smith had introduced no partnership capital of his own, and had merely covenanted to perform his partnership obligations, including paying off the initial advance of capital from his partners. This suggests, putting it more generally, that even in fully commercial transactions, if the bankrupt was not in substance the provider of the asset of which he is to be divested, the anti deprivation rule may not apply. If a party to a transaction brings to it nothing but his own covenant, like a tenant under a lease, the property interest which he takes is what the landlord agrees to grant him. The maxim cujus est dare ejus est disponere (mentioned by the Vice Chancellor 2 J & H 204, 212 213 in relation to a lease) is not restricted to gratuitous dispositions. Briggs J, who has wide experience of litigation relating to interest rate swaps, seems to have taken a similar view in Lomas v JFB Firth Rixson Inc (International Swaps and Derivatives Association Inc Intervening) [2010] EWHC 3372 (Ch), 21 December 2010 (a case on facts very much closer to those of this appeal). Having referred to Ex p Mackay; Ex p Brown; In re Jeavons (1873) LR 8 Ch App 643, British Eagle International Airlines Ltd v Cie Nationale Air France [1975] 1 WLR 758 and the judgment of the Court of Appeal in this case as each concerned with a chose in action with a built in flaw triggered by bankruptcy, Briggs J observed (paras 108 110): Where the asset of the insolvent company is a chose in action representing the quid pro quo for something already done, sold or delivered before the onset of insolvency, then the court will be slow to permit the insertion, even ab initio, of a flaw in that asset triggered by the insolvency process. By contrast, where the right in question consists of the quid pro quo (in whole or in part) for services yet to be rendered or something still to be supplied by the insolvent company in an ongoing contract, then the court will readily permit the insertion, ab initio, of such a flaw, there being nothing contrary to insolvency law in permitting a party either to terminate or adjust what would otherwise be an ongoing relationship with the insolvent company, at the point when it goes into an insolvency process. Examples of the former type are the royalty stream in Ex p Mackay, which was the quid pro quo for a patent sold outright by the person who later became bankrupt, and the debt owed by Air France to British Eagle, which was for services already rendered by British Eagle to Air France prior to the commencement of its winding up. Familiar examples of the latter category are leases and licences, where the right to enjoy the underlying asset accrues over time, in exchange, also over time, for payment of rent or fees, and which have always been terminable on bankruptcy without infringing the rule: see Perpetual [2010] Ch 347, para 64. Briggs J then went on to refer to the security right enjoyed by LBSF. This proposed test inevitably lacks precision, but it is in my respectful opinion a valuable contribution to the search for principle in this area. Moreover the more contrived and unconventional the chose in action is (unconventional, that is, outside the bizarre world of swaps) the stronger are the arguments for taking the chose in action as the parties have fashioned it. I am therefore inclined to give some weight to asking what it is that the bankrupt has brought to the transaction, so long as that is looked at as a matter of substance, and contrived arrangements or analyses (such as that suggested by counsel in Whitmore v Mason) are disregarded. In this case the noteholders were, as a matter of substance, the only party who contributed real assets in many cases the pension funds of hard working Australian citizens. LBSF contributed only promises, and then proved unable to perform them. Its only proprietary interest was under a charge to secure sums that might become due to it on due performance of its obligations. But these are, as I have said, only footnotes. The essential ground of the decision is set out in para 108 of the judgment of Lord Collins, with which I am in full agreement. I also agree with Lord Collins on what he refers to as the LBHI point. I would therefore dismiss this appeal on both grounds. LORD MANCE Introduction This appeal concerns a Lehman Brothers product called the Dante Programme. Sir Andrew Morrit C outlined its essential elements ([2009] EWHC 1912 (Ch); [2009] 2 BCLC 400, para 1) in a description adopted by the Court of Appeal ([2009] EWCA Civ 1160; [2010] Ch 347, para 5): (l) the issue of notes [the notes] to investors by a special purpose vehicle (the issuer) formed by a Lehman company in a tax friendly jurisdiction; (2) the purchase by the issuer with the subscription money paid for the notes of government bonds or other secure investments (the collateral) vested in a trust corporation; (3) a swap agreement entered into by a Lehman company and the issuer under which the Lehman company paid the issuer the amounts due by the issuer to the noteholders in exchange for sums equal to the yield on the collateral; (4) the amount by which the sum payable under the swap agreement by the Lehman company exceeded the yield on the collateral represented the premium for the, in effect, credit insurance provided by the noteholders; (5) the amount payable by the Lehman company to the issuer on the maturity of the notes (or on early redemption or termination) was the initial principal amount subscribed by the investors less amounts calculated by reference to events defined as credit events occurring during a specified period by reference to one or more reference entities, thereby giving effect to the effective insurance aspect of the programme; (6) the collateral was charged by the issuer in favour of the trust corporation to secure its obligations to the noteholders and the Lehman company on terms which changed their respective priorities on the occurrence of certain specified events, including the insolvency of the Lehman company, (7) each of the transactions summarised above (except the purchase of the collateral) is governed by English law. In the absence of any insurable interest, the description credit insurance is, on any view, colloquial or commercial rather than strictly legal. Under the particular tranche of the representative series put before the Supreme Court, the issuer was Saphir Finance plc (Saphir), the Lehman company which was Saphirs counter party in the swap was Lehman Brothers Special Financing Inc (LBSF) and the trust corporation was BNY Corporate Trustee Services Ltd (BNY). The notes were issued in July 2004 and were due to mature after seven years. The amount expressed to be payable by the issuer to LBSF on their maturity was an amount equal to the amount realised from the collateral (which would be netted off against the amount payable by LBSF to the issuer as mentioned in point (5) above, giving a net sum payable one way or the other). As a result of non recourse clauses, Saphir was not itself liable to either the Noteholders or LBSF beyond the amount realised by the collateral. The collateral was highly secure, consisting of A$40m triple A rated floating notes issued by Rabo Australia Ltd and guaranteed by Rabobank Nederland. Due to its floating rate, the value of the collateral would not alter significantly, upwards or downwards. The reference entities were at least double A rated, the credit events which might trigger a reduction in the amounts (capital, and as a result interest) due under the notes were of some severity, and the Noteholders had the further protection of a subordination amount of A$72m (over 50% higher than the Standard & Poors recommended level): only after that amount had been burned through by losses resulting from credit events would the amounts outstanding under the notes reduce, leading also to a reduction in the total payable thereon by way of interest. The reference entities were not entities with which LBSF necessarily had any financial relation, and the extent to which the programme or this tranche covered, directly or indirectly, any actual market exposure of LBSF is unclear. The attraction for Noteholders was an interest rate on their notes of 1.30% above that earned by the Rabo collateral. If there were no credit events at all, then during the period of their notes the Noteholders would receive interest at this uplifted rate on the notes face value (their only effective security in respect of the 1.30% uplift being LBSF), and on the notes maturity they would receive repayment in full via Saphir from LBSF. In return, LBSF would receive via Saphir during the period of the notes an amount equivalent to the interest payable on the Rabo collateral and on maturity the value of the collateral (less minor trustee, etc. fees). If there were duly notified credit events giving rise to losses above the subordination level, the downside for Noteholders was that the amount outstanding on their notes, and so also the interest payable from time to time, would be reduced (even to zero). In that event, LBSF would on maturity receive credit in the full value of the collateral, while crediting correspondingly less to Saphir for the benefit of the Noteholders, thereby making a credit insurance recovery. With the hindsight of the credit crisis of 2007 onwards, it can be seen that, however safe a bet the transaction may have appeared in July 2004, its timing was unfortunate. The contract documentation is of a purgatorial complexity fitting the programmes name. The judgments below have set out many detailed provisions, and the Appendix contains the most salient. These defined and regulated, in particular, the consequences of an Event of Default in respect of which LBSF was the Defaulting Party, and provided for early termination (clauses 5 and 6 of the ISDA Master Agreement). In the event, there were two relevant Events of Default, one consisting of the commencement on 15 September 2008 of Chapter 11 proceedings involving Lehman Brothers Holdings Inc (LBHI LBSFs parent and guarantor in the transaction) and the second consisting of the commencement on 3 October 2008 of such proceedings in respect of LBSF itself. The latter Event of Default led Saphir on 24 March 2009 to give notice specifying that Event of Default only and designating 24 March 2009 as an early termination date in respect of the swap. This appeal concerns the provisions governing an Event of Default and/or Early Termination. In summary, on Early Termination, the Noteholders were to be paid by Saphir their share of the outstanding amount of the notes, that is the face value reduced by reference to any credit events which had already occurred and had been duly notified after they had burned through the subordination amount. The swap was to be unwound by making a market based estimation of any credit events likely to occur during the remaining period of the notes, and by taking into account on the other side the future interest payments which LBSF would have had to make, had the transaction run to maturity. A balance, described as Unwind Costs, was thus to be struck, one way or the other, to unwind the swap (clauses 5.5 and 8.3 of the Supplemental Trust Deed (STD), read with condition 44 of the Offering Circular Supplement (OCS)). In the absence of any Event of Default involving LBSF as the Defaulting Party, the result on early termination was to mirror in effect that which it was estimated would exist on maturity (clauses 5.5 and 8.3 of the STD and condition 44 of the OCS). In the case of a balance due to the issuer (which would in practice only occur, as a result of the interest rate uplift of 1.30%, where there were no or few credit event losses above the subordination amount), the Noteholders would receive its benefit. In the event of a balance due to LBSF, the Noteholders would suffer diminution in their recovery by reference to both past and estimated further credit events in excess of the subordinated amount; on the other side of the coin, LBSF would be covered and secured via Saphir out of the collateral in respect of losses from both past and estimated future credit events. In the case of an Event of Default where LBSF was the Defaulting Party, a different scheme was to apply. The Noteholders were to continue to be entitled to be paid their share of the outstanding amount of the notes, that is their face value reduced by reference to any credit events which had already occurred and been duly notified. The swap was to be unwound, and a balance of Unwind Costs struck, in the same way as where there had been no default. In the case of a balance struck favouring Saphir, the Noteholders position was to be as before. In the case of a balance struck in favour of LBSF, the Noteholders were to be entitled to first recovery. LBSF was to remain entitled to the balance struck in its favour, but only after Saphir had, out of the collateral, satisfied the Noteholders prior claim to recovery of their share of the outstanding value of the notes (STD, clauses 5.5 and 8.3 and OCS, condition 44). Since the value of the collateral was not envisaged or intended to increase, and since there was no recourse against Saphir itself, LBSFs entitlement to the balance struck in its favour was more theoretical than practical. The collateral would be exhausted in (a) meeting any past credit losses in excess of the subordination amount incurred prior to early termination and (b) paying the Noteholders the outstanding amount of their notes. There would be nothing left to meet estimated future credit losses (reflected in the Unwind Costs), if they were not deducted by Saphir from the amount payable to Noteholders and passed on by way of a correspondingly increased payment out of the collateral to LBSF. The present dispute This change (or flip as it has been called), between the positions where there has not been and where there has been an Event of Default with LBSF the Defaulting Party, gives rise to the present appeal. LBSF is the appellant. The respondents are Belmont Park Investments Pty Ltd, a Noteholder, 28 other Australian charities and public bodies who are also Noteholders, and BNY. The primary issue is whether the loss by LBSF in such an event of its priority in respect of future estimated credit losses is invalidated by a principle (which I can conveniently call an anti deprivation principle), preventing a person from being deprived of his, her or its property upon insolvency. There is a further issue whether, on the facts of this case, the loss did occur upon LBSFs insolvency, bearing in mind that there was an Event of Default affecting its parent, LBHI, which occurred some two weeks before LBSF was subject to Chapter 11 proceedings. In this connection, the parties disagree as to whether the occurrence of an Event of Default (here, that involving LBHI on 15 September 2008) automatically introduces Noteholder Priority as opposed to Swap Counterparty Priority, or whether priority depends upon the giving of notice, and the realisation or enforcement of the collateral, pursuant to a particular Event of Default (here, the notice given on 24th March 2009 relying on the Event of Default relating to LBSF). The starting point of LBSFs case is the wide definition of property in section 436 of the Insolvency Act 1986 to include: money, goods, things in action, land and every description of property and also obligations and every description of interest, whether present or future or vested or contingent, arising out of, or incidental to, property. LBSFs case is that, prior to its insolvency, it had property in the form of a present, future or contingent interest in the collateral, securing a prior claim to Unwind Costs due to it on termination, that it was deprived of the claim and/or collateral upon or by reason of its insolvency, and that such a deprivation is invalid as contrary to the policy of the insolvency legislation. Neither of the courts below has accepted LBSFs case. Sir Andrew Morritt C noted five points ([2009] 2 BCLC 400, para 45): the money used by the issuer to buy the collateral derived from the Noteholders, not LBSF; the courts should not be astute to upset commercial transactions; it was appropriate for LBSF to have prior security over the collateral only so long as it continued to perform the swap; LBSFs priority had never extended to a time after the event of default in respect of which it was the defaulting party; and LSBFs prior security was thus always limited and conditional. In the Court of Appeal, Patten LJ [2010] Ch 347, para 135 considered that, whether or not the date for determining priority under clause 5.5 of the STD was 15 September 2008 or 24 March 2009: the only interest or property which [LBSF] ever enjoyed in the collateral was a charge granted by [Saphir] on the terms of the [STD]. That security interest remains part of the property of [LBSF] unchanged by the event of its bankruptcy. The reversal of the order of priority under clause 5.5 was always a facet of the security designed to regulate the competing interests over the collateral of LBSF and the Noteholders. To say that its operation in the event of the companys bankruptcy constitutes the removal of an asset from the liquidation is to confuse the security itself with the operation of its terms in the events prescribed by the charge. LBSF retains the same asset as it had before its bankruptcy and is free to deal with any recoveries for the benefit of its general creditors in accordance with the applicable statutory regime. Patten LJ applied similar reasoning (in para 136) to condition 44 of the Offering Supplementary Circular, holding that the operation of condition 44 does not give to the Noteholders more than the right to recover the whole of the sums due under the Notes in priority to any claim over the collateral by LBSF for the Unwind Costs. It simply adjusts the balances on early termination to ensure that the Noteholders are paid the whole of what is due to them in priority to the sums payable to LBSF. If there is no shortfall in the security LBSF will recover the sums due to it in full. Condition 44 does not therefore remove an asset from LBSF. Nor does it give to the Noteholders security over an asset in which they previously had no interest. It merely regulates the order in which the company and the Noteholders are entitled to be recouped out of the security. Although the amount of the security available to meet LBSF's claims is obviously reduced in the event of a shortfall in the value of the security over what it would have been had no Event of Default occurred, that is simply a function of the change in priority which was always a feature of the security which the company enjoyed. In para 174, Patten LJ summarised his view as being that: it is not possible to strike down the provisions of clause 5.5 and condition 44 merely because their operation may affect the value of the security available to LBSF in the event of a shortfall. There is nothing in the English authorities which supports the extension of the anti deprivation principle to encompass transactions which do not alter the property of the insolvent company in the asset in question . He also expressed doubt (paras 171 173) whether, in the light of the statutory provisions for setting aside transactions in insolvency, there was any scope for any anti deprivation principle, apart from that applied by the House of Lords in British Eagle International Airlines Ltd v Cie Nationale Air France [1975] 1 WLR 758 which precludes a disposition of property in insolvency otherwise than pari passu in accordance with the legislative scheme. Lord Neuberger of Abbotsbury MR, with whose reasoning Longmore LJ concurred, identified a number of features as supporting the Chancellors decision: first, and it appears most importantly in his view, he stressed that the collateral has been funded by the Noteholders money (paras 61 64); second, from the very outset the scheme provided and was marketed on the basis that, if LBSF or LBHI defaulted, the Noteholders would have priority; third, LBSF retained their right to be paid, did not lose any vested asset and would merely rank behind rather than ahead of the Noteholders in relation to the collateral, and not be out of pocket if there was no shortfall (paras 61 and 63 64); fourth, a charge or provision for repayment, while not identical to a lease or licence, has features of similarity and differs from ownership (para 64). The Master of the Rolls saw Patten LJ as having decided the case on the simple basis that the flip, that is, the reversal of the order of priority against a company as the holder of a charge, in favour of another chargee over the same assets, cannot be caught by the rule, even if it operates after the liquidation of the company, at least if such a reversal was an original feature of the company's charge when it was granted. (para 66) He said that he had considerable sympathy with that view, but preferred to rest his conclusion on a more limited ground, namely that: in addition to the facts relied on by Patten LJ, the assets over which the charge exists were acquired with money provided by the chargee in whose favour the flip operates, and that the flip was included merely to ensure, as far as possible, that that chargee is repaid out of those assets all that he provided (together with interest), before the company receives any money from those assets pursuant to its charge. He thought that, without these additional facts: there may be room for argument that, in the absence of these additional facts, the arrangement in this case would have fallen foul of the analysis in Ex p Mackay 8 Ch App 643 (which was arguably approved in the British Eagle case ), on the basis that the right in that case to retain the second half of the royalties in the event of bankruptcy was, like the flip provisions here, an original feature of the contractual arrangement, and the right to recoup money under a change in priority to another chargee is every bit as much of an asset as the right to moneys (in the form of royalties) arising in the future. There is also a danger that the simple analysis adopted by Patten LJ could, in the light of the very limited circumstances in which the court will hold a transaction to be a sham, make it very easy to dress up sale transactions in such a way as to enable the rule to be circumvented. (para 67) An anti deprivation principle? I am satisfied that there are, and ought to be, two principles in this area. One is the principle applied in British Eagle, which precludes a bankrupt from agreeing to distribute his, her or its property other than pari passu in bankruptcy (although it does not preclude creditors from agreeing inter se on the distribution inter se of their pari passu shares: In re Maxwell Communications Corpn plc [1993] 1 WLR 1402). The other is a concurrent principle, whereby dispositions of property on bankruptcy may be invalidated as being in fraud or an evasion of the bankruptcy laws. The only challenge to the former principle has been in written submissions made by The Premier League as interveners (closely related to pending proceedings brought against it by Her Majestys Revenue and Customs). I see no basis for any fundamental challenge to the principle, and I shall in view of the pending proceedings say nothing about particular issues which may arise there about the scope of the principle or its application to direct payment clauses such as those discussed in paragraph 6 11 of Professor Sir Roy Goodes Principles of Corporate Insolvency Law, 3rd ed (2005). It is the latter principle which is in issue on this appeal. This, an anti deprivation principle, was examined and applied by Lord Eldon in Higinbotham v Holme (1812) 19 Ves Jun 88, and in a series of later cases, such as Lester v Garland (1832) 5 Sim 205, Whitmore v Mason (1861) 2 J & H 204, Ex p Mackay; Ex p Brown; In re Jeavons (1873) LR 8 Ch App 643 (CA), Ex p Jay; In re Harrison (1880) 14 Ch D 19 (CA), Ex p Barter; Ex p Black; In re Walker (1884) LR 26 Ch D 510 (CA) and In re Johns; Worrell v Johns [1928] Ch 737 and, more recently, Mayhew v King [2010] EWHC 1121 (Ch). It was recognised and considered, without adverse comment, by the Privy Council in Bombay Official Assignee v Shroff (1932) 48 TLR 443 and by the House of Lords in British Eagle [1975] 1 WLR 758. Section 33(1)(ii) of the Trustee Act 1925 also assumes the existence of such a principle. While the two principles are conceptually distinct, they are quite closely allied. British Eagle addresses what happens in bankruptcy. An anti deprivation principle addresses what happens on bankruptcy. If contracting out of the statutory rule requiring pari passu distribution in bankruptcy is impermissible, it would be surprising if there were no concurrent principle capable of invalidating certain dispositions which, by removing property from the bankrupt on bankruptcy, had the same ultimate effect. The general principle of pari passu distribution in bankruptcy would otherwise easily be evaded, as the court observed in Ex p Mackay LR 8 Ch App 643. It is also unsurprising that the facts of some of the authorities (eg Whitmore v Mason 2 J & H 204 and Ex p Mackay) might plausibly have been analysed as falling within either principle. Further, it is clear that there is no conceptual difference between removing specific property from the bankrupt estate for no consideration (Whitmore v Mason), increasing the security given to a particular creditor (Ex p Mackay) and increasing the bankrupt estates liability to a particular creditor (In re Johns [1928] Ch 737). All these fall within the anti deprivation principle. The existence in the Insolvency Act 1986 of other provisions protecting the interests of creditors in bankruptcy does not supersede or make redundant an anti deprivation principle. First, the 1986 Act must have been enacted against the background of the case law establishing that certain deprivations on bankruptcy are impermissible and void. Second, the statutory provisions cover different ground. Section 127 concerns dispositions after the commencement of the winding up, section 238 transactions at an undervalue and section 239 preferences. Sections 238 and 239 only avoid transactions within specified periods ending with the onset of insolvency (from six months to two years). Section 423 requires proof of both a transaction at an undervalue and a specific intent to put assets beyond the reach of or prejudice a potential claimant. These provisions have their own historical antecedents, dating back to the Fraudulent Conveyances Act 1571 (13 Eliz 1, c 5) and the doctrine of fraudulent preference formulated by Lord Mansfield in 1768 (see Alderson v Temple (1768) 4 Burr 2235 and later incorporated in statutory form in the Companies Act 1862 (25 & 26 Vict, c 89)). The more difficult question concerns the character of transaction and the state of mind which will attract the operation of the anti deprivation principle. In my opinion, the court has to make an objective assessment of the purpose and effect of the relevant transaction or provision in bankruptcy, when considering whether it amounts to an illegimate evasion of the bankruptcy law or has a legitimate commercial basis in other considerations. The references in the cases to fraud of the bankruptcy law are not to fraud in a strict sense or even to conduct which is morally opprobrious. Equity took a broader approach to fraud: Snells Equity, 32nd ed (2010), para 8 001; and see eg the cases on fraudulent concealment preventing the running of a limitation period: Kitchen v Royal Air Force Association [1958] 1 WLR 563; Tito v Waddell (No 2) [1977] Ch 106, 245B C. Counsel for the unsuccessful wife in Higinbotham v Holme 19 Ves Jun 88 made the distinction between actual and other fraud clear when he said, at p 90, that the settlement being free from objection for want of consideration or upon actual fraud could only be represented as a fraud upon the bankruptcy law in one of two ways, either on the basis of (the then existing, but in that case irrelevant and since the Insolvency Act 1985 finally abolished) doctrine of reputed ownership or by considering it as a subtraction from the creditors of his estate, which he enjoys and possesses for every other purpose. In a number of the old authorities, a conclusion that the anti deprivation principle applied was expressed in terms referring to an express or deliberate object of evading the bankruptcy law. Lord Eldon LC in Higinbotham v Holme and the Court of Appeal in Ex p Mackay LR 8 Ch App 643 based themselves on an analysis of the transaction which led them to conclude that the express object was to take the case out of the reach of the bankruptcy laws. The palpably artificial scheme in In re Johns [1928] Ch 737 was described as a deliberate device to secure that more money should come to the mother, if the son went bankrupt, than would come to her if he did not (p 748). In dicta in British Eagle [1975] 1 WLR 758, 780, Lord Cross of Chelsea said that existences of a charge in Ex p Mackay meant that The court could only go behind it if it was satisfied as was indeed obvious in that case that it had been created deliberately in order to provide for a different distribution of the insolvents property on his bankruptcy from that prescribed by the law. Other cases have however stated an anti deprivation principle in terms focusing on the character of the transaction or provision, identified objectively. In a note to Wilson v Greenwood (1818) 1 Swans 471 (another decision of Lord Eldon) which was subsequently quoted by Lord Hatherley LC in argument in Whitmore v Mason 2 J & H 204, 209 210 and by Fry LJ in Ex p Barter LR 26 Ch D 510, 519 520, Mr Swanston stated simply that the owner of property may, on alienation, qualify the interest of his alienee by a condition to take effect on bankruptcy; but cannot by contract or otherwise qualify his own interest by a like condition, determining or controlling it in the event of his own bankruptcy, to the disappointment or delay of his creditors. That is an objective test. In Ex p Jay 14 Ch D 19 a building owner demised land to a builder for 99 years, with detailed covenants to build thereon within certain times and subject to a power of distress and entry in case of either default in performance or bankruptcy or insolvency on the part of the builder, in either of which cases all the builders improvements, plant and chattels on site were to be forfeited to the building owner. There was a commercial advantage behind the forfeiture provision, and Bacon CJ in fact said at first instance that There was no fraud, but a transaction perfectly consistent with the speculation into which both parties had entered, that the materials brought upon the land were to be used in constructing the buildings (p 23). But the Court of Appeal held that (there having been, prior to the bankruptcy, no default which could by itself have triggered the forfeiture) the forfeiture was void in the event that happened, of its being triggered by the builders bankruptcy. In Ex p Barter 26 Ch D 510, a similar point arose under a shipbuilding contract, which entitled the owners, in various events including the builders cessation of work for 14 days or bankruptcy or insolvency, to take possession of the vessel and complete it using such of the builders materials as were on their premises intended for use in completion. The builders went bankrupt and the owners claimed the right to use their materials. In justification, they argued strenuously the question was whether at the time when the contract was entered into the parties intended to defeat the bankruptcy law; whether it was an honest or a dishonest contract (p 515), and the clause was for the builders benefit since completion of the ship would reduce their bankrupt estates liability. The Court of Appeal noted that the latter argument was fallacious, since the effect of the clause was to transfer to the owner the trustees right to elect whether or not to complete. The court went on to reject the owners case without reference to any state of mind, on the simple basis of the rule stated by Mr Swanston. To similar effect is, as Neuberger J noted in Money Markets International Stockbrokers Ltd v London Stock Exchange Ltd [2002] 1 WLR 1150, para 102, a passage in the judgment of Farwell J in Borlands Trustee v Steel Bros & Co Ltd [1901] 1 Ch 279, 291. In the Borlands case, Farwell J, while accepting that the second principle did not apply to provisions compelling sale of shares on bankruptcy at their fair value, added that a provision compelling their sale at something less than the price they would otherwise obtain would be repugnant to the bankruptcy law. The reasoning of Lord Blanesburgh in Bombay Official Assignee v Shroff 48 TLR 443, 446, to which Neuberger J also referred is, as I see it, equivocal and the judgment went off on another point. An objective approach is also consistent with authorities which show that what matters is whether the deprivation was triggered by bankruptcy, and that, if it is, it is irrelevant that there was also events other than bankruptcy, which if they had occurred would have triggered deprivation, but which did not in fact occur. In Higinbotham v Holme 19 Ves Jun 88 there was a settlement by a prospective husband of moneys on trust for the husband unless and until he should, during his wifes lifetime, die or become bankrupt in which case she should receive an annuity. The annuity in favour of the wife was held void as regards the period between the husbands bankruptcy and death, but Lord Eldon made clear that it would still be payable as and from the date when her husband later died. In Ex p Jay 14 Ch D 19 and Ex p Barter 26 Ch D 510 the relevant clauses authorised forfeiture of the builders materials on certain defaults in performance as well as on bankruptcy, but no such other events had occurred prior to the builders bankruptcy, upon which the clauses were actually operated. In re Detmold; Detmold v Detmold (1889) 40 Ch D 585, a settlor made a marriage settlement settling income on himself for life or until he shall become bankrupt, or shall assign, charge, or incumber the said income, or shall do or suffer something whereby the same would through his act, default, or by operation or process of law become vested in or payable to some other person . A judgment creditor obtained the appointment of a receiver over the income on 19 July 1888 and on 29 July 1888 the settler was adjudicated bankrupt. The wifes interest vested on the appointment of the receiver and was held valid as against the creditors. In Whitmore v Mason 2 J & H 204, the fact that the trigger for the anti deprivation principle is bankruptcy was ingeniously invoked in an argument that, since the clause purportedly removing property from the bankrupt partners estate was expressed to take effect in the event of bankruptcy or insolvency, it therefore took effect in this case immediately the partner was unable to pay his debts, and consequently before any act of bankruptcy under which his assignees could claim; but Page Wood V C gave the argument short shrift, saying that a bankrupt is usually insolvent before he commits an act of bankruptcy and if that construction were to prevail, the bankrupt laws might, in all cases, be defeated (p 215). In contrast, in Ex p Newitt; In re Garrud (1881) 16 Ch D 522 the clause in a building lease entitled the building owner to re enter, and provided for forfeiture on re entry of the builders materials by way of liquidated damages, if the builder defaulted in fulfilling the agreement. The builder defaulted but, on one view of the facts, there was no re entry and forfeiture prior to bankruptcy. The Court of Appeal held that, since the trustee in bankruptcy took possession subject to any pre existing rights, the right to re enter and forfeit could be exercised even after the bankruptcy. In the present case, Lord Neuberger MR and Patten LJ [2010] Ch 347, paras 93, 163 thought that the decision in In re Newitt cannot survive British Eagle [1975] 1 WLR 758, in so far as it held that a right to forfeit could be exercised after bankruptcy. But it is unnecessary in this case to consider whether that is correct. A further point is that it may be possible to sever a transaction or provision which infringes the anti deprivation principle, avoiding it only to the extent that it has this character. This is indicated by Lester v Garland 5 Sim 205 (where a husbands provision that moneys settled on himself should on his bankruptcy go to his wife and children was held valid as to 15 sixty sixths, on the basis that so much of the moneys derived from her father and could be treated as coming from her, and void as to the rest). Lord Eldons indication in Higinbotham v Holme 19 Ves Jun 88 that it was only in the period between the settlors bankruptcy and death that the creditors would take priority over the wife is in the same sense. Mr Swanstons note to Wilson v Greenwood 1 Swans 471 covers two categories of situation: first, the owner of property may, on alienation, qualify the interest of his alienee by a condition to take effect on bankruptcy; the anti deprivation principle does not prevent that; but, secondly, he cannot by contract or otherwise qualify his own interest by a condition, determining or controlling it in the event of his own bankruptcy. A straightforward instance of the first situation is provided by the protective trust, within the meaning of section 33 of the Trustee Act 1925, created by a third party: Money Markets International Stockbrokers Ltd [2002] 1 WLR 1150, paras 47 49, and Sir Roy Goode, Perpetual Trustee and Flip Clauses in Swap Transactions [2011] LQR 1, 8. Provisions for the forfeiture of leases on a tenants bankruptcy were seen as falling within the same category (Whitmore v Mason, 2 J & H 204, 212 213). This was despite their mutual aspect (perhaps because it was assumed that landlords could dictate their own terms). Such provisions are now recognised as valid in section 146(9) of the Law of Property Act 1925. A straightforward instance of the second situation is the settlement by a person of his own property on terms depriving him (and so his creditors) of it upon his bankruptcy. Early examples are Higinbotham v Holme 19 Ves Jun 88 and Lester v Garland 5 Sim 205. Contractual situations present more difficulty. As Mr Swanstons note makes clear, the fact that two contracting parties have agreed a provision does not make it valid. The autonomy of contracting parties cannot axiomatically prevail over the interests of third party creditors in bankruptcy. By the same token, it can be no answer to a suggestion of evasion of the bankruptcy law that the provision for deprivation was in the contractual arrangements from the outset. That will commonly be the case (and was so in many of the cases, eg Whitmore v Mason 2 J & H 204, Ex p Mackay LR 8 Ch App 643, Ex p Jay 14 Ch D 19 and Ex p Barter LR 26 Ch D 510). However, it is reasonably clear that Mr Swanstons note was focusing on contracts affecting a pre existing property interest. Even in that connection, the note would, read literally and generally, go too far, as the position regarding leases shows. Where the property interest arises out of or in close connection with the relevant contract providing for its determination on bankruptcy, it may be easier to suggest a real commercial or other basis for the deprivation provision, and correspondingly more difficult to invoke the anti deprivation principle. Thus, in Borlands Trustee [1901] 1 Ch 279 the purpose of the requirement, that any holder of the companys shares who became bankrupt should sell them at a specified price, was that the company should remain under the control of its managers and workers in Burma. There was, Farwell LJ said, at p 291, nothing repugnant to any bankruptcy law in such a provision as that. Turning to the price, he said that there was also nothing repugnant in that, since it was a fair value, although there would have been, had the obligation been to sell the shares at a lesser price (p 291). In the Money Markets International Stockbrokers Ltd case [2002] 1 WLR 1150, Neuberger J identified deprivation provisions operating on bankruptcy in relation to valueless assets or to assets ownership of which depends upon the personal characteristics of their owner as likely also to fall outside the second principle. He noted that it was presumably on this basis that the loss of membership of the relevant stock exchange on bankruptcy had not been challenged in Bombay Official Assignee v Schroff 48 TLR 443 or in Money Markets. In the former case, Lord Blanesburgh said, at p 445, that if such an organisation is to attain its ends membership must plainly be a personal thing, incapable of uncontrolled transfer: expulsion from membership must normally follow default or misconduct: upon expulsion all interest of the defaulting member in the property of the organisation must cease. In Money Markets, Neuberger J extended this approach to an ancillary asset in the form of a share in the London Stock Exchange which was liable to rescission for no consideration on bankruptcy. It is unnecessary to engage with the detail of the case or its outcome, but the conclusion that assets which are ancillary to a personal right may be forfeited on bankruptcy is understandable, although I believe that the terms of forfeiture might require particular consideration if there was nothing personal about the assets themselves and they were detachable and separately alienable. The existence of a contractual scheme, which is said to create the relevant property interest, but at the same time to include provisions providing for its illegitimate deprivation on bankruptcy, raises several questions: First, how far did the scheme confer any property interest on the subsequently bankrupt party? Second, how far did it deprive him of any such property on bankruptcy? Third, in so far as it did deprive him of any such property on bankruptcy, did this amount to an illegitimate evasion of the anti deprivation principle? The first question is exemplified by the difference between the majority and minority in British Eagle as to whether the International Air Transport Association (IATA) arrangements then in force had given rise to any indebtedness between IATA members, and by the conclusion of the majority of the High Court of Australia in International Air Transport Association v Ansett Australia Holdings Ltd [2008] HCA 3, (2008) 234 CLR 151 that the modified IATA arrangements did not do so. The parallel issue in the present case is whether the swap between Saphir and LBSF gave LBSF any property in the form of either or both of a contractual right to priority in respect of Unwind Costs and a proprietary interest in the collateral to secure such Unwind Costs. In answering that question, it is necessary to examine the terms and effect of the contractual arrangements, summarised above. There can be a fine distinction between arrangements conferring a limited or determinable benefit and arrangements conferring a larger benefit but making it forfeitable in circumstances including bankruptcy. Such a distinction has also been examined in the context of the common law rule of repugnancy which prevents a condition subsequent from being attached to an outright gift. The court was invited to sweep away any such distinction, at least in the present context. Mr Snowden made the invitation on the basis that limited or determinable interests should be assimilated with conditions subsequent, rendering the termination potentially invalid in all cases; Mr Salter and Mr Howard made it on the opposite basis that conditions subsequent should be assimilated with limited or determinable interests, and party autonomy given effect in all such situations. In the context of the rule against repugnancy, the distinction between limited or determinable interests and conditions subsequent has been regularly criticised although, one notes, with few positive suggestions as to what might replace it. Porter MR In re Kings Trust (1892) 29 LR Ir 401, 410 thought it little short of disgraceful to our jurisprudence that in reference to a rule professedly founded on public policy there should be a distinction between a gift of an annuity for life coupled with a proviso for cessation if the donee married (treated as giving a life interest) and a gift until he marries (treated as giving an interest only until marriage). Porter MRs criticism appealed, in similar contexts, to Pennycuick V C In re Sharps Settlement Trusts [1973] Ch 331, 340G and to Rattee J In re Scientific Investment Pension Plan Trusts [1999] Ch 53, 59F G, as well as to Professor Sir Roy Goode (Principles of Corporate Insolvency Law, 3rd ed, pp 186 187 and (2011) 127 LQR 1, 8. However, all of these authorities have taken the distinction as well established and one which has to be accepted, and either of the extremes embraced by Mr Snowden on the one hand and Mr Salter and Mr Howard on the other could have far reaching implications. But I think that there is some scope for looking at the substance, rather than the form, when considering whether an agreement confers a limited or determinable interest or amounts to a condition subsequent depriving the bankrupt of property on bankruptcy. This would be consistent with the first instance decision in Mayhew v King [2010] EWHC 1121 (Ch), which no one challenged before the Supreme Court, and which was upheld by the Court of Appeal after the hearing before the Supreme Court, sub nom Folgate London Market Ltd (formerly Towergate Stafford Knight Co Ltd) v Chaucer Insurance plc [2011] EWCA Civ 328. The brokers undertaking by the settlement agreement in that case to indemnify the lorry owners (Millbank Trucks Ltd) against their liability to Mr Mayhew as to 85% up to 1 m, and as to 100% above 1 m clearly reflected effective acceptance of a pre existing exposure to the lorry owners in negligence, and the clause limiting or terminating that agreement upon the lorry owners bankruptcy can have had no commercial or other object, except to prevent the lorry owners continuing to have the benefit of the indemnity to meet the claims of Mr Mayhew and/or their other creditors in whatever way would ordinarily follow in the event of such a bankruptcy. (In fact the lorry owners administrators had assigned the benefit of the indemnity to the lorry owners insurance company which had had under section 151 of the Road Traffic Act 1988 to meet Mr Mayhews claim against the lorry owners.) Professor Worthington in Insolvency Deprivation, Public Policy and Priority Flip Clauses (2010) 7 International Corporate Rescue 28, 36 also criticises a distinction which hangs on the form of words or wafer thin differences in language, but herself advances a more substantive distinction between necessarily time limited interests (like leases) and others. I do not accept that distinction, which would have its own incongruities: a 999 year lease is to all practical intents a permanent interest, and it is hard to see, in its potential termination in say 900 years, any relevance to the question whether its termination on the tenants bankruptcy should be permissible; a distinction between such a lease and a permanent licence is equally unconvincing. In Ansett (2008) 234 CLR 151, paras 151 to 179 Kirby J (dissenting) was, if necessary, prepared to look behind or through the parties actual contractual arrangements, in order to identify a deprivation of property in a contractual scheme which as a matter of law eliminated any indebtedness between IATA members at any time. That must, I think, also go too far and appears to me inconsistent with the assumption of both the majority and the minority in British Eagle. Courts cannot rewrite or review contractual arrangements to give them an effect contrary to the substance of what the parties have agreed, even though this means that the bankrupt has less property than would otherwise be the case before and when he becomes bankrupt. Analysis In the present case, the first question is whether LBSF had, under the contractual arrangements, any relevant property, whether limited and determinable or forfeitable. The parties submissions have focused on the difference in priorities in relation to the collateral between the situations of Swap Counterparty Priority and Noteholder Priority. As a matter of contract, as Patten LJ noted, LBSF retained the right to recover any Unwind Costs payable to it in either situation. But the priority accorded to this right, as against both Saphir and the collateral, depended upon which form of priority applied: see in particular clauses 5.5 and 8.3 of the Supplemental Trust Deed, as well as the Conditions of the OCS referred to in clause 8.3. Since there was by agreement no recourse against Saphir except to the extent covered by the collateral, the real right was against the collateral, to the extent that the collateral was sufficient to enable payment. Since the collaterals value would remain stable, priority was essential to the effectiveness of the right. References in the Court of Appeal judgments (see paras 144 and 146 above) to there being no shortfall in the collateral might suggest that the present dispute arises from some problem with the collateral and its performance. Far from it. The expectation of notified credit events in excess of the subordination amount, giving rise to Unwind Costs payable to LBSF, coupled with provision that no deduction should be made for such Unwind Costs from the amounts payable to Saphir and the Noteholders, simply meant that the total claims against the collateral exceeded any value that it was ever contemplated that the collateral could or would have. The reality is therefore that, if Unwind Costs were payable to LBSF, but the transaction was closed by payment to Saphir and so the Noteholders out of the collateral of the current value of the notes, without reduction for such Unwind Costs, LBSF would have no effective right to recover such Unwind Costs. The difference between Swap Counterparty Priority and Noteholder Priority is a difference between different priority contractual rights against Saphir secured by different priority rights against the collateral held by BNY. In reality, however, it amounts to a difference between having a right and having no effective right. The collateral on which most of the argument in this case has focused is a more visible form of property than a bare claim, but a bare contractual claim is also a form of property. If Saphir, as LBSFs contractual counterparty, had been liable without limit and good financially, the difference in priority over the collateral would have had no significance. But here there was an effective limit on Saphirs liability as counterparty, consisting of the value of the collateral. Hence, the focus on the significance of priority in respect of the collateral. On one reading of paras 135, 136 and 174 of his judgment, Patten LJ took the view that the only asset that LBSF ever had was security over the collateral, and that Swap Counterparty Priority did not involve a different form of property interest to Noteholder Priority. For the reasons I have given, I do not accept that analysis. The two types of priority over the collateral involve different property interests, but so too do the two types of contractual priority created by the parties arrangements. However, these paragraphs in Patten LJs judgment also point towards a different truth. The collateral was acquired by Saphir and given to BNY as trustee expressly to await events. All the relevant provisions relating to priority are expressly relevant only in connection with the realisation or enforcement of the collateral: clause 6.2 of the Principal Trust Deed, clauses 5.5 and 8.3 of the STD and condition 44 of the OCS. What events occurred determined who acquired priority. As it happened, the relevant event was one of default, with LBSF the Defaulting Party, and priority fell accordingly to be given to the Noteholders. Prior to the occurrence of an event determining which form of priority was to apply, I do not consider that LBSF could be said to enjoy either. This is a conclusion which is equally applicable to the question whether LBSF could be regarded as having been deprived of property in the form of a contractual right to priority. It follows that the occurrence of an event determining that Noteholder Priority applied did not deprive LBSF of any previous property in the form of Swap Counterparty Priority. The event prevented LBSF from acquiring Swap Counterparty Priority, rather than deprived it of such Priority. I add that, even if it were right to regard LBSF as having enjoyed property in the form of Swap Counterparty Priority unless an event of default occurred with LBSF being the defaulting party, the case would fall within the category of interests limited to last until a certain event, rather than that of interests forfeitable upon a certain event. These conclusions also correspond, as I see it, with the Chancellors pithy reasoning: see para 143 above. If a contrary answer were given to the first question identified in paragraph 161 above, the second question, how far LBSF was deprived of such property on bankruptcy, would arise. That involves in this case the issue about the trigger and timing of any deprivation identified in paragraph 141 above. I will leave that issue for the moment, and assume that there was a deprivation by reason of a switch in priority on LBSFs bankruptcy. The third question is then whether this amounted to an illegitimate evasion of the anti deprivation principle. In answering this third question in the Court of Appeal [2010] Ch 347, Lord Neuberger attached considerable significance to the fact that the Noteholders put up the money with which Saphir purchased the collateral held by BNY as trustee. Lord Neuberger referred to Whitmore v Mason 2 J & H 204, where partners had agreed that, on the bankruptcy of any one of them, his interest in partnership mines and premises, except for one specified lease, grant and concession, should be valued and paid to him. The exception was held invalid, but Page Wood V C, after referring to Lester v Garland, said that If his co partners had advanced a definite sum of money on account of his share, then the property might have been considered to the extent of the money so advanced by them, as identically their money (pp 214 215). This generous dictum, derived from old authority decided in an era in which wives could not own separate property, is a tenuous basis for enabling a particular creditor to stipulate for priority in his debtors bankruptcy, without having previously taken any security. In any event, the dictum is in my view difficult to apply to the facts of the present case, involving not an out and out contribution to marriage or another venture, but security in respect of complex contractual arrangements. First, it was the essence of the transaction that the collateral should stand as neutral security for (indeed as the limit of) potential indebtedness of Saphir to either LBSF or the Noteholders. The case cannot be approached on the basis that the Noteholders had an inherent or pre existing right either to contractual priority or to the collateral. Their rights depended upon the terms agreed in the documentation. Secondly, although the reality in this case is that LBSF would never be paid unless it retained priority over the collateral, one can imagine a case where there was no collateral, but a simple contractual provision depriving LBSF of the right to payment (or subordinating its right to payment to those of others, in such a way that it would not in practice be paid) in the case of a default where LBSF was the defaulting party. The present problem could not then be solved by enquiring into the source of the collateral, since there would be none. Yet it is difficult to think that the answer to the present problem turns on whether or not there was collateral. For these reasons, I would not subscribe to the line of reasoning suggested in paragraphs 92 98 of Lord Collins judgment. If one is assuming, as I presently am, that LBSF had a first priority property right to recover Unwind Costs payable to it and that it was deprived of this and the collateral securing it upon its bankruptcy, some other justification for this deprivation must be found than the fact that the Noteholders funded the security. Accordingly, bearing in mind the reality that the difference in priority over the collateral amounts to a difference between having and not having any right to recover Unwind Costs, it is I think instructive to start by considering to what extent English bankruptcy law permits contracting parties to agree that one shall have the right to terminate or vary the priority of rights, as well as security in respect of rights, under a contract upon the bankruptcy of the other. In Principles of Corporate Insolvency Law, para 7.11, Professor Sir Roy Goode notes that it is generally assumed that provisions for termination of leases or the hiring of chattels or, indeed, of any kind of agreement, upon the bankruptcy or liquidation of a party are valid. However, he also suggests that the general American bankruptcy rule, that ipso facto termination clauses are ineffective, is one which English law could sensibly follow. He adds that it is a matter for some astonishment that the validity of contractual provisions for termination of rights on winding up has yet to be authoritatively determined. It is relevant to note that the American bankruptcy rule invalidating ipso facto termination clauses is a product of legislation: section 365(e) of the Bankruptcy Code 1978, which was considered by The Hon James M Peck, United States Bankruptcy Judge, in his ruling in the parallel United States litigation concerning the Dante Programme. Section 365(e)) provides that: an executory contract . may not be terminated or modified , and any right or obligation under such contract . may not be terminated or modified, at any time after the commencement of the case solely because of a provision in such contract . that is conditioned on . the commencement of a case under this title . This is complemented by section 541(c) which provides that any interest of the debtor in property becomes property of the estate . notwithstanding any provision in an agreement . that is conditioned on the commencement of a case under this title and that effects or gives an option to effect a forfeiture, modification, or termination of the debtors interest in property. The anti deprivation principle recognised in English case law finds a parallel in section 541. But the English case law has to date focused on deprivation of property, and has not recognised any equivalent principle to that enacted in section 365(e). Further, section 365(e) is itself qualified by the safe harbour provisions of section 560, which specifically protect a non defaulting swap participants contractual rights to liquidate, terminate or accelerate a swap agreement because of a condition of the kind specified in section 365(e)(1), that is the insolvency or financial condition of the debtor and the commencement of a bankruptcy case. District Judge Peck considered section 560 inapplicable because, he concluded, there was nothing in the ISDA Master Agreement or the Swap Agreement referring to the STD or Noteholder Priority or condition 44 of the OCS; and the provisions of the latter documentation, while dictating the means by which the proceeds of each swap agreement would be distributed, were not part of the swap agreement. It is not for this court to go further into that conclusion, which may yet be challenged in further United States litigation. What it does suggest is that any general rule invalidating ipso facto termination clauses ought to be a matter for legislative attention, rather than novel common law development. How far contracting parties may validly agree to one party terminating further performance on the bankruptcy of another was recently considered at first instance in Lomas v JFB Firth Rixson Inc [2010] EWHC 3372 (Ch). The case was decided after the present Court of Appeal decision. It concerned five fixed rate/floating rate swaps to which another Lehman company (LBIE) was party. An event of default as defined in the contract documentation occurred on 15 September 2008 consisting of LBIEs entry into administration. Under section 2(a)(iii) of the ISDA Master Agreement, each partys obligation to make payment or delivery under the swaps was subject to (1) the condition precedent that no Event of Default . with respect to the other party has occurred and is continuing, (2) the condition precedent that no Early Termination Date in respect of the relevant transaction has occurred or been effectively designated . LBIE would have benefited from the continuation of the swaps to their natural expiry dates. LBIEs counterparties relied upon clause 2(a)(iii) to withhold further performance, netting off against amounts owed by LBIE the amounts they owed to LBIE but for LBIEs default. LBIE argued that the power to withhold further performance infringed the second principle. Briggs J rejected the submission. He distinguished between an asset in the form of a chose in action, representing the quid pro quo for something already done, sold or delivered before the onset of insolvency and a right consisting of the quid pro quo (in whole or in part) for services yet to be rendered or something still to be supplied by the insolvent company in an ongoing contract. He held that there is nothing contrary to insolvency law in permitting a party either to terminate or adjust what would otherwise be an ongoing relationship with the insolvent company, at the point when it goes into an insolvency process (para 108), and that: Reduced to its bare essentials, the condition precedent that there should be (inter alia) no bankruptcy event of default was a provision designed to ensure that LBIE would only receive its quid pro quo for providing an interest rate hedge for as long as it was in a financial condition to be able to do so. (para 112) In Lehman Brothers Special Financing Inc v Carlton Communications Ltd [2011] EWHC 718 (Ch), Briggs J followed his previous decision and applied similar reasoning to an interest rate swap on the basis that the condition precedent in section 2(a)(iii) of the ISDA Master Agreement was valid to relieve the non defaulting party from payment obligations for as long as the defaulting party is, by reason of the bankruptcy, incapacitated from providing the promised hedge, whenever during the life of the transaction such incapacity arose (para 38). I would accept that the forfeiture of contractual rights on the bankruptcy of the party enjoying them is in some circumstances capable of constituting a deprivation of property within the principle precluding evasion of the bankruptcy law. This is so not only with accrued rights, but may also be the case with other rights, as, for example, where the bankrupt has performed his part before going bankrupt or the right can fairly be treated as independent of any as yet unperformed obligation. I question, even at common law, whether an insured who enjoys third party liability cover for a period on a claims made basis and goes bankrupt part way through that period could properly be deprived of the benefit of such cover in respect of claims arising from his activities prior to his bankruptcy. To that extent, section 1(3) of the Third Parties (Rights against Insurers) Act 1930 may well have done no more than reflect what would have been held to be the common law. However, Mr Snowden advanced propositions which would mean that any provision for termination on bankruptcy, which would deprive the trustee or liquidator of the opportunity of continuing the contract and so the bankrupt estate of future potential advantage, would infringe the principle. There is in my opinion no basis for any such rule. Where a contract provides for the performance in the future of reciprocal obligations, the performance of each of which is the quid pro quo of the other, I see nothing objectionable or evasive about a provision entitling one party to terminate if the other becomes bankrupt. That is particularly so, having regard to the purpose and character of the present transaction, viewed rather more broadly than the Court of Appeal did in its detailed reasoning. As Sir Andrew Morritt C stated, in the passage quoted in paragraph 135 of this judgment, the transaction provided LBSF with a benefit, which can loosely be described as credit insurance, in return for which LBSF was to pay interest to Saphir for the benefit of the Noteholders at a rate higher than the Rabo Bank rate. Under an insurance in return for the payment periodically of premium, it is natural that the one should be made conditional upon the other. Just so, under the present transaction, it is natural that payment of the interest should be made a condition of LBSF benefitting. Mr Snowden submits that this raises no problem, since LBSF could only obtain continuing benefit under the present transaction by confirming it and continuing to credit Saphir with the full amount of the interest due until expiry. No doubt that is so. It is what LBSF would have wished to be able to do, since the transaction was probably already profitable from its viewpoint, it could not become less so and it was certainly predicted that it would become more so. Hence the present litigation. But the submission misses the point. Had the transaction neither given rise, nor appeared likely to give rise, to credit events exceeding the subordination amount, LBSF could and would have disclaimed it. Saphir would then have been left to prove in LBSFs liquidation for the benefit of the Noteholders for such percentage of the already outstanding and future interest payments as they could recover. In LBSFs liquidation, therefore, the position would be one way. Saphir (and through it the Noteholders) could only lose. That is a risk that no insurer would ordinarily run. Nor is a conventional right to determine on LBSFs default of assistance to Saphir or Noteholders in this situation. There will be no default unless LBSF would lose money by continuing the contract. I see no reason therefore why the law should preclude a commercial party in the position of Saphir (acting for the benefit of Noteholders) from insisting that it would only provide the desired cover so long as LBSF was able, whatever the predicted outcome of the transaction, to perform its part in full. The purpose and effect of such a provision is not to evade the bankruptcy law. It is to protect the natural interest of any contracting party, and particularly someone who is providing in effect credit insurance, that it should not find itself having to perform to its disadvantage, without being able to enforce performance if this would be to its advantage. It is a prudent limitation on the duration and operation of the contract. The result reached by Briggs J in Lomas v JFB Firth Rixson Inc was correct in relation to the mutual contractual obligations with which he was concerned. For reasons I have already explained, no different result can follow in the present case, where, although a prior right over the collateral may be more obviously identifiable as property within the principle precluding evasion of the bankruptcy law, it is no more than collateral for (and indeed the measure of liability under) a chose in action. It would be curious if termination of the right to future performance of the chose in action was itself permissible, but became impermissible if collateral had been provided for its performance. This is particularly so in the present case where the collateral and the cause of action are effectively indistinguishable. Timing The further question (the second identified in paragraph 161 above) is whether, in this case, the loss did occur upon LBSFs insolvency, bearing in mind that there was an event of default affecting its parent, LBHI, which occurred some two weeks before LBSF was subject to Chapter 11 proceedings. In view of the conclusions I have already reached, this question does not require decision. Saphir and BNY submit that the replacement of Swap Counterparty Priority by Noteholder Priority was and is, under clause 5.5, the automatic result of the occurrence of any Event of Default. Whether anyone acts on the Event of Default, and whether the collateral is realised or enforced in relation to the Event of Default is immaterial. Even though the event of default passes unnoticed and even if it is cured, Noteholder Priority persists. Here, there was an event of default, consisting of LBHIs Chapter II bankruptcy on 15 September 2008, that no one had ever acted upon. Nonetheless, they submit, that is sufficient to ensure Noteholder Priority in respect of the event of default which was acted upon, LBSFs Chapter 11 bankruptcy, which occurred on 3 October 2008. I prefer to reserve my position on the correctness of these submissions. The contrary argument is that they do not marry with the general scheme effected by the documentation as a whole. As already emphasised, clauses 5.5 and 8.3 and condition 44 of the OCS are all expressly and solely concerned with situations where Saphir or BNY is applying moneys received in connection with the realisation or enforcement of the collateral. It is in that context only that it is agreed that, if an Event of Default . occurs under the Swap Agreement and the Swap Counterparty is the Defaulting Party . or a tax event occurs, then Noteholder rather than Swap Counterparty Priority will apply. Mr Salter accepts that the only situation in which the difference between Swap Counterparty and Noteholder Priority is relevant or comes into operation is where there has been early termination. The sole purpose of the flip is to deal with Unwind Costs in the manner indicated in clause 8.3 and condition 44, in other words to avoid Saphir and through it the Noteholders having actually to bear the burden of any future credit events in excess of the subordination amount which might on Early Termination be taken into account to their disadvantage in calculating the Unwind Costs. A past event of default which has not been acted upon will have no connection with any early termination or with the realisation or enforcement of the collateral in any circumstances. The natural inference of clause 5.5 and especially clause 8.3, confirmed by the present tense occurs, is that they contemplate an Event of Default connected with the realisation and enforcement of the collateral. The reference in clause 5.5 to a Defaulting Party is a reference to clause 6(a) of the ISDA Master Agreement, which deals with Early Termination following an Event of Default, and requires not more than 20 days notice specifying the relevant Event of Default and designating a day not earlier than the day such notice is effective as an Early Termination Event in respect of all outstanding Transactions. The requirement to specify the relevant Event of Default suggests that Early Termination is to work itself out by reference to the Event of Default so specified. Condition 44, one of the conditions to which clause 8.3 refers, is concerned with Early Redemption Amounts payable under the notes in various circumstances, but its second paragraph makes specific provision for the Early Redemption Amount payable when an Event of Default occurs under the swap and LBSF is the Defaulting Party, as well as for Unwind Costs. These are defined as meaning the value of the termination payment due from or to LBSF under the swap. Again, the inference is that Early Termination under the swap works itself out by reference to a specific Event of Default. The alternative is that an Event of Default which has perhaps not even been detected and certainly has not been acted upon can dictate priority if there should at any subsequent date be Early Termination not involving any further default on the part of the Swap Counterparty. On the actual termination, Saphir and the Noteholders could then avoid having to credit any Unwind Costs otherwise due to LSBF in respect of anticipated future credit events. The justification for such an analysis would seem questionable, when the swap will, by definition, have been satisfactorily performed in the meanwhile and LBSF will not have been responsible for its actual termination. Accordingly, since it is unnecessary for the decision in this case, I prefer not to express any view on the second issue. Conclusion For the reasons I have given in relation to the first issue, I would dismiss the appeal. LORD PHILLIPS, LORD HOPE, LADY HALE AND LORD CLARKE The Issuer with full title guarantee and as continuing security grants in favour of the Trustee such charge and/or security interest as set out in the relevant Supplemental Trust Deed in respect of the relevant Series. 2. Clause 5.2: For each Series, the charges and/or security interest created pursuant to sub Clause 5.1 are granted to the Trustee as continuing security (i) for the payment of all sums due under the Trust Deed and the Notes and the Coupons of such Series, and (ii) for the performance of the Issuer's obligations (if any) under certain agreements as set out in the relevant Supplemental Trust Deed in respect of such Series. The Trustee shall release from such charges any part of the Mortgaged Property when it becomes payable or deliverable to the extent that payment or delivery of it may be obtained and duly paid or made (as the case may be) to a Swap Counterparty under a Swap Agreement and/or to the holders of Notes, Coupons and Receipts . 3. Clause 5.5: . the security . shall become enforceable if (i) any amount due in respect of the Notes is not paid or delivered when due or (ii) a Swap Agreement terminates with sums due to the Swap Counterparty [ie LBSF]. 4. Clause 5.6 provides that: at any time after any security . shall have become enforceable . the Trustee shall (. subject to it having been indemnified to its satisfaction . ) enforce the security over the Mortgaged Property if so directed by the Noteholders in certain specified circumstances, or otherwise at its discretion. 5. Clause 6.1 provides that moneys, received otherwise than in connection with the realisation or enforcement of the security, are to be held by the Trustee, after payment of the Trustees costs, on trust to pay, first, the amounts due to LBSF, the Noteholders and others pari passu, and, secondly, the amounts due to the issuer. 6. Clause 6.2 directs the Trustee: . [to] apply all moneys received by it under this Principal Trust Deed and the relevant Supplemental Trust Deed in connection with the realisation or enforcement of the security as follows and went on to provide that Swap Counterparty Priority means that the claims of LBSF are payable in priority to the claims of the Noteholders, whereas Noteholder Priority means the converse, in each case after providing for payment of certain specified costs and charges. The priority which is to apply in any particular case is that specified in the Supplemental Trust Deed. 7. Clause 7.2: In relation to any Series in respect of which there is a Swap Counterparty, such Swap Counterparty shall, by execution of the relevant Supplemental Trust Deed, covenant and agree: 7.2.1: that its recourse in respect of its claims under the Swap Agreement is limited to the proceeds of the Mortgaged Property in relation to such Series as it is entitled to, as provided in the Trust Deed and no debt shall be owed by the Issuer in respect of any shortfall 8. Schedule 2 Part C contains terms and conditions of the Notes to be applied to all Notes of any series, subject to the terms of the relevant Supplemental Trust Deed and the Terms and Conditions in the Note series prospectus. 9. Condition 10 of Part C of Schedule 2 provides that in certain events (including default for a specified period by the issuer in payment under the Notes) the Trustee may, and if requested by holders of at least one fifth in principal amount of the Notes or if directed by an Extraordinary Resolution of the Noteholders must, give notice to the issuer that the Notes are, and shall immediately become, due and payable at their Early Redemption Amount (a Condition 10 notice). 10. Condition 6(d)(ii) of Part C of Schedule 2 also provides for the early redemption of the Notes if a Swap Agreement is terminated. In that event, the issuer is required to give the Trustee, the Noteholders and LBSF notice, at the expiration of which the Notes are to be redeemed at their Early Redemption Amount. Condition 6(d)(ii) was amended by Condition 38 in the Terms and Conditions (below, para 17) The Supplemental Trust Deed 11. Clause 5.2 contains a charge by the issuer as continuing security in favour of the Trustee over the Collateral and other property representing it from time to time. 12. Clause 5.3 provides that such security is granted to the Trustee as trustee for itself and/or the holders of Notes, and [LBSF], the Custodian and the Paying Agents as continuing security (i) for the payment of all sums due under the Trust Deed and the Notes, (ii) for the performance of the Issuer's obligations (if any) under the Swap Agreement . 13. Clause 5.5: The Trustee shall apply all moneys received by it under this Deed in connection with the realisation or enforcement of the Mortgaged Property as follows: Swap Counterparty Priority unless an Event of Default (as defined in the Swap Agreement) occurs under the Swap Agreement and the Swap Counterparty is the Defaulting Party (as defined in the Swap Agreement) . in which case Noteholder Priority shall apply. 14. Clause 8.3: [LBSF] hereby agrees that, if an Event of Default (as defined in the ISDA Master Agreement) occurs under the Swap Agreement and [LBSF] is the Defaulting Party (as defined in the ISDA Master Agreement) . and Unwind Costs are payable by the Issuer to [LBSF], the Issuer shall apply the net proceeds from the sale or realisation of the Collateral (1) first in redeeming the Notes in an amount as set out in the Conditions and (2) thereafter, in payment of such Unwind Costs to [LBSF]. Terms and Conditions 15. The prospectus to which the Terms and Conditions are attached points out that the Notes are credit linked to the reference entities (ie the securities whose credit was being, in effect, insured). The prospectus also points out that the Noteholders have exposure to the value of the Collateral so that Impairment of the Collateral may result in a negative rating action on the Notes. 16. Condition 6 of the Terms and Conditions as set out in Schedule 2 to the Supplemental Trust Deed contains the details of how and by how much the principal amount due on the Notes is reducible in the event of credit events affecting a reference entity. 17. Condition 38 in the Terms and Conditions specifies or refers to certain events which can give rise to early redemption of the Notes including termination in whole or in part of the relevant Swap Agreement (see Condition 6(d)(ii) in Part C of Schedule 2 to the Principal Trust Deed) and default in payment of any interest due for the period specified in the Condition (which period varies from each series of Notes). If any such event occurs, Condition 38 requires the relevant issuer to serve a notice notifying the Trustee, the relevant rating agency and the Noteholders, of the occurrence of the event and giving notice of the date fixed for redemption of the Notes. In the event of such a notice being served the Notes become redeemable at their Early Redemption Amount. 18. Condition 40 (ii), headed Security Arrangements, provides for the Trustee to apply all moneys received by it in the following order of priorities: Swap Counterparty Priority unless (i) an Event of Default (as defined in the ISDA Master Agreement) occurs under the Swap Agreement and the Swap Counterparty is the Defaulting Party (as defined in the ISDA Master Agreement) or (ii) a Tax Event (as defined in the ISDA Master Agreement) occurs under the Swap Agreement and the Swap Counterparty is the sole Affected Party (as defined in the ISDA Master Agreement), in which case Noteholder Priority shall apply. 19. Condition 44 deals with the determination of the Early Redemption Amounts referred to in Conditions 6(d) and 10 of Part C of Schedule 2 to the Principal Trust Deed. It also includes a definition of Unwind Costs, being the amount due to or, as the case may be, from LBSF, by way of termination payment under the relevant Swap Agreement at its early termination. That amount is to be assessed in accordance with the provisions of the relevant Swap Agreement including by reference to quotations taken in the market, when the relevant Swap Agreement terminates, for what a third party would pay to enter into a swap arrangement on similar terms, or, alternatively, what the issuer would have to pay a third party to enter into such a swap arrangement. 20. The first paragraph of Condition 44 (Condition 44.1) provides that Subject to the immediately succeeding paragraph below the Early Redemption Amount payable on each Note is to be the amount equal to: (i) such Notes pro rata share of the proceeds from the sale or realisation of the Collateral plus (if payable to the Issuer) or minus (if payable to [LBSF]) (ii) the amount of any applicable Unwind Costs 21. Under Condition 44.1, if termination occurs early, an Early Redemption Amount is to be calculated, and if Unwind Costs are payable under the swap to LBSF on termination, they are to be deducted when calculating any amount which would be due to the Noteholders, and if such Unwind Costs are payable to the Issuer, they are to be added to the amount payable to the Noteholders. Condition 44.1 continues: provided that if the amount determined pursuant to sub paragraphs (i) and (ii) above exceeds (the amount of any such excess being the Excess Amount) such Notes Outstanding Principal Amount as of the Early Redemption Date together with interest accrued from, and including, the immediately preceding Interest Payment Date to, but excluding, such Early Redemption Date (such interest being the Accrued Early Redemption Interest Amount) and, such Excess Amount shall be payable by way of an additional payment of interest on each Note. 22. The second paragraph of Condition 44 (Condition 44.2) provides: Notwithstanding the above, if an Event of Default (as defined in the ISDA Master Agreement) occurs under the Swap Agreement and [LBSF] is the Defaulting Party (as defined in the ISDA Master Agreement) , the Early Redemption Amount payable on each Note was to be equal to: (i) such Notes pro rata share of the proceeds from the sale or realisation of the Collateral plus (ii) (but only if payable to the Issuer) the amount of any applicable Unwind Costs divided by the total number of Notes outstanding; provided that if the amount determined pursuant to sub paragraphs (i) and (ii) above results in an Excess Amount (as defined above), such Excess Amount shall be payable by way of an additional payment of interest on each Note. In the event that Unwind Costs are payable by the Issuer to the Swap Counterparty, the Issuer shall apply the net proceeds from the sale or realisation of the Collateral as aforesaid (1) first in redeeming each Note in an amount equal to its Outstanding Principal Amount as of the Early Redemption Date plus the Accrued Early Redemption Interest Amount and (2) thereafter, in payment of such Unwind Costs to the Swap Counterparty. The ISDA Master Agreement 23. Section 5 of the ISDA Master Agreement defines an Event of Default as being: [t]he occurrence [of certain specified events] at any time with respect to [LBSF], or if applicable, any Credit Support Provider of [LBSF]. According to paragraph 9(iv) of the Swap Confirmation, the Credit Support Provider is LBHI, the ultimate parent of LBSF. 24. The defined Events of Default include (i) failure to pay any sums due under the ISDA Master Agreement (if such failure is not remedied after three Local Business Days notice of such failure), and (ii) the institution by LBSF or by LBHI of any proceedings seeking a judgment of insolvency or bankruptcy or any other relief under any bankruptcy or insolvency law or other similar law affecting creditors' rights . 25. Section 6 of the ISDA Master Agreement deals with early termination and provides that: (a) Right to Terminate Following Event of Default. If at any time an Event of Default with respect to a party (the Defaulting Party) has occurred and is then continuing, the other party . may, by not more than 20 days notice to the Defaulting Party specifying the relevant Event of Default, designate a day not earlier than the day such notice is effective as an Early Termination Date in respect of all outstanding Transactions . 26. In all cases, the parties selected Second Method and Market Quotation as the valuation mechanisms for the Swaps. In addition, in all cases, the parties did not select Automatic Early Termination (AET) of the Swap Agreements under Part 1(h) of the Schedule to the ISDA Master Agreement, which would have resulted in the Swaps being deemed automatically to have terminated on the occurrence of specified Events of Default, including bankruptcy. However, in the Swap Confirmations for all cases the parties did specify certain events (such as the Notes being declared due and payable) which would be Additional Termination Events upon the occurrence of which an Early Termination Date for the Swap would immediately occur. 27. Part 5(g) of the Schedule to the ISDA Master Agreement provides: In relation to each Transaction, each party confirms that it is bound by the terms of the Trust Deed and that the terms of such Trust Deed prevail to the extent they conflict with terms relating to such Transaction. [LBSF] agrees that its recourse against [the Issuer] in respect of the relevant Transaction is limited to the assets on which the liabilities of [the Issuer] under the relevant Transaction are secured pursuant to the Trust Deed and that its right to enforce the Security created by [the Issuer] over those assets is limited as provided in the Trust Deed. If the net proceeds of realisation of the Security are insufficient to meet all claims secured thereon, the obligations of [the Issuer] in respect thereof will be limited to such net proceeds and accordingly no debt shall be owed by [the Issuer] in respect of any shortfall remaining after realisation of the Security and application of the proceeds in accordance with the Trust Deed Swap confirmation 28. Paragraph 9 of the Swap Confirmation includes an acknowledgment by the issuer and LBSF that the transaction was not intended to constitute insurance business so that payments by each party under the transaction were independent and not dependent on proof of economic loss of the other. 29. The credit protection provided to LBSF under the Swap Agreement related to the occurrence of Credit Events in relation to the Reference Entities set out in the Swap Confirmation. 30. The payment obligations of the Buyer (LBSF) and Seller (issuer) are specified in paragraphs 3 and 4 of the Swap Confirmation. For the reasons given by Lord Collins and Lord Walker, with which we are in agreement, we too would dismiss this appeal. Appendix The Principal Trust Deed 1. Clause 5.1:

This appeal concerns the application of the anti deprivation rule, a principle of insolvency law that contractual terms purporting to dispose of property on bankruptcy may be invalid as being in fraud or an evasion of the bankruptcy law. This appeal arises out of the insolvency of the Lehman Brothers group, including the Appellant group company, Lehman Brothers Special Financing Inc (LBSF). The commercial context of the dispute is complicated. In October 2002 Lehman Brothers International (Europe) (LBIE) established a synthetic debt repackaged note issuance programme, called the Dante programme. The purpose of the Dante programme was to provide or mimic a form of credit insurance to LBSF against credit events (such as failure to pay, bankruptcy and restructuring) which occurred within the reference portfolio of obligations owed by specified reference entities (the reference portfolio). The commercial purpose of the transaction was achieved through the issue of the so called synthetic credit linked notes by special purpose vehicles (the issuer) set up in tax friendly jurisdictions. The investors in the notes (the noteholders), including the Respondents, were Australian local authorities, pension funds, private investment companies and private individuals. The subscription proceeds paid by the investors for the notes were used by the issuer to purchase secure investments (the collateral) which was then vested in a trust corporation (the trustee). In order to service the interest payments under the notes, the issuer entered into a swap agreement with LBSF under which LBSF received the income (or yield) on the collateral and, in return, paid the issuer the amount of interest due to the noteholders under the terms of the notes. The amount by which the sum payable under the swap agreement by LBSF exceeded the yield on the collateral represented the premium for the, in effect, credit insurance provided by the noteholders. It was further agreed that on maturity of the notes (or on early redemption or termination), LBSF would pay the issuer an amount equal to the initial principal amount subscribed by the investors less amounts calculated by reference to credit events occurring in the reference portfolio and in return would receive the sum equal to the proceeds of sale of the collateral, thereby giving effect to the insurance aspect of the programme. To ensure LBSFs recovery, the trustee was instructed to apply all proceeds from the collateral, first, in meeting the issuers obligations to LBSF and only then in meeting the issuers obligations to the noteholders. However, LBSF would loose its priority claim to the collateral if it was in default under the swap, triggering a change in priority in favour of the noteholders, the so called flip. The events of default under the swap were numerous and, for present purposes, included filing for Chapter 11 protection by Lehman Brothers Holdings Inc (LBHI) on 15 September 2008 and by LBSF on 3 October 2008. In reliance on the latter event, and following a direction from the noteholders, the trustee caused the issuer to terminate the swap with LBSF. This early termination triggered the payment of unwind costs (the market assessment of the net amount either party to the swap would have received were it to run to maturity) to LBSF. At the same time, LBSFs event of default caused the priority of claims against the collateral to change in favour of the noteholders. Given that the issuers obligations to the noteholders and to LBSF were limited to the value of the collateral and that the total claims by the noteholders and LBSF exceeded the value of the collateral, this change in priority effectively deprived LBSF of a chance to recover its unwind costs. As a result, LBSF sought to challenge the validity of the flip on the basis that it breached the anti deprivation principle. LBSFs position was that its rights to the unwind costs and the priority it enjoyed over the collateral formed part of LBSFs insolvent estate of which it was deprived on change of priority following LBSFs bankruptcy. Both the High Court and the Court of Appeal upheld the contractual arrangements. Sir Andrew Morritt C found that the contractual provisions did not offend the anti deprivation rule; or, alternatively, that the rule was not engaged since the flip was triggered by an earlier LBHI Chapter 11 filing and thus LBSFs Chapter 11 filing did not deprive it of any property. In the Court of Appeal, Lord Neuberger MR (with whom Longmore LJ agreed) found the flip provisions valid in reliance, to a large extent, on the fact that the collateral was acquired with money provided by the noteholders. Patten LJ thought that the rule did not apply because a change of priority was always a feature of the security arrangements. The Supreme Court unanimously dismissed LBSFs appeal and upheld the validity of contractual provisions. The lead judgment was given by Lord Collins, with whom Lord Phillips, Lord Hope, Lord Walker, Lady Hale and Lord Clarke agreed. Lord Mance agreed with the majoritys conclusion but for different reasons. Issue 1 the anti deprivation rule Having examined the application of the anti deprivation rule over the last 200 years, Lord Collins held that the rule is too well established to be discarded despite the detailed provisions set out in insolvency legislation, all of which must be taken to have been enacted against the background of the anti deprivation rule: [102]. Lord Collins identified the following limits of the rule. First, a deliberate intention to evade insolvency laws is required, although such intention need not be subjective. Thus a commercially sensible transaction entered into in good faith should not be held to infringe the anti deprivation rule: [78] [79]. Secondly, the anti deprivation rule does not apply if the deprivation takes place for reasons other than bankruptcy: [80]. Thirdly, the distinction between an interest determinable on bankruptcy (the so called flawed asset), which is outside the anti deprivation rule, and an absolute interest defeasible on bankruptcy by a condition subsequent, which falls foul of the rule, is too well established to be dislodged otherwise than by legislation: [87] [88]. However, not every proprietary right expressed to determine or change on bankruptcy is valid, still less a deprivation which has been provided for in the transaction from the outset: [89]. Fourthly, the source of the assets is an important element in determining whether there had been a fraud on the bankruptcy laws: [96]. However, there is no general exception to the anti deprivation rule based simply on the source of the assets: [98]. Lord Collins concluded that commercial sense and absence of intention to evade insolvency laws are highly relevant factors in the application of the anti deprivation rule and that the rule does not apply to bona fide commercial transactions which do not have as their predominant purpose, or one of their main purposes, the deprivation of the property of one of the parties on bankruptcy: [103] [104]. Since the contractual provisions challenged in the present appeal were part of a complex commercial transaction entered into in good faith, the collateral was in substance provided by the noteholders and there was no suggestion that the flip provisions were deliberately intended to evade insolvency law, they did not offend the anti deprivation rule: [108] [113]. Lord Mance agreed that the insolvency legislation has not made redundant the common law anti deprivation principle: [150] [151]. However, he would have dismissed this appeal on the basis that LBSF could not be regarded as having been deprived of any property. On his reading of the documentation, LBSF could not be said to enjoy the contractual priority until the occurrence of certain events. Thus once an event of default under the swap occurred, LBSF was not deprived of the priority but simply prevented from acquiring it in the first place: [168]. Even if LBSF was deprived of its property, the flip simply amounted to a contractual termination of the future reciprocal obligations of the parties, the performance of each of which is the quid pro quo of the other, and thus did not constitute an illegitimate evasion of the bankruptcy laws: [178] [180]. Issue 2 the timing of the deprivation Given the conclusion on issue 1, the question of whether LBHIs earlier bankruptcy (as argued by the Respondents) rather than LBSFs bankruptcy constituted the relevant event of default which triggered the operation of the flip did not arise. Lord Collins would have dismissed the Appellants argument on this point: [118] [120]. Lord Mance, although sceptical of the Respondents argument, preferred not to express a view on this issue: [181] [183].

The central question in this appeal is whether the appellants have suffered actionable personal injury on which they can found claims for negligence/breach of statutory duty. I will refer to the appellants hereafter as the claimants as they were at first instance. The claimants worked for the respondent company, Johnson Matthey Plc (hereafter either Johnson Matthey or the company), in factories making catalytic converters. Platinum salts are used in the production process. In breach of its duty under the health and safety regulations and at common law, the company failed to ensure that the factories were properly cleaned and, as a result, the claimants were exposed to platinum salts, which led them to develop platinum salt sensitisation. Platinum salt sensitisation is, in itself, an asymptomatic condition. However, further exposure to chlorinated platinum salts is likely to cause someone with platinum salt sensitisation to develop an allergic reaction involving physical symptoms such as running eyes or nose, skin irritation, and bronchial problems. When the claimants sensitisation was detected, through routine screening by means of a skin test, they were no longer permitted by the company to work in areas where they might be further exposed to platinum salts and develop allergic symptoms. One has taken up a different role with the company but, he claims, at a significantly reduced rate of pay. The other two had their employment terminated. Each claimant therefore asserts that he has suffered financially as a result of his sensitisation to platinum salts, being unable to take work in any environment (whether with Johnson Matthey or with any other employer) where further exposure might occur. Does the platinum salt sensitisation which each of the claimants has developed qualify as an actionable personal injury, in which case the claimants have viable claims against the company for damages for personal injuries caused by the companys negligence and/or breach of statutory duty? Alternatively, if the platinum salt sensitisation is not properly categorised as an actionable personal injury, can they recover damages for economic loss under an implied contractual term and/or in negligence? The claimants lost at first instance, following a trial of the question of liability, before Mr Justice Jay. Jay J concluded [2014] EWHC 3957 (QB) that they had sustained no actionable personal injury and that their claim was for pure economic loss, for which they were not entitled to recover in tort. He also rejected their alternative claim in contract. That had been put on the basis that there was an implied term in the claimants contracts of employment which obliged the company to provide and maintain a safe place and system of work, and to take reasonable care for their safety, and that they were entitled to damages for pure financial loss for breach of that implied term. The judge, however, considered that the companys implied contractual duty was to protect employees from personal injury, not from economic or financial loss in the absence of personal injury. The Court of Appeal dismissed the claimants appeals ([2016] EWCA Civ 408; [2016] 1 WLR 4487). Lord Justice Sales, with whom the other members of the court agreed, endorsed Jay Js view that the claimants had suffered no actionable personal injury and were claiming for pure economic loss. He saw the physiological change of platinum salt sensitisation as not harmful in itself in any relevant sense (para 30) and concluded that it was not converted into actionable injury by the resulting removal of the claimants from their jobs, with detrimental financial consequences. As for the alternative claim for damages for economic loss under an implied contractual term and/or in negligence, there is, of course, no general duty of care in tort to protect against pure economic loss, and Sales LJ did not consider that a duty of care arose here from the particular circumstances of the case. His reasoning in relation to this was closely tied in with his reasoning in relation to the claim based on contract. That contractual claim failed because Sales LJ was in agreement with Jay J that there was no implied term in the claimants contracts of employment to the effect that the employer would protect them from pure economic loss, whether on the basis of this being a standard implied term in employment contracts or on the basis of features particular to the employment of the claimants. In Sales LJs view, the claimants could not succeed in a tortious claim for pure economic loss when the employer assumed no such responsibility in the employment contract. The medical position It is necessary to understand the medical evidence about the claimants condition for the purposes of the appeal. Sensitisation is a complicated process which has been explained in simplified terms for the purposes of the litigation. It involves the bodys immune system. The immune system reacts to the presence of molecules which are not normally found in the body (antigens) by producing antibodies, in the form of large molecules called immunoglobulins. In many cases, the antibody performs a useful purpose by combining with the antigen and rendering it harmless. However, in some cases, the combination of the antigen and the antibody results in adverse consequences by provoking particular cells within the body (mast cells) to release histamine. In this situation, asthma, rhinitis, eye symptoms or skin rashes may result. A person who is sensitised to platinum salts will have a particular type of antibody in their immune system (IgE antibodies). Although they may not yet have developed any physical symptoms of the sensitisation, it can be demonstrated by a skin prick test in which a minute amount of a solution containing the salts is introduced into the body. A sensitised individual reacts by developing a small raised red, sometimes itchy, lump in the skin. If exposure to platinum salts continues after sensitisation has occurred, the medical evidence is that most (but not all) people will develop physical symptoms relating to one or more of the eyes, nose, chest and skin. At this point, they are said to have developed an allergy. On the other hand, physical symptoms will not develop if there is no further exposure. A person who has been sensitised but has not yet developed symptoms is not limited in any way in their life, except that they must avoid circumstances in which they are exposed to platinum salts. Platinum salts are not encountered in everyday life, only in certain specialised workplaces. Sensitised people cannot work in jobs which involve the potential for further exposure. One of the central authorities which must be considered in determining this appeal is the House of Lords decision in Rothwell v Chemical & Insulating Co Ltd [2008] AC 281, which concerned the development of pleural plaques as a result of exposure to asbestos fibres. The doctors who provided expert medical evidence in the present case were asked to consider whether platinum salt sensitisation could be said to be akin to pleural plaques, and it is convenient to set out their response here. They were agreed that there are important distinctions between the two, namely: i) Slight further exposure to asbestos will not materially worsen pleural plaques, but slight further exposure to platinum salts is likely to increase the degree of sensitisation and may result in asymptomatic sensitisation becoming symptomatic; ii) Pleural plaques do not, themselves, turn into any other injury attributable to asbestos whereas asymptomatic sensitisation may turn into symptomatic sensitisation (allergy); iii) The presence of pleural plaques does not prevent a person from engaging in particular types of work that would otherwise be open to him or her, asbestos exposure being restricted by law in any event. In contrast, a person who has asymptomatic sensitisation to platinum salts is restricted in the work that he or she can do. Collective agreement Employees of Johnson Matthey working in factory areas in which they could be exposed to platinum salts were paid an additional shift allowance. In addition, the claimants trade union had negotiated a collective agreement with the company to address the issue of platinum salt sensitisation and allergy. The agreement provided for regular skin prick tests to take place and for employees who became sensitised to be redeployed away from platinum salt areas if possible. If an employee could no longer continue to work in a factory because of platinum allergy, the agreement provided for the company to dismiss him under special termination conditions, including what was termed an ex gratia payment of a lump sum. The collective agreement expressly acknowledged that an employee dismissed with platinum allergy would normally file a compensation claim against the company. It provided that the termination arrangements were not meant to be an alternative to such claims, and that no waiver of claim was implied in accepting the termination payment. Personal injury/harm Negligence and breach of statutory duty are not actionable per se. It is common ground between the parties that (leaving to one side claims for pure economic loss), in order to make out their claims in tort for negligence or breach of statutory duty, it is necessary for the claimants to establish that there has been damage, in the form of actionable personal injury. The terms physical injury and personal injury tend to be used interchangeably in the authorities, and in the documentation in this case, and this is reflected in this judgment, there being no psychiatric injury to complicate the matter. An exploration of the ambit of personal injury is fundamental to the appeal and depends largely on case law, in particular the two House of Lords cases of Cartledge v E Jopling & Sons Ltd [1963] AC 758 and Rothwell v Chemical & Insulating Co Ltd (supra). It is worth noting from the outset that nowhere in the authorities is there a definition of actionable personal injury, although there is some guidance as to the attributes of it. Personal injury features as a concept in various legislative provisions, again without definition, although in some of the legislation, it is expressly said to include any disease and any impairment of a persons physical or mental condition, see for example section 38 of the Limitation Act 1980. The parties are agreed that if a person were to develop a platinum salt allergy as a result of improper exposure to platinum salts at work, as opposed to mere sensitisation, he or she would have suffered personal injury of a type which would give rise to a cause of action in tort. What divides them is whether or not sensitisation on its own is actionable personal injury. The claimants rely upon Cartledge v E Jopling & Sons Ltd [1963] AC 758 as supporting their case that it is, and Johnson Matthey rely upon Rothwell v Chemical and Insulating Co Ltd [2008] AC 281 as supporting their case that it is not. In Cartledge v E Jopling & Sons Ltd, the claims were brought by steel dressers who had contracted pneumoconiosis whilst working in the defendants factory. The issue was whether their claims were statute barred and the House of Lords therefore had to consider when their cause of action first accrued. This required their Lordships to determine when the steel dressers had suffered actionable personal injury. The problem was that, in pneumoconiosis, substantial injury could occur to the lungs without the sufferer being aware of the disease, as had occurred with the plaintiffs. Amongst the arguments advanced unsuccessfully on their behalf was the argument that actionable injury did not occur until the man became aware of his disease, since a man who does not feel any symptoms or have any knowledge of his disease has suffered no injury. Addressing this argument, Lord Pearce, with whom there was unanimous agreement, gave consideration to the attributes of actionable personal injury. He observed (p 778) that no case had sought to define its borders but, in the following passage, drew what he could from the authorities to which the House had been referred: There is no case that seeks to define the borders of actionable physical injury. Your Lordships have been referred to words used in various cases. In Fair v London & North Western Railway Co [(1869) 21 LT 326, 327 DC] Cockburn CJ said: in assessing that compensation the jury should take into account two things; first, the pecuniary loss he sustains by the accident; secondly, the injury he sustains in his person, or his physical capacity of enjoying life. Again, in Haygarth v Grayson Rollo & Clover Docks Ltd [[1951] 1 Lloyds Rep 49, 52] Asquith LJ said: General damage, while usually assessed in a single global sum, ought to include loss referable to at least three factors, where all three factors are present, namely, the respective loss of earnings, pain and suffering and loss of amenity. Such observations naturally proceed on the normal basis that personal injury involves some pain or patent loss of amenity, but the unusual question before your Lordships is whether a hidden, painless injury or latent loss of amenity sounds in damages. And in no case is it laid down that hidden physical injury of which a man is ignorant cannot, by reason of his ignorance, constitute damage. Lord Pearce went on to hold that actionable harm can be suffered despite the fact that a man has no knowledge of the secret onset of pneumoconiosis and suffers no present inconvenience from it (p 778). In Lord Pearces view, as will be seen from the following quotation from p 779 of the report, the question was whether a man has suffered material damage by any physical changes in his body, and this was a question of fact in each case: It is for a judge or jury to decide whether a man has suffered any actionable harm and in borderline cases it is a question of degree It is a question of fact in each case whether a man has suffered material damage by any physical changes in his body. Evidence that those changes are not felt by him and may never be felt tells in favour of the damage coming within the principle of de minimis non curat lex. On the other hand, evidence that in unusual exertion or at the onslaught of disease he may suffer from his hidden impairment tells in favour of the damage being substantial. There is no legal principle that lack of knowledge in the plaintiff must reduce the damage to nothing or make it minimal. Although symptomless, and not causing any present physical inconvenience, the physical injury to the lungs of the steel dressers was held to constitute actionable damage and, by virtue of the terms of the Limitation Act 1939, their Lordships felt compelled therefore to find that their claims were statute barred. Rothwell v Chemical and Insulating Co Ltd involved employees who had been exposed to asbestos dust and had developed pleural plaques as a result. They were at risk of developing asbestos related diseases and suffered anxiety at that prospect; one of them had developed a depressive illness, brought on by the diagnosis of the plaques. A convenient summary of the medical position about the plaques can be found at the start of Lord Hoffmanns speech in Rothwell. He said, in para 1: These are areas of fibrous thickening of the pleural membrane which surrounds the lungs. Save in very exceptional cases, they cause no symptoms. Nor do they cause other asbestos related diseases. But they signal the presence in the lungs and pleura of asbestos fibres which may independently cause life threatening or fatal diseases such as asbestosis or mesothelioma. In consequence, a diagnosis of pleural plaques may cause the patient to contemplate his future with anxiety or even suffer clinical depression. The unanimous view of the House of Lords was that the claimants had suffered no actionable damage. As Lord Hoffmann put it, in para 2, compensatable physical injury was required to establish a cause of action and the plaques did not constitute such injury. The claimant who had developed clinical depression was in a different position, since psychiatric illness can constitute damage. However, his claim also failed, essentially because it was not reasonably foreseeable that a person of reasonable fortitude would develop a psychiatric illness in his circumstances. In considering the implications of the decision in Rothwell, it is important to have an appreciation of the attributes of the pleural plaques and of how they differ from the damage sustained by the steel dressers in Cartledge. In Cartledge, the inhalation of silica particles had damaged the lung tissue, causing minute scars and reducing the efficiency of the lung tissue. As Lord Hoffmann summarised the position in Rothwell (para 8): their lungs had suffered damage which would have been visible upon an x ray examination, reduced their lung capacity in a way which would show itself in cases of unusual exertion, might advance without further inhalation, made them more vulnerable to tuberculosis or bronchitis and reduced their expectation of life. But in normal life the damage produced no symptoms and they were unaware of it. In contrast, the pleural plaques were not in any way harmful to a sufferers health or physical condition. They were evidence that the lungs had been penetrated by asbestos fibres but they did not, themselves, give rise to actual or prospective disability. Save in the most exceptional cases (which it appears did not include any of the claimants), they would not have any effect upon health at all. They were described, for example, as symptomless bodily changes with no foreseeable consequences (para 17), as not harmful and not giving rise to any symptoms or leading to anything else which constitutes damage (para 49), and as asymptomatic and not the first stage of any asbestos related disease (para 68). In so far as the sufferer faced a risk of deterioration in his health in future, that risk arose from the exposure to the asbestos fibres, not from the plaques, which neither posed nor contributed to any risk. Similarly, it was the exposure to asbestos which caused the anxiety felt by the claimants about their future health, following the discovery that they had pleural plaques, not the plaques themselves. The speeches in Rothwell possibly shed a little further light on the identifying features of actionable personal injury. I will refer to the relevant passages here, and they contribute to my conclusions later. First, it seems to have been accepted that the concept of personal injuries includes a disease or an impairment of a persons physical condition. The term impairment is to be found in certain statutes (see above) and is used by Lord Pearce in Cartledge who referred, at p 779, to the scarring to the lungs in that case as a hidden impairment. The trial judge in Rothwell looked for a disease or impairment of physical condition and, considering the judges finding that there was nothing that could be categorised in that way, Lord Hoffmann made no suggestion that the judge had been wrong to focus on impairment (para 11). Secondly, it was underlined that to be actionable, the damage had to be more than negligible. This is expressed in various ways, including that it must be more than trivial (Lord Hoffmann, at para 8), that it must be real damage (Lord Hope of Craighead, at para 39), and that it must be material (Lord Rodger of Earlsferry, at para 87). Thirdly, following on from that, it was made clear that the mere fact that a particular physical condition might properly be described as an injury does not necessarily mean that it constitutes damage of the requisite kind. Lord Hope countenanced that the plaques could be called an injury (see, for example, at para 39), but the claimants still did not recover because, as he said: the use of these descriptions does not address the question of law, which is whether a physical change of this kind is actionable. There must be real damage, as distinct from damage which is purely minimal: Lord Evershed, at p 774 [of Cartledge]. Where that element is lacking, as it plainly is in the case of pleural plaques, the physical change which they represent is not by itself actionable. Returning to the subject at para 47, he said: It is well settled in cases where a wrongful act has caused personal injury there is no cause of action if the damage suffered was negligible. In strict legal theory a wrong has been done whenever a breach of the duty of care results in a demonstrable physical injury, however slight. But the policy of the law is not to entertain a claim for damages where the physical effects of the injury are no more than negligible. Otherwise the smallest cut, or the lightest bruise, might give rise to litigation the costs of which were out of all proportion to what was in issue. The policy does not provide clear guidance as to where the line is to be drawn between effects which are and are not negligible. But it can at least be said that an injury which is without any symptoms at all because it cannot be seen or felt and which will not lead to some other event that is harmful has no consequences that will attract an award of damages. Damages are given for injuries that cause harm, not for injuries that are harmless. Lord Hoffmann had some comments to make about the nature of damage. He said, at para 7: a claim in tort based on negligence is incomplete without proof of damage. Damage in this sense is an abstract concept of being worse off, physically or economically, so that compensation is an appropriate remedy. It does not mean simply a physical change, which is consistent with making one better, as in the case of a successful operation, or with being neutral, having no perceptible effect upon ones health or capability. Putting this formulation together with the requirement that the damage be more than minimal, he saw the relevant question, on the facts of the Rothwell case, as being (para 19), is [the claimant] appreciably worse off on account of having plaques? Although he had referred at para 7 to damage in the sense of being economically worse off, the context makes it plain that the question he was posing in para 19 was whether the claimant was physically worse off. It can be seen from the passages referred to above that, as well as the usual reference to pain, suffering and loss of amenity, personal injury has been seen as a physical change which makes the claimant appreciably worse off in respect of his health or capability (Lord Hoffmann at para 7 of Rothwell) and as including an injury sustained to a persons physical capacity of enjoying life (Fair v London & North Western Railway Co (1869) 21 LT 326, 327, quoted by Lord Pearce in Cartledge, at p 778), and also an impairment. Furthermore, it has been established that it can be hidden and symptomless (Cartledge). How Jay J and the Court of Appeal saw matters Jay J saw it as key (paras 27 and 31 of his judgment) that the scarring to the lungs in Cartledge was not neutral as to its health impacts and constituted a disease process which is real and present. He contrasted this with the situation in the Rothwell case in that the pleural plaques would never cause symptoms or increase the susceptibility of the individual to other diseases or conditions, and did not reduce life expectancy. He agreed (para 30) that there were factual differences between Rothwell and the instant case, including that the progression from sensitisation to allergy can be envisaged as being along a direct causal pathway [whereas] the pleural plaques were a biological cul de sac. But he thought it critical that the progression would not occur if an employee was removed from the source of the sensitisation and, because the claimants had all been removed from exposure to platinum salts, would not occur in their cases. The correct approach in his view (para 32) was to analyse the sensitisation in terms of the physical or physiological harm that it may be causing. The antibodies in the claimants bodies were not harmful in themselves and he considered that something more has to happen before actionable injury may be sustained. He discarded financial loss consequent upon the changes as irrelevant, and took the view that one cannot define the actionable injury by the steps which are taken to prevent it (by which he must have meant the steps taken to prevent the claimants developing an allergy). It seems to have been his view that, on the facts of this case, nothing short of actual symptoms could amount to actionable injury. In the Court of Appeal, there was a close analysis of Cartledge and Rothwell. Setting out his conclusions, between paras 30 and 32 of his judgment, Sales LJ (with whom the other members of the court agreed) concluded that the claimants have suffered no physical injury. He considered that the platinum salt sensitisation that they have developed is not harmful in any relevant sense. He saw it as analogous to the pleural plaques in Rothwell, and said that it was not a hidden impairment which has the potential by itself to give rise to detrimental physical effects in the course of ordinary life, and was therefore not like the lung scarring in Cartledge. He observed that, like the plaques, platinum salt sensitisation does not reduce life expectancy and, provided the worker is removed from an environment in which he may be exposed to platinum salts (para 27), will not cause symptoms, or increase the susceptibility of the individual to other diseases or conditions. In Sales LJs view (para 30), it did not therefore constitute actionable damage or injury. Sales LJ agreed with Jay J that the steps taken to prevent the allergy developing (removing the employee from work in an environment where further exposure may occur) should not be seen as a component of the injury and that the sensitisation had to be looked at in terms of the physical or physiological harm which it may be causing, which, without further exposure, was none. He acknowledged that the removal of the claimants from their jobs might be seen as an extra element, present in this case and not in Rothwell, but, whilst he accepted that this was detrimental to the claimants financially, Sales LJ did not consider that it converted the physiological change into an actionable injury, because he took the view that the financial detriment should be viewed separately, as a form of pure economic loss. Indeed, he was disposed to view the removal of the claimants from their jobs as a sort of mitigation of loss in advance of injury (para 32), the restriction on their work being to protect them from suffering the physical injury which would otherwise have developed. On his reasoning, as damages can only be claimed for the expenses of mitigation where there is a right to sue for a wrong in the first place, and there was no such right here, damages for the financial loss could not be recovered. The arguments in this court In summary, the claimants argue that platinum salt sensitisation constituted a physical change to their bodies which amounted to material damage in that they were worse off than they would have been but for their employers breach of duty. By virtue of their sensitisation, they were likely to develop an allergy if further exposed to platinum salts. Their bodies were now in a state that made them unfit for further work in areas where they may be exposed to salts (red zones), and this constituted a real loss of amenity and qualified as an actionable personal injury. The company supports the reasoning of Jay J and the Court of Appeal. It argues that platinum salt sensitisation is not an actionable personal injury and that the claim is in reality one for pure economic loss for which the claimants are not entitled to recover, either in tort or through the medium of a term implied into their employment contracts. The claimants cannot establish actionable personal injury, say Johnson Matthey, by adding the financial consequences of the sensitisation to the physiological changes in their bodies. The company argues that the changes in the claimants bodies do not amount to physical damage to bodily tissue or an impediment to the proper working of bodily tissues or organs, and seeks to categorise the molecular change that has occurred as entirely normal and benign in character, as a person will naturally develop antibodies in everyday life and antibodies are not themselves harmful. In the companys view, it would seem perverse and an abuse of language to describe as injured someone who merely acquired a new antibody. The companys argument seeks to align the claimants condition with that of the claimants with pleural plaques in the Rothwell case, and to distance it from the situation in Cartledge, it being asserted that sensitisation is merely an indicator of past exposure to platinum salts as the plaques were an indicator of exposure to asbestos. In addition, it is emphasised that the claimants are not limited in living their lives, except that they should avoid exposure to platinum salts. An important element in the companys argument is that platinum salts are not encountered in ordinary everyday life, only in certain specialist workplace environments. I interpose to observe that an employee should not be exposed to the salts even in the specialist workplace, but it is clear from the existence of the testing regime and the practice of not allowing sensitised individuals to work in the red zones, that exposure does take place, and of course it is admitted that the claimants in this case were in fact exposed to the salts by virtue of the companys breach of its duty under various health and safety regulations. The company says that these claimants almost certainly will not go on to develop platinum salts allergy, now that they are not permitted to work in the red zones, and are aware of the need to avoid contact in other working environments. Furthermore, the company observes that if the claimants were at any stage to develop initial allergy symptoms (which in themselves may be too minor to constitute actionable personal injury), that would be a warning to remove themselves from the source of exposure, thus avoiding significant injury. Encapsulating these elements of their argument in their written case, the company says that the claimants have molecular changes without symptoms and a theoretical but no practical risk of symptoms developing. The company also argues that it is not, in fact, the sensitisation itself that prevents the claimants from working at their old jobs, but the terms of the collective agreement which led to the employer removing them from risky areas. This is demonstrated, it is said, by the fact that the claimants must have been sensitised before the skin prick test revealed that they were, but they continued to do their jobs until the test results were known. Discussion I am not persuaded by the companys attempt to class the claimants condition as just the development of another benign antibody in the body, not a true departure from the normal, and not damaging the claimants health or physical capability. Some antibodies may do their job in the body without producing any adverse consequences. What matters, however, is the behaviour of the particular antibody which is produced in an individual who has been sensitised to platinum salts. If such an individual is subsequently exposed again to the salts, the IgE antibody involved in platinum salt sensitisation is likely, in most people, to react in a way which produces allergic symptoms of a type which, it is common ground, would be of sufficient significance to constitute an actionable personal injury. Whilst possibly simplistic, I do not think it is inappropriate to view the development of a platinum salts allergy in a person who does not, at the outset, have a sensitivity to platinum salts as having two stages: first comes sensitisation, next comes allergy. Before initial employment in the red zones, a medical screening procedure is undertaken so as to avoid employing people who have a genetic disposition to allergy. When commencing work in the red zones, the claimants were people who had the capacity to work there. At that point, their bodies were fitted for that task, still having a safety net to protect them from allergy, in the form of the sensitisation stage, which would enhance the prospect of removing them from further exposure before allergy developed. When they became sensitised, through the companys negligence and/or breach of statutory duty, that change to their bodies meant that they lost this safety net and therefore their capacity to work around platinum salts. But, on the companys argument, this bodily change which leaves the claimants worse off than they were before they became sensitised, is not actionable personal injury. From discussion in the course of argument, it became clear that Johnson Mattheys argument was not that sensitisation can never amount to actionable injury. Mr Kent QC acknowledged, on behalf of the company, that if the claimants had developed a sensitivity to something in everyday life, such as sunlight, as opposed to platinum salts, they would have sustained actionable damage because they would not be able to carry on with their ordinary life and would suffer, as he put it, a deficit which would undoubtedly be characterised as personal injury. It follows from this acknowledgment that there is no dispute that the physiological changes involved in sensitivity can constitute sufficient personal injury, sufficient damage, to found an action for negligence or breach of statutory duty. However, Mr Kent contrasts the person who develops a sensitivity to sun with the situation here because, he says, the sufferer is not sensitive to something in everyday life, but only to a dangerous chemical to which people should not be exposed, given the health and safety regulations. Certain aspects of this argument ring rather hollow in this case, given that the claimants were exposed to the salts by the company, and the risk of further exposure is considered sufficiently significant for the collective agreement to require that they be prevented from working in red zones. However, I will set that objection to one side for present purposes and consider the simple proposition that the claimants have not become sensitised to something in everyday life, like the sun. It is a proposition to which I cannot subscribe. Ordinary everyday life is infinitely variable. For these claimants, their ordinary everyday life involved doing jobs of a type which, by virtue of their sensitisation, they can no longer do. In those circumstance, I do not see how their situation can be validly distinguished from the person who has developed a sensitivity to the sun. The physiological changes to the claimants bodies may not be as obviously harmful as, say, the loss of a limb, or asthma or dermatitis, but harmful they undoubtedly are. Cartledge establishes that the absence of symptoms does not prevent a condition amounting to actionable personal injury, and an acceptance of that is also implicit in the sun sensitivity example, in which the symptoms would only be felt upon exposure to sunshine, just as the symptoms here would only be felt upon exposure to platinum salts. What has happened to the claimants is that their bodily capacity for work has been impaired and they are therefore significantly worse off. They have, in my view, suffered actionable bodily damage, or personal injury, which, given its impact on their lives, is certainly more than negligible. It can be helpful to test an approach by applying it to slightly different facts, albeit that they are not an exact parallel with the present case. Suppose that the claimants were coffee tasters, employed because they had the ability to distinguish different flavours and qualities of coffee, by smell and taste. Suppose further that, through negligence, their sense of smell or taste became impaired in a way which would be of absolutely no consequence to anyone who was not employed in this particular role, but meant that they could no longer do their jobs and had to seek other employment. I venture to suggest that there would be little difficulty in accepting that the changes to their bodies were actionable personal injury. Another example might be of claimants working in the fragrance industry, whose highly developed sense of smell was damaged. It might be that the coffee tasters, or the expert perfumers, would be able to show something which looks more like a physical bodily injury of a conventional kind, but I can see no essential difference between their situation and the present case, where bodily changes have led to the claimants, who were formerly people who could and did work around platinum salts, no longer being able to do so. I should address specifically some of the arguments which featured in the companys case. First, there is the argument that the claimants are attempting to claim for something, an allergy, that will never happen because they will not now work around platinum salts. This goes along with what might be described as the timing argument, namely that the deficit which the claimants rely upon (their inability to do their chosen jobs) did not exist prior to the positive skin tests, and was not the product of the negligent exposure to platinum salts and resulting sensitisation, but of the protective provisions of the collective agreement which required that they be removed from the red zones. Another strand of the argument is the assertion that the claimants are seeking to make what is, in reality, only a risk (the risk of developing an allergy) into an actionable injury. These arguments could only prosper, it seems to me, if the sensitisation itself is not seen as an actionable personal injury, but only as a benign and symptom free molecular change. For the reasons I have given at paras 37 to 40 above, I do not see it in that way. If the sensitisation is viewed as an injury, as in my view it should be, then it did exist before the skin test revealed it. The restrictions on the work that can be done by claimants who have tested positive are attributable to the sensitisation, to which the protective provisions of the collective agreement were a response. Those provisions reflect the fact that, because of the negligence and/or breach of statutory duty of their employers, these claimants bodies are now in such a state that they need to avoid further exposure to platinum salts which, according to the evidence, would be likely to provoke allergy in most people. But the need for sensitised individuals to avoid exposure would apply whether or not there was a collective agreement such as that which was in force in this case, and no matter whether the employer was Johnson Matthey or another employer who imposed no comparable restrictions. As for the fact that the claimants must have worked for a period after they became sensitised, but before their positive skin prick tests demonstrated that fact, I do not see that that advances the argument in any way, given that they did so in ignorance of their condition. They were lucky enough not to have gone on to develop allergic symptoms during that period of unknown sensitisation, but that does not mean that they would be safe to continue to work in red zones (or the equivalent area in another company) if not prevented from doing so by the collective agreement. Once the sensitisation is identified as an actionable injury in its own right, the companys argument that the claimants are, in reality, claiming only for their lost earnings and therefore for pure economic loss also falls away. But, the company asks, what about a claimant who was about to retire when he or she became sensitised, or no longer wanted to work in the same type of employment, and upon whom the sensitisation would therefore have no impact? This, to my mind, does not go to the question of whether actionable personal injury has been suffered, but to the quantum of damages flowing from that, which it could be expected would be reduced by this feature of the particular case. I return to the cases of Rothwell and Cartledge. Although other authorities were cited, including some relating to claims for damage to property, I have found them of little direct, or even indirect, assistance and therefore, like Jay J and the Court of Appeal, my focus has been upon these two central cases. I would distinguish this case from Rothwell. I set out earlier how the doctors saw the distinction between pleural plaques and sensitisation to platinum salts but it is, of course, ultimately a lawyers question whether the two conditions are distinguishable. As I see it, it is material that the pleural plaques were nothing more than a marker of exposure to asbestos dust, being symptomless in themselves and not leading to or contributing to any condition which would produce symptoms, even if the sufferer were to be exposed to further asbestos dust. Similarly, the sensitisation of the claimants in this case marks that they have already been exposed to platinum salts, but unlike the plaques, it constitutes a change to their physiological make up which means that further exposure now carries with it the risk of an allergic reaction, and for that reason they must change their everyday lives so as to avoid such exposure. Putting it another way, they have lost part of their capacity to work or, as the claimants put it in argument, they have suffered a loss of bodily function by virtue of the physiological change caused by the companys negligence. As Lord Pearce said in Cartledge (supra para 15), it is a question of fact in each case whether a man has suffered material damage by any physical changes in his body. It is a question of fact that must be determined in the light of the legal principles applicable to personal injury actions, and this case has provided a useful opportunity to clarify some of those principles. The process has led me, for all the reasons I have set out, to differ from Jay J and the Court of Appeal and to conclude that the concept of actionable personal injury is sufficiently broad to include the damage suffered by these claimants, which is far from negligible. In these circumstances, it is unnecessary to say anything further about the claimants alternative argument that they should be able to recover for pure financial loss. I would allow the appeal on the claimants first ground, having concluded that they do have a cause of action in negligence/statutory duty against the company.

The Appellants worked for the Respondent in factories making catalytic converters. In breach of its duty, under the health and safety regulations and at common law, the Respondent failed to ensure that the factories were properly cleaned and, as a result, the Appellants were exposed to platinum salts. This exposure led them to develop platinum salt sensitisation (immune system production of IgE antibodies). Platinum salt sensitisation is a condition producing or showing no symptoms. Further exposure to chlorinated platinum salts is likely to cause someone with platinum salt sensitisation to develop an allergic reaction with physical symptoms such as asthma, rhinitis or skin rashes. When the Appellants sensitisation was detected, the Respondent no longer permitted them to work in areas where they might be exposed to platinum salts and develop allergic symptoms. Each Appellant claims they have suffered financially because of their sensitisation to platinum salts because they had to take up a different role with the Respondent at a reduced rate of pay or because they had their employment terminated. The questions that arose in the courts below and on appeal to the Supreme Court of the United Kingdom were as follows: (1) Does platinum salt sensitisation qualify as an actionable personal injury? (2) Alternatively, can the Appellants recover damages for economic loss under an implied contractual term and/or in negligence? The Appellants lost at first instance and in the Court of Appeal. At first instance, Mr Justice Jay concluded that they had sustained no actionable personal injury and that their claim was for pure economic loss, for which they were not entitled to recover in tort. He also rejected their alternative claim in contract. The Court of Appeal upheld Mr Justice Jays ruling. The Supreme Court unanimously allows the appeal. Lady Black gives the sole judgment with which the other justices agree. Negligence and breach of statutory duty are not actionable in and of themselves. It is necessary for claimants to establish that there has been damage in the form of actionable personal injury. No decided case provides a definition of actionable personal injury, but there is some guidance as to its attributes. [11 12] Personal injury has been seen as: a physical change which makes the claimant appreciably worse off in respect of his health or capability; as including an injury sustained to a persons physical capacity of enjoying life; and as an impairment. It can also be hidden and symptomless. [27] What matters in this case is the behaviour of the IgE antibody, which is produced by an individual who has developed platinum salt sensitisation. If such an individual is exposed again to platinum salts, the IgE antibody is likely to react in a way which produces allergic symptoms. When an individual becomes sensitised, this change to their body means that they lose their capacity to work around platinum salts. [37] Respondents counsel acknowledged that if the Appellants had developed a sensitivity to something encountered in everyday life, such as sunlight, they would have sustained actionable damage because they would not be able to carry on with their ordinary life. The Appellants ordinary lives involved doing jobs of a type which, by virtue of their sensitisation, they can no longer do. This cannot be distinguished from the person who developed a sensitivity to sunlight. [39] The physiological changes to the Appellants bodies are undoubtedly harmful. Cartledge v Jopling establishes that the absence of symptoms does not prevent a condition amounting to actionable personal injury. What has happened to the claimants is that their bodily capacity for work has been impaired and they are therefore significantly worse off. [40] Once the sensitisation is identified as an actionable injury in its own right, the Respondents argument that the Appellants are claiming only for their lost earnings and therefore for pure economic loss also falls away. [44] This case is distinguishable from Rothwell v Chemical and Insulating Co Ltd. In that case, the pleural plaques the claimants developed were nothing more than a symptomless marker of exposure to asbestos dust and would not lead to or contribute to any condition which would produce symptoms, even with further exposure to asbestos dust. In this case, the Appellants sensitisation carries the risk of an allergic reaction in the event of further exposure to platinum salts and they must change their lives to avoid such exposure. [47] In these circumstances, it is unnecessary to consider the Appellants alternative argument that they should be able to recover for pure financial loss. [49]

Ben Belacum Makhlouf was born in Tunisia on 18 July 1971. On 4 June 1996 he married Ruth Henderson. She came from Northern Ireland and was a citizen of the United Kingdom. The marriage took place in Tunisia. On 13 November 1997, Mrs Makhlouf gave birth to their only child, a daughter called Sarah Jayne. She was born in Northern Ireland, to where Mrs Makhlouf had returned. Her husband joined her there on 19 November 1997, six days after the birth of their daughter. He has lived in Northern Ireland since then. He had come to the United Kingdom and to Northern Ireland in particular with leave to enter as the spouse of a person settled in the UK. The leave to enter was initially valid for one year but on 19 August 1999 he was given indefinite leave to remain. On 14 September 1999, Mrs Makhlouf informed the United Kingdom Border Agency (UKBA) that she and her husband had separated. She claimed that he had been violent to her. He disputes that claim. It has never been alleged that he was violent to his daughter. Indeed, Mr Makhlouf has said that, following the separation from his wife, he enjoyed regular weekly contact with Sarah Jayne. Differences arose between him and his wife concerning their daughters upbringing, he claims and as a result, Mrs Makhlouf refused to allow him to see Sarah Jayne since the beginning of 2003. Notwithstanding that they have not lived together since 1999, Mr and Mrs Makhlouf have never divorced. On 24 April 2003, while drunk, Mr Makhlouf attacked two men after an argument about a game of pitch and toss. He used an offensive weapon (in the form of a key ring which contained a blade). He claimed that he was provoked by the men, who, he said, were loyalist paramilitaries. He also alleged that they had victimised him because of his ethnic origin and skin colour. These claims are not accepted by the respondent and there is nothing in the trial judges sentencing remarks which specifically supports them. The judge did, however, describe the victims behaviour as shameful and the appellant as having taken the law into his own hands but it is not at all clear from the sentencing remarks that it was accepted that the appellant had been provoked because of his ethnic background. The appellant had been remanded in custody from the date of the offences until December 2004 when he was released on bail. He pleaded guilty to two offences of assault occasioning grievous bodily harm contrary to section 20 of the Offences against the Person Act 1861, having pleaded not guilty to the more serious offences under section 18 of the same statute, with which he had originally been charged. The pleas of guilty to the section 20 charges were made, it is claimed, at the earliest opportunity and the trial judge appears to have taken this into account when, on 18 April 2005, he imposed concurrent sentences of 39 and nine months imprisonment. That disposal meant that the appellant was not required to return to prison. In his evidence to the First tier Tribunal, during an appeal against a decision that he should be deported, the appellant said that he had formed a relationship with Charlene McManus after his release from prison and that she had given birth to their son on 12 May 2006. Mr Makhlouf has not been named on the childs birth certificate as his father but Ms McManus has not disputed that he is indeed the boys father. Unfortunately, his relationship with Ms McManus broke down shortly after the birth but Mr Makhlouf claimed that he had regular contact with his son until 2010. These arrangements ended, he claimed, when Ms McManus began to demand that he visit the boy at her flat and, at that time, he was unable to leave his own home because he was suffering from depression. In his evidence to the First tier Tribunal he said that he had been unable to work since 2006 or 2007 because of his depressive illness and had been in receipt of state benefit for this condition. In 2007 the appellant issued proceedings seeking contact with his daughter, Sarah Jayne. He was permitted indirect contact but his application for direct contact was refused. He appealed that decision but this appeal was dismissed by the Fermanagh Family Care Centre on 21 October 2008. He claimed that he had not attended the hearing of the appeal because he had gone to the wrong court. The First tier Tribunal was sceptical of this claim. It observed, If this was truly the reason why the order was made, we find it surprising that he has been unable to secure redress for the consequences of what he claims was a simple mistake. We are not persuaded that the order does not reflect other issues on the suitability of him having contact with Sarah Jayne at that time. On Mrs Makhloufs application, the court made an order under article 179(14) of the Children (Northern Ireland) Order 1995 (SI 1995/755 (NI 2)) which imposed a requirement that the appellant obtain the leave of the court before making any further applications in respect of Sarah Jayne. Between November 2008 and February 2010, the appellant was convicted of and sentenced for a series of offences as follows: On 3 November 2008 he was sentenced to six months imprisonment, suspended for two years, for breach of a non molestation order; On 2 March 2009 he was fined 350 for disorderly behaviour; On 22 February 2010 he was convicted of two sets of offences the first was for breach of a non molestation order on 12 October 2009 for which he was sentenced to three months imprisonment; the second set of offences related to breach of a non molestation order on 11 January 2009 for which he was sentenced to six months imprisonment, suspended for two years, assaulting a police officer and resisting a police officer on the same date for which he received equivalent concurrent sentences. On 14 October 2010 the respondent wrote to the appellant, informing him that she was considering his liability to deportation. She asked him to provide reasons that he should not be deported. She also asked for information about his relationships and about his children. The letter contained what is known as a one stop warning under section 120 of the Nationality, Immigration and Asylum Act 2002 and a questionnaire in which various inquiries were made about his circumstances, those of his children and how he came to the United Kingdom. The letter had been prompted by the respondents having obtained a certificate of the applicants conviction of the offences for which he had been sentenced on 18 April 2005. In a letter of 1 November 2010 the appellants solicitor stated that the offences arose out of an incident in which he had been provoked by loyalist paramilitaries who had targeted him because of his origins and skin colour. The solicitor objected to the delay in seeking his deportation on foot of these convictions. It was claimed that he had a settled life in Northern Ireland and wished to play a parenting role for his children and to support them in the future. Any decision to deport him would breach his rights under article 8 of the European Convention on Human Rights and Fundamental Freedoms (ECHR), the letter suggested. On 4 February 2011 the respondent wrote to the appellant again. She asked for further information about his two children and sought certain material from his solicitor, including passport details and evidence of his residence in the UK; documentary evidence relating to custody arrangements for the children; when he had stopped living with them; and how often he had contact with them. The solicitor was also asked to provide letters from the mothers of the appellants children detailing any support that he provided for the children. Information was also sought relating to medical treatment that he was receiving. No reply to these requests was forthcoming and a reminder was sent on 21 March 2011, asking for a reply by 1 April 2011. No such reply was received and on 28 June 2011 UKBA wrote, asking for evidence of the appellants relationship with any current partner and with his children. On 7 July 2011 the appellants solicitor wrote to ask for more time in which to reply and this was granted in a letter from UKBA of 16 August 2011 but a response within ten days was asked for. In due course the appellants solicitor did indeed reply on 26 August 2011, stating that the appellant was not in contact with his children and was not in a financial position to contribute to their maintenance. The letter claimed that he was being denied contact with his children by their mothers and that he had given instructions to issue legal proceedings so that he could re establish contact with them. In the meantime, Mr Makhlouf was convicted on 15 August 2011 of offences that arose from an incident on 2 April 2011 at the public inquiry office at Enniskillen Police Office. These included disorderly behaviour (for which he was sentenced to five months in prison); attempted criminal damage (for which he received a concurrent sentence of five months imprisonment); and resisting a police officer for which he received an equivalent concurrent sentence. On 12 April 2012 UKBA asked for an update in relation to the contact proceedings that had been mooted in the letter of 26 August 2011. The following day his solicitor replied saying that legal aid applications had been made in order to launch these proceedings but that these had not yet been dealt with by the Legal Aid Commission. No applications for contact had been lodged, therefore. On 30 May 2012 UKBA issued a liability to deportation notice on foot of Mr Makhloufs convictions in April 2005. In an accompanying letter they sought evidence of what were described as applicable circumstances. These included details of marriages or civil partnerships; relationships that could be said to be akin to these; evidence in relation to children or other dependents; and evidence of any medical condition from which he or any dependents suffered. The appellant was also asked for a formal statement setting out the reasons that he should be allowed to stay in the UK, why he wished to stay here and the grounds on which he relied in support of his claim that he should be permitted to do so. No response to this request was received. The appellant gave instructions to his present solicitors to make a further application for contact with Sarah Jayne. The Legal Services Commission refused to grant legal aid for this and it was not pursued. On 5 October 2012 the respondent decided to make a deportation order. Notice of that decision was given to the appellant. It stated: On 18 April 2005 at Belfast Crown Court, you were convicted of grievous bodily harm. In view of this conviction, the Secretary of State deems it to be conducive to the public good to make a deportation order against you. The Secretary of State has therefore decided to make an order by virtue of section 3(5)(a) of the Immigration Act 1971. You have claimed that your deportation from the United Kingdom would be a breach of your human rights under article 8 of the Human Rights Act 1998 on the grounds that you have established a family and/or private life in the United Kingdom. This claim does not meet the criteria as laid out in paragraph(s) 399/399A of the immigration rules and for the reasons given in the attached reasons for decision letter your claim is hereby refused. The letter which accompanied the notice of decision reviewed the various circumstances which were relevant to the appellants case. His several convictions, not merely those in 2005, were rehearsed. The fact that he was no longer in contact with either of his children and had not had any connection with them for some years was alluded to. The sentencing remarks of the judge in April 2005 were quoted. It was stated that specific regard had been had to para 396 of the Immigration Rules which provides that there is a presumption that the public interest requires the deportation of a person who is liable to deportation. It was acknowledged, however, that there was an obligation to consider whether that presumption would be outweighed by other factors, particularly whether the decision to take deportation action would place the United Kingdom in breach of any of its obligations under [ECHR]. The reasons for decision letter accepted that the appellants removal to Tunisia would interfere with his rights under article 8 and that it might not be in the best interests of his children. But it was stated that this interference was in accordance with the permissible aim of the prevention of disorder and crime and the protection of the rights and freedoms of others. The letter continued: In considering whether removal to Tunisia would result in a breach of your rights under article 8, the starting point for considering such a claim is the Immigration Rules. Paragraph 396 establishes that where a person is liable to deportation, the public interest requires it. Where the Secretary of State must make a deportation order in accordance with section 32 of the UK Borders Act 2007, it is also in the public interest to deport. The letter then dealt with the length of sentence imposed and the effect of this in applying the relevant immigration rules, in particular paras 398, 399 and 399A. Reference was made to the criteria in para 399A which must be satisfied in order for a parental relationship with a child to outweigh the public interest in deportation in line with article 8. These criteria were stated to reflect the duty in section 55 of the Borders, Citizenship and Immigration Act 2009 to have regard to the need to safeguard and promote the welfare of children who are in the United Kingdom as interpreted in recent case law, in particular ZH (Tanzania) v Secretary of State for the Home Department [2011] 2 AC 166. There then followed a review of the para 399A criteria as they applied to the appellants children. It was noted that he was not in a genuine and subsisting relationship with his son, indeed that the appellant had provided no evidence of contact with the boy and that he was cared for by his mother. Likewise, the letter claimed, the appellant was not in a subsisting relationship with Sarah Jayne, had no current contact with her and that she was capable of being cared for by her mother. The appellants personal circumstances were then considered. It was noted that he was not in a relationship with a partner at the time; that discounting the time that he had spent in prison, he had been resident in the United Kingdom for a period of 15 years; and that he had ties to Tunisia to which he was to be deported. His parents lived there and that he had lived all his life in Tunisia until he came to the UK in 1997. It was concluded therefore that there were no exceptional circumstances which outweighed the public interest in having the appellant deported. The proceedings The appellant appealed the decision to deport him to the First tier Tribunal. On 5 December 2012 he made a statement setting out the circumstances on which he relied to advance his appeal. He explained that he had wished to make another application for contact with Sarah Jayne but had been unable to pursue this because legal aid for his application had been refused. He claimed that he had obtained legal aid to pursue an application for contact with his son and exhibited an application to the Family Proceedings Court. The appellants appeal was heard on 6 December and the decision was given on 8 January 2013. The tribunal concluded that the Secretary of State had properly applied the Immigration Rules. Indeed, no issue was taken on the application of the rules. The tribunal expressed some doubt as to the existence of the appellants son but concluded, in any event, that the appellant had not produced credible evidence of contact proceedings for either child or that he had any input into their lives. The appeal was dismissed. The appellant appealed to the Upper Tribunal on 1 July 2013. In the course of this appeal it was conceded on the appellants behalf that there were no ongoing contact proceedings in relation to either child. It was submitted that it was irrational for the Secretary of State to have taken into account the sentencing remarks of the trial judge because of the length of time that had elapsed between the trial and the decision to deport. By way of fairly radical alternative to that argument, it was also argued that the Secretary of State had referred to only some of the remarks and had not alluded to the observation of the sentencing judge that nothing would be achieved by sending the appellant back to prison. It was also argued that the Secretary of State had only considered the Immigration Rules and not article 8 proper (sic). It was accepted by the respondent before the Upper Tribunal that the First tier Tribunal had wrongly considered the appellants case as one of automatic deportation under section 32(5) of the UK Borders Act 2007 and that therefore the burden of proving that his deportation was not conducive to the public good fell on the appellant. But it was submitted that this should not affect the outcome of the appeal. The Upper Tribunal agreed. It also agreed with a submission that the panel had overstated the effect of the sentencing of the appellant for breach of a non molestation order. But it concluded that the outcome of the appeal would not have been different even if these errors had not been made. The decision of the Upper Tribunal was appealed to the Court of Appeal in Northern Ireland. On 26 November 2014 that court (Sir Declan Morgan LCJ, Coghlin LJ and Gillen LJ) dismissed the appeal. Morgan LCJ, delivering the judgment of the court, set out the issues raised in the appeal in para 1 of his judgment as follows: (1) Did the Secretary of State err in deciding to deport the appellant under the mandatory power conferred by section 32 of the UK Borders Act 2007 (the 2007 Act)? (2) Did the Upper Tribunal err in law in failing to find that the Secretary of State and First tier Tribunal had erred in law and in refusing to set aside the decision of the First tier Tribunal? (3) Did the Upper Tribunal err contrary to section 6 of the Human Rights Act in failing to set aside the decision to deport in the absence of any tangible evidence for any article 8(2) justification of the encroachment of the article 8 rights of the appellant's children in circumstances where the Tribunal had not been specifically asked to address this point by the parties? Leave to appeal on the first of these two issues had been granted by a different panel of the Court of Appeal at an earlier hearing on 31 March 2014. That court had decided to make no order in relation to the third issue, pending the decision on the first two. The appellant therefore renewed his application for leave to appeal on that point when the matter came on for hearing on the first two issues. On the first issue the Court of Appeal concluded that section 32 played no part in the Secretary of States decision. Had it done so, it would have been unnecessary to consider para 396 of the Immigration Rules and the decision letter had made it abundantly clear that this had been taken into account para 35 of the courts judgment. The first ground of appeal was therefore dismissed. On the second issue the appellant presented two arguments to the Court of Appeal. Firstly, it was submitted that the Secretary of State was wrong to conclude that it was conducive to the public good that the appellant should be deported because of his conviction in 2005. Secondly, it was argued that no proper investigation of the article 8 issues had been undertaken in particular, there had been no proper investigation of the interests of the children. Both arguments were rejected by the Court of Appeal. It considered that the factors outlined in the reasons for decision letter amply supported the conclusion of the Secretary of State that the appellants deportation was conducive to the public good. On the question of the delay in making the decision, the court accepted that this could be an important consideration but that two features of this case made this factor inconsequential. The first was that following the 2005 convictions, the appellant was engaged in a series of further criminal offences and the second was that, during the same period, contact with his son was lost and the complete lack of contact with his daughter which had predated his convictions in 2005 continued. On the issue of whether sufficient attention had been paid by the respondent to the interests of the appellants children, the Court of Appeal adverted to the Secretary of States reference to section 55 of the Border, Citizenship and Immigration Act 2009 and ZH (Tanzania). Although the reasons for decision letter had concentrated on the question whether the conditions contained in para 399A of the Immigration Rules had been fulfilled, there had been a sufficient inquiry into the welfare of the children by the Family Court. The court rejected the suggestion that there should have been further investigation of the impact that the deportation of the appellant might have on the lives of his children, observing that these children did not require the disruption of further investigation in circumstances where a court with appropriate jurisdiction had made important decisions in relation to their welfare. The Court of Appeal therefore rejected the appellants case on the second issue and refused leave to appeal on the third issue. The appeal before this court For the appellant, Ms Higgins QC submitted that the Secretary of State had not contended that the appellant posed any risk to the public. All the evidence suggested that he did not, she claimed. Relying on Keegan v Ireland (1994) 18 EHRR 342, para 48 and Pawandeep Singh v Entry Clearance Office, New Delhi [2005] QB 608, para 72, she submitted that, where the circumstances warrant it, article 8 protects a relationship that could potentially develop between parent and child. Exclusive concentration on the rights of the appellant was inappropriate. His childrens article 8 rights required to be recognised and independently investigated. Too often, Ms Higgins suggested, children were invisible as rights holders. Dealing with the circumstance that there had not been recent contact between the appellant and his children, Ms Higgins drew attention to Strasbourg jurisprudence to the effect that divorce and separation do not bring family life between the child and the absent parent to an end, even if the divorce leads to a significant period of loss of contact: Berrehab v Netherlands (1988) 11 EHRR 322. Where a parents contact has been denied or severely curtailed by the actions of the other, that other parent cannot rely upon reasons related to the effluxion of time to deny the parents ongoing article 8 rights: Ferrari v Romania [2015] 2 FLR 303, para 53. Effective respect for family life required that future family relations between parent and child are not determined by the passage of time alone: Sylvester v Austria (2003) 37 EHRR 17, para 69. In the domestic judicial sphere, courts, Ms Higgins argued, have been taking an increasingly firm line with parties responsible for parental alienation. There were two reasons for this. First, the growing awareness of the fundamental importance of a child having contact with both his or her parents. The second reason was that firmer case management was required lest the family care system itself should contribute to the failure to develop a relationship with both parents, thereby violating the childs article 8 rights: In re A (A Child) (intractable contact dispute) [2013] 3 FCR 257 and In re H B (Children) (Contact: Prohibition on Further Applications) [2015] 2 FCR 581. All of this contributed to the requirement to focus closely on the needs of the children, Ms Higgins said. These should not be assimilated with those of the parent seeking to advance his or her article 8 rights. Children, especially those who had dual or multi ethnic parentage, were entitled to have that ethnicity considered in any evaluation of the scope of their article 8 rights. In General Comment no 14 (2013) on the right of the child to have his or her best interests taken as a primary consideration (article 3 para 1) the United Nations Committee on the Rights of the Children (CRC) emphasises that the concept of the childs best interests is aimed at ensuring both the full and effective enjoyment of the rights recognised in the Convention and the holistic development of the child para 4; that the full application of the childs best interests required the development of a rights based approach para 5; and that whenever a decision was to be made that would affect a specific child, the decision making process must include an evaluation of the possible impact on the child concerned para 6. Paragraph 32 imposed an obligation on the legislator, the judge and the social or educational authority to make specific inquiry as to what the particular circumstances of an individual child demanded. Ms Higgins also drew attention to para 36 of CRC which explained how the best interests of the child were to be treated as a primary consideration. It provides that the words the best interests of a child shall be a primary consideration place a strong legal obligation on states. These words meant that states could not exercise discretion as to whether the best interests of the child were to be given a primary consideration. This was a positive requirement and it should be recognised, therefore, that the childs best interests could not be measured on the same level as all other considerations para 37. They had to be assessed and ascribed the proper weight as a primary consideration in any consideration in any action undertaken. The effect of all this, Ms Higgins said, was that there was a duty to investigate thoroughly the impact on the appellants children that would be occasioned by his deportation. The loss of a possible future relationship with their father with the consequence that this might have on their sense of cultural identity was not to be lightly dismissed. It required to be scrupulously assessed by obtaining social welfare reports. This was particularly necessary since the mother of the appellants son, on learning of his impending deportation, had intimated a change of heart about facilitating contact with him. Counsel contended that a sufficient article 8 inquiry had not been conducted. Article 8 issues had been viewed through the prism of the Immigration Rules which purported to be (but were plainly not) comprehensive of all the issues that arose on the question of the right to respect for family and private life. It was contended that the reality was that the best interests of the child, insofar as they were considered at all under the rules, were taken into account under the very compelling circumstances rubric in those rules see references to this passim my judgment in the associated case of Ali. To provide properly for the appropriate consideration of the best interests of the children, the rules would have required express provision that these interests be taken into account as a separate, stand alone factor. The template letter sent to the appellants solicitors demonstrated, Ms Higgins argued, that this had not taken place. Discussion Where a decision is taken about the deportation of a foreign criminal who has children residing in this country, separate consideration of their best interests is obviously required, especially if they do not converge with those of the parent to be deported. And I consider that Ms Higgins is right in her submission that in the case of a child with a dual ethnic background, that factor requires to be closely examined. She is also right in submitting that the childs interests must rank as a primary consideration see, in particular, ZH (Tanzania) v Secretary of State for the Home Department [2011] 2 AC 166. The question whether sufficient consideration of the article 8 issues which arise in a particular case can take place through the application of the immigration rules has been thoroughly discussed in the associated case of Ali. But that is not an issue which requires to be revisited here because what is at stake is whether the Secretary of State was in fact provided with sufficient material on which to make a proper judgment on the article 8 rights of the appellant and his children. All the evidence on this issue leads unmistakably to the conclusion that the appellant did not enjoy any relationship with either of his children and that they had led lives which were wholly untouched by the circumstance that he was their father. While, of course, the possibility of such a relationship developing was a factor to be considered, in this instance, the material available to the Secretary of State could admit of no conclusion other than that it was unlikely in the extreme. The lately produced information that the mother of his son might re consider contact between them partakes of a last throw of a desperate dice and was not, in any event, provided to the Secretary of State before the decision was taken. The question of the risk of the appellants re offending was, of course, one of the factors to be considered but his criminal behaviour after the offences in 2005 did not augur well in that assessment. True it is that these were associated with disputes about contact with his children but, at the least, they spoke to his propensity to indulge in offending behaviour if he failed to get his way. I cannot accept, therefore, that the Secretary of State was obliged to make yet further inquiries in relation to the appellant and his children beyond those which had already taken place. As the Court of Appeal observed, these children did not require the disruption of further investigation in circumstances where a court with appropriate jurisdiction had made important decisions in relation to their welfare. Conclusion The appeal must be dismissed. LADY HALE: I agree entirely that this appeal must be dismissed for the reasons given by Lord Kerr. I add a few words only because the focus of the argument on behalf of the appellant was that the Secretary of State should have undertaken her own independent enquiries into the best interests of his two children before deciding to deport him. Ms Higgins is of course right to say that where children will be affected by a deportation or removal decision, their best interests must be treated as a primary consideration, and considered separately from those of the adults involved and from the public interest. This duty stems from two sources in domestic law. First, section 55 of the Borders, Citizenship and Immigration Act 2009 requires the Secretary of State to make arrangements for ensuring that her own functions in relation to immigration, asylum and nationality, and those of her immigration officers, are discharged having regard to the need to safeguard and promote the welfare of children who are in the United Kingdom. The aim was to reflect in United Kingdom law the effect of article 3.1 of the United Nations Convention on the Rights of the Child, which requires that in all actions concerning children, including those by administrative bodies, the best interests of the child shall be a primary consideration. But even without section 55, there is a second source of the obligation, in section 6(1) of the Human Rights Act 1998, which requires public authorities to act compatibly with the rights contained in the European Convention on Human Rights, including the right to respect for family life contained in article 8; this has been interpreted by the European Court of Human Rights to include the duty in article 3(1) of the United Nations Convention: see Neulinger v Switzerland (2010) 54 EHRR 1087 and ZH (Tanzania) v Secretary of State for the Home Department [2011] UKSC 4; [2011] 2 AC 166. So it is quite correct to say that children must be recognised as rights holders in their own right and not just as adjuncts to other peoples rights. But that does not mean that their rights are inevitably a passport to another persons rights. The problem in this case is that it is the appellant who is treating the children as a passport to his own rights, rather than as rights holders in their own right. His daughter was nearly 15 when the deportation order was made (and is now nearly 19). Her parents separated before she was two years old. Her contact with him ended when she was five. Legal proceedings when she was ten ended in an order for indirect contact only and a further order (which is not often made) that her father should not be able to make further applications about her upbringing without the permission of the court. It can be assumed, therefore, that there are good reasons for not requiring the mother to allow direct contact between father and daughter. Without a very good reason to the contrary, the Secretary of State is entitled to treat the orders of the family courts as reflecting what is indeed in the best interests of the children concerned. After all, a family court deciding the future of a child has to make the welfare of the child, not only a primary consideration, but its paramount consideration. Family courts are supposed to know about the best interests of children and they have appropriate investigative resources to make their own independent enquiries should they need to do so. The idea that the Secretary of State should make her own investigation of matters which have already been investigated by the family courts is not only completely unrealistic, it is also contrary to our understanding that the uncertainty and anxiety generated by repeated investigations and disputes about their future is usually bad for children. Of course it is good for children, especially children of mixed ethnicity, to have a relationship with both their parents. But is also good for them to have peace and stability. If Sarah Jayne wishes to establish a closer relationship with her father, she will be able to do this for herself, and it will make little difference to their indirect contact whether he is in the United Kingdom or in Tunisia. Tunisia has long been a popular holiday destination for people from this country and hopefully will become so again. The appellants son was aged six when the deportation order was made and is now ten. The relationship between his parents broke down shortly after his birth. The appellant claims to have had regular contact with his son until 2010, when the child was four, but it stopped because his mother wanted it to take place in their home. We do not know whether this had anything to do with his offending behaviour around that time. The appellant claims that he was unable to leave his own home because of depression. We do not know whether this was of a nature or degree to excuse or explain his failure to visit thereafter. He claimed that he had brought proceedings to try and obtain contact with his son, but in 2013 the First tier Tribunal found that he had not produced credible evidence of contact proceedings relating to either child or that he had any input into their lives, and in the Upper Tribunal it was conceded that there were no current contact proceedings. Nothing has been produced to suggest that the appellant has been making a meaningful contribution to his sons life. His son also requires peace and stability. He too can establish a relationship with his father in future should he wish to do so. In my view, the Secretary of States officials deserve credit for the patience and perseverance with which they conducted their inquiries into the appellants family circumstances, to which the response was neither as speedy or as helpful as it might have been. There was nothing which should have prompted them to make further enquiries as to the best interests of the children. There is nothing at all to suggest that the best interests of these children require that their father should remain in the United Kingdom. Of course there will be cases where fuller inquiries are warranted or where the best interests of children do outweigh the public interest in deportation or removal. This is emphatically not one of them.

This is an appeal against an order for the deportation of a foreign criminal who has children who are citizens of and resident in the United Kingdom. The appellant was born in Tunisia. In 1996 he married a UK citizen and they had a daughter, born in Northern Ireland, in 1997. Shortly after the birth, the appellant joined them in Northern Ireland on a spousal visa. A year later he was granted indefinite leave to remain. He separated from his wife in 1999, although they have never divorced. In 2006 he had a son with a new partner, but the relationship broke down shortly after the birth. In 2008 the Family Court ordered that he could only have indirect contact with his daughter and that he must obtain the leave of the court before making any further applications for contact. He has not had any contact with his son since 2010. In 2005 the appellant was convicted of two counts of assault occasioning grievous bodily harm, for which he received concurrent sentences of 39 months and nine months imprisonment. Between 2008 and 2010 he was convicted of and sentenced for a series of further offences, including breach of a non molestation order, disorderly behaviour and assaulting a police officer. Following a further incident in 2011 he was convicted of disorderly behaviour, attempted criminal damage and resisting a police officer for which he received three concurrent sentences of five months imprisonment. In 2012 the Home Secretary sought the appellants deportation on account of his convictions. Following inquiries regarding the appellants family circumstances, a deportation order was issued. The appellant appealed claiming that his deportation would breach his and his childrens right to respect for private and family life under article 8 of the European Convention on Human Rights and that the Secretary of State had failed to take sufficient account of the best interests of his children. His appeals to the First tier Tribunal, Upper Tribunal and Court of Appeal were dismissed. The Supreme Court unanimously dismisses Mr Makhloufs appeal. Lord Kerr gives the lead judgment with which the other Justices agree. Lady Hale gives a concurring judgment. Where a decision is taken about the deportation of a foreign criminal who has children residing in the United Kingdom, separate consideration of their best interests is required, especially if they do not converge with those of the parent to be deported and particularly in the case of a child with dual ethnic background. The childs interests must rank as a primary consideration [40]. The question of whether sufficient consideration of the article 8 issues which arise in a particular case can take place through the application of the immigration rules has been thoroughly discussed in the associated case of Ali v Secretary of State for the Home Department [2016] UKSC 60. But the issue in this case is simply whether the Secretary of State was in fact provided with sufficient material on which to make a proper judgment on the article 8 rights of the appellant and his children [41]. All the evidence on this issue leads unmistakeably to the conclusion that the appellant did not enjoy any relationship with either of his children and they led lives which were wholly untouched by the circumstance that he was their father. While the possibility of such a relationship developing was a factor to be considered, in this case the material available to the Secretary of State could admit of no conclusion other than it was unlikely in the extreme. The lately produced information that the mother of his son might re consider contact between them partakes of a last throw of a desperate dice [42]. The Secretary of State was therefore not obliged to make yet further inquiries in relation to the appellant and his children beyond those which had already taken place [44]. Lady Hale adds that children must be recognised as rights holders on their own account and not just as adjuncts to other peoples rights [47]. But that does not mean that their rights are inevitably a passport to another persons rights. The problem in this case is that it is the appellant who is treating the children as a passport to his own rights, rather than as rights holders in their own right. His daughter is now 19 and has had no contact with him since she was five [48]. Without a very good reason to the contrary, the Secretary of State is entitled to treat the orders of the family courts as reflecting what is indeed in the best interests of the children concerned. The idea that the Secretary of State should make her own investigation of matters which have already been investigated by the family courts is not only unrealistic, but would also create uncertainty and anxiety for the children. Of course it is good for children, especially children of mixed ethnicity, to have a relationship with both of their parents. But it also good for them to have peace and stability. The daughter is not prevented from establishing a relationship with her father by him living in Tunisia [49]. There was no credible evidence that the appellant had sought contact with his son and nothing to suggest that the appellant has been making a meaningful contribution to his life. He too requires peace and stability and can establish a relationship with his father in future should he wish to do so [50]. There is nothing at all to suggest that the best interests of these children require that their father should remain in the United Kingdom. Of course there will be cases where fuller inquiries are warranted or where the best interests of children do outweigh the public interest in deportation or removal, but this is emphatically not one of them [51].

This appeal raises a short question on the operation by the respondent Commissioners (HMRC) of the Construction Industry Scheme under the Finance Act 2004 (the Act). The appellant company (the company) was registered for gross payment under the scheme. As is now accepted, it failed to comply with the requirements of the scheme without reasonable excuse. In consequence, on 30 May 2011, HMRC exercised their power under the Act to revoke its registration. In doing so, they took no account of the likely effect of their action on the companys business. The company contends that this represented a failure to take account of a material consideration, in breach of both domestic public law, and of the European Convention on Human Rights (the Convention). Factual background The facts are set out in detail in the judgment of Henderson LJ in the Court of Appeal: [2016] EWCA Civ 1160. A summary is sufficient for present purposes. The company is a family run business of water well engineers, started in 1972. In 2011 it had about 25 employees, and an annual turnover of about 4.4m, much of it derived from contracts with a small number of major customers. It was first registered for gross payment in about 1984, and its registration was regularly reviewed thereafter. It first failed a review in July 2009, when its registration was cancelled, and the same occurred in June the following year; but on both occasions the registration was reinstated by HMRC following an appeal. Between August 2010 and March 2011 the company was late in making PAYE payments on seven occasions, the delays being generally of a few days, but on one occasion of at least 118 days. This led to a further review and to the cancellation which is the subject of the present proceedings. The companys appeal succeeded before the First tier Tribunal (FTT) ([2012] UKFTT 639 (TC)), but that decision was not upheld by the Upper Tribunal ([2015] UKUT 0392 (TCC)) or the Court of Appeal ([2016] EWCA Civ 1160). It now appeals to this court with permission given by the court itself. By section 67(5) of the Act, the cancellation does not take effect until the final determination of the appeal. The FTT accepted the companys evidence that major customers would be likely to withdraw work if it lost its gross payment status. It found that at the time of HMRCs decision cancellation would have been likely to lead to the loss of around 60% of the companys turnover, and the dismissal of about 80% of its employees, and that recovery would be expected to take about ten years. The FTT also recorded that in July 2011 significant changes were made to the companys PAYE systems, with the result that payments thereafter were always made on time. We have no information as to what has happened to the business in the period since 2011, nor as to the likely effect of the loss of its status if this appeal fails, and the cancellation now takes effect. In that event, the company would not be able to re apply for one year after the cancellation takes effect: section 66(8). The legislation As Henderson LJ noted, the overall structure and purpose of the legislation has remained broadly the same since the inception of the statutory scheme some 45 years ago. He cited Ferris Js description of the background in Shaw v Vicky Construction Ltd [2002] EWHC 2659 (Ch); [2002] STC 1544: in 3. In the absence of the statutory provision with which this appeal is concerned Vicky would be entitled, like any other sub contractor, to be paid the contract price in accordance with its contract with the contractor without any deduction in respect of its own tax liability. However it became notorious that many sub contractors engaged industry the construction disappeared without settling their tax liabilities, with a consequential loss of revenue to the exchequer. 4. In order to remedy this abuse Parliament has enacted legislation, which goes back to the early 1970s, under which a contractor is obliged, except in the case of a sub contractor who holds a relevant certificate, to deduct and pay over to the Revenue a proportion of all payments made to the sub contractor in respect of the labour content of any sub contract. The amount so deducted and paid over is, in due course, allowed as a credit against the sub contractor's liability to the Revenue The relevant provisions in the present case are contained in the Finance Act 2004, Part 3 Chapter 3 Construction Industry Scheme. The main operative provisions are section 61, which provides for deductions on account of tax from contract payments as defined; and section 60 which excludes from the definition payments made to a person registered for gross payment when the payment is made. Registration of sub contractors is governed by sections 63 and 64. Section 63 provides that if HMRC are satisfied that the relevant requirements of sections 63 and 64 are satisfied in respect of a company, it must be registered for gross payment; but, if not, it must be registered for payment under deduction. Henderson LJ rightly observed (para 23) that the registration provisions are highly prescriptive, HMRC having no discretion at this stage; and that payment under deduction is the default position. The detailed requirements for registration of a company are set out in Part 3 of Schedule 11. Again these requirements were rightly described by Henderson LJ as highly prescriptive (paras 27 28). Relevant in the present case is para 12 which sets out The compliance test. This generally requires the company to have complied, in the qualifying period of 12 months preceding the application, with all obligations imposed on it under the Tax Acts or the Taxes Management Act 1970. This is subject to certain exceptions prescribed by regulations for failures to be treated as satisfying the relevant condition (prescribed minor failures, as Henderson LJ described them) (para 12(2)). Also a company that has failed to comply is treated as satisfying the condition if HMRC are of the opinion that the company had a reasonable excuse for the failure to comply and that it complied without unreasonable delay after the excuse had ceased (para 12(3)). The company must also have paid required social security contributions during the qualifying period (para 12(4)); and have complied with specified obligations under the Companies Act 1985 (para 12(5)). Paragraph 13 enables the Treasury by order, subject to approval in draft by the House of Commons, to vary the conditions for registration for gross payment. Section 66 provides for cancellation of registration for gross payment: (1) The Board of Inland Revenue may at any time make a determination cancelling a persons registration for gross payment if it appears to them that if an application to register the person for gross (a) payment were to be made at that time, the Board would refuse so to register him, (b) he has made an incorrect return or provided incorrect information (whether as a contractor or as a sub contractor) under any provision of this Chapter or of regulations made under it, or (c) he has failed to comply (whether as a contractor or as a sub contractor) with any such provision As is common ground, the use of the word may in section 66(1) imports an element of discretion, by contrast with the mandatory words of section 63. The dispute is as to its scope. Where registration for gross payment is cancelled under section 66(1), the person must be registered for payment under deduction (section 66(6)). As already noted, he may not reapply for registration for gross payment for one year after the cancellation takes effect (section 66(8)), but the effect of the cancellation is suspended pending determination of an appeal (section 67(5)). By section 67 a person aggrieved by cancellation of registration may appeal by notice given to HMRC within 30 days. Provision for HMRC review or determination by the tribunal are set out in sections 49Aff of the Taxes Management Act 1970. A favourable conclusion on HMRC review is treated as if it were an agreement for settlement under section 54, and so equivalent to a determination of the appeal (section 49F(2)). As already seen, the first two cancellations were disposed of in this way. However, on the third occasion, HMRC maintained its position and the appeal accordingly was referred to the tribunal. Section 102 of the 1970 Act gives HMRC a general power in their discretion [to] mitigate any penalty. It is not however suggested that cancellation of registration can be treated as a penalty within this provision. under Article 1 of the First Protocol to the Convention (A1P1): In the alternative, the company relies on its right to protection of property Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law. The preceding provisions shall not, however, in any way impair the right of a state to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties. The decisions below As already noted, the FTT allowed the appeal, holding that HMRC had been wrong not to take account of the likely impact on the companys business. The tribunal described section 66 as giving a general unfettered discretion to take account of the impact on a business of cancellation. It thought that HMRC must have itself have taken some account of such factors in its decisions on the two reviews, even though no specific reasons were given. It saw good reasons for the distinction between registration and cancellation, because of the serious implications of cancellation for an existing business (paras 60 62). As already noted, the Upper Tribunal and the Court of Appeal took a different view. It is unnecessary to repeat their detailed reasoning. Henderson LJ approach is encapsulated in the following passage: 60. As a matter of first impression, I cannot find any indication in this tightly constructed statutory scheme that Parliament intended HMRC to have the power, and still less a duty, to take into account matters extraneous to the CIS regime, when deciding whether or not to exercise the power of cancellation in section 66(1). By matters extraneous to the CIS regime I mean in particular, in the present context, matters which do not relate, directly or indirectly, to the requirements for registration for gross payment, and to the objective of securing compliance with those requirements. My preliminary view, therefore, is that consideration of the financial impact on the taxpayer of cancellation would fall well outside the intended scope of the power. He found nothing in the submissions to displace that first impression. In particular, he saw no difficulty in explaining the discretion given by section 66, as compared with the registration provisions, given the highly prescriptive nature of the regime: It seems to me entirely appropriate, and a substantial protection for the registered person, that HMRC should then be given a discretion whether or not to exercise the power of cancellation, even in cases where the condition in section 66(1)(a) is satisfied. The Upper Tribunal gave two examples, in para 64 of the UT Decision, quoted above, of cases where HMRC might properly exercise such discretion in the taxpayers favour, without travelling outside what I would regard as the proper scope of the power. It needs to be remembered, in this connection, that the reasonable excuse exception does not apply to all the requirements of the compliance test, and in the absence of any discretion even a single minor failure to pay national insurance contributions on the due date, or a minor failure to comply with one of the Companies Act requirements, would be fatal, even if there were a reasonable excuse for the non compliance. Similarly, the rigid structure of Regulation 32 itself leaves no scope for the exercise of any discretion, even if the relevant test was failed by a narrow margin, the amount involved was relatively small, and although (when viewed in isolation) there was no reasonable excuse for the non compliance, there was nevertheless good reason to suppose that it would not be repeated. I therefore remain unpersuaded that there is any need to broaden the scope of the discretion conferred by section 66(1) in order to provide it with any worthwhile content. (para 63) In respect of the alternative argument under the Convention, Henderson LJ noted (para 37) that it was common ground before the Court of Appeal that both registration for gross payment, and the contractual right to payment of the contract price, constituted possessions for the purposes of A1/P1. However, he did not accept that any interference with those possessions was disproportionate: Given the practical and cash flow advantages of registration for gross payment, it is always probable that cancellation of the registration will seriously affect the taxpayer's business. Far from being exceptional, such consequences are likely to be the norm, and taxpayers must be taken to be well aware of the risks to their business which cancellation will bring. In individual cases, of which this may perhaps be one, the result may seem harsh; but a degree of harshness in a regime which is designed to counter tax evasion, and where continued compliance is within the power of the sub contractor, cannot in my view be characterised as disproportionate. Both deterrence, and ease of compliance, are important factors which help to make the CIS scheme as a whole clearly compliant with A1P1 (para 80) The submissions in this court The company (by Mr Chacko and Miss Boyd of Counsel) argue that the discretion given by section 66 should be taken at face value. It is in terms unfettered, and there is nothing to indicate an intention to exclude consideration of the practical effect of cancellation. Absent a contrary indication, they submit, the consequences of the exercise of a power must be assumed to be a relevant consideration. They contrast, for example, Schedule 56, para 9 to the Finance Act 2009, which provides for mitigation of certain penalties in special circumstances, but specifically excludes consideration of the taxpayers ability to pay. If Parliament had wished to limit the scope of the discretion under section 66 it would have used express words. There was no logical dividing line between the scope of the discretion accepted as permissible by the Court of Appeal, and that argued for by the company. Nor was a broader discretion inconsistent with the proper exercise of HMRCs statutory functions, as illustrated for example by the wide discretion accepted as appropriate in the context of customs penalties: see Denley v Revenue and Customs Comrs [2017] UKUT 340 (TCC), paras 13 14. Such a discretion also reflects the well established proposition that removal of an advantageous trading status has a more serious impact on a business than refusal to grant the status in the first place. They cite the common law principle of proportionality as applied in the well known case of R v Barnsley Metropolitan Borough Council, Ex p Hook [1976] 1 WLR 1052, 1057, where Lord Denning MR said: [T]here are old cases which show that the court can interfere by certiorari if a punishment is altogether excessive and out of proportion to the occasion It is quite wrong that the Barnsley Corporation should inflict upon [Mr Hook] the grave penalty of depriving him of his livelihood. That is a far more serious penalty than anything the magistrates could inflict. He is a man of good character, and ought not to be penalised thus In the alternative, as in the courts below, they rely on A1/P1. As was accepted before the Court of Appeal, they submit that cancellation clearly involves an interference with the possessions represented by (at least) the sub contractors entitlement to the full contract price or the bundle of rights inherent in registration. Although the article preserves the right of the state to enforce such laws as it deems necessary to secure the payment of tax, that is still subject to the requirement of proportionality. They rely on the words of Lord Phillips MR in Lindsay v Customs and Excise Comrs [2002] EWCA Civ 267; [2002] 1 WLR 1766, para 52: Under Article 1 of the First Protocol to the Convention such deprivation will only be justified if it is in the public interest. More specifically, the deprivation can be justified if it is to secure the payment of taxes or other contributions or penalties. The action taken must, however, strike a fair balance between the rights of the individual and the public interest. There must be a reasonable relationship of proportionality between the means employed and the aim pursued I would accept [counsels] submission that one must consider the individual case to ensure that the penalty imposed is fair. However strong the public interest, it cannot justify subjecting an individual to an interference with his fundamental rights that is unconscionable. They rely to the same effect on the necessary balance as described by Lord Reed in Bank Mellat v Her Majestys Treasury (No 2) [2014] AC 700, para 74: whether, balancing the severity of the measures effects on the rights of the persons to whom it applies against the importance of the objective, to the extent that the measure will contribute to its achievement, the former outweighs the latter. This it is submitted can only be done by assessing the severity of the consequences for the particular individual in question, even if the legislative scheme taken as a whole is proportionate. For HMRC Mr Eadie QC generally supports the reasoning of the Court of Appeal. In respect of the Convention, he does not accept that cancellation involves an interference with a possession for the purposes of A1P1. The subcontractors right to payment of the contract price is in law subject to the limits imposed by the statutory scheme. Similarly, any benefits from registration flow from the statutory scheme and are subject to its conditions, including the risk of cancellation. He relies on the distinction drawn by the Strasbourg court in JA Pye (Oxford) Ltd v United Kingdom (2006) 43 EHRR 3 (the same point did not arise in the Grand Chamber: (2008) 46 EHRR 45). At para 51 the court considered the circumstances in which a legislative provision is to be regarded as an incident of, or limitation on, the applicants property right at the time of its acquisition. It explained: Article 1 does not cease to be engaged merely because a person acquires property subject to the provisions of the general law, the effect of which is in certain specified events to bring the property right to an end, and because those events have in fact occurred. Whether it does so will depend on whether the law in question is properly to be seen as qualifying or limiting the property right at the moment of acquisition or, whether it is rather to be seen as depriving the owner of an existing right at the point when the events occur and the law takes effect. It is only in the former case that article 1 may be held to have no application. (Emphasis added) The present case, Mr Eadie submits, comes clearly into the former category. The power of cancellation for non compliance is an intrinsic part of the possession from the moment of acquisition; its exercise cannot engage the article. In any event, he submits, it is clearly within the wide margin allowed by the Convention in fiscal matters: see Gasus Dosier und Frdentechnik GmbH v Netherlands (1995) 20 EHRR 403, para 59. National & Provincial Building Society v United Kingdom (1997) 25 EHRR 127, para 80. The Strasbourg court has also made clear that the margin may extend to the adoption by the state of general measures which apply to pre defined situations regardless of the individual facts of each case even if this might result in individual hard cases: Animal Defenders International v United Kingdom (2013) 57 EHRR 21, para 106. Discussion Attractively though the appeal has been argued, I have no doubt that the Court of Appeal reached the right conclusion, substantially for the reasons they gave. Apart from the Convention, the companys submission comes down to a short point: that is, given the existence of a discretion in section 66, it must in the absence of any specific restriction be treated as an unfettered discretion. That to my mind overlooks the basic principle that any statutory discretion must be exercised consistently with the objects and scope of the statutory scheme. Like Henderson LJ, I cannot read the power as extending to matters which do not relate, directly or indirectly, to the requirements for registration for gross payment, and to the objective of securing compliance with those requirements (para 60). He rightly emphasised the highly prescriptive nature of the scheme. This starts with the narrowly defined conditions for registration in the first place, among which the record of compliance with the tax and other statutory requirements is a mandatory element, allowing no element of discretion. The same conditions are brought into the cancellation procedure by section 66. The mere fact that the cancellation power is not itself mandatory is unsurprising. Some element of flexibility may be desirable in any enforcement regime to allow for cases where the failure is limited and temporary (even if not within the prescribed classes) and poses no practical threat to the objectives of the scheme. It is wholly inconsistent with that tightly drawn scheme for there to be implied a general dispensing power such as implied by the companys submissions. Turning to A1/P1 I see force in Mr Eadies submission that, even accepting that rights conferred by registration amount to possessions, they cannot extend beyond the limits set by the legislation by which they are created. However, I find it unnecessary to rest my decision on that point, since I have no doubt that the Court of Appeal were right to hold that any interference was proportionate. Once it is accepted that the statute does not in itself require the consideration of the impact on the individual taxpayer, there is nothing in A1/P1 which would justify the court in reading in such a requirement. Registration is a privilege conferred by the legislation, which has significant economic advantages, but it is subject to stringent conditions and the risk of cancellation. The impact on the company is no different in kind from that which is inherent in the legislation. I agree entirely with Henderson LJ that the exercise of the power within the scope of the statutory framework comes well within the wide margin of appreciation allowed to the state for the enforcement of tax. For these reasons, I would dismiss the appeal.

This appeal concerns the legislation which governs the Construction Industry Scheme (the CIS), which was introduced in order to counter widespread tax evasion by sub contractors in the construction industry. It requires certain contractors to deduct and pay over to Her Majestys Revenue and Customs (HMRC) a proportion of all payments made to the sub contractor in respect of labour under a sub contract. The amount deducted and paid over is, in due course, allowed as a credit against the sub contractors liability to HMRC. However, sub contractors with statutory certificates of gross payment registration are exempt from those requirements. That tends to make any sub contractor holding a certificate a more attractive party for a contractor to deal with. It also improves the sub contractors cash flow by enabling the sub contractor to receive the contract price without deduction. The appellant company (the company) is a family run business of water well engineers, started in 1972. In around 1984 the company registered for gross payment under the CIS. It then underwent regular reviews to determine whether it ought to retain its registration certificate. It first failed a review in July 2009, when its registration was cancelled. The same occurred in June 2010. On both occasions the registration was reinstated by HMRC following an appeal. Between August 2010 and March 2011 the company was late in making PAYE payments on seven occasions. The delays were generally of a few days, but on one occasion of at least 118 days. It is accepted that the company failed to comply with the requirements of the CIS without reasonable excuse. At that time the company had about 25 employees and an annual turnover of about 4.4m, much of it derived from contracts with a small number of major customers. A further review followed. On 30 May 2011 HMRC, acting under section 66(1) of the Finance Act 2004, cancelled the companys registration. In doing so, HMRC took no account of the consequences for the companys business. The companys appealed to the First tier Tribunal (FTT) which accepted the companys evidence that the cancellation, once it took effect, would have had a seriously detrimental impact on the company. The FTT allowed the companys appeal, holding that HMRC had been wrong not to take account of the likely impact on the companys business. However, that decision was overturned by the Upper Tribunal with which the Court of Appeal agreed. The company now appeals to the Supreme Court. The Supreme Court unanimously dismisses the appeal. Lord Carnwath gives the judgment, with which Lord Mance, Lord Sumption, Lord Lloyd Jones and Lord Briggs agree. The statutory requirements for registration for gross payment are highly prescriptive. They are contained in the Finance Act 2004. They include a requirement that the applicant for registration complied, within the previous 12 months, with various tax obligations subject to an exception for non compliance with reasonable excuse. Section 66(1) of the Act provides that the Board of Inland Revenue may at any time make a determination cancelling a persons registration for gross payment where certain conditions are satisfied. The word may imports an element of discretion. The dispute is as to the scope of that discretion [5 8]. The company makes two arguments. First, that the discretion under section 66 is unfettered in its terms, which do not exclude consideration of the consequences of cancellation for the company. The company argues that, without any indication to the contrary, the impact on the company must be a relevant consideration [16 17]. Second, the company relies on right to protection of property under Article 1 of the First Protocol to the European Convention on Human Rights (A1/P1). It argues that cancellation clearly involves an interference with the possessions represented by (at least) the sub contractors entitlement to the full contract price or the bundle of rights inherent in registration [18]. A1/P1 provides: Every natural or legal person is entitled to the peaceful enjoyment of his possessions No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law. The preceding provisions shall not, however, in any way impair the right of a state to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties. HMRC generally adopt the reasoning of the Court of Appeal and do not accept that cancellation involves an interference with a possession for the purposes of A1/P1. Alternatively, HMRC rely on the wide margin afforded to Member States under the Convention in fiscal matters [19 20]. The Supreme Court holds that the Court of Appeal was correct. Apart from the Convention, the companys first argument, that the discretion under section 66 is unfettered, overlooks the basic principle that any statutory discretion must be exercised consistently with the objects and scope of the statutory scheme. The discretion does not extend to consideration of matters which relate neither to the requirements for registration for gross payment, nor to the objective of securing compliance with those requirements. The scheme is highly prescriptive, setting out narrowly defined conditions for registration in the first place, including a record of tax compliance. The same conditions are brought into the cancellation procedure by section 66. The mere fact that the cancellation power is discretionary rather than mandatory is unsurprising. Some element of flexibility allows for cases where the failure is limited, temporary and poses no practical threat to the objectives of the CIS. It is wholly inconsistent with that tightly drawn scheme for there to be implied a general dispensing power [21 22]. Turning to A1/P1, there is force in the argument of HMRC that, even if the rights conferred by registration amount to possessions, they cannot extend beyond the limits set by the legislation by which they are created. However, it is unnecessary to decide the appeal on that basis, since the Court of Appeal correctly held that any interference with A1/P1 rights was proportionate. Once it is accepted that the statute does not in itself require the consideration of the impact on the individual taxpayer, there is nothing in A1/P1 which would justify the court in reading in such a requirement [23].

This appeal concerns the Hague Convention on the Civil Aspects of International Child Abduction (25 October 1980) (the Abduction Convention). It raises general questions relating to: the place which the habitual residence of the child occupies in the (1) scheme of that Convention, and (2) whether and when a wrongful retention of a child may occur if the travelling parent originally left the home State temporarily with the consent of the left behind parent or under court permission, and the agreed or stipulated time for return has not yet arrived. In addition, the facts of the present case raise particular questions whether the trial judges conclusions were properly open to him upon: (a) the habitual residence of the children in the case; and (b) whether a wrongful retention in fact occurred, and if so when. The 1980 Hague Abduction Convention The Abduction Convention is in force for some 97 States. Its preamble records the desire of those States: to protect children internationally from the harmful effects of their wrongful removal or retention and to establish procedures to ensure their prompt return to the State of their habitual residence Article 1 states the objects of the Convention as follows: to secure the prompt return of children wrongfully (a) removed to or retained in any Contracting State; and (b) to ensure that rights of custody and of access under the law of one Contracting State are effectively respected in the other Contracting States. The general scheme of the Convention is to enable a left behind parent to make this application in the State to which a child has been taken, seeking return of the child. States are required to set up Central Authorities to transmit and receive such applications. Where the removal from the home State, or the retention in the destination State is wrongful, the courts of the recipient State are required by article 12 to order the return of the child forthwith. Apart from a saving provision in article 20 which permits refusal to return where such would amount to a breach of the requested States fundamental principles of human rights, that obligation to return is subject to very limited exceptions which, if present, enable (but do not require) return not to be ordered. Those exceptions are found in article 13 (rights of custody not being exercised; consent or acquiescence of the left behind parent; grave risk that return would expose the child to physical or psychological harm or would place him/her in an intolerable situation; childs objections), and in article 12 (child has been in the recipient State for one year from the wrongful removal or retention and is now settled there). Where prompt notice of wrongful removal or retention is received, the recipient State is required by article 16 to abstain from any decision on the merits of rights of custody, unless it is determined that return is not to be ordered. Moreover, States are required to act fast on any request. By article 11 an initial period of six weeks is stipulated, and the applicant or his Central Authority are entitled to an explanation from the recipient State if that period is exceeded. Thus the return is summary and its object is to enable merits decisions as to the childs future to be made in the correct State, rather than in the State to which the child has been wrongfully taken, or in which he/she has been wrongfully retained. The general purposes and scheme of the Convention are expanded upon in an explanatory report by Professor Elisa Prez Vera on the work of the drafting conference, which report accompanied the original framing of the Convention; it is accordingly an aid to construction recognised in international law and in particular under article 32 of the Vienna Convention on the Law of Treaties (1969). In England and Wales the Convention is given domestic effect by the Child Abduction and Custody Act 1985, section 1(2). Four key concepts underlie the Convention: wrongful removal, wrongful retention, rights of custody and return. The principal provisions which require attention in the present case, apart from the preamble and article 1, set out above, are articles 3, 4, 5, 12 and 16. So far as relevant, they say: Article 3 The removal or the retention of a child is to be considered wrongful where (a) it is in breach of rights of custody attributed to a person, an institution or any other body, either jointly or alone, under the law of the State in which the child was habitually resident immediately before the removal or retention; and (b) at the time of removal or retention those rights were actually exercised, either jointly or alone, or would have been so exercised but for the removal or retention. Article 4 The Convention shall apply to any child who was habitually resident in a Contracting State immediately before any breach of custody or access rights. The Convention shall cease to apply when the child attains the age of 16 years. Article 5 For the purposes of this Convention [rights of access] (a) rights of custody shall include rights relating to the care of the person of the child and, in particular, the right to determine the child's place of residence; (b) Article 12 Where a child has been wrongfully removed or retained in terms of article 3 and, at the date of the commencement of the proceedings before the judicial or administrative authority of the Contracting State where the child is, a period of less than one year has elapsed from the date of the wrongful removal or retention, the authority concerned shall order the return of the child forthwith. The judicial or administrative authority, even where the proceedings have been commenced after the expiration of the period of one year referred to in the preceding paragraph, shall also order the return of the child, unless it is demonstrated that the child is now settled in its new environment. Article 16 After receiving notice of a wrongful removal or retention of a child in the sense of article 3, the judicial or administrative authorities of the Contracting State to which the child has been removed or in which it has been retained shall not decide on the merits of rights of custody until it has been determined that the child is not to be returned under this Convention or unless an application under this Convention is not lodged within a reasonable time following receipt of the notice. The facts The mother, although born in Canada, was brought up in England and is originally of British nationality. The father is Australian. Mother went to live in Australia in 2008. There she met, and later married, the father. She took Australian citizenship in 2014 and so now has dual British/Australian nationality. Two children were born to them in 2012 and 2014. By the end of 2014 the marriage was in difficulties. Mother was on maternity leave from her job at the time. She told Father that she wanted to make a trip to England with the children before going back to work. Although initially reluctant, he agreed to an eight week visit. Mother and the children came to England on 4 May 2015 with return tickets then scheduled for 24 June. They went to stay with the maternal grandmother, where they have since remained. Discussions between Mother and Father then resulted in Father agreeing to an extension of the eight week visit. Initially, Father agreed to a four week extension. But then, on 28 June 2015 he sent Mother an email which said: For the happiness of yourself & the children & for moving on with our lives I am in agreement that u n the children stay in the UK for a year. That email left open whether the year ran from its date or from Mothers first arrival six or seven weeks earlier. The difference does not affect the outcome of the present dispute, but it is relevant that Father raised the question in emails to Mother whether she intended to return in May or June 2016. She did not answer the question. On the basis of the extension she gave notice to her Australian employer and looked for work in England. In September 2015 she enrolled the older child at a local pre school. The children had entered England on six month visitor visas, so steps needed to be taken to regularise the longer stay now contemplated. What Mother then did loomed large at the hearing before the judge. Without telling Father she applied on 2 November 2015 for British citizenship for the children. She engaged solicitors to make the application. Those solicitors wrote on her behalf to the United Kingdom immigration authorities on 4 November 2015. In the course of a long letter they asserted that the marriage had irretrievably broken down, that Mother had been the object of repeated domestic abuse which had, moreover affected the elder child adversely, that she had been effectively forced not to return to Australia in order to safeguard herself and the children and that the children could not return to Australia because there was nowhere safe for them to go. The letter added: It cannot be in doubt that the childrens centre of life is, and will be, in the UK where the children are registered as requested. Meanwhile in continuing correspondence between the parents, Father pressed Mother on her expected date of return. On 11 February 2016 she wrote saying that she did not know what her plans were but Short term I will not be returning in May. She added I will not base my return to Australia at your demand. Later, Father referred her to the Abduction Convention and instructed solicitors who wrote formally to ask Mother when she planned to return. She replied in June 2016: Thank you for allowing me the time to seek professional advice I can confirm that I intend to remain in the UK for the short term. In due course both parents gave oral evidence at the hearing before the judge of Fathers application under the Abduction Convention. By then it was accepted that Mother did not propose to return. The issue of when she had so decided was much in contention. The judges conclusions on the topic are considered below: [2016] EWHC 3535 (Fam). But Mothers own case was that by April 2016 she had felt that we wouldnt be going back. That meant that on any view there had been a decision not to return before the expiry of the agreed year of stay in England. That gives rise to the second general question in this case, namely: whether and when such a decision can make the retention in the destination country wrongful for the purposes of the Abduction Convention before the expiry of any agreed or sanctioned term of residence there. The judge also had to make findings as to the place of the childrens habitual residence. The details of his conclusions are set out below, but he found that they were habitually resident in England and Wales by at the latest the end of June 2016, which was the last possible date for the expiry of the agreed year of stay. He added that in his view it was eminently arguable that they had acquired habitual residence significantly before that date. Those findings give rise to the first general question in this case, namely: what is the effect on an application under the Abduction Convention if the child has become habitually resident in the destination (requested) State before the act relied on as a wrongful removal or retention occurs. The significance of the two general questions In the simple paradigm case of wrongful removal, one parent will have taken the child from the State where s/he is habitually resident to a destination State. Similarly, in the simple paradigm case of wrongful retention, one parent will have travelled with the child from the State of habitual residence to the destination State, for example for an agreed fortnights holiday (and thus without the removal being wrongful), but will then wrongfully have refused to return. In each of those paradigm cases, the child will have remained habitually resident in the home State. An application under the Abduction Convention will be made in the destination (or requested) State for the return of the child to the State of habitual residence. The return will be a summary one, without investigation of the merits of any dispute between the parents as to custody, access or any other issue relating to the upbringing of the child (article 16). Such merits decisions are for the courts of the State of the childs habitual residence. In some cases, however, it is possible that by the time of the act relied upon as a wrongful removal or retention, the child may have acquired habitual residence in the destination State. It is perhaps improbable in the case of removal, but it is not in the case of retention. It may particularly happen if the stay in the destination State is more than just a holiday and lasts long enough for the child to become integrated into the destination State. It is the more likely to happen if the travelling parent determines, however improperly, to stay, and takes steps to integrate the child in the destination State. Even in the case of wrongful removal it may be possible to imagine such a situation if, for example, there had been successive periods of residence in the destination State, followed by a removal from the State of origin which infringed the rights of custody of the left behind parent. In England and Wales at least, this possibility did not in practice arise in the past, since it was regarded as axiomatic that one parent could not by unilateral action alter the habitual residence of the child. This proposition dated from a dictum of Lord Donaldson MR in In re J (A Minor) (Abduction: Custody Rights) [1990] 2 AC 562, 572, and the decision of Wall J in In re S (Minors) (Child Abduction: Wrongful Retention) [1994] Fam 70, which was approved by the Court of Appeal in In re M (Abduction: Habitual Residence) [1996] 1 FLR 887, 892, and, as Baroness Hale explained in A v A (Children: Habitual Residence) [2014] AC 1 at para 39, it was thereafter taken for granted. Such a proposition is, however, not generally adopted in other countries, including the United States, sits uneasily with the equally axiomatic principle that habitual residence is a question of fact, not law, and is difficult to accommodate within the European approach which requires an examination of integration, as exemplified in Proceedings brought by A (Case C 523/07) [2010] Fam 42 and Mercredi v Chaffe (Case C 497/10PPU) [2012] Fam 22, and which is binding on this country via Council Regulation (EC) No 2201/2003 (Brussels II Revised): see the analysis of Baroness Hale in A v A. It was recognised in In re H (Children) [2015] 1 WLR 863 that such a rule could not survive. If the habitual residence of the child may have changed to the destination State by the time of the wrongful act of removal or retention relied upon, then it becomes necessary to know whether the summary procedure of the Abduction Convention remains available in such a case or does not. Hence the first general question. If the answer is that it is not available, because the Abduction Convention pre supposes an application made in a destination State which is not the State of habitual residence, then the second general question becomes of importance. It becomes important because deliberate acts aimed at integrating the child in the destination State may well be undertaken by the travelling parent once he has decided not to honour his obligation to return to the State of origin. It will then matter whether such acts, or other manifestations of his decision, can themselves amount to wrongful retention. If they can, then wrongful retention may occur before any change of habitual residence has been achieved and whilst the child is still habitually resident in the State of origin. If they cannot, and wrongful retention cannot occur until the day of agreed return arrives, it may be too late for any application under the Abduction Convention, because the same acts which derive from and accompany the decision not to return may themselves have resulted in the child becoming habitually resident in the destination State. The first general question: habitual residence The first question is accordingly this: if by the time of the act relied on as wrongful removal or retention the child is habitually resident in the State where the application for return is made, is summary return under the Abduction Convention still available or not? This question did not arise in either of the courts below, where everyone proceeded on the assumption that the answer was no. It arose in the course of argument in this court, and we have had the benefit not only of some immediate oral submissions, but of considered post hearing written submissions from both parties and from the International Centre for Family Law, Policy and Practice as intervener. The argument that summary return under the Abduction Convention remains available runs as follows: (a) there is no express statement in the Convention that the remedy of summary return is available only where at the time of the act relied on as wrongful the child either remains habitually resident in the State of origin or is not habitually resident in the requested State; (b) on the contrary, article 3 refers to habitual residence only in order to identify the proper law that is to say to identify the law which determines whether a given act is wrongful (because it is in breach of rights of custody) or not; (c) therefore, if the child starts by being habitually resident in State A, but has by the time of the act relied on as wrongful become habitually resident in State B, all that article 3 requires is that you look to the law of State B to decide whether the act was wrongful or not; that is so whether State B is the requested State, or some intermediate State where the child has become habitually resident before arriving in the requested State; (d) once it has been decided that the act constituted either wrongful removal or wrongful retention, the Convention takes the court to article 12, which requires an order for return, subject to the limited exceptions contained in that article and article 13; (e) moreover, it is noticeable that article 12, in providing for an order for return, does not specify that return must be to the state of the childs habitual residence; it could be to any State; this reinforces the conclusion that habitual residence does not govern the place where application for return may be made, but is only referred to in the Convention in order to provide which law is to determine wrongfulness. Accordingly, it is said, on facts such as those of the present case, if the childs habitual residence is in England by the time of the act relied on as wrongful retention, that simply means that it becomes English law which decides whether the retention was wrongful. If it is decided that it is wrongful, there can still be a return to Australia. This may be a possible construction if one has regard simply to the wording of articles 3 and 12. It is, however, not a persuasive construction if one takes into account the general scheme of the Convention. Nor is it the way that the Convention has been operated over the nearly 40 years of its life. Nor is this construction consistent with the way in which the Convention has been treated by subsequent multi lateral instruments in the general field of the conflict of laws in relation to disputes about the upbringing of children. By the time of the Abduction Convention, habitual residence was already established as the principal internationally recognised basis for according jurisdiction relating to the upbringing of children. At any rate by the time of the 1961 Hague Convention on the Protection of Infants, habitual residence was, together with in some respects the law of the childs nationality, the principal basis for jurisdiction (see article 1). By the time of the Abduction Convention, Professor Prez Veras report was saying (in para 19) that the Convention: rests implicitly on the principle that any debate on the merits of the question, ie on custody rights, should take place before the competent authorities in the State where the child had its habitual residence prior to its removal (See also para 66 which repeats the point.) Since then the principle has become even more firmly entrenched. The 1996 Hague Convention on Jurisdiction, Applicable Law, Recognition, Enforcement and Cooperation in respect of Parental Responsibility and Measures for the Protection of Children (the 1996 Convention) accords jurisdiction, by article 5, to the State for the time being of habitual residence, subject only to few qualifications. So, for states members of the European Union (EU), does Regulation 2201/2003 (Brussels II Revised) by article 8. The entire scheme of the Abduction Convention is to provide a summary remedy which negates the pre emptive force of wrongful removal or retention. The aim was also to defeat forum shopping. This is made clear by Professor Prez Veras report, especially at paras 14 15. 14. Now, even if the [left behind parent] acts quickly, that is to say manages to avoid the consolidation through lapse of time of the situation brought about by the removal of the child, the abductor will hold the advantage, since it is he who has chosen the forum in which the case is to be decided, a forum which, in principle, he regards as more favourable to his own claims. 15. To conclude, it can firmly be stated that the problem with which the Convention deals together with all the drama implicit in the fact that it is concerned with the protection of children in international relations derives all of its legal importance from the possibility of individuals establishing legal and jurisdictional links which are more or less artificial. In fact, resorting to this expedient, an individual can change the applicable law and obtain a judicial decision favourable to him. Admittedly, such a decision, especially one coexisting with others to the opposite effect issued by the other forum, will enjoy only a limited geographical validity, but in any event it bears a legal title sufficient to legalize a factual situation which none of the legal systems involved wished to see brought about. With that aim in mind, the framers of the Convention deliberately abjured a treaty which provided for recognition or enforcement of the decisions of the State of habitual residence. Paragraph 36 of the report makes this clear: 36. Secondly, the Convention is certainly not a treaty on the recognition or enforcement of decisions on custody. This option, which gave rise to lengthy debates during the first meeting of the Special Commission, was deliberately rejected. Due to the substantive consequences which flow from the recognition of a foreign judgment, such a treaty is ordinarily hedged around by guarantees and exceptions which can prolong the proceedings. Now, where the removal of a child is concerned, the time factor is of decisive importance . Hence the alternative scheme adopted, for mandatory summary return. Hence also the critical rule in article 16 that the courts of the requested State are to abstain from exercising any jurisdiction which they may have (for example based upon the presence of the child) to make a merits decision. This underlying rationale of the scheme of the Abduction Convention was recognised by this court in In re E (Children) (Abduction: Custody Appeal) [2011] UKSC 27; [2012] 1 AC 144. Baroness Hale and Lord Wilson observed at para 8: The first object of the Convention is to deter either parent (or indeed anyone else) from taking the law into their own hands and pre empting the result of any dispute between them about the future upbringing of their children. If an abduction does take place, the next object is to restore the children as soon as possible to their home country, so that any dispute can be determined there. The left behind parent should not be put to the trouble and expense of coming to the requested state in order for factual disputes to be resolved there. The abducting parent should not gain an unfair advantage by having that dispute determined in the place to which she has come. The whole point of the scheme adopted was to leave the merits to be decided by the courts of the place of the childs habitual residence. The preamble makes this clear in almost the first words of the Convention. If, however, the child has by the time of the act relied on as wrongful become habitually resident in the requested State, then that State will be the appropriate place for the merits of any custody dispute to be resolved. If the requested State is the habitual residence of the child, there can be no place for a summary return to somewhere else, without a merits based decision, still less for such to be mandatory. That would be so whether or not the removal or retention was, judged by the law of the requested State, as the State of habitual residence, wrongful, for even if it were, it would remain open to either party to ask the courts of that State to review the future plans for the upbringing of the child. This understanding of the scheme of the Abduction Convention is reflected in the provisions of both the 1996 Convention and Brussels II Revised. A large number of nations are party to these two multinational instruments, but not nearly so many as are party to the Abduction Convention. These two instruments are concerned, unlike the Abduction Convention, with recognition and enforcement. But they are scrupulous to ensure that wherever possible they are consistent with the Abduction Convention, whose scheme they very plainly seek to preserve. The 1996 Convention adopts, by article 7(2) a definition of wrongful removal and retention in the same words as article 3 of the Abduction Convention. Substantively, article 7(1) provides for cases of wrongful removal and retention a limited exception to the ordinary rule in article 5 that jurisdiction moves with the habitual residence of the child. In effect, the State of habitual residence immediately before the wrongful removal or retention keeps jurisdiction until not only habitual residence has shifted but also there has been an opportunity for the summary return provided for by the Abduction Convention. The effect, plainly intended, is to preserve the regime of the Abduction Convention, and in particular the mandatory summary return. But if, at the time of the wrongful act, the requested State had become the State of habitual residence, the extension by article 7(1) to the jurisdiction of the previous State of habitual residence would have no application and the requested State would have sole jurisdiction; in such an event, there could be no question of a mandatory summary return without consideration of the merits. Brussels II Revised adopts a similar structure to the 1996 Convention. article 2(11) provides a definition of wrongful removal and retention which, although not in identical words to article 3 of the Abduction Convention, achieves the same result, and in particular makes the test for wrongfulness the law of the State of habitual residence immediately before the act relied upon. Article 10 prolongs the jurisdiction of that State in the event of a wrongful removal or retention in much the same terms as does article 7 of the 1996 Convention. As with the 1996 Convention, the intention is plainly to preserve the regime of the Abduction Convention, and article 11 goes on to make supplemental provision for the handling of applications under it. It is revealing that it does so after introduction in the following terms: (1) Where a person [etc] having rights of custody applies to the competent authorities in a member state to deliver a judgment on the basis of [the Abduction Convention] in order to obtain the return of a child that has been wrongfully removed or retained in a member state other than the member state where the child was habitually resident immediately before the removal or retention, paragraphs 2 to 8 shall apply. (Emphasis supplied) Of course, this provision applies only as between States members which are of the EU. But there is no reason why such States alone should adopt a rule that the requested State must be a different one from the State of habitual residence immediately before the wrongful act. On the contrary, the aim is clearly to preserve the scheme of the Abduction Convention. The words other than the member state where the child was habitually resident immediately before the removal or retention plainly assume that this is the scheme implicit in the Abduction Convention. Recital 17 to the Regulation, which expresses the intention that the Abduction Convention should continue to operate, also assumes a difference between the State of habitual residence and the State requested to make a return order. There are other examples of legislative provisions making explicit the principle that return under the Abduction Convention presupposes return from a state other than that of habitual residence at the time of the wrongful act. In New Zealand, the Convention is given effect by the Care of Children Act 2004. In that Act, removal includes retention, in each case as defined in article 3 of the Convention. Section 103 provides: (1) The Authority must take action under the Convention to secure the prompt return of the child to a Contracting State other than New Zealand if the Authority receives, in respect of a child, an application claiming (a) that the child is present in New Zealand; and (b) that the child was removed from that other Contracting State in breach of the applicants rights of custody in respect of the child; and that at the time of the removal those rights of (c) custody were actually being exercised by the applicant, or would have been so exercised but for the removal; and (d) that the child was habitually resident in that other Contracting State immediately before the removal. (Emphasis supplied) In Australia the equivalent Family Law (Child Abduction Convention) Regulations 1986 provide by regulation 16(1A)(b) that one of the conditions for an order for return is that the child habitually resided in a convention country immediately before the childs removal to, or retention in, Australia. In re H (Minors) (Abduction: Custody Rights), In re S (Minors) (Abduction: Custody Rights) [1991] 2 AC 476 the House of Lords addressed the question whether wrongful removal and wrongful retention were mutually exclusive concepts; the issue arose in the context of the commencement date for the 1985 Act as between the two States involved. The House held that for the purposes of the Abduction Convention the two concepts were mutually exclusive, and that because article 12 required it to be possible to calculate the 12 month period from a wrongful retention, as well as from a wrongful removal, the former could not be regarded as simply continuing, but had to have an identified date, in effect its beginning. Giving the sole speech, Lord Brandon explained, at 498G: The preamble of the Convention shows that it is aimed at the protection of children internationally (my emphasis) from wrongful removal or retention. article 1(a) shows that the first object of the Convention is to secure the prompt return to the state of their habitual residence of children in two categories: (1) children who have been wrongfully removed from the state of their habitual residence to another contracting state; and (2) children who have been wrongfully retained in a contracting state other than the state of their habitual residence instead of being returned to the latter state. The Convention is not concerned with children who have been wrongfully removed or retained within the borders of the state of their habitual residence. (Emphasis of other supplied) That echoed an observation of Lord Donaldson MR in the same case in the Court of Appeal. He had said, [1991] 2 AC 476, 486F: plainly the Act and Convention can only apply if the child is found in a different State from that in which it was habitually resident The question raised in the present case did not arise for decision in In re H; In re S and so the observations noted were not the result of argument on the point now at issue. They were, however, a considered analysis of the scheme of the Abduction Convention, and they have been consistently followed in England and Wales ever since. In consequence in a number of cases, which it is not necessary to list, applications under the Convention have failed where the child was habitually resident in England and Wales by the time of the wrongful act relied upon. The researches of counsel, for which we are very grateful, have disclosed that a similar approach has been adopted in Scotland, France, Israel, Switzerland, Canada, Australia, New Zealand and various United States courts whether federal or state. Whilst those surveys cannot by their nature be exhaustive of every decision in every jurisdiction, what is significant is that none of them, including those conducted on behalf of those arguing against the currently assumed analysis (Father and the Intervener), has unearthed any decision to the contrary. In C v M (2014) (Case C 376/14PPU); [2015] Fam 116 the Court of Justice of the European Union (CJEU) adopted the same analysis. The French Father had made application to the Irish Court for the return of children who had been taken to Ireland by Mother. The background was an initial decision of the French court permitting relocation to Ireland, which had been appealed promptly. Mother had moved notwithstanding the pending appeal, a stay having been refused to Father, and subsequently the French decision had been reversed by the appeal court. The Irish court was minded to find that the child had become at some stage habitually resident in Ireland. It referred a number of questions to the CJEU. The CJEU decided (1) that the initial removal to Ireland had not been wrongful, because of the then extant first instance decision permitting the move (para 44), (2) that the subsequent retention there after the French appellate decision might justify an order for return but (3) this would depend on whether by then the child was habitually resident in Ireland (paras 45 49 and 63). If habitual residence had by then been established in Ireland, there could be no order for return. At para 48 the court said: Article 11(1) of the Regulation [vis Brussels II Revised] provides that paragraphs 2 8 of that article are to apply where the holder of rights of custody applies to the competent authorities of a member state to deliver a judgment on the basis of the 1980 Hague Convention in order to obtain the return of a child that has been wrongfully removed or retained in a member state other than the member state where the child was habitually resident immediately before the wrongful removal or retention. It follows that this is not the case if the child was not habitually resident in the member state of origin immediately before the removal or retention. It is certainly true that this paragraph proceeds from the words of article 11(1) of Brussels II Revised. But the application which the father had made was under the Abduction Convention. He had referred also to Brussels II Revised, but this Regulation does not contain the duty to return a child; what it does is to recognise that the Abduction Convention does contain such a duty, and by article 11 it provides supplementary rules for how this duty is to be performed. En route to its conclusion, the CJEU emphasised, first, that the Regulation and the Abduction Convention were to be uniform, that is to say consistent (para 58), and secondly that a decision to return under the Abduction Convention is not a decision on the merits and thus there can be no occasion for a conflict of jurisdiction between the requesting and requested State (paras 37 and 40 42). It left to the Irish court the decision of fact whether and when habitual residence had been established in Ireland. It may be that its proposition that for a return order under the Abduction Convention to be made it was essential that the child was habitually resident at the time of the wrongful act in the State of origin, as distinct from some State other than the requested State, might be wider than necessary, for it may not have considered the possibility of habitual residence in an intermediate State, which did not arise for debate. But what is abundantly clear is that it is only under the Abduction Convention that a summary order for return is provided for, and that such an order could not be made if the child was, by the time of the wrongful act relied upon, habitually resident in the requested State. There is no hint in the courts decision that Brussels II Revised has in any sense modified the fundamentals of the scheme of the Abduction Convention for EU members; quite the contrary. In the later case of OL v PQ (2017) (Case C 111/17PPU), a different chamber of the CJEU reached a similar conclusion. The court held that a child born in Greece was habitually resident there, despite the originally Italian home of her parents, and that in consequence an order under the Abduction Convention for return from Greece to Italy could not be made by the Greek court. At para 38 the court said: It is clear from those provisions that the concept of habitual residence constitutes a key element in assessing whether an application for return is well founded. Such an application can succeed only if a child was, immediately before the alleged removal or retention, habitually resident in the member state to which return is sought. The nearest case proffered as any indication to the contrary is In re G (A Minor) (Enforcement of Access Abroad) [1993] Fam 216. There, the Court of Appeal held that a Canadian resident father could use the Abduction Convention (article 21) to enforce his Canadian given rights of access in relation to a child who was habitually resident in England by the time the mother declined to comply with them. But that was not a case involving any question of return. The provisions of the Convention in relation to access are notably more fluid and flexible. They simply require the central authorities to facilitate co operation with a view to preserving access rights. They make no demands of the courts of the requested State and to the extent that they contemplate that an application may be made there, they appear to assume that those courts will conduct a merits hearing. They provide no guide to the scheme of the Convention in relation to applications for orders for summary return. These various examples of the practice as to the application of the Abduction Convention thus all point in the same direction. The Convention cannot be invoked if by the time of the alleged wrongful act, whether removal or retention, the child is habitually resident in the State where the request for return is lodged. In such a case, that State has primary jurisdiction to make a decision on the merits, based on the habitual residence of the child and there is no room for a mandatory summary return elsewhere without such a decision. It may of course be that in making a merits decision, the court of the requested State might determine that it is in the best interests of the child to be returned to his previous home State, and indeed might do so without detailed examination of all possible evidence, as the English courts may do (see In re J (A Child) (Custody Rights: Jurisdiction) [2005] UKHL 40; [2006] 1 AC 80). But so to do is very different from making a summary order for return without consideration of the merits under the Abduction Convention. The submissions made to this court addressed also the separate question of whether a return under the Abduction Convention, if made, must always and only be made to the State of habitual residence immediately before the wrongful act. It is to be noted that article 12 does not contain any such restriction, and that Professor Prez Veras report at para 110 makes clear that the decision not to do so was deliberate. The reason given is that whilst ordinarily that State will be the obvious State to which return should be made, there may be circumstances in which it would be against the interests of the child for that to be the destination of return. The example given is of the applicant custodial parent who has, in the meantime, moved to a different State. The propriety, in such circumstances, of an order returning the child to the new home state of the custodial parent is not in issue in this case. For the reasons given above, the silence of article 12 on the destination of a return order is of no help on the issue which does arise, namely whether an order for return can be made if at the time of the wrongful act the child was habitually resident in the requested State. It is however to be observed in passing that the unusual circumstances envisaged in para 110 of the Prez Vera report were held at first instance to have arisen in O v O (Child Abduction: Return to Third Country) [2013] EWHC 2970 (Fam); [2014] Fam 87 and there did result in an order for return to the new home State. The second general question: when does wrongful retention occur? This was the question of principle on which leave to appeal to this court was given. If the child has been removed from the home State by agreement with the left behind parent for a limited period (and thus the removal is not wrongful), can there be a wrongful retention before the agreed period of absence expires? The classic example of the possibility is where the travelling parent announces, half way through the agreed period (say of a sabbatical year of study for the parent) that he will not under any circumstances return the child in accordance with the agreement he made. He might do more. He might effectively make it impracticable to return, by, for example, selling his house in the home State, abandoning his job there, and obtaining residency in the new State for himself and the child on the basis of an undertaking that they will both remain there indefinitely. No doubt other examples could be postulated. The question is whether, if such a thing occurs, there is then and there a wrongful retention, or whether his retention of the child cannot in law be wrongful until the date agreed for return arrives and, as it was graphically put in the American case of Falk v Sinclair (2009) 692 F Supp 2d 147, the aeroplane lands and the child is not among those who disembark. There is some difficulty in devising a suitable shorthand for the possibility of wrongful retention in advance of the due date for return. One which has been used is anticipatory retention. This is certainly convenient but it may lead to misconceptions. If early wrongful retention is a legal possibility, it is not because there is an anticipation of retention. On the contrary, the child is retained in the destination State from the moment of arrival, just as he is removed from the home State at the moment of departure. If the departure and arrival are permitted by agreement with the left behind parent, or sanctioned by the court of the home State, they are still respectively removal and retention, but they are not wrongful. So what is under consideration is a retention which becomes wrongful before the due date for return. The key to the concept of early wrongful retention, if it exists in law, must be that the travelling parent is thereafter denying, or repudiating, the rights of custody of the left behind parent and, instead of honouring them, is insisting on unilaterally deciding where the child will live. In the absence of a better expression, the term which will be used here will, for that reason, be repudiatory retention. That is not to import contractual principles lock stock and barrel into the concept, for the analogy with a contract is only partial. It is simply to attempt a shorthand description. The expert and thorough analysis of the known cases in several different jurisdictions which was undertaken in this case by Black LJ, as she then was, cannot be improved upon. It is to be found at paras 28 97 of her judgment [2017] EWCA Civ 980; [2017] 3 FCR 719. On this part of her judgment the Court of Appeal was unanimous. It shows that a concept of repudiatory retention has been recognised in some jurisdictions, and for many years now: early examples included Wall Js decision in In re S (Minors) (Abduction: Wrongful Retention) [1994] Fam 70 and the Canadian case of Snetzko v Snetzko (1996) CanLII 11326. Other cases have rejected the concept, for example in Australia. There are cases going either way in the United States. It follows that there is no generally accepted international practice on the point, nor is there clear authority either way in this jurisdiction. In those circumstances it is necessary for this court to address the principle of the suggested concept. The Court of Appeal concluded unanimously that there was a concept of repudiatory retention known to the law. It divided, however, as to whether it could exist only when the repudiation was communicated to the left behind parent (or at least manifested by action), as Black LJ held, or whether such communication was not necessary in law, as Sharp and Thirlwall LJJ concluded. In considering the existence of the concept, it is necessary also to address how repudiatory retention, if it exists at all, may occur. The helpful submissions made to this court identified six suggested reasons why such a concept is inconsistent with the Abduction Convention and not known to the law. In principle there can only be a single act of wrongful retention and (i) this cannot occur until the due date for return arrives, and is not honoured, because until then there is no breach of the rights of custody of the left behind parent. (ii) In ordinary language retention means continuing to hold or to keep possession; however, until the due date for return arrives, the travelling parents retention is sanctioned and not wrongful. (iii) A repudiatory retention is too uncertain a concept, for the travelling parent may change his mind and return after all on the due date, whatever he may have said or done earlier. (iv) If repudiatory retention were acknowledged, the effect might be to start the clock running before the left behind parent knew about it, with the consequence that the 12 month period stipulated in article 12 might wholly or partly pass and the left behind parent be deprived of or hindered in the right to a certain order for return. (v) Any such concept would be likely to lead to prolonged hearings in applications under the Abduction Convention when it is axiomatic that they should be such as can be dealt with swiftly and summarily. (vi) No such concept is needed because the left behind parent will, if he cannot obtain a summary return order under the Abduction Convention, have other effective remedies. The crux of the issue lies in the first two contentions, which are different ways of expressing the same point. If there is no breach of the rights of custody of the left behind parent, then it is clear that the Convention cannot bite; such a breach is essential to activating it, via articles 3 and 12. It is clearly true that if the two parents agree that the child is to travel abroad for a period, or for that matter if the court of the home State permits such travel by order, the travelling parent first removes, and then retains the child abroad. It is equally true that both removal and retention are, at that stage, sanctioned and not wrongful. But to say that there is sanctioned retention is to ask, rather than to answer, the question when such retention may become unsanctioned and wrongful. When the left behind parent agrees to the child travelling abroad, he is exercising, not abandoning, his rights of custody. Those rights of custody include the right to be party to any arrangement as to which country the child is to live in. It is not accurate to say that he gives up a right to veto the childs movements abroad; he exercises that right by permitting such movement on terms. He has agreed to the travel only on terms that the stay is to be temporary and the child will be returned as agreed. So long as the travelling parent honours the temporary nature of the stay abroad, he is not infringing the left behind parents rights of custody. But once he repudiates the agreement, and keeps the child without the intention to return, and denying the temporary nature of the stay, his retention is no longer on the terms agreed. It amounts to a claim to unilateral decision where the child shall live. It repudiates the rights of custody of the left behind parent, and becomes wrongful. The plain purpose of the Abduction Convention is to prevent the travelling parent from pre empting the left behind parent. The travelling parent who repudiates the temporary nature of the stay and sets about making it indefinite, often putting down the childs roots in the destination State with a view to making it impossible to move him home, is engaging in precisely such an act of pre emption. It is possible that there might also be other cases of pre emptive denial of the rights of custody of the left behind parent, outside simple refusal to recognise the duty to return on the due date. It is not, however, necessary in the present case to attempt to foresee such eventualities, or to consider whether fundamental failures to observe conditions as to the care or upbringing of the child might amount to such pre emptive denial. It is enough to say that if there is a pre emptive denial it would be inconsistent with the aim of the Abduction Convention to provide a swift, prompt and summary remedy designed to restore the status quo ante to insist that the left behind parent wait until the aeroplane lands on the due date, without the child disembarking, before any complaint can be made about such infringement. It is no doubt true that a travelling parent might change his mind after an act of repudiation. But so he might after a failure to return on the due date, and commonly does when faced by notice of the provisions of the Abduction Convention, or by an application under it. So also he might, after making an unsanctioned move to an unagreed country, or after embarking on an unsanctioned programme of religious conversion. The possibility of a change of heart is no reason not to recognise that the heart needs changing if rights of custody in the left behind parent are to be respected. On the contrary, the desirability of inducing a prompt change of mind is an argument for recognising a repudiatory retention when and if it occurs. Proof that it has occurred is a matter of evidence, and what manifestation of it must be demonstrated is considered below. If a concept of repudiatory retention exists, it would indeed follow that once such an act occurs, the article 12 12 month clock would begin to run at that point. If the left behind parent knows of the repudiation, there is every reason why it should run. If he does not, the possibility exists that the 12 month period partly, or sometimes wholly, may pass before he finds out and can make an application under the Abduction Convention. But it is a mistake to think of the 12 month period as a limitation period, of the kind designed in Limitation Acts to protect a wrongdoer from claims which are too old to be pursued. It is not a protection for the wrongdoer. Rather, it is a provision designed in the interests of the child. It operates to limit the mandatory summary procedure of the Convention to cases where the child has not been too long in the destination State since the wrongful act relied on. Where it applies, it does not prevent a summary return; it merely makes it discretionary. In the event that an act of wrongful repudiatory retention had been concealed, that concealment might well be one factor in the decision whether to order return or not. In other cases, the settlement of the child might be so well established that notwithstanding the wrong done by the travelling parent, it is too late to disturb it. Such decisions are fact sensitive ones which are properly left to the court of the requested State. The risk of the 12 month period running without the knowledge of the left behind parent is in any event distinctly less fatal to his interests than the risk of the childs habitual residence being changed without his knowledge, or indeed with his knowledge but without him being able to invoke the Convention because the due date for return has not yet arrived. The latter risk creates a complete bar to return under the Convention; the former a discretionary one. The concern that Abduction Convention applications may become longer and more complicated is a point well made. It was convincingly voiced in the Court of Appeal by Black LJ. It is of the essence of such cases that the remedy is a swift and summary one. Oral evidence should be the exception, not the rule. But some limited disputes of fact are bound to arise. In the kind of case where retention is in question, it will often be critical to establish what the terms were of any arrangement under which the child travelled. That may be as necessary to establish the date of due return (and thus conventional wrongful retention) as to establish an earlier repudiatory retention. The Family Division judges who hear these cases are well used to managing them actively and to controlling any tendency to spill outside the issues necessary to determine them. If the correct rule is that repudiatory retention must be demonstrated by overt act or statement (see below) the danger of speculative applications being made, or of hearings degenerating into speculative cross examination as to the internal and undisclosed thinking of the travelling parent ought not to arise. It may be that in many cases which would be covered by the concept of repudiatory retention the left behind parent may have remedies alternative to an application under the Abduction Convention. We were pressed with the contention that ordinarily he will be able to seek an order for return in the home State, and then enforce it in the destination State. This may indeed sometimes be possible. It will be possible if both States are party to the 1996 Convention and if at the time of the application to the court of the home State the child is still habitually resident there. In that event, the home State has jurisdiction (article 5) and the destination State must enforce its decision (article 23). Article 7 of the 1996 Convention prolongs the jurisdiction of the home State if there has been a wrongful retention, but if the habitual residence of the child has been changed to the destination State by the time of the act relied upon, there will be no wrongful retention and article 7 will not apply. Nevertheless, the necessity for habitual residence in the home State presents no greater hurdle to the left behind parent under the 1996 Convention than under the Abduction Convention, because if the habitual residence of the child has shifted to the destination State by the time of the act relied on, neither form of machinery will work. Likewise, if both States are members of the EU and governed by Brussels II Revised. All that said, the critical fact is that by no means all States which are party to the Abduction Convention are party to the 1996 Convention; at the time of the hearing in this court there were some 49 States which are not. Even fewer are members of the EU. The Abduction Convention has its own self contained scheme and should function as such. The recognition and enforcement provisions in the 1996 Convention are, as explained above, meant to preserve that scheme and not to substitute for it. Moreover, such an application to the home State would have to trigger a merits hearing, in which the home State has to adjudicate upon where the best interests of the child now lie, and upon whether habitual residence has shifted, all depending on facts occurring perhaps some thousands of miles away. That is not at all the same as the mandatory summary remedy provided by the Abduction Convention. Even in jurisdictions, such as England and Wales, which retain the practice of sometimes returning children without a full investigation of the facts (In re J, para 34 above), the remedy is not, for the left behind parent, the equivalent of the Abduction Conventions mandatory summary return. For all these reasons, the principled answer to the question whether repudiatory retention is possible in law is that it is. The objections to it are insubstantial whereas the arguments against requiring the left behind parent to do nothing when it is clear that the child will not be returned are convincing and conform to the scheme of the Abduction Convention. The remaining question is what is needed to constitute such repudiatory retention. As with any matter of proof or evidence, it would be unwise to attempt any exhaustive definition. The question is whether the travelling parent has manifested a denial, or repudiation, of the rights of the left behind parent. Some markers can, however, be put in place. (i) It is difficult if not impossible to imagine a repudiatory retention which does not involve a subjective intention on the part of the travelling parent not to return the child (or not to honour some other fundamental part of the arrangement). The spectre advanced of a parent being found to have committed a repudiatory retention innocently, for example by making an application for temporary permission to reside in the destination State, is illusory. (ii) A purely internal unmanifested thought on the part of the travelling parent ought properly to be regarded as at most a plan to commit a repudiatory retention and not itself to constitute such. If it is purely internal, it will probably not come to light in any event, but even supposing that subsequently it were to do so, there must be an objectively identifiable act or acts of repudiation before the retention can be said to be wrongful. That is so in the case of ordinary retention, and must be so also in the case of repudiatory retention. (iii) That does not mean that the repudiation must be communicated to the left behind parent. To require that would be to put too great a premium on concealment and deception. Plainly, some acts may amount to a repudiatory retention, even if concealed from the left behind parent. A simple example might be arranging for permanent official permission to reside in the destination State and giving an undertaking that the intention was to remain permanently. (iv) There must accordingly be some objectively identifiable act or statement, or combination of such, which manifests the denial, or repudiation, of the rights of custody of the left behind parent. A declaration of intent to a third party might suffice, but a privately formed decision would not, without more, do so. (v) There is no occasion to re visit the decision of the House of Lords in In re H; In re S (para 28 above) that wrongful retention must be an identifiable event and cannot be regarded as a continuing process because of the need to count forward the 12 month period stipulated in article 12. That does not mean that the exact date has to be identifiable. It may be possible to say no more than that wrongful retention had clearly occurred not later than (say) the end of a particular month. If there is such an identifiable point, it is not possible to adopt the submission made to the Court of Appeal, that the left behind parent may elect to treat as the date of wrongful retention either the date of manifestation of repudiation or the due date for return. It may of course be permissible for the left behind parent to plead his case in the alternative, but that is a different thing. When once the actual date of wrongful retention is ascertained, the article 12 period begins to run. This case: the judges decision The judge ([2016] EWHC 3535 (Fam)) held that there was no concept of repudiatory retention known to the law. But he helpfully addressed the facts on the hypothesis that he was wrong about that. He held that the application to the immigration authorities made on 4 November 2015 did not amount to such a repudiatory retention, because although it was concealed from Father, something had to be done to regularise the stay of the children once it was to last more than their six month visas permitted. Father, he held, could not properly have objected to such regularisation, even if Mother feared that he might have tried. There can be no doubt that the judge significantly misdirected himself here. It was not the application for permission to stay which was potentially significant. It was what was said, in support of it, about Mothers intentions. Of course it was said by her solicitors, but if it showed that by that date she had determined that the childrens centre of life is, and will be, in the UK indefinitely, then it would be capable of being an objectively identifiable manifestation, made to an official third party, of her repudiation of Fathers rights of custody, and of the fact that thereafter her retention of the children in the United Kingdom was not in accordance with the arrangement she had made with him, but in defiance of it. However, the question which matters is not whether the judge made this error, but whether it affected his conclusion that Mother had not, before the expiry of the agreed year (which he determined was at the end of June 2016) made any act of repudiatory retention. The judge went on to examine Mothers state of mind. He found that she vacillated in what she meant to do. He had seen her examined and cross examined, and it is clear that he believed her when she said that as at both November 2015 and February 2016, she had not yet made up her mind. In February she had told Father only that she would not be returning in May (when the year would not, on the judges findings, have expired). He attributed her uncertainty in part to anticipation of harassment from Father. He then directed himself that even though she gave evidence that by the end of April 2016 she had resolved not to return, that could not be a date for repudiatory retention because it was too imprecise and thus inconsistent with the In re H; In re S rule that retention must be a definite occurrence rather than a continuing process. To the extent that he relied on imprecision he was, again, clearly wrong. There is, as explained above, nothing in In re H; In re S which prevents a court from saying that retention had occurred not later than the end of April. But what does prevent there from being a repudiatory retention in April is that Mothers internal thinking could not by itself amount to such. If she had had such an intention in November, the application to the immigration authorities would have been capable of amounting to an objective manifestation of her repudiation, but the judge believed her when she said that she did not. It was open to him to believe her or not to believe her about this. He saw her and this court has only a transcript. It does not provide nearly sufficient basis for overturning his decision. His error about the potential significance of what was said to the immigration authorities in November is not inconsistent with his yet believing the witness whom he saw when she said that she had not then (or until April) made up her mind to stay. These findings need to be considered alongside the judges decision as to the habitual residence of the children. He reviewed a body of evidence from Mother, relatives, neighbours and the playschool manager, to the effect that the children were, by the Summer of 2016, firmly integrated into the social and family environment of the part of England in which they had lived for a year, and, in the case of the younger child, for somewhat longer than he had lived in Australia. By reference to the decision of Hayden J in In re B (A Child) (Custody Rights: Habitual Residence) [2016] EWHC 2174 (Fam); [2016] 4 WLR 156, he directed himself correctly as to the test of habitual residence and the factors relevant to the integration necessary to establish it. He found that the children were, by the time of their otherwise wrongful retention at the end of June 2016, already habitually resident in the United Kingdom, so that the Abduction Convention could not apply to call for a mandatory summary return. He expressed the view that they had probably become habitually resident in England much earlier than June 2016. There is no basis in law for criticising the judges decision as to habitual residence. His remark that it was arguable that the children had established habitual residence by the time of the November application to the immigration authorities may well be going too far, for at that stage they had been in the United Kingdom only since May, a period of about six months, but that remark does not alter the propriety of his decision as to June 2016, by which time more than a years residence had passed, during which the children had clearly become integrated parts of English life. For my part, I recognise the force of the contention that the judges error about the potential significance of what was said at the time of the November application to the immigration authorities infected his decision that there was no combination of intention not to return and outward manifestation of that decision until the following summer. But for the reasons given above I conclude that that infection did not in fact take place. It follows that by the time the children were retained in the United Kingdom inconsistently with Fathers rights of custody they had become habitually resident here. That being so, the application under the Abduction Convention cannot succeed. The consequence is that Mothers appeal against the order of the Court of Appeal must succeed, whilst Fathers cross appeal in relation to the finding as to habitual residence must be dismissed. LORD KERR: (dissenting) There is much in Lord Hughes judgment with which I agree. Like Lord Wilson (with whose proposed disposal I fully agree) I would have dismissed the appeal. There is perhaps a slight difference in emphasis between us, however, on the reasons that the appeal should be dismissed and, on that account, I add this short judgment. When dealing with the effect of wrongful retention of a child by what has been described as a travelling parent, one can recognise that various factors are in play. One starts with the proposition that, in general, it should not be possible for a child to acquire or for a parent to bestow habitual residence after the time that wrongful retention begins. A strong imperative exists for discouraging travelling parents from the view that they can avoid the consequences of the Abduction Convention by concealing an intention to retain the child in the country to which they have travelled, on the pretext, for instance, of a holiday of fixed or limited duration. To insist that wrongful retention can only occur at the end of an agreed period of absence could lead to absurd results; would encourage dissimulation on the part of the travelling parent; and would permit habitual residence to be acquired by the perpetration of deception on the left behind parent. As against that, it is often difficult retrospectively to decide when wrongful retention began. It may be the outcome of a gradual change of attitude on the part of the travelling parent. Retention in the country travelled to may be acquiesced in by the left behind parent, even if she or he suspects that the travelling parent may be in the process of forming an intention not to return the child to the country where she or he was habitually resident. If the child has formed relationships in the travelled to country and is well settled there (albeit as a result of the travelling parents covertly formed intention not to return him or her) do the best interests of the child obtrude on the question of where her or his habitual residence should be found to be? No final answers to these potentially difficult questions need be given in the present appeal. I raise them solely to illustrate the extremely trying problems that can arise in this fraught area. How is the fact (and the time of onset) of wrongful retention to be established? Clearly the intention of the travelling parent wrongfully to retain is needed. Must this be accompanied by some overt act or event by which the intention becomes manifest? Not without misgivings, I am prepared to accept that this is required. The reason for my misgivings can be explained by taking a simple but not, I suggest, fanciful, example. Suppose a husband persuades his wife to allow him to take their children to his parents native country on the promise that he will return within a stipulated period. Days after leaving, he conceives a firm determination that the children and he will never return. He does not communicate this to anyone. Some months later, he takes action which clearly demonstrates that he has no intention of returning the children. Evidence emerges that this was his plan from the outset. Is the period between his first determining not to return the children and the later event reckonable in the assessment as to whether they have acquired habitual residence in the country of their paternal grandparents? If we say that the retention only becomes wrongful when the intention of the retaining parent becomes manifest, how is the claim by the father in my example that the children have become habitually resident in his parents country to be resisted? Again, however, this conundrum does not require to be solved in the present appeal and, having expressed my misgivings about the notion that some manifestation of the wrongful retention is required, I say no more about it. For the reasons given by Lord Hughes and Lord Wilson, the judge ([2016] EWHC 3535 (Fam)) was wrong to hold that the law did not recognise repudiatory retention. His examination of when such a wrongful retention might have occurred (if, contrary to his view, the concept exists in law) appears to have been coloured by that primary finding, for he concluded that it had not arisen in this case at all. That finding simply cannot be reconciled with his statement in para 80 that as the months went by, the mother gradually came to the conclusion that she and the children should remain in England. She had reached that conclusion by around April though it was not communicated to the father. And this, notwithstanding that he had earlier said, at para 62, that a finding that there was a wrongful retention on some unspecified date in April 2016 is too imprecise. The opportunity for a firm finding as to the precise timing that an intention was formed is, in the nature of things, unlikely to be always possible. Intentions are formed over days, weeks or even years. Because it is not possible to make a positive finding of the date on which it had been formed is not a reason for not making a finding as to the time by which it had been formed. And indeed Judge Bellamy appears to have done precisely that when he said in para 80 that the mother had decided by around April that the children should remain in England. The judge, having made that finding, was obliged to consider whether the childrens habitual residence had been established in England by April 2016. He did not do that. On that account alone, his decision cannot be allowed to stand, in my opinion. It is impossible to say that, if he had recognised the true implication of his statement that the mother had, by April 2016, formed the intention not to return the children, he would nevertheless have decided that habitual residence in England had by then already been established. In the absence of a finding to that effect, or alternatively the inevitability of such a conclusion, it is quite impossible to conclude that the habitual residence of the children had changed at a time which would displace the fathers rights under the Abduction Convention. There is a more fundamental problem with the judges judgment. This concerns the communications to the Home Office in November 2015. In the letter from the mothers solicitor, it was asserted that she had been advised not to return to Australia; that it was necessary that she remain in England to safeguard herself and her children; and that there was no doubt that the childrens centre of life is and will be in the UK. At paras 53 and 59 of his judgment, the judge dealt with the application for British citizenship in the following terse passages: And The solicitors letter to the Home Office dated 4th November sets out information clearly designed to persuade and assumes that the person making the decision will be exercising a discretion. As the Home Office was not required to exercise a discretion it follows that any misleading or inaccurate information set out in that letter cannot have had any bearing on the decision of the Home Office to approve the childrens applications. As the father well knew, the children had entered the UK on six month visitors visas. To enable them to stay for the year to which the father had agreed, some step had to be taken to enable them lawfully to remain in the UK beyond 5th November. I do not accept that it can properly be said that the mother wrongfully retained the children from 5 November 2015. From these passages, two reasons for the judges conclusions can be discerned. First, the circumstance that the Home Office did not have to exercise a discretion meant that any misleading or inaccurate information in the letter should be discounted or ignored. Secondly, the fact that the father knew that something would have to be done to allow the children to remain in the United Kingdom after 5 November 2015 eliminated any possibility of the mother having wrongfully retained the children from that date. Neither reason is sustainable. More importantly, the conclusions that he reached on those matters deflected the judge from recognising and considering the significance of the evidence provided by the November 2015 correspondence as to the mothers intention at that time. The failure to give proper consideration to that evidence fatally undermines the conclusion reached by the judge as to the time at which the mother had conceived the intention to retain the children in England. In turn, this extinguishes the basis for his decision that the wrongful retention did not begin until June 2016 and that, by that time, the habitual residence of the children was England. Why was the judge wrong to decide that, because the Home Office did not have to exercise a discretion, any misleading or inaccurate information in the letter should be discounted or ignored? Because this was nothing to the point. The significance of the letter in the context of these proceedings was its potential to provide an insight into what the mothers intention was at the time that it was written. The purpose of the letter, the result that it sought to achieve, was entirely incidental to that critical consideration. The importance of the letter bore on the question of what the mothers sentiments about the retention of her children in England were at the time of its dispatch. What it sought to persuade the Home Office of was entirely irrelevant to that question. But the judge dismissed the letter as a potential source of evidence on that central question. Until that question is addressed, the conclusion that the mother had not formed any intention wrongfully to retain the children in England in November 2015 is simply insupportable. Likewise, the fact that the father knew that something would have to be done in November 2015 to ensure that the legal entitlement of the children to remain living in England was preserved, has no direct bearing on the question whether the letter from the mothers solicitor showed that, as early as that date, the mother had decided that she would not return the children to Australia. The contents of the letter certainly suggested that that was the case. As already observed (in para 11 above), it had said that she had been advised not to return to Australia; that it was necessary that she remain in England to safeguard herself and her children; and that there was no doubt that the childrens centre of life is and will be in the UK. What the judge should have asked himself was, is it conceivable that such a letter would be sent if the mother had not already decided that she and the children would not return to Australia?. Instead, he elided that question by concentrating on the circumstance that the husband must have known that the mother would have to do something to regularise the childrens continued stay in England. The important question was why the letter was couched in the terms that it was, if it did not reflect the mothers settled intention to remain here. That question was never asked by the judge and it has not been possible to address it since. It needs to be asked and satisfactorily answered before any conclusion as to the mothers intention in November 2015 about returning her children to Australia can be I consider that this court should have dismissed the mothers appeal. reached. That is why, in my opinion, remittal of the case for a proper hearing is unavoidable. LORD WILSON: (dissenting) I respectfully agree with the exposition of law in the judgment of Lord Hughes. I disagree with him only when, from para 52 onwards under the heading This case: the judges decision, he reaches the conclusion that the mothers appeal should be allowed. The trial judge (the judge) held that the law did not recognise a repudiatory retention and that the mothers retention of the children in the UK became wrongful only on 28 June 2016, which he found to have been the agreed date for their return to Australia. The judge added, however, that, even if the law did recognise a repudiatory retention, he did not consider that it had arisen in the present case, whether in November 2015 or in April 2016 or at all. As Lord Hughes has explained, the Court of Appeal was right to hold that the law does indeed recognise a repudiatory retention. The majority (Sharp and Thirlwall LJJ) proceeded to hold that the judges conclusion that in any event it had not arisen in the present case had been flawed; and they ordered that the case be remitted for further inquiry in that regard, particularly in relation to circumstances in November 2015. In my view the majority were right to order that the possibility of a repudiatory retention, particularly in November 2015, required further to be explored. It required further to be explored by reference in particular to the mothers intention; to the need for some objectively identifiable act of repudiation; and to whether, immediately before any repudiatory retention, the children had already acquired their habitual residence in the UK. Although, like the majority in the Court of Appeal, I will focus principally on circumstances in November 2015, I wish briefly to address the possibility of a repudiatory retention of the children on the part of the mother in April 2016. The judge found: I am satisfied that as the months went by the mother gradually came to the conclusion that she and the children should remain in England. She had reached that conclusion by around April though it was not communicated to the father. So why was there no repudiatory retention in April 2016? In para 55 above Lord Hughes explains that Mothers internal thinking could not by itself amount to such. If she had had such an intention in November, the application to the immigration authorities would have been capable of amounting to an objective manifestation of her repudiation, but the judge believed her when she said that she did not. Today this court decides, with hesitant concurrence on the part of Lord Kerr, that the concept of a repudiatory retention requires not only an intention on the part of the travelling parent to retain a child beyond the agreed date of return but also some objectively identifiable act of repudiation on her part. If, however curiously (see below), the objectively identifiable act occurred in November 2015 but the requisite intention arose only by around April 2016, how obvious is it that the requirements of the concept were not at any rate by then satisfied? More importantly, however, the majority in the Court of Appeal were in my view right to set aside the judges finding that the mothers intention to retain the children beyond 28 June 2016 arose only by around April 2016. For he did not grapple with evidence which seemed clearly to point to her having developed that intention by November 2015. This evidence was the letter dated 4 November 2015 from the mothers solicitor to the Home Office, which accompanied her applications on behalf of the children to be registered as UK citizens. The context was that the children had entered the UK on 5 May 2015 pursuant to visitors visas due to expire on 5 November 2015. In the light of the fathers agreement that they could remain with the mother in the UK until 28 June 2016, it was necessary for their visas to be extended for almost eight months. But the regularisation of their stay in the UK for that extended period could have been achieved without their becoming UK citizens. So the mothers applications for them to be registered as UK citizens called for an explanation. Her failure to notify the father in advance that she was making the applications also called for an explanation and, in cross examination, it received one: she explained that she believed that he would have obstructed them. To her statement in answer to the fathers application, the mother exhibited her solicitors letter dated 4 November 2015. In the letter the solicitor said: that the mother was effectively forced not to return to Australia in that she was advised not to return to Australia; that the interests of these two children are best served by their being (a) order to safeguard herself and her children; (b) (c) in the UK; and (d) be, in the UK where the children are registered as requested. that it cannot be in doubt that the childrens centre of life is, and will The terms of the letter therefore appear to be entirely inconsistent with an intention on the part of the mother to return with the children to Australia in June 2016 or at all. In the body of her statement the mother said that her decision not to return the children to Australia in June 2016 had developed over time and had not arisen long before that date. But she made no comment upon the content of her solicitors letter to the Home Office. She did not say that any part of it had been written without her approval or was untrue. On the contrary she said that her solicitor had been utterly clear that there was nothing wrong or deceptive in the applications for citizenship, being an assertion with which she seems there to have associated herself. In cross examination the mother was taxed, albeit perhaps in terms too general, about the content of the solicitors letter. She agreed that it did not indicate that she and the children would return to Australia in June 2016. She denied that, as at the date of the letter, she had formed an intention to stay with them indefinitely in the UK but, whether in re examination or otherwise, she offered no explanation for what her solicitors had said. In my view the content of the solicitors letter dated 4 November 2015, in support of applications for the children to acquire UK citizenship, represented a major obstacle to any finding that the mother had not by then intended to keep the children indefinitely in the UK. Before making any such finding, the judge was obliged to weigh that evidence and, on some basis or another, to explain it away. But, apart from an early reference to any misleading or inaccurate information set out in that letter, he did not address its content in any way. He said simply: If there is a binding legal principle in relation to anticipatory breach, I do not accept that the circumstances surrounding the childrens applications for British citizenship amount to such a breach. As the father well knew, the children had entered the UK on six month visitors visas. To enable them to stay for the year to which the father had agreed, some step had to be taken to enable them lawfully to remain in the UK beyond 5 November. With respect to the judge, he was there missing the main point and was indeed making an unconvincing subsidiary point. His crucial finding about the mothers intention in November 2015, not even expressly made but to be inferred from his reference to around April 2016, was flawed; and the majority in the Court of Appeal were correct to order that inquiry into it should be conducted again.

This matter centres around a married man and woman who, until 2015, had been living together in Australia with their two children. By the end of 2014 the marriage was in difficulties. The mother, who holds British citizenship, wanted to make a trip to England with the children before returning to work from maternity leave. The father agreed to an eight week stay. The mother and the children came to England on 4 May 2015 where they have since remained. Discussions between the mother and father resulted in the father agreeing to an extension of the eight week visit up to a year. Based on the extension, the mother gave notice to her employer and looked for work in England. In September 2015, the mother enrolled the older child at a local pre school. Without telling the father, on 2 November 2015, she applied for British citizenship for both children who had entered England on six month visitor visas. Her solicitors wrote a letter to the immigration authorities on her behalf indicating that she and the children could not return to Australia for fear of domestic abuse. In continuing correspondence, the father pressed the mother on the childrens expected date of return. The mother indicated that she did not know what her plans were but made clear that she would not be returning in May 2016. In June 2016, she expressed her intention to remain in the UK. The father made an application in the High Court under the Convention of 25 October 1980 on the Civil Aspects of International Child Abduction (the Abduction Convention). The issue of when the mother had decided not to return to Australia was in contention. The mothers own case was that by April 2016 she had felt she and the children would not be returning. The arguments before the Court meant that, on any view, there was a decision not to return to Australia before the expiry of the agreed year. The judge held that the children were habitually resident in England and Wales by the end of June 2016 so that mandatory summary return was unavailable under the Abduction Convention. But he accepted mothers evidence that she did not have the intention, in November 2015, or before April 2016, not to return to Australia. The mother now appeals against the Court of Appeals decision. The issues in the appeal are: (1) what is the effect on an application under the Abduction Convention if a child has become habitually resident in the destination state before the act relied on as a wrongful removal or retention occurs; and (2) if a child has been removed from their home state by agreement with the left behind parent for a limited period can there be a wrongful retention before the agreed period of absence expires (so called repudiatory retention)? The father cross appeals on the issue of habitual residence. The Supreme Court allows the appeal and dismisses the cross appeal. Lord Hughes gives the lead judgment with whom Lady Hale and Lord Carnwath agree. Lord Kerr and Lord Wilson each give judgments concurring on the two points of principle but dissenting on the outcome of this case on its facts. Issue 1 When considering the general scheme of the Abduction Convention, the construction that summary return is available if, by the time of the act relied on as a wrongful removal or retention, a child is habitually resident in the state where the application for return is made is unpersuasive. That construction is inconsistent with the operation of the Abduction Convention since 1980 and its treatment by subsequent international legal instruments. [19] The Abduction Convention is designed to provide a summary remedy which negates the pre emptive force of wrongful removal or retention and to defeat forum shopping. [21] The point of the scheme adopted by the Abduction Convention was to leave the merits to be decided by the courts of the place of the childs habitual residence. If the forum state is the habitual residence of the child, there can be no place for a summary return to somewhere else, without a merits based decision. This understanding of the scheme of the Abduction Convention is reflected in the provisions of both the Revised Brussels II Regulation and the 1996 Hague Convention on Recognition, Enforcement and Cooperation in respect of Parental Responsibility and Measures for the Protection of Children. [23] The Abduction Convention cannot be invoked if by the time of the alleged wrongful act, whether by removal or retention, the child is habitually resident in the state where the request for return is lodged. In such a case, that state has primary jurisdiction to decide on the merits, based on the childs habitual residence, and there is no room for a mandatory summary decision. [34] Issue 2 Repudiatory retention has been recognised in some jurisdictions, but no generally accepted international practice or authority exists on the point. [39] The desirability of inducing a prompt change of mind in the retaining parent is an argument for recognising a repudiatory retention when and if it occurs. The 12 month time limit for seeking mandatory summary return runs from the point a repudiatory retention occurs and that period may pass before an applicant is aware of the repudiatory retention. However, it is not a limitation period but a provision in the childs interest to limit mandatory summary return. Once elapsed it renders a summary return discretionary. The concern that repudiatory retention would make Abduction Convention applications longer and more complicated is a point well made. However, Family Division judges are used to managing applications actively and controlling any tendency to spill outside the relevant issues. Further, if repudiatory retention requires an overt act or statement, this lessens the danger of speculative applications. [46 48] Repudiatory retention is possible in law. The objections to it are insubstantial, whereas the arguments in favour are convincing and conform to the scheme of the Abduction Convention. It would be unwise to attempt an exhaustive definition of proof or evidence. An objectively identifiable act of repudiation is required, but it need not be communicated to the left behind parent nor does an exact date need to be identifiable. [50 51] On the present facts there could not have been a wrongful retention in April 2016 as the mothers internal thinking could not by itself amount to such. If she had such an intention in November 2015, the application to the immigration authorities could have amounted to a repudiatory retention. But it was open to the judge to believe the mothers evidence that she did not possess this intention in November. [55] There is no basis in law for criticising the judges decision as to habitual residence. [57] Lord Kerr dissents on the outcome of this case on its facts. He expresses misgivings about repudiatory retention requiring an overt act by the travelling parent. [63] The judges finding that wrongful retention did not arise in this case could not be reconciled with his statement that the mother had concluded by April 2016 that she and the children should remain in England. [68] Moreover, the judges conclusion that the mother had not formed any intention to retain the children in England in November 2015 is insupportable as he failed to address the question of what bearing the letter of November 2015 had on her intention. [72] Lord Wilson also dissents on the outcome of this case on its facts. The solicitors letter to the immigration authorities in November 2015 represented a major obstacle to any finding that the mother had not by then intended to keep the children in the UK indefinitely. The judges finding as to the mothers intention in November 2015 was flawed and the Court of Appeal were correct to order a fresh inquiry into her intention. [91 92]

This appeal is concerned with claims for first year allowances (FYAs) under the Capital Allowances Act 2001 (CAA 2001) in respect of expenditure on software rights. The claims were made by two limited liability partnerships, the respondents Tower MCashback 1 LLP (LLP1) and Tower MCashback 2 LLP (LLP2). The two claims were not identical, because there was an issue as to whether LLP 1 had started trading during the 2003 4 tax year for which it claimed FYAs (LLP2s claim was for the 2004 5 tax year). This point of distinction led to different outcomes in the Court of Appeal, as explained below. Throughout the litigation there have been two main issues, one procedural and one substantive, each of which is of some general importance. There were also other issues below which have now disappeared. The procedural issue concerns the effect of two closure notices dated 20 June 2006 signed by Mr Peter Frost, an officer in the Anti Avoidance Group (Investigation) of the appellants, the Commissioners for Her Majestys Revenue and Customs (HMRC). The respondents contend that the terms of each closure notice restricted HMRC, on the taxpayers appeal against it, to a single issue (which HMRC have now abandoned). HMRC contend that the notice did not have that restrictive effect. The substantive issue (referred to below as the expenditure issue to distinguish it from the trading issue and the conditional contract issue, neither of which is live in this Court) goes to the efficacy of the tax saving scheme embarked on by LLP1 and LLP2. In this judgment I shall try to use LLPs as referring to limited liability partnerships generally, and the LLPs to refer to LLP1 and LLP2 (with or without LLP3 and LLP4, which are of peripheral interest). The litigation has followed a tortuous course. The Special Commissioner (Mr Howard Nowlan) decided the procedural point in favour of HMRC and disallowed 75% of LLP2s claim for FYAs. He disallowed the whole of LLP1s claim on the separate ground that it had not been trading during the 2003 4 tax year: [2008] STC 3366, 3369 3411. On appeal ([2008] EWHC 2387 (Ch), [2008] STC 3366, 3411) Henderson J allowed the LLPs appeals on the procedural issue. That made the expenditure issue academic, but Henderson J considered it fully and set out the reasons why he would have allowed the LLPs appeals on that ground also (but for the trading issue affecting LLP1, on which he dismissed LLP1s appeal). He also dismissed HMRCs cross appeal on the conditional contract issue. By then it was common ground that if LLP2 was ultimately successful in its claim for FYAs for the 2004 5 tax year, then LLP1 would also be entitled to FYAs for that year. So on further appeal to the Court of Appeal ([2010] EWCA Civ 32, [2010] STC 809), on LLP1 abandoning its appeal on the trading issue, HMRC was for all practical purposes the appellant on both remaining issues. The majority (Scott Baker and Moses LJJ) reversed Henderson J on the procedural issue but agreed with him on the expenditure issue. Arden LJ agreed with the judge on both issues. Because of its abandonment of the trading issue, LLP1s appeal was formally dismissed by the Court of Appeal. But before this Court the argument has in substance been an appeal by HMRC on the expenditure issue and a cross appeal by the LLPs on the procedural issue. Counsel sensibly agreed that both issues should be opened by Mr Kevin Prosser QC (who appeared with Miss Rebecca Murray for HMRC) and responded to by Mr Giles Goodfellow QC (who appeared with Mr Richard Vallat and Mr Thomas Chacko for the LLPs). The procedural issue: statutory provisions Matters of procedure in charging income tax, capital gains tax and corporation tax are regulated largely by the Taxes Management Act 1970 (TMA 1970) and regulations made under TMA 1970. Major amendments were made to TMA 1970 in order to provide for the introduction of self assessment (described by HMRC, as Moses LJ noted, at para 1, as the most fundamental reform of personal tax administration for 50 years). The changes were introduced by the Finance Act 1994 (FA 1994) and took effect, for income tax and capital gains tax purposes, in 1996 97. Further amendments were made by the Finance Act 2001 (FA 2001) intended to simplify and clarify the process of self assessment. A limited liability partnership established under the Limited Liability Partnership Act 2000 has a legal personality separate from those of its members. But if it carries on a trade it is, under section 118ZA of the Income and Corporation Taxes Act 1988 (ICTA 1988), taxed as if it were an ordinary, non incorporated partnership. Section 118ZA(1) (as substituted by FA 2001) provides: For the purposes of the Tax Acts, where a limited liability partnership carries on a trade, profession or other business with a view to profit (a) all the activities of the partnership are treated as carried on in partnership by its members (and not by the partnership as such), (b) anything done by, to or in relation to the partnership for the purposes of, or in connection with, any of its activities is treated as done by, to or in relation to the members as partners, and (c) members as partnership property. the property of the partnership is treated as held by the The most important provisions of the self assessment regime, as it applies to LLPs, are to be found in sections 12AA, 12AB, 12AC, 28B, 31 and 31A of TMA 1970 (the first two introduced by FA 1994, the last four substituted by FA 2001). The familiar provisions of section 50 of TMA 1970, relating to procedure before the Commissioners (now the First tier Tribunal) were also amended by those Acts. Together the provisions require a partnership to submit a partnership return, which is to contain a partnership statement with the particulars required by section 12AB(1). That section, as further amended by the Finance Acts 1995, 1996 and FA 2001, (and in contrast to section 9 of TMA 1970, which applies to a personal return or a trustees return) does not actually include the expression self assessment, but that is its effect. By section 12AC an officer of HMRC may give notice of enquiry into a partnership return. The time limit for a notice of enquiry is generally a year from the due date for submission of the return. Section 28B provides as follows: (1) An enquiry under section 12AC(1) of this Act is completed when an officer of the Board by notice (a closure notice) informs the taxpayer that he has completed his enquiries and states his conclusions. In this section the taxpayer means the person to whom notice of enquiry was given or his successor. (2) A closure notice must either (a) state that in the officers opinion no amendment of the return is required, or (b) make the amendments of the return required to give effect to his conclusions. (3) A closure notice takes effect when it is issued. (4) Where a partnership return is amended under subsection (2) above, the officer shall by notice to each of the partners amend (a) the partners return under section 8 or 8A of this Act, or (b) the partners company tax return, so as to give effect to the amendments of the partnership return. (5) The taxpayer may apply to the Commissioners for a direction requiring an officer of the Board to issue a closure notice within a specified period. (6) Any such application shall be heard and determined in the same way as an appeal. (7) The Commissioners hearing the application shall give the direction applied for unless they are satisfied that there are reasonable grounds for not issuing a closure notice within a specified period. Section 31(1)(b) gives the taxpayer a right of appeal against any conclusion stated or amendment made by a closure notice. By section 31A(5) and (6) the notice of appeal must specify the grounds of appeal, but the Commissioners (or now the First tier Tribunal) may allow other grounds to be put forward. Section 50 (as amended) regulates the disposal of the appeal: (6) If, on an appeal, it appears to the majority of the Commissioners present at the hearing, by examination of the appellant on oath or affirmation, or by other . evidence (a) that . the appellant is overcharged by a self assessment; (b) that . any amounts contained in a partnership assessment are excessive; or (c) that the appellant is overcharged by an assessment other than a self assessment, the assessment or amounts shall be reduced accordingly but otherwise the assessment or statement shall stand good. (7) If, on an appeal, it appears to the Commissioners (a) that the appellant is undercharged to tax by a self assessment . ; (b) that any amounts contained in a partnership statement . are insufficient; or (c) that the appellant is undercharged by an assessment other than a self assessment, the assessment or amounts shall be increased accordingly. (9) Where any amounts contained in a partnership statement are reduced under subsection (6) above or increased under subsection (7) above, an officer of the Board shall by notice to each of the relevant partners amend (a) the partners return under section 8 or 8A of this Act, or (b) the partners company tax return, so as to give effect to the reductions or increases of those amounts. The procedural issue: the facts This summary follows the agreed statement of facts and issues, which give details in relation to LLP2 only. The facts are not materially different in relation to LLP1. On 30 June 2005 HMRC issued a notice of enquiry in relation to LLP2s partnership return. Meetings and correspondence ensued between HMRC and KPMG, acting for the LLPs. HMRC concentrated its enquiries on section 45(4) of CAA 2001 (as inserted by the Finance Act 2003), which withholds FYAs for expenditure on software rights if the person incurring it does so with a view to granting to another person a right to use or otherwise deal with any of the software in question. HMRC asked for quite a lot of information, not all of which was supplied promptly. On 24 May 2006 Mr Peter Honeywell, a director of KPMG, sent a six page letter to Mr Frost, the officer in charge of the enquiry, supplying a good deal more information. The penultimate paragraph of the letter stated: The repayments claimed by a number of partners are currently being withheld and in these circumstances the partnerships generally are anxious to ensure that your enquiries are settled without delay. In these circumstances I have to inform you that if we do not receive either confirmation that you can now agree the amounts claimed in the partners returns or a detailed explanation of your reasons for not doing so by 20 June 2006, we will apply to the Commissioners for a directive under section 28A(4) TMA 1970. Mr Frost replied on 2 June 2006: In helping you to managing your clients expectations I can tell you that I very much hope to reply fully before 31 July, although if I have to defend an application for closure notice before then that date will obviously slip back. In the event Mr Frost, after one more letter from Mr Honeywell, did issue a closure notice on 20 June 2006. A great deal of expensive legal argument might have been avoided if Mr Frost had stood his ground and insisted that he needed more time to consider the matter. The closure notice referred in its heading to LLP2 and section 28B of TMA 1970. It read as follows (emphasis applied): I have now concluded my enquiries into the Partnership Tax Return for the year ended 5 April 2005. As previously indicated, my conclusion is: The claim for relief under section 45 CAA 2001 is excessive. The partnership return for the year ended 5 April 2005 is amended as follows. Capital Allowances Nil Allowable Loss Nil. There was a further paragraph dealing with the practical consequences of this conclusion. The words As previously indicated in the closure notice call for emphasis because Henderson J regarded them as providing a context which the Special Commissioner had ignored. The context was that Mr Frost had on 19 June 2006 written Mr Honeywell a letter concerned solely with the section 45(4) issue, and stating that there seems to be no further point in us debating [that] issue. The closure notice was sent with a covering letter dated 20 June 2006 which stated: Given the content of my last letter to you I am satisfied that the MCashback scheme fails on the section 45(4) CAA 2001 point alone. I would prefer to have had longer to examine the full records, as they have only been completely made available to me with your letter of 24 May. This would enable me to provide your clients with a full list of additional points for their consideration. In the circumstances I have to accept that any additional points that may arise will make no difference to the bottom line that no loss relief is due because of section 45(4). Therefore as your clients are so very anxious to receive closure notices I now enclose copies of those that I have issued today. Henderson J read this as Mr Frost making a conscious decision to pin his colours to the mast of section 45(4). The alternative view is that Mr Frost saw section 45(4) as a sufficient reason for a decision to disallow the claims completely, but not necessarily the only relevant reason for doing so. The procedural issue: discussion Henderson J reached his conclusion despite his having correctly observed, at para 113: There is no express requirement that the officer must set out or state the reasons which have led him to his conclusions, and in the absence of an express requirement I can see no basis for implying any obligation to give reasons in the closure notice. What matters at this stage is the conclusion which the officer has reached upon completion of his investigation of the matters in dispute, not the process of reasoning by which he has reached those conclusions. He also observed (again, in my view, entirely correctly), at paras 115 116: There is a venerable principle of tax law to the general effect that there is a public interest in taxpayers paying the correct amount of tax, and it is one of the duties of the Commissioners in exercise of their statutory functions to have regard to that public interest. [The judge then considered changes in the tax system and continued] For present purposes, however, it is enough to say that the principle still has at least some residual vitality in the context of section 50, and if the Commissioners are to fulfil their statutory duty under that section they must in my judgment be free in principle to entertain legal arguments which played no part in reaching the conclusions set out in the closure notice. Subject always to the requirements of fairness and proper case management, such fresh arguments may be advanced by either side, or may be introduced by the Commissioners on their own initiative. That is not to say, however, that an appeal against a closure notice opens the door to a general roving inquiry into the relevant tax return. The scope and subject matter of the appeal will be defined by the conclusions stated in the closure notice and by the amendments (if any) made to the return. Arden LJ reached the same conclusion as Henderson J but the majority of the Court of Appeal took a different view. Moses LJ (with whom Scott Baker LJ agreed) observed, at para 32, that an appeal under section 31(1)(b) of TMA 1970 is confined to the subject matter of the conclusion. On this point he approved and followed the decision of Dr John Avery Jones CBE in DArcy v Revenue and Customs Commissioners [2006] STC (SCD) 543. Moses LJ (at para 41) took the view that it was for the Special Commissioner (or now the First tier Tribunal) to identify what section 28ZA describes as the subject matter of the enquiry. The closure notice completes that enquiry and states the inspectors conclusions as to the subject matter of the enquiry. The appeal against the conclusions is confined to the subject matter of the enquiry and of the conclusions. But I emphasise that the jurisdiction of the special commissioners is not limited to the issue whether the reason for the conclusion is correct. Accordingly, any evidence or any legal argument relevant to the subject matter may be entertained by the special commissioner subject only to his obligation to ensure a fair hearing. There was little if any difference between the majority of the Court of Appeal and Henderson J as to the principles to be applied (Arden LJ did take a rather different approach). The difference between the majority and the judge was as to the application of those principles. I prefer the approach of Moses LJ, who set out his conclusions on this point at paras 50 51: I agree with Henderson J that the fact that the taxpayers had pressed the inspector to issue the closure notice had no relevance to the identification of the subject matter of the appeal. It was, as he remarked, open to the inspector to delay until he had considered, for example, the business plan. He chose not to do so. But the fact that the inspector had indicated that there might have been other issues which arose, was relevant to the exercise of the special commissioners case management powers. The taxpayer was not deprived of an opportunity fairly to marshal evidence as to the other grounds subsequently advanced by the Revenue on the appeal. There is a second basis on which I differ from Henderson J. Apart from the importance of leaving it to the fact finding tribunal to determine the subject matter of the closure notice, in my view the closure notice itself does not allow of so restricted a view of the subject matter of the appeal. Whilst it did refer to previous correspondence which clearly focussed on section 45(4), the closure notice itself was, in plain terms, a refusal of the claim for relief under section 45 CAA 2001. That was the conclusion stated pursuant to section 28B(1). There is neither statutory warrant nor any need to look further. This should not be taken as an encouragement to officers of HMRC to draft every closure notice that they issue in wide and uninformative terms. In issuing a closure notice an officer is performing an important public function in which fairness to the taxpayer must be matched by a proper regard for the public interest in the recovery of the full amount of tax payable. In a case in which it is clear that only a single, specific point is in issue, that point should be identified in the closure notice. But if, as in the present case, the facts are complicated and have not been fully investigated, and if their analysis is controversial, the public interest may require the notice to be expressed in more general terms. As both Henderson J and the Court of Appeal observed, unfairness to the taxpayer can be avoided by proper case management during the course of the appeal. Similarly Dr Avery Jones observed in DArcy, para 13: It seems to me inherent in the appeal system that the tribunal must form its own view on the law without being restricted to what the Revenue state in their conclusion or the taxpayer states in the notice of appeal. It follows that either party can (and in practice frequently does) change their legal arguments. Clearly any such change of argument must not ambush the taxpayer and it is the job of the Commissioners hearing the appeal to prevent this by case management. CAA 2001 In Barclays Mercantile Business Finance Ltd v Mawson [2004] UKHL 51, [2005] 1 AC 684 (BMBF) Lord Nicholls of Birkenhead (delivering the opinion of the whole appellate committee) explained the general nature of capital allowances (para 3): A trader computing his profits or losses will ordinarily make some deduction for depreciation in the value of the machinery or plant which he uses. Otherwise the computation will take no account of the need for the eventual replacement of wasting assets and the true profits will be overstated. But the computation required by Schedule D (whether for the purpose of income or corporation tax) has always excluded such a deduction. Parliament therefore makes separate provision for depreciation by means of capital allowances against what would otherwise be taxable income. In addition, generous initial or first year allowances, exceeding actual depreciation, are sometimes provided as a positive incentive to investment in new plant. In practice, generous FYAs have also provided a positive incentive to artificial tax avoidance schemes. The relevant statutory provisions as to capital allowances are mostly in Parts 1 and 2 of CAA 2001. They are set out quite fully in paras 15 to 27 of the judgment of Henderson J. Because there is now only a single substantive issue in dispute I can summarise them rather more briefly. Allowances are available for capital expenditure on plant and machinery (section 1(1) and (2)(a)) which includes computer software (section 71, which makes appropriate modifications to the notions of providing and owning plant where it consists of computer software). Allowances must be claimed (section 3). There are fairly complex provisions as to when capital expenditure is incurred (section 5). Section 5 is less directly in point than it was below, but it may be helpful to set out the relevant subsections: (1) For the purposes of this Act, the general rule is that an amount of capital expenditure is to be treated as incurred as soon as there is an unconditional obligation to pay it. (2) The general rule applies even if the whole or a part of the expenditure is not required to be paid until a later date. (3) There are the following exceptions to the general rule. (4) If under an agreement (a) the capital expenditure is expenditure on the provision of an asset, (b) an unconditional obligation to pay an amount of the expenditure comes into being as a result of the giving of a certificate or any other event, (c) the giving of the certificate, or other event, occurs within the period of one month after the end of a chargeable period, and (d) at or before the end of that chargeable period, the asset has become the property of, or is otherwise under the agreement attributed to, the person subject to the unconditional obligation to pay, the expenditure is to be treated as incurred immediately before the end of that chargeable period. (5) If under an agreement an amount of capital expenditure is not required to be paid until a date more than 4 months after the unconditional obligation to pay has come into being, the amount is to be treated as incurred on that date. The claimant must carry on a qualifying activity, which includes a trade (sections 11(1) and 15(1)(a)). The claimant must also incur qualifying expenditure (section 11(1) and (4)). The last mentioned subsection provides: The general rule is that expenditure is qualifying expenditure if (a) it is capital expenditure on the provision of plant or machinery wholly or partly for the purposes of the qualifying activity carried on by the person incurring the expenditure, and (b) the person incurring the expenditure owns the plant or machinery as a result of incurring it. It is not suggested that the general rule is not applicable in this case. The most important types of capital allowances are FYAs and writing down allowances. FYAs are generally more attractive to the taxpayer, especially if they are granted at the rate of 100% of the whole expenditure. 100% FYAs were available under section 45 (ICT expenditure incurred by small enterprises). That section (as amended by the Finance Act 2003) provided as follows: (1) Expenditure is first year qualifying expenditure if (a) it is incurred on or before 31 March 2004, (b) it is incurred by a small enterprise, (c) it is expenditure on information and communications technology, and (d) it is not excluded by section 46 (general exclusions) or subsection (4) below. (2) Expenditure on information and communications technology means expenditure on items within any of the following classes: Class A. Computers and Associated Equipment . Class B. Other Qualifying Equipment . Class C. Software This class covers the right to use or otherwise deal with software for the purposes of any equipment within Class A or B . (4) Expenditure on an item within Class C is not first year qualifying expenditure under this section if the person incurring it does so with a view to granting to another person a right to use or otherwise deal with any of the software in question. The various statutory conditions are brought together by section 52, which specifies the percentages for FYAs. It is common ground that LLP2 was a small enterprise. Originally HMRC relied on section 45(4) as excluding relief, but that contention was abandoned, rightly or wrongly, on the third day of the hearing before the Special Commissioner, and no attempt has been made to reintroduce it. The purpose of section 45(4) was evidently to ensure that the full relief was available only to small enterprises which acquired software rights for use in their own business activities, and not simply as a source of income from licences. The expenditure issue As explained below, the investor members of the LLPs were individuals with large incomes who themselves put up only 25% of the consideration said to have been paid for acquiring rights in software. The remaining 75% was provided by interest free loans on non recourse terms, made to the investor members by special purpose vehicles set up for the purpose. HMRC rely strongly on the circularity of these transactions as more fully described below. The essential issue (simply stated but not simply resolved) is whether the LLPs incurred capital expenditure, to the extent of the whole stated consideration, in acquiring software rights for the purposes of their trades. The LLPs case is that they have plainly satisfied the statutory test, and that they have concurrent conclusions of the Chancery Division and the Court of Appeal in their favour (indeed Henderson J observed, at para 30, that in view of the Special Commissioners findings one might have thought that the answer to this question was obvious). HMRCs case is that in relation to each of the LLPs there was a single composite transaction (that much, at least, is common ground, as the LLPs printed case refers to the wider transaction) and that by that transaction, realistically assessed, much less than the full claimed amount of the expenditure was incurred on the acquisition of software rights. HMRCs printed case (para 66) puts its position as follows: The overall effect of the single composite transaction from LLP2s point of view is that the highly uncommercial loan reduced the cost to LLP2 of the software with the result that LLP2 did not incur expenditure of 27.5m for the purposes of CA 2001. It did incur expenditure of at least 5m, but . it was for LLP2 to prove how much more than this it incurred, by giving evidence as to the value of its members liability under the Member Loans. But LLP2 chose to give no evidence of this before the Special Commissioner. In those circumstances the correct conclusion is that LLP2 incurred expenditure of only 5m. Out of context, the value of its members liability under the Member Loans is a rather opaque expression, but I take it to mean the value of the benefit conferred by the highly uncommercial loan just referred to. Those familiar with the leading cases in this troublesome area of the law will not be surprised to hear that the LLPs rely strongly on the decision of the House of Lords in BMBF [2005] 1 AC 684 and seek to distinguish the decision of the House of Lords in Ensign Tankers (Leasing) Ltd v Stokes [1992] 1 AC 655 (Ensign). HMRCs position is not precisely the converse of that: they seek to distinguish BMBF but do not rely particularly strongly on Ensign, while repudiating any suggestion that Ensign has been impliedly overruled by BMBF. The wider transaction: the participants The arrangements in which the LLPs took part involved three main participants: MCashback Limited (MCashback) which developed and originally owned the software; Tower Group plc (Tower), a financial services company; and the LLP in question (I shall follow the courts below in concentrating on LLP2). MCashback had a board of directors with what the Special Commissioner described as impressive credentials in the retailing world. Its CEO was Mr Bob Cooper, who had been a main board director at Sainsbury. MCashbacks board also included Dr Adrian Rowe (or Roe there are variant spellings in the papers), an IT expert who developed the software, and Mr Ahmed Zghari, its Chief Operating Officer. Dr Rowe and Mr Zghari gave evidence to the Special Commissioner but Mr Cooper (who was principally responsible for income forecasts) did not. The software was for a system described in the agreed statement of facts and issues (paras 27 28) as follows: MCashback had devised a complex software package, called the M Rewards system, to enable manufacturers to promote their products to retail customers by offering them free airtime on their mobile phones. The manufacturers would pay MCashback a fixed fee, called a clearing fee, per transaction. MCashback required additional funding to roll out the M Rewards system. This potentially involved negotiations with manufacturers, supermarket groups and mobile phone companies around the world. MCashback approached Tower Group plc (Tower), which had experience of arranging finance for similar software companies. The funding arrangement proposed by Tower was for MCashback to sell part of its software (by means of SLAs) to four newly created Tower LLPs, the members of which would include Tower personnel and individual outside investors, for a total of 143 million; the LLPs would thereby acquire a right to receive part of the clearing fees derived from the exploitation of the M Rewards system. In the event these ambitious plans were not realised. Only LLP1 and LLP2 (which raised about 7.33m and 27.5m respectively after fees and expenses) completed their transactions in full; LLP3s completion was very much scaled down and LLP4 never completed its transaction at all. Tower was involved in advising and making arrangements for the transactions between MCashback and the LLPs. It had a subsidiary relevant to LLP2, Tower MCashback Finance UK 2 Limited (Tower Finance 2). There was also an entity called Tower Project Finance LLP which acted in an advisory capacity. Some of Towers personnel (Mr Paul Feetum, Mr Stephen Marsden and Mr Simon Smith) became founder members of the LLPs. In the case of LLP1 they also became investor members, as mentioned below. Mr Feetum and Mr Marsden gave evidence to the Special Commissioner. The LLPs were to have founder members (who set them up and entered into contracts with MCashback before relief under section 45 ran out on 1 April 2004) and investor members. The latter were to provide the funds and obtain the tax advantages of the FYAs. LLP1 was very short of investor members, since a number of potential investors dropped out at a late stage, which was why the three founder members became investor members also. LLP2, by contrast, had more than 50 investor members. Its partnership return for 2004 5 shows that the partnership claimed an allowable loss of just under 30m, 27.5m of which was for capital allowances. The largest claim for any individual member was 2,497,439, and the average claim was for a little over 500,000. Most of the investors became partners during June or July 2004. Apart from the three main groups of participants two banks, both based in Guernsey, were involved in the arrangements. These were R & D Investments Ltd (R&D) and Janus Holdings Ltd (Janus). As explained in more detail below, R&D held security deposits placed with it by MCashback, which R&D in turn deposited with Janus as security for a loan by Janus to a Tower Finance company (described in the schemes explanatory material as the Lending SPV). The Tower Finance company made interest free non recourse loans to individual investor members of the LLPs. The Special Commissioner concluded (para 127) that the function of the banks was window dressing, and was actually counter productive, since When I can discern no real change or implication or benefit that results from the insertion of the two banks, the fact that that interposition has increased costs, complexity, documentation and legal fees just serves to underline how vital it was thought to try to disguise the reality of what was happening. The wider transaction: the documents As already noted, it is not disputed that the sequence of events amounted to a prearranged, composite transaction of the type to which Lord Wilberforce referred 30 years ago in a famous passage in W T Ramsay v IRC [1982] AC 300, 326: To force the courts to adopt, in relation to closely integrated situations, a step by step, dissecting, approach which the parties themselves may have negated, would be a denial rather than an affirmation of the true judicial process. In each case the facts must be established, and a legal analysis made: legislation cannot be required or even be desirable to enable the courts to arrive at a conclusion which corresponds with the parties own intentions. In contrast to the timing of events in some other closely integrated situations which have been investigated in some of the well known authorities, the sequence of events in relation to LLP2 was quite protracted. The completion of the transaction entered into on 31 March 2004, which was under the contract required to take place within four months (in order to satisfy section 5(5) of CAA 2001) was in the event delayed until mid January 2005, and in the meantime there seems to have been real doubt as to whether sufficient investor members would come forward to provide the cash sum of 7.5m (25% of 30m, which was the total sum required to meet the whole stated consideration of 27.5m together with 2.5m for fees and expenses). There was also real doubt as to whether the M Rewards scheme would be as big a commercial success as the directors of MCashback hoped. The smooth operation of the scheme was therefore by no means fully pre ordained. But from 31 March 2004 it could be predicted with confidence that if the investors did come up with the necessary funds, their destination would follow a pre ordained pattern. In order to bring the LLP1 and LLP2 transactions to completion ten significant documents (as well as many other more routine items) were executed or issued between 31 March 2004 and early 2005. Those in the appeal papers are as follows (not all the specimen documents in the appeal papers relate to the same LLP): date (1) 31 March 2004 (2) 6 July 2004 Description Software licence agreement (SLA) Limited liability partnership agreement (the partnership agreement) Operations agreement (the operations agreement) Valuation report Information Memorandum Application form (specimen) Loan agreement (members loan agreement) Loan agreement Parties MCashback (1) LLP2 (then Tower Taxi Technology 34 LLP)(2) Original founder members (1) LLP2 (2) MCashback (1)LLP1 (2) LLP2 (3) LLP3 (4) LLP4 (5) Valuation Consulting Ltd (Mr Ian Brewer) Issued by Tower Project Finance LLP (relates to LLP3) PJ Donaldson (an adhering investor member of LLP2) Tower MCashback Finance (1) P J Donaldson (2) Tower MCashback (3) 6 July 2004 (4) 7 July 2004 (5) 12 July 2004 (6) 29 July (7) 30 July 2004 (8) 1 December 2004 Finance (1) Janus (2) (9) 12 January 2005 Guarantee and deposit R & D (1) Janus (2) agreement (10) 12 January 2005 Collateral agreement MCashback (1)R&D(2) It is simplest to comment on these documents in chronological order, after a preliminary word about the position immediately before 31 March 2004. The four LLPs were in existence, having been registered in the names of Tower Taxi Technology 34, 35, 36 and 38 LLP respectively. It is apparent from the recitals and definitions in the specimen SLA that these four corporate limited partnerships were intended to be renamed as LLP1, LLP2, LLP3 and LLP4 respectively. But in the event they changed their names on 14 April 2004 (after signature of the SLAs but before signature of the partnership agreements) so that 34, 35, 36 and 38 became 2, 3, 4 and 1 respectively. In consequence the specimen SLA (describing itself as the LLP1 agreement) was entered into by LLP2 and the agreement defined as the LLP4 agreement was entered into by LLP1. This produced some apparent inconsistencies in other documents. Regrettably these facts were not explained to the Court (though counsel may have had the well meaning intention of avoiding unnecessary complication). So what we are concentrating on is the LLP1 agreement, actually entered into by LLP2. LLP1 and LLP2 each had three founder members who were part of the Tower team, and few if any investor members had committed themselves to investing. The negotiations that were taking place were between MCashback and Tower and their respective advisers. Within the last two or three days before the deadline on 1 April new advice seems to have raised doubt about the wisdom of software rights being acquired by different LLPs in undivided shares, leading to a last minute decision to bundle software into bits (as it was put in an email sent by Mr Feetum at 7.33am on 30 March 2004). In addition there were still vigorous negotiations being conducted on other points (an email sent by Mr Feetum to his team at 7.45 am on 31 March 2004, describing his discussions with Dr Rowe, is vivid evidence of this). Henderson J (at para 31) referred to the emails and was in no doubt that the SLAs were negotiated at arms length between wholly unconnected parties. The Special Commissioner made these findings (para 44) about the decision to bundle the software rights into bits: An email from Towers lawyers on 29 March indicated however that there would be some problem in the LLPs simply purchasing percentage slices of the software, and therefore the solution was adopted that LLP1 would buy the Code Generation Software for 7.334m, carrying an entitlement to 0.66% of clearing fees and to 5.128% of the clearing fees allocable to all four LLPs; LLP2 would buy the Customer Support Software for 27.501m; LLP3 would buy the Call Centre Software for 45.835m and LLP4 would buy the fourth element of software for 62.33m. Notwithstanding the allocations of specific software to each of the LLPs, the price payable by, and the percentage entitlement to clearing fees acquired by, each LLP retained their earlier matched relationship. These details appear to be correct, despite the confusion resulting from the way in which the LLPs were renamed. But it must be borne in mind that the SLA entered into by LLP2 had been drafted for LLP1 (that may be the explanation of a comment by Henderson J in the fifth sentence of para 36 of his judgment). The heart of LLP2s SLA was an obligation on MCashback to grant an exclusive world wide royalty free licence to LLP2 to use the Licensed Software, defined as the Customer Support Interface. The consideration was to be 27.501m payable on completion against an undertaking by MCashbacks solicitors to apply it in obtaining a release of an existing charge on the software and in the procurement of a new security. LLP2 was to be entitled indefinitely to 2.5% of the (gross) clearance fees received from exploitation of the M Rewards system. There is a full summary in the judgment of Henderson J which is readily available ([2002] STC 3366, 3411, paras 36 to 47) and I cannot hope to improve on it. I gratefully adopt the description in para 42 of how the SLA looked forward to matters which had not yet been finally decided: It was always intended that each LLP would raise 75% of the finance which it needed by way of bank borrowing, and that MCashback would be obliged to deposit approximately 82% of the consideration which it received for the grant of the licence as an indirect security for that borrowing. The details had not yet been worked out on 31 March 2004, and the identity of the two participating banks was still undecided. However, the basic framework of the arrangements had been agreed, and this was reflected in the definitions in clause 1.1 of the SLA of the Bank Loan, Bank One, Bank One Security, Bank Two and Bank Two Security. Clause 4.2(d) provided that on completion MCashback should deliver to Bank Two the Bank Two Security, and procure that Bank Two provide to Bank One the Bank One Security. He then summarised Clause 4.2 and Clause 4.3, dealing with security. Bank One was to have been Lloyds TSB, but turned out to be Janus. Bank Two was to have been Halifax Bank of Scotland, but turned out to be R & D. Had all four LLPs proceeded as Tower hoped, they would have produced a total cash investment (from investor members of the LLPs) of 39m, supplemented by bank loans from Janus (through the medium of a SPV, Tower Finance 2 in the case at LLP2) of 117m. A total sum of 156m would have been paid out by the LLPs in three directions: (i) payment of fees and expenses of about 13m; (ii) payment to R & D of a security deposit of 117m; and (iii) payment of the balance of 26m to MCashback for its roll out expenses. These figures are taken from paras 30 and 31 of the agreed statement of facts and issues. As between the different LLPs the plan was as follows: % of clearing fees 0.66 consideration licensed software (m) LLP1 7.334 Code Generation system LLP2 27.501 2.50 Customer Support Interface LLP3 45.835 4.16 Call Centre system LLP4 62.330 5.68 Reporting Module ______ _____ 143.000 13.00 But as already mentioned, only LLP1 and LLP2 got far off the ground. The authorities In BMBF [2005] 1 AC 684, paras 26 to 38, the House of Lords (in an opinion of the appellate committee delivered by Lord Nicholls) gave a brief summary, under the heading The Ramsay Principle, of the laws development, during the past thirty years, in its attitude to artificial tax avoidance. There is another, more detailed discussion of the same topic (starting with the heading Ramsay: A principle of construction? and going on with several other headings) in the opinion of Lord Hoffmann in MacNiven v Westmoreland Investments Ltd [2001] UKHL 6, [2003] 1 AC 311, paras 28 to 62. Those passages are by now well known and I shall not try to summarise them. But I wish to add a few footnotes. The Ramsay case (Ramsay (WT) Limited v Inland Revenue Commissioners [1982] AC 300) was the fountain head, as Lord Hoffmann put it in MacNiven at para 30. Nothing in Lord Wilberforces magisterial opinion in Ramsay was revolutionary, as he was careful to point out (p323). It did not introduce a new, judge made principle (p326). But the clarity of Lord Wilberforces insights was rather obscured by some subsequent decisions, especially (if I may respectfully say so) the opinion of Lord Brightman in Furniss v Dawson [1984] AC 474, 527. There, Lord Brightman, in another very well known passage, following Lord Diplock in Inland Revenue Commissioners v Burmah Oil Co Ltd [1982] STC 30, 33, appeared to lay down a detailed and fairly inflexible prescription of how the Ramsay principle works. Lord Hoffmann commented on this in MacNiven at para 49: In the first flush of victory after the Ramsay, Burmah and Furniss cases, there was a tendency on the part of the Inland Revenue to treat Lord Brightmans words as if they were a broad spectrum antibiotic which killed off all tax avoidance schemes, whatever the tax and whatever the relevant statutory provisions. The need to recognise Ramsay as a principle of statutory construction, the application of which must always depend on the text of the taxing statute in question, was clearly recognised in Craven v White [1989] AC 398: see especially, in the House of Lords, Lord Keith of Kinkel at p 479 and Lord Oliver of Aylmerton at pp 502 503. The House was split three two, the dissenters being Lord Templeman and Lord Goff of Chieveley, who gave the only two full opinions in the House of Lords unanimous decision in Ensign four years later. The drawing back from the rigidity of Furniss v Dawson was continued by the important decisions in Inland Revenue Commissioners v McGuckian [1997] 1 WLR 991 (discussed by Lord Hoffmann in MacNiven at paras 51 to 57) and MacNiven itself. There are also many helpful insights in the judgments in the Court of Final Appeal of Hong Kong in Collector of Stamp Revenue v Arrowtown Assets Ltd [2003] HKCFA 46. That is, in brief summary, the historical context of the decision of the House of Lords in Ensign. Although the composite transaction considered in that case had to be gathered from no fewer than seventeen legal documents, and although the hearing before the Special Commissioners took 18 days, for present purposes the essential facts can be summarised quite briefly (the fullest statement of facts is to be found in the decision of the Special Commissioners [1989] STC 705: details of the setting up and operation of the scheme bank account can be found at pp 719 and 725). Victory Partnership (VP) was a limited partnership formed under the Limited Partnerships Act 1907. Ensign Tankers (Leasing) Ltd (Tankers) was one of the limited partners, with much the largest capital contribution. VP agreed with Lorimar Productions Inc (LPI), a film production company, to acquire the right to make and exploit a film which was then in production (and which LPI agreed to continue to produce on behalf of VP). $4.780m had already been spent out of a budget of $13m. VP agreed to pay $3.25m towards the cost of the film and LPI agreed to lend VP the balance of the budgeted sum (the production loan) and any further sum (the completion loan) needed if (as happened) the film went over budget. To implement these arrangements a bank account (the scheme account) was opened by Guinness Mahon, a merchant bank specialising in such schemes. The account was in the name of VP but could not be operated without the approval of a representative of LPI. VP paid $3.25m into the scheme account, from which it was transferred to LPIs bank, Chemical Bank, to reduce LPIs indebtedness. Lord Templeman described the subsequent operation of the account as follows ([1992] 1 AC 655, 664): Thereafter, when LPI required to spend or spent money in making the film, the amount involved was credited by LPI to the scheme current account (which was controlled by LPI) and returned to LPI on the same day for credit to its account at Chemical Bank. The scheme current account was thus never in credit or debit at the close of any day and [VP] was never in debt as a result of the scheme. In substance the film was funded by LPI borrowing from Chemical Bank. VPs liability to repay the so called loans from LPI was limited both by the Limited Partnerships Act 1907 and by express terms in the scheme documents. VP claimed capital allowances for the whole cost of producing the film. Its claim turned on how much capital expenditure VP had incurred. Lord Templeman differed from Millett J (the first instance judge) as to the significance of the non recourse nature of the loans (p 667): But the non recourse nature of the borrowing ensured that LPI paid the whole cost of the film exceeding $3m and conversely that [VP] would not be liable for the cost of the film in excess of $3m. By the operation of the scheme current account in accordance with the provisions of the scheme, the money of LPI, at all times under the control of LPI, was electronically transferred from Hollywood to the City of London and back again without serving any useful purpose and leaving no trace except entries on computer prints. After a wide ranging survey of authorities on tax avoidance Lord Templeman restated his conclusion at p 676: In the present case if LPI had been a British company, the fact that LPI borrowed $10m from Chemical Bank to enable LPI to make the film would not have denied to LPI a first year allowance equal to the sums borrowed and expended. But [VP] neither borrowed nor spent $10m. Lord Goff took the same view. He observed at p 682: I accept, too, that money was indeed paid by LPI to VP on the various occasions when the relevant account was credited; although that too was deprived of any practical effect by the immediate repayment, on the same day, of exactly the same sum from that account. What I have to do, however, is to stand back from the composite transaction; to look at it as a whole; and to decide, first, what is the true nature and effect of the transaction and, second, whether, on a true construction of section 41(1) of the Finance Act 1971, VP is entitled to an allowance in respect of the whole of the cost of the film, viz $14m. When I embark upon this process, I find it impossible to characterise the money paid by LPI into the bank account to the credit of VP as, in any meaningful sense, a loan. It was not in my opinion money lent to VP to enable VP to finance the production of the film. It was money paid by LPI into the bank account opened in VPs name to enable VP to indulge in a tax avoidance scheme, and for no other purpose. Here Lord Goff emphasised that the Ramsay principle is indeed a principle of construction. He focused on the text of section 41(1) of the Finance Act 1971 (in terms not materially different from those of CAA 2001), and answered the ultimate question . whether the relevant statutory provisions, construed purposively, were intended to apply to the transaction, viewed realistically (Ribeiro PJ in Collector of Stamp Revenue v Arrowtown Assets Ltd [2003] HKCFA 46, para 35, quoted by Lord Nicholls in BMBF at para 36). In the result the House of Lords concluded that VP had spent $3.25m, not $14m, on production of the film, and that was the extent of VPs entitlement to capital allowances. This Court has not been invited, formally or informally, to overrule or depart from Ensign. HMRC suggest in their printed case that Henderson J treated it as impliedly overruled by BMBF, but I do not read his judgment in that way. He did state (para 62) that BMBF is now the leading case in this area. But in BMBF the House of Lords did not mention Ensign, though it was cited, and in the Court of Appeal ([2002] EWCA Civ 1853, [2003] STC 66) only Peter Gibson LJ (paras 40 41) referred to it, without in any way questioning it. He impliedly distinguished it (as I understand those paragraphs) on the basis that Ensign was not a case in which the money went round in a circle; more simply, nothing happened to the money. At first instance in this case Henderson J referred to Ensign once only, at para 48, in a passage dealing with the opinion of tax counsel which had been provided to prospective investor members of the LLPs. The decision of the Court of Appeal in BMBF is of interest for another reason. Both Peter Gibson LJ (with whom Rix LJ agreed) and Carnwath LJ (at paras 44 and 69 to 73 respectively) courteously expressed difficulty with the distinction between legal and commercial concepts drawn by Lord Hoffmann in MacNiven in relation to the construction of tax legislation. Para 38 of Lord Nicholls opinion in BMBF may perhaps be regarded as something of a strategic withdrawal by the House of Lords from a position which, if not untenable (indeed perhaps something of a truism), was likely to give rise to misunderstandings. I must now come to what BMBF itself decided. It was a leasing finance scheme entered into by the taxpayer (which I shall call Barclays Finance to distinguish the body corporate from the decided case). Barclays Finance was described by Lord Nicholls as the UK market leader in this field. Under the scheme Barclays Finance paid about 91m to acquire a newly constructed gas pipeline under the Irish Sea from its owner, Bord Gais Eireann (BGE), an Irish statutory corporation. The pipeline was then leased by Barclays Finance to BGE for an initial term of about 30 years, at an escalating rent, and subleased by BGE to a subsidiary, with which BGE also entered into a transportation agreement and other arrangements under which the subsidiary operated the pipeline. Barclays Finance borrowed the whole of the 91m from Barclays Bank at a fixed commercial rate (10.95%). The sum received by BGE was deposited with a Jersey company called Deepstream, which undertook complicated obligations to make a range of periodical payments to BGE. The deposit with Deepstream returned, via an Isle of Man Barclays subsidiary, to Barclays Banks Treasury. So it was a case in which the money could be said to have gone round in a circle. These transactions were entered into at the end of 1993, that is fairly soon after the decision of the House of Lords in Ensign. The schemes tax implications did not however come before the Special Commissioners until 2001. The Special Commissioners concluded that the scheme had no commercial reality, a conclusion that the Court of Appeal (paras 32 36 and 52 59) found insupportable. The first instance judge, Park J ([2002] STC 1068), had upheld the Special Commissioners but on the different and narrower ground (as Peter Gibson LJ put it [2003] STC 66, para 18) that this was not a case where the finance enabled the lessee to have the use of an asset which, absent the lease finance, it would not have, nor was it a case where the lessee uses the proceeds of sale to repay borrowings or for other purposes of the lessees business. [Park J] described all those cases as being where the finance lessor provided up front finance to the lessee and the finance so provided is used in the lessees business. He contrasted that with the present case where BGE already owned the Pipeline, and after the transaction it was still able to use it as before, though by virtue of the Headlease, the Sublease and the Transportation Agreement, and it still owed the banks the money which it had borrowed, nor was the 91,292,000 available for BGE to use in any other way to finance transactions or activities of its business. Peter Gibson LJ disagreed (para 37): Section 24 focuses on the incurring of expenditure by the trader on the provision of plant or machinery wholly and exclusively for the purposes of his trade. It therefore requires one to look only at what the taxpayer did. To the test posed in section 24 it is immaterial how the trader acquires the funds to incur the expenditure or what the vendor of the provided plant or machinery does with the consideration received. So did Carnwath LJ (para 54): However, there is nothing in the statute to suggest that up front finance for the lessee is an essential feature of the right to allowances. The test is based on the purpose of the lessors expenditure not the benefit of the finance to the lessee. Nor, as the judge recognised, should it make any difference whether the arrangements by which the tax advantage was achieved were simple or, as the Commissioners thought in this case, complicated [and] convoluted. Carnwath LJ also stated, in a passage at para 58 to which Moses LJ attached great importance (he quoted it twice, at paras 69 and 86 of his judgment in the Court of Appeal, supplying emphasis as below): There might be more room for argument as to whether there was expenditure, given the apparent circularity of the payments. However, once one accepts the transfer of ownership, it is difficult to question the reality of the expenditure by which the purchase price was discharged. I have discussed the decision of the Court of Appeal in BMBF at some length because it was the latest relevant authority when MCashback and Tower were planning and negotiating their arrangements; HMRCs appeal to the House of Lords was pending (Henderson J referred to this in para 48 of his judgment). Moreover the single opinion of the House of Lords amounted to a general endorsement of the decision of the Court of Appeal (I have already referred to the matter of the legal commercial concept dichotomy). The House of Lords summarised their conclusion in para 42: If the lessee chooses to make arrangements, even as a pre ordained part of the transaction for the sale and leaseback, which result in the bulk of the purchase price being irrevocably committed to paying the rent, that is no concern of the lessor. From his point of view, the transaction is exactly the same. No one disputes that [Barclays Finance] had acquired ownership of the pipeline or that it generated income for [Barclays Finance] in the course of its trade in the form of rent chargeable to corporation tax. In return it paid 91m. The circularity of the payments which so impressed Park J and the Special Commissioners arose because [Barclays Finance], in the ordinary course [of] its business, borrowed the money to buy the pipeline from Barclays Bank and Barclays happened to be the bank which provided the cash collateralised guarantee to [Barclays Finance] for the payment of the rent. But these were happenstances. None of these transactions, whether circular or not, were necessary elements in creating the entitlement to the capital allowances. The decision of the Special Commissioner The Special Commissioner had an unenviable task and it is clear that he must have devoted a lot of time and thought to the preparation of his written decision, which runs to 176 paragraphs. The decision attracted a good deal of criticism from Henderson J (in particular paras 60, 61 and 74 to 84 of his judgment), and some of the judges criticisms have force. The Special Commissioner reached a conclusion which had not been contended for by either side, which is an adventurous course to take in a complex tax case (see Billingham v Cooper [2001] EWCA Civ 1041, [2001] STC 1177, para 31). Nevertheless the Special Commissioner was the fact finding tribunal, and his findings of fact can be departed from by appellate courts only on the principles laid down in Edwards v Bairstow [1956] AC 14. The most important findings made by the Special Commissioner include the following: (1) the scheme was not a sham, but it was pre ordained and designed as a composite whole (paras 128 132); (2) the market value of the software rights disposed of was very materially below the price ostensibly paid for those rights (para 99, elaborated at paras 100 to 111); (3) the last minute decision to sell the software in bits added to the artificiality of the valuations (para 103); (4) there was little chance that the members loan would be repaid in full within ten years; as much as 60% of the loans might be unpaid, and waived, at the end of that period (para 57); (5) there was no commercial justification for the insertion into the scheme of the two banks, R & D and Janus (paras 66, 127); and (6) the consideration paid by the LLPs was not paid partly for soft finance, which was the Special Commissioners own third approach (paras 113 121). The Special Commissioners conclusion on the expenditure point, so far as it is to be found in any single paragraph, is probably to be found in para 138: The question that I have to address, therefore, is whether it is appropriate to say that capital expenditure of the gross figures has been incurred when the seller has filtered back 75% of the price to the investor members of the LLPs via the cosmetic banking chain, when the reality is that there is a great likelihood that a substantial proportion of the wholly uncommercial loans will eventually be waived, and when, in the meantime, any partial repayments of the loans will be liable to be made on an entirely contingent basis. And when I address that question by looking at the legal reality of what has occurred, and at the money movements, rather than looking fixedly at discredited labels attached to the transactions by the parties, I conclude that the gross capital expenditure has not been incurred. On a purposive basis it seems to me that the investor members and the LLPs have so far incurred the 25% element of the total price, and that the LLPs will incur further capital expenditure if and to the extent that the LLPs discharge members loans on their behalf by the envisaged application of 50% of clearing fees. The judgment of Henderson J Henderson J dealt with the expenditure issue at paras 30 to 86 of his judgment. Paras 30 to 61 are concerned with the facts and I have already summarised the judges careful exposition of the scheme documents. Paras 62 to 71 are concerned with the law, especially the decisions of the Court of Appeal and the House of Lords in BMBF which (as already noted) the judge described as the leading case. The judges discussion of the issue and his conclusions are to be found in fifteen closely reasoned paragraphs, 72 86. sentence of para 72: In fact the judge began the discussion by stating his conclusion in the first In the light of the principles laid down in BMBF and MacNivens case, there cannot in my judgment be any real doubt about the answer to the Expenditure Issue. The whole of the purchase price of 27.501m was expended by LLP2 on the acquisition of the software, and it was not expended on anything else. The rest of the paragraph provides the principal reasons for this conclusion: (1) the purchase price was negotiated at arms length between wholly unconnected parties; (2) title to the software rights passed on completion in January 2005; (3) what happened to the purchase price of 27.501m after it had been paid by LLP2 to MCashback is immaterial, because section 11 of CAA 2001 requires one to look only at what the taxpayer did (BMBF in the Court of Appeal, per Peter Gibson LJ [2003] STC 66, para 37). Henderson J treated the circularity of the movement of the 22.5m as irrelevant, as it had been in BMBF (para 73 of his judgment). He thought that the Special Commissioner had been distracted from the true question by a combination of errors into an unsound approach of his own devising (para 74). In particular: (1) the Special Commissioner had considered the authorities only after reaching his own provisional view, and treated BMBF as irrelevant (para 75); (2) he had been greatly over influenced by his views on the question of valuation, which he had discussed at great length, expressing his conclusions in colourful and sometimes contradictory terms (para 76); (3) market value was, Henderson J stated, completely irrelevant to the expenditure issue, as HMRC were not relying on any of the anti avoidance provisions in section 214 216 of CAA 2001 (para 77); and (4) in any event the criticisms of the evidence of Mr Brewer (who made the valuation report dated 7 July 2004) were largely unfounded, showing a fundamental confusion between the prediction of future income and the valuation of predicted income (para 78). Henderson J then turned (paras 79 83) to the Special Commissioners four possible approaches. The judge considered that the approach that was correct in law was the second approach, that is that the market value of the acquired software might be materially lower than the price paid for it in this case, but that nevertheless the LLPs should still be entitled to claim capital allowances by reference to the full price paid because, whilst the LLPs might only have paid that price because of the non recourse loans provided to the members to contribute their capital, the LLPs have nevertheless paid the full price for the software and nothing can adjust that analysis for tax purposes. The judge agreed with the Special Commissioner as to the difficulties in the third (soft finance) approach, while commenting that on his own findings the Special Commissioner should logically have accepted it. The Special Commissioner had been entitled to conclude that the insertion of the two banks had no commercial justification (para 84 of the judges judgment) but nevertheless the only real transaction was the transaction which the parties actually carried out, involving the banks. The judge rejected the argument that BMBF was distinguishable because in that case the circularity was happenstance. His conclusions can be found in paras 85 and 86: I accept that there are distinctions between the facts of the present case and those of BMBF, and I would agree that in the absence of evidence from the banks the Special Commissioner was entitled to be sceptical about the commerciality of the arrangements into which they entered. It seems to me, however, that none of this advances the Revenues case, because it does not impinge on the narrow question whether LLP 2 incurred the relevant expenditure on the acquisition of the software. The judge referred to MacNivens case, and continued: I hope I have now said enough to explain why in my judgment the Special Commissioners conclusion on the Expenditure Issue cannot stand, and in the absence of a finding of sham the only conclusion open to him was that the whole of the consideration for the software, when it was paid on completion of the SLA in January 2005, was expenditure incurred on the provision of plant within the meaning of section 11 of CAA 2001. The Court of Appeal In the Court of Appeal the only full judgment on the expenditure issue is that of Moses LJ. His judgment covers this issue at paras 56 to 87. He referred at some length to BMBF in the Court of Appeal and the House of Lords (paras 61 to 72), and to Ensign in the House of Lords (paras 73 78). He did not accept the submission (made on behalf of the LLPs) that BMBF shows that the terms of borrowing are simply irrelevant (paras 78 79): The terms of the borrowing, in the context of all the facts, may be relevant in order to cast light on whether LLP2 had really incurred expenditure, as Carnwath LJ foresaw ([2003] STC 66, para 58). The source of the money was irrelevant in BMBF because the borrowing was on regular, commercial terms. Rather than regarding the terms on which LLP2 borrowed 75% of the consideration as simply irrelevant, the Court should consider them in relation to the fundamental question whether the taxpayer suffered the economic burden of paying the full amount. By doing so, it is possible to decide whether there was real expenditure. Moses LJ put aside (paras 80 to 81) the issue of whether incurring expenditure was a legal or commercial concept. The rest of the judgment of Moses LJ (paras 82 to 87) concentrated on the question whether there was real expenditure by the LLPs (without any emphasis on the question for what the expenditure was incurred). Moses LJ distinguished Ensign on two principal grounds. The first was (para 84): Whilst there was an expectation, on the basis of conservative predictions, that the whole of the loan agreement would not be paid off in full over the period of ten years, it cannot be shown that the terms were such that the loan was never likely to be repaid. It all depended on success in marketing the software. In Ensign, the loan never had to be repaid whatever success the film achieved. The last sentence was challenged by Mr Prosser as factually incorrect. The second point of distinction perceived by Moses LJ was (para 85): LLP and its members owned free of any liability software which could generate a substantial proportion of an annual income which the projections showed to be approximately 38m. In Ensign Tankers, the partnership never acquired a right to more than 25% of the returns. In my view this is a seriously oversimplified version of the facts in each case. The LLPs did not own the software; they owned rights in bits of the software which together (if the whole plan had gone through) would have brought them 13% of the clearing fees (one component in computing in MCashbacks trading profit). VP did own the whole of the master negative of the film, but that ownership did not entitle VP to the whole net profits from the film, because there were also heavy distribution and exploitation costs to be incurred by other companies connected with LPI before the film earned what it had cost to make. Moses LJ set out his conclusion in para 86 (referring back to para 85): It is this feature which to my mind is the most important ground for distinguishing Ensign Tankers and this appeal. The ownership of the software agreement was transferred to LLP 2. The question of transfer of ownership casts a clear light on the reality of the expenditure, just as it did in Ensign Tankers. It was unacceptable to contemplate that [VP] had incurred 100% of the expenditure on the film in acquiring a mere 25% of the rights. But the fact that LLP2 acquired the right to the full economic benefit of the agreement is a powerful, and, to my mind, a determinative feature of this appeal. It is worth repeating part of Carnwath LJs judgment (at para 85) which I cited earlier: However, once one accepts the transfer of ownership, it is difficult to question the reality of the expenditure by which the purchase price was discharged. Discussion and conclusions I start from the Special Commissioners findings of fact summarised in para 55 above. Henderson J accepted (1) (not sham, but pre ordained) and (5) (no commercial purpose for insertion of banks, but with the qualification that it was nevertheless the only real transaction). He did not disagree with (6) (the Special Commissioners rejection of his third approach) while commenting that logically he would have expected the Special Commissioner to accept it. As to (4) (prospect of repayment of members loans) the judge set the bar (to my mind) surprisingly low in commenting (para 81) that the Special Commissioner recognised that there was (at the lowest) a real possibility that the clearing fees derived from the software would be sufficient to ensure that at least some of the 75% loan finance would be repaid. The judge strongly disagreed on (2) (valuation) and did not mention (3) (disposition and valuation of rights to software in bits). Before disagreeing strongly with the Special Commissioners views on valuation, Henderson J stated (para 77) that the market value of the software was completely irrelevant. That is, in my view, putting it a good deal too high. It is true that HMRC (for reasons that I do not understand) made no attempt to invoke any of the anti avoidance provisions in CAA 2001. But I cannot accept that the question of valuation was totally irrelevant in the context of a complex pre ordained transaction where the court is concerned to test the facts, realistically viewed, against the statutory text, purposively construed. Henderson J went on to say that the Special Commissioner betrayed a fundamental confusion between the prediction of future income and the valuation of predicted income (Mr Brewers task being limited to the second function). That comment preserves Mr Brewers professional reputation he was acting in accordance with his instructions but to my mind (as to the Special Commissioners mind) it leaves the valuation of the software, on the basis of predicted income derived solely from Mr Coopers revised business plan, as lacking any sort of independent professional approval. I see great force in the Special Commissioners comment (para 104) that in rightly following the instructions that he was given, Mr Brewer naturally produced a fairly useless conclusion. Mr Brewer himself said that a far more extensive exercise would have been required by a private equity firm investing, and that the present valuation was only good enough for Inland Revenue purposes. Moreover the LLPs were not buying the software, either as a whole or even in bits. They were acquiring a licence to use it which was far short of absolute ownership (clause 7.4 of the SLA restricted their right of access to the source code, and there seems to have been no evidence certainly there was no finding about any separate escrow agreement made under that sub clause). In practice, even if all four of the LLPs had completed as planned, they would together have received no more than 13% of the clearance fees in respect of their rights in the software. Cooperation between MCashback and the LLPs was to take place under the opaque terms of the operating agreement. That, on the LLPs case, was the consideration for which they would have been paying 156m (had all the schemes gone through). All those points would arise even in the absence of the last minute change when it was decided to sell the software rights in bits. The Special Commissioner speculated as to which bits, if any, remained unsold (see para 103: his reference to a retained interest in 87% of the clearance fees seems to have overlooked that the LLPs 13% was a gross figure). A confidential report dated 5 July 2004 made by Mr John Heap, an IT expert, suggests that the four systems allocated to the four LLPs (Code Generation, Reporting Module, Customer Support Interface and Call Centre Interface) were the essential parts of the system. But the report (though written more than three months after the SLAs were entered into) reports a different allocation (LLP1 Customer Support Interface; LLP2 Call Centre Interface; LLP3 Reporting Module; LLP4 Code Generation). Both sides accept that that is wrong, and that Mr Heap must have been misled by his instructions. Mr Brewers valuation does not specify the categories of software to which it apportions the total valuation of 145m to 150m, nor does it explain the basis on which the apportionment has been made. The fact that these errors and omissions were made and apparently caused no concern emphasises the extreme unreality of selling the software rights in bits, when they were parts of a closely integrated system designed for a specialised task. To my mind it is only a little less unreal than for a syndicate which owns a racehorse in undivided shares to decide, 48 hours before the big race, to partition the animal so that one member takes the head and neck, and another the off hind leg, and so on. A further indication of how little practical importance seems to have been attached to the division of the software rights, and what they were to earn, is that the reader of the information memorandum relating to LLP3 has to get to p 42, if he gets that far, before learning that the rights in the Call Centre Interface (itself mentioned on p 12) are to earn 4.16% of the clearing fees. For these reasons I respectfully consider that the judge, although correct in his view that market value was not determinative, and also correct in thinking that the Special Commissioner had used unnecessarily colourful and contradictory language, was wrong to dismiss, as sweepingly as he did, the Special Commissioners scepticism about the valuation of the software rights, and the commercial soundness of the transactions. The judge also downplayed the Special Commissioners doubts about the prospects of the members loans being repaid within ten years. He treated the case as essentially similar to BMBF, while conceding that there were factual points of difference. The essential point that he took from BMBF (in para 84 of his judgment) was that CAA 2001 is resistant to an approach on Ramsay lines, because it focuses attention solely on the position of the purchaser. In conclusion on this issue he stated (para 86, which I have already quoted): In the absence of a finding of sham the only conclusion open to him was that the whole of the consideration for the software . was expenditure incurred on the provision of plant within the meaning of section 11 of CAA 2001. I respectfully think that that was wrong in law, and overlooked the continuing validity of the decision of the House of Lords in Ensign. It is not clear to me how far the judge, in these conclusions, was relying on the Special Commissioners rejection of his own third approach, the soft finance analysis (to which the judge had referred in para 30 of his judgment, at the very start of his discussion of the expenditure issue). The grounds on which the Special Commissioner rejected the soft finance analysis (paras 113 121 of his decision) are to my mind rather confused. He recognised that it does not involve any re analysis of the transactions. Ultimately he seems to have rejected it mainly on the practical grounds of difficulty of valuation (though he had, both at a directions hearing and on the first morning of the main hearing, refused HMRCs application for an adjournment in order to obtain expert evidence on valuation matters). He was also apparently influenced by the thought that it would be unrealistically harsh to deprive the investor members of possible future claims for capital allowances in later years. I find those reasons unconvincing. HMRC has now abandoned the soft finance argument as such. But it has not vanished completely, as appears from para 66 of HMRCs printed case, quoted at para 25 above. Before this Court Mr Prosser argued (though this is probably an oversimplification of his more subtle arguments) that even if an investor member did spend the money which he borrowed (say 225,000) as well as his own money (say 75,000) he did not incur expenditure of 300,000 on acquiring software rights, because only 50,000 of the money reached MCashback, and 225,000 went into a loop from which MCashback received no immediate benefit at all. If in the future money were to flow back to MCashback out of the loop it would be because of its own commercial success in generating clearing fees. Whatever the 225,000 was spent on, it was not spent in acquiring software rights from MCashback, because the 225,000 never reached MCashback (I leave open for the present the expenditure, in this example, of the odd 25,000 on fees and expenses). The judge was right to emphasise that the transaction was the subject of tough negotiation between MCashback and Tower (whose founder members stood to make a large gain, when the investor members rights had been fully satisfied, if the M Rewards scheme was as successful as both sides hoped it would be). The negotiations were tough because MCashback (unlike BGE in BMBF) really did need up front finance in order to roll out its software and give effect to its business plan. It saw itself as parting with potentially very valuable rights indefinitely (the investor members dropped out after ten years, but the founder members did not) for only a modest part (just over 18% before fees and expenses, or just under 17% after fees and expenses) of the total capital apparently being raised. That was because 75% of the capital raised, although not simply a sham, was really being used in an attempt to quadruple the investor members capital allowances. That is what the tough bargain which Tower struck with MCashback enabled Tower to offer to its investor members. I have already (para 47 above) quoted Lord Goff in Ensign [1992] 1 AC 655, 682. The facts of that case were different, since in that case there was not in any meaningful sense a loan at all. In this case there was a loan but there was not, in any meaningful sense, an incurring of expenditure of the borrowed money in the acquisition of software rights. It went into a loop in order to enable the LLPs to indulge in a tax avoidance scheme. Despite the shortcomings in his decision, the Special Commissioner was essentially right in his conclusion in para 138 (quoted in para 56 above). I respectfully consider that Moses LJ was right in deriving assistance from Ensign (paras 78 and 79 of his judgment, quoted in para 62 above) as to the relevance of the terms of the borrowing (here interest free and non recourse). But I respectfully think that he was wrong to concentrate on the terms as an indication of whether there was real expenditure. That was the issue in Ensign (no real loan, no real expenditure). Here the issue was whether there was real expenditure on the acquisition of software rights. I think that Moses LJ gave the right answer to the wrong question. The transfer of ownership (or at least of rights) indicated the reality of some expenditure on acquiring those rights, but was not conclusive as to the whole of the expenditure having been for that purpose. Moses LJ was also wrong (on the point of fact raised by Mr Prosser) in saying that in Ensign the loan never had to be paid, whatever success the film achieved: see [1992] 1 AC 655, 663 (Lord Templeman) and 683 (Lord Goff); also the detailed case stated at [1989] STC 705, 721 722, summarising clause 11 of the distribution agreement. One of the lessons of BMBF is that it is not enough for HMRC, in attacking a scheme of this sort, to point to the money going round in a circle. Closer analysis is required. In BMBF the whole 91m was borrowed by Barclays Finance from Barclays Bank on fully commercial terms (though they were companies in the same group) and Barclays Finances acquisition of the pipeline was on fully commercial terms. BGE had the whole 91m at its disposal, and though it was disposed of at once under further pre arranged transactions, those transactions were entirely for the benefit of BGE. BGE had no pressing need for upfront finance (which is not, contrary to what Park J supposed, an essential feature of a leasing scheme capable of generating capital allowances). In the present case, by contrast, the borrowed money did not go to MCashback, even temporarily; it passed, in accordance with a solicitors undertaking, straight to R & D where it produced no economic activity (except a minimal spread for the two Guernsey banks) until clearing fees began to flow from MCashback to the LLPs (in an arrangement comparable, though not closely similar, to the arrangements between LPI and VP in Ensign). The LLPs relied on the decision of the House of Lords in Corporation of Birmingham v Barnes [1935] AC 292. The Corporation was held to be entitled to wear and tear allowances in respect of the whole cost of building and renewing tramways although it had received contributions to the cost from two sources (a factory owner benefited by the tramway and a government grant to encourage public works as a means of reducing unemployment). The statutory words to be construed were the actual cost to the Corporation. Lord Atkin (with whom the rest of the House agreed) understood the words as directed (p 298) to the amount which the Corporation paid for the tramway works, regardless of the source of its funds. That does not assist the LLPs, which did not pay the borrowed money to MCashback to acquire software rights. Instead they put it into a loop as part of a tax avoidance scheme. For these reasons I would allow HMRCs appeal, dismiss the LLPs cross appeal, and set aside the orders of the Court of Appeal and Henderson J. I have considered whether it would be right (especially in view of the factual confusion and absence of any valuation evidence about the allocation of software rights) to remit the matter to another Special Commissioner for further findings. But I do not think it would be right to do so. Neither side asked for a remission, and the Special Commissioner himself twice refused an adjournment for further valuation evidence to be adduced. No one has suggested that that case management decision should now be revisited. I would direct the conclusions and amendments in the closure notices to be amended to allow 25% only of the FYAs claimed. That is in one way generous to the LLPs, since in fact about one third of their contribution (the 25,000 in the example given above) was devoted to fees and expenses. But I think it would, in all the circumstances, be the fair outcome in a confusing case. If a majority of the Court agrees with my conclusion, it is to be expected that commentators will complain that this Court has abandoned the clarity of BMBF and returned to the uncertainty of Ensign. I would disagree. Both are decisions of the House of Lords and both are good law. The composite transactions in this case, like that in Ensign (and unlike that in BMBF) did not, on a realistic appraisal of the facts, meet the test laid down by the CAA, which requires real expenditure for the real purpose of acquiring plant for use in a trade. Any uncertainty that there may be will arise from the unremitting ingenuity of tax consultants and investment bankers determined to test the limits of the capital allowances legislation. LORD HOPE I accept with gratitude Lord Walkers careful description of the facts of this case, his discussion of the authorities and the conclusions that he has reached. Like him, I would dismiss the cross appeal by the LLPs on the procedural issue, allow HMRCs appeal on the expenditure issue and make the order that he proposes. I would however like to add one or two footnotes to what he has said. The procedural issue The stage at which an enquiry under section 12AC(1) of TMA 1970 is completed is identified by a notice given under section 28B by the officer in charge of the enquiry to the taxpayer. Section 28B(1) describes this as a notice which informs the taxpayer that the officer has completed his enquiries and states his conclusions. If an amendment to the return is required to give effect to his conclusions, section 28B(2) requires him to make those amendments. The taxpayer has a right of appeal under section 31(1)(b) of TMA 1970 against any conclusion stated in or amendment made by a closure notice. So it is desirable that the statement by the officer of his conclusions should be as informative as possible. This is because of the function that the terms of the notice will serve in identifying the subject matter of any appeal. In this case the closure notice that Mr Frost issued was in very bald terms. All he said was that the claim for relief under section 45 CAA was excessive, and that the amount in the return for capital allowances was amended to nil. No details were given of the reasons why he had reached the conclusion to which his amendment gave effect. The statute does not spell out exactly what it means by the words his conclusions. But taxpayers are entitled to expect a closure notice to be more informative. Notices of this kind, however, are seldom, if ever, sent without some previous indication during the enquiry of the points that have attracted the officers attention. They must be read in their context. In this case Mr Frost drew attention to this when he prefaced his conclusion with the words as previously indicated. He also sent a covering letter which cast further light on the approach which he had taken to the various issues that had been under examination. In these circumstances it does not seem unfair to the LLPs to hold that the issue as to their entitlement to the allowances claimed should be examined as widely as may be necessary in order to determine whether they are indeed entitled to what they have claimed. Furthermore, while the scope and subject matter of the appeal will be defined by the conclusions and the amendments made to the return, section 50 of TMA does not tie the hands of the Commissioners (now the Tax Chamber) to the precise wording of the closure notice when hearing the appeal. I would therefore respectfully endorse the points that Lord Walker makes in para 18. Our decision to dismiss the cross appeal should not be taken as indicating that uninformative closure notices of the kind that Mr Frost, no doubt under pressure, issued in this case should be the norm. The aim should be to be helpful, both to the taxpayer and to the Tax Tribunal which will have to case manage any appeal. The officer should wherever possible set out the conclusions that he has reached on each point that was the subject of enquiry which has resulted in his making an amendment to the return. The expenditure issue The issue, reduced to its simplest terms, is whether the whole of the 27.5m paid by LLP2 to MCashback under the terms of the software licence agreement was expenditure incurred by LLP2 on the provision of software within the meaning of the Capital Allowances Act 2001. The general rule itself is not in doubt. Expenditure is qualifying expenditure if it is capital expenditure on the provision of plant or machinery wholly or partly for the purposes of the qualifying activity carried on by the person incurring the expenditure: CAA, section 11(4). The problem that the facts of this case give rise to is the extent to which surrounding circumstances, such as the source and destination of the funds expended and the commercial soundness of the transaction when looked at as a whole, may be taken into account in an assessment of the question whether the taxpayer was involved in expenditure that entitled it to the allowance claimed. The case for the LLPs was that transfer of ownership was itself enough to show that real expenditure was incurred. They also maintained that the source of the funds was irrelevant, as also was what the purchaser did with the funds received by it. Moses LJ too adopted a similar approach in the Court of Appeal when he concluded that there was nothing in the terms of the loans which showed that they were never likely to be repaid, as it all depended on success in marketing the software: [2010] STC 809, para 84; and that it was sufficient that the LLPs acquired the right to the full economic benefit of the software: para 86. The reality, however, was that much of the consideration paid by the LLPs for the software was derived from funds borrowed by members of the LLPs on non recourse terms which was immediately passed back by way of a chain of banks to the lender. This was, as Lord Walker says in para 67, a complex pre ordained transaction which requires the facts, realistically viewed, to be tested against the wording of the statute. In Barclays Mercantile Business Finance Ltd v Mawson [2005] 1 AC 684, para 32 Lord Nicholls of Birkenhead said that the question is always whether the relevant provisions of the statute, upon its true construction, applies to the facts as found. In para 39 he stressed the need for a close analysis of what, on a purposive construction, the statute actually requires. CAA, section 11(4) sets out the general rule that expenditure must satisfy if it is to be qualifying expenditure. Purposively construed, it requires it to be demonstrated in this case that the whole of the claimed expenditure of 27.5m was actually incurred on acquiring rights in the software. This is a factual inquiry, the extent and depth of which will always depend on the circumstances of each case. The Special Commissioner held that the scheme in this case was not a sham, but that the market value of the software rights was very materially below the price that had ostensibly been paid for them. A significant proportion of the consideration for their acquisition was provided from loans which were immediately returned to the lender in a way that had been pre ordained. Whatever purpose the loans were designed to serve, it is not obvious that it was to secure the acquisition of rights in the software. The LLPs maintained that the source of this part of the consideration, and what was done with it, was irrelevant. They referred, in support of that proposition, to Birmingham Corporation v Barnes [1935] AC 292, where the Corporation incurred expenditure on building and operating a tramway. Part of the funding for the tramway came from the owner of a factory near to whose premises the tramway ran. Another part came from an Unemployed Grants Committee because the Corporation had used direct labour which included workers who had previously been unemployed. It was held that, when determining the actual cost of the tramway, the source of the funding was irrelevant. I do not think that the decision in that case, on relatively simple facts, offers any guidance as to the view that should be taken of this case. In that case there was no doubt that the whole of the money which the Corporation received, from whatever source, was actually expended on the tramway. A significant part of the money that was passing from one party to another in this case was returned to its source immediately. As Lord Walker points out in para 76, it did not go to MCashback as payment for the rights in the software, even temporarily. This suggests that it is, to say the least, questionable whether it was expended in their acquisition at all. I think that the LLPs were perhaps on stronger grounds in relying on Peterson v Commissioner of Inland Revenue [2005] UKPC 5, [2005] STC 448. In that case the taxpayer was a member of a syndicate of investors formed to finance a feature film in New Zealand. The investors were induced to invest in it by the prospect of obtaining a depreciation allowance to set off against their taxable income, but they were led to believe that the film would cost more than it was actually expected to cost. They signed a contract in which they accepted a liability to pay the artificially inflated amount to the production company. That sum was to be paid in cash at the outset, funded in part by the investors out of their own resources, and in part by the proceeds of a non recourse loan from a third party connected to the production company. Unknown to the investors, the production company did not use the portion of the consideration funded by the loan to make the film but recycled the money back to the lender immediately it was received. The investors claimed to be allowed to set off the full amount against their taxable income. The Commissioner allowed that part which had been funded out of their own resources. But he disallowed the loan element, on the ground that it did not represent expenditure by them at all. The question was whether the investors had obtained a tax advantage which could be held to be void under the tax avoidance legislation in force in New Zealand. The Board held by a majority (Lord Millett, Baroness Hale of Richmond and Lord Brown of Eaton under Heywood) that the investors were entitled to depreciate their full acquisition costs for the film, whatever the means by which they had obtained funds to finance its acquisition. The fact that the cost of the acquisition was funded wholly or in part by a non recourse loan was irrelevant, as was the fact that the costs of the films production had been falsely inflated. The focus was on the party who acquired the asset and his having incurred the cost of doing so. It did not matter where the money came from, nor did it matter what the party who disposed of the asset did with the money when he received it. He was not required to apply the proceeds of disposing of the film to the investors in making the film. So the Commissioner had not succeeded in showing that the investors had not incurred the economic burden of paying the inflated amount for its acquisition. It should be noted, however, that the majority were careful to say that they reached their conclusion on the facts agreed or found by the Taxation Review Authority, the way in which the Commissioner put his case from time to time and the allegations and concessions he had made: para 47. They said that they were not to be understood as deciding that, had the necessary facts been found, the Commissioner might not have successfully challenged the investors case that the obligation which they incurred to pay the inflated amount was exclusively incurred as consideration for the acquisition of the film. There was also a powerful dissent by the minority (Lord Bingham of Cornhill and Lord Scott of Foscote), who thought that it was plain that the non recourse loan was no more than a device to produce a higher capital sum to be depreciated and, thereby, a higher tax deduction: para 91. While the mechanism that was used there was broadly the same as that which was used in this case, I would confine the decision to its own facts. In Barclays Mercantile Business Finance Ltd v Mawson the House of Lords adopted a practical, commercial approach to the reality of the expenditure. Although the facts of this case lead to a different result, I would adopt the same approach here. As Lord Walkers exacting analysis has shown, they do not support LLPs case that the whole of the claimed expenditure was actually used to acquire the rights in the software. I agree that, in the circumstances of this case, we can and should reach our own conclusion as to the amount that should be allowed in respect of the claimed expenditure. LORD RODGER, LORD COLLINS, LORD KERR, LORD CLARKE LORD DYSON For the reasons given by Lord Walker and Lord Hope, with which we entirely agree, we too would dismiss the cross appeal by the LLPs on the procedural issue, allow HMRCs appeal on the expenditure issue and make the order that Lord Walker proposes.

This appeal raises two issues of tax law. The first (the procedural issue), of general importance to the self assessment regime, concerns the scope of arguments which may be advanced by HMRC in a taxpayers appeal against a closure notice which the HMRC issues to conclude its enquiry into a tax return. The second issue (the expenditure issue) concerns the proper approach to determining whether expenditure has been incurred for the purposes of the Capital Allowances Act 2001. The case concerns the tax consequences of the scheme used by MCashback Limited (MCashback) to raise finance to enable it to roll out M Rewards, a software package which it had developed and which enabled manufacturers to promote products to customers by offering free mobile phone airtime. On the advice of Tower Group plc (Tower), it was decided to raise funds by selling rights to the software, via software licence agreements (SLAs), to four Limited Liability Partnerships to be set up as part of the financing scheme. Tower personnel were founder members of the LLPs and negotiated the SLAs with MCashback. The SLAs provided for each LLP to receive a proportion of the clearing fees which manufacturers would pay in respect of each transaction via the M Rewards system. For the purposes of this litigation, the situation of Tower MCashback 2 LLP (LLP2) has been taken as representative of the other LLPs. LLP 2 entered an SLA with MCashback, under which it was to pay 27.5m for a licence of part of the M Rewards system. LLP2 was entitled to 2.5% of the gross clearance fees received from exploitation of M Rewards. LLP2 obtained the funds required to pay the consideration under the SLA (and the associated professional fees) from investors, who became investor members of LLP2. They contributed 25% from their own funds and obtained the remaining 75% from bank borrowing, on uncommercial terms. Janus Holdings Ltd (Janus) lent the required sum to a special purpose vehicle set up by Tower, which made interest free, non recourse loans to the investor members. MCashback was obliged to deposit approximately 82% of the consideration due to it in terms of the SLA as indirect security for the investor members borrowing from Janus. These sums were placed on security deposit with R&D Investments Ltd (R&D), which R&D in turn deposited with Janus as security for Januss loan to the SPV. LLP2 claimed 27.5m first year capital allowances for the 2004/05 tax year, the amount of consideration set out in the SLA. Because of the way LLPs are taxed, the investor members would take the benefit of these allowances if the claim is successful. One of the conditions for entitlement to capital allowances is that a person incurs qualifying expenditure: section 11 Capital Allowances Act 2001. Expenditure is qualifying expenditure if, amongst other things, it is capital expenditure on the provision of plant or machinery, which includes software or rights to software. On 30 June 2005 HMRC issued a notice of enquiry into LLP 2s partnership return. Attention initially focused on section 45(4) CAA 2001, which withholds first year allowances for expenditure on software rights in certain circumstances. After a lengthy period of enquiry, during which correspondence was exchanged about the application of section 45(4), HMRC issued closure notices (under s28B Taxes Management Act 1970) which stated that, as previously indicated the claim for relief under section 45 CAA 2001 is excessive and amended the partnership return so that the capital allowances claimed, and allowable loss, were nil. The LLPs appealed against the closure notices. Before the Special Commissioner, HMRC abandoned the argument that the claims were disallowed by section 45(4) CAA and sought instead to argue that the full extent of the consideration under the SLAs was not expenditure incurred on software. The Special Commissioner decided the procedural point in favour of the HMRC, allowing them to advance this argument, and, on the expenditure issue, disallowed 75% of LLP2s claims. On appeal, the High Court allowed the LLPs appeals on the procedural issue. It would also have allowed the LLPs appeals on the expenditure issue, had the point arisen for decision. The Court of Appeal, by majority, reversed the High Court on the procedural issue (Arden LJ dissenting), but agreed with the High Court on the expenditure issue. HMRC appeals against the determination of the expenditure issue and the LLPs cross appeal against the determination of the procedural issue. The Supreme Court unanimously allows the HMRCs appeal and dismisses the LLPs cross appeal. Lord Walker issues the leading judgment and Lord Hope a short, concurring judgment. The other members of the Court agree with both. It therefore holds that the HMRC could advance alternative arguments on the expenditure issue, and that all of the consideration provided for in the SLA was not expenditure incurred on the provision of software. The Court directs that the closure notices be amended to allow only 25% of the first year allowances claimed. Procedural issue The Special Commissioners are free to entertain legal arguments which played no part in reaching the conclusions set out in the closure notice. The scope and subject matter of the appeal will, however, be defined by the conclusions stated in the closure notice and any amendments made to the return. The Court emphasises that this is not to be taken as encouragement to HMRC to draft every closure notice in wide and uninformative terms. There is, however, a public interest in taxpayers paying the correct amount of tax and it is one of the duties of the Commissioners to have regard to that public interest. Any potential unfairness to the taxpayer can be avoided by proper exercise of case management powers during the appeal: [15] [18]; [83] [85]. Expenditure issue The court considers two previous decisions of the House of Lords: Ensign Tankers (Leasing) Ltd v Stokes [1992] 1 AC 655 and Barclays Mercantile Business Finance Ltd v Mawson [2004] UKHL 51. Both remain good law: [72] It is not enough for HMRC, in attacking a scheme of this sort, simply to point to money going round in a circle: [77] Nor, however, is it the law as the judge had held that unless one finds the transaction in this case to be a sham, the only possible conclusion is that the whole of the consideration in the SLA was expenditure incurred on the provision of software. In the context of a complex pre ordained transaction, the courts task is to test the facts, realistically viewed, against the statutory test, purposively construed: [67] Entitlement to capital allowances requires there to have been real expenditure for the real purpose of acquiring plant or machinery for use in a trade: [80]. Concerns about the valuation of what is being acquired and the commercial soundness of the transactions are relevant. The fact that rights in the software had been transferred by MCashback to LLP2 demonstrated the reality of some expenditure on acquiring those rights, but did not conclusively show that the whole of consideration in the SLA was expenditure for that purpose. The Special Commissioner found that the market value of the software was very materially below 27.5m. He had also held that there was little chance that the members loan would be repaid in full within ten years as much as 60% might be unpaid, and waived, at the end of that period. These findings justified the conclusion that the money which the investor members borrowed was not used, in any meaningful sense, as expenditure in the acquisition of software rights. Instead, it went in a loop back to the lender in order to enable the LLPs to indulge in a tax avoidance scheme: [75]

On 1 January 1973, the United Kingdom became a member of the European Economic Community (the EEC) and certain other associated European organisations. On that date, EEC law took effect as part of the domestic law of the United Kingdom, in accordance with the European Communities Act 1972 which had been passed ten weeks earlier. Over the next 40 years, the EEC expanded from nine to 28 member states, extended its powers or competences, merged with the associated organisations, and changed its name to the European Community in 1993 and to the European Union in 2009. In December 2015, the UK Parliament passed the European Union Referendum Act, and the ensuing referendum on 23 June 2016 produced a majority in favour of leaving the European Union. UK government ministers (whom we will call ministers or the UK government) thereafter announced that they would bring UK membership of the European Union to an end. The question before this Court concerns the steps which are required as a matter of UK domestic law before the process of leaving the European Union can be initiated. The particular issue is whether a formal notice of withdrawal can lawfully be given by ministers without prior legislation passed in both Houses of Parliament and assented to by HM The Queen. It is worth emphasising that nobody has suggested that this is an inappropriate issue for the courts to determine. It is also worth emphasising that this case has nothing to do with issues such as the wisdom of the decision to withdraw from the European Union, the terms of withdrawal, the timetable or arrangements for withdrawal, or the details of any future relationship with the European Union. Those are all political issues which are matters for ministers and Parliament to resolve. They are not issues which are appropriate for resolution by judges, whose duty is to decide issues of law which are brought before them by individuals and entities exercising their rights of access to the courts in a democratic society. Some of the most important issues of law which judges have to decide concern questions relating to the constitutional arrangements of the United Kingdom. These proceedings raise such issues. As already indicated, this is not because they concern the United Kingdoms membership of the European Union; it is because they concern (i) the extent of ministers power to effect changes in domestic law through exercise of their prerogative powers at the international level, and (ii) the relationship between the UK government and Parliament on the one hand and the devolved legislatures and administrations of Scotland, Wales and Northern Ireland on the other. The main issue on this appeal concerns the ability of ministers to bring about changes in domestic law by exercising their powers at the international level, and it arises from two features of the United Kingdoms constitutional arrangements. The first is that ministers generally enjoy a power freely to enter into and to terminate treaties without recourse to Parliament. This prerogative power is said by the Secretary of State for Exiting the European Union to include the right to withdraw from the treaties which govern UK membership of the European Union (the EU Treaties). The second feature is that ministers are not normally entitled to exercise any power they might otherwise have if it results in a change in UK domestic law, unless statute, ie an Act of Parliament, so provides. The argument against the Secretary of State is that this principle prevents ministers withdrawing from the EU Treaties, until effectively authorised to do so by a statute. Most of the devolution issues arise from the contention that the terms on which powers have been statutorily devolved to the administrations of Scotland, Wales and Northern Ireland are such that, unless Parliament provides for such withdrawal by a statute, it would not be possible for formal notice of the United Kingdoms withdrawal from the EU Treaties to be given without first consulting or obtaining the agreement of the devolved legislatures. And, in the case of Northern Ireland, there are certain other arguments of a constitutional nature. The main issue was raised in proceedings brought by Gina Miller and Deir dos Santos (the applicants) against the Secretary of State for Exiting the European Union in the Divisional Court of England and Wales. Those proceedings came before Lord Thomas of Cwmgiedd LCJ, Sir Terence Etherton MR and Sales LJ. They ruled against the Secretary of State in a judgment given on 3 November 2016 R (Miller) v The Secretary of State for Exiting the European Union [2016] EWHC 2768 (Admin). This decision now comes to this Court pursuant to an appeal by the Secretary of State. The applicants are supported in their opposition to the appeal by a number of people, including (i) a group deriving rights of residence in the UK under EU law on the basis of their relationship with a British national or with a non British EU national exercising EU Treaty rights to be in the United Kingdom, (ii) a group deriving rights of residence from persons permitted to reside in the UK because of EU rights, including children and carers, (iii) a group mostly of UK citizens residing elsewhere in the European Union, (iv) a group who are mostly non UK EU nationals residing in the United Kingdom, and (v) the Independent Workers Union of Great Britain. The Secretary of States case is supported by Lawyers for Britain Ltd, a group of lawyers. Devolution arguments relating to Northern Ireland were raised in proceedings brought by Steven Agnew and others and by Raymond McCord against the Secretary of State for Exiting the European Union and the Secretary of State for Northern Ireland. Those arguments were rejected by Maguire J in a judgment given in the Northern Ireland High Court on 28 October 2016 Re McCord, Judicial Review [2016] NIQB 85. On application by the Attorney General for Northern Ireland, Maguire J referred four of the issues in the Agnew case to this court for determination. Following an appeal against Maguire Js decision, the Northern Ireland Court of Appeal has also referred one issue to this Court. The Attorney General for Northern Ireland supports the Secretaries of States case that no statute is required before ministers can give notice of withdrawal. In addition, there are interventions on devolution issues by the Lord Advocate on behalf of the Scottish government and the Counsel General for Wales on behalf of the Welsh government; they also rely on the Sewel Convention (as explained in paras 137 to 139 below). They support the argument that a statute is required before ministers can give notice of withdrawal, as do the advocates for Mr McCord and for Mr Agnew. We are grateful to all the advocates and solicitors involved for the clarity and skill with which the respective cases have been presented orally and in writing, and for the efficiency with which the very substantial documentation was organised. We have also been much assisted by a number of illuminating articles written by academics following the handing down of the judgment of the Divisional Court. It is a tribute to those articles that they have resulted in the arguments advanced before this Court being somewhat different from, and more refined than, those before that court. As mentioned in paras 7 and 9 above, the appellant in the English and Welsh appeal is the Secretary of State for Exiting the European Union, and the Northern Irish proceedings were brought against the Secretary of State for Exiting the European Union and the Secretary of State for Northern Ireland. For the sake of simplicity, we will hereafter refer to either or both Secretaries of State simply as the Secretary of State. The United Kingdoms Relationship with the European Union 1971 2016 The relationship between the UK and the EU 1971 1975 From about 1960, the UK government was in negotiations with the then member states of the EEC with a view to the United Kingdom joining the EEC and associated European organisations. In October 1971, when it had become apparent that those negotiations were likely to be successful, and following debates in each House, the House of Lords and the House of Commons each resolved to approve Her Majestys Governments decision of principle to join the European Communities on the basis of the arrangements which have been negotiated. In the course of the debate in the House of Commons, the Prime Minister, Mr Heath, said that he did not think that any Prime Minister has in time of peace asked the House to take a positive decision of such importance as I am asking it to take, and that he could not over emphasise tonight the importance of the vote which is being taken, the importance of the issue, the scale and quality of the decision and the impact that it will have equally inside and outside Britain. In a debate in the House of Commons in January 1972, in which the earlier resolution was effectively re affirmed, Mr Rippon, the Chancellor of the Duchy of Lancaster, said I do not think Parliament in negotiations on a treaty has ever been brought so closely into the process of treaty making as on the present occasion, adding that we all accept the unique character of the Treaty of Accession. On 22 January 1972, two days after that later debate, ministers signed a Treaty of Accession which provided that the United Kingdom would become a member of the EEC on 1 January 1973 and would accordingly be bound by the 1957 Treaty of Rome, which was then the main treaty in relation to the EEC, and by certain other connected treaties. As with most international treaties, the 1972 Accession Treaty was not binding unless and until it was formally ratified by the United Kingdom. A Bill was then laid before Parliament, and after it had been passed by both Houses, it received Royal assent on 17 October 1972, when it became the European Communities Act 1972. The following day, 18 October 1972, ministers ratified the 1972 Accession Treaty on behalf of the United Kingdom, which accordingly became a member of the EEC on 1 January 1973. The long title of the 1972 Act described its purpose as to make provision in connection with the enlargement of the European Communities to include the United Kingdom . Part I of the 1972 Act consisted of sections 1 to 3, which contained its General Provisions, and they are of central importance to these proceedings. Section 1(2) of the 1972 Act contained some important definitions. The Communities meant the EEC and associated communities (now amended to the EU meaning the European Union). And the Treaties and the Community Treaties (now amended to the EU Treaties) were the treaties described in Schedule 1 (which were the existing treaties governing the rules and powers of the EEC at that time), the 1972 Accession Treaty itself, and any other treaty entered into by any of the Communities, with or without any of the member States, or entered into, as a treaty ancillary to any of the Treaties, by the United Kingdom. The use of a capital T in the Treaties and in the EU Treaties was significant. It meant that future treaties which were concerned with changing the membership or redefining the rules of the EEC could only become Treaties and EU Treaties and have effect in UK law as such if they were added to section 1(2) by an amending statute. By contrast, ancillary treaties covered other treaties entered into by the European Union or by the United Kingdom as a treaty ancillary to the EU Treaties. By virtue of section 1(3), even such an ancillary treaty did not take effect in UK law unless and until it was declared to do so by an Order in Council which had first to be approved in draft form by resolution of each House of Parliament. Section 2 of the 1972 Act was headed General Implementation of Treaties. Section 2(1) of the 1972 Act was in these terms: All such rights, powers, liabilities, obligations and restrictions from time to time created or arising by or under the Treaties, and all such remedies and procedures from time to time provided for by or under the Treaties, as in accordance with the Treaties are without further enactment to be given legal effect or used in the United Kingdom shall be recognised and available in law, and be enforced, allowed and followed accordingly Section 2(2) of the 1972 Act provided that Her Majesty may by Order in Council, and any designated Minister or department may by regulations, make provision (a) for the purpose of implementing any Community [now EU] obligation of the United Kingdom (which is defined as any obligation created or arising by or under the Treaties) or enabling any rights enjoyed by the United Kingdom under or by virtue of the Treaties to be exercised, and (b) for ancillary purposes, including the operation from time to time of subsection (1). Subsection (2) has since been amended, but nothing hangs on the amendments for present purposes. Schedule 2 to the 1972 Act contained Provisions as to Subordinate Legislation in relation to the powers conferred by section 2(2). Section 2(4) provided as follows: The provision that may be made under subsection (2) above includes . any such provision (of any such extent) as might be made by Act of Parliament, and any enactment passed or to be passed, other than one contained in this Part of this Act, shall be construed and have effect subject to the foregoing provisions of this section Section 3 of the 1972 Act provided, among other things, for any question as to the meaning and effect of the Treaties, or as to the validity, meaning or effect of any Community instrument (now EU instrument) to be treated as a question of EU law by the UK courts, and it further provided for such determination to be made in accordance with principles laid down by the European Court of Justice (the Court of Justice) or, if necessary, to be referred to the Court of Justice. Part II of the 1972 Act, which contained sections 4 to 12, and incorporated Schedules 3 and 4, set out a number of statutory repeals and amendments which were needed to enable UK domestic law to comply with the requirements of EU law, that is the law from time to time laid down in the EU Treaties, Directives and Regulations, as interpreted by the Court of Justice. Following a manifesto commitment made during a general election in 1974, the UK government decided to hold a referendum on whether the United Kingdom should remain in the EEC. To that end, it laid a Bill before Parliament which was duly enacted as the Referendum Act 1975. The referendum pursuant to that Act took place on 5 June 1975, and a majority of those who voted were in favour of remaining in the EEC. The relationship between the UK and the EU after 1975 In the past 40 years, over 20 treaties relating to the EEC, the European Community and the European Union were signed on behalf of the member states, in the case of the United Kingdom by ministers. After being signed, each such treaty was then added to the list of Treaties in section 1(2) of the 1972 Act through the medium of an amendment made to that statute by a short appropriately worded statute passed by Parliament, and the treaty was then ratified by the United Kingdom. Some of these Treaties were concerned with redefining and expanding the competences of the EEC, the European Community and the European Union and changing the constitutional role of the European Parliament within the European Community or Union. They included the Single European Act signed in 1986, Titles II, III and IV of the Maastricht Treaty on European Union of 7 February 1992 (the TEU), the 1997 Amsterdam Treaty, the 2001 Treaty of Nice, and the Treaty of Lisbon amending the TEU and the Treaty on the Functioning of the European Union (TFEU), both signed in Lisbon on 13 December 2007 see respectively section 1(2)(j), added by the European Communities (Amendment) Act 1986; section 1(2)(k), added by the European Communities (Amendment) Act 1993; section 1(2)(o), added by the European Communities (Amendment) Act 1998; section 1(2)(p), added by the European Communities (Amendment) Act 2002; and section 1(2)(s), added by the European Union (Amendment) Act 2008. The Treaty of Lisbon introduced into the EU Treaties for the first time an express provision entitling a member state to withdraw from the European Union. It did this by inserting a new article 50 into the TEU. This article (article 50) provides as follows: 1. Any member state may decide to withdraw from the Union in accordance with its own constitutional requirements. 2. A member state which decides to withdraw shall notify the European Council of its intention. In the light of the guidelines provided by the European Council, the Union shall negotiate and conclude an agreement with that state, setting out the arrangements for its withdrawal 3. The Treaties shall cease to apply to the state in question from the date of entry into force of the withdrawal agreement or, failing that, two years after the notification referred to in paragraph 2, unless the European Council, in agreement with the member state concerned, unanimously decides to extend this period. In these proceedings, it is common ground that notice under article 50(2) (which we shall call Notice) cannot be given in qualified or conditional terms and that, once given, it cannot be withdrawn. Especially as it is the Secretary of States case that, even if this common ground is mistaken, it would make no difference to the outcome of these proceedings, we are content to proceed on the basis that that is correct, without expressing any view of our own on either point. It follows from this that once the United Kingdom gives Notice, it will inevitably cease at a later date to be a member of the European Union and a party to the EU Treaties. After 1975, in addition to the amending statutes referred to in para 24 above, statutes were enacted to give effect to changes in the way that members of the European Parliament were selected. The first was the European Assembly Elections Act 1978, which contained in section 6 a stipulation that no new treaty providing for an increase in the powers of the European Assembly (as it then was) should be ratified unless approved by an Act of Parliament. This provision was re enacted as section 12 of the European Parliamentary Elections Act 2002. Section 1 of the 2002 Act provided for a specific number of Members of the European Parliament (MEPs) for specified regions of the United Kingdom. Section 8 of the 2002 Act stated that a person was entitled to vote in elections to the European Parliament if he or she satisfied certain residence requirements, and section 10 identified the (very limited) categories of people who were disqualified from standing as MEPs. In addition to adding the Treaty of Lisbon and the TFEU to section 1(2) of the 1972 Act, the 2008 Act, referred to at the end of para 24 above, contained certain restrictions on the UK governments agreement to changes in the rules of the European Union. Section 5 provided that any treaty which amended the TEU or the TFEU by altering the competences of the European Union, or which altered the decision making processes of the European Union or its institutions in such a way as to dilute the influence of individual member states, should not be ratified by ministers unless approved by Act of Parliament. Section 6 of the 2008 Act stated that ministers should not support any decision under certain specified articles of the TEU and of the TFEU unless both Houses of Parliament had approved a motion sanctioning that course. Subject to an immaterial exception, the European Union Act 2011 repealed and replaced sections 5 and 6 of the 2008 Act. Part I of the 2011 Act included section 1 which was Introductory, sections 2 to 10, which imposed Restrictions both relating to amendments of TEU and TFEU and relating to other decisions under TEU and TFEU, and sections 11 to 13, which related to the conduct of referendums. Sections 2 to 5 imposed restrictions on the ratification by the United Kingdom of any treaty which amended or replaced TEU or TFEU, and also on ministers approving certain specified types of EU decisions under the so called simplified revision procedure. Those restrictions were that (a) a statement relating to the treaty or decision had to be laid before Parliament, (b) the treaty or decision had to be approved by statute, and, (c) in broad terms, where the treaty or decision increased the competences of the European Union, it had to be approved in a UK wide referendum. Section 6 provided that ministers should not, without prior approval both in a statute and in a UK wide referendum, vote in favour of certain decisions, including those which resulted in a dilution in the influence of individual member states in relation to a number of different articles of the TEU and TFEU including in particular article 50(3). Sections 7 to 10 of the 2011 Act contained further restrictions on ministers voting in favour of certain measures under the TEU and TFEU without the prior approval of Parliament. Section 18 of the 2011 Act provided as follows: Directly applicable or directly effective EU law (that is, the rights, powers, liabilities, obligations, restrictions, remedies and procedures referred to in section 2(1) of the European Communities Act 1972) falls to be recognised and available in law in the United Kingdom only by virtue of that Act or where it is required to be recognised and available in law by virtue of any other Act. Following a manifesto commitment in the 2015 general election to hold a referendum on the issue of EU membership, the UK government laid before Parliament a Bill which became the 2015 Act. Section 1 provided that [a] referendum is to be held on a date no later than 31 December 2017 on whether the United Kingdom should remain a member of the European Union, and it specified the question which should appear on the ballot papers. The remaining sections were concerned with questions such as entitlement to vote, the conduct of the referendum, rules about campaigning and financial controls. The referendum duly took place throughout the United Kingdom on 23 June 2016, and it resulted in a majority in favour of leaving the European Union. Ministers have made it clear that the UK government intends to implement the result of the referendum and to give Notice by the end of March 2017. On 7 December 2016, following a debate, the House of Commons resolved [to recognise] that this House should respect the wishes of the United Kingdom as expressed in the referendum on 23 June; and further [to call] on the Government to invoke article 50 by 31 March 2017. The main issue: the 1972 Act and prerogative powers Summary of the arguments on the main issue The Secretary of States case is based on the existence of the well established prerogative powers of the Crown to enter into and to withdraw from treaties. He contends that ministers are entitled to exercise this power in relation to the EU Treaties, and therefore to give Notice without the need for any prior legislation. Following the giving of Notice by the end of March 2017, ministers intend that a Great Repeal Bill will be laid before Parliament. This will repeal the 1972 Act and, wherever practical, it will convert existing EU law into domestic law at least for a transitional period. Under article 50, withdrawal will occur not more than two years after the Notice is given (unless that period is extended by unanimous agreement among the other member states), and it is intended that the Great Repeal Bill will come into force at that point. As was made clear by Lord Browne Wilkinson in R v Secretary of State for the Home Department, Ex p Fire Brigades Union [1995] 2 AC 513, 552, ministers intentions are not law, and the courts cannot proceed on the assumption that they will necessarily become law. That is a matter for Parliament to decide in due course. The issues before us must be resolved in accordance with the law as it stands, as the Secretary of State rightly accepted. The applicants case in that connection is that when Notice is given, the United Kingdom will have embarked on an irreversible course that will lead to much of EU law ceasing to have effect in the United Kingdom, whether or not Parliament repeals the 1972 Act. As Lord Pannick QC put it for Mrs Miller, when ministers give Notice they will be pulling the trigger which causes the bullet to be fired, with the consequence that the bullet will hit the target and the Treaties will cease to apply. In particular, he said, some of the legal rights which the applicants enjoy under EU law will come to an end. This, he submitted, means that the giving of Notice would pre empt the decision of Parliament on the Great Repeal Bill. It would be tantamount to altering the law by ministerial action, or executive decision, without prior legislation, and that would not be in accordance with our law. Following opening remarks made by HM Attorney General, Mr Eadie QC in his submissions on behalf of the Secretary of State, did not challenge much if any of the factual basis of these assertions, but he did challenge the conclusions that were said to derive from them. He argued that the fact that significant legal changes will follow from withdrawing from the EU Treaties does not prevent the giving of Notice, because the prerogative power to withdraw from treaties was not excluded by the terms of the 1972 Act, and that, in any event, acts of the government in the exercise of the prerogative can alter domestic law. More particularly, he contended that the 1972 Act gave effect to EU law only insofar as the EU Treaties required it, and that that effect was therefore contingent upon the United Kingdom remaining a party to those treaties. Accordingly, he said, in the 1972 Act Parliament had effectively stipulated that, or had sanctioned the result whereby, EU law should cease to have domestic effect in the event that ministers decided to withdraw from the EU Treaties. Mr Eadie also relied on the fact that, while statutes enacted since 1972 have imposed Parliamentary controls over the exercise of prerogative powers in relation to the EU Treaties, they have not touched the prerogative power to withdraw from them. Implicitly, therefore, he contended, Parliament has recognised that the power to withdraw from such treaties exists and is exercisable without prior legislation. Mr Eadie also suggested that the 2015 Act was enacted on the assumption that the result of the referendum would be decisive. Mr Eadies reliance on the legislation since 1972 was largely for the purpose of supporting his argument on the effect of the 1972 Act, but he did raise an argument that the legislation from 1972 to 2015 should be looked at as a whole. Also, in answer to a question from the Court, he adopted a suggestion that, even if Parliamentary authority would otherwise have been required, the 2015 Act and the subsequent referendum dispensed with that requirement, but he did not develop that argument, in our view realistically. Before addressing these arguments, it is right to consider some relevant constitutional principles and in particular the Royal prerogative. The constitutional background Unlike most countries, the United Kingdom does not have a constitution in the sense of a single coherent code of fundamental law which prevails over all other sources of law. Our constitutional arrangements have developed over time in a pragmatic as much as in a principled way, through a combination of statutes, events, conventions, academic writings and judicial decisions. Reflecting its development and its contents, the UK constitution was described by the constitutional scholar, Professor AV Dicey, as the most flexible polity in existence Introduction to the Study of the Law of the Constitution (8th ed, 1915), p 87. Originally, sovereignty was concentrated in the Crown, subject to limitations which were ill defined and which changed with practical exigencies. Accordingly, the Crown largely exercised all the powers of the state (although it appears that even in the 11th century the King rarely attended meetings of his Council, albeit that its membership was at his discretion). However, over the centuries, those prerogative powers, collectively known as the Royal prerogative, were progressively reduced as Parliamentary democracy and the rule of law developed. By the end of the 20th century, the great majority of what had previously been prerogative powers, at least in relation to domestic matters, had become vested in the three principal organs of the state, the legislature (the two Houses of Parliament), the executive (ministers and the government more generally) and the judiciary (the judges). It is possible to identify a number of seminal events in this history, but a series of statutes enacted in the twenty years between 1688 and 1707 were of particular legal importance. Those statutes were the Bill of Rights 1688/9 and the Act of Settlement 1701 in England and Wales, the Claim of Right Act 1689 in Scotland, and the Acts of Union 1706 and 1707 in England and Wales and in Scotland respectively. (Northern Ireland joined the United Kingdom pursuant to the Acts of Union 1800 in Britain and Ireland). The independence of the judiciary was formally recognised in these statutes. In the broadest sense, the role of the judiciary is to uphold and further the rule of law; more particularly, judges impartially identify and apply the law in every case brought before the courts. That is why and how these proceedings are being decided. The law is made in or under statutes, but there are areas where the law has long been laid down and developed by judges themselves: that is the common law. However, it is not open to judges to apply or develop the common law in a way which is inconsistent with the law as laid down in or under statutes, ie by Acts of Parliament. This is because Parliamentary sovereignty is a fundamental principle of the UK constitution, as was conclusively established in the statutes referred to in para 41 above. It was famously summarised by Professor Dicey as meaning that Parliament has the right to make or unmake any law whatsoever; and further, no person or body is recognised by the law as having a right to override or set aside the legislation of Parliament op cit, p 38. The legislative power of the Crown is today exercisable only through Parliament. This power is initiated by the laying of a Bill containing a proposed law before Parliament, and the Bill can only become a statute if it is passed (often with amendments) by Parliament (which normally but not always means both Houses of Parliament) and is then formally assented to by HM The Queen. Thus, Parliament, or more precisely the Crown in Parliament, lays down the law through statutes or primary legislation as it is also known and not in any other way. In the early 17th century Case of Proclamations (1610) 12 Co Rep 74, Sir Edward Coke CJ said that the King by his proclamation or other ways cannot change any part of the common law, or statute law, or the customs of the realm. Although this statement may have been controversial at the time, it had become firmly established by the end of that century. In England and Wales, the Bill of Rights 1688 confirmed that the pretended power of suspending of laws or the execution of laws by regall authority without consent of Parlyament is illegall and that the pretended power of dispensing with laws or the execution of laws by regall authoritie as it hath beene assumed and exercised of late is illegall. In Scotland, the Claim of Right 1689 was to the same effect, providing that all Proclamationes asserting ane absolute power to Cass [ie to quash] annull and Dissable lawes are Contrair to Law. And article 18 of the Acts of Union of 1706 and 1707 provided that (with certain irrelevant exceptions) all laws in Scotland should remain in the same force as before but alterable by the Parliament of Great Britain. The Crowns administrative powers are now exercised by the executive, ie by ministers who are answerable to the UK Parliament. However, consistently with the principles established in the 17th century, the exercise of those powers must be compatible with legislation and the common law. Otherwise, ministers would be changing (or infringing) the law, which, as just explained, they cannot do. A classic statement of the position was given by Lord Parker of Waddington in The Zamora [1916] 2 AC 77, 90: The idea that the King in Council, or indeed any branch of the Executive, has power to prescribe or alter the law to be administered by Courts of law in this country is out of harmony with the principles of our Constitution. It is true that, under a number of modern statutes, various branches of the Executive have power to make rules having the force of statutes, but all such rules derive their validity from the statute which creates the power, and not from the executive body by which they are made. No one would contend that the prerogative involves any power to prescribe or alter the law administered in Courts of Common Law or Equity. It is true that ministers can make laws by issuing regulations and the like, often known as secondary or delegated legislation, but (save in limited areas where a prerogative power survives domestically, as exemplified by the cases mentioned in paras 52 and 53 below) they can do so only if authorised by statute. So, if the regulations are not so authorised, they will be invalid, even if they have been approved by resolutions of both Houses under the provisions of the relevant enabling Act for a recent example see R (The Public Law Project) v Lord Chancellor [2016] AC 1531. The Royal prerogative and Treaties The Royal prerogative encompasses the residue of powers which remain vested in the Crown, and they are exercisable by ministers, provided that the exercise is consistent with Parliamentary legislation. In Burmah Oil Co (Burma Trading) Ltd v Lord Advocate [1965] AC 75, 101, Lord Reid explained that the Royal prerogative is a source of power which is only available for a case not covered by statute. Professor HWR Wade summarised the position in his introduction to the first edition of what is now Wade on Administrative Law (1961), p 13: [T]he residual prerogative is now confined to such matters as summoning and dissolving Parliament, declaring war and peace, regulating the armed forces in some respects, governing certain colonial territories, making treaties (though as such they cannot affect the rights of subjects), and conferring honours. The one drastic internal power of an administrative kind is the power to intern enemy aliens in time of war. Thus, consistently with Parliamentary sovereignty, a prerogative power however well established may be curtailed or abrogated by statute. Indeed, as Professor Wade explained, most of the powers which made up the Royal prerogative have been curtailed or abrogated in this way. The statutory curtailment or abrogation may be by express words or, as has been more common, by necessary implication. It is inherent in its residual nature that a prerogative power will be displaced in a field which becomes occupied by a corresponding power conferred or regulated by statute. This is what happened in the two leading 20th century cases on the topic, Attorney General v De Keysers Royal Hotel Ltd [1920] AC 508 and Fire Brigades Union cited above. As Lord Parmoor explained in De Keyser at p 575, when discussing the prerogative power to take a subjects property in time of war: The constitutional principle is that when the power of the Executive to interfere with the property or liberty of subjects has been placed under Parliamentary control, and directly regulated by statute, the Executive no longer derives its authority from the Royal Prerogative of the Crown but from Parliament, and that in exercising such authority the Executive is bound to observe the restrictions which Parliament has imposed in favour of the subject. In Burmah Oil cited above, at p 101, Lord Reid described prerogative powers as a relic of a past age, but that description should not be understood as implying that the Royal prerogative is either anomalous or anachronistic. There are important areas of governmental activity which, today as in the past, are essential to the effective operation of the state and which are not covered, or at least not completely covered, by statute. Some of them, such as the conduct of diplomacy and war, are by their very nature at least normally best reserved to ministers just as much in modern times as in the past, as indeed Lord Reid himself recognised in Burmah Oil at p 100. Consistently with paras 44 to 46, and the passage quoted from Professor Wade in para 47 above, it is a fundamental principle of the UK constitution that, unless primary legislation permits it, the Royal prerogative does not enable ministers to change statute law or common law. As Lord Hoffmann observed in R (Bancoult) v Secretary of State for Foreign and Commonwealth Affairs (No 2) [2009] AC 453, para 44, since the 17th century the prerogative has not empowered the Crown to change English common or statute law. This is, of course, just as true in relation to Scottish, Welsh or Northern Irish law. Exercise of ministers prerogative powers must therefore be consistent both with the common law as laid down by the courts and with statutes as enacted by Parliament. Further, ministers cannot frustrate the purpose of a statute or a statutory provision, for example by emptying it of content or preventing its effectual operation. Thus, ministers could not exercise prerogative powers at the international level to revoke the designation of Laker Airways under an aviation treaty as that would have rendered a licence granted under a statute useless: Laker Airways Ltd v Department of Trade [1977] QB 643 see especially at pp 718 719 and 728 per Roskill LJ and Lawton LJ respectively. And in Fire Brigades Union cited above, at pp 551 552, Lord Browne Wilkinson concluded that ministers could not exercise the prerogative power to set up a scheme of compensation for criminal injuries in such a way as to make a statutory scheme redundant, even though the statute in question was not yet in force. And, as already mentioned in para 35 above, he also stated that it was inappropriate for ministers to base their actions (or to invite the court to make any decision) on the basis of an anticipated repeal of a statutory provision as that would involve ministers (or the court) pre empting Parliaments decision whether to enact that repeal. The fact that the exercise of prerogative powers cannot change the domestic law does not mean that such an exercise is always devoid of domestic legal consequences. There are two categories of case where exercise of the prerogative can have such consequences. The first is where it is inherent in the prerogative power that its exercise will affect the legal rights or duties of others. Thus, the Crown has a prerogative power to decide on the terms of service of its servants, and it is inherent in that power that the Crown can alter those terms so as to remove rights, albeit that such a power is susceptible to judicial review: Council of Civil Service Unions v Minister for the Civil Service [1985] AC 374. The Crown also has a prerogative power to destroy property in wartime in the interests of national defence (although at common law compensation was payable: Burmah Oil cited above). While the exercise of the prerogative power in such cases may affect individual rights, the important point is that it does not change the law, because the law has always authorised the exercise of the power. The second category comprises cases where the effect of an exercise of prerogative powers is to change the facts to which the law applies. Thus, the exercise of the prerogative to declare war will have significant legal consequences: actions which were previously lawful may become treasonable (as in Joyce v Director of Public Prosecutions [1946] AC 347), and some people will become enemy aliens, whose property is liable to confiscation. Likewise, in Post Office v Estuary Radio Ltd [1968] 2 QB 740 the Crowns exercise of its prerogative to extend UK territorial waters resulted in the criminalisation of broadcasts from ships in the extended area, which had previously been lawful. These are examples where the exercise of the prerogative power alters the status of a person, thing or activity so that an existing rule of law comes to apply to it. However, in such cases the exercise has not created or changed the law, merely the extent of its application. The most significant area in which ministers exercise the Royal prerogative is the conduct of the United Kingdoms foreign affairs. This includes diplomatic relations, the deployment of armed forces abroad, and, particularly in point for present purposes, the making of treaties. There is little case law on the power to terminate or withdraw from treaties, but, as a matter of both logic and practical necessity, it must be part of the treaty making prerogative. As Lord Templeman put it in JH Rayner (Mincing Lane) Ltd v Department of Trade and Industry [1990] 2 AC 418, 476, [t]he Government may negotiate, conclude, construe, observe, breach, repudiate or terminate a treaty. Subject to any restrictions imposed by primary legislation, the general rule is that the power to make or unmake treaties is exercisable without legislative authority and that the exercise of that power is not reviewable by the courts see Civil Service Unions case cited above, at pp 397 398. Lord Coleridge CJ said that the Queen acts throughout the making of the treaty and in relation to each and every of its stipulations in her sovereign character, and by her own inherent authority Rustomjee v The Queen (1876) 2 QBD 69, 74. This principle rests on the so called dualist theory, which is based on the proposition that international law and domestic law operate in independent spheres. The prerogative power to make treaties depends on two related propositions. The first is that treaties between sovereign states have effect in international law and are not governed by the domestic law of any state. As Lord Kingsdown expressed it in Secretary of State in Council of India v Kamachee Boye Sahaba (1859) 13 Moo PCC 22, 75, treaties are governed by other laws than those which municipal courts administer. The second proposition is that, although they are binding on the United Kingdom in international law, treaties are not part of UK law and give rise to no legal rights or obligations in domestic law. It is only on the basis of these two propositions that the exercise of the prerogative power to make and unmake treaties is consistent with the rule that ministers cannot alter UK domestic law. Thus, in Higgs v Minister of National Security [2000] 2 AC 228, 241, Lord Hoffmann pointed out that the fact that treaties are not part of domestic law was the corollary of the Crowns treaty making power. In JH Rayner cited above, at p 500, Lord Oliver of Aylmerton put it thus: As a matter of the constitutional law of the United Kingdom, the Royal Prerogative, whilst it embraces the making of treaties, does not extend to altering the law or conferring rights upon individuals or depriving individuals of rights which they enjoy in domestic law without the intervention of Parliament. Treaties, as it is sometimes expressed, are not self executing. Quite simply, a treaty is not part of English law unless and until it has been incorporated into the law by legislation. So far as individuals are concerned, it is res inter alios acta [ie something done between others], from which they cannot derive rights and by which they cannot be deprived of rights or subjected to obligations; and it is outside the purview of the court not only because it is made in the conduct of foreign relations, which are a prerogative of the Crown, but also because, as a source of rights and obligations, it is irrelevant. It can thus fairly be said that the dualist system is a necessary corollary of Parliamentary sovereignty, or, to put the point another way, it exists to protect Parliament not ministers. Professor Campbell McLachlan in Foreign Relations Law (2014), para 5.20, neatly summarises the position in the following way: If treaties have no effect within domestic law, Parliaments legislative supremacy within its own polity is secure. If the executive must always seek the sanction of Parliament in the event that a proposed action on the international plane will require domestic implementation, parliamentary sovereignty is reinforced at the very point at which the legislative power is engaged. While ministers have in principle an unfettered power to make treaties which do not change domestic law, it had become fairly standard practice by the late 19th century for treaties to be laid before both Houses of Parliament at least 21 days before they were ratified, to enable Parliamentary objections to be heard. In 1924, following an indication by the previous government that it did not regard itself as bound by the practice, Arthur Ponsonby, the Parliamentary Under Secretary of State for Foreign Affairs, assured the House of Commons that ministers would in future adhere to this practice, which became known as the Ponsonby Convention. The convention was superseded and formalised by section 20 of the Constitutional Reform and Governance Act 2010. However, by virtue of section 23(1) of that Act, this section does not apply to new EU Treaties, because they are governed by the more specific statutory controls discussed in paras 28 and 29 above. With that background, we turn to analyse the effect of the 1972 Act and the arguments as to whether, in the absence of prior authority from Parliament in the form of a statute, the giving of Notice by ministers would be ineffective under the United Kingdoms constitutional requirements, as it would otherwise impermissibly result in a change in domestic law. The status and character of the 1972 Act Many statutes give effect to treaties by prescribing the content of domestic law in the areas covered by them. The 1972 Act does this, but it does considerably more as well. It authorises a dynamic process by which, without further primary legislation (and, in some cases, even without any domestic legislation), EU law not only becomes a source of UK law, but actually takes precedence over all domestic sources of UK law, including statutes. This may sound rather dry or technical to many people, but in constitutional terms the effect of the 1972 Act was unprecedented. Indeed, it is fair to say that the legal consequences of the United Kingdoms accession to the EEC were not fully appreciated by many lawyers until the Factortame litigation in the 1990s see the House of Lords decisions in R v Secretary of State for Transport, Ex p Factortame Ltd (No 2) [1991] 1 AC 603 and (No 5) [2000] 1 AC 524. Of course, consistently with the principle of Parliamentary sovereignty, this unprecedented state of affairs will only last so long as Parliament wishes: the 1972 Act can be repealed like any other statute. For that reason, we would not accept that the so called fundamental rule of recognition (ie the fundamental rule by reference to which all other rules are validated) underlying UK laws has been varied by the 1972 Act or would be varied by its repeal. In one sense, of course, it can be said that the 1972 Act is the source of EU law, in that, without that Act, EU law would have no domestic status. But in a more fundamental sense and, we consider, a more realistic sense, where EU law applies in the United Kingdom, it is the EU institutions which are the relevant source of that law. The legislative institutions of the EU can create or abrogate rules of law which will then apply domestically, without the specific sanction of any UK institution. It is true that the UK government and UK elected members of the European Parliament participate in the EU legislative processes and can influence their outcome, but that does not diminish the point. Further, in the many areas of EU competence which are subject to majority decision, the approval of the United Kingdom is not required for its legislation to take effect domestically. It is also true that EU law enjoys its automatic and overriding effect only by virtue of the 1972 Act, and thus only while it remains in force. That point simply reflects the fact that Parliament was and remains sovereign: so, no new source of law could come into existence without Parliamentary sanction and without being susceptible to being abrogated by Parliament. However, that in no way undermines our view that it is unrealistic to deny that, so long as that Act remains in force, the EU Treaties, EU legislation and the interpretations placed on these instruments by the Court of Justice are direct sources of UK law. The 1972 Act did two things which are relevant to these appeals. First, it provided that rights, duties and rules derived from EU law should apply in the United Kingdom as part of its domestic law. Secondly, it provided for a new constitutional process for making law in the United Kingdom. These things are closely related, but they are legally and conceptually distinct. The content of the rights, duties and rules introduced into our domestic law as a result of the 1972 Act is exclusively a question of EU law. However, the constitutional processes by which the law of the United Kingdom is made is exclusively a question of domestic law. Under the terms of the 1972 Act, EU law may take effect as part of the law of the United Kingdom in one of three ways. First, the EU Treaties themselves are directly applicable by virtue of section 2(1). Some of the provisions of those Treaties create rights (and duties) which are directly applicable in the sense that they are enforceable in UK courts. Secondly, where the effect of the EU Treaties is that EU legislation is directly applicable in domestic law, section 2(1) provides that it is to have direct effect in the United Kingdom without the need for further domestic legislation. This applies to EU Regulations (which are directly applicable by virtue of article 288 of the TFEU). Thirdly, section 2(2) authorises the implementation of EU law by delegated legislation. This applies mainly to EU Directives, which are not, in general, directly applicable but are required (again by article 288) to be transposed into national law. While this is an international law obligation, failure of the United Kingdom to comply with it is justiciable in domestic courts, and some Directives may be enforced by individuals directly against national governments in domestic courts. Further, any serious breach by the UK Parliament, government or judiciary of any rule of EU law intended to confer individual rights will entitle any individual sustaining damage as a direct result to compensation from the UK government: Brasserie du Pcheur SA v Germany; R v Secretary of State for Transport (Ex p Factortame Ltd) (No 4) (Joined Cases C 46/93 and C 48/93) [1996] QB 404 (provided that, where the breach consists in a court decision, the breach is not only serious but also manifest: Kbler v Austria (Case C 224/01) [2004] QB 848). Thus, EU law in EU Treaties and EU legislation will pass into UK law through the medium of section 2(1) or the implementation provisions of section 2(2) of the 1972 Act, so long as the United Kingdom is party to the EU Treaties. Similarly, so long as the United Kingdom is party to the EU Treaties, UK courts are obliged (i) to interpret EU Treaties, Regulations and Directives in accordance with decisions of the Court of Justice, (ii) to refer unclear points of EU law to the Court of Justice, and (iii) to interpret all domestic legislation, if at all possible, so as to comply with EU law (see Marleasing v La Comercial Internacional de Alimentacion SA (Case C 106/89) [1990] ECR I 4135). And, so long as the United Kingdom is party to the EU Treaties, UK citizens are able to recover damages from the UK government in cases where a decision of one of the organs of the state based on a serious error of EU law has caused them loss. In our view, then, although the 1972 Act gives effect to EU law, it is not itself the originating source of that law. It is, as was said on behalf of the Secretary of State echoing the illuminating analysis of Professor Finnis, the conduit pipe by which EU law is introduced into UK domestic law. So long as the 1972 Act remains in force, its effect is to constitute EU law an independent and overriding source of domestic law. Section 18 of the 2011 Act, set out in para 30 above, was enacted in order to make it clear that the primacy of EU law over domestic legislation did not prevent it being repealed by domestic legislation. But that simply confirmed the position as it had been since the beginning of 1973. The primacy of EU law means that, unlike other rules of domestic law, EU law cannot be implicitly displaced by the mere enactment of legislation which is inconsistent with it. That is clear from the second part of section 2(4) of the 1972 Act and Factortame Ltd (No 2) [1991] 1 AC 603. The issue was informatively discussed by Laws LJ in Thoburn v Sunderland City Council [2003] QB 151, paras 37 47. The 1972 Act accordingly has a constitutional character, as discussed by Laws LJ in Thoburn cited above, paras 58 59, and by Lord Reed and Lords Neuberger and Mance in in R (Buckinghamshire County Council) v Secretary of State for Transport [2014] 1 WLR 324, paras 78 to 79 and 206 to 207 respectively. Following the coming into force of the 1972 Act, the normal rule is that any domestic legislation must be consistent with EU law. In such cases, EU law has primacy as a matter of domestic law, and legislation which is inconsistent with EU law from time to time is to that extent ineffective in law. However, legislation which alters the domestic constitutional status of EU institutions or of EU law is not constrained by the need to be consistent with EU law. In the case of such legislation, there is no question of EU law having primacy, so that such legislation will have domestic effect even if it infringes EU law (and that would be true whether or not the 1972 Act remained in force). That is because of the principle of Parliamentary sovereignty which is, as explained above, fundamental to the United Kingdoms constitutional arrangements, and EU law can only enjoy a status in domestic law which that principle allows. It will therefore have that status only for as long as the 1972 Act continues to apply, and that, of course, can only be a matter for Parliament. We should add that, for these reasons, we do not accept the suggestion that, as a source of law, EU law can properly be compared with, delegated legislation. The 1972 Act effectively operates as a partial transfer of law making powers, or an assignment of legislative competences, by Parliament to the EU law making institutions (so long as Parliament wills it), rather than a statutory delegation of the power to make ancillary regulations even under a so called Henry the Eighth clause, as explained in the Public Law Project case, cited above, paras 25 and 26. The 1972 Act cannot be said to constitute EU legislative institutions the delegates of Parliament: they make laws independently of Parliament, and indeed they were doing so before the 1972 Act was passed. If EU law had the same status in domestic law as delegated legislation, the Factortame litigation referred to above would have had a different outcome. A statutory provision which provides that legislative documents and decisions made by EU institutions should be an independent and pre eminent source of UK law is thus quite different from a statutory provision which delegates to ministers and other organs of the executive the right to make regulations and the like. The exceptional nature of the effect of the 1972 Act is well illustrated by the passages quoted by Lord Reed in para 182 below from the decisions of the Court of Justice in Van Gend en Loos (Case C 26/62) [1963] ECR 1, 12 and Costa v ENEL (Case C 6/64) [1964] ECR 585, 593. They demonstrate that rules which would, as Lord Reed says, normally be incompatible with UK constitutional principles, became part of our constitutional arrangements as a result of the 1972 Act and the 1972 Accession Treaty for as long as the 1972 Act remains in force. The Divisional Courts analysis of the effect of the 1972 Act Although article 50 operates on the plane of international law, it is common ground that, because the EU Treaties apply as part of UK law, our domestic law will change as a result of the United Kingdom ceasing to be party to them, and rights enjoyed by UK residents granted through EU law will be affected. The Divisional Court concluded that, because ministers cannot claim prerogative powers to take an action which would result in a change in domestic law, it was not open to ministers to withdraw from the EU Treaties, and therefore to serve Notice, without authorisation in a statute. In that connection, the Divisional Court identified three categories of right: (1) Rights capable of replication in UK law; (2) Rights derived by UK citizens from EU law in other member states; (3) Rights of participation in EU institutions that could not be replicated in UK law. Many current EU rights fall within the first category. They include, for instance, the rights of UK citizens to the benefit of employment protection such as the Working Time Directive, to equal treatment and to the protection of EU competition law, and the right of non residents to the benefit of the four freedoms (free movement of people, goods and capital, and freedom to provide services). Some of these rights have already been embodied in UK law by domestic legislation pursuant to section 2(2) of the 1972 Act, and they will not cease to have effect upon the United Kingdoms withdrawal from the European Union (unless the domestic legislation giving effect to them is repealed in accordance with the law), although the Court of Justice will no longer have any binding role in relation to their scope or interpretation. Other rights, arising under EU Regulations or directly under the EU Treaties, will cease to have effect upon withdrawal (save in relation to rights and liabilities already accrued), but many could be replicated in a new statute eg the proposed Great Repeal Bill. But, as the Divisional Court pointed out, the need for such replication would only arise because withdrawal from the EU Treaties would have abrogated domestic rights created by the 1972 Act of effect, and again the Court of Justice would no longer have any binding role in relation to them. The second category may appear to be irrelevant for present purposes as the rights within it arise from the incorporation of EU law into the law of other member states, and not from UK legislation. However, some rights falling within one category may be closely linked with rights falling within another category. For example, the rights under Council Regulation (EC) No 2201/2003, concerning jurisdiction and the recognition and enforcement of judgments in matrimonial matters and the matters of parental responsibility (known as Brussels II Revised), would be undermined if a domestic judgment governing the residence of a child could not be enforced outside the UK. The rights in the third category will cease when the United Kingdom is no longer a member of the European Union, as they are by their very nature dependent on continued membership. They include the right to stand for selection or later election to the European Parliament, and the right to vote in European elections, as well as the right to invite the Commission to take regulatory action. However, they have the character of what Mr Eadie described as club membership rights, and are of a different nature from the other more freestanding rights in the first and second categories. Given that it is clear that some rights in the first category will be lost on the United Kingdom withdrawing from the EU Treaties, it is unnecessary to consider whether, for the purpose of their present arguments, the applicants can rely on the loss of rights in the second and third categories. If they cannot succeed in their argument based on loss of rights in the first category, then invoking loss of rights in the other categories would not help them; and if they can succeed on the basis of loss of rights in the first category, they would not need to invoke loss of rights in the other categories. Does the 1972 Act preclude the use of prerogative power to withdraw? While accepting that some rights will be lost on withdrawal from the EU Treaties, the Secretary of States case is that the loss of these rights in such circumstances is provided for, and has therefore effectively been sanctioned, by Parliament in the 1972 Act itself. In this connection, Mr Eadie pointed out that the 1972 Act does not simply incorporate the EU Treaties into UK law in the same way as, say, the Carriage of Goods by Sea Act 1971 incorporates the Hague Rules. By contrast, he said, section 2 of the 1972 Act is ambulatory: in other words, it gives effect to whatever may from time to time be the international obligations of the United Kingdom under or pursuant to the EU Treaties. He pointed out that changes in EU law are brought into domestic law through the medium of section 2 of the 1972 Act and that, once the United Kingdom ceases to be bound by the EU Treaties, there will be no rights and remedies etc to which section 2(1) can apply, and no EU obligations which require delegated legislation under section 2(2), and that the possibility of withdrawal from EU Treaties is therefore effectively provided for in the wording of section 2. It is his case that, by providing that EU law rights, remedies etc from time to time provided for by or under the Treaties were to be given effect or used in the United Kingdom, section 2(1) accommodated the possibility of ministers withdrawing from the Treaties without Parliamentary authority. He also contended that it was self evident that Parliament cannot have intended that the variable content of EU law should continue to be part of domestic law after the UK withdraws from the EU Treaties. We accept the proposition that the ambit of the rights and remedies etc which are incorporated into domestic law through section 2 of the 1972 Act varies with the United Kingdoms obligations from time to time under the EU Treaties. This proposition is reflected in the language of subsections (1) and (2) of section 2, which are quoted in paras 18 and 19 above. However, this proposition is also limited in nature. Thus, the provisions of new EU Treaties are not automatically brought into domestic law through section 2: only once they have been statutorily added to the Treaties and the EU Treaties in section 1(2) can section 2 give effect to new EU Treaties. And section 2 can only apply to those rights and remedies which are capable of being given legal effect or used or enjoyed in the United Kingdom. We also accept that Parliament cannot have intended that section 2 should continue to import the variable content of EU law into domestic law, or that the other consequences of the 1972 Act described in paras 62 to 64 above should continue to apply, after the United Kingdom had ceased to be bound by the EU Treaties. However, while acknowledging the force of Lord Reeds powerful judgment, we do not accept that it follows from this that the 1972 Act either contemplates or accommodates the abrogation of EU law upon the United Kingdoms withdrawal from the EU Treaties by prerogative act without prior Parliamentary authorisation. On the contrary: we consider that, by the 1972 Act, Parliament endorsed and gave effect to the United Kingdoms membership of what is now the European Union under the EU Treaties in a way which is inconsistent with the future exercise by ministers of any prerogative power to withdraw from such Treaties. In short, the fact that EU law will no longer be part of UK domestic law if the United Kingdom withdraws from the EU Treaties does not mean that Parliament contemplated or intended that ministers could cause the United Kingdom to withdraw from the EU Treaties without prior Parliamentary approval. There is a vital difference between changes in domestic law resulting from variations in the content of EU law arising from new EU legislation, and changes in domestic law resulting from withdrawal by the United Kingdom from the European Union. The former involves changes in EU law, which are then brought into domestic law through section 2 of the 1972 Act. The latter involves a unilateral action by the relevant constitutional bodies which effects a fundamental change in the constitutional arrangements of the United Kingdom. So far as the interpretation of subsections (1) and (2) of section 2 of the 1972 Act are concerned, any right available under EU law to the United Kingdom to withdraw from the EU Treaties does not, as Mr Eadie rightly accepted, fall within the subsection, as it is not one which would be given legal effect or used in, or which would be enjoyed by the United Kingdom. Further, the fact that section 2(1) envisages EU law rights and procedures applying as in accordance with the Treaties from time to time and without further enactment takes matters no further. Subsection 2(1) and (2) are concerned to ensure that the variable content of EU law as it stands from time to time, is given effect in domestic law, and there was no practical alternative to such an arrangement in a dualist system. However, it does not follow from this that prerogative powers may be used to withdraw from the Treaties and so cut off the source of EU law entirely. One of the most fundamental functions of the constitution of any state is to identify the sources of its law. And, as explained in paras 61 to 66 above, the 1972 Act effectively constitutes EU law as an entirely new, independent and overriding source of domestic law, and the Court of Justice as a source of binding judicial decisions about its meaning. This proposition is indeed inherent in the Secretary of States metaphor of the 1972 Act as a conduit pipe by which EU law is brought into the domestic UK law. Upon the United Kingdoms withdrawal from the European Union, EU law will cease to be a source of domestic law for the future (even if the Great Repeal Bill provides that some legal rules derived from it should remain in force or continue to apply to accrued rights and liabilities), decisions of the Court of Justice will (again depending on the precise terms of the Great Repeal Bill) be of no more than persuasive authority, and there will be no further references to that court from UK courts. Even those legal rules derived from EU law and transposed into UK law by domestic legislation will have a different status. They will no longer be paramount, but will be open to domestic repeal or amendment in ways that may be inconsistent with EU law. Accordingly, the main difficulty with the Secretary of States argument is that it does not answer the objection based on the constitutional implications of withdrawal from the EU. As we have said, withdrawal is fundamentally different from variations in the content of EU law arising from further EU Treaties or legislation. A complete withdrawal represents a change which is different not just in degree but in kind from the abrogation of particular rights, duties or rules derived from EU law. It will constitute as significant a constitutional change as that which occurred when EU law was first incorporated in domestic law by the 1972 Act. And, if Notice is given, this change will occur irrespective of whether Parliament repeals the 1972 Act. It would be inconsistent with long standing and fundamental principle for such a far reaching change to the UK constitutional arrangements to be brought about by ministerial decision or ministerial action alone. All the more so when the source in question was brought into existence by Parliament through primary legislation, which gave that source an overriding supremacy in the hierarchy of domestic law sources. The point may be illustrated by reference to the formula which Lord Reed uses to make the argument about the variable content of EU law. That formula is All such [members of a specified category] as [satisfy a specified condition] shall be [dealt with in accordance with a specified requirement]. In the present case, the specified condition is a continuing obligation under the EU Treaties, and it must be satisfied by EU laws, which are the relevant members of [the] specified category, in order for the specified requirement, namely that those EU laws are binding domestically, to apply. The membership of the specified category has a variable content which is contingent on the decisions of non UK entities, and the contingency may change that content. That much may well be accommodated by the 1972 Act. But the very formula is not itself variable: it is a fixed rule of domestic law, enacted by Parliament. It is nothing to the point that there was, for UK purposes, no content in the specified category until the 1972 Accession Treaty was ratified (on the day after the 1972 Act received the royal assent). As mentioned in para 77 above, by the 1972 Act, Parliament endorsed and gave effect to the UKs future membership of the European Union, and this became a fixed domestic starting point. The question is whether that domestic starting point, introduced by Parliament, can be set aside, or could have been intended to be set aside, by a decision of the UK executive without express Parliamentary authorisation. We cannot accept that a major change to UK constitutional arrangements can be achieved by ministers alone; it must be effected in the only way that the UK constitution recognises, namely by Parliamentary legislation. This conclusion appears to us to follow from the ordinary application of basic concepts of constitutional law to the present issue. While the consequential loss of a source of law is a fundamental legal change which justifies the conclusion that prerogative powers cannot be invoked to withdraw from the EU Treaties, the Divisional Court was also right to hold that changes in domestic rights acquired through that source as summarised in para 70 above, represent another, albeit related, ground for justifying that conclusion. Indeed, the consequences of withdrawal go further than affecting rights acquired pursuant to section 2 of the 1972 Act, as explained in paras 62 to 64 above. More centrally, as explained in paras 76 to 79 above, section 2 of that Act envisages domestic law, and therefore rights of UK citizens, changing as EU law varies, but it does not envisage those rights changing as a result of ministers unilaterally deciding that the United Kingdom should withdraw from the EU Treaties. Mr Eadie also argued that exercise of prerogative powers can change domestic law. While there are circumstances (as described in paras 52 and 53 above) where the exercise of prerogative powers can affect domestic legal rights, they plainly do not apply in the present case. The rights which flow through the conduit pipe of the 1972 Act are contingent on the possibility of their being removed or changed in accordance with decisions taken by EU institutions, as is recognised by the expression from time to time in section 2(1). However, as implied in para 79 above, far from helping the Secretary of States case, the presence of those words in section 2 highlights their absence from the definition of Treaties and EU Treaties in section 1(2). When one reads the two subsections together, the clear implication is that the continued existence of the conduit pipe, as opposed to the contents which flow through it, can be changed only if Parliament changes the law. In the course of his attractively presented submissions, Mr Eadie sought to meet these points with the argument that the 1972 Act (as amended from time to time) effectively incorporates the EU Treaties, and that the applicants cannot point to any provision in the Act which states that the prerogative powers in relation to those treaties are to be abrogated. Given that there is nothing in the 1972 Act which expressly or by necessary implication abrogated ministers prerogative powers to withdraw from the Treaties to which it applied, he contended that it followed that the prerogative to withdraw from the EU Treaties was not precluded by the 1972 Act. In this connection, he relied on dicta in De Keyser cited above (including Lord Parmoors reference to directly regulated by statute in the passage quoted in para 48 above) which suggested that prerogative powers should not be treated as abrogated unless a statute expressly, or by necessary implication, provided for their abrogation. Mr Eadie also relied on R v Secretary of State for Foreign and Commonwealth Affairs, Ex p Rees Mogg [1994] QB 552, in which the Court of Appeal held that ministers could ratify a protocol to the TEU without Parliamentary approval. In the course of his reasons for rejecting an argument based on the proposition that prerogative powers could not be used to alter the law, Lloyd LJ at p 567H appears to have concluded that ministers prerogative powers exist generally in relation to the EU Treaties, apparently on the basis that a prerogative power can be fettered by statute only in express terms. However, as explained above, the EU Treaties not only concern the international relations of the United Kingdom, they are a source of domestic law, and they are a source of domestic legal rights many of which are inextricably linked with domestic law from other sources. Accordingly, the Royal prerogative to make and unmake treaties, which operates wholly on the international plane, cannot be exercised in relation to the EU Treaties, at least in the absence of domestic sanction in appropriate statutory form. It follows that, rather than the Secretary of State being able to rely on the absence in the 1972 Act of any exclusion of the prerogative power to withdraw from the EU Treaties, the proper analysis is that, unless that Act positively created such a power in relation to those Treaties, it does not exist. And, once one rejects the contention that section 2 accommodates a ministerial power to withdraw from the EU Treaties (as to which see paras 79 and 84 above), it is plain that the 1972 Act did not create such a power of withdrawal, as the Secretary of State properly accepts. We accept, of course, that it would have been open to Parliament to provide expressly that the constitutional arrangements and the EU rights introduced by the 1972 Act should themselves only prevail from time to time and for so long as the UK government did not decide otherwise, and in particular did not decide to withdraw from the EU Treaties. But we cannot accept that the 1972 Act did so provide. As Lord Hoffmann explained in R v Secretary of State for the Home Department, Ex p Simms [2000] 2 AC 115, 131, the principle of legality means that Parliament must squarely confront what it is doing and accept the political cost, and so [f]undamental rights cannot be overridden by general words in a statute, because there is too great a risk that the full implications of their unqualified meaning may have passed unnoticed in the democratic process. Had the Bill which became the 1972 Act spelled out that ministers would be free to withdraw the United Kingdom from the EU Treaties, the implications of what Parliament was being asked to endorse would have been clear, and the courts would have so decided. But we must take the legislation as it is, and we cannot accept that, in Part I of the 1972 Act, Parliament squarely confront[ed] the notion that it was clothing ministers with the far reaching and anomalous right to use a treaty making power to remove an important source of domestic law and important domestic rights. In our judgment, far from indicating that ministers had the power to withdraw from the EU Treaties, the provisions of the 1972 Act, particularly when considered in the light of the unusual nature of those Treaties and the Acts unusual legislative history, support the contrary view. As the Divisional Court said, the long title of the 1972 Act stated that its purpose was to make provision in connection with the enlargement of what is now the European Union, which is not easy to reconcile with a prerogative power to achieve the opposite. Similarly, the side note to section 2, General implementation of Treaties, points away from a prerogative to terminate any implementation. In addition, there is the fact that the 1972 Act required ministers not to commit the United Kingdom to any new arrangement, whether it increased or decreased the potential volume and extent of EU law, without first being approved by Parliament by statute in the case of a new EU Treaty and by an approved Order in Council in the case of a treaty ancillary to any existing EU Treaty. It would scarcely be compatible with those provisions if, in reliance on prerogative powers, ministers could unilaterally withdraw from the EU Treaties, thereby reducing the volume and extent of EU law which takes effect domestically to nil without the need for Parliamentary approval. For these reasons, we disagree with Lloyd LJs conclusion in Rees Mogg in so far as he held that ministers could exercise prerogative powers to withdraw from the EU Treaties. It is only right to add that his ultimate decision was nonetheless correct for the reason he gave on p 568, namely that ratification of the particular protocol in that case would not in any significant way alter domestic law. The EU Treaties as implemented pursuant to the 1972 Act were and are unique in their legislative and constitutional implications. In 1972, for the first time in the history of the United Kingdom, a dynamic, international source of law was grafted onto, and above, the well established existing sources of domestic law: Parliament and the courts. And, as explained in paras 13 15 above, before (i) signing and (ii) ratifying the 1972 Accession Treaty, ministers, acting internationally, waited for Parliament, acting domestically, (i) to give clear, if not legally binding, approval in the form of resolutions, and (ii) to enable the Treaty to be effective by passing the 1972 Act. Bearing in mind this unique history and the constitutional principle of Parliamentary sovereignty, it seems most improbable that those two parties had the intention or expectation that ministers, constitutionally the junior partner in that exercise, could subsequently remove the graft without formal appropriate sanction from the constitutionally senior partner in that exercise, Parliament. The improbability of the Secretary of States case is reinforced by the point that, if, as he contends, prerogative powers could be invoked in relation to the EU Treaties despite the provisions of the 1972 Act, it would have been open to ministers to take such a course on or at any time after 2 January 1973 without authorisation by Parliament. It would also follow that ministers could have taken that course even if there had been no referendum or indeed, at least in theory, even if any referendum had resulted in a vote to remain. Those are implausible propositions. To meet this criticism, it was suggested that, if ministers had invoked their prerogative powers to withdraw from the EU Treaties in such circumstances, their decision may have been judicially reviewable. That is rather a bold suggestion, given that it has always been considered that, because they only operate on the international plane, prerogative treaty making powers are not subject to judicial review see para 55 above. It was also suggested that it should not cause surprise if ministers could exercise prerogative powers to withdraw from the EU Treaties, as they would be accountable to Parliament for their actions. This seems to us to be a potentially controversial argument constitutionally. It would justify all sorts of powers being accorded to the executive, on the basis that ministers could always be called to account for their exercise of any power. There is a substantial difference between (i) ministers having a freely exercisable power to do something whose exercise may have to be subsequently explained to Parliament and (ii) ministers having no power to do that thing unless it is first accorded to them by Parliament. The major practical difference between the two categories, in a case such as this where the exercise of the power is irrevocable, is that the exercise of power in the first category pre empts any Parliamentary action. When the power relates to an action of such importance to the UK constitution as withdrawing from the Treaties, it would clearly be appropriate for the power to be in the second category. The fact that ministers are free to issue a declaration of war without first obtaining the sanction of Parliament does not assist the Secretary of States case. Such a declaration, while plainly of fundamental significance in practice, does not change domestic laws or domestic sources of law, although it will lead to new laws provided Parliament decides that it should. Thus, the continued existence of the new source of law created by the 1972 Act, and the continued existence of the rights and other legal incidents which flow therefrom, cannot as a matter of UK law have depended on the fact that to date ministers have refrained from having recourse to the Royal prerogative to eliminate that source and those rights and other incidents. Subsidiary arguments as to the effect of the 1972 Act The Secretary of State relied on the fact that it was inevitable that Parliament would be formally involved in the process of withdrawal from the European Union, in that primary legislation, not least the Great Repeal Bill referred to in para 34 above, would be required to enable the United Kingdom to complete its withdrawal in an orderly and coherent manner. That seems very likely indeed, but it misses the point. If ministers give Notice without Parliament having first authorised them to do so, the die will be cast before Parliament has become formally involved. To adapt Lord Pannicks metaphor, the bullet will have left the gun before Parliament has accorded the necessary leave for the trigger to be pulled. The very fact that Parliament will have to pass legislation once the Notice is served and hits the target highlights the point that the giving of the Notice will change domestic law: otherwise there would be no need for new legislation. It was also argued on behalf of the Secretary of State that, when ministers are participating in EU law making processes and are therefore involved in making EU law, and hence domestic law, they are thereby exercising prerogative powers, and that the giving of Notice would be an equally legitimate exercise of those powers. We readily accept, without formally deciding, that ministerial activity in the EU law making process is effected under the Royal prerogative. However, it does not follow from this that ministers should be entitled to exercise a prerogative power to leave the European Union. When taking part in EU decision making, UK ministers are carrying out the very functions which were envisaged by Parliament when enacting the 1972 Act. Withdrawing from the EU Treaties involves ministers doing the opposite, namely, unilaterally dismantling the very system which they set up in a co ordinated way with Parliament, as explained in paras 13 to 15 above. Consistently with this, article 16 of TEU stipulates that a representative of each member state at ministerial level can commit member states by voting on the European Council, whereas article 50 provides that withdrawal must be effected by a member state in accordance with [its] constitutional requirements. It was further pointed out that unilateral actions by other member states could remove EU law based rights enjoyed by EU nationals (including UK citizens) living in the United Kingdom eg if another member state withdrew from the European Union. We agree, but cannot accept that it has any relevance to the present dispute, which concerns the domestic constitutional arrangements which apply if the UK government wishes to withdraw from the EU Treaties. The fact that it is inevitable that to the extent that they depend on a particular foreign government, EU rights can be abrogated by the withdrawal from EU Treaties by that foreign government gives no guidance as to what is required by the United Kingdoms constitutional arrangements before ministers can cause the United Kingdom to withdraw from those Treaties. Mr Eadie identified two instances which, he contended, showed that there were circumstances in which the UK government could withdraw from treaties without prior Parliamentary sanction, even if such withdrawal changed domestic law. The first was the United Kingdoms withdrawal in 1972 from the European Free Trade Agreement, EFTA. That is of no assistance to the Secretary of State. For, in stark contrast with UK membership of the European Union as a result of the 1972 Act, no directly effective rights had been created as a result of UK membership of EFTA. Moreover, the decision to withdraw from EFTA was an inevitable corollary of joining the EEC, and the formal notice withdrawing from EFTA was only served after both Houses of Parliament had approve[d] the decision of principle to join the European Communities as explained in para 13 above; it was thus an aspect of the exercise which the Prime Minister and the Chancellor of the Duchy of Lancaster respectively described in the House of Commons in October 1971 and January 1972. The second instance given by Mr Eadie was that of bilateral double taxation treaties (DTTs), which were entered into with other states by the UK government under section 788 of the Income and Corporation Taxes Act 1988 (section 788), now replaced by section 2 of the Taxation (International and Other Provisions) Act 2010 (TIOPA). This point was hardly mentioned in the oral argument before us, perhaps because discussions in some of the articles referred to in para 11 above have shown that the DTTs are an unsatisfactory analogy. By section 788 and now by TIOPA, Parliament provided in primary legislation that arrangements agreed by ministers in a DTT at international level will have effect in national law, but only if those arrangements are specified in an Order in Council which is approved by the House of Commons. Thus, unlike EU law which becomes part of UK law automatically as a result of the 1972 Act, the arrangements under a DTT do not take effect automatically as a result of section 788 or, now, TIOPA, but only through a specific Order in Council which has to be approved by Parliament. The conduit pipe metaphor which applies to the 1972 Act in relation to EU law is inapposite for section 788 and TIOPA in relation to DTTs. Before concluding on the effect of the 1972 Act, it is worth mentioning two points. First, eminent judges have taken it for granted that it is a matter for Parliament whether the United Kingdom withdraws from the EU Treaties. In Blackburn v Attorney General [1971] 1 WLR 1037, 1040, Lord Denning MR said that [i]f her Majestys Ministers sign this treaty and Parliament enacts provisions to implement it he did not envisage that Parliament would afterwards go back on it and try to withdraw from it, but if Parliament should do so then the courts would consider it. In Macarthys Ltd v Smith [1981] ICR 785, 789, Lord Denning (albeit in a dissenting judgment) made a constitutional point, and referred to the possibility of our Parliament deliberately pass[ing] an Act with the intention of repudiating the Treaty. In Pham v Secretary of State for the Home Department [2015] 1 WLR 1591, para 80, having stated that EU law [is] part of domestic law because Parliament has so willed, Lord Mance said that [t]he question how far Parliament has so willed is thus determined by construing the 1972 Act. In R (Shindler) v Chancellor of the Duchy of Lancaster [2016] 3 WLR 1196, para 58, Lord Dyson MR said that Parliament agreed to join the EU by exercising sovereign powers untrammelled by EU law and I think it would expect to be able to leave the EU in the exercise of the same untrammelled sovereign power. Secondly, if, as the Secretary of State has argued, it is legitimate to take account of the fact that Parliament will, of necessity, be involved in its legislative capacity as a result of UK withdrawal from the EU Treaties, it would militate in favour of, rather than against, the view that Parliament should have to sanction giving Notice. An inevitable consequence of withdrawing from the EU Treaties will be the need for a large amount of domestic legislation. There is thus a good pragmatic argument that such a burden should not be imposed on Parliament by exercise of prerogative powers and without prior Parliamentary authorisation. We do not rest our decision on that point, but it serves to emphasise the major constitutional change which withdrawal from the European Union will involve, and therefore the constitutional propriety of prior Parliamentary sanction for the process. Conclusion on the effect of the 1972 Act Accordingly, we consider that, in light of the terms and effect of the 1972 Act, and subject to considering the effect of subsequent legislation and events, the prerogative could not be invoked by ministers to justify giving Notice: ministers require the authority of primary legislation before they can take that course. We turn, then, to deal with the impact of legislation and events after 1972. Legislation and events after 1972: from 1973 to 2014 With one exception, the legislation and events between 1973 and 2014 were relied on in argument by the Secretary of State rather than by the applicants. We will first discuss the Secretary of States points in this connection and we will then turn to the applicants point. We start by addressing the fact that the EU Treaties contained no provision entitling a member state to withdraw at the time of the 1972 Act, and that such a provision, article 50, was introduced by the TFEU in 2008. Although its invocation will have the inevitable consequence which Lord Pannick described (as mentioned in para 36 above), article 50 operates only on the international plane, and is not therefore brought into UK law through section 2 of the 1972 Act, as explained in para 79 above. Accordingly, the Secretary of State can derive no domestic authority from the fact that the EU Treaties now include provision for unilateral withdrawal. In any event, article 50 only entitles a member state to withdraw from the EU Treaties in accordance with its own constitutional requirements, which returns one to the issue in the current proceedings. It was suggested that, by incorporating the TFEU, including its introduction of article 50, into section 1(2) of the 1972 Act in 2008, it cannot have been the intention of Parliament to strip ministers of their ability to exercise their powers under article 50. That is not the issue. Nobody doubts but that, under the TFEU and the TEU, ministers can give Notice under article 50(2); the question we have to decide is whether they can do so under prerogative powers or only with Parliamentary authority. So far as the 2008 Act and the 2011 Act are concerned, Mr Eadie rightly did not go so far as to suggest that they conferred power on ministers to withdraw if that power did not exist under the 1972 Act. More subtly, he submitted that these later statutes implicitly, but clearly, recognised the existence of the prerogative power to withdraw from the EU Treaties, unconstrained by Parliamentary control. He pointed out that the two statutes specified in detail the prerogative powers which Parliament intended to control in relation to the EU Treaties, and that they did not include the power to withdraw from those treaties under article 50(2). That omission was said to be particularly striking because, as explained in para 29 above, the 2011 Act covered another aspect of article 50, as it required legislation and a referendum before ministers could vote in favour of a decision under article 50(3) to depart from the need for unanimity in any decision to extend the two year period in the event of another member state seeking to withdraw from the EU Treaties. But it did not seek to control the giving of notice by ministers under article 50(2), for all its fundamental and irreversible consequences. We do not accept this argument. The fact that a statute says nothing about a particular topic can rarely, if ever, justify inferring a fundamental change in the law. As explained in Ex p Simms [2000] 2 AC 115, 131 cited in para 87 above, [f]undamental rights cannot be overridden by general words in a statute, because there is too great a risk that the full implications of their unqualified meaning may have passed unnoticed in the democratic process. If this is true of general expressions in a statute it must a fortiori be a principle which applies to omissions in a statute. Even if this principle admits of exceptions, they must be rare, and there is no justification for the view that the absence of any reference to article 50(2) in the 2008 and 2011 Acts is such an exception. Those statutes were not attempting to codify the legislative restrictions on the use of the prerogative in relation to the EU Treaties. The restrictions imposed by the two statutes were largely prompted by the fact that the TFEU had both increased the competences of the EU and included provisions which enabled EU institutions to short circuit some of the EUs decision making processes by replacing some of the previous requirements for unanimity or consensus with majority voting or involvement of the European Parliament. (It is fair to add that the restrictions also applied to certain policy issues such as the inclusion of the UK in the Schengen area and the UKs adoption of the Euro, but that does not undermine the point). As explained in paras 5 and 6 of the Explanatory Notes to the 2011 Act, Part 1 of that Act was intended to impose specific restrictions, which in summary terms were as follows. It required a referendum [to] be held before the UK could agree to an amendment of TEU or TFEU, and before the UK could agree to certain decisions already provided for by TEU and TFEU if these would transfer power or competence from the UK to the EU. Further, a referendum and [i]n addition, an Act of Parliament would be required before the UK could agree to a number of other specified decisions provided for in TEU and TFEU. Also, certain other decisions would require a motion to be agreed in both Houses of Parliament before the UK could vote in favour of specified decisions in [EU institutions]. In other words, expressed in broad terms, Part 1 of the 2011 Act was aimed at preventing ministers, without prior Parliamentary approval (plus, in many cases prior approval in a referendum), from supporting any decisions made by the European Union or its institutions which would extend EU competences and the like, or which would dilute the effect of UK voting rights in the EU or any EU institutions. It cannot be inferred from the fact that it was thought necessary to deal with such issues that Parliament intended or assumed that there were no legal limits to the prerogative powers that ministers might exercise in other types of case. Part 1 of the 2011 Act was concerned with decisions of EU institutions in which ministers played a part, not with unilateral decisions of ministers. More broadly, the absence of any Parliamentary controls on article 50(2) in the 2011 Act is entirely consistent with the notion that Parliament assumed that ministers could not withdraw from the EU Treaties without a statute authorising that course and that if and when Parliament had to consider the issue, it would decide whether and if so on what terms, if any, to give such authorisation. If prerogative powers are curtailed by legislation, they may sometimes be reinstated by the repeal of that legislation, depending on the construction of the statutes in question. But if, as we have concluded, there never had been a prerogative power to withdraw from the EU Treaties without statutory authority, there is nothing to be curtailed or reinstated by later legislation. The prerogative power claimed by the Secretary of State can only be created by a subsequent statute if the express language of that statute unequivocally shows that the power was intended to be created see per Lord Hobhouse of Woodborough in R (Morgan Grenfell & Co Ltd) v Special Commissioner of Income Tax [2003] 1 AC 563, para 45. Mr Eadie was right to concede that, however one approaches them, the 2008 and 2011 Acts did not show that. Mr Eadie further submitted that, rather than looking at the question whether ministers could give Notice without statutory authorisation in historical terms starting in 1972, it should be addressed by viewing the effect of the present state of the legislation as a whole, without regard to what the position might have been at some earlier stage. We do not agree. A statute cannot normally be interpreted by reference to a later statute, save in so far as the later statute intends to amend the earlier statute or the two statutes are in pari materia, ie they are given a collective title, are required to be construed as one, have identical short titles, or deal with the same subject matter on similar lines see Bennion on Statutory Interpretation (6th ed, 2013) section 28(13). None of these tests can possibly be said to be satisfied by the 2008 Act or the 2011 Act in relation to the 1972 Act, not least because the later statutes are concerned with a different issue from the 1972 Act. In any event, even if the two later statutes were in pari materia with the 1972 Act, for the reasons given in paras 110 to 112 above we do not consider that they would together yield the interpretation for which the Secretary of State contends. The one feature of the post 1972 history on which the applicants relied was the effect of the 2002 Act. As explained in para 27 above, that Act gave most people of the United Kingdom the right to vote in elections for MEPs, and (albeit by inference) the right to stand for election as an MEP. On the face of it, these are free standing rights outside the ambit of the 1972 Act, in that they are domestically granted in primary legislation passed by Parliament. The Secretary of State cannot argue that these rights are in any sense ambulatory. And they are rights which will inevitably be lost if the United Kingdom withdraws from the EU Treaties and ceases being a member of the European Union. There is therefore some force in the argument that, even if formal Parliamentary sanction to the giving of Notice was not needed on the grounds discussed in paras 74 to 101 above, it would nonetheless be needed because withdrawal from the EU Treaties would deprive UK citizens of the rights given them by Parliament through the 2002 Act. However, there is also force in the Secretary of States response that the rights given by the 2002 Act are simply rights of institutional participation which are contingent on continued UK membership of the European Union. The same sort of arguments might perhaps arise in relation to statutory provisions such as section 4(2) of the Communications Act 2003, which requires OFCOM, the UK telecommunications regulator, to carry out its statutory functions in accordance with the six Community requirements, which are set out in the ensuing subsections and give effect to, and are mandated by, an EU Directive. Given our conclusion that, in the light of the terms and effect of the 1972 Act, ministers cannot give Notice without prior sanction from the UK Parliament, we can limit ourselves to saying that we consider that the arguments based on the 2002 Act do nothing to undermine and may be regarded as reinforcing that conclusion. Legislation and events after 1972: the 2015 Act and the referendum We turn to the 2015 Act and the ensuing referendum. The Attorney General submitted that the traditional view as to the limits of prerogative power should not apply to a ministerial decision authorised by a majority of the members of the electorate who vote in a referendum provided for by Parliament. In effect, he said that, even though it was Parliament which required the referendum, the response to the referendum result should be a matter for ministers, and that it should not be constrained by the legal limitations which would have applied in the absence of the referendum. The referendum is a relatively new feature of UK constitutional practice. There have been three national referendums: on EEC membership in 1975, on the Parliamentary election voting system in 2011 and on EU membership in 2016. There have also been referendums about devolution in Scotland, Wales and Northern Ireland and about independence in Scotland. In 2000, it was considered worth having a legislative framework for the conduct of referendums held in pursuance of any provision made by or under an Act of Parliament see Part VII of the Political Parties, Elections and Referendums Act. The effect of any particular referendum must depend on the terms of the statute which authorises it. Further, legislation authorising a referendum more often than not has provided for the consequences on the result. Thus, the authorising statute may enact a change in the law subject to the proviso that it is not to come into effect unless approved by a majority in the referendum. The Scotland Act 1978 provided for devolution, but stipulated that the minister should bring the Act into force if there was a specified majority in a referendum, and if there was not he was required to lay an order repealing the Act. The Parliamentary Voting System and Constituencies Act 2011 had a provision requiring the alternative vote system to be adopted in Parliamentary elections, but by section 8 stated that the minister should bring this provision into force if it was approved in a referendum, but, if it was not, he should repeal it. Section 1 of the Northern Ireland Act 1998 (the NI Act) provided that if a referendum were to result in a majority for the province to become part of a united Ireland, the Secretary of State should lay appropriate proposals before Parliament. All these statutes stipulated what should happen in response to the referendum result, and what changes in the law were to follow, and how they were to be effected. The same is true of the provisions in Part 1 of the 2011 Act. By contrast, neither the 1975 Act nor the 2015 Act, which authorised referendums about membership of the European Community or European Union, made provision for any consequences of either possible outcome. They provided only that the referendum should be held, and they did so in substantially identical terms. The way in which the proposed referendum was described in public statements by ministers, however, differed in the two cases. The 1975 referendum was described by ministers as advisory, whereas the 2016 referendum was described as advisory by some ministers and as decisive by others, but nothing hangs on that for present purposes. Whether or not they are clear and consistent, such public observations, wherever they are made, are not law: they are statements of political intention. Further, such statements are, at least normally, made by ministers on behalf of the UK government, not on behalf of Parliament. It was suggested on behalf of the Secretary of State that, having referred the question whether to leave or remain to the electorate, Parliament cannot have intended that, upon the electorate voting to leave, the same question would be referred straight back to it. There are two problems with this argument. The first is that it assumes what it seeks to prove, namely that the referendum was intended by Parliament to have a legal effect as well as a political effect. The second problem is that the notion that Parliament would not envisage both a referendum and legislation being required to approve the same step is falsified by sections 2, 3 and 6 of the 2011 Act, which, as the Explanatory Notes (quoted in para 111 above) acknowledge, required just that albeit in the more elegant way of stipulating for legislation whose effectiveness was conditional upon a concurring vote in a referendum. Where, as in this case, implementation of a referendum result requires a change in the law of the land, and statute has not provided for that change, the change in the law must be made in the only way in which the UK constitution permits, namely through Parliamentary legislation. What form such legislation should take is entirely a matter for Parliament. But, in the light of a point made in oral argument, it is right to add that the fact that Parliament may decide to content itself with a very brief statute is nothing to the point. There is no equivalence between the constitutional importance of a statute, or any other document, and its length or complexity. A notice under article 50(2) could no doubt be very short indeed, but that would not undermine its momentous significance. The essential point is that, if, as we consider, what would otherwise be a prerogative act would result in a change in domestic law, the act can only lawfully be carried out with the sanction of primary legislation enacted by the Queen in Parliament. This is why the Secretary of State rightly accepted that the resolution of the House of Commons on 7 December 2016, calling on ministers to give Notice by 31 March 2017, cannot affect the legal issues before this court. A resolution of the House of Commons is an important political act. No doubt, it makes it politically more likely that any necessary legislation enabling ministers to give Notice will be enacted. But if, as we have concluded, ministers cannot give Notice by the exercise of prerogative powers, only legislation which is embodied in a statute will do. A resolution of the House of Commons is not legislation. Thus, the referendum of 2016 did not change the law in a way which would allow ministers to withdraw the United Kingdom from the European Union without legislation. But that in no way means that it is devoid of effect. It means that, unless and until acted on by Parliament, its force is political rather than legal. It has already shown itself to be of great political significance. It is instructive to see how the issue was addressed in ministers response to the 12th Report of Session 2009 10 of the House of Lords Select Committee on the Constitution (Referendums in the United Kingdom). The Committee included the following recommendation in para 197: [B]ecause of the sovereignty of Parliament, referendums cannot be legally binding in the UK, and are therefore advisory. However, it would be difficult for Parliament to ignore a decisive expression of public opinion. The UK governments response as recorded in the Committees Fourth Report of Session 2010 11 was The Government agrees with this recommendation. Under the UKs constitutional arrangements Parliament must be responsible for deciding whether or not to take action in response to a referendum result. The References from Northern Ireland and the devolution questions Introductory As mentioned above, four devolution questions have been referred to this Court by the High Court of Justice in Northern Ireland on the direction of the Attorney General for Northern Ireland, and one has been referred by the Court of Appeal in Northern Ireland on the appeal from Maguire J. The five devolution questions are: If the answer is yes, is the consent of the Northern Ireland Assembly (i) Does any provision of the NI Act, read together with the Belfast Agreement and the British Irish Agreement, have the effect that primary legislation is required before Notice can be given? (ii) required before the relevant legislation is enacted? (iii) If the answer to question (i) is no, does any provision of the NI Act read together with the Belfast Agreement and the British Irish Agreement operate as a restriction on the exercise of the prerogative power to give Notice? (iv) Does section 75 of the NI Act prevent exercise of the power to give Notice in the absence of compliance by the Northern Ireland Office with its obligations under that section? (v) Does the giving of Notice without the consent of the people of Northern Ireland impede the operation of section 1 of the NI Act? Following the hearing, our attention was drawn to the decision of the Northern Irish Court of Appeal in Lee v McArthur and Ashers Baking Co Ltd (No 2) handed down on 22 December 2016. That decision suggests that the High Court may not have had jurisdiction to have made the reference in these proceedings as sought by the Attorney General for Northern Ireland. Given that the issues raised in that reference were fully debated, and that no party to these proceedings has sought belatedly to rely on the decision of the Court of Appeal, we think it appropriate to deal with the reference. The NI Act is the product of the Belfast Agreement and the British Irish Agreement, and is a very important step in the programme designed to achieve reconciliation of the communities of Northern Ireland. It has established institutions and arrangements which are intended to address the unique political history of the province and the island of Ireland. Yet there is also a relevant commonality in the devolution settlements in Northern Ireland, Scotland and Wales (i) in the statutory constraint on the executive and legislative competence of the devolved governments and legislatures that they must not act in breach of EU law (the EU constraints); and (ii) in the operation of the Sewel Convention. (The EU constraints are to be found in sections 29(2)(d), 54 and 57(2) of the Scotland Act 1998; sections 108(6)(c) and 80(8) of the Government of Wales Act 2006; and sections 6(2)(d) and 24(1) of the NI Act). Questions (i), (iii), (iv) and (v) Because we have concluded that primary legislation is required to authorise the giving of Notice, the third question is superseded. The first question is for a similar reason less significant than it otherwise might have been but we address it briefly. When enacting the EU constraints in the NI Act and the other devolution Acts, Parliament proceeded on the assumption that the United Kingdom would be a member of the European Union. That assumption is consistent with the view that Parliament would determine whether the United Kingdom would remain a member of the European Union. But, in imposing the EU constraints and empowering the devolved institutions to observe and implement EU law, the devolution legislation did not go further and require the United Kingdom to remain a member of the European Union. Within the United Kingdom, relations with the European Union, like other matters of foreign affairs, are reserved or excepted in the cases of Scotland and Northern Ireland, and are not devolved in the case of Wales see section 30(1) of, and paragraph 7(1) of Schedule 5 to, the Scotland Act 1998; section 108(4) of, and Part 1 of Schedule 7 to, the Government of Wales Act 2006; and section 4(1) of, and paragraph 3 of Schedule 2 to, the NI Act. Accordingly, the devolved legislatures do not have a parallel legislative competence in relation to withdrawal from the European Union. The EU constraints are a means by which the UK Parliament and government make sure that the devolved democratic institutions do not place the United Kingdom in breach of its EU law obligations. The removal of the EU constraints on withdrawal from the EU Treaties will alter the competence of the devolved institutions unless new legislative constraints are introduced. In the absence of such new restraints, withdrawal from the EU will enhance the devolved competence. We consider the effect of the alteration of competence in our discussion of the Sewel Convention in paras 136 to 151 below. Mr Scoffield QC, who appeared for Mr Agnew, is unquestionably right, however, to claim that the NI Act conferred rights on the citizens of Northern Ireland. Sections 6(2)(d) and 24(1), in imposing the EU constraints, have endowed the people of Northern Ireland with the right to challenge actions of the Executive or the Assembly on the basis that they are in breach of EU law. A recent example of the exercise of such a right is found in the case of Re JR65s Application [2016] NICA 20, where the lifetime ban on men who have had sex with other men from giving blood in Northern Ireland was challenged as being contrary to EU law. As already explained, it is normally impermissible for statutory rights to be removed by the exercise of prerogative powers in the international sphere. It would accordingly be incongruous if constraints imposed on the legislative competence of the devolved administrations by specific statutory provisions were to be removed, thereby enlarging that competence, other than by statute. A related incongruity arises by virtue of the fact that observance and implementation of EU obligations are a transferred matter and therefore the responsibility of the devolved administration in Northern Ireland. The removal of a responsibility imposed by Parliament by ministerial use of prerogative powers might also be considered a constitutional anomaly. In light of our conclusion that a statute is required to authorise the decision to withdraw from the European Union, and therefore the giving of Notice, it is not necessary to reach a definitive view on the first referred question. The EU constraints and the provisions empowering the implementation of EU law are certainly consistent with our interpretation of the 1972 Act but we refrain from deciding whether they impose a discrete requirement for Parliamentary legislation. Section 75(1) of the NI Act obliges a public authority in carrying out its functions in relation to Northern Ireland to have due regard to the need to promote equality of opportunity. By section 75(2), this duty includes an obligation to have regard to the desirability of promoting good relations between persons of different religious belief, political persuasion or radical group. Section 75(3) defines public authority for the purpose of the section and, unlike section 76(7), does not include within the definition a Minister of the Crown. Thus, the Secretary of State does not fall within its ambit. Further, in our view, and in agreement with the Attorney General for Northern Ireland, the decision to withdraw from the European Union and to give Notice is not a function carried out by the Secretary of State for Northern Ireland in relation to Northern Ireland within the meaning of section 75. Because we have held that there is no prerogative power to give Notice, the fourth question is superseded. But in so far as the Secretary of State may have a role in the measures taken by the UK Parliament to give Notice, we are satisfied that section 75 imposes no obligation on him in that context. We also answer the fifth question in the negative. Section 1 of the NI Act is headed Status of Northern Ireland and it provides: (1) It is hereby declared that Northern Ireland in its entirety remains part of the United Kingdom and shall not cease to be so without the consent of a majority of the people of Northern Ireland voting in a poll held for the purposes of this section in accordance with Schedule 1. (2) But if the wish expressed by a majority in such a poll is that Northern Ireland should cease to be part of the United Kingdom and form part of a united Ireland, the Secretary of State shall lay before Parliament such proposals to give effect to that wish as may be agreed between Her Majestys Government in the United Kingdom and the Government of Ireland. In our view, this important provision, which arose out of the Belfast Agreement, gave the people of Northern Ireland the right to determine whether to remain part of the United Kingdom or to become part of a united Ireland. It neither regulated any other change in the constitutional status of Northern Ireland nor required the consent of a majority of the people of Northern Ireland to the withdrawal of the United Kingdom from the European Union. Contrary to the submission of Mr Lavery QC for Mr McCord, this section cannot support any legitimate expectation to that effect. The Sewel Convention and question (ii) That leaves the second question, which raises in substance the application of the Sewel Convention. The convention was adopted as a means of establishing cooperative relationships between the UK Parliament and the devolved institutions, where there were overlapping legislative competences. In each of the devolution settlements the UK Parliament has preserved its right to legislate on matters which are within the competence of the devolved legislature. Section 5 of the NI Act empowers the Northern Ireland Assembly to make laws, but subsection (6) states that [t]his section does not affect the power of the Parliament of the United Kingdom to make laws for Northern Ireland. Section 28(7) of the Scotland Act 1998 provides that the section empowering the Scottish Parliament to make laws: does not affect the power of the Parliament of the United Kingdom to make laws for Scotland. Substantially identical provision is made for Wales in section 107(5) of the Government of Wales Act 2006. The practical benefits of achieving harmony between legislatures in areas of competing competence, of avoiding duplication of effort, of enabling the UK Parliament to make UK wide legislation where appropriate, such as establishing a single UK implementing body, and of avoiding any risk of legal challenge to the vires of the devolved legislatures were recognised from an early date in the devolution process. The convention takes its name from Lord Sewel, the Minister of State in the Scotland Office in the House of Lords who was responsible for the progress of the Scotland Bill in 1998. In a debate in the House of Lords on the clause which is now section 28 of the Scotland Act 1998, he stated in July 1998 that, while the devolution of legislative competence did not affect the ability of the UK Parliament to legislate for Scotland, we would expect a convention to be established that Westminster would not normally legislate with regard to devolved matters in Scotland without the consent of the Scottish Parliament. That expectation has been fulfilled. The convention was embodied in a Memorandum of Understanding between the UK government and the devolved governments originally in December 2001 (Cm 5240). Para 14 of the current Memorandum of Understanding, which was published in October 2013, states: The UK Government will proceed in accordance with the convention that the UK Parliament would not normally legislate with regard to devolved matters except with the agreement of the devolved legislature. The devolved administrations will be responsible for seeking such agreement as may be required for this purpose on an approach from the UK Government. Thus, the UK government undertook not to seek or support relevant legislation in the UK Parliament without the prior consent of the devolved legislature. That consent is given by a legislative consent motion which the devolved government introduces into the legislature. Para 2 of the Memorandum of Understanding stated that it was a statement of political intent and that it did not create legal obligations. Over time, devolved legislatures have passed legislative consent motions not only when the UK Parliament has legislated on matters which fall within the legislative competence of a devolved legislature, but also when the UK Parliament has enacted provisions that directly alter the legislative competence of a devolved legislature or amend the executive competence of devolved administrations. Thus, as the Lord Advocate showed in a helpful schedule, legislative consent motions were passed by the Scottish Parliament before the enactment of both the Scotland Act 2012 and the Scotland Act 2016. Similarly, the Welsh Assembly passed a legislative consent motion in relation to the Wales Act 2014, and in November 2016 the Welsh government laid a legislative consent motion before the Assembly in relation to the current Wales Bill 2016. But legislation which implements changes to the competences of EU institutions and thereby affects devolved competences, such as the 2008 Act which incorporated the Treaty of Lisbon amending the TEU and the TFEU into section 1(2) of the 1972 Act, has not been the subject of legislative consent motions in any devolved legislature. Before addressing the more recent legislative recognition of the convention, it is necessary to consider the role of the courts in relation to constitutional conventions. It is well established that the courts of law cannot enforce a political convention. In Re Resolution to Amend the Constitution [1981] 1 SCR 753, the Supreme Court of Canada addressed the nature of political conventions. In the majority judgment the Chief Justice (Laskin) and Dickson, Beetz, Estey, McIntyre, Chouinard and Lamer JJ stated at pp 774 to 775: The very nature of a convention, as political in inception and as depending on a consistent course of political recognition by those for whose benefit and to whose detriment (if any) the convention developed over a considerable period of time is inconsistent with its legal enforcement. In a dissenting judgment on one of the questions before the court, the Chief Justice and Estey and MacIntyre JJ developed their consideration of conventions at p 853: [A] fundamental difference between the legal, that is the statutory and common law rules of the constitution, and the conventional rules is that, while a breach of the legal rules, whether of statutory or common law nature, has a legal consequence in that it will be restrained by the courts, no such sanction exists for breach or non observance of the conventional rules. The observance of constitutional conventions depends upon the acceptance of the obligation of conformance by the actors deemed to be bound thereby. When this consideration is insufficient to compel observance no court may enforce the convention by legal action. The sanction for non observance of a convention is political in that disregard of a convention may lead to political defeat, to loss of office, or to other political consequences, but will not engage the attention of the courts which are limited to matters of law alone. Courts, however, may recognise the existence of conventions Martland, Ritchie, Dickson, Beetz, Chouinard and Lamer JJ made the same point at pp 882 to 883: It is because the sanctions of convention rest with institutions of government other than courts or with public opinion and ultimately, with the electorate, that it is generally said that they are political. Attempts to enforce political conventions in the courts have failed. Thus in Madzimbamuto v Lardner Burke [1969] 1 AC 645, the Judicial Committee of the Privy Council had to consider a submission that legal effect should be given to the convention which applied at that time that the UK Parliament would not legislate without the consent of the government of Southern Rhodesia on matters within the competence of the Legislative Assembly. In its judgment delivered by Lord Reid the Board stated at p 723 that: That is a very important convention but it had no legal effect in limiting the legal power of Parliament. It is often said that it would be unconstitutional for the UK Parliament to do certain things, meaning that the moral, political and other reasons against doing them are so strong that most people would regard it as highly improper if Parliament did these things. But that does not mean that it is beyond the power of Parliament to do such things. If Parliament chose to do any of them the courts could not hold the Act of Parliament invalid. More recently, the political nature of the Sewel Convention was recognised by Lord Reed in a decision of the Inner House of the Court of Session, Imperial Tobacco v Lord Advocate 2012 SC 297, para 71. While the UK government and the devolved executives have agreed the mechanisms for implementing the convention in the Memorandum of Understanding, the convention operates as a political restriction on the activity of the UK Parliament. Article 9 of the Bill of Rights, which provides that Proceedings in Parliament ought not to be impeached or questioned in any Court or Place out of Parliament, provides a further reason why the courts cannot adjudicate on the operation of this convention. Judges therefore are neither the parents nor the guardians of political conventions; they are merely observers. As such, they can recognise the operation of a political convention in the context of deciding a legal question (as in the Crossman diaries case Attorney General v Jonathan Cape Ltd [1976] 1 QB 752), but they cannot give legal rulings on its operation or scope, because those matters are determined within the political world. As Professor Colin Munro has stated, the validity of conventions cannot be the subject of proceedings in a court of law (1975) 91 LQR 218, 228. The evolving nature of devolution has resulted in the Sewel Convention also receiving statutory recognition through section 2 of the Scotland Act 2016, which inserted sub section (8) into section 28 of the Scotland Act 1998 (which empowers the Scottish Parliament to make laws). Thus subsections (7) and (8) now state: (7) This section does not affect the power of the Parliament of the United Kingdom to make laws for Scotland. (8) But it is recognised that the Parliament of the United Kingdom will not normally legislate with regard to devolved matters without the consent of the Scottish Parliament. A substantially identical provision (clause 2) is proposed in the Wales Bill 2016 2017, which is currently before the UK Parliament. As the Advocate General submitted, by such provisions, the UK Parliament is not seeking to convert the Sewel Convention into a rule which can be interpreted, let alone enforced, by the courts; rather, it is recognising the convention for what it is, namely a political convention, and is effectively declaring that it is a permanent feature of the relevant devolution settlement. That follows from the nature of the content, and is acknowledged by the words (it is recognised and will not normally), of the relevant subsection. We would have expected UK Parliament to have used other words if it were seeking to convert a convention into a legal rule justiciable by the courts. In the Scotland Act 2016, the recognition of the Sewel Convention occurs alongside the provision in section 1 of that Act. That section, by inserting section 63A into the Scotland Act 1998, makes the Scottish Parliament and the Scottish government a permanent part of the United Kingdoms constitutional arrangements, signifies the commitment of the UK Parliament and government to those devolved institutions, and declares that those institutions are not to be abolished except on the basis of a decision of the people of Scotland voting in a referendum. This context supports our view that the purpose of the legislative recognition of the convention was to entrench it as a convention. The Lord Advocate and the Counsel General for Wales were correct to acknowledge that the Scottish Parliament and the Welsh Assembly did not have a legal veto on the United Kingdoms withdrawal from the European Union. Nor in our view has the Northern Ireland Assembly. Therefore, our answer to the second question in para 126 above is that the consent of the Northern Ireland Assembly is not a legal requirement before the relevant Act of the UK Parliament is passed. In reaching this conclusion we do not underestimate the importance of constitutional conventions, some of which play a fundamental role in the operation of our constitution. The Sewel Convention has an important role in facilitating harmonious relationships between the UK Parliament and the devolved legislatures. But the policing of its scope and the manner of its operation does not lie within the constitutional remit of the judiciary, which is to protect the rule of law. Conclusion Accordingly, (i) we dismiss the Secretary of States appeal against the decision of the English and Welsh Divisional Court, (ii) we invite the parties to the reference from the Northern Irish Court of Appeal to agree or, failing agreement, to make written submissions as to the order to be made on the appeal from that Court, and (iii) we answer the second and fifth questions referred by the courts of Northern Ireland as indicated respectively in paras 150 and 134 above, and we do not answer the first, third and fourth questions as they have been superseded. LORD REED: (dissenting) Introduction Article 50 of the Treaty of European Union (TEU) provides: 1. Any member state may decide to withdraw from the Union in accordance with its own constitutional requirements. 2. A member state which decides to withdraw shall notify the European Council of its intention. In the light of the guidelines provided by the European Council, the Union shall negotiate and conclude an agreement with that state, setting out the arrangements for its withdrawal, taking account of the framework for its future relationship with the Union 3. The Treaties shall cease to apply to the state in question from the date of entry into force of the withdrawal agreement or, failing that, two years after the notification referred to in paragraph 2, unless the European Council, in agreement with the member state concerned, unanimously decides to extend this period The cases before the court arise from disputes as to the constitutional requirements which govern a decision by the United Kingdom to withdraw from the European Union under article 50(1): a decision which must be taken before notification can be given under article 50(2). In the case brought by Mrs Miller and Mr Dos Santos (whom I shall refer to as the Miller claimants), the Miller claimants maintain that the Crown cannot lawfully give notification under article 50(2) unless an Act of Parliament authorises it to do so. The Secretary of State for Exiting the European Union, on the other hand, maintains that the decision is one which can lawfully be taken by the Crown in the exercise of prerogative powers. The Divisional Court decided the case in favour of the Miller claimants, and the case now comes before this court as an appeal against that decision. A number of interested parties and interveners have taken part in the Miller appeal. They include the Lord Advocate and the Counsel General for Wales, who as well as presenting arguments in support of those advanced by the Miller claimants, have also argued that, in the event that an Act of Parliament is required, the consent of the Scottish Parliament and the National Assembly for Wales is also required, in accordance with a convention known as the Sewel Convention. Two other cases are also before the court. In the first, an application for leave to apply for judicial review brought by Mr Agnew and others, a number of devolution issues have been referred to this court by the High Court of Northern Ireland. Put shortly, the court is asked to decide whether provisions of the Northern Ireland Act 1998 (the Northern Ireland Act) have the effect that an Act of Parliament is required before notification is given under article 50(2); if so, whether the consent of the Northern Ireland Assembly is required before such an Act of Parliament is enacted, in accordance with the Sewel Convention; and, in any event, whether the Northern Ireland Act prevents or constrains the exercise of the power to give notice. In the second case, an application for leave to apply for judicial review brought by Mr McCord, another devolution issue has been referred to this court by the Court of Appeal of Northern Ireland. The court is asked to decide whether the giving of notification under article 50(2) in the exercise of prerogative powers, without the consent of the people of Northern Ireland, would impede the operation of section 1 of the Northern Ireland Act, which provides that Northern Ireland shall not cease to be part of the United Kingdom without the consent of a majority of the people of Northern Ireland. I shall begin by considering the Miller appeal. The argument of the Secretary of State in the Miller appeal Each side of the argument in the Miller appeal is based on a principle of the British constitution. Counsel on each side cited a librarys worth of authority, but I need mention only a few of the most important cases, as the essence of the relevant principles is clear and well known. The Secretary of State relies on the principle that, as a matter of law, the conduct of the UKs foreign relations falls within the prerogative power of the Crown, advised by its Ministers. This prerogative power includes the power to negotiate international treaties, to amend them, and to withdraw from them. The exercise of that treaty making power is not justiciable by the courts, unless statute has made it so. As Lord Oliver of Aylmerton said in the Tin Council case (JH Rayner (Mincing Lane) Ltd v Department of Trade and Industry [1990] 2 AC 418, 499: On the domestic plane, the power of the Crown to conclude treaties with other sovereign states is an exercise of the Royal Prerogative, the validity of which cannot be challenged in municipal law: see Blackburn v Attorney General [1971] 1 WLR 1037. The Sovereign acts throughout the making of the treaty and in relation to each and every of its stipulations in her sovereign character, and by her own inherent authority; and, as in making the treaty, so in performing the treaty, she is beyond the control of municipal law, and her acts are not to be examined in her own courts: Rustomjee v The Queen (1876) 2 QBD 69, 74, per Lord Coleridge CJ. The case of Blackburn v Attorney General, to which Lord Oliver referred, concerned the UKs entry into the European Communities, as the EU was then known. The action was an attempt to prevent the Crown from acceding to the Treaty of Rome. Lord Denning MR stated: The treaty making power of this country rests not in the courts, but in the Crown; that is, Her Majesty acting upon the advice of her Ministers. When her Ministers negotiate and sign a treaty, even a treaty of such paramount importance as this proposed one, they act on behalf of the country as a whole. They exercise the prerogative of the Crown. Their action in so doing cannot be challenged or questioned in these courts. (p 1040) The compelling practical reasons for recognising this prerogative power to manage international relations were identified by Blackstone: This is wisely placed in a single hand by the British constitution, for the sake of unanimity, strength, and despatch. Were it placed in many hands, it would be subject to many wills: many wills, if disunited and drawing different ways, create weakness in a government; and to unite those several wills, and reduce them to one, is a work of more time and delay than the exigencies of state will afford. (Commentaries on the Laws of England (1765 1769), Book I, Chapter 7, Of the Kings Prerogative) The value of unanimity, strength and dispatch in the conduct of foreign affairs are as evident in the 21st century as they were in the 18th. Confiding foreign affairs to the Crown, in the exercise of the prerogative, does not, however, secure their effective conduct at the expense of democratic accountability. Ministers of the Crown are politically accountable to Parliament for the manner in which this prerogative power is exercised, and it is therefore open to Parliament to require its exercise to be debated and even to be authorised by a resolution or legislation: as it has done, for example, in relation to the ratification of certain treaties under the European Union Amendment Act 2008, the Constitutional Reform and Governance Act 2010 and the European Union Act 2011. The Crown can, in addition, seek Parliamentary approval before exercising the prerogative power if it so chooses. There is however no legal requirement for the Crown to seek Parliamentary authorisation for the exercise of the power, except to the extent that Parliament has so provided by statute: that follows from the general principle set out in Blackburn v Attorney General and the Tin Council case. Since there is no statute which requires the decision under article 50(1) to be taken by Parliament, it follows that it can lawfully be taken by the Crown, in the exercise of the prerogative. There is therefore no legal requirement for an Act of Parliament to authorise the giving of notification under article 50(2). So runs the Secretary of States argument. In support of this argument, the Secretary of State points out that there has been considerable Parliamentary scrutiny of Ministers conduct and their plans in relation to article 50. That scrutiny has included inquiries by the House of Commons Select Committee on Exiting the EU and by the House of Lords European Union Committee, as well as Parliamentary questions and debates. The latter have included a debate in the House of Commons on 7 December 2016, following which the following motion was agreed: That this House recognises that leaving the EU is the defining issue facing the UK; notes the resolution on parliamentary scrutiny of the UK leaving the EU agreed by the House on 12 October 2016; recognises that it is Parliaments responsibility to properly scrutinise the Government while respecting the decision of the British people to leave the European Union; confirms that there should be no disclosure of material that could be reasonably judged to damage the UK in any negotiations to depart from the European Union after article 50 has been triggered; and calls on the Prime Minister to commit to publishing the Governments plan for leaving the EU before article 50 is invoked, consistently with the principles agreed without division by this House on 12 October; recognises that this House should respect the wishes of the United Kingdom as expressed in the referendum on 23 June; and further calls on the Government to invoke article 50 by 31 March 2017. The Secretary of State submits that it is for Parliament, not the courts, to determine the nature and extent of its involvement. The Secretary of State also emphasises, in response to the argument of the Miller claimants, that the giving of notification under article 50(2) does not in itself alter any laws in force in the UK: it merely initiates a process of negotiation. If, at the end of those negotiations, a withdrawal agreement is reached, the procedures for Parliamentary approval laid down in the Constitutional Reform and Governance Act 2010 are likely to apply. Parliament will in any event be invited to legislate before the EU treaties cease to apply to the UK, so as to address the issues then arising in relation to rights and obligations under EU law which are currently given effect in the UK through the European Communities Act 1972 as amended (the 1972 Act). The argument of the Miller claimants The Miller claimants, on the other hand, rely on decided cases concerned with the use of prerogative powers in other situations. They argue that those cases establish the existence of legal constraints on the exercise of those powers, and that those constraints are applicable in the admittedly different situation with which we are now concerned. They argue that the effect of those constraints is that Ministers cannot lawfully give notification under article 50(2) unless an Act of Parliament authorises them to do so. The starting point of this argument is the Case of Proclamations (1611) 12 Co Rep 74, which concerned the question whether James I could, by proclamation, prohibit the construction of new buildings in and around London, and prohibit the manufacture of starch from wheat. Coke CJ stated that the King by his proclamation or other ways cannot change any part of the common law, or statute law, or the customs of the realm (p 75). Those three categories were exhaustive of English law: the law of England is divided into three parts, common law, statute law, and custom; but the Kings proclamation is none of them (ibid). It followed that the King cannot create any offence by his prohibition or proclamation, which was not an offence before, for that was to change the law (ibid). The same approach can be seen in more recent cases. For example, in The Zamora [1916] 2 AC 77 an issue arose as to whether the courts were bound, by an Order in Council made under prerogative powers, to decide that a neutral ship found during wartime to have a contraband cargo on board, while ostensibly bound for a neutral port, was lawful prize: an issue which, under established legal principles, depended on whether the ship or its cargo was in reality destined for the enemy. Lord Parker of Waddington stated: The idea that the King in Council, or indeed any branch of the Executive, has power to prescribe or alter the law to be administered by Courts of law in this country is out of harmony with the principles of our Constitution . No one would contend that the prerogative involves any power to prescribe or alter the law administered in Courts of Common Law or Equity. (p 90) These cases were not concerned with the prerogative power to conduct foreign relations. It is however consistent with those cases that, although the Crown can undoubtedly enter into treaties in the exercise of prerogative powers, it cannot, by doing so, alter domestic law. That is known as the dualist approach to international law, in distinction to the monist approach adopted by many other countries, under which treaties automatically take effect in the domestic legal system. In support of the principle that treaties cannot alter domestic law, the Miller claimants rely on the explanations of the relationship between international and domestic law given by Lord Templeman and Lord Oliver in the Tin Council case. The case concerned the question whether a Minister of the Crown was liable under English law for the debts of an international organisation which had been established by a treaty to which the UK was party. Rejecting the contention that the Minister was liable, Lord Templeman said: Lord Oliver said much the same: A treaty is a contract between the governments of two or more sovereign states. International law regulates the relations between sovereign states and determines the validity, the interpretation and the enforcement of treaties. A treaty to which Her Majestys Government is a party does not alter the laws of the United Kingdom. A treaty may be incorporated into and alter the laws of the United Kingdom by means of legislation. Except to the extent that a treaty becomes incorporated into the laws of the United Kingdom by statute, the courts of the United Kingdom have no power to enforce treaty rights and obligations at the behest of a sovereign government or at the behest of a private individual. (pp 476 477) . as a matter of the constitutional law of the United Kingdom, the Royal Prerogative, whilst it embraces the making of treaties, does not extend to altering the law or conferring rights upon individuals or depriving individuals of rights which they enjoy in domestic law without the intervention of Parliament. Treaties, as it is sometimes expressed, are not self executing. Quite simply, a treaty is not part of English law unless and until it has been incorporated into the law by legislation. So far as individuals are concerned, it is res inter alios acta from which they cannot derive rights and by which they cannot be deprived of rights or subjected to obligations; and it is outside the purview of the court not only because it is made in the conduct of foreign relations, which are a prerogative of the Crown, but also because, as a source of rights and obligations, it is irrelevant. (p 500) Similar observations were made by Lord Hoffmann in the Privy Council case of Higgs v Minister of National Security [2000] 2 AC 228, 241, concerned with the impact of the American Convention on Human Rights on the domestic law of the Bahamas, where he stated that treaties cannot alter the law of the land. The principle that the Crown cannot alter the common law or statute by an exercise of the prerogative was developed in the case of Attorney General v De Keysers Royal Hotel Ltd [1920] AC 508, which concerned the requisitioning of a hotel during the First World War for use as the headquarters of the Royal Flying Corps. After the war, a dispute arose over the basis on which the compensation to be paid to the owners should be assessed. There was a statutory scheme for requisitioning, which included a statutory right to compensation, but Ministers argued that the Crown was in any event entitled to requisition the hotel under prerogative powers, in which event compensation was payable ex gratia rather than being assessed in accordance with the statutory scheme. That argument was rejected by the House of Lords on the basis that if the whole ground of something which could be done by the prerogative is covered by the statute, it is the statute that rules (per Lord Dunedin at p 526). As Lord Dunedin reasoned: Inasmuch as the Crown is a party to every Act of Parliament it is logical enough to consider that when the Act deals with something which before the Act could be effected by the prerogative, and specially empowers the Crown to do the same thing, but subject to conditions, the Crown assents to that, and by that Act, to the prerogative being curtailed. (p 526) The case thus established that, to the extent that a matter has been regulated by Parliament, the Crown cannot regulate it differently under the prerogative. The cases of Laker Airways Ltd v Department of Trade [1977] QB 643 and R v Secretary of State for the Home Department, Ex p Fire Brigades Union [1995] 2 AC 513 are cited by the Miller claimants as more recent examples of the application of the same principle, although in the former case only Roskill LJ relied on it (contrast Lord Denning MR at pp 705G 706A and Lawton LJ at p 728A), while the decision in the latter case was based on a different principle (see per Lord Browne Wilkinson at p 553G and Lord Lloyd of Berwick at p 573 C D). In the light of these decided cases, and others to the same effect, the Miller claimants argue that giving notification under article 50(2) will alter domestic law and destroy statutory rights. That is because it will result in the EU treaties ceasing to apply to the UK, in accordance with article 50(3), from the date of the entry into force of the withdrawal agreement or, failing that, from the expiry of a period of two years after notification, or any longer period which may be agreed with the European Council. Since the EU treaties have been given effect in domestic law by the 1972 Act, so as to create rights enforceable before our national courts, it would offend against the principle established in the Case of Proclamations, and explained more recently in the Tin Council case, for that alteration in domestic law to be effected under the prerogative. This argument assumes that, once notification is given under article 50(2), the process of withdrawal from the EU cannot be stopped. It is common ground in all the cases before the court that it should proceed on that assumption. In any event, even if the process might be stopped, it is common ground that Ministers power to give notice under article 50(2) has to be tested on the basis that it may not be stopped. In those circumstances, that is the basis on which this court is proceeding. Furthermore, since the 1972 Act makes provision for the effect of the EU treaties in domestic law, and notification under article 50(2) will sooner or later result in the treaties ceasing to have effect in domestic law, it is argued that there is a conflict between the exercise of the prerogative to give notification and the statutory scheme. Following De Keyser, that conflict should be resolved in favour of the statute, by holding that the prerogative must be constrained. The referendum Both sides of the argument proceed on the basis that the referendum on membership of the EU, held under the European Union Referendum Act 2015 (the 2015 Act), which resulted in a vote to leave the EU, does not provide the answer. The Secretary of States argument proceeds on the basis that the Crown has taken the decision under article 50(1), accepting the result of the referendum. The Miller claimants argue that only Parliament can take that decision. Both the Secretary of State and the Miller claimants proceed on the basis that the referendum result was not itself a decision by the UK to withdraw from the EU, in accordance with the UKs constitutional requirements, and that the 2015 Act did not itself authorise notification under article 50(2). In these circumstances, there is no issue before the court as to the legal effect of the referendum result. Nor is this an appropriate occasion on which to consider the implications for our constitutional law of the developing practice of holding referendums before embarking on major constitutional changes: a matter on which the court has heard no argument. Other arguments In addition to the arguments advanced by the parties to the Miller appeal, the court also has before it the submissions presented on behalf of the interested parties and interveners. They largely provide further elaboration of the arguments presented on behalf of the principal parties. Without intending any discourtesy, I do not think it is necessary to set out their arguments in full, and would generally wish only to acknowledge the assistance which they have provided. It is however appropriate to note the submissions made by the Lord Advocate (which share common ground with those of the first interested party and the fourth interveners), and by the Counsel General for Wales. One argument advanced by the Lord Advocate and by Ms Mountfield QC on behalf of the first interested party is that the UKs withdrawal from the EU will alter the UKs rule of recognition: that is to say, the rule which identifies the sources of law in our legal system and imposes a duty to give effect to laws emanating from those sources. The status of the EU institutions as a recognised source of law will inevitably be revoked, sooner or later, following notification under article 50(2). Since that will be a fundamental alteration in the UKs constitution, it can only be effected by Parliamentary legislation. An Act of Parliament is therefore argued to be necessary before notification can be given. The Lord Advocate also cites material from Scottish sources which is consistent with the principle derived by the Miller claimants from English case law, such as the Case of Proclamations and the Tin Council case. This includes the provision of the Claim of Right Act 1689: That all Proclamationes asserting ane absolute power to Cass annull and Dissable lawes are Contrair to Law. This provision is analogous to the corresponding provisions in sections 1 and 2 of the Bill of Rights 1688, to which the Miller claimants refer: That the pretended power of suspending of laws or the execution of laws by regall authority without consent of Parlyament is illegall. That the pretended power of dispensing with laws or the execution of laws by regall authoritie as it hath beene assumed and exercised of late is illegall. As Lord Denning MR noted, however, in McWhirter v Attorney General [1972] CMLR 882, 886, the Bill of Rights did not restrict the Crowns prerogative powers in relation to foreign affairs: the Crown retained, as fully as ever, the prerogative of the treaty making power. The same appears to be true of the Claim of Right. The Lord Advocate also cites article 18 of the Union with England Act 1707. This provision, like the corresponding provision in the Union with Scotland Act 1706, states that laws in use in Scotland are to be alterable by the Parliament of Great Britain. The Lord Advocate and the Counsel General for Wales have also advanced submissions concerning the Sewel Convention. That convention was originally stated by Lord Sewel, when Parliamentary Under Secretary of State at the Scottish Office, in the House of Lords during the passage of the Scotland Bill. He said that we would expect a convention to be established that Westminster would not normally legislate with regard to devolved matters in Scotland without the consent of the Scottish Parliament: Hansard (HL Debates), 21 July 1998, col 791. The convention was later embodied in a Memorandum of Understanding between the UK Government and the devolved governments (Cm 5240, 2001). Para 14 of the current Memorandum of Understanding, which was published in October 2013, states: The United Kingdom Parliament retains authority to legislate on any issue, whether devolved or not. It is ultimately for Parliament to decide what use to make of that power. However, the UK Government will proceed in accordance with the convention that the UK Parliament would not normally legislate with regard to devolved matters except with the agreement of the devolved legislature. Para 2 states: This Memorandum is a statement of political intent, and should not be interpreted as a binding agreement. It does not create legal obligations between the parties. In relation to Scotland, the convention was given statutory recognition in section 28(8) of the Scotland Act 1998 (as amended by section 2 of the Scotland Act 2016), which has to be read together with section 28(7): (7) This section does not affect the power of the Parliament of the United Kingdom to make laws for Scotland. (8) But it is recognised that the Parliament of the United Kingdom will not normally legislate with regard to devolved matters without the consent of the Scottish Parliament. Summary of conclusions It may be helpful to summarise at this stage the conclusions which I have reached in relation to the Miller appeal, before explaining the reasons why I have arrived at them. I entirely accept the importance in our constitutional law of the principle of Parliamentary supremacy over our domestic law, established in the Case of Proclamations, the Tin Council case, and other similar cases such as The Zamora. That principle does not, however, require that Parliament must enact an Act of Parliament before the UK can leave the EU. That is because the effect which Parliament has given to EU law in our domestic law, under the 1972 Act, is inherently conditional on the application of the EU treaties to the UK, and therefore on the UKs membership of the EU. The Act imposes no requirement, and manifests no intention, in respect of the UKs membership of the EU. It does not, therefore, affect the Crowns exercise of prerogative powers in respect of UK membership. For essentially the same reason, the supposed analogy with De Keyser appears to me to be misplaced. Further, since the effect of EU law in the UK is entirely dependent on the 1972 Act, no alteration in the fundamental rule governing the recognition of sources of law has resulted from membership of the EU, or will result from notification under article 50. It follows that Ministers are entitled to give notification under article 50, in the exercise of prerogative powers, without requiring authorisation by a further Act of Parliament. Given that conclusion, the argument in relation to the Sewel Convention does not arise: the convention concerns Parliamentary legislation, not the exercise of prerogative powers. The European Communities Act 1972 The issue which lies at the heart of these cases is the effect of the 1972 Act, as amended. Section 2(1) provides: All such rights, powers, liabilities, obligations and restrictions from time to time created or arising by or under the Treaties, and all such remedies and procedures from time to time provided for by or under the Treaties, as in accordance with the Treaties are without further enactment to be given effect or used in the United Kingdom shall be recognised and available in law, and be enforced, allowed and followed accordingly The expression the Treaties is defined by section 1(2). Put shortly, it includes the pre accession treaties (described in Part 1 of Schedule 1), taken with other treaties listed in section 1(2), and any other treaty entered into by the EU . with or without any of the member States, or entered into, as a treaty ancillary to any of the Treaties, by the United Kingdom. In relation to the treaties in the latter categories, section 1(3) lays down a procedure to be followed: If Her Majesty by Order in Council declares that a treaty specified in the Order is to be regarded as one of the EU Treaties as herein defined, the Order shall be conclusive that it is to be so regarded; but a treaty entered into by the United Kingdom after the 22nd January 1972, other than a pre accession treaty to which the United Kingdom accedes on terms settled on or before that date, shall not be so regarded unless it is so specified, nor be so specified unless a draft of the Order in Council has been approved by resolution of each House of Parliament. The term treaty is defined by section 1(4) as including any international agreement, and any protocol or annex to a treaty or international agreement. Section 1(2) is prospective in scope: it is not confined to treaties existing when the 1972 Act was originally enacted, but envisages treaties being entered into in the future. At the time of accession, the Treaties were relatively few in number, and included the Treaty of Rome. Since then, many other treaties, including the Maastricht Treaty and the Treaty of Lisbon, have been added, either by the amendment of section 1(2) so as to add to the list of specified treaties, or by the making of Orders of Council approved by resolutions of both Houses, under section 1(3). Returning to section 2(1), it is important to understand why it was necessary. It follows from the UKs dualist approach to international law that the Treaties could only be given effect in our domestic law by means of an Act of Parliament. This was so notwithstanding the doctrine of EU law, established by the European Court of Justice in Van Gend en Loos (Case C 26/62) [1963] ECR 1, 12, that the Treaty of Rome was more than an agreement which merely creates mutual obligations between the contracting states, and that independently of the legislation of member states, Community law therefore not only imposes obligations on individuals but is also intended to confer upon them rights which become part of their legal heritage. This doctrine was reiterated in Costa v ENEL (Case C 6/64) [1964] ECR 585, 593: By contrast with ordinary international treaties, the EEC Treaty has created its own legal system which, on the entry into force of the Treaty, became an integral part of the legal systems of the member states and which their courts are bound to apply. This doctrine is incompatible with the dualist approach of the UK constitution, and ultimately with the fundamental principle of Parliamentary sovereignty. This was explained by Lord Denning MR in two cases decided around the time when the UK joined the European Communities. The first, Blackburn v Attorney General [1971] 1 WLR 1037, was as explained earlier an attempt to prevent the Crown from acceding to the Treaty of Rome by signing the Treaty of Accession. Having been referred to Costa v ENEL, the Master of the Rolls observed: Even if a treaty is signed, it is elementary that these courts take no notice of treaties as such. We take no notice of treaties until they are embodied in laws enacted by Parliament. and then only to the extent that Parliament tells us. (p 1039) The second case, McWhirter v Attorney General, was decided after the UK had signed the Treaty of Accession but before the 1972 Act had been enacted. The Master of the Rolls stated: Even though the Treaty of Rome has been signed, it has no effect, so far as these courts are concerned, until it is made an Act of Parliament. Once it is implemented by an Act of Parliament, these courts must go by the Act of Parliament. Until that day comes, we take no notice of it. (p 886) As will appear, section 2(1) enables EU law to be given direct effect in our domestic law, but within a framework established by Parliament, in which Parliamentary sovereignty remains the fundamental principle. Considering section 2(1) in greater detail, it is a long and densely packed provision, whose syntax is complex, and whose meaning is not immediately clear. It requires to be read with care. Its essential structure can be expressed in this way: All such [members of a specified category] as [satisfy a specified condition] shall be [dealt with in accordance with a specified requirement]. Rules in that form can be used in many contexts: for example, all such prisoners as are charged with conduct contrary to good order and discipline shall be brought before the Governor; all such incoming passengers as are displaying symptoms of ebola shall be placed in quarantine. Two features of such rules should be noted. First, the rule is conditional in nature: the application of the requirement which it imposes depends on there being members of the specified category that satisfy the relevant condition. In the examples just given, for example, the relevant conditions are being charged with conduct contrary to good order and discipline; and displaying symptoms of ebola. Secondly, although a rule in that form contemplates the possibility that the condition may be satisfied, the form of the rule does not convey any intention that the condition will be satisfied. In the examples just given, for example, the rule does not convey an intention that there will be prisoners who are charged, or passengers who display symptoms of ebola. The intention of the rule maker, so far as it can be derived from the rule, would not therefore be thwarted or frustrated if, either immediately, or at some point in the future, there were no members of the relevant category which satisfied the relevant condition. In section 2(1), the relevant category is: rights, powers, liabilities, obligations and restrictions from time to time created or arising by or under the Treaties, and . remedies and procedures from time to time provided for by or under the Treaties. The words from time to time, which appear twice, mean that section 2(1) is concerned not only with the Treaties, and the regulations and other legal instruments made under them, as they stood at the time of accession, but also with the Treaties and instruments made under them as they may change over time in the future. This recognises the fact that the rights, powers, liabilities, obligations and restrictions created or arising by or under the Treaties, and the remedies and procedures provided for by or under the Treaties, alter from time to time, as a result of changes to the Treaties or to the laws made under the procedures laid down in the Treaties. This is relevant in the present context, since it demonstrates that Parliament has recognised that rights given effect under the 1972 Act may be added to, altered or revoked without the necessity of a further Act of Parliament (something which is also apparent from section 1(3)). In response to this point, the majority of the court draw a distinction, described as a vital difference, between changes in domestic law resulting from variations in the content of EU law arising from new EU legislation, and changes resulting from withdrawal by the UK from the European Union. There is no basis in the language of the 1972 Act for drawing any such distinction. Under the arrangements established by the Act, alterations in the UKs obligations under the Treaties are automatically reflected in alterations in domestic law. That is equally the position whether the alterations in the UKs obligations under the Treaties result from the Treaties ceasing to apply to the UK, in accordance with article 50, or from changes to the Treaties or to legislation made under the Treaties. The Act simply creates a scheme under which the effect given to EU law in domestic law reflects the UKs international obligations under the Treaties, whatever they may be. There is nothing in the Act to suggest that Parliaments intention to ensure an exact match depends on the reason why they might not match. The requirement imposed by section 2(1) is: shall be recognised and available in law, and be enforced, allowed and followed accordingly. This phrase gives effect in domestic law to all such rights, powers and so forth as satisfy the relevant condition. The condition which must be satisfied, in order for that requirement to apply, is set out in the following phrase: All such . as in accordance with the Treaties are without further legal enactment to be given legal effect or used in the United Kingdom. This phrase is of particular importance to the resolution of the Miller appeal. It follows from this phrase that rights, powers and so forth created or arising by or under the Treaties are not automatically given effect in domestic law. Legal effect is given only to such rights, powers and so forth arising by or under the Treaties as in accordance with the Treaties are without further enactment to be given legal effect in the United Kingdom. In this respect, once more, the 1972 Act creates a scheme under which the effect given to EU law in domestic law exactly matches the UKs international obligations, whatever they may be. The words without further enactment reflect the EU law concept of direct effect, established by Van Gend en Loos and Costa v ENEL as explained above (and, in so far as it may be regarded as distinct, the concept of direct applicability, established by article 189 of the Treaty of Rome and now stated in article 288 of the Treaty on the Functioning of the European Union (TFEU): see section 18 of the European Union Act 2011). Accordingly, where in accordance with the Treaties, rights, powers and so forth are to be directly applicable or directly effective in the law of the UK, section 2(1) achieves that effect. But there is no obligation in accordance with the Treaties to give effect in the UK to EU rights, powers and so forth merely because they are directly effective under EU law: such an obligation arises only if and for so long as the Treaties apply to the UK. The extent to which the effect given by section 2(1) to rights, powers and so forth arising under EU law is dependent on the Treaties cannot therefore be confined to the question whether the rights, powers and so forth are, under the Treaties, directly effective: it also depends, more fundamentally, on whether the Treaties impose any obligations on the UK to give effect to EU law. Whether rights, powers and so forth are to be given legal effect in the UK, in accordance with the Treaties, therefore depends on whether the Treaties apply to the UK. As the majority of the court state at para 77, Parliament cannot have intended that section 2 should continue to import the variable content of EU law into domestic law, or that the other consequences of the 1972 Act described in paras 62 to 64 above should continue to apply, after the United Kingdom had ceased to be bound by the EU Treaties. If the Treaties do not apply to the UK, then there are no rights, powers and so forth which, in accordance with the Treaties, are to be given legal effect in the UK. This point is illustrated by the fact that, when the 1972 Act came into force on 17 October 1972, the Treaty of Accession had not yet been ratified or entered into force, with the consequence that the Treaties did not apply to the UK. In consequence, section 2(1) initially had no practical application, there being at that time no rights, powers and so forth which, in accordance with the Treaties, were to be given legal effect in the UK. It was not until 1 January 1973, when the Treaty of Accession came into force, following its ratification by the Crown in the exercise of its prerogative powers, that the condition to which section 2(1) subjected the domestic effect of EU law was satisfied. The Miller claimants respond to this point by arguing that the effect of the 1972 Act was to require the Crown to ratify the Treaty of Accession. This is not, in the first place, an answer to the point that the effect of section 2(1) was contingent on the Treatys entering into force. Furthermore, although it is fair to say that the 1972 Act was enacted in anticipation that ratification was likely to occur that is far from saying that ratification was required by statute. In the first place, as explained in para 159 above, it is a basic principle of our constitution that the conduct of foreign relations, including the ratification of treaties, falls within the prerogative powers of the Crown. That principle is so fundamental that it can only be overridden by express provision or necessary implication, as is accepted in the majority judgment at para 48. No such express provision exists in the 1972 Act. Nor do its provisions override that principle as a matter of necessary implication. As Lord Hobhouse of Woodborough explained in R (Morgan Grenfell & Co Ltd) v Special Commissioner of Income Tax [2002] UKHL 21; [2003]1 AC 563, para 45: A necessary implication is not the same as a reasonable implication A necessary implication is one which necessarily follows from the express provisions of the statute construed in their context. It distinguishes between what it would have been sensible or reasonable for Parliament to have included or what Parliament would, if it had thought about it, probably have included and what it is clear that the express language of the statute shows that the statute must have included. A necessary implication is a matter of express language and logic not interpretation. Secondly, it is not difficult to contemplate circumstances in which ratification might not have occurred. The passage of the 1972 Act was hard fought (as the former minister Ken Clarkes memoir, Kind of Blue (2016), pp 66ff, makes clear), and the possibility of a future Labour Government taking the UK out of the European Communities was apparent. When the Labour Government subsequently came to power, in 1974, it proceeded to hold a referendum in accordance with its manifesto commitment. If the Conservative Government had fallen and the Opposition had come to power while the Treaty of Accession remained unratified, the incoming Labour Government would have been unlikely to ratify it without holding a referendum. Indeed, the Opposition continued to oppose ratification following the Parliamentary passage of the 1972 Act, using an adjournment debate on the date of Royal Assent to criticise ratification as being against the wish of the British people (Hansard (HC Debates), 17 October 1972, cols 58 59). The Government won the division by 31 votes; but if it had lost it, would it have been acting unlawfully if it had decided to respect the will of the House of Commons by not ratifying the treaty? Would it have been legally bound by the 1972 Act to ratify the treaty regardless? These questions can only be answered in the negative. The point can also be illustrated by considering what would have happened if some crisis had occurred in the UKs diplomatic relations with one of its intended partners in the European Communities. If, for example, some dispute comparable in gravity to the then current dispute with Iceland, or the subsequent dispute with Argentina, had occurred with one of the other parties to the Treaty of Rome or the Treaty of Accession, is it likely that the UK would then have ratified the Treaty of Accession? The seemingly less ambitious suggestion in the majority judgment at para 78, that it was not contemplated, when the 1972 Act was being passed, that Ministers would not ratify the Treaties or that, having ratified them, would at some point repudiate them, meets the same objection. That ratification was contemplated is clear, but that tells you nothing about whether the operation of the 1972 Act is conditional on continued membership. What individual members of Parliament contemplated, or expected to happen, is on ordinary principles not relevant to the construction of the Act. In any event it is likely to have varied a good deal. The possibility of the UK being taken out of the European Communities if there were a change of government was apparent. Referring to the structure of section 2(1) of the 1972 Act as set out at para 184 above, it is said at para 82 of the majority judgment that the membership of the specified category [viz, the rights, powers and so forth arising under EU law to which domestic effect must be given] has a variable content which is contingent on the decisions of non UK entities. Section 2(1) says nothing, however, which either expressly or impliedly limits the contingency, to which the duty to give domestic effect to EU law is subject, to decisions by non UK entities. The contingency is that the rights, powers and so forth are such . as in accordance with the Treaties are without further legal enactment to be given legal effect or used in the United Kingdom. It follows from that contingency that the effect given to EU law in our domestic law is conditional on the Treaties application to the UK. That condition was not satisfied when the Act came into force, because the Treaties did not then apply to the UK. The content of the specified category was therefore zero. The satisfaction of the condition, some months later, depended on the decision of a UK entity: it depended on the Crowns exercise of prerogative powers. The content would return to zero if the condition ceased to be satisfied as the result of the UKs invoking article 50. That would be so whether the decision to invoke article 50 had, or had not, been authorised by an Act of Parliament. It is, indeed, accepted by the majority that the condition would cease to be satisfied if the Crown invoked article 50 after being authorised to do so by statute. So the contingency cannot be limited to decisions by non UK entities. The only issue in dispute is whether the action by the Crown, as a result of which the contingency will cease to be satisfied, must be authorised by an Act of Parliament. On that issue, section 2(1) is silent. Neither expressly nor by implication does it require such action to be authorised by Parliament. The fact that section 2(1) is itself a fixed rule of domestic law enacted by Parliament does not affect that conclusion, since a fixed rule which is conditional will necessarily operate only for as long as the condition is satisfied. Nor does it support a conclusion that Parliament has, by necessary implication, deprived the Crown of its prerogative powers: from what words, one might ask, is that implication derived? The amendment of the 1972 Act by section 2 of the European Union (Amendment) Act 2008 I have discussed the position as it stood in 1972. But the real question in the Miller appeal concerns the position following the signing of the Treaty of Lisbon in 2007, and its entry into force in 2009. That is because it was the Treaty of Lisbon which inserted article 50 into the TEU. Parliament addressed the Treaty of Lisbon in the European Union Amendment Act 2008 (the 2008 Act). Section 2 of that Act provides: At the end of the list of treaties in section 1(2) of the European Communities Act 1972 (c 68) add; and (s) the Treaty of Lisbon Amending the Treaty on European Union and the Treaty Establishing the European Community signed at Lisbon on 13 December 2007 (together with its Annex and protocols), excluding any provision that relates to, or in so far as it relates to or could be applied in relation to, the Common Foreign and Security Policy; Section 2 of the 2008 Act thus added the Lisbon Treaty (other than the parts dealing with the Common Foreign and Security Policy) to the Treaties listed in section 1 of the 1972 Act, to which section 2(1) of that Act refers. It follows that the words such . as in accordance with the Treaties are without further legal enactment to be given legal effect or used in the United Kingdom, in section 2(1) of the 1972 Act, must be read as meaning such . as in accordance with the Treaties, including article 50 TEU, are without further legal enactment to be given legal effect or used in the United Kingdom. The contingency to which the effect of EU law in our domestic law has been subject since the amendment of the 1972 Act by the 2008 Act therefore includes the potential operation of article 50. It is entirely in accordance with the Treaties for article 50 to operate, with the result that, when a withdrawal agreement comes into force, or the time allowed under article 50(3) expires, there may be no rights which, in accordance with the Treaties, are to be given legal effect in the UK. This conclusion is not inconsistent with the statement by the majority of the court, at para 104, that article 50 is not given effect in domestic law by section 2 of the 1972 Act. The majority may be right about that, although the point has not been argued, and the opposite view may be arguable (see, for example, Robert Craig, Casting Aside Clanking Medieval Chains: Prerogative, Statute and Article 50 after the EU Referendum, (2016) MLR 1041, where it is argued that section 2(1) of the 1972 Act has given article 50 domestic effect as a power exercisable by Ministers, superseding the prerogative but also supplying the Parliamentary authorisation desiderated by the Miller claimants). Whether article 50 has direct effect in domestic law does not however affect the question whether its operation forms part of the contingency on which the direct effect given to EU law by the 1972 Act is dependent. The result of section 2 of the 2008 Act is thus that the effect given by section 2(1) of the 1972 Act to EU law, which was always conditional on the Treaties applying to the UK, is now subject to the exercise of the power conferred by article 50 to initiate a particular procedure under which the Treaties will cease to apply to the UK. The Miller claimants respond to these points by arguing that section 2(1) of the 1972 Act impliedly requires the power of withdrawal under article 50 to be exercised by Parliament. In so far as that argument is based on the common law principles established by such authorities as the Case of Proclamations, The Zamora, the Tin Council case and the De Keyser case, I shall discuss those principles later. One can however note at present that, as previously mentioned, there is nothing in section 2(1) which demonstrates that Parliament intended to depart from the fundamental principle that powers relating to the UKs participation in treaty arrangements are exercisable by the Crown. As the majority of the court rightly state at para 108, the fact that a statute says nothing about a particular topic can rarely, if ever, justify inferring a fundamental change in the law. Nor would withdrawal under article 50 be inconsistent with the 1972 Act, any more than a failure to ratify the Treaty of Accession. The result would simply be that there were no rights answering to the description in section 2(1): there would be no rights such . as in accordance with the Treaties are without further legal enactment to be given legal effect or used in the United Kingdom. This is a point of general importance. If Parliament chooses to give domestic effect to a treaty containing a power of termination, it does not follow that Parliament must have stripped the Crown of its authority to exercise that power. In the present context, the impact of the exercise of the power on EU rights given effect in domestic law is accommodated by the 1972 Act: the rights simply cease to be rights to which section 2(1) applies. Withdrawal under article 50 alters the application of the 1972 Act, but is not inconsistent with it. The application of the 1972 Act after a withdrawal agreement has entered into force (or the applicable time limit has expired) is the same as it was before the Treaty of Accession entered into force. As in the 1972 Act as originally enacted, Parliament has created a scheme under which domestic law tracks the obligations of the UK at the international level, whatever they may be. Other post 1972 legislation Other post 1972 legislation is of only secondary importance. It is however relevant in so far as it demonstrates, first, that Parliament has legislated on the basis that the 1972 Act did not restrict the exercise of the foreign affairs prerogative in relation to other aspects of the EU treaties, and secondly, that Parliament is perfectly capable of making clear its intention to restrict the exercise of the prerogative when it wishes to do so. Several examples can be given. The earliest is section 6(1) of the European Parliamentary Elections Act 1978 (as amended by section 3 of the European Communities (Amendment) Act 1986), which provided: No treaty which provides for any increase in the powers of the European Parliament shall be ratified by the United Kingdom unless it has been approved by an Act of Parliament. That provision was later re enacted in section 12 of the European Parliamentary Elections Act 2002 (the 2002 Act). A further example is the 2008 Act, which imposed numerous restrictions on the exercise of prerogative powers in relation to provisions of the Lisbon Treaty. Section 5 is particularly significant. It provided: (1) A treaty which satisfies the following conditions may not be ratified unless approved by Act of Parliament. (2) Condition 1 is that the treaty amends the Treaty on European Union (signed at (a) Maastricht on 7 February 1992), (b) the Treaty on the Functioning of the European Union (the Treaty establishing (what was then called) the European Economic Community, signed at Rome on 25 March 1957 (renamed by the Treaty of Lisbon)), or the Treaty establishing the European Atomic (c) Energy Community (signed at Rome on 25 March 1957). (3) Condition 2 is that the treaty results from the application of article 48(2) to (5) of the Treaty on European Union (as amended by the Treaty of Lisbon) (Ordinary Revision Procedure for amendment of founding Treaties, including amendments affecting EU competence). Section 5 therefore prohibited the ratification of treaties unless approved by an Act of Parliament, where the treaties amended the TEU or the TFEU, and resulted from the application of article 48(2) to (5) TEU. Article 48 TEU was a provision introduced by the Lisbon Treaty to provide a simplified procedure for the conclusion of treaties amending the TEU or the TFEU. Paragraphs (2) to (5) provided, so far as material: 2. The Government of any member state, the European Parliament or the Commission may submit to the Council proposals for the amendment of the Treaties. These proposals may, inter alia, serve either to increase or to reduce the competences conferred on the Union in the Treaties . If the European Council, after consulting the European 3. Parliament and the Commission, adopts by a simple majority a decision in favour of examining the proposed amendments, the President of the European Council shall convene a Convention composed of representatives of the national Parliaments, of the Heads of State or Government of the member states, of the European Parliament and of the Commission . The Convention shall examine the proposals for amendments and shall adopt by consensus a recommendation to a conference of representatives of the governments of the member states as provided for in paragraph 4. The European Council may decide by a simple majority, after obtaining the consent of the European Parliament, not to convene a Convention should this not be justified by the extent of the proposed amendments . 4. A conference of representatives of the governments of the member states shall be convened by the President of the Council for the purpose of determining by common accord the amendments to be made to the Treaties. The amendments shall enter into force after being ratified by all the member states in accordance with their respective constitutional requirements. 5. If, two years after the signature of a treaty amending the Treaties, four fifths of the member states have ratified it and one or more member states have encountered difficulties in proceeding with ratification, the matter shall be referred to the European Council. The TFEU establishes numerous rights which are given effect in the UK by section 2(1) of the 1972 Act. Those rights could be altered by a treaty concluded by the UK Government and the governments of the other member states, under article 48(2) TFEU. Section 5 of the 2008 Act required an Act of Parliament before such a treaty could be ratified. If the Miller claimants arguments are correct, an Act of Parliament was already necessary before the UK Government could exercise the treaty making prerogative so as to alter those rights. Section 5 of the 2008 Act was, however, understood as introducing a requirement for legislation where none previously existed: that was the mischief intended to be addressed. For example, the House of Lords Select Committee on the Constitution stated: Clause 5 of the Bill seeks to create a new requirement for prior parliamentary authorisation of ratification. It would apply to amendments of the founding treaties the Treaty on European Union, the Treaty on the Functioning of the European Union and the Treaty Establishing the European Atomic Energy Community when those amendments are made by the ordinary revision procedure. Before examining clause 5 in more detail, it must be noted that the need for express parliamentary approval before the Government ratifies a treaty amending the founding Treaties of the EU has been recognised in one important respect for some time. (6th Report of Session 2007 08, European Union Amendment Bill and the Lisbon Treaty: Implications for the UK Constitution, HL 84, 2008, paras 23 24). The latter sentence referred not to the 1972 Act, but to section 12 of the 2002 Act, discussed at para 206 above. It is also relevant to note section 6(1) of the 2008 Act, which imposed restrictions on the UKs participation in several procedures laid down in the Lisbon Treaty: A Minister of the Crown may not vote in favour of or otherwise support a decision under any of the following unless Parliamentary approval has been given in accordance with this section . The section went on to require Parliamentary approval in the form of a resolution of both Houses. The provisions of the Lisbon Treaty to which section 6 applied did not include article 50 TEU. The Constitutional Reform and Governance Act 2010 (the 2010 Act) is also relevant. It codifies the previous Ponsonby Rule (a convention that treaties, with limited exceptions, would be laid before Parliament before they were ratified), and sets out detailed procedures for Parliamentary scrutiny of new treaties. It does not apply to treaties which are covered by section 5 of the 2008 Act or by the European Union Act 2011 (the 2011 Act), to which I turn next. A withdrawal agreement under article 50(3) would be likely to fall within its scope, but it would have no application to a decision to withdraw from a treaty or to commence the process of withdrawal. The 2011 Act repealed section 12 of the 2002 Act and sections 5 and 6 of the 2008 Act (subject to an immaterial exception), replacing them with a more elaborate system of Parliamentary control. The evident aim was to introduce stronger Parliamentary controls, in relation to matters falling within the scope of the legislation, than were present under the existing law. The power to amend article 50(3), concerning the extension of the two year period for negotiation, or to adopt the ordinary legislative procedure in relation to that provision, was brought within the scope of these controls by sections 4 and 6, read with Schedule 1. Article 50(1) and (2), concerning the decision to withdraw and its notification, were not. As explained earlier, section 5 of the 2008 Act was enacted on the basis that the Crown could exercise its treaty making power so as to alter EU rights given effect in domestic law by the 1972 Act, without necessarily requiring further authorisation by an Act of Parliament. One can also infer from this body of legislation, as the Divisional Court did in the case of R v Secretary of State for Foreign Affairs, Ex p Rees Mogg [1994] QB 552, discussed in paras 235 237 below, that since Parliament has repeatedly placed express restrictions on the exercise of the prerogative in relation to the EU treaties, the absence of a particular restriction in the 1972 Act tends to support the conclusion that no such restriction was intended to arise by implication. It is also necessary to consider the 2015 Act. For the reasons explained in para 171 above, I do not propose to consider the legal implications of the referendum result. It is, however, proper to take note of the judgment of Lord Dyson MR, with whom the other members of the court agreed, in R (Shindler) v Chancellor of the Duchy of Lancaster [2016] EWCA Civ 419; [2016] 3 WLR 1196. That was a case in which a challenge was brought to the franchise rules applicable to the referendum. Having referred to the provision in article 50(1) that any member state may decide to withdraw from the EU in accordance with its own constitutional requirements, the Master of the Rolls stated: The 2015 Act contains part of the constitutional requirements of the UK as to how it may decide to withdraw from the EU . In short, by passing the 2015 Act, Parliament decided that one of the constitutional requirements that had to be satisfied as a condition of a withdrawal from the EU was a referendum. (paras 13 and 19) It follows that, in enacting the 2015 Act, Parliament considered withdrawal from the EU, and made the holding of a referendum part of the process of taking the decision under article 50(1). It laid down no further role for itself in that process. In the absence of any provision requiring Parliamentary authorisation of the decision, it is difficult, against the background of such provisions being laid down in the Acts of 1978, 2002, 2008, 2010 and 2011, to regard such a requirement as being implicit. Using the prerogative to alter the law, or take away statutory rights? In the light of the foregoing discussion, one can return to the arguments advanced by the Miller claimants on the basis of authorities concerned with the common law limits of prerogative powers. The first argument, summarised at paras 165 167 and 169 above, is that the giving of notification under article 50(2) will result in the alteration of the law and the destruction of statutory rights, and therefore cannot be effected in the exercise of prerogative powers, applying the principles established in such cases as the Case of Proclamations, The Zamora, the Tin Council case, and Higgs v Minister of National Security, and reflected also in the Bill of Rights and the Claim of Right. The argument that the 1972 Act created statutory rights which cannot be taken away without a further Act of Parliament starts from a premise which requires examination. The 1972 Act did not create statutory rights in the same sense as other statutes, but gave legal effect in the UK to a body of law now known as EU law. As explained at paras 186 187 above, section 2(1) recognises that the rights arising under that body of law can be altered from time to time, as a result of changes to the Treaties or to the laws made under the procedures laid down in the Treaties, without the necessity of a further Act of Parliament. Such alterations result not only in the creation of EU rights which are consequently given effect in domestic law by the 1972 Act, but also in the repeal and restriction of EU rights previously created, and given effect under domestic law. The successive regulations imposing fishing quotas are an example. To give another example, if Greece were to decide to leave the EU while the UK remained a member, the Treaties would cease to apply to Greece either when a withdrawal agreement entered into force, or in any event after two years had expired. Greek citizens living in the UK would then cease to enjoy the EU rights which continued to be enjoyed here, for example, by French citizens. As these examples illustrate, rights given direct effect by section 2(1) of the 1972 Act are inherently contingent, and can be altered without any further Act of Parliament. This is a very different situation from any contemplated by the judges in the cases relied on, or by the Scottish and English Parliaments at the time of the Glorious Revolution or the Acts of Union. As noted earlier, the majority of the court respond to this point by drawing a distinction between changes which result from the UKs giving notice under article 50, for which a further Act of Parliament is argued to be necessary, and changes which result from any other alteration in the Treaties or in the instruments made under the Treaties, for which no further Act of Parliament is necessarily required. That distinction cannot be derived from the principle established by the Case of Proclamations. It has to be based on an interpretation of the 1972 Act: the matter which was discussed at paras 179 214 above. For the reasons there explained, I see no basis in the 1972 Act for drawing any such distinction. The Act simply creates a scheme under which domestic law reflects the UKs international obligations, whatever they may be. It is equally questionable whether notification under article 50 will alter the law of the land, in the sense in which judges have used that expression. That can be illustrated by reflecting on the effect of notification, and on the ability of Parliament to maintain in force the EU rights currently given effect under section 2(1) of the 1972 Act. The giving of notification does not in itself alter EU rights or the effect given to them in domestic law. Nor does it impinge on Parliaments competence to enact legislation during the intervening period before the treaties cease to have effect. Parliament can enact whatever provisions it sees fit in order to address the consequences of withdrawal from the EU, including provisions designed to protect rights which are currently derived from EU law. Parliament cannot, however, replicate EU law. It cannot establish those elements of it which involve reciprocal arrangements with the other member states, or which involve the participation of EU institutions. Nor can it create rights which have the distinguishing characteristics of EU rights, such as priority over subsequent legislation, and authoritative interpretation by the Court of Justice. The fact that notification alters no law, and that Parliament retains full competence to legislate so as to protect rights before withdrawal occurs, illustrates how different this situation is from those addressed in the cases relied upon. Equally, the fact that the enactment of EU law lies beyond the ability of Parliament illustrates how different it is from the law of the land as usually understood. More fundamentally, however, the argument that withdrawal from the EU would alter domestic law and destroy statutory rights, and therefore cannot be undertaken without a further Act of Parliament, has to be rejected even if one accepts that the 1972 Act creates statutory rights and that withdrawal will alter the law of the land. It has to be rejected because it ignores the conditional basis on which the 1972 Act gives effect to EU law. If Parliament grants rights on the basis, express or implied, that they will expire in certain circumstances, then no further legislation is needed if those circumstances occur. If those circumstances comprise the UKs withdrawal from a treaty, the rights are not revoked by the Crowns exercise of prerogative powers: they are revoked by the operation of the Act of Parliament itself. In so far as the Miller claimants place reliance on rights under EU law as given effect in the legal systems of other member states, such as the right of UK citizens to live and work in Greece, there is no rule which prevents prerogative powers being exercised in a way which alters rights arising under foreign law. In so far as the Miller claimants place reliance on statutes creating rights in respect of EU institutions, such as the right to vote in elections to the European Parliament under the European Parliamentary Elections Act 2002, such statutory rights are obviously conditional on the UKs continued membership of the EU. Parliament cannot have intended them to operate on any other basis. If they cease to be effective following the UKs withdrawal from the EU, that is inherent in the nature of the right which Parliament conferred. The only logical alternative is to hold that Parliament has created a right to remain in the EU, and none of the arguments goes that far. Using the prerogative to revoke a source of law? As explained at para 173 above, it is argued that the 1972 Act created an entirely new, independent and overriding source of domestic law (as it is put in the majority judgment at para 80). Since the identification of a countrys sources of law is one of the most fundamental functions of its constitution, it follows that the Crown cannot lawfully revoke a source of law in the exercise of prerogative powers. So runs the argument. As put by counsel, this argument is based on the concept of the rule of recognition: that is to say, the foundational rule in a legal system which identifies the sources of law in that system and imposes a duty to give effect to laws emanating from those sources. The Lord Advocate and Ms Mountfield QC argue that the rule would be altered by withdrawal from the EU, and therefore, sooner or later, by the giving of notification under article 50. The UKs entry into the EU did not, however, alter its rule of recognition, and neither would its withdrawal. That is because EU law is not a source of law of the relevant kind: that is to say, a source of law whose validity is not dependent on some other, more fundamental, source of law, but depends on the ultimate rule of recognition. The true position was explained by Lord Mance in Pham v Secretary of State for the Home Department [2015] UKSC 19; [2015] 1 WLR 1591, para 80: For a domestic court, the starting point is, in any event, to identify the ultimate legislative authority in its jurisdiction according to the relevant rule of recognition. The search is simple in a country like the United Kingdom with an explicitly dualist approach to obligations undertaken at a supranational level. European law is certainly special and represents a remarkable development in the world's legal history. But, unless and until the rule of recognition by which we shape our decisions is altered, we must view the United Kingdom as independent, Parliament as sovereign and European law as part of domestic law because Parliament has so willed. The question how far Parliament has so willed is thus determined by construing the 1972 Act. As Lord Mance rightly explained, it follows from the UKs dualist approach to international law that EU law is not one of the sources of law identified by the UKs rule of recognition. That was recognised in the cases of Blackburn v Attorney General and McWhirter v Attorney General, as explained in para 183 above. As a source of law, EU law, like legislation enacted by the devolved legislatures, or delegated legislation made by Ministers, is entirely dependent on statute (which is not, of course, to say that EU law has the same effects, as devolved or delegated legislation). It derives its legal authority from a statute, which itself derives its authority from the rule of recognition identifying Parliamentary legislation as a source of law. The recognition of its validity does not alter any fundamental principle of our constitution. The fact that the 1972 Act has a prospective effect, in giving effect to laws made from time to time by the EU institutions, does not affect this analysis. Nor does the limited primacy given to EU law by the 1972 Act alter the position, since that primacy itself derives from the 1972 Act. That was recognised by Lord Bridge of Harwich in R v Secretary of State for Transport, Ex p Factortame Ltd (No 2) [1991] 1 AC 603: Under the terms of the Act of 1972 it has always been clear that it was the duty of a United Kingdom court, when delivering final judgment, to override any rule of national law found to be in conflict with any directly enforceable rule of Community law. (p 659: emphasis supplied) The source of law which is validated by the rule of recognition therefore remains Parliament, not the EU. Since the effect of EU law is dependent on an Act of Parliament, the rule of recognition is unchanged. Parliament has itself made it clear that EU law has not altered the UKs rule of recognition. Section 18 of the 2011 Act provides: Directly applicable or directly effective EU law (that is, the rights, powers, liabilities, obligations, restrictions, remedies and procedures referred to in section 2(1) of the European Communities Act 1972) falls to be recognised and available in law in the United Kingdom only by virtue of that Act or where it is required to be recognised and available in law by virtue of any other Act. Since EU law has no status in UK law independent of statute, it follows that the only relevant source of law has at all times been statute. This understanding underpins the discussion of the constitutional status of EU law in R (Buckinghamshire County Council) v Secretary of State for Transport [2014] UKSC 3; [2014] 1 WLR 324. The issue raised by a conflict between an EU directive and long established constitutional principles of domestic law was identified as the extent, if any, to which these principles may have been implicitly qualified or abrogated by the European Communities Act 1972 (para 78). The issue, in other words, was one of domestic law, turning on the interpretation of the 1972 Act. It was said: Contrary to the submission made on behalf of the claimants, that question cannot be resolved simply by applying the doctrine developed by the Court of Justice of the supremacy of EU law, since the application of that doctrine in our law itself depends upon the 1972 Act. If there is a conflict between a constitutional principle, such as that embodied in article 9 of the Bill of Rights, and EU law, that conflict has to be resolved by our courts as an issue arising under the constitutional law of the United Kingdom. (para 79) The implication is that EU law is not itself an independent source of domestic law, but depends for its effect in domestic law on the 1972 Act: an Act which does not confer effect upon it automatically and without qualification, but has to be interpreted and applied in the wider context of the constitutional law of the UK. Accordingly, although no one can doubt the importance of EU law, the effect given to it by the 1972 Act has not altered any fundamental constitutional principle in respect of the identification of sources of law. The majority of the court respond that this analysis is unrealistic. Although it is accepted that the effect of EU law in domestic law is dependent on the 1972 Act, they argue that for EU law to cease to have effect in our domestic law would be a major change in the UKs constitution. As I understand it, the argument is concerned with the effect of the 1972 Act. Whether the 1972 Act has that effect depends on its interpretation, which simply takes one back to the issues discussed at paras 179 214 above. A further reason for rejecting the argument that the 1972 Act created a new source of law, which cannot be revoked without further legislation, is one that applies even if it is accepted that the 1972 Act created a new source of law (in some sense or other). Since the 1972 Act gives effect to EU law only as long as the Treaties apply to the UK, as explained at paras 189 204 above, that source of law is inherently contingent on the UKs continued membership of the EU. EU laws ceasing to have effect as a result of the UKs withdrawal from the Treaties is something which follows from the 1972 Act itself, and does not require further legislation. The analogy with the De Keyser case Although the majority judgment does not adopt the Miller claimants argument based on a supposed analogy with the De Keyser case, it is nevertheless necessary to address it. As explained earlier, that case established that where Parliament has regulated a matter by statute, the Crown cannot have recourse to a prerogative power in respect of the same matter. The argument by analogy asserts that, since notification under article 50 will eventually render the 1972 Act redundant, it follows that notification cannot be given in the exercise of prerogative powers. I am unable to accept that argument, for a number of reasons. First, the De Keyser principle denies that prerogative power can be exercised where a parallel statutory scheme exists. It does not follow from that principle that a prerogative power cannot be exercised where the eventual consequence will be that a statutory provision will cease to have a practical application. The latter proposition cannot be derived from De Keyser, but must be derived from some other source. The only obvious candidate is Parliaments intention in enacting the statutory provisions in question: an intention, it has to be argued, to impose a limitation on the exercise of the prerogative power. That simply takes one back to the argument as to whether an intention to strip the Crown of its prerogative powers in respect of adherence to the EU treaties can be derived from the 1972 Act: an argument which was addressed at paras 201 204 above. Secondly, the 1972 Act does not, in any event, regulate withdrawal from the EU: it recognises the existence of article 50, as explained in paras 198 202 above, but it says nothing about how or by whom a decision to invoke article 50 should be taken. Thirdly, the difference between the present situation and that with which the De Keyser principle is concerned is also evident at the level of remedies. In De Keyser itself, the remedy was a declaration that the owners were entitled to compensation under the statutory scheme. The remedy flowed from the logic of the principle: Ministers were obliged to comply with the statutory scheme. No comparable remedy can be granted in the present case, since there is no statutory scheme governing the operation of article 50. The Rees Mogg case Finally, in relation to the Miller claimants arguments, it should be noted that this is not the first time that the courts have had to address these arguments. In R v Secretary of State for Foreign Affairs, Ex p Rees Mogg, one of counsels arguments in support of a challenge to the ratification of the Maastricht Treaty was recorded by Lloyd LJ as follows: He submits that by ratifying the Protocol on Social Policy, the Government would be altering Community law under the EEC Treaty . It is axiomatic that Parliament alone can change the law. Mr Pannick accepts, of course, that treaties are not self executing. They create rights and obligations on the international plane, not on the domestic plane. He accepts also that the treaty making power is part of the Royal Prerogative . But the EEC Treaty is, he says, different. For section 2(1) of the European Communities Act 1972 provides . If the Protocol on Social Policy is ratified by all member states, it will become part of the EEC Treaty, which is one of the Treaties referred to in section 2(1): see the definition of the Treaties in section 1(2) of the Act of 1972. Accordingly the Protocol will have effect not only on the international plane but also, by virtue of section 2(1) of the Act of 1972, on the domestic plane as well. By enacting section 2(1), Parliament must therefore have intended to curtail the prerogative power to amend or add to the EEC Treaty. There is no express provision to that effect. But that is, according to the argument, the necessary implication . Where Parliament has by statute covered the very same ground as was formerly covered by the Royal Prerogative, the Royal Prerogative is to that extent, by necessary implication, held in abeyance: see Attorney General v De Keysers Royal Hotel Ltd [1920] AC 508; Laker Airways Ltd v Department of Trade [1977] QB 643, 718,720, per Roskill LJ. (p 567) So one sees here the same arguments: that the prerogative power in relation to treaties cannot be used to alter rights in domestic law; that the effect of section 2(1) of the 1972 Act is to transform rights arising under the EU treaties into rights in domestic law; that section 2(1) therefore impliedly curtailed the prerogative power in relation to the EU treaties; and the supposed analogy with the De Keyser principle. The Divisional Court rejected this argument: We find ourselves unable to accept this far reaching argument. When Parliament wishes to fetter the Crowns treaty making power in relation to Community law, it does so in express terms, such as one finds in section 6 of the Act of 1978. Indeed, as was pointed out, if the Crowns treaty making power were impliedly excluded by section 2(1) of the Act of 1972, section 6 of the Act of 1978 would not have been necessary. There is in any event insufficient ground to hold that Parliament has by implication curtailed or fettered the Crowns prerogative to alter or add to the EEC Treaty. (p 567) The court also rejected the challenge on the basis that the protocol in question was not, in any event, one of the Treaties to which the 1972 Act applied (p 568). Contrary to counsels submission in the present case, it is plain that these two reasons for rejecting the challenge to ratification were independent of one another. The first reason was that section 2(1) did not impliedly curtail the Crowns treaty making power. The second was that the protocol in question did not in any event fall within the ambit of section 2(1). I agree with the Divisional Courts reasoning in the passage which I have cited, and in particular with the final sentence: even apart from the inference which might be drawn from examples of express provisions restricting the exercise of prerogative powers in relation to EU law, there is in any event insufficient ground to hold that Parliament has by implication curtailed or fettered the Crowns prerogative powers in relation to the Treaties. What if there had been no referendum, or a vote to remain? Finally, in relation to the Miller appeal, it is argued by the majority at para 91 that the Secretary of States contentions cannot be correct since, if they were, it would have been open to Ministers to invoke prerogative powers to withdraw from the EU even if there had been no referendum, or indeed even if any referendum had resulted in a vote to remain. There are two answers to this point. First, it does not necessarily follow from my conclusions that Ministers could properly have invoked article 50 whenever they pleased, or, more specifically, in the event of a vote to remain. As Lord Carnwath makes clear at para 266 below, there has been no discussion in this appeal of the question whether there might be any circumstances in which the exercise of the prerogative power in question might be open to review, such as if the referendum held under the 2015 Act had resulted in a vote to remain, and I express no view on that point. Secondly, and more fundamentally, controls over the exercise of ministerial powers under the British constitution are not solely, or even primarily, of a legal character, as Lord Carnwath explains in his judgment. Courts should not overlook the constitutional importance of ministerial accountability to Parliament. Ministerial decisions in the exercise of prerogative powers, of greater importance than leaving the EU, have been taken without any possibility of judicial control: examples include the declarations of war in 1914 and 1939. For a court to proceed on the basis that if a prerogative power is capable of being exercised arbitrarily or perversely, it must necessarily be subject to judicial control, is to base legal doctrine on an assumption which is foreign to our constitutional traditions. It is important for courts to understand that the legalisation of political issues is not always constitutionally appropriate, and may be fraught with risk, not least for the judiciary. Conclusion in relation to the Miller appeal For all the foregoing reasons, I would have allowed the Secretary of States appeal in the Miller case. The Northern Irish cases Given my disagreement with the decision of the majority of the court as to the necessity for an Act of Parliament before article 50 can be invoked, it follows that I would also have dealt with the devolution issues raised in the Northern Irish cases differently. So far as those cases raise issues which are distinct from those arising in the Miller appeal, however, I agree with the way in which the majority have dealt with them. Nothing in the Northern Ireland Act bears on the question whether the giving of notification under article 50 can be effected under the prerogative or requires authorisation by an Act of Parliament. More specifically, neither section 1 nor section 75 of the Northern Ireland Act has any relevance in the present context. Nor does a political convention, such as the Sewel Convention plainly is in its application to Northern Ireland, give rise to a legally enforceable obligation. LORD CARNWATH: (dissenting) For the reasons given by Lord Reed, I would have allowed the appeal by the Secretary of State in the main proceedings. In view of the importance of the case, and the fact that we are differing from the Divisional Court and the majority in this court, I shall add some comments of my own from a slightly different legal perspective. I agree with the majority judgment in respect of the Northern Irish cases and the other devolution issues. Constitutional principles At the heart of the case is the classic statement of principle by Lord Oliver in the Tin Council case (JH Rayner (Mincing Lane) Ltd v Department of Trade and Industry [1990] 2 AC 418): as a matter of the constitutional law of the United Kingdom, the Royal Prerogative, whilst it embraces the making of treaties, does not extend to altering the law or conferring rights upon individuals or depriving individuals of rights which they enjoy in domestic law without the intervention of Parliament (Lord Oliver pp 499E 500D) In the Tin Council case Lord Oliver was speaking only of the making of treaties, not withdrawal. Lord Templeman had earlier made clear that the prerogative enables the Government to negotiate, conclude, construe, observe, breach, repudiate or terminate a treaty (p 476F H). However, there was no discussion of how the classic statement might need modification or development in the context of termination or withdrawal. In principle the same basic rule should apply. Just as the Executive cannot without statutory authority create new rights or obligations in domestic law by entering into a treaty, so it cannot by termination of a treaty take away rights or obligations which currently exist. However, that tells one nothing about the process by which this result is to be achieved, nor at what stage of that process the intervention of Parliament is required. Precedents are hard to find. Counsel have taken us on an interesting journey through cases and legal sources from four centuries and different parts of the common law world. The only example we were shown of withdrawal from a treaty was a recent decision of the Canadian Federal Court: Turp v Ministry of Justice & Attorney General of Canada 2012 FC 893. That was an unsuccessful challenge by the executive to the use of its prerogative powers to withdraw from the Kyoto Protocol on Climate Change, against the background of a statute (passed against the opposition of government) requiring the preparation of plans giving effect to the Protocol. On its face it is a striking example of the use of the prerogative to frustrate the apparent intention of Parliament as expressed in legislation. However, the authority is of limited assistance in the present context, since it had been held in a previous case (Friends of the Earth v Canada (Governor in Council), 2008 FC 118) that the obligations under the statute were not justiciable in the domestic courts. In the end the search through the authorities tells one little that is not sufficiently expressed by the classic rule. It also confirms the lack of any direct precedent for withdrawal from a treaty previously given effect in domestic law, let alone one which has played such a vital part in the development of our laws over more than 40 years. However, lack of precedent is not a reason for inventing new principles, nor is there a need to do so. The existing principles correctly applied provide a clear and coherent framework for effective resolution of all the competing considerations, including the referendum result. The balance of power In considering that framework it is important to recognise the sensitivity in our constitution of the balance between the respective roles of Parliament, the Executive and the courts. The Divisional Court saw this principally in binary terms: the Executive versus Parliament. Under the general heading, the sovereignty of Parliament and the prerogative powers of the Crown, they referred on the one hand to the most fundamental rule that the Crown in Parliament is sovereign (para 20), and on the other to the general rule that the conduct of international relations and the making and unmaking of treaties are matters for the Crown in the exercise of its prerogative powers (para 30), the balance between the two being as explained by Lord Oliver in the Tin Council case (paras 32 33). Although the Tin Council principles as such are not in doubt, they are only part of the story. It is wrong to see this as a simple choice between Parliamentary sovereignty, exercised through legislation, and the untrammelled exercise of the prerogative by the Executive. Parliamentary sovereignty does not begin or end with the Tin Council principles. No less fundamental to our constitution is the principle of Parliamentary accountability. The Executive is accountable to Parliament for its exercise of the prerogative, including its actions in international law. That account is made through ordinary Parliamentary procedures. Subject to any specific statutory restrictions (such as under the Constitutional Reform and Governance Act 2010), they are a matter for Parliament alone. The courts may not inquire into the methods by which Parliament exercises control over the Executive, nor their adequacy. The FBU case Defining the proper boundaries between the respective responsibilities of Parliament, the Executive and the courts lay at the heart of the dispute in the FBU case (R v Secretary of State for the Home Department Ex p Fire Brigades Union [1995] 2 AC 513). That case concerned statutory provisions (under the Criminal Justice Act 1988) providing for compensation for criminal injuries, intended to replace a previous non statutory scheme established under the prerogative. Section 171 provided that the new scheme should come into force on such day as the Secretary of State may by order appoint. No such date was appointed, but instead after some years the Secretary of State announced that a new non statutory scheme would be introduced, which was inconsistent with the scheme provided for by the Act. The House of Lords held by 3 2 that this action was an abuse of power and so unlawful. In the leading judgment Lord Browne Wilkinson noted that the new scheme was to be brought into effect at a time when Parliament has expressed its will that there should be a scheme based on the tortious measure of damages, such will being expressed in a statute which Parliament has neither repealed nor (for reasons which have not been disclosed) been invited to repeal. , it would be most surprising if, at the present day, prerogative powers could be validly exercised by the executive so as to frustrate the will of Parliament expressed in a statute and, to an extent, to pre empt the decision of Parliament whether or not to continue with the Statutory scheme even though the old scheme has been abandoned. It is not for the executive to state as it did in the White Paper (paragraph 38) that the provisions in the Act of 1988 will accordingly be repealed when a suitable legislative opportunity occurs. It is for Parliament, not the executive, to repeal legislation (p 552D E) He concluded: By introducing the tariff scheme he debars himself from exercising the statutory power for the purposes and on the basis which Parliament intended. For these reasons, in my judgment the decision to introduce the tariff scheme at a time when the statutory provisions and his power under section 171(1) were on the statute book was unlawful and an abuse of the prerogative power. (p 554G) The minority, by contrast, regarded the majoritys decision (in Lord Keiths words p 544) as a most improper intrusion into a field which lies peculiarly within the province of Parliament. In a recent article (A dive into deep constitutional waters: article 50, the Prerogative and Parliament (2016) 79(6) MLR 1064 1089), Professor Gavin Phillipson considers some lessons from that decision for the present case. As he points out (ibid p 1082), the apparently fundamental difference of approach between majority and minority came down ultimately to a narrow issue of statutory construction of section 171: whether the section imposed no duty owed to the public (p 544F per Lord Keith), or rather, as the majority thought (p 551D, per Lord Browne Wilkinson), it imposed a continuing obligation on the Secretary of State to consider whether to bring the statutory scheme into force, which was frustrated by implementation of the inconsistent non statutory scheme. Professor Phillipson also draws attention to the important observations by Lord Mustill on the balance between the three organs of the state, and in particular the means by which Parliament exercises control of the Executive, not restricted to legislative control. Although stated in a minority judgment, the underlying principles are not I believe controversial. Lord Mustill said: It is a feature of the peculiarly British conception of the separation of powers that Parliament, the executive and the courts each have their distinct and largely exclusive domain. Parliament has a legally unchallengeable right to make whatever laws it thinks right. The executive carries on the administration of the country in accordance with the powers conferred on it by law. The courts interpret the laws, and see that they are obeyed. This requires the courts on occasion to step into the territory which belongs to the executive, not only to verify that the powers asserted accord with the substantive law created by Parliament, but also, that the manner in which they are exercised conforms with the standards of fairness which Parliament must have intended. Concurrently with this judicial function Parliament has its own special means of ensuring that the executive, in the exercise of delegated functions, performs in a way which Parliament finds appropriate. Ideally, it is these latter methods which should be used to check executive errors and excesses; for it is the task of Parliament and the executive in tandem, not of the courts, to govern the country (p 567D F, emphasis added) Lord Mustill went on to comment on the development over the previous 30 years of court procedures to fill gaps where the exercise of such specifically Parliamentary remedies has been perceived as falling short, and to avoid a vacuum in which the citizen would be left without protection against a misuse of executive powers. He thought these judicial developments were welcome but not without risks: As the judges themselves constantly remark, it is not they who are appointed to administer the country. Absent a written constitution much sensitivity is required of the parliamentarian, administrator and judge if the delicate balance of the unwritten rules evolved (I believe successfully) in recent years is not to be disturbed (p 567H) Professor Phillipson comments: the British constitution works most effectively when parliamentary and judicial forms of control and accountability, rather than being framed as antagonistic alternatives, or mutually exclusive directions of travel, work together, but with clearly defined, differentiated and mutually complementary roles. (p 1089) That observation is particularly pertinent having regard to the debate which took place on the opposite side of Parliament Square on the last day of the hearing in the Supreme Court. That led to the motion, passed by a large majority of the House of Commons, the terms of which have been set out by Lord Reed (para 163). In particular, it recognised that it is Parliaments responsibility to properly scrutinise the Government while respecting the decision of the British people to leave the European Union, and ended by call(ing) on the Government to invoke article 50 by 31 March 2017. Of course the House of Commons is not the same as the Queen in Parliament, whose will is represented exclusively by primary legislation. However, the motion lends support to the view that, at least at this initial stage of service of a notice under article 50(2), the formality of a Bill is unnecessary to enable Parliament to fulfil its ordinary responsibility for scrutinising the governments conduct of the process of withdrawal. Application of the principles to the present case The logical starting point for consideration of the present case is the power which is in issue: that is, the power under article 50 of the Lisbon treaty to initiate the procedure for withdrawal by a decision in accordance with our constitutional requirements, followed by service of a notice. The existence of that power in international law is not in doubt. The issues for the court are, first, who has the right under UK constitutional principles to exercise it, and, secondly, subject to what constitutional requirements. As to the first, under Tin Council principles the position is clear. In the absence of any statutory provision to the contrary, the power to make or withdraw from an international treaty lies with the Executive, exercising the prerogative power of the Crown. As to the second, it is necessary to consider whether that power is subject to any restrictions by statute, express or implied, or in the common law. In agreement with Lord Reed, and for the same reasons, I find no such restrictions in the EU statutes. I agree with Mr Eadie that this issue must be considered by reference to the statutory scheme as it exists at the time the power in question is to be exercised. The 1972 Act of course provided the framework for what followed. But I find it illogical to search in that Act for a presumed Parliamentary intention in respect of withdrawal, at a time when the treaty contained no express power to withdraw, and there was no reason for Parliament to consider it. The 1972 Act did not remove the Crowns treaty making prerogative in respect of European matters, whether expressly or by implication (as under the De Keyser principle: majority judgment para 48). No one doubts the power of the Executive in 2008 to enter into the Lisbon Treaty, including article 50. The critical issue is how Parliament dealt with that matter for the purposes of domestic law. In the 2008 Act Parliament recognised the Lisbon treaty (including article 50) by its inclusion in the treaties listed in section 1 of the 1972 Act. Thereafter it became (by virtue of 1972 Act section 2(1)) part of the statutory framework in accordance with which, and therefore subject to which, any rights and obligations derived from EU law by virtue of that Act were to be enjoyed in domestic law. Unlike other powers in the treaty, the 2008 Act did not impose any restriction on the exercise of article 50 by the Executive. That position was confirmed by the 2011 Act, which made specific reference to article 50(3) but placed no restriction on article 50(2). There the matter rests today. Turning to the common law, the Tin Council rule is simple and uncontroversial: the prerogative does not extend to altering the law or conferring rights upon individuals or depriving individuals of rights which they enjoy in domestic law without the intervention of Parliament. Judged by that test the answer again is clear. Service of an article 50(2) notice will not, and does not purport to, change any laws or affect any rights. It is merely the start of an essentially political process of negotiation and decision making within the framework of that article. True it is that it is intended to lead in due course to the removal of EU law as a source of rights and obligations in domestic law. That process will be conducted by the Executive, but it will be accountable to Parliament for the course of those negotiations and the contents of any resulting agreement. Furthermore, whatever the shape of the ultimate agreement, or even in default of agreement, there is no suggestion by the Secretary of State that the process can be completed without primary legislation in some form. This analysis was in substance adopted by Maguire J in the McCord proceedings, in line with the submissions of the Attorney General for Northern Ireland (repeated in this court). He said: In the present case, it seems to the court that there is a distinction to be drawn between what occurs upon the triggering of article 50(2) and what may occur thereafter. As the Attorney General for Northern Ireland put it, the actual notification does not in itself alter the law of the United Kingdom. Rather, it is the beginning of a process which ultimately will probably lead to changes in United Kingdom law. On the day after the notice has been given, the law will in fact be the same as it was the day before it was given. The rights of individual citizens will not have changed though it is, of course, true that in due course the body of EU law as it applies in the United Kingdom will, very likely, become the subject of change. But at the point when this occurs the process necessarily will be one controlled by parliamentary legislation, as this is the mechanism for changing the law in the United Kingdom. (para 105) The Divisional Court (para 17) took a different approach. They in effect adopted the analysis proposed by Lord Pannick, taking account of the agreed (albeit possibly controversial) assumption that the article 50(2) notice is irrevocable. On that footing, even if it has no immediate effect, it will lead inexorably to actual withdrawal at latest two years later (subject to agreement to defer). Lord Pannick drew the analogy of a trigger being pulled (written case para 11 12): it is the giving of the notice which triggers the legal effects under article 50(3). Those effects are that once notification is given, [t]he Treaties shall cease to apply to the state in question, from the date of a withdrawal agreement, or if no such agreement is reached at the latest within two years from notification, unless an extension of time is unanimously agreed by the European Council and the member state concerned. Notification is the pulling of the trigger which causes the bullet to be fired, with the consequence that the bullet will hit the target and the Treaties will cease to apply. Lord Pannicks trigger/bullet analogy is superficially attractive, but (with respect) fallacious. A real bullet does not take two years to reach its target. Nor is its progress accompanied by an intense period of negotiations over the form of protection that should be available to the victim by the time it arrives. The treaties will indeed cease to apply, and domestic law will change; but it is clearly envisaged that the final form of the changes will be governed by legislation. As the Secretary of State has explained, the intention is that the legislation will where possible reproduce existing European based rights in domestic law, but otherwise ensure that there is no legal gap. Although there is no evidence from any government witness on the intended role of Parliament, we were shown without objection or contradiction the statement made by the Secretary of State to Parliament on 10 October 2016 (Hansard Vol 615). Having described the mandate for Britain to leave the European Union as clear, overwhelming and unarguable, he explained the governments plans for a great repeal Bill: We will start by bringing forward a great repeal Bill that will mean the European Communities Act 1972 ceases to apply on the day we leave the EU The great repeal Act will convert existing European Union law into domestic law, wherever practical. That will provide for a calm and orderly exit, and give as much certainty as possible to employers, investors, consumers and workers In all, there is more than 40 years of European Union law in UK law to consider, and some of it simply will not work on exit. We must act to ensure there is no black hole in our statute book. It will then be for this House I repeat, this House to consider changes to our domestic legislation to reflect the outcome of our negotiation and our exit, subject to international treaties and agreements with other countries and the EU on matters such as trade On the assumption that such a Bill becomes law by the time of withdrawal, there will be no breach of the rule in its classic form. The extent to which existing laws are changed or rights taken away will be determined by the legislation. Ultimately of course that result depends on the will of Parliament; it is not in the gift of the executive. But there is no basis for making the opposite assumption. Lord Pannicks argument in effect requires the classic rule to be reformulated: the prerogative does not extend to any act which will necessarily lead to the alteration of the domestic law, or of rights under it, whether or not that alteration is sanctioned by Parliament. We were shown no authority to support a rule as so stated, nor any principled basis for the court to invent it. In any event, that process, like the service of the article 50 notice, will be subject to Parliamentary scrutiny in whatever way Parliament chooses. It will be for Parliament and the Executive acting in partnership to determine the timing and content of the legislative programme. Pre empting the will of Parliament One possible answer to the analysis in the previous paragraph is that it would involve the Executive unlawfully frustrating or pre empting the will of Parliament. This point is touched on in the majority judgment by reference in particular to the Lord Browne Wilkinsons statements in the FBU case (see para 250 above). They are said to establish the principle that ministers cannot frustrate the purpose of a statute for example by emptying it of content or preventing its effectual operation; and that it is inappropriate for ministers to base their actions (or to invite the court to make any decision) on the basis of an anticipated repeal of a statutory provision as that would involve ministers (or the court) pre empting Parliaments decision whether to enact that repeal. (majority judgment para 51) As I understand the majority judgment, however, this line of argument does not ultimately form part of their reasoning, in my view rightly so. In the first place, the FBU case was about abuse, not absence, of power. There was no doubt as to the existence of the prerogative power. But it was held to be an abuse to use it for a purpose inconsistent with the will of Parliament, as expressed in a statute which it had neither repealed nor been invited to repeal. Such issues do not arise in this case. The Miller respondents base their case unequivocally on absence of a prerogative power to nullify the statutory scheme set up by the 1972 Act, rather than abuse (see Lord Pannicks response to Lord Reed: Day 2 Transcript, p 158, lines 8 25). Further, Lord Browne Wilkinson was not purporting to lay down any general principle about the relevance of future legislation in relation to the exercise of the prerogative. His comments were directed to the facts of the particular case, in which the new scheme was being introduced without any reference at all to Parliament. Similar arguments in the present case would have to be seen in a quite different context, which (as Lord Pannick accepts) would include the 2015 Act and the referendum result. It is one thing, as in the FBU case, to use the prerogative to introduce a scheme which is directly contrary to an extant Act, and which Parliament has had no chance to consider. It is quite another to use it to give effect to a decision the manner of which has been determined by Parliament itself, and in the implementation of which Parliament will play a central role. In such circumstances talk of frustrating or pre empting the will of Parliament would be wide of the mark. Conversely, it would be wrong to assume (as the majority appears to do: para 91) that the courts would necessarily have been powerless in the (politically inconceivable) event of the Executive initiating withdrawal entirely of its own motion, or even in defiance of a referendum vote to remain. Protection of individual interests I would not wish to leave the case without acknowledging the important submissions made by the other respondents and interveners, particularly as to the scale and significance of the interests which will be affected by withdrawal. It is not clear, however, how a requirement for statutory authority for the article 50(2) notice will do anything to safeguard those interests, nor indeed to advance the process of Parliamentary scrutiny which will ultimately be critical to their protection. I take as representative the cases for the third and fourth respondents, presented by Ms Mountfield QC and Mr Gill QC. Their submissions provide vivid illustrations of the variety of ways in which individual and group interests will be profoundly affected by implementation of the decision to leave the EU. Ms Mountfield for example provides a detailed breakdown of fundamental and non replicable EU citizenship rights. The list starts with the fundamental status of EU citizenship (Citizens Directive 2004/38/EC preamble), leading to more specific rights, such as the right to move, reside, work and study throughout the member states, the right to vote in European elections, the rights to diplomatic protection, and the right to equal pay, and to non discriminatory healthcare free at the point of use. She categorises the governments case as an assertion of untrammelled prerogative power to do away with the entire corpus of European law rights currently enjoyed under UK law, and render a whole suite of constitutional statutes meaningless, without any Parliamentary authority in the form of a statute. While there is no reason to question her account of the profound effect of the prospective changes, I do not for the reasons already given accept that this can be describe as untrammelled use of executive power, nor that the control of Parliament will be improperly bypassed. Nor does she explain how that impact will be mitigated by a statute which does no more than authorise service of the notice. Similar arguments are made by Mr Gill for the fourth respondents (the AB parties). They are representative, among others, of the very large numbers of EEA nationals and their children living in this country, whose rights to continued residence will be threatened unless adequate arrangements are made to protect them. Mr Gill refers in particular to the important right under the Citizens Directive for those who have lived in the UK for five years to apply for citizenship in the following year, a right which will be lost on withdrawal. Section 7 of the Immigration Act 1988 provides that a person shall not require leave to enter or remain in the United Kingdom in any case in which he is entitled to do so by virtue of an enforceable EU right. Typical is Mrs KK, a Polish national resident and working here since 2014, married to a third country national, with a Polish national child born in the UK in 2015. She feels in a complete state of limbo having received no assurance from the Secretary of State as to what her status will be during and after the withdrawal negotiations, nor how her husband and child will be affected. Such people, says Mr Gill, will have made life changing decisions and moved permanently to the UK with the ultimate intention of acquiring permanent residence. They may also find themselves exposed to criminal liability under the Immigration Act 1971 if their status is removed. Mr Gill recognises that Parliament may prior to actual withdrawal put in place a statutory protection mechanism; but that depends on the will of Parliament, which, he says, the Secretary of State cannot lawfully pre empt. It is, he submits, a misuse of the prerogative to foist such a situation on Parliament; the rights to remain must be addressed by Parliament before the giving of the article 50(2) notice. There are two problems with that submission. First, it is difficult to talk of the Executive foisting on Parliament a chain of events which flows directly from the result of the referendum which it authorised in the 2015 Act. Secondly, however desirable it would be for issues of detail such as those affecting his clients to be addressed at this stage, it is wholly inconsistent with the structure of article 50. That assumes the initiation of the process by a simple notice under article 50(2), to be followed by detailed negotiations leading if possible to an agreement on the terms of withdrawal. The details of the protections available for Mr Gills clients must depend, at least in part, on the outcome of those negotiations. No doubt for this reason such an extreme argument is not adopted by the other respondents. They accept that, at this stage of the article 50 process, they cannot reasonably expect anything more than bare statutory authorisation for the service of the notice. That is realistic. But it also underlines the point that successful defence of the Divisional Courts order will do nothing to resolve the many practical issues which will need to be addressed over the coming period, nor to protect the rights of those directly affected. Those problems, and the need for Parliament to address them, will remain precisely the same with or without statutory authorisation for the article 50 notice. If that is what the law requires, so be it. But some may regard it as an exercise in pure legal formalism. Conclusion Shortly after the 1972 Act came into force, Lord Denning famously spoke of the European Treaty as like an incoming tide. It flows into the estuaries and up the rivers. It cannot be held back (Bulmer Ltd v Bollinger [1974] Ch 401, 418F). That process is now to be reversed. Hydrologists may be able to suggest an appropriate analogy. On any view, the legal and practical challenges will be enormous. The respondents have done a great service in bringing these issues before the court at the beginning of the process. The very full debate in the courts has been supplemented by a vigorous and illuminating academic debate conducted on the web (particularly through the UK Constitutional Law Blog site). Unsurprisingly, given the unprecedented nature of the undertaking there are no easy answers. In the end, in respectful disagreement with the majority, I have reached the clear conclusion that the Divisional Court took too narrow a view of the constitutional principles at stake. The article 50 process must and will involve a partnership between Parliament and the Executive. But that does not mean that legislation is required simply to initiate it. Legislation will undoubtedly be required to implement withdrawal, but the process, including the form and timing of any legislation, can and should be determined by Parliament not by the courts. That involves no breach of the constitutional principles which have been entrenched in our law since the 17th century, and no threat to the fundamental principle of Parliamentary sovereignty. LORD HUGHES: (dissenting) Some observers, who have not been provided with the very detailed arguments which have been debated before us (or the something over 20,000 pages of documents which supported those arguments) might easily think that the principal question in this case is: Does the 2016 referendum result not conclude the issue, and mean that the country is bound to leave the EU? In fact, that is not the principal question. No one suggests that the referendum by itself has the legal effect that a Government notice to leave the EU is made lawful. Specifically, that is not the contention of the Government, speaking through the Secretary of State for exiting the EU. The referendum result undoubtedly has enormous political impact, but it is not suggested by the Government that it has direct legal effect. The principal question in this case is not whether the UK ought or ought not to leave the EU. That is a matter for political judgment, which is where the referendum comes in. Courts do not make political judgments. The question in this case is not whether, but how, the UK may lawfully set about leaving the EU, if that is the political decision made. It is about the legal mechanics of leaving. As the foregoing judgments show, this case is capable of stimulating discussion on a number of legally interesting topics. There are also supplementary questions arising out of the legal positions of Scotland, Northern Ireland and Wales. But, at some risk of over simplifying, the main question centres on two very well understood constitutional rules, which in this case apparently point in opposite directions. They are these: Rule 1 the executive (government) cannot change law made by Act of Parliament, nor the common law; and Rule 2 the making and unmaking of treaties is a matter of foreign relations within the competence of the government. Nobody questions either of these two rules. Mrs Miller relies on the first. The government relies on the second. The government contends that Rule 2 operates to recognise its power, as the handler of foreign relations, to unmake the European Treaties. Mrs Miller contends that Rule 1 shows that the power to handle foreign relations stops short at the point where UK statute law is changed. Mrs Millers case is that because there was an Act of Parliament (the European Communities Act 1972) to give effect to our joining the (then) EEC and to make European rules part of UK law, there has to be another Act of Parliament to authorise service of notice to leave. This is the effect, she says, of Rule 1. Thus, she says, Rule 2 is true, but does not apply. The governments case is that the European Communities Act 1972, which did indeed make European rules into laws of the UK, will simply cease to operate if the UK leaves. The Act was only ever designed to have effect whilst we were members of the EU. It agrees that as a government it cannot alter the law of the UK which statute has made, but it says that if it serves notice to leave the EU, and in due course we leave, it would not be altering the statute; the statute would simply cease to apply because there would no longer be rules under treaties to which the UK was a party. Thus, it says, Rule 1 does not apply and Rule 2 does. Which of these arguments is correct depends in the end on the true reading of the European Communities Act 1972. Clearly, either reading is possible. The majority judgment gives cogent expression to the conclusion that it is Mrs Millers reading which is correct. For my part, for the reasons which Lord Reed very clearly sets out, I would have preferred the view that this Act was only ever to be operative for so long as the UK was a member of (first) the EEC, and now the EU. It is not helpful, particularly because this is a minority view, to repeat the analysis which Lord Reed expounds. I agree with his judgment. In short, because of Rule 1 the Act was necessary to convert the UKs international obligations under the various European treaties into law with domestic effect. Without the Act, those European rules would have had effect between States at the international level but would not have been part of domestic UK law and so would not have bound UK citizens individually. But the Act is couched in terms which give legal effect to the obligations and rules which arise under the treaties. If the UK leaves the EU, there are no longer any treaties to which this country is a party. It seems to me to follow that the Act will cease to import any of the rules which presently it does. The Act is not changed; it does, however, cease to operate because there are no longer any treaty rules for it to bite upon. Thus I would, for myself, have allowed the appeal of the Secretary of State from the decision of the (English) Divisional Court. I agree that on either view of the principal Miller appeal, the devolution questions raised should all be answered no, for the reasons set out in the majority judgment. I likewise agree with the majoritys treatment of the Sewel convention. It remains only to add that the arguments before us made it clear that whatever the outcome of the Miller appeal, much the same legislative programme will be required in Parliament, upon the UKs departure from the EU, to deal with the multifarious legal rules presently operative via the 1972 Act. The issues before this court do not touch this exercise, which will be a matter in any event for Parliament. The court is concerned only with the necessary procedure for the service of an article 50 notice to leave.

Article 50 of the Treaty on the European Union provides, in summary terms, that, if a member state decides to withdraw from the European Union (the EU) in accordance with its own constitutional requirements, it should serve a notice of that intention (a Notice), and that the treaties which govern the EU (the EU Treaties) shall cease to apply to that member state within two years thereafter. Following the June 2016 referendum, the Government proposes to use its prerogative powers to withdraw from the EU by serving a Notice withdrawing the UK from the EU Treaties. The principal issue in these appeals is whether such a Notice can, under the UKs constitutional arrangements, lawfully be given by Government ministers without prior authorisation by an Act of Parliament. Northern Ireland, and interventions by the Lord Advocate for the Scottish Government and the Counsel General for Wales for the Welsh Government, raise the additional issues of whether the terms on which powers have been statutorily devolved require consultation with or the agreement of the devolved legislatures before Notice is served, or otherwise operate to restrict the Governments power to do so (the devolution issues). The UKs constitutional requirements are a matter of domestic law which the parties all agree should be determined by UK judges. The issues in these proceedings have nothing to do with political issues such as the merits of the decision to withdraw, the timetable and terms of so doing, or the details of any future relationship between the UK and the EU. The claimants submit that, owing to the well established rule that prerogative powers may not extend to acts which result in a change to UK domestic law, and withdrawal from the EU Treaties would change domestic law, the Government cannot serve a Notice unless first authorised to do so by an Act of Parliament. Resolution of this dispute depends on the proper interpretation of the European Communities Act 1972 (the ECA), which gave domestic effect to the UKs obligations under the then existing EU Treaties, together with subsequent statutes, which gave effect to and related to later EU Treaties, and the European Union Referendum Act 2015. The devolution issues require the court to consider whether the terms of the Northern Ireland Act 1998 (NIA), and associated agreements, require primary legislation, and the consent of the Northern Ireland Assembly and/or the people of Northern Ireland, before a Notice can be served. Under each of the devolution settlements in Northern Ireland, Scotland and Wales the devolved legislatures have responsibilities to comply with EU law, and there is a convention (the Sewel Convention) that the UK Parliament will not normally exercise its right to legislate with regard to devolved matters without the agreement of the devolved legislature. The principal issue was raised in proceedings brought by Gina Miller and Deir Dos Santos against the Secretary of State for Exiting the European Union. The Divisional Court of England and Wales (Lord Thomas LCJ, Sir Terence Etherton MR and Sales LJ), declared that the Secretary of State did not have power to give Notice, without Parliaments prior authority. The Secretary of State has appealed to the Supreme Court against this decision. The Northern Ireland claims were heard together by Maguire J in the Northern Ireland High Court, who determined and dismissed the devolution issues, and, on an application by the Attorney General for Northern Ireland Maguire J referred four issues to the Supreme Court and the Northern Ireland Court of Appeal referred one further issue. The Supreme Court by a majority of 8 to 3 dismisses the Secretary of States appeal (Lord Neuberger, Lady Hale, Lord Mance, Lord Kerr, Lord Clarke, Lord Wilson, Lord Sumption and Lord Hodge in the majority with Lord Reed, Lord Carnwath and Lord Hughes dissenting). In a joint judgment of the majority, the Supreme Court holds that an Act of Parliament is required to authorise ministers to give Notice of the decision of the UK to withdraw from the European Union. Each of the dissenting justices gives a separate judgment. On the devolution issues, the court unanimously concludes that neither section 1 nor section 75 of the NIA is of assistance in this case, and that the Sewel Convention does not give rise to a legally enforceable obligation. The principal issue Majority judgment The Supreme Court considers that the terms of the ECA, which gave effect to the UKs membership of the EU, are inconsistent with the exercise by ministers of any power to withdraw from the EU Treaties without authorisation by a prior Act of Parliament Section 2 of the ECA authorises a dynamic process by which EU law becomes a source of UK law and takes precedence over all domestic sources of UK law, including statutes [60]. So long as the ECA remains in force its effect is to constitute EU law as an independent and overriding source of domestic law [65]. It operates as a partial transfer of law making powers, an assignment of legislative competences, by Parliament to EU institutions, unless and until Parliament decides otherwise [67 68]. It is common ground that UK domestic law will change as a result of the UK ceasing to be party to the EU treaties and the rights enjoyed by UK residents granted through EU law will be affected [69]. The Government argues that the 1972 Act does not exclude the power for ministers to withdraw from the EU Treaties, and that section 2 of the Act actually caters for the exercise of such a power as it gives effect to EU law only so long as the power of withdrawal is not exercised [75]. However, there is a vital difference between variations in UK law resulting from changes in EU law, and variations in UK law resulting from withdrawal from the EU Treaties. Withdrawal makes a fundamental change to the UKs constitutional arrangements, by cutting off the source of EU law, [78 80]. Such a fundamental change will be the inevitable effect of a Notice being served [81]. The UK constitution requires such changes to be effected by Parliamentary legislation [82]. The fact that withdrawal from the EU would remove some existing domestic rights of UK residents also renders it impermissible for the Government to withdraw from the EU Treaties without prior Parliamentary authority [83]. It would have been open to Parliament when enacting the ECA to authorise ministers to withdraw from the EU Treaties, but clear words would have been required; not only are there no such clear words, but the provisions of the ECA indicate that ministers do not have such power [87, 88]. Withdrawal is not authorised by section 2, which envisages ministers taking part in the EU law making processes: withdrawing from the EU is doing the opposite [95]. The fact that ministers are accountable to Parliament for their actions is no answer constitutionally, if the power to act does not exist in the first place and where (as the court has been asked to assume) the exercise of the power would be irrevocable and pre empt any Parliamentary action [92]. Subsequent EU related legislation and events after 1972, including the introduction of Parliamentary controls in relation to decisions made by UK ministers at EU level relating to the competences of the EU or its decision making processes, but not to the giving of notice under Article 50(2), are entirely consistent with an assumption by Parliament that no power existed to withdraw from the treaties without a statute authorising that course [111]. The 2016 referendum is of great political significance. However, its legal significance is determined by what Parliament included in the statute authorising it, and that statute simply provided for the referendum to be held without specifying the consequences. The change in the law required to implement the referendums outcome must be made in the only way permitted by the UK constitution, namely by legislation. The Government accepts that the resolution of the House of Commons on 7 December 2016 calling on ministers to give notice under Article 50 by 31 March 2017 is a political act which does not affect the issues arising in the appeals [116 124]. Dissenting judgments Lord Reed, with whom Lord Carnwath and Lord Hughes agree, considers that the effect which Parliament has given to EU law under the ECA is inherently conditional on the application of the EU treaties to the UK and therefore on the UKs membership of the EU. The ECA does not impose any requirement or manifest any intention in respect of the UKs membership of the EU. It does not therefore affect the Crowns exercise of prerogative powers in respect of UK membership [177]. Lord Carnwath observes that service of notice under Article 50(2) will not itself change any laws or affect any rights but is merely the start of an essentially political process of negotiating and decision making within the framework of that article. The Government will be accountable to Parliament for those negotiations and the process cannot be completed without the enactment by Parliament of primary legislation in some form [259]. The devolution issues The devolution Acts were passed by Parliament on the assumption that the UK would be a member of the EU, but they do not require the UK to remain a member. Relations with the EU and other foreign affairs matters are reserved to UK Government and parliament, not to the devolved institutions. Withdrawal from the EU will alter the competence of the devolved institutions, and remove the responsibilities to comply with EU law. [129 130]. In view of the decision of the majority of the Justices that primary legislation is required for the UK to withdraw from the EU, it is not necessary for the court to decide if the NIA imposes a discrete requirement for such legislation [132]. The decision to withdraw from the EU is not a function carried out by the Secretary of State for Northern Ireland in relation to Northern Ireland within the meaning of section 75 NIA. Moreover, section 1 NIA, which gave the people of Northern Ireland the right to determine whether to remain part of the UK or to become part of a united Ireland, does not regulate any other change in the constitutional status of Northern Ireland [133 135]. As to the application of the Sewel Convention to the decision to withdraw from the EU given the effect on the devolved competences, the Convention operates as a political constraint on the activity of the UK Parliament. It therefore plays an important role in the operation of the UK constitution. But the policing of its scope and operation is not within the constitutional remit of the courts. The devolved legislatures do not have a veto on the UKs decision to withdraw from the EU [136 151].

On 11 December 2013 an International Centre for Settlement of Investment Disputes (ICSID) tribunal made a final investment arbitration award (the Award) in favour of the Respondents to this appeal (the Claimants) against the appellant (Romania). The Award related to investments made by the Claimants in food production in Romania prior to Romanias accession to the European Union on 1 January 2007. The present appeal is the latest chapter in the Claimants extensive attempts in a number of different jurisdictions to enforce their award against Romania and the attempts of the European Commission (the Commission) to prevent enforcement on the ground that it would infringe EU law prohibiting unlawful State aid. More specifically, this appeal arises out of Romanias application in the Commercial Court to set aside the registration of the Award or to stay enforcement pending the determination of the proceedings in the EU courts, and out of the Claimants application in response for security in the amount of the Award. Factual and procedural background The First and Second Claimants are brothers born in Romania who became Swedish nationals in 1995 and 1992 respectively, having renounced their Romanian nationality. The Third to Fifth Claimants are Romanian companies incorporated by the First and Second Claimants. In 1993 Romania entered into an association agreement with the European Community and the then 15 member states of that Community, which entered into force in 1995 (the Europe Agreement). The Europe Agreement included a provision on State aid and required Romania eventually to introduce State aid rules similar to the EC rules on State aid. The Europe Agreement further encouraged Romania to establish and improve a legal framework which favours and protects investment and to conclude agreements for the promotion and protection of investment. In 1997 to 1998 the Commission was of the view that Romania did not yet meet the criteria for EU membership and recommended, inter alia, that Romania pursue rapid privatisation, secure foreign direct investment and engage in regional development. In 1999, in the context of attempting to develop its regional policy, Romania adopted an investment incentive scheme in the form of Emergency Government Ordinance No 24/1998 (EGO 24). With effect from 1 April 1999 the tei Nucet region of Romania was designated as a disfavoured region for a ten year period. The designation was later extended to include Drgneti. On 30 June 1999 Romania adopted Law No 143/1999 incorporating State aid rules into domestic law and designating the Romanian Competition Council as the competent authority for authorising the grant of State aid. On 15 May 2000 the Romanian Competition Council issued Decision No 244/2000 declaring that certain facilities provided under EGO 24 distorted competition because they constituted incompatible State aid within the meaning of Law No 143/1999 and therefore had to be eliminated unless modified. On 16 June 2000 Romania passed Emergency Government Ordinance No 75/2000 which, with effect from 1 July 2000 modified but did not eliminate EGO 24. The Claimants do not accept that the Romanian Competition Council had authority to require the revocation of the schemes or that its decision followed from EU State aid rules. During the early 2000s, the Claimants, in reliance on the EGO 24 incentives (which required investments to be maintained for twice the period of the benefits received) invested in a large, highly integrated food production operation in that region as part of a ten year business plan. In 2002 Romania and Sweden negotiated the Sweden Romania Bilateral Investment Treaty on the Promotion and Reciprocal Protection of Investments (the BIT). The BIT entered into force on 1 April 2003. It provided for reciprocal protection of investments and included provision for investor State dispute resolution under the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (the ICSID Convention). Romania had ratified the ICSID Convention in 1975 and the United Kingdom had done so in 1966. During the formal accession negotiations between Romania and the EU from 2000 to 2004, the EU informed Romania that various Romanian government schemes, including the EGO 24 scheme, were not in line with the State aid rules of the acquis communautaire. The EU urged Romania to bring its schemes into alignment without delay. The EU in 2001 also invited Romania to identify existing schemes that Romania considered were compatible with the acquis and to provide information on the benefits of schemes to disfavoured regions. In a 2003 paper the EU proposed that Romania close existing schemes to new entrants. On 31 August 2004 Romania passed a Government Ordinance repealing all but one of the tax incentives provided in EGO 24 subject to certain transitional periods agreed with the EU with effect from 22 February 2005. The government report accompanying these measures indicated that the repeal was effected in order to meet the criteria in the Community rules on State aid and also facilitate completion of accession negotiations. On 28 July 2005 the Claimants filed a request for arbitration with ICSID under the terms of the BIT, claiming that the repeal of the EGO 24 incentives was a breach of the BIT. Romania contended that it was forced to revoke the incentives in order to comply with EU requirements and allow lawful accession by Romania to the EU. The Commission participated in the arbitration as amicus. Both Romania and the Commission submitted that any payment of compensation arising out of any award in the arbitration would constitute illegal State aid under EU law and render the award unenforceable in the EU. On 1 January 2007 Romania acceded to the EU. On 24 September 2008 the ICSID Tribunal dismissed Romanias objections on jurisdiction and admissibility and concluded that it had jurisdiction over the claims asserted by the Claimants. On 11 December 2013 the ICSID Tribunal issued the Award. It held that Romania had breached the terms of the BIT by failing to ensure fair and equitable treatment, respect the Claimants legitimate expectations and act transparently. Compensation of RON 376,433,229 was awarded (approximately 70m at the time) plus interest to the date of the award of RON 424,159,150 (approximately 80m at the time) plus compound interest until satisfaction of the Award. The Tribunal declined to address in the Award the effect of the EU State aid rules on its enforceability. On 9 April 2014 Romania applied to annul the Award under the procedure set out in the ICSID Convention and to suspend its enforcement pending a decision on that application. Following Romania purportedly implementing the Award in part by setting off tax debts owed by the Third Claimant (which set off was later annulled by the Romanian courts), on 26 May 2014 the Commission issued an injunction under article 11(1) of Regulation 659/1999 (the injunction decision) ordering Romania to suspend any action which might lead to the execution or implementation of the Award until the Commission had taken a final decision on the compatibility of that State aid with the EU internal market, on the ground that the execution of the Award appeared to the Commission to constitute unlawful State aid contrary to article 107(1) of the Treaty on the Functioning of the EU (TFEU). On 7 August 2014 the ICSID ad hoc Committee agreed to a continuation of the stay of enforcement of the Award, provided that Romania filed an assurance that it would pay the Award in full and subject to no conditions whatsoever if the annulment application was dismissed. Romania did not give this assurance and the stay was revoked in September 2014. On 1 October 2014 the Commission took a decision formally opening the State aid investigation (the initiating decision). On 30 March 2015 the Commission adopted Final Decision 2015/1470 (the Commission Decision) which was addressed to Romania. It decided that the payment of the Award by Romania constituted State aid within article 107(1) TFEU and was incompatible with the internal market. It prohibited Romania from making any payment of such State aid to the Claimants and demanded that Romania recover any payments already made under the Award. It further provided that the Claimants and five other entities directly or indirectly owned by the First and Second Claimants were jointly liable to repay any sums received by any one of them as part payment of the Award. Proceedings seeking annulment of the Commission Decision were commenced before the General Court of the European Union (GCEU) by the Third to Fifth Claimants on 6 November 2015, by the First Claimant on 28 November 2015 and by the Second Claimant on 30 November 2015. The Claimants did not apply for interim relief before the GCEU. On 26 February 2016, having heard arguments from the parties to the arbitration and from the Commission as amicus, the ICSID ad hoc Committee delivered a decision rejecting Romanias application to annul the Award. On 18 June 2019 the GCEU annulled the Commission Decision on the ground that the Commission had purported retroactively to apply its powers under article 108 TFEU and Regulation No 659/1999 to events predating Romanias accession to the EU: European Food SA and Others v European Commission (Cases T 624/15, T 694/15 and T 704/15) EU:T:2019:423. The GCEU did not rule upon certain other grounds of appeal presented by the Claimants because, in the light of its decision, they did not arise. On 31 July 2019 the Commission adopted a decision to appeal against the decision of the GCEU. That decision was communicated to this court and the parties on 13 August 2019. On 27 August 2019 the Commission lodged its appeal to the Court of Justice of the European Union (CJEU). The appeal is limited to the pleas of law addressed by the GCEU in its judgment of 18 June 2019. Should it succeed on its appeal, the Commission has invited the CJEU to remit the remaining pleas to the GCEU for further consideration. There are ongoing enforcement proceedings by the Claimants in the United States, France, Belgium, Luxembourg and Sweden. On 12 March 2019 the Brussels Court of Appeal referred three questions to the CJEU concerning the enforcement of the Award and the principle of sincere co operation in EU law. On 7 September 2018 the Commission responded to a request for an opinion from Romania stating, inter alia, that it continued to view the payment into court of security by Romania as breaching the Commission Decision, the position it maintained throughout the High Court and Court of Appeal proceedings. On 7 December 2018 the Commission adopted a decision empowering it to refer Romania to the CJEU for infringement proceedings for failure to recover sums said to have been paid by Romania to the Claimants under the Award. The proceedings in this jurisdiction On 2 October 2014 the First Claimant applied without notice for registration of the Award in the Commercial Court, pursuant to the Arbitration (International Investment Disputes) Act 1966 (the 1966 Act). Registration was effected on 17 October 2014. On 28 July 2015 Romania filed an application to the Commercial Court to vary or set aside the registration order. By a counter application the Claimants sought an order for security to be made in the event that a stay of enforcement was ordered. In a judgment dated 20 January 2017 [2017] EWHC 31 (Comm); [2017] Bus LR 1147 Blair J dismissed Romanias application to set aside registration, but granted Romanias application to stay enforcement of the Award pending determination of the proceedings in the GCEU. (1) The Claimants had advanced a case on the basis that the Award was res judicata. The judge held that he could not determine whether the Award could be enforced on this basis, because this was in issue in the pending proceedings before the GCEU and accordingly there was a real risk of inconsistent decisions if the domestic court were to decide as a matter of EU law that the Award could be enforced. (2) The judge held that the Commission Decision did not prevent registration of the Award and accordingly he refused Romanias application to set aside registration. However, he held that the domestic court could not enforce the judgment consequent on registration of the Award in circumstances in which the Commission had prohibited Romania from making any payment under the Award to the Claimants. In his view this did not create a conflict with the international obligations of the United Kingdom under the ICSID Convention, because a purely domestic judgment would be subject to the same limitation. (3) The judge held that the domestic court could not rule on whether article 351 TFEU applies in the present case because it was being considered by the GCEU and so there was a real risk of conflicting decisions if the domestic court were now to rule on the issue. (4) The judge held that there was no conflict between the European Communities Act 1972 and the 1966 Act and accordingly he rejected a submission on behalf of the Claimants that the court should give priority on this ground to the 1966 Act. (5) The judge held that he could not rule on the Claimants arguments that EU law did not preclude enforcement because the issue had been raised before the GCEU and there was a real risk of conflict. (6) The judge rejected arguments by Romania that the Award had already been paid in full. (7) The judge held that the domestic court cannot rule on the validity of the BIT between Sweden and Romania, although he accepted the submission of behalf of the Claimants that the validity of that treaty was not relevant to the issues to be decided. Following a further hearing in May 2017, Blair J handed down a second judgment on 15 June 2017 [2017] EWHC 1430 (Comm) in which he refused the Claimants application for security. He considered that, as payment under the Award was prohibited under the Commission Decision, if the court were to proceed to enforce the award against the assets of Romania it would be acting in direct contradiction of the Decision. Accordingly, it was not possible to order security as a condition of the stay. The judge also rejected a submission on behalf of the Claimants that the consequences of non compliance with an order for security need not be set out in the order which could instead provide that the parties could come back to court to consider what the consequences should be. He considered that the balance at that time was against ordering security but he did not rule it out definitively for the future. The Claimants appealed both orders to the Court of Appeal. On 27 July 2018 the Court of Appeal (Arden, Hamblen and Leggatt LJJ) [2018] EWCA Civ 1801; [2019] Bus LR 1394 dismissed the appeal against the order for a stay but allowed the appeal against the security order and ordered that security should be provided in the sum of 150m. In dismissing the Claimants appeal against the grant of a stay: (1) The Court of Appeal did not agree with Blair J that the issue ought not to be decided because of a risk of conflict with the GCEU. However, it considered that to permit enforcement on the basis that the Award was res judicata would frustrate the effective application of EU State aid law. (2) Arden and Leggatt LJJ held that Blair J had erred in holding that the effect of the 1966 Act, in implementing the ICSID Convention in domestic law, is to give an award upon registration the same status within English law as any other judgment. Hamblen LJ dissented on this issue and considered that Blair J had correctly held that there was no conflict between the international obligations of the United Kingdom under the ICSID Convention (and the 1966 Act which gives effect to those obligations) and under EU law. (3) Arden and Leggatt LJJ held that a stay was within the powers of the domestic court because it was consistent with the purposes of the ICSID Convention and it was appropriate to exercise the discretion to order a stay on the facts of the case. (4) Leggatt and Hamblen LJJ held that, if there was a conflict between the international obligations of the United Kingdom under the ICSID Convention as reflected in the 1966 Act and the courts duties under EU law, the judge had correctly concluded that there ought to be a stay because the applicability of article 351 TFEU was an issue before the GCEU and there was a clear risk of conflicting decisions. The Court of Appeal held that there was power to order security. It considered that the judge was correct in holding that the duty of sincere co operation precluded the provision of security as a condition of the stay. However, the Court of Appeal held that EU law did not preclude an order for security which did not provide as a consequence of any failure to provide security that the stay would be lifted. It considered that there was no material risk of conflict which would preclude such an order. Accordingly, it ordered Romania to provide security in the sum of 150m. It suspended enforcement of the Court of Appeal security order, however, to allow Romania time to lodge an application for permission to appeal to the Supreme Court. On 31 October 2018 the Supreme Court granted Romania permission to appeal limited to Grounds 1, 3 and 4 as set out in the notice of appeal. The Supreme Court also ordered that the stay of the security order made by the Court of Appeal be continued until determination of the appeal or further order. The same order granted the Commission permission to intervene in the appeal, as it had in the High Court and the Court of Appeal. On 11 April 2019 the Supreme Court granted the Claimants permission to cross appeal in relation to the order for a stay on Grounds 1 and 2 in the notice of cross appeal and reserved to the hearing the question of permission to cross appeal on Grounds 3 and 4 in that notice. The grounds of appeal are set out at paras 37 to 39 below. The appeal was listed for hearing over three days commencing on 18 June 2019. On the morning of that day the GCEU handed down its judgment annulling the Commission Decision. As the Court of Appeals order of a stay had lapsed with the GCEU giving its judgment, and as security had been ordered as a term of the stay, by its order of 18 June 2019, the Supreme Court adjourned the hearing to a further hearing listed for 7 9 October 2019 and gave directions for other steps to be taken with a view to establishing or clarifying the basis on which it would have jurisdiction to hear the appeals. Following the Commissions confirmation that it intended to appeal against the decision of the GCEU to the CJEU, Romania issued an application for the stay of enforcement of the Award, which had lapsed with the GCEUs judgment, to be imposed or extended pending determination of the appeal to the CJEU. The Claimants also issued applications against Romania for security in respect of any stay. These applications were heard by Phillips J on 9 September 2019. On 10 September 2019 Phillips J [2019] EWHC 2401 (Comm) ordered that enforcement of the Award be stayed pending the final determination of the CJEU appeal proceedings. He also ordered that Romania provide security in the amount of 150m by 17 October 2019. Following judgment, the parties applied for certificates for a leapfrog appeal to the Supreme Court under the Administration of Justice Act 1969, which the judge granted. Grounds of appeal Romania appeals against the order for security on the following grounds. Ground 1: The Court of Appeal erred in its approach to assessing whether there was a risk of conflict. Ground 3: The security ordered and whether it is to be used to pay the Award is to be subject to the jurisdiction of the Commercial Court, which, from the date on which the United Kingdom withdraws from the EU, will not be bound to observe EU law. While the United Kingdom remains a member state of the EU, it is contrary to EU law for the Court of Appeal as an emanation of the State to create a situation whereby the authority of the EU institutions could be wholly circumvented. Ground 4: By ordering Romania to provide security, the Court of Appeal has erred in going further than the process of enforcement which it itself considered to be premature. The Claimants cross appeal against the grant of a stay on the following original grounds. Original Ground 1: Under the ICSID Convention and the 1966 Act there is no power to order a stay of the Award. Original Ground 2: The stay is incompatible with the ICSID Convention in any event and serves no useful purpose. Original Ground 3: The European Communities Act 1972 does not require the United Kingdom to breach its pre accession obligations under the ICSID Convention as implemented by the 1966 Act. Original Ground 4: Article 351 TFEU applies with the result that the obligations of the United Kingdom under the pre accession ICSID Convention are not subject to the over riding effect of EU law. In addition, the Claimants, with the permission of the Supreme Court, rely on a new ground of appeal: New Ground: The effect of the GCEUs judgment annulling the Commission Decision is that the duty of sincere co operation can no longer require courts in this jurisdiction to stay enforcement of the award. It is convenient to consider the Claimants appeal (by way of the cross appeal) in respect of the stay first. The Stay Appeal The new ground Article 4(3) of the Treaty on European Union (TEU) provides: Pursuant to the principle of sincere cooperation, the Union and the member states shall, in full mutual respect, assist each other in carrying out tasks which flow from the Treaties. The member states shall take any appropriate measure, general or particular, to ensure fulfilment of the obligations arising out of the Treaties or resulting from the acts of the institutions of the Union. The member states shall facilitate the achievement of the Unions tasks and refrain from any measure which could jeopardise the attainment of the Unions objectives. The duty of sincere co operation contained in article 4(3) TEU was described, in its application to State aid law, in the following terms by the Court of Justice in Deutsche Lufthansa AG v Flughafen Frankfurt Hahn GmbH (Ryanair Ltd intervening) (Case C 284/12) [2014] 2 CMLR 20, para 41: It is also important to note that the application of the European Union rules on State aid is based on an obligation of sincere co operation between the national courts, on the one hand, and the Commission and the courts of the European Union, on the other, in the context of which each acts on the basis of the role assigned to it by the Treaty. In the context of that co operation, national courts must take all the necessary measures, whether general or specific, to ensure fulfilment of the obligations under European Union law and refrain from those which may jeopardise the attainment of the objectives of the Treaty, as follows from article 4(3) TEU. Therefore, national courts must, in particular, refrain from taking decisions which conflict with a decision of the Commission . In imposing and upholding the stay in the present case, Blair J and the Court of Appeal both referred to this passage and acted on the premise that the Commission Decision was valid in accordance with the principle stated in Masterfoods v HB Ice Cream (Case C 344/98) [2001] All ER (EC) 130, para 53 that: Acts of the Community institutions are in principle presumed to be lawful until such time as they are annulled or withdrawn. In the changed circumstances brought about by the decision of the GCEU annulling the Commission Decision, however, the Claimants now advance, with the permission of this court, their new ground of appeal. The courts below proceeded on the basis that the duty of sincere co operation in EU law required a stay of enforcement because there was a valid Commission decision which imposed a direct prohibition on Romania from paying the Award. The Claimants now submit that as the Commission Decision has been annulled and the Commission has not sought interim measures staying the effect of the judgment, there is no EU law duty on courts in this jurisdiction to stay enforcement of the Award. They submit that the presumption of validity no longer applies in respect of the Commission Decision and that, on the contrary, the applicable and binding act of the EU institutions is now the judgment annulling the Commission Decision. In their submission the authoritative determination of the EU institutions, binding on the UK courts, is that the Commission had no competence to find that the Award was State aid or to apply EU law to the Award at all and that, accordingly, the basis for the stay has fallen away entirely. They further point to article 278 TFEU which states: Actions brought before the Court of Justice of the European Union shall not have suspensory effect. The Court may, however, if it considers that circumstances so require, order that application of the contested act be suspended. In the present case, no application has been made to suspend the application of the judgment of the GCEU. Similarly, article 279 TFEU provides that the CJEU may, in any cases before it, prescribe any necessary interim measures. No such measures have been sought or ordered. Accordingly, the Claimants submit that the reasoning in and the annulment ordered pursuant to the GCEUs judgment have full legal effect. In response, the Commission and Romania submit that the effects of the GCEUs judgment are limited to annulling the Commission Decision, and that this does not extend to: (1) the injunction decision of 26 May 2014 prohibiting Romania from implementing the award pending further investigation by the Commission; or (2) the initiating decision of 1 October 2014 by which the Commission formally opened the State aid investigation. They contend that neither is the subject of any successful or pending legal challenge and that, accordingly, the consequence of the relief granted by the GCEU is that the Commissions State aid investigation into Romanias implementation of the Award is reopened. The effect of this, they say, is that even if the Commission does not succeed in its appeal to the CJEU, it will be open to the Commission to re take a State aid decision provided it can do so by addressing and avoiding the legal difficulties identified in the GCEUs judgment. In the meantime, the injunction decision continues to have effect. They maintain that the duty of sincere co operation requires courts in this jurisdiction to refrain from taking decisions that would conflict with these decisions. In addition, they point to the pending appeal by the Commission to the CJEU and the possibility that the Commission Decision may yet be vindicated as creating a further risk of conflict which engages the duty of sincere co operation. Before considering these submissions, it is appropriate to consider what precisely was decided in the judgment of the GCEU. In the view of the GCEU, the ICSID Tribunal in the Award had confined itself to determining the exact damage suffered by the Claimants on the basis of the repeal of EGO 24 and calculated the amount of damages corresponding to a right to compensation which arose at the time of the infringements committed by Romania in 2005 (para 74). The right to receive the compensation awarded arose prior to Romanias accession to the EU on 1 January 2007. The Award was simply the recognition of that right and payments made in 2014 merely represented the enforcement of that right which arose in 2005 (para 78). EU law was not applicable in Romania before its accession and it was only from Romanias accession that the Commission acquired the competence enabling it to review Romanias actions pursuant to article 108 TFEU (para 79). As the EGO 24 incentives were repealed in 2005, the Commission was by no means competent to assess their alleged unlawfulness in the light of EU law, at least with regard to the period predating accession (para 86). The GCEU noted that, as the compensation awarded was calculated from the repeal of EGO 24 on 22 February 2005 until its scheduled expiry on 1 April 2009, that period covered 27 months during which Romania was a member of the EU (para 89). The amounts awarded as compensation for the pre accession period could not constitute State aid in EU law and the Commission had exercised its powers retroactively in relation to a situation predating Romanias accession to the European Union, at least with regard to those amounts (para 90). With regard to the award of compensation in respect of the post accession period, even assuming that the payment of compensation relating to that period could be classified as incompatible aid, given that the Commission did not draw a distinction between the periods of compensation for the damage suffered by the applicants before or after accession, the Commission has, in any event, exceeded its powers in the area of State aid review. (para 91) The GCEU then addressed the classification by the Commission of the Award as an advantage and a State aid within the meaning of article 107 TFEU and concluded as follows: 107. the Commission is not competent and EU law is not applicable to the EGO scheme, to its revocation or to the compensation for that revocation, because the arbitral award, which found that there was a right to compensation in 2013, did not have the effect of triggering the applicability of EU law and the Commissions competence to the earlier EGO tax incentives and, accordingly, to the compensation at issue which resulted therefrom. 108. Therefore, as the compensation at issue covered, at least in part, a period predating accession (from 22 February 2005 to 1 January 2007) and as the Commission did not draw a distinction, among the amounts to be recovered, between those falling within the period predating accession and those falling within the period subsequent to accession, the decision by which it classified the entirety of the compensation as aid is necessarily unlawful. 109. It follows that the contested decision is unlawful in so far as it classified as an advantage and aid within the meaning of article 107 TFEU the award, by the arbitral tribunal, of compensation intended to compensate for the damage resulting from the withdrawal of the tax incentives, at least in respect of the period predating the entry into force of EU law in Romania. In summary, the GCEU held that the Commission had exceeded its competence to the extent that it had applied its State aid powers retroactively to events predating Romanias accession and the Commission Decision was unlawful to the extent that it classified as an advantage or aid compensation relating to the period prior to Romanias accession to the EU. As the Commission had not distinguished between the pre and post accession periods, the Commission Decision as a whole was annulled. Initiating decision and injunction decision Romania and the Commission submit that the effect of that relief is that the position prior to the Commission Decision is restored. They submit that the injunction decision and the initiating decision commencing the formal investigation into State aid arising from the Award are distinct from the annulled Commission Decision and are unchallenged. (The Claimants did, in fact, challenge the injunction decision before the GCEU but they later withdrew that action: Micula v European Commission (Case T 646/14) EU:T:2016:135. The initiating decision has never been challenged.) The result, Romania and the Commission therefore submit, is that the Commissions investigation into Romanias implementation of the Award is reopened and that both the injunction decision and the initiating decision are restored. The Commission submits that the reopening of the investigation means that the investigation must be closed, either by a successful appeal to the CJEU reinstating the Commission Decision, or by the Commission adopting a new final decision. The Commission also points to the fact that the initiating decision recalls Romanias obligations under the standstill provision in article 108(3) TFEU which provides that the member state concerned shall not put its proposed measures into effect until this procedure has resulted in a final decision. The case law of the Court of Justice establishes that annulment of an EU measure does not necessarily affect the preparatory acts (R v Ministry of Agriculture, Fisheries and Food, Ex p Fedesa (Case C 331/88) [1990] ECR I 4023, para 34; Kingdom of Spain v Commission of the European Communities (Case C 415/96) [1998] ECR I 7008, para 32). In certain circumstances, therefore, it may be possible to resume the procedure for replacing a measure at the point at which the illegality occurred. In the present case, Romania and the Commission, relying on ArcelorMittal Tubular Products Ostrava v Commission (Case T 364/16) EU:T:2018:696, para 64, maintain that the prior acts adopted in the context of the investigation, the injunction decision and the initiating decision, are separate acts unaffected by the judgment of the GCEU and must therefore be presumed to be lawful. On that basis they rely on Deutsche Lufthansa AG (Case C 284/12) which establishes that where the Commission has initiated a formal investigation procedure under article 108(2) TFEU with regard to a State measure which has not been notified and is being implemented, a national court is required, pursuant to the duty of sincere co operation, to adopt all the necessary measures with a view to drawing the appropriate conclusions from an infringement of the obligation to suspend the implementation of that measure. (See also European Commission v Hansestadt Lbeck (Case C 524/14 P) EU:C:2016:971, paras 29, 30 where this was endorsed by the Grand Chamber of the Court of Justice.) Moreover, Deutsche Lufthansa also establishes that where a national court, in these circumstances, entertains doubts as to whether the measure at issue constitutes State aid within article 107(1) TFEU, or as to the validity of interpretation of the decision to initiate the formal examination procedure, the appropriate course is for it to seek clarification from the Commission or to refer a question to the Court of Justice for a preliminary ruling. In response the Claimants submit that the injunction decision and the initiating decision are tainted by the same illegality as the Commission Decision which has been annulled by the GCEU. Relying on Asteris AE v Commission of the European Communities (Joined Cases 97/86, 193/86, 99/86 and 215/86) [1988] ECR 2181, paras 27 29, they submit that the Commission is under an obligation by virtue of article 266 TFEU to comply not only with the operative part of the judgment but also with its reasoning. In Asteris the Greek government had secured the annulment of a regulation fixing aid for the production of tomato concentrates for the 1983/84 marketing year. While that case had been pending before the Court of Justice the Commission had made the same error in relation to regulations adopted in relation to subsequent marketing years. The Court of Justice held that the Commission was bound to have regard not only to the operative part of the judgment but also to the grounds which led to the judgment and constitute its essential basis, in so far as they are necessary to determine the exact meaning of what is stated in the operative part (para 27) and concluded: However, by virtue of the retroactive effect of judgments by which measures are annulled, the finding of illegality takes effect from the date on which the annulled measure entered into force. It follows that in the present case the institution concerned is also under an obligation to eliminate from the regulations already adopted when the annulling judgment was delivered and governing marketing years after 1983/84 any provisions with the same effect as the provision held to be illegal. (para 30) On behalf of the Claimants, Ms Demetriou QC submits that the injunction decision and the initiating decision are vitiated by the same legal errors which resulted in the annulment of the Commission Decision and that it is, therefore, not open to the Commission to rely on the preceding decisions as giving rise to a duty of sincere co operation on the part of national courts. In determining the effect of the annulment of an EU measure on a preparatory measure, it is necessary, in each case, to identify the precise provision held to be illegal and the specific reasons which underlie the finding of illegality and which the institution concerned must take into account when replacing the annulled measure (Asteris, para 27; Kingdom of Spain v Commission of the European Communities, para 31). As stated above, the Commission Decision was flawed because the Commission exceeded its competence by applying its State aid powers retroactively to events predating Romanias accession and because the Commission Decision classified as an advantage or aid compensation relating to the period prior to Romanias accession to the EU. The failure to distinguish between pre and post accession periods led to the annulment of the whole Commission Decision. These errors also characterise the injunction decision and the initiating decision. The initiating decision (C (2014) 6848), while expressly stating in the preamble, para (57) that the obligation not to put into effect any aid measure only applies to aid measures put into effect after the entry into force of the Romanian Treaty of Accession on 1 January 2007, continues: (58) The Commission considers that executing the Award would amount to new aid in the sense of article 1(c) of Regulation (CE) No 659/1999 of 22 March 1999, as the decision to execute the Award would take place after the entry into force of the Treaty for Romania. (59) It does not matter that the revocation of the EGO 24 facilities occurred before the entry into force of the Treaty for Romania or that the amount granted or to be granted would correspond, at least partially, to the operating expenses incurred by the claimants before the entry into force of the Treaty for Romania. For the purposes of State aid law it does not matter at which time these expenses were incurred; rather, the decisive point in time is the moment at which the State decides to relieve the undertaking of the economic burden that those expenses constitute. Similarly, at para (34) the Commission states that implementation of the Award would grant to the Claimants an amount corresponding to the advantages foreseen under the abolished EGO 24 scheme from the moment it was repealed (22 February 2005) until the scheduled expiry (1 April 2009) and that this constitutes an economic advantage within article 107(1) TFEU. In the same way the preamble to the injunction decision states at para 23 that by implementing the award Romania is reinstating the EGO incentives and will grant to the Claimants the advantages foreseen under the abolished EGO 24 from its repeal until its scheduled expiry. These preliminary decisions are, therefore, subject to the same flaws as the Commission Decision. Nevertheless, we are not persuaded that these errors in the preparatory decisions prevent the Commission from relying on the initiating decision as giving rise to a duty of sincere co operation on the part of national courts. The judgment of the GCEU leaves in existence an extant Commission investigation into State aid. In the absence of a final decision of the Commission closing the formal investigation procedure, the effects of that initiating decision subsist (European Commission v Hansestadt Lbeck (Case C 524/14 P), para 31). This necessarily imposes a duty of sincere co operation on the part of the United Kingdom. Whereas in Asteris the reasoning of the Court of Justice totally undermined the legality of the regulations in respect of subsequent years, it may well be open to the Commission to reconfigure the investigation in the present case so as to avoid the errors which resulted in the annulment of the Decision. Thus, for example, it may be open to the Commission to reframe its investigation so that it is limited to the post accession period. Similarly, we note that the reasoning of the GCEU judgment does not address the Commissions case, founded on the terms of Romanias accession agreement (L 157/203, 21.6.2005; Annex V, section 2, para 5) which exceptionally permits the Commission to object to any aid measure granted in the pre accession period from 1 September 2004 and to initiate a formal investigation procedure in relation to it and which empowers the Commission to decide thereafter that Romania shall take all necessary measures to recover the aid from the beneficiary. It may be open to the Commission to reconfigure its investigation on this basis. In any event, courts in this jurisdiction cannot be confident that the judgment of the GCEU rules out such possibilities. For these reasons, we consider that the subsisting initiating decision continues to engage the duty of sincere co operation owed by national courts, notwithstanding the failure of the Commission to apply to suspend the effect of the GCEU decision or to seek an interim order from the CJEU. With regard to the injunction decision, the Claimants object that on its construction it cannot have any application in the present circumstances. The operative part of the decision provides that Romania shall immediately suspend any action which may lead to the execution or implementation of the Award until the Commission has taken a final decision on the compatibility of that State aid with the internal market. The Claimants submit that this created only an interim prohibition until the Commission took a final decision, that that final decision was taken on 31 March 2015 and that at that point this injunction ceased to apply. Whether the injunction may have revived as a result of the annulment of the Commission Decision, as suggested by the Commission, was a point not fully argued before us. In any event, it is not necessary to reach a concluded view on this point in the light of the conclusions to which we have come on the parties other submissions. The pending appeal The decision of the GCEU is currently under appeal to the CJEU. Romania and the Commission submit that, as a result, the duty of sincere co operation continues to apply. They observe that it has not been suggested that the Commissions appeal has no realistic prospect of success and they point to a risk of conflict between the EU courts and courts in this jurisdiction if the GCEU judgment does not stand and the Commission Decision is vindicated. In Masterfoods (Case C 344/98) the Irish High Court had granted HB a permanent injunction restraining Masterfoods from inducing retailers to store Masterfoods products in freezers belonging to HB, in breach of an exclusivity clause, thereby rejecting Masterfoods case that the clause and HBs conduct infringed EC competition rules. In parallel proceedings before the Commission, the Commission ruled that the exclusivity provision infringed article 85(1) of the Treaty establishing the European Community (EC) and that HBs inducement to retailers in Ireland to enter into freezer cabinet agreements subject to a condition of exclusivity infringed article 86 EC. The Irish Supreme Court made a preliminary reference to the Court of Justice in which it asked whether the obligation of sincere co operation required the Supreme Court to stay the proceedings pending the disposal of the appeal to the Court of First Instance against the decision of the Commission and any subsequent appeal to the Court of Justice. The Court of Justice expressed the duty on a national court in such circumstances in the following terms: When the outcome of the dispute before the national court depends on the validity of the Commission decision, it follows from the obligation of sincere co operation that the national court should, in order to avoid reaching a decision that runs counter to that of the Commission, stay its proceedings pending final judgment in the action for annulment by the Community Courts, unless it considers that, in the circumstances of the case, a reference to the Court of Justice for a preliminary ruling on the validity of the Commission decision is warranted. (para 57) On behalf of the Claimants, Ms Demetriou seeks to distinguish Masterfoods on two grounds. First, she points to the fact that the decision by the Commission in that case was valid and subsisting whereas the Commission Decision with which we are concerned has been annulled. Secondly, she submits that in Masterfoods the national court was seized with precisely the same issue of law as had been decided by the Commission in its decision, namely the application of the same competition provisions to the same agreements, and that accordingly the Court of Justice was concerned to avoid a direct conflict which would have infringed the principle of legal certainty. By contrast, she submits, there is no such risk in the present case. In these proceedings the court is not asked to determine whether the award or any part of it constitutes State aid, so there is no risk of conflicting judgments on that point or on EU law more generally. In the absence of a stay of the national proceedings, the award could be enforced which might result in Romania paying compensation to the Claimants. Should the Court of Justice allow the Commissions appeal, she submits, that would oblige Romania to recover the payments of compensation which would not be a conflict but, at most, a possible practical inconvenience. Moreover, that possibility would be remote because if the Commission were to succeed on appeal before the Court of Justice it would be necessary for the matter to be remitted to the GCEU to resolve the other grounds for annulment not yet ruled on by that court. The first suggested ground of distinction may be dealt with very briefly. The judgment of the Court of Justice in Masterfoods makes clear that the duty of sincere co operation (and therefore the obligation to stay national proceedings) continues pending final judgment in the action for annulment by the Community Courts (paras 57, 59). We are also unable to accept the second suggested ground of distinction. The duty of sincere co operation is intended to preserve the effectiveness of actions taken by EU bodies with relevant competence. While it is true that the present state of legal proceedings before the EU courts and in this jurisdiction does not present the stark direct conflict apparent in Masterfoods, we are concerned with potentially contradictory decisions on the same subject matter between the same parties (cf Crehan v Inntrepreneur Pub Co [2007] 1 AC 333, per Lord Bingham of Cornhill, at para 11). Ms Demetriou minimises unduly the risk of conflict which the duty of sincere co operation is intended to avoid. It is only where there is scarcely any risk of a conflict between decisions of domestic and EU institutions that national authorities should proceed (Delimitis v Henninger Brau AG (Case C 234/89) at para 50; Emerald Supplies Ltd v British Airways plc (Nos 1 & 2) (CA) [2016] Bus LR 145, para 70). Moreover, it appears by analogy with Kernkraftwerke Lippe Ems GmbH v Hauptzollamt Osnabruck (Case C 5/14) EU:C:2015:354 at para 33, that national institutions should defer even if the impediment to the full effectiveness of EU law is only temporary. Subject to the other grounds of appeal considered below, it is not possible to conclude that there is scarcely any risk of conflict. On the contrary, the risk of the consequences to which Ms Demetriou points would amount to a substantial impediment to the operation of EU law. Accordingly, the existence of a pending appeal to the Court of Justice with a real prospect of success is, in itself, sufficient to trigger the duty of cooperation and, subject to the further grounds of appeal considered below, requires the grant of a stay so as not to undermine the effect of the Commission Decision, should it be upheld. For these reasons, we would dismiss this ground of appeal. Cross Appeal Original Ground 1: Under the ICSID Convention and the 1966 Act there is no power to stay Cross Appeal Original Ground 2: The stay is incompatible with the ICSID Convention in any event and serves no useful purpose Grounds 1 and 2 may conveniently be considered together. There are currently 154 State parties to the ICSID Convention. Both the United Kingdom and Romania are Contracting States. The United Kingdom became a party in 1966, prior to its accession to the EEC in 1973. Romania became a party in 1975, prior to its accession to the EU in 2007. The EU is not a party to the ICSID Convention. Section 6 of Chapter IV of the ICSID Convention provides for the recognition and enforcement of awards. Article 53 provides in relevant part: (1) The award shall be binding on the parties and shall not be subject to any appeal or to any other remedy except those provided for in this Convention. Each party shall abide by and comply with the terms of the award except to the extent that enforcement shall have been stayed pursuant to the relevant provisions of this Convention. Article 54 provides in relevant part: Article 53 Article 54 (1) Each Contracting State shall recognize an award rendered pursuant to this Convention as binding and enforce the pecuniary obligations imposed by that award within its territories as if it were a final judgment of a court in that State. (2) A party seeking recognition or enforcement in the territories of a Contracting State shall furnish to a competent court or other authority which such State shall have designated for this purpose a copy of the award certified by the Secretary General. Each Contracting State shall notify the Secretary General of the designation of the competent court or other authority for this purpose and of any subsequent change in such designation. (3) Execution of the award shall be governed by the laws concerning the execution of judgments in force in the State in whose territories such execution is sought. Article 55 provides that nothing in article 54 shall be construed as derogating from the law in force in any Contracting State relating to immunity of that State or of any foreign State from execution. Article 53(1) prohibits any appeal or any other remedy except those provided for in this Convention. The exception is a reference to the provisions in section 5 of Chapter IV of the Convention. Article 50 provides for any dispute between the parties as to the meaning or scope of an award to be decided by a Tribunal. Article 51 provides for revision of an award by a Tribunal on the ground of the discovery of some fact which decisively affects the award. Article 52 provides for the annulment of an award by an ad hoc Committee on the grounds that the Tribunal was not properly constituted, that it has manifestly exceeded its powers, that there was corruption on the part of a member of the Tribunal, that there has been a serious departure from a fundamental rule of procedure, or that the award has failed to state the reasons on which it is based. In each case the Tribunal or Committee concerned may stay enforcement of the award pending its decision. The Arbitration (International Investment Disputes) Act 1966 implements the ICSID Convention in the domestic law of the United Kingdom. Section 1(2) provides that a person seeking recognition or enforcement of an ICSID award shall be entitled to have the award registered in the High Court. Section 2 provides: 2. Effect of registration. (1) Subject to the provisions of this Act, an award registered under section 1 above shall, as respects the pecuniary obligations which it imposes, be of the same force and effect for the purposes of execution as if it had been a judgment of the High Court given when the award was rendered pursuant to the Convention and entered on the date of registration under this Act, and, so far as relates to such pecuniary obligations (a) proceedings may be taken on the award, (b) the sum for which the award is registered shall carry interest, (c) over the execution of the award, the High Court shall have the same control as if the award had been such a judgment of the High Court. (2) Rules of court under section 84 of the Senior Courts Act 1981 may contain provisions requiring the court on proof of the prescribed matters to stay execution of any award registered under this Act so as to take account of cases where enforcement of the award has been stayed (whether provisionally or otherwise) pursuant to the Convention, and may provide for the provisional stay of execution of the award where an application is made pursuant to the Convention which, if granted, might result in a stay of enforcement of the award. A rule of court, CPR 62.21(5), provides with regard to registration under the 1966 Act: Where, on granting permission to register an award or an application made by the judgment debtor after an award has been registered, the court considers (a) that the enforcement of the award has been stayed (whether provisionally or otherwise) under the Convention; or (b) that an application has been made under the Convention which, if granted, might result in a stay of the enforcement of the award, the court may stay the enforcement of the award for such time as it considers appropriate. At first instance, Blair J dismissed the application by Romania to set aside the order of Burton J registering the award. In Blair Js view, registration of the award would not place Romania in breach of the Commission Decision. However, he stayed enforcement of the award pending the resolution of the annulment proceedings in the GCEU on the basis that under the ICSID Convention and under section 2 of the 1966 Act an arbitral award was to be equated for the purposes of enforcement with a judgment of the High Court. As the High Court would not enforce a domestic judgment which conflicted with a decision of the Commission, it could not enforce the Award pending the outcome of the annulment proceedings. Accordingly, article 351 TFEU (set out at para 90, below) did not apply because there was no conflict between the obligations of the United Kingdom under the ICSID Convention and the EU Treaties. The Court of Appeal unanimously dismissed the appeal against the order for a stay. The majority (Arden and Leggatt LJJ) held that while section 2(1) of the 1966 Act did not have the effect of making an ICSID award registered under section 1 equivalent for all purposes to an ordinary domestic judgment, the domestic court could grant a stay of execution if in the circumstances of the case it was just to do so, provided the stay was temporary and consistent with the purposes of the ICSID Convention. Hamblen LJ (dissenting on this point) held that the ICSID Convention and the 1966 Act conferred on a registered award the same status as a final domestic judgment. Since such a judgment would not be enforced where inconsistent with EU law, there was no inconsistency with the ICSID Convention or the 1966 Act in not enforcing an award where inconsistent with EU law. On behalf of the Claimants it is submitted that Blair J and the Court of Appeal were in error in granting a stay because the ICSID Convention and the 1966 Act do not permit a stay in such circumstances. Distinguishing between enforcement and execution, they submit that a stay of enforcement may only be granted pursuant to articles 50 52 of the ICSID Convention. Article 54 imposes a duty on national courts to enforce awards and does not permit a national court to refuse enforcement where it would refuse to enforce a domestic judgment. They accept that the national court has control over the execution of an award, including power to grant a temporary stay; however, this is strictly for procedural (not substantive) reasons and only where no inconsistency arises with the duties to recognise and enforce the award. They submit that the stay granted in these proceedings was not a stay of execution but a stay of enforcement pending the determination of the GCEU proceedings, which the Court had no power to order. The provisions of the 1966 Act must be interpreted in the context of the ICSID Convention and it should be presumed that Parliament, in enacting that legislation, intended that it should conform with the United Kingdoms treaty obligations. It is a notable feature of the scheme of the ICSID Convention that once the authenticity of an award is established, a domestic court before which recognition is sought may not re examine the award on its merits. Similarly, a domestic court may not refuse to enforce an authenticated ICSID award on grounds of national or international public policy. In this respect, the ICSID Convention differs significantly from the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958. The position is stated in this way by Professor Schreuer in his commentary on article 54(1): The system of review under the Convention is self contained and does not permit any external review. This principle also extends to the stage of recognition and enforcement of ICSID awards. A domestic court or authority before which recognition and enforcement is sought is restricted to ascertaining the awards authenticity. It may not re examine the ICSID tribunals jurisdiction. It may not re examine the award on the merits. Nor may it examine the fairness and propriety of the proceedings before the ICSID tribunal. This is in contrast to non ICSID awards, including Additional Facility awards, which may be reviewed under domestic law and applicable treaties. In particular, the New York Convention gives a detailed list of grounds on which recognition and enforcement may be refused (Christoph H Schreuer, The ICSID Convention: A Commentary, 2nd ed (2009), p 1139, para 81) The Conventions drafting history shows that domestic authorities charged with recognition and enforcement have no discretion to review the award once its authenticity has been established. Not even the ordre public (public policy) of the forum may furnish a ground for refusal. The finality of awards would also exclude any examination of their compliance with international public policy or international law in general. The observance of international law is the task of the arbitral tribunal in application of article 42 of the Convention subject to a possible control by an ad hoc committee Nor would there be any room for the application of the Act of State doctrine in connection with the recognition and enforcement of an ICSID award (Schreuer, pp 1140 1141, para 85) Contracting States may not refuse recognition or enforcement of an award on grounds covered by the challenge provisions in the Convention itself (articles 50 52). Nor may they do so on grounds based on any general doctrine of ordre public, since in the drafting process the decision was taken not to follow the model of the New York Convention. However, although it is recognised that this is the general position under the Convention, it is arguable that article 54(1), by framing the relevant obligation as to enforcement as an obligation to treat an award under the Convention as if it were a final judgment of a local court, allows certain other defences to enforcement which are available in local law in relation to such a final judgment to be raised. The principle that arbitration awards under the ICSID Convention should be enforceable in the courts of all Contracting States and with the same status as a final judgment of the local courts in those States, as eventually set out in article 54(1), was a feature from an early stage in the drafting of the Convention. Mr Aron Broches, General Counsel of the World Bank at the time who chaired the regional consultative meetings (the Regional Consultative Meetings) that occurred as part of the Conventions drafting, explained to delegates that by virtue of this formula Contracting States would be entitled to apply their local law of sovereign or state immunity with regard to the enforcement of awards, and thereby avoid or minimise possible embarrassment at having to enforce awards against other friendly Contracting States. Accordingly, it was made clear that article 54(1) had the substantive effect of introducing to some degree a principle of equivalence between a Convention award and a local final judgment as regards the possibility of applying defences in respect of enforcement. See ICSID, History of the ICSID Convention (Washington DC, 1968) vol II 1: Doc 22 (20 September 1963) Memorandum of the discussion by the Executive Directors, September 10, 1963, Discussion of the First Preliminary Draft Convention, p 177); Doc 25, (30 April 1964) Summary Record of Proceedings, Addis Ababa Consultative Meetings of Legal Experts, December 16 20, 1963, p 242; Doc 31 (20 July 1964) Summary Record of Proceedings, Bangkok Consultative Meetings of Legal Experts, April 27 May 1, 1964, p 520. In his report on the Regional Consultative Meetings, Mr Broches referred to certain comments that had dealt with the effect of what was then draft section 15 (which became article 54(1)) on existing law with respect to sovereign immunity. Mr Broches explained that the drafters had no intention to change that law. By providing that the award could be enforced as if it were a final judgment of a local court, section 15 implicitly imported the limitation on enforcement which in most countries existed with respect to enforcement of court decisions against Sovereigns. However, this point might be made explicit in order to allay the fears expressed by several delegations (History, vol II 1: Doc 33 (9 July 1964) Chairmans Report on the Regional Consultative Meetings of Legal Experts, p 575; and see Doc 27 (12 June 1964) Summary Record of Proceedings, Santiago Consultative Meetings of Legal Experts, February 3 7, 1964, pp 342 et seq, where Mr Broches again indicated that this was the intended effect of what became article 54(1), but that it could be made completely clear to allay concerns). Accordingly, the provision which eventually became article 55 was included in what was designated as the First Draft of the Convention and was retained in the final version of the Convention (History, vol I, 254; vol II 1, Doc 43 (11 September 1964) Draft Convention: Working Paper for the Legal Committee, p 636). The official Report of the Executive Directors on the Convention confirmed that this provision was introduced for the avoidance of doubt (as its text indicates): see ICSID, Report of the Executive Directors of the International Bank for Reconstruction and Development on the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (Washington DC, 1965), para 43; Mr Broches made the same point in his Memorandum to the Executive Directors (History, vol II 2, Doc 128 (19 January 1965) Memorandum from the General Counsel and Draft Report of the Executive Directors to accompany the Convention, paras 43 44). The law of State immunity varies from State to State, and the Convention made no attempt to harmonise it. As Professor Schreuer points out in his commentary on article 54, persons seeking to enforce arbitration awards made pursuant to the Convention will tend to choose to do so in those jurisdictions which have the least generous rules of State immunity for the protection of the assets of other Contracting States (Schreuer, p 1124, para 27). The fact that the specific qualification of the obligation to enforce an award like a final court judgment relating to state immunity was expressly dealt with in article 55 for the avoidance of doubt indicates that article 54(1) was itself understood to have the effect of allowing the possibility of certain other defences to enforcement if national law recognised them in respect of final judgments of local courts. The travaux prparatoires also indicate that it was accepted that further defences available in national law in relation to enforcement of court judgments could be available in exceptional circumstances by virtue of the formulation of the obligation in article 54(1). Mr Broches pointed out that the First Draft went further than the Secretariat draft since treating awards in the same way as court judgments implied that exceptional grounds only could be invoked to prevent recognition and enforcement (Aron Broches, Awards Rendered Pursuant to the ICSID Convention: Binding Force, Finality, Recognition, Enforcement, Execution, (1987) ICSID Rev 287, 312). But he also resisted a proposal by the Austrian representative to delete the words (in what became article 54(1)) requiring an award to be enforced as if it were a final judgment [of a local court], so as to make the obligation in that provision an unqualified one, since the Austrian representative noted that there were several possibilities for annuling [sic] judgments even after they had been declared final (History, vol II 2, Doc 120 (11 January 1965) Summary Proceedings of the Legal Committee meeting, December 11, morning, p 901). Mr Broches stated that in his opinion by making an award the equivalent of a final judgment one had reached the maximum obtainable (that is to say, in practical terms, given the issues raised in the drafting meetings) (Broches, p 314). So, for example, there was discussion of the possibility in English law of applying to have a final judgment of a national court set aside on the grounds that it was obtained by fraud, and Mr Broches confirmed that this would also be applicable in relation to a Convention award: see History, vol II 2, Doc 113 (11 January 1965) Summary Proceedings of the Legal Committee meeting, December 10, afternoon, p 889 (If a final judgment against a sovereign State could not be executed, then an award could not be executed either; and in the same way, if a final judgment was open to some extraordinary remedy in the case of fraud or similar occurrence, that would be true for the award as well.). Later, Mr Broches resisted a suggestion that what is now article 55 should be expanded so as also to cover the cases where there were laws which, although not related to immunities, might limit the execution of the award against the State, on the grounds that he thought this was unnecessary because full recognition had been given to the laws of the State in article [54] and [article 55] dealt with one specific problem on which certain delegations had expressed concern (History, vol II 2, Doc 120, p 905). In his commentary on article 54, Professor Schreuer observes that at the stage of recognition and enforcement of awards [t]he otherwise self contained nature of the Convention does not apply (p 1120, para 10). At, pp 1142 1143, para 91 he says (omitting references): The fact that article 54(1) assimilates ICSID awards to final judgments of domestic courts implies that enforcement may be resisted in countries where national rules provide for an exceptional refusal to enforce a final judgment. Though this possibility was already acknowledged during the drafting of the Convention, it has not yet been relied upon in practice in order to defy recognition and enforcement of ICSID awards. Instead, past attempts to resist enforcement of awards have relied upon immunity from execution. Article 54(3) of the Convention is concerned with execution of awards. Its effect is that the available processes of execution will be those in the law of the State where enforcement is sought. It does not require that State to make available any other processes of execution. This provision does not limit the obligation on Contracting States to enforce awards. Once again, the matter is explained by Professor Schreuer in his commentary: having regard to all the authentic language versions of the Convention, no distinction is to be drawn between enforcement and execution (p 1134, para 64). He observes in his commentary on article 54(3): The drafting history and the context of article 54(3) make it clear that the laws of the enforcing State that govern execution of an ICSID award are of a procedural nature only. Article 54(3) does not detract from the obligation of every State party to the Convention to enforce awards. In particular, the laws of the enforcing State may not serve as a standard for the review of awards. Article 54(3) does not affect the finality and non reviewability of awards (p 1149, para 112) Articles 50(2), 51(4) and 52(5) make specific provision for staying enforcement of an award in certain specific situations, none of which applies here. Section 2(2) of the 1966 Act and CPR 62.21(5) make corresponding provision in domestic law for the grant of a stay in such situations. These stays pursuant to the Convention are available only in the context of interpretation, revision and annulment of awards addressed by those articles. In the present case, Romania has already exercised and exhausted its right under article 52 of ICSID to seek annulment of the Award. The ICSID ad hoc Committee upheld the Award on 26 February 2016. However, in light of the wording of articles 54(1) and 55 and the travaux prparatoires reviewed above, it is arguable that there is scope for some additional defences against enforcement, in certain exceptional or extraordinary circumstances which are not defined, if national law recognises them in respect of final judgments of national courts and they do not directly overlap with those grounds of challenge to an award which are specifically allocated to Convention organs under articles 50 to 52 of the Convention. Mr Broches proposed at the drafting meeting on 11 December 1964 referred to above that representatives should consciously accept something that was of necessity not precise, which each country in good faith would seek to translate into appropriate local law. He thought that it was necessary to leave some freedom to the Contracting States to interpret in good faith the principal concept laid down in the Convention (ie the obligation in article 54(1)) (History, vol II 2, Doc 120, 903). In the Court of Appeal Hamblen LJ accepted Romanias submission that the relevant obligation of the United Kingdom under article 54(1) was one of equivalence. He considered that, while there will be different national rules and procedures relating to enforcement, provided the same rules and procedures are applied to registered awards as to final court judgments in the State concerned article 54 will be complied with. In his view, the effect of section 2(1) of the 1966 Act was to make an ICSID award registered under section 1 of the Act equivalent for all purposes to a judgment of the High Court given in ordinary domestic proceedings. As a result, in his view, if the present award had been a final decision of the English court there could be little doubt that the English court would stay enforcement because payment was prohibited by a subsequent Commission decision. On that basis, he considered that enforcement of the Award had to be stayed. The courts have general powers under the CPR to order a stay where that would be appropriate outside the specific situations dealt with in CPR 62.21: see in particular CPR 3.1(2)(f), CPR 40.8A and CPR 83.7(4). Hamblen LJs view on the general question whether article 54(1) operates on the basis of a principle of equivalence gains some support from the points set out above and the travaux prparatoires referred to. But as appears below, even if he is right on that point, consideration of the effect of article 351 TFEU means that it does not follow that Romania succeeds in showing that the enforcement of the Commission Award should be refused under the ICSID Convention and the 1966 Act. On the other hand, it might be said that this reading of the obligation of each Contracting State under article 54(1) to enforce the pecuniary obligations imposed by an ICSID award as if it were a final judgment of a court in that State fails to take proper account of the scheme of the ICSID Convention as described above. It is arguable that there is countervailing force in the view of Arden and Leggatt LJJ in the Court of Appeal that it would be inconsistent with that scheme for a national court to refuse to enforce an award on the ground that, if it had been an ordinary domestic judgment, giving effect to it would be contrary to a provision of national law and that the only circumstances in which the validity or enforceability of an ICSID award can be challenged are those set out in the ICSID Convention itself. It is arguable that the words as if it were a final judgment of a court in that State in article 54(1) should not be read as referring to the circumstances in which an award is enforceable in the State concerned or as importing national standards as a requirement of enforceability. Rather it is arguable that, as Leggatt LJ put it (at para 258), albeit without consideration of the travaux prparatoires, the purpose of equating an award with a final judgment of a court in the state where enforcement is sought is to give legal force to an award for the purpose of executing it and to provide machinery for that purpose. If that is right, then section 2(1) of the 1966 Act, which implements article 54(1), would not entitle courts in this jurisdiction to refuse to enforce an award on grounds that would justify staying enforcement of a domestic judgment. On this view, article 54(1) simply provides a legal basis for execution. If anything, this might be said to emerge even more clearly from section 2(1) which provides that an award shall be of the same force and effect for the purposes of execution (emphasis added) as a domestic judgment (although clearly that provision should be read so as to conform with article 54(1), to which it is intended to give effect). Nevertheless, despite the view they took about the effect of article 54(1), Arden and Leggatt LJJ came to the conclusion that it was open to the court to grant a stay. In their view article 54(3) gave the national court control over the process of execution which includes its manner and timing and that was reflected in section 2(1)(c) of the 1966 Act. Rules of court, CPR 40.8A and CPR 83.7(4), confer wide discretionary powers to stay the execution of a final judgment. Accordingly, it was open to courts in this jurisdiction to grant a stay of execution if in the particular circumstances of the case it was just to do so, provided that the stay was temporary and consistent with the purposes of the ICSID Convention (Arden LJ at paras 122 126; Leggatt LJ at paras 260 262). Both emphasised, however, that this power could not extend to declining to enforce an award because of a substantive objection to it or staying enforcement of an award permanently or indefinitely (at paras 125, 262). The difference between Hamblen LJ on the one hand and Arden and Leggatt LJJ on the other regarding the proper interpretation of article 54(1) of the ICSID Convention is something which ultimately could only be authoritatively resolved by the International Court of Justice. There are valid arguments on both sides. It is perhaps not altogether surprising that there is some doubt about the true meaning and effect of article 54, given that the work on drafting that provision was carried out under great time pressure and is described by Broches as being characterized by great fluidity, sometimes bordering on confusion (Schreuer, p 1135, para 66). However, the important point for present purposes is that whichever view is correct, it does not assist Romania in this case. We first address the position which arises on the interpretation of article 54(1) preferred by Arden and Leggatt LJJ. We agree with them that courts in this jurisdiction have the power to stay execution of an ICSID award in the limited circumstances which they describe. However, we consider that in granting a stay of execution of the Award in the present case pending the determination of the annulment proceedings in the GCEU (or further order in the meantime) they exceeded the proper limits of that power. The grant of a stay in these circumstances was not consistent with the ICSID Convention, on their interpretation of it, under which the United Kingdom and its courts had a duty to recognise and enforce the Award. This was not a limited stay of execution on procedural grounds, but a prohibition on enforcement of the Award on substantive grounds until the GCEU had ruled on the apparent conflict between the ICSID Convention and the EU Treaties. Effect was given to the Commission Decision until such time as the GCEU might pronounce upon it. The logic of the position adopted by Arden and Leggatt LJJ was that if the GCEU upheld the Commission Decision, the stay would continue indefinitely (and the same would be true if the CJEU allows the Commissions appeal against the decision of the GCEU). But the grounds of objection raised by the Commission, even if upheld before the EU courts, were not valid grounds of objection to the Award or its enforcement under the ICSID Convention, as interpreted by Arden and Leggatt LJJ. The principle laid down in article 53(1) that awards are binding on the parties and are not subject to any appeal or other remedy except those provided under the Convention and reflected in article 54 (on their interpretation of it) was disregarded. In substance, the Court of Appeal made use of powers to stay execution granted by domestic law in order to thwart enforcement of an award which had become enforceable under the ICSID Convention. On the other hand, if article 54(1) incorporates the principle of equivalence, in line with Hamblen LJs interpretation, it remains the case that Romanias submission in answer to the Claimants cross appeal cannot succeed. This is because article 351 TFEU has the effect that any obligation on the UK courts to give effect to a decision such as the Commission Decision pursuant to the duty of sincere co operation which might arise under the Treaties in other circumstances does not arise in this case. The discussion below of Original Ground 4 of the cross appeal, explains that the United Kingdom owes relevant obligations to non EU member states under the ICSID Convention, a treaty to which the United Kingdom was party before it became a member state. By virtue of article 351 TFEU this means that the obligations on the United Kingdom arising from the ICSID Convention are not affected by the provisions of the Treaties. Leaving aside the Treaties, in the circumstances of the present case the English courts are obliged under article 54(1) of the ICSID Convention to give effect to the Award in favour of the Claimants and this is not a case in which any of the exceptional possible types of defence to enforcement contemplated by Mr Broches and Professor Schreuer arise. Leaving the Treaties out of the analysis, if the Award were a final judgment of an English court it would be enforced without question. Similarly, on Hamblen LJs interpretation of article 54(1) involving the principle of equivalence, it must follow that the Award would be enforced in the same way. Article 351 TFEU means that this obligation cannot be affected by anything in the Treaties, which are the foundation for the legal effect of Commission rulings and for the obligation of sincere co operation on which Romania seeks to rely. Romanias attempt to pray in aid the obligation of sincere co operation is an attempt to pull itself up by its own bootstraps. It cannot make out the necessary foundation for its argument, since it cannot show that the obligation of sincere co operation has any application at all. Finally, in this regard, we should refer to the submission on behalf of Romania that to the extent that there is any uncertainty as to the meaning of the relevant provisions of the ICSID Convention and the 1966 Act, this court is bound by EU law to interpret them so far as possible in accordance with EU law in order to comply with the EU principle of effectiveness (seeking to gain support from van Munster v Rijksdienst voor Pensioenen (Case C 165/91) [1994] ECR I 4686, para 34; Budjovick Budvar nrodn podnik v Rudolf Ammersin GmbH (Case C 216/01) [2003] ECR I 13657, paras 168 169). This is another bootstraps argument on behalf of Romania. The first step in the analysis should be to ask whether the United Kingdom has relevant obligations arising from the ICSID Convention which, by operation of article 351 TFEU, preclude the application of the Treaties. As explained below in relation to Cross Appeal Original Ground 3 (paras 101 108), on a proper interpretation of the ICSID Convention, the United Kingdom clearly does have such obligations. Therefore, the Treaties do not have any relevant effect and this court is not bound by EU law to interpret the Convention in the manner for which Romania contends. In any event, the proper interpretation of the Convention is given by principles of international law applicable to all Contracting States and it cannot be affected by EU law. Cross Appeal Original Ground 3: The European Communities Act 1972 does not require the United Kingdom to breach its pre accession obligations under the ICSID Convention, as implemented by the 1966 Act On behalf of the First Claimant, Viorel Micula, Mr Patrick Green QC advances this ground of appeal, which the other Claimants adopt, on the basis that a conflict might be said to arise between the United Kingdoms obligations under the ICSID Convention and EU law. Mr Green submits that the UK Parliament, in enacting section 2(1) of the European Communities Act 1972, could not have intended to empower the EU to put the United Kingdom in breach of pre accession international obligations, with only EU institutions as arbiters of the lawfulness of doing so. He says this is so for two reasons. First, it undermines the scheme of the Convention and the express terms and purpose of the 1966 Act. Secondly, at the time Parliament enacted the 1972 Act there was before it a treaty which provided, in what has become article 351 TFEU, that it would not affect the pre accession international obligations of member states. The effect of the 1972 Act was to confer defined competences within limited fields and the limitations included the preservation of prior international obligations falling within what is now article 351 TFEU. In this regard he relies on the decision of the Court of Appeal in Shindler v Chancellor of the Duchy of Lancaster [2016] EWCA Civ 469; [2017] QB 226, in particular the observations of Elias LJ at paras 58 59, and the observations of Lord Mance in Pham v Secretary of State for the Home Department [2015] UKSC 19; [2015] 1 WLR 1591, para 82. The constitutional principles which underlie this submission are clearly correct. Under the UK constitution Parliament is sovereign and EU law has effect within the United Kingdom only to the extent that it has been given such effect by section 2(1) of the European Communities Act 1972 (R (Buckinghamshire County Council) v Secretary of State for Transport (HS2) [2014] UKSC 3; [2014] 1 WLR 324, para 79; Pham v Secretary of State for the Home Department [2015] 1 WLR 1591, paras 80, 90; R (Miller) v Secretary of State for Exiting the European Union [2017] UKSC 5; [2018] AC 61, paras 60, 61). It is for the UK courts to decide on the scope and effect of section 2(1) and, as Lord Reed observed in HS2 at para 79, if there is a conflict between a constitutional principle and EU law, that conflict has to be resolved by our courts as an issue arising under the constitutional law of the United Kingdom. However, by contrast with HS2, which concerned article 9 of the Bill of Rights, the present case concerns obligations arising under the ICSID Convention which are given effect by the 1966 Act, which is not a statute of fundamental constitutional importance. In these circumstances, there is no sound basis for concluding that the effect of section 2(1) of the European Communities Act 1972 was impliedly excluded so far as the 1966 Act is concerned. In any event, successive treaties which have been given effect in the domestic law of the United Kingdom by section 2(1) of the 1972 Act have included a provision equivalent to the current article 351 TFEU. As a result, the 1972 Act has already made provision for the effect of accession on pre accession treaties and, accordingly, this ground of appeal collapses into Original Ground 4 to which we now turn. Cross Appeal Original Ground 4: Article 351 TFEU (formerly article 307 EC) Article 351 TFEU provides: The rights and obligations arising from agreements concluded before 1 January 1958 or, for acceding States, before the date of their accession, between one or more member states on the one hand, and one or more third countries on the other, shall not be affected by the provisions of the Treaties. To the extent that such agreements are not compatible with the Treaties, the member state or States concerned shall take all appropriate steps to eliminate the incompatibilities established. member states shall, where necessary, assist each other to this end and shall, where appropriate, adopt a common attitude. In applying the agreements referred to in the first paragraph, member states shall take into account the fact that the advantages accorded under the Treaties by each member state form an integral part of the establishment of the Union and are thereby inseparably linked with the creation of common institutions, the conferring of powers upon them and the granting of the same advantages by all the other member states. At first instance Blair J held that article 351 TFEU did not apply because there was no conflict between the obligations of the United Kingdom under the ICSID Convention and the EU Treaties. In the Court of Appeal the majority (Hamblen and Leggatt LJJ) considered that the issue of whether there was a conflict between the United Kingdoms duties under EU law and under the ICSID Convention depended on the proper application of article 351 TFEU. That issue had been before the GCEU in the annulment proceedings, although not in precisely the same way, and Blair J had been entitled to stay the proceedings on the basis that without a stay, there would be a clear risk of conflicting decisions with the EU courts. There had been no appeal against his finding on that point. Leggatt LJ considered that while the point could be taken by the court of its own motion, it was inappropriate to do so. Arden LJ (dissenting on this point) considered that the interpretation of article 351 TFEU was a point which should be taken by the court of its own motion. It was for the UK courts to decide whether article 351 TFEU applied to the ICSID Convention. In view of her conclusion that a stay could be ordered consistently with the ICSID Convention, there was no need to reach a final decision on the article 351 TFEU point. However, she considered that there was little overlap between that issue and the proceedings in the GCEU. Before the Supreme Court, the parties have addressed this ground of cross appeal on the basis that it arises only if Blair J and the Court of Appeal erred in concluding that to stay the enforcement or execution of the award pending the annulment proceedings is consistent with the ICSID Convention. We agree that the matter should be approached on this basis. In those circumstances, Romania and the Commission submit that the EU duty of sincere co operation nevertheless requires the imposition of a stay, while the Claimants submit that the United Kingdoms obligations to recognise and enforce awards under the ICSID Convention are pre accession treaty obligations within article 351 TFEU and are therefore unaffected by EU obligations. Preliminary issue: permission to appeal A preliminary issue which arises under this ground of cross appeal is whether the Claimants should be given permission to appeal on this ground, the question of permission having been reserved to the full hearing. At first instance, the Claimants argued that article 351 TFEU applied with the result that the obligations of the United Kingdom arising from the pre accession ICSID Convention were not subject to the over riding effect of EU law. Blair J did not express any conclusion as to the United Kingdoms separate international law obligations under the ICSID Convention, but considered that article 351 TFEU was one of the grounds on which the Claimants asked the GCEU to annul the Commission Decision and that, even though those issues were not necessarily the same as those which arose in these proceedings, there was a risk of conflicting decisions if the court were to decide the effect of article 351 TFEU while the GCEU proceedings were pending (Blair J, Judgment of 20 January 2017 [2017] EWHC 31 (Comm); [2017] Bus LR 1147, para 152). In the Court of Appeal, Leggatt LJ (at para 265) and Hamblen LJ (at paras 160 164) agreed with that conclusion. The grounds of appeal of the Claimants before the Court of Appeal did not raise objection to the judges rejection of their arguments on article 351 TFEU. However, although the position is not entirely clear, it seems that they did seek to rely on article 351 TFEU in the course of argument without amending their grounds of appeal (see Arden LJ at para 172, cf Leggatt LJ at para 265). Romania now objects to the Supreme Court considering the submissions of the Claimants on article 351 TFEU, on the ground that the point was not appealed from Blair J to the Court of Appeal. We would grant permission to appeal on this ground. First, we agree with the observation of Arden LJ in the Court of Appeal (at para 173) that courts in this jurisdiction should normally, so far as the law allows, exercise their powers so as to ensure compliance with the international obligations of the United Kingdom. The article 351 TFEU issue as now presented to this court is concerned with seeking to identify what are the relevant international obligations of the United Kingdom and, in the event of a conflict, which obligations are to prevail. Furthermore, we are persuaded that this issue goes to the heart of the present dispute and that the parties cannot by their conduct withdraw it from the courts consideration. Secondly, the ground is a pure point of law and we are satisfied that Romania and the Commission have had ample time to enable them to meet the case which is now put against them. Article 351 TFEU Article 351 TFEU is an express provision of EU law regulating priority where there are potentially conflicting obligations. It is general in scope and applies to any international agreement, irrespective of subject matter, which is capable of affecting the application of the EU Treaties (Criminal proceedings against Levy (Case C 158/91) [1993] ECR I 4287, para 11). It applies to agreements concluded by the United Kingdom before its accession on 1 January 1973 (Commission of the European Communities v United Kingdom of Great Britain and Northern Ireland (Open Skies) (Case C 466/98) [2003] 1 CMLR 6, para 25). Article 351 TFEU is intended to establish, in accordance with principles of international law, that the application of the EU Treaties does not affect the duty of a member state to respect the rights of non member states under a prior agreement and to perform its obligations thereunder (Commission of the European Economic Community v Government of the Italian Republic, In re Italian Customs Duties on Radio Valves (Case C 10/61) [1962] ECR 1; Attorney General v Burgoa (Case C 812/79) [1980] ECR 2787, para 8; Levy (Case C 158/91), para 11; R v Secretary of State for the Home Department, Ex p Evans Medical Ltd (Case C 324/93) EU:C:1995:84; [1995] All ER (EC) 481, para 27). It also implies a duty on the part of the EU institutions not to impede the performance of the obligations of the member states which stem from a prior agreement (Attorney General v Burgoa (Case C 812/79), para 9). The rule in article 351 TFEU is concerned with conflicting obligations. Accordingly, where an international agreement merely permits but does not require a member state to act in a manner contrary to EU law, the member state must refrain from such conduct (Evans Medical (Case C 324/93), para 32). Moreover, article 351 TFEU does not apply to the obligations of a member state under a pre accession agreement where the rights of non member states are not involved. If the only obligations in play are those owed to other member states, the matter is regarded as an intra EU matter and EU law prevails over obligations under pre accession agreements (Commission v Italy, In re Italian Customs Duties on Radio Valves (Case C 10/61) [1962] ECR 1, 10; Radio Telefis Eireann v Commission of the European Communities (RTE) (Joined Cases C 241/91 P and C 242/91 P) [1995] All ER (EC) 416, para 84). Determining the scope of obligations under pre accession agreements In order to determine whether a rule of EU law may be deprived of effect by a pre accession international agreement, it is necessary to consider whether that agreement imposes on the member state concerned obligations the performance of which may still be required by non member states which are parties to it (Levy (Case C 158/91), para 13; Evans Medical (Case C 324/93), para 28). In Levy the Court of Justice considered a submission that an International Labour Organization Convention, ratified by France prior to the entry into force of the Treaty of Rome, was inconsistent with a Council Directive. The Court of Justice held: [I]n proceedings for a preliminary ruling, it is not for this Court but for the national court to determine which obligations are imposed by an earlier international agreement on the member state concerned and to ascertain their ambit so as to be able to determine the extent to which they constitute an obstacle to the application of the directive. (para 21) [See also Office national de lemploi v Minne (Case C 13/93) [1994] ECR I 371, para 18.] Similarly, in Evans Medical (Case C 324/93) the Court of Justice held (paras 29 30) that it was not for that court but for the national court to determine which obligations were imposed by the Single Convention on Narcotic Drugs, a treaty concluded by the United Kingdom before its accession, and to ascertain their ambit so as to be able to determine the extent to which they thwarted the application of Community law. The authorities cited by Romania on this point cast no doubt on the principle stated in Levy and Evans Medical. In Budjovick Budvar nrodn podnik v Rudolf Ammersin GmbH (Case C 216/01) [2003] ECR I 13657, the obligation owed under the prior bilateral treaty was common ground (para 147). In T Port GmbH & Co v Hauptzollamt Hamburg Jonas (Joined Cases C 364/95 and C 365/95) [1998] ECR I 1023 the Court of Justice merely held that what is now article 351 TFEU did not apply in a case involving imports from a third country which was not at the relevant time a party to a prior international agreement concluded by member states (paras 61 65). Both Levy and Evans Medical were concerned with proceedings for a preliminary ruling. As Advocate General Lenz explained in Evans Medical (at EU:C:1994:357, para 39), what is now article 267 TFEU empowers the Court of Justice to give preliminary rulings on EU law. It does not confer any power to interpret agreements in international law which member states concluded with non member states before the entry into force of the Treaties or prior to their own accession. Accordingly, it would not be possible for the Supreme Court to make a preliminary reference to the CJEU on this issue in the present case. While it may well be open to the Court of Justice to rule on the extent of a member states prior treaty obligations in other circumstances for example in infringement proceedings (see Evans Medical per Advocate General Lenz at para 44; European Commission v Slovak Republic (Case C 264/09) [2011] ECR I 8065, paras 32 40) or in direct actions (RTE (Joined Cases C 241/91 P and C 242/91 P)), Levy and Evans Medical make clear that this is not a question of EU law and that there can be no objection to the courts of a member state deciding the issue. Furthermore, as this is a matter of the interpretation of the prior agreement in international law, EU courts are no better placed to determine the scope of obligations under a pre accession agreement than the courts of the member state concerned or, indeed, a court or tribunal which has jurisdiction to rule on its meaning under the prior agreement itself. On behalf of Romania, Mr ODonoghue QC submits that in applying article 351 TFEU it is necessary to distinguish between two questions. The first is whether there is a relevant prior international obligation in play at all. The second is whether, even if as a matter of international or domestic law the obligation is in some sense owed to all parties to the prior agreement, the effect of that is that the case does not only involve intra Community relations for the purposes of article 351 TFEU. His formulation of the second limb, however, mis states the effect of the authorities. While it is correct that in order for article 351 TFEU to apply relevant obligations under the prior treaty must be owed to a non member state, that does not impose an additional requirement that the particular dispute before the court must relate to extra EU activities or transactions. The decisions of the Court of Justice demonstrate that the opposite is the case. Thus, Levy was concerned only with conduct within France. Similarly, Evans Medical concerned activities entirely within the EU the importation of drugs from the Netherlands to the United Kingdom but article 351 TFEU was nevertheless engaged. In both cases what mattered was that the relevant obligations under the prior treaties were owed to non member states. Thus, notwithstanding the fact that the United Kingdom, Sweden and Romania were at the material times all member states, if the relevant obligations under the ICSID Convention are owed to ICSID contracting States which are non member states, article 351 TFEU will be engaged. Does article 351 TFEU apply to the United Kingdoms relevant obligations under the ICSID Convention? It is not difficult to see that all States which are parties to the ICSID Convention have an interest in the effective operation of the Convention scheme for the enforcement of arbitral awards. However, article 351 TFEU is concerned with conflicting obligations and, accordingly, it is only if a relevant obligation under ICSID is owed by the United Kingdom to a non member state that the Claimants can succeed on this ground. We also accept the submission on behalf of Romania that we are not here concerned with the general question whether the United Kingdom owes obligations under the ICSID Convention to non member states, but with the question whether the specific obligation of the United Kingdom under the ICSID Convention to enforce this award is owed by the United Kingdom to non member states. Romanias case is that the only legal obligation of the United Kingdom which is in play is the obligation owed under the ICSID Convention to Sweden, which is an EU member state. It submits that Sweden is the only State with a direct interest in the enforcement of the award. The Claimants, on the other hand, identify as the relevant obligations of the United Kingdom articles 54 and 69 of the ICSID Convention. Article 54(1) provides that each contracting State shall recognise an award rendered pursuant to the Convention as binding and shall enforce the pecuniary obligations imposed by that award as if it were a final judgment of a court in that State. Article 69 provides that each Contracting State shall take such legislative or other measures as may be necessary for making the provisions of the ICSID Convention effective in its territories. The Claimants submit that these obligations are owed to all other parties to the ICSID Convention. Mr ODonoghue on behalf of Romania submits that if the Claimants are correct in their submission, this would apply equally to every significant obligation in every multilateral treaty with the result that every multilateral treaty involving some parties which are not EU member states would fall within article 351 TFEU. He submits that this clearly is not correct and points to decisions of the Court of Justice relating to other multilateral conventions where, he says, article 351 TFEU did not apply: Commission v Italy, In re Italian Customs Duties on Radio Valves (Case C 10/61); Ministere Public v Deserbais (Case C 286/86) [1988] ECR 4907; RTE (Joined Cases C 241/91 P and C 242/91 P). Thus, for example, he submits that in RTE (Joined Cases C 241/91 P and C 242/91 P), a direct action, the CJEU found that the rights of non member states under the Berne Convention were not involved, since the case involving the United Kingdom and Ireland only concerned the rights of EU member states, notwithstanding that the Berne Convention was a multilateral treaty involving multiple non member states. He relies in particular on para 84 of the judgment where the Court of Justice observed: It is, however, settled case law that the provisions of an agreement concluded prior to entry into force of the Treaty or prior to a member states accession cannot be relied on in intra Community relations if, as in the present case, the rights of non member countries are not involved (Emphasis added) We note, however, that since its decision in RTE, the Court of Justice has had occasion to consider the Berne Convention in Luksan v van der Let (Case C 277/10) EU:C:2012:65; [2013] ECDR 5, where it stated (para 58) that the Berne Convention displayed the characteristics of an international agreement for the purposes of article 351 TFEU, although it concluded (para 62) that article 351 TFEU was not engaged in that case because the relevant provision of the Convention allowed but did not require a member state to adopt a measure which appears to be contrary to EU law. There is, however, a shorter and more fundamental answer to this submission of Romania: it is founded on a non sequitur. In order to determine whether article 351 TFEU applies in any particular case it will be necessary to construe the prior agreement in question in order to ascertain whether any relevant obligations arising from it are owed to non member states. The authorities on which Romania relies can cast no light on the question whether obligations under articles 54 and 69 of the ICSID Convention are owed to all Contracting States. It is clear that the specific duties in articles 54 and 69 of the ICSID Convention are owed to all other Contracting States. The Convention scheme is one of mutual trust and confidence which depends on the participation and compliance of every Contracting State. The importance within this scheme of the effective recognition and enforcement of awards is apparent from the preamble which emphasises the requirement that any arbitral award be complied with. The structure of the ICSID Convention supports this interpretation. The Convention establishes the International Centre for Settlement of Investment Disputes to provide facilities for conciliation and arbitration of investment disputes between Contracting States and nationals of Contracting States (article 1). The Convention provides that in relation to such disputes any Contracting State or any national of a Contracting State can apply to a tribunal appointed pursuant to Chapter IV of the Convention. However, article 64 provides a separate route for resolution of disputes between Contracting States by permitting an aggrieved State to refer the matter to the International Court of Justice. This is required to provide a remedial mechanism in cases of infringement of direct obligations owed to other States. The obligations of Contracting States in articles 53, 54 and 69 are expressed in unqualified terms, without limit as to the persons to whom they are owed. Article 64 is expressed in entirely general terms which are apt to include disputes regarding the obligations set out in those articles. These features of the Convention regime provide a strong indication that a Contracting State which has obligations under the Convention in relation to an award owes those obligations to all other States party to the Convention as well as to any party to the award. Article 27(1) confirms that the obligation on a Contracting State against whom an arbitration award is made to comply with the award is not just owed to the other parties to the dispute, since it recognises that any Contracting State whose national is involved in the dispute may bring an international claim against the other Contracting State if it fails to comply with the award rendered. Professor Schreuer in his commentary on article 53 confirms that the obligation of compliance under article 53 is in fact owed to every other Contracting Party: p 1100, para 13 and p 1109, para 46. The same is true of the obligation under article 54, as Professor Schreuer confirms in his commentary on that provision at p 1125, para 28, (non compliance with article 54 would carry the usual consequences of state responsibility ). The Claimants identify four features of the scheme, which demonstrate that its purpose requires that the relevant obligations must be owed, not only to the State of nationality of the party seeking to enforce the award, but to all Contracting States. First, a key purpose of the Convention is to encourage investment by providing investors with reassurance that a monetary award can be enforced in the territories of all Contracting States. The failure of any Contracting State to enforce an award in accordance with article 54 would undermine the Convention scheme on which investors and Contracting States all rely. This points to a network of mutual enforcement obligations. Secondly, were a Contracting State, when implementing its Convention obligations into domestic law, to qualify them by providing that no award was to be recognised or enforced if illegal under domestic law or contrary to its public policy, that would represent a plain breach of duty owed to all other Contracting States of which they would all be entitled to complain, even before such legislation came to be applied in any particular case. Thirdly, if a Contracting State were to fail to enforce an award in accordance with the ICSID scheme the beneficiaries of the award would be compelled to seek enforcement elsewhere and the burden of enforcement would fall on other States involving expenditure of resources within their legal systems. Fourthly, in such situations attempts to enforce in an alternative forum might result in the party against which enforcement is sought reducing or withdrawing its commercial assets in that alternative forum to the detriment of the State concerned. The travaux prparatoires of the ICSID Convention also support the view that obligations to comply with the Convention scheme are owed to all Contracting States. Thus, at the Fifth Session held on 18 December 1963, responding to a suggestion by the representative of Dahomey that, by analogy with article 94 of the UN Charter, the Security Council be given power to enforce awards, the Chairman stated that he did not believe that any State which had acceded to the Convention would fail to fulfil its provisions but added: If it did, other Contracting States might take such action as might be appropriate. (History, vol II I, Doc 25 (30 April 1964) Summary Record of Proceedings, Addis Ababa Consultative Meetings of Legal Experts, December 16 20, 1963, p 273) Similarly, in the Sixth Session held on 20 February 1964 the Chairman acknowledged that a Contracting States duty to comply with an award was owed to all other Contracting States. Apart from legal sanctions based on the revival of the right of diplomatic protection of the investors State there would be even more serious indirect sanctions because a State which did not comply would fail to meet its obligations not only to the investor but also to the community of Contracting States which would presumably include capital exporting countries from which the losing State could expect assistance. (History, vol II I, Doc 29 (1 June 1964) Summary Record of Proceedings, Geneva Consultative Meetings of Legal Experts, February, 17 22, 1964, p 425) Although these statements were made in the context of compliance with awards, as opposed to recognition and enforcement, they are powerful indications that obligations under the ICSID Convention are owed by all Contracting States to the community of Contracting States. Accordingly, neither the Convention nor its travaux prparatoires provide any warrant for restricting the duties owed by a Contracting State under articles 54 and 69 so that they are owed only to the State of nationality of an award beneficiary. Does the article 351 TFEU issue give rise to a risk of conflict which requires the imposition of a stay pending the outcome of the proceedings before the EU courts? Romania and the Commission submit that this court is precluded from deciding the issue of the extent of the obligations of the United Kingdom and to whom those obligations are owed because there would be a risk of a conflict between such a ruling and a future ruling by an EU court in the present dispute. It is said that the duty of sincere co operation requires courts in this jurisdiction to impose a stay pending the resolution of the issue by the EU courts. Neither the EU courts nor domestic courts have competence to give an authoritative decision, binding as between States, as to the existence and extent of obligations under a prior multilateral convention. The convention itself will usually make provision for the resolution of disputes. In the case of the ICSID Convention that function is reserved to the International Court of Justice by article 64. However, both the EU courts (for example, in infringement proceedings or direct actions) and domestic courts (in national proceedings) have competence to consider and rule upon the effect of a multilateral treaty, insofar as it may bear upon the outcome of the proceedings before them. In the present case, the duty of sincere co operation does not require courts in this jurisdiction to decline to decide this issue pending its resolution by the EU courts, or otherwise to defer to the EU courts on this issue, for the following reasons. First, the case law of the Court of Justice makes clear that, as a matter of EU law, questions as to the existence and extent of obligations under prior treaties, in the context of article 351 TFEU, are not reserved to the EU courts. In Levy and Evans Medical the Court of Justice has accepted the appropriateness of national courts ruling on such issues. Such questions are not governed by EU law and the Court of Justice is in no better position than a national court to answer them. This is addressed at paras 98 99 above. Secondly, although the Claimants have raised an article 351 TFEU issue in the proceedings before the EU courts, it is not the same issue as that with which this court is seized. In the proceedings to annul the Commission Decision, the Claimants advanced eight pleas of law, one of which was that the Commission Decision was in breach of article 351 TFEU, because that provision affords primacy to Romanias pre existing international obligations under the BIT and the ICSID Convention. The GCEU did not rule on that plea and, accordingly, it is not the subject of the appeal to the CJEU by the Commission. Although the pleadings before the GCEU made references to article 54 of the ICSID Convention in conjunction with article 53, the essential article 351 TFEU issue raised by the Claimants in the annulment proceedings concerned Romanias obligation to abide by and comply with the award under article 53 of the ICSID Convention. By contrast, the issue with which we are concerned in these proceedings is the United Kingdoms obligations to implement the ICSID Convention and to recognise and enforce the award under articles 54 and 69 of the ICSID Convention. The extent of the United Kingdoms obligations under those articles has not been raised before the EU courts. There is, therefore, no congruence of the issues before the domestic courts and the EU courts. Thirdly, the prospect of an EU court addressing the applicability of article 351 TFEU to pre accession obligations under the ICSID Convention in the context of the present dispute is remote. Although the Claimants raised in the annulment proceedings the issue of Romanias obligations under the ICSID Convention, the GCEU did not rule on this issue. The pending appeal to the CJEU is limited to those grounds on which the GCEU decided the application. Accordingly, if the Commission fails on the appeal, the article 351 TFEU issue will not be addressed in those proceedings. If the Commission succeeds on the appeal, however, the matter will have to be remitted to the GCEU for consideration of the other pleas advanced by the Claimants and the article 351 TFEU issue, so far as concerns the obligations of Romania, may then be considered by the GCEU or on a further appeal by the CJEU. The preliminary reference to the CJEU made by the Belgian court does not raise any issue in relation to article 351 TFEU. Belgium was an original signatory of the Treaty of Rome and the entry into force of that treaty pre dated Belgiums ratification of the ICSID Convention. It is conceivable that if the United Kingdom courts were to conclude that no stay of enforcement is required, because article 351 TFEU secures pre accession obligations owed to non member states under articles 54 and 69 of the ICSID Convention, and if the United Kingdom were to enforce the award on that basis, the Commission might thereafter bring infringement proceedings against the United Kingdom in which that issue would be squarely raised. It is important to point out, however, that the Commission has given no indication that it is contemplating any such proceedings and the possibility is entirely speculative. There is no good answer to the Claimants submission that relevant duties are owed by the United Kingdom under articles 54 and 69 of the ICSID Convention to non member states, so it seems unlikely that the Commission could bring infringement proceedings on this basis. It would have no realistic prospect of success in disputing the existence of such obligations. Moreover, were it to seek to do so, the principle of comity and the two way application of the principle of sincere co operation would be likely to lead the Court of Justice to leave the interpretation of the Convention, to which the EU is not a party, to the domestic courts of the United Kingdom as a Contracting State. (In this regard see the observation of the Court of Justice in Commission v Slovak Republic (Case C 264/09), para 40.) In any event, it would not be appropriate for this court to stay enforcement in deference to the EU courts on this issue, which is not one of EU law, simply because of the speculative possibility of infringement proceedings in the future. (See, generally, Patmalneice v Secretary of State for Work and Pensions [2011] 1 WLR 783.) The possibility that the EU courts may consider this issue at some stage in the future is both contingent and remote. We cannot accept that in such circumstances the duty of sincere co operation requires the imposition of a stay on the enforcement of the award. Conclusion on the cross appeal For these reasons the duty of sincere co operation is not applicable in this case and there is no impediment to the lifting of the stay, which is an unlawful measure in international law and unjustified and unlawful in domestic law. We would therefore allow the cross appeal of the Claimants and lift the stay on enforcement of the award. The appeal In the light of our conclusion in relation to the cross appeal, it is no longer necessary to consider the appeal in relation to the provision of security. We would discharge the order for security.

The appeals arise out of the attempted enforcement of an investment arbitration award (the Award) in favour of the Respondents to this appeal (the Claimants) against the Appellant (Romania) in relation to investments made by the Claimants in food production in Romania before the country acceded to the European Union (EU). With effect from 1 April 1999, Romania adopted an investment incentive scheme for certain regions (EGO 24). On 30 June 1999, Romania incorporated EU State aid rules into domestic law, as a result of which EGO 24 was modified. During the early 2000s, the Claimants invested in a large, highly integrated food production operation in the relevant region in reliance on EGO 24. In 2002, Romania and Sweden entered into a bilateral investment treaty (the BIT) providing reciprocal protection of investments and investor State arbitration under the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (the ICSID Convention). During the accession negotiations between Romania and the EU before its accession on 1 January 2007, the EU informed Romania that certain schemes, including EGO 24, were contrary to EU State aid rules. As a result, Romania repealed all but one of the incentives under EGO 24. On 28 July 2005, the Claimants filed a request for ICSID arbitration under the BIT based on this repeal. On 11 December 2013, the tribunal issued the Award, deciding that Romania had breached the BIT and awarding compensation of approximately 70m plus interest. Romania unsuccessfully applied to annul the Award. Romania purported to implement the Award by setting off tax debts owed by one of the Claimants. This precipitated the European Commission issuing an injunction on 26 May 2014 ordering Romania to suspend any action that might lead to execution of the Award until the Commission had taken a final decision on its compatibility with State aid rules (the injunction decision). On 1 October 2014, the Commission formally opened a State aid investigation (the initiating decision). On 30 March 2015, the Commission adopted a final decision (the Commission Decision) concluding that the payment of the Award by Romania constituted unlawful State aid. The Claimants sought annulment of the Commission Decision before the General Court of the European Union (the GCEU) in 2015. On 18 June 2019, the GCEU annulled the Commission Decision on the ground that the Commission had purported to apply its powers retroactively to events pre dating Romanias accession to the EU. The Commission applied to appeal this decision. The English proceedings were started in 2014 by the Claimants applying for registration of the Award under the Arbitration (International Investment Disputes) Act 1966 (the 1966 Act), which was granted. In 2015, Romania applied for a stay of enforcement and the Claimants sought an order for security. In 2017, the High Court granted Romanias application to stay enforcement pending the GCEU proceedings and refused the Claimants application for security. The Claimants appealed these orders. In 2018, the Court of Appeal continued the stay but ordered that Romania provide security. Romania appealed the order for security and the Claimants cross appealed the grant of a stay. The hearing before the Supreme Court was listed to start on 18 June 2019, but that morning the GCEU handed down its judgment, causing the hearing to be adjourned until October 2019. The Supreme Court unanimously allows the Claimants cross appeal and lifts the stay. In light of this, it is no longer necessary to consider Romanias appeal in relation to security, so that order is discharged. Lord Lloyd Jones and Lord Sales give the judgment, with which all members of the Court agree. The Court considers the Claimants cross appeal first [40]. The Claimants appeal the stay on five grounds: (1) the effect of the GCEUs judgment is that the duty of sincere co operation no longer requires the English courts to stay enforcement; (2) there is no power to order a stay under the ICSID Convention and the 1966 Act; (3) the stay is incompatible with the ICSID Convention; (4) the European Communities Act 1972 does not require the United Kingdom to breach pre accession obligations under the ICSID Convention; and (5) Article 351 of the Treaty on the Functioning of the EU (TFEU) applies, with the result that the obligations of the United Kingdom under the pre accession ICSID Convention are not subject to the overriding effect of EU law [38] [39]. First, the Claimants submit that the GCEU decision annulling the Commission Decision changes the circumstances, meaning there is no EU law duty on the English courts to stay enforcement [43]. Romania, and the Commission intervening, submit that the GCEU judgment annuls only the Commission Decision and not the injunction or initiating decisions [44]. The Court considers that the GCEU judgment leaves in existence an extant Commission investigation into State aid. Without a final Commission decision closing the formal investigation procedure, the effects of the initiating decision subsist, imposing a duty of sincere co operation on the English courts [51]. Second, in relation to the Claimants second and third grounds, the Court examines the ICSID Convention and the 1966 Act [60] [63]. The Court emphasises that the scheme of the ICSID Convention does not permit a domestic court before which recognition is sought to re examine an award on its merits, once its authenticity is established [68]. In light of the wording of articles 54(1) and the preparatory materials, it is arguable that there is scope for certain exceptional defences against enforcement if national law recognises them in respect of final domestic judgments [78]. Though the proper interpretation of article 54(1) of the ICSID Convention is something which could only be authoritatively resolved by the International Court of Justice, it does not affect the outcome of the present case [83]. The Court agrees with the majority in the Court of Appeal that English courts have the power to stay execution of an ICSID award in the limited circumstances they describe, but in the present circumstances the granting of a stay exceeds the proper limits of that power and is not consistent with the ICSID Convention [84]. Finally, the Claimants fourth and fifth grounds collapse into one another and thus fall to be considered together [89]. Article 351 TFEU is intended to establish that the application of the EU treaties does not affect the duty of a member state to respect the rights of non member states under a prior agreement and to perform its obligations thereunder [97]. In the Courts view, the specific duties in articles 54 and 69 of the ICSID Convention are owed to all other Contracting States, including non member states [107] [108]. The duty of sincere co operation does not require courts in this jurisdiction to decline to decide the issue pending its resolution by the EU courts; EU case law makes it clear that questions regarding prior treaties under article 351 are not reserved to the EU courts. The article 351 issue here the extent of the United Kingdoms obligations under the ICSID Convention is not the same issue that is before the EU courts [112] [113]. The possibility that the EU courts may consider the issue at some future stage is contingent and remote. In such circumstances the duty of sincere co operation does not require the imposition of a stay of enforcement of the Award [117]. The Court therefore allows the Claimants cross appeal and lifts the stay. In light of this conclusion, it is no longer necessary to consider Romanias appeal in relation to security [118] [119].

This appeal concerns the legality under the Human Rights Act 1998 and the European Convention on Human Rights and Fundamental Freedoms (Human Rights Convention or the Convention) of an Enhanced Criminal Record Certificate (ECRC) issued in respect of the appellant (AR) under section 113B of the Police Act 1997. The certificate gave details of a criminal charge for which he had been tried and acquitted. The Court of Appeal held that the information contained in the certificate involved no breach of his rights under either article 6.2 (presumption of innocence) or article 8 (right to respect for private and family life). Permission to appeal was given solely in respect of article 8. The main issue in short is whether the admitted interference with his private life involved in the disclosure was justified, having regard in particular to what is said to be the limited utility to its recipients of the information so disclosed. The appeal also raises questions as to the proper role of the appellate courts in reviewing the judges finding of proportionality under the Convention. The legislation Part V of the Police Act 1997 provides a legislative framework for the disclosure of criminal records, for example where required in connection with applications for employment or licences. It has been subject to a number of amendments since then. The following references are to the Act as it was in the period material to the certificates issued in this case, that is, between March 2011 and August 2012. Significant amendments made to the scheme under the Protection of Freedoms Act 2012 (the 2012 Act) came into effect in September 2012. These followed a report by Sunita Mason, the Independent Advisor for Criminality Information Management: A Common Sense Approach A review of the criminal records regime in England and Wales (the Mason review). In her Preface she spoke of a degree of dissatisfaction with a system that has evolved with the laudable aim of protecting vulnerable people but is now viewed by some as intrusive and an unnecessary bar to employment. There is also concern that some people may be treated as guilty until proven innocent. She recommended a number of common sense actions to rebalance the system. Although not directly applicable to the case before us, the changes throw some light on the perceived weaknesses of the system at the time, and will need to be taken into account in considering references to our judgment in the future. Also in September 2012 (again in line with the Mason recommendations) there came into force provisions enabling a person dissatisfied with the content of an ECRC to apply for its review by the Independent Monitor established under the Police Act 1997 (sections 117A, 119B). A further important change occurred on 1 December 2012 when the functions of the Secretary of State, formerly carried out by the Criminal Records Bureau, were transferred to the Disclosure and Barring Service (DBS) by an order made under section 88 of the 2012 Act. The 1997 Act as amended provides for three forms of certificate, only the third of which is in issue in the appeal. Section 112 provides for the issue of criminal conviction certificates (CCCs), giving prescribed details of every conviction held in central records, not including spent convictions (section 112(3)); or stating that there is no such conviction (section 112(2)). CCCs are available to any applicant over 16 on payment of a fee. Section 113A provides for the issue on a more restricted basis of criminal record certificates (CRCs) which differ from CRCs in particular in that they include details of spent convictions and cautions (section 113A(6)). Under section 113A(2) an application for a CRC must be countersigned by a registered person with a statement by the registered person that the CRC is required for the purposes of an exempted question. By section 113A(6) exempted questions are ones in respect of which certain provisions of the Rehabilitation of Offenders Act 1974 are disapplied. Typically, they include questions to assess the suitability for admission to certain professions, or for certain offices or employments; or to hold certain licences or permits, or to work with children or vulnerable adults. A registered person is a person listed in the register maintained by the Secretary of State under section 120(1) as likely to ask such questions, such as employers or prospective employers, or bodies responsible for appointment to certain voluntary roles, or for granting certain types of licences. Section 113B, which is in issue in this case, deals with a third category enhanced criminal record certificates (ECRCs). Like CRCs they are issued again on an application countersigned by a registered person for the purposes of an exempted question, but can contain additional information. The relevant definition is in section 113B(3) and (4): (3) An enhanced criminal record certificate is a certificate which (a) gives the prescribed details of every relevant matter relating to the applicant which is recorded in central records and any information provided in accordance with subsection (4), or (b) states that there is no such matter or information. (4) Before issuing an enhanced criminal record certificate the Secretary of State must request the chief officer of every relevant police force to provide any information which, in the chief officers opinion (a) might be relevant for the purpose described in the statement under subsection (2), and (b) ought to be included in the certificate. (In September 2012, following a recommendation of the Mason review, section 4(a) was amended to refer to information which the chief officer reasonably believes to be relevant: 2012 Act section 82(1)(c).) Thus, there is an important difference between the contents of CRCs and ECRCs. The information included in a CRC is limited to the facts of convictions or cautions or their absence. By contrast, an ECRC includes information on the basis simply of the chief officers opinion as to its relevance, and whether it ought to be included in the certificate. In the case of an ECRC, it must further be shown that the exempted question is being asked for a particular prescribed purpose. The Police Act 1997 (Criminal Records) Regulations 2002 (SI 2002/233) prescribed the purposes for which an ECRC might be required (regulation 5A). They included a range of matters, starting with various categories of work with children (defined in regulation 5C) and with adults (regulation 5B), and extending to such matters as obtaining licences under the Gambling Act 2005 or the National Lottery etc Act 1993, and assessing suitability for employment related to national security, and suitability to obtain a taxi driver licence (regulation 5A(c) (zf)). The present case the facts On 21 January 2011 the appellant (AR), then aged nearly 33, was acquitted of rape by the Crown Court sitting at Bolton. He was a married man with children, of previous good character, and a qualified teacher, but was working at the time as a taxi driver. It had been alleged that, shortly after 1.00 am on 4 November 2009, he had raped a 17 year old woman, who was a passenger in a taxi driven by him. His defence was that there had never been sexual contact with the alleged victim. Both he and the complainant gave evidence and were cross examined at the trial. There was no scientific evidence to support or undermine the allegation. Following his acquittal, he applied for an ECRC in connection with an application for a job as a lecturer. On 22 March 2011 an ECRC (the first ECRC) was issued which, under the heading other relevant information disclosed at the Chief Police Officers discretion, contained the following statement about the charge and acquittal: On 4/11/09 police were informed of an allegation of rape. A 17 year old female alleged that whilst she had been intoxicated and travelling in a taxi, the driver had conveyed her to a secluded location where he forcibly had sex with her without her consent. AR was identified as the driver and was arrested. Upon interview he stated that the female had been a passenger in his taxi, but denied having sex with her, claiming that she had made sexual advances towards him which he had rejected. Following consideration by the Crown Prosecution Service, he was charged with rape of female aged 16 years or over, and appeared before Bolton Crown Court on 21/01/11 where he was found not guilty and the case was discharged. On 20 April 2011 AR submitted an objection to the contents of the certificate, stating: There is no conviction. The jury rejected the complainants evidence and the disclosure of the allegation is so prejudicial as to prevent me from being fairly considered for employment. Even if the disclosure of the allegation was possibly appropriate the disclosure fails to provide a full account of the evidence given and how the jury came to its conclusion. It is wrong, unfair and grossly prejudicial [that] I should have to defend myself every time I apply for employment after the jury have ruled I am an innocent man. The disclosure was upheld on 16 May 2011 by Inspector Kynaston (the officer responsible for the initial decision). AR then appealed to the Information Governance Unit (IGU) of the Greater Manchester Police in a letter dated 2 June 2011. His letter pointed out that he was a qualified teacher and wanted to pursue that career, but that now, when I apply for jobs, this rape allegation is disclosed on my CRB and therefore employers will not consider me. The appeal was rejected. The panel took account of a Memorandum dated 20 March 2012, on a standard form, prepared by a Ms Wilson, and signed also by Inspector Kynaston. (I understand that the form was part of the so called QAF documents, to which I will refer below: para 34.) She noted ARs application for the post of lecturer, and stated her view that the information was relevant to the post applied for and ought to be disclosed. In answer to a question as to the relevance of the information, she noted that the position of lecturer would give the opportunity for the applicant to befriend vulnerable females of a similar age to the victim, with the risk that he might use his role to abuse his trust and authority and commit similar offences. quality to pass the test, she said: In answer to the question Do you believe the information to be of sufficient I believe the information is of sufficient quality to pass the required test because: There was sufficient evidence for the CPS to authorise the applicant being charged with Rape, indicating that they believed there to be a realistic prospect of conviction. If the CPS had not believed the allegation, they would not have authorised the charge. This indicates that on the balance of probabilities the allegation was more likely to be true than false. Although the applicant was found not guilty by the jury, the test for criminal conviction is beyond all reasonable doubt, which is higher than that required for CRB disclosure purposes. Therefore the applicants acquittal does not prove that he was innocent, or even that the jury thought he was innocent, just that he could not be proved guilty beyond all reasonable doubt She then reviewed the details of the case at trial, referring for example to the trial judges comment on the inconsistencies in the complainants account, which she thought could plausibly be attributed to her admitted intoxication. Ms Wilson concluded this section: Although the IGU review has raised that the acquittal indicates that the allegation might not be true, the legislation and guidance is clear that allegations that might not be true can be disclosed, as the test required for CRB disclosure purposes is lower than this. Due to the above, I believe that the information is more likely to be true than false and is not lacking in substance, and it is reasonable to believe that the information might be true, and therefore it passes the required test. In answer to the question do you consider the information is both reasonable and proportionate to disclose, she said that it was. It was relatively recent, and although isolated was very serious as it relates to an alleged rape using force, by a stranger. She added: If the applicant repeats this alleged behaviour in the [position applied for], vulnerable people could be caused serious emotional and physical harm. She recognised that disclosure would have an impact on ARs human rights as he may fail to gain employment in his chosen profession, but this would not prevent him gaining employment in another profession which does not require an enhanced CRB check. She thought it important that the potential employer was made aware of this allegation in order that they can make an informed recruitment decision and act to safeguard vulnerable people; and that the potential risk to vulnerable people outweighed the effect of disclosure on his human rights. The Memorandum ended with a comment that the disclosure text was accurate, balanced, and not excessive There is no intimation of the applicants guilt or otherwise in the text. On 28 March 2012 a second ECRC was issued, this time in connection with an application by AR for a licence to work as a private hire driver. The ECRC contained the same information as before. AR wrote to the Criminal Records Bureau (CRB), in similar terms to his earlier letter, with further information about his academic qualifications, and his family, and commenting: This will affect the rest of my life and future as nobody will employ me to teach with this disclosed on my CRB. The disclosure was confirmed by the CRB on 7 August 2012. An internal note indicated that the letter was treated as offering no new information, and as covered by the previous consideration. The proceedings The present proceedings for judicial review were issued on 21 December 2012. They came before HH Judge Raynor QC (sitting as a Deputy High Court judge), who dismissed the claim in a judgment given on 5 September 2013 ([2013] EWHC 2721 (Admin)). He identified three issues (para 1): (a) whether the disclosure was a breach of the presumption of innocence under article 6.2 of the European Convention on Human Rights; (b) whether the disclosure was procedurally unfair because it was inconsistent with the claimants acquittal and/or occurred without consultation, and (c) whether the retention and disclosure of data regarding the acquittal is and was a breach of article 8 of ECHR. As to article 6.2, he held, having regard in particular to the guidance of the European Court of Human Rights in Allen v United Kingdom (2013) 36 BHRC 1; (2016) 63 EHRR 10, that the disclosure involved no breach of that article. The disclosure did not suggest that AR should have been convicted, or that he in fact committed the acts complained of (para 55). Nor was there any procedural unfairness in respect of the decision under challenge in March 2012: When making that decision, account was taken of his previous complaints regarding the March 2011 disclosure, there had been no legal challenge to that disclosure and the Chief Constable in my view was entitled to proceed upon the basis that the claimants complaints were as previously stated. In the event it is plain that the police in the March 2012 review anticipated and considered the matters that the claimant later raised in his letter of 22 June 2012 and, as submitted by the defendants, no suggestion has been made in these proceedings of any further substantive matters that the claimant would have wished to raise. (para 40(e)) The judge also rejected the suggestion that the police, as part of the decision making process, should have obtained a full trial transcript; a transcript of the summing up was sufficient (para 40(b)). In relation to article 8, he referred in some detail (para 30) to the leading authority of R (L) v Comr of Police of the Metropolis [2009] UKSC 3; [2010] 1 AC 410; (Ls case). He concluded (paras 39 40) that the disclosure was reasonable, proportionate and no more than necessary to secure the objective of protecting young and vulnerable persons. He accepted that the review had proceeded on the false premise that the CPS decision to charge itself indicated that the allegation was more likely to be true than false, but considered that the review was carefully considered and fair. On the substance of the allegation he said: The fact of acquittal was recognised, and in my view it was right to comment that nothing could be assumed from the fact of acquittal other than that the jury was not satisfied beyond reasonable doubt of guilt. Whilst I do not consider that a firm or reliable conclusion as to whether the complainants account is more likely to be true than false can be gathered from the transcript alone, I am quite satisfied that the Chief Constable was fully entitled to conclude that it was not lacking in substance, and that it [was] reasonable to believe that the information might be true. In my judgment that is a sufficient basis for disclosure (subject to the issue of proportionality), given the other factors reasonably relied upon by the Chief Constable as justifying disclosure as stated in the review, such as the seriousness of the alleged offence, its relevance to the position applied for and its comparatively recent occurrence. (paras 40(c) (d)) On the question of proportionality, having noted that the claimants employment difficulties had been taken into account, he said: In my judgment, the Chief Constable was justified in concluding that the potential risk to the vulnerable if the claimant obtained a private hire drivers licence and had acted as alleged by the complainant outweighed the detriments that would be caused to him by the disclosure and the interference with his article 8 rights and that disclosure were both justified and proportionate. I am satisfied that the disclosure in the March 2012 ECRC Certificate was no more than was necessary to meet the pressing social need for children and vulnerable adults to be protected and that the balance between that need and respect for the claimants article 8 rights was struck in the right place. (para 40(f)) In the Court of Appeal, McCombe LJ (with whom Lord Dyson MR, and David Richards LJ agreed) dealt at some length with the article 6.2 issue. He reviewed the authorities, domestic and European, including in particular the decisions of the Supreme Court in R (Adams) v Secretary of State for Justice [2011] UKSC 18; [2012] 1 AC 48, and of the Grand Chamber in Allen v United Kingdom (above). He summarised the effect of those authorities (by reference to the words of Lord Hope at para 111 of Adams): that it is not open to the state to undermine the effect of an acquittal (para 54). He accepted that there was some unfortunate language in the reviewing officers reasoning: He concluded: I have in mind here in particular the suggestion that the decision to prosecute indicated that on a balance of probabilities the allegations were more likely to be true than false and the statement of the officers own conclusion at the end that the information might be true. Nonetheless, a statement that the allegations were more likely to be true on the balance of probabilities does not cast doubt on an acquittal in view of the different, and more exacting, standard of proof in criminal proceeding (para 58) Taken as a whole, it seems to me that the issue of the certificate did not undermine the appellants acquittal. Nowhere is it said that he was in truth guilty of the offence. The purport of the certificate is to state the fact of the allegation and of the acquittal. It is no doubt implicit that this is an alert to the potential employer of those facts as to a possible risk to the vulnerable. However, that does not, to my mind, undermine the effect of the acquittal. The effect of the acquittal is that the jury was not satisfied, so that they were sure, that the appellant was guilty. The effect of indicating facts from which others may perceive a risk from a particular individual does not contradict the effect of that verdict. (para 60) He dealt more shortly with article 8, relying on the guidance of the Supreme Court in Ls case. He dismissed the complaint of procedural unfairness, for substantially the same reasons as the judge (para 66). On the roles respectively of the judicial review judge, and the Court of Appeal, he followed the judgment of Beatson LJ in R (A) v Chief Constable of Kent [2013] EWCA Civ 1706; 135 BMLR 22 (R (A)), to which I will need to return. Applying this approach McCombe LJ concluded that the appellate court should only consider the issue of proportionality for itself if it finds that the judge has made a significant error of principle. He found no such error in Judge Raynors judgment (paras 75 76). R (L) v Comr of Police of the Metropolis As already noted, the leading authority on the operation of the ECRC regime (as it appeared in its original form in section 115(6) (7) of the 1997 Act), and on its relationship to article 8, is the decision of the Supreme Court in Ls case. In the first judgment, Lord Hope described the background to the legislation, which had given effect, following consultation, to proposals in a Government White Paper, On the Record: The Governments Proposals for Access to Criminal Records for Employment and Related Purposes in England and Wales (1996) (Cm 3308). He referred (paras 4 5) to paras 29 and 30 of the White Paper, where it was explained that local records held by police forces contained a range of information about individuals, including convictions and cautions for minor offences as well as information going beyond the formal particulars of convictions, which might be of legitimate interest to those considering employing individuals for particularly sensitive posts; and that it was thought right for such information to be disclosed where there are particularly strong grounds for it, such as to combat the risk of paedophile infiltration of child care organisations; but that stricter guidelines on what may be disclosed would provide reassurance to those subject to checking . Before Ls case the leading authority had been the decision of the Court of Appeal in R (X) v Chief Constable of the West Midlands Police [2004] EWCA Civ 1068; [2005] 1 WLR 65 (Xs case). That case, like the present, involved a failed criminal charge; but not an actual acquittal following trial. The applicant had applied for a job as a social worker. Although he had no previous convictions, he had once been charged with indecent exposure, but the proceedings had been discontinued when the alleged victim failed to identify him. The ECRC issued by the Chief Constable contained details of the allegations of indecent exposure under the heading of other relevant information. The applicants challenge was rejected by the Court of Appeal. Lord Woolf CJ (paras 36 37) thought that the Act imposed on the Chief Constable a duty to disclose if the information might be relevant, unless there was some good reason for not making such a disclosure. He inferred that, in the view of Parliament, it was important for the protection of children and vulnerable adults that information be disclosed even if it only might be true. Given the statutory underpinning of the certificate, he saw little prospect of a successful challenge under article 8(2) of the Human Rights Convention, absent any untoward circumstance , adding: I accept that it is possible that there could be cases where the information should not be included in the certificate because it is disproportionate to do so; the information might be as to some trifling matter; it may be that the evidence made it so unlikely that the information was correct, that it again would be disproportionate to disclose it (para 41) In Ls case Lord Hope saw this passage as a significant departure from the way the White Paper envisaged the scheme would be operated (para 38). Its effect had been to tilt the balance against the applicant too far: It has encouraged the idea that priority must be given to the social need to protect the vulnerable as against the right to respect for private life of the applicant. The words ought to be included in section 115(7)(b) require to be given much greater attention. They must be read and given effect in a way that is compatible with the applicants Convention right and that of any third party who may be affected by the disclosure: Human Rights Act 1998, section 3(1). But in my opinion there is no need for those words to be read down or for words to be added in that are not there. All that is needed is to give those words their full weight, so that proper consideration is given to the applicants right to respect for her private life. (para 44) Ls case itself did not involve a criminal charge. The claimant had been employed by an agency providing staff for schools, which required her to apply for an ECRC. The certificate disclosed that she herself had no criminal convictions, but gave details about her child, who had been included on the child protection register on the ground inter alia of alleged inadequate parental supervision by her. It also referred to allegations that she had refused to co operate with social services. The agency ended her employment. She brought judicial review proceedings, claiming that the disclosure was in breach of her right to respect for private life under article 8 of the Convention. Her claim failed. It was held in summary that, although article 8 was engaged, the essential issue was whether the disclosure was a proportionate interference with her private life; that in cases of doubt, the applicant should be consulted before making the disclosure; but that, in the particular circumstances of the case, the significance of the information in respect of risk to children outweighed the prejudicial effect which disclosure had on her employment prospects. As Lord Hope said (para 48): there is no doubt that the facts that were narrated were true. It was also information that bore directly on the question whether she was a person who could safely be entrusted with the job of supervising children in a school canteen or in the playground. It was for the employer to decide what to make of this information, but it is not at all surprising that the decision was that her employment should be terminated. In a concurring judgment, Lord Neuberger thought it realistic to assume that in the majority of cases an adverse ECRC was likely to represent a killer blow to the hopes of a person aspiring to a post within the scope of the section (para 75). He observed that disclosable information under section 115 may frequently extend to allegations of matters which are disputed by the applicant, or even to mere suspicions or hints of matters which are disputed by the applicant; and that, taken on its own, the statutory test of relevance set too low a hurdle to satisfy article 8. The qualifying requirement to consider whether it ought to be included provided the requisite balancing exercise necessary to avoid breach of article 8 (paras 77 80). He gave examples of the factors likely to be relevant: the legislation, through the medium of section 115(7)(b), rightly acknowledges that the relevant public authority, namely the chief officer, must balance the need to protect those vulnerable people whom an ECRC is designed to assist with the article 8 rights of those in respect of whom an ECRC is issued. Having decided that information might be relevant under section 115(7)(a), the chief officer then has to decide under section 115(7)(b) whether it ought to be included, and, in making that decision, there will often be a number of different, sometimes competing, factors to weigh up. Examples of factors which could often be relevant are the gravity of the material involved, the reliability of the information on which it is based, whether the applicant has had a chance to rebut the information, the relevance of the material to the particular job application, the period that has elapsed since the relevant events occurred, and the impact on the applicant of including the material in the ECRC, both in terms of her prospects of obtaining the post in question and more generally. In many cases, other factors may also come into play, and in other cases, it may be unnecessary or inappropriate to consider one or more of the factors I have mentioned. Thus, the material may be so obviously reliable, relevant and grave as to be disclosable however detrimental the consequential effect on the applicant. (paras 80 81) Guidance statutory and non statutory Following the initial hearing the court sought more detailed information about the guidance available both to chief officers and to potential employers as to the operation of the ECRC system, and also any evidence about its impact in practice on those affected. We were interested in particular to see what advice was or is given as to the test for the reliability of information, and what if anything is said about disclosures following a trial and acquittal. The resulting picture is not entirely clear or consistent. As has been seen (para 6 above), the Mason review recommended a stricter test of relevance, but it contained no discussion of the test of reliability. It contained some discussion of the ECRC system, with examples, but no reference was made to the issue of disclosure following trial and acquittal. At the time of the decisions with which this appeal is concerned there was no statutory guidance regarding the application of the ECRC regime. Section 113B(4A), which came into force on 10 September 2012, requires the chief officer to have regard to guidance published by the Secretary of State. The current guidance is the Statutory Disclosure Guidance (2nd ed, August 2015). Under the heading Information should be sufficiently credible, it states: This will always be a matter of judgement, but the starting point will be to consider whether the information is from a credible source. In particular, allegations should not be included without taking reasonable steps to ascertain whether they are more likely than not to be true. (para 18, emphasis added) The same wording appeared in a version available in some form in July 2012: see R (A) at para 12. It seems likely, as Mr Southey QC suggests, that Ms Wilsons use of the expression more likely to be true than not reflected some equivalent guidance available at the time, but the actual source has not been identified. The 2015 guidance (like the 2012 version) also addresses the issue whether the information ought to be included in the certificate, and that of proportionality: whether disclosure pursues a legitimate aim, and if so whether it is proportionate, weighing factors underpinning relevancy, such as seriousness, currency and credibility against any potential interference with privacy (para 22). Nowhere does the statutory guidance address the question of disclosure of criminal allegations following a trial and acquittal. There was at the material time non statutory guidance in the form of a so called Quality Assurance Framework (QAF). This was described by Mr Moffett QC, for the Secretary of State, as a non statutory suite of documents and processes, including specific documents concerning all aspects of the process. Ms Richards QC for the Chief Constable told the court that it had been originally developed between ACPO (the Association of Chief Police Officers) and the CRB (Criminal Records Bureau) to provide a standardised framework under which to process, consider and disclose police information for Enhanced Criminal Records and ISA registration checks. She told us that the standard forms used in the present case were part of the then current QAF (Version 7). She referred us, for example, to one of the QAF documents, GD2 Disclosure Text Good Practice Guidance, in which the purposes of disclosure were said to be to convey non conviction information that may identify a potential risk to the vulnerable. Among the listed criteria were: 3. information; only relay the relevant facts. 4. The disclosure text should be balanced and neutral in tone, offering no opinion, assumption or supposition It should not include any unnecessary detail or Again we were not referred to any specific reference to the treatment of acquittals. Mr Moffett referred us to a more recent document issued by the DBS: Quality Assurance Framework an applicants introduction to the decision making process for Enhanced Disclosure and Barring Service checks (March 2014). It discusses the three primary tests, described as tests of Relevance, Truth/Substantiation and Proportionality. Under the heading Substantiation (p 9): The weight of evidence required is set at a reasonably low level. Some have argued that a higher test, one of a balance of probabilities should be used. Case law, however, asks for consideration of whether there are untoward circumstances that lead the decision maker to believe that it is unlikely that the information is true or that the information is so without substance as to make it unlikely to be true. A reasonable decision maker would not disclose the existence of allegations without first taking reasonable steps to ascertain whether they might be true (Emphasis added) This, it will be seen, is a rather different emphasis from the statutory guidance: reasonable steps to ascertain whether the allegations might be true, rather than whether they are more likely to be true than not. The document goes on to make clear that the disclosure may include information of matters that did not result in a conviction, a prosecution or even a charge as long as they pass the tests within QAF. One reason is said to be the need to protect from harm children and vulnerable adults, both of whom, sadly, are the least likely to make good witnesses, and less likely to present themselves as credible or believable when set against their abusers. Accordingly, it is said: So, there may not be sufficient evidence to secure a prosecution or even get a case to court (remember, the tests in court are far higher than those required for disclosure) but there may be enough for police to believe that someone may pose a real risk. (Emphasis added) This document is also of interest since it contains what appears to be the only specific reference to disclosures following a not guilty verdict in a criminal trial. Under the heading What kind of information can be considered for disclosure?, it includes incidents for which individuals were found Not Guilty in a court of law (in certain circumstances). That is supported by a quotation from the judgment of Wyn Williams J in R (S) v Chief Constable of West Mercia Constabulary [2008] EWHC 2811 (Admin): I do not suggest for one minute that allegations should not be disclosed in an ECRC simply because the alleged offender has been acquitted. The circumstances surrounding the acquittal are all important. There will be instances where an alleged offender is acquitted but only because the Magistrates (or Jury) entertain a reasonable doubt about the alleged offenders guilt. The tribunal of fact may harbour substantial doubts. In such circumstances, however, it might well be perfectly reasonable and rational for a Chief Constable to conclude that the alleged offender might have committed the alleged offence. (para 70) The commentary notes that, in that particular case, the decision making was found wanting and the challenge against disclosure was upheld, but no further explanation is given. Reference to the judgment of Wyn Williams J shows that the certificate was quashed because the chief officer had failed to take account of the Magistrates express indication that they regarded it as a case of mistaken identity. It is clear also that the judge (understandably at the time) was guided by the approach of the Court of Appeal in Xs case, before the reservations expressed in Ls case. As regards guidance to employers on the use of information disclosed in ECRCs, Mr Moffett drew attention to the Secretary of States statutory duty to publish a Code of Practice in connection with the use of information provided to registered persons (Police Act 1997 section 122(2)). The Code of Practice in force at the relevant time was prepared in 2009. The current version is dated November 2015. The Code (in both versions) requires the registered body to have a written policy on the suitability of ex offenders for employment and to make it available to applicants; and to notify potential applicants of the potential effect of a criminal record history on the recruitment and selection process. There is no specific reference to the handling of information in ECRCs, or of information about acquittals, other than a general requirement to discuss the content of the Disclosure with the applicant before withdrawing the offer of employment. There appears to be no formal evidence as to how ECRCs are used in practice by employers. A recent investigation into DBS by the National Audit Office (February 2018) records: There is no check on what employers have done with the information provided by DBS. Government does not know how many people this information prevented from working with children or vulnerable adults. (para 4.15) There is some evidence that employers are encouraged to treat police disclosures with care. Mr Moffett referred to a document published by Nacro (with the support of DBS) entitled Recruiting Safely and Fairly: A Practical Guide to Employing Ex Offenders (2015). This is directed principally at the employment of those with criminal convictions, said to constitute over 20% of the working age population, and accordingly a significant talent pool that organisations cannot afford to ignore. Although there is no specific advice on the handling of information in ECRCs relating to acquittals, emphasis is given to the need to adapt procedures to avoid inadvertent discrimination against those with criminal records, and for the need for a careful and sensitive risk assessment interview where concerns arise from a criminal record check. Mr Moffett also asked the court to note evidence from a report by a company called Working Links (Tagged for Life: A research report into employer attitudes towards ex offenders) that only 5% of employers surveyed would automatically reject a candidate with a criminal record. The same report indicates that only 18% had actually employed someone they knew to have convictions. For more specific advice on the use of non conviction information, he referred us to a Local Government Association publication (Taxi and PHV Licensing: Councillors Handbook; pp 13 16). Responding to anecdotal evidence that some authorities have been reluctant to attach weight to such information, it is noted that such information can and should be taken into account and may sometimes be the sole basis for a refusal. The following advice is given: When dealing with allegations rather than convictions and cautions, a decision maker must not start with any assumptions about them. Allegations will have been disclosed because they reasonably might be true, not because they definitely are true. It is good practice for the decision makers, with the help of their legal adviser, to go through the contents of an enhanced disclosure certificate with an applicant/driver and see what they say about it. If, as sometimes happens in practice, admissions are made about the facts, that provides a firm basis for a decision. (p 15) Finally, at its request, the court was given some information about the numbers of ECRCs relating to acquittals as a proportion of the whole. Ms Richards gave us the following information for the period 1 April 2017 to 31 March 2018: During that period there were 128,154 applications for Enhanced Criminal Record Certificates (ECRCs) processed by Greater Manchester Police (GMP). In relation to 80 of the 128,154 ECRC applications, GMP provided information pursuant to section 113B(4) of the Police Act 1997. 11 of the 80 cases in which information was provided pursuant to section 113B(4) included acquittal information (some may have contained other, non acquittal information as well, eg allegations which did not result in a trial). In eight of those 80 cases, the individual disputed the inclusion of such information. Only one of the eight disputes involved the inclusion of acquittal information. The submissions Mr Southey submits first that the Court of Appeal erred in failing to carry out their own assessment of proportionality. I will deal with that issue in the next section of this judgment. He submits in any event that the treatment of the issue of proportionality by the courts below in the present case was defective. The disclosure in the ECRC should have been found to be in breach of both the substantive and procedural obligations under article 8. As to the latter, it is said, AR was not given an opportunity to make representations before the first ECRC was issued, and accordingly no weight was given to his views, for example on the possibility of alternative employment. The principal dispute has related to the substantive obligation under article 8. There is no dispute that the disclosure involved an interference with ARs rights under the article. The issue is whether, in terms of article 8.2, it was necessary . for the protection of the rights and freedoms of others in other words, whether it was proportionate. That issue had to be addressed, in short, (in Lord Neubergers words: para 29 above) by balancing the need to protect those vulnerable people whom an ECRC is designed to assist with the article 8 rights of those in respect of whom an ECRC is issued. Mr Southey did not suggest that an ECRC might not sometimes be appropriate following an acquittal. But in his submission, the starting point must be the reliability of the allegations. That could only be assessed by a detailed analysis of the evidence, by reference so far as necessary to the transcript of oral evidence (as indicated by Coulson J in R (RK) v Chief Constable of South Yorkshire Police [2013] EWHC 1555 (Admin), para 57). Further, given the potential harm of disclosure to ARs prospects, and the gravity of the allegations, they should not have been disclosed unless they could be established on the balance of probabilities. The judge had been correct to hold that it was not possible to extract from the available material a firm or reliable conclusion that the complainants account is more likely to be true than false. However, neither he nor the Court of Appeal had understood its significance. In his submission, it inevitably undermined the weight which the police had given to the value of the disclosed information in the proportionality balance. That had expressly proceeded on the basis that the complainants account was likely to be true. Reducing the weight to be given to that side of the balance implied that greater, indeed decisive, weight should have been given to the highly damaging effect of the disclosure on AR and his family. Ms Richards for the Chief Constable did not accept that it was either necessary or practicable to conduct a mini trial of the allegations, or of their probability. As shown by the case law, the decision was one of balance taking into account a range of factors, including the gravity of the alleged conduct and its circumstances, the reliability and relevance of the information, the period that has elapsed since the events in question, and the impact on the applicant. In the present case, the majority of these factors weighed in favour of disclosure: the alleged offence was of the most serious nature, the circumstances were directly related to the employment sought, and the alleged offence was recent. The acquittal indicated only that the jury was not satisfied beyond reasonable doubt that AR was guilty of rape. His acquittal and continuing denial of the offence, and the potential impact of disclosure, were important factors in the balance, but not determinative. Her general approach to the legislation was supported by Mr Moffett for the Secretary of State, although he abstained from comments on the facts of this case. Following the conclusion of the oral hearing, the court asked for further submissions on the relationship of articles 6.2 and article 8 in the present context: in short, if disclosable information was limited by the former to the bare facts of the charge and acquittal, how should that be taken into account in assessing its practical utility to employers under the article 8 balance? Mr Southey submitted that merely informing an employer of the fact of charge and acquittal could not be proportionate, because it would lead them to speculate, rather than make an informed decision, and it risked giving them the impression that the information is more reliable than it really is. Ms Richards did not accept that article 6.2 would preclude a statement that the allegations were more likely to be true than not. However, in her submission, such a statement was not necessary to make disclosure proportionate. The purpose of disclosure is to draw to the attention of the registered body matters which may indicate a potential risk; it is then for the registered body to decide what (if any) further inquiries to make and to undertake its own assessment of any potential risk that the applicant might pose. The disclosure of information in an ECRC forms only part of a recruitment process. Mr Moffett supported that position, adopting the words of the Court of Appeal in this case (para 60): The purport of the certificate is to state the fact of the allegation and of the acquittal. It is no doubt implicit that this is an alert to the potential employer of those facts as to the possible risk to the vulnerable . (His emphasis) He also gives examples of cases where further information had been accepted by the courts as properly included: i) R (A) v Chief Constable of Kent Constabulary (2013) 135 BMLR 22 in which the ECRC recorded that the applicant was found not guilty of four charges of ill treatment or neglect of a person without capacity, no evidence being offered (para 16). ii) R (LG) v Independent Monitor [2017] EWHC 3327 (Admin) in which the ECRC recorded the acquittal of a nurse on charges of theft from a patient, noting that her earlier admission of theft had been ruled inadmissible at trial, and the jury directed to acquit (para 14). iii) R (BW) v Independent Monitor [2015] EWHC 4095 (Admin) in which the ECRC had included the reasons given by a District Judge in the Youth Court for acquitting the applicant of a charge of common assault, including his view that the burden of proof was not to the required standard and that the benefit of the doubt had to be given to the [applicant]. He reminds us that, for prosecutions in the Magistrates Court, the rules envisage that reasons may be given for an acquittal: Criminal Procedure Rules rule 24.3(6). Proportionality in the appellate court Before turning to the issues arising under article 8 itself, it is necessary to address the dispute as to the correct role of the appellate court in such cases. There was no disagreement as to the correctness of the approach adopted by the HH Judge Raynor: that is, to make his own assessment of proportionality, but giving weight to the views of the primary decision maker, as the person with relevant statutory or other authority, and institutional competence (Huang v Secretary of State for the Home Department [2007] 2 AC 167; R (SB) v Governors of Denbigh High School [2007] 1 AC 100, paras 30, 34; Pham v Secretary of State for the Home Department [2015] UKSC 19; [2015] 1 WLR 1591, para 108). There is however an issue about the approach of the Court of Appeal, taking account of the guidance given by the Supreme Court in In re B (A Child) (Care Proceedings: Threshold Criteria) [2013] UKSC 33; [2013] 1 WLR 1911 (In re B). The relevant rule at the time, CPR rule 52.11(3), provided simply [The rule is now in CPR rule 52.21.] that the court will allow the appeal where the decision of the lower court was wrong. judgments of the Supreme Court in In re B: In R (A) Beatson LJ had sought to summarise the effect of the majority The majority judgments stated that the correct approach for an appellate court is to treat the exercise as an appellate exercise and not as a fresh determination of necessity or proportionality. Their reasoning was based on the requirement for a fair hearing before an independent tribunal under ECHR article 6. They considered that, because there is no obligation under article 6 to provide a right of appeal at all, it is open to domestic law to fashion the scope of any right given. In England and Wales CPR Part 52 limits this to a review of the decision of the lower court: see Lord Wilson at para 36, Lord Neuberger at paras 83 and 85, and Lord Clarke at para 136. It was recognised (see Lord Neuberger at para 88) that if, after such a review, the appellate court considered that the judge had made a significant error of principle the appellate court is able to reconsider the issue for itself if it can properly do so because remitting the issue results in expense and delay, and is often pointless. (para 87, emphasis added) Mr Southey submits that a test which depends on the court finding a significant error of principle is too narrow, and not supported by the reasoning of the Supreme Court. In re B was, he says, a different type of case. The appeal was from the judges decision on a care order. The judge had had to decide for himself whether the proposed order satisfied the statutory test, on the basis of the oral and other evidence before him. By contrast, in the present case, the judge was not the initial decision maker, but was reviewing the decision of the Chief of Police, and he heard no oral evidence. The Court of Appeal was in as good a position as the trial judge to make its own assessment of proportionality, whether or not it found an error of principle in the judges reasoning. In In re B Lord Neuberger identified two main issues for the judge (para 49), the first being whether the threshold in section 31(2) of the Children Act 1989 was satisfied; the second whether, if so, it was appropriate to make a care order. The first issue does not arise in this case. It was in the context of the second main issue (para 72ff) that Lord Neuberger considered the approach to be adopted by an appellate court on an appeal against a decision on issue of proportionality under the Convention. He thought that there should be no departure from the ordinary approach of an appellate court: that of reviewing the trial judges decision, rather than reconsidering the issue afresh (para 86). He described the approach as follows (para 88, emphasis added): If, after reviewing the judges judgment and any relevant evidence, the appellate court considers that the judge approached the question of proportionality correctly as a matter of law and reached a decision which he was entitled to reach, then the appellate court will not interfere. If, on the other hand, after such a review, the appellate court considers that the judge made a significant error of principle in reaching his conclusion or reached a conclusion he should not have reached, then, and only then, will the appellate court reconsider the issue for itself if it can properly do so (as remitting the issue results in expense and delay, and is often pointless). The contrary view of the minority was that the appellate court, while taking account of the decision of the court below, must make its own assessment of proportionality (paras 116 119 per Lord Kerr; paras 204 205 per Lady Hale). Their view was clearly rejected by the majority. I would observe that this rejection was not simply directed to cases where the first court enjoys the advantage of hearing oral evidence. It also reflected the general policy consideration that the purpose of the appeal is to enable the reasoning of the lower court to be reviewed and errors corrected, not to provide an opportunity for the parties to reargue the same case (see also McGraddie v McGraddie [2013] UKSC 58; [2013] 1 WLR 2477, para 3 per Lord Reed). Lord Neuberger dealt separately with the standard to be applied in deciding whether the judge was entitled to reach his conclusion on proportionality, once satisfied that it was based on justifiable primary facts. He rejected the view suggested in some authorities that the conclusion must be plainly wrong, before the appellate court could interfere: at least where Convention questions such as proportionality are being considered on an appeal, I consider that, if after reviewing the trial judges decision, an appeal court considers that he was wrong, then the appeal should be allowed. Thus, a finding that he was wrong is a sufficient condition for allowing an appeal against the trial judges conclusion on proportionality, and, indeed, it is a necessary condition (save, conceivably, in very rare cases). (paras 91 92) Lord Wilson agreed with the main substance of Lord Neubergers reasoning on this aspect (para 37, approving paras 83 90; and para 46, citing paras 90 91). Lord Clarke, while agreeing generally with Lord Neubergers reasoning (para 134), added his own comments on this aspect (para 137). Of CPR rule 52.11, he said: The rule does not require that the decision be plainly wrong. However, the courts have traditionally required that the appeal court must hold that the judge was plainly wrong before it can interfere with his or her decision in a number of different classes of case. I referred to some of them in Assicurazioni Generali SpA v Arab Insurance Group [2003] 1 WLR 577, to which Lord Neuberger refers at para 57, at my paras 9 to 23. It seemed to me then and it seems to me now that the correct approach of an appellate court in a particular case may depend upon all the circumstances of that case. So, for example, it has traditionally been held that, absent an error of principle, the Court of Appeal will not interfere with the exercise of a discretion unless the judge was plainly wrong. On the other hand, where the process involves a consideration of a number of different factors, all will depend on the circumstances. As Hoffmann LJ put it in In re Grayan Building Services Ltd [1995] Ch 241 at 254, generally speaking, the vaguer the standard and the greater the number of factors which the court has to weigh up in deciding whether or not the standards have been met, the more reluctant an appellate court will be to interfere with the trial judges decision. In the present context, it seems to me, in agreement with Lord Neuberger at para 58, that the court should have particular regard to the principles stated by Lord Hoffmann in Piglowska v Piglowski [1999] 1 WLR 1360, 1372, which are quoted by Lord Wilson at para 41. In Abela v Baadarani [2013] UKSC 44; [2013] 1 WLR 2043 (a decision given a few days after In re B), Lord Clarke, with the agreement of the rest of the court (including Lord Neuberger), expressed the position more succinctly. The issue in that case was whether there was good reason (under CPR rule 6.15(1)) to treat as valid service the steps taken by the claimant to bring the claim form to the attention of the defendant. He said: The judge held that there was. In doing so, he was not exercising a discretion but was reaching a value judgment based on the evaluation of a number of different factors. In such a case, the readiness of an appellate court to interfere with the evaluation of the judge will depend upon all the circumstances of the case. The greater the number of factors to be taken into account, the more reluctant an appellate court should be to interfere with the decision of the judge. As I see it, in such circumstances an appellate court should only interfere with that decision if satisfied that the judge erred in principle or was wrong in reaching the conclusion which he did. (para 23) In the light of that review, I agree with Mr Southey that the Court of Appeal applied too narrow a test, by asking simply whether the judges reasoning disclosed a significant error of principle. That expression was indeed used by Lord Neuberger, but he linked it to the question of whether the judge had reached a conclusion he should not have reached (In re B, para 88). That passage preceded and was separate from his consideration of the standard of review (para 91). As Lord Clarke said in Abela the question in relation to the standard of review is whether the judge erred in principle or was wrong in reaching the conclusion which he did (para 23, emphasis added). So far I have omitted any reference to one passage in Lord Neubergers judgment. After his discussion of the standard of review, while acknowledging the danger in over analysis, he added the following by way of further explanation: An appellate judge may conclude that the trial judges conclusion on proportionality was (i) the only possible view, (ii) a view which she considers was right, (iii) a view on which she has doubts, but on balance considers was right, (iv) a view which she cannot say was right or wrong, (v) a view on which she has doubts, but on balance considers was wrong, (vi) a view which she considers was wrong, or (vii) a view which is unsupportable. The appeal must be dismissed if the appellate judges view is in category (i) to (iv) and allowed if it is in category (vi) or (vii). (para 93) He added further comments on categories (iv) and (v) of this analysis (para 94). With hindsight, and with great respect, I think Lord Neubergers warning about the danger of over analysis was well made. The passage risks adding an unnecessary layer of complication. Further, it seems to focus too much attention on the subjective view of the appellate judges and their degrees of certainty or doubt, rather than on an objective view of the nature and materiality of any perceived error in the reasoning of the trial judge. The passage has not been without its critics. Professor Zuckerman (Civil Procedure: Principles and Practice 3rd ed, paras 24.209 210) has described it as puzzling, and saw the difference between categories (iv) and (v) as so fine as hardly to matter. In any event, I do not understand this passage to have been essential to Lord Neubergers reasoning or that of the majority. (As already noted, Lord Wilson limited his agreement to paras 83 91). In conclusion, the references cited above show clearly in my view that to limit intervention to a significant error of principle is too narrow an approach, at least if it is taken as implying that the appellate court has to point to a specific principle whether of law, policy or practice which has been infringed by the judgment of the court below. The decision may be wrong, not because of some specific error of principle in that narrow sense, but because of an identifiable flaw in the judges reasoning, such as a gap in logic, a lack of consistency, or a failure to take account of some material factor, which undermines the cogency of the conclusion. However, it is equally clear that, for the decision to be wrong under CPR 52.11(3), it is not enough that the appellate court might have arrived at a different evaluation. As Elias LJ said (R (C) v Secretary of State for Work and Pensions [2016] EWCA Civ 47; [2016] PTSR 1344, para 34): the appeal court does not second guess the first instance judge. It does not carry out the balancing task afresh as though it were rehearing the case but must adopt a traditional function of review, asking whether the decision of the judge below was wrong. It follows that in the present case it was sufficient for the Court of Appeal to consider whether there was any such error or flaw in the judges treatment of proportionality. If there was not, there was no obligation (contrary to Mr Southeys submission) for the Court of Appeal to make its own assessment. Article 8 Discussion I turn to the disputes relating to article 8. Was the Court of Appeal correct to find no material error or flaw in the judges reasoning? I need not dwell long on the procedural aspects. It makes no difference whether this is looked at by reference to article 8, or to common law principles of fairness. The complaint in essence is of lack of consultation, and was rightly rejected for the reasons given by the judge (para 16 above) as endorsed by the Court of Appeal. The officers were fully aware from the evidence at trial of the nature of ARs defence, and his personal circumstances, and they were aware and took account of the potential impact on his employment prospects. As the judge said, there was no indication of any further information he would have wished to advance. Turning to the substantive effect of article 8, Mr Southeys principal submission is that the interference involved in the disclosure could not be justified unless the officers (or the judge) were in a position to form a positive view of likely guilt. This could not be done without a full appraisal of the evidence in the trial. He relies on R (RK) v Chief Constable of South Yorkshire Police (above). There Coulson J accepted that the mere fact of acquittal did not render disclosure of the alleged offence disproportionate, but he thought it a matter of significance in assessing proportionality. In the case before him the police had failed to give it proper weight; on one reading of the documents, they seemed to have grudgingly noted the acquittal and then gone on to address the allegations as if they had been proved (para 37). Mr Southey relies particularly on a later passage in which the judge criticised the failure of the police to make any detailed analysis of the critical evidence at the trial, which had been provided in transcript form: If the ECRC is going to disclose information in relation to allegations that have been rejected by the jury, on the grounds that the allegations could still be substantiated, then at the very least that requires a detailed analysis of those allegations by reference to the evidence. (para 57) While I do not question the actual decision in that case, I cannot accept that, as a matter of domestic law or under article 8, it is necessary or appropriate for those responsible for an ECRC to conduct a detailed analysis of the evidence at the trial, such as envisaged by Coulson J. That is the task of the judge and jury, who have the advantage of seeing and hearing the witnesses. Whether or not it would be compatible with article 6.2 for the chief officer to express a view on the merits of the case following an acquittal, it is not the proper function of an officer to attempt to replicate the role of the court, or (in Ms Richards words) to conduct a mini trial. Nor can that be read into the language of the statute. His task under section 113B is to identify and disclose relevant information, not to make a separate assessment of the evidence at trial. As Mr Moffetts examples show (para 52 above), additional information may in some cases be available about the circumstances of the acquittal, including possibly the courts own statements about it, which may give reasons for treating the courts disposal as less than decisive. By contrast in the case considered by Wyn Williams J (para 36 above) the available information should have been taken as a positive indication of innocence. However, in the absence of information of that kind, it is not the officers job to fill the gap. To the extent that Ms Wilson in the present case saw it as part of her task to assess whether, in the light of the evidence at trial, the allegation was more likely to be true than false, she was in error. The judge did not make the same error. He went no further than to accept, as he was entitled to do, the Chief Constables view that the information was not lacking substance and that the allegations might be true. However, that in itself did not mean that disclosure was disproportionate. It was a matter for him to assess whether the information, albeit in the limited form contained in the ECRC, was of sufficient weight in the article 8 balance. It is to be borne in mind that the information about the charge and acquittal was in no way secret. It was a matter of public record, and might have come to a potential employers knowledge from other sources. If so, a reasonable employer would have been expected to want to ask further questions and make further inquiries before proceeding with an offer of employment. Its potential significance was as the judge found underlined by the seriousness of the alleged offence, its relevance to the position applied for, and its comparatively recent occurrence (para 40(d)). These were matters envisaged by Lord Neuberger in Ls case as potentially justifying disclosure (para 29 above). On the other side, the judge took full account of the possible employment difficulties for AR, but regarded those as no more than necessary to meet the pressing social need for which the ECRC process was enacted (para 40(f)). In my view Mr Southey has failed to identify any error in the judges reasoning. Accordingly, in agreement with the Court of Appeal I would dismiss the appeal. Postscript Although I have reached a clear conclusion on the limited issues raised by the appeal before us, it gives rise to more general concerns about the ECRC procedure in similar circumstances. I bear in mind that the case preceded the improvements made in 2012 following the Mason report. However, so far as can be judged from the material before us, little attention has been given to the conceptual and practical issues arising from the relationship of the procedure to criminal proceedings. The issue did not arise in Ls case itself, which did not involve a criminal charge, and where in any event there was no significant dispute as to the correctness of the allegations. Nor was it a subject considered in the Mason review. It seems to have been assumed, at least since the Court of Appeal decision in Xs case, that a failed prosecution is no bar to the inclusion of the same allegations in an ECRC. This understanding is reflected in the 2014 QAF document, to which Mr Moffett referred, supported by reference to a 2008 judgment of Wyn Williams J (para 36 above). But that passage gives no clear guidance as what weight should be given to an acquittal in different circumstances. As already noted, it makes no reference to the Supreme Courts criticisms of the balance struck in Xs case. Given that Parliament has clearly authorised the inclusion in ECRCs of soft information, including disputed allegations, there may be no logical reason to exclude information about serious allegations of criminal conduct, merely because a prosecution has not been pursued or has failed. In principle, even acquittal by a criminal court following a full trial can be said to imply no more than that the charge has not been proved beyond reasonable doubt. In principle, it leaves open the possibility that the allegation was true, and the risks associated with that. However, I am concerned at the lack of information about how an ECRC is likely to be treated by a potential employer in such a case. Ms Richards was at pains to emphasise that the ECRC is only part of the information available, and will be not necessarily lead to failure. On the other hand, Lord Neuberger assumed that an adverse ECRC would be a killer blow for an application for a sensitive post (para 29 above). That view was adopted without question by the Strasbourg court in MM v United Kingdom (2013) (Application No 24029/07), but it is not at all clear with respect that it was on based on any objective information or empirical evidence of what happens in practice. We have been shown reports which emphasise the importance of not excluding the convicted from consideration for employment, but they say nothing about the acquitted, who surely deserve greater protection from unfair stigmatisation. Nor does there appear to be any guidance to employers as to how to handle such issues. Even if the ECRC is expressed in entirely neutral terms, there must be a danger that the employer will infer that the disclosure would not have been made unless the chief officer had formed a view of likely guilt. These issues require further consideration outside the scope of this appeal. Careful thought needs to be given to the value in practice of disclosing allegations which have been tested in court and have led to acquittal. The figures noted above show that the number of ECRCs relating to acquittals represent a very small proportion of the whole. This may suggest that in many cases chief officers find no cause for disclosure of risk in cases following acquittals.

This appeal concerns the legality under the Human Rights Act 1998 of an Enhanced Criminal Record Certificate (ECRC) issued in respect of the appellant (AR) under section 113B of the Police Act 1997. An ordinary Criminal Records Certificate is limited to the facts of convictions or cautions or their absence. By contrast, an ECRC includes information on the basis simply of the Chief Officers opinion as to its relevance, and whether it ought to be included in the certificate. In January 2011, AR was acquitted of rape by the Crown Court. He was a married man with children, of previous good character, and a qualified teacher, but was working at the time as a taxi driver. It was alleged that he had raped a woman who was a passenger in a taxi driven by him. His defence was that there had never been sexual contact with the victim. Following his acquittal, he applied for an ECRC in the course of an application for a job as a lecturer. The ECRC was issued with details of the rape charge for which he had been tried and acquitted. AR objected to this disclosure on the basis that there had been no actual conviction and it failed to give a full account of the evidence given and how the jury came to its conclusion. The judge and the Court of Appeal dismissed ARs appeal against the disclosure, holding that it was reasonable, proportionate and no more than necessary to secure the objective of protecting young and vulnerable persons. The main issue before the Supreme Court was whether the admitted interference with ARs rights under article 8 of the European Convention of Human Rights (ECHR) due to the disclosure was justified. There was also a question as to the proper role of an appellate court in reviewing the judges finding of proportionality under the ECHR. The Supreme Court unanimously dismisses the appeal. Lord Carnwath gives the judgment with which all the other justices agree. The leading authority on the operation of the ECRC regime is the Supreme Court decision in R (L) v Comr of Police of the Metropolis [2010] 1 AC 410 (Ls case). In Ls case, the ECRC disclosed details of alleged inadequate parental supervision by the applicant of her child. It was held that although article 8 was engaged, the essential issue was whether the disclosure was a proportionate interference with her private life, and that in the particular circumstances of the case, the significance of the information in respect of risk to children outweighed the prejudicial effect of the disclosure on the applicants employment prospects [22 29]. Following the initial hearing before the Supreme Court in the present case, the court sought more detailed information about the guidance available to chief officers and potential employers as to the operation of the ECRC system, and also any evidence about its impact on those affected. The resulting picture was not entirely clear or consistent [30 41]. On the issue of the proper role of the appellate court in approaching proportionality, Lord Carnwath noted that the purpose of the appeal is to enable the reasoning of the lower court to be reviewed and errors corrected, not to provide an opportunity for parties to reargue the same case [57]. The question in relation to the standard of review is whether the judge erred in principle or was wrong in reaching the conclusion which he did [61]. To limit intervention to a significant error of principle, as the Court of Appeal did, is too narrow an approach if it is taken as implying that the appellate court has to point to a specific principle which has been infringed by the judgment of the court below. The decision may be wrong because of an identifiable flaw in the judges reasoning which undermines the cogency of the conclusion. It is equally clear, however, that it is not enough that the appellate court might have arrived at a different evaluation. In the present case, it was sufficient for the Court of Appeal to consider whether there was any such error or flaw in the judges treatment of proportionality, and if there was not, there was no obligation for it to make its own assessment [64 65]. The procedural aspect of the complaint under article 8 is essentially that there was a lack of consultation, and this was rightly rejected for the reasons given by the judge as endorsed by the Court of Appeal. The officers were fully aware from the evidence at trial of the nature of ARs defence, and his personal circumstances, and they were aware and took account of the potential impact on his employment prospects. As the judge said, there was no indication of any further information he would have wished to advance [66]. On the substantive effect of article 8, Lord Carnwath rejected the submission that the interference involved in the disclosure could not be justified unless the officers were in a position to form a positive view of likely guilt, which could not be done without a full appraisal of the evidence at trial. He did not accept that, as a matter of domestic law or under article 8, it is necessary or appropriate for those responsible for an ECRC to conduct a detailed analysis of the evidence at the trial [67 68]. The judge went no further than to accept, as he was entitled to do, the Chief Constables view that the information was not lacking substance and that the allegations might be true. It was a matter for him to assess whether the information was of a sufficient wright in the article 8 balance. It should be borne in mind that the information about the charge and acquittal was a matter of public record, and might have come to the potential employers knowledge from other sources. The judge took full account of the possible employment difficulties for AR, but regarded them as no more than necessary to meet the pressing social need for which the ECRC process was enacted [69 70]. Lord Carnwath notes in a postscript to his judgment that although he has reached a clear conclusion on the limited issues raised by this appeal, it gives rise to more general concerns about the ECRC procedure in similar circumstances. There is no clear guidance as to what weight should be given to an acquittal in different circumstances, and there is a lack of information about how an ECRC is likely to be treated by a potential employer in such a case. Careful thought needs to be given to the value in practice of disclosing allegations which have been tested in court and have led to an acquittal [72 76].

At common law, if an insured makes a fraudulent claim on his insurer, the latter is not liable to pay the claim. In relation to contracts concluded after 12 August 2016, the rule has been restated and its other consequences defined in section 12 of the Insurance Act 2015. The question at issue on this appeal is what constitutes a fraudulent claim. This is a controversial question at common law, which the Act of 2015 does not resolve. Three possible situations may be relevant. First, the whole claim may have been fabricated. In principle the rule would apply in this situation but would add nothing to the insurers rights. He would not in any event be liable to pay the claim. Secondly, there may be a genuine claim, the amount of which has been dishonestly exaggerated. This is the paradigm case for the application of the rule. The insurer is not liable, even for that part of the claim which was justified. Third, the entire claim may be justified, but the information given in support of it may have been dishonestly embellished, either because the insured was unaware of the strength of his case or else with a view to obtaining payment faster and with less hassle. The present appeal is concerned with embellishments of this kind. They are generally called fraudulent devices. The expression is borrowed from a standard clause avoiding contracts of fire insurance which was widely used in the 19th and early 20th centuries. But it is archaic and hardly describes the problem. I shall use the expression collateral lies, by which I mean a lie which turns out when the facts are found to have no relevance to the insureds right to recover. The question is whether the insurer is entitled to repudiate a claim supported by a false statement, if the statement was irrelevant, in the sense that the claim would have been equally recoverable whether it was true or false. The facts On the night of 28/29 January 2010, shortly after leaving Klaipeda in Lithuania with a cargo of scrap iron, the DC MERWESTONE was incapacitated by an ingress of water which flooded the engine room. The ingress of water was the combined result of (i) the negligence of the crew in failing to close the sea inlet valve of the emergency fire pump and drain down the system, after they had used the hoses to clear ice chips from the hatch covers; (ii) damage to the emergency fire system pump casing and filter after the vessel had sailed from Klaipeda, as a result of the freezing and expansion of the seawater inside them; (iii) the negligence of contractors employed on an earlier occasion, who failed to seal the engine room bulkheads after passing cables through them, with the result that they were not watertight; and (iv) defects in the engine room pumping system, which was unable to cope with the rate of ingress. The main engine was damaged beyond repair. The insurers instructed solicitors, Ince & Co, to investigate. Ince asked the owners for their explanation of the casualty. Mr Chris Kornet, the relevant individual in the vessels managers, developed a theory that the bilge alarm had sounded at about noon on 28 January, but the crew had been unable to investigate or deal with the leak because of the rolling of the ship in heavy weather. The judge found that this was a speculation on Mr Kornets part which he genuinely regarded as plausible. But in proffering it to Ince & Co in an e mail of 21 April 2010, he pretended that he had been told about the alarm activation by members of the crew. The judge found that this was a reckless untruth. Mr Kornet had not been told this by the crew and had no reason to believe that the crew would support it. And, although the master did later support the story, he had not done so by 21 April. Mr Kornets reason for acting in this way was that he was frustrated by the insurers delay in recognising the claim and making a payment on account. At a time when the cause of the flooding was not clear, he believed that it would fortify the claim and accelerate payment if the casualty could be blamed on the crews failure to respond to the activation of the bilge alarm. This was because otherwise attention would be concentrated on the defective condition of the ship and on the possible responsibility of the owners for that state of affairs. He had been advised that the wording of the Inchmaree clause in the Institute Time Clauses might afford a defence under the policy if the owners were found to have any responsibility for what happened. In fact, the lie was irrelevant to the merits of the claim. The judge, Popplewell J, held that the loss was proximately caused by a peril of the seas, namely the fortuitous entry of seawater through the sea inlet valve during the voyage, and that the relevant part of the Inchmaree clause had no application to this peril. He rejected a contention that the owners had sent the vessel to sea with defective engine room pumps in breach of the warranty implied by section 39(5) of the Marine Insurance Act 1906, because the managers had not known of the problem at the relevant time. It followed that the owners had a valid claim for some 3.241m whether or not the crew had failed to act on a bilge alarm activation at about noon on 28 January. However, he held that that claim was lost as a result of the collateral lie about it: [2013] 2 All ER (Comm) 465. He reached that conclusion with regret because he regarded it as unjust to the parties before him. At para 225 of his judgment, he observed: In a scale of culpability which may attach to fraudulent conduct relating to the making of claims, this was at the low end. It was a reckless untruth, not a carefully planned deceit. It was told on one occasion, not persisted in at the trial. It was told in support of a theory about the events surrounding the casualty which Chris Kornet genuinely believed to be a plausible explanation. The reckless untruth was put forward against the background of having made the crew available for interview by the Underwriters solicitor, who had had the opportunity to make his own inquiries of the crew on the topic. To be deprived of a valid claim of some 3.2m as a result of such reckless untruth is, in my view, a disproportionately harsh sanction. The case law: exaggerated claims There is a substantial body of case law on the effect of express clauses avoiding the policy or forfeiting the claim if it is affected by fraud. These cases turn on the language of the contract, although it is fair to say that most of them show a strong propensity on the part of the courts to give them an interpretation wide enough to cover any dishonesty in relation to the claim whether or not it was decisive of the merits. Such clauses appear to have been in common use from the end of the 18th century. The common law rule relating to fraudulent claims appears to originate rather later, in the middle of the 19th century. In Britton v Royal Insurance Co (1866) 4 F & F 905, which is generally regarded as the leading case, there was an express clause, but Willes J in his summing up to the jury stated the law altogether generally at pp 908 909: A fire insurance, he said, is a contract of indemnity; that is, it is a contract to indemnify the assured against the consequences of a fire, provided it is not wilful. Of course, if the assured set fire to his house, he could not recover. That is clear. But it is not less clear that, even supposing it were not wilful, yet as it is a contract of indemnity only, that is, a contract to recoup the insured the value of the property destroyed by fire, if the claim is fraudulent, it is defeated altogether. That is, suppose the insured made a claim for twice the amount insured and lost, thus seeking to put the office off its guard, and in the result to recover more than he is entitled to, that would be a wilful fraud, and the consequence is that he could not recover anything. This is a defence quite different from that of wilful arson. It gives the go bye to the origin of the fire, and it amounts to this that the assured took advantage of the fire to make a fraudulent claim. The law upon such a case is in accordance with justice, and also with sound policy. The law is, that a person who has made such a fraudulent claim could not be permitted to recover at all. The contract of insurance is one of perfect good faith on both sides, and it is most important that such good faith should be maintained. It is the common practice to insert in fire policies conditions that they shall be void in the event of a fraudulent claim; and there was such a condition in the present case. Such a condition is only in accordance with legal principle and sound policy. This approach was not initially accepted in Scotland, where the Court of Session held that the genuine part of a fraudulently inflated claim was recoverable: Reid & Co Ltd v Employers Accident & Livestock Insurance Co Ltd (1899) 1 F 1031. But in England the courts consistently applied Willes Js test to avoid the entirety of an exaggerated claim. That approach was endorsed by the House of Lords in Manifest Shipping Co Ltd v Uni Polari Insurance Co Ltd (The STAR SEA) [2003] 1 AC 469. It was settled from an early stage of the history of English insurance law that the duty of utmost good faith applied not only in the making of the contract but in the course of its performance. The principle was given statutory force by section 17 of the Marine Insurance Act. In Brittons Case, Willes J regarded the fraudulent claims rule as a manifestation of the duty of utmost good faith, a view adopted by Christopher Clarke LJ, delivering the leading judgment in the Court of Appeal in the present case (paras 76 77). The rule is peculiar to contracts of insurance, and there can be little doubt that historically it is because they are contracts of utmost good faith that they have this unique characteristic. But I am inclined to agree with the view expressed by Lord Hobhouse in The STAR SEA (paras 50, 61 62) that once the contract is made, the content of the duty of good faith and the consequences of its breach must be accommodated within the general principles of the law of contract. On that view of the matter, the fraudulent claims rule must be regarded as a term implied or inferred by law, or at any rate an incident of the contract. The correct categorisation matters only because if it is a manifestation of the duty of utmost good faith, then the effect of section 17 of the Marine Insurance Act 1906 is that the whole contract is voidable ab initio upon a breach, and not just the fraudulent claim. If, on the other hand, one adheres to the contractual analysis, the right to avoid the contract for breach of the duty must depend on the principles governing the repudiation of contracts, and avoidance would operate prospectively only. The choice is not, however, before us on this appeal because the insurers do not seek to avoid the contract. They seek only to avoid the claim for this particular casualty. What matters for present purposes is the rationale of the rule, on which there is a broad consensus in the authorities. It is the deterrence of fraud. As Lord Hobhouse observed in The STAR SEA at para 62, The logic is simple. The fraudulent insured must not be allowed to think: if the fraud is successful, then I will gain; if it is unsuccessful, I will lose nothing. Cf Galloway v Guardian Royal Exchange (UK) Ltd [1999] Lloyds Rep IR 209, 214 (Millett LJ); Direct Line Insurance v Khan [2002] Lloyds Rep IR 364, para 38; Agapitos v Andrew [2003] QB 556, para 14 (Mance LJ); AXA General Insurance Ltd v Gottlieb [2005] 1 All ER (Comm) 445 (CA), paras 28, 31. The courts have explained the lack of a similar rule in other areas of the law of contract by pointing to the asymmetrical positions of the parties to an insurance contract, the insurer being vulnerable on account of his dependence on the insured for information both at the formation of the contract and in the processing of claims: see Pan Atlantic Insurance Co Ltd v Pine Top Insurance Co Ltd [1995] 1 AC 501, 542B (Lord Mustill); Orakpo v Barclays Insurance Services [1995] Lloyds Rep IR 443, 451 (Hofmann LJ), 452 (Parker LJ). Fraudulent insurance claims are a serious problem, the cost of which ultimately falls on the general body of policy holders in the form of increased premiums. But it was submitted to us that a forfeiture rule was not the answer to that problem. There was, it was said, little empirical evidence that the common law rule was an effective deterrent to fraud, and no reason to think that the problem was peculiar to claims on insurers as opposed to, say, claims in tort for personal injuries, the cost of which also falls ultimately on insurers and policy holders without there being any equivalent common law rule. Informational asymmetry is not a peculiarity of insurance, and in modern conditions may not even be as true of insurance as it once was. These points have some force. But I doubt whether they are relevant. Courts are rarely in a position to assess empirically the wider behavioural consequences of legal rules. The formation of legal policy in this as in other areas depends mainly on the vindication of collective moral values and on judicial instincts about the motivation of rational beings, not on the scientific anthropology of fraud or underwriting. As applied to dishonestly exaggerated claims, the fraudulent claims rule is well established and, as I have said, will shortly become statutory. The case law: collateral lies The extension of the common law rule from dishonestly exaggerated claims to justified claims supported by collateral lies is a more recent and a more controversial development. So far as reported cases go, it makes its first appearance in a brief and unexplained remark of Lord Sumner in Lek v Mathews (1927) 29 Ll L Rep 141, 164. Mr Lek was alleged to have dishonestly exaggerated a claim on the insurers of his stock. In the Court of Appeal, Atkin LJ had held that even a knowing falsehood would not give rise to a forfeiture if Mr Lek genuinely believed that he was entitled to utter it. Commenting on this observation, Lord Sumner said that Lord Atkin must have had in mind mis statements on a purely collateral question, adding that even so I could not agree. Three years later, Roche J offered a somewhat more expansive statement of principle in his direction to the jury in Wisenthal v World Auxiliary Insurance Corpn Ltd (1930) 38 L Rep 54. This case concerned an all risks policy on goods in transit and in storage pending sale. The insurers disputed the insureds title and accused her of fraudulently exaggerating her claim. They also alleged that facts and documents relevant to these issues had been concealed. The report (p 62) records the relevant part of the judges summing up in the following terms: Fraud, said his Lordship, was not mere lying. It was seeking to obtain an advantage, generally monetary, or to put someone else at a disadvantage by lies and deceit. It would be sufficient to come within the definition of fraud if the jury thought that in the investigation deceit had been used to secure easier or quicker payment of the money than would have been obtained if the truth had been told. The jury held that the insured did have title and rejected the allegation of exaggeration. But they found that she had fraudulently suppressed relevant documents, and on that basis Roche J entered judgment for the insurers. In England, matters rested there until 1985, when the relevance of a collateral lie was considered in Black King Shipping Corpn and Wayang (Panama) SA v Massie (The LITSION PRIDE) [1985] 1 Lloyds Rep 437. The LITSION PRIDE was insured against war risks on terms which required her owners to give notice as soon as practicable of her entry into specified war zones and to pay an additional premium. The owners traded her into a war zone without giving notice, dishonestly intending to avoid the payment of the additional premium if the vessel got out unscathed. When she was hit by a missile and sunk, they gave the required notice by a letter which they dishonestly backdated to a date before the vessel entered the war zone. The fraud was irrelevant to the merits of the claim, because the vessel was held to be insured under a held covered clause with or without prior notice. But Hirst J held that the claim was forfeit on the ground that it was a breach of the insureds duty of good faith. His decision has not fared well in subsequent decisions. Royal Boskalis Westminster NV v Mountain [1997] 1 Lloyds Rep LR 523 was a claim on war risk underwriters for the constructive total loss of a fleet of dredgers trapped in Iraq by the Iraqi invasion of Kuwait. The owners abandoned the vessels to the underwriters, but then succeeded in procuring their release by the Iraqi authorities in return for a substantial ransom. They subsequently claimed for (i) the value of the ships, and (ii) sue and labour costs (other than the ransom) incurred in extricating them from Iraq. In presenting their claim to the underwriters, they suppressed the fact of the ransom and the detailed terms on which it was paid, mainly because they were concerned about a possible breach of United Nations sanctions against Iraq. Rix J held that the vessels were not a constructive total loss, but that the insured were entitled to a proportion of their sue and labour costs. He refused to allow the underwriters to argue that the claim was forfeit on account of the dishonest suppression of information about the insureds dealings with Iraq because the point had not been pleaded. But he added that he would have rejected the argument anyway. This was because he considered that the claim for sue and labour costs was entitled to succeed irrespective of the matters which the owners had concealed. At pp 592 593, he observed: Whatever be the precise definition and ambit of the concept of a fraudulent claim, there was no such claim here. I am in the process of finding that the sue and labour claim was and is a good and valid claim. It is not a false or fraudulent claim. It is totally unlike those instances of fraudulent claim to be found in the authorities, such as claims in respect of deliberately self inflicted or pretended losses, or claims in amounts which are knowingly or recklessly exaggerated: see, for instance, Goulstone v The Royal Insurance Co, (1858) I F & F 276, where, in the context of a claim for inter alia the loss of furniture whose value was exaggerated four fold, Pollock CB glossed a fraudulent claim as one wilfully false in any substantial particular at p 279; or Chapman v Pole, (1870) 22 LT 306, where again in the context of exaggerated value Cockburn, CJ spoke of one who knowingly preferred a claim he knew to be false or unjust at p 307; or The Captain Panagos DP, [1986] 2 Lloyds Rep 470, where Mr Justice Evans defined a fraudulent claim as one which is made on the basis that facts exist which constitute a loss by an insured peril, when to the knowledge of the assured those alleged facts are untrue, at p 511. It seems to me that even if one assumed, for instance, that the representation over the existence of any record of the finalization agreement was made fraudulently, that would not make the claim in question a fraudulent claim within these definitions of that expression. Rix Js judgment was appealed in part to the Court of Appeal and the appeal allowed, but not on this point: see [1999] QB 674. I shall refer to the Court of Appeals decision in another context below. Manifest Shipping Co Ltd v Uni Polaris Insurance Co Ltd (The STAR SEA) [2003] 1 AC 469, concerned the insureds non disclosure in good faith of a privileged expert report, said to be relevant to an allegation that the insured had knowingly sent the vessel to sea in an unseaworthy condition. The House of Lords rejected the insurers contention that they were entitled to forfeit the claim, because (i) the duty of the insured in presenting claims under the policy was a duty of honesty only, and (ii) it did not in any event subsist once proceedings had been begun. The relevance of the decision for present purposes lies in the discussion of The LITSION PRIDE in the speech of Lord Hobhouse (para 71), with whom Lord Steyn, Lord Hoffmann and Lord Clyde agreed: The particular claim was only fraudulent in so far as the broker had not been truthful in dealing with the insurers at that stage. The reasoning adopted by Hirst J has been criticised both by academic writers and by other judges in later cases. I consider that it should not any longer be treated as a sound statement of the law. In so far as it is based upon the principle of the irrecoverability of fraudulent claims, the decision is questionable upon the facts since the actual claim made was a valid claim for a loss which had occurred and had been caused by a peril insured against when the vessel was covered by a held covered clause. In K/S Merc Scandia XXXXII v Certain Underwriters (The MERCANDIAN CONTINENT) [2001] 2 Lloyds Rep 563, the point arose in a rather oblique fashion. The owners of the MERCANDIAN CONTINENT had obtained judgment in earlier High Court proceedings against a Trinidadian shipyard for damage caused by negligent repair work. Jurisdiction in the earlier proceedings had been founded on an agreed submission to the jurisdiction of the English court. The yards liability insurers appointed solicitors to conduct the defence on behalf of their insured. They had challenged the jurisdiction of the English court, relying in good faith on a document forged by the shipyards management, which suggested that the agreed submission had been made without authority. In due course the document was exposed as a forgery and the challenge to the jurisdiction was abandoned. The shipyard having gone into liquidation, the owners brought the current proceedings against the yards liability insurers under the Third Parties (Rights Against Insurers) Act 1930. The insurers defended the claim on the ground that they had lawfully avoided the policy because of the fraud of the insured shiprepairer in relation to the question of jurisdiction. Longmore LJ, delivering the leading judgment in the Court of Appeal, drew attention to the fact that the fraud was directed against the shipowners, not the liability insurers. But he rejected the defence on the principal ground that the concocted document would have made no difference to the insurers liability to meet the claim: para 42. He drew attention to the law relating to pre contractual non disclosure and misrepresentation, which required the relevant matters to be material to the risk and their non disclosure to have induced the insurer to act in a way that he would not otherwise have done. He continued (para 26): In my judgment these requirements, which must exist before an underwriter can avoid for lack of good faith pre contract, must also apply, making due allowance for the change of context, where an underwriter seeks to avoid for lack of good faith or fraud in relation to post contractual matters. In particular the requirement of inducement which exists for pre contract lack of good faith must exist in an appropriate form before an underwriter can avoid the entire contract for post contract lack of good faith. Referring (para 29) to Rix Js judgment in Royal Boskalis, he gratefully borrow[ed] the concept that the relevant conduct of the insured must be causally relevant to underwriters ultimate liability, or at least, to some defence of the underwriters before it can be permitted to avoid the policy. This is, I think, the same concept as that underwriters must be seriously prejudiced by the fraud complained of before the policy can be avoided. Longmore LJ considered the question entirely in the context of the right to avoid the policy for breach of the duty of good faith under section 17 of the Marine Insurance Act 1906, because that was the right which the defendant insurers invoked. But I do not think that the requirement for a causal connection between the fraud and the insurers liability can be any different, depending on whether the insurer is seeking to avoid the policy or just the claim. Thus far, it would be fair to say that the case law on post contractual collateral lies since the brief and early references in Lek v Mathews and Wisenthal v World Auxiliary Insurance Corpn Ltd reveals considerable judicial misgivings about their use as a basis for avoiding liability when the claim is well founded. The position, however, changed with the important and influential judgment of Mance LJ in Agapitos v Agnew (The AEGEON) [2003] QB 556. This was a claim for the total loss of the passenger ferry AEGEON following a fire during hot work on the vessel. The hull insurers defended the claim on the ground that the hot work had been carried out in breach of various warranties in the policy. If the warranties alleged were effective, there was undoubtedly a breach. The issue was whether they were. It was argued that they had never been agreed or had been waived. In the course of the proceedings, the insurers purported to avoid the policy for fraud and applied to amend their pleading to rely on this as a defence. The fraud alleged consisted in the owners having pleaded in their reply that hot work had begun on 12 February 1996, when they subsequently disclosed witness statements asserting that it was 12 days earlier on 1 February. The difference of date had no bearing on the merits of the claim, because if the warranties existed and had not been waived, there was a breach whenever hot work began. The question was whether this mattered. Toulson J held that it did not. His reason was that on the footing that the underwriters had a good defence of breach of warranty the defence of fraud was superfluous. On the footing that they did not, he distinguished the cases on fraudulently exaggerated claims on the same ground as Rix J in Royal Boskalis, namely that the alleged lie had to be material to the claim, in the sense that the truth would have afforded the insurers a defence. He therefore refused to allow them to amend. The Court of Appeal affirmed his decision on different grounds. They held, following The STAR SEA, that any duty of good faith in the presentation of claims ceased with the commencement of proceedings. But Mance LJ dealt, obiter, with the question whether the fraudulent claim could ever have applied to a collateral lie. Rejecting Toulson Js analysis, he held that a collateral lie in the presentation of a claim, even if it was irrelevant to the merits of the claim, was as much subject to the fraudulent claim rule as a dishonest exaggeration. Mance LJ distinguished between the common law rule about fraudulent claims and the duty of utmost good faith which was the basis of section 17 of the Marine Insurance Act 1906. He rejected the suggestion that the common law rule depended on the insurer having acted on the lie, and tentatively proposed that the test should be subject to an attenuated test of materiality. On inducement, he said this: 36. What relationship need there then be between any fraud and the claim if the fraudulent claim rule is to apply? And need the fraud have any effect on insurers conduct? Speaking here of a claim for a loss known to be non existent or exaggerated, the answers seem clear. Nothing further is necessary. The application of the rule flows from the fact that a fraudulent claim of this nature has been made. Whether insurers are misled or not is in this context beside the point. The principle only arises for consideration where they have not been misled into paying or settling the claim, and its application could not sensibly depend upon proof that they were temporarily misled. The only further requirement is that the part of the claim which is non existent or exaggerated should not itself be immaterial or unsubstantial: see paras 32 33 above. That also appears consistent with general principle, even though, in a pre contract context, no significance or sanction attaches to a fraudulent misrepresentation or nondisclosure unless it has, by misleading insurers, induced them to enter a contract. On materiality, he continued: 37. What is the position where there is use of a fraudulent device designed to promote a claim? I would see no reason for requiring proof of actual inducement here, any more than there is in the context of a fraudulent claim for non existent or exaggerated loss. As to any further requirement of materiality, if one were to adopt in this context the test identified in the Royal Boskalis case [1997] LRLR 523 and The Mercandian Continent [2001] 2 Lloyds Rep 563, then, as I have said, the effect is, in most cases, tantamount to saying that the use of a fraudulent device carries no sanction. It is irrelevant (unless it succeeds, which only the insured will then know). On the basis (which the cases show and I would endorse) that the policy behind the fraudulent claim rule remains as powerful today as ever, there is, in my view, force in Mr Popplewells submission that it either applies, or should be matched by an equivalent rule, in the case of use of a fraudulent device to promote a claim even though at the end of a trial it may be shown that the claim was all along in all other respects valid. The fraud must of course be directly related to and intended to promote the claim (unlike the deceit in The Mercandian Continent). Whenever that is so, the usual reason for the use of a fraudulent device will have been concern by the insured about prospects of success and a desire to improve them by presenting the claim on a false factual basis. If one does use in this context the language of materiality, what is material at the claims stage depends on the facts then known and the strengths and weaknesses of the case as they may then appear. It seems irrelevant to measure materiality against what may be known at some future date, after a trial. The object of a lie is to deceive. The deceit may never be discovered. The case may then be fought on a false premise, or the lie may lead to a favourable settlement before trial. Does the fact that the lie happens to be detected or unravelled before a settlement or during a trial make it immaterial at the time when it was told? In my opinion, not. Materiality should take into account the different appreciation of the prospects, which a lie is usually intended to induce on insurers side, and the different understanding of the facts which it is intended to induce on the part of a judge at trial. 38. The view could, in this situation, be taken that, where fraudulent devices or means have been used to promote a claim, that by itself is sufficient to justify the application of the sanction of forfeiture. The insureds own perception of the value of the lie would suffice. Probably, however, some limited objective element is also required. The requirement, where a claim includes a non existent or exaggerated element of loss, that that element must be not immaterial, unsubstantial or insignificant in itself offers a parallel. In the context of use of a fraudulent device or means, one can contemplate the possibility of an obviously irrelevant lie one which, whatever the insured may have thought, could not sensibly have had any significant impact on any insurer or judge. Tentatively, I would suggest that the courts should only apply the fraudulent claim rule to the use of fraudulent devices or means which would, if believed, have tended, objectively but prior to any final determination at trial of the parties rights, to yield a not insignificant improvement in the insureds prospects whether they be prospects of obtaining a settlement, or a better settlement, or of winning at trial. Courts are used enough to considering prospects, eg when assessing damages for failure by a solicitor to issue a claim form within a limitation period. Mance LJs analysis of the law relating to collateral lies was applied by the Privy Council in Stemson v AMP General Insurance (NZ) Ltd [2006] Lloyds Rep IR 852 and Beacon Insurance Co Ltd v Maharaj Bookstore Ltd [2014] 4 All ER 418. It was recognised by the Supreme Court in Summers v Fairclough Homes Ltd [2012] 1 WLR 2004, para 29, although in that case the point arose only by way of analogy in a case turning on the inherent procedural power of a court to strike out a dishonest claim. In none of these cases was there any issue about the correctness of the analysis in The AEGEON. Other common law jurisdictions The only Commonwealth jurisdiction in which the application of the fraudulent claim rule to valid claims has been considered in any detail is Australia, whose case law exhibits the same differences of opinion as the English cases. GRE Insurance Ltd v Ormsby (1982) 29 SASR 498 is a decision of the Full Court of South Australia. The insured, whose policy covered theft consequent upon a forcible entry, embellished the evidence of forcible entry by causing further damage to the door and lock before taking a photograph of it and sending it to the insurers. The trial judge found that there had in fact been a forcible entry and the insurer accepted this finding on appeal to the full court. But the insurer defended the claim on account of the dishonest photograph. The defence was rejected. Mitchell J held that the defence did not arise because the claim was valid. A valid claim would not, as it seems to me, become a fraudulent claim, even if it were proved that there was an attempt to support the valid claim by evidence which was intentionally false (pp 502 503). Walters J agreed, adding that at common law an insurer could not be treated as having the necessary fraudulent intent if there never was an intention on the part of the respondents to get, and knowingly to get, more than what they had really lost (p 503). Cox J also agreed, suggesting that in this respect the common law may differ from the effect of some standard express clauses forfeiting fraudulent claims as the courts had construed them (pp 505 506). In Tiep Thi Ho v Australian Associated Motor Insurers Ltd [2001] VSCA 48, the insureds car was damaged in a road accident while being driven by her son. She mistakenly believed that the policy did not cover damage while the car was being driven by her son and so pretended that it had been damaged while being driven by thieves. In fact the son was insured, and the lie was irrelevant to the insurers liability. The Victoria Court of Appeal held that the insurer was entitled to reject the claim. The decision turned mainly on section 56(1) of the Commonwealth Insurance Contracts Act 1984, which provided that it should be a defence that the claim had been made fraudulently. But Buchanan JA, delivering the leading judgment, considered that the same result would have followed at common law, because the mischief of the fraudulent claims rule lay in the insureds dishonest state of mind and not in its consequences. At para 14, he put the matter thus: As a matter of public policy, attributable to the need to promote honesty on the part of insured persons and proponents for insurance, whose knowledge of the relevant circumstances of the casualty as well as the nature of the risk was generally greater than that of their insurers, the courts would not aid a fraudulent claimant. The courts would not look behind fraud to see if otherwise there was a valid claim or a claim unaffected by the fraud, and no effort was made to reduce or extinguish claims only after gauging the effects of the fraud upon insurers. Buchanan JA concluded (para 23) that the existence of an underlying valid claim does not render fraud irrelevant, and that in deciding otherwise in Ormsby the South Australia court had been wrong. In the United States almost all the relevant case law concerns fire policies subject to an express avoidance clause, generally the clause against any fraud or false swearing in the Standard Fire Insurance Policy of the State of New York. The cases ultimately turn on the construction of the language. However, they are nonetheless of interest, because materiality is not in terms dealt with in the clause, and is consequently addressed by the courts as a matter of general principle. In applying the clause, the courts have generally adopted a test of materiality similar to that of Mance LJ in The AEGEON. The leading case is the decision of the US Supreme Court in Claflin v Commonwealth Insurance Co 110 US 81 (1884) in which the court held (p 95) that the materiality of a statement in the eye of the law, consists in their tendency to influence the conduct of the party who has an interest in them, and to whom they are addressed. In Long v Insurance Company of North America 670 F 2d 930 (1982), the insurers defended a claim for loss by fire on the ground (i) that the fire was caused by arson procured by the insured, and (ii) that in the course of the insurers investigation he had untruthfully denied moving his furniture out of his house shortly before it was destroyed. The Tenth Circuit Court of Appeals, applying the test stated in Claflin, held that summary judgment had been properly given against an insured on ground (ii), without there being any need to investigate whether the insured was in fact responsible for the fire. The court held (p 934): Regarding allegations of false swearing, a misrepresentation will be considered material if a reasonable insurance company, in determining its course of action, would attach importance to the fact misrepresented. In Fine v Bellefonte Underwriters Insurance Co 725 F 2d 179 (1984), the Second Circuit Court of Appeals considered that this result followed from the absence of any requirement of inducement in the fraudulent claims rule. It observed that: materiality of false statements is not determined by whether or not the false answers deal with a subject later determined to be unimportant because the fire and loss were caused by factors other than those with which the statements dealt. False sworn answers are material if they might have affected the attitude and action of the insurer. They are equally material if they may be said to have been calculated either to discourage, mislead or deflect the companys investigation in any area that might seem to the company, at that time, a relevant or productive area to investigate. Some states, such as Texas, have overruled these decisions by statute. But they have generally been followed by state and US district courts in cases where similar clauses have appeared in the policy and there is no overriding statutory rule. Analysis This is the first time that the House of Lords or the Supreme Court has had the opportunity to resolve the question whether the fraudulent claims rule applies to justified claims supported by collateral lies. I have reached the conclusion that the rule does not apply to such claims. The starting point is that in law it is not a precondition of the insurers liability that a claim should have been made on him. The insureds right to indemnity arises as soon as the loss is suffered: Chandris v Argo Insurance Co Ltd [1963] 2 Lloyds Rep 65; Firma C Trade SA v Newcastle Protection and Indemnity Association [1991] 2 AC 1, 35 36 (Lord Goff). It follows, as Mance LJ pointed out in AXA General Insurance Ltd v Gottlieb [2005] 1 All ER (Comm) 445, para 26 that the effect of a claim subsequently being made for a fraudulently inflated amount is retrospectively to remove or bar the insureds pre existing cause of action. In other words, it is not a conditional liability but a forfeiture. In this context, there is an obvious and important difference between a fraudulently exaggerated claim and a justified claim supported by collateral lies. Where a claim has been fraudulently exaggerated, the insureds dishonesty is calculated to get him something to which he is not entitled. The reason why the insured cannot recover even the honest part of the claim is that the law declines to sever it from the invented part. The policy of deterring fraudulent claims goes to the honesty of the claim, and both are parts of a single claim: Galloway v Guardian Royal Exchange (UK) Ltd [1999] Lloyds Rep IR 209, 213 214 (CA); Direct Line Insurance v Khan [2002] 1 Lloyds Rep IR 364; AXA General Insurance Ltd v Gottlieb [2005] 1 All ER (Comm) 445 (CA), para 31. The principle is the same as that which applies in the law of illegality. The courts will not sever an agreement affected by illegality into its legal and illegal parts unless it accords with public policy to do so, even if each part is capable of standing on its own: Kuenigl v Donnersmarck [1955] 1 QB 515, 537 (McNair J); Royal Boskalis Westminster NV v Mountain [1999] QB 674, 693 (Stuart Smith LJ), 704 (Pill LJ). The position is different where the insured is trying to obtain no more than the law regards as his entitlement and the lie is irrelevant to the existence or amount of that entitlement. In this case the lie is dishonest, but the claim is not. The immateriality of the lie to the claim makes it not just possible but appropriate to distinguish between them. I do not accept that a policy of deterrence justifies the application of the fraudulent claim rule in this situation. The law deprecates fraud in all circumstances, but the fraudulent claim rule is peculiar to contracts of insurance. It reflects, as I have pointed out, the laws traditional concern with the informational asymmetry of the contractual relationship, and the consequent vulnerability of insurers. It is therefore right to ask in a case of collateral lies uttered in support of a valid claim, against what should the insurer be protected by the application of the fraudulent claims rule? It would, as it seems to me, serve only to protect him from the obligation to pay, or to pay earlier, an indemnity for which he has been liable in law ever since the loss was suffered. It is not an answer to this to say, as Christopher Clarke LJ did in the Court of Appeal, that the insurer may have been put off relevant inquiries or driven to irrelevant ones. Wasted effort of this kind is no part of the mischief against which the fraudulent claims rule is directed, and even if it were the avoidance of the claim would be a wholly disproportionate response. The rule, moreover, applies irrespective of whether or not the lie set a hare running in the insurers claims department. Nor is it an answer to say, as the courts have often said of fraudulently inflated claims, that the insured should not be allowed a one way bet: he makes an illegitimate gain if the lie persuades, and loses nothing if it does not. This observation, which is true of fraudulently inflated claims, cannot readily be transposed to a situation in which the claim is wholly justified. In that case, the insured gains nothing from the lie which he was not entitled to have anyway. Conversely, the underwriter loses nothing if he meets a liability that he had anyway. In The STAR SEA at para 61, Lord Hobhouse warned that the courts should be prepared to examine the application of any such principle to the particular class of situation to see to what extent its application would reflect principles of public policy or the over riding needs of justice. Where the application of the proposed principle would simply serve the interests of one party and do so in a disproportionate fashion, it is right to question whether the principle has been correctly formulated or is being correctly applied. It was for this reason that Rix J questioned the correct formulation of the principle in Royal Boskalis and Longmore LJ did the same in The MERCANDIAN CONTINENT. As their judgments show, the difficulties really arise from the fact that the fraudulent claim rule does not require the insurer to have relied upon the dishonest information or acted on it in any way. In almost every case in which it has been applied, the insurer has declined to pay, either because there were other grounds for declining or because he saw through the exaggeration or both. Indeed, in AXA General Insurance Ltd v Gottlieb [2005] 1 All ER (Comm) 445 (CA) the Court of Appeal held that the insurer was entitled to recover interim payments made in respect of a valid claim before any exaggeration had occurred; and in Stemson v AMP General Insurance (NZ) Ltd [2006] Lloyds Rep IR 252 the rule was applied in a case where not only was the lie irrelevant to the recoverability of the indemnity but it had been corrected before any payment had been made. That these remarkable consequences follow from applying the fraudulent claims rule to a collateral lie suggests that something has gone wrong with the underlying principle. Anomalies of this kind flow from the absence of any requirement of reliance or inducement when a lie is said to have been told in support of a claim. This is a well established feature of the fraudulent claims rule, but nonetheless remarkable for that. There is one other context in which neither reliance nor inducement need be shown, and that is in the criminal law, a position confirmed by the Fraud Act 2006. But there is, as far as I am aware, no other context in which the civil law avoids a transaction on account of a fraud which has had no impact on its intended target. In the law of deceit, it is fundamental that the representee must have acted on the misrepresentation. If he would have done the same thing even in the absence of the misrepresentation, a claim based on it will fail. The same applies in a claim to rescind a contract for misrepresentation, fraudulent or otherwise. Thus, if an insurer were to settle a claim by agreement and then discover that that he had been told a lie in the course of the claim process, he would have to show that his agreement was influenced by the lie in order to rescind it. A lie which had no impact on him would not be good enough. Even in the law of insurance a material misrepresentation or non disclosure in the making of the contract, whether honest or dishonest, will not give rise to a right of avoidance unless it induced the insurer to accept the risk or to do so on the particular terms: Pan Atlantic Insurance Co Ltd v Pine Top Insurance Co Ltd [1995] 1 AC 501. As Lord Mustill pointed out in that case, the need to show inducement reflected the fundamental requirement of the law that the misrepresentation or non disclosure should have had some substantial causative effect. He specifically rejected an argument that in the context of pre contractual misrepresentation or non disclosure the absence of any reference to inducement in the Marine Insurance Act 1906 reflected a disciplinary element in the law of marine insurance, which required that breaches of the insureds duty of utmost good faith should be deterred by imposing condign sanctions even in the absence of reliance or inducement. In language which would later be echoed by Lord Hobhouse in The STAR SEA (para 61, quoted above), he remarked of this submission that to enable an underwriter to escape liability when he has suffered no harm would be positively unjust, and contrary to the spirit of mutual good faith (p 549D). Yet if causation is irrelevant to the application of the fraudulent claim rule, some connection must necessarily exist between the collateral lie and the claim, unless the rule is to part company with rationality. Mr Edelman QC, who appeared before us for the insurers, recognised this. He found the necessary connection in a test of materiality. But he submitted that what was required was that the lie should be material to the potential merits of the claim as they would have appeared to a hypothetical insurer at the time that the lie was uttered, when the full facts were not necessarily known. It did not have to be material to the merits of the claim as they were subsequently shown to be, for example at trial after the facts had been found. For reasons which I shall explain, I agree that materiality provides the necessary connection between the collateral lie and the claim, but in the context of a fraudulent statement in support of a claim I do not accept that it must be assessed by reference to the merits of the claim as they appear to be when the lie was uttered. In this context, I think that hindsight is necessary. Materiality would not ordinarily be relevant at all where a representation was made fraudulently. But that is because causation is ordinarily established in such cases by the mere fact that the representee acted on the statement. If a person sets out to induce the representee to act on a dishonest statement, and the representee does act on it, it is necessarily material, or at any rate the representor having intended the result cannot be heard to say that it was not. The point does not arise in a case where, whatever the insureds intentions, the statement had no relevant impact on the insurer. This is, I think, why Lord Mance acknowledged in The AEGEON (para 38) that while the lie must be in some sense material if the fraudulent claims rule is to apply, the test of materiality cannot be the same in this context as it is in the law of fraud generally. Mance LJs tentative answer was substantially the same as Mr Edelmans. The lie must be such as would, if believed, have tended objectively but prior to any final determination at trial of the parties rights, to yield a not insignificant improvement in the insureds prospects whether they be prospects of obtaining a settlement, or a better, settlement, or of winning at trial. In the Court of Appeal in the present case, Christopher Clarke LJ was inclined (para 165) to modify this test so as to substitute for the requirement of a not insignificant improvement in the insureds apparent prospects, a requirement of a significant improvement. The modification is endorsed by Mance LJ in his judgment on this appeal. In either form, the test proposed is similar to the test for the materiality of pre contractual misrepresentations and non disclosures, from which it was presumably derived. But I do not think that such a test can apply to a collateral lie at the claims stage. I start from the proposition that materiality and inducement are closely connected. This is well established in the context of pre contractual breaches of the insured duty of good faith. The test of inducement is subjective. It depends on the state of mind of the actual insurer when he decided to accept the risk or the particular terms. The test of materiality by comparison is objective. It depends on what would be relevant to a hypothetical prudent insurer in the same situation: see section 18(2) of the Marine Insurance Act 1906; cf section 7(3) of the Insurance Act 2015. Thus it is well established that an insured is required to disclose credible reports that his ship is in trouble, even if they subsequently turn out to have been unfounded; and conversely the insured need not disclose circumstances which were immaterial at the time, even if they subsequently turn out to have been material after all. This is because, as the Court of Appeal held in Brotherton v Aseguradora Colseguros SA [2003] Lloydss Rep IR 746, the materiality of a given circumstance has to be tested at the time of the placing of the risk and by reference to the impact that it would then have on the mind of a prudent underwriter at that time: cf Arnould, The Law of Marine Insurance and Average, 18th ed (2013), paras 15.95 15.107, esp 15.96 15.97; MacGillivray on Insurance Law, 13th ed (2015), para 17.047. There are in my opinion two reasons why this test of materiality cannot apply to lies told in the course of making a claim. The first is that no impact on the mind of the prudent underwriter is required in that context. As Lord Goff said of pre contractual disclosure in Pan Atlantic (p 517G H), if actual inducement is not required, materiality becomes all important. In that case, there were two competing tests of materiality: a weak test, which depended on whether the relevant fact would have influenced the thought processes of the hypothetical prudent underwriter, and a strong test which would have depended on whether it would have been decisive. Lord Goff went on to point out that it was only because the Appellate Committee thought it necessary to show that the actual underwriter was induced to accept the risk on the particular terms that the majority felt able to adopt the weak test of materiality. It is, however, difficult to see what relevance either test of materiality can have if there is no requirement of inducement. The function of materiality in the law of misrepresentation and non disclosure is to limit the matters upon which the insurer can relevantly claim to have relied. If the insureds statements need have no actual impact on the insurer at all, why should it matter what impact it might objectively have been expected to have? Even the strong test of materiality rejected in Pan Atlantic, ie that the relevant fact must be decisive, fails to connect the misrepresentation or non disclosure to the claim if the law does not require the actual insurer to have made any decision at all in response to what he has been told. If the question of materiality is not to depend on the impact of the statement on the mind of the insurer, then it is difficult to see why it should depend on the merits of the claim as they appeared to be at any particular moment, as opposed to the merits of the claim as they actually were. The second reason is that the insurers assessment of a claim is of a quite different character from his assessment of a risk at the pre contract stage. In deciding whether to accept the risk and on what terms, the insurer has a complete discretion. There are no legal standards by which his decision can be assessed. It is a pure question of judgment, which the hypothetical prudent insurer may make for good reasons or bad in his own commercial interest. Hence the critical importance of the impact of non disclosure on his thought processes. But when deciding whether to accept a claim under an existing contract, the insurers position is very different. He has no discretion, because he is already bound. The only question properly before him is whether to acknowledge a liability that if it exists at all exists already, whether or not he realises it. Ultimately, his assessment is simply an attempt to predict what a court would decide. In that context, the only rational test of the materiality of a lie must be based on its relevance to a court which is in a position to find the relevant facts. For this reason, although a lie uttered in support of a claim need not have any adverse impact on the insurer, I consider that it must at least go to the recoverability of the claim on the true facts. By that test, the fraudulent claims rule applies to a wholly fabricated claim. It applies to an exaggerated claim. It applies even to the genuine part of an exaggerated claim if the whole is to be regarded as a single claim, as it must be. But it does not apply to a lie which the true facts, once admitted or ascertained, show to have been immaterial to the insureds right to recover. It is true that the moral character of the insureds lie is in no way mitigated by the fact that it turns out to have been unnecessary. But there are principled limits to the role which a claimants immorality can play in defeating his legitimate civil claims. These limits have been applied outside the realm of insurance ever since the failure two centuries ago of Lord Mansfields attempt to introduce a general duty of good faith in the law of contract. Ultimately, however, even the law of insurance is concerned more with controlling the impact of a breach of good faith on the risk than with the punishment of misconduct. The extension of the fraudulent claims rule to lies which are found to be irrelevant to the recoverability of the claim is a step too far. It is disproportionately harsh to the insured and goes further than any legitimate commercial interest of the insurer can justify. It leads naturally to the anomalous consequences which Popplewell J, rightly to my mind, pointed out in this case. Those anomalies are all the more remarkable for the fact that the rule has no application to collateral lies told after the commencement of legal proceedings, when experience suggests that parties are most likely to gild the lily. In my opinion, it is not the law. The Human Rights Convention I have not dealt with the appellants further arguments based on article 1 of the First Protocol to the Human Rights Convention. They do not arise on the view which I take of the position at common law. Disposition I would accordingly allow the appeal. Subject to any submissions which may be made to us on the form of order, I would enter judgment against the insurers for the sum which the judge found would have been due but for the forfeiture of the claim, namely 3,241,310.60 and interest. LORD CLARKE: Introduction I would allow the appeal, essentially for the reasons given by Lord Sumption, which I will not repeat. This appeal is concerned with what, like Lord Sumption, I will call collateral lies, that is lies which are not relevant to the question whether the underwriters are liable under the insurance contract or not. It seems to me that the question whether collateral lies told by the insured should entitle underwriters to refuse to discharge their liability under a contract is essentially a policy question. Lord Sumption, Lord Toulson and Lord Hughes conclude that the question should be answered in the negative. I agree. As Lord Mance shows, there is a case to be made for the contrary view, but in my opinion public policy does not require that the insurer should have a defence. The critical point is that, in the case of a collateral lie, as Lord Sumption observes at para 26, the insured is trying to obtain no more than the law regards as his entitlement and the lie is irrelevant to the existence or amount of that entitlement. Such a lie is thus immaterial to the claim. As Lord Sumption puts it, the lie is dishonest but the claim is not. This approach reflects the personal views of Popplewell J. Having concluded that the underwriters defence of fraudulent device (ie the telling of a collateral lie) succeeded, he said this in para 225, very near the end of his judgment: I have reached this conclusion with regret. In a scale of culpability which may attach to fraudulent conduct relating to the making of claims, this was at the low end. It was a reckless untruth, not a carefully planned deceit. It was told on one occasion, not persisted in at the trial. It was told in support of a theory about the events surrounding the casualty which Chris Komet genuinely believed to be a plausible explanation. The reckless untruth was put forward against the background of having made the crew available for interview by the Underwriters solicitor, who had had the opportunity to make his own inquiries of the crew on the topic. To be deprived of a valid claim of some 3.2m as a result of such reckless untruth is, in my view, a disproportionately harsh sanction. I agree. In my opinion, legal policy does not require such a harsh result. Moreover, this conclusion seems to me to be consistent with the approach of Rix J in Royal Boskalis Westminster NV [1997] 1 Lloyds Rep 523, which is discussed by Lord Sumption at para 15. I will not repeat his account of the facts, save to note that the shipowners claimed for the value of their ships and sue and labour costs other than a ransom which they had paid. In presenting their claim to the underwriters, they concealed the fact of the ransom and the detailed terms on which it was paid, (as Lord Sumption puts it) because they were concerned about a possible breach of UN sanctions against Iraq. Rix J held (albeit obiter) that he would have rejected the argument on the basis that he considered that the claim for sue and labour was entitled to succeed irrespective of the matters which the owners had concealed. In this regard Rix J said at pp 592 593, in a passage quoted by Lord Sumption: Whatever be the precise definition and ambit of the concept of a fraudulent claim, there was no such claim here. I am in the process of finding that the sue and labour claim was and is a good and valid claim. It is not a false or fraudulent claim. It is totally unlike those instances of fraudulent claim to be found in the authorities, such as claims in respect of deliberately self inflicted or pretended losses, or claims in amounts which are knowingly or recklessly exaggerated: see, for instance, Goulstone v The Royal Insurance Co, (1858) I F & F 276, where, in the context of a claim for inter alia the loss of furniture whose value was exaggerated four fold, Pollock CB glossed a fraudulent claim as one wilfully false in any substantial particular at p 279; or Chapman v Pole, (1870) 22 LT 306, where again in the context of exaggerated value Cockburn, CJ spoke of one who knowingly preferred a claim he knew to be false or unjust at p 307; or The Captain Panagos DP, [1986] 2 Lloyds Rep 470, where Mr Justice Evans defined a fraudulent claim as one which is made on the basis that facts exist which constitute a loss by an insured peril, when to the knowledge of the assured those alleged facts are untrue, at p 511. It seems to me that even if one assumed, for instance, that the representation over the existence of any record of the finalization agreement was made fraudulently, that would not make the claim in question a fraudulent claim within these definitions of that expression. Those conclusions seem to me to be consistent with the approach outlined above. They are also consistent with the views expressed by Lord Hobhouse in The Star Sea [2003] 1 AC 469, para 72 and by Longmore LJ in The Mercandian Continent [2001] 2 Lloyds Rep 563 discussed by Lord Sumption at paras 16 and 17. I agree with him that the relevant conduct must, as Longmore LJ put it, be causally relevant to underwriters ultimate liability. I also agree with him (at the end of para 17) that the requirement for a causal connection cannot be any different depending upon whether the insurer is seeking to avoid the policy or just the claim. Lord Sumption further notes at para 27 that at para 61 in The Star Sea Lord Hobhouse warned that the courts should be prepared to examine the application of any such principle to the particular class of situation to see to what extent its application would reflect principles of public policy or the over riding needs of justice. Where the application of the proposed principle would simply serve the interests of one party and do so in a disproportionate fashion, it is right to question whether the principle has been correctly formulated or is being correctly applied. I agree. In addition to the absent requirement of materiality, there are two other features that seem to me to point to the conclusion that a collateral lie should not be held to be relevant, save no doubt to the veracity of the insured, which may be relevant to the facts found at a trial. The first is that the mere telling of a lie to underwriters in connection with a claim cannot sensibly be treated as forfeiture of the claim. Suppose a collateral lie is told on a Monday but resiled from, say, a week later, can it sensibly be held that it is then too late because the lie has already caused forfeiture of the claim? Such a principle would in my opinion be disproportionate and contrary to public policy. The second is the effect of the principle laid down in The Star Sea and not challenged in this appeal that, as Lord Hughes puts it at para 94, the common law rule of fraudulent claims has evolved to exclude from its operation fraud committed after litigation has begun. It is I think accepted that this includes collateral lies. I agree with Lord Hughes that it would be altogether disproportionate for the insurers to be vouchsafed a new defence to the whole claim if, for example, under pressure in the witness box the claimant were to utter a demonstrable untruth going to the claim. It would mean that the moment the collateral lie was uttered, it would be open to the underwriters to invite the judge to hold that the statement was a lie and to stop the trial on the basis that the underwriters now had a cast iron defence which could not be remedied by admission that the statement was a lie or in any other way, whether the underwriters were liable under the insurance contract or not. This too would in my opinion be disproportionate and contrary to public policy. Could it really make any difference if the lie was uttered just before the issuing of proceedings? In my opinion such a conclusion would make no sense. In all the circumstances I agree that the appeal should be allowed for the reasons given by Lord Sumption. I do not detect any significant difference between the reasons given by Lord Sumption, Lord Toulson and Lord Hughes. LORD HUGHES: A policyholder makes a claim under his insurance policy. The claim is within the cover provided by the policy. The loss has indeed occurred without complicity on the part of the policyholder and it is not exaggerated as to amount. There has been no breach of any specific warranty in the policy. The claim is thus far good in law and would succeed. But the insured embellishes the claim by fraudulent evidence designed to improve the prospects of the insurers accepting it without undue delay or enquiry. Does the claim for this reason fail? What, in other words, is the true extent of what is known as the fraudulent claims rule? I have reached the same conclusion as Lord Sumption. The fraudulent claims rule does not defeat a claim which is wholly good in law, even if a lie is told in support of it. But I do so for reasons which are a little different from, and to an extent additional to, his. It has been common ground between the parties, and is indisputable, that the fraudulent claims rule is well established in English law and that it operates to bar the whole of the policyholders claim where that claim is either wholly invented or fraudulently exaggerated. The claiming policyholder, if he is found fraudulently to have exaggerated his claim, recovers nothing; he does not recover the unexaggerated part. The issue in this case has been whether that rule extends also to bar the claim where the insured has not invented or exaggerated the claim but has employed what has been termed a fraudulent device. By that, in this special context, is meant a lie or other fraud in the presentation of the claim to the insurers, in a case where the underlying claim is in fact good in the amount claimed. Typically the fraudulent device is bogus evidence of some kind advanced in support of the claim in order to bolster it. Plainly, a fraudulent claim, properly so called, ie one which is either wholly invented or fraudulently exaggerated, may also be supported by bogus evidence of this kind. But in the terminology of insurance law, the expression fraudulent device, which derives from language adopted in times past by express clauses in some policies, has been used conveniently to refer only to those cases where the underlying claim, even though supported by bogus evidence or some other fraud, is good. I gratefully adopt Lord Sumptions expression, collateral lie to describe this situation. In the vernacular, the situation contemplated might be described as the policyholder gilding the lily. The issue as to the extent of the fraudulent claims rule, and whether it extends to collateral lies, arises in the present case in the context of a claim under a marine insurance policy for some 3.2m in respect of sea damage to the engines of a ship. However, the law in question applies in exactly the same way to any commercial or domestic insurance policy. Insurance against losses plays a very large part in the lives of most people, whether the context is commercial or domestic. Increasingly, people do not themselves stand the multifarious risks of loss which inevitably attend daily life but, rather, insure against it. Reporting in 2014 after a substantial consultation process, the English and Scottish Law Commissions recorded that: Insurance underpins a healthy and prosperous society, enabling businesses and individuals to protect themselves against risk. The UK insurance industry is the third largest in the world, the largest in Europe and a vital part of the UK economy. (Law Com, No 353, para 1.1) The UK insurance market was noted to manage investments amounting to 25% of the UKs total net worth. The law has for centuries recognised that special rules need to apply to insurance contracts. At the stage when a policy is being taken out, the potential insured will typically know a great deal more about his circumstances, and thus about the risk, than can the insurer to whom he is applying. The response of the common law to this truth was to develop the rule that a contract for insurance must be conducted on both sides in the utmost good faith. In particular, when the contract is in negotiation the general common law rule was that the applicant must volunteer to the insurer, whether he is asked or not, anything which he knows or ought to know and which a prudent insurer would regard as relevant to the assessment of the risk. The consequence of breach, at common law, was that the insurer is entitled to avoid the policy altogether. When the law of insurance as it applied to marine contracts was codified by the Marine Insurance Act 1906, this rule of utmost good faith was repeated in section 17, which read: 17. A contract of marine insurance is a contract based upon the utmost good faith, and, if the utmost good faith be not observed by either party, the contract may be avoided by the other party. This provision was declaratory of the common law relating to insurance generally. As will be seen, this common law/statutory rule has recently been modified by statute, differentially for consumer insurance and non consumer policies, but exacting duties of disclosure are still imposed on the applicant for insurance at the pre contract stage. Otherwise, no doubt, the consequence would either be difficulty obtaining insurance or, more likely, demands for higher premiums. At the later stage when a claim is made, the policyholder will also typically know a good deal more about the facts which give rise to the claim than the insurers possibly can, whether the claim arises out of a motor accident, a burglary, fire damage to a factory or warehouse, the loss of luggage on holiday or the ingress of seawater into a ship. Insured loss is generally adventitious. It may occur anywhere in the world and with or without witnesses. Only sometimes will thorough investigation of the circumstances of the claimed loss be a realistic option for insurers. Moreover, it is very much in the interest of policyholders generally that when a claim arises, it should be accepted promptly by the insurers, payment should be made, and business or private life should be allowed to resume with the loss repaired. Typically, insurers market their policies in part by advertising what they assert to be their prompt and uncomplicated response to claims. If such is to be the response to claims, insurers must take the claiming insured to a considerable extent on trust. Furthermore, if claims have to be investigated in detail and routinely verified by insurers, the cost of the systems necessary to do this will fall on policyholders generally through increased premiums, and good claims will be delayed alongside the bad. The response of the common law to these truths was the development of the fraudulent claims rule. It is a rule of law, imposed by the courts whether or not the policy contains a clause to the same effect, although many do and more used to do in the early days of insurance when the rule was developing. It seems more realistic to acknowledge it as having achieved the status of a rule of common law, grounded in sound policy, rather than depending on an implied term in the contract. Apart from any other reason, it seems far from clear that in every case such an implied term would meet the tests of obviousness or business necessity. To anticipate, it will be seen that the recent legislation in relation to consumer and non consumer insurance preserves the fraudulent claims rule, but without resolving the question raised in the present case about its extent. The very clear rationale of the fraudulent claims rule is the need to discourage fraud in claims. It is notorious that such fraud is endemic. The problem is longstanding, but if anything the evidence suggests that it is increasing rather than diminishing. Recent concerns, chiefly about the connected problem of fraudulent third party claims against insurers (generally alleging personal injury) led to a government established task force formed of representatives of all principal interests. It accepted an Association of British Insurers estimate of between 1.32 billon and 2.1 billon per annum as a likely level of dishonestly inflated or totally fictitious claims: Insurance Fraud Taskforce Final Report PU 1891 January 2016. Although that estimated figure did not distinguish between fraudulent claims by policyholders and those made by third parties, the two species of fraud clearly exhibit shared features. Reviewing the same problem specifically in the context of claims by policyholders, the English and Scottish Law Commissions had concluded just a few months earlier that fraudulent insurance claims are a serious and expensive problem: Insurance Contract Law: Law Com 353 (July 2014) paragraph 19.1. Part of the reason for the level of fraud may be that it is too easy, for in many cases the prospect of discovery may be poor. Another part seems likely to be a prevalent feeling that insurance companies are fair game and deception of them effectively victimless. Although that perception is quite false, since the cost of fraudulent claims is in effect distributed amongst policyholders generally via increased premiums, it is likely that it is one widely shared. An unacceptably high level of fictitious and dishonestly inflated claims thus forms part of the background against which the proper ambit of the fraudulent claims rule falls to be considered. The occasion of the claim in this case The insured claimants were the owners of a cargo ship the DC Merwestone (the vessel). At about 0930 on 27 January 2010 she left Klaipeda in Lithuania bound for Bilbao. From just before 2100 on the following evening, 28 January, seawater was seen to be pushing up through the floor plates in the engine room. By just before 0300 on 30 January, about 30 hours later, the main engine was fully submerged and stopped working. Later that morning a tug came alongside and the vessel was towed to Gdynia. The main engine was damaged beyond repair. The owners were insured against loss under a marine insurance policy. At the trial before Popplewell J there was dispute about what had occurred and whether it was or was not covered by the policy. The judge set out his findings of fact and his construction of the terms of the policy in a careful and comprehensive judgment, and neither has been subject to appeal. Accordingly, it is enough now to record that the cover extended to loss attributable to crew negligence, unless the owners were personally guilty of want of due diligence, and that it extended to unseaworthiness unless, the owners were personally privy to it. The details of what had occurred can similarly now be much abbreviated. The vessel had a duct keel tunnel running more or less its full length in a central position, from the bowthruster room in the foreship to the engine room in the aft. Before leaving Klaipeda the crew had used an emergency fire hose and pump, housed in the bowthruster room, to blast ice from the hatch covers, but had negligently failed to drain seawater from the pump when they finished, nor had they closed the sea inlet valve to the pump. The water froze and expanded, cracking the pump casing and disturbing the seal on the filter. That left two holes in the bowthruster room, open to the sea. After the vessel sailed, the water melted and seawater entered the bowthruster room. From there it ran along the duct keel tunnel and into the engine room, which it was able to do because apertures at each end, through which cables passed, had not been packed or sealed. The lack of seals had been the responsibility of contractors who had modified the vessel. In the engine room there were pumps which ought to have been able to cope with pumping out the water which entered via the duct keel tunnel, but they were defective. Accordingly the causes of the damage were crew negligence, contractors negligence and unseaworthy pumps. The judge determined that the owners were not personally guilty of want of due diligence, nor privy to the unseaworthiness. It followed that the claim was covered by the policy. Whilst that is now accepted to be the position, both the facts of the casualty and the import of the policy were heavily in dispute at the trial. The insurers disputed liability under the policy for a raft of different reasons. On any view, the casualty ought not to have happened, and seaworthiness and the owners possible privity to it were bound to come under active consideration, as must have been apparent to them. It was with this background of a claim which was likely to be disputed, and in due course was disputed, that one of the owners principal directors recklessly misled the insurers with the false statement which amounted to a fraudulent device. The fraudulent device The insurers were understandably sceptical about how the flooding could have resulted from a relatively small leak in the bowthruster room. They made specific written inquiries about a number of matters relating to this and to seaworthiness, included amongst which was a request for the owners explanation of the ingress of the water and the failure of the pumps to control it. By a letter of 21 April 2010, written by way of answer, the owners director Chris Kornet asserted amongst other things that the bilge alarm had sounded at around 1200 on 28 January, that is to say about nine hours before the water was seen to be under the floor plates of the engine room. No action had been taken in relation to the sounding alarm, he said, because it was attributed to the ship rolling in heavy seas. When, later, he was asked the source of these assertions, Mr Kornet said that he had been given this information by the Master and crew. These statements were untrue. The alarm had not sounded before about 2100, nine hours later, and Mr Kornet had not been told by the Master or crew that it had. Later, after Mr Kornet had spoken to him, the Master fell into line with what had been reported to the insurers, but it was not in fact correct. The judge concluded that Mr Kornet had convinced himself that the alarm must have gone off at about the time he asserted, and that his proffered explanation (heavy seas) for non investigation was plausible. Nevertheless, even on these findings, the false assertions were, as the judge found, reckless. The false statements were made when Mr Kornet was frustrated that the insurers were not paying up immediately. They were intended to reassure the insurers that the ship was not unseaworthy and in particular that its alarm systems were working satisfactorily. Otherwise the insurers were, as he knew, likely to focus on the state of the ship and the possible privity of the owners to any unseaworthiness. As it turned out, these false statements made no difference to the claim. The causes of the water ingress were not altered by whether the bilge alarm had sounded earlier than it did or not, nor did it make any difference whether or not the Master and crew had told Mr Kornet that it had gone off. The fraudulent claims rule and the duty of good faith It seems likely that the fraudulent claims rule developed as a matter of history from the general rule that the parties to a contract of insurance owe each other the duty to act with the utmost good faith. In the present case, in the Court of Appeal, Christopher Clarke LJ accepted this as the juridical basis for the fraudulent claims rule: see para 77. In the past it has from time to time been assumed, in cases where any difference between the two rules did not fall for examination, that the fraudulent claims rule was simply a manifestation of the rule of good faith. That assumption was made in passing in the classic direction to the jury of Willes J in Britton v Royal Insurance Co (1866) 4 F & F 905, quoted by Lord Sumption at para 7 above, doubtless for the very good reason that the judge was directing the jury as to the law to be applied rather than embarking on a general lecture upon legal theory. A similar assumption then figured in the judgments in both Orapko v Barclays Insurance Services Co Ltd [1995] 1 LRLR 443 and Galloway v Guardian Royal Exchange (UK) Ltd [1999] Lloyds Rep 209. But in none of those cases did any question of difference between the two rules arise. In each of the three there was fraudulent exaggeration of the claim, and indeed in the last two cases also non disclosure pre contract. In fact, there are significant differences between the two rules. If it were the case that the pre contract duty of good faith continues unaltered post contract, that would no doubt support the contention that the fraudulent claims rule embraces collateral lies deployed in support of a legally sound claim. The collateral lie would be a breach of good faith and, as Lord Sumption says at para 8, the consequence of an unaltered duty of good faith would be that the collateral lie would entitle the insurer to avoid the whole policy, and not simply for the future but ab initio. If that were so, the claim would fall with the policy. It has, however, been clear for many years, and is now indisputable following Manifest Shipping Co Ltd v Uni Polaris Insurance Co Ltd (The Star Sea) [2001] UKHL 1; [2003] 1 AC 469, that although some duty of good faith continues post contract, it differs significantly from the pre contract rule both as to the obligation which it imposes and as to the remedy for breach. There is, for example, no continuing duty on the insured to disclose information which comes to the actual or constructive knowledge of the insured after the cover was issued see Cory v Patton (1872) LR7 QB 304, Lishman v Northern Maritime Insurance Co (1875) LR 10 CP 179, Niger Co Ltd v Guardian Assurance Co Ltd (1922) 13 Lloyds Rep 75 and New Hampshire Insurance Co v MGN Ltd [1997] LRLR 24, all confirmed in The Star Sea. There is no occasion in the present case to pursue the elusive matter of definitive analysis of the content of the post contract duty of good faith, for it is enough that it plainly includes the fraudulent claims rule. Secondly, any duty of disclosure which may exist post contract ends with the commencement of litigation, when the different rules of court take over; they include, significantly, the concept of legal privilege. Thirdly and for present purposes most importantly, as The Star Sea makes clear, the remedy for post contract fraud in the making of the claim is loss of the claim, not avoidance of the whole policy. All of that means that one cannot answer the question in the present case by predicating it on the basis that the fraudulent claims rule is merely a manifestation of the duty of utmost good faith. Whilst the fraudulent claims rule is confirmed by The Star Sea, that case leaves open the present issue, namely what kind of fraud is caught by it. Moreover, the recent legislation (see below) treats the rules of good faith and fraudulent claims differently. It modifies the rule of utmost good faith but leaves the fraudulent claims rule untouched. Fraudulent devices: authority In Agapitos v Agnew (The Aegeon) [2002] EWCA Civ 247; [2003] QB 556, in the course of a thorough review of the question here in issue, Mance LJ, as he then was, justly observed at para 22 that there is a dearth of convincing authority either for or against the inclusion of fraudulent devices within the fraudulent claims rule. There is no direct decision against inclusion. At first instance in Royal Boskalis Rix J expressed strong obiter doubts about it. That case did concern falsity in the presentation of the claim which could properly be analysed as a collateral lie. It amounted to deliberate concealment of the terms on which the ship had been extracted from Iraq. The lie was told for fear that the insurers would try to rely on illegality if the truth were revealed, but on the judges ruling the validity of the claim was not affected by the falsity. Thus, the concealment was collateral because the claim was good. At [1997] LRLR 523, 592, Rix J said: Whatever be the precise definition and ambit of the concept of a fraudulent claim, there was no such claim here. I am in the process of finding that the sue and labour claim was and is a good and valid claim. It is not a false or fraudulent claim. It is totally unlike those instances of fraudulent claim to be found in the authorities, such as claims in respect of deliberately self inflicted or pretended losses, or claims in amounts which are knowingly or recklessly exaggerated: see, for instance, Goulstone v Royal Insurance Co (1858) 1 F & F 276 . or The Captain Panagos DP [1986] 2 Lloyds Rep 470, 511, where Evans J defined a fraudulent claim as one which is made on the basis that facts exist which constitute a loss by an insured peril, when to the knowledge of the assured those alleged facts are untrue I doubt that it is every knowingly or recklessly false statement made in the context of a claim which renders that claim a fraudulent claim for the purpose of the doctrine whereby the making of a fraudulent claim leads to the automatic forfeiture of the whole policy under which the claim is made. However, that case was not decided by the judge on the basis of the fraudulent claims rule, and he refused a late application by the insurers to allege fraud. It was decided on the basis of the scope of the duty of good faith. When in due course it reached the Court of Appeal, the decision was reversed on different grounds and the present issue did not arise for discussion. For the reasons explained by Mance LJ at para 28 in The Aegeon, there is no significant assistance to be had on the present issue from Piermay Shipping Co SA v Chester (The Michael) [1979] 2 Lloyds Rep 1. In The Star Sea the House was clearly exercised by the risk of disproportionately severe remedies, which risk tends to support a policy argument against inclusion. On the other hand, to the extent that the decision concludes that there is an obligation on the insured to treat his insurer with honesty when making a claim, it is capable of supporting inclusion, as perhaps may Lord Hobhouses parting remarks on the topic at para 72, emphasising the fundamental impact which fraud has on the relationship under insurance contracts. But the present issue simply did not arise and was not discussed. The much criticised decision in Black King Shipping Corpn and Wayang (Panama) SA v Massie (The Litsion Pride) [1985] 1 Lloyds Rep 437 did assume that the lie there told defeated the claim, and in The Mercandian Continent at para 29 Longmore LJ (obiter) treated the decision as justified by the fraudulent claims rule. But Hirst J did not so base it, reasoning instead from the duty of good faith, and this was roundly rejected in The Star Sea at para 71. The treatment of The Litsion Pride by Lord Hobhouse in The Star Sea is, to my mind, more consistent with the exclusion of collateral lies from the fraudulent claims rule than with their inclusion. At para 71, Lord Hobhouse said of the earlier case; In so far as it is based upon the principle of the irrecoverability of fraudulent claims, the decision is questionable upon the facts since the actual claim made was a valid claim for a loss which had occurred and had been caused by a peril insured against when the vessel was covered by a held covered clause. True it is that Lord Hobhouse then added: It is not necessary to examine whether there might or might not have been some other basis upon which the case could be decided in favour of the insurer as one feels it clearly ought to have been. It is not at all clear what route towards a finding for the insurers in The Litsion Pride Lord Hobhouse had in mind, but it does not seem likely that he can have been assuming that a collateral lie relating to the claim would have provided it, for then he could not easily have made the first observation. With hindsight, it may be that the better analysis of The Litsion Pride is that the lie told was not part of the presentation of the claim at all, but rather part of a dishonest antecedent attempt to avoid liability to pay the additional premium for taking the ship into a war zone. Likewise the present point was far from arising in The Mercandian Continent, where the lie was in no sense part of the presentation of the claim, indeed was not even directed to the insurers, but rather amounted to a misplaced attempt to serve their interests. In summary, authority for inclusion of fraudulent devices within the rule boils down to a possibly relevant dictum of Lord Sumner in Lek v Matthews (1927) 29 Lloyds List Rep 141 and a first instance trial before Roche J in Wisenthal v World Auxiliary Insurance Corp Ltd (1930) 38 Lloyds List Rep 54, plus the considered obiter view of the Court of Appeal in The Aegeon itself. Lek v Matthews concerned a claim by a stamp collector for valuable stamps lost by theft. The theft had genuinely occurred and many stamps had been stolen. But in the course of quantifying the claim, the insured listed a substantial number of stamps which he knew he had never had. The trial judge, Branson J, held that he had been fraudulent and that his claim accordingly failed. In the Court of Appeal the collector succeeded in persuading Atkin and Bankes LJJ that he had not been fraudulent, although Scrutton LJ disagreed. The House of Lords restored the decision of Branson J. The judgments at every stage are long and heavily detailed as to fact and evidence. It is apparent that there was in some quarters a good measure of judicial sympathy for the claimant, on the grounds that he was a man of wealth and good reputation, who had certainly suffered the theft. The basis of the Court of Appeal decision was, in part, the conclusion of Atkin LJ that Mr Lek had not been dishonest, and thus not fraudulent, if he had genuinely believed that he was entitled to the sum which he claimed, and whether or not he had knowingly or recklessly included stamps which he had never had. Although Lord Phillimore dissented in restoring the finding of fraud, all three members of the House of Lords rejected this Atkin approach to the meaning of fraud, thus perhaps to an extent anticipating the debate many years later in the line of cases which includes Royal Brunei Airlines Sdn Bhd v Tan [1995] 2 AC 378 and Barlow Clowes International Ltd v Eurotrust International Ltd [2005] UKPC 37; [2006] 1 WLR 1476. Atkin LJ offered this example at (1926) 25 Lloyds Rep 544: In the course of adumbrating the later overruled view of dishonesty/fraud, The owner of a picture may have valued it at its true value, and may have had undoubted loss by theft. At the same time he may be unwilling to disclose how he acquired it, and in answer to underwriters may give a false account of its purchase. Such a falsehood, however blameworthy, seems to me on the supposed facts to afford no evidence of a fraudulent claim. Referring to this, Lord Sumner said in the House of Lords at 163 164: If a man has claimed for the loss of things which he knew he had not got, I think it is a contradiction in terms to say that he may have honestly believed in his claim. What is the use of a clause of defeasance in case a false claim is made, if we are to say that answers which violate this contractual clause and the most obvious rules of honesty as well do not matter so long as Mr Lek was convinced that he ought to win? It simply means that if he decides his own case in his own mind in his own favour and is persuaded that he is right (as anyone might be), falsehood in securing the victory does not matter. The learned Lord Justice gives an illustration about a picture, which shows, I think, that he had in his mind a case of misstatements on purely collateral matters. Even so, I could not agree: but these present matters are not collateral; they are of the essence. Atkin LJs picture illustration was plainly offered in support of his theory of fraud. It was not related to any issue as to collateral lies. The fraud practised by Mr Lek could not on any view be regarded as a mere collateral fraud, for it pretended that items had been lost which had never been there to be stolen. I respectfully agree entirely with Lord Mance (para 128) that there is no difficulty whatever in describing what Mr Lek did as fraudulent, whether or not he believed that he was morally justified in doing it. But the question which we face in the present case is not whether a collateral lie is dishonest (or fraudulent) but whether it brings the consequence that the whole claim fails. As to that, it is perhaps possible that in his brief riposte Lord Sumner may have had in mind the present issue as to collateral lies, but it does not seem particularly likely in a case where the issue was whether there was fraud at all. On any view, the present issue did not arise and there is no sign of it having been argued. Wisenthal did raise collateral lies. The claim was made on a policy insuring valuable furs and skins which were being taken to Glasgow to be auctioned. The insurers primary case was that the claimed theft had been carried out with the connivance or privity of the insured and most of the cross examination by Mr Norman Birkett QC on their behalf focussed on issues of credit. They also alleged pre contract non disclosure by allowing the insurers to think that daily rental rooms where the sale was to take place were a proper auction house. However, the jury answered questions about whether these complaints were made out either not satisfied or no. The jury further answered that it was not satisfied that there had been fraudulent exaggeration of the claim. The findings which the jury made against the claimant furriers were that (1) they had concealed whatever stock book they had, and had fraudulently told the insurers that there was none, and (2) they had fraudulently concealed a bank account in a name of a relative which was being used habitually for the business, but which name camouflaged the connection. The jury also found that it was impossible to put a quantity or value on the merchandise which had been taken. On these findings the judge gave judgment for the defendant insurers. Although the inability to say what had been stolen would presumably have justified this outcome, it seems clear that the judge took the view that the two collateral frauds specifically found also led to the failure of the claim. Otherwise there would have been no need to ask the jury for findings in relation to those complaints. Moreover he had directed the jury that it would be sufficient to come within the definition of fraud if deceit had been used in the investigation to secure easier or quicker payment of the money than would have been obtained if the truth had been told. Understandably therefore in The Aegeon at para 29 Mance LJ described the case as of interest. The report contains no indication that the issue was argued. Whether there were other first instance trials at this time which made the same assumption that collateral lies were sufficient to defeat a claim, even in the absence of fiction, complicity in loss, or exaggeration, is not known. The considered view of the Court of Appeal in The Aegeon was that the fraudulent claims rule did include fraudulent devices, differing on this point from the view of Toulson J (as he then was) at first instance. The case proceeded on a preliminary point of pleading, and the views on the present issue were technically obiter, because the fraud had been committed after the commencement of litigation, and on the basis of The Star Sea it was held that the fraudulent claims rule, whatever its scope, did not apply after that point. Although expressed at para 45 as a tentative view, the conclusion on the present issue was nevertheless fully reasoned and thorough. It depended not so much on authority, which as has been seen was scanty and equivocal, but upon reasoning from principle. The governing consideration seems to have been that the insured would otherwise enjoy the advantage of what has become known as the one way bet: see especially paras 20 and 37. The conclusion reached in The Aegeon has been assumed subsequently to represent the law in cases both at first instance and on appeal, but in none of them was the point put in issue and in several it could not have arisen for decision. Sharons Bakery (Europe) Ltd v AXA Insurance UK plc [2011] EWHC 210 (Comm); [2012] Lloyds Rep IR 164, was a case of material non disclosure at inception of cover of the fact that a finance company had been deceived into advancing finance, although the same bogus invoices had also been submitted in support of a subsequent claim in relation to a fire which had genuinely happened. The policy was held by Blair J to be avoidable for the non disclosure, irrespective of the fraudulent device employed in support of the claim. Moreover in that case there was an express clause avoiding the policy in the event of fraudulent devices, so that the general law was not in point. Similarly, in Bate v Aviva Insurance UK Ltd [2014] EWCA Civ 334; [2014] Lloyds Rep IR 527 the policy was avoidable for (fraudulent) non disclosure quite apart from that non disclosure being untruthfully denied when a subsequent claim was made. Apart from the facts that the judge found the latter fraudulent device, and that the Court of Appeal upheld his decision, the present issue was simply not discussed. Likewise, although in AXA General Insurance Ltd v Gottlieb [2005] EWCA Civ 112; [2005] 1 All ER 445 the Court of Appeal (per Mance LJ) re stated the conclusion in The Aegeon, the fraud in that case consisted in asserting payments made for alternative accommodation and electrical work when those payments had never been made; the case was one of fraudulent claim properly so called and what was at issue was the extent to which insurers could recover sums previously paid under the policy. Aviva Insurance Ltd v Brown [2012] Lloyds Rep IR 211 was another case of a fraudulent claim rather than of fraudulent device. The claim was for rent allegedly paid out for alternative accommodation when there was no question of payment because the policy holder himself owned the house in question. That he might have made an entirely different claim for the loss of rental which might otherwise have been paid by a third party tenant does not alter the fact that this was a fraudulent claim; if he had sought to make that quite different case he would have had to show that the house would otherwise have been rented out. The correctness of The Aegeon was not debated, although whether the fraud was sufficiently connected to the claim, and/or sufficiently serious, was. The clearest case of direct application of The Aegeon is Stemson v AMP General Insurance (NZ) Ltd [2006] UKPC 30; [2006] 1 Lloyds Rep IR 852. The principal decision of the Privy Council was that there was no reason to disturb the concurrent findings in both courts below that the insured had himself started the house fire on which the claim was predicated. He had, however, also lied to the insurers during the investigation by claiming, falsely, that he had not previously contemplated sale of the house, when in fact he had indeed done so under considerable financial pressure. The Board upheld the judges decision that this lie was, as well as clearly relevant to the conclusion that the insured started the fire, an independent reason why the claim failed. The judgment of Lord Mance records, however, at para 121 that the law as stated in The Aegeon had not been questioned in argument. The real issue was whether the finding that the claim was wholly bogus could stand. Lastly, in Summers v Fairclough Homes Ltd [2012] UKSC 26; [2012] 1 WLR 2004 the Supreme Court dealt with the law relating to fraudulent third party claims against insurers. It is true that at para 29 Lord Clarke, giving the judgment of the court, distinguished the law as between parties to an insurance contract, and that in doing so he included The Aegeon in his list of cases demonstrating the fraudulent claims rule in such cases. But that cannot realistically be treated as expressing any view on the present issue. The personal injuries claimant in Summers made a bogus claim, alleging that he was grossly disabled when in fact he was working and playing football, and on this basis claimed approximately eight times what his case was truly worth. The court referred to the fraudulent claims rule in insurance only to distinguish it from the law applicable to third party claims. Plainly, the fact that The Aegeon has been assumed to represent the law, and indeed has not been questioned, is of some relevance to the present issue. But the present case appears to be the first time since that decision that any court has heard argument about it, and certainly the first time that either this court or the House of Lords has been required to confront the issue. The essential question is whether The Aegeon was right. Authority: other jurisdictions As Lord Sumption records, Australian cases demonstrate a difference of opinion on the present issue. That the second of them involved construction of a statute whereas the first did not does not affect this position. Just as does the English statute (see below), the Australian Act left open the meaning of claim made fraudulently and thus the present issue. Materiality Materiality is a concept of central importance to the law of pre contract disclosure, founded on the duty of utmost good faith: Pan Atlantic Insurance Co Ltd v Pine Top Insurance Co Ltd [1995] 1 AC 501. It means something significant which the proposer knows, or ought to know, but the insurer does not. If that unknown something would affect the decision of a hypothetical insurer whether to take the risk or not, or on what terms to do so, it is material in the sense there used. Can materiality in this sense be read across to the later stage of a claim being made, and if it can, does it assist in providing the answer to the present issue as to whether fraudulent devices are included in the fraudulent claims rule? In Royal Boskalis, Rix J thought, at 597 598, that it was not apparent how the concept of materiality was to apply at the stage of a claim made under the policy. He added that an obstacle to transposing materiality of fraud from the pre contract to the claims stage lies in the fact that by definition at the latter stage it will arise only when the fraud has been detected. But the debate in his case was being conducted before The Star Sea reached the House of Lords. It was being conducted in the context of an issue about whether the pre contract duty of good faith continued unaltered to the post contract stage of the making of a claim, and with it the right to avoid the policy altogether for breach. I do not think that the discovery of the truth is necessarily the difference between the pre and post contract stages. True it is that by the time there is a question whether a lie told in support of a claim does or does not defeat that claim, the lie will normally have been discovered. But the same is true of a failure of pre contract disclosure. By the time there is a question whether it justifies the insurer in avoiding the contract, the truth will normally have been discovered. The insurer avoids the policy, or seeks to do so, because he has found out what he was not told during the negotiations leading to it. It is not difficult in most situations to ask, a propos the collateral lie, whether it was told intending the insurer to act in reliance on it, nor whether it did in fact affect the insurers behaviour during the period before he found out the truth. There may be the occasional case of a lie which is simply irrelevant to the laying of the claim and is told for some different reason, such as the lies in The Litsion Pride (to hide the fact that the insured had been trying to evade his liability to pay the additional premium) and The Mercandian Continent (to support the insurers wish to litigate in Trinidad rather than in London). The genuinely burgled householder who was unquestionably absent at the time but lies about where he was to avoid domestic embarrassment would be another example. But leaving aside such wholly irrelevant lies, generally speaking a lie told in the making of the claim, whether collateral or otherwise, is told with the aim of affecting the behaviour of the insurer. That is the whole point of it. The aim may be to speed up the acceptance of liability, or to avoid further enquiry, or there may be many other reasons. And the insurer, before he learns the truth, may be influenced in his behaviour in these or other ways, by the lie. The important difference between the pre and post contract (claim) stages lies in the power of decision in the hands of the insurer. Pre contract, he is free to take or to refuse the risk. A failure of disclosure or false statement deprives him of the opportunity to consider something. If it might have affected his decision, it is material. And if he had known the truth, he would have had a perfect right to refuse to issue the policy. Post contract, the insurer has no such freedom of choice. If the claim is good, he is legally obliged to pay it. A lie told in the making of the claim may well affect his handling of the claim, or the speed at which he pays it, or the inquiries which he calls for, but it can make no difference to his liability to pay. It may well be material (relevant) to his behaviour, but it is immaterial (irrelevant) to his liability. So materiality means something different at the two stages. The question is: material to what? For this reason, I respectfully agree with Rix Js conclusion that the concept cannot simply be transposed to the post contract situation. It does not migrate unchanged between the two stages, any more than the duty of good faith does. It is therefore possible to say, as Lord Sumption explains, that materiality used in the different sense of relevance to liability provides the answer to the issue in the present case. The collateral lie is immaterial to the liability of the insurer. In analysing the issue in that way one is, in a sense, re stating the question: does a collateral lie defeat the claim? But one is also focussing on the critical difference between the collateral lie and the false or exaggerated claim. The collateral lie is certainly told with the aim of improving the position of the liar, but in fact and in law it makes no difference to the validity of his claim whether it is accepted or found out. The false or exaggerated claim is also made with the aim of improving the position of the liar, but if accepted it provides him with something to which he is not entitled in law. Lest it be thought that to state the present issue only in terms of materiality is to re state rather than to answer the question, it is helpful to address the underlying policy of the law. This becomes relevant in any event since the rule that the exaggerated claim fails altogether can only be because, as a matter of policy, severance is refused in law even where the exaggerated part is eminently severable in fact (as for example where an additional valuable has been added to the list of items lost, just as Mr Lek added stamps he had never had). The rationale of the fraudulent claims rule There is no doubt that the purpose of the fraudulent claims rule is to discourage fraud, having regard to the particular vulnerability of insurers. This rationale has frequently been reiterated. In Galloway v Guardian Royal Exchange (UK) Ltd [1990] Lloyds Rep IR 209, 214, it was expressed thus by Millett LJ at 214: The making of dishonest insurance claims has become all too common. There seems to be a widespread belief that insurance companies are fair game, and that defrauding them is not morally reprehensible. The rule which we are asked to enforce today may appear to some to be harsh, but it is in my opinion a necessary and salutary rule which deserves to be better known by the public. I for my part would be most unwilling to dilute it in any way. And in The Star Sea Lord Hobhouse said this at para 62: The logic is simple. The fraudulent insured must not be allowed to think: if the fraud is successful, then I will gain; if it is unsuccessful, I will lose nothing. This latter formulation of the justification for the rule, which has often been repeated, gives rise to the commonly used shorthand that the fraudulent insured must not be allowed a one way bet. It was the principal argument relied upon by the insurers in The Aegeon and in the present case for the inclusion of collateral lies within the rule. The need for such a rule, severe as it is, has in no sense diminished over the years. On the contrary, Parliament has only recently legislated to apply a version of it to the allied social problem of fraudulent third party personal injuries claims. Section 57 of the Criminal Justice and Courts Act 2015 provides that in a case where such a claim has been exaggerated by a fundamentally dishonest claimant, the court is to dismiss the claim altogether, including any unexaggerated part, unless satisfied that substantial injustice would thereby be done to him. Parliament has thus gone further than this court was able to do in Summers v Fairclough Homes. Severe as the rule is, these considerations demonstrate that there is no occasion to depart from its very long established status in relation to fraudulent claims, properly so called. It is plain that it applies as explained by Mance LJ in The Aegeon at paras 15 18. In particular, it must encompass the case of the claimant insured who at the outset of the claim acts honestly, but who maintains the claim after he knows that it is fraudulent in whole or in part. The insured who originally thought he had lost valuable jewellery in a theft, but afterwards finds it in a drawer yet maintains the now fraudulent assertion that it was stolen, is plainly within the rule. Likewise, the rule plainly encompasses fraud going to a potential defence to the claim. Nor can there be any room for the rule being in some way limited by consideration of how dishonest the fraud was, if it was material in the sense explained above; that would leave the rule hopelessly vague. Nevertheless, the severity of the rule is an important consideration. Addressing the related (but distinct) rule of utmost good faith as applied post contract, and its even more severe sanction of avoidance of the policy ab initio, Lord Hobhouse in The Star Sea warned at para 51 of the dangers of remedies becoming disproportionate to the breach of duty. That consideration underlay the conclusion that the content of the duty of good faith did not extend to mere non disclosure post contract. When speaking of the fraudulent claims rule, he returned to the point at para 61: The courts should likewise be prepared to examine the application of any such principle to the particular class of situation to see to what extent its application would reflect principles of public policy or the over riding needs of justice. Where the application of the proposed principle would simply serve the interests of one party and do so in a disproportionate fashion, it is right to question whether the principle has been correctly formulated or is being correctly applied. In their 2014 report (para 54 supra) the Law Commissions referred at paragraph 1.25 to the same consideration. They said: The 1906 Act is insurer friendly. The principles were developed at a time when the insured knew their business while the insurer did not, and were designed to protect the fledgling insurance industry against exploitation by the insured. Where a policyholder is in breach of an obligation, the law gives wide ranging opportunities for the insurer to avoid the contract and refuse all claims, or to treat its liability as discharged, even where the remedy seems out of proportion to the wrong done by the policyholder. They also noted that the strict legal entitlement of insurers was not always mirrored by best market practice as to enforcement of remedies. There is self evidently a much greater risk of disproportionate remedy when the claimant is legally entitled to everything which he claims. Nor is the proposition that the fraudulent claimant has a one way bet entirely accurate. He does not stand to lose nothing at all if found out. He will commit a criminal offence, although the risk of prosecution is relatively slight, even after some well publicised recent trials, especially if he stood to gain nothing to which he was not entitled, and it may not operate as a significant sanction in many cases. The same may well be true of the potential to be held liable in damages to the insurers. Even, however, if those risks are regarded as comparatively remote, and are disregarded, the consequence of discovery is not limited to them. The insured who is shown to have acted fraudulently will, first of all, forfeit all or most of his credibility in any debate, in court or out of it, as to his entitlement under the policy. He will probably be disbelieved even where he is telling the truth. Secondly, if there is litigation in relation to the claim, he will be likely to be penalised by expensive inter partes costs orders as a result of his fraud. Thirdly, the policy is likely to be terminated by the insurers, at least prospectively. Fourthly, the history will be disclosable in any other insurance proposal which the claimant may make. He is likely to be refused insurance, or to have to pay a good deal more for it than others must. These are, cumulatively, significant sanctions. These sanctions also apply, of course, to the insured who advances a fraudulent claim, properly so called. But the fact that they may be visited both on him and on the teller of a collateral lie does not answer the question whether the additional sanction of forfeiture of the claim is equally proportionate for both cases. It is not. Likewise, the wish to deter the one way bet can be applied to the collateral lie, as it can to fraudulent claims properly so called. But there is plainly a difference of quality between the insured who deals fraudulently with his insurer in an attempt to gain something to which he is not entitled, and the insured who dishonestly gilds the lily with a lie or falsified evidence, but stands thereby to obtain nothing more than was his legal due. Courts meet daily the party who gilds the lily with a lie, and have become used to warning themselves that his case will be damaged severely as a result, but may not nevertheless be altogether bad. It becomes necessary to ask whether the undoubtedly severe rule is required to meet the second category of case. Given the other consequences which are likely to be visited on the perpetrator of a collateral lie, the sanction of loss of the entire (but valid) claim is disproportionate. It is otherwise if the claim is wholly or partially false; in that event these other consequences are not a sufficient sanction. The extension of forfeiture to a purely collateral lie is not justified as part of a generally imposed legal rule irrespective of any expressly agreed term of the policy. It is simply too large a sledgehammer for the nut involved. That conclusion is consistent with the manner in which the common law rule of fraudulent claims has evolved to exclude from its operation fraud committed after litigation has begun. That limitation was derived in The Aegeon from The Star Sea, but is in fact not compelled by it since the earlier case concerned non disclosure rather than fraudulent claims. It has been assumed in the present case to be correct. This important limitation cannot be based on anything but policy and a conclusion that without it the remedy would be disproportionate. It would be perfectly logical to say that whilst of course the separate rules of court regime for disclosure, considered in The Star Sea, overtakes the duty of good faith once litigation is begun, a duty to abstain from fraud is not in the least inconsistent with the regime attending litigation and its eventual resolution by trial. Indeed, there is a passing observation to that effect in the speech of Lord Sumner in Lek v Matthews at p 145, where he appears to have assumed, obiter, that the fraudulent claims rule would apply to false statements made at trial. The reason for the limitation now accepted must be that it would be altogether disproportionate for the insurers to be vouchsafed a new defence to the whole claim if, for example, under pressure in the witness box on the second day of the trial, the claimant were to utter a demonstrable untruth going to the claim. The basis of this important limitation must be that the courts should be left to deal in the other ways available to them with fraud in the course of litigation, for which they have adequate sanctions. The conclusion here arrived at is also consistent with the recent treatment of the law of insurance by Parliament, acting on the recommendation of the Law Commission. Consumer insurance contracts are now dealt with by the Consumer Insurance (Disclosure and Representations) Act 2012, already in force. The Insurance Act 2015, soon to come into force, deals with both commercial and consumer contracts. The effect of the statutes is to separate the duty of good faith from the law relating to fraudulent claims. Both abolish the rule previously codified in section 17 of the Marine Insurance Act 1906 providing for avoidance ab initio for breach of the duty of good faith, although the manner in which the continuing duty of disclosure pre contract is expressed differs as between consumer and commercial contracts. Section 12 of the 2015 Act deals with fraudulent claims. It preserves the rule that the fraudulent claimant recovers nothing, including any unexaggerated element. It takes the opportunity to limit the right of the insurer to avoid the whole policy to a prospective one. But like the Law Commissions, the Act deliberately leaves open the scope of the fraudulent claims rule, and in particular leaves open the present issue as to whether it extends to fraudulent devices. It was clearly contemplated by Parliament that the courts would in due course resolve this question. Conclusion My conclusion is, like that of Lord Sumption but for additional reasons, that the fraudulent claims rule is of considerable importance and must be preserved, but that its extension to collateral lies (fraudulent devices) is not based on sound authority and would result in a remedy disproportionate to the breach of duty involved. It follows that there is no occasion to consider the separate argument of the claimants based upon article 1 of Protocol 1 to the ECHR. LORD TOULSON: I agree with Lord Sumption and Lord Hughes in their conclusion and in what I take to be the essential reasoning in both their judgments. Lord Sumption at paras 25 and 26 identifies and explains the important difference between a fraudulently exaggerated claim and a justified claim supported by collateral lies. In the case of the former, he notes that the court declines to sever the dishonest part of the claim. Unlike the curates egg, the claim is not regarded as good in parts. The reason for adopting a strict approach is one of deterrence. In the case of the latter, Lord Sumption observes that the insured is trying to obtain no more than his legal entitlement, and the lie is irrelevant to the existence or amount of that entitlement. As he succinctly puts it, the lie is dishonest but the claim is not. Lord Sumption expresses the view, with which I agree, that the immateriality of the lie to the claim makes it not just possible but appropriate to distinguish this from the former case, and that a policy of deterrence does not go so far as to justify the denial of a valid claim by reason of a collateral lie. Lord Hughes at para 100 identifies a qualitative difference between the insured who deals dishonestly with his insurer in an attempt to gain something to which he is not entitled and the insured who dishonestly gilds the lily with a lie, but stands thereby to obtain nothing more than his legal due. Like Lord Sumption, he does not consider that the policy of deterrence would justify deprival of the insureds legal right of indemnity under the contract of insurance. I agree with Lord Hughes that the lie told in the latter case may be material to the insureds conduct, in that it may induce the insurer to accept the claim; but, if so, the insurer will have been induced to pay what it was liable to pay, and the insured will have gained no more than his legal entitlement. I agree with Lord Sumption that such a lie should not be regarded as material in the same sense as a lie which goes to the existence or amount of the insureds entitlement. It is aptly described as collateral, or irrelevant to the existence and amount of the insurers liability. In that critical sense it is immaterial to the parties respective rights and obligations. Lord Mance argues that to take this view is to overlook the obvious purpose for which the lie is told and its potential impact on the insurer. I recognise, as I have said, that the lie told in support of a true claim may be material to the insurers conduct by influencing him, as intended, to accept the claim, but the distinction which I draw (echoing the judgments of Lord Sumption and Lord Hughes) is between a lie of that nature and one which is material to the insureds entitlement in the sense that it is an attempt to obtain something to which he is not entitled. As Lord Hughes has pointed out, to tell lies in support of a valid claim is not risk free. Every experienced advocate knows that, as well as being dishonest, it is not a smart thing for a client who has a good cause to try to improve it by lying. In criminal cases it is probably a more likely cause of the wrongful conviction of an innocent person than anything else. For that reason, it is mandatory for the trial judge to give a Lucas direction (named after R v Lucas (Ruth) [1981] QB 720) in any case where it appears that the defendant may have told lies. The jury must be specifically warned that people sometimes lie in an attempt to bolster up a just cause. Insurance claims are tried by judges, not juries, but that does not alter the fact that proof that a party has lied is likely to have an extremely deleterious effect on his credibility. It is also likely to be reflected in any costs order which the court may make. Notwithstanding those risks, people sometimes lie in support of a valid claim, whether under an insurance claim or otherwise; but there is no evidence about the prevalence of lies told in support of valid claims, or about the relative effect of different grades of sanction. I am not a psychologist, but I am sceptical about the idea that knowledge of this judgment will incentivise people with valid insurance claims to lie in support of their claims. Those who are honest will not do so because it would not be in their nature, while some who are dishonest may do so if they think that they will get away with it, despite the risk of it having a boomerang effect on whether the court believes anything that they say. I agree with Lord Mance that integrity on both sides of the claims process is an important consideration. So is arriving at a result which is just and reflects the parties legal rights. In considering whether as a matter of public policy the courts should apply a draconian rule of denying a right of recovery under a contract of insurance to the insured who tells a lie in support of a valid claim, the court must ultimately be guided by its own sense of what is just and appropriate. When all is said and done, that is the critical question on which the court is divided. On that question I agree with all that Lord Sumption and Lord Hughes have said. LORD MANCE: (dissenting) In Agapitos v Agnew (The Aegeon) [2002] EWCA Civ 247; [2003] QB 556, I considered in detail whether, as a matter of policy, the underlying rationale of the fraudulent claim principle should extend to invalidate not merely the whole of a claim where part proves otherwise good, but the whole of a claim where the whole proves good (para 19). As I pointed out, the word proves assumes that all aspects of the litigation proceed to trial and, if the use of fraudulent devices constitutes a defence, there may never be such a trial (para 19). I concluded, tentatively, that the use of a fraudulent device did give rise to a defence, and the other members of the court (Brooke LJ and Park J) agreed. The Court of Appeal in the present case (Christopher Clarke and Vos LJJ and Sir Timothy Lloyd) came to the like result as a matter of ratio after full consideration of the relevant considerations and authorities. In the present case, I have had the benefit of reading the differently nuanced judgments prepared by Lord Sumption and Lord Hughes. Both wrestle from different angles with the difficulty of describing the use of a fraudulent device as anything other than material to a central underwriting decision that is, the decision whether or not a claim should be settled. Insurance is about the assessment of risk and the settlement of claims. Both processes depend on good faith and fair information, and both are normally consensual. Litigation is neither the aim nor the norm. To suggest that a lie which the insured felt necessary to promote settlement of a claim is immaterial or collateral if years later it can be shown that it was after all unnecessary to tell it mistakes the nature of the business and the relationship. Further, it is either a non sequitur or at least begs the issue on this appeal to say, as Lord Sumption says, that because an underwriter assessing a claim will attempt to predict what a court would decide, therefore the only rational test of the materiality of a lie must be based on its relevance to a court which is in a position to find the relevant facts. On the contrary, since the lie is told to influence the underwriters assessment of what a court would decide and thereby to induce the underwriter to pay the claim, its materiality can perfectly well be, and must in my view be, based on its relevance to that assessment and to the underwriters decision whether to pay: see further 130 below. I also differ from Lord Hughess view, on the question whether as a matter of policy the fraudulent claims principle should be seen as extending to or embracing the use of fraudulent devices. More specifically, I do not accept that either the factors he deploys in para 98 or general considerations of proportionality in play in the absence of any expressly agreed term of the policy do or should lead to a conclusion that the fraudulent claims principle does not embrace the use of fraudulent devices. If and in so far as the factors in para 98 have any real validity or weight as sanctions, they would have it in relation to the established fraudulent claims rule. Yet that rule exists notwithstanding them. I will not in the circumstances rehearse all the detailed conclusions which lead me to broadly the same conclusion on the appropriate policy and principles now as I expressed tentatively in 2002. The only alteration that I might make to the principles which I then identified would be to heighten the threshold test of materiality, rather as Christopher Clarke LJ himself tentatively suggested (para 165), so as to substitute, for the requirement of a not insignificant improvement of the insureds prospects, a requirement of a significant improvement of the insureds prospects, before a claim is barred. The relationship of insured and insurer is a special one, in relation to which the good faith or uberrimae fidei has long been fundamental. As a special relationship it survived the failure of Lord Mansfields attempt to introduce a general duty of good faith into English contract law. It did so rightly because of the general imbalance in information and control and the significance of moral hazard in insurance relationships. Insurance fraud is commonplace, often being regarded as a victimless crime in relation to which insurers are fair game. Of course, insurers do not always pay claims as speedily as would be desired, but that is not an excuse for fraud, and is something for which a separate remedy is under current legislative scrutiny. There is long standing if limited authority for the inclusion of fraudulent devices within the ambit of the fraudulent claims principle. In Lek v Matthews (1927) 29 Ll L Rep 141, a case of alleged loss of a stamp collection, the policy provided that, if the assured shall make any claim knowing the same to be false and fraudulent, as regards amount or otherwise, the policy shall become void, and all claims thereunder shall be forfeited: see p 141. The underwriters case was that, if there was any loss and even if the assured believed that it amounted in total to the sum claimed, he had supported this amount by including stamps which he knew he did not possess and had not lost. In this context, Atkin LJ in the Court of Appeal (1926) 25 Ll L Rep 525, 544 concluded that, so long as the assured believed in his entitlement to the amount claimed, he could not be said to have the intent to defraud the underwriters, which is essential to the underwriters defence, explaining that: From this point of view it appears to me immaterial whether in answering the underwriters interrogatories, whether before or during the action, he gave answers that were inaccurate, reckless or were knowingly false. The owner of a picture may have valued it at its true value, and may have had undoubted loss by theft. At the same time he may be unwilling to disclose how he acquired it, and in answer to underwriters may give a false account of its purchase. Such a falsehood, however blameworthy, seems to me on the supposed facts to afford no evidence of a fraudulent claim. This approach was given short shrift in the House of Lords, where Viscount Sumner said rhetorically (pp 163 164): If a man has claimed for the loss of things which he knew he had not got, it is a contradiction in terms to say that he may have honestly believed in his claim. What is the use of a clause of defeasance in case a false claim is made, if we are to say that answers which violate this contractual clause and the most obvious rules of honesty as well do not matter so long as Mr Lek was convinced that he ought to win? It simply means that if he decides his own case in his own mind in his own favour and is persuaded that he is right (as anyone might be), falsehood in securing the victory does not matter. The clause can only be read as permitting this by treating it as mere folly. The learned Lord Justice gives an illustration about a picture which shows, I think, that he had in his mind a case of misstatements on purely collateral matters. Even so, I could not agree; but these present matters are not collateral; they are of the essence. The other two members of the House, Lord Phillimore (dissenting in the result) and Lord Carson, expressed their full concurrence with these remarks. Their upshot is that a dishonest statement made to further a claim in which the claimant honestly believes renders the claim fraudulent, in the context of a clause such as that present in the policy in Lek v Matthews. It is also clear that the remarks embraced the situation of a simply fraudulent device, deployed to promote an insurance claim in respect of goods (eg the picture in Atkin LJs example) which had actually been lost. One can, as more recent authority illustrates, question whether lies about truly collateral matters should attract the operation of the fraudulent devices principle, (see eg para 125 below, with the reference there to The Mercandian Continent), but that is a different matter. What matters for present purposes is the assimilation of fraudulent devices with a fraudulent claim. There is no reason why the position should be any different in this respect under the common law rule mirrored by the wording of the clause in Lek v Matthews. Roche J so held when summing up to the jury in Wiesenthal v World Auxiliary Insurance Corpn Ltd (1930) 38 Ll L Rep 54. By the end of the trial, a core issue in that case was whether Mr Wisenthal had used fraudulent devices (the jury held in the event that he had). The report at pp 61 62 summarises Roche J as instructing the jury, somewhat damningly: Mr Alfred Wisenthal has been shown to be in many respects untruthful, and that was a disadvantage, but if the jury thought his lies were merely the outcome of habit and not intended to obtain a fraudulent advantage in this case they would not count it against him. Fraud was not mere lying. It was seeking to obtain an advantage, generally monetary, or to put someone else at a disadvantage by lies and deceit. It would be sufficient to come within the definition of fraud if the jury thought that in the investigation deceit had been used to secure easier or quicker payment of the money than would have been obtained if the truth had been told. Roche J, later Lord Roche, had had one of the largest commercial practices as a silk and was an experienced commercial judge. His conclusion as to the common law in the 1920s carries weight. A conceptual point which remained unsettled was however the relationship between any such principle and the rule enshrined in section 17 of the Marine Insurance Act 1906, whereby A contract of marine insurance is a contract based upon the utmost good faith, and, if the utmost good faith be not observed by either party, the contract may be avoided by the other party. In Black King Shipping Corpn and Wayang (Panama) SA v Massie (The Litsion Pride) [1985] 1 Lloyds Rep 437 Hirst J held, in the context of a fraudulent device (a dishonest backdating of a notice of entry into the Gulf, unnecessary and irrelevant to the claim in law, but believed by Owners to be relevant at the time they made it), that section 17 applied to enable avoidance ab initio, while operating at the same time, in Hirst Js view, to give underwriters an alternative option simply to rely on the fraud as a defence to the particular claim. This theory did not survive academic criticism or subsequent authority: see Manifest Shipping Co Ltd v Uni Polaris Insurance Co Ltd (The Star Sea) [2003] 1 AC 469, paras 61 62 and 71, per Lord Hobhouse, where the fraudulent claims principle is put as the consequence of a rule of law albeit, one may add, a rule of law no doubt deriving from the foundation of good faith on which insurance rests (see para 114 above), but tailored to the post contractual position. See also the view expressed in Agapitos v Agnew, para 45(d), and the later decision in AXA General Insurance Co Ltd v Gottlieb [2005] EWCA Civ 112; [20015] 1 AER (Comm) 445, para 31 (identifying the fraudulent claims rule as a special common law rule). When stating in The Star Sea that Hirst Js approach should no longer be regarded as a sound statement of the law, Lord Hobhouse also stated in a passage in para 71 quoted by Lord Sumption: In so far as it is based upon the principle of the irrecoverability of fraudulent claims, the decision is questionable upon the facts since the actual claim made was a valid claim for a loss which had occurred and had been caused by a peril insured against when the vessel was covered by a held covered clause. But it is important to note that Lord Hobhouse went on immediately to add: It is not necessary to examine whether there might or might not have been some other basis upon which the case could have been decided in favour of the insurer as one feels clearly it ought to have been. And in the next paragraph (para 72) he also noted that: Fraud has a fundamental impact upon the parties relationship and raises serious public policy considerations. Remediable mistakes do not have the same character. Similarly, in K/S Merc Scandia XXXXII v Certain Underwriters (The Mercandian Continent) [2001] 2 Lloyds Rep 563 Longmore LJ was concerned in the passages from paras 26 to 28 which Lord Sumption has cited in para 16 with the relevance of materiality to avoidance ab initio, not with the present problem. Longmore LJ in fact addressed the present problem in para 29 in terms which constitute further authority for treating the fraudulent claims principle as embracing fraudulent devices and another precursor to the reasoning in The Aegeon. He said: I should lastly refer to what has been called the much discussed decision in The Litsion Pride [1985] 1 Lloyds Rep 437 where the assured did not inform underwriters that their vessel was about to go into an exclusion zone but concocted a letter to their brokers two days after a casualty in that exclusion zone had occurred; this letter was falsely dated the day that the vessel entered the exclusion zone and informed the brokers and the underwriters that was what the vessel was about to do. Owners brokers also wrote later false statements in support of the claim. Mr Justice Hirst held that the false letter was a fraud clearly connected to the claim and the later statements were made in the direct context of the claim. It is thus a case of making a fraudulent claim and to that extent was, with respect, good law, but irrelevant to the present case. To the extent, however, that the case enunciates any wider obligations of post contract good faith in relation to merely culpable non disclosure or misrepresentation, it has been finally and authoritatively disapproved in The Star Sea (see para 71) (emphasis added) In this court we are of course free to reconsider prior authority at a lower level, although we should no doubt be reluctant to upset the instincts of previous courts addressing an issue over the past century. I appreciate the strength of the comment made by Popplewell J, when dismissing the present claim, that To be deprived of a valid claim of some 3.2m as a result of such reckless untruth is, in my view, a disproportionately harsh sanction. However, I think this comment has too narrow a focus; and, further, that it fails to consider the matter in the context of the well established core fraudulent claims principle and the reasoning behind it as a whole. The core fraudulent claims principle deprives an insured of the whole of any claim which he has fraudulently exaggerated. This principle has, at the instance of the Law Commission, been embodied by Parliament in the Insurance Act 2015, which will shortly come into effect, and will provide as follows: If the insured makes a fraudulent claim under a contract 12. Remedies for fraudulent claims (1) of insurance (a) the insurer is not liable to pay the claim, (b) the insurer may recover from the insured any sums paid by the insurer to the insured in respect of the claim, and (c) in addition, the insurer may by notice to the insured treat the contract as having been terminated with effect from the time of the fraudulent act. It is not in dispute that, in proposing this clause in the relevant Bill, the Law Commission left open for the courts to consider its application, directly or by analogy, to fraudulent devices. But it is clear that the policy behind its enactment by Parliament was the policy which the courts have for long applied, based on the special position of insurance and the belief that a stringent legal response to fraudulent claims serves as a necessary and justified deterrence to insurance fraud. We were referred to academic criticism of theories of deterrence in this context, but, as Lord Sumption observes, many legal rules are framed on a basis which assumes that they are capable of having and shaping legal, social or economic behaviour, and here is a classic example of Parliament endorsing this approach. The fraudulent devices rule serves a similar role in encouraging integrity and deterring fraud in the claims process. It should not be forgotten that very frequently fraud in the claims process will be associated with (a) the fraudulent pursuit of a non existent or bad claim or (b) the fraudulent exaggeration of a good claim. And, aside from cases in which either (a) or (b) is with the benefit of hindsight established, it will, or will almost always, be associated with (c) the pursuit of what the insured believes or fears to be at least a questionable claim. (There can be cases where an insured tells lies during the claims process for reasons entirely collateral to the merits of the claim, eg as in The Mercandian Continent or to cover up some personal or business embarrassment, but one would not then expect the threshold test of materiality to be met.) Lord Hughes, Lord Sumption and Lord Toulson suggest a difference in quality between the fraud involved in cases (a) and (b) on the one hand and in case (c) on the other hand. Lord Hughes says (para 100) that the difference in quality is between fraud in an attempt to gain something to which he [the assured] is not entitled, and the insured who dishonestly gilds the lily with a lie or falsified evidence, but stands thereby to obtain nothing more than was his legal due, while Lord Sumption says (paras 24 25) with Lord Toulsons support (para 105) that it is between a fraudulently exaggerated (or no doubt non existent) claim and the position where the insured is trying to obtain no more than the law regards as his entitlement. The difficulty with both analyses is that they look at fraud and the use of a fraudulent device with hindsight, rather than by reference to the state of mind with which a fraudulent device is usually deployed. That, as I have pointed out, is precisely because the assured does not believe or is not confident that he has a good claim. The fraudulent devices rule means that a fraudulent claimant cannot in cases (a) and (b) safely embellish his bad or exaggerated claim with fraudulent devices, and then, when any such device is discovered, hope to do better with the next device or the lies he will tell in court to pursue his bad or exaggerated claim. In case (c), it means that he cannot safely distort the claims process to his advantage and hope to prevent the insurer identifying, relying on or investigating the weakness which led to the insured telling the lie in the first place. In each of cases (a), (b) and (c), the use of a fraudulent device material to the insurance claim operates as a bar to its further pursuit, making further investigation into the underlying circumstances unnecessary and operating as a clear disincentive to lying. These are significant protective effects, which are entirely consistent with the underlying philosophy of insurance, mutual trust. Abolishing the fraudulent devices rule means that claimants pursuing a bad, exaggerated or questionable claim can tell lies with virtual impunity. The same logic governs fraudulent devices as it does fraudulent claims generally. It is, as Lord Hobhouse said in The Star Sea, para 62: simple. The fraudulent insured must not be allowed to think: if the fraud is successful, then I will gain; if it is unsuccessful, I will lose nothing. In short, on the approach advanced by the majority, the fraudulent device will advance the insurance recovery if undiscovered, and quite possibly lead to the recovery of a bad or exaggerated claim, and it will have no effect on any insurance recovery to which the assured may be entitled, even if it is discovered. Either way, it will have distorted the claims process, which Lord Hughes rightly identifies (in para 55) as key to insurance, from the viewpoint of policyholders as much as insurers. And, if the fraudulent device is discovered, it will have distorted the claims process by the time and cost involved in unveiling the fraud and attempting to ascertain its true implications. From the insureds viewpoint the risk that this might lead a court at trial to deprive him of some costs will be unlikely to outweigh the perceived advantages of telling the lie at the time it was told. And in many cases the lie will be undiscovered, the insurers will pay and it will never be investigated or known how far the claim was bad or exaggerated and how far any questions about it might have been answered adversely to the insured. Where an insured has a claim which he believes or fears to be questionable, it makes little sense in my view to say, as Lord Sumption does in para 26 with Lord Toulsons support (para 105) that the lie is dishonest, but the claim is not. When the lie is told, it is, as I have pointed out, often told precisely because the insured does not really believe he has a good claim, even though at a later trial it may be shown (as it was in The Litsion Pride, where notice of entry into the Gulf proved not in law to be a condition of the insurance) that his fears were in law unfounded. Further, although the point is ultimately semantic, there is no difficulty (and neither Viscount Sumner nor Roche J experienced any) in describing a claim otherwise honestly believed in as itself fraudulent if it is being promoted by a fraudulent device. In the relatively rare case, like the present, where the insured pursues a claim to trial, and is found after the event to have had a sound claim, it may seem harsh that the insured loses everything. But policy must by definition look at the position overall, as the core fraudulent claims rule does. In any event a person who uses fraudulent devices in the context of an insurance relationship deserves no real sympathy: see Lord Hobhouses words in The Star Sea, paras 62 and 72, quoted in paras 120 and 129 above. As to materiality, it is clear that inducement has no role in relation to the core fraudulent claims rule, and there is no reason why it should do so in relation to fraudulent devices. It is equally clear that materiality must be considered by reference to the position at the time when the fraudulent device is deployed, and that it cannot be right to consider it retrospectively by reference to whatever a court, years later perhaps, decides is the actual factual or legal position. There is as a matter of common sense no difficulty about describing a lie told during the claims process as material by reference to the circumstances as they were at the time when it was told. It makes no sense to do otherwise. Lies are told in a particular context, and it is only in that context that they can even be identified as lies. To suggest, as Lord Toulson does (para 107), that a lie told to promote a claim is immaterial to the parties respective rights and obligations, simply because, perhaps years later, it can be seen that the lie was unnecessary and the claim good without it, seems a charter for untruth, which overlooks (a) the obvious imperative of integrity on both sides in the claims process and (b) the obvious reality that lies are told for a purpose, almost invariably as here to obtain the uncovenanted advantage of having the claim considered and hopefully met on a false premise. I add that, if a lie could be disregarded as immaterial because it could be shown, years later, that it was irrelevant to the outcome of the claim, then logically a lie exaggerating the value of a claim ought also to be disregarded in relation to whatever was, years later, shown to be the valid claim. The applicability or otherwise of the fraudulent claims rule in relation to lies told during the course of litigation was not argued before us. In Agapitos v Agnew the court (at paras 47 53) applied by analogy in this context the reasoning in relation to non disclosure adopted by the House of Lords in The Star Sea. This might have been an area worth revisiting on the present appeal. But, assuming the correctness of the decision on this point in Agapitos v Agnew, its rationalisation must be that the court process should be allowed to operate independently, with its own inbuilt sanctions in respect of lies or other abuses by either party. That has no bearing on the present issue, which is whether the undoubted fraudulent claims rule, which Parliament has now endorsed, extends to or embraces the use of a fraudulent device. It was submitted that the fraudulent devices rule operates in a case like the present inconsistently with the principle in the first paragraph of Protocol 1 (A1P1) to the European Convention on Human Rights, in that it deprives the insured of a proprietary right in the form of an insurance claim. The court is under section 6(1) of the Human Rights Act 1998 not to act inconsistently with the Convention rights, and this is said to mean that it should define or develop the common law in such a way as to ensure that insurers cannot deprive any insured of his insurance rights in a way which would be disproportionate. In the light of the view of the majority on this appeal, I do not propose to spend time considering the merits or implications of this sort of horizontal application of the Convention rights in the present context. Accepting that the fraudulent claims rule, including the fraudulent devices rule, can deprive an insured of a valid claim, the deprivation clearly has a legitimate aim, and my view would be that it would be and was proportionate as a bright line rule for the reasons I have given and which the Court of Appeal gave. For these reasons, I consider that the Court of Appeal came to the right conclusion and would myself dismiss the appeal. In the light of the majority judgment, insurers will no doubt be advised about whatever may be the potential merits of making express in future whatever understanding they have, or action they may wish to take, regarding the effect of fraudulent devices, as and when such are discovered to have been used by an insured during the claims process.

The issue on this appeal was whether the insurers of a ship were entitled to repudiate liability on the ground that the insured had told a lie in presenting the claim, if the lie proved to be irrelevant to the insurers liability. The vessel DC MERWESTONE was incapacitated by a flood in her engine room. Her main engine was damaged beyond repair. The flood was caused by (i) the crews negligence in failing to close the sea inlet valve in the emergency fire pumps, (ii) damage to the pumps, (iii) the negligence of previous contractors who had failed to seal bulkheads and (iv) defects in the engine room pumping system. The appellant owners presented an insurance claim to the respondent insurers for 3,241,310.60. They told the insurers solicitors that the crew had informed them that the bilge alarm had sounded at noon that day, but could not be investigated because the vessel was rolling in heavy weather. This was a lie told by the owners to strengthen the claim, accelerate payment under the policy, and take the focus off any defects in the vessel for which the owners might have been responsible. The lie was in fact irrelevant to the claim, since the vessels loss was found to have been caused by a peril of the seas. But the judge held that the owners lie was a fraudulent device, which meant the insurers did not have to pay out under the policy. The Court of Appeal agreed. The Supreme Court allows Versloot Dredgings appeal by a majority of 4 to 1, holding that the fraudulent device rule does not apply to collateral lies, which are immaterial to the insureds right to recover. Lord Sumption gives the lead judgment. Lord Clarke, Lord Hughes and Lord Toulson give concurring judgments. Lord Mance gives a dissenting judgment. The common law has long prohibited recovery from an insurer where the insureds claim has been fabricated or dishonestly exaggerated (the fraudulent claims rule). The purpose of the rule is to deter fraud. This appeal concerns the more recent extension of that rule to fraudulent devices, i.e. collateral lies told by the insured to embellish their claim, but which are irrelevant because the claim is justified whether the statement was true or false [1,9]. The fraudulent claims rule does not apply to collateral lies. The dishonest lie is typically immaterial and irrelevant to the honest claim: the insured gains nothing by telling it, and the insurer loses nothing if it meets a liability that it has always had [23 26]. If a collateral lie is to preclude the claim, it must be material. The real test of materiality is that a collateral lie told in the course of making a claim must at least go to the recoverability of the claim on the true facts as found by the court [35 36]. The test is not, as suggested by Mance LJ in The Aegeon [2003] QB 556 and the Court of Appeal and Lord Mance in this case, an attenuated test of materiality requiring that the prospects of the claim should apparently be improved, given the facts known at the time of the lie [18 22, 31]. Lord Clarke concurs, adding that public policy requires that the collateral lie be irrelevant to the insureds claim, and that it would make little sense to support a rule that bars claims involving collateral lies uttered before proceedings are begun, and not afterwards [39 49]. Lord Hughes agrees, pointing out that this extension of the important fraudulent claims rule has been left open by the Insurance Act 2015. The forfeiture of the entire claim is not a proportionate sanction for the teller of a collateral lie, who will suffer in other ways if his lie is discovered [65 104]. Lord Toulson, concurring, concludes that this outcome is just and appropriate [105 110]. In a dissenting judgment, Lord Mance would have dismissed the appeal, upholding the principle set out in The Aegeon, but modifying it so as to require a heightened threshold test of materiality of a significant improvement of the insureds prospects at the time of the lie (rather than retrospectively at the time that the court determines the facts), in order to bar the insureds claim [111 134].

Iceland is one of the most productive countries per capita in the world. It ranks high in economic and political stability. But the global financial crisis of 2008 exposed its dependence on the banking sector, and in the autumn of that year the nations entire banking system failed. The dispute which has given rise to this appeal is one of the products of that crisis. It has its origin too in the fact that Iceland is a party, as are all the Member States of the European Union, to the Agreement on the European Economic Area (the EEA Agreement) which was established on 1 January 1994. On 6 December 2002 Annex IX (Financial Services) to the EEA Agreement was amended by the incorporation of Directive 2001/24/EC of the European Parliament and of the Council of 4 April 2001 on the reorganisation and winding up of credit institutions (the Directive). Landsbanki Islands hf (Landsbanki) and its wholly owned subsidiary Heritable Bank plc (Heritable) are both credit institutions for the purposes of article 1(1) of the Directive. Landsbanki is a company incorporated under the laws of Iceland with its registered office in Reykjavik. Heritable is a company incorporated under the Companies Act 1985 with its registered office in Glasgow. Both companies are the subject of proceedings resulting from insolvency which were commenced on 7 October 2008. On that date the Financial Services Authority of Iceland, in the exercise of emergency powers conferred on it the previous day by the Icelandic Parliament, took control of Landsbanki, which was later granted a moratorium on its liabilities. On 29 April 2009, under provisions by which financial undertakings which had been granted a moratorium were deemed to be in a winding up proceeding subject to the ordinary rules, the District Court of Reykjavik appointed a winding up board to the company. Landsbankis winding up board is the appellant in this appeal. On 7 October 2008 the Court of Session appointed joint administrators to Heritable under paragraph 13 of Schedule B1 to the Insolvency Act 1986 on the application of the Financial Services Authority. The joint administrators of Heritable are the respondents to the appeal. The Directive was implemented in the United Kingdom by The Credit Institutions (Reorganisation and Winding up) Regulations 2004 (the Regulations). Landsbanki is an EEA credit institution for the purpose of Part 2 of the Regulations. Heritable is a UK credit institution for the purposes of Parts 3 and 4. The issue before the court concerns claims submitted by Landsbanki in the administration of Heritable and claims by Heritable against Landsbanki. It relates to the effect in the administration of Heritable of a decision made by Heritable not to pursue its claims in the winding up of Landsbanki. Its resolution depends on the proper construction of the Regulations and the Directive. The competing claims On 8 December 2008 Landsbanki submitted three claims in the administration of Heritable: (1) a claim for about 86m in respect of a revolving credit facility dated 31 May 2002 which was governed by English law (the Landsbanki rcf claim); (2) a contingent claim for 50m under a subordinated loan agreement (the subordinated debt claim); and (3) a contingent claim of 1,011,817,245 in respect of liabilities under a guarantee of Heritables liabilities (the guarantee claim). On 6 November 2009 the administrators of Heritable rejected the Landsbanki rcf claim under section 49(2) of the Bankruptcy (Scotland) Act 1985 (the 1985 Act), as applied to administrations by rules 2.41(1) and 4.16 of the Insolvency (Scotland) Rules 1986. This was on the ground that Heritable had claims against Landsbanki which equalled or exceeded the amount of the Landsbanki rcf claim which served to extinguish it. This decision was based on the application of the rule of Scots law on the balancing of accounts in bankruptcy. On 26 November 2009 the administrators accepted the subordinated debt claim and the guarantee claim, but valued them at nil under paragraph 3(1) of Schedule 1 to the 1985 Act on the basis that there was no prospect of the relevant contingencies being satisfied. On 4 May 2010 a fourth claim was submitted by the winding up board of Landsbanki for 17,122,221.92 under a master participation agreement (the Landsbanki mpa claim). It also was rejected by the administrators of Heritable. On 20 November 2009 Landsbanki appealed to the Court of Session against the decision by the administrators of Heritable to reject the Landsbanki rcf claim. This was commenced by way of a note in the petition for the making of an administration order in respect of Heritable. The note was later amended to include an appeal against the decisions to value the subordinated debt claim and the guarantee claim at nil. It has not yet been amended to include an appeal against the rejection of the Landsbanki mpa claim. The issue in the appeal to this court is concerned only with the rejection of the Landsbanki rcf claim by the administrators. On 30 October 2009 Heritable submitted four claims in the winding up of Landsbanki: (1) a claim for 661,673,236 as damages for breach of the revolving credit facility dated 31 May 2002 (the Heritable rcf claim); (2) a claim of 234,850,801 as damages under the master participation agreement (the Heritable mpa claim); (3) a claim for 7,665,032 under certain interest swap transactions in connection with an ISDA Master Agreement dated 23 December 2004 (the swap claim); and (4) a claim for 1,099,978 as reimbursement of payments made by Heritable in connection with Landsbankis Icesave accounts in the United Kingdom (the Icesave claim). In each claim letter it was stated that, subject to the extent to which Heritable was required or permitted by the law governing Heritables administration to set off any liabilities it owed to Landsbanki against amounts owed by Landsbanki to Heritable, Heritables claims were to rank as unsecured claims in the winding up of Landsbanki. By notices dated 14 January 2010 Landsbankis winding up board rejected the Heritable rcf claim, the Heritable mpa claim and the Icesave claim. The swap claim was accepted, but only to the extent of 7,247,284. The proceedings in Iceland The administrators of Heritable objected to the decision by the winding up board of Landsbanki to reject their claims by a notice of objection dated 22 February 2010. As Landsbanki had already commenced proceedings in the Court of Session, the administrators asked that no further steps be taken in relation to their objection until Landsbankis appeal before the Court of Session had been finally determined. By letters dated 8 March and 19 March 2010 the winding up board of Landsbanki declined to accede to this request. On 23 March 2010 the winding up board referred the administrators objections to the District Court of Reykjavik under article 120 of the Icelandic Bankruptcy Act 1991 (the BA 1991). On 14 April 2010 the administrators sought a stay of the proceedings before that court pending a final determination of the preliminary issues that had been identified in relation to Landsbankis appeal before the Court of Session. On 17 May 2010 the District Court of Reykjavik declined to grant a stay of those proceedings. On 12 August 2010 the administrators of Heritable formally withdrew the Heritable claims, including the swap claim, from Landsbankis winding up. On 2 September 2010 the winding up board of Landsbanki issued a counterclaim in the District Court of Reykjavik in which it sought a declaration that the Heritable claims had been extinguished by article 118 of the BA 1991. On 14 September 2010 the administrators applied to discontinue the article 120 proceedings before that court in relation to the rejection of Heritables claims by the winding up board. Their application was granted on 20 September 2010. The winding up board appealed against that decision to the Icelandic Supreme Court, but it was affirmed by the Supreme Court on 21 October 2010. It concluded that there was no need to rule on the counterclaim by Landsbankis winding up board because it was incompetent. The proceedings in Scotland The argument for Landsbankis winding up board in the note which they lodged in the proceedings in the Court of Session was that the decision to reject the Heritable claims in the Icelandic proceedings had effect and was binding in the United Kingdom in terms of regulation 5(1) of the Regulations. The administrators of Heritable were therefore bound to hold that Heritable had no claim against Landsbanki which could operate by way of set off. It was averred that, as there were no other defences to the Landsbanki rcf claim, the administrators were bound to allow that claim in full. In their answers to the note the administrators took a plea to the relevancy of the note in so far as it relied on the decision in the winding up of Landsbanki. A debate took place on the relevancy of the Landsbanki winding up boards averments before the Lord Ordinary, Lord Glennie, in June 2010. There were two issues. The first was whether, under regulation 5(1) of the Regulations, the decision by the winding up board to reject the Heritable claims had effect and should be recognised in the United Kingdom. The second was whether any future determination by the District Court of Reykjavik of the winding up boards rejection of Heritables claims would found a plea of res judicata in the Court of Session. On 20 July 2010 the Lord Ordinary rejected the arguments which had been submitted by the administrators in support of their plea to the relevancy on both grounds: [2010] CSOH 100, [2011] 2 BCLC 437. He held, having regard to the terms of the Directive, that a ruling by Landsbankis winding up board in the Icelandic winding up proceedings should, to the extent that it was final and binding in Iceland, be recognised and given effect in the United Kingdom, and that effect should also be given to the extinguishment of a claim under Icelandic law if not presented within a particular time: para 65. He was not persuaded that there was any limit on the recognition to be given to a ruling in the Landsbanki proceedings in Iceland as to the validity of Heritables claims against Landsbanki. So if the Icelandic court were to decide that there was no valid claim, its decision would have effect in the United Kingdom as if it were part of the general law of insolvency of the United Kingdom and would have to be given effect in the administration of Heritable: para 81. The administrators of Heritable reclaimed against the Lord Ordinarys interlocutor. By the time of the hearing in the Inner House res judicata was no longer a live issue, as Heritable had withdrawn its claims in the Landsbanki winding up. On 6 July 2011 Landsbankis winding up board was given permission to amend its pleadings to enable it to argue that, as the effect of the withdrawal of Heritables claims and the discontinuance of the article 120 proceedings in Iceland was that the winding up boards determination of those claims was final and binding under Icelandic law, Heritables claims had been extinguished as a matter of the insolvency law of Iceland and that they had also been extinguished by reason of not having been submitted within the prescribed time. On 28 September 2011 the First Division (Lord President Hamilton, Lord Mackay of Drumadoon and Lord Marnoch) recalled the Lord Ordinarys interlocutor: [2011] CSIH 61, 2012 SC 209. It held that, in accordance with the principles of unity and universality required by the Directive, the affairs of Heritable, a United Kingdom credit institution which was itself in insolvency, should be wound up with the defences available under its own general law to protect the interests of its creditors, and in particular that effect should be given to regulation 22(3)(d) of the Regulations under which the law of the United Kingdom was to determine the conditions under which set off might be invoked in Heritables winding up: para 38. Landsbankis winding up board now have appealed against that decision to this court. The legal framework (a) Icelandic law In paragraph 17 of its note Landsbankis winding up board made averments about Icelandic law in relation to the winding up of Landsbanki to the following effect, which the Lord Ordinary accepted as well founded for the purposes of the debate before him: para 21. The winding up of a financial undertaking such as Landsbanki is subject to the same rules as apply to bankruptcy proceedings generally. Article 116 of BA 1991 provides that legal action cannot be brought against a bankrupt estate unless expressly permitted by law. An action for payment cannot be commenced against a bankrupt, although an action which is still pending can be continued. Article 117 provides that a party who is unable to pursue his claim by action but wishes to maintain a claim against a bankrupts estate must submit a statement of his claim to the trustee in bankruptcy. The claim must be submitted within the period stated in the trustees notice issued to creditors under article 85. It will have the same effects as if a legal action had been filed in respect of it at the point in time when the trustee receives the statement. Article 118 provides that, if a claim which is not the subject of a pending action is not submitted to the trustee in bankruptcy within the prescribed time, it is cancelled with respect to the bankrupts estate. This is a more rigid system than that which applies to the adjudication of claims in Scotland under sections 48 53A of the 1985 Act. But every system has to set a timetable for the submission of claims, and the Icelandic system has the merit of certainty and of minimising the risk of delay. Article 119 provides that, once the period for stating claims is over, the trustee in bankruptcy is required to prepare a list of the submitted claims and a statement of how he thinks each claim should be recognised. An opportunity is given by article 120 to a claimant who is unwilling to accept the ruling of the trustee in bankruptcy as to the recognition of his claim to state his objection at a meeting of the creditors held to consider the stated claims, or to notify his objection by letter no later than the date of the meeting. If the trustee is unable to settle the issue, he is required to refer the matter to the district court. If his position on the claim is not challenged, it is to be regarded as finally approved during the bankruptcy proceedings. Applying the law as so described to the claims by Heritable, it was averred for Landsbankis winding up board that the submission of claims by Heritable was the equivalent of the bringing of a legal action against Landsbanki. Any claim that was not submitted in the winding up had been extinguished, and those claims that were submitted had been adjudicated upon. The administrators of Heritable had objected to the determination of the winding up board and the matter had been referred to the district court in Reykjavik. The question whether or not Heritables claims could be maintained against Landsbanki would depend on the result of the proceedings in Iceland. On 12 August 2010, following the decision of the Lord Ordinary that the arguments for the winding up board were well founded, the administrators of Heritable withdrew Heritables claims from the winding up. In their notice of withdrawal the administrators said that this was being done without prejudice to Heritables right to rely on its claims against Landsbanki for the purpose of insolvency set off under Scots insolvency law. On 21 October 2010 (as already narrated in para 11, above) the Icelandic Supreme Court refused the winding up boards appeal against the decision of the district court to discontinue the article 120 proceedings in relation to the winding up boards rejection of the Heritable rcf claim, the Heritable mpa claim, the Icesave claim and the balance of the swap claim. Landsbankis winding up board submits that, according to Icelandic insolvency law, the effect of these developments is that there was a rejection of the Heritable claims which was never overturned and that their withdrawal has served to extinguish them under article 118 of BA 1991. So they are no longer maintainable against Landsbanki, and the administrators attempt to reserve Heritables rights was meaningless and ineffective as the consequences of Icelandic law have effect in Scotland under regulation 5(1). The meaning and effect of that regulation is at the heart of the winding up boards argument. (b) the Directive The primary EU instrument dealing with cross border insolvency is Council Regulation (EC) No 1346/2000 of 29 May 2000 on insolvency proceedings (the 2000 Insolvency Regulation). But article 1(2) of the 2000 Insolvency Regulation provides that it shall not apply to insolvency proceedings concerning credit institutions and a number of other undertakings in the financial sector. The reorganisation and winding up of credit institutions is provided for instead by the Directive, which required national implementation by the Member States and by non EU countries in the EEA, including Iceland, by 5 May 2004. Among the recitals to the Directive are the following: (6) The administrative or judicial authorities of the home Member State must have sole power to decide upon and to implement the reorganisation measures provided for in the law and practices in force in that Member State. Owing to the difficulty of harmonising Member States laws and practices, it is necessary to establish mutual recognition by the Member States of the measures taken by each of them to restore to viability the credit institutions which it has authorised. (14) In the absence of reorganisation measures, or in the event of such measures failing, the credit institutions in difficulty must be wound up. Provision should be made in such cases for mutual recognition of winding up proceedings and of their effects in the Community. (16) Equal treatment of creditors requires that the credit institution is wound up according to the principles of unity and universality, which require the administrative or judicial authorities of the home Member State to have sole jurisdiction and their decisions to be recognised and to be capable of producing in all the other Member States, without any formality, the effects ascribed to them by the law of the home Member State, except where this Directive provides otherwise. (17) The exemption concerning the effects of reorganisation measures and winding up proceedings on certain contracts and rights is limited to those effects and does not cover other questions concerning reorganisation measures and winding up proceedings such as the lodging, verification, admission and ranking of claims concerning those contracts and rights and the rules governing the distribution of the proceeds of the realisation of the assets, which are governed by the law of the home Member State. (23) Although it is important to follow the principle that the law of the home Member State determines all the effects of reorganisation measures or winding up proceedings, both procedural and substantive, it is also necessary to bear in mind that those effects may conflict with the rules normally applicable in the context of the economic and financial activity of the credit institution in question and its branches in other Member States. In some cases reference to the law of another Member State represents an unavoidable qualification of the principle that the law of the home Member State is to apply. Article 2 of the Directive defines the expression reorganisation measures as meaning measures which are intended to preserve or restore the financial situation of a credit institution and which could affect third parties pre existing rights, including among other things reduction of claims. It defines winding up proceedings as meaning proceedings whose aim is to realise assets under the supervision of the administrative or judicial authorities of a Member State, including where the proceedings are terminated by a composition or other similar measure. Article 3 provides that the administrative or judicial authorities of the home Member State shall alone be empowered to decide on the implementation of one or more reorganisation measures in a credit institution, including branches established in other Member States. These reorganisation measures are to be applied in accordance with the laws, regulations and procedures applicable in the home Member State, unless otherwise provided in the Directive, and they are to be fully effective in accordance with the legislation of that Member State throughout the Community without any further formalities, including as against third parties in other Member States. Article 9, which deals with winding up proceedings, is to a similar effect. It provides that the administrative or judicial authorities of the home Member State which are responsible for the winding up shall alone be empowered to decide on the opening of the winding up proceedings concerning a credit institution, including branches established in other Member States. A decision to open winding up proceedings taken by the administrative or judicial authority of the home Member State is to be recognised without further formality within the territory of all other Member States and shall be effective there when the decision is effective in the Member State in which the proceedings are opened. Article 10, which is headed Law applicable, provides in paragraph 1 that a credit institution is to be wound up in accordance with the laws, regulations and procedures applicable in its home Member State insofar as the Directive does not provide otherwise. Paragraph 2 of this article states that the law of the home Member State shall determine in particular, among other things (c) the conditions under which set offs may be invoked; (g) the rules governing the lodging, verification and admission of claims; (h) the rules governing the distribution of the proceeds of the realisation of assets, the ranking of claims and the rights of creditors who have obtained partial satisfaction after the opening of insolvency proceedings by virtue of a right in re or through set off; (l) the rules relating to the voidness, voidability or unenforceability of legal acts detrimental to all the creditors. Article 21 is headed third parties rights in re. It provides that the adoption of reorganisation measures or the opening of winding up proceedings shall not affect the rights in re of creditors or third parties in respect of tangible or intangible, moveable or immoveable assets belonging to the credit institution which are situated within the territory of another Member State at the time of the adoption of such measures or the opening of such proceedings. Article 23 is headed Set off. It provides: (1) The adoption of reorganisation measures or the opening of winding up proceedings shall not affect the right of creditors to demand the set off of their claims against the claims of the credit institution, where such a set off is permitted by the law applicable to the credit institutions claim. (2) Paragraph 1 shall not preclude the actions for voidness, voidablity or unenforceability laid down in article 10(2)(l). (c) the Regulations As the Lord President observed, the structure of the Regulations which were made to implement the Directive as from 5 May 2004 does not mirror exactly that of the Directive which they transpose: 2012 SLT 247, para 9. But it has not been suggested that the Directive has not been properly implemented by the Regulations. Their effect, as described in the Explanatory Note, is that no winding up proceedings or reorganisation measures in respect of EEA credit institutions can be undertaken in the United Kingdom except in the circumstances permitted by the Regulations, and that EEA reorganisation measures and winding up proceedings are to be recognised in the United Kingdom. An EEA credit institution is defined in regulation 2 as meaning an EEA undertaking, other than a UK institution, of a description which applies to Landsbanki. A UK credit institution means an undertaking whose head office is in the United Kingdom of a description that applies to Heritable. The provisions dealing with the matters as so described are set out in regulations 3 and 5 in Part 2 of the Regulations, which is headed Insolvency Measures and Proceedings: Jurisdiction in Relation to Credit Institutions. Regulation 3(1) provides that on or after 5 May 2004 a court in the United Kingdom may not, in relation to an EEA credit institution or any branch of an EEA credit institution, make a winding up order, appoint a provisional liquidator or make an administration order. It gives effect to the principle of mutual recognition referred to in recital 14 of the Directive. Regulation 5(1), the meaning and effect of which (as mentioned earlier: see para 22, above) lies at the heart of the argument for Landsbanki, provides: An EEA insolvency measure has effect in the United Kingdom in relation to (a) any branch of an EEA credit institution, (b) any property or other assets of that credit institution, (c) any debt or liability of that credit institution, as if it were part of the general law of insolvency of the United Kingdom. Regulation 5(2) provides that a competent officer may exercise in the United Kingdom in relation to a credit institution which is subject to an EEA insolvency measure any function which he is entitled to exercise in relation to that credit institution in the relevant EEA State. Regulation 5(6), read together with the definition of the expressions it uses in regulation 2, provides that an EEA insolvency measure means, as the case may be, a reorganisation measure or winding up proceeding as defined in article 2 of the Directive (see para 25, above) which has effect in relation to an EEA credit institution by virtue of the law of the relevant EEA State. The winding up of Landsbanki would appear to be an insolvency measure for the purposes of regulation 5(1). Part 3 of the Regulations is headed Modifications of the Law of Insolvency: Notification and Publication. Regulation 7, which is in that Part, provides: The general law of insolvency has effect in relation to UK credit institutions subject to the provisions of this Part. There then follow provisions dealing with various procedural matters, such as consultation with the Financial Services Authority prior to a voluntary winding up, notification to the Financial Services Authority by the court of any decision, order or appointment that it makes, notification by the Financial Services Authority to the EEA regulator of any EEA state in which the UK credit institution has a branch, notification to creditors, submission of claims by EEA creditors, reports to creditors, service of notices and documents and disclosure of confidential information received from an EEA regulator. Part 4 of the Regulations is headed Reorganisation or winding up of UK Credit Institutions: Recognition of EEA Rights. Regulation 19(1)(b) provides that this Part applies where an administration order made under paragraph 13 of Schedule B1 to the 1986 Act on or after 5 May 2004 is in force in relation to a UK credit institution. It applies therefore to the administration of Heritable. Regulation 21(1) provides that for the purposes of Part 4 affected credit institution means a UK credit institution which is the subject of a relevant reorganisation or winding up. It also provides that relevant reorganisation or relevant winding up means any voluntary arrangement, administration, winding up, or order referred to in regulation 19(1) to which Part 4 applies. Heritable is an affected credit institution within the meaning of that expression as defined in this article. Regulation 22 is headed EEA rights: applicable law in the winding up of a UK credit institution. It provides, so far as material to this case, as follows: (1) This regulation is subject to the provisions of regulations 23 to 35. (2) In a relevant winding up, the matters mentioned in paragraph (3) are to be determined in accordance with the general law of insolvency of the United Kingdom. (3) Those matters are (d) the conditions under which set off may be invoked; (g) the claims which are to be lodged against the estate of the affected credit institution; (i) the rules governing (i) the lodging, verification and admission of claims, (ii) the distribution of proceeds from the realisation of assets, (iii) the ranking of claims, (iv) the rights of creditors who have obtained partial satisfaction after the opening of the relevant winding up by virtue of a right in rem or set off. Regulation 26 deals with third parties rights in rem in a way that gives domestic effect to article 21 of the Directive. A relevant reorganisation or winding up is not to affect the rights in rem of creditors or third parties in respect of assets belonging to the affected credit institution which are situated within the territory of an EEA state at the relevant time. Regulation 28 deals with creditors rights to set off in a way that gives domestic effect to article 23 of the Directive. It provides: (1) A relevant reorganisation or a relevant winding up shall not affect the right of creditors to demand the set off of their claims against the claims of the affected credit institution, where such a set off is permitted by the law applicable to the affected credit institutions claim. (2) Paragraph (1) does not preclude actions for voidness, voidability or unenforceability of legal acts detrimental to creditors under the general law of insolvency of the United Kingdom. The issue As will be apparent from what has been said so far, the issue in this case is how cross claims between two credit institutions are to be dealt with in insolvency proceedings in two different EEA States. As at the date when each EEA proceeding was opened, there were claims by Landsbanki against Heritable in Scotland and claims by Heritable against Landsbanki in Iceland. The winding up board of Landsbanki rejected Heritables claims, and Heritable later withdrew them. The result is that they are no longer provable in Landsbankis winding up under Icelandic law. The administrators of Heritable have rejected the Landsbanki rcf claim by the application of set off. This was done by applying the principle known to Scots law as the balancing of accounts in bankruptcy. If this principle is available to the administrators under regulation 22(3)(d), it will determine how much if anything will be recoverable by Landsbanki in satisfaction of its claim from the administration of Heritable. Scots law has long recognised that it would be inequitable for a debtor of a bankrupt to be required to pay his debt in full, while he could only get a dividend for the debt due to him by the bankrupt: Bell, Commentaries 7th ed, (1990) pp 118 et seq; Goudy, Bankruptcy 4th ed, (1914) p 550. Bell expresses the principle in this way at p 118: It is not only expedient, but required by the plainest principles of equity, that where one of the parties becomes unable to pay his debt to the other, he should not be entitled to require payment from that other of an equal debt that is due to him. Thus, the settlement of mutual debts may be referred to two distinct principles: the one is virtual payment and extinction; the other, retention till counter performance. At p 119, having noted that the latter operates only in bankruptcy, he observes: The former is known by the name of Compensation (in England Set off), and is amply discussed by our authors; the latter, sometimes vaguely, called Retention, but which may be distinguished as the Balancing of Accounts in Bankruptcy. The latter he describes as the more important branch of the doctrine. It is not merely an arrangement of convenience, but is an equitable adjustment of mutual debts and credits, to avoid manifest injustice. As Lord Hodge pointed out in Integrated Building Services Engineering Consultants Ltd v PIHL UK Ltd [2010] CSOH 80, [2010] BLR 622, para 23, there is no consensus as to whether this principle is a species of retention, as Lord McLaren in Ross v Ross (1895) 22 R 461, 465 suggests, or an extension of compensation by which one claim may be set off against another, resulting in the extinction of the former claim. In many contexts, such as the present, this question is of no practical importance. What the administrators are seeking to do in this case is to strike a balance between the competing claims for the purpose of working out how much, if anything, is due to Landsbanki by way of a dividend in the administration of Heritable. This procedure is, in essence, no different from that which is referred to in articles 10(2)(c) and 23 of the Directive and regulations 22(3)(d) and 28 as set off. Landsbanki submits that the issue is to be determined by construing regulation 5(1) in accordance with the Directive. So construed, the effects of Icelandic insolvency law on the claims that Heritable lodged in Landsbankis winding up must be held to apply automatically in the United Kingdom. If and to the extent that they have been rejected or extinguished under Icelandic insolvency law, that rejection or extinction applies automatically to EEA insolvency proceedings in the United Kingdom. The rejection or extinction of claims in the main proceedings takes effect throughout the EEA in accordance with the laws of the State in which these proceedings are opened. It follows that these claims have no part to play in the administration of Heritable. They may not be raised by way of a defence to Landsbankis claims against Heritable. Heritable submits that the effect of the Directive is that each Member State has exclusive jurisdiction to open proceedings with respect to credit institutions with head offices within its territory and to make legal rulings applying its own law. In a case such as this, where a parent credit institution has its head office in one Member State and its wholly owned subsidiary has its head office in another, each Member State must recognise the other Member States proceedings. The Regulations, transposing the Directive into United Kingdom law, allocate the proceedings relating to Heritable to the Scottish courts. Scots law is the law governing all issues arising in and with respect to its administration. They include the determination and quantification of Landsbankis proof in the administration, questions as to whether Heritable is able to rely on its cross claims against Landsbanki to reduce its liabilities to Landsbanki and questions as to the amount for which Landsbanki is to be admitted in the administration as a creditor. The question, in short, is whether Icelandic law binds the administrators of Heritable. Does it govern the question whether the claim that Heritable wishes to maintain in its administration against Landsbanki by way of set off against Landsbankis claim against it still subsists for this purpose? Must it be taken to have been extinguished for this purpose because it can no longer be maintained against Landsbanki in the winding up proceedings in Iceland? The parties are agreed that there is no previous case law which addresses this issue. Some preliminary observations The position at common law was explained in the Inner House by Lord President Hamilton: 2012 SC 209, para 29. A debt under a contract whose proper law is the law of another jurisdiction may, for the purposes of Scots law, be discharged by insolvency proceedings in that other jurisdiction: Rochead v Scot (1724) M 4566. But such proceedings will not, for the purposes of Scots law, discharge a debt where the proper law of the contract is not the law of the jurisdiction in which the proceedings are taking place: Adams v National Bank of Greece SA [1961] AC 255, where the proper law of the contract was that of England: St Clair and Drummond Young, The Law of Corporate Insolvency in Scotland 4th ed, (2011) para 22.31. The position under the common law of England is the same: Antony Gibbs & Sons v La Socit Industrielle et Commerciale des Mtaux (1890) LR 15 QBD 339. The question whether an obligation has been extinguished is governed by its proper law: Wight v Eckhardt Marine GmbH [2003] UKPC 37, [2004] 1 AC 147, para 11, per Lord Hoffmann; Dicey, Morris & Collins, The Conflict of Laws 14th ed, (2006) vol 2, para 31R 092, Rule 200. The proper law of the revolving credit facility is English law. So, if the matter were to be regulated by the common law, the position would be that what happened to Heritables rcf claim in Iceland would have no bearing on the question whether it could be used by way of set off against Landsbankis rcf claim in the administration of Heritable in Scotland. The effect of the Directive, however, is that the common law must give way to the law under which proceedings resulting from the insolvency of credit institutions must be conducted by the Member States to the extent, if any, that it directs. The question is whether it, and the Regulations which give it effect, contains such a direction. The answer is to be found by construing the Directive and the Regulations which implement it, and applying that construction to the facts. The principle of mutual recognition on which the scheme of the Directive proceeds is indicated by recitals (6) and (16). The administrative or judicial authorities of the home Member State must have sole power to decide upon and to implement the reorganisation measures provided for by the law and practices in force in that Member State. Equal treatment of creditors requires that the credit institution is wound up according to the principles of unity and universality. Those principles require the administrative or judicial authorities of the home Member State to have sole jurisdiction for the conduct of such proceedings. They also require that the decisions of those authorities will be recognised and be capable of producing in all the other Member States, without any further formality, the effects ascribed to them by the law of the home Member State. There is no indication here that any one home Member State is to have priority over the others. On the contrary, the insolvency proceedings in each Member State are to be conducted solely in accordance with the laws and procedures of that Member State. These recitals indicate that the separate regime of the Directive for credit institutions is modelled on the principle which is set out in article 16(1) of the 2000 Insolvency Regulation. The basic rule of jurisdiction which article 3(1) of the 2000 Insolvency Regulation lays down is that the courts of the Member State within the territory of which the centre of a debtors main interests is situated has jurisdiction to open insolvency proceedings. There is to be a single forum for this purpose, except where the debtor possesses an establishment within the territory of another Member State, in which case article 3(2) provides that the other Member State has jurisdiction restricted to the assets of the debtor situated in that other Member State. Article 16(1) of the 2000 Insolvency Regulation states: Any judgment opening insolvency proceedings handed down by a court of a Member State which has jurisdiction pursuant to Article 3 shall be recognised in all the other Member States from the time that it becomes effective in the State of the opening of the proceedings. The effects of that recognition are set out in article 17(1). It states that the judgment opening the proceedings referred to in article 3(1) shall, with no further formalities, produce the same effects in any other Member State as under the law of the State of the opening of proceedings. Articles 3, 9 and 10 of the Directive (see paras 26 28, above) carry the principles referred to in the recitals forward into the provisions of the Directive, except that the home Member State alone is empowered to take measures with regard to branches of a credit institution established in other Member States: article 3(1). It follows that the fact that Heritables claims against Landsbanki have been extinguished for all the purposes of the winding up of Landsbanki in Iceland cannot be questioned in the administration of Heritable in Scotland. Iceland, as Landsbankis home EEA State, has sole jurisdiction for this purpose, and the effects of the insolvency proceedings in Iceland must be recognised in Scotland. But does it follow that the administrators of Heritable must treat Heritables rcf claim as having been extinguished here too because of the effects on that claim of what has happened in Iceland? The answer indicated by article 10(2) suggests the contrary. It states that the law of the home Member State shall determine, among other things, the conditions under which set offs may be invoked, the rules governing the admission of claims and the distribution of the proceeds of the realisation of assets, the ranking of claims and the rights of creditors who have obtained partial satisfaction after the opening of insolvency proceedings. Landsbankis argument, however, is that the meaning and effect of regulation 5(1) is that the extinction of Heritables claim that results from the fact that the claim is no longer being pursued in Iceland has effect in the United Kingdom as if the EEA insolvency measure in Iceland in respect of Landsbanki was part of the law of insolvency of the United Kingdom too. It starts from the position that there is nothing in the Directive to prevent the relevant body of the home Member State of an insolvent credit institution from adjudicating upon the validity of claims lodged by creditors who are also the debtors of the credit institution or to prevent the law of that Member State from extinguishing claims by creditors who have themselves become insolvent. It takes this to mean that it is the insolvency law of that credit institutions home Member State that has effect also in the place where the insolvency proceedings in respect of its creditor were opened. This, it says, is made clear so far as the law of the United Kingdom is concerned by regulation 5(1). That regulation states that an EEA insolvency measure has effect in the United Kingdom in relation to any debt or liability of an EEA credit institution as if it were part of the general law of insolvency of the United Kingdom. Mr Alexander QC for Landsbanki submitted that the insolvency measure for the purposes of that regulation, as defined by regulation 5(6), is the winding up of Landsbanki in Iceland. The words as if it were part of the general law of insolvency of the United Kingdom meant that the effects of that insolvency measure were automatically incorporated into that law and must be given effect here. Everything turned on the meaning of that phrase. It gave effect to the collective nature of insolvency proceedings and the principle of equality among creditors. There was a level playing field, with one set of rules for all. Each creditor must lodge his claim in the credit institutions home Member State. That was what Heritable did when the proceedings were opened in Iceland. But there were no longer any rival cross claims, as Heritable had withdrawn its claim in the winding up of Landsbanki. It is a striking feature of this argument, well presented though it was, that it is based entirely on regulation 5(1). Mr Moss QC for Heritable had no quarrel with the proposition that, according to the principles of unity and universality, the Directive required that insolvency proceedings in respect of a credit institution should proceed on a strict entity basis in the home Member State of that institution, irrespective of where it had its branches. He was willing to assume too that Iceland had implemented the Directive correctly into its own law. He submitted that, if Heritable and Landsbanki had both been Scottish companies and were both being wound up in Scotland, it would not have been open to doubt that Heritable could assert a set off against Landsbanki in its own winding up even though it had not claimed in Landsbankis winding up. This was simply a matter of common sense. The liability of the debtor company was still an asset for the purposes of the creditors winding up. The question was whether that position was fundamentally altered by regulation 5(1) in the case of a winding up in another EEA State. He submitted that, when that regulation was examined in its context and regard was had to the consequences of Landsbankis argument, it was not. Discussion There is much more to the Regulations than regulation 5(1). The first point to notice is that Part 2, as its heading indicates, is concerned with jurisdiction in relation to EEA credit institutions. One can, of course, take from the provisions of this Part that the Regulations are designed to adopt the strict entity approach, based upon the principle which is to be found in article 9 of the Directive, that it is the administrative or judicial authorities of the credit institutions home Member State that shall alone be responsible for the opening of proceedings for its winding up. Seen in that context, there is nothing remarkable about what regulation 5 sets out. Even if that credit institution has branches in the United Kingdom, the entire process of winding up must be conducted in the home Member State. So an EEA insolvency measure in another EEA State must, as regulation 5(1)(a) says, have effect in the United Kingdom in relation to any of its branches here as if it were part of the general law of insolvency of the United Kingdom. Regulations 5(1)(b) as to the credit institutions property or other assets, and 5(1)(c) as to its debt and liabilities, are mirror images of each other. They are to be dealt with in the proceedings in the other EEA State. Property or assets located in Scotland are not to be disposed of in accordance with the rules of diligence that are available under Scots law, and steps by a creditor to enforce a claim against the credit institution are to be pursued solely in the proceedings in the other EEA State. Regulation 5(2) provides that, for the purposes of those proceedings, decisions taken by a person entitled to exercise any function which he is entitled to exercise in those proceedings are to be given effect in this country. In this way the integrity of the exclusive jurisdiction that is given to the home EEA State is preserved. But these provisions are concerned only with an EEA insolvency measure in relation to a credit institution which is located in another EEA State. It is only for that purpose that an EEA measure is to have effect as if it were part of the general law of insolvency in the United Kingdom. They apply to the winding up of Landsbanki in Iceland. But they do not apply to the administration of Heritable in Scotland. The rules which apply to Heritable, which is a UK credit institution, are set out in Parts 3 and 4 of the Regulations. Mr Alexander submitted that the effect of the phrase as if it were part of the general law of insolvency of the United Kingdom was that the winding up proceedings in Iceland had to be regarded as having been incorporated into the general law of insolvency of the United Kingdom, and that the reference to the general law of insolvency in regulation 7 had to be read in the same way. But in my opinion this reads too much into this phrase. It has the effect for which he contended in relation to the winding up of Landsbanki. But it does not extend to the proceedings relating to Heritable. The phrase as used in regulation 7 is a reference to the laws, regulations and procedures applicable in the UK credit institutions home Member State, as article 10(1) of the Directive indicates. The rules which are most directly in point for the purposes of this appeal are set out in regulations 7 and 22. Regulation 7, which is in Part 3, gives effect to article 10(1) of the Directive. It provides that the general law of insolvency has effect in relation to UK credit institutions subject to the provisions of that Part. The general law of insolvency must be taken for this purpose to be the general law of insolvency of the part of the United Kingdom in which the credit institution is located: see the definition in regulation 2(3). The modifications that Part 3 makes to the general law of insolvency are summarised in para 34, above. Regulation 22, which is in Part 4, deals with the applicable law in relation to EEA rights in the winding up of a UK credit institution. Regulation 22(1) states that its provisions are subject to the provisions of regulations 23 to 35. Regulation 22(2), which gives effect to article 10(2) of the Directive, states that the matters mentioned in regulation 22(3) are to be determined in accordance with the general law of insolvency of the United Kingdom. They include the conditions under which set off may be invoked and the rules governing, among other things, the admission and ranking of claims: regulations 22(3)(d) and (i). Regulation 28 preserves the right of creditors to demand the set off of their claims against the claims of the affected credit institution, where set off is permitted by the law applicable to the credit institutions claim. This is the other side of the application of the principle of set off that is referred to in regulation 22(3)(d). It reinforces the point that issues of set off are to be determined in the home EEA State, as the common law of Scotland requires, according to the proper law of the contract. It is conceived in the interests of creditors in other EEA States, bearing in mind that exclusive jurisdiction is given to the United Kingdom as the home Member State. Their right to claim set off is put onto the same basis as creditors in the United Kingdom. This gives effect to article 23(1) of the Directive, and it respects the principle of unity and universality on which the Directives provisions are based. The key to a proper understanding of regulation 5(1), therefore, lies in an appreciation of the fact that, while it is designed to give effect to the mandatory choice of the law of insolvency of the EEA State in which the foreign credit institution is located, it is not concerned in the least with the effects of the mandatory choice of Scots law for the administration of Heritable in Scotland. Those effects are provided for in Part 3 and 4 of the Regulations, which have nothing to do with the effects of the mandatory choice of the law of Iceland for the winding up of Landsbanki. I would therefore reject the argument for Landsbanki, on the ground that it fails to take account of the scheme of the Directive and the Regulations. But I think that there is also much force in Mr Mosss argument, which built on points made by the Lord President in his opinion at 2012 SC 209, paras 32 and 40, that Landsbankis argument produces an arbitrary and unprincipled outcome. As the Lord President observed in para 32, the logic of Landsbankis argument is that Heritables claims against Landsbanki would have been extinguished even if Heritable had been a wholly solvent company. It might have decided that there was no point in pursuing a claim in Landsbankis winding up because the prospects of a dividend were remote and the costs of doing that outweighed any possible advantage. However sound that assessment might have been, its effect would have been that Heritable would have been unable to set off its claim by way of a defence to a claim pursued against it in Scotland by Landsbanki. The only way for a creditor to avoid that result would be to lodge and maintain its claim in the insolvency proceedings in the other Member State, even if the prospects of recovering anything were nil. This would also be, as the Lord President said in para 40, to give universal priority to the process in which a decision happened to be made first. That would encourage forum shopping, especially where there was a prospect of inconsistent findings as to the validity of a claim in different Member States. It is hard to believe that this was intended by the framers of the Directive. These arguments do not, of course, provide an answer in themselves to Landsbankis case. But they do suggest that it is crucial to pay close attention to the scheme of the Directive to which the Regulations give effect. When this is done the answer is, in my opinion, entirely clear. Conclusion For these reasons I would dismiss the appeal and affirm the First Divisions interlocutor.

The dispute which has given rise to this appeal is a product of the failure of Icelands entire banking system in the autumn of 2008. The issue is how cross claims between two credit institutions are to be dealt with in insolvency proceedings in two different states in the European Economic Area (the EEA). Landsbanki Islands hf (Landsbanki) is an Icelandic company. Its wholly owned subsidiary, Heritable Bank plc (Heritable), is a Scottish company. Both companies have been in formal insolvency since 7 October 2008. On that date, the Court of Session appointed joint administrators to Heritable, and the Financial Services Authority of Iceland took control of Landsbanki. The District Court of Reykjavik later appointed a winding up board to Landsbanki [1 3, 38]. The relevant European legislation is Directive 2001/24/EC of 4 April 2001 on the reorganisation and winding up of credit institutions (the Directive), which applies to EU Member States and non EU countries in the EEA, including Iceland. The Directive was implemented in the UK by The Credit Institutions (Reorganisation and Winding up) Regulations 2004 (the Regulations). Landsbanki is an EEA credit institution for the purpose of Part 2 of the Regulations. Heritable is a UK credit institution for the purposes of Parts 3 and 4. Regulation 5 in Part 2 of the Regulations provides in essence that an EEA insolvency measure has effect in the UK in relation to the branches of an EEA credit institution, its property and assets, and its debts and liabilities, as if it were part of the general law of insolvency of the UK [2, 4, 23, 33]. Landsbanki submitted a total of four claims in Heritables administration in Scotland, but only one, submitted in December 2008 for about 86m in respect of a revolving credit facility governed by English law, is the subject of this appeal. Heritables administrators rejected that claim in November 2009, applying the Scots law rule on the balancing of accounts in bankruptcy, on the ground that Heritable had claims against Landsbanki which equalled or exceeded the amount of Landsbankis claim and which served to extinguish it. Later in November 2009, Landsbanki appealed to the Court of Session in Scotland against the administrators decision. In October 2009 Heritable had submitted four claims in Landsbankis winding up in Iceland. In January 2010 Landsbankis winding up board rejected three and accepted the fourth in a reduced amount. Heritables administrators formally objected to these decisions in February 2010 [5 10]. In the Court of Session appeal in Scotland, Landsbanki argued that the rejection of Heritables claims had effect and was binding in the UK in terms of regulation 5 of the Regulations, and that Heritables administrators were therefore bound to hold that Heritable had no claim against Landsbanki which could operate by way of set off. Heritable argued that Landsbankis argument was irrelevant. In Iceland, Heritables administrators asked that no further steps be taken in relation to their objections until Landsbankis Court of Session appeal in Scotland had been finally determined. Landsbankis winding up board declined this request and referred the objections to the District Court of Reykjavik in March 2010. Heritables administrators unsuccessfully sought a stay of those proceedings pending a determination of the point before the Court of Session [10, 12]. Back in Scotland, the Lord Ordinary in the Court of Session found in favour of Landsbanki in July 2010 after a debate. Following this decision, Heritables administrators withdrew Heritables claims from Landsbankis winding up in August 2010. Landsbanki then issued a counterclaim in the proceedings in the District Court of Reykjavik seeking a declaration that the Heritable claims had been extinguished. Heritables administrators successfully applied to discontinue the proceedings before the District Court of Reykjavik and the appeal of Landsbankis winding up board to the Icelandic Supreme Court was unsuccessful. Back again in Scotland, Heritable appealed against the Lord Ordinarys decision and the Inner House of the Court of Session reversed the Lord Ordinary in September 2011. Landsbanki now appeal to the Supreme Court. The issue is whether Heritables claims, extinguished as a matter of Icelandic law, are to be treated as extinguished in Heritables administration so that Heritables administrators cannot use them to set off Landsbankis claim [11, 13 16, 22, 43]. The Supreme Court unanimously dismisses Landsbankis appeal. It affirms the decision of the Inner House of the Court of Session. The judgment is given by Lord Hope with whom all the other Justices agree [62]. Heritables administrators may use the Heritable claims by way of set off against Landsbankis claim. The key to a proper understanding of regulation 5 lies in an appreciation of the fact that, while it is designed to give effect to the mandatory choice of the law of insolvency of the EEA state in which the foreign credit institution is located, it is not concerned in the least with the effects of the mandatory choice of Scots law for the administration of Heritable in Scotland. Those effects are provided for in Parts 3 and 4 of the Regulations, which have nothing to do with the effects of the mandatory choice of the law of Iceland for the winding up of Landsbanki [58]. Seen in the context of Part 2 of the Regulations (which is concerned with jurisdiction in relation to credit institutions), there is nothing remarkable about what regulation 5 sets out: even if an EEA credit institution has branches in the UK, the entire process of winding up must be conducted in its home state. Applied in this case, regulation 5 provides, among other things, that Landsbankis property or assets located in Scotland are not to be disposed of in accordance with Scots law, and that steps by a creditor to enforce a claim against Landsbanki are to be pursued solely in the proceedings in Iceland. For the purposes of the winding up, decisions taken by the winding up board are to be given effect in Scotland. In this way the integrity of the exclusive jurisdiction that is given to Iceland is preserved. But the provisions of regulation 5 are concerned only with the winding up in Iceland in relation to Landsbanki and it is only for that purpose that the winding up is to have effect as if it were part of the general law of insolvency in the UK. The provisions do not apply to the administration of Heritable in Scotland. The rules which apply to Heritable are set out in Parts 3 and 4 of the Regulations [52 54]. Regulations in Parts 3 and 4 provide that the general law of insolvency has effect in relation to UK credit institutions and that matters such as the conditions under which set off may be invoked and the rules governing, among other things, the admission and ranking of claims are to be determined in accordance with the general law of insolvency of the UK. They also preserve the right of creditors to demand the set off of their claims against the claims of the insolvent credit institution, where set off is permitted by the law applicable to the credit institutions claim. Issues of set off are therefore to be determined as the common law of Scotland requires, according to the proper law of the contract. That rule is conceived in the interests of creditors in other EEA states, bearing in mind that exclusive jurisdiction is given to the UK as the home state. The creditors right to claim set off is put onto the same basis as creditors in the UK [56, 57]. Although not decisive, Landsbankis argument also produces an arbitrary and unprincipled outcome. Its logic is that Heritables claims against Landsbanki would have been extinguished even if Heritable had been a wholly solvent company. The only way for Heritable to have avoided the extinguishment of its claim and therefore retained the right to use it by way of set off would have been for it to lodge and maintain it in Landsbankis winding up, even if it would not have been cost effective to do so or the prospects of recovery were nil. The effect of Landsbankis argument would also be to give universal priority to the process in which a decision happened to be made first. That would encourage forum shopping, especially where there was a prospect of inconsistent findings as to the validity of a claim in different states. It is hard to believe that this was intended by the framers of the Directive [59 61].

This appeal and cross appeal raise important questions about the compatibility of two statutory regimes, namely the adjudication of construction disputes and the operation of insolvency set off. In bare outline, section 108 of the Housing Grants, Construction and Regeneration Act 1996 (the 1996 Act) confers a right upon a party to a construction contract to refer a dispute arising under that contract to adjudication. Rules made under the Insolvency Act 1986 (now rule 14.25 of the Insolvency (England and Wales) Rules 2016 (SI 2016/1024)) (the IR) make provision for automatic set off of cross claims between a company in liquidation and each of its creditors, giving rise to a single net balance between them, to be ascertained by the taking of an account. Rule 14.24 does the same for a company in distributing administration. The 1996 Act does not deny the right of a company to refer disputes to adjudication merely because it is in liquidation, but it is argued on this appeal that, if there are cross claims between parties to a construction contract and one of them is in liquidation, then there can be no adjudication of any dispute between them about those cross claims even if, but for the liquidation and the existence of cross claims, one or more of those disputes would fall within the right to refer to adjudication conferred by section 108. This objection to the use or availability of adjudication in the context of insolvency set off is put on two grounds, which may be labelled jurisdiction and futility. First it is said that since insolvency set off replaces the former cross claims with a single claim for the net balance, there is no longer a claim, or therefore a dispute, under the construction contract, so that the adjudicators jurisdiction under section 108 (or under a bespoke or standard form contractual provision to similar effect) is not engaged. There is only a dispute about the net balance arising under the regime for insolvency set off. Secondly it is submitted that, even if there is jurisdiction, the conduct of an adjudication in the context of insolvency set off will, generally speaking, not lead to an enforceable award, and will therefore be an exercise in futility which the court can and ordinarily should restrain by injunction, before costs are thrown away upon a process which serves no useful purpose. In short, it is said that the two regimes are simply incompatible. Both these submissions were endorsed by the trial judge in the present proceedings, but only the futility argument prevailed in the Court of Appeal. This court is therefore faced with an appeal against the order made by the Court of Appeal by way of an injunction restraining the pursuit of the adjudication, and a cross appeal seeking to restore the judges ruling that the adjudicator lacked jurisdiction. The two objections to the use of adjudication in the context of insolvency set off are conceptually distinct and, as the parties recognised, the question of jurisdiction logically comes first. It is a question of construction of section 108 and of the express or implied terms of a construction contract made in accordance with its requirements. But the general need to construe and apply both statutes and contracts in context and by reference to their purpose makes it convenient to begin, after a summary of the facts, with an overview of the respective contexts and purposes of both the adjudication and corporate insolvency regimes, set off being only a subordinate part of the latter. Furthermore a conclusion that the two regimes really are incompatible might well incline the court to a construction which recognised that reality, rather than forced the two regimes into unprofitable co existence. By the same token, the opposite conclusion about compatibility might encourage a more generous approach to the construction of the provisions conferring jurisdiction. The Facts Both the appellant Bresco Electrical Services Ltd (Bresco) and the respondent Michael J Lonsdale (Electrical) Ltd (Lonsdale) are electrical works contractors. By a sub sub contract dated 21 August 2014 (the Contract) Bresco agreed to perform electrical installation works for Lonsdale at a site at 6, St Jamess Square, London SW1. The Contract is a construction contract to which section 108 applies, and it included express provision for adjudication of disputes arising under it which complied with the section. In December 2014 Bresco ceased to attend the site, alleging much later that it did so by way of acceptance of repudiatory breach of the Contract by Lonsdale. In March 2015 Bresco went into creditors voluntary liquidation. Thereafter Bresco acted as described below by its liquidator or from time to time by its agent Pythagoras Capital Ltd (Pythagoras) which is funding the claim against Lonsdale in the liquidation. In correspondence in late 2017 both Bresco and Lonsdale made claims against each other for breach of the Contract. Each accused the other of repudiatory breach. Lonsdales claim included 325,000 odd for the cost of having Brescos contracted works done by another contractor. Bresco says that those were additional to the works for which it contracted, and claimed for the value of works which it had carried out under the Contract, for which it had not been paid. Both parties claimed damages against the other. Both Brescos claims and Lonsdales cross claims arose entirely from the Contract. Each denied the others claims in their entirety. On 18 June 2018 Bresco served on Lonsdale notice of intention to refer a dispute to adjudication, seeking payment of 219,000 odd for the value of work done, and damages for loss of profits under the Contract. On 21 June RICS appointed Mr Tony Bingham as adjudicator on Brescos application. Bresco served its notice of referral to adjudication on the same date. Lonsdales response was, on 22 June, to assert that the Adjudicator was without jurisdiction, for the reason described above relating to insolvency set off and, on 26 June, to issue the present proceedings in the Technology and Construction Court (TCC) under CPR Part 8 for a declaration that the Adjudicator lacked jurisdiction and for an injunction restraining the further conduct of the adjudication. Lonsdales claim was tried with commendable speed on 11 July 2018 by Fraser J, who delivered an equally speedy reserved judgment on 31 July, acceding to Lonsdales case on lack of jurisdiction. On its appeal to the Court of Appeal (Sir Andrew McFarlane P, King and Coulson LJJ) Bresco succeeded on jurisdiction, but the injunction restraining the further conduct of the adjudication was continued on the basis that, since there could be no enforcement, it would be an exercise in futility and a waste of time and money. Accordingly Bresco appeals to this court against the continuation of the injunction, while Lonsdale cross appeals on jurisdiction. The Construction Adjudication Regime Introduced as a statutory regime by the 1996 Act, adjudication of construction disputes has been a conspicuously successful addition to the range of dispute resolution mechanisms available for use in what used to be an over adversarial, litigious environment. It builds upon a purely contractual structure for adjudication which was already by 1996 regarded by many in the industry as best practice. Speaking generally, adjudication is one of a spectrum of dispute resolution mechanisms which range from party and party negotiation at one end, through mediation, early neutral evaluation (ENE) and arbitration to litigation at the other end, lying roughly between ENE and arbitration. ENE delivers a private non binding opinion on the merits of the dispute from an independent, respected and often expert source. Arbitration delivers a (usually) private determination from a similar source which is binding subject to very limited scope for appeal. Adjudication shares with ENE the independent, often expert, respected source together with the speed and economy of ENE, with a provisional element of binding decision, unless and until the matter in dispute is later resolved by arbitration, by litigation or by agreement. The statutory regime was introduced in response to the report and recommendations of Sir Michael Latham, commissioned in July 1993 to review the procurement and contractual arrangements in the UK construction industry. His final report, called Constructing the Team, published in July 1994, contained at chapter 9 a section headed Dispute Resolution. Drawing upon experience of the development of alternative dispute resolution (ADR) in the USA, he noted at paragraph 9.2 that debate over adjudication, conciliation/mediation and arbitration had been strong throughout his review, with a growing consensus over the action needed. Of those alternatives his main focus was upon adjudication. He recommended that adjudication should extend to the widest range of potential disputes under the construction contract, that it should be available immediately, that adjudicators decisions should be swiftly implemented and that litigation or arbitration should be resorted to only after practical completion. A very important underlying objective, both of adjudication and of other recommendations which were eventually implemented in the 1996 Act, was the improvement of cash flow to fund ongoing works on construction projects. A particular concern was that a dispute between (say) a sub contractor and a sub sub contractor which could only be resolved by litigation or arbitration could in the meantime disrupt the entire project while a refusal of interim payment led to the cessation of significant works. The motto which has come to summarise the recommended approach is pay now, argue later. Adjudication was one of five reforms introduced by Part II of the 1996 Act designed to facilitate the realisation of the cash flow aspiration behind that motto. The way in which adjudication initially emerged as a consensual industry solution to this cash flow problem, before being mandated by the 1996 Act, is graphically described by May LJ in Pegram Shopfitters Ltd v Tally Weijl (UK) Ltd [2003] EWCA Civ 1750; [2004] 1 WLR 2082, paras 1 3. It is achieved by rigorous time limits for the conduct of the adjudication, the provisionally binding nature of the adjudicators decision and the readiness of the courts (and in particular the TCC) to grant speedy summary judgment by way of enforcement, leaving any continuing disagreement about the merits of the underlying dispute to be resolved at a later date, by arbitration, litigation or settlement agreement. But solving the cash flow problem should not be regarded as the sole objective of adjudication. It was designed to be, and more importantly has proved to be, a mainstream dispute resolution mechanism in its own right, producing de facto final resolution of most of the disputes which are referred to an adjudicator. Furthermore the availability of adjudication as of right has meant that many disputes are speedily settled between the parties without even the need to invoke the adjudication process. This is in part because Parliament chose to confer the right to adjudicate at any time, so that it can be and is used to resolve disputes eg about final accounts between the parties after practical completion, rather than merely at the interim stage: see Connex South Eastern Ltd v MJ Building Services Group plc [2005] EWCA Civ 193; [2005] 1 WLR 3323, paras 34 38 per Dyson LJ, who concluded that in section 108: The phrase at any time means exactly what it says. There is a chorus of observations, from experienced TCC judges and textbook writers to the effect that adjudication does, in most cases, achieve a resolution of the underlying dispute which becomes final because it is not thereafter challenged. Underlying statistics are hard to find, but judicial confirmation that this is so may be found in Carillion Construction Ltd v Devonport Royal Dockyard [2005] EWHC 778 (TCC), para 78 per Jackson J, Aspect Contracts (Asbestos) Ltd v Higgins Construction plc [2013] EWHC 1322 (TCC); [2013] Bus LR 1199, para 29 per Akenhead J, Severfield (UK) Ltd v Duro Felguera UK Ltd [2015] EWHC 3352 (TCC), para 63 per Coulson J, Meadowside Building Developments Ltd v 12 18 Hill Street Management Co Ltd [2019] EWHC 2651 (TCC), paras 63 64 per Adam Constable QC and Balfour Beatty Civil Engineering Ltd v Astec Projects Ltd [2020] EWHC 796 (TCC), paras 20 21 per Waksman J. It is worth quoting Mr Constables observations in full. After noting Coulson LJs comment in the present case (in the Court of Appeal) that many adjudication decisions become final either because the parties so agree, or because neither party challenges it, he continued: This plainly reflects the reality across the construction industry. Although it may have been a process which had its origins in a desire to maintain cashflow, the lifeblood of the construction industry (and alluded to in para 37 of Bresco, quoted above), it would in my view be wrong to restrict the utility of adjudication, in light of the breadth of the statutory scheme and its practical use within the industry, as being solely about short term cashflow. The scheme is, for example, used to determine final account disputes, and professional negligence claims, neither of which are usually primarily (or at all) about cashflow. Adjudication is often about achieving a quicker and cheaper resolution to the parties disputes. Where one party regards an adjudicators decision as a real miscarriage of justice, it has the right to take the dispute to litigation or arbitration to have that decision effectively overturned; where, as is so often the case, the parties regard the decision as a decent attempt to arrive at a fair resolution of the competing positions, the parties generally treat the decision as binding or negotiate a settlement around it. This is good for the overall administration of justice and no doubt many cases which would otherwise end up in the TCC are resolved without burdening public resources as a result of the practical utility of adjudication, notwithstanding its temporary nature. Confirmation from leading textbooks may be found in Glover and Elliott, Building Contract Disputes: Practice and Precedents looseleaf ed, paras 5 1 and 5 7, and Keating on Construction Contracts 10th ed (2016), para 18 028. In a 2014 article in Building, there is attributed to David Adamson (former Deputy Chair of the Construction Clients Forum) the suggestion that only around 2% of adjudication decisions have since been challenged in the courts (Joey Gardner, Lathams report: Did it change us?, Building, 27 June 2014). Statistics do not appear available to confirm this figure, but the overall picture of most adjudication decisions achieving de facto final resolution of the underlying dispute appears clear. Turning to the mechanics, section 108 of the 1996 Act was slightly amended (and augmented by section 108A) by the Local Democracy, Economic Development and Construction Act 2009, following a further report by Sir Michael Latham. It is convenient for present purposes to refer to section 108 in its amended form. It provides, so far as is relevant, as follows (with the 2009 amendments in square brackets): (1) A party to a construction contract has the right to refer a dispute arising under the contract for adjudication under a procedure complying with this section. For this purpose dispute includes any difference. (2) The contract shall [include provision in writing so as to] enable a party to give notice at any time of his (a) intention to refer a dispute to adjudication; (b) provide a timetable with the object of securing the appointment of the adjudicator and referral of the dispute to him within seven days of such notice; (c) require the adjudicator to reach a decision within 28 days of referral or such longer period as is agreed by the parties after the dispute has been referred; allow the adjudicator to extend the period of 28 (d) days by up to 14 days, with the consent of the party by whom the dispute was referred; (e) impartially; and impose a duty on the adjudicator to act enable the adjudicator to take the initiative in (f) ascertaining the facts and the law. (3) The contract shall provide [in writing] that the decision of the adjudicator is binding until the dispute is finally determined by legal proceedings, by arbitration (if the contract provides for arbitration or the parties otherwise agree to arbitration) or by agreement. The parties may agree to accept the decision of the adjudicator as finally determining the dispute. [(3A) The contract shall include provision in writing permitting the adjudicator to correct his decision so as to remove a clerical or typographical error arising by accident or omission.] (4) The contract shall also provide [in writing] that the adjudicator is not liable for anything done or omitted in the discharge or purported discharge of his functions as adjudicator unless the act or omission is in bad faith, and that any employee or agent of the adjudicator is similarly protected from liability. (5) If the contract does not comply with the requirements of subsections (1) to (4), the adjudication provisions of the Scheme for Construction Contracts apply. The Scheme for Construction Contracts (the Scheme) referred to in section 108(5) is contained in the Schedule to the Scheme for Construction Contracts (England and Wales) Regulations 1998 (SI 1998/649). Part 1 of the Schedule contains what is, in effect, a default adjudication framework if the parties to a construction contract fail to include one expressly with terms that are compliant with section 108, which operates as a set of statutorily implied terms: see section 114(4) of the 1996 Act. The detailed terms of the default framework do not matter for present purposes, save to note that by paragraph 8 the adjudicator may determine more than one dispute, and disputes under more than one relevant contract, if the parties so agree. In the present case the Contract contained express provision for adjudication which complied with the requirements of section 108. Construction adjudication does not generally allow for party and party costs shifting. Paragraph 25 of the default framework only permits adjudicators to determine the amount of their own reasonable fees and expenses and to apportion them between the parties. Section 108A (introduced in 2009) significantly limits the ability of the parties to contract otherwise. In the present case the Contract provided for joint and several liability for the adjudicators fees. Certain aspects of this machinery will need closer review, in particular the one dispute rule and the scope for the respondent to an adjudication reference to rely upon set off (at law or in equity) as a defence. But the following features are uncontentious and worthy of note at the outset. First, construction adjudication is semi compulsory. That is, the parties are not required to adjudicate every dispute. Rather each party is given a statutory and contractual right to require an adjudication of any dispute, including difference, which may arise under a construction contract, and to do so at any time, even after the contract has been fully performed or come to an end, whether by effluxion of time or discharge, including discharge by breach. Secondly, that right is conferred upon every legal person who or which is, or was, a party to a construction contract (as defined). There is no exclusion of particular types of person, such as a company in liquidation, as there is in some comparable jurisdictions such as New South Wales. Thirdly, the jurisdiction of the adjudicator is defined in the simplest of terms. It extends to every dispute which arises under a qualifying contract which a party entitled to adjudicate chooses to include in their reference. Fourthly, adjudication is remarkably speedy, because of the time limits imposed both on the parties and the adjudicator. A bespoke adjudication framework which does not include those time limits will not be in accordance with section 108(2), and will be overridden by the time limits in the default framework. Fifthly, as a direct corollary of speed, the adjudication process is almost bound to be cheaper, usually very much cheaper, than arbitration or litigation. This is mainly because, as lawyers and their clients know, the scope for expenditure on a dispute increases with the time available to argue about it. It is also because adjudicators are not confined to a purely passive role, but may investigate both fact and law as they think fit, within the time constraints imposed. It is unusual for there to be an oral hearing. Sixthly, the adjudicator will be both independent and equipped with the requisite subject matter expertise. Though not usually a lawyer, the adjudicator may obtain independent legal advice if necessary. Finally, when compared with arbitration and litigation, speed and economy come at an inevitable price in terms of reliability. There is no formal avenue of appeal against an adjudicators decision, and the court will in general summarily enforce it, regardless whether it is correct on the merits, provided that the adjudicator acted independently and within their jurisdiction. But a dissatisfied party can insist on having the dispute redetermined de novo in court or by arbitration (if available) even though the adjudicators decision will continue to bind in the meantime. Insolvency Set off The special rules as to set off in the context of insolvency (usually labelled insolvency set off) form a small but important part of the wider statutory insolvency code, which is directed to ensuring that the assets of an insolvent person (individual or company) are first collected in and then distributed mainly pari passu among those with relevant claims of the same priority. Speaking generally, those objectives are served by the imposition of substantial restraints upon what creditors might otherwise be able to do by way of enforcing their rights. These restraints serve both to optimise the collection and realisation of the insolvent persons assets and to prevent a free for all among the creditors in seeking to get their hands on them. By contrast there are, unsurprisingly, few corresponding restraints upon the enforcement of the insolvent persons rights by the relevant office holder. In what follows I will concentrate on corporate insolvency, and therefore refer to the insolvent person as the company. Although substantially the same scheme governs the insolvency process in both liquidation (voluntary or compulsory) and in a distributing administration, I will refer for present purposes to the office holder as the liquidator. The basic scheme whereby an unsecured creditors claims may only be pursued by way of proof and participation in a pari passu distribution of any available surplus after discharge of prior claims, whereas the liquidator may pursue the companys claims in full, and with every available tool for enforcement, risks causing a real injustice where there are cross claims between the company and one of its creditors arising from their mutual dealings. Leaving aside the special position of fiduciaries, there is no fairness in a creditor having to accept only a proportion of the debt due, while the company can recover on its cross claim against the same creditor in full. The legal and equitable rules for asserting set off as a defence to the companys claim by no means encompass every type of cross claim, in relation to current, contingent and future liabilities. But the statutory regime for set off in insolvency, now to be found in IR 14.25 operates upon an altogether more comprehensive and rigorous basis. First, it applies to every type of pre liquidation mutual dealing, and also to secured, contingent and future debts: see IR 14.25(1), (2), (6) and (7). Secondly, whereas legal or equitable set off is essentially optional, taking effect only if the cross claim is pleaded as a defence to the claim, insolvency set off is mandatory, and takes effect upon the commencement of the insolvency (the cut off date). It is said to be self executing, and for some purposes the original cross claims are replaced by a single claim for the balance: see IR 14.25(3) and (4). Thus the separate cross claims may no longer be assigned after the cut off date: see Stein v Blake [1996] AC 243. But the separate claims may survive for other purposes: see Wight v Eckhardt Marine GmbH [2003] UKPC 37; [2004] 1 AC 147, paras 26 27 per Lord Hoffmann. One example is the balance of contingent or prospective claims under IR 14.25(5). Within the liquidation, a net balance owing to the creditor must be pursued by proof of debt in the ordinary way. The liquidator is entitled to be paid the full amount of any net balance owing by the creditor, and may exercise any available remedies for its quantification and recovery, including litigation, arbitration or ADR: see IR 14.25(4) and (5). The identification of the net balance is to be ascertained by the taking of an account: see IR 14.25(2). If there is no dispute as to the existence and amount of the claims and cross claims this is in practice a matter of simple arithmetic, the net balance being the difference between the aggregate of the claims and the aggregate of the cross claims. But if any of the claims and cross claims are in dispute, then those disputes will need first to be resolved, by reference to the individual merits of each, before the arithmetic resumes: see again Stein v Blake (supra) per Lord Hoffmann at 255E G. This schematic portrayal of the way in which insolvency set off works should not mask the reality, namely that set off may, and commonly does, arise both in the ordinary process of proof by a creditor and in the ordinary course of litigation or other dispute resolution processes when the liquidator is seeking to pursue a claim of the company. The account is not an essential first step in the process. Thus a proof by a creditor must acknowledge an undisputed cross claim by the company (see IR 14.4(1)(d)), or the claim may be allowed in part by the liquidator after reducing the creditors claim by reference to a disputed cross claim of the company. In a claim in court by the company the liquidator may acknowledge an undisputed cross claim by the defendant, or be met by the defendant asserting a disputed cross claim against the company by way of set off (and therefore defence) in those proceedings: see Stein v Blake (supra) at p 253 per Lord Hoffmann. The process of proof of debt in the insolvency regime shares a number of the essential features of adjudication. Once initiated it is designed to operate both speedily and relatively cheaply. The liquidator is a professional likely to have some experience or expertise in business of the type being conducted by the company, together with accounting expertise. The liquidator is also semi independent. Although nominally asserting the companys position against the proving creditor, the liquidator is in substance adjudicating between the creditors as a whole in deciding what share of the available assets each should receive. The liquidator holds no brief for any particular creditor. The process of proof is (by comparison with litigation or arbitration) relatively light touch and inquisitorial, and the outcome is only provisionally binding, in the sense that both the proving creditor and any other dissatisfied creditor may challenge the liquidators ruling, by proceedings in court in which the issues are addressed de novo. It becomes final only if not challenged. In practice, as with adjudication, most of the liquidators rulings in the process of proof are not challenged. Where there are real disputes between the company and third parties (who may be creditors or debtors) the insolvency code is inherently flexible as to the best means for their resolution. A disputed pending claim (in court proceedings or in arbitration) against the company (as at the cut off date) may be allowed to continue by the liquidator or by the court supervising the insolvency process, as the best means of resolving the dispute: see Cosco Bulk Carrier Co Ltd v Armada Shipping SA [2011] EWHC 216 (Ch); [2011] 2 All ER (Comm) 481, para 58. New proceedings may be authorised for the same purpose. The liquidator may take the initiative by seeking the directions of the court in relation to particular disputes or to legal issues common to a number of disputed claims, and for that purpose join interested parties or representatives of interested classes. Within those proceedings the court has almost unlimited procedural flexibility, as the numerous matters referred to court by the administrators of the top Lehman company in London (Lehman Brothers International (Europe)) demonstrated. Furthermore there is no rule that, merely because there exists set off between cross claims, and the need to take an account, disputes about all the claims and cross claims need to be adjudicated upon in a single proceeding. Again, the Lehman litigation contains numerous examples of the separate resolution, in successive proceedings, of different issues between the same parties within the Lehman group, concerning their mutual dealings. More generally liquidators are no strangers to ADR, or to the pursuit of the most cost effective and proportionate means of resolution of disputes. Specific provision is made for the expenses incurred by liquidators in the pursuit of other dispute resolution procedures to be treated as liquidation expenses: see IR 7.108(4)(a)(ii). The court has expressly approved the inclusion of third party determination procedures similar to adjudication in insolvency schemes of arrangement: see In re Pan Atlantic Insurance Co Ltd [2003] EWHC 1696 (Ch); [2003] 2 BCLC 678, para 32 per Lloyd J. The Cross Appeal Jurisdiction As already noted the question whether the determination of a matter in dispute falls within the jurisdiction of an adjudicator turns on the true construction of section 108 and the contractual provision for adjudication in the relevant construction contract. There is no single, universal, form of words in current use but a form which does not confer a right to refer any dispute arising under the relevant contract will not be compliant with section 108 of the 1996 Act, in which case the form used in the default scheme is statutorily implied. Paragraph 1(1) of the Scheme, which was expressly incorporated into the Contract in the present case, provides that: Any party to a construction contract (the referring party) may give written notice (the notice of adjudication) of his intention to refer any dispute arising under the contract to adjudication. Thus an adjudicator properly appointed has jurisdiction to determine a dispute if it arises under the construction contract and has been referred to the adjudicator by one of the parties to the contract. It is common ground in the present case that the disputed claim of Bresco referred to Mr Bingham would have been within his jurisdiction as a dispute under the Contract, even though Bresco was by then in liquidation and the Contract had ended, if Lonsdale had not had a cross claim qualifying (if well founded) for insolvency set off. The main submission for Lonsdale is that because of the automatic operation of insolvency set off (on the cut off date in March 2015) all claims and cross claims under the Contract then ceased to exist, and were replaced by a single claim to the balance (by whichever of the parties turned out to have the larger claim). This was not a claim under the Contract but a claim under Brescos insolvency. Accordingly any dispute or disputes about that claim for the balance was also a dispute under the insolvency rather than under the Contract. Lonsdale advanced a number of subordinate arguments to bolster this central submission. First, it was said that the liberal construction afforded to similar provisions in agreements to arbitrate was inappropriate in the present context, mainly because adjudication was imposed upon the parties by the 1996 Act, rather than freely agreed, but also because arbitration was different in kind from adjudication. Secondly, a narrow construction of the gateway to jurisdiction was warranted as a simple means of avoiding the various respects in which adjudication was said to be incompatible with the process of accounting required by insolvency set off. Thirdly it was submitted that, even if disputes under the Contract survived insolvency set off, the requirement to resolve them all together in a single account could not be accommodated within an adjudication because of the single dispute rule, and the limited scope within adjudication for the determination of cross claims. It is convenient to address these subordinate arguments first, even though some of them overlap with the second issue, which is directly about incompatibility. There is some reported authority, but little agreement, on the question whether the liberal construction afforded to jurisdiction provisions in arbitration agreements should inform the construction of section 108 of the 1996 Act and paragraph 1 of the Scheme, in relation to the jurisdiction of an adjudicator. In the leading arbitration case Fiona Trust and Holding Corpn v Privalov [2007] UKHL 40; [2007] Bus LR 1719, the question was whether an arbitration agreement which conferred jurisdiction in relation to a dispute about repudiation of the contract should extend to the question whether the contract should be rescinded for bribery or misrepresentation in its inception. The House of Lords held that it did, and that this did not depend upon fine distinctions about whether the contract required that the dispute arose under or in relation to or in connection with the contract. A similar issue arose in relation to adjudication under a construction contract in Hillcrest Homes Ltd v Beresford and Curbishley Ltd [2014] EWHC 280 (TCC). At para 50 HHJ Raynor QC saw considerable force in the submission that the reasoning in Fiona Trust was inapplicable to construction adjudication because the provision for adjudication was the consequence of statutory intervention. By contrast in J Murphy & Sons Ltd v W Maher & Sons Ltd [2016] EWHC 1148 (TCC); [2017] Bus LR 916 Sir Robert Akenhead reached the opposite conclusion, treating the learning about arbitration in Fiona Trust as a useful analogy at para 23. The editors of Hudsons Building and Engineering Contracts 14th ed (2019) prefer Judge Raynors view, at para 11 022, while the editors of Keating on Construction Contracts, Supplement to 10th ed (2019), para 18 077 appear to veer toward recognising the force of Fiona Trust by analogy. There is in my view little to be gained by an extensive analysis of the question how close is the analogy between arbitration and adjudication for the purpose of applying or not applying the learning in Fiona Trust. There are plainly points to be made on both sides. There are obvious differences between arbitration and adjudication, but they are both types of dispute resolution procedures for which provision is made by a contract between the parties, in which recourse to that procedure is conferred by way of contractual right. I am not persuaded that the statutory compulsion lying behind the conferral of the contractual right to adjudicate points at all towards giving the phrase a dispute arising under the contract a narrow meaning, by comparison with a similar phrase in a contract freely negotiated. The fact that, after due consideration of the Latham Report, Parliament considered that construction adjudication was such a good thing that all parties to such contracts should have the right to go to adjudication points if anything in the opposite direction. Indeed, the fact that the right to adjudicate is statutorily guaranteed is a powerful consideration favourable both to its recognition as a matter of construction, and to the caution which the court ought to employ before preventing its exercise by injunction. Incompatibility with insolvency set off, as a spur to a narrow construction of the adjudication jurisdiction, is a much deeper question and underlies the whole of these proceedings. It is the central question on the issue whether the adjudication should be restrained by injunction. I would prefer to address it in a single section of this judgment, below, rather than either to analyse it twice, or split it into inconvenient and arbitrary parts. Suffice it to say, for present purposes, that for reasons to follow I do not regard construction adjudication as in any way incompatible with the operation of the insolvency code in general, or with insolvency set off in particular. The single dispute rule was deployed as the second prong of a forensic Mortons Fork. Either there was a single dispute about the net balance, in which case it did not arise under the contract, or there were multiple disputes (arising under the various cross claims if they survived) which needed to be resolved on the taking of a single account, but which could not fall within the adjudicators jurisdiction because of the single dispute rule. I consider this argument to be misconceived. The starting point is that nothing in the 1996 Act or in the Scheme expressly creates a single dispute rule, as a matter of jurisdiction. The jurisdiction of the adjudicator is, subject to the overriding requirement that the dispute or disputes referred arise under the contract, mainly defined by the terms of the reference in each particular case. The only guidance from the Scheme is, in paragraph 8, that the adjudicator may determine more than one dispute, or disputes under more than one contract, if the parties so agree. However narrowly the referring party chooses to confine the reference, a claim submitted to adjudication will nonetheless confer jurisdiction to determine everything which may be advanced against it by way of defence, and this will necessarily include every cross claim which amounts to (or is pleaded as) a set off. This much was common ground, but it is supported by authority: see Bailey Construction Law 3rd ed (2020), para 24.57 and PC Harrington Contractors Ltd v Multiplex Constructions (UK) Ltd [2007] EWHC 2833 (TCC); [2008] BLR 16, paras 40 41 per Christopher Clarke J. The set off may be advanced by way of defence to the exclusion of the claim referred to adjudication, but not as an independent claim for a monetary award in favour of the respondent to the reference. To the same effect, in relation to a cross claim in fraud, is Speymill Contracts Ltd v Baskind [2010] EWCA Civ 120; [2010] BLR 257, paras 36 37 per Jackson LJ. What is or is not a single dispute within the rule is by no means straightforward. The most comprehensive judicial analysis of the rule appears in Witney Town Council v Beam Construction (Cheltenham) Ltd [2011] EWHC 2332 (TCC); [2011] BLR 707, para 38 per Akenhead J, in the following principles: (i) A dispute arises generally when and in circumstances in which a claim or assertion is made by one party and expressly or implicitly challenged or not accepted. (ii) A dispute in existence at one time can in time metamorphose into something different to that which it was originally. (iii) A dispute can comprise a single issue or any number of issues within it. However, a dispute between parties does not necessarily comprise everything which is in issue between them at the time that one party initiates adjudication; put another way, everything in issue at that time does not necessarily comprise one dispute, although it may do so. (iv) What a dispute in any given case is will be a question of fact albeit that the facts may require to be interpreted. Courts should not adopt an over legalistic analysis of what the dispute between the parties is, bearing in mind that almost every construction contract is a commercial transaction and parties cannot broadly have contemplated that every issue between the parties would necessarily have to attract a separate reference to adjudication. (v) The Notice of Adjudication and the Referral Notice are not necessarily determinative of what the true dispute is or as to whether there is more than one dispute. One looks at them but also at the background facts. (vi) Where on a proper analysis, there are two separate and distinct disputes, only one can be referred to one adjudicator unless the parties agree otherwise. An adjudicator who has two disputes referred to him or her does not have jurisdiction to deal with the two disputes. (vii) Whether there are one or more disputes again involves a consideration of the facts. It may well be that, if there is a clear link between two or more arguably separate claims or assertions, that may well point to there being one dispute. A useful if not invariable rule of thumb is that, if disputed claim No 1 cannot be decided without deciding all or parts of disputed claim No 2, that establishes such a clear link and points to there being only one dispute. These principles were applied with apparent approval by Coulson J in Deluxe Art & Theme Ltd v Beck Interiors Ltd [2016] EWHC 238 (TCC); [2016] BLR 274, paras 15 16. They were not subjected to any sustained challenge in these proceedings. Applying Akenhead Js useful rule of thumb, it appears that a dispute about a cross claim relied on as a set off by way of defence to the claim referred will be part of the dispute raised by the reference, because the claim cannot be decided without consideration of the cross claim by way of defence. However that may be, the single dispute rule would only assist Lonsdales argument on jurisdiction if the law of insolvency set off compelled the liquidator to bring all disputes about the claims and cross claims qualifying for set off for resolution in a single proceeding. But the law and practice of insolvency set off does no such thing. The liquidator may, if it appears economical and proportionate to do so, untangle a complex web of disputed issues arising from mutual dealings between the company and a third party by picking some as suitable for adjudication, others for arbitration and others for disposal by an application to the court for directions, or by ordinary action. At the same time the liquidator may seek to deploy ADR and negotiation to narrow the issues in the meantime. Returning to the main submission, the existence of a cross claim operating by way of insolvency set off does not mean that the underlying disputes about the companys claim under the construction contract and (if disputed) the cross claim simply melt away so as to render them incapable of adjudication. The submission that they are replaced by a dispute in the insolvency is wrong for the reasons which follow. First, the submission proves too much. It is common ground that a disputed claim by the company in liquidation for (say) 300,000 under a construction contract can be referred by the liquidator to adjudication. But suppose there is an undisputed cross claim for 25. This would trigger insolvency set off and on Lonsdales argument (as Ms Sinclair QC ruefully admitted) deprive the adjudicator of jurisdiction. True it is that the liquidator would have to give credit for 25 against the companys claim, but in reality the only dispute would be as to the merits of that claim under the construction contract. To treat the existence of the undisputed cross claim for 25 as a basis for depriving the company of its right to adjudication of its disputed claim would be a triumph of technicality over substance. Now suppose that there is a disputed cross claim under the same contract for 100,000. Again, this dispute would be entirely a dispute or disputes under the contract, and the cross claim would be available by way of insolvency set off, as a defence to one third of the companys claim. Using Akenhead Js rule of thumb, there would still be a single dispute under the contract. Finally, suppose that the cross claim is alleged to overtop the companys claim (as here). It would still be available as a defence to the companys claim, now to the whole of it, and form part of the same dispute. The only constraint upon the adjudicators jurisdiction would be that he could not award the balance to the creditor, but he could dismiss the claim and even make a declaration as to the value of the cross claim, as part of his reasons why the companys claim wholly failed, leaving the creditor to prove for it in the liquidation under IR 14.25(3). Secondly, the submission assumes, from an over literal reading of the language of Lord Hoffmanns speech in Stein v Blake, that the claims and cross claims which fall within insolvency set off lose their separate identity for all purposes, on the cut off date. It is true that they do for the purpose of assignment, but there are important examples of purposes where they do not. Lord Hoffmann himself acknowledged this in Stein v Blake at p 255E, when he said that: The cross claims must obviously be considered separately for the purpose of ascertaining the balance. For that purpose they are treated as if they continued to exist. As already noted a future or contingent claim may survive set off so as to be enforceable as to the balance after the debt becomes due: see IR 14.25(5), which gave effect (by amendment) to part of the reasoning of the Court of Appeal in In re Kaupthing Singer and Friedlander Ltd [2010] EWCA Civ 518; [2011] BCC 555. More prosaically, when a liquidator causes a company in liquidation to pursue a contractual claim by litigation or arbitration, the pleaded claim remains one based upon the underlying contract, even if an undisputed set off is acknowledged, or a disputed set off is raised by way of defence. Nor does the existence of insolvency set off deprive the owner of the original claim of ancillary rights under the transaction which created it. For example, insolvency set off is now considered to apply to secured claims: see In re Lehman Brothers International (Europe) (No 4) [2017] UKSC 38; [2018] AC 465, paras 167 170 per Lord Neuberger of Abbotsbury and MS Fashions Ltd v Bank of Credit and Commerce International SA [1993] Ch 425, 446 per Dillon LJ, impliedly overruling dicta to the contrary by Rose LJ in In re Bank of Credit and Commerce International SA (No 8) [1996] Ch 245, 256 and In re Norman Holding Co Ltd [1991] 1 WLR 10. This is because mutual dealings in IR 14.25 are not limited to provable debts. Thus where a secured claim for (say) 300,000 is reduced to 200,000 by a set off, the creditor for the balance retains its security rights. By analogy the company retains its rights as to dispute resolution, whether to go to court, or a contractual right to arbitrate or adjudicate. A main plank in the reasoning of the Court of Appeal that the challenge to jurisdiction was unfounded was that if (as is not in dispute) a liquidator was entitled to pursue the companys claims by arbitration (pursuant to a clause referring disputes under the contract to arbitration) then the same must apply to the right to refer disputes to adjudication: see per Coulson LJ at para 31. I agree. I can see no reason why the two forms of dispute resolution should be treated differently. For all those reasons I would dismiss the cross appeal on jurisdiction. The Appeal Futility The reasoning of the Court of Appeal that the adjudication triggered by the reference made on Brescos behalf should be restrained by injunction may be captured from the following extracts from the judgment of Coulson LJ: 37. I consider that there is a basic incompatibility between adjudication and the regime set out in the Rules. The former is a method of obtaining an improved cashflow quickly and cheaply. The latter is an abstract accounting exercise, principally designed to assist the liquidators in recovering assets in order to pay a dividend to creditors. 38. This incompatibility can be seen in the different processes that each regime entails; in a comparison of the results that may be available; and in a consideration of the wider issues that could arise if companies in insolvent liquidation regularly sought to refer claims to adjudication. 45. a decision of an adjudicator in favour of a company in liquidation, like Bresco, would not ordinarily be enforced by the court. in my view, judgment in favour of a company in insolvent liquidation (and no stay), in circumstances where there is a cross claim, will only be granted in an exceptional case. 46. As a result of this . a reference to adjudication of a claim by a contractor in insolvent liquidation, in circumstances where there is a cross claim, would be incapable of enforcement and therefore an exercise in futility. The Court of Appeal was encouraged in its view by the following additional considerations. First, participation in adjudication would involve the waste of limited financial resources by the liquidator. Secondly it would expose the respondent to the reference to wasting costs in a futile process, where there would be no basis of recovering them even if successful. Thirdly the respondent would, if the liquidator obtained summary judgment for an excessive amount, have to spend further costs on court proceedings to rectify the position, with doubtful recovery from the company even if successful. Finally the pursuit by liquidators of adjudication followed by enforcement would put undue pressure on the TCC, to the detriment of solvent court users. In considering that those considerations of futility and incompatibility justified the grant of an injunction, the Court of Appeal relied upon Twintec v Volkerfitzpatrick Ltd [2014] EWHC 10 (TCC); [2014] BLR 150. At paras 63 64 Edwards Stuart J said this: By section 37 of the Senior Courts Act 1981, the court may grant an injunction in all cases in which it appears to the court to be just and convenient to do so I am unable to see how it would be either just or convenient to permit an adjudication to continue in circumstances where the decision of the adjudicator will be incapable of enforcement. In the present case if the adjudication went ahead and the adjudicator purported to give a decision in Twintecs favour, that decision would not be binding on VFL. Precisely the same issue would still have to be resolved in the litigation. Accordingly a victory by Twintec in the adjudication would be one that would make no difference to its legal rights. On the contrary, Twintec would have diverted valuable resources in order to deal with the issues in the adjudication and to incur substantial irrecoverable expenditure in doing so. Conversely, a purported decision in VFLs favour would be unenforceable and would, in itself, achieve nothing. It is true that a well reasoned decision by an adjudicator might encourage the parties to settle their dispute, but that, it seems to me, is a fairly nebulous advantage. I cannot see how it outweighs the significant and otherwise unproductive expenditure of money and resources by both parties that the adjudication will involve. In this court Lonsdale broadly supported the reasoning of the Court of Appeal. If a just and convenient test for the grant of an injunction might be thought too broad, Ms Sinclair QC submitted that a useful analogy was to be found in the principles applied by the court when restraining the presentation of a winding up petition for the enforcement of a disputed debt. For Bresco Mr Arden QC suggested that the exceptional jurisdiction to grant an anti suit injunction might be more appropriate by way of analogy. Trenchant expressions of the futility of adjudication, and its incompatibility with insolvency set off, from two judges with great experience in construction disputes deserve real respect, although the observations by Edwards Stuart J may have arisen from the particular facts of the Twintec case. Nonetheless I am unable to accept that they afford any proper basis for the grant of an injunction to restrain the pursuit of adjudication merely because the company making the reference is in an insolvency process and there are cross claims between the company and the respondent to the reference which trigger insolvency set off. The starting point, once it is appreciated that there is jurisdiction under section 108 in such circumstances, is that the insolvent company has both a statutory and a contractual right to pursue adjudication as a means of achieving resolution of any dispute arising under a construction contract to which it is a party, even though that dispute relates to a claim which is affected by insolvency set off. It follows that it would ordinarily be entirely inappropriate for the court to interfere with the exercise of that statutory and contractual right. Injunctive relief may restrain a threatened breach of contract but not, save very exceptionally, an attempt to enforce a contractual right, still less a statutory right. That very steep hurdle is not surmounted, either generally (in the context of insolvency set off) or on the particular facts of this case. For reasons already explained it is simply wrong to suggest that the only purpose of construction adjudication is to enable a party to obtain summary enforcement of a right to interim payment for the protection of its cash flow, although that is one important purpose. In the context of construction disputes adjudication has, as was always intended, become a mainstream method of ADR, leading to the speedy, cost effective and final resolution of most of the many disputes that are referred to adjudication. Dispute resolution is therefore an end in its own right, even where summary enforcement may be inappropriate or for some reason unavailable. Nor is there any basis for a conclusion that this beneficial means of dispute resolution is incompatible with the insolvency process, or with the requirement to deal with cross claims in insolvency by set off, still less an exercise in futility. First, as already described, the process of proof of debt in insolvency shares many of the attractive features of adjudication, in terms of speed, simplicity, proportionality and economy, but adjudication has the added advantage that a construction dispute arising during an insolvency will be more amenable to resolution by a professional construction expert than by many liquidators. In many cases, disputed cross claims needing to be resolved as a prelude to a final arithmetical set off account will both, or all, arise under the same construction contract, as in the present case, because all the mutual dealings between the parties will have arisen under the aegis of that single contract. Even if they arise under more than one construction contract, the adjudicator will be better placed than most liquidators to resolve them. The Scheme contains provision whereby that may be achieved by consent, and the need to take cross claims into account as defences (by way of set off) may well mean that there is in reality one single dispute within Akenhead Js helpful rule of thumb in the Witney Town Council case. It is true that the effect of insolvency set off may mean that cross claims raise issues wholly outwith the purview of one or more construction contracts, such as the apportionment of liability for personal injuries, or liability under mutual dealings between the same parties in some other commercial field. In such a case the adjudicator will need to have regard to them, if they amount to a defence to the disputed construction claim being referred, but may have simply to make a declaration as to the value of the claim, leaving the unrelated cross claim to be resolved by some other means. That is a remedy well within the adjudicators powers. Nonetheless the adjudicators resolution of the construction dispute referred by the liquidator may be of real utility to the conduct of the process of set off within the insolvency process as a whole. Thus it is no answer to the utility (rather than futility) of construction adjudication in the context of insolvency set off to say that the adjudicators decision is unlikely to be summarily enforceable. The reasons why summary enforcement will frequently be unavailable are set out in detail in Bouygues (UK) Ltd v Dahl Jensen (UK) Ltd [2001] 1 All ER (Comm) 1041, paras 29 35 per Chadwick LJ. As he says, the court is well placed to deal with those difficulties at the summary judgment stage, simply by refusing it in an appropriate case as a matter of discretion, or by granting it, but with a stay of execution. There is in those circumstances no need for an injunction, still less a need to prevent the adjudication from running its speedy course, as a potentially useful means of ADR in its own right. Furthermore it will not be in every case that summary enforcement will be inappropriate. There may be no dispute about the cross claim, and the claim may be found to exist in a larger amount, so that there is no reason not to give summary judgment for the company for the balance in its favour. Or the disputed cross claim may be found to be of no substance. Or, if the cross claim can be determined by the adjudicator, because the claim and cross claim form part of the same dispute under the contract, the adjudicator may be able to determine the net balance. If that is in favour of the company, there is again no reason arising merely from the existence of cross claims why it should not be summarily enforced. True it is that the adjudicator may over value the net balance in favour of the company, so that summary enforcement may leave the respondent to the reference having first to establish a true balance in its favour and then to pursue it by proof (or possibly as a liquidation expense) against an under funded liquidation estate. But over valuation is a problem that may arise in any liquidation context, even where there is no cross claim. There is no suggestion that, absent insolvency set off, adjudication is ordinarily futile merely because the company making the reference is in liquidation or distributing administration. The proper answer to all these issues about enforcement is that they can be dealt with, as Chadwick LJ suggested, at the enforcement stage, if there is one. In many cases the liquidator will not seek to enforce the adjudicators decision summarily. In others the liquidator may offer appropriate undertakings, such as to ring fence any enforcement proceeds: see the discussion of undertakings in the Meadowside case. Where there remains a real risk that the summary enforcement of an adjudication decision will deprive the respondent of its right to have recourse to the companys claim as security (pro tanto) for its cross claim, then the court will be astute to refuse summary judgment. There remain the issues about costs and the burden on the TCC. Taking costs first, Parliament chose to make this form of semi compulsory ADR costs neutral, even when invoked after the completion or other termination of the contract, when issues of cash flow have passed into history. Thus the statutory and contractual right with which an injunction would interfere has costs neutrality built into it. The very considerable success of construction adjudication since 1996 suggests that costs neutrality was built in for good reason. Many forms of ADR, including mediation, are costs neutral, and are none the worse (many would say all the better) for that. So are small claims procedures in the County Court, and many other court or tribunal dispute resolution processes. So also, in the insolvency context, is the process of proof of debt. Similarly it is inherent in the adjudication procedure that a party may be put to expense in having an incorrect decision put right in later litigation (or arbitration), at least part of which will usually be irrecoverable even if the litigation succeeds. That cannot of itself be a reason for preventing by injunction the statutory right to adjudication. Lonsdale makes the particular point, in the insolvency context, that a joint and several liability to pay the adjudicators costs and expenses (as in the Contract in this case and in the Scheme) may leave the respondent having to pay the whole of those amounts, with no effective recourse against the insolvent company for its half share. But that liability of the company will be a liquidation (or administration) expense, rather than a matter of proof: see IR 7.108(4)(a)(ii). Although this may not be a complete guarantee of payment by the company, it provides reasonable reassurance, and a joint and several liability of this kind is not generally risk free, for example where insolvency of one party follows the reference to adjudication. And it is a point equally applicable to all adjudication in the insolvency context, even where there are no cross claims, so it proves too much. In my view, consideration of costs and of burdens on the court militate against, rather than in favour, of admitting applications for injunctions to restrain adjudications before they have run their course. The tight time limits and document based investigatory nature of construction adjudication means that, if left to proceed, it would probably be completed before any opposed injunction application could be determined by the court, and at a fraction of the likely cost. The outcome of the adjudication may mean that no risks of the respondent losing the benefit of insolvency set off arise, for example if the respondent is successful. Opposition to such attempts to enforce as there may be can then, if necessary, be dealt with on their merits, when the outcome of the adjudication is known, rather than having to be guessed at. I have therefore reached the opposite conclusion from that of the Court of Appeal on the issue of futility. Construction adjudication, on the application of the liquidator, is not incompatible with the insolvency process. It is not an exercise in futility, either generally or merely because there are cross claims falling within insolvency set off, and there is no reason why the existence of such cross claims can constitute a basis for denying to the company the right to submit disputes to adjudication which Parliament has chosen to confer. For those reasons I consider that the appeal should be allowed.

This case is about the relationship between (a) the adjudication regime for building disputes and (b) a rule of insolvency law called insolvency set off. Adjudication was introduced by Parliament in 1996 to help resolve disputes in the building industry. Parties to a construction contract have the right to refer their disputes to an independent adjudicator for a quick decision. The adjudicators decision is binding unless and until it is successfully challenged in court. In the meantime, the losing party must comply with the adjudicators decision a principle known as pay now, argue later which is designed to stop financial disputes from holding up the projects cash flow. Insolvency set off means that, when a company enters liquidation and there are mutual debts between the company and one of its creditors, the debts in each direction automatically cancel each other out. This leaves a single net balance owed in one direction. The liquidator of the company will calculate the balance and decide how much the company owes or is owed overall. The facts of the case Bresco and Lonsdale are electrical contractors. In 2014 Bresco carried out installation work for Lonsdale on a construction site at 6 St Jamess Square, London SW1. In 2016 Bresco entered insolvent liquidation. Both parties claimed they were owed money by the other. Lonsdale said Bresco had abandoned the project prematurely, forcing them to pay 325,000 for replacement contractors. Bresco said Lonsdale had never paid for some work Bresco had done, so Lonsdale owed 219,000 in unpaid fees plus damages for lost profits. In 2018 Brescos liquidators took steps to refer their 219,000 claim to an adjudicator. Lonsdale objected to the adjudication. They said Brescos claim (if any) and Lonsdales cross claim had cancelled each other out by the process of insolvency set off. This meant there was no longer any claim, or therefore any dispute under the contract, so adjudication was unavailable (the jurisdiction point). In any case the adjudicators decision would not be enforced until the liquidator calculated the net balance. So an adjudication was pointless (the futility point). Mr Justice Fraser accepted both Lonsdales points and granted an injunction to stop the adjudication. Following an appeal by Bresco, the Court of Appeal rejected the jurisdiction point but upheld the injunction on the basis of the futility point. Bresco appealed again to the Supreme Court. Lonsdale cross appealed on the jurisdiction point. The Supreme Court unanimously allows the appeal and dismisses Lonsdales cross appeal, with the result that the adjudication can go ahead. Lord Briggs gives the only judgment. (1) The jurisdiction point The Supreme Court concludes that the adjudicator does have jurisdiction. The insolvency set off between Brescos claim and Lonsdales cross claim does not mean that there is no longer a dispute under the construction contract, or that the claims have simply melted away [47]. The claims maintained their separate identity for many purposes [29]. Despite insolvency set off, Bresco could have brought court proceedings to determine the value of its claim, or exercised a contractual right to go to arbitration [50 51]. It follows that Bresco could also refer its claim to adjudication [52]. (2) The futility point The Court of Appeal thought there was a basic incompatibility between adjudication and insolvency set off. If the adjudicator found in favour of Bresco, the courts would refuse to enforce the award because it would interfere with the insolvency process. The adjudication would not promote the goal of pay now, argue later: it was futile and a waste of resources [54 56]. The Supreme Court rejects that view [58]. Bresco has a statutory and contractual right to adjudication. It would ordinarily be inappropriate for the court to interfere with the exercise of that statutory and contractual right [59]. Maintaining cash flow is not the only purpose of adjudication under the 1996 Act. Adjudication was designed to be a method of alternative dispute resolution (ADR) in its own right. In reality most decisions of an adjudicator are never challenged in court and they lead to a speedy, cost effective and final resolution of the dispute [13 15]. Here an adjudication will be a simple, proportionate method for Brescos liquidators to determine the net balance [60 62]. It is possible that the courts will not grant summary enforcement of the adjudicators decision due to the insolvency process, but that does not deprive the adjudication of its potential usefulness to the liquidators [64 67].

There are three cases before the Court, two on appeal from the Court of Appeal of England and Wales and one from the Inner House of the Court of Session in Scotland. This judgment deals with the two English cases, while a separate judgment will deal with the Scottish case. The issue common to all three is the scope for judicial review by the High Court or Court of Session of unappealable decisions of the Upper Tribunal established under the Tribunals, Courts and Enforcement Act 2007 (the 2007 Act). It is no longer argued on behalf of the Government that such decisions are not amenable to judicial review at all. But it is argued that they are only reviewable in exceptional circumstances. The claimants argue that no such limit exists. The debate, therefore, has focussed upon the effect of the creation of a wholly new and integrated tribunal structure under the 2007 Act. The cases It has been helpful to hear three different cases together, all raising essentially the same question in different contexts. In all of them the claimant failed in an appeal to the First tier Tribunal set up under the 2007 Act and was refused permission to appeal to the Upper Tribunal against that decision both by the First tier Tribunal and by the Upper Tribunal. In all three the claimant seeks a judicial review of the refusal of permission to appeal by the Upper Tribunal. In R (Cart) v The Upper Tribunal, Mr Cart appealed to the Social Security and Child Support Tribunal (whose jurisdiction has since been taken over by the First tier Tribunal) against the refusal of the Child Support Agency (whose functions have since been taken over by the Child Maintenance and Enforcement Commission) to revise a variation in the level of child maintenance to be paid to his ex wife for the support of their children. His appeal was dismissed in October 2007. He applied for permission to appeal to the Child Support Commissioners. In June 2008, Commissioner Jacobs gave him permission to appeal on three grounds but refused him permission to appeal on a fourth. The functions of the Child Support Commissioners were then taken over by the Administrative Appeals Chamber of the Upper Tribunal. Following a hearing in January 2009 the Upper Tribunal, consisting of the Senior President, Carnwath LJ, and Tribunal Judge Jacobs (as the Commissioner had now become) dismissed his appeal on the three grounds for which permission had been given and declined permission to reopen the fourth: [2009] UKUT 62 (AAC). Mr Cart sought judicial review of the Upper Tribunals refusal of permission to appeal on the fourth point. It was agreed that the amenability of the Upper Tribunal to judicial review should be determined as a preliminary issue. In December 2009, the Divisional Court dismissed his claim for judicial review, holding that this was only available in exceptional circumstances: [2009] EWHC 3052 (Admin), [2010] 2 WLR 1012. In July 2010, the Court of Appeal dismissed his appeal, reaching the same result but by a different route: [2010] EWCA Civ 859; [2011] 2 WLR 36. It will be necessary to return to their reasoning in due course. Mr Cart now appeals to this Court. R (MR (Pakistan)) v The Upper Tribunal concerns a native of Pakistan who has been in the United Kingdom since June 2007. At that stage he had a multi visit visa valid until June 2009. In March 2010 he applied for asylum on the basis of his conversion to Christianity. This was refused in April 2010. His appeal to the Immigration and Asylum Chamber of the First tier Tribunal was dismissed less than two weeks later. His application to the First tier Tribunal for permission to appeal to the Upper Tribunal was refused in May and his application to the Upper Tribunal was refused only days later by Ouseley J, sitting as a judge of the Upper Tribunal. MR sought judicial review of Ouseley Js decision. Permission to apply was granted by Judge Nicholas Cooke QC, sitting as a High Court Judge. But at the hearing of the claim in December 2010, Sullivan LJ determined a preliminary issue concerning the amenability of the Upper Tribunal to judicial review in accordance with the decision of the Court of Appeal in Cart and dismissed the claim: [2010] EWHC 3558 (Admin). He granted a certificate under section 12 of the Administration of Justice Act 1969, so that the appeal against his decision could leap frog over the Court of Appeal and be heard by this Court together with the appeals in Cart and Eba. In Eba v Advocate General for Scotland, Ms Eba appealed to the Social Entitlement Chamber of the First tier Tribunal against the refusal of her claim for disability living allowance. Her appeal was also refused, as were her applications both to the First tier Tribunal and to the Upper Tribunal for permission to appeal to the Upper Tribunal against that refusal. Ms Ebas petition for judicial review of each of those decisions was dismissed by the Lord Ordinary, who followed the reasoning of the Divisional Court in Cart: [2010] CSOH 45, 2010 SLT 547. She reclaimed that refusal, on the ground that judicial review was not so limited. The Advocate General cross appealed on the ground that the Upper Tribunal was not amenable to judicial review at all. The First Division refused the cross appeal but allowed Ms Ebas reclaiming motion on the basis that the supervisory jurisdiction of the Court of Session was not so limited and that, notwithstanding the decision of the Court of Appeal in Cart, it did not follow that the result should be the same in Scotland: [2010] CSIH 78; 2010 SLT 1047. The First Division granted the Advocate General permission to appeal to this Court. Conveniently, however, we heard first the arguments of all three claimants, Mr Richard Drabble QC for Mr Cart, Mr Jonathan Mitchell QC for Ms Eba, and Mr Manjit Gill QC for MR, followed by oral arguments for two of the interveners, Mr Michael Fordham QC for the Public Law Project, and Mr James Mure QC for the Lord Advocate, followed by Mr James Eadie QC for the Secretaries of State for Justice and for the Home Department and the Child Maintenance and Enforcement Commission and Mr David Johnston QC for the Advocate General for Scotland. Mr Alex Bailin QC and others also made helpful written submissions on behalf of the intervener JUSTICE. It has been particularly useful to be able to look at the issues in the context of the two jurisdictions, social security (including for this purpose child support) and immigration and asylum, which together make up the great bulk of the business of the new tribunal system, and in the context of the supervisory jurisdiction of the higher courts in both Scotland and England and Wales. The judgment in Eba will deal with the supervisory jurisdiction of the Court of Session in Scotland while this judgment will deal with the supervisory jurisdiction of the High Court in England and Wales. The tribunal systems with which we are concerned, both before and after their restructuring in the 2007 Act, however, are common to both parts of the United Kingdom, and in many contexts also to Northern Ireland. The tribunal system One of the most important and controversial features of the development of the legal system in the 20th century was the creation and proliferation of statutory tribunals separate from the ordinary courts. Mostly they were set up to determine claims between an individual and the state to war pensions, to social security benefits, to immigration and asylum, to provision for special educational needs, to be released from detention in a psychiatric hospital, against the refusal or withdrawal of licences or approvals to conduct certain kinds of business, for the determination of liability to direct and indirect taxation, for compensation for compulsory purchase and so on. In some instances, they were set up to adjudicate upon statutory schemes, generally those which modified what would otherwise be an ordinary contractual relationship between private persons between employer and employee or between landlord and tenant of residential property. These jurisdictions were and remain very diverse. The subject matter can range from liability to VAT or entitlement to performing rights or the price of leasehold enfranchisement, which can be worth millions of pounds, to the amount of weekly means tested benefits or war pensions entitlement, which may be worth only a few pounds at a time but may mean a great deal to the claimants involved and to others like them. The judiciary, also, could and still can be very diverse, ranging from seconded High Court judges or senior Queens Counsel to fee paid part timers from a great variety of legal professional backgrounds. In many cases, tribunals also had and still may have members who were not legally qualified but had other professional qualifications or experience which was particularly suited to the subject matter of the claim. Some had single tier structures, some with and some without a right of appeal to the High Court or Court of Appeal. Some had two tier structures with their own appellate tier, again with or without a right of appeal to the High Court or Court of Appeal. But in general these tribunal systems shared some common characteristics. They were set up by statute to administer complex and rapidly changing areas of the law. Their judges were expected to know this law without having to have lawyers for the parties to explain it to them. Their members were expected to have relevant expertise or experience in the subject matter of the dispute, not only so that they would be able to adjudicate upon factual issues without the help of lawyers for the parties, but also so that the parties could feel confident that the overall balance of the panel (for example between employers and employees) would produce impartial results. Their procedures were also tailored to the subject matter of the dispute and they were not bound by the technical rules of evidence. While legal representation was common in those tribunals where large sums of money were at stake, and latterly in mental health review tribunals where personal liberty was at stake, the original expectation in most tribunals was that people would not need representation, or could be helped by specialist non lawyer representatives. In theory, therefore, the respective roles of the tribunal and the parties were rather different from their roles in the ordinary courts. The tribunal was more than a neutral referee before whom each party was expected to lay out all the material necessary to decide the case for the judge to choose which he preferred (compare Bingham, The Rule of Law, 2010, p 89). In general, this diverse specialism was regarded as a strength rather than a weakness, although the concomitant lack of legal aid in almost all tribunals was regretted by those who saw the benefits which skilled representation could bring. However, another feature of these tribunal systems was more controversial. They were mostly resourced and administered by whichever Department of State was responsible for the statutory scheme in question, rather than by the Department which was responsible for the administration of justice in the ordinary courts. This led to fears that they were not, or at least were not seen to be, sufficiently independent of those sponsoring Departments. The Department may have seen the independence and expertise of the tribunals as an integral part of the proper administration of a statutory scheme which was designed to bring certain benefits to the people. But others may have feared that they were simply accomplices with the Department in denying to claimants the benefits which were properly theirs. In between these two extremes, there might well be a perceived risk that the tribunals would be more inclined to accept the Departmental view of what the law was, rather than an alternative view which was more favourable to the claimant or taxpayer or whomever. The system was greatly improved by the Tribunals and Inquiries Act 1958, following the Report of the Franks Committee on Administrative Tribunals and Inquiries in 1957 (Cmnd 218), with its insistence on openness and accountability to the higher courts. In particular, provision was made in section 9 for appeals to the High Court which could be applied to any specified tribunal; and all (save two) previous exclusions of judicial review were abrogated by section 11. The Franks Committee was firm that the prerogative orders were clearly necessary in cases where questions of jurisdiction are involved and in cases where no provision is made for appeals on points of law. Accordingly no statute should contain words purporting to oust those remedies (para 117). A later improvement was to strengthen the leadership of particular tribunal systems by introducing a presidential structure, headed by a High Court or Circuit Judge. The final solution, following the Report of Sir Andrew Leggatt, Tribunals for Users One System, One Service (TSO, March 2001), was to transfer the administration of tribunals to the Ministry of Justice and to set up a new, integrated tribunal structure to take over the jurisdiction of most, but not all, of the existing systems under the 2007 Act. But before turning to the effect of that Act, it is necessary to see how judicial review was employed under the old system. Judicial review in its modern form, of course, is the product of two developments. One was the integration and simplification of the procedures for obtaining the former prerogative writs of certiorari, prohibition and mandamus or declaratory relief, in the revised Order 53 of the Rules of the Supreme Court, introduced in 1978 following the recommendations of the Law Commissions Report on Remedies in Administrative Law (1976, Law Com No 73). The other was the vigorous development of the substantive law, most notably of course in Anisminic v Foreign Compensation Commission [1969] 2 AC 147. Mr Fordham, for the Public Law Project, rightly reminds us that the remedy of certiorari had long been available to quash the decision of an inferior court or tribunal for error of law on the face of the record: see R v Northumberland Compensation Appeal Tribunal, Ex p Shaw [1952] 1 KB 338. There the tribunal had wrongly interpreted the service to be taken into account in assessing the applicants compensation for loss of office. There was no right of appeal against its decisions. The Attorney General had argued that certiorari would only lie to prevent a tribunal exceeding its jurisdiction. Both the Divisional Court and the Court of Appeal emphatically disagreed. This was not to assume an appellate function which had not been given to it; the court had an inherent jurisdiction to control all inferior tribunals, not in an appellate capacity, but in a supervisory capacity. This control extends not only to seeing that the inferior tribunals keep within their jurisdiction, but also to seeing that they observe the law. The control is exercised by means of a power to quash any determination by the tribunal which, on the face of it, offends against the law. The Kings Bench does not substitute its own views for those of the tribunal, as a Court of Appeal would do. It leaves it to the tribunal to hear the case again . : see Denning LJ, at pp 346 7. Singleton LJ lamented the lack of a right of appeal on a point of law, which he thought would save a great deal of time and trouble in deciding whether certiorari would lie: see pp 345 6. No doubt such views were influential when the Franks Committee came to recommend such a right. Then came Anisminic Ltd v Foreign Compensation Commission [1969] 2 AC 147, where not only was there no right of appeal from the Commissions decisions but there was also an express provision in the Foreign Compensation Act 1950 that those decisions shall not be called in question in any court of law (s 4(4)). This provision was one of the two expressly excepted from the general abrogation of such clauses in section 11 of the 1958 Act. In holding that, nevertheless, it was not effective to oust the jurisdiction of the High Court to set aside a decision which was a nullity, and that a decision made in error of law was a nullity, the House of Lords effectively removed the distinction between error of law and excess of jurisdiction. Where there was a right of appeal, of course, an aggrieved party would be expected to use that rather than judicial review. Judicial review was always a remedy of last resort. However, where there was no such right, there are numerous examples, at the highest level, of resort to judicial review to correct an error of law made by an inferior tribunal. Two will suffice. In Re Woodling, Woodling v Secretary of State for Social Services [1984] 1 WLR 348, the question of law was whether cooking meals was attention in connection with bodily functions for the purpose of attendance allowance. It reached the House of Lords by way of judicial review of the refusal of the Social Security Commissioner to grant leave to appeal from the decision of the Attendance Allowance Board. Significantly for the cases before this Court, the Board and the Commissioner were bound by an earlier decision of the Court of Appeal (R v National Insurance Commissioner, Ex p Secretary of State for Social Services [1981] 1 WLR 1017) excluding cooking; and when it was suggested to the Commissioner that this decision was wrong he indicated that he could add nothing to his earlier refusal of leave. (The challenge failed in the House of Lords, their lordships taking the view that attention in connection with bodily functions referred to things which the fit man normally does for himself, it not occurring to them that this might include cooking his own meals.) That was a social security case. R v Immigration Appeal Tribunal, Ex p Bakhtaur Singh [1986] 1 WLR 910 was an immigration case. The claimants appeal against the decision of the Secretary of State to deport him failed before the adjudicator and the Immigration Appeal Tribunal refused leave to appeal to that Tribunal. The case reached the House of Lords by way of judicial review of that refusal. The issue was whether the public interest in paragraph 154 of the Immigration Rules could include the interests of the Sikh community as well as the public interest in maintaining effective immigration control. Once again, the adjudicator had considered himself bound by dicta in an earlier High Court case (R v Immigration Appeal Tribunal, ex p Darsham Singh Sohal [1981] Imm AR 20). Thus the principle was firmly established that the unappealable decisions of inferior tribunals, including the refusal of leave to appeal, were amenable to judicial review on all the usual grounds. Indeed, in some cases, judicial review was considered a more appropriate remedy, even though statute provided another way of correcting errors of law: in Bone v Mental Health Review Tribunal [1985] 3 All ER 330, for example, Nolan J thought judicial review preferable to the power of a mental health review tribunal to state a case for the opinion of the High Court and the case stated procedure fell into disuse. However, the availability of judicial review was seen as a particular problem in the context of immigration and asylum appeals. In the Nationality, Immigration and Asylum Act 2002, s 101(2), Parliament introduced a form of statutory review of the refusal by the Immigration Appeal Tribunal of permission to appeal to that Tribunal. This was conducted by a single High Court judge without either an oral hearing or any appeal from his decision. It was therefore much swifter than the standard judicial review process, which involves the possibility of both written and oral submissions before both a High Court judge and a Lord Justice of Appeal. In R (G) v Immigration Appeal Tribunal [2005] 1 WLR 1445, the Court of Appeal held that, although the introduction of this new statutory procedure did not remove the judicial review jurisdiction, the new procedure was an adequate and proportionate protection for the claimants rights and it was therefore a proper exercise of the courts discretion to decline to entertain an application for judicial review of issues which were or could have been the subject of statutory review. Lord Phillips MR observed, at para 20: The consideration of proportionality involves more than comparing the remedy with what is at stake in the litigation. When Parliament enacts a remedy with the clear intention that this should be pursued in place of judicial review, it is appropriate to have regard to the considerations giving rise to that intention. The satisfactory operation of the separation of powers requires that Parliament should leave the judges free to perform their role of maintaining the rule of law but also that, in performing that role, the judges should, so far as consistent with the rule of law, have regard to legislative policy. The same approach was adopted when the Asylum and Immigration (Treatment of Claimants et cetera) Act 2004 collapsed the former two tier appellate structure into one. If the Asylum and Immigration Tribunal refused to order the reconsideration of a decision, the aggrieved party could ask the High Court to review the matter on paper and its decision was final (2002 Act, s 103A). The Tribunals, Courts and Enforcement Act 2007 Part 1 of the 2007 Act established the new unified tribunal structure which was recommended in the Leggatt Report. There is a First tier Tribunal, which is organised into chambers according to subject matter, each with its own President. It consists of its judges and other (non lawyer) members. There is an Upper Tribunal, also organised into chambers according to subject matter, each with its own President. With one exception, the Upper Tribunal Presidents are all High Court judges, but this is not a statutory requirement. It too consists of its judges and other (non lawyer) members. While most of the tribunal judiciary are specifically appointed to that role, all the judges in the ordinary courts, from the Lords Justices of Appeal to the District Judges in the Magistrates Courts, are automatically judges of both the First tier and Upper Tribunals. The whole is presided over by the Senior President of Tribunals, who shares the responsibility for organising the chambers with the Lord Chancellor (see s 7). The Senior President is currently a Lord Justice of Appeal, but the Act provides two routes to appointment: the first is that the Lord Chancellor and heads of the judiciary in England and Wales, Scotland and Northern Ireland all agree to recommend an appeal court judge for appointment; and only if that process does not produce a result does the second route, selection by the Judicial Appointments Commission, which is not limited to appeal court judges, apply (see Schedule 1, para 2(5)). Parliament has therefore expected, but not insisted, that the Senior President be an appeal court judge. The new structure may look neat but the diversity of jurisdictions accommodated means that it is not as neat as it looks. Thus, for example, the jurisdiction of the Special Commissioners of Income Tax and the VAT and Duties Tribunal has been assigned to the First tier Tribunal, although the importance of the decisions they make and the expertise of their judiciaries is, and should be, at least the equivalent of that of the Social Security Commissioners, who as appellate judges are assigned to the Upper Tribunal. Section 3(5) provides that The Upper Tribunal is to be a superior court of record. The Upper Tribunal has in fact three different roles. First, it may be the tribunal of first instance. Thus, for example, the Lands Chamber has both the first instance and appellate jurisdictions of the former Lands Tribunal; the Administrative Appeals Chamber has the jurisdiction of the former Transport Tribunal; and the Tax and Chancery Chamber has the jurisdiction of the former Financial Services and Markets Tribunal. Thus some first instance jurisdictions have been transferred to the Upper Tribunal whereas others of equivalent importance and difficulty, particularly in the tax field, have been transferred to the First tier Tribunal. Second, and this is a major innovation in the 2007 Act, it may exercise a statutory jurisdiction which is the equivalent of the judicial review jurisdiction of the High Court in England and Wales or Northern Ireland (ss 15, 16, 17). This only applies if certain conditions are met, the most important of which is that the application falls within a class specified in a direction given by the Lord Chief Justice or his nominee with the consent of the Lord Chancellor under Part 1 of Schedule 2 to the Constitutional Reform Act 2005 (s 18(6)). Once such a direction has been given, any application for judicial review or permission to apply for judicial review which is made to the High Court in that class of case must be transferred to the Upper Tribunal (Senior Courts Act 1981, s 31A(2)). The High Court also has power to transfer judicial review cases of other kinds to the Upper Tribunal if it appears just and convenient to do so (1981 Act, s 31A(3)). Similar provision is made in Scotland, in that judicial review cases in a specified class must, and others may, be transferred from the Court of Session to the Upper Tribunal (2007 Act, s 20(1)). The difference is that the application must first be made to the Court of Session, whereas in England and Wales and Northern Ireland applications in the specified classes should be made direct to the Upper Tribunal. Third, and probably most important, there is a right of appeal to the Upper Tribunal on any point of law arising from a decision made by the First tier Tribunal other than an excluded decision (s 11(1), (2)). This right may only be exercised with the permission of either the First tier or the Upper Tribunal (s 11(3), (4)). Section 11(5) lists the decisions which are excluded from the right of appeal. These include decisions of a description specified in an order made by the Lord Chancellor (s 11(5)(f)). The current list is contained in the Appeals (Excluded Decisions) Order 2009, as amended in 2010 to take account of the inclusion of immigration and asylum appeals within the new structure. There is a right of appeal to the Court of Appeal, in England and Wales or Northern Ireland, or the Court of Session in Scotland, on any point of law arising from a decision made by the Upper Tribunal other than an excluded decision (s 13(1), (2)). Excluded decisions include any decision of the Upper Tribunal on an application under section 11(4)(b) (application for permission or leave to appeal) (s 13(8)(c)). These appeals also require permission either from the Upper Tribunal or, if refused by the Upper Tribunal, from the relevant appellate court (s 13(3), (4), (5)). Where this would be a second tier appeal (that is, an appeal from the decision of the Upper Tribunal on appeal from the First tier Tribunal), the Lord Chancellor has exercised the power granted to him by section 13(6) to order that permission shall not be granted unless (a) the proposed appeal would raise some important point of principle or practice; or (b) there is some other compelling reason for the relevant appellate court to hear the appeal (Appeals from the Upper Tribunal to the Court of Appeal Order 2008, SI 2008 No 2834, art 2). Equivalent provision has been made for appeals from the Upper Tribunal to the Court of Session in Scotland by rule 41.59 of the Act of Sederunt (Rules of Court of Session 1994) 1994 (inserted by SSI 2008 No 349). These criteria are, of course, those applicable to a second tier appeal from a court to the Court of Appeal in England and Wales under section 55(1) of the Access to Justice Act 1999. It is worth noting that both the First tier Tribunal and the Upper Tribunal have power to review their own decisions, but this power does not apply to excluded decisions (see ss 9(1) and 10(1) respectively). This means that the Upper Tribunal has no power to review its own decision to refuse permission to appeal to the Upper Tribunal, even if it is convinced that that decision was wrong (compare the facts of Re Wooding, para 19 earlier). There is no express provision in the 2007 Act which makes any attempt to limit or remove the supervisory jurisdiction of the High Courts of England and Wales or Northern Ireland and the Court of Session in Scotland to review the decisions of the Upper Tribunal. It is nevertheless argued, and both the Divisional Court and the Court of Appeal held, that in the light of the system introduced by the 2007 Act the exercise of that jurisdiction should be limited to certain exceptional cases. Before turning to the possible approaches available to this Court, it is worth noting the various ways in which that argument has been put in the course of these proceedings. The developing argument The Cart case was heard by the Divisional Court along with two cases involving the Special Immigration Appeals Commission (SIAC). As does section 3(5) of the 2007 Act, section 1(3) of the Special Immigration Appeals Commission Act 1997 provides that SIAC shall be a superior court of record. The Governments primary case was that this made both tribunals immune from judicial review. This is not surprising, given that the same view had been expressed, of the Employment Appeal Tribunal, by Morison J in Chessington World of Adventures Ltd v Reed [1998] ICR 97, and by Sedley LJ in R v Regional Office of the Employment Tribunals (London North), Ex p Sojorin (unreported), 21 February 2000, and at para 6.31 of the Leggatt Report, and of the Upper Tribunal itself in de Smiths Judicial Review 6th ed (2007), para I 093. Nevertheless the argument was comprehensively demolished by Laws LJ, with whom Owen J agreed, in a typically subtle and erudite judgment, to which the following brief summary cannot do justice. It was a constitutional solecism to consider that merely to designate a body a superior court of record was sufficient to preclude judicial review. This could only be done by the most clear and explicit language and not by implication, still less by what was effectively a deeming provision. The rule of law requires that statute law be interpreted by an authoritative and independent judicial source: . the need for such an authoritative judicial source cannot be dispensed with by Parliament. This is not a denial of legislative sovereignty, but an affirmation of it . The requirement of an authoritative judicial source for the interpretation of law means that Parliaments statutes are always effective; . (para 38). That source was the High Court. This was not because it was a superior court of record but because it was a court of unlimited jurisdiction. Other courts and tribunals, having a limited jurisdiction, were not that source and were susceptible to judicial review by the High Court. Unreviewable courts of limited jurisdiction were exceptional. In the light of that comprehensive demolition, Mr Eadie has not since tried to rebuild the argument. He does not need to do so, because (in relation to the Upper Tribunal but not to SIAC) he has succeeded on his secondary case, that judicial review is only exercisable in rare and exceptional cases. Laws LJ accepted the argument on the basis that the newly constituted Upper Tribunal was the alter ego of the High Court within the areas covered by the tribunal system: it constituted an authoritative, impartial and independent judicial source for the interpretation and application of the relevant statutory tests. The rule of law did not require that it be subject to review for error of law within its jurisdiction: it had the final power to interpret for itself the law it must apply (para 94). But in the grossly improbable event that [Upper Tribunal] were to embark upon a case which was frankly beyond the four corners of its statutory remit there was no reason why the High Court should not correct it. With more caution, he accepted that it might also intervene where there has been a wholly exceptional collapse of fair procedure: something as gross as actual bias on the part of the tribunal (para 99). Laws LJ recognised that if the Upper Tribunal were in truth the alter ego of the High Court the logical consequence would be that it was wholly immune from the supervision of the High Court. The Government therefore pursued that argument before the Court of Appeal. Sedley LJ, giving the judgment of the court, rejected it: . the [Upper Tribunal] is not an avatar of the High Court at all: far from standing in the High Courts shoes, . , the shoes the [Upper Tribunal] stands in are those of the tribunals it has replaced (para 19). But he agreed that the supervisory jurisdiction of the High Court, well known to Parliament as one of the great historic artefacts of the common law, runs to statutory tribunals both in their old and in their new incarnation unless ousted by the plainest possible statutory language. There is no such language in the 2007 Act (para 20). Nevertheless, it did not follow that judicial review should be available on the full panoply of grounds which had been developed over the last half century. Judicial review had always been a remedy of last resort. As the Court of Appeal had recognised in R (Sivasubramaniam) v Wandsworth County Court [2003] 1 WLR 475, permission would not be granted where satisfactory alternative recourse existed, whether or not it had been exhausted. The scope of judicial review was a matter of principle, not discretion. But it could be changed to keep pace with other changes. The complete reordering of administrative justice was such a change: The tribunal system is designed to be so far as possible a self sufficient structure, dealing internally with errors of law made at first instance and resorting to higher appellate authority only where a legal issue of difficulty or of principle requires it. By this means serious questions of law are channelled into the legal system without the need of post Anisminic judicial review. (para 30) Two principles needed to be reconciled: one was the relative autonomy which Parliament had invested the tribunals as a whole and the Upper Tribunal in particular; the other was the constitutional role of the High Court as guardian of the standard of legality and due process from which the Upper Tribunal was not exempt (para 35). There was a true jurisprudential difference between an error of law made in the course of an adjudication which a tribunal is authorised to conduct and the conducting of an adjudication without lawful authority. For the former, no system of law can guarantee to be infallible. But [o]utright excess of jurisdiction by the [Upper Tribunal] and or denial by it of fundamental justice, should they ever occur, are in a different class: they represent the doing by the [Upper Tribunal] of something that Parliament cannot possibly have authorised it do so (para 36). Thus, by this rather different route, the Court of Appeal in Cart arrived at the same practical conclusion as had both the Divisional Court in Cart and the Court of Appeal in Sivasubramaniam [2003] 1 WLR 475. Sivasubramaniam was, of course, dealing with the new system of civil appeals brought in under the Access to Justice Act 1999 in response to the Bowman Report (1997). For the first time, virtually all appeals from a district judge to a circuit judge in a county court required permission to appeal. Refusal of permission by the circuit judge meant that there was no way, other than by judicial review, of having the case scrutinised by a High Court judge. However, while judicial review was not ousted, the Court of Appeal considered the new scheme provided the litigant with fair, adequate and proportionate protection against the risk that the judge of the lower court may have acted without jurisdiction or fallen into error (para 54). Permission to apply for judicial review should therefore not be granted except in very rare cases where it was sought on the ground of jurisdictional error in the narrow, pre Anisminic sense, or procedural irregularity of such a kind as to constitute a denial of the applicants right to a fair hearing (para 56). In R (Sinclair Gardens Investments (Kensington) Ltd) v Lands Tribunal [2005] EWCA Civ 1305, [2006] 3 All ER 650, essentially the same approach was applied to the refusal, by a non lawyer member of the Lands Tribunal, of permission to appeal from a determination of a Leasehold Valuation Tribunal relating to residential service charges. Thus the mere fact that a decision by the Lands Tribunal was obviously wrong in law was not enough to justify its being judicially reviewed (para 56); although there might be exceptional circumstances other than those identified in Sivasubramaniam which would justify this, for example where there were conflicting decisions in Leasehold Valuation Tribunals which cried out for definitive resolution (para 57). On the other hand, in Sivasubramaniam itself, the Court of Appeal had recognised the special features of the asylum jurisdiction which justified the former practice of unrestricted judicial review of refusals of leave to appeal. In MR (Pakistan), therefore, Mr Manjit Gill argued that those special features justified making an exception to the principles adopted by the Court of Appeal in Cart. Sullivan LJ disagreed. The immigration and asylum jurisdiction was not the only one in which claimants might be unrepresented, or particularly vulnerable, or where fundamental human rights were involved, or where the law was complex. There was no principled justification for maintaining a historical exemption: one of the basic purposes of the 2007 Act was to unify the procedures of the many and disparate tribunals which had been gathered into the new structure. It would be a significant invasion of the coherence of the new system to maintain such a historical exemption (para 53). The field of choice in this Court The way in which the argument has developed through the proceedings which are now collected before us enables us to be clear on three points. First, there is nothing in the 2007 Act which purports to oust or exclude judicial review of the unappealable decisions of the Upper Tribunal. Clear words would be needed to do this and they are not there. The argument that making the Upper Tribunal a superior court of record was sufficient to do this was killed stone dead by Laws LJ and has not been resurrected. Second, it would be completely inconsistent with the new structure introduced by the 2007 Act to distinguish between the scope of judicial review in the various jurisdictions which have now been gathered together in that new structure. The duties of the Senior President, set out in section 1(2), clearly contemplate that the jurisdictions will retain their specialist expertise, so that one size does not necessarily fit all; but the relationships of its component parts with one another and with the ordinary courts are common to all. So too must be the principles adopted by the High Court in deciding the scope of judicial review. Third, the scope of judicial review is an artefact of the common law whose object is to maintain the rule of law that is to ensure that, within the bounds of practical possibility, decisions are taken in accordance with the law, and in particular the law which Parliament has enacted, and not otherwise. Both tribunals and the courts are there to do Parliaments bidding. But we all make mistakes. No one is infallible. The question is, what machinery is necessary and proportionate to keep such mistakes to a minimum? In particular, should there be any jurisdiction in which mistakes of law are, either in theory or in practice, immune from scrutiny in the higher courts? In the course of oral argument before the Court it became clear that there were three possible approaches which the Court could take. First, we could accept the view of the courts below in Cart and MR that the new system is such that the scope of judicial review should be restricted to pre Anisminic excess of jurisdiction and the denial of fundamental justice (and possibly other exceptional circumstances such as those identified in Sinclair Gardens). Second, we could accept the argument, variously described in the courts below as elegant and attractive, that nothing has changed. Judicial review of refusals of leave to appeal from one tribunal tier to another has always been available and with salutary results for the systems of law in question. Third, we could adopt a course which is somewhere between those two options, and was foreshadowed by Dyson LJ (with the enthusiastic support of Longmore LJ) in R (Wiles) v Social Security Commissioner [2010] EWCA Civ 258 but rejected by the Court of Appeal in Cart, namely that judicial review in these cases should be limited to the grounds upon which permission to make a second tier appeal to the Court of Appeal would be granted. (i) The exceptional circumstances approach The approach of the Divisional Court and Court of Appeal would lead us back to the distinction between jurisdictional and other errors which was effectively abandoned after Anisminic. It is a distinction which lawyers can readily grasp. As Denning MR put it in Shaws case [1952] 1 KB 338, 346, A tribunal may often decide a point of law wrongly whilst keeping well within its jurisdiction. There are, however, several objections to reviving it. First, we would not in fact be turning the clock back to the days before Anisminic because, as we have seen, certiorari was available to correct errors of law on the face of the record made by tribunals of limited jurisdiction. We would be re introducing a distinction which had become relevant for the most part only where judicial review was expressly excluded, which it is not here. Secondly, the distinction was given its quietus by the majority in Anisminic not least because the word jurisdiction has many meanings ranging from the very wide to the very narrow. By the narrow original sense both Lord Reid and Lord Pearson meant that the tribunal had asked itself the wrong question. But, as Lord Reid explained, a tribunal does this if it does any of the things which would ordinarily render its decision susceptible to judicial review (at p 171). And, as Lord Pearson observed, there has been evolution over the centuries and there have been many technicalities. There have also been many border line cases (at p 195). And Lord Wilberforce did not find the expressions asking the wrong question or applying the wrong test wholly satisfactory, although he agreed that such decisions were a nullity (at p 210). If the approach of the Court of Appeal in Cart is maintained we may expect a return to some of the technicalities of the past. Thirdly, as Lord Wilberforce pointed out (at p 207), it does of course lie within the power of Parliament to provide that a tribunal of limited jurisdiction should be the ultimate interpreter of the law which it has to administer: the position may be reached, as the result of statutory provisions, that even if they make what the courts might regard as decisions wrong in law, these are to stand. But there is no such provision in the 2007 Act. There is no clear and explicit recognition that the Upper Tribunal is to be permitted to make mistakes of law. Certain decisions are unappealable and for the most part there are obvious practical reasons why this should be so. But this does not mean that the tribunal must always be permitted to make errors of law when making them. The consideration which weighed most heavily with the Court of Appeal in Sivasubramaniam was proportionality. There must be a limit to the resources which the legal system can devote to the task of trying to get the decision right in any individual case. There must be a limit to the number of times a party can ask a judge to look at a question. The Court of Appeal took the view that, in the sorts of cases coming before the district judges in the county courts, it was enough if both the district judge and the circuit judge could detect no arguable case that the district judge had gone wrong. There was no need, save in the two extreme and exceptional cases identified, for a High Court judge to take another look especially as, under the current judicial review procedures, it would then be possible for the case to be looked at another four times. This approach accepts that a certain level of error is acceptable in a legal system which has so many demands upon its limited resources. Some might question whether it does provide sufficient protection against mistakes of law. In the ordinary courts, unlike the new tribunal system, there may be an appeal on a point of fact as well as law. It makes sense to limit such appeals to those with a real prospect of success. But judicial review is not such an appeal. The district judge and the circuit judge may both have gone wrong in law. They may work so closely and regularly together that the latter is unlikely to detect the possibility of error in the former. But at least in the county courts such errors are in due course likely to be detected elsewhere and put right for the future. The county courts are applying the ordinary law of the land which is applicable in courts throughout the country, often in the High Court as well as in the county courts. The risk of their developing local law is reduced although by no means eliminated. But that risk is much higher in the specialist tribunal jurisdictions, however expert and high powered they may be. As a superior court of record, the Upper Tribunal is empowered to set precedent, often in a highly technical and fast moving area of law. The judge in the First tier Tribunal will follow the precedent set by the Upper Tribunal and refuse permission to appeal because he is confident that the Upper Tribunal will do so too. The Upper Tribunal will refuse permission to appeal because it considers the precedent to be correct. It may seem only a remote possibility that the High Court or Court of Appeal might take a different view. Indeed, both tiers may be applying precedent set by the High Court or Court of Appeal which they think it unlikely that a higher court would disturb. The same question of law will not reach the High Court or the Court of Appeal by a different route. There is therefore a real risk of the Upper Tribunal becoming in reality the final arbiter of the law, which is not what Parliament has provided. Serious questions of law might never be channelled into the legal system (as Sedley LJ put it at para 30) because there would be no independent means of spotting them. High Court judges may sit in the Upper Tribunal but they will certainly not be responsible for all the decisions on permission to appeal, nor is it possible for the Upper Tribunal to review its own refusals, even when satisfied that they are wrong in law. Furthermore, it appears to be accepted that full judicial review of the unappealable decisions of the First tier Tribunal, and possibly of excluded decisions of the Upper Tribunal other than the refusal of permission to appeal, remains available. It is difficult to spell out a principled basis for such anomalies. In short, while the introduction of the new system may justify a more restricted approach, the approach of the Court of Appeal in Cart is too narrow, leaving the possibility that serious errors of law affecting large numbers of people will go uncorrected. (ii) The status quo ante but which? Mr Drabble, together with (in the rather different context of Scotland) Mr Mitchell, makes a powerful case for the status quo, by which he means the position obtaining in the social security system before the 2007 Act. The Social Security Commissioners were a highly skilled body of senior lawyers, thoroughly steeped in the intricacies of social security law, yet they could occasionally fail to detect the possibility of error in a social security tribunals decision for example because both were following an authoritative decision of the High Court or Court of Appeal which had stood for some time. Judicial review of the refusal of leave enabled such questions of law, often important to a great many people, to be examined in the higher courts to the benefit of the jurisdiction in question. It is, after all, the object of the benefits system to get things right to pay people the benefits to which Parliament has said that they are entitled, not a penny more but also not a penny less. He also rightly points out that nothing much has changed. The Social Security Commissioners are now judges of the Upper Tribunal but they are (mostly) the same people doing the same job. The new structure has followed the model of the previous social security adjudication system. What is so different that it justifies the removal of a right from which each party in a social security claim could benefit, the Department as well as the individual claimant? Mr Manjit Gill makes essentially the same argument in immigration and asylum cases. They too had a two tier appellate structure with the possibility of judicial review of unappealable decisions until the 2002 Act. The 2002 Act introduced the alternative form of statutory review, but it still gave access to a High Court judge. The 2004 Act collapsed the two tier structure into one, but provided an equivalent form of statutory review giving access to a High Court judge. Now, as Sullivan LJ put it in FA (Iraq) and PD (India) v Secretary of State for the Home Department [2010] EWCA Civ 827, at para 1, The wheel has come full circle. Once again there is a two tier appellate structure with a right of appeal with permission on a point of law from the First tier to the Upper Tribunal and a further right of appeal, with permission, to the Court of Appeal. The only change from the old two tier structure is the introduction of the limited grounds for a second tier appeal to the Court of Appeal. The statutory reviews introduced by the 2002 and 2004 Acts have been abolished. Hence, he argues, in that system too we are now back where we began and there is no reason to restrict the availability of judicial review of unappealable decisions. But it is impossible to leave out of account the reasons why those statutory reviews were introduced. It is not difficult to dress up an argument as a point of law when in truth it is no more than an attack upon the factual conclusions of the first instance judge. In most tribunal cases, a claimant will have little to gain by pressing ahead with a well nigh hopeless case. He may have less money than he otherwise would, but he will not have to leave the country and may make another claim if circumstances change. But in immigration and asylum cases, the claimant may well have to leave the country if he comes to the end of the road. There is every incentive to make the road as long as possible, to take every possible point, and to make every possible application. This is not a criticism. People who perceive their situation to be desperate are scarcely to be blamed for taking full advantage of the legal claims available to them. But the courts resources are not unlimited and it is well known that the High Court and Court of Appeal were overwhelmed with judicial review applications in immigration and asylum cases until the introduction of statutory reviews. Mr Gills answer is that under the new system the burden on the High Court and Court of Appeal is to be reduced by transferring judicial review applications relating to the refusal of the Secretary of State to treat new representations as a fresh claim to the Upper Tribunal (see the announcement made by Lord McNally, Hansard (HL), 3 March 2011, col WS120). But this, of course, does not address the perceived burden resulting from attempts to achieve a judicial review of the decisions of the Tribunal itself. Mr Fordham, in particular, argues that there is no need to introduce further restrictions upon judicial review. The courts have already adopted principles of judicial restraint when considering the decisions of expert tribunals. As long ago as R v Preston Supplementary Benefits Appeal Tribunal, Ex p Moore [1975] 1 WLR 624, before the creation of the unified social security appeal tribunals with a common right of appeal to the Commissioners, Lord Denning MR observed, at pp 631 2, that the courts should leave the tribunals to interpret the Supplementary Benefits Act in a broad reasonable way, according to the spirit and not the letter. But it was important that cases raising the same points should be dealt with in the same way, so the courts should be prepared to consider points of law of general application. Individual cases of particular application should be left to the tribunals. More recently, in Cooke v Secretary of State for Social Security [2001] EWCA Civ 734, [2002] 3 All ER 279, paras 15 17, I (with the agreement of both Clarke LJ and Butterfield J) urged appropriate caution in giving permission to appeal from the Social Security Commissioners, because of their particular expertise in a highly specialised area of the law, where it was quite probable that . the Social Security Commissioner will have got it right. Those observations have been referred to many times since, not least by Dyson LJ in R (Wiles) v Social Security Commissioner [2010] EWCA Civ 258, paras 53 54, where he said this: Thus, in seeing whether it can detect some error of law by the commissioner who has refused leave to appeal, the reviewing court should not be astute to find such error. This is a further reason why there need be no real concern that the established approach to judicial review in these cases would lead to an opening of the floodgates. It is, however, fair to say that this restraint has found more favour in some contexts than in others. Although it was adopted in the asylum context in AH (Sudan) v Secretary of State for the Home Department [2007] UKHL 49, [2008] AC 678, at para 30, the courts are also well aware of the anxious scrutiny required in asylum cases and of the particular difficulties facing the tribunals in this jurisdiction. Had they adopted the same restraint in asylum as in social security cases, it might not have been thought necessary to introduce the statutory review procedures. Ironically, therefore, the more troubling the context, the more necessary it has seemed to limit the availability of judicial review. The real question, as all agree, is what level of independent scrutiny outside the tribunal structure is required by the rule of law. The mere fact that something has been taken for granted without causing practical problems in the social security context until now does not mean that it should be taken for granted forever. Equally the fact that the courts have hitherto found it difficult to deter repeated or unmeritorious applications in immigration and asylum cases does not mean that such applications should become virtually impossible. There must be a principled but proportionate approach. (iii) The second tier appeals criteria An important innovation in the 2007 Act was the power given to the Lord Chancellor in section 13(6), to prescribe the same criteria for the grant of permission to appeal from the Upper Tribunal to the Court of Appeal as apply to second tier appeals in the courts of England and Wales. These have now been prescribed for second tier appeals from the Upper Tribunal in all three jurisdictions. (It was the previous lack of such criteria which led to the remarks about restraint in Cooke.) This gives, at the very least, an indication of the circumstances in which Parliament considered that questions of law should be, as Sedley LJ put it, channelled into the legal system. In Wiles, Dyson LJ considered that there was much to be said for applying the same criteria to judicial review of a Social Security Commissioners refusal of permission to appeal to himself (para 48). This would reflect the fact that (i) the issues that arise . may affect the lives not only of the individual claimant, but also of many others who are in the same position, some of whom are among the most vulnerable members of our society; and (ii) the issues may be of fundamental importance to them, sometimes making the difference between a reasonable life and a life of destitution (para 47). This proposal was warmly endorse[d] by Longmore LJ (para 79). It was, however, expressly rejected by Sedley LJ in Cart, because the new tribunal structure is something greater than the sum of its parts. It represents a newly coherent and comprehensive edifice designed, among other things, to complete the long process of divorcing administrative justice from departmental policy, to ensure the application across the board of proper standards of adjudication, and to provide for the correction of legal error within rather than outside the system (para 42). While all of this is true, it seems to me to do little justice to the independence and expertise of the tribunal judiciaries in the old system and to over estimate what has changed in the new. There must be some risk that the amalgamation of very different jurisdictions in the new chambers will dilute rather than enhance the specialist expertise of their judges and members. Mental health and special educational needs, for example, are similar in some ways but very different in others. It would be difficult to say that bringing them together has reduced the capacity for error although of course we all hope that it has not been increased. The claimants accept that if there is to be any restriction on the availability of judicial review, this approach would be far preferable to that of the Court of Appeal in Cart. Their main objection is that it would deprive the parties of the second substantive hearing to which they would have been entitled if the Upper Tribunal had spotted the error and given permission to appeal. Another objection is that it would leave uncorrected those errors of law which do not raise an important point of principle or practice and where there is no other compelling reason for the court to hear the case. But no system of decision making is perfect or infallible. There is always the possibility that a judge at any level will get it wrong. Clearly there should always be the possibility that another judge can look at the case and check for error. That second judge should always be someone with more experience or expertise than the judge who first heard the case (it is to be hoped that the new structure will not perpetuate the possibility, exemplified in Sinclair Gardens, that a non lawyer member might be entrusted with deciding whether a tribunal chaired by a legally qualified tribunal judge had gone wrong in law, but this is left to the good sense of the Senior President rather than enshrined in the legislation). But it is not obvious that there should be a right to any particular number of further checks after that. The adoption of the second tier appeal criteria would lead to a further check, outside the tribunal system, but not one which could be expected to succeed in the great majority of cases. Conclusion For all those reasons, together with those given by Lord Dyson (in this case) and Lord Hope (in Eba), the adoption of the second tier appeals criteria would be a rational and proportionate restriction upon the availability of judicial review of the refusal by the Upper Tribunal of permission to appeal to itself. It would recognise that the new and in many ways enhanced tribunal structure deserves a more restrained approach to judicial review than has previously been the case, while ensuring that important errors can still be corrected. It is a test which the courts are now very used to applying. It is capable of encompassing both the important point of principle affecting large numbers of similar claims and the compelling reasons presented by the extremity of the consequences for the individual. It follows that the approach in Sinclair Gardens should no longer be followed. If this approach is adopted, the Civil Procedure Rules Committee might also wish to consider the scope for stream lining the procedure for considering applications for permission to apply for judicial review of these decisions. I agree with Lord Phillips that it would be totally disproportionate to allow the four stage system of paper and oral applications to both the High Court and the Court of Appeal in such cases. The previous procedures for statutory reviews in immigration and asylum cases showed that there is nothing inherently objectionable in a paper procedure, particularly if there has been an oral hearing of the first application for permission to appeal. But, in agreement with Lord Clarke, it seems to me that this is a matter for the rules committee rather than for this Court to determine. In the result, however, there is clearly nothing in Mr Carts case to bring it within the second tier appeal criteria. The tribunal considered very carefully whether he had been prejudiced by the failure of the Secretary of State to give him notice of the application to vary and it was clear that he had not, so any difference of approach to whether prejudice was necessary would not affect the result. The same is true of the case of MR (Pakistan). As Ouseley J said in refusing permission to appeal to the Upper Tribunal, crucial to the decision was the finding that the applicant was not a genuine convert to Christianity. The question of how a genuine convert would be treated did not arise. I would therefore dismiss the appeals in the cases of Cart and MR (Pakistan) but on a different basis from that adopted in the Divisional Court and the Court of Appeal. LORD PHILLIPS I have had the benefit of reading the judgment of Lady Hale, which illuminates the background to the English appeals, and the issues that are raised by them. I have also had the benefit of reading the judgment of Lord Hope in the Scottish appeal. His conclusions are in harmony with those of Lady Hale. I am in agreement with both judgments. My own contribution is essentially by way of emphasis, directed largely to the fundamental issue of principle raised by these appeals. That is whether the courts should apply a principle of proportionality when deciding whether to accede to an application to judicially review a decision of the Upper Tribunal. For the reasons that follow I have decided that they should, but that, at least in England and Wales, the needs of proportionality also require changes in the Civil Procedure Rules (CPR). Introduction In March 2001 a Committee chaired by Sir Andrew Leggatt delivered a report (the Leggatt Report) to the Lord Chancellor on the delivery of justice through tribunals. The Committee was confronted with 70 different administrative tribunals employing about 3,500 people and handling nearly one million cases a year. The Leggatt Report made recommendations for bringing these tribunals into a single Tribunals System. In July 2004 a Government White Paper accepted the broad thrust of those recommendations. Parliament then implemented this by enacting the Tribunals, Courts and Enforcement Act 2007 (TCEA). A striking feature of the tribunals system created by the TCEA is the creation of two tiers, a First tier Tribunal and an Upper Tribunal. Appeals lie from the First tier Tribunal to the Upper Tribunal. Carnwath LJ was appointed the first Senior President of the new system. In his article Tribunal Justice a New Start in [2009] Public Law 48 he commented of the Upper Tribunal that it would be operating in parallel with the existing Administrative Court and would become the principal agency for judicial review of the legality of tribunal decisions. He suggested that there was scope for rethinking the traditional allocation, as between courts and tribunals, of responsibilities for definitive interpretation of substantive law, including human rights law, in specialist fields. These three conjoined appeals raise a single issue. This is the extent to which decisions of the Upper Tribunal are properly subject to judicial review by the Administrative Court in England and Wales and the Court of Session in Scotland. That issue calls for a review of the roles of the legislature, the executive and the judiciary in maintaining the rule of law in this country. The rule of law requires that the laws enacted by Parliament, together with the principles of common law that subsist with those laws, are enforced by a judiciary that is independent of the legislature and the executive. Laws LJ, in paras 43 to 51 of his judgment in Cart [2009] EWHC 3052 (Admin), has summarised the history of the role of the courts from 1066 to 1873 in upholding and developing the law. In particular, he has described the growth of the supremacy under the common law of the court of the Kings Bench as a court of unlimited jurisdiction with the power by means of the prerogative writs to supervise the other courts, described as inferior courts of record. The Judicature Act 1873 marked the assumption by Parliament of responsibility for the infrastructure necessary for the administration of justice. A new hierarchy of courts was created, including a High Court and a Court of Appeal. The common law powers of the Kings Bench were vested in the High Court. The creation of a Court of Appeal provided, however, an alternative means of reviewing errors of law on the part of inferior courts and, in particular, the County Court, which replaced the use of the prerogative writs. Since 1873 there has been a series of statutes dealing with the administration of justice, of which the Supreme Court Act 1981 (now the Senior Courts Act 1981) was particularly significant. Section 4 of that Act defined the composition of the High Court. Section 19 provided that the High Court should continue to exercise the jurisdiction that it enjoyed prior to the 1981 Act. Thus the common law powers of judicial review were preserved. Section 31 of the 1981 Act provided for rules of court to be made governing the procedure to be followed on an application for judicial review and required the leave of the High Court to be obtained for such an application. Part 54 of the CPR gives effect to that requirement. At the same time as making provision for the structure of the general court system, Parliament created tribunals to adjudicate on disputes in specialised areas and a number of specialist courts. A common theme can be identified in relation to most of these, as well as in relation to the general court system. The possibility of at least one appeal is desirable in order to address the possibility of error of law on the part of the court or tribunal first seised of the matter. Legislation dealing with the court system in general and with specialist courts and tribunals usually makes provision for appeals. Prior to 1999 there was growing concern that rights of appeal in civil proceedings were over generous with the result that the pursuit of appeals that lacked merit was resulting in unnecessary delay and consumption of limited judicial resources. Lord Woolfs final report on Access to Justice published in July 1996 reached a similar conclusion on this topic to that subsequently reached by the Bowman Report published in September 1997. Both concluded that civil appeals served both a private and a public purpose. The private purpose was to correct an error, unfairness or wrong exercise of discretion leading to an unjust result. The public purpose was to ensure public confidence in the administration of justice and, in appropriate cases, to clarify and develop the law, practice and procedure and to help maintain the standards of first instance courts and tribunals. Many of the existing provisions for appeals failed, however, to have regard to proportionality. Rights of appeal should be proportionate to the grounds of complaint and the subject matter of the dispute. More than one level of appeal would not normally be justified unless an important point of principle or practice was involved. The Bowman Report led to provisions in the Access to Justice Act 1999 which resulted in a new Part 52 of the CPR to replace the provisions of the Rules of the Supreme Court dealing with, inter alia, appeals to the High Court from lower courts and tribunals and appeals to the Court of Appeal. Section 54 of the 1999 Act provided that rules of court could introduce a requirement that any right of appeal be exercised only with permission. It further provided that no appeal could be made against a decision of a court to give or refuse permission, albeit that rules of court might provide for the making of a further application for permission to that court or another court. CPR 52.3 introduced a permission requirement in relation to appeals from lower courts, but not from tribunals, albeit that it stated that other enactments might require permission for particular appeals. CPR 52.3(6) provides that permission to appeal may only be given where the court considers that the appeal would have a real prospect of success or where there is some other compelling reason why the appeal should be heard. CPR 52.13(2) provides that in the case of a second appeal to the Court of Appeal the court will only give permission to appeal if the appeal raises an important point of principle or practice or there is some other compelling reason for the court to hear it. The power of the High Court to conduct judicial review subsists alongside these statutory provisions for appeal. It is not, however, the practice of the Court to use this power where a satisfactory alternative remedy has been provided by Parliament. Where this is not the case the power of judicial review is a valuable safeguard of the rule of law. It is one which the judges guard jealously. The decision of the House of Lords in Anisminic Ltd v Foreign Compensation Commission [1969] 2 AC 147 finessed what, on its face, appeared to be an attempt by Parliament to exclude judicial review of the decisions of the Commission. Since that case Parliament has not purported, as it might have done, expressly to preclude the exercise by the High Court of the power of judicial review. At paras 39 to 40 of his judgment in Cart Laws LJ stated that the general principle was clear: The rule of law requires that statute should be mediated by an authoritative and independent judicial source; and Parliaments sovereignty itself requires that it respect this rule. None of this, of course, is to say that Parliament may not modify, sometimes radically, the procedures by which statute law is mediated. It may impose tight time limits within which proceedings must be bought. It may provide a substitute procedure for judicial review, as it has by a regime of statutory appeals in fields such as town and country planning, highways, and compulsory purchase: where, however, the appeal body remains the High Court. It may create new judicial authorities with extensive powers. It may create rights of appeal from specialist tribunals direct to the Court of Appeal. The breadth of its power is subject only to the principle I have stated. The proposition that Parliamentary sovereignty requires Parliament to respect the power of the High Court to subject the decisions of public authorities, including courts of limited jurisdiction, to judicial review is controversial. Hopefully the issue will remain academic. Before the Divisional Court in Cart the Secretary of State contended that, by enacting in section 3(5) of TCEA that the Upper Tribunal should be a superior court of record, Parliament had rendered its decisions immune from judicial review. The Divisional Court rejected that submission, and it has not been pursued. The issue before this Court relates to the principles that should govern the exercise of the power judicially to review the decisions of the Upper Tribunal. The appellants in the English appeals, supported by JUSTICE as intervener, adopt the same approach as the Lord Advocate in the Scottish Appeal and contend that judicial review should be permitted whenever there is an arguable case that the Upper Tribunal has made any error of law. The Secretary of State submits that the statutory provisions for appeal in the TCEA meet the requirements of the rule of law in all ordinary circumstances. Judicial review of the Upper Tribunal is only appropriate in exceptional circumstances, which do not exist in any of the appeals before the Court. The issue of principle raised by these appeals is thus whether, and on what basis, the right to judicial review of a decision of the Upper Tribunal should be restricted. All three appeals have, however, an important common factor. Each arises out of the refusal of the Upper Tribunal to give permission to appeal to it from a decision of the First tier Tribunal or, in the case of Cart, of the Tribunal whose functions have been taken over by the First tier Tribunal. In each of the English cases a claim for judicial review of the Upper Tribunals decision was dismissed on the ground that this could only be justified in exceptional circumstances. In the Scottish case a similar application was granted, and the Advocate General appeals against the decision granting the application for judicial review. It became apparent in the course of argument that the appellants in the English cases were particularly aggrieved that they had been denied the right to have their appeals heard. Because there was no right to appeal to the Court of Appeal from the Upper Tiers refusal to give permission to appeal, they had only had one substantive hearing. Mr Gill QC for MR accepted that it was this fact, rather than the status of the tribunal that had refused permission to appeal, that gave rise to his principal complaint. There have already been a number of decisions of lower courts in which it has been held appropriate to circumscribe the right to judicial review. The appellants in the English appeals submit that they were wrongly decided and I propose first to consider them. Next I shall consider the recommendations made by the Leggatt Report in relation to the availability of judicial review. After that I shall examine the extent to which Parliament gave effect to those recommendations. Finally I shall answer the issue of principle posed above, with specific reference to the individual appeals. Restrictions on the right to judicial review The first of a series of cases in which the court held that there was a right to judicial review which was restricted involved two appeals by the same appellant in relation to two unsuccessful applications for judicial review. In R (Sivasubramaniam) v Wandsworth County Court; R (Sivasubramaniam) v Kingston upon Thames County Court (Lord Chancellors Department intervening) [2002] EWCA Civ 1738, [2003] 1 WLR 475, which I shall hereafter refer to as Siva, the applicant brought bizarre claims before two district judges. Each had been dismissed. Applications for permission to appeal were dismissed in each case by a county court judge. In the latter, but not the former, case he could have appealed to the Court of Appeal. He did not do so. He applied in each case to the High Court for permission to claim judicial review. His applications were dismissed. He appealed against the dismissals to the Court of Appeal. In the second case the Court of Appeal refused the application on the ground that there had been a satisfactory alternative remedy. The Court rejected the submission by the respondents that section 54(4) of the Access to Justice Act ousted judicial review of the decision of the county court judge. It held, however, at para 48: Under the 1999 Act, and the rules pursuant to it, a coherent statutory scheme has been set up governing appeals at all levels short of the House of Lords. One object of the scheme is to ensure that, where there is an arguable ground for challenging a decision of the lower court, an appeal will lie, but to prevent court resources being wasted by the pursuit of appeals which have no prospect of success. The other object of the scheme is to ensure that the level of judge dealing with the application for permission to appeal, and the appeal if permission is given, is appropriate to the dispute. This is a sensible scheme which accords with the object of access to justice and the Woolf reforms. It has the merit of proportionality. To permit an applicant to bypass the scheme by pursuing a claim for judicial review before a judge of the Administrative Court is to defeat the object of the exercise. We believe that this should not be permitted unless there are exceptional circumstances and we find it hard to envisage what these could be. So far as the first case was concerned, the Court adopted a similar approach. It held: 54 This scheme we consider provides the litigant with fair, adequate and proportionate protection against the risk that the judge of the lower court may have acted without jurisdiction or fallen into error. The substantive issue will have been considered by a judge of a court at two levels. On what basis can it be argued that the decision of the judge of the appeal court should be open to further judicial review? The answer, as a matter of jurisprudential theory, is that the judge in question has limited statutory jurisdiction and that it must be open to the High Court to review whether that jurisdiction has been exceeded. But the possibility that a circuit judge may exceed his jurisdiction, in the narrow pre Anisminic sense, where that jurisdiction is the statutory power to determine an application for permission to appeal from the decision of a district judge, is patently unlikely. In such circumstances an application for judicial review is likely to be founded on the assertion by the litigant that the circuit judge was wrong to conclude that the attack on the decision of the district judge was without merit. The attack is likely to be misconceived, as exemplified by the cases before us. We do not consider that judges of the Administrative Court should be required to devote time to considering applications for permission to claim judicial review on grounds such as these. They should dismiss them summarily in the exercise of their discretion. The ground for so doing is that Parliament has put in place an adequate system for reviewing the merits of decisions made by district judges and it is not appropriate that there should be further review of these by the High Court. This, we believe, reflects the intention of Parliament when enacting section 54 (4) of the 1999 Act. While Parliament did not legislate to remove the jurisdiction of the High Court judicially to review decisions of county court judges to grant or refuse permission to appeal, we do not believe that Parliament can have anticipated the spate of applications for judicial review that section 54 (4) appears to have spawned. 55 Everything that we have said should be applied equally to an application for permission to claim judicial review of the decision of a judge of the county court granting permission to appeal. We are not aware that such an application has yet been made. Exceptional circumstances 56 The possibility remains that there may be very rare cases where a litigant challenges the jurisdiction of a circuit judge giving or refusing permission to appeal on the ground of jurisdictional error in the narrow, pre Anisminic sense, or procedural irregularity of such a kind as to constitute a denial of the applicant's right to a fair hearing. If such grounds are made out we consider that a proper case for judicial review will have been established. The Court commented on the fact that permission to claim judicial review was regularly given in relation to refusals by the Immigration Appeal Tribunal of permission to appeal to the tribunal against decisions of special adjudicators. The Court observed at para 52 that on the face of it judicial review of such decisions might seem anomalous, but explained the practice as follows: There are, in our judgment, special factors which fully justify the practice of entertaining applications for permission to claim judicial review of refusals of leave to appeal by the tribunal. In asylum cases, and most cases are asylum cases, fundamental human rights are in play, often including the right to life and the right not to be subjected to torture. The number of applications for asylum is enormous, the pressure on the tribunal immense and the consequences of error considerable. The most anxious scrutiny of individual cases is called for and review by a High Court judge is a reasonable, if not an essential, ingredient in that scrutiny. In Gregory v Turner [2003] EWCA Civ 183; [2003] 1 WLR 1149 the Court of Appeal followed Siva when it refused an application for judicial review of the decision of a circuit judge who refused permission to appeal from the decision of a district judge, despite the fact that there were grounds for concluding that the district judge had fallen into error. At para 46 Brooke LJ explained the reason for what might appear to be an injustice: In his Interim Report on Access to Justice (1995), Section I, Chapter 4, paras 5 and 6 Lord Woolf highlighted the tensions that exist between a desire to achieve perfection and a desire to achieve a system of justice which is not inaccessible to most people on grounds of the time and cost involved. He quoted tellingly from a 1970 broadcast by Lord Devlin: is it right to cling to a system that offers perfection for the few and nothing at all for the many? Perhaps: if we could really be sure that our existing system was perfect. But of course it is not. We delude ourselves if we think that it always produces the right judgment. Every system contains a percentage of error; and if by slightly increasing the percentage of error, we can substantially reduce the percentage of cost, it is only the idealist who will revolt. Both Siva and Gregory v Turner involved attempts to review decisions of the County Court. In R (on the application of Sinclair Gardens Investments (Kensington) Ltd) v Lands Tribunal [2005] EWCA Civ 1305; [2006] 3 All ER 650 the Court of Appeal applied the same reasoning to the scheme laid down by Parliament for leasehold valuation. The statutory scheme in that case provided for an appeal from the Leasehold Valuation Tribunal to the Lands Tribunal provided that one or the other gave permission to appeal. Both having refused permission, a landlord sought permission to review the decision of the Lands Tribunal to refuse permission to appeal. The application was refused and the landlord appealed to the Court of Appeal. The Court dismissed the appeal. Giving the only reasoned judgment, Neuberger LJ said this: 56 I do not accept that the mere fact that a decision of the Lands Tribunal refusing permission to appeal was obviously wrong in law would be sufficient to justify its being judicially reviewed. Such a basis for judicial review would fly in the face of the conclusion and reasoning in Sivasubramaniams case and in Gregory v Turner, which appear to me to be applicable in this case for the reasons given above. Before permission to seek judicial review could be granted, it would not be enough to show that the refusal of permission to appeal was plainly wrong in law. It would also have to be established that the error was sufficiently grave to justify the case being treated as exceptional. 57 I think it is appropriate to say, that there could, in my view, be cases, which would be wholly exceptional, where it would be right to consider an application for judicial review of such a decision on the basis of what could be said to be an error of law. A possible example would be if the Lands Tribunal, despite being aware of the position, refused, without any good reason, permission to appeal on a difficult point of law of general application, which had been before a number of different LVTs which had taken different views on it, and which cried out for a definitive answer in the public interest. In that connection, it seems to me that one could say that it was not so much the point of law itself which justified judicial review, but more the failure of a public tribunal to perform its duty to the public, as well as what one might call its duty to the parties in that particular case. In Siva the Court of Appeal recognised that there were special circumstances that justified judicial review of decisions of the Immigration Appeal Tribunal that refused permission to appeal to it. Parliament then intervened by section 101(2) of the Nationality, Immigration and Asylum Act 2002 to provide for a statutory review, to be carried out by a High Court judge on paper, of such refusals. In R(G) v Immigration Appeal Tribunal [2004] EWCA Civ 1731, [2005] 1 WLR 1445 the Court of Appeal endorsed the view of Collins J at first instance that it was Parliaments intention that this should provide a satisfactory alternative to judicial review, thereby avoiding the delay that was involved in the four stage process of the latter. The Court of Appeal held that the statutory regime provided adequate and proportionate protection of the asylum seekers rights and that it was, accordingly, a proper exercise of the courts discretion to decline to entertain an application for judicial review of issues which had been, or could have been the subject of statutory review. The Court stated at para 20: The consideration of proportionality involves more than comparing the remedy with what is at stake in the litigation. Where Parliament enacts a remedy with the clear intention that this should be pursued in place of judicial review, it is appropriate to have regard to the considerations giving rise to that intention. The satisfactory operation of the separation of powers requires that Parliament should leave the judges free to perform their role of maintaining the rule of law but also that, in performing that role, the judges should, so far as consistent with the rule of law, have regard to legislative policy. This approach was followed by the Court of Appeal in R (F (Mongolia)) v Asylum and Immigration Tribunal [2007] 1 WLR 2523 in relation to the new review procedure introduced under the Asylum and Immigration (Treatment of Claimants, etc Act) 2004 see Lady Hales judgment at para 31. This series of cases was considered by the Court of Appeal in Wiles v Social Security Commissioner [2010] EWCA Civ 258, when considering an appeal against the refusal to grant judicial review of the decision of a social security commissioner refusing permission to appeal from a decision of the Social Security Appeal Tribunal under the regime that pre dated the TCEA. Giving the leading judgment, Dyson LJ held at para 43 that it was impossible to find in the relevant legislation any indication that Parliament intended to oust, or even to limit, the jurisdiction to grant judicial review. That jurisdiction had been exercised in social security cases for nearly thirty years. In the light of this it would not be right to curtail it. But for this, however, Dyson LJ would have favoured applying the same criteria to an application for judicial review as was applied by the court when considering an application for permission to bring a second appeal, as set out at para 70 above. The Leggatt recommendations The Leggatt Report recommended a two tier tribunal system, describing the upper tier as the appellate Division. There would be a comprehensive and systematic right of appeal from first tier tribunals to the appellate Division, and from there to the Court of Appeal. In these circumstances the Report recommended that the right of judicial review should be excluded 6.30. This recommendation had regard to the waste of scarce resources involved where judicial review was available in parallel with statutory rights of appeal to a tribunal and to the huge number of judicial review applications in immigration and asylum cases, most of which were unsuccessful 6.27. The Report commented, erroneously, that this goal could be achieved by making the appellate Division a superior court of record 6.33. It recommended, however, an express statutory exclusion of judicial review 6.34. Parliaments response Parliament made the Upper Tribunal a superior court of record see section 3(5) of the TCEA. Although the Government argued in Cart that this meant that its decisions were not susceptible to judicial review see Lady Hales judgment at para 30 it does not follow that this was Parliaments intention, or indeed the Governments intention in promoting the Act. In the Home Office Consultation Paper on immigration appeals, Fair Decisions; Faster Justice, of 12 August 2008 it was stated at para 23 that the Government had been advised that except in the most exceptional circumstances decisions of the Upper Tribunal would not be subject to judicial review. What must, I believe, be beyond doubt is that it was Parliaments intention that the two tier structure set up by the TCEA would provide a statutory right of appeal in relation to decisions of tribunals that would, in most cases, provide a satisfactory alternative to judicial review. Discussion It is now common ground that the fact that the Upper Tribunal is a superior court of record does not render its decisions immune from judicial review. The issue raised by these appeals falls into two parts: (i) is it right to impose restrictions on the grant of judicial review in relation to decisions of the Upper Tribunal? (ii) If it is, what restrictions should be imposed? It was submitted on behalf of the English appellants, with support from the Public Law Project represented by Mr Fordham QC as intervener, that the courts had taken a wrong turning in the recent series of cases that had imposed restrictions on the grant of judicial review. There was no justification for departing from the long established practice of the court to entertain a claim for judicial review whenever there were reasonable grounds for contending that an inferior court had made an error of law. The Scottish respondent contended that the Court of Session had rightly applied the ordinary principles of judicial review to a decision of the Upper Tribunal. Mr Eadie QC, responding to the English appeals, and Mr Johnston QC, for the Advocate General for Scotland, submitted that Parliament had by the TCEA deliberately set up a self sufficient structure dealing internally with errors of law and that, in accordance with Parliaments intention, applications for judicial review should only be entertained in exceptional circumstances. I am in no doubt that the submissions of the English appellants should be rejected. The administration of justice and upholding of the rule of law involves a partnership between Parliament and the judges. Parliament has to provide the resources needed for the administration of justice. The size and the jurisdiction of the judiciary is determined by statute. Parliament has not sought to oust or fetter the common law powers of judicial review of the judges of the High Court and I hope that Parliament will never do so. It should be for the judges to decide whether the statutory provisions for the administration of justice adequately protect the rule of law and, by judicial review, to supplement these should it be necessary. But, in exercising the power of judicial review, the judges must pay due regard to the fact that, even where the due administration of justice is at stake, resources are limited. Where statute provides a structure under which a superior court or tribunal reviews decisions of an inferior court or tribunal, common law judicial review should be restricted so as to ensure, in the interest of making the best use of judicial resources, that this does not result in a duplication of judicial process that cannot be justified by the demands of the rule of law. Lady Hale observes in para 51 of her judgment, that the real question in this appeal is what level of independent scrutiny outside the tribunal structure is required by the rule of law. To this question I would add the two words if any. I add those two words because if the court is to entertain applications for judicial review of the decisions of the Upper Tribunal this will require a High Court or Deputy High Court judge to consider every such application, however stringent may be the criteria for granting permission. For the reasons given by Lady Hale in para 47 of her judgment, the stringency of the criteria that must be demonstrated will not discourage a host of applications in the field of immigration and asylum which are without any merit. Thus the first question is whether there is justification for imposing this burden on the High Court. My initial inclination was to treat the new two tier tribunal system as wholly self sufficient. It is under the presidency of a judge who is likely to be a member of the Court of Appeal, and High Court judges can and will sit in the Upper Tribunal. There is considerable flexibility in the system in relation to the administration and composition of the Upper Tribunal. Can it not be left to the Senior President, in consultation with the President of the Queens Bench Division and other judicial colleagues to ensure that the tribunal judiciary is so deployed as to ensure the appropriate degree of judicial scrutiny of decisions of the lower tier? Having considered, however, the judgment of Lady Hale, who has great experience in this field, and those of other members of the Court, I have been persuaded that there is, at least until we have experience of how the new tribunal system is working in practice, the need for some overall judicial supervision of the decisions of the Upper Tribunal, particularly in relation to refusals of permission to appeal to it, in order to guard against the risk that errors of law of real significance slip through the system. What would, however, be totally disproportionate, is that this judicial supervision should extend to the four stage system of paper and oral applications first to the Administrative Court and then, by way of appeal, to the Court of Appeal, to which the ordinary judicial review procedure is subject. What are first required are readily identifiable criteria for the grant of permission to seek judicial review. That these exist should be capable of demonstration by paper applications, and my firm view is that applications for judicial review should be restricted to a single paper application, unless the court otherwise orders. This is, however, a matter for the Civil Procedure Rule Committee. As to the criteria, I have been persuaded, for the reasons given by Lady Hale, that the test laid down by the Court of Appeal in Siva is not the most satisfactory, and that the test governing second appeals in the courts of England and Wales should be adopted. For these reasons I endorse the conclusions reached by Lady Hale. I consider, however, that the procedural change, the possibility of which she contemplates in paragraph 58 of her judgment, will prove a necessity. I concur in the order that she proposes at para 60. LORD HOPE AND LORD RODGER For the reasons given by Lady Hale, Lord Phillips and Lord Dyson, we would make the order proposed by Lady Hale. LORD BROWN The critical issue raised by these appeals is the scope of the High Courts supervisory jurisdiction over a particular but important category of unappealable decisions of the Upper Tribunal, namely those by which the Upper Tribunal refuses leave to appeal to it from a First tier Tribunal decision. Having had the advantage of reading in draft the detailed judgments of Lord Phillips, Lord Hope (in Eba), Lady Hale and Lord Dyson, and respectfully agreeing with all of them as I do, there is singularly little that I wish to add. Really the only point I am concerned to emphasise is that our decision on these appeals to adopt the second appeals approach when deciding whether or not to permit a judicial review challenge in these cases cannot properly be regarded as in any way contrary to principle. The point can be simply made. The very fact that Parliament, by section 13(6) of the 2007 Act, has prescribed the same criteria for the grant of permission to appeal from the Upper Tribunal to the Court of Appeal as apply to second tier appeals in the courts of England and Wales destroys any possibility of an absolutist argument to the effect that the rule of law requires, post Anisminic (Anisminic Ltd v Foreign Compensation Commission [1969] 2 AC 147), unrestricted judicial review over all unappealable decisions of courts or tribunals of limited jurisdiction to ensure that they are not permitted, unsupervised by the higher courts, to commit errors of law. The second tier appeals approach expressly contemplates that some Upper Tribunal decisions, even though erroneous in point of law, will be refused leave to appeal on the basis that they raise no important point of principle or practice and that there is no other compelling reason to hear them. Understandably, it has never been suggested that, following a refusal of leave to appeal on this basis, the underlying decision is nonetheless judicially reviewable for error of law. If, then, the rule of law allows certain errors of law in substantive decisions of the Upper Tribunal on appeal from the First tier Tribunal to go uncorrected, why as a matter of principle should it not similarly allow this in respect of decisions of the Upper Tribunal refusing leave to appeal to itself from the First tier Tribunal? True it is, of course, that the refusal of leave to appeal will have deprived the party refused of a second substantive hearing. Realistically, however, the very fact that he was refused leave to appeal to the Upper Tribunal (by both tribunals) tends to indicate the unlikelihood of there having been a genuinely arguable error of law in the first place. And certainly this situation calls no less for a proportionate answer to the question arising as to the required scope of the Courts supervisory jurisdiction to safeguard the rule of law. The rule of law is weakened, not strengthened, if a disproportionate part of the courts resources is devoted to finding a very occasional grain of wheat on a threshing floor full of chaff. For the reasons given in the other judgments to which I have referred (together with the reasoning above if, indeed, it adds anything to what others have said), I too would make the order proposed and leave it to the Rules Committee to decide how precisely to stream line the procedure for considering applications for permission to apply for judicial review in this class of case. LORD CLARKE I entirely agree with paras 1 to 50 of Lady Hales judgment, which set out the relevant history and issues with great clarity. I also agree with her that the real question in this appeal is what level of independent scrutiny outside the tribunal structure is required by the rule of law. It was common ground between the parties that at least some judicial scrutiny was required. It is, as I see it, a matter for the courts to determine what that scrutiny should be. I am not persuaded that judicial review requires the same degree of scrutiny in every case. All depends upon the circumstances. The circumstances have been described in detail by both Lady Hale and Lord Phillips as regards England and, in the Eba case, by Lord Hope as regards Scotland. The relevant circumstances include the following. The tribunal structure provides for the Upper Tribunal, as a superior court of record, to review the decision of the First tier tribunal. As Lord Phillips observes at para 91, the new system is under the presidency of a judge who is likely to be a member of the Court of Appeal and High Court judges can and will sit in the Upper Tribunal. Further scrutiny of a decision by the Upper Tribunal refusing permission to appeal is only needed in case something has gone seriously wrong. I agree with Lady Hale, Lord Phillips and Lord Dyson (and with Lord Hope in Eba) that adequate scrutiny will be provided if the High Court applies the same test as is applied by the Court of Appeal in the case of a second appeal. As Lord Phillips observes at para 70, in such a case the Court of Appeal will only give permission to appeal under CPR 52.13(2) if the appeal raises an important point of principle or practice or there is some other compelling reason for the court to hear it. My experience as Master of the Rolls was that such a test worked well for second appeals. On the one hand it limited the number of appeals and thus the expenditure of excessive resources while, on the other hand, it enabled the court to hear cases raising an important point and cases where there was some other compelling reason to do so. In that way the court has been able to deal with cases where something has gone seriously wrong. In my opinion the same would be true in the case of a proposed challenge to a refusal of permission to appeal by the Upper Tribunal. I agree with Lady Hale at para 57 that such an approach would be both rational and proportionate. I also agree with Lord Phillips at para 86 that there can be no doubt that Parliament intended that the two tier tribunal structure would provide a statutory right of appeal in relation to decisions of lower tier tribunals which would, in most cases, provide a satisfactory alternative to judicial review. Finally I agree with Lord Phillips at para 94 that the second appeals test should be adopted in preference to the approach laid down in Siva. The question which then arises is whether the application for permission to apply for judicial review should be dealt with wholly on paper or whether, if it was refused on paper, there should be a right to renew the application orally. There would then be a further question whether, if the application was refused at the first instance, it would be open to the applicant to apply to the Court of Appeal for permission to appeal and, if so, what the procedure should be. I agree with Lord Phillips at para 93 that it would be totally disproportionate to provide for the four stage system of paper and oral applications to which the ordinary judicial review procedure is subject. Although there is much to be said for his view that the application should be determined on paper unless the court otherwise orders, I also agree with him that this is a matter for the Civil Procedure Rules Committee. For these reasons I concur with the order proposed by Lady Hale at para 60. LORD DYSON Introduction It is common ground (and rightly so) that the Tribunals, Courts and Enforcement Act 2007 (TCEA) does not oust the courts jurisdiction to grant judicial review of unappealable decisions of the Upper Tribunal (UT). What is in issue is the scope of this jurisdiction. The Divisional Court and the Court of Appeal described it in similar terms. Laws LJ in the Divisional Court said ([2010] 2 WLR 1012, para 99) that it was limited to exceptional cases where there was an excess of jurisdiction in the narrow pre Anisminic sense ([1969] 2 AC 147) or where there has been a wholly exceptional collapse of fair procedure. Sedley LJ, delivering the judgment of the Court of Appeal, adopted at [2011] 2 WLR 36, para 42 what he described as the Sivasubramaniam model ([2003] 1 WLR 475) ie excess of jurisdiction in the pre Anisminic sense or procedural irregularity of such a kind as to constitute a denial of the applicants right to a fair hearing Sivasubramaniam para 56. This is the scope of the jurisdiction for which Mr Eadie QC (in Cart) and Mr Johnston QC (in Eba) contend. Like Lady Hale, I shall refer to it as the exceptional circumstances approach. On the other hand, Mr Drabble QC (supported by Mr Fordham QC and Mr Bailin QC) in Cart and Mr Mitchell in Eba submit that there is no justification for any restriction in the scope of the judicial review jurisdiction: it should in principle be available in all cases of legal error; and Mr Manjit Gill QC in MR (Pakistan) makes the same submission in the particular context of immigration and asylum cases. The exceptional circumstances approach I agree with Lady Hale that, for the reasons that she gives, the exceptional circumstances approach is not justified. As Mr Fordham points out, there are objections to it both in principle and in practice. As regards principle, the concept of jurisdictional error in the pre Anisminic sense (where, for example, a tribunal embarks on a case that is beyond its statutory remit) was used to indicate that a decision was so fundamentally flawed as to be a nullity, so that judicial review could be granted notwithstanding the existence of a statutory ouster. There is no statutory ouster in the present context. Even if there were, the importance of Anisminic is that it showed that a material error of law renders a decision a nullity so that the decision is in principle judicially reviewable. It is difficult to see any principled basis for holding that only jurisdictional errors of law by the UT should be judicially reviewable. In practical terms, it is immaterial to the victim of an error of law whether it is a jurisdictional error or should be differently classified. Non jurisdictional error may be egregious and obvious. Laws LJ accepted (para 99) that on the exceptional circumstances approach a decision which gets it wrong, even extremely wrong will not justify judicial review, whereas if the issue can be classified as jurisdictional, mere error will suffice. Thus a non jurisdictional error of law on a point of general public importance (for example, an important point of statutory interpretation) would not be amenable to judicial review; whereas a one off jurisdictional error of no general significance would be. Such a distinction does not promote the rule of law. In my view, as a matter of principle, there is no justification for drawing the line at jurisdictional error. Lady Hale has referred to the problem of practice. The distinction between jurisdictional error and other error is artificial and technical. I agree with what the editors of De Smiths Judicial Review 6th ed, (2007) state at para 4 046: It is, however, doubtful whether any test of jurisdictional error will prove satisfactory. The distinction between jurisdictional and non jurisdictional error is ultimately based on foundations of sand. Much of the super structure had already crumbled. What remains is likely quickly to fall away as the courts rightly insist that all administrative actions should be simply, lawful, whether or not jurisdictionally lawful. Unrestricted judicial review In my view, the case for retaining unrestricted judicial review is more formidable. There are a number of strands to the argument. First, there is nothing to indicate that Parliament intended to restrict the High Courts previous jurisdiction over unappealable decisions of tribunals. Although the TCEA made substantial changes to the organisation of tribunals, it is contended that these do not justify the court, as a matter of judicial policy, making a major change to the scope of judicial review. The High Courts supervisory jurisdiction to correct any error of law in unappealable decisions of the predecessors of the UT has been beneficial for the rule of law. There is a real risk that the exclusion of judicial review will lead to the fossilisation of bad law such, for example, as that which was corrected in Woodling v Secretary of State for Social Services [1984] 1 WLR 348 (see para 19 of Lady Hales judgment). There are also risks in restricting the judicial review jurisdiction in relation to errors of law in unappealable decisions of tribunals in cases involving fundamental rights and EU law. In such cases, if the UT makes an error of law in refusing permission to appeal, the consequences for the individual concerned may be extremely grave. Indeed, in Sivasubramaniam itself, the Court of Appeal recognised the existence of special factors which fully justify the practice of entertaining applications for permission to claim judicial review of refusals of leave to appeal by the [immigration appeal tribunal] (para 52). In asylum cases, fundamental human rights are in play, often including the right to life and the right not to be subjected to torture. Secondly, as Lady Hale says (para 49), the courts have established a principle of judicial restraint when considering decisions of expert tribunals. If this principle towards decisions of the UT is respected (as it should be), then judicial review of unappealable decisions provides a system of justice which is proportionate and appropriate to protect the rule of law. Further restrictions on the scope of judicial review are unnecessary. Finally, in so far as a floodgates argument is relied on by the respondents to justify restricting the scope of judicial review, this should be resisted. First, there is no evidence of a floodgates problem in relation to any tribunals except in the field of immigration and asylum. Secondly, this is in any event not a legitimate basis for the courts to restrict the scope of judicial review as a matter of judicial policy where Parliament, in enacting the TCEA, decided not to do so for itself. As Lord Bridge said in Leech v Deputy Governor of HMP Parkhurst [1988] AC 533 at 566C: In a matter of jurisdiction it cannot be right to draw lines on a purely defensive basis and determine that the court has no jurisdiction over one matter which it ought properly to entertain for fear that acceptance of jurisdiction may set a precedent which will make it difficult to decline jurisdiction over other matters which it ought not to entertain. Historically, the development of the law in accordance with coherent and consistent principles has all too often been impeded, in diverse areas of the law besides that of judicial review, by the courts fear that unless an arbitrary boundary is drawn it will be inundated by a flood of unmeritorious claims. Despite their apparent strength, I cannot accept these arguments. The TCEA has made a major change to the order of things. It implemented many of the recommendations of the committee chaired by Sir Andrew Leggatt, Tribunals for usersOne System, One Service (2001). The committees terms of reference included a review of the delivery of justice through tribunals to ensure that there are fair, timely, proportionate and effective arrangements for handling those disputes, within an effective framework for decision making which encourages the systematic development of the area of law concerned, and which forms a coherent structure, together with the superior courts, for the delivery of administrative justice. As stated in the overview of its report, the committee considered that its proposals would give to tribunals a collective standing to match that of the Court System and a collective power to fulfil the needs of users in the way that was originally intended (para 8). The report contains many proposals which were designed to meet that overall objective. Para 6.16 is important: These arrangements will create for the first time a complete structure of appellate tribunals, covering all tribunal jurisdictions. As we explain in further detail in paragraphs 6.376.38 below, the President of each Division will be a judge, often a senior one. All members will be experts, specialising in the jurisdiction of the Division or Divisions in which they sit. They will also be trained to conduct hearings in the distinctive enabling approach common to all tribunals. For all these reasons, we think the time has come for a change in the relationship between tribunals and the courts. Hitherto, tribunal decisions have in general not set precedents. In some tribunals, there have been arrangements to identify individual cases as carrying particular weight or authority, which future tribunals are normally expected to observe. We do not think that will suffice to give the greater coherence and consistency that we would recommend in the Tribunals System. We therefore wish to see systematic arrangements for the setting of precedent. We think that this should lead to changing the relationship between tribunals and the supervisory jurisdiction of the High Court. There is also a section of the report (paras 6.27 to 6.36) headed The place of judicial review. It notes (para 6.27) that the proportion of immigration and (mostly) asylum cases in applications for permission for judicial review in 1999 was approaching two thirds of the total. While the great majority of them were unsuccessful, they demonstrated the waste of scarce resources which can arise from problems in the relationship between tribunals and courts. It states (para 6.31) that the EAT and the Transport Tribunal have been designated as superior courts of record and as such have a status formally equivalent to that of the High Court and therefore escape judicial review. Others do not. Para 6.32 states that the aim of the new appellate Division would be to develop by its general expertise and the selective identification of binding precedents, a coherent approach to the law. It would be comparable in authority to the High Court so far as tribunals are concerned. For that reason, it would be inappropriate to subject the Presidents of the appellate Division to review by another judge of equal status. The report considers two ways of excluding judicial review. One is by constituting all the appeal tribunals as a superior court of record, but this is rejected for the reasons stated in para 6.33. The other is to exclude judicial review by express statutory provision (para 6.34). It is this proposal that is recommended, the advantage being said to be that it would preserve a clear distinction between the new System and the courts. It is true that this last proposal was not accepted by Parliament. But it is clear that the Leggatt committee proposed that judicial review of decisions by what was to become the UT should be excluded altogether because they thought that their proposals for restructuring and enhancing the tribunal system and the resultant change in the relationship between the tribunals and the courts meant that judicial review was no longer necessary. Since Parliament adopted the main thrust of the committees proposals, the views of the committee as to the significance of those changes for the relationship between the tribunals and the courts are entitled to respect. The fact that Parliament did not accept the recommendation to exclude judicial review of unappealable decisions of the UT does not mean that it rejected the committees view that there had been a significant change in the structure of the tribunal system such as might justify a reappraisal of the scope of the judicial review jurisdiction. As I shall explain, the Government certainly did not disagree with that view and there is no reason to think that Parliament disagreed with it either. It merely means that Parliament was not willing to adopt the controversial suggestion that judicial review should be excluded altogether. An insight into the thinking of Government and Parliament is to be found in the Government White Paper: Transforming Public Services: Complaints, Redress and Tribunals presented to Parliament in July 2004 (Cm 6243). At para 7.27, the paper stated that it was intended to strengthen the UT by the secondment of circuit judges and, for cases of sufficient weight, High Court judges with relevant expertise. Para 7.28 stated: With this structure the only possible role for judicial review in the High Court would be on a refusal by the first and second tier to grant permission to appeal. It is this possible route to redress which has caused so much difficulty for both the Immigration Appellate Authorities and the Courts. When permission to appeal has been refused by both tiers, and provided that the tribunal appellate judiciary are of appropriate quality, as we intend that they should be, there ought not to be a need for further scrutiny of a case by the courts. However, complete exclusion of the courts from their historic supervisory role is a highly contentious constitutional proposition and so we see merit in providing as a final form of recourse a statutory review on paper by a judge of the Court of Appeal. Thus a consequence of giving effect to the Leggatt report was to bring about a strategic reorganisation of the tribunals system by making it more coherent and improving its expertise and standing. I agree with the views expressed in the Leggatt report and the 2004 White Paper that the changes demanded a reappraisal of the scope of judicial review. Parliament refused to undertake it. The task of deciding the scope of the judicial review jurisdiction falls therefore to be performed by the courts. It follows that the fact that in the pre TCEA era there was unrestricted availability of judicial review of refusals of permission to appeal by appeal tribunals is not of itself a good reason for holding that that situation should survive the enactment of the TCEA. It is for the court to decide in the post TCEA world whether any and, if so, what restrictions should be placed on the availability of judicial review. I accept that any restrictions call for justification. Prima facie, judicial review should be available to challenge the legality of decisions of public bodies. Authority is not needed (although much exists) to show that there is no principle more basic to our system of law than the maintenance of rule of law itself and the constitutional protection afforded by judicial review. But the scope of judicial review should be no more (as well as no less) than is proportionate and necessary for the maintaining of the rule of law. The status and functions of the UT to which I have already referred are important here. In my view, there are three reasons why unrestricted judicial review of unappealable decisions of the UT is neither proportionate nor necessary for maintaining the rule of law. First, there is the status, nature and role of the UT to which I have already referred. Secondly, the TCEA gives those who wish to challenge the decision of a First tier Tribunal (FTT) the opportunity to have the decision scrutinised on several occasions: first when the FTT decides whether or not to review its decision under section 9(1) and (2); second, if the FTT decides not to review its decision, when it decides whether or not to grant permission to appeal to the UT under section 11(4)(a); third, if the FTT refuses permission to appeal, when the UT decides whether or not to grant permission to appeal under section 11(4)(b). The UT initially decides this on the papers. In certain categories of case, there is a right to renew the application at an oral hearing (Tribunal Procedure (Upper Tribunal) Rules 2008 (SI 2008/2698) rules 22(3) and (4); in any event, the UT has the power, if it considers it appropriate to do so, to hold an oral hearing to decide permission (ibid, rules 5(1) and 5(3)(g)). The third reason involves the issue of resources. There is no doubt that immigration and asylum cases have presented huge problems for the justice system. The relevant history is summarised at paras 46 and 47 of Lady Hales judgment. It is singled out for particular mention in the 2004 White Paper as having caused so much difficulty for both the Immigration Appellate Authorities and the Courts. The adoption of unrestricted judicial review of refusals of permission to appeal by the Upper Tribunal (Immigration and Asylum Chamber) would involve a return to the position under the Immigration Act 1971 and the Asylum and Immigration Appeals Act 1993 when the courts were inundated with unmeritorious applications for judicial review of refusals by the Immigration Appeal Tribunal of decisions of the special adjudicator. Parliament recognised the existence of the problem and sought to overcome it successively by enacting Nationality, Immigration and Asylum Act 2002 and the Asylum and Immigration (Treatment of Claimants etc) Act 2004 (see para 21 of Lady Hales judgment). It cannot have been intended by Parliament when it enacted the TCEA that there should, in effect, be a return to the situation that obtained before the enactment of the 2002 Act. Mr Gill does not suggest that this was Parliaments intention. His point is simply that, in the absence of the plainest express words to restrict the courts historical role of supervising statutory tribunals of limited jurisdiction, it is unconstitutional for the courts to limit that role. Recognising that a return to the pre 2002 Act days would be unlikely to commend itself to this court as necessary and proportionate for the maintenance of the rule of law, Mr Gill suggested in his reply, as an alternative to his principal submission, that judicial review should lie in cases where there was clear and obvious error and where the prospects of success were strong as opposed to real. One can readily sympathise with the argument that problems that are peculiar to the immigration and asylum cases should not determine the scope of judicial review in all other cases. It seems that the courts have not been inundated with unmeritorious applications for judicial review of the refusal of leave to appeal from other tribunals. But Sullivan LJ was right, for the reasons that he gave at paras 51 to 53 of his judgment in MR (Pakistan), to hold that the same approach should be applied to permission decisions made by the Immigration and Asylum Chamber of the Upper Tribunal as they do to decisions made by other chambers. In the light of the unified tribunal structure created by the TCEA, there should be a unified approach as to the grounds, if any, on which a judicial review of decisions of the UT can be sought. It would be contrary to the unifying purpose of the TCEA for a different approach to be adopted depending on the subject matter of the decision being appealed. I accept that floodgates arguments must be examined with care. But they cannot be ignored, particularly in the light of the experience in the immigration and asylum field. As Lord Phillips says, judicial resources are limited. It is clear from the general acceptance of the Leggatt report and from the terms of the 2004 White Paper that Parliament intended that there should not be a return to the pre 2002 Act days in immigration and asylum cases when the courts were overwhelmed with unmeritorious judicial review claims. If the floodgates argument were the only point militating against unrestricted judicial review, I doubt whether it would be enough. But it does not stand alone. The various factors to which I have drawn attention (in particular, the reorganisation of the tribunal system) lead me to conclude that it is not necessary or proportionate for the maintaining of the rule of law to allow unrestricted judicial review of unappealable decisions of the UT. For these reasons, I would hold that unrestricted judicial review is not necessary for the maintenance of the rule of law and is not proportionate. The second tier appeals approach It follows from what I have said so far that the court must find another solution. The problem with the exceptional circumstances approach is that, although it recognises the need to restrict the scope of judicial review, it does so in a way which creates its own problems and does not target arguable errors of law of general importance. The problem with unrestricted judicial review is that it captures all arguable errors of law without discriminating between them notwithstanding the countervailing factors to which I have referred. In R (Wiles) v Social Security Commissioner [2010] EWCA Civ 258, I suggested that there was much to be said for applying (by analogy) the criteria for the grant of permission by the UT to the Court of Appeal. Section 13(6) of the TCEA provides that permission shall not be granted unless (a) the proposed appeal would raise some important point of principle or practice; or (b) there is some other compelling reason for the relevant appellate court to hear the appeal. These criteria are identical to those that apply to any second appeal in the courts: see section 55(1) of the Access to Justice Act 1999. It seems to me that the second appeal criteria approach offers a number of advantages. First, and obviously, it does not suffer from the defects of the two alternatives that I have rejected. Secondly, and positively, it ensures that errors on important points of principle or practice do not become fossilised within the UT system. An individual who has been unsuccessful before the FTT will be able to raise an important point of law in the courts if the UT refuses to grant permission to appeal to itself. As explained by the Court of Appeal in Uphill v BRB (Residuary) Ltd [2005] 1 WLR 2070, it is not enough to point to a litigants private interest in the correction of error in order to obtain permission for a second appeal. Permission will only be given where there is an element of general interest, which justifies the use of the courts scarce resources: see also Zuckerman on Civil Procedure 2nd ed, (2006) para 23.139. It follows that, if the law is clear and well established but arguably has not been properly applied in the particular case, it will be difficult to show that an important point of principle or practice would be raised by an appeal. The position might be different where it is arguable that, although the law is clear, the UT is systematically misapplying it: see, for example, Cramp v Hastings Borough Council [2005] 4 All ER 1014. Thirdly, the second limb of the test (some other compelling reason) would enable the court to examine an arguable error of law in a decision of the FTT which may not raise an important point of principle or practice, but which cries out for consideration by the court if the UT refuses to do so. Care should be exercised in giving examples of what might be some other compelling reason, because it will depend on the particular circumstances of the case. But they might include (i) a case where it is strongly arguable that the individual has suffered what Laws LJ referred to at para 99 as a wholly exceptional collapse of fair procedure or (ii) a case where it is strongly arguable that there has been an error of law which has caused truly drastic consequences. The second appeal criteria have been in force in the courts since October 2000. The exceptional nature of the test is well understood. A perusal of the commentary in Civil Procedure (2011) (The White Book) on CPR 52 r 13(2)(a) and (b) suggests that the application of the second appeals test has not caused difficulty. That also accords with the experience of Lord Clarke. It also accords with mine. I agree with others that rules should be made by the Civil Procedure Rule Committee (CPRC) to govern the exercise of the judicial review jurisdiction of unappealable decisions of the UT. The mistakes of the past should not be repeated. A fair but streamlined system should be introduced with an emphasis on applications being made and dealt with on paper. Ultimately, however, it will be for the CPRC, taking account of the judgments of this court and after due consultation, to decide what is the appropriate procedure to adopt. In practice, there is little if any substantive difference between an appeal on a point of law and judicial review, although each may, of course, be subject to different procedural conditions. Parliament has shown a liking for the second appeal criteria in second appeals and in particular in the tribunal context of appeals from the UT to the Court of Appeal. It can at least be said that to import those criteria into the judicial review jurisdiction in the present context does not go against the grain of the TCEA. More positively, in my view the second tier appeals approach provides a proportionate answer to the question: what scope of judicial review of unappealable decisions of the UT is required to maintain the rule of law? For these reasons, as well as those given by Lady Hale and Lord Phillips (in Cart) and by Lord Hope (in Eba), I would allow these appeals on the jurisdictional issue. But, in agreement with them, I would dismiss the appeals in both cases as well as in MR (Pakistan).

This judgment deals with two English cases, while a separate judgment deals with the Scottish case Eba v Advocate General for Scotland. The issue common to all three is the scope for judicial review by the High Court or Court of Session of unappealable decisions of the Upper Tribunal established under the Tribunals, Courts and Enforcement Act 2007 (the 2007 Act). In all of them the claimant failed in an appeal to the First tier Tribunal and was refused permission to appeal to the Upper Tribunal against that decision both by the First tier Tribunal and by the Upper Tribunal. In all three the claimant seeks a judicial review of the refusal of permission to appeal by the Upper Tribunal. The tribunal systems with which the three cases are concerned, both before and after their restructuring in the 2007 Act, are common to both parts of the United Kingdom, and in many contexts also to Northern Ireland. Part 1 of the 2007 Act established a new unified tribunal structure, which accommodates a diversity of jurisdictions. There is a right of appeal to the Court of Appeal, in England and Wales or Northern Ireland, or the Court of Session in Scotland, on any point of law arising from a decision made by the Upper Tribunal other than an excluded decision (s 13(1), (2)). Excluded decisions include any decision of the Upper Tribunal on an application for permission or leave to appeal (s 13(8)(c)). Mr Cart appealed to the Social Security and Child Support Tribunal (whose jurisdiction has since been taken over by the First tier Tribunal) against the refusal of the Child Support Agency to revise a variation in the level of child maintenance to be paid to his ex wife. His appeal was dismissed. He applied for permission to appeal to the Child Support Commissioners (whose functions were subsequently taken over by the Administrative Appeals Chamber of the Upper Tribunal). Commissioner Jacobs gave him permission to appeal on three grounds but refused him permission to appeal on a fourth. The Upper Tribunal dismissed his appeal on the first three grounds and declined permission to reopen the fourth. Mr Cart sought judicial review of the Upper Tribunals refusal of permission to appeal on the fourth point. Determining the amenability of the Upper Tribunal to judicial review as a preliminary issue, the Divisional Court dismissed his claim for judicial review, holding that this was only available in exceptional circumstances. The Court of Appeal dismissed his appeal, reaching the same result but by a different route. MR is a native of Pakistan whose application for asylum was refused. His appeal to the Immigration and Asylum chamber of the First tier Tribunal was dismissed. Both the First tier Tribunal and then the Upper Tribunal refused his application for permission to appeal to the Upper Tribunal. MR sought judicial review of the Upper Tribunals refusal of permission to appeal. Sullivan LJ dismissed the judicial review claim in accordance with the decision of the Court of Appeal in Cart. He granted a certificate so that the appeal against his decision could leap frog over the Court of Appeal and be heard by this Court together with the appeals in Cart and Eba. The Supreme Court unanimously dismisses the appeals but on a different basis from that adopted in the Divisional Court and the Court of Appeal. It decides that permission for judicial review should only be granted where the criteria for a second tier appeal apply, that is where there is an important point of principle or practice or some other compelling reason to review the case. Lady Hale gives the leading judgment. The scope of judicial review is an artefact of the common law whose object is to maintain the rule of law. The question is, what machinery is necessary and proportionate to keep mistakes of law to a minimum? What level of independent scrutiny outside the tribunal structure is required by the rule of law? [37], [51] There are three possible approaches which the Court could take. First, that the scope of judicial review should be restricted to the exceptional circumstances identified in the Divisional Court and Court of Appeal, namely pre Anisminic excess of jurisdiction and the denial of fundamental justice (and possibly other exceptional circumstances). Second, that unrestricted judicial review should be available. Third, that judicial review should be limited to the grounds upon which permission to make a second tier appeal to the Court of Appeal would be granted, namely (a) the proposed appeal would raise some important point of principle or practice, or (b) there is some other compelling reason for the court to hear the appeal. [38] While the introduction of the new system may justify a more restricted approach, the exceptional circumstances approach is too narrow, leaving the possibility that serious errors of law affecting large numbers of people will go uncorrected. As regards the second approach, it is well known that the High Court and Court of Appeal were overwhelmed with judicial review applications in immigration and asylum cases until the introduction of statutory reviews. The mere fact that something has been taken for granted without causing practical problems in the social security context until now does not mean that it should be taken for granted forever. [44], [47], [51] The adoption of the second tier appeals criteria would be a rational and proportionate restriction upon the availability of judicial review of the refusal by the Upper Tribunal of permission to appeal to itself. It would recognise that the new and in many ways enhanced tribunal structure deserves a more restrained approach to judicial review than has previously been the case, while ensuring that important errors can still be corrected. It is a test which the courts are now very used to applying. It is capable of encompassing both the important point of principle affecting large numbers of similar claims and the compelling reasons presented by the extremity of the consequences for the individual. There is clearly nothing in Mr Cart or MRs cases to bring them within the second tier appeal criteria. [57], [59], [128], [130], [131], [133] Per Lord Phillips. Where statute provides a structure under which a superior court or tribunal reviews decisions of an inferior court or tribunal, common law judicial review should be restricted so as to ensure, in the interest of making the best use of limited judicial resources, that this does not result in a duplication of judicial process that cannot be justified by the demands of the rule of law. [89]

In 1999 the Inland Revenue, as it was then known and to which I will refer as the Revenue, published a revised version of a booklet known as IR20 and entitled Residents and non residents Liability to tax in the United Kingdom. The 1999 version of the booklet, which remained operative until 2009 and which I will call the booklet, offered general guidance upon the meaning of the word residence and of the phrase ordinary residence in the context of an individuals liability for UK income tax and capital gains tax. The present appeals require the court mainly to construe the guidance in the booklet. For the main contention of the appellants is that, on its proper construction, the guidance contained a more benevolent interpretation of the circumstances in which an individual becomes non resident and not ordinarily resident in the UK than is reflected in the ordinary law and that the appellants had a legitimate expectation, to which the court should give effect, that the more benevolent interpretation would be applied to the determination of their status for tax purposes. Their subsidiary and alternative contention is, that, even if, when properly construed, the guidance did not contain a more benevolent interpretation than is reflected in the ordinary law, it was the settled practice of the Revenue to adopt such an interpretation of it and that the practice was such as to give rise to a legitimate expectation, to which again the court should give effect, that the interpretation would be applied to the determination of their status. The latter limb of each of the appellants alternative contentions is not in dispute. The Revenue accepts that, if either the proper construction of the booklet or its settled practice was as they contend, a legitimate expectation arose which requires that their status for tax purposes should be determined in accordance with the allegedly more benevolent interpretation of the circumstances in which an individual becomes non resident and not ordinarily resident in the UK. The issues arise within applications for judicial review. Mr Davies and Mr James (the first appellants) issued their application in February 2007. They sought judicial review of determinations by the Revenue dated 28 November 2006 that they had each been resident and ordinarily resident in the UK for the tax year 2001 02. Mr Gaines Cooper (the second appellant) issued his application in April 2007. He sought judicial review of a determination by the Revenue dated 25 January 2007 that he had been resident and ordinarily resident in the UK for the tax years from 1993 94 to 2003 04. In each application the appellants contended that, by reference to the allegedly more benevolent interpretation contained in the guidance or adopted by the Revenue in accordance with its settled practice, the determinations were erroneous. In addition to the issue of their application for judicial review the first appellants filed a notice of appeal to the special commissioners which would now be heard by the Tax Chamber of the First tier Tribunal against the determinations of the Revenue dated 28 November 2006. There was a dispute as to whether their application or their appeal should first be determined. On 10 July 2008 the Court of Appeal, in my view correctly and irrespective of its reasoning, ruled that the application should first be determined and it therefore remitted to the Administrative Court the question whether permission to apply for judicial review should be granted. The appeal of the first appellants to the commissioners has been stayed pending determination of the present proceedings. But the course taken in the case of the second appellant was different. The Revenues determination dated 25 January 2007 accorded with assessments for the years from 1992 93 to 2003 04 which it had raised against him in 2005 and against which he had appealed to the commissioners. In June/July 2006, at a hearing which proceeded for ten days, the commissioners conducted a trial of preliminary issues whether he had been: (a) domiciled in the UK from 1992 93 to 2003 04; (b) resident in the UK from 1993 94 to 2003 04; and (c) ordinarily resident in the UK from 1992 93 to 2003 04. I will explain in para 24 below why he did not dispute that he had been resident in the UK in 1992 93. In the event, by Decision dated 31 October 2006, the commissioners held that he had been domiciled, resident and ordinarily resident in the UK during all those years respectively. Against their conclusion in respect of domicile the second appellant appealed, on point of law, to the High Court; on 13 November 2007 Lewison J dismissed his appeal. The result is that the second appellant, can no longer dispute that he was domiciled in the UK from 1992 93 to 2003 04; but his UK domicile is irrelevant to the present proceedings. Nor can he continue to dispute that, according to the ordinary law, he was resident in the UK from 1993 94 to 2003 04 and ordinarily resident in the UK from 1992 93 to 2003 04. His case is, however, that, by reference to either of the contentions set out above, the ordinary law does not govern determination of the issue surrounding his UK residence and ordinary residence during those years. It is unfortunate that, for whatever reason, the course taken in the case of the first appellants was not taken in the case of the second appellant. Were either of his contentions in the present proceedings to prevail, it would follow that the commissioners invested a large amount of time as well as a conspicuous degree of care in application to the issues of his residence and ordinary residence of principles inapplicable to them. In their Decision they expressly noted that their function was to apply the law rather than the guidance in the booklet. But, whereas issues of fact between the Revenue and the first appellants in relation to their circumstances in 2001 02 remain unresolved, the now conclusive resolution by the commissioners of the issues of fact between the Revenue and the second appellant in relation to his circumstances from 1992 93 to 2003 04 at any rate throws the effect of these proceedings into sharp relief. For, although it remains an open question whether, upon application of the ordinary law, the first appellants were resident and ordinarily resident in the UK during the year relevant to them, we know that, upon application of the ordinary law, the second appellant was resident and ordinarily resident in the UK during the years relevant to him. As the appellants rightly stress, a legitimate expectation that the ordinary law will apply to them is a matter of no legal significance in that it adds nothing to the right of every citizen to due application to him of the ordinary law. A complication, to which I will turn in para 30 and para 31 below, is that, while they all contend for what I have described as a more benevolent interpretation of the circumstances in which a taxpayer becomes non resident and not ordinarily resident in the UK than is reflected in the ordinary law, the benevolent interpretation for which the first appellants contend is not identical to that for which the second appellant contends. I infer that it is the unchallengeable findings of fact made by the commissioners against the second appellant which drive him to contend for a more ambitious interpretation than that for which the first appellants now contend. In the Administrative Court permission to apply for judicial review was refused in both cases by Wilkie J on 10 October 2008 in the case of the first appellants and by Lloyd Jones J on 3 November 2008 in the case of the second appellant. All the appellants appealed against the refusals and, when granting permission to appeal, the Court of Appeal listed the appeals to be heard together. On 10 July 2009 the court allowed their appeals against the refusals and, pursuant to CPR 52.15(4), directed that it should itself, on a later date, hear their applications for judicial review. The hearing took place on 4, 5 and 6 November 2009 and judgments were handed down on 16 February 2010. The court (Ward, Dyson and Moses LJJ) thereby dismissed the applications for judicial review and it is against the dismissals that the present appeals are brought. The appellants The first appellants are successful property developers. By March 2001, then based in Swansea, they each held 50% of the preference shares in Liberty Property Holdings Ltd (Liberty). They were also prominent in the administration of Swansea Rugby Football Club and were respected members of the local community. They decided to extend their property development business to Brussels. Whether their decision was related to a possible disposal of their shares in Liberty appears to be in dispute. At all events, in March 2001, they caused a company, in which each of them had a one third shareholding, to be incorporated in Belgium. Furthermore they began to rent furnished apartments in the same block in Brussels and began to reside in them, at any rate in part, prior to 6 April 2001. They contend that, prior to 6 April 2001, they had begun to work full time for the Belgian company in the field of property development; that, alternatively, during the weeks after 5 April 2001, they had begun to work full time for it; that, from the date whatever it was when their full time work for it began, they have worked for it full time throughout a number of years; and that it has become extremely successful. On the other hand they accept that neither of them sold their homes in Swansea; that their wives, and in the case of Mr. Davies his daughters, remained resident, or partly resident, in Swansea; and that they returned very frequently, albeit not for lengthy periods, to their homes in Swansea in order to be with their families or in connection with Liberty (of which they remained non executive directors) or with rugby in Swansea or with other matters of local importance. In December 2001 Liberty acquired the first appellants shares in itself for a consideration of 4.5m each. Although the capital gain within the consideration remains unidentified, it is clearly important for the first appellants that they should be recognised at law to have been neither resident nor ordinarily resident in the UK in 2001 02. The second appellant is a successful entrepreneur. His domicile of origin was in England (and Wales) and he remains a British citizen. His case before the commissioners was that in 1976, when aged 39, he acquired a domicile of choice in the Seychelles. But, by their Decision, we know that he remained domiciled in England until, at any rate, 2003 04. Between 1976 and 2004 he led an international existence, assiduously charted in their Decision. But, by reference inter alia to two substantial homes successively maintained and to a significant extent occupied by him in Berkshire and in Oxfordshire throughout those years and to the presence in England, following 1977, of the wife whom he was ultimately to marry in 1993 and also, from his birth in 1998 until after 2004, of their son, the commissioners concluded that from 1992 to 2004 the second appellant dwelt permanently in the later home in England and that thus, notwithstanding his residence in the Seychelles throughout those years, he was resident and ordinarily resident in the UK during the years under review. C. Residence as a matter of law The status of being resident in the UK creates liability to UK tax under provisions of the Income Tax (Earning and Pensions) Act 2003 and the Income Tax (Trading and Other Income) Act 2005. But the word itself is not currently defined in statute. In 1936 the Income Tax Codification Committee appointed by the Chancellor of the Exchequer issued a Report (Cmd 5131) in which, in para 59 of Volume I, it concluded that the lack of clarity surrounding the word residence was intolerable and in which, in Volume II, it set out a proposed Bill including, in clause six, a definition of the circumstances in which an individual would be resident in the UK. But the Bill was never enacted. Under active consideration today, however, is the governments proposal to introduce a full statutory definition of tax residence for individuals; and the time for response to its initial consultation paper, issued in June 2011 by HM Treasury and HMRC and entitled Statutory definition of tax residence: a consultation, has recently expired. In the absence to date of any statutory definition of residence taxpayers and their advisers have had to turn to the guidance given by the courts and, importantly, also by the Revenue in relation to its meaning. But the courts have not nor, as we shall see, has the Revenue found it easy to formulate the guidance. For more than 80 years the leading authority has been Levene v Inland Revenue Comrs [1928] AC 217. Until 1919 Mr. Levene was resident and ordinarily resident in the UK. During the next five years he spent about five months (mainly in the summer) each year, staying in hotels in the UK and receiving medical attention or pursuing religious and social activities. He spent the remaining months staying in hotels abroad. The appellate committee declined to disturb the conclusion of the commissioners that Mr Levene had remained resident and ordinarily resident in the UK during those years. Viscount Cave, the Lord Chancellor, adopted, at p 222, the definition of reside given in the Oxford English Dictionary, namely to dwell permanently or for a considerable time, to have ones settled or usual abode, to live in or at a particular place; and, of these three descriptions, the Lord Chancellor chose, no doubt as being the most helpful, that of a settled or usual abode. Since 1928, if not before, it has therefore been clear that an individual who has been resident in the UK ceases in law to be so resident only if he ceases to have a settled or usual abode in the UK. Although, as I will explain in para 19 below, the phrase a distinct break first entered the case law in a subtly different context, the phrase, now much deployed including in the present appeals, is not an inapt description of the degree of change in the pattern of an individuals life in the UK which will be necessary if a cessation of his settled or usual abode in the UK is to take place. To the legal analysis of a taxpayers residence must be added a provision which can be traced back to section 10 of an Act of 1799 (39 Geo III, c 13) which introduced income tax in order to raise an ample Contribution for the Prosecution of the War against Napoleon. Parliament has recently placed the provision, in modified form and in clearer terms than those of its several predecessors, in section 829 of the Income Tax Act 2007; but it is convenient to cite the section in which it was to be found when the booklet was operative and indeed during the years for which assessments have been raised against the appellants. The section was section 334 of the Income and Corporation Taxes Act 1988 and it provided as follows: Commonwealth citizens and others temporarily abroad Every Commonwealth citizen or citizen of the Republic of Ireland (a) shall, if his ordinary residence has been in the United Kingdom, be assessed and charged to income tax notwithstanding that at the time the assessment or charge is made he may have left the United Kingdom, if he has so left the United Kingdom for the purpose only of occasional residence abroad, and (b) Kingdom upon the whole amount of his profits or gains shall be charged as a person actually residing in the United The effect of this provision is or should be now clear. If an individual (restricted under the 1988 Act to Commonwealth and Irish citizens) who has been resident and ordinarily resident in the UK ceases to be resident in the UK, he will nevertheless be deemed to have remained resident in the UK if he has left the UK for the purpose only of occasional residence abroad. So the provision puts a second hurdle in his way in that, in order to escape liability as a resident, he needs to establish not only that he has become non resident but also that his change to non residence was not for the purpose only of occasional residence abroad. That such is the effect of the statutory provision can be discerned in the opinions in Levene itself. For the Lord Chancellor (with whose opinion Lord Atkinson agreed) and Lord Warrington of Clyffe both held that the appellant could not overturn the conclusion that he had remained resident and ordinarily resident in the UK and, at pp 224 and 232, they each made clear that, while they considered that alternatively he may well have fallen foul of the provision (which was then in General Rule 3 in the First Schedule to the Income Tax Act 1918), they did not rest their decision upon it. Viscount Sumner, on the other hand, at p 227, expressly rested his decision upon it. In Reed v Clark [1986] Ch 1, however, Nicholls J made it expressly clear that such was the effect of the statutory provision. Mr Dave Clark, who had been resident and ordinarily resident in the UK, moved to Los Angeles on 3 April 1978 and made his home and place of business there until 2 May 1979, when, not having set foot in the UK in the interim, he returned to reside here. Nicholls J dismissed the Revenues appeal against the ruling of the commissioners that he had not been resident nor ordinarily resident in the UK in 1978 79. He rejected each of the Revenues alternative arguments that (a) on the primary facts found by the commissioners Mr Clark had been so resident and ordinarily resident and (b) for the purposes of the provision (which was then in section 49 of the Income and Corporation Taxes Act 1970) he had left the UK for the purpose only of occasional residence abroad. Nicholls J, at p 15C, accepted the Revenues submission that the provision brought into the tax net those who were not resident in the UK at all in the year of assessment. He held, at p 16H, that occasional residence was the converse of ordinary residence and he cited, at p 17D, the statement of Lord Scarman in R v Barnet London Borough Council, Ex p Nilish Shah [1983] 2 AC 309, 343 that ordinary residence referred to a mans abode in a particular place or country which he has adopted voluntarily and for settled purposes as part of the regular order of his life or the time being, whether of short or of long duration. By that route Nicholls J came to contrast occasional residence with residence for a settled purpose. In observing, at p 18A, that his construction might give little scope in practice for the operation of the statute as an independent charging provision, Nicholls J perhaps had in mind that, were the persons residence abroad not to have been for a settled purpose, his settled or usual abode might have remained in the UK with the result that, in the light of the definition adopted in Levene, he would not have ceased to be a UK resident and so would already have fallen at the first hurdle. Nevertheless the concepts of settled purpose and settled abode are clearly different. Nicholls J proceeded to hold, at p 18G, that there had been a distinct break in the pattern of Mr Clarks life in the UK such that his becoming non resident had not been for the purpose only of occasional residence abroad. In referring to a distinct break Nicholls J, as he acknowledged at 14F, was adopting a phrase first used in this context in the decision of the Court of Session in Inland Revenue Comrs v Combe (1932) 17 TC 405. Until 1926 Captain Combe was resident and ordinarily resident in the UK. Then he went to New York to work as a broker for a firm on Wall Street. The objective was that he should become its European representative and, in furtherance of it, he returned to the UK, staying in hotels, for 52 days, 175 days and 181 days during each of the following three years. In upholding the conclusion that he was not liable to tax as a UK resident for those years the court proceeded straight to the statutory provision (which then remained in General Rule 3) and concluded that the captain had not left the UK for the purpose only of occasional residence abroad. It was implicit in its conclusion that he had left the UK in the sense of becoming non resident in it. When, therefore, Lord Sands observed, at p 411, that there was a distinct break in what he described as the captains residence in the UK, it was with a view to explaining his conclusion that the captains residence abroad had been more than occasional. In Reed v Clark Nicholls J applied the phrase in precisely the same context and helpfully added that what was required distinctly to be broken was the pattern of the taxpayers life [1986] Ch 1, 18. It is therefore clear that, whether in order to become non resident in the UK or whether at any rate to avoid being deemed by the statutory provision still to be resident in the UK, the ordinary law requires the UK resident to effect a distinct break in the pattern of his life in the UK. The requirement of a distinct break mandates a multifactorial inquiry. In my view however the controversial references in the judgment of Moses LJ in the decision under appeal to the need in law for severance of social and family ties pitch the requirement, at any rate by implication, at too high a level. The distinct break relates to the pattern of the taxpayers life in the UK and no doubt it encompasses a substantial loosening of social and family ties; but the allowance, to which I will refer, of limited visits to the UK on the part of the taxpayer who has become non resident, clearly foreshadows their continued existence in a loosened form. Severance of such ties is too strong a word in this context. It became clear from decisions like Combe that, if a taxpayer left the UK in order to pursue employment abroad which was full time, it was likely not only that he would cease to be a UK resident but also that he would escape being deemed still to be a UK resident under the statutory provision. For, from the fact that the employment was full time, it was likely to follow that he had made a distinct break in the pattern of his life in the UK. By section 11 of the Finance Act 1956 the position of the full time employee or other worker abroad was strengthened by a provision (now in effect contained in section 830 of the 2007 Act) that, in determining whether he remained resident in the UK, regard should not be had to any place of abode in the UK which he maintained for his use. As I will demonstrate in para 36 below, the Revenue also sought to eliminate any remaining element of doubt about the proper treatment of the full time employee abroad by providing in the booklet that, subject to specified conditions of ostensibly simple application, he would definitely be treated as not resident, nor ordinarily resident, in the UK. In his case, therefore, the Revenue was dispensing with the need for the multifactorial inquiry. In its piecemeal contribution to the law relating to UK residence for tax purposes, Parliament has also made provision in respect of the individual who has been non resident in the UK and challenges a contention that he has become resident here for tax purposes. He is, as Nicholls J pointed out in Reed v Clark above, at p 16G, the converse of the UK resident who contends that he has become non resident in the UK and who, as I have explained, is required by statute also to address the purpose of his change to non residence. Until 1993 Parliaments provision in respect of the former individual, now in effect to be found in sections 831 and 832 of the 2007 Act, was that, subject to one bright line rule, he did not become resident in the UK for income tax purposes if, in the words of subsections (1)(a) and (2) of section 336 of the 1988 Act (entitled Temporary Residents in the United Kingdom), he was in the United Kingdom for some temporary purpose only and not with any view or intent of establishing his residence there. The bright line rule, set out in subsection (1)(b) and, albeit in slightly different terms, in subsection (2), was that he had not actually resided in the United Kingdom at one time or several times for a period equal in the whole to six months in any year of assessment; and both subsections concluded by making clear that, if he had so resided for such a period in any year, he was chargeable to UK income tax for that year. Until 1993, however, the available accommodation rule, abrogated in 1956 in respect of the full time employee abroad, continued to apply to the person who claimed to be only a temporary resident within the meaning of section 336: its effect was that, were living accommodation in the UK to have been available for his use during any year of assessment, any presence on his part within the UK during that year would be taken to have been otherwise than for some temporary purpose only and not with any view or intent of establishing his residence there. The application to him of the available accommodation rule was abrogated, with effect from 1993 94, by the insertion into section 336 of subsection (3). It will now be clear why the second appellant did not dispute that he had been resident in the UK in 1992 93, namely the first of the 12 years of assessment. Before the commissioners he unsuccessfully contended that the relevant inquiry was not whether he had become non resident in the UK in 1976 but whether, having then become non resident, he had again become resident in the UK in any of the years of assessment. In other words he unsuccessfully contended that the parameters of the inquiry were set by section 336, rather than by section 334, of the 1988 Act. But, in that in 1992 93 living accommodation in the UK had been available for his use and in that during that year he had been present in the UK albeit not for a total of six months, he was constrained to concede that, even on his approach, he was in principle liable to tax as a UK resident for that first year. D. Revenue guidance There can be no better introduction to this section than in the words of Moses LJ in his judgment in the decision under appeal: 12. The importance of the extent to which thousands of taxpayers may rely upon guidance, of great significance as to how they will manage their lives, cannot be doubted. It goes to the heart of the relationship between the Revenue and taxpayer. It is trite to recall that it is for the Revenue to determine the best way of facilitating collection of the tax it is under a statutory obligation to collect. But it should not be forgotten that the Revenue itself has long acknowledged that the best way is by encouraging co operation between the Revenue and the public Co operation requires fair dealing by the Revenue, and frank and open dealing by the public. Of course the Revenue may refuse to give guidance and re create a situation in which the taxpayers and their advisers are left to trawl through the authorities to find a case analogous to their own, or, if they are fortunate, a statement of principle applicable to their circumstances. But since 1973, in a field fraught with borderline cases relating to an enormous variety of circumstances, the Revenue has chosen to confer what presumably it regarded as a benefit on taxpayers who wished to know whether they were likely to be treated as resident or not. The primary duty of the Revenue is to collect taxes which are properly payable in accordance with current legislation but it is also responsible for managing the tax system: section 1 of the Taxes Management Act 1970. Inherent in the duty of management is a wide discretion. Although the discretion is bounded by the primary duty (R(Wilkinson) v Inland Revenue Comrs [2005] 1 WLR 1718, para 21 per Lord Hoffmann), it is lawful for the Revenue to make concessions in relation to individual cases or types of case which will, or may, result in the non collection of tax lawfully due provided that they are made with a view to obtaining overall for the national exchequer the highest net practicable return: Inland Revenue Comrs v National Federation of Self employed and Small Businesses Ltd [1982] AC 617, 636 per Lord Diplock. In particular the Revenue is entitled to apply a cost benefit analysis to its duty of management and in particular, against the return thereby likely to be foregone, to weigh the costs which it would be likely to save as a result of a concession which cuts away an area of complexity or likely dispute. The Revenue accepts first that, were it in the booklet to have made the representations about the circumstances necessary for the achievement of non residence for which either the first appellants or the second appellant contend, such would have been within its powers; and second that, for so long as the representations remained operative, an individual would have had, and therefore have been able to enforce, a legitimate expectation that it would appraise his case by reference to them notwithstanding that they failed to reflect the ordinary law. In this connection, however, the Revenue refers to the decision of the Divisional Court of the Queens Bench Division in R v Inland Revenue Comrs Ex p MFK Underwriting Agents Ltd [1990] 1 WLR 1545. It was advantageous to members of syndicates at Lloyds that funds required to be held for them by their underwriters should be so invested as to yield what the Revenue would accept to be capital gain rather than as income. Prior to their investment in American and Canadian index linked bonds underwriters had, by their agents, inquired of the Revenue whether the uplift for indexation to be achieved on sale or redemption of the bonds would be treated as capital gain rather than as income. They unsuccessfully contended that the Revenues responses constituted an affirmative to which it should be held irrespective of whether such treatment of the uplift was correct as a matter of law. Having rejected the Revenues argument that any such affirmative response would have been outside its powers, Bingham LJ proceeded, at p 1569, as follows: I am, however, of the opinion that in assessing the meaning, weight and effect reasonably to be given to statements of the revenue the factual context, including the position of the revenue itself, is all important. Every ordinarily sophisticated taxpayer knows that the revenue is a tax collecting agency, not a tax imposing authority. The taxpayers only legitimate expectation is, prima facie, that he will be taxed according to statute, not concession or a wrong view of the law Such taxpayers would appreciate, if they could not so pithily express, the truth of the aphorism of One should be taxed by law, and not be untaxed by concession: Vestey v Inland Revenue Comrs [1979] Ch 177, 197 per Walton J. No doubt a statement formally published by the Inland Revenue to the world might safely be regarded as binding, subject to its terms, in any case falling clearly within them. But where the approach to the revenue is of a less formal nature a more detailed inquiry is in my view necessary First, it is necessary that the taxpayer should have put all his cards face upwards on the table Secondly, it is necessary that the ruling or statement relied upon should be clear, unambiguous and devoid of relevant qualification. The court held that the Revenues statements about the treatment of the uplift had not been clear enough to give rise to any legitimate expectation. In that the representations in the booklet are formally published by the Revenue to the world rather than being its response to approaches of a less formal nature, a literal reading of Bingham LJs judgment suggests that, although they are binding in relation only to cases falling clearly within them, the requirement that they should be clear, unambiguous and devoid of relevant qualification does not apply to them. But in my view a case would fall clearly within them only if they were clear, unambiguous etc; and in R (Bancoult) v Secretary of State for Foreign and Commonwealth Affairs (No 2) [2008] UKHL 61, [2009] 1 AC 453, Lord Hoffmann, at para 60, applied the quoted words of Bingham LJ to a formal publication, namely a press announcement, on the part of the Foreign Secretary. It is better to forsake any arid analytical exercise and to proceed on the basis that the representations in the booklet for which the appellants contend must have been clear; that the judgement about their clarity must be made in the light of an appraisal of all relevant statements in the booklet when they are read as a whole; and that, in that the clarity of a representation depends in part upon the identity of the person to whom it is made, the hypothetical representee is the ordinarily sophisticated taxpayer irrespective of whether he is in receipt of professional advice. The alleged representations The first appellants contend that, in the booklet, the Revenue represented that an individual would be accepted as not resident and not ordinarily resident in the UK if he: (a) (paragraph 2.2 of the booklet); or (b) 2.8); or (c) went abroad for a settled purpose and remained abroad for at least a whole tax year (paragraph 2.9) left the UK to take up full time employment abroad left the UK permanently or for at least three years (paragraph provided, in each case, that his visits to the UK during the years following departure totalled less than six months in any tax year and averaged less than 91 days in each such year (the day count proviso). The first appellants accept that, if he is to become non resident in the UK, the law requires an individual to effect a distinct break in the pattern of his life in the UK such as to demonstrate that, when subsequently present in the UK, he is here only as a visitor; and they contend that, by (a), (b) and (c) above, the Revenue reflected in a simplified form the requirement of a distinct break. Their primary contention is that, irrespective of whether they fell within (a) or (b), they fell within (c). They therefore contend that, if (as appears to be the case) they went abroad for a settled purpose for at least one tax year and satisfied the day count proviso, the Revenue is bound to acknowledge their status as having been neither resident nor ordinarily resident in the UK in 2001 02 notwithstanding that, were their cases to be appraised on a wider basis, they might not have effected a distinct break in the pattern of their life in the UK. The second appellant, by contrast, contends that, in the booklet, the Revenue represented that a taxpayer would be accepted as not resident and not ordinarily resident in the UK if he went to live abroad for at least three years and satisfied the day count proviso. His contention is that, in the interests of simplicity, the Revenue thereby cut away its need or entitlement to afford any independent consideration to whether he had effected a distinct break in the pattern of his life in the UK. The proper construction of the booklet The preface to the booklet stated: The notes in this booklet reflect the law and practice at October 1999. They are not binding in law and do not affect rights of appeal about your own tax. You should bear in mind that the booklet offers general guidance on how the rules apply, but whether the guidance is appropriate in a particular case will depend on all the facts of that case. If you have any difficulty in applying the rules in your own case, you should consult an Inland Revenue Tax Office The first paragraph quoted does not advance the Revenues case: no doubt it intended the booklet to reflect the law but it accepts that, were the booklet to have failed to do so, it would be bound by its terms irrespective of the discrepancy. The second paragraph is however of greater significance: it stressed that the guidance was general; that its application to a particular case depended upon its facts; and that, in the event of any difficulties in its application to his case, the individual should consult a Revenue tax office. Neither in 1976 nor at any time thereafter did the second appellant seek advice from a tax office, still less a ruling on residence such as was available until the introduction of self assessment on 6 April 1996. Nor did the first appellants (who were at all material times advised by PricewaterhouseCoopers LLP) seek such advice in advance of their going to Brussels in March 2001. Paragraph 1.1 of the booklet stated: The terms residence and ordinary residence are not defined in the Taxes Acts. The guidelines to their meaning in this Chapter and in Chapters 2 (residence status of those leaving the UK) and 3 (those coming to the UK) are largely based on rulings of the Courts. This booklet sets out the main factors that are taken into account, but we can only make a decision on your residence status on the facts in your particular case. The paragraph therefore told the taxpayer that the booklet set out only the main factors to be taken into account and repeated that the decision in relation to residence could be made only upon an evaluation of the facts of the case. Paragraph 1.4 of the booklet stated: It is possible to be resident (or ordinarily resident) in both the UK and some other country (or countries) at the same time. If you are resident (or ordinarily resident) in another country, this does not mean that you cannot also be resident (or ordinarily resident) in the UK. So here the taxpayer learned that it would be insufficient for him to become resident abroad: if he was to become non resident in the UK, more was needed. Crucial to the appeals is the second chapter of the booklet, entitled Leaving the UK. Paragraph 2.1, headed Short absences, stated: You are resident and ordinarily resident in the UK if you usually live in this country and only go abroad for short periods for example, on holiday or on business trips. The appellants stress the reference to short periods and they reasonably submit that the day count proviso was the other side of the same coin. The Revenue, by contrast, stresses the word usually. I accept its submission that the word conveyed to the reasonably sophisticated taxpayer that the inquiry would encompass consideration of various aspects of his life with a view to the identification of its usual location. Paragraph 2.2, headed Working abroad, stated: If you leave the UK to work full time abroad under a contract of employment, you are treated as not resident and not ordinarily resident if you meet all the following conditions your absence from the UK and your employment abroad both last for a least a whole tax year during your absence any visits you make to the UK total less than 183 days in any tax year, and average less than 91 days a tax year. (The average is taken over the period of absence up to a maximum of four years Any days spent in the UK because of exceptional circumstances beyond your control, for example the illness of yourself or a member of your immediate family, are not normally counted for this purpose.) The second bullet point, which has two parts, represented the day count proviso. Although the first part of it was statutory (now section 830 of the 2007 Act), the second part of it reflected long established Revenue practice: thus, if the individual visited the UK for six months or more in any year of assessment, he was treated as resident here for that year but, if he did not do so and his visits to the UK averaged less than 91 days each year during up to four tax years, he was treated as not resident here for those years. Reluctant though I am to be distracted from consideration of the substantive issues in the appeals, it is convenient here to append a footnote about an alternative ground of appeal on the part of the first appellants, which their leading counsel described as peripheral and which he did not address in oral argument save to decline formally to abandon. The argument is based on their alternative, fall back assertion that it was only after 5 April 2001, namely during the weeks which followed it, that they began the full time work in Belgium which has since proceeded for a number of years and at least throughout the year 2002 03. On that basis the argument is that the Revenue is required to treat the first appellants as not resident and not ordinarily resident in the UK even in the crucial year 2001 02 because they had left the UK prior to the start of that year and because they had left to work full time abroad even though the work did not begin until after the start of that year. But no rational taxpayer could imagine that the route to non residence by his pursuit of full time employment abroad throughout a tax year could be successfully traversed even in relation to a preceding year. It is only the individuals full time employment abroad which yields the distinct break in the pattern of his life in the UK (see para 21 above) and the terms of paragraph 2.2 adequately convey its status as a pre requisite to non residence. Paragraphs 2.7 to 2.9, which lie at the centre of the appeals, were headed Leaving the UK permanently or indefinitely so their content was entirely governed by that rubric, in which the two adverbs provided important colour to the type of leaving which the Revenue was proposing to address. I also agree, however, with the observation of Moses LJ that: It makes no sense to construe leave when qualified by the adverbs permanently or indefinitely as referring to the process of going abroad. They clearly require consideration of the quality of the absence. (para 44) The paragraphs stated: 2.7 2.8 If you go abroad permanently, you will be treated as remaining resident and ordinarily resident if your visits to the UK average 91 days or more a year Any days spent in the UK because of exceptional circumstances beyond your control, for example the illness of yourself or your immediate family, are not normally counted for the purposes of averaging your visits. If you claim that you are no longer resident and ordinarily resident, we may ask you to give some evidence that you have left the UK permanently, or to live outside the UK for three years or more. This evidence might be, for example, that you have taken steps to acquire accommodation abroad to live in as a permanent home, and if you continue to have property in the UK for your use, the reason is consistent with your stated aim of living abroad permanently or for three years or more. If you have left the UK permanently or for at least three years, you will be treated as not resident and not ordinarily resident from the day after the date of your departure providing[viz the day count proviso]. 2.9 If you do not have this evidence, but you have gone abroad for a settled purpose (this would include a fixed object or intention in which you are going to be engaged for an extended period of time), you will be treated as not resident and not ordinarily resident from the day after the date of your departure providing your absence from the UK has covered at least a whole tax year, and your visits to the UK since leaving [satisfy the day count proviso]. If you have not gone abroad for a settled purpose, you will be treated as remaining resident and ordinarily resident in the UK, but your status can be reviewed if your absence actually covers three years from your departure, or evidence becomes available to show that you have left the UK permanently providing [viz the day count proviso]. On any view the three paragraphs were very poorly drafted. But does it follow that, when read in conjunction with the other parts of the booklet to which I have drawn attention, they amounted to a clear representation of the types for which the appellants respectively contend? Regrettable though it would be, a confusing presentation would be likely to have lacked the clarity required by the doctrine of legitimate expectation. There is now a preliminary dispute between the appellants about the nexus between paragraph 2.9 and paragraphs 2.7 and 2.8. For in this court the first appellants for the first time contend that paragraph 2.9 charts a free standing route to non residence; to be specific, that the subject of paragraph 2.7 is leaving the UK permanently, that that of paragraph 2.8 is leaving it permanently or indefinitely and that that of paragraph 2.9 is leaving it for a settled purpose; and that they themselves travelled by the route charted in paragraph 2.9. The second appellant, by contrast, accepts the Revenues contention as did the first appellants in the Court of Appeal that paragraph 2.9 was linked to paragraph 2.8 and charted only a different way in which an individual might establish that he had left the UK indefinitely. In one sense it comes as no surprise that the Revenue should explain that paragraph 2.9 (which first appeared in the 1996 version of the booklet, as paragraph 2.10) was introduced as a result of the decision in 1985 of Nicholls J in Reed v Clark [1986] Ch 1. For, by referring to the need for a settled purpose, the paragraph introduces a phrase adopted by Nicholls J: see para 18 above. But the paragraph is a garbled reference to the decision: for Nicholls J was describing the settled purpose not as a route to becoming non resident but as the means by which the taxpayer who had become non resident escaped being treated otherwise under what is now section 829 of the 2007 Act. Nevertheless, as all parties agree, the exercise required by these appeals is not to compare the booklet with the law but to construe it by reference to its own terms; and, as a matter of construction, the contention of the first appellants that paragraph 2.9 was independent of paragraph 2.8 is in my view patently incorrect. It was grouped with paragraphs 2.7 and 2.8 under the heading Leaving the UK permanently or indefinitely; and, following paragraph 2.8 in which the Revenue offered one example of evidence which might satisfy it that the individual had left either permanently or indefinitely, paragraph 2.9, which, by its opening hypothesis if you do not have this evidence, made an express link with paragraph 2.8, purported to identify another situation in which the Revenue would accept that he had left indefinitely, namely that in which he had gone abroad for a settled purpose (including for a project in which he was to be engaged for an extended period of time) and satisfied the other specified conditions. So the three paragraphs must be read compendiously. They shared one important feature: they all referred to visits on the part of the individual to the UK. If he usually resides in the UK, he will go abroad as a visitor but, if he has left the UK and has adopted a usual residence abroad, he will come to the UK as a visitor: we are not visitors in the country of our usual residence. The reference to visits to the UK therefore underlined the need for a change in the individuals usual residence and therefore, by ready inference, for a distinct break in the pattern of his life in the UK. Another important feature lay in paragraph 2.8. The evidence there suggested was that the individual had taken steps to create a permanent home abroad. He was then warned however that, if he continued to have property in the UK for his use, his reason for doing so must have been consistent with his stated aim of living abroad permanently or for at least three years. The suggestion was therefore that it might be permissible for him to maintain in the UK not a home but property for [his] use but that, if he did so, he would fail to secure non resident status unless his reason for doing so survived the test of consistency with his stated aim. In the course of his submissions leading counsel for the first appellants invited the court to consider a document not placed before the Court of Appeal. It is entitled Notes on NON RESIDENCE, ETC and, when an individual asks the Revenue to supply him with the supplementary pages of a tax return referable to his claim to non residence, it will supply not only the extra pages but also the Notes in order to assist him in completing them. The Notes put before the court were referable to the tax year 2001 02, being the crucial year for the first appellants. By question 2A, first inserted into the Notes supplied for the year 2000 01, the individual was invited to ask himself Have you left the UK? In order to help him answer the question, the Notes said: Even if you make frequent trips abroad in the course of your employment, you will not have left the UK if you usually live in the UK, and your home and settled domestic life remain there. The premise of the question which followed was that prior to the relevant tax year the individual had left in the above sense and, on that basis, he was invited to consider whether he had lived or had intended to live outside the UK for at least three years (reflective of paragraph 2.8 of the booklet) or had worked abroad full time throughout the relevant tax year (reflective of paragraph 2.2, when properly construed) or had been abroad for a settled purpose (reflective of paragraph 2.9). The proposition in the Notes quoted above was a clear (and, as it happens, also a reasonably accurate) definition of leaving the UK for the purposes of attaining non residence; and, inasmuch as the Notes had apparently been furnished in that form to everyone who submitted a claim to the Revenue that he had become non resident for any year after 1999 2000, it would, in the event of any significant doubt about the meaning of the booklet, have been legitimate to construe it in the light also of the quoted proposition. On any view it is inconsistent with the contention of the first appellants, accepted by Lord Mance, that the Revenue was treating as non resident an individual who had done no more than to go abroad for a settled purpose (and to remain there for at least a year and to satisfy the day count proviso) irrespective of whether he had continued usually to live in the UK and to make his home and settled domestic life here. At last comes the moment in which to stand back from the detailed textual analysis of the booklet and to survey the wood instead of the trees. Unlike so it seems its successor, namely HMRC6, the exposition in the booklet of how to achieve non resident status should have been much clearer. My view however, is that, when all the passages in it to which I have referred were considered together, it informed the ordinarily sophisticated taxpayer of matters which indeed were unlikely to come as a surprise to him, namely that: (a) he was required to leave the UK in a more profound sense than that of travel, namely permanently or indefinitely or for full time employment; (b) he was required to do more than to take up residence abroad; (c) he was required to relinquish his usual residence in the UK; (d) any subsequent returns on his part to the UK were required to be no more than visits; and (e) any property retained by him in the UK for his use was required to be used for the purpose only of visits rather than as a place of residence. He will surely have concluded that these general requirements in principle demanded and might well in practice generate a multifactorial evaluation of his circumstances on the part of the Revenue albeit subject to appeal. If invited to summarise what the booklet required, he might reasonably have done so in three words: a distinct break. The evaluative nature of the inquiry described in the booklet was fairly recognised by the first appellants accountant himself when he stated as follows: [W]hat IR20 does (according to the understanding which I have always had as a practitioner) is to set out certain factors which will be taken into account. Some of these factors relate to the quality of the links which the taxpayer has with another country (eg fulltime employment for at least a whole tax year, settled purpose, acquiring accommodation abroad, living outside the UK for three years or more), and some of the factors relate to the extent of the links retained by the taxpayer with the UK (eg the number of days spent here, retaining a property in the UK). It follows from this that HMRC have set out their view of the quality of the links with another country and the extent of the remaining links with the UK which should together be taken into account in determining whether someone has ceased to be UK resident. The quality of the links with the other country are relevant insofar as they help to determine the extent to which the taxpayer has removed himself from the UK. Were I wrong, however, to have concluded that the booklet succeeded in conveying to the taxpayer the information to which I have referred in para 45 above, it would in no way follow that, on this, the main, basis upon which they are advanced, the appeals should succeed. Were I wrong, I would feel driven to conclude only that the treatment in the booklet of the means of becoming non resident was so unclear as to communicate to its readers nothing to which legal effect might be given. Such a conclusion would leave the appeals far short of their necessary foundation, namely of clearly specified criteria by reference to which they legitimately expected their claims to non residence to be determined. The alleged change of practice I summarise the subsidiary and alternative contention of the appellants as follows: that, even if, on a proper construction of the booklet, the Revenue did not thereby make the representations for which they have respectively contended, its settled practice over many years was nevertheless to determine claims to non residence on the footing that, in the booklet, it had made such representations; that its settled practice continued until a date shortly after all the years of assessment (ie until a date in 2004 05); that its practice thereupon changed in that it began to conduct, including in relation to the appellants, a general inquiry into whether the taxpayer had effected a distinct break in the pattern of his life in the UK; and that the Revenue had thus raised in the appellants a legitimate expectation that it would determine their claims in respect of the years of assessment by reference to its earlier settled practice. It is an arresting proposition that, having published and regularly revised a booklet in which it purported to explain how it would determine claims by individuals to have become non resident and of which it encouraged widespread use, the Revenue departed from it as a matter of settled practice. Clear evidence would be necessary in order to make the proposition good. But there is another reason for the need for clear evidence in this connection. For, whereas, in the booklet the Revenue gave unqualified assurances about its treatment of claims to non residence which, if dishonoured, would readily have fallen for enforcement under the doctrine of legitimate expectation, it is more difficult for the appellants to elevate a practice into an assurance to taxpayers from which it would be abusive for the Revenue to resile and to which under the doctrine it should therefore be held. [T]he promise or practicemust constitute a specific undertaking, directed at a particular individual or group, by which the relevant policys continuance is assured: R (Bhatt Murphy) v The Independent Assessor [2008] EWCA Civ 755, per Laws LJ at [43]. The result is that the appellants need evidence that the practice was so unambiguous, so widespread, so well established and so well recognised as to carry within it a commitment to a group of taxpayers including themselves of treatment in accordance with it. The appellants place before the court statements by their tax advisers and others that in their experience the Revenue did not prior to 2004 05 conduct any general inquiry into whether a person who claimed to have become non resident pursuant to paragraphs 2.7 to 2.9 of the booklet had effected a distinct break in the pattern of his life in the UK; and they add that, so far as they know, it was the settled practice of the Revenue not to do so and thus that the general inquiries in that regard which were directed at the appellants from 2004 05 onwards represented an unheralded departure from it. By its witness statements the Revenue disputes the existence of any such alleged practice and, in an argument which found favour in the Court of Appeal, suggests that the appellants witnesses may have mistakenly deduced the existence of the alleged earlier practice from what was on any view a later increase in the level of Revenue scrutiny of claims to have become non resident. In any event, however, the appellants accept that, in order to make good their case, they need evidence beyond the generalised, anecdotal understanding of their witnesses, however highly regarded; and in this regard they primarily rely on a letter, entirely unrelated to the cases before the court, from a Revenue Inspector, Mr Wilks, to an accountant, Mr Sawyer, dated 7 July 1999, which was never published and of which the appellants learnt only following the Revenues disclosure of it in the course of these proceedings. I should add that, in this court albeit not in the Court of Appeal, the appellants have also relied on a document published by the Institute of Chartered Accountants in England and Wales, dated 30 November 1994, in which, no doubt accurately, it recorded the Revenue as confirming that, were a UK resident to retire overseas to a house which he owned but to retain ownership of another house in the UK to which he were to make regular holiday visits of 50 days each year, he would have become non resident and not ordinarily resident in the UK; but in my view the quoted words sufficiently betoken a distinct break. In his letter to Mr Sawyer, Mr Wilks wrote: As promised Im writing to confirm the way we approach the residence status of individuals who leave the UK for purported permanent residence but who cannot produce the sort of evidence mentioned in paragraph 2.9 of IR20. Subject only to the caveat that the following guidance is general and particular cases will always need to be decided on their own specific facts, I can say that provided such an individual lives outside the UK for 3 years or more from the date of departure, and after departure has not visited the UK for as much as 183 complete days in any one tax year or 91 or more days a year on average then we will, after the 3 years has elapsed, accept the claim to have become not resident and not ordinarily resident. Specifically, circumstances such as the spouse and/or children having continued to live in the UK a residence having been maintained here duties having continued to be performed in the UK will not prejudice the claim to non residence. The reference by Mr Wilks to IR20 was to the 1996 version and, in the 1999 version, paragraph 2.9, which he cited, became paragraph 2.8. There is no doubt that Mr Wilks letter accords well with the assertions of the appellants professional witnesses. If and insofar as, by his reference to individuals who leave the UK, Mr Wilks was attempting to refer to individuals who effect a distinct break in the pattern of their lives in the UK, the attempted reference was too elliptical; and the fact that, in another context, he wrote a further letter to Mr Sawyer dated 8 March 2000, in which he referred to a person who continues to be resident in the UK on the basis that he hasnt in reality left the UK, cannot alter the natural construction of the earlier letter. But did it reflect a settled practice to depart from the law and indeed from the then current version of the booklet? Until 1998 some UK residents had been able to take advantage of what was known as the foreign earnings deduction. To the extent that they earned income from employment carried out wholly or partly abroad for at least a year, they had been able to deduct it in full from their income for UK tax purposes. But, by section 63 of the Finance Act 1998, the right to make the deduction was abolished. The abolition precipitated an increase in claims to non residence on the part of mobile workers, ie persons, such as lorry drivers and airline pilots, who made frequent and regular trips abroad in the course of their work but who remained based in the UK. In the present proceedings the Revenue disclosed its statements made in 2000 and 2001 to a variety of professionals about its treatment of such claims. The statements are unhelpful to the appellants case. For example the gist of a tax bulletin, published by the Revenue in April 2001, was that, unless he was working full time abroad for at least a whole tax year and so could satisfy the requirements of paragraph 2.2 of the booklet, it was probable that the mobile worker usually lived in the UK, thus also failed to fall within paragraphs 2.7 to 2.9 and so was resident in the UK. The bulletin explained that individuals usually live in the UK if their home continues to be in the UK and their settled domestic life remains here. Although the bulletin related to mobile workers, tax advisers sought clarity as to how it affected the Revenues treatment of business executives who were seconded to work abroad but who regularly returned to the UK. For example, one of the expert witnesses of the first appellants, Mr Hilton Gee, who was a senior manager at PricewaterhouseCoopers LLP until 2006 but who never handled their case, spoke to a Revenue manager on 8 May 2001 and made the following note: I asked whether the Tax Bulletin article reflects a change of Practice by the Revenue or a change in policing standards. [He] confirmed that the article does not reflect any change in the Revenues practice, but it does reflect their view that whereas in the past they might have taken a claim to non residence at face value, they now feel that they should be asking for more facts. The article was directed at a specific category of individual and [he] can see that, if you try to apply its literal wording to other categories of businessmen, one might get the wrong impression. The Revenue are attempting to describe the difference between a businessman who is based in the UK but travels abroad for most of the time, and a businessman who is based abroad but manages to visit the UK from time to time, and are saying that in a case which may not be clear cut you need to look at all relevant factors. In June 2001 accountants at Arthur Andersen raised analogous questions at a meeting with senior Revenue officers. According to the Revenues note, its officers explained that paragraph 2.2 of the booklet still applied; that mobile workers who worked partly within the UK did not fall within it; but that business executives seconded to work abroad might well do so; and that they could fall within the paragraph without severing every link with the UK. Arthur Andersen acknowledged in the words of the note that: If an individual had full time employment abroad, it was not necessary to look at the wider factors in paragraph 2.7 about personal circumstances such as accommodation, family life etc. Arthur Andersen, at any rate, were under no illusion about the nature of the inquiry into a claim for non residence which was required by the booklet when it did not fall within paragraph 2.2. The Revenues dialogue with the accountants culminated in its letter, dated July 2001, sent to the Institute of Chartered Accountants, the Chartered Association of Certified Accountants, the Chartered Institute of Taxation, the Confederation of British Industry, and the big five firms of accountants. It made clear that most mobile workers failed to become non resident because they did not fall within paragraph 2.2 and because they had not genuinely left the UK in the residence sense. In the light of the wide circulation of the letter, it is hard to imagine that tax practitioners did not realise that the Revenue required that an individual who claimed to have become non resident but who failed to fall within paragraph 2.2 should genuinely have left the UK, being a requirement reflective only of the ordinary law. Had there been a facility for cross examination of the appellants professional witnesses in the proceedings, no doubt their precise understanding of what was or was not required both in law and in practice and their grounds for having it would have been laid bare. In my view the Court of Appeal was right to hold that the appellants failed to establish that, by its inquiries and determinations in respect of them, the Revenue was departing from a settled practice such as to found a legitimate expectation. In about 2001, probably triggered by the mobile workers, scrutiny of claims to non residence became more frequent. But when, previously, claims had been scrutinised, had the Revenue adopted a settled practice of applying criteria different from those identified not only by the ordinary law but also in its own booklet read as a whole? The appellants evidence to this effect was far too thin and equivocal. H. Conclusion I would dismiss the appeals. LORD HOPE I am grateful to both Lord Wilson and Lord Mance for their description of the background to these appeals and for the way in which they have identified the points that are in issue. I have reached the conclusion that, for the reasons that are set out in Lord Wilsons judgment, the appeals should be dismissed. I have nothing to add to what Lord Wilson has said about the appellants secondary and alternative contention. Their case that the Revenue had raised a legitimate expectation that their claim would be determined more favourably than the law and a proper construction of IR 20 would indicate was simply not made out by the evidence. The difference between Lord Wilson and Lord Mance as to the primary issue turns on the meaning that paragraphs 2.7 to 2.9 of IR 20 would convey to the ordinarily sophisticated taxpayer. Is the question whether the taxpayer has become non resident and not ordinarily resident in the United Kingdom to be determined simply by reference to the taxpayers intention when going abroad regarding the overall duration of his absence and counting up the days of any return visits? Or is it to be determined by evaluating the quality or nature of the absence and of any return visits that he has made? There is an obvious attraction in keeping the test as simple as possible, especially as taxpayers are now responsible for self assessment when making their returns. But the underlying principle that the law has established is that it must be shown that there has been a distinct break in the pattern of the taxpayers life in the UK. The inquiry that this principle indicates is essentially one of evaluation. It depends on the facts. It looks to what the taxpayer actually does or does not do to alter his lifes pattern. His intention is, of course, relevant to the inquiry. But it is not determinative. All the circumstances have to be considered to see what light they can throw on the quality of the taxpayers absence from the UK. The question then is whether on its proper construction the booklet sets out tests which are so clear that they eliminate the need for an inquiry into whether there was in fact a distinct break. As Lord Mance points out, the requirement for a distinct break is not clearly expressed in the relevant paragraphs of the booklet. But I cannot agree with him that chapter 2 is to be read as substituting for that test a series of specifically delineated cases which clearly and unambiguously eliminated the need for such an inquiry: see para 100, below. The booklet must be read as a whole, including its introductory paragraphs. As the preface to the booklet made clear, it offered general guidance. Its application to a particular case was to depend on its own facts. So paragraphs 2.7 2.9 do not stand alone. Taken as a whole, the message that the booklet conveyed was that all the circumstances were open to evaluation in order to see whether the rules for non residence were satisfied. I am in full agreement with Lord Wilsons careful analysis. LORD WALKER I agree that these appeals should be dismissed for the reasons given in the judgment of Lord Wilson. The stronger appeal is that of Mr Davies and Mr James, but it is by no means as strong as is claimed by the exaggerated opening of their printed case. The preface to the relevant edition of IR 20 made clear that it gave general guidance only, and that whether the guidance was appropriate in a particular case would depend on all the facts of the case. In the event of difficulty taxpayers were invited to consult an Inland Revenue tax office. The appellants had expert professional advisers, and it was well known to them that a large amount of tax was at stake. The guidance in IR 20 is far from clear, as Lord Wilson explains. Yet there is no suggestion that any attempt was made to seek clarification from an office of the Inland Revenue, still less that any specific guidance or assurance was given on the particular course of action proposed by the appellants. It seems possible that the preferred strategy was to let sleeping dogs lie, despite the obscurity of parts of IR 20. But whether that is right or not, the appeals must be dismissed for the reasons given by Lord Wilson, which are essentially the same as those given by Moses LJ in the Court of Appeal. LORD CLARKE I agree that these appeals should be dismissed for the reasons given by Lord Wilson. I have reached the conclusion that his reasoning is to be preferred to that of Lord Mance for the reasons given by Lord Hope. LORD MANCE Introduction In these appeals, the issue is whether Her Majestys Revenue and Customs (HMRC) is entitled to treat the appellants as resident and ordinarily resident in the United Kingdom, in the case of Mr Davies and Mr James in the tax year 2001 02 and in the case of Mr Gaines Cooper in respect of the tax years 1993 94 to 2003 04. The issue turns primarily upon the interpretation and effect of Revenue guidance on the liability to tax in the United Kingdom of residents and non residents, known as IR20. IR20 was first issued in 1973, and existed in various versions developed from time to time until April 2009, when IR20 was entirely replaced by materially different guidance called HMRC 6. A secondary issue in each appeal is whether HMRC, in seeking to treat the appellants as ordinarily resident, resiled illegitimately from a practice followed prior to 2005 with respect to the interpretation and application of IR20. HMRC has confirmed in each appeal (HMRC Case para 2) that it accepts that a taxpayer has a legitimate expectation that HMRC will apply the guidance of IR20 to the facts of his particular case and, if satisfied that the facts and evidence fall within one of the circumstances in chapter 2 of IR20 indicating a certain residence treatment, will treat him accordingly. This accepts that the guidance of IR20 gives rise to a legitimate expectation, but the nature of that legitimate expectation depends upon the terms of the guidance. In R (Bancoult) v Secretary of State for Foreign and Commonwealth Affairs (No 2) [2008] UKHL 61, [2009] AC 453, para 60, cited recently in Paponette v Attorney General of Trinidad and Tobago [2010] UKPC 32, [2011] 3 WLR 219, para 28, Lord Hoffmann said that: a legitimate expectation can be based only upon a promise which is clear, unambiguous and devoid of relevant qualification It is not essential that the applicant should have relied upon the promise to his detriment, although this is a relevant consideration in deciding whether the adoption of a policy in conflict with the promise would be an abuse of power . As to the need for a representation to be clear, unambiguous and devoid of qualification, the Board in Paponette endorsed Dyson LJs statement in R (Association of British Civilian Internees: Far East Region) v Secretary of State for Defence [2003] EWCA Civ 473, [2003] QB 1397, para 56, that the question is how on a fair reading of the promise it would have been reasonably understood by those to whom it was made ([2011] 3 WLR 219, para 30). The primary issue in each appeal is thus how, on a fair reading, IR20 would have been reasonably understood by those to whom it was directed. It is for the courts to resolve this as a matter of law. If any of the appellants succeeds on either issue, it may also be necessary to consider what precise relief would be appropriate. Mr Eadie QC for HMRC suggested in his oral submissions that a requirement to treat the taxpayer as not resident and ordinarily resident should not follow axiomatically. However, the unequivocal nature of the above confirmation makes it difficult to see how this could be so if and in so far as any of the appellants succeeds on the primary issue. More specifically the issues are whether, upon the true interpretation of IR20 or under Revenue practice prior to 2005, taxpayers seeking to show that they are neither resident nor ordinarily resident in the United Kingdom are required to show that they have made a distinct break from or severed family and social ties in the United Kingdom. HMRC maintains and the Court of Appeal (paras 50, 53 55) has held that this is not required where a taxpayer can show that he or she is in full time employment abroad, but is required in all other circumstances. This is said to reflect the test which would, having regard to past case law, apply in strict law. The present judicial review proceedings are brought on the basis that, whatever the legal position might otherwise be, HMRC must as a matter of public law honour the terms of IR20. This, as I have explained in para 70, follows from the HMRCs assurance, that if satisfied that the facts and evidence fall within chapter 2 of IR20, it will treat the relevant taxpayer accordingly. While accepting this assurance, I confess to some residual unease about a concession so apparently general and independent of any consideration of particular circumstances, including any knowledge and advice possessed by or available to the particular taxpayer. Nevertheless, that is the agreed basis upon which this appeal falls to be considered as a matter of public law. Statutory background Although this case concerns the effect of IR20 and/or Revenue practice, I refer at points to the limited statutory provisions relating to residence to be found in the Income and Corporation Taxes Act 1988 (ICTA 1988), which it will therefore be helpful to set out: 335 Residence of persons working abroad (1) Where (a) a person works full time in one or more of the following, that is to say, a trade, profession, vocation, office or employment; and (b) no part of the trade, profession or vocation is carried on in the United Kingdom and all the duties of the office or employment are performed outside the United Kingdom; the question whether he is resident in the United Kingdom shall be decided without regard to any place of abode maintained in the United Kingdom for his use. (2) Where an office or employment is in substance one of which the duties fall in the year of assessment to be performed outside the United Kingdom there shall be treated for the purposes of this section as so performed any duties performed in the United Kingdom the performance of which is merely incidental to the performance of the other duties outside the United Kingdom. 336 Temporary residents in the United Kingdom (1) A person shall not be charged to income tax under Schedule D as a person residing in the United Kingdom, in respect of profits or gains received in respect of possessions or securities out of the United Kingdom, if (a) he is in the United Kingdom for some temporary purpose only and not with any view or intent of establishing his residence there, and (b) he has not actually resided in the United Kingdom at one time or several times for a period equal in the whole to six months in any year of assessment, but if any such person resides in the United Kingdom for such a period he shall be so chargeable for that year. (2) For the purposes of Cases I, II and III of Schedule E, a person who is in the United Kingdom for some temporary purpose only and not with the intention of establishing his residence there shall not be treated as resident in the United Kingdom if he has not in the aggregate spent at least six months in the United Kingdom in the year of assessment, but shall be treated as resident there if he has. (3) The question whether (a) a person falls within subsection (1)(a) above, or (b) for the purposes of subsection (2) above a person is in the United Kingdom for some temporary purpose only and not with the intention of establishing his residence there, shall be decided without regard to any living accommodation available in the United Kingdom for his use. Section 336(3) was only introduced for and with effect from the tax year 1993 94 by section 208 of the Finance Act 1993. IR20 has, as stated, developed over the years. The version which matters in the case of Mr Davies and Mr James was issued in December 1999. Mr Gaines Coopers case may require consideration also of earlier versions issued in October 1992, November 1993 and October 1996. However, Mr Gaines Coopers case is that he left the United Kingdom permanently long ago and has lived abroad for many years, and the changes in provisions governing his situation are relatively limited. The 1992 version read as follows: Leaving the UK permanently 2.5 If you go abroad permanently but have accommodation in the UK available for your use, you will be treated as resident for any tax year during which you visit the UK (see Chapter 4 for details of when accommodation is regarded as available). The length of the visit does not matter. If you come to the UK in most tax years, you remain ordinarily resident. 2.6 If you go abroad permanently and do not have available accommodation in the UK, you will be treated as remaining resident and ordinarily resident if your visits to the UK average 91 days or more a year. 2.7 If you claim that you are no longer resident and ordinarily resident you will normally be asked to give some evidence that you have left the UK permanently for example, that you have sold your UK home (or you have left it empty and on the market for sale) and set up a permanent home abroad. If you can provide this, you may be treated as provisionally not resident and not ordinarily resident from the day after the date of your departure. Normally this provisional ruling is confirmed after you have lived abroad for a whole tax year, as long as your visits to the UK since leaving have averaged less than 91 days a tax year. 2.8 If you do not have this evidence, a decision is postponed for up to three years. The decision will be based on what has actually happened since you left the UK. Until then you are provisionally treated as remaining resident in the UK. You continue to receive tax allowances and reliefs (see paragraph 8.1). Your tax bill may be adjusted when the final decision has been made. In the event, the guidance regarding accommodation in paragraphs 2.5 and 2.6 was superseded as a matter of law by the introduction (for and from the tax year 1993 94) of section 336(3) of ICTA 1988 (para 72 above), providing that whether a person is in the United Kingdom with the intention of establishing his residence there should be decided without regard to any living accommodation available in the United Kingdom for his use. This change was reflected in the 1993 version of IR20 which read: Leaving the UK permanently 2.6 If you go abroad permanently, you will be treated as remaining resident and ordinarily resident if your visits to the UK average 91 days or more a year. For tax years before 1993 94, if you went abroad permanently but had accommodation in the UK available for your use, you were treated as resident for any tax year during which you visited the UK (see Chapter 4 for details of when accommodation was regarded as available). The length of the visit did not matter. If you came to the UK in most tax years, you remained ordinarily resident. 2.7 If you claim that you are no longer resident and ordinarily resident, you will normally be asked to give some evidence that you have left the UK permanently for example, that you have taken steps to acquire accommodation abroad to live in as a permanent home, and if you continue to own property in the UK, the reason is consistent with your stated aim of permanent residence abroad. If you can provide this, you may be treated as provisionally not resident and not ordinarily resident from the day after the date of your departure. Normally this provisional ruling is confirmed after you have lived abroad for a whole tax year, as long as your visits to the UK since leaving have averaged less than 91 days a tax year. 2.8 If you do not have this evidence, a decision is postponed for up to three years. The decision will be based on what has actually happened since you left the UK. Until then you are provisionally treated as remaining resident in the UK. You continue to receive tax allowances and reliefs (see paragraph 8.1). Your tax bill may be adjusted when the final decision has been made. The Revenue in its submissions before the Supreme Court suggested that section 336(3) has no bearing on the present appellants situations, being relevant to persons who have established residence and ordinary residence abroad and come back here temporarily, rather than to the question whether persons have established ordinary residence abroad (an analysis encapsulated in the title to a contribution to issue 435 of CCH Taxes The Weekly Tax News after the Special Commissioners decision in relation to Mr Gaines Copper: Tis better to have left and returned than never to have left at all: p 37). Whatever the accuracy of the Revenues submission on this point in strict law, it is clear, from the change in treatment of the significance of available accommodation in the 1993 and subsequent versions of IR20, that for the purposes of IR20 the Revenue treated the thinking behind section 336 as directly relevant to the question whether a taxpayer had established residence and ordinary residence abroad. The 1996 version of IR20 was amended by the addition in the light of the decision, some ten years before, of Nicholls J in Reed v Clark [1986] Ch 1 of a new paragraph 2.10, which became paragraph 2.9 of the 1999 version and is of particular relevance to the cases of Mr Davies and Mr James. The 1999 version read: 1 Residence and ordinary residence Residence in both the UK and another country 1.4 It is possible to be resident (or ordinarily resident) in both the UK and some other country (or countries) at the same time. If you are resident (or ordinarily resident) in another country, this does not mean that you cannot also be resident (or ordinarily resident) in the UK. Where, however, you are resident both in the UK and a country with which the UK has a double taxation agreement, there may be special provisions in the agreement for treating you as a resident of only one of the countries for the purposes of the agreement (paragraph 9.2). 2 Leaving the UK . Short absences 2.1 You are resident and ordinarily resident in the UK if you usually live in this country and only go abroad for short periods for example, on holiday or on business trips. Working abroad 2.2 If you leave the UK to work full time abroad under a contract of employment you are treated as not resident and not ordinarily resident if you meet all the following conditions your absence from the UK and your employment abroad both last for at least a whole tax year during your absence any visits you make to the UK total less than 183 days in any tax year, and average less than 91 days a tax year. (The average is taken over the period of absence up to a maximum of four years see paragraph 2.10. Any days spent in the UK because of exceptional circumstances beyond your control for example the illness of yourself or a member of your immediate family, are not normally counted for this purpose.) 2.3 If you meet all the conditions in paragraph 2.2, you are treated as not resident and not ordinarily resident in the UK from the day after you leave the UK to the day before you return to the UK at the end of your employment abroad. You are treated as coming to the UK permanently on the day you return from your employment abroad and as resident and ordinarily resident from that date. If there is a break in full time employment, or some other change in your circumstances during the period you are overseas, we would have to review the position to decide whether you still meet the conditions in paragraph 2.2. If at the end of one employment you returned temporarily to the UK, planning to go abroad again after a very short stay in this country, we may review your residence status in the light of all the circumstances of your employment abroad and your return to the UK. If you do not meet all the conditions in paragraph 2.2, you remain resident and ordinarily resident unless paragraphs 2.8 2.9 apply to you. Special rules apply to employees of the European Community (see paragraph 2.14). 2.4 The treatment in paragraph 2.3 will also apply if you leave the UK to work fulltime in a trade, profession or vocation and you meet conditions similar to those in paragraph 2.2. Meaning of full time 2.5 There is no precise definition of when employment overseas is full time, and a decision in a particular case will depend on all the facts. Where your employment involves a standard pattern of hours, we will regard it as full time if the hours you work each week clearly compare with those in a typical UK working week. If your job has no formal structure or no fixed number of working days, we will look at the nature of the job, local conditions and practices in the particular occupation to decide if the job is full time. If you have several part time jobs overseas at the same time, we may be able to treat this as full time employment. That might be so if, for example, you have several appointments with the same employer or group of companies, and perhaps also where you have simultaneous employment and self employment overseas. But if you have a main employment abroad and some unconnected occupation in the UK at the same time, we will consider whether the extent of the UK activities was consistent with the overseas employment being full time. Accompanying spouse 2.6 If you are the husband or wife of someone who leaves the UK within the terms of paragraph 2.2 or 2.4 and you accompany or later join your spouse abroad, you may also by concession (extra statutory concession A78) be treated as not resident and not ordinarily resident from the day after your departure to the day before your return, even if you are not yourself in full time employment abroad. This applies where you are abroad for a complete tax year, and during your absence any visits you make to the UK total less than 183 days in the tax year average less than 91 days a tax year. (The average is taken over the period of absence up to a maximum of four years see paragraph 2.10. Any days spent in the UK because of exceptional circumstances beyond your control, for example the illness of yourself or a member of your immediate family, are not normally counted for this purpose.) Where the tax years of your departure or return are spilt in this way, your tax liabilities which are affected by residence status are calculated on the basis of the period you are treated as resident in the UK. Leaving the UK permanently or indefinitely 2.7 If you go abroad permanently, you will be treated as remaining resident and ordinarily resident if your visits to the UK average 91 days or more a year see paragraph 2.10. Any days spent in the UK because of exceptional circumstances beyond your control, for example the illness of yourself or your immediate family, are not normally counted for the purposes of averaging your visits. 2.8 If you claim that you are no longer resident and ordinarily resident, we may ask you to give some evidence that you have left the UK permanently, or to live outside the UK for three years or more. This evidence might be, for example, that you have taken steps to acquire accommodation abroad to live in as a permanent home, and if you continue to have property in the UK for your use, the reason is consistent with your stated aim of living abroad permanently or for three years or more. If you have left the UK permanently or for at least three years, you will be treated as not resident and not ordinarily resident from the day after the date of your departure providing your absence from the UK has covered at least a whole tax year, and your visits to the UK since leaving have totalled less than 183 days in any tax year, and have averaged less than 91 days a tax year. (The average is taken over the period of absence up to a maximum of four years see paragraph 2.10. Any days spent in the UK because of exceptional circumstances beyond your control, for example the illness of yourself or a member of your immediate family, are not normally counted for this purpose.) 2.9 If you do not have this evidence, but you have gone abroad for a settled purpose (this would include a fixed object or intention in which you are going to be engaged for an extended period of time), you will be treated as not resident and not ordinarily resident from the day after the date of your departure providing your absence from the UK has covered at least a whole tax year; and your visits to the UK since leaving have totalled less than 183 days in any tax year and have averaged less than 91 days a tax year. If you have not gone abroad for a settled purpose, you will be treated as remaining resident and ordinarily resident in the UK, but your status can be reviewed if your absence actually covers three years from your departure, or evidence becomes available to show that you have left the UK permanently providing in either case your visits to the UK since leaving have totalled less than 183 days in any tax year and have averaged less than 91 days a tax year. Calculating annual average visits 2.10 If it is necessary to calculate your annual average visits to the UK, the method is as follows: Total visits to the UK in days x 365 Total period since leaving (in days) = annual average visits . After the third review the year of departure is dropped from the calculation. At each subsequent review the oldest year is dropped, so that there is a rolling period of four years being reviewed. However, if during your absence the pattern of your visits varied substantially year by year, it might be appropriate to look at the absence as being made up of separate periods for the purpose of calculating average visits. This might be necessary if, for example, a shift in the pattern of your visits suggested a change of circumstances, which altered how we viewed your residence status. Contacting the Inland Revenue 2.11 You should let us know when you leave the UK (other than for short trips as in paragraph 2.1). You will normally be asked to complete form P85,which will help to determine your residence status. Paragraphs 2.1 to 2.6 repeated similar provisions in previous editions, all including a 183 day limit. Such a limit appears for the first time in the 1996 edition in paragraphs dealing with Leaving the UK permanently . Again, it is clear that, even if the scope of section 336 of ICTA 1988 may in strict law be regarded as confined to persons who have already established residence and ordinary residence abroad, the Revenue was inspired to take a more generalised view of the relevance of a 183 day limit in IR20, treating it as part of the test whether someone has established residence and ordinary residence abroad. Davies and James Mr Davies and Mr James are British citizens, who were born in the United Kingdom and lived and worked in Wales until 2001, when they took decisions, with the benefit of undisclosed professional tax advice, aimed at bringing about a cessation of ordinary residence here. In pursuit of those decisions, in March 2001, they moved from the United Kingdom to apartments in Brussels, and incorporated and became directors of a Belgian company, Beaufort House SA, in which each held one third of the shares. They also entered into employment contracts for full time work with that company for three years from 1 April 2001. They say that, in planning for and making this move, they and their tax advisers, PriceWaterhouseCoopers, relied upon the guidance in IR20 in believing that it would mean that they would cease to be ordinarily resident in the United Kingdom. The importance of this is that, in the tax year 2001 02, as they probably already envisaged, they realised chargeable gains in respect of which they became liable to capital gains tax unless they were not resident and ordinarily resident in the United Kingdom in that tax year. In May 2002 they submitted to HMRC forms P85 (Leaving the United Kingdom) declaring that their intention had been to live outside the United Kingdom for a full tax year after their departure (though not permanently), that they would be working full time under a contract for their employment abroad for three years and that they expected to be in the United Kingdom for less than 90 days a year. HMRC maintains and the Court of Appeal has held that Mr Davies and Mr James are unable to take advantage of paragraph 2.2 of IR20, because their employment by Beaufort House SA did not in fact commence from 5 April 2001, but only later, since on 5 April 2001 they were in fact on holiday in Italy. That is accepted factually, but Mr Goldberg QC does not abandon his clients submission that it is sufficient under paragraph 2.2 that their employment should last for at least a whole tax year including a later tax year, such as 2002 03. Rightly, however, he did not elaborate on the submission, which is without merit. It is plainly implicit that the whole tax year to which paragraph 2.2 refers is that in relation to which absence of ordinary residence in the United Kingdom is asserted. Mr Goldberg QC for Mr Davies and Mr James has thus to fall back on paragraph 2.8 or 2.9. In relation to these paragraphs, Mr Daviess and Mr Jamess case is that they went abroad either to live outside the United Kingdom for three years or more within paragraph 2.8 or, at least, for a settled purpose within paragraph 2.9, and that they were in fact absent from the United Kingdom for the whole tax year 2001 02, indeed for three tax years, from such departure, and that their visits to the United Kingdom totalled less than 183 days in any such tax year and averaged less than 91 days a tax year. HMRC asserts in response that Mr Davies and Mr James failed to establish the necessary distinct break with family and social ties in the United Kingdom. In particular, they continued to each to have a substantial house here, in which their spouses lived when not visiting them in Belgium and where they lived when in the United Kingdom; and they retained employment and business links in the United Kingdom, as well as other links such as with Swansea Football Club and the Area Health Authority. The Court of Appeal held that the issue whether such a break was necessary under IR20 should be determined in the present judicial review proceedings prior to any proceedings before the Special Commissioners ([2008] EWCA Civ 933, paras 18 19 and 24). Gaines Cooper Mr Gaines Coopers case involves very different and more complex facts, which have already been established in proceedings before the Special Commissioners, who, in a full and very clearly reasoned decision, concluded that Mr Gaines Cooper was in law resident and ordinarily resident during the relevant tax years in the United Kingdom. In doing so they said that in this appeal we must apply the law rather than the provisions of IR20: para 99. A brief summary will suffice, since it is of the essence of the present appeal that most of the facts so established are irrelevant under IR20 and/or under Revenue practice. Mr Gaines Cooper is also a British citizen, who was born and educated and for many years lived here. But by 1974 he had formed the view that the tax regime in the United Kingdom was unfavourable to businessmen and entrepreneurs, and on that basis he began to establish overseas interests. He did so first in Canada and then in the Seychelles, where he purchased a house (Bois Noir) in late 1975 and was granted a residency permit in February 1976 and with which he has had close links ever since, and later elsewhere worldwide. In February 1980, HMRC wrote to him asking for details of his travel to the United Kingdom between 1976 and 1979. The figures provided for days spent, which there is no reason to doubt, were 49, 45 and 56, not counting days of arrival and departure. HMRC raised no further queries thereafter and did not suggest that he might be taxable as resident or ordinarily resident in the United Kingdom until 2000, when the inquiries began which led eventually to these proceedings. After marrying Mrs Dilona Lantang in 1979, Mr Gaines Cooper also purchased a house in California, where they lived for a time, but the marriage was dissolved in 1986. In 1993 he married a Seychellois citizen, Miss Jane Laye Sion, whom he had met in the Seychelles, but who had moved with her family to the United Kingdom, and their son James was born in 1998. Through off shore companies, Mr Gaines Cooper has retained property in the United Kingdom which was, apart from occasional periods of letting, available for his use. Since early 1989 that has consisted of Old Place, near Henley, where his wife, Mrs Jane Gaines Cooper lives during term time, as does Mr Gaines Cooper when here. By reason of the availability of such property, Mr Gaines Cooper accepts that, in the tax years immediately prior to 1993 94 and under the language then of IR20, the availability of such property meant that he was, even though he might satisfy all other conditions of IR20, to be treated as ordinarily resident in the United Kingdom. In school holidays, Mrs Gaines Cooper and James also join Mr Gaines Cooper abroad in the Seychelles or wherever he may be. In October 1987 Mr Gaines Cooper acquired an Italian company, Orthofix, administered from Cyprus and from about 1988 serviced by a company of which he was director based in Henley. He developed it by 2003 into a worldwide company with subsidiaries registered in twenty four countries. From 1992 to 1995 he was employed half time to perform duties in the United Kingdom for Orthofix. After about 1987 he also became involved in manufacturing Laryngeal masks, first through a Seychelles company and then from 1988 by mass production in Indiana, USA. So far as he had earnings here, he paid tax on them here. During the relevant tax years, Mr Gaines Cooper spent about 150 days each year on airplanes, travelling between his interests in different countries, and spending each year in total about three or four months in the United Kingdom, three or four months in Jersey, six to eight weeks in the United States, two weeks in Cyprus and two weeks in Italy. He also made visits to the Seychelles, which involved in the years 1991 92 to 1995 96 weeks in total rather than months according to the Special Commissioners (para 108). It is now common ground that the total days spent by Mr Gaines Cooper in the United Kingdom, calculated by ignoring days of arrival and departure (in accordance with IR20) were, in the tax years 1992 93 to 2002 03, as follows (the square bracketed figures being those arrived at by the Commissioners who concluded that when examining the position in strict law they should add back days of arrival and departure, including single day trips to the United Kingdom): 1992 93: 107 (including 60 for a heart bypass) [147]; 1993 94: 78 [121]; 1994 95: 110 [158]; 1995 96: 66 [110]; 1996 97: 109 [146]; 1997 98: 92 (including 8 for Jamess birth) [141]; 1998 99: 110 (including 8 for Jamess birth) [151]; 1999 2000: 81 [127]; 2000 01: 50 [94]; 2001 02: 0 [27]; and 2002 03: 68 [105]. The Commissioners concluded, looking at the position overall, that England remained the centre of gravity of [Mr Gaines Coopers] life and interests, because he lived in Henley more than anywhere else and because of his many other ties to Berkshire and Oxfordshire. On the basis of figures calculated according to IR20 (and all the more so if one excludes as exceptional circumstances the time spent here for a heart bypass and Jamess birth), Mr Gaines Cooper satisfied in the relevant tax years the conditions both that his visits should in no tax year total 183 days and that they should have averaged over any four year period less than 91 days a year. Mr Gaines Cooper clearly intended to maintain that position permanently or for three years or more, and has maintained it over a period of many years. The essential question is whether that is sufficient to attract the benefit of paragraph 2.7, read with paragraph 2.8, or paragraph 2.9 of IR20. The status and interpretation of IR20 Giving the leading judgment in the Court of Appeal Moses LJ, with whose reasoning Dyson LJ agreed, addressed the question of the status and interpretation of IR20 (1999 version) in relation to questions of residence for the purpose of taxation as follows (para 4): It is notorious that the principles to be applied [on such questions] are to be found, not in the few statutory provisions (sections 334 336 ICTA 1988, now sections 829 832 ITA 2007), which do not purport to be a statutory code but in case law, mainly from the late 19th and early 20th Century. As the Codification Committee recognised, only study of that jurisprudence would enable intelligent prediction of the outcome of an assertion as to residence or non residence. All the more important, then, that guidance should be given on which taxpayers could rely. The Income Tax Codification Committee, chaired by Lord Macmillan and reporting in 1936 (Cmd 5131), put the matter strongly, saying: We are, however, of opinion that the present state of affairs, under which an enquirer can only be told that the question whether he is resident or not is a question of fact for the Commissioners, but that by the study of the effect of a large body of case law he may be able to make an intelligent forecast of their decision, is intolerable and should not be allowed to continue. (paragraph 59) The Codification Committees prescription to resolve this situation was a draft set of statutory rules, which was not however enacted. Nearly 20 years later in 1955, the Royal Commission on The Taxation of Profits and Income (Cmd 9474) set out what it believed to be the practice which the Revenue followed and claimed to derive from the few statutory rules existing and from decided cases. This included a principle that: A man who has been regularly resident in the United Kingdom and has then gone abroad may or may not be treated as a visitor if he comes back again at any time. That depends primarily on the question whether the circumstances in which he went abroad indicate a clear break with the United Kingdom as his place of ordinary residence. (paragraph 290) The Commission, quoting the 1936 reports words set out above, agreed that the state of affairs was unsatisfactory. It suggested as the remedy a printed leaflet which sets out at any rate the main lines of the Revenue Departments established practice, and went on to say that: . fixed rules would simplify the work of administration even if they worked unreasonably in some instances. But it is one of the arguments against the existing system that it does lead to the devotion of a great deal of time and skill to considering and adjudicating upon individual cases, whereas the establishment of certain fixed rules would make this unnecessary without giving any individual a serious cause of complaint. Indeed we think that the visitor or potential visitor would normally prefer certainty to the assurance that there will be the fullest consideration of his personal circumstances. (paragraph 292) By 1961 separate visitors and permanent residence leaflets were in existence, and steps were begun to bring into existence the single guidance which became the first edition of IR20 in 1973. The Preface to IR20 has since 1992 started with the statement that: The notes in this booklet reflect the law and practice at the time of writing. They are not binding in law and do not affect rights of appeal about your own tax. You should bear in mind that the booklet offers general guidance on how the rules apply, but whether the guidance is appropriate in a particular case will depend on all the facts of that case. Until 1996 it went on: From 1996, it read: You should therefore always consult an Inland Revenue Tax Office on how the rules apply in your own case . If you have any difficulty in applying the rules in your own case, you should consult an Inland Revenue Tax Office . This change followed from the introduction in April 1996 of self assessment, representing a major shift in the responsibilities of taxpayers, who from then on had to determine for themselves in the first instance whether or not they were ordinarily resident for tax purposes. However, it is not, I understand, suggested that the change is critical to the outcome of the present appeals in any year. Paragraph 1.1 of IR20 notes that the terms residence and ordinary residence are not defined in the Taxes Acts, but states that: The guidelines to their meaning in this Chapter and in Chapters 2 . and 3 . are largely based on rulings of the courts. This booklet sets out the main factors that are taken into account, but we can only make a decision on your residence status on the facts in your particular case As Moses LJ underlined in paras 17 to 25 of his judgment, HMRC has given, both by the language of paragraphs 2.2 to 2.9 and expressly in the present proceedings (para 70 above), a binding and lawful assurance that it will treat a taxpayer, whose case falls within the circumstances described, as not resident and not ordinarily resident. The significance of the words quoted above from the Preface and paragraph 1.1 is to show that the guidance is meant to reflect the law and practice, and to set out the main factors and that, although it is not binding in law and does not affect a taxpayers right of appeal, it was and is intended to obviate any need for a taxpayer to look further. As HMRC itself put the matter, in writing to PriceWaterhouseCoopers about Mr Daviess and Mr Jamess positions on 14 March 2005: it is generally accepted that some of the practices outlined in IR20 are relaxations from the strict position. Not all these relaxations are covered in Extra Statutory Concessions (ESCs). Parliamentary Draftsmen did not draw up the IR20 notes, as they are simply general guidance. Therefore it is not appropriate to seek to construe this general guidance as if it were statute law. On the other hand we do consider ourselves bound to follow the practices outlined in IR20. Therefore if your clients circumstances place them within IR20 2.2, or 2.7 etc we will accept the non resident (NR) claim. This conclusion would apply even if a strict interpretation of the law suggested otherwise. Moses LJ correctly identified each of paragraphs 2.2 to 2.9 in the 1999 version as requiring at the outset not merely a departure from the United Kingdom, but satisfaction of a further qualification (in addition to the later provisos relating to the duration of absence from and of visits to the United Kingdom). In the case of paragraph 2.2, the further qualification was that he must have left to work full time; no more, and in particular no severance of any family and social ties within the United Kingdom, was required (para 43). But, in the case of paragraphs 2.7 to 2.9, he held that severance of ties had to be demonstrated, because (para 44) The adverbs permanently or indefinitely make, as a matter of construction, all the difference. The extent to which a taxpayer retains social and family ties within the United Kingdom must have a significant and often dispositive impact on the question whether a taxpayer has left permanently or indefinitely (for at least three years). It makes no sense to construe leave when qualified by the adverbs permanently or indefinitely as referring to the process of going abroad. They clearly require consideration of the quality of the absence and contrast with 2.1 . Moses LJ considered that this interpretation was supported both by the contrast with paragraph 2.1 (short absences) and by the reference in paragraph 2.8 to the need, if you continue to have property in the UK for your use, for evidence that the reason is consistent with your stated aim of living abroad permanently or for three years or more. To my mind, however, the references in paragraphs 2.7 and 2.8 to going abroad permanently or to live outside the UK for three years or more and to a stated aim of living abroad permanently or indefinitely are directed most obviously to the taxpayers intention regarding the overall duration of his or her absence, rather than to the quality of absence or the nature of any return visits or continuing British connections. Further, it is clear that the words Leaving the UK permanently or indefinitely cannot and do not precisely or accurately reflect all the paragraphs above which they appear. Thus, the only requirements under the first part of paragraph 2.9 are (i) going abroad (ii) for a settled purpose, which is expressly defined to include a fixed object or intention in which you are going to be engaged for an extended period of time. That paragraph, reflecting Reed v Clark [1986] Ch 1, is again focused on the taxpayers intention when going abroad; and a settled purpose to engage in an overseas activity for an extended period of time may clearly exist without any intention to stay overseas either permanently or indefinitely. As in Reed v Clark, therefore, a taxpayer may have a settled purpose simply to remain outside the United Kingdom for one tax year. When paragraph 2.9 starts with the phrase If you do not have this evidence, this cannot mean that paragraph 2.9 only applies as a sort of long stop, when a taxpayer is asserting that his intention was to go abroad permanently or indefinitely, but when he cannot prove this but can prove some more limited settled purpose. To that extent, I disagree with Moses LJs description of paragraph 2.9 as designed to assist taxpayers who lack evidence (para 50), a description which may have been based on a partial concession below (para 51) which cannot however be sustained. In my opinion, paragraph 2.9 is designed to assist taxpayers who never intended to leave permanently or indefinitely, but can show a settled purpose of lesser duration. The second part of paragraph 2.9 deals likewise with situations where there was neither an intention to go abroad permanently or indefinitely nor, additionally, any settled purpose. It covers two possibilities: one that the taxpayer can subsequently say and show that he has now acquired an intention to leave the United Kingdom permanently (or, one would presume though this is not expressed, for three years or more); the other that his actual absence covers three years from departure. This second possibility looks on its face at the period for which he is abroad, again without focusing on the quality of absence. Paragraph 2.1 in my view also lends no real support to HMRCs case. It focuses on persons who usually live in this country and only go abroad for short periods for example, on holiday or on business trips. Not only does this leave open what is meant under IR20 by usually living here, but the reference to only going abroad for short periods cannot be regarded as matching either Mr Gaines Coopers or Mr Daviess and Mr Jamess lifestyles during the relevant periods, and is consistent with an analysis whereby persons spending less than 91 days here within the terms of paragraphs 2.2 onwards are not treated as ordinarily resident. What is also worth note is the use throughout chapter 2 of words such as go abroad, leave and departure interchangeably in relation to short and long term absence. It is impossible to derive from any of them any message as to the quality of the absence required for cessation of United Kingdom residency. Reference was made to a short check sheet (Notes on Non residence) issued by HMRC to persons making tax returns, which included from the tax year 2000 01 a question 2A, asking Have you left the UK? with a note: Even if you make frequent trips abroad in the course of your employment, you will not have left the UK if you usually live in the UK, and your home and settled domestic life remain here, If NO, you are resident in the UK . This was introduced after a number of long distance lorry drivers based in, but driving overseas for substantial periods from, the United Kingdom made claims to be not ordinarily resident here. One would have thought that such claims were self evidently not admissible, on the basis that part of such drivers work must have taken place in the United Kingdom, eg when they collected and returned vehicles or tractors. Question 2A recognises this by its reference to making frequent trips abroad in the course of your employment. It does not address persons who worked basically abroad, although sometimes coming here on business. In any event, it does not form part of IR20, and it has not been relied upon by HMRC as qualifying whatever IR20 may mean. It follows from what I have already said that I do not find in the express terms of paragraph 2 of IR20, or in particular in the words permanently or indefinitely, direct support for any requirement for a distinct break. Looking at the matter more broadly, it would seem to me remarkable that, if any such requirement were intended, it was not clearly expressed. The guidance is intended to be useful as well as reliable. A requirement for a distinct break from family and social ties in the United Kingdom would certainly be a main factor (see paragraph 1.1). It and its uncertainty would also be matters of obvious concern to many taxpayers. How (for example) does one demonstrate a distinct break from family ties, in a world where spouses or partners may live and work in different countries, but meet regularly in one or the other? This is highlighted by a point made by Moses LJ after he had referred to section 334 of ICTA 1988 and to case law including Levene v Inland Revenue Comrs [1928] AC 217, The Comrs of Inland Revenue v Combe (1932) 17 TC 405, Revenue and Customs Comrs v Grace [2009] STC 2707 and Reed v Clark. He said (para 53): While IR20 is designed to guide and simplify, I cannot accept that it provides a warrant for ignoring so obvious a factor [as the need for a distinct break] for determining whether a taxpayer hitherto resident and ordinarily resident in the UK has ceased to be so and has left permanently or indefinitely. Yet HMRC now suggests that the existence of so obvious a factor was left to inference from what appear, at best, very opaque clues. Moses LJ regarded the statutory and case law position as confirming his view that a distinct break was required. He said (para 52): I am confirmed in that view by the objective of IR20 stated in the opening words of the preface, that it is designed to reflect the law. It would, therefore, be surprising if IR20 had the effect of contradicting established jurisprudence. In my opinion, it is wrong to start with the premise that IR20 was designed to reflect the law as a court would interpret it apart from IR20 and Revenue practice; and also wrong to assume a knowledge of the case law as background to the construction of IR20. The purpose of IR20 was to reflect the law and practice. It was addressed to individual taxpayers, and, even if they might often have professional advisers, those advisers would be very likely to be, as Mr Daviess and Mr Jamess were, accountants rather than lawyers, and correspondingly interested in HMRCs understanding and practice rather than prepared to attempt exhaustive analysis of legal authority. These points are underlined, rather than undermined, by Miss Simler QCs submission that there is nothing in IR20 to suggest that there is likely to be any divergence from the law. To the extent that that is so, it confirms that, even if he were interested in the legal position apart from Revenue understanding and practice, a taxpayer or professional adviser need look no further than IR20. It follows that the terms of IR20 should be read as independent of any conclusion to which a strict interpretation of the law might lead: see HMRCs letter dated 14 March 2005 (para 87 above). A degree of simplification brought about by fixed rules, in place of a difficult judgment as to whether the circumstances indicated a clear break with the United Kingdom as his place of ordinary residence, is indeed precisely what the Royal Commission on The Taxation of Profits and Income encouraged in 1955 (para 84 above). The aim and function of IR20 in this respect is demonstrated by consideration of the further conditions of chapter 2. In addition to the requirements already discussed, a taxpayer seeking to take advantage of paragraphs 2.7 to 2.9 must satisfy two conditions relating to duration of absence from and visits to the United Kingdom. As I have already stated (para 75 above), the first (absence totalling less than 183 days in a tax year) was clearly inspired by the provisions of section 336(1)(b), delimiting what counts as temporary residence in the United Kingdom. The second (an average of less than 91 days a tax year in the United Kingdom) has no statutory basis. It is a condition introduced by HMRC to enable a taxpayer to know where he stands in HMRCs eyes. It is there, on its face, as a measure of the degree of separation from the United Kingdom which HMRC will in practice accept as sufficient to avoid ordinary residence here. The further references in paragraph 2.8 to the exclusion from this 91 day average period of days spent here due to exceptional circumstances such as the illness of yourself or a member of your immediate family do not fit with an expectation of a distinct break of social or family ties with the United Kingdom. The reference in all versions of IR20 from November 1993 on to a person being able to have property available for use in the United Kingdom during his visits here also militates against a requirement of a distinct break. IR20 should in this connection be read on its own terms, independently of the statutory or common law background to that reference. There is here, however, a minor paradox, since the October 1992 version contains a contrary reference, reflecting the law as it was prior to the Finance Act 1993 which introduced section 336(3) into ICTA 1988 for the tax year 1993 94 (para 74 above). Mr Gaines Cooper had property available for his use in the United Kingdom at all material times. In relation to the tax year 1993 94 he cannot simply rely on IR20, he must rely upon it as (notionally) supplemented by section 336(3). However, HMRC did not in its submissions identify this as a specific problem for Mr Gaines Cooper in relation to the tax year 1993 94, and I will put it on one side for the moment. Moses LJ found support in paragraph 1.4 for his view that a value judgment was necessary as to whether there had been a direct break (para 53). That the guidance in paragraph 1.4 is correct is clear. But it says, to my mind, nothing about whether such a value judgment is necessary under paragraphs 2.7 to 2.9. In particular, it is obvious that, if a person falls automatically to be treated as ordinarily resident here if he or she spends 91 days or more here, he or she may well be ordinarily resident in one or two other countries in the same tax year, whether on the basis of an equivalent 91 day rule there or for more general reasons. It does not follow that compliance with the express requirement and conditions of paragraphs 2.7 to 2.9 may not be sufficient to ensure that a person is not ordinarily resident here. Ward LJ appears to have concluded (paras 118 119) that the appellants each had an unarguably strong case for claiming to be ordinarily resident abroad under IR20. But he went on to say that the principle of case law recognised in Viscount Cave LCs dictum in Levene v Inland Revenue Comrs [1928] AC 218, 233, that a man may reside in more than one place, entitled HMRC to look for a clear or clean break with this country. That is once again to make the error of applying the case law, rather than the terms of IR20. In so far as paragraph 1.4 reflects a similar principle, it must be read not as watering down the categorical guidance as to situations of non residence given in chapter 2, but consistently with that guidance in the way which I have indicated in the previous paragraph. It is submitted on behalf of HMRC that all that the specific 91 day rule does is identify a limit which HMRC applies to persons who would or might otherwise be able to show that they are not ordinarily resident (ie by having made a distinct break with United Kingdom ties). It is an upper limit above which HMRC will not accept absence of ordinary residence, but keeping below that limit does not indicate or point to an absence of ordinary residence. The word providing used in paragraphs 2.8 and 2.9 of the 1999 version is particularly relied upon. The language used in IR20 is however variable. In previous versions of paragraph 2.8 (see the versions of paragraph 2.7 quoted in paras 73 and 74 above) and in paragraph 2.7, words such as as long as and if were and are used, and the limit is clearly expressed as a condition of entitlement in paragraphs 2.2 and 2.6 dealing with persons with full time employment outside the United Kingdom and their accompanying spouses. It is of course HMRCs case that a distinction is to be drawn between paragraphs 2.2 to 2.6 and later paragraphs, but to my mind the distinction rests on weak foundations in so far as it is based on such terminological differences. The natural meaning to a potential taxpayer of all relevant paragraphs of the guidance is, as I see it, that, as long as he confines his presence within the United Kingdom to less than 183 days in any one tax year and less than 91 days average per tax year, and satisfies the other requirements relating to intention and/or years spent abroad, he will qualify as not ordinarily resident. In my opinion, the natural meaning of chapter 2 in all its versions since at least 1993 is that, rather than imply the case law test of a distinct break, they introduced (and for public law purposes substitute) a series of specifically delineated cases, into which, if a taxpayer falls, he or she will be treated without more as not resident or ordinarily resident in the United Kingdom. I repeat that the suggestion that the distinct break test is implicit in the language of paragraphs 2.5 to 2.9 (though not in that of paragraph 2.2) appears to me remarkable in the light of the obvious importance of such a factor if it were envisaged. Paragraphs 2.5 to 2.9 of IR20 are essentially futile, indeed positively misleading, if they are read as incorporating or reiterating the difficult case law test of a distinct break, and moreover imposing a further specific restriction (a 91 day average limit) to the taxpayers disadvantage. I appreciate that, in all the appellants cases, the view may be taken that it is desirable and appropriate that HMRC should be able to tax as ordinarily resident persons with the life style and connections with the United Kingdom of these appellants. That is a moral or fiscal judgment, which may well reflect the strict law (and evidently does so in the case of Mr Gaines Cooper). But it does not follow that it is the conclusion to be drawn from the guidance in IR20 which HMRC issued, in the interests of good governance, clarity and transparency for the benefit of individuals, to explain the combination of the law and practice by reference to which such individuals could direct their affairs. I would therefore allow these appeals, so far as they concern the correct interpretation of IR20. It seems to me to follow from the assurance given by HMRC in these proceedings (para 70 above) that there should be a declaration that HMRC should treat the appellants in respect of the relevant tax years (save perhaps 1992 93, on which I would be prepared to hear any further specific submissions) in accordance with that interpretation of IR20. I did not find in Mr Eadies submissions any good reason to the contrary. Since writing this judgment, I have had the benefit of reading Lord Wilsons judgment. My own view, as will be apparent from what I have already written, is that to treat IR20 as pregnant with the detailed implications listed in para 45 (or, in summary, as informing an ordinarily sophisticated taxpayer of a need for a multifactorial evaluation of his or her circumstances and for a distinct break) runs contrary not only to the wording and sense of the document itself but also to its genesis and purpose: paras 83 87 above; so also, to treat IR20 as so unclear as to communicate nothing to which legal effect can be given on the means by which non resident status might be acquired. Practice It is in these circumstances unnecessary to go into the secondary issue regarding HMRCs practice prior to 2005, when the issues relating to the appellants first crystallised. Whether the appellants can show a clear and unequivocal practice is in issue, as are potentially how far it would be necessary to establish any general or particular knowledge of or reliance on such a practice and how far they could hold HMRC to such a practice as a matter of legitimate expectation. These are all matters into which I prefer not to go. Conclusion I would allow these appeals, on the primary issue of interpretation of IR20 and make the declaration to which I have referred in para 101.

In 1999 the Inland Revenue [now known as Her Majestys Revenue and Customs, HMRC] published a booklet known as IR20 and entitled Residents and Non Residents Liability to tax in the United Kingdom, which offered general guidance on the word residence and the phrase ordinary residence for the purposes of an individuals liability for UK income and capital gains tax. IR20 remained operative until 2009. The Appellants contend that, on its proper construction, IR20 contained a more benevolent interpretation of the circumstances in which an individual becomes non resident and not ordinarily resident in the UK than did the ordinary law; alternatively that prior to 2005 it was the settled practice of HMRC to adopt such a benevolent interpretation of IR20. Either the construction or the practice gave rise (so they say) to a legitimate expectation that the benevolent interpretation would be applied to determinations of their status for tax purposes and consequently HMRC should not have determined that, during the years relevant to them, they were resident or ordinarily resident in the UK. The First Appellants, Mr Davies and Mr James, contend that prior to 6 April 2001 they left the UK for the settled purpose of establishing and working full time for a Belgian company. Although their wives and Mr Davies daughters remained resident in the UK and although they returned frequently to the UK, albeit for short periods, they contend that they are entitled to be treated as non resident and not ordinarily resident in 2001 2002 by reference to paragraph 2.9 of IR20 since they had gone abroad for a settled purpose and had remained abroad for at least a whole tax year. The situation of the Second Appellant, Mr Gaines Cooper, is different from that of the First Appellants in that it has already been conclusively determined, by reference to the ordinary law, that he was resident and ordinary resident in the UK in the years relevant to him. He contends, however, that his status should instead be determined by reference to paragraphs 2.8 and 2.9 of IR20 or to the alleged settled practice and that, on either basis, he was not resident in the UK from 1993 to 2004 nor ordinarily resident here from 1992 to 2004. The High Court refused the Appellants permission to apply for judicial review of the determinations by HMRC that they were resident and ordinarily resident in the UK in the relevant years. The Court of Appeal granted them permission but dismissed their substantive applications. The Appellants appeal to the Supreme Court. The Supreme Court, by a 4 1 majority, dismisses the two appeals on the grounds that the proper construction of IR20 does not support the Appellants contentions and that there is insufficient evidence of any settled practice on the part of the HMRC by way of departure from the IR20 guidance. Lord Wilson gives the leading judgment; Lords Hope, Walker and Clarke give short concurring judgments. Lord Mance gives a dissenting judgment. An individuals status as being resident and ordinarily resident in the UK largely determines his liability for UK income tax and capital gains tax. In law an individual who has been resident in the UK ceases to be so resident only if he ceases to have a settled or usual abode in the UK per Levene v Inland Revenue Comrs [1928] AC 217 [13 Section 334 of the Income and Corporation Taxes Act 1988 (now replaced) also provided that an individual would nevertheless be deemed to have remained resident in the UK if he had left the UK for the purpose only of occasional residence abroad [15 17]. At law, an individual needs to effect a distinct break in the pattern of his life in the UK in order to become non resident per Reed v Clark [1986] Ch 1 [18 19]; this mandates a multifactorial evaluation of his circumstances [20]. But an individuals pursuit of full time employment abroad is likely to be sufficient to cause him to cease to be a UK resident and not to be deemed under the statute still to be a UK resident [21]. HMRC issued guidance on residence and ordinary residence in IR20. HMRC accepts that it is bound by whatever might be the proper construction of the guidance and that the guidance gave rise to a legitimate expectation that it would appraise any individuals case by reference to such guidance even if it failed to reflect the ordinary law [27]. The First Appellants contend that HMRC represented in IR20 that non residence was achieved if an individual left the UK to take up full time employment abroad, or left the UK permanently or for at least three years, or went abroad for a settled purpose and remained abroad for at least a whole tax year, provided in each case that any visits to the UK totalled less than six months in any one year and averaged less than 91 days each year [the day count proviso] [30]. The Second Appellant contends that HMRC thereby represented that it was sufficient for an individual to live abroad for at least three years and to satisfy the day count proviso, thus eliminating any need for consideration of whether he had effected a distinct break in the pattern of his life in the UK [31]. The majority holds that the proper construction of IR20, when read as a whole, does not support the Appellants contentions [45, 64]. Paragraph 2.1 indicated that an individuals claim to non residence would generate consideration of various aspects of his life with a view to the identification of its usual location [35]. The heading to paragraphs 2.7 to 2.9 namely Leaving the UK permanently or indefinitely required consideration of the quality of his absence from the UK [37]. Paragraph 2.9, which stated that if an individual had gone abroad for a settled purpose, he would be treated as not resident and not ordinarily resident if his absence from the UK had covered at least a whole tax year and he had met the day count proviso, could not be construed as a freestanding route to non residence since there was an express link to paragraph 2.8, which required an individual to leave indefinitely [41]. Although its exposition of how to achieve non residence should have been much clearer, IR20, taken as a whole, informed the ordinarily sophisticated taxpayer that he had to leave the UK permanently, indefinitely or for full time employment; had to do more than to take up residence abroad; and had to relinquish his usual residence in the UK. It also informed him that any subsequent returns to the UK had to be no more than visits and that any property retained in the UK by him for his use had to be used for the purpose only of such visits rather than as a place of residence [45]. He will have concluded that such requirements in principle demanded, and might well in practice generate, a multifactorial evaluation of his circumstances [45, 64] and, in summary, that he had to make a distinct break [45]. Alternatively, IR20 was so unclear as to communicate nothing to which legal effect might be given [47]. The majority holds that there was insufficient evidence that HMRC had departed from IR20 as a matter of settled practice [58]. Such a contention requires evidence that the practice was so unambiguous, so widespread, so well established and so well recognised as to amount to a specific commitment of treatment in accordance with it [49] but the Appellants evidence to this effect was far too thin and equivocal [58]. Lord Mance, dissenting, holds that the references to going abroad permanently or living outside the UK for three years or more in paragraphs 2.7 2.8 referred to the taxpayers intention regarding the duration of his absence rather than the quality of any absence or the nature of any return visits or continuing UK connections [89]. Paragraph 2.9 was designed to assist taxpayers who never intended to leave permanently or indefinitely, but went abroad for a settled purpose to engage in an overseas activity for an extended period of time of lesser duration [89]; or where the taxpayer could subsequently show he had acquired an intention to leave the UK permanently or that his actual absence covered three years from departure [90]. It would be remarkable if there were a requirement for a distinct break from life in the UK when no such requirement was clearly expressed [93] and other factors, including the day count proviso, militated against such a requirement [95; 96].

The Clapham omnibus has many passengers. The most venerable is the reasonable man, who was born during the reign of Victoria but remains in vigorous health. Amongst the other passengers are the right thinking member of society, familiar from the law of defamation, the officious bystander, the reasonable parent, the reasonable landlord, and the fair minded and informed observer, all of whom have had season tickets for many years. The horse drawn bus between Knightsbridge and Clapham, which Lord Bowen is thought to have had in mind, was real enough. But its most famous passenger, and the others I have mentioned, are legal fictions. They belong to an intellectual tradition of defining a legal standard by reference to a hypothetical person, which stretches back to the creation by Roman jurists of the figure of the bonus paterfamilias. As Lord Radcliffe observed in Davis Contractors Ltd v Fareham Urban District Council [1956] AC 696, 728: The spokesman of the fair and reasonable man, who represents after all no more than the anthropomorphic conception of justice, is and must be the court itself. It follows from the nature of the reasonable man, as a means of describing a standard applied by the court, that it would misconceived for a party to seek to lead evidence from actual passengers on the Clapham omnibus as to how they would have acted in a given situation or what they would have foreseen, in order to establish how the reasonable man would have acted or what he would have foreseen. Even if the party offered to prove that his witnesses were reasonable men, the evidence would be beside the point. The behaviour of the reasonable man is not established by the evidence of witnesses, but by the application of a legal standard by the court. The court may require to be informed by evidence of circumstances which bear on its application of the standard of the reasonable man in any particular case; but it is then for the court to determine the outcome, in those circumstances, of applying that impersonal standard. In recent times, some additional passengers from the European Union have boarded the Clapham omnibus. This appeal is concerned with one of them: the reasonably well informed and normally diligent tenderer. The reasonably well informed and diligent tenderer The RWIND tenderer, as he has been referred to in these proceedings, was born in Luxembourg. He owes his existence to the EU directives concerned with public procurement. For present purposes, the most significant directive is Directive 2004/18/EC of 31 March 2004 on the coordination of procedures for the award of public works contracts, public supply contracts and public service contracts (OJ L 134, 30 April 2004, p 114). The background to the Directive, as explained in the second recital to the preamble, is that the award of contracts by public authorities in the member states is subject to the principles of freedom of movement of goods, freedom of establishment and freedom to provide services, and to other principles derived from those, such as the principles of equal treatment, non discrimination, mutual recognition, proportionality and transparency. In particular, as explained in the forty sixth recital: Contracts should be awarded on the basis of objective criteria which ensure compliance with the principles of transparency, non discrimination and equal treatment and which guarantee that tenders are assessed in conditions of effective competition. To ensure compliance with the principle of equal treatment in the award of contracts, it is appropriate to lay down an obligation established by case law to ensure the necessary transparency to enable all tenderers to be reasonably informed of the criteria and arrangements which will be applied to identify the most economically advantageous tender. These general principles are reflected in the requirements laid down in Directive 2004/18. In particular, article 2 requires that contracting authorities shall treat economic operators equally and non discriminatorily and shall act in a transparent way. Article 41 entitles unsuccessful candidates to be informed of the reasons for the rejection of their applications. Article 53 sets out requirements governing the disclosure of the criteria for the award of public contracts. It was in order to articulate the standard of clarity required in this context by the principle of transparency that the European Court of Justice invoked the RWIND tenderer. In the case of SIAC Construction Ltd v County Council of the County of Mayo (Case C 19/00) [2001] ECR I 7725, where there was a disagreement between the parties as to the interpretation of tender documents, the court stated: 41. Next, the principle of equal treatment implies an obligation of transparency in order to enable compliance with it to be verified (see, by analogy, Case C 275/98 Unitron Scandinavia and 3 S [1999] ECR 1 8291, paragraph 31). More specifically, this means that the award criteria must be formulated, in the contract documents or the contract notice, in such a way as to allow all reasonably well informed and normally diligent tenderers to interpret them in the same way. In that passage, the court explained what the legal principle of transparency meant in the context of invitations to tender for public contracts: the award criteria must be formulated in such a way as to allow all RWIND tenderers to interpret them in the same way. That requirement set a legal standard: the question was not whether it had been proved that all actual or potential tenderers had in fact interpreted the criteria in the same way, but whether the court considered that the criteria were sufficiently clear to permit of uniform interpretation by all RWIND tenderers. The objective nature of the standard to be applied also appears from the opinion of Advocate General Jacobs in the same case: The national court should take into consideration not merely the literal terms of the contract documents but also the way in which they may be presumed to be understood by a normally experienced tenderer (para 51: emphasis supplied). That the standard is objective also appears from the opinion of Advocate General Sharpston in Lmmerzahl GmbH v Freie Hansestadt Bremen (Case C 241/06) [2008] 1 CMLR 462. The case concerned another directive which is relevant to the present appeal, namely Directive 89/665/EEC of 21 December 1989 on the coordination of the laws, regulations and administrative provisions relating to the application of review procedures to the award of public supply and public works contracts (OJ L 395, 30 December 1989, p 33). Article 1 of the Directive requires member states to take the measures necessary to ensure that: as regards contracts falling within the scope of Directive 2004/18/EC, decisions taken by the contracting authorities may be reviewed effectively and, in particular, as rapidly as possible in accordance with the conditions set out in articles 2 to 2f of this Directive, on the grounds that such decisions have infringed Community law in the field of public procurement or national rules transposing that law. The issue in the case was whether a national time limit for the bringing of proceedings was compatible with Directive 89/665. The time limit started to run if the alleged irregularity was identifiable on the basis of the tender notice. The Advocate General posed the question as to what was the degree or nature of knowledge of an irregularity which might be attributed to a tenderer without breaching the effectiveness principle underlying Directive 89/665. She observed: 66. It seems to me that a requirement of actual, or subjective, knowledge on the part of the tenderer would run counter to legal certainty. Furthermore, in circumstances such as those of the present case, it could be difficult to prove that a tenderer had actual knowledge of an irregularity, and a requirement of such proof would hardly be consistent with the need for a rapid review process. 67. It therefore seems preferable to formulate the test in terms of a standard of deemed, or objective, knowledge. The court already applies an objective standard in respect of tenderers' ability to interpret award criteria against the yardstick of equality of treatment in public procurement, namely the ability of a reasonably well informed and normally diligent tenderer. The same formula seems appropriate in the context of what knowledge of an irregularity in the tender procedure it is reasonable to deem a tenderer to possess. As the Advocate General noted in that passage, the yardstick of the RWIND tenderer is an objective standard applied by the court. An objective standard of that kind is essential in order to ensure equality of treatment, as the court explained in SIAC. In addition, as the Advocate General explained, such a standard is consistent with legal certainty: something which would be undermined by a standard which depended on evidence of the actual or subjective ability of particular tenderers to interpret award criteria in a uniform manner. Furthermore, to require proof of the subjective understanding of tenderers would be inconsistent with the need for review to be carried out as rapidly as possible, as required by article 1 of Directive 89/665. The latter requirement has also been emphasised by the Court of Justice: see for example Universale Bau AG v Entsorgungsbetriebe Simmering GmbH (Case C 470/99) [2002] ECR I 11617, para 74. Judgments of the Court of Justice subsequent to SIAC are consistent with this approach. An example is the case of EVN AG v Austria (Case C 448/01) [2003] ECR I 14527, which concerned the award of a contract for the supply of electricity. The invitation to tender required tenderers to state the amount of electricity which could be supplied from renewable sources. It was contended by an unsuccessful tenderer that that requirement lacked the transparency required by the predecessor directive to Directive 2004/18, because there was a failure to specify the period of time in respect of which the amount that could be supplied was to be stated. The Court of Justice said: 56. It is clear from the court's case law that the procedure for awarding a public contract must comply, at every stage, with both the principle of the equal treatment of potential tenderers and the principle of transparency so as to afford all parties equality of opportunity in formulating the terms of their tenders (see, to that effect, Universale Bau, paragraph 93). 57. More specifically, this means that the award criteria must contract documents or the contract be formulated, in the notice, in such a way as to allow all reasonably well informed tenderers of normal diligence to interpret them in the same way (SIAC Construction, paragraph 41). 58. Consequently, in the case at issue in the main proceedings, the fact that in the invitation to tender the contracting authority omitted to determine the period in respect of which tenderers had to state in their tenders the amount of electricity from renewable energy sources which they could supply could be an infringement of the principles of equal treatment and transparency were it to transpire that that omission made it difficult or even impossible for tenderers to know the exact scope of the criterion in question and thus to be able to interpret it in the same way. 59. Inasmuch as that requires a factual assessment, it is for the national court to determine, taking account of all the circumstances of the case, whether, despite that omission, the award criterion at issue in the main proceedings was sufficiently clearly formulated to satisfy the requirements of equal treatment and transparency of procedures for awarding public contracts. The rationale of the standard of the RWIND tenderer is thus to determine whether the invitation to tender is sufficiently clear to enable tenderers to interpret it in the same way, so ensuring equality of treatment. The application of the standard involves the making of a factual assessment by the national court, taking account of all the circumstances of the particular case. The standard of the RWIND tenderer has been applied by the Court of Justice and the General Court in a number of cases in which those courts have themselves had to determine whether tender documents complied with the standard. An example is the case of Commission of the European Communities v Netherlands (Case C 368/10) [2012] 3 CMLR 234, which concerned the compatibility with Directive 2004/18 of a tender specification for drinks machines which contained generally expressed requirements relating to sustainability. The court stated: 109. The principle of transparency implies that all the conditions and detailed rules of the award procedure must be drawn up in a clear, precise and unequivocal manner in the notice or contract documents so that, first, all reasonably informed tenderers exercising ordinary care can understand their exact significance and interpret them in the same way and, secondly, the contracting authority is able to ascertain whether the tenders submitted satisfy the criteria applying to the relevant contract 110. As the Advocate General stated in point 146 of her opinion, it must be held that the requirements relating to compliance with the criteria of sustainability of purchases and socially responsible business and the obligation to contribute to improving the sustainability of the coffee market and to environmentally, socially and economically responsible coffee production are not so clear, precise and unequivocal as to enable all reasonably informed tenderers exercising ordinary care to be completely sure what the criteria governing those requirements are. The same applies, and all the more so, in relation to the requirement addressed to tenderers that they state in their tender in what way [they] fulfil those criteria or in what way [they] contribute to the goals sought by the contracting authority with regard to the contract and to coffee production, without precisely indicating to them what information they must provide. In that case, as in other direct actions where the RWIND tenderer test has been applied (such as Evropaki Dynamiki Proigmena Systimata Tilepikoinonion Pliroforikis kai Tilematikis AE v Commission of the European Communities) (Case T 59/05) (unreported) 10 September 2008 and Evropaki Dynamiki Proigmena Systimata Tilepikoinonion Pliroforikis kai Tilematikis AE v European Maritime Safety Agency (EMSA) (Case T 70/05) [2010] ECR II 313), the court arrived at its conclusion on the basis of its consideration of the relevant documents, without requiring evidence as to the interpretation placed on the documents by actual or potential tenderers. The provision of reasons As I have explained, article 41 of Directive 2004/18 imposes on contracting authorities a duty to inform any unsuccessful candidate, on request, of the reasons for the rejection of his application. Guidance as to the effect of that duty can be found in the judgment of the Court of First Instance in Strabag Benelux NV v Council of the European Union (Case T 183/00) [2003] ECR II 138, paras 54 58, where the court stated (para 54) that the obligation imposed by an analogous provision was fulfilled if tenderers were informed of the relative characteristics and advantages of the successful tenderer and the name of the successful tenderer. The court continued (para 55): The reasoning followed by the authority which adopted the measure must be disclosed in a clear and unequivocal fashion so as, on the one hand, to make the persons concerned aware of the reasons for the measure and thereby enable them to defend their rights and, on the other, to enable the court to exercise its supervisory Jurisdiction. The Court of Justice stated in Evropaki Dynamiki Proigmena Systimata Tilepikoinonion Pliroforikis kai Tilematikis AE v Commission of the European Communities (Case C 561/10 P), judgment of 20 September 2011 (unreported), paras 25 and 27, that the contracting authority is not obliged to produce a copy of the evaluation report or to undertake a detailed comparative analysis of the successful tender and of the unsuccessful tender. The present case The present case concerns a tendering process carried out by the respondent in 2010 in respect of the provision of medical services to health authorities in Scotland. The appellant was the existing supplier of the services in question, but was unsuccessful in a tender competition for a replacement contract. It challenged that decision on the ground that the respondent had breached certain of its duties under the Public Contracts (Scotland) Regulations 2006 (SSI 2006/1), which implemented Directives 89/665 and 2004/18. In particular, it complained that the criteria in the invitation to tender were insufficiently clear, and that the reasons given to it for the rejection of its tender were unclear and lacking in detail. Following an eight day proof, at which the appellant adduced evidence from a number of witnesses to the effect that they had not understood the criteria in the same way as the successful tenderer, the appellants case was rejected by the Lord Ordinary, Lord Hodge: [2012] CSOH 75. In relation to the clarity of the criteria, he expressed the opinion that it was unrealistic to require a contracting authority to frame its invitation to tender in such detail that two reasonable people could not reach different views on its interpretation. He noted that there were practical limits to the extent to which a contracting authority could spell out every aspect of what its criteria might entail, and stated that it was implicit in the RWIND tenderer test that the court should ask what would have been reasonably foreseeable by a RWIND tenderer as being encompassed by the stated criteria. Applying that objective approach to the invitation to tender, in the light of evidence as to the relevant context, he concluded that the criteria met the required standard of clarity. In relation to the reasons given, he applied the approach which I have described in paragraph 17 in the light of the evidence, and concluded that the reasons which had been given were adequate: the appellant could have been left in no real doubt as to why it had been unsuccessful, and as to the relative characteristics and advantages of the successful tenderer. The appellant was able to assert its rights before the courts. An appeal to the Inner House was refused, for reasons set out in an opinion delivered by the Lord Justice Clerk, Lord Carloway: [2013] CSIH 22; 2013 SC 411. In his opinion, the Lord Justice Clerk recalled what the Court of Justice had said about the requirement of transparency in SIAC, namely that the test was whether the invitation to tender had formulated the criteria in such a way as to allow all reasonably well informed and normally diligent tenderers to interpret them in the same way (para 52). He observed (para 57): The criteria must be formulated in such a manner as to allow all reasonably well informed and diligent tenderers to interpret them uniformly. If such a tenderer could, understandably and plausibly have construed the criteria in different ways then the criteria must be deemed insufficiently transparent. However, that is a long way from a proposition that the mere fact that a tenderer, who might normally be regarded as reasonably well informed and diligent, construed the criteria in his own particular way is destructive of the process. For such an outcome, the court has to be satisfied that the interpretation was open to the hypothetical tenderer and not simply that the unsuccessful tenderer had been reasonably well informed and diligent and in fact reached that interpretation. The Lord Justice Clerk also observed that it was relevant to consider what the hypothetical RWIND tenderer would have anticipated was entailed by the criteria, but expressed doubt as to whether it was useful or appropriate to employ in this context the concept of reasonable foreseeability: a concept which appeared to add nothing to the established jurisprudence in this field but which, because of its familiarity in other branches of the law, might cause confusion in this context. In the appeal to the Inner House, counsel for the appellant founded on evidence which had been led before the Lord Ordinary as to witnesses understanding of the invitation to tender. Counsel sought to rely on the evidence in order to establish how a RWIND tenderer would have understood the criteria in question. The Lord Justice Clerk considered however that the attempt to establish by evidence how the RWIND tenderer would have understood the criteria was misguided (para 60). The Lord Justice Clerk also observed that it was of considerable importance that decisions of the courts on the validity of a tendering process were taken with all due expedition, so that the parties could know, without delay, whether or not the contract was going to proceed. Unless there was a strong reason to suppose that it would cause injustice, such decisions ought to be capable of being taken in the absence of detailed oral testimony. If it were otherwise, a swift decision would be almost impossible. In relation to the adequacy of the reasons given, the Inner House followed the same approach as the Lord Ordinary and arrived at the same conclusion. The appeal In its appeal to this court, the appellant challenges the conclusions reached by the courts below both in relation to the clarity of the tender criteria and in relation to the adequacy of the reasons given for the rejection of its tender. In relation to the tender criteria, the appellant submits that the Inner House erred in treating the RWIND tenderer as a hypothetical construct, and in applying the RWIND tenderer standard not according to the evidence of witnesses as to what an actual tenderer did or thought, but according to the courts assessment of what a hypothetical RWIND tenderer would have done or thought. The evidence of witnesses from an actual tenderer as to their understanding of the tender criteria, far from being irrelevant, established what RWIND tenderers actually understood, unless it were shown that the witnesses were not reasonably well informed or normally diligent. The courts below had, it was submitted, confused the RWIND tenderer test with the interpretation of a contract: an objective test was appropriate in the latter context, but not in the former. For the reasons I have explained at paragraphs 2 3 and 7 12, these submissions are in my view ill founded. I agree with the way in which this issue was dealt with by the Lord Justice Clerk: The court's decision will involve it placing itself in the position of the reasonably informed tenderer, looking at the matter objectively, rather than, as occurred here to a degree, hearing evidence of what such a hypothetical person might think Although different from an orthodox exercise in contractual interpretation, the question of what a reasonably well informed and normally diligent tenderer might anticipate or understand requires an objective answer, albeit on a properly informed basis. Just like those other juridical creations, such as the man on the Clapham omnibus (delict) or the officious bystander (contract), the court decides what that person would think by making its own evaluation against the background circumstances. It does not hear evidence from a person offered up as a candidate for the role of reasonable tenderer. In a disputed case, the court will, no doubt, need to have explained to it certain technical terms and will have to be informed of some of the particular circumstances of the terms or industry in question, which should have been known to informed tenderers. However, evidence as to what the tenderers themselves thought the criteria required is, essentially, irrelevant. (para 60) As the Lord Justice Clerk made clear, evidence may be relevant to the question of how a document would be understood by the RWIND tenderer. The court has to be able to put itself into the position of the RWIND tenderer, and evidence may be necessary for that purpose: for example, so as to understand any technical terms, and the context in which the document has to be construed. But the question cannot be determined by evidence, as it depends on the application of a legal test, rather than being a purely empirical enquiry. Although, as counsel for the appellants emphasised, the question is not one of contractual interpretation the issue is not what the invitation to tender meant, but whether its meaning would be clear to any RWIND tenderer it is equally suitable for objective determination. I also agree with the Lord Justice Clerk that it is unnecessary, and potentially confusing, to introduce the concept of reasonable foreseeability in the present context. The Lord Ordinarys reference to reasonable foreseeability did not however lead him into error: in substance, he and the Inner House applied the same objective test by considering what a RWIND tenderer would have understood as being encompassed or entailed by the terms of the invitation to tender. Counsel for the appellant also submitted that the Lord Ordinary and the Inner House had erred in concluding that a number of specific aspects of the invitation to tender complied with the requisite standards of transparency. In each case, the argument was essentially that the court had erred in holding that the meaning of the relevant criterion would have been sufficiently clear to a hypothetical RWIND tenderer, in the light of evidence that it had not been clear to witnesses whose understanding was said to be representative of that of a RWIND tenderer. Once it is accepted, however, that the courts below applied the correct legal test, this court will not readily interfere with the conclusion which they reached in the light of their evaluation of the evidence (cf Biogen Inc v Medeva plc [1997] RPC 1, 45; In re B (A Child) (Care Proceedings: Threshold Criteria) [2013] UKSC 33; [2013] 1 WLR 1911). There is no suggestion that circumstances entitling this court to interfere might exist in the present case, if the principal submission, that the courts below erred in law in their treatment of the evidence in question, were rejected. In these circumstances, it is unnecessary to repeat the analysis carried out by the Inner House. It was also submitted that the courts below had erred in concluding that the reasons given to the appellants for the rejection of their tender were adequate. As I have explained, however, the courts below applied the approach laid down by the Court of Justice. It is not the function of this court to review their findings, in the absence of any error of law in their approach to the evidence or some other recognised ground for interfering with their assessment. Conclusion For these reasons, I would dismiss the appeal.

The present case concerns a tendering process carried out by the respondent in 2010 in respect of the provision of medical services to health authorities in Scotland. The appellant was the existing supplier of the services in question, but was unsuccessful in a tender competition for a replacement contract. The appellant challenged that decision on the ground that the respondent had breached certain of its duties under the Public Contracts (Scotland) Regulations 2006 (SSI 2006/1), which implemented certain EU Directives. In particular, the appellant complained that: (i) the criteria in the invitation to tender were insufficiently clear; and (ii) that the reasons given for the rejection of the tender bid were unclear and lacking in detail. [18] One of the EU Directives implemented by the Regulations is Directive 2004/18/EC of 31 March 2004, which concerns the coordination of procedures for the award of public works contracts, public supply contracts and public service contracts. The Directive seeks to ensure that the award of contracts by public authorities in the member states is subject to the principles of freedom of movement of goods, freedom of establishment and freedom to provide services, and to other principles derived from those, such as the principles of equal treatment, non discrimination, mutual recognition, proportionality and transparency. In particular, article 2 requires that contracting authorities shall treat economic operators equally and non discriminatorily and shall act in a transparent way. Article 41 entitles unsuccessful candidates to be informed of the reasons for the rejection of their applications. The Court of Justice of the European Union (the CJEU) has explained that the principle of transparency requires that that the award criteria for public contracts must be formulated in such a way as to allow all reasonably well informed and normally diligent tenderers [(RWIND tenders)] to interpret them in the same way. [57] The appellants case was rejected by the Outer House of the Court of Session. There, the Lord Ordinary, Lord Hodge, concluded that the award criteria met the required standard of clarity and that the reasons given by the respondent for rejecting the appellants tender were adequate. The appellants appeal to the Inner House of the Court of Session was refused. [1923] The issues before the Supreme Court on the appeal from the Inner House are: (i) in relation to the clarity of award criteria, whether the lower courts erred in treating the RWIND tenderer as a hypothetical construct, based on the courts objective assessment of the appropriate standard of clarity, rather than on the basis of the evidence of witnesses as to what an actual tenderer did or thought; and (ii) whether the lower courts had erred in concluding that the reasons given to the appellants for the rejection of their tender were adequate. The Supreme Court unanimously dismisses the appeal. Lord Reed gives the only judgment, with which the other Justices agree. The courts below applied the correct legal test to assess the clarity of the award criteria. In these circumstances it was not appropriate for the Supreme Court to interfere with the conclusion which they reached in the light of their evaluation of the evidence. Similarly, in assessing the adequacy of reasons given to the appellant, the lower courts applied the approach laid down by the CJEU, and it is not appropriate for the Supreme Court to interfere with their factual findings. Standard of clarity in award criteria When courts refer to the approach of a reasonable person or, in this case, an RWIND tenderer, they are describing an objective legal standard by reference to a hypothetical person. It follows that it would be misconceived for a party to seek to lead evidence from actual persons on how they would have acted in a given situation or what they would have perceived. [23] The decisions of the CJEU and the opinions of Advocates General in a series of cases also make clear that the RWIND tenderer standard is an objective one. The relevant question is not whether it had been proved that all actual or potential tenderers had in fact interpreted the criteria in the same way, but whether the court considered that the criteria were sufficiently clear to permit of uniform interpretation by all RWIND tenderers. An approach which depends on evidence of the actual or subjective understanding of tenderers would undermine the principle of legal certainty and the need that any review of a tender process be carried out as quickly as possible. [716] Reasons given to unsuccessful tenderers The scope of the duty to give reasons for an unsuccessful tender is described by the Court of First Instance in Strabag Benelux NV v Council of the European Union (Case T 183/00). The court stated that the obligation was fulfilled if tenderers were informed of the relative characteristics and advantages of the successful tenderer and the name of the successful tenderer. The lower courts followed this approach and each concluded that the reasons which had been given to the appellant were adequate since the appellant could have been left in no real doubt as to why it had been unsuccessful, and as to the relative characteristics and advantages of the successful tenderer. [19; 23; 30]

The issue in this case is whether the future of two little girls, one now aged four years and two months and the other now aged two years and 11 months, should be decided by the courts of this country or by the authorities in Hungary. Both children were born in England and have lived all their lives here. But their parents are Hungarian and the children are nationals of Hungary, not the United Kingdom. Under article 8.1 of Council Regulation (EC) No 2201/2003, concerning jurisdiction and the recognition and enforcement of judgments in matrimonial matters and the matters of parental responsibility, known as the Brussels II revised Regulation (the Regulation), the primary rule is that jurisdiction lies with the courts of the member state where the child is habitually resident. That would be England in this case. However, an exception is made by article 15, under which those courts can transfer the case to a court in another member state with which the child has a particular connection, if that court would be better placed to hear the case, or part of it, and the transfer is in the best interests of the child. These children have a particular connection with Hungary, as it is the place of their nationality. The issue, therefore, is the proper approach to deciding whether a Hungarian court would be better placed to hear the case and to whether transferring it would be in the best interests of the children. The context in which these questions arise is important. Free movement of workers and their families within the European Union has led to many children living, permanently or temporarily, in countries of which they are not nationals. Inevitably, some of them will come to the attention of the child protection authorities, because of ill treatment or neglect or the risk of it. In the past, the courts in this country might assume that they had jurisdiction simply because of the childs presence here. It is now clear, however, that public law proceedings fall within the scope of the Regulation (see In re C (Case C 435/06) [2008] Fam 27), so that in every case with a European dimension (more properly, a Regulation dimension) the courts of this country have to ask themselves whether they have jurisdiction. Even if they do have jurisdiction, Sir James Munby P has said that in every case they will need to consider whether the case should be transferred to another member state: see In re E (A Child) (Care Proceedings: European Dimension): Practice Note [2014] EWHC 6 (Fam); [2014] 1 WLR 2670, para 31; also Merton London Borough Council v B (Central Authority of the Republic of Latvia intervening) [2015] EWCA Civ 888; [2016] 2 WLR 410, para 84(ii). As the Family Rights Group observe in their helpful intervention, this has led to a remarkable proliferation of case law over the last three years. Hitherto, courts would manage cases with a foreign element by evaluating foreign placement options and deciding upon the best outcome for the child themselves. Now, they may be more inclined to transfer the decision making abroad. One reason for this change in approach may be the concerns voiced in many parts of Europe about the law and practice in England and Wales in relation to what is sometimes referred to as forced adoption (referred to by the President in his judgment in this case: [2015] EWCA Civ 1112; [2016] 2 WLR 713, para 8). Research compiled by the Council of Europe (O Borzova, Social services in Europe: legislation and practice of the removal of children from their families in Council of Europe member states, Report to the Parliamentary Assembly, 2015, Doc 13730) and commissioned by the European Union (C Fenton Glynn, Adoption without Consent, Directorate General for Internal Policies of the EU Parliament, Policy Department C: Citizens Rights and Constitutional Affairs, 2015) shows that other member states do permit adoption without parental consent. However, England and Wales is unusual in permitting parental consent to be dispensed with where the welfare of the child requires this (Adoption and Children Act 2002, section 52(1)(b)) rather than on more precise grounds of parental absence or misconduct. This country is also unusual in the speed and frequency with which it resorts to adoption as the way to provide a permanent home for children who for one reason or another cannot live with their families. The European Court of Human Rights has, however, held our law to be compatible with the right to respect for private and family life, protected by article 8 of the European Convention on Human Rights: YC v United Kingdom (2012) 55 EHRR 967. It goes without saying that the provisions of the Regulation are based upon mutual respect and trust between the member states. It is not for the courts of this or any other country to question the competence, diligence, resources or efficacy of either the child protection services or the courts of another state (see In re M (Brussels II Revised: Article 15) [2014] EWCA Civ 152; [2014] 2 FLR 1372, para 54(v), per Munby P). As the Practice Guide for the application of the Brussels IIa Regulation puts it, the assessment of whether a transfer would be in the best interests of the child should be based on the principle of mutual trust and on the assumption that the courts of all member states are in principle competent to deal with a case (p 35, para 3.3.3). This principle goes both ways. Just as we must respect and trust the competence of other member states, so must they respect and trust ours. Article 15 So far as relevant, article 15 of the Regulation reads as follows: 1. By way of exception, the courts of a member state having jurisdiction as to the substance of the matter may, if they consider that a court of another member state, with which the child has a particular connection, would be better placed to hear the case, or a specific part thereof, and where this is in the best interests of the child: (a) stay the case or the part thereof in question and invite the parties to introduce a request before the court of that other member state in accordance with paragraph 4; or (b) request a court of another member state to assume jurisdiction in accordance with paragraph 5. Paragraph 1 shall apply: (a) upon application from a party; or (b) of the courts own motion; or (c) upon application from a court of another member state with which the child has a particular connection, in accordance with paragraph 3. 2. A transfer made of the courts own motion or by application of a court of another member state must be accepted by at least one of the parties. 3. The child shall be considered to have a particular connection to a member state as mentioned in paragraph 1, if that member state: (c) is the place of the childs nationality; 4. The court of the member state having jurisdiction as to the substance of the matter shall set a time limit by which the courts of that other member state shall be seised in accordance with paragraph 1. If the courts are not seised by that time, the court which has been seised shall continue to exercise jurisdiction in accordance with articles 8 to 14. 5. The courts of that other member state may, where due to the specific circumstances of the case, this is in the best interests of the child, accept jurisdiction within six weeks of their seisure in accordance with paragraph 1(a) or 1(b). In this case, the court first seised shall decline jurisdiction. Otherwise, the court first seised shall continue to exercise jurisdiction in accordance with articles 8 to 14. The courts shall cooperate for the purposes of this article, either directly or through the central authorities designated pursuant to article 53. This case 6. The parents are in their 20s. The father is of Hungarian Roma descent, the mother of mixed Hungarian and Roma descent. The father has two older children, a girl now aged seven and a boy now aged five, half siblings of the children with whom we are concerned. These parents met and began their relationship in 2010. In July 2011, when the mother was pregnant with the older of the two children in this case, whom I shall call Janetta, they travelled to this country. Janetta was born here in January 2012. The family had some contact with the local authority in April and May 2012, because of their accommodation problems, and both the local authority and the Hungarian embassy offered to support their return to Hungary, but in fact they stayed here. Their second child, whom I shall call Ella, was born here in May 2013. The mother had had no ante natal care. The baby was born in the room in which the family were living without any medical assistance. The London Ambulance Service arrived after the baby was born but before the placenta was delivered. They called the police, as the father was reported to be resisting the mother and baby receiving medical attention or being taken to hospital. The family were living in circumstances of extreme squalor, with no food, clothing or bedding seen for either child. Janetta was removed from her parents that same day. Ella was discharged from hospital into foster care when she was eight days old. They were initially placed separately but since 28 May 2013 they have both been living with the same foster carers. The local authority originally applied for an emergency protection order, but this was not pursued because the parents agreed to the children being accommodated by the local authority under section 20 of the Children Act 1989 while an assessment was carried out. The local authority originally arranged for the children to have contact with their parents three times a week; this was reduced to twice a week because the parents often failed to attend or left early; and in February 2014, it was reduced to once a week. Care proceedings were not issued until January 2014 and the first interim care order was made in February. Before beginning the proceedings, the local authority had commissioned assessments of the childrens maternal grandmother and great grandmother in Hungary from Children and Families Across Borders (CFAB). The maternal grandmother was unable to offer a home but the great grandmother had suitable accommodation and was willing to offer the mother and children a home, provided that the father played no part in their lives. At that stage the father did not want his own mother to be assessed as a possible carer. The local authority had also been in touch with the Hungarian Central Authority (HCA), which had, in January 2014, suggested that the solution was for the Hungarian authorities to bring the children back to Hungary, as they were Hungarian citizens and their relatives could keep in contact with them there. Also, if they were to be adopted, only the Hungarian authorities have the right to adopt Hungarian citizen minors. That has been the consistent position of the HCA throughout. At the first hearing in the High Court, the mother, then pregnant with the couples third child, indicated her intention to return to Hungary to have the baby and also to apply for the transfer of the proceedings under article 15. This she duly did and gave birth to a baby boy in March 2014 (she later accepted that her return was in order to avoid care proceedings here in respect of him). At a hearing on 18 March 2014, Holman J declared that the girls were habitually resident here and that is not now in dispute. He adjourned the article 15 application so that there could be some clearer understanding of what arrangements might exist for the transfer of the children themselves to live, whether long term or even during the course of the proceedings, under suitable arrangements in Hungary ([2014] EWHC 999 (Fam), para 12). Accordingly, the allocated social worker visited Hungary in April 2014. She met the mother and the new baby, who were then living with the maternal great grandmother. The great grandmother was adamant that the father would not be allowed near her home, whereas the mother intended to reunite with the father as soon as they could find accommodation in Hungary. The social worker also met with representatives of the HCA and with social care professionals. The mothers application under article 15 came before Sir Peter Singer, sitting as a Deputy Judge of the High Court, on 9 May 2014. At that stage, both the local authority and the childrens guardian were supporting a transfer to Hungary, but only once the requisite assessments had been completed there and a clear recommendation made about the appropriate placement for the girls. By a judgment delivered on 12 May 2014, Sir Peter Singer refused the transfer application, but provided that a further application could be considered after the fact finding hearing listed for 25 June 2014. The purpose of that hearing was to establish whether the facts were such as to meet the threshold for compulsory state intervention in family life, set out in section 31(2) of the Children Act 1989: A court may only make a care order if it is satisfied (a) that the child concerned is suffering, or is likely to suffer, significant harm; and (b) that the harm, or likelihood of harm, is attributable to (i) the care given to the child, or likely to be given to him if the order were not made, not being what it would be reasonable to expect a parent to give to him; or (ii) the childs being beyond parental control. Only if that threshold is crossed can the court go on to consider whether making the order that the local authority seek will best promote the welfare of the child, which is the courts paramount consideration (1989 Act, section 1(1)). Neither parent attended the hearing on 25 June 2014, although both were legally represented. The fathers whereabouts were unknown but the mother had been in touch with her solicitor by telephone. At that stage she accepted 11 of the findings sought by the local authority. Five of these related to the circumstances in which the family were living and the lack of medical attention when Ella was born. Two related to the risk of harm stemming from domestic abuse in the parents relationship and the fathers aggressive and volatile personality. Two related to the parents inconsistent and unsatisfactory contact with, and effective abandonment of, the girls: by the time of the hearing, the mother had not seen them since February and the father had not seen them since March 2014. The last finding was the parents lack of insight into the local authoritys concerns and failure to co operate with attempts to assess them. Hogg J made findings accordingly, which all agreed were sufficient to satisfy the threshold in section 31(2). The hearing to decide what orders to make was planned for September 2014. In August, the social worker discovered that the mother, father and the new baby were all living with the paternal grandmother. The social workers assessment of the paternal grandmother (over the telephone) was negative. There being no viable family placement in Hungary, the local authoritys final care plan, supported by the Childrens Guardian, was that the girls should be adopted. Their current foster parents were being given active consideration as their adopters (and have since been approved as such). Accordingly the local authority issued a further application for a placement order under section 21 of the Adoption and Children Act 2002. This authorises the authority to place a child for adoption without parental consent (it is a separate question whether parental consent to the actual adoption order should be dispensed with). Under section 21(2), a court may not make a placement order unless: the child is subject to a care order, (a) the court is satisfied that the conditions in section 31(2) (b) of the 1989 Act (conditions for making a care order) are met, or the child has no parent or guardian. (c) Thus, unless the child has no parent or guardian, the threshold conditions for state intervention must be met, but they can be met either by the prior making of a care order, or by making the requisite findings in the placement order proceedings, which may (but need not) be contemporaneous with the care proceedings. The hearing listed for September could not proceed because interpreters failed to attend. It was relisted for November 2014. The mothers position was that she wanted to look after the children in Hungary; failing that, she wanted them to live with the paternal grandmother in Hungary; failing that, she wanted them to live with the maternal great grandmother in Hungary; and failing that, for them to be placed in a childrens home in Hungary. The father wanted to look after them with the mother in the paternal grandmothers home; if the parents cohabitation was not acceptable, the children should live with the mother in the maternal great grandmothers home and he would stay in England; in his oral evidence he said that he would stay and work in England, but spend holidays living with the mother and children at the maternal great grandmothers home. The HCA now took the view, apparently based on the CFAB and English social workers assessments, that there was no suitable family member in Hungary; so the children should be placed with a foster parent there, so that they could keep the connection with their parents. The local competent authority would make a decree appointing a guardian and foster parent for them. Two professional colleagues would come to England to escort the children to their foster placement in Hungary. Only the Hungarian authorities had the right to adopt them. The High Court decision The case was tried over five days, from 3 to 7 November 2014, by His Honour Judge Bellamy, sitting as a Deputy High Court Judge. The mother renewed her application for an article 15 transfer on the first day, but the judge postponed deciding this until the end of the hearing, because the fathers counsel was unprepared for it and further submissions were expected from the HCA. He proceeded to hear evidence and submissions on all aspects of the case. On 11 November 2014 he delivered judgment only on the article 15 application, which he granted: In re J (Children: Brussels II Revised: Article 15) [2014] EWFC 45. The judge directed himself (at para 70) in accordance with the guidance given by Sir James Munby P, in In re M (Brussels II Revised: Article 15) [2014] EWCA Civ 152; [2014] 2 FLR 1372, at para 54: The language of article 15 is clear and simple. It requires no gloss. The court had to ask itself the three questions set out in article 15.1. Unless they were answered in the affirmative there was no power to seek a transfer. If they were, there was still a discretion, but it is not easy to envisage circumstances in where, those conditions having been met, it would nonetheless be appropriate not to transfer the case. In answering those questions, it is not permissible for the court to enter into a comparison of such matters as the competence, diligence, resources or efficacy of either the child protection services or the courts of the other state. The judge cited two further important passages from Sir James judgment: I wish to emphasise that the question of whether the other court will have available to it the full list of options available to the English court for example, the ability to order a non consensual adoption is simply not relevant to either the second or the third question. As Ryder LJ has explained, by reference to the decisions of the Supreme Court in In re I (A Child) (Contact Application: Jurisdiction) [2009] UKSC 10; [2010] 1 AC 319 and of this court in In re T (A Child) (Care Proceedings: Request to Assume Jurisdiction) [2013] EWCA Civ 895, [2014] Fam 130, the question asked by article 15 is whether it is in the childs best interests for the case to be determined in another jurisdiction, and that is quite different from the substantive question in the proceedings, what outcome to these proceedings will be in the best interests of the child?. Article 15 contemplated a relatively simple and straightforward process: As Lady Hale observed in Re I, para 36, the task for the judge under article 15, will not depend upon a profound investigation of the childs situation and upbringing but upon the sort of considerations which come into play when deciding upon the most appropriate forum. So the judge proceeded to ask himself the three questions. It was common ground that, because of their nationality, the children had a particular connection with Hungary (para 80). In considering whether a Hungarian court was better placed to hear the case, he set out the following factors in favour (para 82): (i) the mothers only language is Hungarian; the father speaks only a little English; in England they require the support of an interpreter; (ii) one full sibling and two half siblings are habitually resident in Hungary; the Hungarian court could promote contact between them in ways not open to an English court and is likely to be better placed to assess whether the girls should establish a relationship with their baby brother; (iii) any further assessment required (given that he had already expressed concern about the brevity of the CFAB assessment of the maternal great grandmother and the social workers telephone assessment of the paternal grandmother) would be better undertaken in Hungary than in England; (iv) the Hungarian authorities would have access to background information about the family (the mothers step fathers conviction for physically abusing her; the fathers time in foster care; the removal of the two half siblings from their mother and placement in foster care); (v) the limits to what the English court could do to ensure that the childrens cultural and linguistic needs are met (the final care plan being silent about what the authority intended to do to promote this); (vi) a change of placement might be necessary, should the current foster carers not be approved as adopters for them and not be willing to become their special guardians; and (vii) there was good reason to believe that force of circumstances might compel both parents to return to Hungary. He then turned to the factors pointing the other way (para 83): (i) the English court had heard all the evidence and it was possible that a final determination could be made immediately; further delay would be avoided; (ii) social work assessments had been completed of the parents, the maternal grandmother and great grandmother, and the paternal grandmother, and of the childrens best interests by a very experienced Childrens Guardian; no detailed assessments had been undertaken by the Hungarian authorities although they had had time to do so; (iii) the parents had had full legal representation and interpretation before the English court; (iv) the allocated social worker had a relationship with the children and a thorough knowledge of the case and had travelled to Hungary to make her own inquiries; (v) retaining the proceedings in England would retain judicial continuity in the sense of having access to all the case papers and a picture of the development of the case over time (including the frequent changes in the parents positions); and (vi) the children had lived here all their short lives; their ethnic, cultural and linguistic needs must be weighed against the importance of growing up in a safe, stable, secure and risk free environment. He discussed the issue of delay (paras 84 to 92). He concluded that, although it was inevitable that there would be some further delay in settling the childrens future if the case were transferred, and he did not know what the extent of that would be, it had to been seen in the context of the significant delay so far, much of which was attributable to the local authority. He was not therefore persuaded that significant weight should be attached to it. He concluded (para 93) that the Hungarian court was better placed to hear the case. He attached particular weight to the point made at para 20(ii) above (the potential for contact with siblings), a factor which had tipped the balance for Pauffley J in In re J (A Child: Brussels II revised: Article 15: Practice and Procedure) [2014] EWFC 41. The judge then turned to consider whether transfer of the proceedings to Hungary would be in the childrens best interests. The local authority argued that the stark choice now facing the court on the article 15 application is for the children to keep their long term carers and preserve the status quo or be removed to foster care in Hungary. The judge however did not accept that this is a point which the court may take into account in determining best interests in this context. It is relevant to the determination of the question what outcome to these proceedings will be in the best interests of these children?; it is not relevant to the determination of the question is transfer of these proceedings to the Hungarian court in these childrens best interests?. (para 94) Having found that the Hungarian court was better placed to hear the case, it followed that it would be in their best interests to transfer it (para 95). Finally, he considered the exercise of his discretion under article 15. Having answered all three of the questions in article 15.1 in the affirmative, there were no features which would properly entitle him to exercise his discretion against requesting the Hungarian court to assume jurisdiction (para 98). Accordingly, his order asked the courts of Hungary to accept the request for a transfer of the case; the request would be transmitted by the local authority to the HCA for onward transmission to the Hungarian court; in the event that the Hungarian courts accepted the request within the six week time limit laid down in article 15, the case would be urgently re listed before him for consequential orders, including the transfer of the children to Hungary; in the event that the request was not accepted within that time, it would be relisted for further directions. It would appear that by the case he had in mind, not only the care proceedings, but also the placement order proceedings. The Court of Appeal decision The local authority and the Childrens Guardian appealed to the Court of Appeal with the permission of Black LJ. The hearing took place in March 2015, before Sir James Munby P, Black LJ and Sir Richard Aikens, but judgment was not delivered until November (this time adopting the initial of the childrens surname): In re N (Children) (Adoption: Jurisdiction) [2015] EWCA Civ 1112; [2016] 2 WLR 713. A great deal of the Presidents leading judgment is devoted to some very important questions relating to jurisdiction in adoption generally, which are not before this court on this appeal. In summary, these are (para 63): (i) Does an English court have jurisdiction (a) to make an adoption order in relation to a child who is a foreign national, and (b) to dispense with the consent of a parent who is a foreign national? This was a difficult question, given that the Brussels II revised Regulation does not cover adoption or measures preparatory to adoption, nor is there any other international instrument covering the matter. The Court of Appeal answered both (a) and (b) in the affirmative and this issue is not before this court. (ii) If the English court does have such jurisdiction, how should that be exercised? The President gave guidance on this issue (paras 104 to 111). Once again, this guidance is not before this Court on this appeal, but it does have some relevance to the issue which is before us, as we shall see. (iii) What is the scope of the Brussels II revised Regulation? It is well established that the Regulation applies to care proceedings, as well as to proceedings between private parties: see In re C (Case C 435/06) [2008] Fam 27. However, by excluding decisions on adoption, measures preparatory to adoption, or the annulment or revocation of adoption from the scope of the Regulation, does article 1.3.b also exclude (a) care proceedings where the care plan is adoption, or (b) placement order proceedings? The court concluded that (a) was within the scope of the Regulation, but (b) was not. This is not under appeal to this court. That leaves the remaining three issues, which related to article 15 (para 63): (iv) What, upon the true construction of article 15 of the Regulation, are the requirements before the English court can make a request for a transfer to another member state? The President observed that there is much English learning on the meaning and application of article 15.1 (para 113). He repeated the guidance he had given in In re M (Brussels II Revised: Article 15) [2014] EWCA Civ 152; [2014] 2 FLR 1372, para 54 (see para 18 above), on which the judge had also relied. He went on to emphasise how important it is that article 15 is considered at the earliest possible opportunity (para 114), although it could be considered at any stage of the proceedings (para 117); that repeat applications were to be deprecated and would usually fail unless there had been a change of circumstances, although they might sometimes be appropriate (para 118); that a transfer could be considered after a fact finding hearing, but only in exceptional circumstances (para 120); and that the process should be summary, measured in hours not days and not dependent on a profound investigation of the evidence (para 122). (v) Leaving on one side any question arising in relation to article 1.3.b, was the judge justified in deciding as he did? Could it be said that he was wrong to do so? The court concluded that he was justified in deciding to exercise jurisdiction to request transfer under article 15; he undertook a careful examination of all the relevant factors; he did not consider any irrelevant factors; he did not err in the weight he attached to the relevant factors, or misdirect himself in law (para 64(v)). (vi) Was the judges decision vitiated by his failure to address article 1.3.b? What were the consequences of his omission to do so? The court held that the fact that he did not appreciate the effect of article 1.3.b did not vitiate his decision. His decision in relation to the care proceedings could and should stand and they should be stayed. His decision in relation to the placement order proceedings could not stand, but as they were of their nature consequential on the care proceedings, they too were stayed (para 64(vi)). Black LJ and Sir Richard Aikens delivered short concurring judgments. The appeal was therefore dismissed. The issues in this appeal The Childrens Guardian, on behalf of the children, and with the support of the local authority, now appeals to this court. The mother and the father resist that appeal. Although not formally represented before this Court, the HCA also supports the decision. Their letter of 3 February 2016 informs the court that the HCA accepted jurisdiction under article 15.5 on 15 January 2015 following the High Courts request; they were notified of the Court of Appeal decision on 2 December 2015; while waiting for the childrens social worker to contact them about the details of bringing the children to Hungary, their competent local authority Guardianship Office had ascertained that the parents living circumstances were not convenient to take care of the children; however they wished to keep the connection with them; and the girls had two half sister/brother who are living in the mothers care (sic?). An English speaking foster parent had been identified for the girls, as had a child protection guardian. The HCA reiterated their consistent view that only the Hungarian authorities have the right to adopt Hungarian citizens and that the children have the possibility of keeping connection with their parents and family members if they live in Hungary. In addition, this court has received valuable written submissions from three interveners: the AIRE Centre, the Family Rights Group and the International Centre for Family Law, Policy and Practice. The principal issue before this Court is the proper approach to the assessment of the childs best interests in the context of an application for transfer under article 15. In particular, is it limited to questions of forum, and if so, how does it differ from the question of whether the foreign court is better placed to hear the case? Is the court entitled to take into account the consequences for the child of transferring the proceedings where, as here, the transfer will also result in the childs removal from her current placement to a placement in another country? A further issue is whether the judge was correct to find that the Hungarian court was better placed when he had heard all the evidence and was in a position to give a final judgment upon it. The local authority has raised additional issues relating to the placement order proceedings. As the Regulation does not apply to these, was the Court of Appeal correct to impose a stay upon them in consequence of staying the care proceedings? As this is the United Kingdoms court of final instance, the further issue arises as to whether we are obliged to make a reference to the Court of Justice of the European Union on the ground that the interpretation of article 15 is not acte clair. Between the hearing in the Court of Appeal and the handing down of judgment, the CJEU accepted a reference from the Supreme Court of Ireland in the case of Child and Family Agency (CAFA) v JD (Case C 428/15). Four of the six questions referred are relevant to this case: (1) Does article 15 of Regulation 2201/2003 apply to public law care applications by a local authority in a member state, when if the court of another member state assumes jurisdiction, it will necessitate the commencement of separate proceedings by a different body pursuant to a different legal code and possibly, if not probably, relating to different factual circumstances? If the best interests of the child in article 15.1 of (3) Regulation 2201/2003 refers only to the decision as to forum, what factors may a court consider under this heading, which have not already been considered in determining whether another court is better placed? (4) May a court for the purposes of article 15 of Regulation 2201/2003 have regard to the substantive law, procedural provisions, or practice of the courts of the relevant member state? (6) Precisely what matters are to be considered by a national court in determining which court is best placed to determine the matter? At the time of writing, the CJEU has not given judgment. The Guardian sought permission to appeal to this court on question (1) above. It is certainly arguable, for the reasons sketched in the question from the Irish court, that article 15 is not applicable to care proceedings. The case cannot be transferred in the same way that a case between parents or other private parties can be transferred. The proceedings in the other member state will inevitably be different proceedings, with different parties, different procedures, and possibly different substantive law. Indeed, there may not be proceedings in a court at all, but only within administrative authorities, as in this case. As Black LJ elegantly put it, what is being transferred is not the case but the problem (para 189(i)). However, given that the Regulation clearly does apply to public law proceedings, the question whether article 15 does not apply in public law proceedings is obviously not acte clair. It must await the determination of the Irish reference. For that reason, it seemed to this court more convenient to refuse permission to appeal on that ground and proceed on the basis that article 15 can apply to public law proceedings. Whether it is necessary to await the decision of the CJEU on questions (3), (4) and (6) before deciding this case is another matter, to which I shall return. The proper approach to article 15.1 The argument before us has principally focussed on the nature of the best interests evaluation required by article 15.1 and in particular whether it is limited to questions relevant to the choice of forum. This has been described as the attenuated welfare test (see In re T (A child: Article 15, Brussels II Revised) [2013] EWHC 521 (Fam); [2013] 2 FLR 909, para 21). Its source appears to be my own observation in In re I, quoted in In re M (see above at para 18). Contrary to the impression given there, In re I was not a case about article 15, but a case about article 12 of the Regulation, which relates to Prorogation of Jurisdiction. Article 12.1 allows a court dealing with divorce, separation or nullity proceedings also to deal with connected parental responsibility matters if the spouses and holders of parental responsibility agree. Article 12.3 gives the courts of a member state jurisdiction in relation to parental responsibility, even though the child is not habitually resident there, where: the child has a substantial connection with that member a. state, in particular by virtue of the fact that one of the holders of parental responsibility is habitually resident in that member state or that the child is a national of that member state; and b. the jurisdiction of the courts has been accepted expressly or otherwise in an unequivocal manner by all the parties to the proceedings at the time the court is seised and is in the best interests of the child. It was in that context that I observed (at para 36): The final requirement in article 12(3) is that the jurisdiction of the English courts should be in the best interests of the child. Nothing turns, in my view, on the difference between the best interests of the child in article 12(3), the superior interests of the child in article 12(1) and the childs interest in article 12(4). They must mean the same thing, which is that it is in the childs interests for the case to be determined in the courts of this country rather than elsewhere. This question is quite different from the substantive question in the proceedings, which is what outcome to these proceedings will be in the best interests of the child? It will not depend upon a profound investigation of the childs situation and upbringing but upon the sort of considerations which come into play when deciding upon the most appropriate forum. The fact that the parties have submitted to the jurisdiction and are both habitually resident within it is clearly relevant though by no means the only factor. It appears to have been the Court of Appeals endorsement of this approach to the best interests test in article 15.1 which led the judge to hold (see para 24 above) that the consequences for these children of being removed from their long term carers and taken to new foster carers in Hungary was completely irrelevant to whether transferring the case would be in their best interests. The first point made by the appellants is that the requirement in article 12.3 is quite different from the requirement in article 15.1. In article 12.3 (as also in article 12.1) it is the court which is deciding whether to accept jurisdiction, which it would not otherwise have, that has to decide whether to do so is in the best interests of the child. This is roughly equivalent to the requirement in article 15.5 that the court which is requested to take the case (here the Hungarian court) must consider that it is the best interests of the child to accept jurisdiction. Article 15.1 is directed towards the court which already has jurisdiction in an existing case. It imposes an additional requirement that the transferring court considers this to be in the best interests of the child. Obviously, the considerations applicable when deciding whether to relinquish jurisdiction may be somewhat different from the considerations applicable when deciding whether to accept it. Secondly, article 12.3 contains no requirement that the court accepting jurisdiction be better placed to hear the case than the court which would otherwise have it. Interestingly, the draft of article 15.1 proposed by the EU Commission did not contain this requirement, although the Explanatory Memorandum referred to situations (albeit exceptional) where the courts of another member state would be better placed to hear the case. The requirement does, however, appear in article 8 of the 1996 Hague Convention on Jurisdiction, Applicable Law, Recognition, Enforcement and Co operation in respect of Parental Responsibility and Measures for the Protection of Children, which the Commission described as a similar mechanism in their Explanatory Memorandum. That may be why it found its way into the eventual Regulation. The European legislator must have considered that the better placed requirement was something different from the best interests requirement, otherwise they would not both be there. Thirdly, as originally drafted, article 15.1 limited transfer to exceptional circumstances. As finally adopted, it no longer does so, merely introducing the power with the words by way of exception. An exception does not necessarily require that the circumstances be exceptional. Nevertheless, it is an exception to the general rule, that the future of children should be decided in the courts of the member state where they are habitually resident. In general, it is expected that exceptions will be narrowly construed and applied (see, for example, Somafer SA v Saar Ferngas AG (Case C 33/78) [1978] ECR 2183; [1979] 1 CMLR 490, para 7), although the text which was eventually adopted is more open ended than that originally proposed. Fourthly, however, it is clear that the Commission regarded the requirement that the court proposing the transfer, as well as the court accepting it, should evaluate whether the transfer would be in the best interests of the child as an additional safeguard. By this they must have meant an additional safeguard for the child. In this connection, recital 12 to the Regulation is relevant: The grounds of jurisdiction in matters of parental responsibility established in the present Regulation are shaped in the light of the best interests of the child, in particular on the criterion of proximity. This means that jurisdiction should lie in the first place with the member state of the childs habitual residence, except for certain cases of a change in the childs residence or pursuant to an agreement between the holders of parental responsibility. Recital 33 is also relevant: This Regulation recognises the fundamental rights and observes the principles of the Charter of Fundamental Rights of the European Union. In particular, it seeks to ensure respect for the fundamental rights of the child as set out in article 24 of the Charter of Fundamental Rights of the European Union. Article 24 of the Charter of Fundamental Rights is headed The rights of the child: 1. Children shall have the right to such protection and care as is necessary for their well being. They may express their views freely. Such views shall be taken into consideration on matters which concern them in accordance with their age and maturity. 2. In all actions relating to children, whether taken by public authorities or private institutions, the childs best interests must be a primary consideration. 3. Every child shall have the right to maintain on a regular basis a personal relationship and direct contact with both his or her parents, unless that is contrary to his or her interests. As the AIRE Centre point out in their helpful intervention, article 24.2 is clearly modelled on article 3.1 of the United National Convention on the Rights of the Child. They further point out that secondary EU legislation, such as the Regulation, must be interpreted consistently with the Treaties, including the Charter of Fundamental Rights: Criminal proceedings against Lindqvist (Case C 101/01) [2003] ECR I 12971, Ordre des barreaux francophones et germanophone v Conseil des ministres (Case C 305/05) [2007] ECR I 5395. The provisions of the Charter only apply when member states are implementing EU law, but we are clearly doing so in this case. If there were any doubt about the need to interpret and apply the Regulation consistently with article 24 of the Charter, recital 33 puts that beyond doubt. This is a case about childrens rights, and in particular, the right to have their best interests regarded as a primary consideration in all actions relating to them. As the AIRE Centre also point out, the line of case law leading to the attenuated welfare test does not appear to have had any explicit regard to the best interests obligation. The test might have looked very different if it had done. It is the case, as argued on behalf of the mother, that the better placed and best interests questions are inter related. Some of the same factors may be relevant to both. But it is clear that they are separate questions and must be addressed separately. The second one does not inexorably follow from the first. The question remains, what is encompassed in the best interests requirement? The distinction drawn in In re I remains valid. The court is deciding whether to request a transfer of the case. The question is whether the transfer is in the childs best interests. This is a different question from what eventual outcome to the case will be in the childs best interests. The focus of the inquiry is different, but it is wrong to call it attenuated. The factors relevant to deciding the question will vary according to the circumstances. It is impossible to be definitive. But there is no reason at all to exclude the impact upon the childs welfare, in the short or the longer term, of the transfer itself. What will be its immediate consequences? What impact will it have on the choices available to the court deciding upon the eventual outcome? This is not the same as deciding what outcome will be in the childs best interests. It is deciding whether it is in the childs best interests for the court currently seised of the case to retain it or whether it is in the childs best interests for the case to be transferred to the requested court. Application in this case It follows that the judge was wrong to accept that it followed from his decision that the Hungarian court was better placed to hear the case that it would be in the best interests of the children to transfer it. He ought to have addressed his mind to the short and long term consequences for them of doing so and also of not doing so. The short term consequence was that these little girls would be removed from the home where Ella had lived for virtually all her life and Janetta had lived for most of hers, where they were happy and settled, and doing well (Janettas behaviour having been seriously disturbed when they first arrived). They would be transferred to a foster placement about which the court knew nothing other than that the foster carer spoke English. The country, the language and the surroundings would be completely unfamiliar to them. The long term consequence would be to rule out one possible option for their future care and upbringing, that is, remaining in their present home on a long term legally sanctioned basis, whether through adoption, or through a special guardianship order, or through an ordinary residence order. It would not be in the best interests of these children to transfer a dispute about their future to a court which would be unable to consider one of the possible outcomes, indeed the outcome which those professionals with the closest knowledge of the case and the children now consider would be best for them. That is not, of course, to say that that is the outcome which the court should eventually decide. There is a very live issue as to whether in the long run these little girls of Hungarian nationality and descent, with mixed Hungarian and Roma ethnicity, and many family members in Hungary, including their parents, grandparents, a sibling and half siblings, would be better living in Hungary. The judge took into account the importance of their siblings and their background when addressing the question of which court was better placed. But in addressing that question, he did not take into account what the real issues in the case were. The real issues were that the parents wanted the girls to come to Hungary, preferably to live with them or with members of the extended family. The advantages and disadvantages of this had been explored by the girls social worker. The underlying problem was that the mothers family would have nothing to do with the father, whom they saw as abusive, while the fathers family supported him, and the mother wished to stay with him. The HCA, therefore, apparently relying largely on the assessments carried out by or for the local authority, did not see family placement as viable, and so proposed foster care, but preserving the possibility of some sort of relationship with the parents and siblings. The local authority, with the support of the Childrens Guardian, now proposed placement for adoption, preferably with the existing foster carers. The judge considered the Hungarian authorities better placed to achieve the first two of these outcomes. He did not consider how far it would be open to him to achieve the same outcomes without transferring the case. Yet there clearly would have been ways of securing that the children were placed under the aegis of the relevant Guardianship Office in Hungary. As the Family Rights Group observe, the courts have been arranging foreign placements for years. The mother is right to say that the court cannot dictate the content of a local authoritys care plan when it makes a final care order in care proceedings. On the other hand, the local authority may be willing to change its care plan in the light of clear findings as to the childrens best interests. In any event, a placement abroad can be achieved without making a care order. If the child is not subject to a care order, the inherent jurisdiction of the High Court may be used in a flexible way to secure the desired outcome. The prohibitions on its use in section 100(2) of the Children Act 1989 would not preclude the court from making orders in favour of the relevant Hungarian authority. A similar result might be achieved through orders under section 8 of the Children Act 1989, which again would not be precluded by section 9(5) (sections 100(2) and 9(5) preclude the use of such orders in effect to place children in the care of a local authority). Nor did the judge consider which court would be better placed to achieve the third outcome. There could only be one answer to this. But there would be a variety of ways of achieving that outcome. The local authority did propose a closed adoption, but there are other ways of achieving permanence and stability in this country without cutting off all links with the childrens family and background. There are orders in favour of foster parents which fall short of adoption. Whether the children remain in foster care under a care order or under some order in favour of the foster carers, the court is in charge of contact. It could make contact orders which would be recognisable and enforceable in Hungary. Alternatively, it could transfer the contact part of the proceedings to Hungary under article 15. All of these things should have been taken into account in deciding which court was better placed. Above all, in this particular case, the judge had heard and read all the evidence that anyone involved wished to put before him. He was in a position to decide the outcome. Although a transfer request can be made and determined at any time, it would be rare indeed that, the case having reached such a point, another court would be better placed to hear it. Thus, in my view, not only did the judge take the wrong approach to the best interests question, he also left out of account some crucial factors in deciding upon the better placed question. I shall return to the consequences of that after considering the other issues in the case. The placement order proceedings The local authority argue that, as the placement order proceedings are not within the scope of the Regulation, there was no power to stay them with a view to transfer under article 15. The Court of Appeal was correct to recognise that, but wrong to stay them as consequential on the care proceedings. Section 21(2) of the Adoption and Children Act 2002 (para 15 above) makes it clear that the threshold may be determined either in care proceedings or in separate placement order proceedings. Thus they argue that the placement order proceedings should have been left to take their course. It is, of course, correct that article 15 does not apply to placement order proceedings. The judge was wrong to think that it did. But that, in itself, did not invalidate his decision to transfer the care proceedings. If it was right to transfer the care proceedings, then it made no sense to leave the placement order proceedings to continue as if nothing had happened. The object of the transfer was that the childrens future should be decided in Hungary and not in England. As the mother points out, under the Family Procedure Rules 2010, the court has wide case management powers, including, under rule 4.1(3)(g), the power to stay the whole or part of any proceedings either generally or until a specified later date. The Court of Appeal has the same powers as the trial judge. It clearly had the power to do this. If it had been right to uphold the transfer, it would clearly have been right to stay the placement order proceedings. Reference to the CJEU? As already noted, there is a live question before the CJEU as to whether article 15 is capable of applying to public law proceedings such as these. This cannot be regarded as acte clair. This court has to decide whether to make its own reference of essentially the same question that the Supreme Court of Ireland has already referred; whether to delay its decision until the outcome of that reference is known; or whether to proceed on the assumption that article 15 is capable of applying to public law proceedings and review the decisions of the courts below on their merits. In my view, the third course is infinitely preferable to the other two. These proceedings have already taken far too long. Some of the delay is attributable to the local authority, which should have brought proceedings long before they did, rather than relying upon the parents agreement for the children to be accommodated; some of the delay is attributable to the vacillations of the parents and their failure to co operate with the authority over assessments and contact with their children; some of it is attributable to the courts. There may be good, or at least understandable, reasons for much of this. But the children are the last people who should be made to suffer for the actions or inaction of others. Janetta is now aged four years and two months. Ella is now aged two years and 11 months. For almost all of Ellas life the girls have lived with their present foster parents. One way or another, their best interests demand that their future should be decided as soon as possible. But does that leave this court free to decide upon the correct approach to an article 15 application? The Supreme Court of Ireland has referred questions which are essentially the same as the principal issue in this case. However, it has done so in a very different context a pregnant woman who had deliberately left England and moved to have her baby in Ireland in order to avoid care proceedings here. The transfer question therefore also raised issues about the free movement of workers within the European Union which do not arise in this case. I share the Presidents view that the language of article 15.1 is simple and clear. It requires no gloss or explanation. The court has three questions to answer: does the child have a particular connection (as defined in article 15.3) with another member state; would a court in that member state be better placed to hear the case, or a specified part of it; and would this be in the best interests of the child? The better placed and best interests questions are separate questions and the best interests question is intended to be an additional safeguard for the child. The question is not what eventual outcome to the case will be in the best interests of the child but whether the transfer will be in her best interests. Subject to that, the scope of the inquiry will depend upon all the circumstances of the case. I would therefore proceed on the basis that the meaning of article 15.1 is acte clair, albeit not yet clair, and we are merely applying it to the facts of the case, which is the task of the national courts. Furthermore, for the reasons already explained, the judge was, in my view, plainly wrong to conclude that the Hungarian authorities were, on the particular facts of this case, better placed to hear the case. He left out of account the vital factor that to transfer the case would preclude one possible outcome which might be in the best interests of the children concerned, whereas retaining jurisdiction would allow all the possible outcomes to be considered. Transfer would also precipitate their removal from their long standing home without any evaluation of the impact of this upon their psychological well being. In my view, therefore, it is not necessary for this court to make a reference to the CJEU or to await the outcome of the reference made by the Supreme Court of Ireland. We should proceed to decide the case. Conclusion It follows that the appeal must be allowed and the transfer request set aside. After this period of time, there can be no question of re opening the transfer application. It is in the best interests of these children for their future to be decided as soon as possible. Unfortunately, it will be necessary for the evidence to be updated. The case should therefore be returned to the Family Division of the High Court, to be heard by a judge of that division, as soon as possible. As has already been made clear, the range of possible outcomes for these two children is not limited to the primary case presented to the judge: closed adoption here as against foster placement in Hungary. There are several other options in between. The guidance given by the President in this case (paras 104 to 111) is relevant. He emphasised the importance in the checklist of factors to be considered when deciding whether to make an adoption order in section 1(4) of the 2002 Act, (c) the likely effect on the child (throughout his life) of having ceased to be a member of the original family and become an adopted person and (d) the childs background (para 104). The court and the professionals must give the most careful consideration to those parts of the checklist which focus attention, explicitly or implicitly, on the childs national, cultural, linguistic, ethnic and religious background. The court is directed to consider the likely effect, throughout her life, of having ceased to be a member of her original family (para 105). As he had said in Merton London Borough Council v B [2015] EWCA Civ 888; [2016] 2 WLR 410, para 84, We must be understanding of the concerns about our processes voiced by European colleagues; and the court must rigorously apply the principle that [non consensual] adoption is the last resort and only permissible if nothing else will do (para 106). On the other hand, as he had said in In re J (Care Proceeding: Appeal) [2014] EWFC 4; [2015] 1 FLR 850, para 36, at the end of the day matters had to be judged according to the law of England and by reference to the standards of reasonable men and women in contemporary English society. The parents views, whether religious, cultural, secular or social, are entitled to respect but cannot be determinative (para 108). One important factor, in considering the childs welfare, is whether an adoption order would be recognised in the country where the child is domiciled, or a national, or has been habitually resident. If it would not be, the court will have to consider the disadvantages of a limping adoption order (see In re B(S) (An Infant) [1968] Ch 204), which might make it difficult for them ever to visit Hungary. This might tell in favour of finding other ways of giving the children the security and stability they need. Much will, of course, depend upon the evidence before the judge at the rehearing. It will be for him or her to decide upon the outcome which will be in the best interests of these little girls.

This question in this appeal is whether the courts of England or Hungary should have jurisdiction to determine proceedings concerning the future welfare of two young girls. They are Hungarian nationals but were born and have been resident in England all their lives. Under article 8(1) of Council Regulation (EC) No 2201/2003 concerning jurisdiction and the recognition and enforcement of judgments in matrimonial matters and the matters of parental responsibility (known as Brussels II Revised) the primary rule is that jurisdiction lies with the courts of the member state where the child is habitually resident. The issue is whether the exception to this rule, found in article 15, permitting the transfer of certain proceedings to a court in another member state if it is better placed to hear the case and this would be in the best interests of the child, should apply in this case. The parents of the girls are Hungarian nationals, who moved to England in 2011. The older girl (Janetta) was born in January 2012. She came to the attention of the UK authorities when the mother gave birth to the younger girl (Ella) in May 2013. Due to the conditions of extreme squalor in which Janetta was found to be living, and the absence of medical attention for Ellas birth, both girls were removed from their parents that day and have been living with foster carers ever since. Care proceedings were issued in January 2014 and the local authority made enquiries regarding the availability and suitability of family members in Hungary to care for the girls. It was in touch with the Hungarian Central Authority (HCA) which proposed the transfer of the girls to Hungary and maintained that only the Hungarian authorities had the right to adopt Hungarian citizen minors. The mother returned to Hungary in 2014 and has since given birth to a third child. She applied for the care proceedings in respect of the girls to be transferred to Hungary pursuant to article 15 of Brussels II Revised. The local authority concluded that there was no viable family placement in Hungary and applied for a placement order for the adoption of the girls, possibly by their foster parents in England, without parental consent. The High Court granted the mothers application (supported by the HCA) to request the transfer of the proceedings under article 15. The Court of Appeal dismissed the appeal brought by the Childrens Guardian and local authority. The Childrens Guardian appeals to the Supreme Court. The issues were the proper approach to the assessment of the childs best interests for the purposes of article 15 and the correctness of the decision to transfer in this case. The Supreme Court unanimously allows the appeal, setting aside the request for a transfer of the proceedings to Hungary and returning the case to the High Court. Lady Hale gives the only judgment. The context in which the question of jurisdiction arises is important. Free movement of workers and their families within the EU has led to many children residing in states of which they are not nationals. Inevitably some of them require protection from ill treatment or neglect, or the risk of it. In every case it is necessary for the court to consider whether the case should be transferred to another state [2]. It is particularly important where the English court might exercise its power to place children for adoption without parental consent, on the basis that the welfare of the child requires this, as this power is unavailable in many other member states [3]. Although the question of the applicability of article 15 to public law care proceedings is currently the subject of a pending reference to the Court of Justice of the European Union in a case from Ireland, the Supreme Court proceeds on the assumption that article 15 is capable of applying and reviews the decisions of the courts below on their merits, rather than making a further reference. The best interests of the girls requires a decision on their future without yet further delay [35, 54]. As for the correct approach to article 15, the language is simple and clear and the court can apply it to the facts of this case without awaiting the outcome of the reference [57]. The principal issue is the nature of the best interests assessment in article 15 and whether it is limited to questions relevant to the choice of forum, as the judge had found. The addition of the best interests test is intended to be an additional safeguard for the child, consistent with the rights of children found in article 24 of the Charter of Fundamental Rights of the European Union [41 42]. While a number of factors will be relevant both to the question of whether a court is better placed to hear the proceedings and of whether transfer is in the best interests of the child, these are separate questions and must be addressed separately. The answer to the second does not inexorably follow from the first [43]. The question is whether the transfer (rather than the eventual outcome) is in the childs best interests but the impact of the transfer on the welfare of the child and on the choices available to the court deciding the eventual outcome must be considered [44]. In the present case, the short term effect of the transfer would be to remove the girls from the home where Ella had lived for virtually her whole life and Janetta for most of hers, where they were happy and settled, to an unfamiliar foster placement in Hungary; and the long term effect would be to rule out one possible option for their future care and upbringing, which was to remain in their present home either through adoption, or a special guardianship order or ordinary residence order. This is not necessarily the outcome which the court should eventually decide, as questions of maintaining links with the girls extended family in Hungary and ethnic background will also be important factors [45 46]. But the judge failed to consider whether the English court could achieve the same outcomes in Hungary as the Hungarian courts, without the need to transfer the case, which would also preserve the options to keep the girls in their present home [48 49]. The English court was also better placed to decide the outcome as it had already heard all the evidence that those involved wished to put before it [50]. These were crucial factors which had been left out of account [51]. The judge had been wrong to apply article 15 to the placement order proceedings but this did not in itself vitiate his decision to transfer the care proceedings. He had the power to stay the placement order proceedings under the wide case management powers of the court and, if it had been right to uphold the transfer, then it would clearly have been right to stay the placement order proceedings [53]. The case is therefore returned to the High Court to determine the future arrangements for the girls, with updated evidence. The full range of outcomes will be open to the court, not simply the stark choice between closed adoption and a foster placement in Hungary, and the judge will apply the extended guidance given by the Court of Appeal in this case [61].

Does the Scottish Parliament have power to legislate for the continuity of laws relating to devolved matters in Scotland which are now the subject of European Union (EU) law but which will cease to have effect after the United Kingdom (UK) withdraws from the EU? That is the principal subject matter of a reference by the Attorney General and the Advocate General for Scotland (the UK Law Officers) to this court under section 33 of the Scotland Act 1998 as amended (the Scotland Act). This is the judgment of the court. Factual background On 29 March 2017 the UK Government notified the European Council of its decision that the UK would withdraw from the EU in accordance with article 50 of the Treaty on European Union (article 50 and TEU). Subject to the judgment of the Court of Justice of the European Union (CJEU) on the reference by the Inner House of the Court of Session on the revocability of article 50 or unless a withdrawal agreement were to provide otherwise or there were to be unanimous agreement of the member states of the EU to an extension of the time limit for withdrawal set out in article 50, the UK will cease to be a member of the EU on 29 March 2019. So long as the UK is a member of the EU, EU law governs matters within its sphere in each of the jurisdictions of the UK without differentiation. When the Scotland Act was enacted, the power to amend EU law, the body of rights and obligations which are binding on all EU member states, resided with the EU institutions. It still so resides. But on the UKs withdrawal from the EU (UK withdrawal), and subject to any agreement to the contrary, EU law will cease to bind the UK and its constituent jurisdictions. Many of our laws are the product of EU legislation through directly applicable EU Regulations, decisions and tertiary legislation, or are derived from EU law, for example by the implementation in our domestic legal systems of EU obligations such as those contained in EU Directives. To achieve legal continuity and to promote legal certainty it is considered necessary to incorporate direct EU legislation into domestic law and to preserve the effect of EU derived domestic legislation after UK withdrawal. On 13 July 2017 the UK Government introduced in the House of Commons the European Union (Withdrawal) Bill (the UK Bill) to repeal the European Communities Act 1972 and to achieve legal continuity within each of the jurisdictions of the UK after withdrawal from the EU. That Bill was not passed by both Houses of Parliament until 20 June 2018. It received Royal Assent on 26 June 2018, becoming the European Union (Withdrawal) Act 2018 (the UK Withdrawal Act). Both before and during the passage through Parliament of the UK Bill, the UK Government discussed its terms with representatives of devolved institutions in the UK. After proposed amendments to the UK Bill, which the Scottish Government supported, were defeated in the House of Commons, the Scottish Government introduced the UK Withdrawal from the European Union (Legal Continuity) (Scotland) Bill (the Scottish Bill) in the Scottish Parliament on 27 February 2018. In accordance with section 31 of the Scotland Act 1998 both the Deputy First Minister of the Scottish Government (John Swinney MSP), who introduced the Bill, and the Presiding Officer of the Scottish Parliament (Rt Hon Kenneth Macintosh MSP) issued statements on the legislative competence of the Scottish Bill when it was introduced to the Scottish Parliament. The Scottish Government expressed the view that the Bill would be within the legislative competence of the Scottish Parliament. The Presiding Officer expressed the view that it would not, because the Bill, which would be enacted before the UK withdrew from the EU, would not be compatible with EU law at the time when the Scottish Parliament passed the legislation. In short, the Presiding Officer opined that the Scottish Parliament could not seek to exercise competence before that competence had been transferred to it and that provisions in the Bill, which postponed the legal effect of the legislation until UK withdrawal, did not alter the Parliaments competence at the time when the legislation was passed. The Scottish Parliament passed the Scottish Bill on 21 March 2018. This resulted in the reference to this court under section 33(1) of the Scotland Act which provides that the Advocate General, the Lord Advocate or the Attorney General may refer the question of whether a Bill or any provision of a Bill would be within the legislative competence of the Parliament to the Supreme Court for decision. The reference was made within four weeks of the passing of the Scottish Bill in accordance with section 33(2) of the Scotland Act. The Lord Advocate has responded to the reference and has submitted that the Scottish Bill would be within the legislative competence of the Scottish Parliament. The Scottish Parliament was not the only devolved legislature that sought to pass legislation to provide for domestic legal continuity after the UKs withdrawal from the EU on exit day. After the UK Parliament did not accept amendments to the UK Bill which the First Minister of Wales supported, the Welsh Assembly passed legislation to similar effect as the Scottish Bill in the Law Derived from the European Union (Wales) Bill (the Welsh Bill). This resulted in a reference by the Attorney General to this court under section 112(1) of the Government of Wales Act 2006 in relation to the Welsh Bill. But, after agreement was reached between the Welsh Government and the UK Government on 24 April 2018 which resulted in amendments to clause 11 of the UK Bill (now section 12 of the UK Withdrawal Act) and the Welsh Assembly gave legislative consent to the UK Bill, the Attorney General has withdrawn that reference. The Law Derived from the European Union (Wales) Act 2018 received the Royal Assent on 6 June 2018 and came into force on the following day by virtue of section 21. Nonetheless, the questions which this reference raises have implications not only for the Scottish Parliament but also for the other devolved legislatures of the UK. The Counsel General to the Welsh Government and the Attorney General for Northern Ireland have therefore appeared as interveners and have addressed the court. We are very grateful to them for their assistance. The role of this court Withdrawal from the EU will result in legislative powers, which are currently vested in EU institutions, being transferred to institutions in the UK. There has been and is a political debate as to which institutions within the UK should best exercise those powers in the public interest. It is not the role of this court to form or express any view on those questions of policy, which are the responsibility of our elected representatives and in which the wider civil society has an interest. Our role is simply to determine as a matter of law whether and to what extent the Scottish Bill would be within the legislative competence of the Scottish Parliament. That question is answered, as we explain below, by analysing the provisions of the Scotland Act. The Scotland Act Since the Scottish Parliament commenced its work on 2 July 1999, the courts have had occasion to interpret the law by which it is governed. The main principles may be summarised as follows. The powers of the Scottish Parliament, like those of Parliaments in many other constitutional democracies, are delimited by law. The Scottish Parliament is a democratically elected legislature with a mandate to make laws for people in Scotland. It has plenary powers within the limits of its legislative competence. But it does not enjoy the sovereignty of the Crown in Parliament; rules delimiting its legislative competence are found in section 29 of and Schedules 4 and 5 to the Scotland Act, to which the courts must give effect. And the UK Parliament also has power to make laws for Scotland, a power which the legislation of the Scottish Parliament cannot affect: section 28(7) of the Scotland Act. The Scotland Act must be interpreted in the same way as any other statute. The courts have regard to its aim to achieve a constitutional settlement and therefore recognise the importance of giving a consistent and predictable interpretation of the Scotland Act so that the Scottish Parliament has a coherent, stable and workable system within which to exercise its legislative power. This is achieved by interpreting the rules as to competence in the Scotland Act according to the ordinary meaning of the words used. These statements of the law can be found in Whaley v Lord Watson 2000 SC 340, 348 349 per the Lord President (Lord Rodger); Martin v Most [2010] UKSC 10; 2010 SC (UKSC) 40, para 52 per Lord Walker of Gestingthorpe; AXA General Insurance Ltd v Lord Advocate [2011] UKSC 46; 2012 SC (UKSC) 122; [2012] 1 AC 868, paras 45 46 per Lord Hope of Craighead, paras 146 147 per Lord Reed; Imperial Tobacco Ltd v Lord Advocate 2012 SC 297, para 58 per Lord Reed, [2012] UKSC 61; 2013 SC (UKSC) 153, paras 6 and 12 15 per Lord Hope; Attorney General v National Assembly for Wales Commission [2012] UKSC 53; [2013] 1 AC 792, paras 78 81 per Lord Hope; and In re Agricultural Sector (Wales) Bill [2014] UKSC 43; [2014] 1 WLR 2622, para 66 per Lord Reed and Lord Thomas of Cwmgiedd CJ. Section 28 of the Scotland Act provides that, subject to section 29, the Scottish Parliament may make laws. Section 29 delimits the legislative competence of the Scottish Parliament. It provides, so far as relevant: (1) An Act of the Scottish Parliament is not law so far as any provision of the Act is outside the legislative competence of the Parliament. (2) A provision is outside that competence so far as any of the following paragraphs apply (b) (c) (d) it relates to reserved matters, it is in breach of the restrictions in Schedule 4, it is incompatible with EU law, (3) For the purposes of this section, the question whether a provision of an Act of the Scottish Parliament relates to a reserved matter is to be determined, subject to subsection (4), by reference to the purpose of the provision, having regard (among other things) to its effect in all the circumstances. There are therefore three principal restrictions which are relevant to this reference. First, a provision is outside competence if it is incompatible with EU law (section 29(2)(d)). This restriction is what caused the Presiding Officer of the Scottish Parliament to express his view which we discussed in para 7 above. Secondly, a provision is outside competence if it relates to reserved matters (section 29(2)(b) and (3)). Section 30 and Schedule 5 define reserved matters, which include foreign affairs etc, including relations with the EU, in paragraph 7 of Schedule 5. Thirdly, a provision is outside competence if it is in breach of the restrictions in Schedule 4 (section 29(2)(c)). Schedule 4 lists enactments and rules of law which are protected from modification by an Act of the Scottish Parliament or by subordinate legislation created on its authority. It is necessary in this overview of the Scotland Act also to mention three other provisions. First, section 101 governs the approach to the interpretation of Acts of the Scottish Parliament or subordinate legislation which could be read as to be outside competence. Section 101(2) provides Such a provision is to be read as narrowly as is required for it to be within competence, if such a reading is possible, and is to have effect accordingly. Since the cases to which we referred in para 13 above were decided, the UK Parliament, in the Scotland Act 2016, has enacted two important amendments to the Scotland Act, which are designed to entrench the role of the Scottish Parliament and Scottish Government in the UK constitution. Thus, secondly, it is provided in section 63A (inserted by section 1 of the 2016 Act): (1) The Scottish Parliament and the Scottish Government are a permanent part of the United Kingdoms constitutional arrangements. (2) The purpose of this section is, with due regard to the other provisions of this Act, to signify the commitment of the Parliament and Government of the United Kingdom to the Scottish Parliament and the Scottish Government. (3) In view of that commitment it is declared that the Scottish Parliament and the Scottish Government are not to be abolished except on the basis of a decision of the people of Scotland voting in a referendum. Thirdly, in the same Act the UK Parliament has given statutory recognition to the Sewel convention by inserting into section 28 of the Scotland Act (by section 2 of the 2016 Act), immediately after the subsection preserving the power of the UK Parliament to make laws for Scotland, the following subsection: (8) But it is recognised that the Parliament of the United Kingdom will not normally legislate with regard to devolved matters without the consent of the Scottish Parliament. In R (Miller) v Secretary of State for Exiting the European Union (Birnie intervening) [2017] UKSC 5; [2018] AC 61 (paras 136 137) this court explained that, although the Sewel convention cannot be enforced by the courts, it nonetheless plays an important role in facilitating harmonious relationships between the UK Parliament and the devolved legislatures. The Convention is embodied in a Memorandum of Understanding between the UK Government and the devolved governments which, in para 14 of the current memorandum (published in October 2013), states: the UK Government will proceed in accordance with the convention that the UK Parliament would not normally legislate with regard to devolved matters except with the agreement of the devolved legislature. The devolved administrations will be responsible for seeking such agreement as may be required for this purpose on an approach from the UK Government. The mechanism in Scotland for agreeing to such legislation by the UK Parliament is by a legislative consent motion which is put to a vote in the Scottish Parliament. As Lord Hope stated in Imperial Tobacco para 6, disputes between the Scottish Parliament and the UK Parliament as to legislative competence have been avoided, partly by the use of legislative consent motions passed by the Scottish Parliament and partly by the care which officials within the Scottish Parliament have taken to ensure that measures which the Scottish Parliament passes are within competence. On this occasion the Scottish Government opposed the enactment of the UK Bill without the amendments which it had supported and on 15 May 2018 the Scottish Parliament voted to refuse a legislative consent motion in relation to it. That vote does not affect the legal validity of the UK Withdrawal Act. But there is now a conflict between that Act and the Scottish Bill. This is the first occasion in the 19 years since the Scottish Parliament commenced its work that there has been a challenge by Law Officers of the UK Government to a Bill of the Scottish Parliament on the ground that it is outside legislative competence. The reference and the structure of this judgment The reference poses four principal questions, together with subordinate questions. The enactment of the UK Withdrawal Act poses two further questions. In this judgment we address those questions in the following manner: (1) We consider the UK Law Officers submission that the Scottish Bill in its entirety is outside competence principally because it relates to the reserved matter of relations with the EU (paras 23 36). (2) We address the challenge that section 17 of the Scottish Bill, which seeks to make the consent of the Scottish Ministers a pre condition for the legal effect of certain future subordinate legislation by Ministers of the Crown containing devolved provision which affects the operation of retained EU law, is outside competence (paras 37 65). (3) We consider whether section 33 of and Schedule 1 to the Scottish Bill, which purport to repeal references to EU law in the Scotland Act on the ground that they are spent after UK withdrawal, are outside competence (paras 66 79). (4) We address the challenge that various provisions of the Scottish Bill are outside competence because (i) they are incompatible with EU law, (ii) modify the European Communities Act 1972, and/or (iii) are contrary to the rule of law (paras 80 90). (5) We consider whether it is competent for this court to consider the effect of the UK Withdrawal Act on the legality of the Scottish Bill in the context of this reference (paras 91 97). (6) Finally, we address the extent to which the UK Withdrawal Act has put provisions of the Scottish Bill outside the legislative competence of the Scottish Parliament (paras 98 124). (1) Whether the Scottish Bill as a whole is outside the legislative competence of the Scottish Parliament The first question referred is stated in the Reference as follows: Whether the Scottish Bill as a whole is outside the legislative competence of the Scottish Parliament because: Paragraph 7 of Part 1 of Schedule 5 provides: It is contrary to the constitutional framework (a) underpinning the devolution settlement; and/or (b) It relates to the reserved matter of relations with the European Union set out in paragraph 7(1) of Part 1 of Schedule 5, falling under section 29(2)(b) of the Scotland Act; and/or (c) certainty and legality. It is contrary to the rule of law principles of legal including relations with 7(1) International relations, territories outside the United Kingdom, the European Union (and their institutions) and other international organisations, regulation of international trade, and international development assistance and co operation are reserved matters. (2) Sub paragraph (1) does not reserve (a) observing and implementing international obligations, obligations under the Human Rights Convention and obligations under EU law, assisting Ministers of the Crown in relation to (b) any matter to which that sub paragraph applies. We begin by explaining the scope of this question as it was developed in argument, and its relationship to other referred questions. The Scottish Parliament is a legislature of unlimited legislative competence subject to the limitations in sections 28 and 29 of the Scotland Act, and in particular the five exclusions from its competence specified in section 29(2). The most significant of these exclusions are (b), (c) and (d). They are very different in nature. Exclusions (c) and (d) are concerned with specific inconsistencies, in the case of (c) with specified UK legislation or rules of law identified in Schedule 4, and in the case of (d) with the Human Rights Convention or EU law. By comparison, the effect of case (b) is to prevent the Scottish Parliament from legislating about reserved matters at all, even if there is no inconsistency between its proposed legislation and any of these UK wide sources of law. The UK Law Officers attack the Scottish Bill at two levels, one general and the other particular. The general attack, which is the subject of Question 1, is based mainly on the contention that the entire Scottish Bill relates to international relations. As a result, it is said to be beyond the competence of the Scottish Parliament quite apart from any specific inconsistency between its terms and any UK wide source of law. The UK Law Officers seek to reinforce this point by arguing that a broad view must be taken of the nature of the relationship between the Scottish Bill and relations with the EU which will serve to bring it within section 29(2)(b). This is, first, because under section 29(3) the question whether a provision of a Scottish Act relates to a reserved matter must be determined by reference to the purpose of the provision, having regard (among other things) to its effect in all the circumstances. The purpose, it is said, of the Scottish Bill is to deal with relations with the EU in a manner specific to Scotland, whereas the assumption underlying Schedule 5, Part 1, paragraph 7 is that they will be dealt with on a UK wide basis, necessarily by the UK Parliament. Secondly, so it is submitted, it is because the Scottish Bill is open to review on more general grounds than those set out in section 29 of the Scotland Act, including its alleged inconsistency with the constitutional framework underpinning the devolution settlement or with the rule of law principles of legality and legal certainty. The argument is that the Scottish Bill cuts across the attempts of the UK Parliament and government to deal in a way that applies coherently and consistently across the whole of the UK with a matter within their reserved competence, namely the legal consequences of withdrawal from the EU. It is also said that the existence of parallel legislation on the same subject matter in Scotland and in the UK as a whole, undermines legal certainty. The starting point in considering these arguments is the proper scope of a reference under section 33 of the Scotland Act. There is a difference between a want of legislative competence and more general grounds for judicial review on public law grounds. The result of a want of legislative competence is that a Scottish enactment is a nullity (not law): see section 29(1) of the Scotland Act. A Scottish enactment which is held by a court to be unlawful on more general public law grounds is not necessarily a nullity. In AXA General Insurance Ltd v Lord Advocate Lord Hope at para 47 and Lord Reed at paras 149 153, with whom the rest of the court agreed, observed that since the Scottish Parliament is a statutory body owing its powers and duties to an Act of the UK Parliament, section 29 is not exhaustive of the grounds on which its legislation may be reviewed. Other grounds of challenge such as inconsistency with fundamental rights may in principle be available. They were, however, dealing with proceedings by way of judicial review on appeal from the Court of Session. It is clear, in particular from the observations of Lord Hope, that that was the context of these particular statements. A reference to this court under section 33 of the Scotland Act is concerned only with the extent of the Scottish Parliaments legislative competence: see section 33(1). This is a term of art in the Scotland Act. It refers back to section 29, which provides that a provision is outside the legislative competence of the Scottish Parliament in the five cases specified in subsection (2). For the purposes of a reference under section 33, they are exhaustive. It follows that the only relevant issue under Question 1 is whether the Scottish Bill relates to reserved matters, specifically relations with the EU, within the meaning of section 29(2)(b). Consistency with the rule of law or the constitutional framework underpinning the devolution settlement is relevant only so far as it assists in resolving that issue. They are not independent grounds of challenge available in these proceedings. In order to relate to a reserved matter, a provision of a Scottish bill must have more than a loose or consequential connection with it: Martin v Most at para 49 (Lord Walker). In Imperial Tobacco Ltd v Lord Advocate at para 26, Lord Hope observed that the question required one first to understand the scope of the matter which is reserved and, secondly, to determine by reference to the purpose of the provisions under challenge (having regard among other things to their effect in all the circumstance) whether those provisions relate to the reserved matter. The purpose of an enactment for this purpose may extend beyond its legal effect, but it is not the same thing as its political motivation. There can be no doubt about the purpose of the Scottish Bill or its effect if valid. It is accurately stated in section 1(1): (1) The purpose of this Act is to make provision (a) in connection with the prospective withdrawal of the United Kingdom from the EU in consequence of the notification given under section 1 of the European Union (Notification of Withdrawal) Act 2017 (UK withdrawal), and (b) for ensuring the effective operation of Scots law (so far as within devolved legislative competence) upon and after UK withdrawal. The decisive issue in these proceedings is accordingly the scope of the reservation for international relations. Before broaching that issue, it is necessary to say something about the legal context of the reservation for international relations. Three broad points need to be made about it: (1) In the eyes of the outside world a state is a subject of international law and as such a unitary entity. Other states or international organisations are not concerned with its internal distribution of powers, duties or competences. The UK is a member state of the EU and has all the international rights and obligations attaching to that status. Scotland is not as such a member state. It participates in the EU as an integral part of the UK. The UK is of course free to provide domestically for the observation and implementation of its EU and other international obligations by the devolved administrations and legislatures. But they remain the UKs international obligations, and the UK remains responsible at the international level for their proper discharge. (2) As a matter of domestic law, the conduct of the UKs international relations is a prerogative power of the Crown. It requires legislative authority only insofar as statute so provides, expressly or by implication. Ministers of the Crown cannot alter the law of any part of the UK by the exercise of that prerogative power. For that reason, where a treaty requires changes to the law of the UK, the long standing practice of Her Majestys Government has been to obtain legislative authority for those changes before ratifying any international engagement and thereby committing the UK internationally. (3) Reserved matters as defined in Schedule 5 are excluded from the legislative competence of the Scottish Parliament by virtue of section 29(2)(b), and also by virtue of section 29(2)(c), since Schedule 4, Part 1, paragraph 2 prevents it from legislating to modify the law on reserved matters. But it is important to appreciate that the statutory provisions for reserved matters are not only a limitation on the competence of the Scottish Parliament. Reserved matters are also excluded from the devolved competence of the Scottish Ministers by virtue (primarily) of section 54. Under section 54(3), the Scottish Ministers cannot exercise any function which it would not be competent for the Scottish Parliament to confer on them by legislation. The effect of this last provision is that the transfer from Ministers of the Crown to the Scottish Ministers of the function of exercising the prerogative powers of the Crown, which is effected generally by section 53, does not extend to the prerogative power to conduct international relations. This feature of the statutory scheme is particularly important in the case of the reservation for international relations, since the conduct of international relations is a matter for the executive, in which legislation generally plays an ancillary or implementing role. Schedule 5, Part 1, paragraph 7, distinguishes between (i) international relations, including relations with the EU, which are reserved; and (ii) the observation and implementation of international obligations and obligations under the Human Rights Convention and EU law, which are not reserved. For this purpose, EU law means all those rights, powers, liabilities, obligations and restrictions from time to time created or arising by or under the EU Treaties and all those remedies and procedures from time to time provided for by or under the EU Treaties: section 126(9). The observation and implementation of EU law is accordingly within the domestic competence of the Scottish Parliament and the Scottish Ministers unless it falls within another reserved matter, but subject always to the provisos that under section 29(2)(d) the legislature has no competence to legislate incompatibly with EU law and that under section 57(2) the Scottish Ministers have no competence to act incompatibly with EU law. The Scottish Bill is not within the carve out from the reserved matter for the observation or implementation of obligations under EU law. It has nothing to do with the observation or implementation of those obligations. If the Scottish Bill becomes law, its provisions will not affect the law of Scotland until after withdrawal, ie at a time when the UK has no EU law obligations. This point is more fully addressed at paras 80 to 90 below. The Scottish Bill is concerned with the purely domestic rules of law which at that point will replace EU law. The fact that those domestic rules may be substantially the same as the rules which previously applied as a matter of EU law does not make them obligations under EU law. Their juridical source is purely domestic. If the Scottish Bill is not within the carve out for the observation or implementation of EU law, does it fall within the general reservation for relations with the EU? The distinction between the observation or implementation of obligations under EU law and other aspects of relations with the EU means that the reservation in Schedule 5, Part 1, paragraph 7 is in practice likely to be relevant mainly to acts of the Scottish Ministers. There is relatively little scope for Scottish legislation to relate to international relations other than by way of implementation of international obligations, unless such legislation were to purport to deal with the power of Ministers of the Crown to exercise its prerogative in foreign affairs, or to create a state of law in Scotland which affected the effectual exercise of that power. An example might perhaps be the purported imposition of sanctions in Scotland on foreign countries for political purposes. It is particularly difficult to envisage Scottish legislation relating to relations with the EU other than by way of implementation of EU law obligations. This is because for as long as the UK remains in the EU they are comprehensively regulated by provisions of the European Communities Act 1972 which are protected enactments under Schedule 4, Part 1, paragraph 1(2)(c). In our judgment, the Scottish Bill does not relate to relations with the EU. It will take effect at a time when there will be no legal relations with the EU unless a further treaty is made with the EU. The Bill does not purport to deal with any legal rule affecting the power of Ministers of the Crown to negotiate such a treaty or otherwise to conduct the UKs relations with the EU. It does not purport to affect the way in which current negotiations between the UK and the EU are conducted. It simply regulates the legal consequences in Scotland of the cessation of EU law as a source of domestic law relating to devolved matters, which will result from the withdrawal from the EU already authorised by the UK Parliament. This is something that the Scottish Parliament is competent to do, provided (i) that it does it consistently with the powers reserved in the Scotland Act to the UK Parliament, and with legislation and rules of law protected under Schedule 4, and (ii) that its legislation does not relate to other reserved matters. Parts of the argument of the UK Law Officers appear to suggest a wider objection that separate Scottish legislation about the consequences of withdrawal is legally untidy, politically inconvenient or redundant in the light of the corresponding UK legislation. But we are not concerned with supposed objections of this kind, which go to the wisdom of the legislation and not to its competence. Different considerations may arise if and when further legislation is required to implement any agreement which Ministers of the Crown may negotiate with the EU governing the terms of withdrawal or the subsequent relations of the UK with the EU. But that is a matter which will have to be addressed when that legislation comes to be proposed. The UK Law Officers case on these points is not assisted by reference to the constitutional framework underlying the devolution settlement or the principles of legal certainty and legality. The constitutional framework underlying the devolution settlement is neither more nor less than what is contained in the Scotland Act construed on principles which are now well settled. And there is nothing legally uncertain or otherwise contrary to the rule of law about the enactment of legislation governing the domestic legal consequences of withdrawal at both the UK and the Scottish level, provided that they do not conflict, a question which is addressed below. Accordingly, the answer to Question 1 is No, subject in the case of Question 1(a) to the remaining questions referred. (2) Whether section 17 of the Scottish Bill is outside the legislative competence of the Scottish Parliament The second question is stated in the reference as follows: Section 17 of the Bill is headed Requirement for Scottish Ministers consent to certain subordinate legislation. Subsection (1) defines the subordinate legislation to which the section applies: Whether section 17 of the Scottish Bill is outside the legislative competence of the Scottish Parliament because: (a) It modifies sections 28(7) and 63(1) of the Scotland Act and is accordingly in breach of the restriction in paragraph 4(1) of Schedule 4, falling under section 29(2)(c) of the Scotland Act; and/or (b) It relates to the reserved matter of the Parliament of the United Kingdom set out in paragraph 1(c) of Part 1 of Schedule 5, falling under section 29(2)(b) of the Scotland Act. (1) This section applies to subordinate legislation made, confirmed or approved by a Minister of the Crown or any other person (other than the Scottish Ministers) if it contains devolved provision (whether or not it (a) also contains other provision), (b) affects the operation of the devolved provision modifies or otherwise (i) retained (devolved) EU law, or (ii) anything that would be, on or after exit day, retained (devolved) EU law, it is made, confirmed or approved under a (c) function (i) (ii) modified in accordance with subsection (3), conferred, or by or under an Act of the Parliament of the United Kingdom enacted after the date on which this section comes into force, and (d) it does not apart from this section require the consent of the Scottish Ministers before it is made, and (e) it is made by statutory instrument. Subsection (3) explains what is meant in subsections (1)(b) and (1)(c)(ii) by modifies and modified: (3) A function is modified in accordance with this subsection if it is modified in a way that enables or requires the subordinate legislation to contain devolved provision that it could not previously contain. Subsection (4) defines the expression devolved provision: (4) For the purposes of this section, devolved provision means provision that would be, if it were contained in an Act of the Scottish Parliament, within the legislative competence of the Scottish Parliament. Subsection (1) having defined the ambit of section 17, and subsections (3) and (4) having defined some of the expressions employed, the operative provision of the section is set out in subsection (2): (2) The subordinate legislation, to the extent that it contains devolved provision, is of no effect unless the consent of the Scottish Ministers was obtained before it was made, confirmed or approved. Section 28(1) of the Scotland Act confers on the Scottish Parliament the power to make laws known as Acts of the Scottish Parliament, subject to section 29. Section 28(7) provides: (7) This section does not affect the power of the Parliament of the United Kingdom to make laws for Scotland. That provision makes it clear that, notwithstanding the conferral of legislative authority on the Scottish Parliament, the UK Parliament remains sovereign, and its legislative power in relation to Scotland is undiminished. It reflects the essence of devolution: in contrast to a federal model, a devolved system preserves the powers of the central legislature of the state in relation to all matters, whether devolved or reserved. Section 29(1) provides that an Act of the Scottish Parliament is not law so far as any provision of the Act is outside the legislative competence of the Parliament. Section 29(2) provides that a provision is outside that competence so far as, inter alia: (c) it is in breach of the restrictions in Schedule 4. Schedule 4 provides, in paragraph 4(1): (1) An Act of the Scottish Parliament cannot modify, or confer power by subordinate legislation to modify, this Act. Subsequent provisions in paragraph 4 create a number of exceptions to that general prohibition, but there is no exception relating to section 28(7). It follows that a provision in an Act of the Scottish Parliament is outside legislative competence in so far as it purports to modify section 28(7). Section 17 of the Bill, if it received Royal Assent, would therefore be outside legislative competence in so far as it purported to do so. (a) Would section 17 of the Bill modify section 28(7) of the Scotland Act? It is submitted on behalf of the UK Law Officers that section 17 of the Bill would modify section 28(7) of the Scotland Act, since it would impose a condition limiting the power of the UK Parliament to make laws for Scotland in relation to devolved matters. Any law which the UK Parliament makes, conferring on Ministers of the Crown or other persons the power to make subordinate legislation falling within the scope of section 17, would be of no effect unless the Scottish Ministers consent to the subordinate legislation in question in accordance with that section. That would be inconsistent with the sovereign power of the UK Parliament to legislate for Scotland. Section 17 would therefore limit the continuing effect of, and thus modify, section 28(7) of the Scotland Act, in breach of the limit on legislative competence imposed by section 29(2)(c) of the Scotland Act, read together with paragraph 4(1) of Schedule 4. In response, the Lord Advocate advances a number of arguments. First, he submits that a distinction should be drawn between a provision which expressly or implicitly alters a provision in a protected enactment, and so modifies it, and one which merely adds further provision in the same field of law. Similar arguments are also advanced by the Attorney General for Northern Ireland and on behalf of the Counsel General for Wales. Counsel for the Counsel General submits that where the UK Parliament passes legislation for Wales, there is no reason in principle why the Welsh Assembly cannot legislate to the effect of adding a requirement (for example, for consultation), although no such requirement appears in the legislation enacted by Parliament. The devolution legislation recognises this, and deals with the situation by giving the UK Parliament the option of entrenching legislation by protecting it from modification. It is, he submits, inconsistent with that structure to say that legislating to add to or detract from what Westminster had enacted (or might wish to enact in the future) was itself outside legislative competence. In support of his submission, the Lord Advocate cites Martin v Most at para 110, where Lord Rodger of Earlsferry in his dissenting judgment described a provision in an Act of the Scottish Parliament which enabled sheriffs to impose a maximum sentence of imprisonment of 12 months on persons convicted on summary complaint as superseding, and so modifying, a provision in UK road traffic legislation which stipulated that the maximum term of imprisonment for a specified conviction on summary complaint was six months. The UK provision was not amended or repealed, but it was superseded in its application to Scotland, and so modified, by a provision which was inconsistent with it. The Lord Advocate also cites the judgments of the Inner House, and of this court, in Imperial Tobacco Ltd v Lord Advocate. The relevant issues in that case arose under paragraph 2(1) of Schedule 4 to the Scotland Act, which provides that an Act of the Scottish Parliament cannot modify the law on reserved matters, an expression which is defined in paragraph 2(2) as meaning any enactment or rule of law the subject matter of which is a reserved matter. One question which arose was whether provisions in an Act of the Scottish Parliament which restricted the display of tobacco products, and prohibited their sale by vending machines, modified existing UK Regulations which prohibited the sale of tobacco for oral use and the sale of cigarettes with high tar yields. The creation of additional offences was held not to modify the existing Regulations. In the Inner House, Lord President Hamilton distinguished at para 17 between a provision which, expressly or implicitly, alters another provision and one which adds a further specific restriction or restrictions to existing specific restrictions, albeit in the same field of law. The latter, he said, did not modify an existing enactment. In this court Lord Hope stated at para 44: [The provisions in question] do not seek to amend or otherwise affect anything that is set out in those Regulations. In that sense they cannot be said to modify them at all. As Lord Reed said [in the Inner House] the Regulations continue in force as before. Proceeding on that basis, the Lord Advocate advances three reasons why section 17 would not modify section 28(7) of the Scotland Act. First, he submits, Parliaments power to make laws for Scotland would remain unaffected. The subordinate legislation to which section 17 of the Bill would apply would not be made by Parliament itself, but by Ministers and other persons. To similar effect, the Attorney General for Northern Ireland submits that section 17 would not touch, far less modify, Parliaments power to enact: all it would affect was what Ministers of the Crown and other persons might do pursuant to a power that Parliament might give them. Secondly, the Lord Advocate submits that section 17 of the Bill would not modify section 28(7) of the Scotland Act because it would remain within the power of the UK Parliament subject, he submits, to the Sewel convention, set out in section 28(8) of the Scotland Act to disapply section 17 of the Bill, or to repeal it altogether. Thirdly, the Lord Advocate submits that since section 17 would not prevent the UK Parliament from conferring powers on Ministers to make subordinate legislation for Scotland, and would not affect the formal validity of any subordinate legislation made in the exercise of such powers, but is directed merely at the legal effect of such legislation, it follows that section 17 would not affect the UK Parliaments power to make laws for Scotland, and therefore would not modify section 28(7) of the Scotland Act. In that regard, the Lord Advocate draws an analogy with the distinction between a laws being on the statute book and its being in force. Considering first the meaning of modification, the expression modify is defined in section 126(1) of the Scotland Act as follows: modify includes amend or repeal. This clearly strikes at the express amendment or repeal of any provision which is protected against modification. The Lord Advocate accepts, however, that it is not confined to express amendment or repeal: a provision may also be held to modify another provision if it has the effect of amending or repealing it. He submits that, where there is no express amendment or repeal, the issue can be tested by asking whether there is an inconsistency between the provision under consideration and the protected enactment or rule of law. As appears from the authorities cited by the Lord Advocate, one enactment does not modify another merely because it makes additional provision in the same field of law. If it did, the important distinction between the protection of enactments from modification under Schedule 4 to the Scotland Act, and the inability of the Scottish Parliament to legislate in relation to reserved matters under Schedule 5, would become obscured. When the UK Parliament decides to reserve an entire area of the law to itself, it does so by listing the relevant subject matter in Schedule 5. When it has not taken that step, but has protected a particular enactment from modification by including it in Schedule 4, it is not to be treated as if it had listed the subject matter of the enactment in Schedule 5. Where the only relevant restriction on the legislative power of the Scottish Parliament is the protection of an enactment from modification under Schedule 4, the Parliament has the power to enact legislation relating to the same subject matter as the protected enactment, provided it does not modify it. Without attempting an exhaustive definition, a protected enactment will be modified by a later enactment, even in the absence of express amendment or repeal, if it is implicitly amended, disapplied or repealed in whole or in part. That will be the position if the later enactment alters a rule laid down in the protected enactment, or is otherwise in conflict with its unqualified continuation in force as before, so that the protected enactment has to be understood as having been in substance amended, superseded, disapplied or repealed by the later one. Applying that approach, we are unable to accept the Lord Advocates submission that section 28(7) of the Scotland Act would not be modified by section 17 of the Bill. As the Lord Advocate acknowledges, the power of the UK Parliament to make laws for Scotland includes the power to make laws authorising the making of subordinate legislation by Ministers and other persons. An enactment of the Scottish Parliament which prevented such subordinate legislation from having legal effect, unless the Scottish Ministers gave their consent, would render the effect of laws made by the UK Parliament conditional on the consent of the Scottish Ministers. It would therefore limit the power of the UK Parliament to make laws for Scotland, since Parliament cannot meaningfully be said to make laws if the laws which it makes are of no effect. The imposition of such a condition on the UK Parliaments law making power would be inconsistent with the continued recognition, by section 28(7) of the Scotland Act, of its unqualified legislative power. Thus, in order for section 17 of the Bill and section 28(7) of the Scotland Act to operate concurrently, the former would have to be treated as impliedly amending the latter, so that it read: (7) Subject to section 17 of the UK Withdrawal from the European Union (Legal Continuity) (Scotland) Act 2018, this section does not affect the power of the Parliament of the United Kingdom to make laws for Scotland. That conclusion is not altered by the other arguments advanced by the Lord Advocate. In relation to the first argument (para 47 above), a provision which made the effect of laws made by the UK Parliament for Scotland conditional on the consent of the Scottish Ministers, unless it disapplied or repealed the provision in question, would for that very reason be inconsistent with the continued recognition of its unqualified sovereignty, and therefore tantamount to an amendment of section 28(7) of the Scotland Act. In relation to the second argument (para 48 above), the question before the court is whether, if the Bill were to receive Royal Assent, section 17 would be law. If not, there would be no question of its having to be disapplied or repealed by the UK Parliament: it would be of no legal effect whatsoever (not law, in terms of section 29(1) of the Scotland Act). It is therefore no answer to an argument that section 17 of the Bill would be outside legislative competence, to say that it could be disapplied or repealed. In relation to the third argument (para 49 above), this submission resembles the Lord Advocates first argument, and for similar reasons we are unable to accept it. A provision which imposes a condition on the legal effect of laws made by the UK Parliament, in so far as they apply to Scotland, is in conflict with the continuation of its sovereign power to make laws for Scotland, and is therefore equivalent to the amendment of section 28(7) of the Scotland Act. The suggested analogy reinforces the point. If a provision of a Bill passed by the Scottish Parliament were to prevent legislation enacted by the UK Parliament from coming into force without the Scottish Ministers consent, that provision would undoubtedly limit the UK Parliaments power to make laws for Scotland. For these reasons, we conclude that section 17 of the Bill would modify section 28(7) of the Scotland Act, contrary to section 29(2)(c) and paragraph 4(1) of Schedule 4. Having reached that conclusion, it is unnecessary for us to consider whether section 17 of the Bill would also breach the restriction in paragraph 4(1) of Schedule 4 by modifying section 63(1). (b) Does section 17 relate to the reserved matter of Parliament? The remaining question, in relation to section 17 of the Bill, is whether it relates to the reserved matter of the Parliament of the United Kingdom, set out in paragraph 1(c) of Part 1 of Schedule 5 to the Scotland Act, to which effect is given by section 29(2)(b). Reserved matters are set out in Schedule 5. Paragraph 1 is headed The Constitution, and provides: the Union of the Kingdoms of Scotland and the Crown, including succession to the Crown The following aspects of the constitution are reserved matters, that is (a) and a regency, (b) England, the Parliament of the United Kingdom, (c) (d) the continued existence of the High Court of Justiciary as a criminal court of first instance and of appeal, (e) as a civil court of first instance and of appeal. the continued existence of the Court of Session Paragraph 1 is qualified by paragraphs 2 to 5, but none of the qualifications affects paragraph 1(c). It is submitted on behalf of the UK Law Officers that section 17 of the Bill relates to the reserved matter of the Parliament of the United Kingdom. Its purpose is to achieve what the Scottish Government failed to achieve during the passage of the UK Withdrawal Act through Parliament, namely the enactment of a requirement that subordinate legislation made under the Act, affecting matters devolved to Scotland, would be subject to a requirement that the consent of the Scottish Government must be obtained. That purpose is made plain by the Scottish Government in the Policy Memorandum which was published to accompany the Bill, at paras 68 69: 68. While it may prove efficient or beneficial to be able to make provision on a UK wide basis, the Scottish Government considers that this should only be possible with the consent of the Scottish Ministers. Amendments to the [European Union (Withdrawal) Bill] to this effect were jointly proposed by the Scottish and Welsh Governments but were not accepted by the UK Government. 69. In order to ensure the involvement of devolved Scottish institutions in devolved Scottish law making, the Bill therefore creates a default procedural requirement under which UK Ministers must obtain the consent of the Scottish Ministers before they make, confirm or approve secondary legislation relating to devolved matters which modifies, or would modify, any retained (devolved) EU law. The effect of section 17 is consistent with that purpose. It would give the Scottish Ministers the power to prevent subordinate legislation made by a Minister of the Crown from having effect in Scotland by withholding their consent. Section 17 thus seeks to impose on a power to be granted by Parliament a limitation that Parliament itself had chosen not to impose. It is inconsistent with the power of a sovereign Parliament. In response, the Lord Advocate submits that the reservation of the Parliament of the United Kingdom is narrower in scope than the argument advanced on behalf of the UK Law Officers assumes. It comprises such matters as the existence of Parliament, its composition and its procedures. Section 17 of the Bill has no impact on any of these matters, or on the powers of Parliament. The argument advanced by the UK Law Officers fails to recognise that it is not, in general, outside the legislative competence of the Scottish Parliament to amend or repeal legislation enacted by the UK Parliament. Similar submissions are also made on behalf of the Counsel General for Wales and by the Attorney General for Northern Ireland. We are not persuaded that section 17 of the Bill relates to the matter reserved by paragraph 1(c) of Schedule 5. In deciding what that provision is intended to reserve, it is necessary to take account of its statutory context, including the heading of paragraph 1: Imperial Tobacco, para 17. As we have mentioned, paragraph 1 is headed The Constitution. It reserves five aspects of the constitution. They are all fundamental elements of the constitution of the UK, and of Scotlands place within it: the Crown, the Union, the UK Parliament, and the existence of Scotlands higher civil and criminal courts. Considered in that context, the reservation in paragraph 1(c) encompasses, amongst other matters, the sovereignty of Parliament, since that is an attribute of Parliament which is relevant indeed, fundamental to the constitution. On the other hand, the reservation in paragraph 1(c) cannot have been intended, ordinarily at least, to protect legislation enacted by Parliament from the effects of legislation passed by the Scottish Parliament, since that purpose is effected by other provisions of the Scotland Act, which reserve matters to the UK Parliament and thereby prevent the Scottish Parliament from legislating on those matters, or which protect enactments made by the UK Parliament from modification by legislation passed by the Scottish Parliament. It follows that, if the Scottish Parliament legislates in order to give effect in Scotland to a policy which has been rejected by the UK Parliament, it does not, as a general rule, thereby infringe the reservation created by paragraph 1(c). Neither the purpose nor the effect of such legislation impinges upon the constitutional functions, powers or privileges of Parliament. The point can be illustrated by the case of In re Agricultural Sector (Wales) Bill which concerned a Bill passed by the Welsh Assembly, as emergency legislation, in order to establish a scheme for setting minimum wages for agricultural workers in Wales, shortly after the previous scheme, covering England and Wales, had been abolished by an Act of Parliament. The Bill was challenged by the Attorney General on the ground that it did not relate to the devolved matter of agriculture, and was therefore outside the legislative competence of the Assembly. No challenge was brought on the ground that, since the Bill gave effect to a policy which had been rejected by the UK Parliament, the Bill therefore related to the reserved matter of the UK Parliament. Nor was there any suggestion in the judgment that such a challenge might have been brought. Similarly in the present case, the fact that section 17 of the Bill gives effect to a policy rejected by the UK Parliament does not mean that it relates to the reserved matter of Parliament. Nor are we persuaded that section 17 impinges upon the sovereignty of Parliament. Section 17 does not purport to alter the fundamental constitutional principle that the Crown in Parliament is the ultimate source of legal authority; nor would it have that effect. Parliament would remain sovereign even if section 17 became law. It could amend, disapply or repeal section 17 whenever it chose, acting in accordance with its ordinary procedures. The preferable analysis is that although section 17, if it became law, would not affect Parliamentary sovereignty, it would nevertheless impose a condition on the effect of certain laws made by Parliament for Scotland, unless and until Parliament exercised its sovereignty so as to disapply or repeal it. It would therefore affect the power of the Parliament of the United Kingdom to make laws for Scotland, and so modify section 28(7) of the Scotland Act. Conclusion in relation to section 17 For the foregoing reasons, the answer to Question 2(a) is Yes. Section 17 of the Bill would not be within the legislative competence of the Scottish Parliament, because it would modify section 28(7) of the Scotland Act, contrary to section 29(2)(c). The answer to Question 2(b) is no. (3) Whether section 33 of and Schedule 1 to the Scottish Bill are outside the legislative competence of the Scottish Parliament Section 33 of the Scottish Bill purports to repeal spent references to EU law in the Scotland Act. It provides: (1) In section 29(2)(d) of the Scotland Act 1998 (no competence for Scottish Parliament to legislate incompatibly with Convention rights or EU law) the words or with EU law are repealed. (2) In section 57(2) of that Act (no power for members of the Scottish Government to act incompatibly with Convention rights or EU law), the words or with EU law are repealed. (3) Schedule 1 contains further repeals of provisions in that Act which are spent as a consequence of the UKs withdrawal from the EU. Schedule 1 provides for the repeal of provisions in the Scotland Act concerning EU parliamentary elections, references to the Court of Justice of the EU (CJEU), obligations under EU law, and EU law. The UK Law Officers submit that these provisions are outside legislative competence because they modify provisions of the Scotland Act which Schedule 4 to that Act prohibits the Scottish Parliament from modifying. Paragraph 4 of Schedule 4 states: (1) An Act of the Scottish Parliament cannot modify, or confer power by subordinate legislation to modify, this Act. That prohibition is subject to exceptions listed in the remaining sub paragraphs of paragraph 4; but, as the UK Law Officers submit, of the provisions which Schedule 1 to the Scottish Bill would repeal, only sections 12(4)(a) and 82(1) fall within the listed exceptions. The other provisions, it is submitted, are protected from modification. The UK Law Officers fundamental objection to section 33 and Schedule 1 is that it is for the UK Parliament to amend the terms of the devolution settlement in the Scotland Act; it is not for the Scottish Parliament to determine its own competence. They refer to the statement of the Judicial Committee of the Privy Council in Bribery Comr v Ranasinghe [1965] AC 172, 197: A legislature has no power to ignore the conditions of law making that are imposed by the instrument which itself regulates its power to make law. The UK Law Officers point out that the repeals in section 33(1) and (2) would alter provisions (sections 29 and 57(2)) which define the competence of the Scottish Parliament and the Scottish Government. The UK Law Officers advance a second argument addressing paragraph 7 of Schedule 4 to the Scotland Act, which contains another exception to the prohibition against modification of the Scotland Act. It provides that Part 1 of Schedule 4 (which includes paragraph 4 of that Schedule) does not prevent an Act of the Scottish Parliament (b) repealing any spent enactment, or conferring power by subordinate legislation to do so. The UK Law Officers submit that the statutory references to EU law in the Scotland Act cannot be spent until the European Communities Act 1972 (the 1972 Act) has been repealed. They submit that the effect of section 33 is not suspended by section 1(2) of the Scottish Bill. That section provides: In so far as any provision of this Act, or any provision made under it, would, if it were in effect before the relevant time, be incompatible with EU law, the provision is to have no effect until the relevant time. Section 1(3) defines relevant time in section 1(2) as the time when the relevant provision of EU law ceases to have effect in Scots law as a consequence of the withdrawal of the UK from the EU. Because the repeals to be effected by section 33 of and Schedule 1 to the Scottish Bill would not by themselves be incompatible with EU law, section 1(2), it is argued, cannot have the effect of postponing the repeals until after UK withdrawal. Further, the fact that a provision has not been brought into force does not prevent it from being outside legislative competence: reference is made to the judgment of this court in Christian Institute v Lord Advocate [2016] UKSC 51; 2017 SC (UKSC) 29, para 109, in which this court held that legislation, which was not within the legislative competence of the Scottish Parliament, could not be brought into force. Finally, and in any event, the UK Law Officers submit that even if references to EU law were to be seen as spent because they were meaningless after UK withdrawal, there are other provisions which are not. They refer to section 34 of the Scotland Act, which enables the Scottish Parliament to reconsider a Bill if the Supreme Court, on considering a reference under section 33, decides to make a reference to the CJEU for a preliminary ruling. Such a provision would be rendered redundant by the repeal of the European Communities Act 1972 and might then require to be repealed. But because the provision was not rendered meaningless, it could not be treated as spent. We are not able to accept those submissions. The constitutional principle in Ranasinghe is not breached if there is a provision in the Scotland Act which allows the Scottish Parliament to repeal provisions in that Act which regulate its competence. The Lord Advocate submits that paragraph 7 of Schedule 4 is such a provision, arguing that the provisions of the Scotland Act, which section 33 of and Schedule 1 to the Scottish Bill would repeal, will be spent on UK withdrawal and that it is within the competence of the Scottish Parliament to provide in advance for UK withdrawal. The central question therefore is whether he is correct in that submission. We have concluded that he is. We do not accept that the power in paragraph 7 of Schedule 4 to repeal any spent enactment is restricted to a statutory provision which is literally meaningless, as the UK Law Officers suggest. Synonyms for the adjective, spent, include exhausted, finished, used up, and no longer active. Something is spent if it has been used and is unable to be used again. In a legal context of paragraph 7 of Schedule 4 to the Scotland Act, the adjective spent means a statutory provision which has no continuing legal effect. EU law is defined in section 126(9) of the Scotland Act as (a) all those rights, powers, liabilities, obligations and restrictions from time to time created or arising by or under the EU Treaties, and (b) all those remedies and procedures from time to time provided for by or under the EU Treaties. The constraints which EU law, so defined, place on the competence of the Scottish Parliament and the Scottish Government under sections 29(2)(d) and 57(2) of the Scotland Act will cease to have effect on UK withdrawal. Similarly, the provisions of the Scotland Act which refer to elections to the European Parliament and to procedures available to the Scottish Parliament when this court makes a reference to the CJEU under article 267 of the Treaty on the Functioning of the EU (TFEU) will cease to have legal effect on UK withdrawal. The UK Law Officers do not suggest that it would be incompatible with EU law for the Scottish Parliament now to enact section 33 of and Schedule 1 to the Scottish Bill. On the contrary, they submit that, because that would be compatible with EU law, section 1(2) of the Scottish Bill does not protect those provisions by postponing the repeal of the provisions of the Scotland Act until after the UK has withdrawn from the EU. We agree with that submission. But there is another mechanism by which the Scottish Parliament has provided for the postponement of the coming into force of section 33 and Schedule 1. Section 36(1) of the Scottish Bill provides that specified provisions of the Bill come into force on the day after Royal Assent. Those provisions do not include section 33. That section falls under section 36(2), which provides that the other provisions of the Bill come into force on such day as the Scottish Ministers may by regulations appoint. If read in isolation, section 36(2) would allow the Scottish Ministers to bring section 33 into force before the UK withdraws from the EU. But a statutory provision should not be interpreted in such isolation from its statutory context. As we have seen, section 1(1) of the Scottish Bill provides: The purpose of this Act is to make provision in connection with the prospective withdrawal of (a) the United Kingdom from the EU in consequence of the notification given under section 1 of the European Union (Notification of Withdrawal) Act 2017 (UK withdrawal), and (b) for ensuring the effective operation of Scots law (so far as within devolved legislative competence) upon and after UK withdrawal. This provides the context both for the interpretation of section 33 and for the exercise by the Scottish Ministers of the section 36(2) power. The provisions which section 33 and Schedule 1 would repeal would not be spent until UK withdrawal. The power of the Scottish Ministers in section 36(2) to make regulations to bring section 33 of the Scottish Bill into force is therefore restricted by the terms of section 33. If the Scottish Ministers were to make regulations to bring section 33 into force before UK withdrawal, they would be acting in excess of their powers as section 33 repeals provisions which are spent as a consequence of the UKs withdrawal from the EU, and those provisions will not be spent until the UK withdraws from the EU. Furthermore, if it were necessary in order to avoid a breach of paragraph 4(1) of Schedule 4 to the Scotland Act, section 101(2) of the Scotland Act, which we have set out in para 16 above, requires the court to read section 36(2) narrowly so that the apparently general power of the Scottish Ministers to bring into force provisions of the Scottish Bill can be exercised in relation to section 33 only when it is competent to do so, that is to say once the UK has withdrawn from the EU and the provisions to be repealed have become spent. Finally, we do not accept the submission that this courts judgment in Christian Institute points to the conclusion that the legislative competence of a devolved legislature must always be assessed by reference to an impugned provision of a Bill which has been passed whether or not that provision has been brought into force. In that case this court held that the information sharing provisions in Part 4 of the Children and Young People (Scotland) Act 2014 were incompatible with the rights of children, young persons and parents under article 8 of the European Convention on Human Rights both because they were not in accordance with the law as that article requires and because they might result in a disproportionate interference with those persons article 8 rights. The case was not concerned with legislation which was addressing a contingency outside the control of the Scottish Parliament which would occur on a future date. The timing of the bringing into force of the impugned provisions of the 2014 Act was irrelevant to the challenge mounted in Christian Institute. By contrast, the Scottish Bill makes provision for the contingency of UK withdrawal, which will occur on 29 March 2019 unless steps are taken by the UK Government and, through the European Council, the governments of the other 27 member states of the EU to extend the period before the UK exits the EU. It enables the Scottish Ministers to bring into force the relevant provisions from the date when that contingency occurs. We therefore conclude that section 33 of and Schedule 1 to the Scottish Bill would not be outside the legislative competence of the Scottish Parliament under section 29(2)(c) of the Scotland Act on the ground that they breach paragraph 4(1) of Schedule 4 to that Act. But this does not mean that those provisions of the Scottish Bill, if it were to receive Royal Assent, would be within the legislative competence of the Scottish Parliament. This is because we have yet to consider the application of section 29(2)(c) in the light of the enactment of the UK Withdrawal Act which, in paragraph 21(2)(b) of Schedule 3, has amended Schedule 4 to the Scotland Act by adding the UK Withdrawal Act to the statutes which the Scottish Parliament cannot modify. We address this matter in paras 98 124 below. (4) Whether various provisions of the Scottish Bill are outside competence because (i) they are incompatible with EU law, (ii) modify section 2(1) of the European Communities Act 1972, and/or (iii) are contrary to the rule of law It is argued on behalf of the UK Law Officers that provisions of the Scottish Bill are not law because they are incompatible with EU law and therefore outside the competence of the Scottish Parliament by virtue of section 29(2)(d) of the Scotland Act or because they entail a prohibited modification of section 2(1) of the European Communities Act 1972 (the 1972 Act), contrary to section 29(2)(c) of and Schedule 4 paragraph 1(2)(c) to the Scotland Act. The UK Law Officers further submit that those provisions are contrary to the rule of law. The provisions which are said not to be law on those grounds are those (i) which incorporate or empower the Scottish Ministers to incorporate into Scots law directly applicable EU law (sections 3 5 and 13), (ii) which disapply mandatory principles of EU law (sections 6 8 and 10), (iii) which empower the Scottish Ministers to make regulations to modify retained (devolved) EU law (section 11), or (iv) which are in whole or in part parasitic upon one or more of the previously mentioned provisions (sections 13A 16, 18 19, 21, 22 and 36A in relation to sections 11 and 13, and sections 23 26 and 34 and Schedule 2 in relation to sections 3 5). These submissions rest on the premise that the Scottish Parliament does not at present have legislative competence to pass an Act containing provisions which cannot be brought into effect until current restraints on legislative competence are removed at a future date. If the provisions had come into effect on the date when the Bill was passed by the Scottish Parliament they would be outside that competence. Postponement of the coming into effect of such provisions, it is argued, does not affect legislative competence as legislative competence and legal effect are separate questions. It is submitted that the court would be placed in an impossible position if it had to assess the competence of the Scottish Parliament by reference to the future legal effect of a provision. Similar arguments that the Scottish Bill by legislating for the removal of the obligations (i) to legislate compatibly with EU law and (ii) prohibiting the modification of section 2(1) of the 1972 Act, wrongly assumes that the Scottish Parliament can make provision now for the exercise of powers which it is possible the Parliament will acquire in the future, influenced the Presiding Officer when he made his careful statement on legislative competence. The Lord Advocate in reply submits that the impugned provisions are not incompatible with EU law because they will not come into force until the TEU and the TFEU cease to apply to the UK, thereby removing the supremacy of EU law. He submits that it is not contrary to EU law and it is consistent with legal certainty for a member state, such as the UK, to pass anticipatory legislation to address the consequences to its statute book of the proposed withdrawal from the EU, provided that that is done in a way which respects the supremacy of EU law until withdrawal. A devolved legislature, such as the Scottish Parliament, may likewise enact such legislation consistently with EU law. In addressing this challenge we refer to the purpose of the Scottish Bill which is stated in section 1(1), which we have quoted in paras 28 and 76 of this judgment: it is to make provision in connection with the prospective UK withdrawal and to ensure the effective operation of Scots law so far as within devolved competence on or after that withdrawal. Section 1(2) is a critical provision. As we have seen, it provides: (2) In so far as any provision of this Act, or any provision made under it, would, if it were in effect before the relevant time, be incompatible with EU law, the provision is to have no effect until the relevant time. Subsection (3) defines the relevant time: (3) In subsection (2), the relevant time, in relation to any provision of this Act or any provision made under it, means the time at which the provision of EU law with which it would be incompatible ceases to have effect in Scots law as a consequence of UK withdrawal. The effect of these provisions is that none of the sections of the Bill to which we have referred in para 80 above can have legal effect until the provision of EU law with which it is incompatible has ceased to have effect as a consequence of the UK withdrawal. Absent such legal effect, there is no incompatibility with EU law. The challenge under section 29(2)(d) of the Scotland Act therefore fails. Similarly, the postponement of the legal effect of the impugned provisions prevents there being any modification of section 2(1) of the 1972 Act, which incorporates EU law into our domestic laws, because the UK withdrawal, which is the precondition of the bringing into legal effect of the provisions, will involve the repeal of section 2(1) of the 1972 Act. Prospective legislative provision for the consequences of the repeal of the 1972 Act, which has no legal effect until such repeal, entails no modification of that Act. The challenge under section 29(2)(c) of the Scotland Act therefore fails. The residual challenge based on the rule of law is, with respect, misconceived. The principles of legal certainty and legality when applied to the competence of the Scottish Parliament operate within the statutory framework of the Scotland Act. The rule of law in relation to the legislative competence of the Scottish Parliament is maintained through the operation of section 29 of and Schedules 4 and 5 to the Scotland Act and the scrutiny by this court under section 33 of that Act relates to the application of those provisions. That scrutiny involves an assessment whether legislation by the Scottish Parliament complies with the limitations imposed by section 29 of the Scotland Act. As we have stated (para 35 above) there is nothing legally uncertain or contrary to the rule of law about the enactment of legislation by both the UK Parliament and the Scottish Parliament, provided that they do not conflict. The remit of this court under section 33 of the Scotland Act to scrutinise Bills of the Scottish Parliament does not extend to addressing arguments which are either complaints about the quality of the drafting of a Bill or seek to raise uncertainties about the application of a Bills provisions in future circumstances which may or may not arise and which, should they occur, may require amending legislation. In our view, the Lord Advocate is correct in his submission that the possibility of the need to amend legislation to take account of changed future circumstances does not alter the competence of that legislation now. While that is a complete answer to this challenge, it is appropriate briefly to discuss one more detailed argument under this heading. The UK Law Officers assert that the mechanism by which sections 2 5 of the Scottish Bill, which are concerned with the retention of devolved EU law and devolved EU rights after exit day, may be brought into effect by regulations made by the Scottish Ministers under section 36 of the Bill involves a breach of the constitutional structure of the devolution settlement. The argument appears to be that there is uncertainty as to when the entirety or parts of the TEU and TFEU will cease to apply to the UK because that will depend on any transitional arrangements which are negotiated by the UK and the EU. The retention of existing EU law by those sections takes effect only on exit day and there is no provision for the scrutiny of the decision by the Scottish Ministers to bring those provisions into effect using their regulation making power under section 36 of the Scottish Bill. Again, we are not able to accept this submission. Section 28 of the Scottish Bill defines exit day as follows: (1) In this Act, exit day means the day that the United Kingdom leaves the EU. [sic] Where the United Kingdom leaves the EU at a (3) specific time on exit day, references in this Act to before, after or on that day, or to beginning with that day, are accordingly to be read as references to before, after or at that time on that day or (as the case may be) to beginning with that time on that day. [sic] For the purposes of this section, the United (4) Kingdom leaves the EU when the Treaty on the European Union and the Treaty on the Functioning of the European Union cease to apply to the United Kingdom as a consequence of UK withdrawal. This provision, which when introduced into the Scottish Parliament empowered the Scottish Ministers to specify by regulations what was exit day but which was subsequently amended, was enacted on the understanding that it was expected that the UK would cease to be a member of the EU at 11 pm on 29 March 2019 in accordance with the timescale set down in article 50(3) of the TEU, an understanding which was later enacted in the definition of exit day in section 20 of the UK Withdrawal Act. But it was recognised that the date could change depending on the outcome of any negotiations between the UK and the European Council. In our view, it is possible that the definition of exit day may have to be amended if, for example, in the light of negotiations between the UK and the EU, transitional arrangements were put in place so that not all of the provisions of the TEU and the TFEU ceased to have effect at the same moment. But that is of no consequence. The same may be true of the definition of exit day in the UK Withdrawal Act. What is relevant is that any power of the Scottish Ministers under section 36 of the Scottish Bill to bring into effect sections 2 to 5 will be overridden by section 1(2), which we have quoted in para 84 above. The legal validity of such subordinate legislation, if it failed to respect the restriction imposed by section 1(2), would be open to challenge by judicial review and thus subjected to the scrutiny of the courts. So also would subordinate legislation under sections 11 and 12 of the Scotland Bill to which the UK Law Officers referred in their submissions. There is no question of having to read down these provisions under section 101 of the Scotland Act. As discussed below however, there are other grounds for concern about section 11 of the Scottish Bill. Finally, the UK Law Officers assert that at the heart of the section 1(2) mechanism the Scottish Parliament is seeking to modify its own competence by making an assumption that at some future date its competence will be altered. This is said to breach constitutional principle. We do not accept that this is the effect of the Scottish Bill. Legislation by the UK Parliament has empowered the UK Government to serve a notice under article 50 of the TEU. The service of that notice currently has the consequence that the requirement that the Scottish Parliament legislate compatibly with EU law in section 29(2)(d) of the Scotland Act will cease on 29 March 2019. That will be the result of the article 50 notice unless future political decisions, such as the extension of the time limits of article 50, are made to alter the time limit. When the Scottish Parliament passed the Scottish Bill, the prospective removal of the restriction in section 29(2)(d) requiring its legislation to be compatible with EU law would enhance the legislative competence of the Scottish Parliament on 29 March 2019, unless supervening circumstances intervened. The Scottish Parliament has sought to provide for the continuity of Scots law on the UK withdrawal, by enacting provisions which can take effect only after that withdrawal thereby respecting the supremacy of EU law while it continues. That breaches no constitutional principle. (5) Whether this court can consider the effect of the UK Withdrawal Act in the context of this reference A question has arisen as to whether this court, in addressing the reference under section 33 of the Scotland Act, can have regard to the amendments made to the Scotland Act after the date on which the Scottish Parliament passed the Scottish Bill. The Attorney General for Northern Ireland submits that this court must examine both the Scottish Bill and the Scotland Act as each of them stood on 21 March 2018, when the Scottish Parliament passed the Scottish Bill. The repeated assertion by the UK Law Officers in their written case and supplementary case that the legislative competence of the Scottish Bill must be assessed as at that date is consistent with that submission. But the Advocate General for Scotland in his oral submissions presented an alternative case when he invited this court to address the effect of the UK Withdrawal Act on the Scottish Bill. We are satisfied that, when addressing the questions in the reference as to whether the Scottish Bill would be within legislative competence, this court must have regard to how things stand at the date when we decide those questions. Section 33 of the Scotland Act provides for the reference of the question of whether a Bill or any provision of a Bill would be within the legislative competence of the Parliament. The use of the conditional mood (would be) is significant as it points to the incomplete nature of a Bill as legislation until it receives Royal Assent. In our view, it is implicit in section 33 that this court is required to consider the competence of a Bill if it were to receive Royal Assent. In other words, section 33 instructs this court to decide whether a Bill or any provision of a Bill would be within legislative competence if the Bill were to receive Royal Assent. This interpretation is consistent with the legislative process set out in the Scotland Act. Legislation of the UK Parliament takes the form of Acts of the Crown in Parliament: Royal Assent is a necessary step in the legislative process. Section 28 of the Scotland Act uses a similar model. Subsection (2) provides: Proposed Acts of the Scottish Parliament shall be known as Bills; and a Bill shall become an Act of the Scottish Parliament when it has been passed by the Parliament and has received Royal Assent. Section 33 enables a reference to be made in the four weeks after the Scottish Parliament has passed the Bill. The Presiding Officer of the Scottish Parliament may not submit a Bill for Royal Assent at any time within that period or when a reference has been made to this court but has not been decided or disposed of: section 32(2)(a) and (b). He may not submit a Bill in its unamended form for Royal Assent if this court has decided that the Bill or any provision of it would not be within the legislative competence of the Parliament: section 32(3)(a). Section 29, which defines the legislative competence of the Scottish Parliament, governs the legality of an Act of the Parliament or a provision in such an Act and not a Bill, which in section 28(2) is a proposed Act. When this court applies section 29 in a section 33 reference, it assesses the legality of the Bill if it were to become an Act. The task of this court when deciding a question in a reference under section 33 is therefore to determine whether the Bill or provision of the Bill would be within legislative competence if it were to receive Royal Assent at the time of our decision. In the rare circumstance in which there is supervening legislation by the UK Parliament which amends the Scotland Act and thereby changes the legislative competence of the Scottish Parliament after the Scottish Parliament has passed a Bill, this courts decision may be different from what it would have been if the Scotland Act had not been so amended. The amendment of the Scotland Act by the UK Withdrawal Act is such a circumstance. (6) The effect of the UK Withdrawal Act on the legislative competence of the Scottish Parliament in relation to the Scottish Bill. It is submitted on behalf of the UK Law Officers that the entirety of the Scottish Bill would modify the UK Withdrawal Act. The Scottish Bill, which addresses matters within devolved competence, is modelled on the form of what became the UK Withdrawal Act and heavily overlaps with that Act. But the intention of Parliament was to create a single body of retained EU law across the UK on withdrawal from the EU and, it is submitted, the UK Parliament did not contemplate that there would be separate bodies of retained EU law governed by separate legal regimes. In their supplementary case the UK Law Officers state: The whole and evident purpose of inserting an enactment into paragraph 1(2) of the Schedule 4 [to the Scotland Act] list is so that the Scottish Parliament is not permitted to create its own version of the same regime. We are not able to accept these contentions. We agree with the submission of the Lord Advocate that they conflate the mechanism of paragraph 1 of Schedule 4 with that under Schedule 5 to the Scotland Act. As we have stated (in para 51 above) when the UK Parliament decides to reserve an area of law to itself, it lists the relevant subject matter in Schedule 5 as a reserved matter. Parliament has not done so in relation to the subject matter of the UK Withdrawal Act. Instead, by adding the UK Withdrawal Act to the list of provisions, in paragraph 1(2) of Schedule 4 to the Scotland Act, which are protected against modification, the UK Parliament has chosen to protect the UK Withdrawal Act against subsequent enactments under devolved powers which would alter a rule in the UK Withdrawal Act or conflict with its unqualified continuation in force. As we have stated, a protected enactment will be modified by a later enactment, even in the absence of express amendment or repeal, if it is implicitly amended, disapplied or repealed in whole or in part. It is necessary therefore to examine the individual provisions of the Scottish Bill to see whether they have that effect on provisions of the UK Withdrawal Act. To that end, we invited parties to produce a schedule setting out their contentions in relation to the provisions of the Scottish Bill. We are grateful to the UK Law Officers, the Lord Advocate and their legal representatives for cooperating in the production of that schedule which has greatly assisted our work. It is not necessary for this court to refer to the many provisions of the Scottish Bill which merely replicate provisions in the UK Withdrawal Act and which therefore involve no modification of the latter. We can confine our attention to those provisions which we are persuaded do amount to modifications and which are therefore not law in terms of section 29(1) and (2)(c) of the Scotland Act. In our view, the following provisions of the Scottish Bill would not be within legislative competence if the Scottish Bill were to receive Royal Assent. Section 2(2): Section 2 of the Scottish Bill would maintain the effect in Scots law of EU derived domestic legislation on and after exit day. Subsection (2) defines EU derived domestic legislation as including any enactment so far as relating otherwise to the EU or the EEA. Unlike section 2(2) of the UK Withdrawal Act, section 2 of the Scottish Bill does not exclude from its definition the 1972 Act. By contrast section 1 of the UK Withdrawal Act repeals the 1972 Act on exit day. This inconsistency is not removed by section 2(3) of the Scottish Bill, which defines devolved EU derived domestic legislation as EU derived legislation if and to the extent that it makes provision that is (or would be, if it were contained in an Act of the Scottish Parliament) within the legislative competence of the Scottish Parliament. That is because paragraph 1(2)(c) of Schedule 4 to the Scotland Act protects from modification only specified provisions of the 1972 Act with the result that the Scottish Parliament has power to maintain in effect in Scots law the remaining provisions of the 1972 Act. Section 5: This section would provide that the general principles of EU law and the Charter of Fundamental Rights (the Charter) would be part of Scots law on or after exit day so far as they have effect in EU law immediately before exit day and relate to EU law which sections 2, 3 and 4 would save or incorporate into Scots law. The Lord Advocate correctly conceded that this section was a modification of the UK Withdrawal Act. This is because section 5(4) of that Act provides that the Charter is not part of domestic law on or after exit day and paragraph 3 of Schedule 1 provides that there is to be no right of action based on a failure to comply with any of the general principles of EU law and no power to quash any enactment or conduct on the basis of incompatibility with any of such principles. This inconsistency, whether analysed as an implied repeal or a disapplication of those provisions of the UK Withdrawal Act, clearly amounts to a modification and section 5 therefore would not be law. Section 7(2)(b) and (3): Section 7(1) would provide that there is no right in Scots law on or after exit day to challenge any retained devolved EU law on the basis that, immediately before exit day, an EU instrument was invalid. This subsection is in identical terms to paragraph 1(1) of Schedule 1 to the UK Withdrawal Act except that it is confined to retained devolved EU law. As such, it involves no modification of the UK Withdrawal Act. But subsection (2)(b) empowers the Scottish Ministers to make regulations to describe or provide for challenges to the validity of retained (devolved) EU law to which the abolition in subsection (1) will not apply. Further, subsection (3) provides that, subject to provisions made by regulations under section 32, the abolition in subsection (1) does not apply in relation to any right of action accruing before exit day. Section 7(2)(b) of the Scottish Bill is inconsistent with and may be seen as an implied repeal or disapplication of paragraph 1(2) of Schedule 1 to the UK Withdrawal Act in which the abolition of the right of challenge in paragraph 1(1) is disapplied so far as (a) the European Court has decided before exit day that the instrument was invalid, or (b) a Minister of the Crown has made regulations to disapply the abolition in relation to a specified kind of challenge. Section 7(3) of the Scottish Bill also is similarly inconsistent with paragraph 1 of Schedule 1 to the UK Withdrawal Act, which does not preserve accrued rights of action. The Lord Advocate, correctly, conceded that these subsections were modifications because they provided for qualifications to the abolition of the right to challenge which were not contained in paragraph 1 of Schedule 1 to the UK Withdrawal Act. Section 8(2): Section 8(1) of the Scottish Bill would provide that there was no right in Scots law on or after exit day to damages in accordance with the rule in Francovich (see Francovich v Italian Republic (Joined Cases C 6/90 and C 9/90) [1995] ICR 722; [1991] ECR I 5357). This provision is materially identical to the provision in paragraph 4 of Schedule 1 to the UK Withdrawal Act. But subsection (2) disapplies the abolition of the rule in Francovich in relation to any right of action accruing before exit day, subject to provision made by regulations under section 32. This disapplication of the abolition has no equivalent in paragraph 4 of Schedule 1 to the UK Withdrawal Act and is therefore a modification of that provision. Again, the Lord Advocate correctly conceded this point. Section 9A: This section provides for the scrutiny of regulations made under section 7(2)(b). As such it is ancillary to a subsection which would not be law (paras 103 and 104 above), and it therefore itself would not be law. Section 9B: This section provides for consultation on draft proposals under section 7(2)(b) and would not be law for the same reason as section 9A. Section 10(2), (3)(a) and (4)(a): Section 10 would be concerned with the interpretation of retained (devolved) EU law. Subsection (2) provides that a court or tribunal exercising devolved jurisdiction must, where it considers it relevant for the interpretation of retained (devolved) EU law, have regard to (a) any principles laid down, or any judgments made, on or after exit day, by the European Court, and (b) anything done on or after exit day by another EU entity or the EU. The Lord Advocate correctly concedes that this, by creating a duty, is a modification of section 6(2) of the UK Withdrawal Act which makes similar provision but creates a power. Section 10(3)(a) provides: Any question as to the validity, meaning or effect of any retained (devolved) EU law is to be decided, so far as they are relevant to it (a) in accordance with any retained (devolved) EU case law. The equivalent UK provision in section 6(3)(a) of the UK Withdrawal Act provides for the decision to be taken in accordance with any retained case law and any retained general principles of EU law. The omission of reference to the retained general principles of EU law mandates a different approach to interpretation and amounts to an implied repeal of that part of section 6 of the UK Withdrawal Act. It is therefore a modification and would not be law. Section 10(4)(a) provides that subsection (3) is subject to (a) section 11(7), which permits the Scottish Ministers to provide by regulations that section 10(3) does not apply to any provision made by the regulations. This would enable the adoption by regulations of different rules of interpretation and would modify section 6 of the UK Withdrawal Act. Section 11: This section would empower the Scottish Ministers to remedy by regulations deficiencies in retained (devolved) EU law arising from the withdrawal of the United Kingdom from the EU. It is similar to section 8 of the UK Withdrawal Act but empowers the Scottish Ministers rather than a Minister of the Crown to make the regulations. The UK Withdrawal Act, in section 11 and Schedule 2, also confers powers on devolved authorities to make regulations. But Schedule 2 of the UK Withdrawal Act contains conditions and restrictions in paragraphs 3(4), 5(4), 6(1) and 7(2) on what devolved authorities may provide in regulations under those powers. Those conditions and restrictions are not mirrored in section 11 of the Scottish Bill which is prima facie the equivalent of an amendment or disapplication of Schedule 2 to the UK Withdrawal Act. The Lord Advocate submits that section 11 of the Scottish Bill would create a parallel regulation making power, which operates according to its own terms and does not modify the UK Withdrawal Act. He submits that the powers in section 11 of the Scottish Bill could, if necessary, be read down by the application of section 101(2) of the Scotland Act, which provides that a provision of an Act of the Scottish Parliament be read as narrowly as is required for it to be within competence, if such a reading is possible, and is to have effect accordingly. The Lord Advocate points out that section 30A of the Scotland Act, which was introduced by section 12 of the UK Withdrawal Act, prevents an Act of the Scottish Parliament from modifying or conferring power by subordinate legislation to modify, retained EU law so far as the modification is of a description specified in regulations made by a Minister of the Crown. If such regulations were made to limit the competence of the Scottish Parliament, they would limit the powers which the Scottish Ministers could exercise under section 11 of the Scottish Bill. Ministers of the Crown now have power under section 30A of the Scotland Act to curtail the modification of retained EU law by the Scottish Parliament or Scottish Ministers. But the difficulty with the Lord Advocates position is that unless a Minister of the Crown were to exercise that power, the Scottish Ministers would be able to exercise the parallel regulation making power in section 11 of the Scottish Bill free from conditions and restrictions which the UK Withdrawal Act has imposed. The existence of a power in a Minister of the Crown to neutralise a provision of the Scottish Bill does not alter the nature of that provision as a modification of the UK Withdrawal Act. Section 13B: This section would require the Scottish Ministers, in making provision in regulations under section 11(1), 12 or 13(1), to have regard to the guiding principles on the environment and animal welfare which are set out in subsection (3). In so far as this provision would be applied to section 11(1), which as a modification of the UK Withdrawal Act is not law, it must also be a modification but only to that extent. Section 14: This section would provide for the scrutiny by the Scottish Parliament of regulations made under sections 11, 12 and 13 of the Scottish Bill. In so far as the section would relate to regulations made under section 11 of the Scottish Bill, which as a modification is not law, it is ancillary to section 11 and itself is a modification of the UK Withdrawal Act but only to that extent. Section 14A: This section would require additional scrutiny by the Scottish Parliament of regulations made under sections 11, 12 and 13 of the Scottish Bill if the Committee on Delegated Powers and Law Reform of the Scottish Parliament so recommended. Again, in so far as the section would relate to regulations made under section 11 of the Scottish Bill, it is ancillary to the invalid section 11 and itself is a modification of the UK Withdrawal Act but only to that extent. Section 15: This section would require the Scottish Ministers to consult on the regulations which they proposed to make in response to a recommendation under section 14(5). Again, in so far as the section would apply to proposed regulations to be made under section 11 of the Scottish Bill, it is ancillary to the invalid section 11 and itself is a modification of the UK Withdrawal Act but only to that extent. Section 16: This section would require the Scottish Ministers to make explanatory statements when laying before the Scottish Parliament a Scottish statutory instrument or draft instrument containing regulations under section 11(1), 12 or 13(1) of the Scottish Bill. Again, only to the extent that the section would apply to regulations under section 11, it is ancillary to that section and is itself a modification of the UK Withdrawal Act. Section 17 does not involve a modification of the UK Withdrawal Act. But as we have explained in paras 37 65 above, this section is a modification of section 28(7) of the Scotland Act and is not law. Section 19(1): Section 19 would empower the Scottish Ministers to make regulations to provide for the charging of fees for functions which a Scottish public authority has as a result of provision made under sections 11(1), 12 and 13. Again, only to the extent as the section would apply to regulations under section 11, it is ancillary to that section and is itself a modification of the UK Withdrawal Act. Section 22: This section would provide that Part 4 of the Scottish Bill, which relates to financial matters, does not affect the power under section 11, 12 or 13 to require payment of or make other provision in relation to fees and charges. The reference to section 11 falls along with that section. Section 26A(6): Section 26A would impose a duty on the Scottish Ministers to prepare proposals on how regard is to be had to the guiding principles on the environment and on how to ensure that there continues to be effective and appropriate governance relating to the environment after the UK withdraws from the EU. Subsection (5) lists the familiar principles, such as the precautionary principle and that the polluter should pay to rectify environmental damage. Subsection (6) states: Those principles are derived from the equivalent principles provided for in article 191(2) in Title XX of the Treaty on the Functioning of the European Union and accordingly they are to be interpreted, so far as appropriate, in a manner consistent with the interpretation of those equivalent principles by the European Court from time to time. (Emphasis added) The words emphasised, by imposing a duty to give effect to the jurisprudence of the European Court, are inconsistent with section 6(1) of the UK Withdrawal Act which provides: A court or tribunal (a) is not bound by any principles laid down, or any decisions made, on or after exit day by the European Court, . The emphasised words amount to an implicit amendment of section 6(1)(a) of the UK Withdrawal Act as they disapply it in relation to the application of the environmental principles by Scottish public authorities, and as such are a modification of that section of the UK Withdrawal Act. Section 33 and Schedule 1 paragraphs 11(a) and 16: Section 33 would repeal spent references to EU law in the Scotland Act. Subsection (1) would remove the words or with EU law in section 29(2)(d) of the Scotland Act, so as to remove the existing restriction on the competence of the Scottish Parliament that it cannot legislate incompatibly with EU law. Subsection (2) would repeal the same words in section 57(2) of the Scotland Act which currently restricts the power of members of the Scottish Government by preventing them from acting incompatibly with EU law. Subsection (3) would refer to Schedule 1 which contains further repeals of spent provisions in the Scotland Act. Paragraph 11(a) of that Schedule would repeal the words or an obligation under EU law in section 106(5) of the Scotland Act. Section 106 is concerned with the power by subordinate legislation to facilitate the transfer of functions to the Scottish Ministers and provides in subsection (4) that the Scottish Ministers are to be consulted about such legislation if it modifies a function of observing or implementing an international obligation or an obligation under EU law to achieve a result by reference to a quantity which relates to the UK. Paragraph 16 of Schedule 1 to the Scottish Bill would repeal the words or with EU law in paragraphs 1(d) and (e) of Schedule 6 to the Scotland Act. Schedule 6 of the Scotland Act provides for the handling of devolution issues in legal proceedings and paragraph 1 of that Schedule defines devolution issue. These provisions involve modifications of the UK Withdrawal Act and therefore are not law. Section 33(1) of the Scottish Bill would be inconsistent with section 12(1) of the UK Withdrawal Act which not only removes the reference to EU law in section 29(2)(d) of the Scotland Act but replaces it with the words in breach of the restriction in section 30A(1) (ie the prohibition against modification of retained EU law so far as the modification is of a description specified in regulations by a Minister of the Crown). Section 33(1) could have effect only if it were brought into force before section 12(1) of the UK Withdrawal Act and would in effect be disapplying that provision of the UK Withdrawal Act in not inserting those replacement words into the Scotland Act. Section 33(2) similarly would not replace the repealed words in section 57 of the Scotland Act with the provisions set out in paragraph 1 of Schedule 3 to the UK Withdrawal Act which insert subsections (4) (15) into section 57 of the Scotland Act. Paragraphs 11(a) and 16 of Schedule 1 to the Scottish Bill (and therefore section 33(3) in giving Schedule 1 effect) also disapply provisions of the UK Withdrawal Act. Paragraph 11(a) does not replace the repealed words in section 106 of the Scotland Act with the words, a retained EU obligation which paragraph 17(2) of Schedule 3 to the UK Withdrawal Act inserts in their place. Paragraph 16 similarly does not insert into Schedule 6 to the Scotland Act the words which paragraph 23(2) and (4) of Schedule 3 to the UK Withdrawal Act insert as substitutes. Conclusion (i) The Scottish Bill as a whole would not be outside the legislative competence of the Scottish Parliament because it does not relate to reserved matters. (paras 23 36 above) (ii) Section 17 of the Scottish Bill would be outside the legislative competence of the Scottish Parliament because it would modify section 28(7) of the Scotland Act. (paras 37 65 above) (iii) Section 33 of and Schedule 1 to the Scottish Bill would not be outside the legislative competence of the Scottish Parliament on the basis that they would modify provisions of the Scotland Act. (paras 66 79 above) (iv) the specific provisions of the Scottish Bill listed in para 80 above would not be outside the legislative competence of the Scottish Parliament because (i) they are not incompatible with EU law, (ii) they do not modify the European Communities Act 1972, and (iii) they are not contrary to the rule of law. (paras 80 90 above) (v) As a result of the enactment of the UK Withdrawal Act the following provisions of the Scottish Bill would at least in part be outside the legislative competence of the Scottish Parliament: sections 2(2), 5, 7(2)(b) & (3), 8(2), 9A, 9B, 10(2), (3)(a) and (4)(a), 11, 13B, 14, 14A, 15, 16, 19(1), 22, 26A(6), 33(1), (2) & (3) and Schedule 1 paragraphs 11(a) and 16. (paras 98 124 above) We therefore answer the reference as follows:

Section 29(1) of the Scotland Act 1998 (the Scotland Act) provides that any Act passed by the Scottish Parliament will not be law so far as any provision of the Act is outside the legislative competence of the Parliament. Section 29(2) says that a provision is outside of the legislative competence of the Scottish Parliament if, amongst other things: it relates to matters which are reserved to the UK Parliament (including international relations); is in breach of the restrictions in Schedule 4 of the Scotland Act (which specifies provisions of enactments passed by the UK Parliament which cannot be modified by the Scottish Parliament); or is incompatible with European Union (EU) law. On 29 March 2019, the UK is due to withdraw from the EU. On 13 July 2017, the UK Government introduced the European Union (Withdrawal) Bill (the UK Bill) in the House of Commons, to repeal the statute which had taken the UK into the EU and to make provisions to achieve legal continuity within each of the UKs constituent jurisdictions. On 26 June 2018, the UK Bill became an Act (the UK Withdrawal Act). The UK Withdrawal Act amended Schedule 4 to the Scotland Act to include itself within the prohibition against modification. On 27 February 2018, the Scottish Government introduced the UK Withdrawal from the European Union (Legal Continuity) (Scotland) Bill (the Scottish Bill), to make its own provision for legal continuity following the UKs withdrawal from the EU. The Scottish Bill was passed by the Scottish Parliament on 21 March 2018. Section 17 of the Scottish Bill relates to subordinate legislation made by Ministers in the UK Government after withdrawal from the EU on matters of retained EU law which, if they were contained in a statute, would be within the legislative competence of the Scottish Parliament. The section provides that any such subordinate legislation will be of no effect unless the consent of the Scottish Ministers is obtained. Section 33 of and Schedule 1 to the Scottish Bill provide for the repeal of references to EU law and institutions of the EU in the Scotland Act. In accordance with section 33(1) of the Scotland Act, the Attorney General and the Advocate General for Scotland made a reference to the UK Supreme Court asking for a decision on whether the Scottish Bill is within the competence of the Scottish Parliament. The Supreme Court gives a unanimous judgment. It finds that the whole of the Scottish Bill would not be outside the legislative competence of the Scottish Parliament. However, section 17 would be outside the legislative competence of the Parliament because it would modify the Scotland Act and, at least in part, the sections referred to in the final paragraph below would be outside the competence of the Scottish Parliament because they would modify provisions of the UK Withdrawal Act. It is not for this Court to express any view on the question of which institutions of the UK should exercise the legislative powers currently held by EU institutions upon the UKs withdrawal. Instead, the role of the Court is to determine as a matter of law whether, and to what extent, the Scottish Bill would be within the legislative competence of the Scottish Parliament [11]. Is the Scottish Bill as a whole outside the legislative competence of the Scottish Parliament? The only relevant question is whether the Scottish Bill relates to relations with the EU (a reserved matter) [26]. To relate to a reserved matter, a provision must have more than a loose or consequential connection with it [27]. The Scottish Bill does not relate to relations with the EU. It simply regulates certain of the legal consequences of the cessation of EU law as a source of domestic law [33]. Is section 17 of the Scottish Bill outside the legislative competence of the Scottish Parliament? Under Schedule 4 to the Scotland Act, the Scottish Parliament does not have legislative competence to modify the Scotland Act [42]. An enactment is modified by a later enactment if it is implicitly amended, disapplied or repealed in whole or in part [51]. The UK Parliament has the power to authorise Ministers to make subordinate legislation, but the effect of section 17 would be to make the legal effect of such subordinate legislation conditional upon the consent of the Scottish Ministers. The imposition of this condition would be inconsistent with the recognition in section 28(7) of the Scotland Act that the UK Parliament has unqualified legislative power in Scotland. It would therefore have to be treated as impliedly amending (and thus modifying) section 28(7) of the Scotland Act [52]. Are section 33 of and Schedule 1 to the Scottish Bill outside the legislative competence of the Scottish Parliament? There is an exception to the rule that the Scottish Parliament does not have legislative competence to modify the Scotland Act, which allows the Parliament to repeal any enactment which is spent [69]. Spent means that the provision has no continuing legal effect [72]. The provisions which section 33 and Schedule 1 would repeal will not be spent until the UKs withdrawal from the EU [76]. However, the Scottish Ministers do not have power to bring section 33 into force until the UK has withdrawn, at which point the provisions to be repealed would have become spent [77]. As a result, section 33(1) and Schedule 1 do not breach Schedule 4 to the Scotland Act [79]. Are various provisions of the Scottish Bill outside the legislative competence of the Scottish Parliament because they (i) are incompatible with EU law, (ii) modify section 2(1) of the European Communities Act 1972 (ECA), and/or (iii) are contrary to the rule of law? None of the provisions which are challenged take legal effect until the provisions of EU law with which they are incompatible have ceased to have effect as a consequence of the UKs withdrawal from the EU. Without such legal effect, there is no incompatibility with EU law and no modification of section 2(1) of the ECA [84 85]. The challenge based on the rule of law is misconceived [86]. Can the Supreme Court consider the effect of the UK Withdrawal Act in the context of this reference? Yes, because the Courts task is to decide whether the Bill would be within the legislative competence of the Scottish Parliament if it received the Royal Assent at the time of the Courts decision [97]. What is the effect of the UK Withdrawal Act on the legislative competence of the Scottish Parliament in relation to the Scottish Bill? The UK Withdrawal Act is not a reserved matter but it is protected against modification under Schedule 4 [99]. Several provisions of the Scottish Bill in whole or in part amount to modifications of the UK Withdrawal Act. These are: section 2(2) [101]; section 5 [102]; section 7(2)(b) and 7(3) [103 104]; section 8(2) [105]; section 9A [106]; section 9B [107]; section 10(2), 10(3)(a) and 10(4)(a) [108 110]; section 11 [111 113]; section 13B, section 14, section 14A, section 15, section 16, section 19(1) and section 22 (to the extent that these provisions relate to section 11) [114 118, 120 121]; section 26A(6) [122]; and section 33 and Schedule 1 paragraphs 11(a) and 16 [123 124].

This appeal raises a well formulated issue as to the construction of section 21 of the Limitation Act 1980, and a rather more diffuse question as to the meaning and application of section 32 of the Act, in both cases in relation to what is assumed to have been (although this is hotly contested in the proceedings) an unlawful distribution in specie by the Claimant company of its shareholding in a trading subsidiary by the directors of the Claimant (including the two defendants), six years and three days before the issue of the claim form in these proceedings. The Defendants sought summary judgment dismissing the claim on the ground that it was statute barred, and succeeded at first instance, before HHJ Hodge QC, sitting as a judge of the High Court. The Court of Appeal (Arden, Tomlinson and David Richards LJJ) held, first, that time did not run against the Claimant company because of section 21(1)(b) of the Act and that, in any event, there was a triable issue as to whether, within the meaning of section 32 of the Act, there had been deliberate concealment of the facts involved in the breach of duty constituted by the unlawful distribution. Whatever the conclusion of this court as to the construction of sections 21 and 32, there could not now be summary judgment for the Defendant directors. This is because the Claimant has since amended its claim to include the allegation that the claimed unlawful distribution amounted to a fraudulent breach of trust to which the Defendants were party, within the meaning of section 21(1)(a). Nonetheless the issue as to the meaning of section 21(1)(b) is of sufficient importance to have made it appropriate for this appeal (for which permission had been sought prior to the amendment pleading fraud) to proceed. The Assumed Facts At all material times before October 2007, the Claimant was a holding company with a number of trading subsidiaries. The subsidiaries operated in two business areas, the supply and construction of conservatories and a combined heat and power business. Two trading subsidiaries in the conservatory business are referred to in the particulars of claim, K2 Conservatory Systems Ltd (K2) and Cestrum Conservatories Ltd (Cestcon). The combined heat and power business was carried on by Vital Energi Utilities Ltd (Vital). The directors of the Claimant were at all material times the Defendants, Mr and Mrs Fielding, and three other executive directors, Mr Beckett, Mr Whitelock and Mr Kavanagh. The issued share capital of the Claimant comprised three classes of shares: 50,000 A ordinary shares, 50,000 B ordinary shares, and 50,000 D ordinary shares. The A and B ordinary shares were held by Mr and Mrs Fielding in equal parts, while the D ordinary shares were held by Mr Beckett, Mr Whitelock and The Burnden Group Trustee Limited (TBGT), the trustee of an employee share scheme. The controlling shareholders were Mr and Mrs Fielding. In or about July 2007, Scottish & Southern Energy plc (SSE) offered to purchase a 30% shareholding in Vital for 6m, subject to a significant number of conditions including, in particular, the complete separation of Vital from the conservatory business. In October 2007, the following pre arranged transactions were carried out: a. On 4 October 2007, the shareholders of the Claimant exchanged their shares for shares in a new holding company for the group, BHU Holdings Ltd (BHUH), with the shareholdings in that company precisely mirroring the former shareholdings in the Claimant. b. On 12 October 2007, a distribution in specie of the Claimants shareholding in Vital was approved by a unanimous resolution of the directors of the Claimant and by a resolution in writing of BHUH as the sole member of the Claimant. The distribution was effected on 12 October 2007, with the transfer of the only issued share in Vital from the Claimant to BHUH being registered in the register of members of Vital on that day. Although it is pleaded in the particulars of claim that Vital was a subsidiary of the Claimant until 15 October 2007, it is accepted by the Claimant for present purposes that the share in Vital was distributed in specie on 12 October 2007. c. On 15 October 2007, BHUH went into members voluntary liquidation. A special resolution to that effect was passed on that day by the members of BHUH, and the directors of BHUH made a statutory declaration as to its solvency. Also on 15 October 2007, pursuant to reconstruction agreements made on that day under section 110 of the Insolvency Act 1986, the liquidator of BHUH transferred the share in Vital to a new company, Vital Holdings Limited (VHL) and the shares in the Claimant to a new company, Burnden Group Holdings Limited (BGHL). The two new holding companies issued shares to the former shareholders in BHUH, again precisely mirroring their shareholdings in BHUH and, previously, in the Claimant. d. On 19 October 2007, Mrs Fielding sold a 30% shareholding in VHL to SSE for 6m. Of that sum, 3m was lent to the Claimant and the balance was, according to the Claimants case, put towards the purchase of a property for 8.3m by Mr and Mrs Fielding in May 2008. Subsequently, on 2 October 2008, the Claimant, K2 and Cestcon all went into administration. In December 2009, the Claimant went into liquidation and the present liquidator was appointed in December 2012. It is alleged by the Claimant that the distribution in specie of the Claimants shareholding in Vital to BHUH was unlawful, and it is claimed that the Defendants breached their duties to the Claimant in making the distribution. The basis of the claim that the distribution was unlawful, at least when the matter was before the Court of Appeal, was that the Claimant company did not have sufficient accumulated, realised profits to enable the distribution of its shareholding in Vital to be lawfully made. The detailed basis of that allegation has changed over time and has, throughout, been firmly challenged by the Defendants. The detail is irrelevant to the limitation issues before this court. It is simply to be assumed that the distribution was unlawful, that the Defendants participation in it amounted to a breach of their fiduciary duties to the Claimant and that, because the distribution was made to a company, BHUH, in which they were majority shareholders and directors, the distribution was one from which they derived a substantial benefit. Section 21 Section 21 of the Limitation Act 1980 provides, so far as is relevant, as follows: 21. Time limit for actions in respect of trust property. (1) No period of limitation prescribed by this Act shall apply to an action by a beneficiary under a trust, being an action in respect of any fraud or fraudulent (a) breach of trust to which the trustee was a party or privy; or (b) to recover from the trustee trust property or the proceeds of trust property in the possession of the trustee, or previously received by the trustee and converted to his use. (2) Where a trustee who is also a beneficiary under the trust receives or retains trust property or its proceeds as his share on a distribution of trust property under the trust, his liability in any action brought by virtue of subsection (1)(b) above to recover that property or its proceeds after the expiration of the period of limitation prescribed by this Act for bringing an action to recover trust property shall be limited to the excess over his proper share. This subsection only applies if the trustee acted honestly and reasonably in making the distribution. (3) Subject to the preceding provisions of this section, an action by a beneficiary to recover trust property or in respect of any breach of trust, not being an action for which a period of limitation is prescribed by any other provision of this Act, shall not be brought after the expiration of six years from the date on which the right of action accrued. For the purposes of this subsection, the right of action shall not be treated as having accrued to any beneficiary entitled to a future interest in the trust property until the interest fell into possession. It is common ground (and clear beyond argument) that, as directors of an English company who are assumed to have participated in a misappropriation of an asset of the company, the Defendants are to be regarded for all purposes connected with section 21 as trustees. This is because they are entrusted with the stewardship of the companys property and owe fiduciary duties to the company in respect of that stewardship: see Paragon Finance plc v DB Thakerar & Co [1999] 1 All ER 400; JJ Harrison (Properties) Ltd v Harrison [2002] 1 BCLC 162, in particular per Chadwick LJ at paras 25 29; Williams v Central Bank of Nigeria [2014] AC 1189, per Lord Sumption at para 28 and, most recently, First Subsea Ltd (formerly BSW Ltd) v Balltec Ltd [2018] Ch 25, per Patten LJ at para 50. By the same token, the company is the beneficiary of the trust for all purposes connected with section 21. Complications have arisen where, although a director, the Defendants breach of duty did not involve the misapplication of company property: see for example Gwembe Valley Development Co Ltd v Koshy (No 3) [2004] 1 BCLC 131, but those difficulties (if indeed they survive the decision of the Court of Appeal in the First Subsea case) do not arise on this appeal. It is also now common ground that, unless section 21(1) applies, the Defendants have the benefit of the six year period of limitation laid down by section 21(3), because the relevant breach of duty arising from the distribution of the shareholding in Vital occurred on 12 October 2007, and these proceedings were issued more than six years later. At the time of the hearing before the Court of Appeal there was no relevant allegation of fraud: see para 32 of the judgment of David Richards LJ [2017] 1 WLR 39. Although such an allegation has since been pleaded, this appeal has been argued upon the basis that the only question to be decided is whether the Defendants ability to rely upon a six year period of limitation under section 21(3) is denied to them by reason of section 21(1)(b). Section 21(1)(b) is about actions to recover from the trustee trust property or the proceeds of trust property A preliminary objection was taken in the Court of Appeal by Mr David Chivers QC (who appears also on this appeal for the Defendants) that a claim such as the present, for an account of profits or alternatively equitable compensation, did not fall within section 21(1)(b) at all. This was rejected by the Court of Appeal (at para 38), upon the basis that a claim for equitable compensation, in a case where the trustees indirect interest in the trust asset had been converted to the use of the trustee, was an appropriate remedy to seek in an action falling within section 21(1)(b). That analysis of David Richards LJ has not been challenged on this appeal. Rather, Mr Chivers focus has been on the remaining part of section 21(1)(b), by way of submissions that the relevant trust property (namely the shareholding in Vital) was never in the possession of the Defendants, or previously received by them and converted to their use. The gist of his submission, both here and below, was that from start to finish the shareholding in Vital had been in the legal and beneficial ownership and therefore possession of a succession of corporate entities, namely the Claimant company, then BHUH, to which the shareholding was unlawfully distributed, and later VHL, to which the shareholding was later transferred as part of the corporate reconstruction which led to these proceedings, and where it ultimately remained. Although the Defendants were from time to time shareholders and directors in all those corporate entities, the shareholding in Vital was never in their possession, nor previously received by them and converted to their use. To hold otherwise would, he submitted, involve the lifting of one or more corporate veils, or ignoring the separate legal personality of the companies concerned, all of which are prohibited, save in circumstances which do not apply to this case, by the reasoning of this court in Prest v Petrodel Resources Ltd [2013] 2 AC 415. In the Court of Appeal, David Richards LJ acknowledged (at para 35) that this submission responded well to a literal reading of section 21(1)(b) but that such an interpretation would be a recipe for avoidance by trustees because, in the modern world, it is commonplace for companies to be used to hold assets, where the beneficial ownership is vested in the company but the entire economic benefit is available for the shareholders. Relying upon and approving the analysis of Mr Richard Field QC in In re Pantone 485 Ltd; Miller v Bain [2002] 1 BCLC 266, David Richards LJ concluded that, in order to achieve its purpose, section 21(1)(b) had to be construed so as to include within its terms a transfer (in breach of trust) to a company directly or indirectly controlled by the defaulting trustee. which may be summarised as follows: In this court, Mr Chivers made a detailed and thorough attack on that analysis, i) There was no need to be concerned with anti avoidance when construing section 21(1)(b). If trustees deliberately inserted a company between them and the misappropriated assets this would be a recognised ground for lifting the corporate veil: see the Prest case, at paras 34 35. It would be an abuse of corporate legal personality. ii) In any event, the deliberate use of a corporate vehicle to insulate trustees from liability, after six years, for breach of trust would in most cases give rise to a claim in fraud within section 21(1)(a). iii) It was wrong in principle to equate control of a company with possession of its assets save, perhaps, where the company was a pure nominee. For that purpose, he relied upon the analysis of possession for the purposes of section 8 of the Trustee Act 1888 (the distant predecessor of section 21) by Lindley LJ in Thorne v Heard [1894] 1 Ch 599, at 605 606. In practical terms, he submitted that majority shareholders had much less than absolute control over a companys property, because of the requirement to have regard to the interests of other stakeholders, such as minority shareholders and creditors. iv) As to the Pantone case, he submitted that the deputy judges analysis had been based upon the Harrison case (cited above), in which Chadwick LJs conclusion was grounded on facts which included the acquisition (in breach of duty) by a director of the company by a purchase at an undervalue, followed by an on sale of it to a third party. In that type of case, Mr Chivers submitted, the companys property had indeed been previously received by the director/trustee before being converted to his use by its on sale. v) In response to a question from the court as to whether an unlawful distribution in specie could itself be said to be a conversion of trust property Mr Chivers submitted that a distribution, even if unlawful, affirmed rather than denied the companys title to that which was distributed. vi) Finally, in response to the question whether a director could not be said to have previously received company property by virtue of his office as director, in advance of any misapplication of it in breach of trust, Mr Chivers submitted that this would render the requirement of previous receipt otiose, since it would apply in every case. These carefully constructed submissions were of real force, to the extent that they demonstrated that there was no need to have regard to anti avoidance in construing section 21(1)(b). The deliberate use of a corporate vehicle to distance a defaulting trustee from the receipt or possession of misappropriated trust property might justify lifting the corporate veil. In any event it would in most cases justify a finding of fraud, within the meaning of section 21(1)(a). Furthermore, the submission that control of a company afforded by being a majority shareholder and director is not so absolute as to confer de facto possession of its property is persuasive: see eg Lonrho Ltd v Shell Petroleum Co Ltd [1980] 1 WLR 627. But taken as a whole, Mr Chivers submissions do not lead to the conclusion that section 21(1)(b) is inapplicable to the assumed facts with which this appeal is concerned, merely because the misappropriated property has remained legally and beneficially owned by corporate vehicles throughout, rather than becoming vested in law or in equity in the defaulting directors. The starting point in the construction of section 21(1)(b) is to pay due regard to its purpose. This was laid down, in relation to its predecessor, in In re Timmis, Nixon v Smith [1902] 1 Ch 176 at 186 by Kekewich J as follows: The intention of the statute was to give a trustee the benefit of the lapse of time when, although he had done something legally or technically wrong, he had done nothing morally wrong or dishonest, but it was not intended to protect him where, if he pleaded the statute, he would come off with something he ought not to have, ie, money of the trust received by him and converted to his own use. That this is the purpose of what is now section 21 was confirmed by Chadwick LJ in the Harrison case at para 40. Mr Chivers did not, when it was put to him, challenge it in any way. It is necessary to bear in mind that section 21 is primarily aimed at express trustees, and applicable to company directors by what may fairly be described as a process of analogy. An express trustee, such as a trustee of a strict settlement, might or might not from time to time, or indeed at all, be in possession or receipt of the trust property. The property might consist of land in the possession of a tenant for life. By contrast, in the context of company property, directors are to be treated as being in possession of the trust property from the outset. It is precisely because, under the typical constitution of an English company, the directors are the fiduciary stewards of the companys property, that they are trustees within the meaning of section 21 at all. Of course, if they have misappropriated the property before action is brought by the company (the beneficiary for this purpose) to recover it they may or may not by that time still be in possession of it. But if their misappropriation of the companys property amounts to a conversion of it to their own use, they will still necessarily have previously received it, by virtue of being the fiduciary stewards of it as directors. It may well be that, in relation to trustees who are company directors, the requirement in section 21(1)(b) that the property be previously received by them before its conversion adds little or nothing to the conditions for the disapplication of any limitation period which would otherwise have operated in their favour. But that requirement is not otiose in relation to trustees generally, for the reason already given. Thus, for example, the trustee of a strict settlement who had, without dishonesty, committed a breach of trust by neglecting to exercise available powers to prevent dissipation of the trust property by the tenant for life, would not be deprived of the benefit of the trustees six year limitation period by virtue of section 21(1)(b). He would neither be in possession of the trust property, nor would he ever have received it nor, incidentally, would he have converted it to his own use. There is nothing in Mr Chivers objection that to treat individual directors as being in possession, or in previous receipt, of company property by virtue of their office would unfairly assume a level of control over it which they might in practice lack, for example by being in a minority on the Board. Trustees of an express trust in whom the trust property is vested in law are each treated as being in possession or receipt of the trust property, notwithstanding that they hold title to it jointly with all the other trustees. In the present case, (of course only on the assumed facts), the Defendant directors converted the companys shareholding in Vital when they procured or participated in the unlawful distribution of it to BHUH. It was a conversion because, if the distribution was unlawful, it was a taking of the companys property in defiance of the companys rights of ownership of it. It was a conversion of the shareholding to their own use because of the economic benefit which they stood to derive from being the majority shareholders in the company to which the distribution was made. By the time of that conversion the Defendants had previously received the property because, as directors of the Claimant company, they had been its fiduciary stewards from the outset. For those reasons, although they differ to some extent from the Court of Appeals analysis, I would dismiss this appeal so far as it relates to section 21. Section 32 Section 32 of the Limitation Act 1980, as amended by section 6(6) of, and paragraph 5 of Schedule 1 to, the Consumer Protection Act 1987, provides, so far as relevant for present purposes, as follows: 32. Postponement of limitation period in case of fraud, concealment or mistake. (1) Subject to subsections (3) and (4A) below, where in the case of any action for which a period of limitation is prescribed by this Act, either the action is based upon the fraud of the (a) Defendant; or (b) any fact relevant to the plaintiffs right of action has been deliberately concealed from him by the Defendant; or (c) consequences of a mistake; the action is for relief from the the period of limitation shall not begin to run until the plaintiff has discovered the fraud, concealment or mistake (as the case may be) or could with reasonable diligence have discovered it. References in this subsection to the Defendant include references to the Defendants agent and to any person through whom the Defendant claims and his agent. (2) For the purposes of subsection (1) above, deliberate commission of a breach of duty in circumstances in which it is unlikely to be discovered for some time amounts to deliberate concealment of the facts involved in that breach of duty. The Court of Appeal reversed the judges order by way of Defendants summary judgment in relation to section 32, mainly because they regarded the issues as to its applicability as being too fact sensitive to be suitable for summary judgment: see per David Richards LJ at paras 51 and 55. On the way to that conclusion David Richards LJ adopted an interpretation of section 32(2) which has, on this appeal, been subjected to significant, albeit commendably brief, criticism by Mr Chivers, both orally and in writing, centred around issues as to the meaning of the phrase some time in subsection (2), and the interpretation placed upon it by Lewison J in JD Wetherspoon plc v Van de Berg & Co Ltd [2007] EWHC 1044 (Ch); [2007] PNLR 28, at para 40. The in depth analysis of this difficult question would take the court into a potential minefield of difficulties which surround section 32 and, in this corporate context, would also involve a consideration of questions of attribution. There cannot be summary judgment in favour of the Defendants in this case, both because of the recent plea of fraud and because of this courts decision about the meaning of section 21. Whatever the correct interpretation of section 32(2), there would still be fact intensive issues calling for a trial. In view of the relatively summary way in which this issue has been addressed by counsel (about which I express no criticism at all), I have not therefore considered it appropriate to reach any final view about it. It is sufficient for present purposes for me to conclude that the appeal in relation to section 32 should be dismissed because the issue is unsuitable for summary judgment. I express no view one way or the other on the correctness or otherwise of the interpretation of section 32(2) adopted en passant by the Court of Appeal.

Prior to 4 October 2007, Mr and Mrs Fielding, (the Defendants) were directors and controlling shareholders of Burnden Holdings (UK) Limited (the Claimant). The Claimant was the holding company of a number of trading subsidiaries, including Vital Energi Utilities Ltd (Vital). On 4 October 2007, the shareholders of the Claimant exchanged their shares for shares in a new holding company for the group, BHU Holdings Ltd (BHUH). On 12 October 20071, in an approved transaction, the Claimant effected a distribution in specie of its shareholding in Vital to BHUH. Subsequently, the shareholding in Vital was transferred to another new holding company (VHL). Mrs Fielding later sold her shareholding in VHL, and the Claimant went into liquidation. On 15 October 2013, more than six years after the 12 October 2007 distribution, the Claimant, by its liquidator, issued proceedings against the Defendants for the unlawful distribution in specie of the Claimants shareholding in Vital. This was outside of the six year limitation period set out in section 21(3) of the Limitation Act 1980 in respect of an action by a beneficiary for breach of trust. The Defendants applied to the High Court for summary judgment on the basis that the claim was time barred. For the purposes of the present appeal, it is assumed that the distribution was unlawful, because this appeal concerns only the limitation issues; however, the unlawfulness of the distribution is contested by the Defendants in the main proceedings. The High Court granted summary judgment in favour of the Defendants on the ground that the claim was time barred. The Court of Appeal set aside the judges order for summary judgment on the basis that the limitation period did not run against the Claimant, because section 21(1)(b) of the Limitation Act 1980 (section 21(1)(b)) provides that no limitation period applies to an action by a beneficiary under a trust to recover from the trustee trust property or the proceeds of trust property in the possession of the trustee, or previously received by the trustee and converted to his use. The Court of Appeal further held that, in any event, there was a triable issue as to whether section 32 of the Limitation Act 1980 (section 32) applied. Section 32 provides that where any relevant fact has been deliberately concealed by the Defendant, the period of limitation does not begin to run until the plaintiff has, or could have, discovered the concealment. The Defendants appealed to the Supreme Court on the proper construction of section 21(1)(b) (in particular whether company directors are in possession of or have previously received trust property within the meaning of that section), and section 32.2 1 The date of this transaction is in issue in the main proceedings, but for the purposes of this appeal, 12 October 2007 is accepted as the relevant date. 2 Since the Court of Appeal judgment, the Claimant has amended its claim to include an allegation of fraud. Under section 21(1)(a) of the Limitation Act, this means there could not now be summary judgment for the Defendants. Nonetheless the issue as to the meaning of section 21(1)(b) is of sufficient importance to have made it appropriate for this appeal (for which permission had been obtained prior to the amendment pleading fraud) to proceed. The Supreme Court unanimously dismisses the appeal, finding that section 21(1)(b) applies to trustees who are company directors, who are to be treated as being in possession of the trust property from the outset. The Court declines to express a final view on section 32. Lord Briggs gives the judgment, with which the rest of the Court agrees. Section 21 For the purposes of section 21, the Defendants are regarded as trustees, because they are entrusted with the stewardship of the companys property and owe fiduciary duties to the company in respect of that stewardship. The company is regarded as the beneficiary of the trust under section 21 [11]. Contrary to the Defendants submissions, section 21(1)(b) does not become inapplicable merely because the misappropriated property has remained legally and beneficially owned by corporate vehicles, rather than having become vested in law or in equity in the defaulting directors [16]. The purpose of section 21(1)(b), as laid down in In re Timmis, Nixon v Smith [1902] 1 Ch 176 and JJ Harrison (Properties) Ltd v Harrison [2002] 1 BCLC 162, is to give a trustee the benefit of the lapse of time when, although he had done something legally or technically wrong, he had done nothing morally wrong or dishonest. It is not intended to protect him where, if he pleaded the statute, he would come off with something he ought not to have [17]. Section 21 is primarily aimed at express trustees and is applicable to company directors by a process of analogy. An express trustee might or might not from time to time be in possession or receipt of the trust property [18]. By contrast, in the context of company property, directors are to be treated as being in possession of the trust property from the outset. It is precisely because, under the typical constitution of an English company, the directors are the fiduciary stewards of the companys property, that they are trustees within the meaning of section 21. If their misappropriation of the companys property amounts to a conversion of it to their own use, they will necessarily have previously received it, by virtue of being the fiduciary stewards of it as directors [19]. In relation to trustees who are company directors, it may be that the requirement in section 21(1)(b) that the property be previously received by them adds little or nothing to the other conditions for the disapplication of the limitation period. However, that requirement is not redundant in relation to trustees generally [20]. On the assumed facts of the present case, the Defendants converted the companys shareholding in Vital when they procured or participated in the unlawful distribution of it to BHUH. By the time of that conversion the defendants had previously received the property because, as directors of the Claimant, they had been its fiduciary stewards from the outset [22]. Section 32 In depth analysis of the section 32 issue would take the court into a minefield of difficulties. It is not necessary to decide this point because of the recent plea of fraud, and because of this courts decision about the meaning of section 21, which mean the issue is unsuitable for summary judgment. Accordingly the court expresses no view on the correctness of the Court of Appeals approach to section 32(2) [26].

Under the Food Safety Act 1990 the appellant local authority (the council) has responsibility for the enforcement of food safety laws in its area, many of which are contained in regulations made under the Act. We are concerned in this case with the Food Labelling Regulations 1996 (SI 1996/1499) (the regulations). The respondent (the company) carries on the business of buying, processing and selling meat products. On 29 June 2011 inspectors from the councils trading standards department visited the companys premises where they found a number of packages of frozen meat labelled with use by dates which had passed. An information was preferred against it, including 23 charges under regulation 44(1)(d). A sample charge was in the following terms: On 29 June [2011] at Cwmbran, you Douglas Willis Ltd, Unit 5, Grange Road, Industrial Estate, Cwmbran, Torfaen, did sell food, namely Pork Pigs Tongues labelled Use by 27/7/09, after the date shown in the use by date relating to it, Contrary to Regulation 44(1)(d) of the Food Labelling Regulations 1996 made under the Food Safety Act 1990. The charges were dismissed by Gwent Justices on 1 September 2011 on a submission by the company that it had no case to answer. The justices accepted the companys argument that the prosecution had to prove that at the date of the alleged offence the food was highly perishable and likely after a short period to constitute an immediate danger to human health. The council appealed by way of case stated to the Divisional Court. From the findings in the stated case, there was no evidence as to when the food items had been labelled or frozen. However, the justices concluded that since they were all frozen at the time of the inspection, they were not then highly perishable and so did not require a use by date under the regulations. Therefore no offence was committed under the relevant regulation. The appeal was heard by Aikens LJ and Maddison J, who delivered a joint judgment: [2012] EWHC 296 (Admin), [2012] CTLC 16. The company argued that the justices were right in their approach. The council argued that the justices were wrong and that the prosecution had only to show that the company was selling (within the meaning of the regulation) food which was the subject of a use by label displaying a date which had passed. The court did not accept either partys argument. It held that the prosecution did not have to show that the food was in a highly perishable state at the date of the alleged offence, but that it did have to show that the food had at some stage been in a state which required it to be labelled with a use by date and that the date had passed. At the request of the council, the court certified that the case involved the following point of law of general public importance: Does an offence under regulation 44(1)(d) of the Food Labelling Regulations 1996 require the prosecution to prove that the label or marking bearing the use by date, after which the food was sold, was applied at a time when (1) the food was ready for delivery to the ultimate consumer or to a catering establishment, and (2) from the microbiological point of view it was highly perishable and in consequence likely after a short period to constitute an immediate danger to human health? Permission to appeal was given by this court. The company was not represented on hearing of the appeal. The reasons are understandable but the result is unfortunate. From the councils viewpoint, the appeal raised a matter of general importance. From the companys viewpoint, the combination of the costs which it would incur in contesting the appeal and its potential liability to pay the councils costs presented a bigger threat to it than the likely amount of any fines. It is a small family company. In these circumstances the court asked a member of its legal staff to prepare a note of points which might have been made on behalf of the company. This was disclosed to Jonathan Kirk QC, who represented the council. In addition, mindful that he was appearing for a public authority against an unrepresented respondent, Mr Kirk himself invited the court to consider those points which he would have regarded as fairly capable of argument if he had been instructed on the other side. This was in accordance with the best tradition of the bar and we believe that it has enabled us fairly to evaluate all the arguments. Nevertheless, it is still unfortunate that the court did not the have the benefit of hearing argument on both sides. The regulations There are EU Directives about food labelling but the UK regulations go further than European law requires and it is not necessary to refer to the European provisions. Part 1 of the regulations contains definitions. Under regulation 2, sell is defined as meaning offer or expose for sale or have in possession for sale. The term appropriate durability indication is defined as meaning: (a) in the case of a food other than one specified in sub paragraph (b) of this definition, an indication of minimum durability, and (b) in the case of a food which, from the microbiological point of view, is highly perishable and in consequence likely after a short period to constitute an immediate danger to human health, a use by date. The term ultimate consumer is defined as meaning any person who buys otherwise than for the purposes of resale, for the purposes of a catering establishment or for the purposes of a manufacturing business. The term catering establishment has a definition which it is unnecessary to set out but it includes restaurants, schools and hospitals. Part II sets out labelling requirements. Regulation 4(1) provides: Subject to [exceptions which are immaterial in the present case], this Part of these Regulations applies to food which is ready for delivery to the ultimate consumer or to a catering establishment. Regulation 5 contains a general labelling requirement. It provides: Subject to the following provisions of this Part of these Regulations, all food to which this Part of these Regulations applies shall be marked or labelled with (c) the appropriate durability indication Regulation 21 deals with cases where a use by date is required by virtue of regulations 2 and 5. Regulation 21(1) provides: Where a use by date is required in respect of a food it shall be indicated by the words use by followed by (a) the date up to and including which the food, if properly stored, is recommended for use, and (b) any storage conditions which need to be observed. Regulation 35 prescribes the manner in which food is to be marked or labelled. It provides: When any food other than [immaterial exceptions] is sold, the particulars with which it is required to be marked or labelled by these Regulations shall appear (a) on the packaging, or (b) on a label attached to the packaging, or (c) on a label that is clearly visible through the packaging, save that where the sale is otherwise than to the ultimate consumer such particulars may, alternatively, appear only on the commercial documents relating to the food where it can be guaranteed that such documents, containing all such particulars, either accompany the food to which they relate or were sent before, or at the same time as, delivery of the food, and provided always that the particulars required by Regulation 5 (c) shall also be marked or labelled on the outermost packaging in which that food is sold. Part IV deals with offences and legal proceedings. Regulation 44 (1) provides: If any person (a) sells any food which is not marked or labelled in accordance with the provisions of Part II of these Regulations, or (d) sells any food after the date shown in a use by date relating to it, or (e) being a person other than whichever of (i) the manufacturer, (ii) the packer, or (iii) the seller established within the European Community, was originally responsible for so marking the food, removes or alters the appropriate durability indication relating to that food, he shall be guilty of an offence and shall be liable on summary conviction to a fine Regulation 46 provides that it is a defence to a charge under regulation 44(1)(e) to show that the removal or alteration was effected with the written authorisation of a person who could himself have effected the removal or alteration without committing an offence under that regulation. Regulation 48 confirms that the extended meaning of sale referred to above applies to offences under the regulations. Section 21 of the Act enables a person charged with an offence under the regulations to advance a defence of due diligence, ie that he took all reasonable precautions and exercised all due diligence to avoid the commission of the offence by himself or by a person under his control. The Divisional Courts judgment The reasoning of the Divisional Court may be summarised as follows: The labelling requirements in Part II together with the definitions in i) Part I are fundamental to the scheme of the regulations. ii) The offence under regulation 44(1)(a), ie selling food which is not marked or labelled in accordance with Part II of the regulations, is committed if food is sold which at the point of sale is not marked or labelled in the way that Part II requires it to have been marked or labelled. Accordingly, if a time had previously come when the food required to be labelled with a use by label, but there was a failure to do so, an offence would be committed by thereafter selling it without such a label, regardless of the condition of the food at the point of sale. iii) Likewise, the offence of selling food after the date shown in a use by date relating to it, contrary to regulation 44(1)(d), would be committed if food were sold after the date shown in a use by label which Part II required it to have had. iv) The need for the prosecution to show that Part II required the food to have had a use by label was implicit in the words a use by date relating to it. The court said at para 27: A use by label cannot, in our view, relate to the food if the food does not require that type of label to be attached to it. The court went on to say that if, as a result of a misunderstanding, a person put a use by label on food that was in a frozen state at the point when it became ready for delivery to the ultimate consumer or a caterer, an offence could not be committed under regulation 44(1)(d) by selling the food after the expiry of its supposed use by date. v) The court noted, as the prosecution had pointed out, that regulation 44(1)(d) did not include the words in accordance with the provisions of Part II of these Regulations, by contrast with the language of regulation 44(1)(a). However, it observed that the obligation to label food with a use by date could only arise by reason of the earlier provisions, and it considered that the reference in regulation 44(1)(d) to a use by date must be construed in accordance with the provisions of regulations 2, 4 and 5. vi) The court also noted the prosecutions concern that the courts construction would encourage widespread evasion of the regulations by freezing food after its use by date had passed and then selling it without committing any offence. However, the court considered that the fact that there was a use by label would be prima facie evidence that it was required, and that an evidential burden would lie on a person who sold the food after the relevant date to show that it had not in fact required a use by label. Discussion The Divisional Court was right to reject the companys argument that the prosecution had to prove that the food was in a highly perishable state at the time of the alleged offences under regulation 44(1)(d). On the wording of the paragraph, all that the prosecution had to prove was that (i) the food was in the companys possession for sale (and therefore sold within the extended meaning of that term), (ii) that the food had a use by mark or label relating to it, and (iii) that the date shown had passed. To read into paragraph (d) an additional requirement that the food was in a highly perishable state at the time of the alleged offence would seriously weaken the regulatory scheme and the protection provided to consumers. It would enable a retailer of perishable food, which had passed its use by date, to freeze it and then sell it without the consumer knowing how long it had been unfrozen. Mr Kirk submitted that it was similarly wrong for the Divisional Court to read into the paragraph a requirement for the prosecution to show not only that the product had a use by mark or label, showing a date which had passed, but that it was required to have such a marking. In his submission, this construction gave the paragraph, and in particular the word relating, a meaning which it did not naturally bear and which did not accord with the scheme and purpose of the regulations. As a matter of ordinary English, I would read relating to in the phrase sells any food after the date shown in a use by date relating to it as synonymous with referring to; or, in other words, as meaning simply that the food sold is the subject of a mark or label with a use by date. It denotes a factual connection rather than a legal requirement. The word relating is similarly used, for example, in regulation 35. Dealing with the ways in which marking may be done, that regulation permits certain particulars to appear on the commercial documents relating to the food. (In fairness to the Divisional Court, Mr Kirk acknowledged that its attention was not drawn to this point or to other examples in the regulations where relating to is used in the sense of referring to.) The next question is whether contextual considerations should lead to the conclusion that the words of regulation 44(1)(d) are intended to import an additional connection between the use by marking and the food, namely a requirement for the food to have such a marking under the provisions of Part II. With respect to the Divisional Court, I do not think that comparison with regulation 44(1)(a) supports such a conclusion. Rather, the reverse. It is significant that regulation 44(1)(a) contains the words marked or labelled in accordance with the provisions of Part II of these Regulations, which are missing from regulation 44(1)(d), and there is an intelligible reason for those words to appear in paragraph (a) but not in paragraph (d). Paragraph (a) deals with the sale of food which ought to have been, but was not, marked or labelled under Part II. Once food has been marked with a use by date, the regulations protect the consumer by prohibiting the removal or alteration of the marking, except by or with the written authority of the person originally responsible for it, and by prohibiting the sale of the food after the use by date shown. These prohibitions serve a parallel purpose and are set out in paragraphs (d) and (e). Consider the example given by the Divisional Court of a use by label being placed on food by a mistake. A retailer who bought the food in that state would commit an offence under paragraph (e) if he removed the label without the written authority of the original labeller. This is rational because the person responsible for the labelling will know, first hand, the relevant facts and circumstances. There would be a lacuna or anomaly if the retailer could nevertheless sell the product to a consumer after the relevant date had passed. Paragraph (d) prohibits him from doing so. If, therefore, there has in truth been a mistake, the way of correcting it within the scope of the regulations is to obtain written authorisation for removing or altering the label from the person who was originally responsible for it. As to the practical problems of enforcement if the Divisional Courts construction is correct, the potential complications would be significantly greater than in a case under paragraph (a). Where food inspectors find food which they consider has not been marked in accordance with the provisions of Part II, evidence will be available as to its actual condition at the time of inspection. The situation would be different in a prosecution under paragraph (d) if the food was frozen at the time of the inspection. On the Divisional Courts construction, questions would arise as to when the marking had been done and what had been the state of the food at the time of the marking, which would be matters unknown to the inspectors. Mr Kirk argued persuasively that it is not unrealistic to imagine a defendant being able to obtain expert evidence sufficient to raise an issue about whether the state of the food at the time of its marking (whenever that may have been) would have been such that from a microbiological point of view it was likely after a short period to constitute an immediate danger to human health. He referred to literature showing that this is potentially a complex and controversial topic. Realistically, an enforcement authority might be understandably reluctant to incur the expense of launching a prosecution if it were likely to become involved in issues of that kind. There was some discussion in argument about the position if a use by marking was applied maliciously by somebody who had no business to do so. Suppose that a disaffected customer, or a customer with a warped sense of humour, were to put labels with expired use by dates on meat in a supermarket before being noticed and stopped. Or suppose that an anonymous employee put false labels on food products as an act of industrial sabotage. We are not concerned with cases of that kind. It may be possible as a matter of common sense to construe paragraph (d) as not intended to apply to a marking made by someone who had no responsibility at the time of so doing for the production or custody of the food (ie the opposite of a person envisaged by paragraph (e) as having had such responsibility and therefore having authority to alter or remove a label) but who was merely acting as an interfering mischief maker. However, it is unnecessary to decide that point, about which the court did not hear argument, and I do not consider that such a remote consideration should affect the question of construction with which the court is concerned. I conclude that under regulation 44(1)(d) it is sufficient for the prosecution to prove that the defendant had food in its possession for the purpose of sale which was the subject of a mark or label showing a use by date which had passed. The justices were therefore wrong to accept the companys submission of no case to answer in relation to the 23 charges brought under that regulation. The answer to the question certified by the Divisional Court is no. In view of the passage of time, it would be inappropriate to remit the case to the original justices to continue the hearing. The Divisional Court ordered that the case should be remitted to a different panel of justices for a rehearing, and that order will stand, but the rehearing will be in accordance with the law stated in this judgment. To that extent, this appeal is allowed.

The appellant local authority (the Council) has responsibility for the enforcement of food safety laws in its area. In June 2011 inspectors visited the premises of the respondent company, which carries on the business of buying, processing and selling meat products. The inspectors found a number of packages of frozen meat labelled with use by dates which had passed. The respondent was tried on 23 charges of selling food after the date shown in the use by date relating to it contrary to Regulation 44(1)(d) of the Food Labelling Regulations 1996 (the Regulations) made under the Food Safety Act 1990. The charges were dismissed by Gwent Justices on 1 September 2011. They accepted a submission by the respondent that it had no case to answer because the prosecution had not proved that at the date of the alleged offence the food required a use by label under the Regulations, ie that it was highly perishable and likely after a short period to constitute an immediate danger to human health. There was no evidence as to when the meat had been labelled or frozen. The Council appealed by way of case stated. The Divisional Court allowed the appeal, holding that the prosecution did have to show that the food had at some stage been in a state which required it to be labelled with a use by date, which had passed, but not that it was in that state at the time of the offence. The Council brought a further appeal to the Supreme Court, submitting that the prosecution had only to show that the respondent was selling food which was the subject of a use by label displaying a date which had passed. The Supreme Court unanimously allows the appeal. It holds that under Regulation 44(1)(d) it is sufficient for the prosecution to prove that a defendant had food in its possession for the purpose of sale which was the subject of a label showing a use by date which had passed. The case will be remitted to a different panel of justices for a rehearing in accordance with this ruling. The judgment is given by Lord Toulson. The Divisional Court was right to reject the respondents argument that the prosecution had to prove that the food was in a highly perishable state at the time of the alleged offences under Regulation 44 (1)(d). On the wording of that paragraph, all the prosecution had to prove was that (i) the food was in the respondents possession for sale (and therefore sold within the extended meaning of that term), (ii) that the food had a use by mark or label relating to it, and (iii) that the date shown had passed [21]. To read into paragraph (d) an additional requirement that the food was in a highly perishable state at the time of the alleged offence would seriously weaken the regulatory scheme and the protection provided to consumers. It would enable a retailer of perishable food, which had passed its use by date to freeze it and then sell it without the consumer knowing how long it had been unfrozen [22]. The words relating to in the phrase sells any food after the date shown in a use by date relating to it were synonymous with referring to. It denoted a factual connection rather than a legal requirement and simply meant that the food sold was the subject of a label with a use by date [24]. Comparison with other paragraphs of Regulation 44 (1) showed that, unlike the offence in paragraph (a), there was a reason for the omission of the words marked or labelled in accordance with Part II of these Regulations. Once food had been marked with a use by date the Regulations protected the consumer by prohibiting the removal or alteration of the marking except with the written authority of the original marker and by prohibiting the sale of the food after the use by date shown [25 27]. The Divisional Courts construction of the Regulations would give rise to significantly greater practical problems and expense for enforcement under paragraph (d) compared with (a). Questions relating to when the marking of the food had been done and the state of the food at the time would be matters unknown to the inspectors and realistically might deter prosecutions [28].

This is an appeal on preliminary points of European Union and domestic law regarding the circumstances in which damages may be recoverable for failure to comply with the requirements of the Public Procurement Directive (Parliament and Council Directive 2004/18/EC on the coordination of procedures for the award of public works contracts, public supply contracts and public service contracts (OJ 2004 L134, p114) (the PP Directive)), as given effect in the United Kingdom by the Public Contracts Regulations 2006 (SI 2006/5) (the 2006 Regulations). As recited in the Statement of Facts and Issues, the appellant, the Nuclear Decommissioning Authority (the NDA) is a non departmental public body established under the Energy Act 2004 (the EA 2004), and is responsible for 17 nuclear sites and the associated civil nuclear assets and liabilities formerly owned by the UK Atomic Energy Authority and British Nuclear Fuels Ltd. Pursuant to its duties under the EA 2004, the appellant is responsible for ensuring that, once decommissioned, sites previously used for nuclear generation are made suitable to be used for other purposes. The respondent, ATK Energy EU Ltd (ATK), provides integrated waste management and decommissioning services for the nuclear industry. ATK has pursued against the NDA a claim for damages for breaches of the NDAs obligations under the PP Directive and the 2006 Regulations in respect of the award of a contract for the decommissioning of 12 Magnox power stations, at Berkeley, Bradwell, Chapelcross, Dungeness A, Hinkley Point A, Hunterston A, Oldbury, Sizewell A, Trawsfynydd, Wylfa and two others. An agreement of compromise has been reached in respect of the claim, but the parties wish this judgment to be issued nonetheless. In short, Fraser J held, and it is for the purposes of the present appeal to be assumed, that the NDA failed to award the contract to the tenderer which submitted the most economically advantageous offer determined in accordance with the criteria which the NDA had itself specified, in breach of obligations under regulations 18(27) and 30(1) to (4) of the 2006 Regulations read against the background of the articles 29.1, 29.7 and 53 of the PP Directive. The NDA erroneously concluded that a consortium, known as CFP, had provided the most economically advantageous offer, awarding it a score of 86.48%. It awarded a consortium known as Reactor Site Solutions (RSS), of which ATK and another company, Bechtel, were members, a score of 85.42%. Fraser J [2016] EWHC 1988 (TCC) found (i) that CFP should have been disqualified from the competition for failing two threshold requirements, and (ii) that, in any event, RSS would have won the competition had the NDA not made many manifest errors (para 944) in its assessment of the tenders, but for which the NDA would have awarded RSS a score of 91.48% and CFP a score of only 85.56%. The public procurement directives in effect prior to 2004, concerning works (Council Directive 71/305/EEC (OJ 1971 L185, p5)) and supplies (Council Directive 77/62/EEC (OJ 1977 L13, p1)), contained no enforcement provisions. Following the decision of the Court of Justice in Gebroeders Beentjes BV v State of the Netherlands (Case C 31/87) [1988] ECR I 4635, paras 38 44, that the provisions of these Directives were unconditional and sufficiently precise to be relied upon by persons before national courts, a further Directive was introduced, Council Directive 89/665/EEC (OJ 1989 L395, p33) later amended by Council Directive 2007/66/EC (OJ 2007 L335, p31) (the 2007 Directive), to provide effective remedies for economic operators, including the setting aside of awards and compensation. I will refer to Council Directive No 89/665/EEC, as so amended, as the Remedies Directive. Domestic effect was given to the Remedies Directive by amendment of the 2006 Regulations by the Public Contracts (Amendment) Regulations 2009 (SI 2009/2992) (the 2009 Amendment Regulations). The 2006 Regulations have since been superseded by the Public Contracts Regulations 2015 (SI 2015/102). Under regulation 118 thereof, the 2006 Regulations remain, however, applicable for the purposes of this case. The scheme of the Remedies Directive, as implemented and as applicable on the facts of this case, was, in outline, as follows: (a) Under article 2a(2) of the Remedies Directive, a standstill period of at least ten days was required, from the date of receipt of a telephone or letter communication to an economic operator (such as ATK) that it had not been awarded the contract; during the standstill period the relevant contracting authority (here the NDA) could not enter into the contract; as implemented domestically by regulations 32(1) and 32A(5) of the 2006 Regulations, the standstill period was fixed as exactly ten days from the date of such receipt. (b) Under article 2c of the Remedies Directive, the United Kingdom was required to allow a period of at least ten days from any such communication for the economic operator to issue proceedings seeking a review of the authoritys decision; it implemented this requirement under regulation 47D(2) by allowing 30 days beginning with the date on which the economic operator first knew or ought to have known that grounds for starting proceedings had arisen; this was coupled with a proviso under regulation 47D(3) that it did not require proceedings to be started before the end of a defined period, corresponding with that stated in article 2c. (Article 2f in fact required that domestic law allow a period of at least 30 days, from publication of a contract award notice or information given by the contracting authority about the conclusion of the contract, for challenges based on limited grounds of ineffectiveness identified in article 2d; this may, perhaps, have been an inspiration for the more general 30 day period in regulation 47D(2).) (c) Under article 2(3) of the Remedies Directive, as implemented by regulation 47G, the authority, on becoming aware of the issue of a claim form relating to its decision to award the contract to CFP, was required to refrain from entering into the contract, if not already entered into, until court order or disposal of the proceedings. In the present case, the NDA informed RSS by telephone and letter delivered on 31 March 2014 that RSS had been unsuccessful. It also informed all bidders that it would voluntarily observe an extended standstill period until 14 April 2014. RSS wrote letters on 6, 8 and 10 April 2014, by which it requested various information and ultimately asked for a further extended standstill period until 23 April 2014, saying that it might otherwise be forced to issue a claim by 14 April to protect its position. On 11 April 2014, the NDA refused to extend the standstill period, and on the same day RSS replied that this was regrettable and that it was actively considering commencing a claim, and urged the NDA not to enter into the contract. On 15 April the NDA repeated that it was unable to agree to refrain from taking steps to enter into the contract, explaining that delay would cause it to suffer significant additional cost. Later that day, the NDA entered into the contract with CFP and informed RSS accordingly. On 28 April 2014, and so within the 30 days referred to in para 5(b) above, ATK, though not Bechtel, issued the claim form beginning the present proceedings. Preliminary issues ordered by Akenhead J on 10 October 2014 were decided by Edwards Stuart J on 23 January 2015 ([2015] PTSR 1106), leading to an appeal determined by the Court of Appeal (Lord Dyson MR, Tomlinson and Vos LJJ) by judgment dated 15 December 2015: [2016] PTSR 689. The shape of the arguments has changed, leading to a position where three main issues are now presented in the Statement of Facts and Issues as arising on this appeal. Slightly reformulated to reflect the submissions before the Supreme Court, they are: (i)(a) whether the Remedies Directive only requires an award of damages to be made when any breach of the PP Directive is sufficiently serious and (b) whether the answer to this question is acte clair, so that it need not be referred to the Court of Justice? (ii) whether regulation 47J(2)(c) of the 2006 Regulations confers a power to award damages in respect of any loss or damage suffered by an economic operator (a) in the case of any breach, or (b) only in the case of a sufficiently serious breach, of the Regulations? (iii) whether (and, if so, when) an award of damages under regulation 47J(2)(c) of the 2006 Regulations may be refused on the ground that an economic operator, who issued a claim form in respect of a contract award decision within the 30 day time limit prescribed by regulation 47D of the 2006 Regulations, did not do so and inform the contracting authority that it had done so before the contracting authority entered into the contract? Before Edwards Stuart J issue (i) only appears to have arisen tangentially to an argument, which no longer directly arises, that damages were discretionary. So far as he addressed it, his answer appears to have been negative (para 86). Issue (ii), he answered: (a) Yes; (b) No (para 71). Issue (iii), he held, involved a question of fact, not suitable for resolution as a preliminary issue in this case, though his views were generally discouraging of the idea that damages would be refused on any such basis (paras 42 54). In the Court of Appeal, Vos LJ, in a judgment with which the other members concurred, determined these issues to the following effect: (i)(a) Yes. (b) Yes (para 55). (ii)(a) Yes. (b) No (paras 66 70). (iii) No (paras 71 77). In relation to the first issue, Vos LJ, after analysing Court of Justice case law, concluded (paras 62 65) that breaches of the PP Directive must, in the light of the Remedies Directive, be actionable under the following three minimum conditions (the Francovich conditions): (1) the rule of law infringed must be intended to confer rights on individuals, (2) the breach must be sufficiently serious, and (3) there must be a direct causal link between the breach of the obligation and the damage sustained by the injured party. National law must also respect the principle of equivalence of EU with domestic rights (para 62). For present purposes, it is Francovich condition (2) which matters. As to the second issue, Vos LJ held, and this is not contentious, that it is open to national law to lay down criteria that provide a less restrictive remedy in damages than would be provided by the Francovich conditions (para 66). He went on to hold (and this is contentious) that the 2006 Regulations had this effect; whether ATKs claim was viewed as being for breach of directly enforceable EU law or for breach of domestic law enacted to give effect to the EU obligation contained in the Remedies Directive, it constituted a private law claim for breach of statutory duty, which, under English law, was not subject to any restrictive condition limiting its availability to cases of sufficiently serious breach (paras 66 67). As to the third issue, Vos LJ held that this involved an issue of determination or estimation of damages, which was for domestic law to determine (paras 55 and 71). He went on to hold that there was nothing in the 2006 Regulations or in general domestic law to oblige an economic operator to issue its claim form before the contracting authority entered into the contract, or to deprive it of a claim to damages on the ground that it had failed to invoke any other remedy (paras 72 76). The NDA now appeals by permission of the Supreme Court. Issue (i) Francovich condition (2) in EU law Articles 1 to 3 of the Remedies Directive read: 1(1). Member states shall take the measures necessary to ensure that, as regards contracts falling within the scope of Directive 2004/18/EC, decisions taken by the contracting authorities may be reviewed effectively and, in particular, as rapidly as possible in accordance with the conditions set out in articles 2 to 2f of this Directive on the grounds that such decisions have infringed Community law in the field of public procurement or national rules transposing that law. 2(1) Member states shall ensure that the measures taken concerning the review procedures specified in Article 1 include provision for powers to: (a) take, at the earliest opportunity and by way of interlocutory procedures, interim measures with the aim of correcting the alleged infringement or preventing further damage to the interests concerned, including measures to suspend or to ensure the suspension of the procedure for the award of a public contract or the implementation of any decision taken by the contracting authority; (b) either set aside or ensure the setting aside of decisions taken unlawfully, including the removal of discriminatory technical, economic or financial specifications in the invitation to tender, the contract documents or in any other document relating to the contract award procedure; (c) infringement. award damages to persons harmed by an (7) except where a decision must be set aside prior to the award of damages, a member state may provide that, after the conclusion of a contract , the powers of the body responsible for review procedures shall be limited to awarding damages to any person harmed by an infringement. 3(1) The Commission may invoke the procedure provided for in paras 2 to 5 when, prior to a contract being concluded, it considers that a serious infringement of Community law in the field of public procurement has been committed during a contract award procedure falling within the scope of Directive 2004/18/EC. The Francovich conditions derive from the Court of Justices decisions in Francovich v Italian Republic (Joined Cases C 6/90 and C 9/90) [1995] ICR 722; [1991] ECR I 5357 and Brasserie du Pcheur SA v Federal Republic of Germany, R v Secretary of State for Transport, Ex p Factortame Ltd (No 4) (Joined Cases C 46/93 and C 48/93) [1996] QB 404 (Brasserie du Pcheur). These were decisions on state liability, in Francovich itself for failure to transpose a directive and in Brasserie du Pcheur for domestic laws which violated European law. In the latter case, the Court of Justice set out the three Francovich conditions at para 51, remarking in this respect that Community law confers a right to reparation where three conditions are met, and went on: 55. As to the second condition, as regards both Community liability under article 215 and member state liability for breaches of Community law, the decisive test for finding that a breach of Community law is sufficiently serious is whether the member state or the Community institution concerned manifestly and gravely disregarded the limits on its discretion. 56. The factors which the competent court may take into consideration include the clarity and precision of the rule breached; the measure of discretion left by that rule to the national or Community authorities; whether the infringement and the damage caused was intentional or involuntary; whether any error of law was excusable or inexcusable; the fact that the position taken by a Community institution may have contributed towards the omission, and the adoption or retention of national measures or practices contrary to Community law. 57. On any view, a breach of Community law will clearly be sufficiently serious if it has persisted despite a judgment finding the infringement in question to be established, or a preliminary ruling or settled case law of the court on the matter from which it is clear that the conduct in question constituted an infringement. 66. The aforementioned three conditions are necessary and sufficient to found a right in individuals to obtain redress, although this does not mean that the state cannot incur liability under less strict conditions on the basis of national law. In Brasserie du Pcheur one issue before the Court of Justice was whether a national court was entitled to make reparation conditional on the existence of fault, whether intentional or negligent. Referring to the second Francovich condition, the Court said: 78. So, certain objective and subjective factors connected with the concept of fault under a national legal system may well be relevant for the purpose of determining whether or not a given breach of Community law is serious: see the factors mentioned in paras 56 and 57 above. 79. The obligation to make reparation for loss or damage caused to individuals cannot, however, depend on a condition based on any concept of fault going beyond that of a sufficiently serious breach of Community law. 80. Accordingly, reparation of loss or damage cannot be made conditional on fault (intentional or negligent) on the part of the organ of the state responsible for the breach, going beyond that of a sufficiently serious breach of Community law. The three Francovich conditions were in Kbler v Republik sterreich (Case C 224/01) [2004] QB 848, para 51, deployed in the context of state liability for failure by a final state court to apply European Union law, with the gloss (para 53) that, having regard to the specific nature of the judicial function and the legitimate requirements of legal certainty, the second condition could only be met in the exceptional case where the court has manifestly infringed the applicable law. The question on this appeal is whether, as the Court of Appeal considered, the three Francovich conditions apply to a claim against a contracting authority under the PP and Remedies Directives (and whether the answer to this question is acte clair). In submitting that the Court of Appeal was wrong, ATK makes a number of points. It points to the purposes of the Remedies Directive generally, and to the terms of articles 1(1) and 2(1) in particular, as showing an intention to address and provide a remedy in damages for harm caused by infringements generally. It points to the wording of article 3 as indicating that, where there is an intention to limit provisions of the Directive to cases of serious infringement, the intention is made express. It points to the fact that, if the Francovich conditions apply, then no remedy at all would potentially be available in cases falling within the last words of article 2(7). ATK also submits that the Court of Appeals approach is inconsistent with the European Unions international obligations under the Government Procurement Agreement (GPA 1994), a plurilateral agreement contained in Annex 4 to the Agreement in 1994 establishing the World Trade Organisation and approved on behalf of the Union by article 2 of Council Decision 94/800/EC (OJ 1994 L336, p144). Article XX(2) of the GPA 1994 provided for each party to provide effective procedures enabling suppliers to challenge alleged breaches of the Agreement arising in the context of procurements in which they have, or have had, an interest, while article XX(7) provided that: Challenge procedures shall provide for: an assessment and a possibility for a decision on rapid interim measures to correct breaches of the (a) Agreement . ; (b) the justification of the challenge; correction of the breach of the Agreement or (c) compensation for the loss or damages suffered, which may be limited to costs for tender preparation or protest. A similar provision appears in the more recent revised GPA to which the EU became party on 6 April 2014: Council Decision 2014/115/EU (OJ 2014 L68, p1). ATK submits that article XX(7) contemplates that damages must always be recoverable for a breach (and cannot be restricted to cases of serious breach), even if they may be limited to costs for tender preparation or protest. It points to the principle, endorsed in zen Letovho Provozu R, sp v Bundesamt fr Finanzen (Case C 335/05) [2007] STC 1509, para 16, and Association Justice & Environment zs v Commission of the European Communities (Case T 727/15) 23 January 2017, para 77, that secondary EU legislation should, so far as possible, be interpreted consistently with international agreements concluded by the European Union. Finally, but most importantly, ATK submits that Court of Justice case law supports its position. The debate in this area turns on two principal authorities: Stadt Graz v Strabag AG (Case C 314/09) [2010] ECR I 8769 (decided 30 September 2010 by the Third Chamber, without an Advocate Generals opinion) and Combinatie Spijker Infrabouw De Jonge Konstruktie v Provincie Drenthe (Case C 568/08) [2010] ECR I 12655 (Advocate Generals opinion delivered 14 September 2010; Judgment of the Second Chamber 9 December 2010). In Stadt Graz the basic question referred was whether the Remedies Directive precluded national legislation which made the right to damages for an infringement of public procurement law by a contracting authority conditional upon the infringement being culpable. The legislation in question included a presumption that the contracting authority was at fault, and a provision that the authority could not rely on a lack of individual abilities. The court, in holding that such legislation was impermissible, said this: 33. Directive 89/665 lays down only the minimum conditions to be satisfied by the review procedures established in domestic law to ensure compliance with the requirements of EU law concerning public procurement If there is no specific provision governing the matter, it is therefore for the domestic law of each member state to determine the measures necessary to ensure that the review procedures effectively award damages to persons harmed by an infringement of the law on public contracts 34. Although, therefore, the implementation of article 2(1)(c) of Directive 89/665 in principle comes under the procedural autonomy of the member states, limited by the principles of equivalence and effectiveness, it is necessary to examine whether that provision, interpreted in the light of the general context and aim of the judicial remedy of damages, precludes a national provision such as that at issue in the main proceedings from making the award of damages conditional, in the circumstances , on a finding that the contracting authoritys infringement of the law on public contracts is culpable. 35. In that regard, it should first be noted that the wording of article 1(1), article 2(1), (5) and (6), and the sixth recital in the preamble to Directive 89/665 in no way indicates that the infringement of the public procurement legislation liable to give rise to a right to damages in favour of the person harmed should have specific features, such as being connected to fault proved or presumed on the part of the contracting authority, or not being covered by any ground for exemption from liability. 36. That assessment is supported by the general context and aim of the judicial remedy of damages, as provided for in Directive 89/665 37. According to settled case law, while the member states are required to provide legal remedies enabling the annulment of a decision of a contracting authority which infringes the law relating to public contracts, they are entitled in the light of the objective of rapidity pursued by Directive 89/665 to couple that type of review with reasonable limitation periods for bringing proceedings, so as to prevent the candidates and tenderers from being able, at any moment, to invoke infringements of that legislation, thus obliging the contracting authority to restart the entire procedure in order to correct such infringements 38. Furthermore, the second subparagraph of article 2(6) of Directive 89/665 reserves to the member states the right to limit the powers of the body responsible for the review procedures, after the conclusion of a contract following its award, to the award of damages. 39. Against that background, the remedy of damages provided for in article 2(1)(c) of Directive 89/665 can constitute, where appropriate, a procedural alternative which is compatible with the principle of effectiveness underlying the objective pursued by that directive of ensuring effective review procedures only where the possibility of damages being awarded in the event of infringement of the public procurement rules is no more dependent than the other legal remedies provided for in article 2(1) of Directive 89/665 on a finding that the contracting authority is at fault. 40. it makes little difference in that regard that, by contrast with the national legislation referred to in Commission of the European Communities v Portugal (Case C 275/03), the legislation at issue in the main proceedings does not impose on the person harmed the burden of proving that the contracting authority is at fault, but requires the latter to rebut the presumption that it is at fault, while limiting the grounds on which it can rely for that purpose. 41. The reason is that that legislation, too, creates the risk that the tenderer who has been harmed by an unlawful decision of a contracting authority is nevertheless deprived of the right to damages in respect of the damage caused by that decision, where the contracting authority is able to rebut the presumption that it is at fault. 42. At the very least, that tenderer runs the risk, under that legislation, of only belatedly being able to obtain damages, in view of the possible duration of civil proceedings seeking a finding that the alleged infringement is culpable. ATK submits that, although the immediate focus of Stadt Graz was on the impermissibility of any limitation of liability by reference to a requirement of fault, its whole tenor was that the Remedies Directive contemplates a general right to damages for any infringement of the public procurement legislation, neither subject, nor capable of being made subject, to any specific features. A requirement that the breach should be sufficiently serious would, it submits, be an example of a special feature. Spijker concerned a situation not dissimilar to the present. The claimants tender had come second in circumstances which the claimant (Combinatie) alleged breached the PP Directive. The defendant Provincie, following an interim administrative court order that the contract should be awarded to no one else but Machinefabriek Emmen BV (MFE), awarded it to MFE. The claimant sued the Provincie for damages in the civil courts. One issue which the civil court, the Rechtbank Assen, identified was whether any unlawful act fell to be attributed to the Provincie. The court, taking the view that the Provincie might have acted unlawfully, asked the Court of Justice by questions 4(c) and (d): (c) If [the] authority is required to pay damages, does Community law set criteria for determining and estimating those damages, and if so, what are they? (d) If the contracting public authority cannot be deemed liable, is it possible, under Community law, for some other person to be shown to be liable, and on what basis? Advocate General Cruz Villaln said (para 5), in connection with question 4(c) that: the present case offers the opportunity to clarify certain points of Directive 89/665 which are of great significance for the purpose of upholding the legality which European Union law requires in the context of public procurement. In the course of his opinion, he said (para 77) that: In my view, it is solely for the Rechtbank to assess(40) points such as whether there was any liability and whether, where appropriate, it must be attributed to the Provincie, to the State on account of the actions of the judge dealing with interim relief proceedings or to any other person taking into consideration the evidence which has been shown to be relevant: the fact that the Provincie did not wait before making the award or appeal against the interim measures; the possible alternatives (if any) to making the award to MFE; the circumstances surrounding the provisional enforcement of the order of the judge dealing with interim relief proceedings, and the Combinaties voluntary withdrawal of the appeal lodged against that order. Footnote 40 to this passage read: 40. In order to do so, it must take into account all the factors which characterise the situation which has been brought before it, in particular, the degree of clarity and precision of the rule infringed, whether the infringement was intentional, whether the error of law was excusable or inexcusable, the position taken, where applicable, by a Community institution and non compliance by the court in question with its obligation to make a reference for a preliminary ruling under article [267 TFEU] (Case C 224/01 Kbler [2003] ECR I10239, para 55), a sufficiently serious infringement of European Union law occurring where the decision concerned was made in manifest breach of the case law of the court in the matter. (Joined Cases C46/93 and C48/93 Brasserie du pcheur and Factortame [1996] ECR I1029, para 57, and Kbler, para 56.) The Court addressed question 4(c) as follows: 85. By its fourth question, part (c), the referring court asks, in essence, whether, if the awarding authority has to make good the damage arising from an infringement of EU law on the award of public contracts, EU law provides criteria on the basis of which the damage may be determined and estimated and, if so, what those criteria are. 86. Article 2(1)(c) of [the Remedies Directive] clearly indicates that member states must make provision for the possibility of awarding damages in the case of infringement of EU law on the award of public contracts, but contains no detailed statement either as to the conditions under which an awarding authority may be held liable or as to the determination of the amount of the damages which it may be ordered to pay. 87. That provision gives concrete expression to the principle of State liability for loss and damage caused to individuals as a result of breaches of EU law for which the State can be held responsible. According to case law developed since the adoption of the [Remedies Directive], but which is now consistent, that principle is inherent in the legal order of the Union. The Court has held that individuals harmed have a right to reparation where three conditions are met: the rule of EU law infringed must be intended to confer rights on them; the breach of that rule must be sufficiently serious; and there must be a direct causal link between the breach and the loss or damage sustained by the individuals ([the Francovich case] para 35, the Brasserie du Pcheur case] paras 31 and 51; and [the Danske Slagterier case] paras 19 and 20). 88. As matters stand at present, the case law of the Court of Justice has not yet set out, as regards review of the award of public contracts, more detailed criteria on the basis of which damage must be determined and estimated. 89. As regards EU legislation, it should be noted that Directive 89/665 has been largely amended by Directive 2007/66/EC of the European Parliament and of the Council of 11 December 2007 amending Council Directives 89/665/EEC and 92/13/EEC (OJ 2007 L 335, p 31), adopted after the date of the facts which gave rise to the dispute in the main proceedings. However, on that occasion, the EU legislature refrained from adopting any provisions on that point. 90. In the absence of EU provisions in that area, it is for the legal order of each member state to determine the criteria on the basis of which damage arising from an infringement of EU law on the award of public contracts must be determined and estimated (see, by analogy, Case C 315/01 GAT [2003] ECR I 6351, para 46; and Case C 314/09 [the Stadt Graz case [2010] ECR I 8769], para 33) provided the principles of equivalence and effectiveness are complied with (see, to that effect, Joined Cases C 295/04 to C 298/04 Manfredi and others [2006] ECR I 6619, para 98). It is apparent from well established case law that the 91. detailed procedural rules governing actions for safeguarding an individuals rights under EU law must be no less favourable than those governing similar domestic actions (principle of equivalence) and must not render practically impossible or excessively difficult the exercise of rights conferred by EU law (principle of effectiveness) . 92. Therefore, the answer to the fourth question, part (c) is that, as regards state liability for damage caused to individuals by infringements of EU law for which the state may be held responsible, the individuals harmed have a right to redress where the rule of EU law which has been infringed is intended to confer rights on them, the breach of that rule is sufficiently serious, and there is a direct causal link between the breach and the loss or damage sustained by the individuals. In the absence of any provision of EU law in that area, it is for the internal legal order of each member state, once those conditions have been complied with, to determine the criteria on the basis of which the damage arising from an infringement of EU law on the award of public contracts must be determined and estimated, provided the principles of equivalence and effectiveness are complied with. In view of that answer, there is no need to reply to part 93. (d) of the fourth question. ATK argues that, in the light of para 93, these paragraphs must be taken to contain answers to both questions 4(c) and (d), that paras 89 and 90 indicate that no EU law conditions attach to liability of a contracting authority of the sort covered by question 4(c), whereas para 92 (and presumably para 87 on which para 92 is evidently based), which refer to the Francovich conditions, cover question 4(d) and are confined to the liability of the state and those for whom the state may be liable who are not contracting authorities. I am unable to accept this interpretation of the Court of Justices judgment. It converts an apparently clear exposition of the position regarding question 4(c) into an incoherent mixture of two differing schemes between which the text, on ATKs interpretation, jumps back and forwards. In my view, the text is clear. Paras 85 and 86 set the scene, viz that what is about to be discussed is the liability of an awarding authority for damage arising from an infringement of the PP Directive, and para 87 proceeds by making clear that the liability of an awarding authority is to be assessed by reference to the Francovich conditions. Subject to those conditions being met, paras 88 to 90 go on to make clear that the criteria for damages are to be determined and estimated by national law, with the further caveat that the general principles of equivalence and effectiveness must also be met (para 91). Finally, para 92 summarises what has gone before, repeating the need to satisfy the Francovich conditions. This is also exactly what the Advocate General had indicated in footnote 40 of his opinion. As to para 93, the inference is that the Court considered that the same principles must govern any claim against the State itself or a body for which the State is answerable (such as perhaps the administrative court which issued the interim order in Spijker). That is of course logical. The Court of Justice in Spijker was aware of the recent decision in Stadt Graz, cited it in para 90, and clearly did not consider it in any way inconsistent with what the Court of Justice said about the general applicability of the Francovich conditions. Nor was it inconsistent. Whether an error is excusable or inexcusable is a matter that a court may take into account when considering whether a breach is sufficiently serious to justify an award of damages under the second condition: see Brasserie du Pcheur, para 57, quoted in para 11 above. But the introduction of a fixed requirement of fault as a condition of State liability, on whichever party the burden of proving or disproving fault is placed, is well established as illegitimate on a line of authority which goes back to Brasserie du Pcheur itself (see para 12 above), and to Commission of the European Communities v Portugal (Case C 275/03) EU:C:2004:632 and which was merely reflected in the decision in Stadt Graz. The clarity of EU law in this respect was, no doubt, why the decision was taken that no Advocate Generals opinion was required in Stadt Graz. In these circumstances, there is in my view very clear authority of the Court of Justice confirming that the liability of a contracting authority under the Remedies Directive for breach of the PP Directive is assimilated to that of the state or of a public body for which the state is responsible. It is in particular only required to exist where the minimum Francovich conditions are met, although it is open to States in their domestic law to introduce wider liability free of those conditions. In the light of Spijker, ATKs submissions based on the general wording of articles 1 and 2 of the Remedies Directive cannot lead to a contrary conclusion. Article 3 is dealing with a different subject matter, which, even by way of contrast, could not throw much light on the scope of articles 1 and 2, and certainly cannot in the light of Spijker. Nor is ATKs argument by reference to the EUs international obligations under the GPA 1994 capable of leading to a contrary decision on any points. Any impetus which article XX(7) can give to ATKs argument is very weak at best. That article requires no more than either correction of the breach or compensation, and the compensation required may fall far short of covering the actual loss or damage suffered (since it may be limited to costs for tender preparation or protest). There is, apparently, no WTO authority on the interpretation of article XX(7) (or as to whether it might not itself be read subject to a condition such as the second Francovich condition). The argument based on GPA 1994 cannot in any event withstand the clear impact of the Courts judgment in Spijker. Finally, the Supreme Court, during the course of submissions, asked about academic authority, and was shown a further article additional to any in the agreed bundles. That was Professor Steen Treumers article Basis and Conditions for a Damages Claim for Breach of the EU Public Procurement Rules in Fairgrieve and Lichre, Public Procurement Law (2011). Professor Treumer wrote then of a lack of clarity in cases such as Commission v Portugal, of confusion arising from, and fundamentally different approaches taken in, the cases of Stadt Graz and Spijker and of differing approaches taken in national law, presumably before those cases. For the reasons I have already given, I do not see any such lack of clarity or confusion. Further, the Supreme Court was shown in the agreed bundles a more recent article, by a serving judge of the General Court, Judge Anthony M Collins, Damages in Public Procurement An Illusory Remedy? in Chapter 21 (p 339) in Of Courts and Constitutions Liber Amicorum in honour of Nial Fennelly (ed Bradley, Travers and Whelan) (2014). Setting out the criteria for the recovery of damages for breaches of the procurement rules, Judge Collins explains Spijker precisely in the sense which I consider that it obviously bears. It harmonises liability for such breaches irrespective of the identity of the author of the alleged illegality, with the minimum Francovich conditions applying to all such breaches (p 340), and with the result (p 341) that: the requirements that the rule breached must be intended to confer rights on individuals and that the breach of such a rule must be sufficiently serious, means that not every legal error in the course of an award procedure can ground an action in damages. This article reinforces my view that there is no uncertainty or confusion in the Court of Justices case law, and that the Supreme Court can be safe in relying on the clear language and ruling in Spijker as settling the position, whatever may have been previous doubts or differences of view at national level. For these reasons, I consider that the Court of Appeal answered the first question correctly, and in a manner which does not call for any reference by the Supreme Court, as the final court of appeal, to the Court of Justice. Issue (ii) Francovich condition (ii) at domestic law level This is a domestic law issue. The question is whether the UK legislator has, by the 2006 Regulations, gone further than European law requires, by making any contracting authority breaching the Regulations liable for any damages thereby caused, irrespective of whether the breach would under the second Francovich principle be sufficiently serious to require domestic law to make available a remedy in damages. The relevant Regulations read as follows: 32. Information about contract award procedures [Award decision notice] (1) Subject to paragraph (13), a contracting authority shall, as soon as possible after the decision has been made, inform the tenderers and candidates of its decision to (a) (b) award the contract; or conclude the framework agreement, and shall do so by notice in writing by the most rapid means of communication practicable. (2) Where it is to be sent to a tenderer, the notice referred to in paragraph (1) shall include (a) the criteria for the award of the contract; (b) the reasons for the decision, including the characteristics and relative advantages of the successful tender, the score (if any) obtained by the economic operator which is to receive (i) the notice; and (ii) the economic operator (aa) (bb) agreement, to be awarded the contract; or to become party to the framework and anything required by paragraph (10); (c) (d) the name of the economic operator to be awarded the contract; or (i) (ii) to become a party to the framework agreement; and a precise statement of either (i) when, in accordance with regulation 32A, the standstill period is expected to end and, if relevant, how the timing of its ending might be affected by any and, if so what, contingencies; or (ii) the date before which the contracting authority will not, in conformity with regulation 32A, enter into the contract or conclude the framework agreement. (2A) Where it is to be sent to a candidate, the notice referred to in paragraph (1) shall include the reasons why the candidate was unsuccessful; (a) and (b) the information mentioned in paragraph (2), but as if the words and relative advantages were omitted from sub paragraph (b). (a) 47A. Duty owed to economic operators (1) This regulation applies to the obligation on a contracting authority to comply with the provisions of these Regulations, other i. than regulations 14(2), 30(9), 32(14),40 and 41(1); and ii. any enforceable [EU] obligation in respect of a contract or design contest (other than one excluded from the application of these Regulations by regulation 6, 8 or 33); and a concessionaire to comply with the provisions of (b) regulation 37(3). 47C. Enforcement of duties through the Court (1) A breach of the duty owed in accordance with regulation 47A or 47B is actionable by any economic operator which, in consequence, suffers, or risks suffering, loss or damage. (2) Proceedings for that purpose must be started in the High Court, and regulations 47D to 47P apply to such proceedings. 47I. Remedies where the contract has not been entered into (1) Paragraph (2) applies where (a) the Court is satisfied that a decision or action taken by a contracting authority was in breach of the duty owed in accordance with regulation 47A or 47B; and (b) In those circumstances, the Court may do one or more the contract has not yet been entered into. (2) of the following (a) order the setting aside of the decision or action concerned; (b) order the contracting authority to amend any document; award damages to an economic operator which (c) has suffered loss or damage as a consequence of the breach. (3) This regulation does not prejudice any other powers of the Court. 47J. Remedies where the contract has been entered into (1) Paragraph (2) applies if the contract has already been entered into. (a) the Court is satisfied that a decision or action taken by a contracting authority was in breach of the duty owed in accordance with regulation 47A or 47B; and (b) In those circumstances, the Court (a) must, if it is satisfied that any of the grounds for ineffectiveness applies, make a declaration of ineffectiveness in respect of the contract unless regulation 47L requires the Court not to do so; (b) must, where required by regulation 47N, impose penalties in accordance with that regulation; (c) may award damages to an economic operator which has suffered loss or damage as a consequence of the breach, regardless of whether the Court also acts as described in sub paragraphs (a) and (b); (d) must not order any other remedies. (2) These Regulations were all introduced by the 2009 Amendment Regulations, to implement the 2007 Directive. The 2006 Regulations and 2009 Amendment Regulations were made under the power contained in section 2(2) of the European Communities Act 1972, to make provision for the purpose of implementing EU obligations of the United Kingdom and/or dealing with matters arising out of or related to any such obligation. The Francovich conditions are no more than minimum conditions, which domestic law is free to relax or ignore. There is therefore no Marleasing presumption that the United Kingdom legislator intended to reflect the Francovich conditions (Marleasing SA v La Comercial Internacional de Alimentacin SA (Case C 106/89) [1990] ECR I 4135). Further, it is not suggested that it would be outside the scope of section 2(2) for the United Kingdom legislator to provide for the recovery of damages in respect of breaches which were not sufficiently serious to meet the EU law minimum requirement that a damages remedy be available: see United States v Nolan [2015] UKSC 63; [2016] AC 463, para 63. ATK relies on the wording of the 2006 Regulations as introducing unconditional actionability of breaches, coupled with unconditional domestic liability for breaches of any domestically based statutory duty. It points to the obligation contained in regulation 47A(2) and the duty, breach of which is by regulation 47C(1) prescribed as actionable by any economic operator who in consequence suffers loss or damage. ATK submits that there is no warrant for reading into these Regulations any condition that the breach must be sufficiently serious before it is actionable in damages. Although there was no requirement to do so, or presumption that this would be done, the NDA invites the Supreme Court to conclude that it was the intention of the UK legislator simply to give effect to the minimum EU requirements regarding damages. It points to the uses of the word may in regulations 47I(2) and 47J(2)(c). It does not suggest that this gives rise to any general discretion. But it suggests that it is consistent with a limitation of damages by reference to the Francovich conditions. It picks up, in domestic law, the requirement under article 2(1) of the Remedies Directive that domestic law shall include a power to award damages to an economic operator harmed by an infringement, a requirement which, as I have held, is limited by the Francovich conditions. ATK in response submits the word may can be explained as a reference to the possibility that the contracting authority might have a defence, for example due to failure by the economic operator to mitigate its loss. That to my mind is a somewhat slender explanation for the introduction of the word may, especially as loss arising from a failure to mitigate is commonly regarded as not having been caused by the breach: see eg Sotiros Shipping Inc v Sameiet Solholt (The Solholt) [1983] 1 Lloyds Rep 605. The Court of Appeal dealt with this issue quite shortly. It noted that the 2009 Amendment Regulations had been preceded by an Explanatory Memorandum and a Transposition Note as well as a Consultation Document of April 2009, all of which [it said] make it reasonably clear that the Governments intention was to do only what was necessary to implement the Remedies Directive without any gold plating save where such was expressly identified (para 17). But it viewed the claim provided by the 2006 Regulations, as amended in 2009, as an ordinary private law claim for breach of statutory duty, to which no restrictive condition applies under English law, and saw it as irrelevant in this context whether or not the legislator intended to gold plate the EU law on public procurement when introducing the Regulations (para 67). The Court of Appeal was right in para 17 to identify the legislators intention in 2009 as having been not to gold plate. The Explanatory Note to the 2009 Amendment Regulations said that except where otherwise stated (none of the respects so stated being presently relevant) the Regulations implemented the Directive. The Explanatory Memorandum laid before Parliament referred to the Regulations as implementing articles in the Directive that need to be transposed and to the amendments to the 2006 Regulations as needed to implement the Directive. The Impact Assessment, prepared by the Office of Government Commerce (the OGC) and attached to the Explanatory Memorandum, concluded by saying that the OGC had adhered to guidance including avoidance of gold plating and taking a minimalist approach to implementation insofar as is possible within the context of this implementation and that the impact assessment had examined, article by article, the choices available for the UK and identified a range of options, invariably selecting those which represent the least cost and greatest benefit within the confines of the mandate laid down in the Directive (para 72). The Impact Assessment contained a detailed account of the choices available and made. None relates to or suggests a choice in 2009 to implement the Directive by introducing domestic liability for damages in circumstances not required under EU law. The Explanatory Note, the Explanatory Memorandum and the Impact Assessment are all potentially admissible as aids to the understanding of the legislators intentions in 2009, on the principle identified by the House of Lords in R v Montila [2004] UKHL 50; [2004] 1 WLR 3141, para 35. However, ATK submits that 2009 is not the relevant date. It points out that, although regulations 47A through to 47P (Part 9) of the 2006 Regulations as amended by the 2009 Amendment Regulations were introduced as a complete substitute for the previous section 47 (Part 9) and were the product of extensive re writing of previous text with many new elements, the bare outline of regulations 47A to 47C, 47I and 47J can still be detected in the much more limited language of regulation 47(1), (6), (8) and (9) of the earlier 2006 Regulations, which can in turn be traced back to the Public Services Contracts Regulations 1993 (SI 1993/3228), regulation 32(1), (2), (4) and (5). ATK submits that there is no reason to suggest that the legislator in 2009 intended any different approach to the damages recoverable under the earlier 1993 and 2006 Regulations, and that there is no material to show that avoidance of gold plating had the same weight at those earlier dates. As to this, it is true that there is no material bearing directly on the legislators intentions at those earlier dates (though there is equally nothing to show that it was necessarily any different). But in my view it is unrealistic, when construing regulations 47A through to 47P, to ignore the legislators intention in 2009 to introduce a whole new package of substituted provisions which should, save where a deliberate choice to the contrary appeared, have no greater force than EU law requires. What happened in 2009 was effectively a new start, based on the Remedies Directive. ATK also points to Matra Communications SAS v Home Office [1999] 1 WLR 1646. There the Court of Appeal specifically expressed the view (p 1655B) that damages under the Remedies Directive 89/665/EEC were not subject to the Francovich conditions (described by the Court of Appeal as Norbrook conditions, after Norbrook Laboratories Ltd v Ministry of Agriculture, Fisheries and Food (Case C 127/95) [1998] ECR I 1531). The Court of Appeal went on (para 1655D G) to express the view that the damages provided by domestic law remain damages on the basis envisaged by Directive (89/665/EEC); but regulation 32(5)(b)(ii) none the less thereby creates a private law, non discretionary, remedy, because within the national legal order any remedy in damages necessarily has those qualities. The Court of Appeal in Matra can now be seen to have been wrong in treating the Francovich conditions as irrelevant. Its further view that domestic law damages remain damages on the basis envisaged by [the] Directive might however be read as consistent with the NDAs case on the present issue. Where the Court of Appeal in the present case went in my opinion clearly wrong was in its assumption that any claim for damages under the 2006 Regulations was no more than a private law claim for breach of a domestically based statutory duty, and for that reason subject to ordinary English law rules which include no requirement that a breach must be shown to be sufficiently serious before damages are awarded (para 67). The Court of Appeal appears to have assumed that the categorisation in domestic law of a claim based on EU law as being for breach of statutory duty freed it automatically from any conditions which would otherwise apply under EU law. That this is not so is clear if one takes the simple case of a domestic claim against the State for failure correctly to transpose EU law. Such a claim is subject to the Francovich and Brasserie du Pcheur principles and conditions. Sir Andrew Morritt put the matter correctly, with references to past authority, when he said in Phonographic Performance Ltd v Department of Trade and Industry [2004] 1 WLR 2893, paras 11 to 12: 11. At the outset it is necessary to consider the nature of PPLs claim. The decisions of the European Court of Justice in Francovich v Italian Republic (Joined Cases C 6/90 and C 9/90) [1995] ICR 722 and Brasserie du Pcheur SA v Federal Republic of Germany (Joined Cases C 46 and C 48/93) [1996] QB 404 have established, and it is not disputed, that a member state may incur liability to a person under Community law where three conditions are satisfied. They are that (1) the rule of Community law infringed is intended to confer rights on individuals; (2) the breach is sufficiently serious, and in particular that there was a manifest and grave disregard by the member state of its discretion; and (3) there is a direct causal link between the breach of the obligation resting on the member state and the damage sustained by the injured party. As I have already pointed out for the purposes of these preliminary issues I have to assume that all those conditions will be established. 12. The nature of such a claim in English law was considered by Hobhouse LJ in R v Secretary of State for Transport, Ex p Factortame Ltd (No 5) [1998] 1 CMLR 1353. In that case the Divisional Court concluded that liability had been established and went on to consider whether exemplary damages could and should be awarded. It was in that context that Hobhouse LJ considered (para 173) that the liability was best understood as a breach of statutory duty. In so doing he relied on the dictum to the same effect of Lord Diplock in Garden Cottage Foods v Milk Marketing Board [1984] AC 130, 141 and the conclusion of Mann J in Bourgoin v Ministry of Agriculture, Fisheries and Food [1986] QB 716, 733 that the duty was imposed by the relevant article and section 2(1) European Communities Act 1972. Transposed to the facts of this case the duty for the breach of which the Crown is sued is that imposed by article 8.2 of the Rental Directive and section 2(1) [of the] European Communities Act 1972. The scheme of the Remedies Directive is a balanced one. The Francovich conditions represent the Court of Justices conclusion as to the appropriate minimum protection by way of damages which an economic operator can expect. Although there is no Marleasing imperative to construe the scheme so far as possible consistently with the Francovich conditions, it is I think a natural assumption that the UK legislator will not go further than required by EU law when implementing such a scheme, without considering this and making it clear. That is fortified by the legislators clear intention not to gold plate when substituting the new Part 9 scheme for the old in 2009. In these circumstances, I consider that the 2006 Regulations as amended in 2009 should be read as providing for damages only upon satisfaction of the Francovich conditions. That is also consistent with the use of the word may which otherwise seems to me to have no real significance. Issue (iii) failure to claim before the contract was made Issue (iii) is whether, if proceedings have been started within the 30 day time limit prescribed by regulation 47D of the 2006 Regulations, an award of damages under regulation 47J(2)(c) of the 2006 Regulations may nonetheless be refused on the ground that the economic operator did not issue its claim form in respect of a contract award decision and inform the contracting authority that it had done so before the contracting authority entered into the contract? Issue (iii) arises from the difference between the periods set by the domestic legislator for a standstill and for the commencement of proceedings by a person aggrieved by the decision to award a public procurement contract. The UK legislator could have implemented articles 2a(2) and 2c of the Remedies Directive by assimilating the standstill period and the period for applying for a review. The former had under article 2a(2) to be at least ten days from sending by fax or electronically or from receipt of the contract award decision. The latter could under article 2c have been at least ten days from the same moment. While regulation 32A(2) reflected the period identified in article 2a(2), regulation 47D(2) gave a period for proceedings for review (not involving a claim of ineffectiveness) 20 days longer than the minimum required by article 2c. Thus, in the present case, the NDA was free after ten days (extended voluntarily for four further days) to enter into the contract, but ATK had another 20 (or, after the voluntary extension) 16 days within which to issue its claim form for damages. The significance of this issue is that, if ATK had issued its claim form before the NDA entered into the contract, then the NDA would have been required under regulation 47G(1) to refrain (a) from entering into the contract; (b) If this requirement to refrain continued, and ATKs challenge succeeded, ATK would in due course be awarded the contract and avoid the GBP 100m loss claimed. However, it should be noted that: the NDA could have applied under regulation 47H(1) to bring the (c) requirement to an end; (d) the court would then under regulation 47H(2) have been obliged to consider whether, apart from regulation 47G(1) it would be appropriate to make an interim order requiring the NDA to refrain from entering into the contract; (e) assuming that the court concluded that ATKs challenge had some merit (which it would in this case presumably have been seen as having, since it ultimately succeeded), the court would have considered whether it would not be appropriate to make an interim order in the absence of undertakings or conditions (regulation 47H(3)), and would have had the power to require or impose undertakings or conditions in relation to the requirement that the NDA refrain from entering into the contract; (f) the NDA would in this way, assuming that it was ordered to continue to refrain from entering into the contract while ATKs challenge was resolved, have had the benefit of a cross undertaking and/or security, which would, if the NDA defeated ATKs challenge, cover loss or damage which the NDA suffered through not being able to enter into the contract. The NDA contends in these circumstances that ATK failed to mitigate (or avoid) its loss by deliberately deciding not to issue a claim form until after the NDA had entered into the contract. ATKs response is that the NDAs case conflicts with the scheme of the 2006 Regulations, as well as with a general principle that it is open to a party to elect as it chooses between remedies, particularly between seeking interim relief and relying on a claim for damages. ATK also submits that the NDAs case amounts to imposing a time limit which would be shorter than that required by EU law or stipulated by domestic law and/or incompatible with EU principles of legal certainty and effectiveness. There is Court of Justice authority that national law may recognise a general principle of mitigation along the lines for which the NDA contends in respect of breaches by the State of EU law. The Court of Justice said this in Brasserie du Pcheur, paras 83 85: 83. In the absence of relevant Community provisions, it is for the domestic legal system of each member state to set the criteria for determining the extent of reparation. However, those criteria must not be less favourable than those applying to similar claims based on domestic law and must not be such as in practice to make it impossible or excessively difficult to obtain reparation. 84. In particular, in order to determine the loss or damage for which reparation may be granted, the national court may inquire whether the injured person showed reasonable diligence in order to avoid the loss or damage or limit its extent and whether, in particular, he availed himself in time of all the legal remedies available to him. Indeed, it is a general principle common to the legal 85. systems of the member states that the injured party must show reasonable diligence in limiting the extent of the loss or damage, or risk having to bear the damage himself Mulder v Council and Commission of the European Communities (Joined Cases C 104/89 and C 37/90) [1992] ECR I 3061, 3136 3137, para 33. The court reiterated the substance of these paragraphs in Danske Slagterier v Bundesrepublik Deutschland (Case C 445/06) [2010] All ER (EC) 74, paras 59 61. It is, in my opinion, clear that the Court of Justice was here leaving it to domestic law to determine whether and how far to apply any such principle, even though it expressed the view that it was a general principle common to the legal systems of the member states that the injured party must show reasonable diligence in limiting the extent of the loss or damage, or risk having to bear the damage himself. The general legislative schemes, constituting the background to this issue under EU and domestic law, have been summarised in paras 5 and 42 above. In the context of an argument about mitigation, it is worth underlining one feature. Both the Remedies Directive and the 2006 Regulations treat a contracting authoritys decision to award a contract in circumstances where the substantive requirements of the PP Directive or the 2006 Regulations have not been observed as an actionable infringement or breach of duty to any economic operator thereby disadvantaged. This is so, although no contract will at that point have been entered into. Proceedings may be begun, within the relevant time limit, before or after the entry into the contract, but in either case they involve the same complaint, viz failings in the prescribed procurement process, leading to the decision to award the contract to the wrong person. In this context, the actual entry into any contract appears in effect to be treated not as the relevant breach, but as the consequence of the prior breach consisting in the prior wrongful decision to award the contract. This is also consistent with the way in which ATKs present claim was formulated and litigated before Fraser J who gave judgment on 29 July 2016, holding that the NDA had failed properly to conduct the procurement process and ought to have awarded the contract to ATK. If that proves to be the right analysis, it at least opens the way to a submission under domestic law that the duty to mitigate arose as from the date of ATKs receipt of the decision to award the contract to CFP. I do not understand ATK to have contested that in their submissions. Accordingly, since the appeal is concerned with what the Remedies Directive and the 2006 Regulations treat as an existing infringement, an argument that ATK failed to mitigate is in principle open to the NDA. But issue (iii) as formulated before the Supreme Court (para 7(iii)), falls to be answered with reference to the circumstances of this appeal. We are not concerned with a familiar form of mitigation, such as a failure to take steps to seek alternative business to replace the contract wrongly awarded to a competitor. We are concerned with a very unusual form of mitigation, whereby, it is suggested, ATK should have taken steps to prevent the NDA giving effect to the NDAs infringement, even if ATK thereby had to expose themselves to the risks associated with the possibility of their challenge to the contract award decision failing. That the so called duty to mitigate may in some circumstances require the victim of a breach to take steps by way of legal action is, in my opinion, clear. Lord Pannick QC, representing the NDA, was able to refer to cases in which English courts have held that the victim of a breach of duty should, by way of mitigation, pursue available legal remedies, before, for example, suing his professional advisers for negligence: Western Trust & Savings Ltd v Travers & Co (1998) 75 P & CR 200; Walker v Geo H Medlicott & Son [1999] 1 WLR 727. See also the discussion of these and other cases in Jackson & Powell on Professional Liability 8th ed (2017), paras 11.336 11.339. The principle that a breach may call for mitigation, by third party action of this sort, is therefore uncontroversial. If my builder leaves my front door open and squatters enter, I cannot say that I have lost my house. I must take steps, legal steps if necessary, to recover possession. Lord Pannick also referred to cases on the exercise of a discretion, where the failure to seek interim relief as against the person or body alleged to have been in breach of duty was regarded as a relevant factor. In one, Evans LJ expressed a view that a failure to seek interim relief was relevant to the exercise of discretion to give leave for judicial review of a local authority decision to award a waste disposal contract to a competitor of the claimant: Mass Energy Ltd v Birmingham City Council [1994] Env LR 298. In another, R (Gavin) v Haringey Borough Council [2004] 1 PLR 61 David Richards J took into account an objectors failure to apply for interim relief reasonable though it was since such an application would have involved giving an undertaking in damages as relevant to an issue whether planning permission should be quashed; the developer had a reasonable case for considering that the planning permission was valid, and the objectors failure had enabled the developer, reasonably, to continue to incur costs on the development. The factors relevant to an exercise of discretion can be very wide. But the awarding of damages for a breach, or their refusal on account of a failure to mitigate, is not discretionary. No authority was cited to us on a situation directly comparable to the present, where it is submitted that the victim of a breach may be regarded as acting unreasonably, by not taking steps to stop the perpetrator of the breach from carrying it into effect. The NDA does not suggest that ATKs conduct, in delaying the issue of a claim form, would necessarily or always fall to be regarded as unreasonable. The NDAs proposition is that, on a full examination at a trial of all the circumstances in the light of evidence, including in particular examination of the reasons for ATKs conduct, ATK may be held to have acted unreasonably and thereby to have failed to avoid the loss of the contract, so disabling itself from claiming damages for any loss arising from the NDAs entry into the contract with CFP, rather than with RSS. In this connection, the NDA surmises, plausibly, that the reason why ATK did not issue its claim form at a time when this would have put an automatic stop on the NDA entering into the contract is that it appreciated that this would lead to the NDA seeking to lift the stop. In that case, it would very probably only have been possible to maintain the stop if ATK was ready and able to put up security for any loss which the NDA would suffer through the continuation of the stop. This, ATK may well not have been. But another possible reason why ATK might not have been able to maintain the stop (or not have thought it sensible to bring about a stop in the first place, by issuing a claim form before the contract was entered into) was that it could not show that damages would not constitute an adequate remedy if the NDA proved to have failed wrongly to award the contract to the RSS consortium to which ATK belonged. The question therefore arises whether and on what basis it could be said to be unreasonable for ATK to delay commencing proceedings until after the entry into the contract. If ATK regarded damages as an adequate remedy, there would be no point in bringing about a stop in the first place. Even if it did not regard damages as an adequate remedy and confident though it may have been in the prospects of success of its (ultimately successful) challenge to the NDAs contract award decision it may in its own interests have preferred to rest on a claim for damages if its challenge to the contract award decision succeeded, rather than give a cross undertaking and expose itself to an indeterminate liability thereunder if its challenge failed. It is true, as Lord Pannick submits, that the scheme of the Remedies Directive and the 2006 Regulations aims specifically at giving an economic operator the opportunity to stop the wrongful award of a procurement contract to a competitor. But that does not mean that the economic operator is obliged to take advantage of the opportunity. The scheme gives both parties choices as to how to proceed and how to protect themselves. It assimilates the position, after a stop has been placed on the entry into a contract by the issue of a claim, with that which exists when a party is seeking an interim injunction: see para 42(d) above. An economic operator is, under the scheme as enacted in the United Kingdom, thus left free to issue a claim for damages after awaiting the entry into the contract. If, on the other hand, it issues a claim before entry into the contract, it is, on the face of it, also entitled to consider in its own interests whether or not to give an undertaking or put up security, if that is later required as the price of continuing the stop on entry into the contract. The provision of an undertaking or security as a condition of the continuation of a stop order or stay is a matter of free choice for a party. There is no basis for regarding the victim of an alleged breach seeking interim relief as obliged to exercise that choice in the interests of the other party, or indeed of anyone save itself. I am unable to accept the NDAs proposition that, because the court could reasonably demand a cross undertaking or security as a condition of a continuation of the stop order, it would or could be regarded as unreasonable for ATK to refuse to put this up. For the court to impose a condition as the price of continued relief which a party is seeking is quite different from treating the victim of a breach as acting unreasonably if it fails to seek a particular form of relief or to back it with an undertaking or security. The present issue only arises, by definition, in a context where the contracting authority proves to have infringed procurement rules by its contract award decision. Under the scheme, the contracting authority also has a choice as to whether and how to act and to protect itself in a context where this is alleged or is a possibility. If it wishes to avoid the exposure resulting from having entered into the contract in circumstances where there is still time for an aggrieved economic operator to issue a claim form, it can delay entering into the contract until after the expiry of the 30 day period allowed to the economic operator for issue of a claim form. The delayed entry into the contract could involve the contracting authority in some loss, over and above that due to the minimum ten day standstill anyway required under the Remedies Directive and the 2006 Regulations. In the event that the contract award decision proved not to have involved any infringement, the contracting authority would have to bear that loss, without any recourse. But some loss of this sort could anyway result under the scheme from the ten day standstill period (and from the period which might elapse between the imposition of any stop and its discharge, in a case where the Court did not see fit to continue the stop by requiring an undertaking or security). The loss would on any view be unlikely to be anything approaching that which would arise from entering into the contract with one economic operator and being held liable to another for having wrongly done so. In summary, an economic operator is entitled, in the face of what it views as (and later proves to have been) a breach of duty by the contracting authority, to leave it to the authority to take the risk of implementing its wrongful award decision. The economic operator cannot be said to be acting unreasonably if it fails to stop the authority from perpetrating a breach of duty which the authority could itself stop perpetrating. It cannot be said to be acting unreasonably if it refuses to give an undertaking or put up security in order to maintain a stop which it has in the first instance obtained by issuing a claim form before the authority has entered into the contract to give effect to its wrongful contract award decision. I add that it has not been and could not be suggested that the NDA entered into the contract only because it thought that it was not exposed to a subsequent claim by ATK. Indeed, NDAs submissions before the Court of Appeal said this (para 51): The [NDA] makes no bones about the fact that, because of the financial implications of delay, it would have applied to lift the suspension and (if successful) signed the contract, had [ATK] sought to trigger and maintain the suspension without offering a cross undertaking in damages. The [NDA] does not know what it would have done if a cross undertaking had been offered it would have depended upon advice that was not in fact sought, and factors such as the likely date of an expedited trial that did not become known, because of the way that [ATK] in fact acted. The second sentence indicates that the NDA might have sought to remove any stop on its entry into of the contract, even if ATK had offered a suitable cross undertaking in order to achieve its continuation. In other words, the NDA may, even in that context, have preferred to run the same risk that it did by entering into the contract in this case. For the reasons I have given, I do not consider that there are any circumstances in which ATK could be regarded as having failed unreasonably to mitigate its loss arising from the NDAs wrongful contract award decision, by failing to initiate or pursue steps to prevent the NDA from implementing that decision by entering into the contract with ATKs competitor, CFP. Under the scheme of the Remedies Directive and 2006 Regulations, each side had choices which it was entitled to, and no doubt did, exercise in its own interests. In these circumstances, the answer to issue (iii) is in the negative as the Court of Appeal held. Conclusion Under issue (i), ATKs case in this Court was that European Union law requires a remedy in damages for any breach, whether serious or not, or that this issue should at least be referred to the Court of Justice. This case would, if accepted, have constituted a reason for reaching the same result as the Court of Appeal did by reference to domestic law. The Supreme Court does not however accept ATKs case on this issue. Under issue (ii), the NDAs case has been the Court of Appeal was wrong to hold that, even though European Union law only requires a remedy in damages for a serious breach, domestic law goes further by requiring a remedy in damages for any breach, whether serious or not. The NDA has succeeded, and its appeal should be allowed, on this issue. Under issue (iii), the NDA also sought to establish that there should be a trial as to whether an award of damages may in the circumstances of this case be refused to an economic operator. The NDA has failed, and its appeal should be dismissed, on this issue.

The respondent (ATK) brought a public procurement claim against the appellant, a non departmental public body (the NDA), in connection with ATKs unsuccessful bid for a contract for services to decommission sites previously used for nuclear generation. The parties have agreed to compromise the claim, but have requested the Court to issue its judgment nonetheless. For this purpose, the NDA is to be taken, as the judge held, to have failed wrongly to award the contract to the consortium to which ATK belonged, in breach of its obligations under the Public Procurement Regulations 2006 (the 2006 Regulations), which give effect in the UK to the Public Procurement Directive No 2004/18/EC (the PP Directive). Directive No 89/665/EEC, as amended (the Remedies Directive), requires effective remedies for economic operators to be made in such cases, including compensation and the setting aside of awards. It was given domestic effect by amendment of the 2006 Regulations. Regulation 47G of the 2006 Regulations thus requires a contracting authority, on becoming aware of the issue of a claim form relating to its procurement decision, to refrain from entering into the contract with the successful tenderer, if not already entered into, until court order or disposal of the proceedings. Although the NDA observed an extended standstill period during which, pursuant to regs.32(1) and 32A(5), it could not enter into a contract with the successful tenderer, it refused ATKs request for a further extension and proceeded to enter into the contract. ATK subsequently issued the present proceedings, within the 30 day time limit provided by reg.47D. The following preliminary issues regarding the circumstances in which damages may be recoverable for breaches of the 2006 Regulations arose for consideration: (i) whether the Remedies Directive only requires a damages award to be made when any breach of the PP Directive is sufficiently serious; (ii) whether reg.47J(2)(c) of the 2006 Regulations confers a power to award damages in respect of any loss or damage suffered by an economic operator in the case of any breach (not merely a sufficiently serious breach) of the Regulations; and (iii) whether (and, if so, when) a damages award under reg.47J(2)(c) of the 2006 Regulations may be refused on the basis that an economic operator issued proceedings within the 30 day period provided by reg.47D, but not before the contracting authority entered into the contract. The Court of Appeal determined these issues to the following effect: (i) Yes; (ii) Yes; and (iii) no. The NDA appeals to the Supreme Court on issues (ii) and (iii). The Supreme Court allows the NDAs appeal on issue (ii) but dismisses it on issue (iii). Lord Mance gives the judgment, with which the rest of the Court agrees. Issue (i) The sufficiently serious condition in EU law ATKs case in the Supreme Court was that EU law requires a remedy in damages for any breach, whether serious or not, or that this issue should at least be referred to the Court of Justice. This case would, if accepted, have constituted a reason for reaching the same result as the Court of Appeal did by reference to domestic law. ATKs case is not, however, accepted on this issue. The decision of the Court of Justice in Spijker (Case C 568/98) provides clear authority that the liability of a contracting authority under the Remedies Directive for breach of the PP Directive is assimilated to that of the state or of a public body for which the state is responsible [19 25]. Such liability is only required to exist where the minimum Francovich conditions are met, the second of which is that the breach must be sufficiently serious [9]. Articles 1 to 3 of the Remedies Directive do not evince an intention to provide a remedy in damages for harm caused by infringements generally [14; 25]. Any further international obligation (if any) to which the EU may have committed itself under the Government Procurement Agreement (GPA 1994), including under article XX(7), provides only weak support for ATKs argument to the contrary and cannot in any event withstand the clear impact of the Courts judgment in Spijker [15; 25]. Issue (ii) The second Francovich condition at domestic law level The UK legislator has not, by the 2006 Regulations, gone further than EU law requires by conferring a power to award damages in respect of loss or damage suffered by an economic operator in the case of any breach, as opposed to only a sufficiently serious breach, of the Regulations. The Court of Appeal was correct to consider that the explanatory materials preceding the amendments to the 2006 Regulations indicate the legislators intention to do only what was necessary to implement the Remedies Directive without any gold plating [33 35]. However, the Court of Appeal erred in its assumption that any claim for damages under the 2006 Regulations was no more than a private law claim for breach of a domestically based statutory duty, and that this categorisation automatically freed the claim from any conditions which would otherwise apply under EU law [37 39]. The scheme of the Remedies Directive is a balanced one, with the Francovich conditions representing the Court of Justices conclusion as to the appropriate level of minimum protection by way of damages which an economic operator can expect. The UK legislator would not have gone further than required by EU law when implementing this scheme without considering this and making it clear [39]. This conclusion is also consistent with the use of the word may in regs.47I(2) and 47J(2)(c) which would otherwise have no real significance [32; 39]. Issue (iii) Failure to claim before the contract is made ATK cannot be said to have failed to mitigate (or avoid) its loss by not having taken steps to prevent the NDA from carrying its breach of duty into effect. The remedies scheme aims specifically at giving an economic operator the opportunity to stop the wrongful award of a procurement contract to a competitor. But an operator will not act unreasonably in not taking advantage of that opportunity. The scheme gives both parties choices as to how to proceed and how to protect themselves [53 55]. The NDA could have delayed entry into the contract under after the 30 day period which ATK had to commence proceedings. ATK may not have issued its claim form at a time when this would have put an automatic stop on the NDA entering into the contract because it appreciated that this would lead to the NDA seeking to lift the stop, and ATK in turn having to put up security for any loss the NDA would suffer through the continuation of the stop [51 52]. An economic operator cannot be said to have acted unreasonably in deciding not to pursue a course which exposes it to the risks associated with the possibility of its challenge to the contract award decision failing [54].

The disciplinary panels of bodies which regulate professional conduct conventionally have power to suspend a professionals right to practise for a specified period. They do so by directing that the entry of his (or her) name on the professional register be suspended for the specified period. Usually that power is accompanied by a power (but occasionally by a duty) of a panel to conduct a later review of the suspension in order to determine whether to direct its continuation beyond the specified period or to make some other direction. This appeal concerns the ambit of the inquiry which, in the case of one of these disciplinary panels, should be undertaken in the course of a review. In 2002 Mr Khan was registered as a pharmacist. He practised in Glasgow. In 2012 the General Pharmaceutical Council (the council), by its registrar, referred to its Fitness to Practise Committee (the committee) an allegation that his fitness to practise as a pharmacist was impaired by reason of criminal convictions which had been recorded against him. On 27 June 2013 the committee found that the impairment of his fitness to practise was established. When it turned to identify the sanction which would properly reflect the gravity of the misconduct for which he had been convicted, the committee rejected the option of suspending his right to practise. Instead it directed that his entry in the register of pharmacists be altogether removed. On 10 July 2014 the Extra Division of the Inner House, Court of Session, allowed his appeal against the direction for removal. The court (comprising Lord Eassie, Lord Drummond Young and Lord Wheatley) quashed the direction and remitted the case to the committee for it to determine the appropriate sanction in the light of its Opinion, which was delivered by Lord Drummond Young. In the course of its Opinion the Extra Division noted that: the committee had exercised its power under article 54(2)(c) of the (a) Pharmacy Order 2010, SI 2010 No 231, (the Order), which has effect in Scotland as well as in England and Wales, to direct that the entry in the Register of the person concerned be removed; (b) article 57(2)(a) of the Order would disable Mr Khan from applying for the restoration of his entry in the register before the expiry of five years from the date of its removal; (c) the power under article 54(2)(d) of the Order to suspend a persons entry in the register was limited to suspension for such period not exceeding 12 months as may be specified in the direction; and (d) the committee had concluded (and, so the court impliedly held, had reasonably concluded) that suspension of Mr Khans entry for no longer than 12 months would be insufficient to mark the gravity of his misconduct. At that point, however, the Extra Division observed that, in considering and rejecting the option of suspending Mr Khans entry in the register, the committee had made no mention of its power under article 54(3)(a)(ii) of the Order to conduct a review following a direction for suspension and thereupon to direct that the suspension of the entry be extended for such further period not exceeding 12 months as may be specified in the direction, starting from the time when the period of suspension would otherwise expire. A review can be conducted at any time but will ordinarily take place towards the end of the period of suspension; and it is usual for a committee which imposes a period of suspension to direct that a review should take place. In relation to the power to conduct a later review, the Extra Division then proceeded to make statements of law which precipitate the councils appeal to this court. It held that: (a) there was a middle way between suspension for 12 months, which the committee had considered to be insufficient, and removal, which, as it had acknowledged, perhaps appeared harsh; (b) those two choices therefore represented a false dichotomy; (c) in the light of the power to conduct a later review, and indeed to conduct even later reviews, it had been reasonably incidental to the original committees power of suspension for 12 months for it to indicate that it considered that the suspension should be extended thereafter, for a further 12 months or longer as the case might be; the later Committee will be obliged to respect the indication and if it (d) although the indication of the original committee would not bind the review committee, it must be assumed that the later Committee will act in a reasonable manner and will respect the decision and findings of the earlier Committee; and (e) departs from it will be expected to give reasons for doing so. So the question raised by the appeal surrounds the ambit of a review hearing following suspension. It asks specifically: can the power of a review committee to direct suspension beyond the year of the original suspension be so exercised as to reflect a conclusion that the gravity of the registrants misconduct demanded a longer period of suspension than that of one year which could not have been exceeded in the direction given by the original committee? To this specific question the council invites the court to answer: no. This courts conclusion will directly inform the ambit of a review following a direction of suspension only when it is conducted under article 54(3)(a) of the Order. But the regulatory systems relating to professions other than that of pharmacy make similar provisions for review following suspension. If the detail of their provisions were to disclose relevant differences from those set out in the Order, this courts judgment would not be applicable to them without adjustment. In the absence of relevant differences, however, todays judgment will carry persuasive authority in relation to them. Recognition of its potentially wider significance has prompted two interventions in the appeal to this court. The first intervener is the General Medical Council (the GMC). Under subsection (2)(b) of section 35D of the Medical Act 1983 the Medical Practitioners Tribunal (as it is now called), upon finding that a practitioners fitness is impaired, may direct that his registration shall be suspended for such period not exceeding 12 months as it may specify; under subsection (4A) the tribunal may attach a direction that a review of the direction of suspension be conducted prior to its expiry; and under subsection (5)(a) the tribunal which conducts the review may direct that the period of suspension be extended, albeit not, save exceptionally, for more than 12 months at a time. The provisions for review of suspension therefore appear similar to those in the Order. The first intervener joins the council in inviting the court to answer the specific question: no. The second intervener is the Health and Care Professions Council, which regulates about 350,000 people in 16 different health and care professions, now including social workers in England. Under article 29(5)(b) of the Health and Social Work Professions Order 2001, SI 2002 No 254, its Conduct and Competence Committee, upon finding that a registrants fitness to practise is impaired, may direct suspension of his registration for a period not exceeding one year; and under article 30(1)(a) and (5) the committee is required to review the direction prior to expiry of the suspension and can then extend it but by no more than a year at a time. Apart from its mandatory nature, the provisions for a review of suspension therefore appear similar to those in the Order. The second intervener describes its approach to the appeal as nuanced. At first it seemed almost elusive. By the end of the hearing, however, its submission became clear, namely that the Extra Divisions analysis of the ambit of the power of a review committee had been essentially correct; and in this submission it was joined by the Advocate to the Court. Mr Khan appears in person albeit with the considerable assistance of Mr Edwards. He seeks to defend the Extra Divisions analysis, which he himself had urged upon it; but, in case the councils appeal were to succeed, he mounts a cross appeal to the effect that in any event the committees direction for his removal from the register was, in the light of the nature of his misconduct to which I will now turn, disproportionate. B: THE MISCONDUCT Mr Khans misconduct related to the breakdown of his marriage, which has since been dissolved. On 20 July 2010 Mr Khan kicked his wife when she was lying in bed; grabbed her hair; punched her in the face; dragged her off the bed; and again struck her in the face. Mr Khan was thereupon charged with having assaulted his wife and placed on bail, conditions of which were that he should neither return to the matrimonial home nor contact her. On 8 March 2011, in breach of the conditions, he returned there and contacted her. On 13 May 2011, having pleaded guilty to the assault, Mr Khan was fined 400, ordered to compensate his wife in the sum of 500 and admonished for the breach of the conditions. On 9 March 2012 Mr Khan returned to the home; found the door locked against him; demanded entry; banged on the door; and shouted and swore at his wife so as to put her in fear. On 30 March 2012 Mr Khans wife left their two children, aged nine and two, at home in the care of her mother and sister while she went out. He arrived with another relation. They tricked the wifes sister into opening the door, whereupon he walked in. He unhooked pictures from the wall; kicked a hole in the wall; kicked a door; kicked over a shoe rack; swore at the sister that he was going to kill her, his wife and the whole family; and, with that other relation, removed the children. The police later went to his home, arrested him, recovered the children and restored them to the care of his wife. On 8 May 2012 Mr Khan pleaded guilty to having behaved threateningly and abusively on 9 and 30 March and, on the latter occasion, to having wilfully or recklessly damaged property belonging to his wife. On 8 June 2012 he was sentenced for these offences to a community payback order, which comprised supervision for 18 months and requirements to complete 180 hours of unpaid work within six months and to attend for six months at a domestic violence programme called Change. C: THE COMMITTEES DETERMINATION Before the committee Mr Khan admitted the misconduct set out above; accepted that it had been wholly inappropriate; apologised for it; and acknowledged that the effect on public confidence of it, and of the criminal convictions referable to it, was such that his fitness to practise was impaired. The committee accepted reports that he had diligently completed the 180 hours of unpaid work and had successfully attended the Change programme, in which, in the course of cognitive behavioural therapy, he had learnt skills which had enabled him to communicate reasonably with his wife. The committee accepted that he had genuinely learnt the error of his past conduct; that his social worker had assessed him as at low risk of re offending; that his misconduct had in no way affected his professional performance; that his clinical skills were not in issue; and that his patients were not at risk. It noted, however, that the period of supervision was still continuing. Under article 54(1) of the Order the committee was required first to decide for itself whether Mr Khans fitness to practise was impaired. In this regard it recited Rule 5 of the General Pharmaceutical Council (Fitness to Practise and Disqualification etc) Rules 2010 (the Rules), which are scheduled to the General Pharmaceutical Council (Fitness to Practise and Disqualification etc Rules) Order of Council 2010, SI 2010 No 1615. Rule 5 required the committee to decide whether, in the light of his conduct, a registrant was fit to practise by having regard to four criteria including, at para (2)(b), whether his conduct had brought the profession of pharmacy into disrepute. The committee decided that Mr Khans conduct had done so; that indeed it would shock the public; and that he had been right to acknowledge that it had impaired his fitness to practise because any other conclusion would undermine public confidence in the profession. The committees determination of the impairment of Mr Khans fitness to practise enabled it to turn, under article 54(2) of the Order, to consider the appropriate sanction. It reminded itself that the purpose was not to punish Mr Khan. It noted the councils submission that nothing less than either suspension or removal of his registration would suffice. The committee observed that: it could not direct suspension for more than 12 months; following a direction for removal there could be no restoration to the (a) (b) register within five years; (c) his conduct; (d) removal; (e) (f) of sanction available to it. suspension for 12 months would be insufficient to mark the gravity of the maintenance of public confidence demanded nothing less than removal might appear harsh; and a harsh direction might in part be a consequence of the limited choice Under article 59 of the Order a direction for removal does not take effect pending any appeal but the committee exercised its power under article 60(2) to direct that Mr Khans entry on the register be suspended forthwith, pending the coming into force of the direction. The direction for removal has been under appeal ever since so Mr Khans interim suspension has also continued ever since, in other words for almost three and a half years. The period of interim suspension would not count towards the period of five years after which Mr Khan could apply for restoration to the register because the latter would begin only on the date of removal. D: THE ALLEGED MIDDLE WAY There is, as Mr Edwards submits, a quantum leap between the original committees power of suspension which can be for no more than one year and its power of removal which must endure for at least five years. The council suggests that the limit on the period of suspension, introduced in 2007 when the power to suspend was itself introduced, in particular reflected concern that a registrant suspended for a period longer than a year would be likely to lose his skills. It also appears that the temporal limit on the registrants ability to apply for restoration to the register following removal, also introduced in 2007, in particular reflected concern about inappropriately early applications for restoration which were regarded as inconsistent with the imposition of the ultimate sanction of removal. The powers of the review committee following the original committees direction for a registrants suspension are fully set out in article 54(3)(a) of the Order. But no indication is there given about the way in which the powers should be exercised; and in that regard only limited assistance can be derived from the Rules. Rule 34(4) requires the representative of the council to inform the review committee of the background to the case and the sanction previously imposed and to direct its attention to any relevant evidence, including transcripts of previous hearings; and paras (4) and (5) permit both parties to adduce evidence in relation to the person concerneds fitness to practise. Para (6), however, provides that, following a direction for suspension, the review committee must receive further evidence although the subject of it is not identified. It certainly seems that the reference to the registrants fitness to practise relates to his fitness at the time of the review hearing. Greater assistance is, however, to be collected from the Indicative Sanctions Guidance which the Fitness to Practise Committee approved on 13 May 2011 and which was intended to explain its approach to decision making. Although the guidance has now been replaced by other guidance, entitled Good decision making: fitness to practise hearings and sanctions guidance and published by the council in July 2015, it is the earlier guidance which applies to Mr Khans case. reviews of suspension. It stated: In para 17 of the Indicative Sanctions Guidance the committee addressed In some cases it may be self evident that following a short period of suspension, there will be no value in a review hearing. In most cases however, where a period of suspension is imposed the Committee will need to be reassured that the registrant is fit to resume practice either unrestricted or with conditions or further conditions. The Committee will also need to satisfy itself that the registrant has fully appreciated the seriousness of the relevant breach(es), has not committed any further breaches of the Councils Standards of conduct, ethics and performance, has maintained his or her skills and knowledge up to date and that the public will not be placed at risk by resumption of practice or by the imposition of conditional registration. The current guidance is in similar terms. The guidance therefore makes clear that the focus of a review is upon the current fitness of the registrant to resume practice, judged in the light of what he has, or has not, achieved since the date of the suspension. The review committee will note the particular concerns articulated by the original committee and seek to discern what steps, if any, the registrant has taken to allay them during the period of his suspension. The original committee will have found that his fitness to practise was impaired. The review committee asks: does his fitness to practise remain impaired? It is worthwhile to look across at the recent work of the three UK Law Commissions in this area. In April 2014 they published a report entitled Regulation of Health Care Professionals, Regulation of Social Care Professionals in England, Law Com No 345, Scot Law Com No 237, NILC 18 (2014), Cm 8839, together with a draft Bill. Their work was born of public concern that professional regulation in the health care sector across the UK, and in the social care work sector in England, had grown piece meal over more than a century and had become inconsistent, incoherent and cumbersome. Their remit was to review the rules which governed nine regulatory bodies, including the council, the GMC and the Health and Care Professions Council; and, following extensive consultation, their recommendation was to confine the regulatory functions of the nine bodies within a single legal framework, set out in the draft Bill. In January 2015 the government published a response to the report, in which it accepted most of the Commissions recommendations and expressed a commitment to introduce legislation in due course. What is of interest for present purposes is that in para 9.123 of their report the Commissions suggest that greater consistency is appropriate in the conduct of review hearings and that, in their draft Bill, they propose the following: 161 Review of suspension orders: disposals by fitness to practise panel (1) (2) If the panel determines that the registered professionals (3) fitness to practise is no longer impaired, the panel (a) must revoke the suspension order (4) If the panel determines that the registered professionals (5) fitness to practise is impaired, the panel may dispose of the case as described in any of the following subsections So the proposal of the Commissions is that the review committee should ask whether the registrants fitness to practise is no longer impaired or is impaired. In other words it should address changes relevant to his impairment which have or have not occurred since the date of the original committees direction. It is also noteworthy that in the fifth report of the Shipman Inquiry, 9 December 2004, Cm 6394, Dame Janet Smith, Chairman, when referring to reviews under section 35D(5) of the Medical Act 1983, stated at para 27.267: Review hearings are extremely important. They are the teeth behind the sanctions other than erasure and should focus the doctors mind on the need to undertake any necessary remediation. The Extra Divisions conception is that a review committee has a role in determining the sanction appropriate to the circumstances by reference to which the original committee found that the registrants fitness to practise was impaired; that, in particular where the original committee has directed suspension for one year, the review committee can look back at those circumstances and determine whether, although one year was the maximum period of suspension open to the original committee, its direction was insufficient to mark their gravity; that, while that determination falls to be made by the review committee, it should afford great respect to any indication by the original committee that its direction was indeed insufficient to mark their gravity; and that, if determining that the direction was insufficient, the review committee should exercise its power of extension under article 54(3)(a)(ii) of the Order. The Extra Divisions conception is alien to the generally accepted conception of a review as a vehicle for monitoring the steps taken by the registrant towards securing professional rehabilitation. Indeed there is authority, unfortunately not cited to the Extra Division, which expressly holds that the conception which it favoured is misplaced. It is Taylor v General Medical Council [1990] 2 AC 539. Before the Judicial Committee of the Privy Council was an appeal by a medical practitioner against a direction by (as it was then called) the Professional Conduct Committee of the GMC to extend for a second time the period of one year which had been specified in its original direction for suspension. The doctor, who had previously received a suspended sentence of imprisonment for making false statements in order to enable persons to obtain passports, had been found guilty of serious professional misconduct in having irresponsibly issued prescriptions for methadone to about 70 patients. Upon directing suspension for one year, the committee had intimated the need for a later review, at which the period was extended for a year and the same intimation was given. The doctors appeal was brought against the direction made at the second review, which was for extension for one further but final year. The submission of counsel for the GMC, set out at pp 540 and 542, was that the committee must have considered that three years was the proper period of suspension in view of the doctors serious misconduct; that its initial direction for suspension could not have been for more than a year; and that it had not been wrong for the two years to be added at the two successive reviews. By a judgment delivered by Lord Bridge of Harwich, the committee allowed the doctors appeal. It held at p 545: It can never be a proper ground for the exercise of the power to extend the period of suspension that the period originally directed was insufficient to reflect the gravity of the original offence or offences. And it concluded at p 547: the only explanation for the committees decision to direct a third such period was that they regarded the original decision to direct suspension instead of erasure as having been too lenient the direction was wrong in principle. The decision in the Taylor case has never been questioned save now, unwittingly, by the Extra Division. Take, for example, the case of Obukofe v General Medical Council [2014] EWHC 408 (Admin). A medical practitioner appealed against the direction of (as it was then called) a Fitness to Practise Panel of the GMC to extend for one year the period, also of one year, for which he had originally been suspended from practice. He had received suspended sentences of imprisonment following convictions for sexual assault on two junior members of staff at the hospital where he had worked. Popplewell J dismissed his appeal. One of the grounds of appeal was that the direction for extension violated the principle of double jeopardy. The judge said: 48. This is to misunderstand the nature and effect of a suspension which is subject to review 49. The imposition of a further sanction by way of an extension of the period of suspension depends upon an assessment of his fitness to practise at that later stage. No question of double jeopardy arises. In summary, the Extra Division was too ingenious. There was no middle way. It was wrong to remit the case to the committee for disposal on that basis. But Mr Khan had argued in the alternative that, irrespective of whether that basis for remission existed, the direction of his removal from the register was disproportionate. He now cross appeals against the Extra Divisions implicit rejection of that alternative argument. E: THE CROSS APPEAL An appellate court must approach a challenge to the sanction imposed by a professional disciplinary committee with diffidence. In a case such as the present, the committees concern is for the damage already done or likely to be done to the reputation of the profession and it is best qualified to judge the measures required to address it: Marinovich v General Medical Council [2002] UKPC 36, para 28. Mr Khan is, however, entitled to point out that (a) the exercise of appellate powers to quash a committees direction or to substitute a different direction is somewhat less inhibited than previously: Ghosh v General Medical Council [2001] UKPC 29, [2001] 1 WLR 1915, para 34; (b) on an appeal against the sanction of removal, the question is whether it was appropriate and necessary in the public interest or was excessive and disproportionate: the Ghosh case, again para 34; and (c) a court can more readily depart from the committees assessment of the effect on public confidence of misconduct which does not relate to professional performance than in a case in which the misconduct relates to it: Dad v General Dental Council [2000] 1 WLR 1538, pp 1542 1543. Mr Khan was guilty of three incidents of domestic violence, of which the first and third were particularly serious. In the third he even involved the children of the family. His conduct betrayed a gross loss of control and his purpose was, directly and indirectly, to hurt his wife. Mitigation on his behalf in the Sheriff Court would have been hard to articulate. Inevitably the convictions attracted at first a significant fine and later a substantial community penalty. There, however, lay the punishment. The focus for the committee was different: its task, not easy, was to judge the effect of the conduct on public confidence in the profession and to identify a sanction proportionate to its judgement. Mr Khans conduct did not relate to his professional performance. No patient had been, or was likely to be, put at risk. The committee fairly recited several further features of the case which militated against the removal of his registration, such as his genuine acknowledgement of fault and the positive reports of his response to the requirements of the community payback order, as set out in para 19 above. Rule 31(14)(a) required the committee to have regard to the Indicative Sanctions Guidance when determining sanction. It duly referred to para 14 of the guidance, entitled Cases where removal from the Register may be appropriate, and it picked out two of the cases there described, albeit in arrestingly general terms, namely Behaviour is fundamentally incompatible with registration and Public confidence in the profession demands no lesser sanction. But the committee might also usefully have referred to para 8 of the guidance, entitled Mitigating Features General and, had it done so, it would have picked out (a) no prior disciplinary history; (b) genuine insight into misconduct; (c) open admissions at an early stage; (d) no actual or potential harm to patients or the public; (e) genuine expression of remorse to committee; and (f) steps taken to prevent recurrence. The committee itself acknowledged that its direction for removal might appear harsh. It was indeed harsh. It was unnecessary. It was disproportionate. The sanction proportionate to the disrepute into which Mr Khans conduct had brought, or was likely to bring, the profession of pharmacy was suspension of his registration, which, at the time of the committees determination, should no doubt have been for a period of a year. F: CONCLUSION instead of the committees direction for his removal from the register, (a) the councils appeal should be allowed; (b) the Extra Divisions interlocutor should be recalled; (c) Mr Khans cross appeal should also be allowed; (d) a direction for his suspension from it should be substituted; (e) in the light of the length of his interim suspension since the date of the committees direction, the period of his suspension should be four months; (f) attached to the direction for his suspension for four months should be a direction for a review committee to conduct a review prior to its expiry; and (g) the review committee should be invited to have regard in particular to any report upon him by his supervisor following the expiry of his period of supervision; to any evidence relating to the risk that he has lost necessary skills since the date of the committees determination and therefore to any efforts on his part to retain them; and, generally, to any relevant occurrence since that date. It was for the above reasons that, at the end of the hearing, Lord Neuberger, the President of the court, announced its unanimous conclusion, which was that

In 2002 Mr Khan was registered as a pharmacist. Between 2010 and 2012 Mr Khan pleaded guilty to three incidents of domestic violence. In 2012 the General Pharmaceutical Council referred to its Fitness to Practise Committee (original committee) an allegation that Mr Khans fitness to practise as a pharmacist was impaired by reason of his misconduct. On 27 June 2013 the original committee found that the impairment of his fitness to practise was established. When it turned to identify the sanction in article 54(2)(d) of the Pharmacy Order 2010 (the Order) which would properly reflect the gravity of Mr Khans misconduct, the original committee rejected the option of suspending his right to practise for 12 months on the basis that this sanction would be insufficient to mark the degree of gravity of Mr Khans misconduct. Instead it directed that his entry in the register of pharmacists be altogether removed. The Extra Division of the Court of Session allowed Mr Khans appeal against the direction for removal and remitted the case to the original committee for it to determine the appropriate sanction in light of its Opinion. It found that the original committee had made no mention of its power under article 54(3)(a)(ii) of the Order to conduct a review following a direction for suspension and to direct that the suspension of the entry be extended for such further period not exceeding 12 months as may be specified in the direction. In its view there was therefore a middle way between suspension for 12 months, which the original committee has considered to be insufficient, and removal, which the original committee had acknowledged perhaps appeared harsh. In light of the original committees power to conduct later reviews, it had been reasonably incidental to its power of suspension for 12 months for it to indicate that it considered that the suspension should be extended thereafter, for a further 12 months or longer. Although this indication would not bind the review committee, the Extra Division reasoned that it must be assumed that the later committee will be obliged to respect the indication and if it departs from it will be expected to give reasons for doing so. The General Pharmaceutical Council appealed the decision of the Extra Division. Its appeal concerns whether a review committee may impose a further suspension to reflect the original committees conclusion that the gravity of the registrants misconduct demanded a longer period of suspension than the 12 months it was permitted to imposed. Mr Khan cross appealed against the Extra Divisions implicit rejection of his argument that in any event his removal from the register was disproportionate. The Supreme Court unanimously allows both the General Pharmaceutical Councils appeal and Mr Khans cross appeal. Lord Wilson gives the judgment, with which the other Justices agree. The Appeal The powers of the review committee following the original committees direction for a registrants suspension are set out in article 54(3)(a) of the 2010 Order. That article does not indicate how the powers should be exercised, and only limited assistance may be derived from the General Pharmaceutical Council (Fitness to Practise and Disqualification etc) Rules 2010. Rule 34(4) requires the representative of the council to inform the review committee of the background to the case and sanction previously imposed and to direct its attention to any relevant evidence. Rule 34(4) and (5) permit both parties to adduce evidence in relation to the person concerns fitness to practice. Rule 34(6) provides that, following a direction for suspension, the review committee must receive further evidence although the subject of it is not identified. It certainly seems that the reference to the registrants fitness to practise relates to his fitness at the time of the review hearing [24]. Greater assistance is collected from the Indicative Sanctions Guidance which makes clear that the focus of the review is upon the current fitness of the registrant to resume practice, judged in the light of what he has, or has not, achieved since the date of suspension. The review committee asks: does his fitness to practise remain impaired [27]. The recent work of the three UK Law Commissions in this area proposes that the review committee should address changes relevant to impairment which have or have not occurred since the date of the original committees direction [28]. It is also noteworthy that in the fifth report of the Shipman Inquiry, the Chairman stated that review hearings should focus the doctors mind on the need to undertake any necessary remediation [29]. The Extra Divisions conception is alien to the generally accepted conception of a review as a vehicle for monitoring the steps taken by the registrant towards securing professional rehabilitation [31]. Taylor v General Medical Council [1990] 2 AC 539, not cited to the Extra Division, expressly holds that the conception favoured by the Extra Division is misplaced [32]. In Taylor the court held that it can never be a proper ground for the exercise of the power to extend the period of suspension that the period originally directed was insufficient to reflect the gravity of the original offence [33]. The Extra Division was too ingenious. There was no middle way. It was wrong to remit the case to the committee on that basis [35]. The Cross Appeal The original committee itself acknowledged that its direction for removal might appear harsh. Serious though Mr Khans misconduct certainly was, the sanction appropriate to the disrepute into which Mr Khans conduct had brought, or was likely to bring, the profession of pharmacy was suspension of his registration, which, at the time of the committees determination, should no doubt have been for a period of a year [40]. A direction for suspension should be substituted in place of the original committees direction for removal from the register. In light of Mr Khans interim suspension since the date of the original committees direction, the period of his suspension should be four months and a review committee should conduct a review prior to the expiry of this period [41].

This is a remarkable case in more than one respect. The appeal depends upon whether the Court is bound to stay action 2006 Folio 815 (the 2006 proceedings) under Article 27 of Regulation 44/2001 of the Council of the European Union (the Regulation) and, if not, whether it should do so under Article 28. Before Burton J (the judge), the respondents expressly disclaimed any intention to rely upon Article 27 but relied upon Article 28 in support of a submission that the court should stay the 2006 proceedings in favour of proceedings in Greece. The judge refused to grant a stay and gave summary judgment for the appellants against the respondents. The judge granted the respondents permission to appeal to the Court of Appeal on various grounds, including a ground based on Article 27. The Court of Appeal (Longmore, Toulson and Rimer LJJ) held that it was bound to stay the action under Article 27. It also gave some consideration to Article 28 but held that it was not necessary to reach a final conclusion in that regard because of its decision under Article 27. It declined to consider the issues relevant to summary judgment on the ground that, if there was to be a stay, those issues should be determined by the courts in Greece. The facts and the 2006 proceedings I can take the relevant events from the judgment of Longmore LJ in the Court of Appeal. He in turn took them from the judgment of the judge. On 3 May 2006 the vessel Alexandros T sank and became a total loss 300 miles south of Port Elizabeth, with considerable loss of life. Her owners were Starlight Shipping Company (Starlight). They made a claim against their insurers, who denied liability on the basis that the vessel was unseaworthy with the privity of the assured, namely Starlight. The insurers also said that Starlight had failed properly to report and repair damage to the vessel in accordance with Class Rules. Starlight, through their solicitors Messrs Ince & Co, made a number of serious allegations against the insurers which fell into two categories, as summarised by Longmore LJ at para 4: (1) allegations of misconduct by the insurers and their underwriters involving alleged tampering with and bribing of witnesses, in particular the bosun, a Mr Miranda, to give false evidence, coupled with other allegations of spreading false and malicious rumours (described for some reason as malicious scuttlebutt) against Starlight in the course of purported investigation of their claims; and (2) deliberate failure by the insurers to pay up under the policy, said to have had consequential financial impact upon Starlight, and to have led to substantial recoverable loss and damage. The insurers also relied upon material non disclosure. Those allegations were made before the issue of proceedings and, in particular, in a letter dated 18 July 2006 from Ince & Co to the insurers solicitors, who were Hill Dickinson LLP, then Hill Taylor Dickinson, whom I will together call HD. On 15 August 2006 Starlight issued the 2006 proceedings in the Commercial Court against various insurers. The first four defendants have been described as the Company Market Insurers (CMI) and the fifth to seventh defendants as the Lloyds Market Insurers (LMI). The policies issued by both the CMI and the LMI contained exclusive jurisdiction clauses. They provided for English law and each party expressly agreed to submit to the exclusive jurisdiction of the Courts of England and Wales. Overseas Marine Enterprises Inc (OME) were identified in the policies as managers. In paras 5 to 8 of his judgment Longmore LJ spelled out in some detail issues between the parties in the 2006 proceedings. It is plain that the points raised by Ince & Co to which I have referred were both pleaded and central to the issues between the parties in those proceedings. Thus, in para 7 Longmore LJ referred to a witness statement in which Mr Crampton of Lax & Co, who were now acting for Starlight, asserted that the allegations made by the insurers in defence of the claim were based on false evidence which they had obtained from the bosun. He also relied upon significant payments said to have been made to the bosun on behalf of the insurers in this connection. In addition, a witness statement was introduced in support of a proposed amendment of the claim form alleging that Starlight had sustained losses beyond the measure of indemnity in the relevant policy. It was alleged that, but for the failure of the insurers to pay under the policy, Starlight would have purchased a replacement vessel and had lost between US$ 45 million and US$ 47.7 million by way of increased capital cost and chartering losses. However, on 14 December 2007, Tomlinson J refused to allow the amendment on the basis of the decision of the Court of Appeal in Sprung v Royal Insurance [1999] Lloyds Rep IR 111, approving the decision in The Italia Express (no. 2) [1992] 2 Lloyds Rep 281. As Longmore LJ explained in para 1, as a matter of English law, an insurer commits no breach of contract or duty sounding in damages for failure promptly to pay an insurance claim.1 The law deems interest on sums due under a policy to be adequate compensation for late payment; this is so, even if an insurer deliberately 1 Toulson LJ noted at paras 74 and 75 that the present state of English law was criticised by the Law Commission and the Scottish Law Commission in para 2.87 of a joint consultation paper on Insurance Law; Post Contract Duties (LCCP201/SLCDP152) published on 20 December 2011. The Commissions have provisionally proposed that the law should be reformed. withholds sums which he knows to be due under a policy. If parties agree that English law is to apply to a policy of insurance, this principle is part of what they have agreed. English law, moreover, gives no separate contractual remedy to an insured who complains that an insurer has misconducted himself before settling a claim. In either case the remedy of the insured is to sue the insurer and, if no settlement is forthcoming, proceed to judgment. The trial was fixed for 14 January 2008. The settlements On 13 December 2007, which was the day before the hearing before Tomlinson J referred to above, the 2006 proceedings had been settled between Starlight and OME and the LMI for 100% of the claim, but without interest and costs, in full and final satisfaction of the claim. It was a term of the settlement agreement that Starlight would obtain a stay by way of a Tomlin Order, and a Tomlin Order by consent between Starlight and the LMI was accordingly made on 20 December 2007, backdated to 14 December, in these terms: Save for the purposes of carrying into effect the terms agreed between the Claimant and the Fifth to Seventh Defendants, all further proceedings between the Claimant and the Fifth to Seventh Defendants shall be stayed with effect from 14 December 2007 or such earlier date as may be agreed between the parties or otherwise ordered hereafter. A similar settlement agreement dated 3 January 2008 was made between Starlight and OME and the CMI and a similar Tomlin Order was made on 7 January 2008, but with immediate effect. In each settlement agreement the Assured were defined as being [OME] and Starlight as Managers and/or Owners and/or Associated and/or Affiliated Companies for their respective right and interest in the ship Alexandros T. The CMI settlement agreement then provided: 1. Each Underwriter agrees to pay on or before 18 January 2008 their due proportions of the sum of US$16m being 100% of their due proportions of the sum insured being 50% of the US$32m without interest or costs. 2. The Assured and Claimant agree to accept the EURO equivalent of each Underwriters due proportion of US$16m in full and final settlement of all and any claims it may have under Policy No 302/CF 000220Z against the Underwriters in relation to the loss of Alexandros T, including all claims for interest and costs (including in respect of all costs orders made to date in the proceedings) but without effect to any other insurance policy in which each Underwriter may be involved. 3. The Assured and Claimant agree to Indemnify each Underwriter against any claim that might be brought against it by any of the Assureds or the Claimant's associated companies or organisations or by any mortgagee in relation to the loss of Alexandros T or under Policy No 302/CF000220Z. 4. Following the signing of this agreement, and in consideration of the promises herein, the Claimant and the Underwriters will apply to stay the Proceedings as against the Underwriters, the Proceedings to be stayed for all purposes save for the purposes [of] carrying the terms agreed herein into effect, such stay to have effect from the first obtainable date after 27 December 2007 5. Following the due and proper payment by the Underwriters of the amount specified in paragraph 1 above, the Assured and Claimant and the Underwriters agree to file a consent order dismissing the Proceedings, with no order as to costs. 6. This agreement is subject to English law and to the exclusive jurisdiction of the High Court in London. 2. The underwriters agree to pay on or before 24 December 2007 the sum of US$8M being 100% of their due proportions of the sum insured being 25% of US$32m without interest or costs 3. The Assured and claimant agree to accept the EURO equivalent of US$8M in full and final settlement of all and any claims it may have under Policy No against the Underwriters signing below in relation to the loss of Alexandros T 4. The Assured and Claimant agree to indemnify the underwriters signing below against any claim that might be brought against them by any of the Assureds or the Claimant's associated companies or organisations or by any mortgagee in relation to the loss of Alexandros T or under Policy The LMI settlement agreement provided in similar but not identical terms: 5. This agreement is subject to English law and the jurisdiction of the High Court of London. The Greek proceedings After setting out the terms of the settlement agreements, Longmore LJ wryly observed at the end of para 12 of his judgment that one might have expected that to be that, but it was not to be. He described what then happened in paras 13 to 15. More than three years later, in April 2011, nine sets of Greek proceedings, in materially identical form, (Greece 1), were issued by Starlight, by OME, by their co assureds under an associated Fleet Policy and by individual officers of those companies, against the LMI and the CMI, some of their employees or underwriters, and HD and some of their partners and employees (the HD defendants). The claims are for compensation for loss of hire and loss of opportunity by Starlight totalling approximately US$ 150 million and for pecuniary compensation due to moral damage amounting to 1 million. The claims also include similarly substantial claims by the other claimants in respect of alleged acts, all done unlawfully and in breach of good faith for the alleged purpose of avoiding the performance by the defendants of their legal obligations. All the claims rely upon breaches of the Greek Civil and Criminal Code. However the factual allegations, which Longmore LJ noted had been said by the judge to be entirely familiar, include the allegation that the appellants were responsible for using false affidavits of witnesses (primarily Mr Miranda) with intention to harm the claimants, described thus by Mr Crampton in a statement summarising the Greek claims: The underwriters pursued this criminal effect by intentionally fabricating false evidence with the purpose that the underwriters (who were responsible for the payment of insurance indemnity for the vessel) avoid paying this insurance indemnity, contrary to their contractual obligations and their legal obligations and in particular contrary to the provisions of the insurance contract, providing for the timely payment of the insurance indemnity. They also include the claim that the appellants were asserting and disseminating false information to third parties, although they were aware of their falsity, damaging the claimants reputation and credibility with the purpose that the underwriters (who were responsible for the payments of the insurance indemnity for the vessel) avoid paying the insurance indemnity, contrary to their contractual obligation and their legal obligation and in particular contrary to provisions of the insurance contract providing for the timely payment of the insurance indemnity Mr Crampton then turned to what he called the [i]ntentional fabrication of false evidence for defrauding the English court and [t]he moral instigation alternatively complicity of the underwriters to perjury and on the defrauding of the court by the underwriters. He summarised the position in this way in paragraph 20 of his witness statement: The essence of the complaint against the Defendants in the Greek proceedings concerns the allegation that the Defendants obtained false evidence in Greece from the bosun of the Alexandros T, Aljess Miranda This evidence was then deployed in these proceedings in England and also in the Greek proceedings. There is a substantial section of the Greek pleadings relating to the financial consequences of the failure by the insurers to comply with their obligations under the policy and the way in which they allegedly handled the investigations. In a further set of proceedings, known as Greece 2, two additional heads of loss are claimed by Starlight and OME, arising out of substantially the same allegations. As Longmore LJ put it in para 15, in apparent recognition of the problem raised by the fact that such claims had either not been brought in England or had been ruled out as a matter of English law by Tomlinson J, Mr Crampton, in paragraph 27 of his witness statement, explained that the claims are advanced in two ways in the Greek pleadings: first, that as a result of the underwriters intention to avoid payment of the insurance indemnity, eventually resulting in late payment of the policy proceeds, the claimants missed the opportunity to use the policy proceeds to invest in three vessels (not just the one referred to in the 2006 proceedings); and, secondly, that, as a result of the defendants actions in acquiring the false evidence of Mr Miranda, his clients were not able to insure the vessels and without insurance they would not have been able to trade them and could not purchase them. He stated that his clients would amend their pleadings prior to the hearing of the disputes in Greece so as to clarify this head of claim, such that no claim is made in respect of the late payment of the policy proceeds. The expert evidence from the defendants is that it is not possible to amend the pleadings in the Greek courts, but, treating the proposed draft amendment, which he exhibited, as a clarification, it did not seem to the judge that it in any way cured the defect, if defect there was. It is further said that the insurance of the three potential new vessels was rendered impossible, since all the London insurers refused to quote for the vessels because of the refusal of the defendant underwriters to quote for them and because of the defamatory accusations spread as to the unseaworthiness of the Alexandros T. All these allegations arise out of the alleged manner in which the defendants handled Starlight's claim in respect of the Alexandros T, and, even though the consequences and the consequential losses have expanded, and the claim for moral damages has been included, and although it seems that Starlight now rely on an expanded affidavit of Mr Miranda, the allegations, even though put into the context of Greek law, were said by the judge to be materially identical to those made prior to the settlement agreement. The acts complained of are all said to have constituted delicts under Greek law akin to the torts of defamation and malicious falsehood under English law. The present position Since the issue of the Greek proceedings, as Longmore LJ explained in para 16 (and the judge at his para 14), the insurers have taken further steps and brought further proceedings in England as follows. By applications issued in the 2006 proceedings on 25 July and 3 August 2011, the CMI and the LMI respectively sought, pursuant to the Tomlin Orders (if necessary after lifting the stay imposed by them) summary relief pursuant to CPR Part 24 by way of declarations and damages against Starlight. The LMI, because permission was given to them to join OME as a third party, also sought summary relief pursuant to Part 24 against OME (which filed an acknowledgment of service and a defence) to enforce the LMI settlement agreement, to which it also was a party. In addition, fresh proceedings (2011 Folio 702) were commenced by the LMI, without prejudice to their case that sufficient relief could and would be obtained in the 2006 proceedings, against both Starlight and OME, and, after an acknowledgment of service and defence were filed, an application was made under Part 24 for similar relief to the claim in the 2006 proceedings. The LMI also brought fresh proceedings (2011 Folio 1043) against Starlight's co assured and, again after acknowledgments of service and defence had been filed, sought declaratory relief and damages for breach of the exclusive jurisdiction clause in their insurance policies, by virtue of the issue of the Greek proceedings by those co assured. Also in fresh proceedings (2011 Folio 894), the CMI brought claims against OME and the same co assured in respect of similar claims for breach of the exclusive jurisdiction clause in the policy, and in respect of OME by reference to breach of the terms of the settlement agreement. Judgment in default was entered by the CMI against all those defendants on 26 October (amended on 14 November) 2011. Those proceedings are not the subject of this appeal and no issue therefore currently arises with respect to them. Finally, and by separate application, the HD defendants were joined as defendants in the 2006 proceedings so that, in due course, they too might be able In summary, the claims made in the various proceedings are these. to claim relief by seeking declaratory relief within the original proceedings. Starlight and their associates applied to stay both the 2006 proceedings in their current form and 2011 Folios 702 and 1043. (a) The 2006 proceedings. (1) The CMI claim against Starlight and, through Part 20 proceedings, against OME (i) a declaration that the Greek claims fall within the terms of the release in the CMI settlement agreement; (ii) a declaration that the bringing of the Greek claims was a breach of the release in the settlement agreement; (iii) damages for breach of the release in the settlement agreement; (iv) a declaration that the bringing of the Greek claims was a breach of the jurisdiction clauses in the settlement agreement and the policies; (v) damages for breach of the jurisdiction clauses in the policies and CMI settlement agreement; and (vi) an indemnity under clause 3 of that agreement in respect of claims brought by Starlight and/or its associated companies in the various Greek proceedings; (2) the LMI claim against Starlight (i) declarations that the LMI settlement agreement settles any claim against them by Starlight in respect of the loss of the Alexandros T and covers Starlights claims in the Greek proceedings (para 3); (ii) a declaration that Starlight is in breach of that agreement in bringing the Greek proceedings; (iii) damages for breach of the settlement agreement; and (iv) a declaration that the agreement entitles the LMI to an indemnity against Starlight in respect of the matters covered by the indemnity, which includes all claims by Starlight and its associated companies in the Greek proceedings; and (3) the LMI claims against OME by Part 20 proceedings: (i) like relief to that which the LMI claim against Starlight, as summarised above; and possibly (ii) damages for breach of the exclusive jurisdiction clause in the policy, although this claim is not repeated among the prayers. (b) Action 2011 Folio 702. The LMI claim against Starlight and OME: (i) declarations that the LMI settlement agreement settles any claim against them by Starlight and/or OME in respect of the loss of the Alexandros T and covers Starlights and/or OMEs claims in the Greek proceedings; (ii) damages for breach of that agreement; (iii) damages for breach of the jurisdiction clause in the policy; and (iv) damages for breach of the jurisdiction clause in the settlement agreement. (c) Action 2011 Folio 1043. The LMI claim against five of Starlights co assureds for breach of their policy jurisdiction clauses. The decisions of the judge and the Court of Appeal The insurers sought to enforce the settlement agreements referred to in the Tomlin Orders and, in a judgment handed down on 19 December 2011, having refused a stay under Article 28, the judge held that they were entitled to summary judgment for (inter alia) a declaration that the matters sought to be raised in Greece were part of the settlement of the claim and that Starlight (and OME) are bound to indemnify the insurers against any costs incurred and any sums that may be adjudged against them in the Greek proceedings. As stated above, the Court of Appeal held that it was bound to stay the 2006 proceedings and 2011 Folio 702 and 1043 under Article 27, made no final determination of the position under Article 28 and declined to consider the issues of summary judgment. The Court of Appeal also held that it was not too late for the respondents to rely upon Article 27 or Article 28. The issues In this Court the appellants challenge the correctness of the Court of Appeals conclusion under Article 27 and, on the respondents cross appeal, submit that the judge was correct to refuse a stay under Article 28. If the appellants succeed under both articles, the case will have to be remitted to the Court of Appeal to consider the respondents appeal from the summary judgment granted by the judge. Article 27 The questions for decision under Article 27 are whether, in the events which happened, the Court of Appeal was wrong to hold that it was not too late for the respondents to rely upon Article 27, whether the proceedings in Greece and the proceedings in England involve the same cause of action, whether they are between the same parties and which court was the court first seised. For reasons which will appear, I will defer consideration of the too late point until after consideration of the other issues. Article 27 must be construed in its context. The immediate context of Articles 27 and 28 is that they form part of Section 9 of Chapter II of the Regulation, which must be read in the light of Recitals 2 and 15 of the preamble. It is apparent from Recital 2 that the Regulation aims, in the interests of the proper functioning of the internal market, to put in place: Provisions to unify the rules of conflict of jurisdiction in civil and commercial matters and to simplify the formalities with a view to rapid and simple recognition and enforcement of judgments from Member States bound by this Regulation. Recital 15 provides: In the interests of the harmonious administration of justice it is necessary to minimise the possibility of concurrent proceedings and to ensure that irreconcilable judgments will not be given in two Member States. There must be a clear and effective mechanism for resolving cases of lis pendens and related actions and for obviating problems flowing from national differences as to the determination of the time when a case is regarded as pending. For the purposes of this Regulation that time should be defined autonomously. The mechanism referred to in Recital 15 is provided by Section 9 of Chapter II of the Regulation, which includes Articles 27 and 28: Section 9 Lis pendens related actions Article 27 1. Where proceedings involving the same cause of action and between the same parties are brought in the courts of different member states, any court other than the court first seised shall of its own motion stay its proceedings until such time as the jurisdiction of the court first seised is established. 2. Where the jurisdiction of the court first seised is established, any court other than the court first seised shall decline jurisdiction in favour of that court. Article 28 1. Where related actions are pending in the courts of different member states, any court other than the court first seised may stay its proceedings. 2. Where these actions are pending at first instance, any court other than the court first seised may also, on the application of one of the parties, decline jurisdiction if the court first seised has jurisdiction over the actions in question and its law permits the consolidation thereof. 3. For the purposes of this Article, actions are deemed to be related where they are so closely connected that it is expedient to hear and determine them together to avoid the risk of irreconcilable judgments resulting from separate proceedings. Article 29 Where actions come within the exclusive jurisdiction of several courts, any court other than the court first seised shall decline jurisdiction in favour of that court. Article 30 For the purposes of this Section, a court shall be deemed to be seised: 1. at the time when the document instituting the proceedings or an equivalent document is lodged with the court, provided that the plaintiff has not subsequently failed to take the steps he was required to take to have service effected on the defendant, or 2. if the document has to be served before being lodged with the court, at the time when it is received by the authority responsible for service, provided that the plaintiff has not subsequently failed to take the steps he was required to take to have the document lodged with the court." The Regulation is the successor to the Brussels Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters 1968 (the Brussels Convention), in which the equivalent provisions to Articles 27 and 28 were Articles 21 and 22 respectively. The Court of Justice of the European Union (the CJEU) has held that the principles developed in its case law with regard to Articles 21 and 22 of the Brussels Convention apply equally to Articles 27 and 28 of the Regulation: see Folien Fischer AG v Ritrama SpA (Case C 133/11) [2013] QB 523 at paras 31 and 32. The CJEU was of course previously the European Court of Justice (ECJ). Although some of the decisions to which I refer were made by the ECJ, for simplicity I will refer to all the European decisions as those of the CJEU. The CJEU has laid down a number of general principles which are of some importance. They include the important principle that a court in a Member State must not grant an anti suit injunction to restrain the bringing or continuing of proceedings in another Member State, whether to restrain an abuse of process or to restrain proceedings brought or continued in breach of an exclusive jurisdiction clause: see eg Turner v Grovit (Case C 159/02) [2005] 1 AC 101 and West Tankers Inc v Allianz SpA (The Front Comor) (Case C 185/07) [2009] 1 AC 1138. They also include the following, with specific reference to Articles 27 and First, the purpose of Article 27 is to prevent the courts of two Member States from giving inconsistent judgments and to preclude, so far as possible, the non recognition of a judgment on the ground that it is irreconcilable with a judgment given by the court of another Member State: Gubisch Maschinenfabrik KG v Palumbo (Case C 144/86) [1987] ECR 4861 at para 8. Second, the objective of Article 28 is to improve co ordination of the exercise of judicial functions within the European Union and to avoid conflicting and contradictory decisions, thus facilitating the proper administration of justice: see eg The Tatry (Case C 406/92) [1999] QB 515 at paras 32, 52 and 55 and Sarrio SA v Kuwait Investment Authority [1999] 1 AC 32, per Lord Saville at 39F H. The CMI claims: same causes of action? 28. It is convenient to consider first the position of the CMI claims. The first specific question is whether the 2006 proceedings involve the same cause or causes of action as the Greek proceedings, by which I mean Greece 1 and Greece 2. The principles of EU law which are relevant to the determination of this question are in my opinion clear. They have been considered in a number of cases in the CJEU and are essentially as submitted on behalf of the CMI. They may be summarised in this way. i) ii) iii) iv) The phrase "same cause of action" in Article 27 has an independent and autonomous meaning as a matter of European law; it is therefore not to be interpreted according to the criteria of national law: see Gubisch at para 11. In order for proceedings to involve the same cause of action they must have "le mme objet et la mme cause". This expression derives from the French version of the text. It is not reflected expressly in the English or German texts but the CJEU has held that it applies generally: see Gubisch at para 14, The Tatry at para 38 and Underwriting Members of Lloyds Syndicate 980 v Sinco SA [2009] Lloyd's Rep IR 365, per Beatson J at para 24. Identity of cause means that the proceedings in each jurisdiction must have the same facts and rules of law relied upon as the basis for the action: see The Tatry at para 39. As Cooke J correctly stated in JP Morgan Europe Ltd v Primacom AG [2005] 2 Lloyd's Rep 665 at para 42, The expression 'legal rule' or 'rule of law' appears to mean the juridical basis upon which arguments as to the facts will take place so that, in investigating 'cause' the court looks to the basic facts (whether in dispute or not) and the basic claimed rights and obligations of the parties to see if there is co incidence between them in the actions in different countries, making due allowance for the specific form that proceedings may take in one national court with different classifications of rights and obligations from those in a different national court. Identity of objet means that the proceedings in each jurisdiction must have the same end in view: see The Tatry at para 41, Gantner Electronic GmbH v Basch Exploitatie Maatschappij BV (Case C 111/01) [2003] ECR I 4207 at para 25, Primacom at para 42 and Sinco at para 24. v) The assessment of identity of cause and identity of object is to be made by reference only to the claims in each action and not to the defences to those claims: see Gantner at paras 24 32, where the CJEU said this in relation to Article 21 of the Brussels Convention: . in order to determine whether two claims brought between the same parties before the courts of different Contracting States have the same subject matter, account should be taken only of the claims of the respective applicants, to the exclusion of the defence submissions raised by a defendant. See also to similar effect Kolden Holdings Ltd v Rodette Commerce Ltd [2008] 1 Lloyd's Rep 434, per Lawrence Collins LJ at para 93 and Research in Motion UK Ltd v Visto Corporation [2008] 2 All ER (Comm) 560, per Mummery LJ at para 36. vi) It follows that Article 27 is not engaged merely by virtue of the fact that common issues might arise in both sets of proceedings. I would accept the submission on behalf of the CMI that this is an important point of distinction between Articles 27 and 28. Under Article 28 it is actions rather than claims that are compared in order to determine whether they are related. vii) After discussing Gubisch, The Tatry, Sarrio, The Happy Fellow [1998] 1 Lloyds Rep 13 and Haji Ioannou v Frangos [1999] 2 Lloyds Rep 337, Rix J summarised the position clearly and, in my opinion, accurately in Glencore International AG v Shell International Trading and Shipping Co Ltd [1999] 2 Lloyds Rep 692 at 697: It would appear from these five cases, of which the first two were in the European Court of Justice, and the latter three in the domestic Courts of England, that, broadly speaking, the triple requirement of same parties, same cause and same objet entails that it is only in relatively straightforward situations that art 21 bites, and, it may be said, is intended to bite. After all, art 22 is available, with its more flexible discretionary power to stay, in the case of related proceedings which need not involve the triple requirement of art 21. There is no need, therefore, as it seems to me, to strain to fit a case into art 21. The European Court, when speaking in Gubisch (at para 8) of the purpose, in the interests of the proper administration of justice within the European Community, of preventing parallel proceedings in different jurisdictions and of avoiding in so far as it is possible and from the outset the possibility of irreconcilable decisions, was addressing arts 21 and 22 together, rather than art 21 by itself. Thus a prime example of a case within art 21 is of course where party A brings the same claim against party B in two jurisdictions. Such a case raises no problem. More commonly, perhaps, the same dispute is raised in two jurisdictions when party A sues party B to assert liability in one jurisdiction, and party B sues party A in another jurisdiction to deny liability, or vice versa. In such situations, the respective claims of parties A and B naturally differ, but the issue between them is essentially the same. The two claims are essentially mirror images of one another. Gubisch and The [Tatry] are good examples of this occurrence. On the other hand, Sarrio v KIA is a case where the same claimant was suing the same defendant on different bases giving rise to different issues and different financial consequences, and where liability on one claim did not involve liability (or non liability) on the other. Haji Ioannou v Frangos illustrates the situation where even though the cause is the same, and even though there is some overlap in the claims and issues, nevertheless different claims, there the proprietary claim to trace, may raise sufficiently different issues of sufficient importance in the overall litigation for it to be concluded that the objet differs. The authority of The Happy Fellow at first instance may be somewhat shaken by the reservations expressed by Lord Justice Saville on appeal, but it too may be said to illustrate the process of analysing the claims and issues in the respective proceedings to identify whether they are the same. Where, for instance, there is no dispute over a shipowners right to limit should he be found liable (a separate question, which need not even be resolved at the time when a limitation action is commenced or a decree given), I do not for myself see why it should be held that the liability action and the limitation action involve the same cause of action for the purposes of art 21. How do these principles provide an answer to the question whether the 2006 proceedings involve the same cause or causes of action as the Greek proceedings? It is necessary to consider the claims advanced by the CMI and the LMI separately and, in the case of each cause of action relied upon, to consider whether the same cause of action is being relied upon in the Greek proceedings. In doing so, the defences advanced in each action must be disregarded. The essential question is whether the claims in England and Greece are mirror images of one another, and thus legally irreconcilable, as in Gubish and The Tatry, in which case Article 27 applies, or whether they are not incompatible, as in Gantner, in which case it does not. Thus in Gantner a claim for damages for repudiation of a contract and a claim for the price of goods delivered before the repudiation could both have succeeded and the fact that a set off of the damages would make the price less beneficial to the seller did not make them incompatible. And in Maersk Olie & Gas A/S v Firma M de Haan en W De Boer (Case C 39/02) [2004] ECR I 9657 owners of a vessel which damaged a pipeline (owned by Maersk) sought a declaration that they were entitled to limit their liability under the 1957 International Convention relating to the Limitation of Liability of Owners of Sea going Ships and the Dutch legislation that gave effect to it and that a limitation fund be established. Maersk subsequently commenced proceedings in Denmark claiming compensation for damage to the pipeline. The CJEU held that the causes of action were not the same: see paras 35 to 39. The CJEU underlined both the principle in Gantner that account should be taken only of the claims and not of the defences advanced and the principle in The Tatry that the cause of action comprised both the facts and the legal rule invoked as the basis of the application. It held on the facts, at para 38, that: the unavoidable conclusion is that, even if it be assumed that the facts underlying the two sets of proceedings are identical, the legal rule which forms the basis of each of those applications is different. The action for damages is based on the law governing non contractual liability, whereas the application for the establishment of a liability limitation fund is based on the 1957 Convention and the Netherlands legislation which gives effect to it. The CJEU thus distinguished Gantner and The Tatry on the basis that in those cases, by contrast, the claim brought in the second set of proceedings mirrored that brought in the first set. What then is the position on the facts? The CMI advance the claims referred to in para 18 above under three heads, each of which relies upon provisions either of the CMI settlement agreement or the policies. It is convenient to consider the claims under the three heads in this order: indemnity, exclusive jurisdiction and release. Indemnity claims These are based on clause 3 of the settlement agreement set out above. The claims are simple. By clause 3 the Assured as defined agreed to indemnify the CMI against any claim that might be brought against them by any of the Assureds or the Claimants associated companies or organisations or by any mortgagee in relation to the loss of Alexandros T or under the relevant policy. The CMI say that the Greek proceedings are in respect of such claims and that they are entitled to be indemnified against the consequences of those proceedings. They say that that claim under clause 3 does not give rise to the same claim or cause of action as any claim or cause of action in the Greek proceedings. They say that, on the contrary, it assumes that the Greek proceedings will proceed and that the claimants in Greece may succeed. I would accept that submission. In my opinion, none of the causes of action relied upon in the Greek proceedings has identity of cause or identity of object with the CMIs claim for an indemnity. As to cause, the subject matter of the two claims is different. The former are claims in tort (or its Greek equivalent) and the claim for an indemnity is a claim in contract. As to object, that of the Greek proceedings is to establish a liability under Greek law akin to tort, whereas, as for example in the case of a claim on an insurance policy, the object of the CMIs claim is to establish a right to be indemnified in respect of such a liability. Further, whereas Starlight and its co assureds and the individual officer claimants in the Greek proceedings are seeking each to recover its or his own loss, the indemnity clause will, if the indemnity claim is otherwise good, entitle the CMI to recover from Starlight not just any sum awarded in Greece to Starlight, but also any sums awarded to any of Starlights co claimants. So the object of the English indemnity claim against Starlight differs from, and is in fact much wider than, the object of Starlights claim in the Greek proceedings. Moreover, the claim for an indemnity in the 2006 proceedings in England does not interfere in any way with the Greek proceedings or vice versa. There is no attempt in Greece to impugn the settlement agreements or the indemnity agreements contained in them. The respondents do not assert, for example, that the indemnities do not apply to some or all of the Greek claims. I would determine this point in favour of the CMI on this simple basis. The CMIs cause of action for an indemnity under clause 3 of the settlement agreement is not the same cause of action as any of the causes of action relied upon in Greece, which are tortious. The respective causes of action have neither the same object (le mme objet) nor the same cause (la mme cause). Exclusive jurisdiction clauses The same is in my opinion true of the CMIs claims that the respondents have brought the proceedings in Greece in breach of the exclusive jurisdiction clauses in the settlement agreement and/or in the insurance policies. Clause 6 of the settlement agreement expressly provides that it is subject to English law and the exclusive jurisdiction of the High Court in London. The CMI say that, in bringing the Greek proceedings, the respondents are in breach of clause 6 and that they are entitled to damages as a result. They do not seek an anti suit injunction to restrain the Greek proceedings. They simply seek a declaration that the claims brought by Starlight and OME in Greece 1 and Greece 2 fall within the scope of the settlement agreement. Moreover the respondents do not assert in the Greek proceedings that the settlement agreements do not preclude the bringing of their claims in Greece. It may be that the reason they do not advance that argument is that they would be met with the response that a dispute as to the meaning and effect of the settlement agreements is subject to the English jurisdiction clause so that the court in Greece would have to decline jurisdiction. However that may be, they do not in fact advance the argument. It follows that in this respect too the Greek proceedings are not the mirror image of the English proceedings or vice versa and that the cause or causes of action based on an alleged breach of clause 6 of the CMI settlement agreements are not the same cause or causes of action as are advanced by the respondents in Greece. They do not have le mme objet et la mme cause. As I see it, the position is the same in the case of the alleged breach of the exclusive jurisdiction clauses in the insurance policies. There is an established line of cases in England to the effect that claims based on an alleged breach of an exclusive jurisdiction clause or an arbitration clause are different causes of action from claims for substantive relief based on a breach of the underlying contract for the purposes of Article 21 of the Brussels Convention and Article 27 of the Regulation: see eg Continental Bank NA v Aeakos Compania Naviera SA [1994] 1 WLR 588 per Steyn LJ (giving the judgment of the Court of Appeal) at 595H 596C; Alfred C Toepfer International GmbH v Molino Boschi Sarl [1996] 1 Lloyds Rep 510 per Mance J at 513; Toepfer International GmbH v Socit Cargill France [1997] 2 Lloyds Rep 98, per Colman J at 106; Sinco per Beatson J at paras 50 and 54; and WMS Gaming Inc v Benedetti Plus Giocolegale Ltd [2011] EWHC 2620 (Comm) per Simon J at para 32. Those cases support the conclusion that the claims of the CMI in the 2006 proceedings for breach of the exclusive jurisdiction clauses in the insurance policies (or indeed in the settlement agreement) do not involve the same cause or causes of action within the meaning of Article 27 as the respondents claims in (or akin to) tort in the Greek proceedings. I understand that this point has been reserved for decision by the Court of Appeal but, as I see it at present, nothing in the relief sought by the CMI offends the principle of mutual trust and confidence which underlies the Regulation: see eg Erich Gasser GmbH v MISAT Srl (Case C 116/02) [2005] QB 1. The CMI do not seek to stop the Greek proceedings or to restrain Starlight and OME from pursuing them. They merely seek declarations as to the true position under the settlement agreements which are both governed by English law and subject to the exclusive jurisdiction of the English courts and under the clauses in the insurance contracts which also provide for the exclusive jurisdiction of the English courts. This has the advantage that the courts with exclusive jurisdiction decide what is the true meaning of the settlement agreements and the jurisdiction clauses. Release The same is also, in my opinion, true of the claims based on what are called the release provisions in the CMI settlement agreement. It is said that the provision that the sums agreed to be paid under the CMI settlement agreement are to be paid in full and final settlement of all and any claims it may have under the policy precludes the payment of any further sums arising out of the loss of the vessel insured. It is said that, in the light of the agreement, the CMI are entitled to a declaration that the Greek claims fall within the terms of the agreement, that they are entitled to a declaration that the bringing of those claims is a breach of the agreement and that they are entitled to damages for that breach. The question is whether these claims involve le mme objet et la mme cause as the claims in the Greek proceedings. In my opinion they do not for the same reasons as in the case of the claims for an indemnity and the claims arising out of the exclusive jurisdiction clauses. The Greek claims are claims in tort and these are contractual claims. The factual bases for the two claims are entirely different. Moreover the object of the two claims is different. This is to my mind clear in the case of the claims for damages for breach of the release provisions in the settlement agreements and for a declaration that the bringing of the Greek claims is a breach of the settlement agreement. The nature of the claims is almost identical to the nature of the claims for breach of the jurisdiction agreements. In both cases the alleged breach is the bringing of the claims in Greece. Moreover, like the claims for an indemnity, the claim for damages for breach of the settlement agreement assumes that the claims in Greece may succeed. Is the position different in respect of the claim for a declaration that the Greek claims fall within the terms of the release in the settlement agreements? In my opinion the answer is no. All these claims have the same thing in common. It is that the legal basis for the claims in Greece is different from the legal basis of the claims in England. In Greece the legal basis for the claims is tortious, whereas in England the legal basis of the claims is contractual. It is thus not a case like Gubisch, where, as the CJEU put it at para 15, the same parties were engaged in two legal proceedings in different Contracting States which were based on the same cause of action, that is to say the same contractual relationship. The cause was therefore the same. Equally the objet of the actions was the same, namely to determine the effect if any of the contract. As the CJEU put it at para 16, the action to enforce the contract was aimed at giving effect to it, while the action for its rescission or discharge was aimed precisely at depriving it of any effect. The question whether the contract was binding lay at the heart of the two actions. That is not true here because the object of the English action is to enforce the contract, whereas the object of the Greek proceedings is to establish a different liability in tort. Lord Mance takes a different view in one respect. So far as the claims for damages for breach of the releases in the settlement agreements, the claims for a declaration and damages for breach of the jurisdiction clauses and the claims for indemnities are concerned, there is no difference between us. However, so far as the claims for a declaration that the Greek claims fall within the terms of the release in the settlement agreements is concerned, Lord Mance takes a different view. He notes in para 140 the terms in which the claims are pleaded. The formulation in paragraph 18(a) above, which was adopted by the respondents, is in fact derived from the declaration made by the judge. However, to my mind nothing turns on this difference. Moreover, I do not see that it makes any difference that the respondents discharged their obligations under the settlement agreements. The critical point is that on the facts here the legal basis of the claims in tort in Greece is different from the legal basis of the contractual claims in England. It is true that, if successful, a declaration that the tortious claims have been settled or released will or may afford the appellants a defence to the Greek proceedings but the cases show that defences are irrelevant. Viewed through the perspective of the claims, the two claims are not the mirror image of one another. Even if (contrary to my view) the two sets of proceedings had in this respect le mme objet they did not have la mme cause, whereas the cases show that, in order to involve the same cause of action, they must have both le mme objet et la mme cause. The position would be different if the CMI were to advance a claim in the English proceedings claiming a declaration that they are not liable to the respondents in Greece. That claim would be the mirror image of the claims being brought by the respondents in Greece and would fall within the principles laid down in Gantner and The Tatry. In fact, after the judge had delivered his judgment, the CMI did, as I understand it, make an application for such a negative declaration in the light of the fact that Starlight and OME had commenced Greece 2. We were told that in the event the application was never determined and that the CMI do not pursue it. It has been confirmed that any such claim has now been abandoned. For these reasons, subject to a possible reference to the CJEU discussed in paras 58 59 below, I would hold that Article 27 does not apply to any of the causes of action advanced by or against the CMI. I appreciate that, in reaching these conclusions I have reached a different view from that of the Court of Appeal. Before I express my reasons, I should say that I suspect that the focus of the argument in the Court of Appeal was somewhat different from that in this Court. The reasons are I think twofold. First, in para 40 of his judgment Longmore LJ distinguished Sinco on the basis that the difference between this case and that is that in that case, in contradistinction to this, there was no settlement agreement which could, as he put it, supposedly deny the Greek claimants the right to bring proceedings at all. I do not see that as correct. As explained above, the CMI do not seek to deny the respondents the right to commence proceedings in Greece but merely say that the causes of action in the two sets of proceedings are different. The second point is perhaps more significant. In para 46 Longmore LJ correctly notes that the CMIs case is that the bringing of the Greek proceedings is a breach of the jurisdiction clauses in the policies and a breach of the terms of the settlement agreement and, again correctly, states that the primary relief claimed by the CMI in England is a declaration that Starlight will be liable to indemnify the CMI against any costs incurred in the Greek proceedings and any liability in those proceedings. I have already given my reasons for concluding that those are different causes of action from the causes of action in tort relied upon by the respondents in Greece. They are not a mirror image of one another. As I see it, the Court of Appeal treated the question as a broad one focusing on the overall result in each jurisdiction. This can be seen from paras 47 to 50 of Longmore LJs judgment. In paras 46 and 47 he summarised the claims of both the CMI and the LMI. He then said this at paras 48 and 49: 48. It is clear that the first 3 paragraphs of the LMI application are in terms an assertion that LMI are not liable in respect of the claims in Greece. CMI's allegation that the Greek claimants are in breach of the settlement agreements is in effect a similar assertion. It may be said that there are other causes of action in the English proceedings which are not exactly mirror images of the allegations in the Greek proceedings but to the extent that they are not, they are essentially the same in the sense that the key assertion in Greece is that there are non contractual claims and the key assertion in England is that those non contractual claims have been compromised by the settlement agreements. The claims for damages and indemnity are in any event parasitic on the central contention that, once a settlement had been reached, all matters in issue had been compromised. It is, of course, elementary that Article 27 has regard to causes of action rather than proceedings and that is why it is necessary to concentrate on the allegations relating to the settlement agreement. It is certainly the case that there is a considerable risk of inconsistent judgments if one of the sets of proceedings is not stayed and the rationale behind Article 27 therefore favours a stay if the Greek court was the court first seised. 49. I therefore conclude that, in so far as the English proceedings assert non liability by reason of the settlement agreements, there is an identity of issues and the respective causes of action are the same. To the extent that allegations are made in England that the Greek parties are in breach of the settlement agreements or in breach of the exclusive jurisdiction clauses in either the insurance policy or the settlement agreements themselves (and that they should therefore indemnify the insurers for the cost of the Greek proceedings) they are parasitic and dependent on the basic cause of action in England for a declaration of non liability. They cannot proceed in their own right until the underlying question of the ambit of the settlement agreements as a defence to the Greek actions in tort has been resolved. In my opinion that analysis is not consistent with the principles laid down by the CJEU set out above. As already stated, those principles require a comparison of the claims made in each jurisdiction and, in particular, consideration of whether the different claims have le mme objet et la mme cause without regard to the defences being advanced. As I see it, Article 27 involves a comparison between the causes of action in the different sets of proceedings, not (as in Article 28) the proceedings themselves. In para 48 Longmore LJ recognises that there are causes of action in the English proceedings which are not (as he puts it) exactly mirror images of the allegations in the Greek proceedings but says that, to the extent that they are not, they are essentially the same in the sense that the key assertion in Greece is that there are non contractual claims and the key assertion in England is that those non contractual claims have been compromised by the settlement agreements. And at the end of para 49 he says that the claims in England cannot proceed in their own right until the underlying question of the ambit of the settlement agreements as a defence to the Greek action in tort has been resolved. I respectfully disagree with that approach. It focuses on the nature of the settlement agreements as a defence to the Greek action in tort, which the authorities in the CJEU show is irrelevant. Given the fact that defences are irrelevant, the analysis cannot involve a broad comparison between what each party ultimately hopes to achieve. The analysis simply involves a comparison between the claims in order to see whether they have the same cause and the same object. In so far as Andrew Smith J treated the question as a broader one in Evialis SA v SIAT [2003] 2 Lloyds Rep 377 I respectfully disagree with him, although, as Beatson J observed in Sinco at para 50, Evialis was distinguishable on the facts because the insured had brought a substantive claim in the English proceedings in addition to their claim in the Italian proceedings, which rendered the former a mirror image of the latter. This case can be distinguished on the same basis, at least in the case of the CMIs claims. I also note in connection with Sinco that at para 40 Longmore LJ observed that the difference between that case and this was that in that case there was no settlement agreement which could supposedly deny the right of the Greek claimants to bring proceedings at all. For the reasons I have given I would respectfully disagree with that approach. A settlement agreement might be a defence to a claim. It could not deny the right of the Greek claimants to bring proceedings at all. For these reasons I would hold that Article 27 has no application to the case of the CMI. Moreover, subject to one point discussed at paras 58 59 below, I would not order a reference to the CJEU on this question because the relevant principles are clearly set out in its jurisprudence and are acte clair. In these circumstances, where none of the causes of action in the English proceedings is the same as the causes of action in the Greek proceedings, it is not necessary in the case of the CMI to consider the other issues which might arise, namely the position in relation to other parties and which court was the court first seised for the purposes of Article 27. The LMI claims: same causes of action? Save possibly for two points, the position of the LMI is essentially the same as in the case of the CMI. The first point is that the jurisdiction clause in clause 5 of the LMI settlement agreement differs from that in clause 6 of the CMI settlement agreement in that it does not expressly provide for the exclusive jurisdiction of the High Court in London but merely for the jurisdiction of the High Court in London. However, subject to its detailed provisions, Article 23 of the Regulation provides that, where parties have agreed that a court or the courts of a Member State shall have jurisdiction, that court or those courts shall have jurisdiction and, moreover, that such jurisdiction shall be exclusive unless the parties have agreed otherwise. The question whether the parties had agreed otherwise was discussed by the judge at paras 19 to 23 of his judgment, where he held that the parties had not agreed otherwise and that clause 5 of the LMI was an exclusive jurisdiction clause. No appeal was brought against that part of the judges ruling. The second point is this. I had understood during the argument that the LMI were seeking a negative declaration of the kind which the CMI were not. It now appears that I was mistaken. I understand that the LMI had indicated an intention of doing so if the CMI proceeded with an application for permission to do so but, since they did not, nor did the LMI, who have now expressly stated that, like the CMI, they will not do so. As I see it, in these circumstances the position of the LMI is the same as that of the CMI. The causes of action advanced in England in the 2006 action and in 2011 Folio 702, as summarised on behalf of the LMI, are claims by the LMI against Starlight and OME based on clauses 3, 4 and 5 of the LMI settlement agreement. Those advanced in 2011 Folio 1043 are claims by the LMI against the co assureds to enforce the English jurisdiction clause in the insurances. Since, on this basis, the relief sought by the LMI is not a declaration of non liability, the conclusions and reasoning set out above on the question whether the causes of action are the same apply to it. It follows that I would allow the appeals of both the CMI and the LMI on the Article 27 point. However these conclusions are subject to the question whether any of the issues discussed above should be referred to the CJEU. Left to myself, I would not refer any of them because the principles of European law are clear and the only question is how they should be applied in the instant case. However, Lord Mance has arrived at a different view from me on the question whether Article 27 applies to the claims by both the CMI and the LMI for a declaration that the Greek claims fall within the terms of the release in the settlement agreements or that under the agreements the tort claims have been settled. In short he is of the view that those claims are essentially for declarations of non liability. In these circumstances, I have reached the conclusion that the position is the same as I previously considered it to be when I thought that the LMI were seeking a declaration of non liability. That is that, unless the CMI and the LMI abandon those claims within 14 days, we should refer the question whether the claims for those declarations involve the same cause of action as the claims in Greece within the meaning of Article 27. Lord Neuberger has also given reasons why, absent such abandonment, this question should be referred. On the other hand, if the CMI and the LMI do abandon those claims, I would allow both their appeals under Article 27 and refuse a mandatory stay of the proceedings under it. If they do not abandon those claims, I would allow the appeals under Article 27 in respect of the other claims but refer the question referred to above to the CJEU and defer a decision on that issue until the CJEU has determined the question. Seisin under Article 27 It is not I think in dispute (and is in any event correct) that a court is only seised of claims by or against new parties from the date that those parties are added to the proceedings. In relation to the 2006 proceedings, the English court was only seised of claims against OME once OME was joined to the proceedings on 20 September 2011 and, for example, to the extent that the LMI in action 2011 Folio 702 are seeking declarations relying on the settlement agreement as a settlement of or defence to Starlight's and OME's claims in the Greek proceedings, the English courts were only seised of that action in 2011. It follows that, in each of those cases the court first seised was the Greek court and not the English court, and that, to the extent that the LMI advance claims for a declaration that the Greek claims fall within the terms of the release in the settlement agreement or that under the agreement the tort claims have been settled, unless the English court is the court first seised, they will be entitled to a stay under Article 27. The same is essentially true of the CMI claims. The question is which court is first seised of what in circumstances where some of the claims brought in England are different from and based on different causes of action from those brought in Greece and one of them in each case, namely the claim for the declaration or declarations referred to above, is based on the same cause of action. The approach of the parties is starkly different. It is submitted on behalf of the appellants that the answer is to be found in the language of Articles 27 and 30 and is that the court first seised is that in which the proceedings were first brought and that the court remains the court first seised of the proceedings even where those proceedings are subsequently amended by the addition of new claims or otherwise. It is submitted on behalf of the respondents, by contrast, that if a new claim is added by amendment, the court is seised of the proceedings so far as that amendment is concerned when the amendment is made and not at the time of the institution of the original, unamended proceedings. It seems to me that there is considerable force in the appellants analysis of the language of the Regulation but the respondents case has support both in the English cases and in the textbooks. In the course of this judgment I will consider the issues (interesting as they are) only briefly because I have reached the conclusion that, if the appellants persist in their claims for the declarations referred to in paras 58 and 59 above and this issue is critical for the resolution of the appeal, the proper course is to refer the question to the CJEU. The case for the appellants can be summarised thus. Article 27 is concerned with proceedings involving the same cause of action. So, for the purposes of deciding whether to grant a stay of its proceedings under Article 27, the court must compare the cause or causes of action in each set of proceedings. It is Article 30 that determines when the court is deemed to be seised and, by Article 30(1), it provides that (subject to the limited exceptions at the end of Article 30(1) and in Article 30(2)), it is deemed to be seised when the document instituting the proceedings or an equivalent document is lodged with the court. Where the question is which of two courts is first seised, the two dates on which the courts are deemed to be seised are compared and the court deemed to be seised first is the court first seised. The appellants also rely upon the transitional provisions in Article 66, which they say support the proposition that proceedings have only one date upon which they are instituted and is inconsistent with the idea that they can have several such dates as and when new claims are added by amendment. The appellants say that in this case the answer is that the English court was the court first seised because the Greek court was not seised until some five years later. They say that this is a simple rule which is easy to apply and that there is no warrant in the language of the Regulation for concluding that it was intended that the court should be seised anew each time a new claim is added by amendment, which would be complicated and unnecessary and give rise to endless interlocutory disputes. The appellants criticise Longmore LJ for asking in para 52 whether it can be said that the English court was first seised of the relevant causes of action now pursued in Greece and for noting that Article 27 only has regard to "causes of action" rather than proceedings. They say that that is inconsistent with Articles 27 and 30 because Article 27(1) uses the word "proceedings" twice and it is used again in Article 30(1). They recognise that for the purpose of deciding whether there is le mme objet or la mme cause the court must look to the claims made but, for the purpose of deciding which court is deemed to be "first seised" under Article 27, the autonomous test in Article 30 is applied. Finally, they say that Article 30 does not mention "causes of action" and that the Court of Appeal overlooked the word "proceedings" used twice in Article 27, and did not refer to Article 30 at all. Moreover, although the word "proceedings" is not defined in the Regulation, it appears nearly 50 times in the Regulation used as a word of general application. The uses of the word show that issues or causes of action (or claims) may change during the course of the "proceedings". The appellants further criticise Longmore LJ in the Court of Appeal by reference to paras 53 and paras 64 66. They contrast the reference in para 53 to Article 27 having regard only to causes of action rather than proceedings, with the reference in para 64, with apparent approval, to this quote from the judgment of Saville LJ in The Happy Fellow at pages 17 18: article 21 is concerned with proceedings and article 22 with actions. The questions are whether the proceedings involve the same cause or object or whether the actions are related. It is thus a misreading of the Convention to ask which Court is first seised of issues which are or might be raised within the proceedings or actions. If such were the case, then the articles would achieve precisely the opposite of their intended purpose which is, to achieve the proper administration of justice within the Community . " Saville LJ was there considering the position under what is now Article 28. However the appellants say that the word action in Article 28 means the same as proceedings in Article 27 and that Longmore LJ was correct in paras 64 66 and wrong in para 53. Although the appellants case has to my mind the merit of simplicity and of the avoidance of time consuming and expensive satellite litigation, the respondents say that it is simplistic and contrary to both principle and authority. It is fair to say that there is considerable support in the authorities and the text books for the proposition that the new claims added to the 2006 proceedings, which were founded on the Greek proceedings and thus made second in time, were new claims, that the English court should be regarded as seised of them only when they were added to the 2006 proceedings and that the Greek court was the court first seised within the meaning of Article 27. In the important case of FKI Engineering Ltd v Stribog Ltd [2011] 1 WLR 3264, which was itself a case on Article 28, the Court of Appeal considered Article 27 and a number of cases decided under it. At para 84 Rix LJ said that the essence of the cases was that, where the same cause of action or the same parties are introduced only by way of service, or amendment, the relevant proceedings are only brought at the time of such service or amendment, not at the time of the institution of the original, unamended proceedings. Neither Mummery LJ nor Wilson LJ expressed a different view. The respondents also rely upon Sinco per Beatson J at paras 61 to 68 and, in that connection, upon this comment in Briggs on Civil Jurisdiction and Judgments, 5th edition, 2009 at para 2.235, page 327, note 1: In [Sinco] the proposition that an English court was first seised of a claim for damages for breach of a jurisdiction clause, which could only have been brought before the English court after the objected to proceedings were instituted before the foreign court, was rather challenging. And in Research in Motion UK Ltd v Visto Corporation [2007] EWHC 900 (Ch), Lewison J said at para 19: It is also common ground that the counterclaim is to be treated as an action in its own right for the purposes of the judgment regulation. It seems to me that once RIM's English non infringement action is out of the way the only relevant proceedings are Visto's counterclaim and the Italian proceedings. Of those two, the Italian court is plainly the first seised. Indeed it cannot be otherwise since the very fact of the Italian claim is part of the foundation of the counterclaim. The respondents rely upon Briggs at para 2.235, where, as I read it, their case is supported, although some doubts are expressed as to the desirability of this approach. The respondents also relied upon the 15th edition, 2012 of Dicey, Morris and Collins on The Conflict of Laws at paras 12 060 and 12 069, where they say this: 12 060. Each lis between a plaintiff and a defendant has to be considered individually to determine which court was seised of it first in time, and article 27 applied accordingly. 12 069. Where a claim form which has been issued and served is amended by the addition of an additional claim, or by the introduction of a claim or counterclaim against another party, the material question is whether the date of seisin in respect of the additional claim is the date on which the amended claim form is reissued (which may, depending on the circumstances, be only after obtaining the permission of the court), or the date of the original issue. As it is difficult to see how a court can be said to be seised of a claim which has not been made and does not appear in the claim form, it cannot be correct that as long as a claim form has been issued and served, the court already has temporal priority over any issue which may later be added by amendment. It would follow from a conclusion that the court is not seised of the new claim until the amended claim form is reissued that the defendant may be able to pre empt the amendment by commencing an action of his own in another Member State. The court seised with such pre emptive proceedings will obviously be regarded as being seised later than the court before which the original action was brought, but institution of the later action may serve to prevent the proposed, and now duplicative, amendment of the original action; and there is no basis in the Regulation for refusing to give effect to a use of the rules which might be characterised as sharp practice. Finally, the respondents rely upon Fentiman on International Commercial Litigation, 2010, at para 11.27: Principle suggests that an amended claim arising from the same facts as the original claim might be consolidated with the original claim for the purposes of Article 30 but not where the facts arose subsequently. In the latter case it does no violence to the expressions 'actions' or 'proceedings' to differentiate the claims. While these expressions of view undoubtedly provide strong support for the respondents submissions, some of them seem to me to be expressed in a somewhat tentative way and I am not sure that the textbook writers grapple with the points made by the appellants on the language of the Regulation. However that may be, as indicated earlier, I am of the opinion that this issue is by no means acte clair and, if the appellants maintain their claim or claims in England for a declaration that the Greek claims fall within the terms of the release in the settlement agreements or that under the agreements the tort claims have been settled, I would refer an appropriate question to the CJEU before forming a concluded view with regard to the applicability to that claim or claims. If they abandon them, I would hold that the respondents are not entitled to a stay under Article 27, refuse them a mandatory stay in respect of all the claims and allow the appellants appeal. Article 28 The question whether those claims which are not within Article 27 should be stayed depends upon whether they should be stayed under Article 28. As stated above, in the exercise of his discretion the judge refused the respondents application for a stay under Article 28. The appellants say that he was right to do so. The respondents case is that the English court was second seised for the purpose of Article 28 and that a stay should be granted as a matter of discretion. Seisin under Article 28 It is plain from the express terms of Article 28(1) that the discretion in Article 28 is limited to any court other than the court first seised. It follows that, if the English court was first seised, it has no discretion to stay. Article 28 moreover applies to related actions pending in the courts of different member states and, by Article 28(3), actions are deemed to be related where they are so closely connected that it is expedient to hear and determine them together to avoid the risk of irreconcilable judgments resulting from separate proceedings. It is not in dispute in these appeals that the various proceedings are related proceedings for the purposes of Article 28 and I would in any event so hold. The questions remain whether the actions are pending, whether the English court is the court first seised and, if it is not, how the discretion should be exercised. In Stribog the Court of Appeal considered the correct approach to Article 28. It held that two questions arise, namely (1) whether the two sets of proceedings are related, taking account of any amendments which have been made at the time of the enquiry and (2) which set of proceedings were commenced first? Rix LJ expressed the position clearly at paras 119 and 120. He explained that it is only when there are related and pending actions in separate member states that Article 28 comes into issue. The question whether they are related is, as he put it, the Article 28(3) question. He then said: 119. The question of when seisin occurs and thus which of the courts is the court first seised is the article 30 question. FKIs submission in effect seeks to roll the two questions together and ask: which of the two courts is the first to be seised of an action which at the time of its seisin was a related action? This is the concept of the first related action, a concept found in neither article 28 nor article 30. Stribog on the other hand asks: once you have found two related and pending actions and seek to stay one of them, invoking article 28, which of the two courts was the first to achieve seisin of one or other of those actions? 120. In my judgment, the latter question is the correct one, and is to be preferred to the former . See also per Mummery LJ at paras 40 to 44, where he stressed in particular that the question is whether the court concerned is seised of an action and not of a particular issue in an action. He also stressed that the time at which the comparison between the two actions is made is the time of the hearing of the application for the stay. Wilson LJ noted at paras 132 134 that Mummery and Rix LJJ asked the relevant questions in a slightly different order: Mummery LJ asked which court was first seised in a pending action before asking whether the actions were related, whereas Rix LJ preferred to ask them in the reverse order. Wilson LJ said that he did not see why the order matters but that Rix LJ seemed to have the terminology of Article 28 on his side. I agree. The question whether the actions are pending is closely related to the question whether the English court remains first seised. The respondents say that there was no action pending in England when the Greece 1 proceedings were commenced. In the alternative they say that, if the original action is still alive, the English court is not first seised because the claims now brought are entirely new claims, which they say should be equated with new proceedings. I will consider these points in turn. On the first point, the appellants say, by contrast, that the 2006 proceedings are still on foot, and thus pending, having been stayed but not finally concluded. I would accept the appellants submissions. The settlement agreements were in this respect in identical terms. It was a term of them that Starlight would obtain a stay by way of Tomlin Orders. The orders were both in the same terms, which are standard in such cases, and (as quoted in para 7 above) provided that save for the purposes of carrying into effect the terms agreed all further proceedings shall be stayed. It appears to me that, on the true construction of those orders, the actions remained unstayed for the purposes of carrying into effect the terms agreed and were otherwise stayed. As I see it, in so far as the actions remained unstayed, it follows that the court remained seised of them, presumably at least until there was no longer any need for the terms agreed to be carried out. It is plain from the language of Article 28(1) that the court first seised means the court first seised of the action, which must mean first seised of the proceedings, not of particular claims or causes of action within the proceedings. It seems to me to follow that, in so far as the appellants are seeking to enforce the provisions of the settlement agreements, as they are, the English court remains first seised. I arrive at this conclusion by a construction of Article 28(1) and of the Tomlin Order. The appellants were able to pursue these claims without issuing further proceedings. In this regard I would accept the analysis of the judge at paras 24 to 29. I would adopt the analysis of Sir Andrew Morritt V C in Bargain Pages Ltd v Midland Independent Newspapers Ltd [2003] EWHC 1887 (Ch) and I would not follow the reasoning of the Court of Appeal in Hollingsworth v Humphrey, (1987) CAT 1244. What then of the parts of the actions which are stayed under the Tomlin Orders? These would include the claims for breach of the exclusive jurisdiction clauses in the policies of insurance, which do not depend upon the terms of the settlement agreements. The appellants rely upon principles developed by the English courts as a matter of English, not European, law. However, this is in my opinion a permissible approach. Article 30 of the Regulation provides for the circumstances in which a court is deemed to be seised. I recognise of course that the concept of seisin is an autonomous European law device but Article 30 does not make express provision for the circumstances in which it ceases to be seised. In these circumstances, it seems to me to be appropriate for national courts to have regard both to the nature of seisin in European law and to their own procedural rules in deciding whether their courts are no longer seised of a particular set of proceedings. The appellants rely upon the decision of the Court of Appeal in Rofa Sport Management AG v DHLK International (UK) Ltd [1989] 1 WLR 902, where the Court of Appeal held that a stay of proceedings is not equivalent to a dismissal or discontinuance and therefore that an action in which all further proceedings have been stayed, even if by consent of all parties after a settlement, remains in being. See in particular per Neill LJ at 909H to 910D and 911A C. He concluded that, for the sake of clarity and certainty, the word stay in an order should not be treated as a possible equivalent of a dismissal or discontinuance. Although the action cannot continue without an order of the court, nor can it, he said, be regarded as dead in the same way as an action which has been dismissed or discontinued by order. I agree. The reasoning in Rofa supports the conclusion that in circumstances in which the 2006 proceedings have been stayed and not dismissed or discontinued the court remains seised of them. It is not and could not be disputed that the court was seised of the proceedings in accordance with Article 30 when the claim form in the 2006 proceedings was issued. It is not suggested that the appellants failed to take any of the steps referred to in Article 30(1) or (2) which would have nullified that effect. The question is whether anything happened subsequently from which it can be inferred that the court was no longer seised. I would answer that question in the negative. Although Rofa was not a decision on the construction of the Regulation, the correct approach is to consider whether anything occurred which could lead to the conclusion that the approach adopted there should not be applied to the stay incorporated in the Tomlin Orders and, if not, whether there is anything which leads to the conclusion that the court is not still seised of the proceedings. I would answer both those questions in the negative. Although it is true that the CMI settlement agreements contained a provision that, on payment of the settlement sum, the parties would file a consent order dismissing the proceedings, no such consent order was made or filed. The LMI settlement agreement does not contain any such provision. In all these circumstances, I can see no sensible basis upon which it can be said that the English court is no longer seised of the proceedings. There remain significant disputes arising out of the settlement agreements and the insurances. The second point taken on behalf of the respondents under this head is that, even if the original action is still alive, the claims now brought are new claims, which should be equated with, or treated as, new proceedings. They rely upon this dictum of Rix LJ in Stribog at para 129: Seventhly, there is nothing in the ECJ or English jurisprudence to support the judges approach in this case. It is possible that the introduction of entirely new causes of action or parties is to be recognised as the bringing of entirely new proceedings, so that the timing of seisin (the article 30 question) has to be looked at from that point of view, as occurs for the purposes of article 27. Even so, it is not clear to me that in this connection article 27 and article 28 work in the same way: for article 27 is worded in terms of the bringing of actions with the same parties and the same cause of action (Where proceedings are brought in the courts) whereas article 28 is worded in terms of the pendency of related actions (Where related actions are pending in the court) (emphasis added). That emphasises that the article 28 question is asked with relation to pending actions, and not, as the article 27 question is asked, with relation to the bringing of actions. In any event, the judge is in my respectful judgment mistaken to think that any amendment is analogous to the bringing of new causes of action or the addition or substitution of new parties. For my part, I would not accept that approach as applied to Article 28. In para 68 above I referred to the statement of Rix LJ at para 84 of Stribog. In para 63 of his judgment in the instant case Longmore LJ quoted para 84, where Rix LJ said that, where proceedings are amended to add new claims, the court is only seised of the relevant proceedings so far as the new claims are concerned at the time of the amendment. Immediately after the quote, Longmore LJ correctly pointed out that those observations were made in relation to Article 27 and not Article 28. He then quoted the second sentence from the above quotation from para 129 of Rix LJs judgment. Longmore LJ then asked whether this tentative expression of view in relation to "the introduction of entirely new causes of action" being tantamount to "the bringing of entirely new proceedings" means, for the purpose of this case, that the Greek courts are to be regarded as first seised of the relevant related action? He said at para 64 that, in his opinion it did not. He gave two reasons. He said that in the first place Rix LJ had already quoted the passage from the judgment of Saville LJ in The Happy Fellow which I set out in para 66 above. At para 65 Longmore LJ said that, in the second place, Rix LJ provided his tentative response to his tentative view in the remainder of paragraph 129 which he then quoted. That response is to my mind telling. Longmore LJ then expressed his conclusion at para 66. He expressed doubt about Rix LJs distinction between entirely new causes of action as opposed to partially new causes of action. However that may be, his conclusion seems to me to be contained in the last two sentences of para 66: As Saville LJ said in The Happy Fellow it is a misreading of Article 28 to ask which court is first seised of issues; it must likewise be wrong in an Article 28 context to ask which court is first seised of causes of action. That is Article 27 territory because, for the purpose of Article 28, one has to ask which court is first seised of an action, not a cause of action and, still less, an issue. On that basis Longmore LJ concluded at para 67 that, if the original English action and the subsequent Greek actions are related, as he concluded they are, it was the English court that was the court first seised. I agree. First, the contrary view seems to me to be inconsistent with the two stage approach to Article 28 adopted in Stribog. As Longmore LJ observed at para 66, in the context of Article 28 it is wrong in principle to ask which court is first seised of a cause of action, because Article 28 is concerned with related actions as a whole. Secondly, I would accept the appellants submission that on the facts of this case the claims now brought are not (as Rix LJ put it) entirely new. On the contrary, applying the broad and common sense approach favoured by Lord Saville in Sarrio, the claims now brought by the appellants are unquestionably related to the original action within the meaning of Article 28. I would only add in conclusion that it seems to me that it would be very odd indeed if a court which is seised of proceedings and stays those proceedings by way of a Tomlin order on the express terms that it retains jurisdiction to take further steps by way of implementation or policing of the order were prevented from exercising that jurisdiction, either by lifting the stay or otherwise, on the ground that it was no longer seised of the proceedings. It seems to me to be at least arguable that those steps should properly be treated as part of the existing proceedings. They might perhaps be treated as part of the same procedural unit as discussed by the CJEU in Purrucker v Vallz Prez (No 2) (Case C 296/10) [2011] Fam 312 at para 80. The case was on very different facts but was concerned with two paragraphs in a regulation which were identical to Articles 27 and 30 of the Regulation. In any event to treat the enforcement action as something entirely new seems to me to be wrong. It is never easy to decide what is an entirely new claim, what is a new claim and what is an expansion of an old claim. These claims are not new or entirely new because they are brought by way of enforcement of the outcome of the original dispute, in the same way as execution on a money judgment. In these circumstances it makes sense to hold that these claims, which largely arise out of the settlement agreements, arise out of the attempts made by the respondents to avoid the effect of those agreements and, in particular, the exclusive jurisdiction agreements. This solution would, as I see it, be consistent with the overall policy of the Regulation to avoid a multiplicity of proceedings. However, I can see that there is scope for argument under this head and, if the issue of first seised were critical to the decision, it might be appropriate to refer an appropriate question to the CJEU. I therefore turn to the issue of discretion on the assumption that the English court is second seised for the purposes of Article 28. Discretion On that assumption, the question arises whether the action or actions should be stayed as a matter of discretion. The judge held that no such stay should be granted. Given that the shape of the case has changed considerably since the matter was before the judge, it appears to me that this Court should consider for itself whether to grant a stay. I have reached the clear conclusion that it should not. I have reached that conclusion essentially for the reasons advanced on behalf of the appellants. They may be summarised in this way. In Owens Bank Ltd v Bracco (Case C 129/92) [1994] QB 509, at paras 74 79, Advocate General Lenz identified a number of factors which he thought were relevant to the exercise of the discretion. They can I think briefly be summarised in this way. The circumstances of each case are of particular importance but the aim of Article 28 is to avoid parallel proceedings and conflicting decisions. In a case of doubt it would be appropriate to grant a stay. Indeed, he appears to have approved the proposition that there is a strong presumption in favour of a stay. However, he identified three particular factors as being of importance: (1) the extent of the relatedness between the actions and the risk of mutually irreconcilable decisions; (2) the stage reached in each set of proceedings; and (3) the proximity of the courts to the subject matter of the case. In conclusion the Advocate General said at para 79 that it goes without saying that in the exercise of the discretion regard may be had to the question of which court is in the best position to decide a given question. On the facts here those questions can be considered together. As I see it, the issues are not dissimilar from those considered by Cooke J in Primacom at para 65, where he said this: Even if I had found that these two sets of proceedings and the German proceedings were related within the meaning of article 28, 'the strong presumption' which 'lies in favour of the applicant' on an application for a stay would be overridden here by virtue of the terms of the SSFA. Although the ECJ decision in Gasser means that a stay is mandatory where article 27 applies, there is no reason why weight should be given to that decision in the context of article 28, where a discretion is given to the court, the jurisdiction of which has been agreed by the parties as exclusive. It is nothing to the point that an English court could not have issued an anti suit injunction to prevent the German proceedings (as per C 159/02 Turner v Grovit [[2005] 1 AC 101]). The injustice of giving precedence to proceedings brought in breach of an exclusive jurisdiction clause where the parties have agreed that England is the appropriate forum is self evident. To breach the clause and to gain the benefit of priority for the German courts by such breach offends justice, where the court has a discretionary decision to make. In my opinion, similar considerations apply here. Although the true construction of the settlement agreements and the question whether Starlight and OME are in breach of them is ultimately a matter for the court which finally determines the summary judgment application or for the court at trial, there is a strong argument (to put it no higher) that the Greek proceedings have been brought by Starlight and OME in breach of the settlement agreements, which are subject to the exclusive jurisdiction of the English courts and/or in breach of the exclusive jurisdiction clauses in the insurance contracts. I would reject the submission that those considerations are impermissible in the light of the decision in Gasser. It was there held that, if the criteria for ordering a mandatory stay under Article 27 are satisfied, then the court second seised must stay its proceedings even if the court second seised has jurisdiction under an exclusive jurisdiction clause falling within Article 23. That conclusion was reached on the basis that, under Article 27, where there are two sets of proceedings which involve the same cause of action and the same parties, the court second seised is obliged to order a stay. The Regulation only permits one set of proceedings to continue. The position is quite different under Article 28, which clearly contemplates that where there are two related sets of proceedings they may proceed in parallel. That conclusion follows from the proposition that the grant of a stay is discretionary and not mandatory. In these circumstances, I can see no reason why, in exercising that discretion under Article 28, the court second seised should not take into account the fact that the parties had previously agreed (or arguably agreed) an exclusive jurisdiction clause in favour of that court. On the contrary, depending upon the circumstances of the particular case, that seems to me to be likely to be a powerful factor in support of refusal of a stay. After all, Recital 14 expressly provides: The autonomy of the parties to a contract, other than an insurance, consumer or employment contract, where only limited autonomy to determine the courts having jurisdiction is allowed, must be respected subject to the exclusive grounds of jurisdiction laid down in this Regulation. There is a close relationship between the claims in England and the subject matter of the claims in Greece. The natural court to consider the issues raised by the CMI and the LMI is the High Court in England because they raise contractual questions governed by English law and because it is at least arguable that the parties have agreed that they should be decided by the High Court, where the proceedings are more advanced than in Greece. After all, the judge granted summary judgment as long ago as December 2011. The court in Greece will then have the benefit of the decision of the court which, in the Advocate Generals language, is in the best position to decide these issues. Once there is a final judgment of the English courts, it will be recognisable in Greece, as elsewhere in the EU and will assist the Greek court. In this way, the principles of mutual trust upon which the Regulation is founded will be respected and there will be no risk of irreconcilable judgments. In these circumstances I would uphold the decision of the judge in refusing a stay under Article 28. There is no need for a reference to the CJEU because the question I would have referred does not arise given my conclusion on the exercise of discretion. It was at one time suggested that there is a referable question as to whether Article 28 gives the court second seised a choice between staying the proceedings under Article 28(1) and declining jurisdiction under Article 28(2). However, that suggestion was abandoned before the hearing. I would in any event have rejected it as unarguable. There is no support whatever for it in the language of Article 28 and none of the sources referred to supports the conclusion. The discretion is to stay or not to stay under Article 28(1) and to decline or not to decline jurisdiction under Article 28(2). The Court may thus both refuse to stay and refuse to decline jurisdiction. As the Advocate General explained in Bracco, all depends upon the circumstances. Too late? The remaining question is whether the Court of Appeal was wrong to reject submissions made on behalf of the appellants that it was too late for the respondents to rely upon Article 27. This is another part of the case where the facts seem to me to be startling. The appeal on this point is brought by the LMI and not the CMI but it is I think accepted that, if the appeal succeeds, the CMI will be able to take advantage of it. The most important point raised by this part of the appeal is whether the courts had a discretion to hold that the LMI should not be permitted to rely upon various procedural acts and omissions on the part of the respondents in response to their attempt at a late stage to rely upon Article 27 of the Regulation or whether, once the point was brought to its attention, the Court of Appeal was bound to consider Article 27 (as quoted at para 24 above) because it expressly provides that, where the conditions are satisfied any court other than the court first seised shall of its own motion stay its proceedings until such time as the jurisdiction of the court first seised is established. I have reached the conclusion that the answer is that the appellants were entitled to rely upon the acts or omissions of the respondents and that, having regard to what had happened before Judge Mackie QC and the judge, the Court of Appeal was not bound to take the point of its own motion. Moreover, subject to a possible reference, I would hold that the Court of Appeal should have considered the acts or omissions of the respondents and have held that it was too late for the respondents to rely upon Article 27. The question of the scope of the Court of Appeals duty to take the point of its own motion in circumstances of this kind is however an important point on the construction of Article 27 and, if it were necessary for the determination of the appeal, I would refer it to the CJEU. However, if the LMI abandon their claim or claims for a declaration of non liability a reference will not be necessary for the determination of the appeal. If they do not, my present view is that it will. The relevant chronology, which I take from the Statement of Facts and Issues, is briefly as follows. I will omit references to the CMI proceedings, in which the applications were heard at the same time as those in the LMI proceedings. By application notice dated 3 August 2011, the LMI applied for wide ranging relief against Starlight to enforce the LMI settlement agreement. By application notice dated 18 August 2011 the LMI sought permission to join OME and to serve OME out of the jurisdiction. As explained earlier, the LMI commenced 2011 Folio 702 against Starlight and OME in order to enforce the LMI settlement agreement. They also commenced 2011 Folio 1043 only against the co assureds, which was an action founded solely on the exclusive jurisdiction clause in the policies. On 20 September 2011 the LMI obtained permission from Judge Mackie QC to issue a Part 20 claim against OME in 2006 Folio 815 and, lest it be needed, to serve that Part 20 claim form and the claim forms in 2011 Folios 702 and 1043 out of the jurisdiction and to serve them on Lax & Co in London. The applications were supported by a witness statement by their solicitor, Mr Zavos, in which he referred both to possible stays under Article 27 and Article 28 giving reasons why stays should not be granted. The orders gave notice to each of Starlight, OME and the co assureds that: You may apply within seven days after the date of service of this Order on you to have the Order set aside or varied. This time limit does not apply to an application to dispute the jurisdiction of the Court in respect of which the procedure in CPR Part 11 as modified by CPR Part 58 applies No such application was made. Starlight did not serve evidence within the time provided in the CPR. However, on 4 November 2011 they served evidence which included an express request by Mr Crampton of Lax & Co that the relief sought by the appellants on the merits be denied, alternatively that the matter be referred to a full trial, with provision for disclosure and exchange of witness and expert evidence. On 7 November Starlight, OME and the co assureds each filed a defence on the merits in the relevant action, having first obtained an extension of time for doing so. Each of the defences included a paragraph which stated: The claims in the Greek Proceedings fall outside the jurisdiction clause in the policy and the jurisdiction clause in the Settlement Agreement. It is respectfully denied therefore that the High Court of Justice of England and Wales has jurisdiction to determine the claims in the Greek Proceedings The grounds on which Starlight, OME and the co assureds opposed the appellants claims and applications for summary relief, were in summary that the claims brought in the Greek proceedings (1) did not fall within the scope of the releases contained in the LMI settlement agreement or the CMI settlement agreement; (2) did not fall within the scope of the indemnities contained in the settlement agreements; and (3) did not fall within the scope of the jurisdiction clauses contained in the settlement agreements or in the policies. Following service of the defences, the LMI applied for summary judgment in all the actions and all the applications were fixed to be heard on 28 and 29 November at the same time as the application for summary relief against Starlight in the 2006 proceedings. In their skeleton argument prepared for those hearings, which were served on 23 November 2011, the LMI included the following: 71. There has been no application for a mandatory stay under Article 27 of the Judgments Regulation in respect of the [LMIs] claims to enforce the jurisdiction clause in the contract of insurance, and to enforce the terms of the [LMI] Settlement Agreement. This is (no doubt) because the claims are different claims from the claims advanced by the Assureds in Greece. On 25 November 2011, Starlight, OME, and the co assureds, through their former counsel, James Drake QC and Emma Hilliard, provided their skeleton argument to the court, which expressly disavowed any application under Article 27, in these terms: 69. It is well established that in order for Article 27 to operate there must, when comparing the two sets of proceedings in issue, be three identities: of parties, of cause, and of objet: see generally Briggs & Rees, Civil Jurisdiction and Judgments (5th ed 2009) at paras 2 227 to 2 231. 70. Starlight does not here contend that there is here an identity of cause and objet between the Greek proceedings and the Insurers applications. Although designed to preclude in so far as possible, and from the outset a clash of verdicts, the operation of Article 27 (as distinct from Article 28) is highly restricted in its actual operation. Comparison must be made between the claims made in the two actions, regardless of possible defences, to see whether they proceed on essentially the same facts and under the same rule of law. In the footnotes they referred to the cases I have discussed earlier, including Gubisch, Gantner and The Tatry. It is thus plain that before the matter came before the judge the respondents had made a clear and reasoned decision not to rely upon Article 27. Moreover, there is no reason to think that the judge did not consider the points they made and accept them. They relied only on Article 28. They did so pursuant to an application made by application notice dated 24 November 2011. However that application was out of time. So, by further application notices in each action dated 28 November 2011, the respondents applied for permission to make the Article 28 application out of time, and for relief from sanctions pursuant to CPR Part 3. The sanction referred to was that imposed by CPR Part 11, which provides that a defendant who files an acknowledgment of service and fails to apply to the court within the time allowed under the CPR for an order declaring that it has no jurisdiction or should not exercise any jurisdiction which it may have, is to be treated as having accepted that the court has jurisdiction to try the claim: CPR rule 11(5). As stated in para 19 above, the judge dismissed the stay application under Article 28 and held that the appellants were entitled to summary judgment. He held that (1) each of the claims made by Starlight, OME, and the co assureds against the appellants in Greece is in breach of the exclusive English jurisdiction agreement in the policies; (2) each of the claims made by Starlight and OME against the appellants in Greece is in breach of the jurisdiction agreements in the settlement agreements which provide for exclusive English jurisdiction; (3) each of the claims made by Starlight and OME against the appellants in Greece is in breach of the terms of the settlement agreements; (4) each of Starlight, OME and the co assureds is liable in damages to the insurers for breach of contract and under Section 50 of the Senior Courts Act 1981; and (5) each of Starlight and OME is bound to indemnify and hold the insurers harmless against each of the claims in the Greek proceedings pursuant to the indemnities in the settlement agreements. The judge handed down his judgment on 19 December 2011 and fixed 2 February 2012 for the hearing of consequential applications. In the meantime, on 7 December 2011 Thomas Cooper had replaced Lax & Co as the respondents solicitors. On 24 January 2012 draft grounds of appeal were served which included for the first time reliance on Article 27. They were considered in a somewhat amended form by the judge. The judge granted permission to appeal on a number of grounds including the Article 27 point. As to that he said that he would not have given permission on that point alone, as he put it, not least because the Article 27 case could become the subject of an independent application at first instance at any time hereafter. He recognised that this would have the effect of turning the Court of Appeal into a first instance court but concluded that it could be argued without the need for further evidence and without a great addition of time. In the Court of Appeal the appellants relied upon the provisions of CPR Part 11, but the Court of Appeal held that it did not apply because applications under Articles 27 and 28 are not challenges to the jurisdiction. It further held that it was bound to take the Article 27 point of its own motion. The LMI say that the Court of Appeal was wrong on both points. CPR Part 11 provides, so far as relevant as follows: (1) A defendant who wishes to (a) dispute the court's jurisdiction to try the claim; or (b) argue that the court should not exercise its jurisdiction, may apply to the court for an order declaring that it has no such jurisdiction or; should not exercise any jurisdiction which it may have. (2) A defendant who wishes to make such an application must first file an acknowledgment of service in accordance with Part 10. (3) A defendant who files an acknowledgment of service does not, by doing so, lose any right that he may have to dispute the courts jurisdiction. (4) An application under this rule must (a) be made within 14 days after filing an acknowledgment of service; and (b) be supported by evidence. (5) If the defendant (a) files an acknowledgment of service; and (b) does not make such an application within the period specified in paragraph (4), he is to be treated as having accepted that the court has jurisdiction to try the claim. (6) An order containing a declaration that the court has no jurisdiction or will not exercise its jurisdiction may also make further provision including (a) setting aside the claim form; (b) setting aside service of the claim form; (c) discharging any order made before the claim was commenced or before the claim form was served; and (d) staying the proceedings. In an action in the Commercial Court such as this CPR 11(4) is varied by CPR 58.7(2) so that the application under CPR 11(1) must be made within 28 days after filing an acknowledgment of service and not 14 days. As I understand it acknowledgments of service were filed in each case. The position under CPR Part 11 is different from the position under the former Rules of the Supreme Court, under which the equivalent rule, namely RSC Order 12 rule 8(1), did not include an application for a stay. By contrast CPR 11(1)(b) applies to an application for an order that the court should not exercise its jurisdiction. An application for a stay is precisely that. An application for a stay under Article 27 is thus an application within CPR 11(1)(b). The applicant must file an acknowledgment of service and must make an application within 28 days. The respondents did not do that. Nor did they seek an extension of time to so do within the CPR. It is arguable that the effect of CPR 11(5) is that their failure to do so means that they are treated as accepting that the court both has jurisdiction and that it is free to exercise it. The difficulty is that the wording of paragraph (5) may only relate to the existence of the jurisdiction rather than the exercise of it. This point was left open in Texan Management Ltd v Pacific Electric Wire & Cable Company Ltd [2009] UKPC 46 at paras 68 and 69. However that may be, the LMI rely upon the voluntary submission to the jurisdiction evidenced by the acknowledgment of service and the service of a defence. They also rely upon the clear and unequivocal statement of the respondents position in their skeleton argument before the judge. It is plain from the terms of the concession quoted at para 106 above that serious thought had been given to the question both of whether to make the concession and of the basis on which it was to be made. In these circumstances, unless there is some rule of European law to the contrary, it appears to me that the Court of Appeal should have considered whether, in the exercise of their discretion to permit argument on a new point, they should exercise that discretion in favour of the respondents or not. Moreover, it appears to me that, given the clear basis on which the concession was made and, given that the judgment had proceeded on that basis, the Court of Appeal should have held that it had a discretion under CPR rule 11(1) to permit an application under the rule to be made out of time but should have refused to exercise it. However it is said that on the true construction of Article 27, the court, including on these facts the Court of Appeal, has a duty to consider the application of Article 27 of its own motion whenever the point is taken. This strikes me as extremely improbable. I would accept the submissions of the LMI in this respect. The CJEU has recognised the importance of national rules of procedure. Thus, for example, in Shevill v Presse Alliance SA (Case C 69/93) [1995] 2 AC 18 the CJEU said: 35. the object of the [Brussels] Convention is not to unify the rules of substantive law and of procedure of the different contracting states, but to determine which court has jurisdiction in disputes relating to civil and commercial matters in relations between the contracting states and to facilitate the enforcement of judgments: see Kongress Agentur Hagen G.m.b.H vs Zeehaghe B.V. (Case C 365/88) [1990] E.C.R. 1 1845, 1865, para. 17. 36. Moreover, the court has consistently held that, as regards procedural rules, reference must be made to the national rules applicable by the national court, provided that the application of those rules does not impair the effectiveness of the Convention: paragraphs 19 and 20 of [Kongress Agentur Hagen G.m.b.H. vs Zeehaghe B.V. (Case C 365/88) [1990] E.C.R. 1 1845]." I would accept the LMIs submission that Article 27 is part of European law and overrides national law which is incompatible with it. It does not however follow from this proposition that English procedural rules were overridden. A national procedural rule must not impair the effectiveness of Article 27. It must not render the exercise of rights conferred by EU law impossible or excessively difficult: Amministrazione delle Finanze dello Stato v SpA San Giorgio (Case 199/82) [1983] ECR 3595, [1985] 2 CMLR 658. This is the principle of effectiveness, which involves considering whether the rule can operate consistently with Article 27, or whether it is incompatible with it. The procedural rule should not be less favourable than those governing similar domestic actions, which is the principle of equivalence: see eg Interfact Ltd v Liverpool City Council [2011] QB 744, Kapferer v Schlank and Schlick GmbH (Case C 234/04) [2006] ECR I 2585 at paras 19 to 22, Kbler v Austria (Case C 224/01) [2004] QB 848; and Eco Swiss China Time Ltd v Benetton International NV (Case C 126/97) [1999] ECR I 3055. I refer only to Interfact, where the Court of Appeal refused to exercise its discretion to allow cases to be reopened under CPR 52.17, so as to give a remedy for infringement of a provision of European law. Lord Judge CJ, delivering the judgment of the Court of Appeal, said : 41 In general, EU law does not require national courts to disapply their own procedural rules in order to secure the vindication of EU rights. In Kapferer v Schlank & Schick GmbH the Austrian Supreme Court was seised of an appeal in which the respondent had failed to lodge within the time stipulated a respondent's notice taking a point on jurisdiction under the Brussels Convention. The court referred to the Court of Justice the questions whether it was, nevertheless, bound to take the point of EU law of its own motion and whether EU law required a national court to review and set aside a final judicial decision in circumstances where it later became apparent that the decision of the court was in breach of EU law. The Court of Justice held that a national court is not so bound 44 . [Kapferer] establishes as a matter of general principle that EU law does not require a national court to reopen a final judicial decision, even if failure to do so would make it impossible to remedy an infringement of a provision of EU law: see the Kapferer case, at para 21; Amministrazione dell'Economia e delle Finanze and Agenzia delle Entrate v Fallimento Olimpiclub Srl (Case C 2/08) [2009] ECR I 7501, para 23; Asturcom Telecommunicaciones SL v Rodrguez Nogueira (Case C 40/08) [2010] 1 CMLR 865 para 37. 49. The Court of Justice has upheld national time limits and limitation periods on grounds of legal certainty and the need to ensure finality in decision making, even though the effect has been to preclude enforcement of an EU law right: see, for example, Palmisani v Istituto Nazionale della Previdenza Sociale (INPS) (Case C 261/95) [1997] ECR I 4025; Fantask A/S v Industriministeriet (Ehrvervsministeriet) (Case C 188/95) [1997] ECR 1 6783. Finally, I would accept these submissions made by the LMI. Under English law a final judgment on the merits should not be set aside without very solid grounds: Brown v Dean [1910] AC 373 at 374, per Lord Loreburn. Interest republicae ut sit finis litium. This is part of the common tradition of the legal systems of the Member States: Rewe Zentralfinanz eG and Rewe Zentral AG v Landwirtschaftskammer fr das Saarland (Case C 33/76) [1976] E.C.R. 1989. As quoted above, in Interfact the Court of Appeal rejected the argument that, where an appellate court has a discretion to exercise under national procedural law to allow a final judgment to be challenged on appeal, it must exercise that discretion so as to remedy the infringement of EU law. In my judgment, there is no sensible basis upon which it can be said that the time limit under CPR 11(4), which can in an appropriate case be extended under CPR 3.1(2)(a), is contrary to EU law. The time limit satisfies the principle of equivalence because it is the same rule that applies in all cases. It fulfils a legitimate aim, namely making sure that points going to whether the proceedings are to be tried on their substantive merits in England are taken promptly and without unnecessary costs. It satisfies the principle of legal certainty because parties need to know where they stand. The absence of a time limit would allow a litigant to take the point years afterwards. Moreover, the time limit does not render the right to apply for a stay under Article 27 (or Article 28) impossible or excessively difficult to exercise. It allows sufficient time for the point to be raised, especially given the express rule permitting an extension of time in appropriate cases. As to the expression of its own motion in Article 27, there are a number of different parts of the Regulation that have a similar provision. On the facts here the potential for a stay under Article 27 was before the courts on at least two occasions. The position was explained to Judge Mackie QC on the without notice application referred to above. There is no reason to think that he did not give consideration to the position. More importantly perhaps the position was explained to the judge in the skeleton arguments to which I have referred. He was given both reasons and authority on the question whether a stay should be granted under Article 27. It seems to me that the judge was entitled to accept those submissions, which were made on the respondents behalf by experienced counsel and solicitors. For these reasons I would hold that the Court of Appeal should have refused to allow the respondents to rely upon Article 27 in the Court of Appeal. That said, I would accept that the meaning and effect of the duty to consider Article 27 of its own motion are matters of some potential importance and I have (somewhat reluctantly) reached the conclusion that they are not acte clair. I would therefore refer an appropriate question to the CJEU if it were necessary in order to resolve the appeal. If the appellants abandon the claims to the declarations referred to in paras 58 and 59 above, such a reference will not be necessary because, for the reasons given above, I would allow the appeals under Article 27 in their entirety. It seems to me that rather different considerations apply to Article 28 and that the Court of Appeal were entitled to consider Article 28 as part of the appeal from the decision of the judge who had considered it in detail. CONCLUSIONS For these reasons I would invite the CMI and the LMI to consider whether they wish to pursue their claims for declarations (referred to in paras 58 and 59 above) that the Greek claims fall within the terms of the release in the settlement agreements or that under the agreements the tort claims have been settled. As Lord Neuberger observes, those are the claims described in para 18(a)(1)(i), 18(a)(2)(i) and 18(b)(i) above. They should indicate their position within 14 days of this judgment being handed down. If they persist in their claims, some limited questions should be referred to the CJEU as described above. The decision whether to stay those claims would then await the result of the reference, although I would allow the appeal under Article 27 in respect of the other claims. If they abandon them, I would allow all the appeals of both the CMI and the LMI under Article 27. I would in any event dismiss the respondents cross appeal under Article 28 and I would hold that their application for a stay under Article 28 should be refused as a matter of discretion. The parties should make written submissions on the form of order and costs within 21 days of the handing down of this judgment. Finally, I would like to thank all counsel and solicitors for their assistance in this unusual and in some respects difficult case. LORD NEUBERGER Subject to one point, I entirely agree with Lord Clarkes reasoning and conclusions. The one point concerns the issue discussed in paras 44 46 and 58 59 of Lord Clarkes judgment and in Lord Mances judgment. That issue is whether (i) LMIs claim in England for a declaration that the Greek claims have been settled, and (ii) CMIs claim in England for a declaration that the Greek claims were compromised (the English declaration claims, described in para 18(a)(1)(i), 18(a)(2)(i) and 18(b)(i) of Lord Clarkes judgment) should be stayed under Article 27. In my view, if that issue remains live, it should be referred to the CJEU, as I do not regard it as acte clair. I see the force of Lord Clarkes view that the English declaration claims do not have le mme objet et la mme cause, if one gives that expression a very narrow effect. I also accept that, particularly in the light of the existence of Article 28, there is good reason to give Article 27 a relatively narrow meaning, as Rix J pointed out in Glencore International AG v Shell International Trading and Shipping Co Ltd [1999] 2 Lloyds Rep 692, 697. I also accept that the decisions of the CJEU cited by Lord Clarke at paras 26 28 of his judgment support the contention that Article 27 has a relatively narrow ambit of application. However, it is also important to appreciate that the fundamental purpose of Article 27, as explained by the CJEU, is to ensure that judgments obtained in one member state are enforceable in other member states, and that the consequence of this is that one should avoid mutually inconsistent judgments. The purpose of Article 27 is to help achieve that end. It seems to me that, if the Greek court were to give Starlight and OME judgment for a particular sum in respect of its Greek claims, and the English court were to give judgment in favour of LMI and CMI in the form of a declaration that those very claims have been settled or compromised, the two judgments would be incompatible as a matter of principle and logic. It is not possible for a court to award a claimant damages in respect of a claim which has been compromised with the defendant. To put the point another way, to say that a defendant currently owes a claimant damages in respect of a claim which the defendant has settled or compromised with the claimant involves an illogicality. Accordingly, it seems to me that there is a real case for saying that the English declaration claims should be stayed. The difference between the English declaration claims and CMIs and LMIs claims in England for an indemnity and damages for breach of the settlement agreements (the English indemnity and damages claims, as described in paras 18(a)(1)(iii), (v) and (vi), 18(a)(2)(iii) and (iv) and 18(b)(ii), (iii) and (iv) of Lord Clarkes judgment) may appear to be relatively small, but I believe that there is a crucial distinction, as a result of which it is acte clair that the English damages and indemnity claims do not fall foul of Article 27. The crucial difference is that, if those claims were successful, they could not lead to inconsistent judgments in England and Greece. I accept that, if they were successful, the English indemnity and damages claims could be fairly said to neutralise, at any rate in commercial terms, any benefit to Starlight and OME of a judgment in the Greek claims. However, crucially in my view, success for LMI and CMI in the English indemnity and damages claims would not be logically inconsistent in any way with success for Starlight in the Greek claims. It is not inconsistent (although it is commercially pointless) to say that a defendant is liable to pay a claimant a sum by way of damages, while the claimant is bound to indemnify the defendant in respect of the whole of that sum (or is bound to pay an equivalent sum to the defendant). Indeed, the indemnity is not merely logically consistent with the liability: it is positively meaningless without the liability for damages, and the liability for damages, though rendered nugatory by the indemnity, is not logically inconsistent with the indemnity. LORD MANCE General I am in substantial but not complete agreement with the reasoning and conclusions reached in the course of the judgment prepared by Lord Clarke, although, ultimately, as will appear, we agree on the proper disposition of these appeals. The differences between Lord Clarke and myself relate to the significance and operation of article 27 of the Council Regulation (EC) No 44/2001 (the Brussels Regulation) with regard to the respondents Greek claims. I have no difficulty in agreeing with Lord Clarkes conclusions regarding the English claims made by CMI and LMI for damages for (i) breach of the exclusive jurisdiction clauses in the Settlement Agreements and insurance policies and (ii) indemnity under clauses 3 and 4 of the respective Settlement Agreements. Such claims do not assert that there is no tort liability because of the Settlement Agreements. They assert (i) that the respondents are claiming in the wrong jurisdiction and (ii) that the respondents have agreed to indemnify them in respect of any tort claims (valid or not) by the respondents themselves as well as by others arising from the loss of the vessel. However, I do not accept the reasoning by which Lord Clarke reaches his conclusions with regard to these claims for damages and the further release claims (as Lord Clarke conveniently calls them) which he addresses in paras 40 to 59 of his judgment. This difference becomes important in relation to the first head of the release claims, as I shall show. One strand of Lord Clarkes reasoning is that the English claims based on the Settlement Agreements cannot be the mirror image of the Greek tort claims, because they involve contract and tort claims and cannot constitute the same cause of action: para 34, third sentence, para 41, second and third sentences and para 43, second and last sentences. Another strand is that it is relevant or conclusive that the English and Greek claims do not interfere with each other, and, in particular, that the Greek claims do not impugn the settlement agreements: para 35, first and second sentences and para 37, in its entirety. Neither of these strands of reasoning is in my opinion sustainable, for reasons which I will explain. The release claims The release claims need a little analysis. There are three heads. The first head is summarised by the respondents themselves and by Lord Clarke (para 18(a)) as involving claims for declarations that the Greek claims fall within the terms of the release. But this head is in fact pleaded by LMI as a claim for a declaration that the Greek claims have been settled (application notice, para (1) 1 and 3), while CMI plead that the Greek claims were compromised (particulars of additional claim, para 10) and follow this with a claim for a declaration that the Greek claims fall within clause 2 of the CMI Settlement Agreement (particulars of additional claim, para 27(a)). These are clear statements (right or wrong as they may prove to be) that the Greek claims have been settled or compromised within the terms of the Settlement Agreements. The second and third heads are claims for a declaration that the bringing of the Greek claims was a breach of the release in each of the Settlement Agreements and for damages for such breach. They must stand or fall together. They raise different considerations from the first head. The first head of release claim The English claims that the Greek claims have been settled or were compromised are in my opinion mirror images of the Greek tort claims. The English pleas mean, and can only mean that the English claimants are not liable for the Greek tort claims. The legal effect of these English statements is (under English eyes and, I am confident, European law) that the Greek claims are no more. If an English court were to give a judgment to that effect, and there was no prior Greek judgment or other reason for non recognition, the Greek court ought under the Brussels Regulation to accept it. It cannot make any difference to the application of article 27 that the reason for non liability is a contractual settlement agreement. The only point of enforcing the contract is to show that there are no valid Greek tort claims. The Greek claims aim to enforce tort liabilities. The first head of the English claims aims to establish that there are no such valid tort liabilities, because they have been settled. The Greek and English claims cannot stand together. The concepts used in article 27 (such as cause of action or the concept of same object which one must read into the English text) are autonomous European concepts: Gubisch v Palumbo Case 144/86, [11] and The Tatry Case C 406/92, [47]. In the latter case, the European Court of Justice said that the cause of action comprises the facts and the rule of law relied on as the basis of the action and that the object of the action for the purposes of article [27] means the end the action has in view [39] [41]. An analysis of the cases helps to understand what was meant. Gubisch v Palumbo happened to concern a situation where the mirror image claims were in a general sense contractual. The German claim was for the price of machinery delivered. The later Italian claim by the buyer was, firstly, that there was no liability because he had revoked his offer before it had reached the seller for acceptance strictly, this was not a contractual claim, but a claim that there was no contract and, secondly, that, if there was a contract, his consent was vitiated and the contract should be set aside for mistake or on the ground of the sellers fraud, or, thirdly, that any contract had been discharged on account of the sellers late delivery. Both the question referred and the Court of Justices summary of the facts embraced all three aspects of the Italian claim: see e.g. judgment [2] and [4]. The subsequent reasoning and the answer given refer to mirror image claims, one seeking enforcement, the other seeking rescission or discharge, of a contract: see [13] and [15] and the Courts answer. The Court said [17] that it must be held that the two actions have the same subject matter, for that concept cannot be restricted so as to mean two claims which are entirely identical. The absence of express reference at these points to the first Italian claim (that no contract had ever been concluded) cannot mean that the Court was drawing any distinction between that claim and the other two. On the contrary, the inference is that it saw it as posing no different issue. It could not have made any difference to the Court of Justices conclusions if, instead of or in addition to some or all of the pleas actually made in the Italian proceedings, the Italian claimants had alleged that the contract had been rescinded or discharged under some separate subsequent agreement, whether, for example, by novation or by some compromise relating to the parties past dealings or outstanding issues. Nor, in a situation in which concurrent contract and tort claims are possible (see e.g. Henderson v Merrett Syndicates Ltd [1994] UKHL 5; [1995] 2 AC 145), could it be crucial to the application of article 27 whether the foreign claim was being pursued in contract or tort, when the later English claim asserted a settlement agreement wide enough to cover both. Lord Clarke cites at para 28(iii) a useful encapsulation by Cooke J in JP Morgan Europe Ltd v Primacom AG [2005] 2 Lloyds Rep 665, [42], of the meaning of the expression legal rule or rule of law which the Court of Justice used in The Tatry Case C 406/92, [39]. Cooke J suggested that, in investigating cause, it was necessary, after looking at the basic facts, to look at the basic claimed rights and obligations of the parties. Here, the basic claimed rights and obligations of the parties are, in Greece, that the English claimants are liable in tort, and, in England, under the first head which asserts that the Greek claims have been settled, that there is no or no further liability for the Greek claims. The way in which article 27 was applied in The Tatry is also of interest. Having said that the cause of action comprises the facts and the rule of law relied on as the basis of the action [39], the Court of Justice went on: 40 Consequently, an action for a declaration of non liability, such as that brought in the main proceedings in this case by the shipowners, and another action, such as that brought subsequently by the cargo owners on the basis of shipping contracts which are separate but in identical terms, concerning the same cargo transported in bulk and damaged in the same circumstances, have the same cause of action. Here, the English claim that the Greek claims fall within the release and have been settled or compromised concerns, and seeks to negative, the same tort claims as the Greek actions seek to enforce. It can make no difference that the Greek claimants have not sought, pre emptively, to refer to, address or impugn in their Greek claims a possible defence (the Settlement Agreements) that might be raised in the Greek proceedings. One would not expect them to do so, any more than the German claimants in Gubisch v Palumbo addressed or would be expected to address every or any of the multiple arguments that the Italian claimants later deployed. The fact that the English claims do not seek directly to interfere with the Greek claims is also irrelevant. It would anyway be impermissible to claim in England an injunction restraining the Greek proceedings, but, quite apart from that, article 27 and the principle in Gubisch v Palumbo do not depend upon one set of proceedings seeking directly to prevent another. They derive from the principle that Member States must recognise each others judgments, and the aim of avoiding inconsistent judgments. As to the same object, the end which the Greek and English proceedings have in view is the same in each case, to decide the issue of liability for the torts alleged in Greece. That this is what is meant by the same object is clear from both Gubisch v Palumbo and The Tatry. The matter is directly addressed in the latter case in paras 42 to 45: 42 The question accordingly arises whether two actions have the same object when the first seeks a declaration that the plaintiff is not liable for damage as claimed by the defendants, while the second, commenced subsequently by those defendants, seeks on the contrary to have the plaintiff in the first action held liable for causing loss and ordered to pay damages. 43 As to liability, the second action has the same object as the first, since the issue of liability is central to both actions. The fact that the plaintiff's pleadings are couched in negative terms in the first action whereas in the second action they are couched in positive terms by the defendant, who has become plaintiff, does not make the object of the dispute different. 44 As to damages, the pleas in the second action are the natural consequence of those relating to the finding of liability and thus do not alter the principal object of the action. Furthermore, the fact that a party seeks a declaration that he is not liable for loss implies that he disputes any obligation to pay damages. 45 In those circumstances, the answer to the fifth question is that, on a proper construction of Article 21 of the Convention, an action seeking to have the defendant held liable for causing loss and ordered to pay damages has the same cause of action and the same object as earlier proceedings brought by that defendant seeking a declaration that he is not liable for that loss. The reference in [44] to a partys claim for a declaration of non liability implying that it disputes any obligation to pay damages is equally applicable to the present English claims that the Greek tort claims fall within the release or have been settled or compromised. The English claims imply that the Greek claims are disputed. In short, the issue of liability is central to both the Greek and the English proceedings here, as it was to the Dutch and English proceedings in The Tatry. Not merely the same cause of action but also the same object is involved in the present case, as it was in The Tatry. The two sets of proceedings would, if pursued to judgment, lead to judgments which were legally and directly incompatible. It is therefore necessary under article 27 to consider whether it is the Greek or the English courts which fall in this connection to be regarded as first seised. The second and third heads of the release claims The second and third heads are more elusive. Claims for a declaration that the bringing of the Greek claims was a breach, and for damages for the breach, of the release in the Settlement Agreements may on one view be seen as little different from the claims made under the first head. But I have come to the conclusion that this would be wrong. The second and third heads postulate, and for present purposes at least we must accept, that the releases contain some positive continuing promise which the respondents by their Greek claims are now breaching. The terms of the releases were in each case (clause 2 in the case of CMI, clause 3 in the case of LMI) that the respondents would accept underwriters due proportion of the relevant payment in full and final settlement of all and any claims it may have under Policy no. against the Underwriters in relation to the loss of Alexandros T. One must make the assumption, for present purposes, that the Greek tort claims fall within this agreement. The difficulty is that the agreement was performed, in the sense that there was not merely an accord, but an accord and satisfaction. All policy claims were thus not just agreed to be settled, but they actually were settled, and, if and to the extent that that is the nature of the second and third heads of English release claim, they would not in reality differ from the first head. The question therefore arises, what if any outstanding promise could there be left to perform which the second and third heads claim to enforce? I have come to the conclusion that the acceptance of the sums paid in full and final settlement involves, certainly very arguably, a continuing outstanding promise not further to pursue claims of the nature identified in clauses 2 and 3 respectively. Even after the settlement, the pursuit of such claims could cause CMI and LMI loss. Most obviously, such loss could consist in the costs of defending the Greek claims. If they let the Greek proceedings go undefended, it could, subject to issues arising from the potential recognition of any Greek judgment under the Brussels Regulation, include the amount of any judgment awarded against them in the Greek proceedings. Likewise potentially, though subject to additional questions arising from any potential issue estoppel or application of the rule in Henderson v Henderson (1843) 3 Hare 100, even if they unsuccessfully defended the Greek claims. The consequences Accordingly, the second and third heads of release claims, analysed as I have analysed them, are outside the scope of article 27. As regards the first head, the remaining issue is whether the Greek or the English courts fall for the relevant purpose to be regarded as first seised. In so far as the first head of release claims was added into the pre existing English proceedings by an amendment made after the Greek proceedings were begun, is it to be viewed discretely as a new claim of which the English court is second seised? Or does it fall to be viewed as part, by amendment, of a single set of English proceedings commenced well before any Greek proceedings? I agree with Lord Clarke at para 60 that a court is only seised of claims by or against new parties from the date that those parties are added to the proceedings. In relation to the 2006 proceedings, the English court was only seised of claims against OME once OME was joined to the proceedings on 20 September 2011 and, as against OME therefore, the English courts were only seised of the first head of release claims made by CMI and LMI in 2011. Since the first head of release claims is in my opinion the mirror image of the Greek tort claims, article 27 must, on that basis, apply to preclude the pursuit of the first head of release claims as against OME in England. The respondents submit that article 27 also applies to preclude the pursuit in the English proceedings of the first head of claim against Starlight, which was party to the English proceedings from their outset. The Court of Appeal accepted this submission. CMI and LMI challenge it. Lord Clarke has in his paras 61 to 71 set out and discussed the respective submissions. To my mind, the sense of the Regulation as well as the case law and the academic guidance all point in one direction. The chronological priority contemplated by the Regulation cannot be gained, or subverted, by the addition by amendment of a new claim in proceedings otherwise second brought (any more than it can be affected by the addition of new claimants or defendants, as Lord Clarke accepts: para 60). To the authorities under the current Regulation to which Lord Clarke refers, I would only add that similar thinking is to be found under the predecessor provisions of Article 21 and 22 of the Brussels Convention in the decisions at both levels in Grupo Torras SA v Shekh Fahad Al Sabah [1995] 1 Lloyds Rep 374, 418 419 (Mance J) and [1996] 1 Lloyds Rep 7, 24 (CA). Conclusion It follows that the conclusions I would reach, were all the issues to be finally decided now, would be that: The first head of English release claims would be precluded under i) article 27, having regard to what I conclude are in this respect the prior Greek claims. ii) All the remaining heads are outside the scope of article 27 and are permissible. It is however necessary to consider whether these conclusions are founded on principles of European law which are so clear that no reference to the Court of Justice is required. A reference to the Court of Justice In relation to the conclusion expressed in para 161ii, we are all in agreement in our conclusions. Any differences in reasoning regarding article 27 are irrelevant, and no reference is necessary. As to para 161i, Lord Clarke would reach the opposite conclusion to that which I have expressed and he considers in the light of my judgment that a reference is called for, if the English appellants persist in their first head of release claims. With the latter view I agree. The differences between Lord Clarkes and my reasoning are not, I believe, simple differences regarding the application to facts of clear principles of European law. I might by myself have thought that all the relevant principles of European law were clear, but I certainly do not dissent from the proposition that the differences, being material to our respective conclusions, require a reference. If the appellants wish to persist in, rather than abandon, the first head of release claims, there should accordingly be a reference as Lord Clarke suggests. Ultimately, therefore, although by different reasoning, Lord Clarke and I arrive at the same conclusions regarding the appropriate disposition of these appeals.

On 3 May 2006, the vessel Alexandros T sank and became a total loss 300 miles south of Port Elizabeth with considerable loss of life. Her owners were Starlight Shipping Company (Starlight). Starlight made a claim against their insurers, who denied liability on the basis that the vessel was unseaworthy with the privity of Starlight. In response, Starlight made a number of serious allegations against their insurers including allegations of misconduct involving tampering with and bribing of witnesses. On 15 August 2006, Starlight issued proceedings in the Commercial Court against various insurers (the 2006 proceedings). One group of insurers was described as the Company Market Insurers (CMI) and the other group was described as the Lloyds Market Insurers (LMI). Before the hearing, the 2006 proceedings were settled between Starlight and the insurers and the proceedings were stayed by way of a Tomlin Order. In April 2011, nine sets of Greek proceedings, in materially identical form, were issued by Starlight although they were expressed as torts actionable in Greece. The insurers sought to enforce the earlier settlement agreements. Starlight applied for a stay of these proceedings, firstly pursuant to Article 28 then Article 27 of Council Regulation (EC) No 44/2001 (the Regulation) The judge refused to grant a stay under Article 28 and gave summary judgment to the insurers. The Court of Appeal held that it was bound to stay the 2006 proceedings under Article 27, which provides for a mandatory stay, and it was not therefore necessary to reach a final determination of the position under Article 28. Before the Supreme Court, the insurers challenge the correctness of the Court of Appeals conclusion under Article 27 and submit that the judge was correct to refuse a stay under Article 28. Starlight cross appeal on the Article 28 point. Subject to the possibility of a reference to the CJEU on some limited questions, the Supreme Court unanimously allows the CMIs and LMIs appeal. Lord Clarke gives the lead judgment, with which Lord Sumption and Lord Hughes agree. Lord Neuberger agrees adding a short judgment of his own. Lord Mance agrees with the result. Article 27 Article 27 must be construed in its context. The purpose of Article 27 is to prevent the courts of two Member States from giving inconsistent judgments and to preclude, so far as possible, the non recognition of a judgment on the ground that it is irreconcilable with a judgment given by the court of another Member State [23, 27]. In the case of each cause of action relied upon, it is necessary to consider whether the same cause of action is being relied upon in the Greek proceedings. In doing so, the defences advanced in each action must be disregarded [29]. The essential question is whether the claims in England and Greece are mirror images of each other and thus legally irreconcilable [30]. There are three heads of claim in England: indemnity, exclusive jurisdiction and release [32]. None of the causes of action relied upon in the Greek proceedings has identity of cause or identity of object with the CMIs claim for an indemnity. The subject matter of the claims is different. The Greek proceedings are claims in tort (or its Greek equivalent) and the claims in England are claims in contract. As to object, that of the Greek proceedings is to establish a liability under Greek law akin to tort, whereas the object of the CMIs claim is to establish a right to be indemnified in respect of such a liability and to claim damages for breach of the exclusive jurisdiction clauses [34]. The same is true of the CMIs claims in respect of the exclusive jurisdiction clauses in the settlement agreement and/or in the insurance policies [36]. The causes of action based upon an alleged breach of the settlement agreement are not the same causes of action as are advanced in Greece [37]. The same is also true of the claims based on the release provisions in the CMI settlement agreement [40]. The Greek claims are claims in tort and the English proceedings are contractual claims. The factual bases for the two claims are entirely different. Moreover, the object of the two claims is different [41]. The Supreme Court is unanimous that that is the position with regard to the claims for damages for breach of the release provisions in the settlement agreements. However, in so far as the insurers claim declarations, while the majority reaches the same conclusion, Lord Mance reaches a different conclusion on the basis that the claims for declarations in the two jurisdictions are mirror images of each other. The court unanimously decides that, unless the insurers abandon those claims for declarations, the relevant question should be referred to the CJEU for an opinion [59]. In the event, the CMI have now abandoned their claims for declarations based on the release provisions and it is not necessary to refer the question to the CJEU. It follows that the CMIs appeals under Article 27 are allowed. The position of the LMI is essentially the same as in the case of the CMI [55]. If the LMI do the same within the time permitted, their appeals will also be allowed under Article 27. A similar position has been reached in respect of LMIs submission that the appeals under Article 27 should have been rejected by the Court of Appeal as being too late [123]. Article 28 The discretion to stay claims under Article 28 is limited to any court other than the court first seised [74]. On the assumption that the English court is second seised for the purposes of Article 28, the question arises whether the actions should be stayed as a matter of discretion [91]. The circumstances of each case are of particular importance but the aim of Article 28 is to avoid parallel proceedings and conflicting decisions. In a case of doubt it would be appropriate to grant a stay [92]. However, the natural court to consider the issues raised by CMI and LMI is the High Court in England because they raise contractual questions governed by English law and because it is at least arguable that the parties have agreed that they should be decided by the High Court, where the proceedings are more advanced than in Greece [96]. The decision of the judge in refusing a stay under Article 28 is upheld and the cross appeal is dismissed [97, 125].

Under the Mental Health Act 1983 (the MHA), the Crown Court may impose a hospital order together with a restriction order upon a mentally disordered offender, if this is considered necessary to protect the public from serious harm. This means that the patient is liable to indefinite detention in hospital for medical treatment and can only be discharged by the Secretary of State for Justice or the First-tier Tribunal (the FtT). Such a discharge can be conditional, which means that the patient remains subject to recall to hospital, as well as to whatever conditions are imposed by the Secretary of State or the FtT. The question in this case is whether the conditions imposed can, if the patient consents, be such as would amount to a deprivation of liberty within the meaning of article 5 of the European Convention on Human Rights (ECHR). The patient in this case is anxious to get out of hospital and is willing to consent to a very restrictive regime in the community in order that this can happen. The Secretary of State argues that this is not legally permissible. The factual background The patient was born on 11 July 1983 and so is now aged 35. He has a diagnosis of mild learning disabilities, autistic spectrum disorder, and pathological fire setting. On 27 April 2001, when aged 17, he was convicted of arson, being reckless as to whether life would be endangered, and arson. He was made the subject of a hospital order under section 37 of the MHA, together with a restriction order under section 41. Apart from a brief period from December 2006 to April 2007, when he was conditionally discharged, he has been detained in hospital ever since. He is considered to represent a serious risk of fire setting and of behaving in a sexually inappropriate way towards women. His current application to the FtT for a conditional discharge was heard on 15 May 2015. His responsible clinician and the treating clinical team opposed his discharge but considered that he would benefit from a change of environment and a transfer to another low secure forensic unit. Two external experts considered that he could be safely managed in the community under a conditional discharge, provided that a suitable care plan was in place. There was no plan at that stage, but it was envisaged that a suitable plan would involve a level of restriction, supervision and monitoring which would amount to a deprivation of liberty within the meaning of article 5 of the ECHR, as explained by this court in Surrey County Council v P; Cheshire West and Chester Council v P [2014] UKSC 19; [2014] AC 896 (Cheshire West). In short, he would be required to live at a particular place, which he would not be free to leave, and would not be allowed out without an escort. He was prepared to consent to such a placement and it was agreed that he had the capacity to do so. No such placement had yet been identified, and so it was not possible for the FtT to discharge him then. But the FtT was invited to rule upon whether, as a matter of principle, it would be lawful to discharge him on condition that he complied with a care plan which would amount to a deprivation of liberty. The FtT ruled that it had no such power. In doing so, it followed the decision of the Court of Appeal in B v Secretary of State for Justice [2011] EWCA Civ 1608; [2012] 1 WLR 2043 that the FtT had no power to impose conditions which in themselves amounted to a deprivation of liberty. It rejected an argument that this could be circumvented by a condition of compliance with a care plan, because the conditions in the care plan would be imposed by the authority which devised and implemented the care plan, and not by the hospital or the FtT. It also found that any consent which the patient purported to give would not be a genuine, properly considered and reliable consent, given his propensity to change his mind and that the only alternative was to remain in hospital. It made no decision as to whether such a discharge would be appropriate in his case. On the patients appeal to the Upper Tribunal, Charles J decided that there was power to impose a condition of compliance with a care package, provided that the patient had the capacity to consent to it and did consent: [2015] UKUT 644 (AAC); [2016] MHLR 198. On the Secretary of States appeal to the Court of Appeal, the court held that it was bound by the ratio of B, which was clear: there was no power to impose conditions which amounted to a deprivation of liberty, even with the consent of a patient with the capacity to do so, and the appeal was allowed: [2017] EWCA Civ 194; [2017] 1 WLR 4681. The patient now appeals to this court. The legal background Restriction orders have their origin in the Mental Health Act 1959, which is the foundation of the modern mental health law, now contained in the 1983 Act (as later amended, principally by the Mental Health Act 2007). Under an ordinary hospital order, the patient was admitted to hospital for treatment for a defined period, which could be renewed from time to time by his responsible medical officer (now his responsible clinician). He could be discharged by his responsible medical officer, the hospital managers or a Mental Health Review Tribunal (now the FtT). In other words, the length of time he spent in hospital was in the hands of the medical authorities or the tribunal. There was no power to recall him to hospital after discharge, although he could be admitted afresh if the grounds existed. Under what is now called a restriction order, on the other hand, the patients detention lasted indefinitely, and the powers of the responsible medical officer to discharge him or even to grant him leave of absence, could only be exercised with the consent of the Home Secretary (now the Secretary of State for Justice). The Home Secretary had an independent power to grant a discharge, which could be either absolute or conditional; if conditional, the patient could be recalled to hospital at any time. Those powers survive unchanged into what is now section 42(2) and (3) of the MHA 1983. It is not express, but must be implicit, that the Secretary of State has power to vary the conditions from time to time. Other than that, neither the 1959 Act or its successor the 1983 Act said anything about the kinds of condition which might be imposed and they provided no sanctions for their breach, other than the possibility of recall to hospital. Under the 1959 Act, the Mental Health Review Tribunal could review the case periodically, but could only make recommendations to the Home Secretary and had no power itself to grant a discharge. Thus, from the states point of view, a restriction order combined the advantages of a hospital order with the advantages of indefinite preventive detention and a power of instant recall to hospital after a conditional discharge. All of this was enacted before the United Kingdom recognised the right of individual petition to the European Court of Human Rights in 1966. In X v United Kingdom (1981) 4 EHRR 181, a conditionally discharged restricted patient complained that he had been recalled to hospital after three years in the community, without any grounds having to be shown and without immediate recourse to a tribunal which could direct his release. The court held that, under article 5(1)(e) of the ECHR, he could only be detained as a person of unsound mind if the criteria laid down in Winterwerp v The Netherlands (1979) 2 EHRR 387 were fulfilled: he must reliably be shown to be suffering from a true mental disorder, established on the basis of objective medical expertise; the disorder must be of a kind or degree warranting compulsory confinement; and the validity of continued confinement would depend upon the persistence of such a disorder. In Xs case, the court saw no reason to doubt the medical opinion that these criteria did exist when he was recalled to hospital. On the other hand, the court did find a breach of article 5(4), which requires that every person deprived of his liberty by detention shall be entitled to take proceedings by which the lawfulness of his detention shall be decided speedily by a court and his release ordered if the detention is not lawful. The result of this (and other developments) was that the 1959 Act was amended in 1982 and then consolidated in the MHA 1983. Restricted patients detained in hospital were given the right to apply to a Mental Health Review Tribunal within the same periods that ordinary hospital order patients could apply: that is, once within the second six months after detention and once within every 12 months thereafter (section 70). A conditionally discharged patient could apply once within the second 12 months after his discharge and within every two-year period thereafter (section 75(2)). If a conditionally discharged patient is recalled to hospital, his case must be referred to a tribunal within one month of the recall (section 75(1)(a)). He himself can also apply within the same periods after his recall as he could after his initial detention (section 75(1)(b)). Allied to that, the tribunal was itself given the power to discharge a restricted patient, either absolutely or conditionally. Originally, the tribunal had to be satisfied that the grounds for detention did not exist; but this was amended, following a declaration of incompatibility, by the Mental Health Act 1983 (Remedial) Order 2001 (SI 2001/3712). As the MHA now stands, the patient must be discharged if the tribunal is not satisfied that all the grounds for his detention continue to exist: ie that he is suffering from mental disorder or from mental disorder of a nature or degree which makes it appropriate for him to be liable to be detained in a hospital for medical treatment; or that it is necessary for the health or safety of the patient or for the protection of other persons that he should continue to receive such treatment; or that appropriate medical treatment is available for him (section 72(1)(b)(i), (ii) and (iia)). If the tribunal is (a) not so satisfied and (b) is satisfied that it is not appropriate for the patient to remain liable to be recalled to hospital for medical treatment, it must direct his absolute discharge (section 73(1)). Where (a) applies but (b) does not, the tribunal must direct his conditional discharge (section 73(2)). Where a tribunal directs a conditional discharge, the Secretary of State may recall the patient to hospital at any time under section 42(3) (section 73(4)(a)). The patient must also comply with the conditions imposed by the tribunal at the time or by the Secretary of State at any later time (section 73(4)(b)). The Secretary of State may vary the conditions set either by the tribunal or by himself at any time (section 73(5)). Thus the Secretary of State is in complete charge of what the conditions are and whether the patient should be recalled to hospital. There are no sanctions for breach of the conditions other than recall to hospital, which may be at any time. No criteria for recall are laid down in the MHA. However, the logic of X v United Kingdom is that at least the Winterwerp criteria must be satisfied; and in any event, the tribunal will have to discharge the patient once more if not satisfied that the MHA criteria are met (and see R (MM) v Secretary of State for the Home Department [2007] EWCA Civ 687, (2007) 98 BMLR 130, where it was agreed that breach of a condition was not a free-standing ground for recall and the Secretary of State must form a view of whether the statutory criteria are met). However, the MHA says nothing, and has never said anything, about what the conditions may be. In practice, the Secretary of State will usually impose conditions of residence at a stated address and for both clinical and social supervision. The social supervisor provides practical support, for example in accessing the aftercare services to which the patient is entitled under section 117 of the MHA, and is expected to have regular meetings with the patient (Ministry of Justice, Guidance for social supervisors, 18 March 2009). The clinical supervisor is responsible for the regular assessment of the patients mental health and monitoring his medication (Ministry of Justice, Guidance for clinical supervisors, 18 March 2009). The Ministry expects reports from both supervisors after the first month and every three months thereafter. It is usually a condition that the patient shall comply with treatment as directed by the clinical supervisor (para 23 of the Guidance for clinical supervisors). However, the power to impose treatment without consent upon hospital patients, by force if need be, contained in section 63 of the MHA, does not apply to conditionally discharged restricted patients (section 56(3)(c), as substituted by section 34(2) of the 2007 Act). A patient is entitled to refuse treatment unless he lacks the capacity to make the decision, in which case the Mental Capacity Act 2005 (MCA) may permit treatment which is in his best interests, but will only permit coercion in order to impose treatment in very limited circumstances (MCA, sections 5 and 6). Hence, in R (SH) v Mental Health Review Tribunal [2007] EWHC 884 (Admin); (2007) 10 CCLR 306, Holman J rejected a challenge to the legality of a condition to comply with treatment as being contrary both to the common law right to choose what medical treatment to have and to the right to respect for private life in article 8 of the ECHR. Although the condition said shall comply, the patient remained free to choose whether or not to have the treatment at each and every time when he was required to do so. That refusal would not, by itself, necessarily lead to his recall to hospital. Nevertheless, the Secretary of States policy on recall states that failure to comply with medication will usually trigger consideration of whether the patient should be recalled, as would non-compliance with other conditions. Whether the patient is in fact recalled depends on a range of factors (Ministry of Justice, The recall of conditionally discharged restricted patients, 4 February 2009, paras 5 and 7). The arguments The purpose of conditional discharge is to enable the patient to make a safe transition from the more institutional setting of a hospital to a less institutional setting in the community. Transition through progressively less secure hospital conditions before discharge into the community is common and conditional discharge is part of the same continuum. As Lord Bingham put it in R (H) v Secretary of State for the Home Department [2003] UKHL 59; [2004] 2 AC 253, at para 26: the conditional discharge regime, properly used, is of great benefit to patients and the public and conducive to the Convention object of restricting the curtailment of personal liberty. If there is any possibility of treating and supervising a patient in the community, the imposition of conditions permits that possibility to be explored and, it may be, tried. So why, in an appropriate case, asks Mr David Lock QC on behalf of the patient, should that purpose not be served by a transition into a community setting which is different from a hospital but nevertheless amounts to a deprivation of liberty, because the patient is under continuous supervision and control and not free to leave? If this condition cannot be imposed, the patient will stay in hospital longer than he otherwise would have done and the MHAs rehabilitative purpose will be frustrated. He argues that there is nothing in either the common law interpretation of section 73(2) (or for that matter section 42(2)) or in article 5 of the ECHR to prevent the imposition of such a condition where the patient consents to it and has the capacity so to do. As to the common law, the interpretation of section 73(2) (and section 42(2)) may depend, in part at least, on what is meant by discharge. Does it mean, as the patient argues, discharge from detention in the hospital where he is currently detained or, as the Secretary of State argues, discharge from the liability to be detained? If it means the latter, then a condition of continued detention, albeit not in a hospital, would not amount to a discharge. If it means the former, then that obstacle at least is removed. In Secretary of State for the Home Department v Mental Health Review Tribunal for Mersey Regional Health Authority [1986] 1 WLR 1170, Mann J held that it meant discharge from hospital, so that a condition could not be imposed that the patient reside in another hospital, even if not under conditions of detention. In R (Secretary of State for the Home Department) v Mental Health Review Tribunal, PH as interested party [2002] EWHC 1128 (Admin); [2002] MHLR 241, known as PH, Elias J held that it meant discharge from detention in hospital, so that there could be a discharge on condition of residence in another hospital: but he also held that the crucial question was whether the conditions amounted to detention, which was not permitted. The Court of Appeal proceeded on the assumption that this proposition was correct and decided that the conditions imposed were not such as to amount to a deprivation of liberty and therefore that they were not ultra vires: [2002] EWCA Civ 1868; [2003] MHLR 202. The MHA draws a clear distinction between being actually detained, being liable to be detained, and being neither. A patient who is detained in hospital under compulsory powers such as a hospital order, including a restriction order, is actually detained. A hospital order or other compulsorily detained patient who is granted leave of absence under section 17 of the MHA remains liable to be detained (see section 17(1)). A patient who is released from hospital under a community treatment order under section 17A is not liable to be detained (see section 17D(2), as inserted by section 32(2) of the 2007 Act). But a restricted patient who is granted a conditional discharge remains liable to be detained: this much appears from section 42(2), which states that a restricted patient who is absolutely discharged ceases to be liable to be detained, with the clear implication that a restricted patient who is conditionally discharged remains liable to be detained. This must mean that discharge has a different meaning when referring to restricted patients in sections 42(2) and 73(2) from the meaning that it has in sections 23 and 72 when dealing with the discharge of unrestricted patients. Section 23(1) states that a patient who is for the time being liable to be detained shall cease to be so liable if ordered to be discharged by his responsible clinician, the hospital managers or (in certain circumstances) his nearest relative. It contains no power to grant a conditional discharge. Section 72 deals with the tribunals powers to discharge non-restricted patients who are liable to be detained and also confers no power to impose a conditional discharge. Discharge in sections 23 or 72 must therefore mean an absolute discharge, not only from detention but also from the liability to be detained. On the other hand, discharge in sections 42(2) and 73(2) when referring to the conditional discharge of restricted patients, cannot mean discharge from the liability to be detained, because the patient remains liable to be detained. It must therefore mean discharge from the hospital in which the patient is currently detained. Does it therefore follow, as Elias J considered, and the Court of Appeal agreed, that it must mean discharge from any sort of detention? In Secretary of State for Justice v RB [2010] UKUT 454 (AAC), the Upper Tribunal (Carnwath LJ, HHJ Sycamore and UTJ Rowland), held that it did not and that it was not bound by PH to hold that it did (para 54). In its view: The premise for exercise of the tribunals powers is that the patient has previously been lawfully detained (so that article 5 has been complied with); but that he does not now need to be detained in a hospital and that some other form of accommodation is appropriate, subject to the possibility of recall. The next step is to devise the conditions. At that stage, it is hard to see why the question whether the conditions would amount to detention for the purposes of article 5 should come into it. Even if they do amount to such detention, there will be no breach of article 5 because the 1983 Act makes provision for the procedural safeguards guaranteed by article 5. The tribunals concern should be simply to decide what is necessary for the well-being and protection of the patient, and the protection of the public and to satisfy themselves that the patient is willing to comply with the conditions and to that extent consents to them. We see no reason why Parliament should have wished them to concern with themselves with the fine distinctions which may arise under the Strasbourg case law on detention. (para 53) The only qualification was that the conditions could not impose detention in a hospital because, by definition, the tribunal had to have held that it was not satisfied that the criteria for such detention existed (para 55) (see para 10 above). The Court of Appeal did not agree: B v Secretary of State for Justice [2011] EWCA Civ 1608; [2012] 1 WLR 2043. The only form of detention of restriction order patients which was authorised by the MHA was detention in a hospital for medical treatment. Such an invasion of the fundamental common law right to liberty should not be read into the general words of section 73. This would be contrary to the principle of legality: R v Secretary of State for the Home Department, Ex p Simms [2000] 2 AC 115. It would conflict with the scheme of the Act, under which the Secretary of State could approve the patients transfer to another hospital or into guardianship. And the lack of criteria would mean that the detention was not in accordance with the law for the purpose of article 5 of the ECHR. The Court of Appeal adopted the reasoning in Bs case when reaching the same conclusion in this case. As to the ECHR, Mr Lock argues that there is no deprivation of liberty if the patient consents: in Storck v Germany (2005) 43 EHRR 6, the European Court held: the notion of deprivation of liberty within the meaning of article 5(1) does not only comprise the objective element of a persons confinement to a certain limited place for a not negligible length of time. Individuals can only be considered as being deprived of their liberty if, as an additional subjective element, they have not validly consented to the confinement in question. (para 74) The same formulation was repeated by the Grand Chamber in Stanev v Bulgaria (2012) 55 EHRR 22, para 117. Hence, in Storck, although there was a deprivation of liberty in respect of one period of detention in a psychiatric clinic, there was no such deprivation in respect of another, as the patient had consented to being there. But it is also clear from Storck that an initial consent can be withdrawn, for example, where the patient attempts to leave the hospital. And it is clear from later decisions, such as Buzadji v Moldova (Application No 23755/07), Grand Chamber Judgment of 5 July 2016, that consent given in circumstances where the choice is between greater and lesser forms of deprivation of liberty - there between detention in prison and detention under house arrest - may be no real consent at all. It is, of course, an irony, not lost on the judges who have decided these cases, that the Secretary of State for Justice is relying on the protection of liberty in article 5 in support of an argument that the patient should remain detained in conditions of greater security than would be the case were he to be conditionally discharged into the community. It is, however, difficult to extract the principle of the least restrictive alternative from the case law under article 5. This has not concerned itself with the conditions of the patients detention (which may raise issues under article 3 or 8), as long as the place of detention is appropriate to the ground upon which the patient is detained: thus, in Ashingdane v United Kingdom (1985) 7 EHRR 528, the court rejected a complaint that the patient should have been transferred from Broadmoor to a more open hospital setting much earlier than he was. Mr Lock also argues that there is unjustified discrimination between a patient who has and a patient who lacks the capacity to decide for himself. If the patient lacks capacity, the Court of Protection can authorise a deprivation of liberty in accordance with the sort of care plan which is envisaged in this case, provided that it is in his best interests, whereas if the patient has capacity, the FtT has no power to do so, even with his consent. This is a new point, perhaps prompted by the obiter dictum in the Court of Appeal (at para 35), to the effect that the FtTs power to defer a decision might be used to invoke the jurisdiction of the Court of Protection to authorise the deprivation of liberty of an incapacitated patient under section 16 of the MCA. The Court of Protection cannot authorise the deprivation of liberty of an incapacitated person who is ineligible within the meaning of Schedule 1A to the MCA, section 16A (as inserted by section 50 of, and Schedule 8 to, the 2007 Act). A restricted patient who is actually detained in hospital is ineligible (falling within Case A in para 2). A restricted patient who is conditionally discharged from hospital falls either within Case B or Case C and is not wholly ineligible. A deprivation of liberty whose purpose consists wholly or mainly in medical treatment in hospital cannot be authorised, but a deprivation for other purposes can be authorised, provided that it is not inconsistent with the requirements of their MHA regime. Whether the Court of Protection could authorise a future deprivation, once the FtT has granted a conditional discharge, and whether the FtT could defer its decision for this purpose, are not issues which it would be appropriate for this court to decide at this stage in these proceedings. Assuming that both are possible, and therefore that there might be an incompatibility with article 14, read either with article 5 or with article 8, it would make no difference to the outcome of this case. The outcome of this case depends upon whether it is possible to read the words discharge subject to conditions in section 42(2) (dealing with the Secretary of States powers) and conditional discharge in section 73(2) (dealing with the FtTs powers) as including the power to impose conditions which amount to a deprivation of liberty within the meaning of article 5. Conditional discharge: what does it mean? The MHA is silent: it says nothing about the type or content of the conditions which may be imposed by the Secretary of State or the FtT. In this respect it has remained unchanged since the 1959 Act. There are several possibilities: (1) that the FtT cannot impose a condition of detention in a hospital but the Secretary of State may do so; (2) that neither may do so; (3) that both may impose a condition of detention in a place which is not a hospital within the meaning of the MHA whether or not the patient consents; (4) that both may do so but only if the patient consents; and (5) that neither may do so. There is of course the argument that a condition which amounts to a detention or deprivation of liberty could nonetheless serve the rehabilitative purpose of the power of conditional discharge. Just as there is nothing in the MHA which permits it, there is nothing in the MHA which prohibits it. The thinking of the experienced Upper Tribunal in RB (para 21 above) is worthy of respect. The main textual argument in favour of a power to impose such a condition is that a conditionally discharged patient remains liable to be detained within the meaning of the MHA (see para 18 above). As such, he is more akin to a hospital patient who has been given leave of absence than to a patient who is subject to a community treatment order. Discharge therefore cannot mean discharge from compulsion. Although it must mean discharge from the hospital where he is currently detained, it need not mean any more than that, and so could encompass a range of possible arrangements. Furthermore, although it is clear that the FtT cannot impose a condition of detention in a hospital for treatment, because by definition the FtT is not satisfied that the grounds for such detention exist (para 10 above), the same is not true of the Secretary of State. He has power to discharge the patient conditionally irrespective of whether the grounds for detention in hospital still exist. Moreover, if there is power to impose such a condition, it is difficult to see why the patients consent should be a pre-requisite. The patients willingness to comply with the conditions is always, of course, a highly relevant factor in deciding whether he is suitable for discharge; but this is a practical rather than a legal requirement. Yet no-one in these proceedings has suggested that there is power to impose such a condition without the patients consent. On the other hand, there are compelling reasons not to construe sections 42(2) and 73(2) in such a way. The first reason is one of high principle: the power to deprive a person of his liberty is by definition an interference with his fundamental right to liberty of the person. This engages the rule of statutory construction known as the principle of legality, as explained in the well-known words of Lord Hoffmann in R v Secretary of State for the Home Department, Ex p Simms [2000] 2 AC 115, at 131: the principle of legality means that Parliament must squarely confront what it is doing and accept the political cost. Fundamental rights cannot be overridden by general or ambiguous words. This is because there is too great a risk that the full implications of their unqualified meaning may have passed unnoticed in the democratic process. In the absence of express language or necessary implication to the contrary, the courts therefore presume that even the most general words were intended to be subject to the basic rights of the individual. The words of sections 42(2) and 73(2) are about as general as it is possible to be. Parliament was not asked to consider whether they included a power to impose a different form of detention from that provided for in the MHA, without any equivalent of the prescribed criteria for detention in a hospital, let alone any of the prescribed procedural safeguards. While it could be suggested that the FtT process is its own safeguard, the same is not the case with the Secretary of State, who is in a position to impose whatever conditions he sees fit. The second reason is one of practicality. The patients continued co-operation is crucial to the success of any rehabilitation plan. There is, as the FtT found in this case, always a concern that the patients willingness to comply is motivated more by his desire to get out of hospital than by a desire to stay in whatever community setting he is placed. As Holman J pointed out in SH (para 13 above), the MHA confers no coercive powers over conditionally discharged patients. Breach of the conditions is not a criminal offence. It is not even an automatic ground for recall to hospital, although it may well lead to this. But a recalled patient cannot be kept in hospital if the grounds for detaining him there are not satisfied. The patient could withdraw his consent to the deprivation at any time and demand to be released. It is possible to bind oneself contractually not to revoke consent to a temporary deprivation of liberty: the best-known examples are the passenger on a ferry to a defined destination in Robinson v Balmain New Ferry Co Ltd [1910] AC 295 and the miner going down the mine for a defined shift in Herd v Weardale Steel, Coal and Coke Co Ltd [1915] AC 67. But that is not the situation here: there is no contract by which the patient is bound. This leads to the third and perhaps most compelling set of reasons against such a power: it would be contrary to the whole scheme of the MHA. That Act provides in detail for only two forms of detention: (1) detention for no more than 36 hours in a place of safety, which may be a hospital, under sections 135 and 136; and (2) detention in a hospital under the civil powers contained in sections 2 (for assessment), 3 (for treatment) and 4 (for assessment in an emergency); or under a court order made in criminal proceedings under sections 35 (remand to hospital for report), 36 (remand to hospital for treatment), 37 (hospital order), 38 (interim hospital order), 41 (restriction order), and 45A (hospital and limitation directions, as inserted by section 46 of the Crime (Sentences) Act 1997); or under the Secretary of States directions under sections 47 (transfer of persons imprisoned under criminal powers) or 48 (transfer of persons imprisoned under civil powers). In each of those cases, the Act gives specific powers, both to convey the patient to the hospital or a place of safety and to detain him there: see sections 135(3) and 136(2) for detention in a place of safety; section 6(2) for detention in hospital under civil powers; sections 35(9) and 36(8) for remands to hospital for report or treatment; section 40(1) and (2) for a hospital order (with or without a restriction order) and an interim hospital order; section 45B(1) for a hospital and limitation direction; and section 47(3) for prisoner transfers. There is no equivalent express power to convey a conditionally discharged restricted patient to the place where he is required to live or to detain him there. If the MHA had contemplated that such a patient could be detained, it is inconceivable that equivalent provision would not have been made for that purpose. The MHA also makes detailed provision for the retaking of people who absent themselves from the place of safety or hospital where they are detained. A person authorised to be detained in a place of safety is deemed to be in legal custody and the person authorised to detain him has all the powers of a constable for that purpose (section 137(1) and (2)). If he escapes from legal custody, he may be retaken by that person or by any constable or Approved Mental Health Professional (section 138(1)). For hospital patients, as already explained (para 18 above), the MHA draws a distinction between being detained and being liable to be detained. A patient who is granted leave of absence and a conditionally discharged restricted patient remain liable to be detained but are not in fact detained under the MHA (at least unless the responsible clinician has directed that a patient given leave of absence remain in custody, under section 17(3)). The MHA contains elaborate provisions for recovering patients who are absent without leave. These are: patients who have absented themselves from the hospital where they are detained without having been granted leave of absence under section 17; patients who fail to return to hospital from leave when they should have done; patients on leave who have been recalled to hospital; and patients who break a condition of residence in their leave of absence (MHA, section 18(1)). A conditionally discharged patient who is recalled to hospital by the Secretary of State is also treated as if he were absent without leave for the purpose of the powers in section 18 (MHA, section 42(4)(b)). Patients who are absent without leave may be taken into custody and returned to hospital (the hospital where they were previously detained or, in the case of a conditionally discharged restricted patient, the hospital specified in the Secretary of States warrant of recall) by any police officer, any Approved Mental Health Professional, or by anyone on the staff of or authorised by that hospital (section 18(2)). Thus a conditionally discharged restricted patient is not liable to be taken into custody and returned anywhere unless and until he is recalled to hospital by the Secretary of State. Merely absenting himself from the place where he is required to live is not enough. Once again, if the MHA had contemplated that he might be detained as a condition of his discharge, it is inconceivable that it would not have applied the same regime to such a patient as it applies to a patient granted leave of absence under section 17. Added to those considerations is another which was influential with the Court of Appeal. A hospital order patient (including a patient on leave of absence) can apply to the FtT once within the second six months of his detention and once within every 12-month period thereafter. A conditionally discharged restricted patient who has not been recalled to hospital can only apply once within the second 12 months of his discharge and once within every two-year period thereafter. At the very least, this is an indication that it was not thought that such patients required the same degree of protection as did those deprived of their liberty; and this again is an indication that it was not contemplated that they could be deprived of their liberty by the imposition of conditions. Conclusion For all those reasons, I conclude that the MHA does not permit either the FtT or the Secretary of State to impose conditions amounting to detention or a deprivation of liberty upon a conditionally discharged restricted patient. It follows that this appeal must be dismissed. The making of a hospital order under section 37 of the Mental Health Act 1983, coupled with a restriction order under section 41, is a power given to the senior criminal courts (the Crown Court) in relation to offenders convicted of offences which carry sentences of imprisonment. The power is designed to provide an alternative to (probably but not invariably lengthy) imprisonment in the case of an offender who is mentally disordered. A restriction order can be imposed only, as section 41 explicitly says, where it is necessary for the protection of the public from serious harm, that is to say where the offender poses a risk of serious harm to the public: R v Birch (1989) 90 Cr App R 78. No one doubts that the machinery now in place for the making of this combination of orders, and for subsequent review by the FTT, complies with the requirements of article 5 of the European Convention on Human Rights. That article, as is well known, specifically contemplates legitimate detention both of persons convicted before a criminal court (article 5(1)(a)) and of those who are of unsound mind, whether convicted or not (article 5(1)(e)). The prime purpose of this combination of orders is thus the protection of the public. Another is, plainly, the treatment and if possible rehabilitation of the offender, since then the risk of serious harm to the public may be reduced or, sometimes, eventually removed. Recovery and rehabilitation are, inevitably, very likely to be progressive and/or partial, rather than instantaneous or complete. If the treatment progresses to the point where the nature of the detention can be relaxed, consistently with the continued protection of the public, it is very plainly in the public interest that it should be. The mechanism contemplated by the Mental Health Act for this relaxation, where it is appropriate, is conditional discharge. The irony so cogently pointed out by Lady Hale at para 24 is that in this case the contention which invokes article 5 ECHR has the result, if it is correct, that a restricted patient who has made sufficient progress for his conditions of detention to be relaxed but not entirely removed, cannot be conditionally discharged to a less severe form of detention. He will, very likely, instead remain in detention in hospital, because in the absence of conditions ensuring public safety it will not be possible for the FTT to say that it is not satisfied that his condition warrants his detention there (section 72(1)(b)(i) and (ii) as applied to restricted patients by section 73(1)(a)). This will be so, on the argument of the Secretary of State, even if everyone is agreed that the protection of the public would sufficiently be safeguarded by the relaxed conditions, and even if, as here, the offender actively seeks the relaxed form of detention. The two arguments which Lady Hale finds lead inevitably to this unsatisfactory result are one of legality and the other of practical construction of the scheme of the Mental Health Act. If they do indeed lead inevitably to this result, then of course they must prevail. It does not seem to me that they do. Lord Hoffmanns celebrated formulation of the rule of legality in R v Secretary of State for the Home Department, Ex p Simms [2000] 2 AC 115 at 131 must not be watered down. Fundamental rights are not to be taken away by a side- wind, or by ambiguous or unspecific words. The right to liberty is a paradigm example. But what is in question here is not the removal of liberty from someone who is unrestrained. The restricted patient under consideration is, by definition, deprived of his liberty by the combination of hospital order and restriction order. That deprivation of liberty is lawful, and Convention-compliant. If he is released from the hospital and relaxed conditions of detention are substituted by way of conditional discharge, he cannot properly be said to be being deprived of his liberty. On the contrary, the existing deprivation of liberty is being modified, and a lesser deprivation substituted. The authority for his detention remains the original combination of orders, from the consequences of which he is only conditionally discharged. This was the reasoning of the Upper Tribunal in Secretary of State for Justice v RB [2010] UKUT 454 (AAC), in the passage set out by Lady Hale at para 21. It seems to me that it was clearly right. It might be otherwise if the proposed conditions to be attached to discharge were to amount to a greater level of detention than is authorised by the hospital and restriction orders. If one were to hypothesise an improbable scenario in which a FTT were to be asked to impose a condition which amounted, for example, to solitary and isolated confinement, such a question might arise, and with it the application of the Simms principle. But the present case is not suggested to involve any potential conditions which are other than a relaxation of the detention to which MM is otherwise subject in the hospital. The position of a restricted patient subject to a court order for detention in a secure hospital is not comparable to that of the unconvicted defendant in Buzadji v Moldova, 5 July 2016 (Application No 23755/07). There is no reason to doubt that a deprivation of liberty is involved if a defendant awaiting trial is given, in effect, the choice whether to be remanded in custody or to avoid such remand by consenting to house arrest. Such a defendant is otherwise at liberty. A restricted patient who seeks relaxation of his detention conditions is not. It is necessary to confront the suggested practical and textual objections. (a) The Act specifically provides for conditional discharge. (b) For the reasons given by Lady Hale at paras 19 and 20 discharge in the context of a restricted patient must mean discharge from the hospital in which he is currently detained. (c) Everyone agrees that the power to order conditional discharge enables the FTT (or the Secretary of State) to impose conditions beyond that of liability to recall. Such conditions might include co-operation with treatment, attending appointments and keeping in touch with supervisors, the regular taking of medicine, perhaps keeping away from specified people or places or abstaining from specified practices. The only issue is whether if the conditions (considered outwith the context of an existing restriction order) meet the Cheshire West test of deprivation of liberty, they become impermissible (Surrey County Council v P; Cheshire West and Chester Council v P [2014] AC 896). (d) There clearly is a risk that a patient who initially professed his consent to conditions meeting the Cheshire West test might subsequently change his mind. That may well be a particular risk with a patient who is mentally disordered. There are indeed no specific provisions in the Mental Health Act, if this happens, for taking him into custody and restoring him to the place where his conditions require him to live. But what the Act does do is to authorise the Secretary of State to recall him to hospital (section 73(4)(a)). If he is recalled, that triggers the express provision in section 42(4)(b) which treats him henceforth as absent without leave, and then the various provisions of the Act for his being taken into custody and returned to the hospital come into operation. Whether or not the Act might have provided additional powers, these are perfectly viable and rational remedies for the risk of failure to comply with conditions. It may well be that it was not thought appropriate to vest in those managing some place of lesser security where the patients conditions required him to live, the same powers as those possessed by a secure hospital. (e) Moreover, the same risk of later refusal to comply with conditions will exist where the conditions do not approach the Cheshire West threshold, and it is met with the same remedy or sanction. If the patient, having initially professed himself keen to comply with medication rules, or anxious to avoid contact with particularly vulnerable persons, then decides not to comply with the conditions, then what the Act contemplates is that his case will be assessed by the Secretary of State who will either decide to recall him, or will decline to do so. If he does recall him, there are then ample powers to enforce the recall. Short of that, there are no powers to compel him to obey the conditions; no criminal offence is committed and he cannot physically be compelled to obey. The position is thus the same for conditions which meet the Cheshire West test and for those which do not. (f) Some reliance was placed upon the fact that the interval stipulated in the Act in which application to the FTT can be made is greater for a restricted patient who has been conditionally discharged than for a restricted patient who has not. The latter is entitled to apply within the period 6-12 months from the making of the hospital and restriction orders, and thereafter at 12- month intervals: section 70. The conditionally discharged patient is subject to a longer interval, namely within the period 12-24 months of discharge and bi-ennially thereafter: section 75(2). If, however, a conditionally discharged restricted patient is recalled to hospital, his entitlement to apply to the tribunal reverts to the same intervals as before his discharge: section 75(1). This can be said to be some indication that Parliament did not think that a conditionally discharged restricted patient needed the same protection by way of entitlement to make further application to the tribunal as a patient who either had not made any previous application or whose applications for discharge, conditional or otherwise, had been refused. But that is not surprising, given the difference between the two cases. The conditionally discharged prisoner will, by definition, have had a recent determination of the tribunal relaxing his manner of detention. It is going further than is justified to read into this difference a Parliamentary assumption that the conditions applied on conditional discharge could never amount to ones which, if considered without the background of an extant order for detention in hospital, would meet the Cheshire West test for detention. Whilst this consideration is of some limited weight, I do not think that it can prevail against the scheme of the Act as set out above, for relaxation of detention by means of conditions attached to discharge. Nor do I think that any help can be derived from the intervals prescribed for the different case of a non-restricted hospital order patient, which apply equally to those still actually detained and those on leave of absence. For these reasons it seems to me that the FTT does indeed have the power, if it considers it right in all the circumstances, to impose conditions upon the discharge of a restricted patient which, if considered out of the context of an existing court order for detention, would meet the Cheshire West test, at least so long as the loss of liberty involved is not greater than that already authorised by the hospital and restriction orders. Whether it is right to do so in any particular case is a different matter. The power to do so does not seem to me to depend on the consent of the (capacitous) patient. His consent, if given, and the prospect of it being reliably maintained, will of course be very relevant practical considerations on the question whether such an order ought to be made, and will have sufficient prospect of being effective. Tribunals will at that stage have to scrutinise the reality of the consent, but the fact that it is given in the face of the less palatable alternative of remaining detained in hospital does not, as it seems to me, necessarily rob it of reality. Many decisions have to be made to consent to a less unpalatable option of two or several: a simple example is where consent is required to deferment of sentence, in a case where the offence would otherwise merit an immediate custodial sentence. I would, myself, for those reasons, allow this appeal.

Under the Mental Health Act 1983 (MHA) a Crown Court may impose upon a mentally disordered offender a hospital order together with a restriction order, if this is considered necessary to protect the public from serious harm. Such a patient is liable to indefinite detention and can only be discharged by the respondent Secretary of State or the First tier Tribunal (FtT). A discharge may be conditional, such that the patient remains subject to recall to hospital as well as to the conditions. The issue in this case is whether the conditions imposed can, if the patient consents, be so restrictive as to amount to a deprivation of liberty within the meaning of article 5 of the European Convention on Human Rights. MM has a diagnosis of mild learning disabilities, autistic spectrum disorder and pathological fire setting. In 2001, when aged 17, he was convicted of arson offences. He was made the subject of a hospital order and a restriction order. Apart from a period of conditional discharge from December 2006 to April 2007, he has been detained in hospital ever since. He is considered to represent a serious risk of fire setting and of behaving in a sexually inappropriate way towards women. MM applied to the FtT for conditional discharge in May 2015. He was prepared to consent to a care plan that required him to live at a particular place, from which he would not be free to leave and would not be allowed out without an escort. The FtT ruled it had no power to impose conditions on discharge which themselves amounted to a deprivation of liberty. The Upper Tribunal held that it had, but the Court of Appeal held that it did not. MM appealed to the Supreme Court, arguing that if this condition cannot be imposed, he will have to remain in conditions of greater security in hospital, and the MHAs rehabilitative purpose will be frustrated. The Supreme Court by a majority of 4 to 1 (Lord Hughes dissenting) dismisses MMs appeal. It holds that the MHA does not permit either the FtT or the Secretary of State to order a conditional discharge of a restricted patient subject to conditions which amount to detention or a deprivation of liberty. Lady Hale (with whom Lord Kerr, Lady Black, and Lord Lloyd Jones agree) gives the main judgment. The Secretary of State has complete control over the conditions imposed on restricted patients and whether the patient should be recalled to hospital. The MHA does not specify what conditions may be imposed. In practice, the conditions usually require residence at a stated address and for both clinical and social supervision [11 12]. The purpose of conditional discharge is to enable the patient to make a safe transition from the institutional setting of a hospital to the community [14]. The word discharge in sections 42(2) and 73(2) MHA, when referring to the conditional discharge of restricted patients, must mean actual discharge from the hospital in which the patient is currently detained, as he remains liable to be detained [20]. Although there is nothing in the MHA which expressly prohibits a condition which amounts to a detention or deprivation of liberty in another setting, there are compelling reasons not to construe ss 42(2) and 73(2) in this way: It is difficult to see why the patients consent would be required for the exercise of a power to impose such a condition, yet all parties agree that consent is needed [30]. The power to deprive a person of his liberty is an interference with a fundamental right. The principle of legality means express language is required. Parliament was not asked to consider whether the general terms of ss 42(2) and 73(2) MHA included a power to impose a different form of detention, without prescribed criteria for such detention or, if imposed by the Secretary of State, any procedural safeguards [31]. As a practical matter, there is always a concern that the patients willingness to comply with the proposed condition is motivated more by his desire to get out of hospital and that he might then withdraw his consent and demand to be released. The patient would not be bound by his consent to comply with the condition [32]. Most compellingly, such a power would be contrary to the whole scheme of the MHA, which provides in detail for only two forms of detention (in a place of safety for up to 36 hours, or in a hospital), each with associated specific powers to convey a patient there, to detain him and to retake him if he absents himself from such detention without leave. There is no equivalent express power to convey a conditionally discharged restricted patient to the place where he is required to live or to detain him there, nor is he liable to be taken into custody and returned anywhere unless and until he is recalled to hospital by the Secretary of State [33 36]. The fact that a conditionally discharged restricted patient can apply far less frequently than a hospital patient to the FtT for his release indicates that Parliament did not consider that such patients might be subject to conditions which required the same degree of protection as those deprived of their liberty [37]. Accordingly, the MHA does not permit either the FtT or the Secretary of State to impose conditions amounting to detention or a deprivation of liberty upon a conditionally discharged restricted patient and MMs appeal is dismissed [38]. Lord Hughes, dissenting, would have held that the FtT did have the power, if it considered it right in all the circumstances, to impose conditions on the discharge of a restricted patient so long as the loss of liberty involved was not greater than that already authorised by the hospital and restriction orders. If the treatment of the patient had progressed to the point where the nature of the detention could be relaxed, it was plainly in the public interest that it should be, and he did not consider that the MHA prohibited such arrangements [39 49].

The issue in this appeal is about the proper construction of an option clause in a lease of land at Cumbernauld. The lease was entered into between the appellants, Multi Link Leisure Developments Limited, (the tenants) and the respondents, North Lanarkshire Council, (the landlords). It granted to the tenants an option to purchase the leased subjects. This was to be at a price to be determined by the landlords according to an agreed formula if the option to purchase was exercised subsequent to the first year of let. The tenants have exercised the option, but they disagree with the landlords as to the price that must be paid for its exercise according to that formula. They contend that the effect of the option clause is that the price is to be determined without reference to any increase in value that may be attributed to the subjects on the ground that it is likely that planning permission will be granted for housing development. The landlords, on the other hand, contend that the option clause, properly construed, does not envisage that there should be any discount of any element attributable to the potential of the subjects for development. The difference between these two approaches as to the meaning of the option clause is very substantial. The tenants say that the full market value of the subjects, for the purposes of the option clause, is 500,000. They seek declarator that this is the price that is payable for the purchase of the subjects by the tenants to the landlords. The landlords say that the full market value of the subjects, taking account of their potential for development, is 5.3 million and that, as the tenants have exercised the option, this is the price that must be paid. The tenants have refused to pay any more than 500,000, so the answer to the question which approach is right will determine whether the option contract remains in force. The parties are agreed that, if the tenants are right, the contract remains in force and the landlords will require to value the subjects anew on the basis of the construction of the clause contended for by the tenants. They are also agreed that, if the landlords are right, the option is spent and can no longer be exercised during the remaining term of the lease. The factual background The case was argued in the Court of Session on the basis of the parties pleadings and various documents which had been lodged in process. No oral evidence was led as to the surrounding circumstances. The only facts that were before the Lord Ordinary were those that could be ascertained from the parties averments. The argument concentrated for the most part on the wording of the option clause itself. Reference was also made to some other provisions in the lease which might assist as to the meaning of the option clause. The lease is dated 18 January and 11 February 2000. It was varied by a minute of variation of lease dated 13, 24 and 29 November 2001, by which an error in the extent of the ground leased was corrected and a new plan relative to the lease was substituted. The subjects comprise an area of ground extending to about 34.32 hectares located at East Waterhead Farm about a mile east of the town centre of the Cumbernauld. It had previously been in use for agricultural purposes. In terms of clause 2 of the lease the date of entry was 1 June 1999. The lease was to endure for 50 years until 31 May 2049. Clause 5 of the lease provided for rent reviews every five years. In the event of the parties failing to agree, the amount of the revised rent was to be referred to arbitration. The arbiter was to be instructed to assess the rent on the basis of the open market rent, no account being taken of works effected by the tenants or on their behalf. By clause 9 it was provided that the tenants were to occupy and use the subjects for the development of a pay and play golf course and ancillary activities incidental to that use, and for no other purpose whatever without the prior express written consent of the landlords. It was also provided that if the golf course was not developed within five years of the date of entry, or if the subjects of lease were to cease to be used for that purpose, the lease was to terminate with immediate effect. By clause 12 it was provided that the tenants were bound at their own expense to provide an efficient drainage system for the subjects and to bear the whole expense of maintaining it in efficient working order. It is agreed that a golf course was duly developed within five years of the date of entry, and that the land is still being used as a pay and play golf course. By clause 18.1 the tenants were given an option to purchase the subjects during the currency of the lease. No period of notice was required if the tenants decided to exercise the option to purchase during the first year of the period of let. In that event the option price was to be the sum of 130,000. Thereafter the tenants had to give the landlords not less than twelve months notice in writing prior to the proposed date of entry for the purchase if they wished to exercise it. The dispute between the parties is as to the effect of clause 18.2, which is in these terms: The price to be paid by Multi Link in terms of this clause (the option price) shall, if the option to purchase is exercised within the first year of the period of let, be the sum of ONE HUNDRED AND THIRTY THOUSAND POUNDS (130,000) STERLING. The option price, if the option to purchase is exercised subsequent to the first year of let, shall be equal to the full market value of the subjects hereby let as at the date of entry for the proposed purchase (as determined by the landlords) of agricultural land or open space suitable for development as a golf course but, for the avoidance of doubt, shall be not less than the sum of ONE HUNDRED AND THIRTY THOUSAND POUNDS (130,000) STERLING. In determining the full market value (i) the landlords shall assume (a) that the subjects hereby let are in good and substantial order and repair and that all obligations of the landlords and the tenants under this lease have been complied with, and (b) that the subjects hereby let are ready for occupation, and (ii) the landlords shall disregard (a) any improvements carried out by the tenants during the period of this lease otherwise than in pursuance of an obligation [to] the landlords, and (b) any damage to or destruction of the subjects hereby let. By clause 18.6 it was provided, for the avoidance of doubt, that the option to purchase was personal to Multi Link and that it was to be exercisable only so long as they were tenants under the lease. The tenants first expressed an interest in exercising the option to purchase in 2005. On 14 March 2005 their solicitors wrote to the landlords seeking to know the price that they would seek for the subjects. By letter dated 29 June 2005 the landlords proposed a price of 500,000, subject to the tenants entering into a minute of agreement, fortified by a standard security, to the effect that an additional sum, to be agreed, would be payable in the event of a change of use generating a higher value for the land. The tenants were not willing to agree to this proposal. In 2006 the prospect of a change of use generating a higher value was confirmed by the publication in 2006 of the Glasgow and Clyde Valley Joint Structure Plan which identified as one of three priorities for development in the South Cumbernauld Community Growth area, within which the subjects of the lease are situated. In 2008 the North Lanarkshire Finalised Draft Local Plan identified the area as a potential area for housing led urban expansion. The landlords position, as explained in their averments, is that it would be unreasonable for them to fail to have regard to this planning background when determining the price payable under clause 18.2. By letter dated 8 October 2007 the tenants solicitors served on the landlords notice of their decision to exercise the option, with entry one year later on 8 October 2008. They invited the landlords to provide them with their views as to the full market value of the subjects as defined by clause 18.2. By letter dated 4 November 2008 the landlords solicitors intimated that they fixed the price at 5.3 million. The tenants made further proposals as to the option price, but they were rejected by the landlords. By a letter dated 22 January 2009 the landlords served formal notice on the tenants requiring them within 28 days to pay 5.3 million in exchange for a valid marketable title, failing which the landlords would be entitled to rescind the contract resulting from the exercise of the option in clause 18. The tenants did not comply with these conditions. So by letter dated 25 February 2009 the landlords served on the tenants a formal notice of rescission of the option contract and the purchase and sale of the subjects resulting from the notice of 8 October 2007. The tenants then raised the present action in which they seek declarator that their option to purchase has not validly been rescinded and that on a proper construction of clause 18.2 the landlords are bound to determine the full market value of the subjects as agricultural land or open space suitable for a golf course, without reference to any increase in value which may be attributable to the fact that is likely that planning permission will be granted for housing development there. The Lord Ordinary, Lord Glennie, held on 31 July 2009 that the obvious meaning of the words used in clause 18.2 was that the full market value was to be assessed by reference only to the use of the subjects as a golf course, and he made the declarations that the tenants had asked for: [2009] CSOH 114, 2009 SLT 1170. The landlords reclaimed, and on 30 December 2009 an Extra Division (Lords Carloway and Hardie and Sir David Edward QC) allowed the reclaiming motion: [2009] CSIH 96, 2010 SC 302. It held that the words full market value were to be construed as meaning what they said and that considerations that might be relevant to market value were not to be ignored unless there were express words to that effect: para 28. Decree was pronounced in terms of the conclusion to the landlords counterclaim. This was to the effect that the contract resulting from the exercise of the option clause had been rescinded, the option was spent and it could not be exercised during the remaining term of the lease. The option clause The courts task is to ascertain the intention of the parties by examining the words they used and giving them their ordinary meaning in their contractual context. It must start with what it is given by the parties themselves when it is conducting this exercise. Effect is to be given to every word, so far as possible, in the order in which they appear in the clause in question. Words should not be added which are not there, and words which are there should not be changed, taken out or moved from the place in the clause where they have been put by the parties. It may be necessary to do some of these things at a later stage to make sense of the language. But this should not be done until it has become clear that the language the parties actually used creates an ambiguity which cannot be solved otherwise. The option clause can, for the purposes of analysis, be broken down into the following parts: (1) the opening words, which state that the option price shall be equal to the full market value of the subjects hereby let; (2) the direction that the option price is to be determined as at the date of entry for the proposed purchase; (3) the words as determined the landlords which then follow in parenthesis, indicating by whom the option price as at the date of entry is to be determined; (4) the direction that the full open market value is to be of agricultural land or open space suitable for development as a golf course but, for the avoidance of doubt shall be not less than the sum of one hundred and thirty thousand pounds (130,000) sterling. (5) the direction that in determining the full market value the landlords shall assume (a) that the subjects hereby let are in good and substantial order and repair and that all obligations of the landlords and the tenants under this lease have been complied with, and (b) that the subjects hereby let are ready for occupation; and (6) the direction that in determining the full market value the landlords shall disregard (a) any improvements carried out by the tenants during the period of this lease otherwise than in pursuance of an obligation [to] the landlords, and (b) any damage to or destruction of the subjects hereby let. [The word to is inserted to make good an obvious omission from this part of the clause as printed in the lease.] The problem The Lord Ordinary said that there were certain parts of the clause that could safely be disregarded: para 5. He omitted the provision that the option price should be not less than 130,000. He also omitted the reference to the date of entry. It was agreed before him that the words as determined by the landlords were misplaced as that they should be in close proximity to the words full market value. So he decided to omit those words too. This left him with the words in parts (1) and (4) to (6) of the foregoing analysis, less the reference to the figure of 130,000. He then said, in his summary of counsel for the pursuers argument in para 8, that the valuer was being asked to assume that the purchase was for development as a golf course [the emphasis is mine]. In para 9 he said that he accepted that the option price was to be equal to the full market value, but that when one asked oneself of what the answer was the full market value of the subjects for the proposed purchase of land suitable for development as a golf course. He said that this was a clear pointer to the sole use to which the valuer must have regard when assessing the full market value of the subjects. The purpose in inserting in clause 18(2) that the proposed purchase was for development as a golf course, as he saw it, was to restrict the assumed use by reference to which the subjects were to be valued [again, the emphasis is mine]. He found support for this approach in the assumptions set out in part (5) of the foregoing analysis. I have italicised the words for development in my quotations from the Lord Ordinarys opinion in the previous paragraph to draw attention to the fact that when he was construing the option clause he departed from the words that the parties themselves had used. The words in the relevant part of the clause, which is part (4) of the foregoing analysis, are of agricultural land or open space suitable for development as a golf course [again, my emphasis]. Taking the words that the parties themselves used, this is a description of the state of the subjects as they are to be taken to be in as at the date of entry. It is not a direction about the purpose for which they are being purchased. If it had been, it would have been an easy step to conclude that the full market value must be taken to be restricted by the assumed use. That is how one would construe the words open market rent for the purposes of the rent reviews referred to in clause 5, as the open market rent must be determined by reference to the use of the subjects that is permitted by the lease. In Arthur Bell & Sons v Assessor for Fife [1965] RA 535, 540 541 Lord Avonside said, with reference to the estimation of the annual value of subjects under the Valuation and Rating (Scotland) Act 1956, that it was notorious that one must take a building according to its use at the time of the valuation. But the insertion of a description as to the assumed state of the subjects as at the date of entry for the proposed purchase under the option clause does not have that effect. It permits account to be taken of the way land in that state might be expected to be used in the future, including its being used for development. The Lord Ordinarys omission of the words as at the date of entry for the proposed purchase (as determined by the landlords) made it easier for him to conclude, wrongly in my opinion, that this was a direction about the purpose for which the subjects were being purchased. These departures from the words the parties themselves used were crucial to the Lord Ordinarys reasoning, and I do not think that his interpretation of the option clause can be accepted. The Extra Division, for its part, based its conclusion as to the meaning of the option clause on the weight which is said should be given to the words full market value: paras 27, 28. The problem with this approach, however, is that it pays no regard to the words which follow, especially to the assumptions and disregards in parts (5) and (6) of the foregoing analysis. Had the words full market value stood alone, it would have been plain that the value was to be determined by reference to the uses to which the land was reasonably capable of being put in the future: Raja Vyricherla Narayana Gajapatiraju v The Revenue Divisional Officer, Vizagapatam [1939] AC 302, 313; see also Griffiths v WE & DT Cave Ltd (1998) 78 P&CR 8, 14. It is the words which follow that give rise to difficulty, when an attempt is made to construe the clause as a whole. Parts (1) to (4), taken by themselves and read according to the words used, tell the valuer what the subjects are to be assumed to be and how they are to be valued. The subjects are assumed to be agricultural land or open space suitable for use as a golf course, and they are to be valued at their full market value. This approach to the option price makes commercial sense. The assumption describes the land as it was at the date of entry to the lease. But once the option is exercised all restrictions on the use of the land fly off. The tenants will become the owners of the land. They will be free to sell it on to a third party at its full market value or to use it themselves for any use whatever that will get planning permission. Both parties to the lease, if they had applied business commonsense, would have been aware of the advantages that ownership would confer on the tenant in the event of the option clause being exercised. This suggests that, if it had been their intention to restrict the option price to the value of the subjects as a golf course and to exclude any value attributable to their potential for development, they would have said so. The problem, however, is that they then added the assumptions and disregards set out in parts (5) and (6). Their function is not hard to understand if the full market value is to be determined simply on the basis that the subjects are to be assumed to be agricultural land or open space suitable for development as a golf course. What they require the valuer to do is to make further assumptions which tend to indicate that he is to value the subjects strictly according to their actual state and existing use as at the date of entry for the proposed purchase, disregarding tenants improvements and any damage to or destruction of the subjects. Yet these assumptions and disregards are introduced by the words in determining the full market value, which in themselves contain no hint of any restriction on the nature of the market to which the valuer may look when he is conducting this exercise. This part of the clause looks as if it has been borrowed from a different lease without regard to the context. But the words are there as part of the option clause. So it is not possible simply to ignore them. Lord Rodger says that it is helpful to start with the assumptions and disregards that the landlords are to apply when determining the full market value: para 28. I do not disagree with this approach, which is both logical and helpful. Of course, it all depends on what the question is that one is trying to answer. If this was a case where there was no question of any development value, the assumptions and disregards would indeed be central to a proper understanding of the approach to value. Contrary to what the landlords valuer in this case thought, and the parties accepted in the Inner House, they do not indicate that all capital expenditure by the tenants is to be disregarded. The disregard extends only to improvements carried out by the tenants otherwise than in pursuance of an obligation to the landlords. But the inquiry cannot end there. As the valuer himself said at the end of para 3.0 of his report, use as a golf course might not represent the full market value in view of the planning assumptions that he addressed in para 4.0. Development value was likely to completely eclipse any value that might be attributed to the subjects in their existing use. The question whether the planning assumptions can be taken into account too is the crucial question in this case. The assumptions and disregards do not mention this point, so one has to look at the whole clause to see what it means. The solution I do not think that it is possible to reconcile the assumptions and disregards with the earlier parts of the option clause. They seem to me to be approaching the question of value on different bases. The assumptions and disregards are designed to settle the basis for a purchase of subjects in their existing use. The earlier parts of the clause are designed to settle the price for the purchase of subjects that will have a value in the open market that takes account of their potential for development. In this situation the solution must be found by recognising the poor quality of the drafting and trying to give a sensible meaning to the clause as a whole which takes account of the factual background known to the parties at the time when the lease was entered into. Support for this approach is to be found in the following passage from the judgment of Lord Bridge of Harwich in Mitsui Construction Co v Attorney General of Hong Kong (1986) 33 BLR 1, 14, where he said: The poorer the quality of the drafting, the less willing any court should be to be driven by semantic niceties to attribute to the parties an improbable and un businesslike intention, if the language used, whatever it may lack in precision, is reasonably capable of an interpretation which attributes to the parties an intention to make provision for contingencies inherent in the work contracted for on a sensible and businesslike basis. In Ravennavi SpA v New Century Shipbuilding Co Ltd [2007] 2 Lloyds Rep 24, para 12 Moore Bick LJ said: Unless the dispute concerns a detailed document of a complex nature that can properly be assumed to have been carefully drafted to ensure that its provisions dovetail neatly, detailed linguistic analysis is unlikely to yield a reliable answer. It is far preferable, in my view, to read the words in question fairly as a whole in the context of the document as a whole and in the light of the commercial and factual background known to both parties in order to ascertain what they were intending to achieve. It has, of course, long been recognised that the commercial or business object of the provision in question may be relevant: Prenn v Simmonds [1971] 1 WLR 1381, 1385 per Lord Wilberforce; see also Aberdeen City Council v Stewart Milne Group Ltd [2010] CSIH 81, para 11, although I think that the way this issue should be approached is less clearly explained in the 19th century Scottish cases referred to by the Extra Division in that paragraph (Mackenzie v Liddell 1883 10 R 705, Bank of Scotland v Stewart 1891 18 R 957, Jacobs v Scott & Co 1899 2 F (HL) 70). In Antaios Compania Naviera SA v Salen Rederierna AB [1985] AC 191, 201, Lord Diplock said that if detailed and syntactical analysis of words in a commercial contract is going to lead to a conclusion that flouts business commonsense, it must yield to business commonsense; see also Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896, 913 where Lord Hoffmann included this as the fifth of his common sense principles. In Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749, 771 Lord Steyn, making the same point, said that words are to be interpreted in the way in which a reasonable commercial person would construe them, and that the standard of the reasonable commercial person is hostile to technical interpretations and undue emphasis on niceties of language; see also Bank of Scotland v Dunedin Property Investment Co Ltd 1998 SC 657, 661 per Lord President Rodger. In Deutsche Genossenschaftsbank v Burnhope [1995] 1 WLR 1580, 1587, however, Lord Steyn reminded us that our law of construction is based on an objective theory, and he emphasised the objective nature of the exercise of searching for meaning of language in its contractual setting: The court must not try to [divine] the purpose of the contract by speculating about the real intention of the parties. It may only be inferred from the language used by the parties, judged against the objective contextual background. What then of the objective commercial background in this case? The landlords are a local authority. They were under a statutory duty not to dispose of land for a consideration less than the best that could reasonably be obtained: Local Government (Scotland) Act 1973, section 74(2). The tenants are a commercial organisation. They are in business to make money. They undertook to use the subjects during the period of the lease for the development of a pay and play golf course and for no other purpose without the prior express written consent of the landlords. But a successful exercise of the option would transfer to them all the rights of ownership, which they could be expected to turn to their financial advantage if the opportunity of doing so were to present itself. The land itself was in use as grazing land when the lease was entered into. It was situated about a mile from the town centre and the lease was entered into for a period of fifty years. It can be inferred from the price that was agreed for the exercise of the option within the first twelve months that at that stage there was no evidence that it had any hope value and that it was thought to be suitable only for recreational activities. But much can change within a period of fifty years, and there has been no indication that there were any planning constraints such as a designation of the land as part of a green belt that would inhibit its potential for development. The land has now been identified as lying within a potential area for housing led urban expansion. If the tenants are right, acquiring the land at a price which ignores its potential for development will provide them with a very substantial windfall at the expense of the landlords. This was something that the wording of the option clause might have been expected to guard against. The tenants, on the other hand, did not ensure that the opportunity to obtain a windfall in circumstances such as have now arisen was expressly provided for. I do not think that the assumptions and disregards at the end of the option clause, which sit uneasily with the clause when read as a whole, carry sufficient weight to overcome the message conveyed by its opening words by attributing to them the meaning that the tenants contend for. They indicate that the parties were agreed that the option price was to be determined by the full market value of the land as described, taking full account of its potential, if any, for development. That is what reasonable commercial men would have agreed to when the lease was entered into, if they had applied their minds to the benefits that would accrue to the tenants if they were to exercise the option to purchase. I would hold that it must be taken to be what the parties agreed to in this case. Conclusion Although I prefer not to endorse the Extra Divisions reasoning, I consider that it arrived at the right result. I would dismiss the appeal and affirm the Extra Divisions interlocutor. LORD RODGER Lord Hope has set out the background and the wording of the clause which the Court has to interpret. I can accordingly explain my approach very briefly. As their name suggests, Multi Link Leisure Developments (Multi Link) are a commercial company operating in the leisure field. They leased land near Cumbernauld from the North Lanarkshire Council to construct a golf course. This was a commercial venture: the course was to be a pay and play course. In these circumstances it is appropriate to treat the lease as a commercial agreement which is to be construed accordingly. It is therefore noteworthy that Multi Links interpretation of the disputed clause of the lease produces a result whether or not appropriately described as a windfall which it seems unlikely that the parties to a commercial agreement would ever have intended: that Multi Link should be able to buy the land for a sum that takes no account of its (substantial) hope value. That result is even more surprising when the clause provides that, in the circumstances which have occurred, the price is to be the full market value of the subjects. Nevertheless, something has gone wrong with the drafting of the relevant clause, Clause 18.2. So no construction is ever going to produce perfect harmony among all its elements. The Lord Ordinary proceeded by stripping out various pieces of the text, including the reference to the date of entry. As a result he produced a version which included the phrase for the proposed purchase of agricultural land or open space suitable for development as a golf course: Multi Link Leisure Developments Ltd v North Lanarkshire Council 2009 SLT 1170, 1172, para 5. But, as Sir John Dyson pointed out in the course of argument, words in Clause 18.1 (prior to the proposed date of entry for the purchase) show that the words for the proposed purchase in Clause 18.2 are actually part of the description of the date of entry, which the Lord Ordinary had omitted. It is therefore not easy to use them to construct the phrase to which the Lord Ordinary attached so much importance. When translating a document written in a foreign language, it often makes sense to start with the parts whose meaning is clear and then to use those parts to unravel the meaning of the parts which are more difficult to understand. The same applies to interpreting contracts or statutes. Here, since their meaning is not really in doubt, I find it helpful to start with the assumptions and disregards that the landlords are to apply when determining the full market value. First, the landlords are to assume that the subjects are in good and substantial order and repair and that all the obligations of the landlords and tenants under the lease have been complied with. Since more than five years have passed, this means, in particular, that the landlords are to proceed on the basis that the golf course, which the tenants were obliged to construct in terms of Clause 9, has indeed been constructed and is in good order and repair. In fact, the golf course has been duly created. So Multi Link are to pay for the golf course on the assumption that it is in good condition. The Extra Division, who did not refer to this part of Clause 18.2, proceeded on the basis that, in assessing the full market value, the landlords were to ignore anything done by the tenants to develop the golf course: Multi Link Leisure Developments Ltd v North Lanarkshire Council 2010 SC 302, para 26. This was understandable, since, curiously enough, it was the basis upon which both parties proceeded in the Inner House and in the face of some resistance in this Court. Nevertheless, I am quite unable to approach the interpretation of the clause on that basis since it is inconsistent with the specific direction in the later part of the clause. The suggestion seemed to be that the words of agricultural land or open space suitable for development as a golf course meant that the landlords were to value the subjects as if the golf course had not been developed and that this was justified because, otherwise, Multi Link would be paying twice over for the development of the course. But that approach is utterly inconsistent with the assumption that is spelled out in the later part of the clause. And that assumption itself is entirely consistent with Clause 21, which provides that, at the expiry or termination of the lease, the tenants are to yield up the subjects with any buildings and others thereon well and substantially maintained in accordance with the obligations hereinbefore specified and that without any compensation being paid therefor. Since, on its expiry or termination, Multi Link are not to be paid for the buildings etc which they may have constructed in accordance with their obligations under the lease, it would make no sense whatever if they could buy the subjects under the option without paying for the same buildings etc. In effect, the cost of constructing the golf course in terms of Clause 9 is treated as part of the consideration which Multi Link provide in return for the lease of the land. Therefore, as the assumption makes clear, if Multi Link want to buy a completed golf course, they have to pay for it. On the other hand, the landlords are to disregard any improvements which the tenants may have carried out otherwise than in pursuance of an obligation [to] the landlords. Again, this makes sense, since those improvements form no part of the consideration for the lease. So, having paid to make these improvements which they were not obliged to make, the tenants should not have to pay again if they buy the land. In my view the problematical words of agricultural land or open space suitable for development as a golf course cannot be construed in a manner that is inconsistent with the clear directions as to the assumptions which the landlords are to adopt in assessing the full market value. In the circumstances of this case they have to value the golf course which has been laid out and they have to do so on the basis that it is in good and substantial order and repair. If Multi Link have carried out other improvements which they were not obliged to carry out, these are to be ignored. If the landlords proceed in this way, they will comply with the instructions in the clause. And, if there were no other elements in the picture, no doubt they would be able to assess what someone wanting to buy a golf course would pay for this course in this area. But the instructions in the clause do not tell the landlords to ignore any other factor which might be relevant to the value of the golf course. And there is indeed a further, very significant, factor: in 2006 the Glasgow and Clyde Valley Joint Structure Plan identified the area where the land lies as a community growth area for an indicative capacity of 2,000 houses. In addition, in 2008 the final draft of the relevant Local Plan identified that community growth area as a suitable location for medium term housing development. Obviously, these changes mean that the possible purchasers of the golf course would now include developers who were interested in acquiring the land, not as a golf course, but as a site for a possible housing development. So the potential value of the golf course on the open market will have increased accordingly. Multi Link contend, however, that the words of agricultural land or open space suitable for development as a golf course show that this factor and this increase in value are to be ignored. The valuation is to proceed on the basis that the land is to be used as a golf course and nothing else. Given that apart from planning considerations there is no limit on the use to which the land could be put if Multi Link successfully exercised their option to purchase it, that would be a highly unusual and artificial approach to valuation far less to determining the full market value of the land. Construing Clause 18.2 as a whole and as part of a commercial agreement, I am satisfied that the words in question are not to be interpreted as requiring the landlords to adopt this unusual approach and to ignore the hope value. Had the parties intended the landlords to assume that the land was to be used only as a golf course, I would have expected to find that assumption included among the others at the end of the clause. For these reasons the landlords are entitled to have regard to the hope value of the golf course when assessing its full market value. Although my reasoning is different, I agree with the result reached by the Extra Division. I would accordingly dismiss the appeal. It will be up to the parties to work out how, if at all, they are to arrange for the lease to be terminated and the hope value to be unlocked. LADY HALE We are required to construe the following words: The Option price, if the Option to purchase is exercised subsequent to the first year of let, shall be equal to the full market value of the subjects hereby let as at the date of entry for the proposed purchase (as determined by the Landlords) of agricultural land or open space suitable for development as a golf course but, for the avoidance of doubt, shall be not less than the sum of ONE HUNDRED AND THIRTY THOUSAND POUNDS (130,000) STERLING. In determining the full market value (i) the Landlords shall assume (a) that the subjects hereby let are in good and substantial order and repair and that all obligations of the Landlords and the Tenants under this Lease have been complied with, and (b) that the subjects hereby let are ready for occupation, and (ii) the Landlords shall disregard (a) any improvements carried out by the Tenants during the period of this Lease otherwise than in pursuance of an obligation the Landlords, and (b) any damage to or destruction of the subjects hereby let. (emphasis supplied) The puzzle is what those italicised words are meant to mean. There are at least four possible meanings of the term taken as a whole: (i) the value of the land as agricultural land or open space suitable for development as a golf course, without any hope value; (ii) the same but with any hope value; (iii) the value of the land with the golf course which has now been constructed on it, without any hope value; and (iv) the same but with any hope value. The appellant tenants argued primarily for (i) but would accept (iii) as second best. Their point was that it is otherwise difficult to ascribe any meaning at all to the italicised words and that (iii) would mean that they had to pay twice for the golf course. But their main aim was to avoid having to pay any hope value. The Lord Ordinary opted for (iii) on the basis that the assumptions required the valuer to assume that the golf course had indeed been constructed but the italicised words restricted the possible uses to which the valuer had to have regard. The respondent landlords argued for (ii) before the Inner House and the Inner House agreed with them. The reality is that it made no difference whether the right answer was (ii) or (iv) because in either case the contract to purchase had been validly rescinded and the option was now spent. I do not regard the tenants position as quite as fanciful as others might. Local authorities are not commercial organisations. They are there to serve the local population, not to make money. In 1999, it appears that no one was thinking about the potential for residential development. The Council, no doubt conscious of their responsibility to provide facilities for healthy recreation for the inhabitants of Cumbernauld, wanted a pay and play golf course which all could enjoy. The tenants were prepared to take the commercial risk of developing the land as a golf course. The Council were happy to tie up the land for that purpose for fifty years. On the Lord Ordinarys view of the matter, if the option were exercised they would not only have had the course built but would also have been paid for it. Had it not been for the possibilities opened up by the regional development plan, that might have seemed a good deal to them. As things now stand, unless the parties can come to some sensible agreement to unlock both the land and its development value, the Council are going to be no better off than they were at the outset. All of that is by the by. We have to try and make sense of the words the parties used. The problem with the italicised words is that they begin with of with no clear indication of what they belong to. It would be ungrammatical to link them to full market value as that is already followed by another genitive. It appears, therefore, that they must be linked to the proposed purchase but there is no need for them there and indeed they are now inaccurate as a statement of fact. Faced with that conundrum, I have found comfort in Lord Rodgers approach: construe the words you can understand and see where that takes you. Even here we have to insert the word to between obligation and Landlords in disregard (ii)(a). But after that the assumptions clearly take us at least as far as solution (iii). The valuer is to assume that the Tenant has complied with the obligation to build the golf course: assumption (i)(a). That improvement is not to be disregarded: cf disregard (ii)(a). By itself, that does not tell us whether the answer is (iii) or (iv). But it does tell us that the italicised words do not mean that the land is to be valued as if the golf course had never been built. This also suggests that they are not meant to limit the ordinary meaning of full market value. This is reinforced by their grammatical ineptitude: if they were meant to limit it, they would have come immediately after full market value and been preceded by as rather than of. Finally, if the parties had meant anything other than the ordinary sense of full market value they could so easily have used a different phrase. Thus, by a route mapped out by Lord Rodger, I too arrive at the conclusion that this appeal should be dismissed. LORD CLARKE I agree that this appeal should be dismissed. I detect no difference between the principles applicable to the construction of a lease in Scotland and in England. The true construction of clause 18.2 of the lease depends upon the language of the clause construed in the context of the lease as a whole, which must in turn be considered having regard to its surrounding circumstances or factual matrix. I do not think that the parties can have given express consideration to the question that has arisen in this case. If they had, they would surely have expressly provided that, if the tenants exercised the option to purchase in clause 18 of the lease, they must pay the full market value of the land as described, taking full account of its potential, if any, for development. Any other conclusion would flout business commonsense because it would give the tenants an unwarranted windfall. Applying the principles stated by Lord Hope in his para 20, I would construe the reference to full market value in clause 18.2 of the lease as meaning the full market value of the land, including its potential development value. SIR JOHN DYSON SCJ I agree that this appeal should be dismissed. To the extent that there is any difference between the reasoning of Lord Hope and Lord Rodger, I prefer that of Lord Rodger.

This appeal concerns the proper construction of a term of a lease which gives the Appellant (the tenant) the option to purchase the leased property from the Respondent (the landlord). The question was whether, given the particular drafting, the Respondent was entitled to take into account hope value attributable to the potential for residential development when it determined the option price. The lease in question was a fifty year lease of land near Cumbernauld, commencing on 1 June 1999. The Appellant was to develop a golf course on the land. The Appellant was given an option to purchase the land. The lease set out how the option price was to be calculated. The relevant part of the clause provided that it was to be equal to the full market value of the subjects as at the date of entry for the proposed purchase (as determined by the landlords) of agricultural land or open space suitable for development as a golf course. But, in determining the full market value, the landlords were to assume that the subjects were in good and substantial order and repair, that all obligations of the landlords and the tenants under the lease had been complied with and that they were ready for occupation. They were to disregard any improvements carried out by the tenants during the period of this lease otherwise than in pursuance of an obligation to the landlords, and any damage to or destruction of the subjects of the lease. Neither party seems to have contemplated, when they entered into this lease, that the site might be used for residential development. However, it has now been identified as being in an area which has the potential for housing led urban expansion. This gives it a hope value which was not in prospect when the lease was entered into. The Appellant exercised the option to purchase on 8 October 2007. The Respondent fixed the price at 5.3 million. This figure included value attributable to the development potential of the land. The Appellant took issue with this valuation on the ground that it was far in excess of the value of the land as a golf course. Eventually, the Respondent served notice on the Appellant requiring payment of 5.3 million. When the Appellant did not pay, the Respondent terminated the option contract. The parties are agreed that, if the termination was valid, the option was spent and could not be exercised again. The Appellant sought a declaration that the option contract has not been validly rescinded and that the Respondent is to determine the full market value of the land without reference to any increase in value attributable to its potential for residential development. They relied, in particular, on the inclusion in the lease of the words of agricultural land or open space suitable for development as a golf course. The Lord Ordinary found for the Appellant. His decision was reversed by the Inner House, which held that full market value meant what it said; that express wording would have been needed in order for considerations relevant to market value to be ignored, and that there was no such wording here. The Appellant appealed to the Supreme Court. The Supreme Court unanimously dismisses the appeal. It holds that the Respondent was entitled, when determining the option price, to take full account of the lands potential for development. Lord Hope holds that the problem arises because of the conflict between the words of the first part of the clause (full market value of the subjects of agricultural land or open space suitable for development as a golf course) and the assumptions and disregards in the second part. These two parts of the clause approach the question of value on different bases. The earlier parts were designed to settle the price for the purchase of land that will have a value in the open market that takes account of the potential for development. The assumptions and disregards were designed to settle the basis for a purchase of the land in its existing use. The court has to recognise the poor quality of the drafting and try to give a sensible meaning to the clause as a whole, which takes account of the factual background known to the parties at the time they entered into the lease: [16] [19]. The commercial or business object of the provision has to be taken into account: [21] The Appellants construction would provide them with a substantial windfall at the expense of the Respondent: [23]. Had reasonable commercial parties directed their mind to the benefits which would accrue to the Appellant if the option was exercised, they would have agreed that the option price was to be the full market value of the land, taking account of any development potential. That is what the parties must be taken to have agreed in this case: [23]. Lord Rodger also holds that the lease should be construed as a commercial agreement. It seems unlikely that parties to such an agreement would have intended the Appellants construction: [26]. Something had gone wrong with the drafting: [27]. In those circumstances, it is useful to start with those parts of the clause whose meaning was clear and then to consider those parts which are more difficult to understand: [28]. The meaning of the assumptions and disregards is clear: [28]. They provide that, contrary to the approach taken by the parties, the valuation is to be on the basis that the golf course has been constructed and is in good order and repair: [29] [32]. The words of agricultural land or open space suitable for development as a golf course cannot be construed inconsistently with the clear directions in the assumptions and disregards so as to require the valuer to assume that the golf course had not been developed: [33]. The clause contains no instructions to ignore any other factor which might be relevant to the value of the golf course: [34]. The approach contended for by the Appellant would be an unusual and artificial approach to valuation, given that there was no limit on the use to which the land could be put after the option was exercised: [36]. Lady Hale agrees with Lord Rodgers approach and also concludes that the appeal should be dismissed: [44]. Lord Clarke agrees that the appeal be dismissed, emphasising that any other conclusion would flout business common sense: [45]. Sir John Dyson agrees that the appeal should be dismissed, preferring Lord Rodgers reasoning to Lord Hopes to the extent that there is any difference between them: [46].

The short point in this appeal is whether the appellant county council, as local planning authority, correctly understood the meaning of the word openness in the national planning policies applying to mineral working in the Green Belt, as expressed in the National Planning Policy Framework (NPPF). The Court of Appeal ([2018] EWCA Civ 489), disagreeing with Hickinbottom J ([2017] EWHC 442 (Admin)) in the High Court, held that, in granting planning permission for the extension of a quarry, the council had been misled by defective advice given by their planning officer. In the words of Lindblom LJ, giving the leading judgment: It was defective, at least, in failing to make clear to the members that, under government planning policy for mineral extraction in the Green Belt in para 90 of the NPPF, visual impact was a potentially relevant and potentially significant factor in their approach to the effect of the development on the openness of the Green Belt, (para 49, per Lindblom LJ) He thought that, having regard to the officers own assessment, it was quite obviously relevant, and therefore a necessary part of the assessment. The court quashed the permission. In this court, the council, supported by the quarry operator (the third respondent), argues that the Court of Appeals reasoning was based on misunderstandings both of the relevant policies and of the officers report, and that the permission should be reinstated. The first and second respondents (collectively referred to as Samuel Smith) seek to uphold the decision and reasoning of the Court of Appeal. Green Belt policy History and aims Although we are directly concerned with the policies in the NPPF (in its original 2012 version), Green Belt policies have a very long history. It can be traced back to the first national guidance on Green Belts in Circular 42/55 (issued in August 1955). More recently Planning Policy Guidance 2: Green Belts (published in 1995 and amended in 2001) (PPG2) confirmed the role of Green Belts as an essential element of planning policy for more than four decades; and noted that the purposes of Green Belt policies and the related development control policies set out in 1955 remain valid today with remarkably little alteration (para 1.1). The NPPF itself, as appears from ministerial statements at the time, was designed to consolidate and simplify policy as expressed in a number of ministerial statements and guidance notes, rather than to effect major policy changes (see Redhill Aerodrome Ltd v Secretary of State for Communities and Local Government [2014] EWCA Civ 1386; [2015] PTSR 274, paras 16ff, 22 per Sullivan LJ). In the NPPF the concept of openness first appears in the introduction to section 9 (Protecting Green Belt land) which gives a statement of the fundamental aim and the purposes of Green Belt policy: 79. The Government attaches great importance to Green Belts. The fundamental aim of Green Belt policy is to prevent urban sprawl by keeping land permanently open; the essential characteristics of Green Belts are their openness and their permanence. 80. Green Belt serves five purposes: to check the unrestricted sprawl of large built up areas; another; encroachment; to prevent neighbouring towns merging into one to assist in safeguarding the countryside from to preserve the setting and special character of historic towns; and the recycling of derelict and other urban land. to assist in urban regeneration, by encouraging This statement of the fundamental aim of the policy and the five purposes is unchanged from PPG2. The PPG included a fuller statement of certain objectives for the use of land within defined Green Belts, including (for example) providing opportunities for access to open countryside, and retaining and enhancing attractive landscapes (para 1.6), but adding: The extent to which the use of land fulfils these objectives is however not itself a material factor in the inclusion of land within a Green Belt, or in its continued protection. For example, although Green Belts often contain areas of attractive landscape, the quality of the landscape is not relevant to the inclusion of land within a Green Belt or to its continued protection. The purposes of including land in Green Belts are of paramount importance to their continued protection, and should take precedence over the land use objectives. (para 1.7) It is clear therefore that the visual quality of the landscape is not in itself an essential part of the openness for which the Green Belt is protected. Control of development in Green Belts Key features of development control in Green Belts are the concepts of appropriate and inappropriate development, and the need in the latter case to show very special circumstances to justify the grant of planning permission. In R (Lee Valley Regional Park Authority) v Epping Forest District Council [2016] EWCA Civ 404; [2016] Env LR 30 (the Lee Valley case), Lindblom LJ explained their relationship: 18. A fundamental principle in national policy for the Green Belt, unchanged from PPG2 to the NPPF, is that the construction of new buildings in the Green Belt is inappropriate development and should not be approved except in very special circumstances, unless the proposal is within one of the specified categories of exception in the closed lists in paras 89 and 90. The distinction between development that is inappropriate in the Green Belt and development that is not inappropriate (ie appropriate) governs the approach a decision maker must take in determining an application for planning permission. Inappropriate development in the Green Belt is development by definition, harmful to the Green Belt harmful because it is there whereas development in the excepted categories in paras 89 and 90 of the NPPF is not. These concepts are expressly preserved in the policies for the control of development set out in paras 87ff of the NPPF: As with previous Green Belt policy, inappropriate development is, by definition, harmful to the Green Belt and should not be approved except in very special circumstances. Very special circumstances will not exist unless the potential harm the Green Belt by reason of inappropriateness, and any other harm, is clearly outweighed by other considerations. (paras 87 88) Paragraph 89 indicates that construction of new buildings is to be regarded as inappropriate with certain defined exceptions. The exceptions include, for example, buildings for agriculture and forestry, and (relevant to authorities discussed later in this judgment): provision of appropriate facilities for outdoor sport, outdoor recreation and for cemeteries, as long as it preserves the openness of the Green Belt and does not conflict with the purposes of including land within it; the partial or complete redevelopment of previously developed sites (brownfield land), whether redundant or in continuing use (excluding temporary buildings), which would not have a greater impact on the openness of the Green Belt and the purpose of including land within it than the existing development. infilling or limited Paragraph 90, which defines forms of development regarded as not inappropriate is directly in issue in the present case: 90. Certain other forms of development are also not inappropriate in Green Belt provided they preserve the openness of the Green Belt and do not conflict with the purposes of including land in Green Belt. These are: mineral extraction; engineering operations; local transport infrastructure which can demonstrate a requirement for a Green Belt location; the re use of buildings provided that the buildings are of permanent and substantial construction; and development brought forward under a Community Right to Build Order. (Emphasis added. I shall refer to the words so emphasised as the openness proviso) Paragraphs 89 90 replace a rather fuller statement of policy for Control of Development in section 3 of PPG2. Paragraphs 3.4 3.6 (New buildings), and paras 3.7 3.12 (Re use of buildings, and, under a separate heading, Mining operations, and other development) cover substantially the same ground, respectively, as NPPF paras 89 and 90, but in rather fuller terms. The policy for Mining operations, and other development was as follows: 3.11 Minerals can be worked only where they are found. Their extraction is a temporary activity. Mineral extraction need not be inappropriate development: it need not conflict with the purposes of including land in Green Belts, provided that high environmental standards are maintained and that the site is well restored. Mineral and local planning authorities should include appropriate policies in their development plans. Mineral planning authorities should ensure that planning conditions for mineral working sites within Green Belts achieve suitable environmental standards and restoration 3.12 The statutory definition of development includes engineering and other operations, and the making of any material change in the use of land. The carrying out of such operations and the making of material changes in the use of land are inappropriate development unless they maintain openness and do not conflict with the purposes of including land in the Green Belt (Emphasis added) It will be noted that a possible textual issue arises from the way in which the PPG2 policies have been shortened and recast in the NPPF. In the PPG the openness proviso is in terms directed to forms of development other than mineral extraction (it also appears in the section on re use of buildings: para 3.8). By contrast, mineral extraction is not expressly subject to the proviso, but may be regarded as not inappropriate, subject only to high environmental standards and the quality of restoration. In the shortened version in the NPPF these categories of potentially appropriate development have been recast in para 90, and brought together under the same proviso, including the requirement to preserve openness. I do not read this as intended to mark a significant change of approach. If that had been intended, one would have expected it to have been signalled more clearly. To my mind the change is explicable as no more than a convenient means of shortening and simplifying the policies without material change. It may also have been thought that, whereas mineral extraction in itself would not normally conflict with the openness proviso, associated building or other development might raise greater problems. A possible example may be seen in the Europa Oil case discussed below (para 26). Other relevant policies Mineral policies A later part of the NPPF (section 13, headed Facilitating the sustainable use of minerals) deals with mineral development generally. It emphasises the importance of ensuring a sufficient supply of minerals to support economic growth (para 142); and gives advice on the inclusion of mineral policies in local plans (para 143), and on the determination of planning applications (para 144). The latter includes (inter alia) a requirement to ensure that there are no unacceptable adverse impacts on the natural and historic environment , and that provision is made for restoration and aftercare at the earliest opportunity to be carried out to high environmental standards . No issue arises under these policies in the present case, but they show that development which is appropriate in Green Belt may be found unacceptable by reference to other policy constraints. Local plan policies The proposal was also subject to Green Belt and other policies in the local plan (the Selby District Core Strategy Local Plan). These are summarised by Lindblom LJ (para 9). It is not suggested by either party that these materially affect the legal issues arising in the present appeal. The application and the officers report The application was for an extension to the operational face of Jackdaw Crag Quarry, a magnesian limestone quarry owned and operated by the third respondent, Darrington Quarries Ltd. The quarry, which extends to about 25 hectares, is in the Green Belt, about 1.5 kilometres to the south west of Tadcaster. It has been operated by Darrington Quarries for many years, planning permission for the extraction of limestone having first been granted in July 1948 and subsequently renewed. The proposed extension is for an area of about six hectares, expected to yield some two million tonnes of crushed rock over a period of seven years. The application had received planning permission in January 2013, but that permission was quashed because of failings in the environmental impact assessment. The application came back to the county councils Planning and Regulatory Functions Committee on 9 February 2016, when the committee accepted their officers recommendation that planning permission be granted. Following completion of a section 106 agreement planning permission was granted on 22 September 2016. The officers report, prepared by Vicky Perkin for the Corporate Director, Business and Environmental Services, was an impressively comprehensive and detailed document, running to more than 100 pages, and dealing with a wide range of planning considerations. Under the heading Landscape impact, the report summarised the views of the councils Principal Landscape Architect, who had not objected in principle to the proposal, but had drawn attention to the potential landscape impacts and the consequent need to ensure that mitigation measures are maximised (paras 4.118, 7.42 5). For present purposes the critical part of the report comes under the heading Impacts of the Green Belt (paras 7.117ff). Having summarised the relevant national and local policies, she referred (para 7.120) to the consultation response from Samuel Smith stating that: the application site falling within the Green Belt is critical in the determination of the proposal and added that mineral extraction remains inappropriate development in the Green Belt unless it can be demonstrated that the proposal both preserves the openness of the Green Belt and doesnt conflict with the purposes of including land within the Green Belt. The objector also stated that one of the aims of the Green Belt, in assisting in urban regeneration will be materially harmed by the development (her italics) The officer commented: 7.121 When considering applications within the Green Belt, in accordance with the NPPF, it is necessary to consider whether the proposed development will firstly preserve the openness of the Green Belt and secondly ensure that it does not conflict with the purposes of including land within the Green Belt. 7.122 It is considered that the proposed development preserves the openness of the Green Belt and does not conflict with the purposes of including land within the Green Belt. Openness is not defined, but it is commonly taken to be the absence of built development. Although the proposed development would be on existing agricultural land, it is considered that because the application site immediately abuts the existing operational quarry, it would not introduce development into this area of a scale considered to conflict with the aims of preserving the openness of the Green Belt. 7.123 In terms of whether the proposed development does not conflict with the purposes of including land within the Green Belt, the proposed quarrying operations are not considered to conflict with the purposes of including land within the Green Belt. Equally, it is not considered that the proposed development would undermine the objective of safeguarding the countryside from encroachment as it should be considered that the site is in conjunction with an operational quarry which will be restored. The proposed development is a temporary use of land and would also be restored upon completion of the mining operations through an agreed [restoration plan]. 7.124 The purposes of including land within the Green Belt to prevent the merging of neighbouring towns and impacts upon historic towns are not relevant to this site as it is considered the site is adequately detached from the settlements of Stutton, Towton and Tadcaster. It is also important to note that the A64 road to the north severs the application site from Tadcaster. 7.125 As mentioned in the response from [Samuel Smith], one of the purposes of the Green Belt is assisting in urban regeneration which the objector claims will be undermined by the proposed development. Given the situation of the application site, adjacent to an existing operational quarry and its rural nature, and the fact that minerals can only be worked where they are found, it is considered that the site would not, therefore, undermine this aim of the Green Belt. 7.126 The restoration scheme is to be designed and submitted as part of a section 106 Agreement, it is considered that there are appropriate controls to ensure adequate restoration of the site. Due to the proposed restoration of the temporary quarry and the fact that it is considered the proposal doesnt conflict with the aims of the Green Belt, it is considered that the proposed development would not materially harm the character and openness of the Green Belt, and would, therefore, comply with Policy SP3 and SP13 of the Selby District Core Strategy Local Plan and NPPF. Section 8 of the report gives the planning officers conclusion: 8.4 It is considered that the proposed screening could protect the environment and residential receptors from potential landscape and visual impacts. 8.5 Due to the proposed restoration of the temporary quarry and the fact that it is considered the proposal doesnt conflict with the aims of the Green Belt, it is considered that the proposed development would not materially harm the character and openness of the Green Belt. Legal principles Much time was taken up in the judgments below, as in the submissions in this court, on discussion of previous court authorities on the relevance of visual impact under Green Belt policy. The respective roles of the planning authorities and the courts have been fully explored in two recent cases in this court: Tesco Stores Ltd v Dundee City Council (Asda Stores Ltd intervening) [2012] UKSC 13; [2012] PTSR 983, and Hopkins Homes Ltd v Secretary of State for Communities and Local Government [2017] UKSC 37; [2017] 1 WLR 1865. In the former Lord Reed, while affirming that interpretation of a development plan, as of any other legal document, is ultimately a matter for the court, also made clear the limitations of this process: Although a development plan has a legal status and legal effects, it is not analogous in its nature or purpose to a statute or a contract. As has often been observed, development plans are full of broad statements of policy, many of which may be mutually irreconcilable, so that in a particular case one must give way to another. In addition, many of the provisions of development plans are framed in language whose application to a given set of facts requires the exercise of judgment. Such matters fall within the jurisdiction of planning authorities, and their exercise of their judgment can only be challenged on the ground that it is irrational or perverse (para 19) In the Hopkins Homes case (paras 23 34) I warned against the danger of over legalisation of the planning process. I noted the relatively specific language of the policy under consideration in the Tesco case, contrasting that with policies: expressed in much broader terms [which] may not require, nor lend themselves to, the same level of legal analysis The concept of openness in para 90 of the NPPF seems to me a good example of such a broad policy concept. It is naturally read as referring back to the underlying aim of Green Belt policy, stated at the beginning of this section: to prevent urban sprawl by keeping land permanently open . Openness is the counterpart of urban sprawl and is also linked to the purposes to be served by the Green Belt. As PPG2 made clear, it is not necessarily a statement about the visual qualities of the land, though in some cases this may be an aspect of the planning judgement involved in applying this broad policy concept. Nor does it imply freedom from any form of development. Paragraph 90 shows that some forms of development, including mineral extraction, may in principle be appropriate, and compatible with the concept of openness. A large quarry may not be visually attractive while it lasts, but the minerals can only be extracted where they are found, and the impact is temporary and subject to restoration. Further, as a barrier to urban sprawl a quarry may be regarded in Green Belt policy terms as no less effective than a stretch of agricultural land. It seems surprising in retrospect that the relationship between openness and visual impact has sparked such legal controversy. Most of the authorities to which we were referred were concerned with the scope of the exceptions for buildings in para 89 (or its predecessor). In that context it was held, unremarkably, that a building which was otherwise inappropriate in Green Belt terms was not made appropriate by its limited visual impact (see R (Heath and Hampstead Society) v Camden London Borough Council [2007] EWHC 977 (Admin), upheld at R (Heath and Hampstead Society) v Vlachos [2008] EWCA Civ 193; [2008] 3 All ER 80). As Sullivan J said in the High Court: The loss of openness (ie unbuilt on land) within the Green Belt or Metropolitan Open Land is of itself harmful to the underlying policy objective. If the replacement dwelling is more visually intrusive there will be further harm in addition to the harm by reason of inappropriateness (para 22) To similar effect, in the Lee Valley case, Lindblom LJ said: The concept of openness here means the state of being free from built development, the absence of buildings as distinct from the absence of visual impact. (para 7, cited by him in his present judgment at para 19) Unfortunately, in Timmins v Gedling Borough Council [2014] EWHC 654 (Admin) (a case about another familiar Green Belt category cemeteries and associated buildings), Green J went a stage further holding, not only that there was a clear conceptual distinction between openness and visual impact, but that it was: wrong in principle to arrive at a specific conclusion as to openness by reference to visual impact. (para 78, emphasis in original) This was disapproved (rightly in my view) in Turner v Secretary of State for Communities and Local Government [2016] EWCA Civ 466; [2017] 2 P & CR 1, para 18. This concerned an inspectors decision refusing permission for a proposal to replace a mobile home and storage yard with a residential bungalow in the Green Belt. In rejecting the contention that it was within the exception for redevelopment which would not have a greater impact on the openness of the Green Belt, the inspector had expressly taken account of its visual effect, and that it would appear as a dominant feature that would have a harmful impact on openness here. The Court of Appeal upheld the decision. Sales LJ said: The concept of openness of the Green Belt is not narrowly limited to the volumetric approach suggested by [counsel]. The word openness is open textured and a number of factors are capable of being relevant when it comes to applying it to the particular facts of a specific case. Prominent among these will be factors relevant to how built up the Green Belt is now and how built up it would be if redevelopment occurs and factors relevant to the visual impact on the aspect of openness which the Green Belt presents. (para 14) Before us there was no challenge to the correctness of this statement of approach. However, it tells one nothing about how visual effects may or may not be taken into account in other circumstances. That is a matter not of legal principle, but of planning judgement for the planning authority or the inspector. The only case referred to in argument which was directly concerned with mineral extraction as such was Europa Oil and Gas Ltd v Secretary of State for Communities and Local Government [2013] EWHC 2643 (Admin); [2014] 1 P & CR 3 (upheld at [2014] EWCA Civ 825; [2014] PTSR 1471). That concerned an application for permission for an exploratory drill site to explore for hydrocarbons in the Green Belt, including plant and buildings. The inspector had considered the potential effect of the development on the Green Belt: I consider Green Belt openness in terms of the absence of development. The proposal would require the creation of an extensive compound, with boundary fencing, the installation of a drilling rig of up to 35 metres in heating, a flare pit and related buildings, plant, equipment and vehicle parking on the site. Taking this into account, together with the related HGV and other traffic movements, I consider that the Green Belt openness would be materially diminished for the duration of the development and that there would be a conflict with Green Belt purposes in respect of encroachment into the countryside over that period. (quoted by Ouseley J at para 16) He refused permission, taking the view that it did not fall within the exception for mineral extraction, and that there were no very special circumstances to out weigh the harm to the Green Belt identified in that passage. It was held that he had erred in failing to treat the proposal as one for mineral extraction, and therefore potentially within the exception in NPPF para 90. Ouseley J noted the special status of mineral extraction under Green Belt policy. As he said: 67. One factor which affects appropriateness, the preservation of openness and conflict with Green Belt purposes, is the duration of development and the reversibility of its effects. Those are of particular importance to the thinking which makes mineral extraction potentially appropriate in the Green Belt. Another is the fact that extraction, including exploration, can only take place where those operations achieve what is required in relation to the minerals. Minerals can only be extracted where they are found 68. Green Belt is not harmed by such a development because the fact that the use has to take place there, and its duration and reversibility are relevant to its appropriateness and to the effect on the Green Belt . The key point, in my judgment, is that the inspector approached the effect on Green Belt openness and purposes on the premise that exploration for hydrocarbons was necessarily inappropriate development since it did not come within any of the exceptions. He was not considering the application of the proviso to para 90 at all: on his analysis, he did not get that far. Had he been assessing the effect on Green Belt openness and purposes from the point of view of the proviso, it would have been on the very different premise that exploration for hydrocarbons on a sufficient scale to require planning permission is nevertheless capable in principle of being appropriate development. His mind set would have been different, or at least it might well have been different However, he made clear that it remained necessary for the decision maker to consider the proposal under the proviso to para 90. Affirming his decision in the Court of Appeal, Richards LJ said (para 41): Although the decision turned principally on a legal issue as to the meaning of mineral extraction, it is significant that the impact on the Green Belt identified by the inspector (including a 35 metre drill rig and related buildings) was not thought necessarily sufficient in itself to lead to conflict with the openness proviso. That was a matter for separate planning judgement. Material considerations Section 70(2) of the Town and Country Planning Act 1990 (the Act) required the council in determining the application to have regard to the development plan and any other material consideration. In summary Samuel Smiths argument, upheld by the Court of Appeal, is that the authority erred in failing to treat the visual effects, described by the officer in her assessment of Landscape impact (para 17 above) as material considerations in its application of the openness proviso under para 90. The approach of the court in response to such an allegation has been discussed in a number of authorities. I sought to summarise the principles in Derbyshire Dales District Council v Secretary of State for Communities and Local Government [2009] EWHC 1729 (Admin); [2010] 1 P & CR 19. The issue in that case was whether the authority had been obliged to treat the possibility of alternative sites as a material consideration. I said: 17. It is one thing to say that consideration of a possible alternative site is a potentially relevant issue, so that a decision maker does not err in law if he has regard to it. It is quite another to say that it is necessarily relevant, so that he errs in law if he fails to have regard to it 18. For the former category the underlying principles are obvious. It is trite and long established law that the range of potentially relevant planning issues is very wide (Stringer v Minister of Housing and Local Government [1970] 1 WLR 1281); and that, absent irrationality or illegality, the weight to be given to such issues in any case is a matter for the decision maker (Tesco Stores Ltd v Secretary of State for the Environment and West Oxfordshire District Council [1995] 1 WLR 759, 780). On the other hand, to hold that a decision maker has erred in law by failing to have regard to alternative sites, it is necessary to find some legal principle which compelled him (not merely empowered) him to do so. I referred to the discussion of this issue in a different context by Cooke J in the New Zealand Court of Appeal, in CreedNZ Inc v Governor General [1981] 1 NZLR 172, 182 (adopted by Lord Scarman in the House of Lords in In re Findlay [1985] AC 318, 333 334, and in the planning context by Glidewell LJ in Bolton Metropolitan Borough Council v Secretary of State for the Environment and Greater Manchester Waste Disposal Authority (1991) 61 P & CR 343, 352): 26. Cook J took as a starting point the words of Lord Greene MR in the Wednesbury case [1948] 1 KB 223, 228: If, in the statute conferring the discretion there is to be found expressly or by implication matters which the authority exercising the discretion ought to have regard to, then in exercising the discretion it must have regard to those matters. He continued: What has to be emphasised is that it is only when the statute expressly or impliedly identifies considerations required to be taken into account by the authority as a matter of legal obligation that the court holds a decision invalid on the ground now invoked. It is not enough that it is one that may properly be taken into account, nor even that it is one which many people, including the court itself, would have taken into account if they had to make the decision . (Emphasis added) In approving this passage, Lord Scarman noted that 27. Cook J had also recognised, that in certain circumstances there will be some matters so obviously material to a decision on a particular project that anything short of direct consideration of them by the ministers would not be in accordance with the intention of the Act. (In re Findlay at p 334) It seems, therefore, that it is not enough that, in the 28. judges view, consideration of a particular matter might realistically have made a difference. Short of irrationality, the question is one of statutory construction. It is necessary to show that the matter was one which the statute expressly or impliedly (because obviously material) requires to be taken into account as a matter of legal obligation. Mutatis mutandis, similar considerations apply in the present case. The question therefore is whether under the openness proviso visual impacts, as identified by the inspector, were expressly or impliedly identified in the Act or the policy as considerations required to be taken into account by the authority as a matter of legal obligation, or alternatively whether, on the facts of the case, they were so obviously material as to require direct consideration. The reasoning of the courts below Hickinbottom J in the High Court held in summary that consideration of visual impact was neither an implicit requirement of the openness proviso, nor obviously relevant on the facts of this case. He said: 64. I stress that we are here concerned with differential impact, ie the potential adverse visual impact over and above the adverse spatial impact. On the facts of this case it is difficult to see what the potential visual impact of the development would be over and above the spatial impact, which, as Mr Village concedes, was taken into account. In any event, even if there were some such impact, that does not mean that openness would be adversely affected; because, in assessing openness, the officers would still have been entitled to take into account factors such as the purpose of the development, its duration and reversibility, and would have been entitled to conclude that, despite the adverse spatial and visual impact, the development would nevertheless not harm but preserve the openness of the Green Belt. In this case, the potential visual impact of the 65. development falls very far short of being an obvious material factor in respect of this issue. In my judgment, in the circumstances of this case, the report did not err in not taking into consideration any potential visual impact from the development. Indeed, on the facts of this case, I understand why the officers would have come to the view that consideration of visual impact would not have materially added to the overarching consideration of whether the development would adversely impact the openness of the Green Belt. Lindblom LJ took the opposite view. He summarised the visual impacts described by the officer: 42. The proposed development was a substantial extension to a large existing quarry, with a lengthy period of working and restoration. As the Principal Landscape Architect recognized in her response to consultation, and the officer acknowledged without dissent in her report, there would be permanent change to the character of the landscape (paras 4.109 and 4.115 of the report). The quality of the Locally Important Landscape Area as a whole would be compromised (para 7.41). The exposed face of the extended quarry would be as visible as that of the existing quarry, if not more so (paras 4.111 and 7.42). Long distance views could be cut off by the proposed bunding and planting. Agricultural land would ultimately be replaced by a deep lower level landscape of grassland (para 4.113). The character and quality of the landscape would be permanently changed and the impact cannot be described as neutral (paras 4.115 and 7.44). Concluding her assessment of Landscape Impact, the officer was satisfied that the proposed screening could protect the environment and residential receptors from potential landscape and visual impacts, and that with the proposed mitigation measures the development would comply with national and local policy (paras 7.47 and 8.4). 43. That assessment did not deal with the likely effects of the development on the openness of the Green Belt as such, either spatial or visual. It does show, however, that there would likely be or at least could be effects on openness in both respects, including the closing off of long distance views by the bunding and planting that would screen the working (para 4.111 of the officers report). The officers conclusion overall (in para 7.47) was, in effect, that the proposed screening would be effective mitigation, without which the development would not be acceptable. But this was not followed with any discussion of the harmful effects that the screening measures themselves might have on the openness of the Green Belt. (Emphasis added) He then directed particular attention to para 7.122 of the report, which he understood to encapsulate her views on the application of the openness proviso under NPPF para 90: 45. So it is to para 7.122 that one must look, at least in the first place, to see whether the officer considered the relevance of visual impact to the effect of this development on the openness of the Green Belt. Did she confront this question, and bring the committees attention to it? I do not think she did. She neither considered, in substance, the likely visual impact of the development on the openness of the Green Belt nor, it seems, did she ask herself whether this was a case in which an assessment of visual impact was, or might be, relevant to the question of whether the openness of the Green Belt would be preserved. Indeed, her observation that openness is commonly taken to be the absence of built development seems deliberately to draw the assessment away from visual impact, and narrow it down to a consideration of spatial impact alone. And the burden of the assessment, as I read it, is that because the further extraction of limestone would take place next to the existing quarry, the scale of the development would not fail to preserve the openness of the Green Belt. This seems a somewhat surprising conclusion. But what matters here is that it is a consideration only of spatial impact. Of the visual impact of the quarry extension on the openness of the Green Belt, nothing is said at all. That was, it seems to me, a significant omission, which betrays a misunderstanding of the policy in para 90 of the NPPF. 46. One must not divorce para 7.122 from its context. The report must be read fairly as a whole. The question arises, therefore: did the officer address the visual impact of the development on the openness of the Green Belt in the remaining paragraphs of this part of her report, or elsewhere? I do not think she did. Her consideration of the effects of the development on the purposes of including land in the Green Belt, in paras 7.123 to 7.125, is unexceptionable in itself. However, she did not, in these three paragraphs, revisit the question of harm to the openness of the Green Belt, either in spatial or in visual terms. The conclusion to this part of the report, in para 7.126, is that the character and openness of the Green Belt would not be materially harmed by the development a conclusion repeated in para 8.5 and that the proposal would therefore comply with Policy SP3 and Policy SP13 of the local plan and the NPPF. But I cannot accept that this conclusion overcomes the lack of consideration of visual impacts on openness in the preceding paragraphs. It seems to treat character as a concept distinct from openness. Even if these two concepts can be seen as related to each other, and however wide the concept of character may be, there is no suggestion here that the officer was now providing a conclusion different from that in para 7.122, or additional to it. 47. The same may also be said of the officers earlier discussion of Landscape Impact in paras 7.41 to 7.47. Her assessment and conclusions in that part of her report are not imported into para 7.122, or cross referred to as lending support to her conclusion there . (Emphasis added) This led to the overall conclusion in para 49 (quoted in part at the beginning of this judgment): 49. I can only conclude, therefore, that the advice given to the committee by the officer was defective. It was defective, at least, in failing to make clear to the members that, under government planning policy for mineral extraction in the Green Belt in para 90 of the NPPF, visual impact was a potentially relevant and potentially significant factor in their approach to the effect of the development on the openness of the Green Belt, and hence to the important question of whether the proposal before them was for inappropriate development in the Green Belt and, indeed, in implying that the opposite was so One can go further. On the officers own assessment of the likely effects of the development on the landscape, visual impact was quite obviously relevant to its effect on the openness of the Green Belt. So the consideration of this question could not reasonably be confined to spatial impact alone. (Emphasis added) Although it is necessary to read the discussion in full, I have highlighted what seem to me the critical points in Lindblom LJs assessment of the failure to take account of visual effects; in summary: i) In paras 42 and 43, he extracts from the officers own landscape assessment the observation that the exposed face of the extended quarry would be as visible as that of the existing quarry, if not more so and that long distance views could be cut off by the proposed bunding and planting. This leads to the view that: there would likely be or at least could be effects on openness in both respects, including the closing off of long distance views by the bunding and planting that would screen the working. ii) In para 7.122, where the officer purported to address the issue of openness, she failed to consider the likely effect of such visual impact nor its relevance to whether the openness of the Green Belt would be preserved. Instead, by in effect equating openness with absence of built development, she tended to narrow the issue down to a consideration of spatial impact alone. That betrayed a misunderstanding of the policy in para 90 of the NPPF. iii) The subsequent paragraphs dealt with other aspects of the effect on the purposes of the Green Belt, and were unexceptionable in themselves; but they did not revisit the question of visual impact or so make up for the deficiency in para 7.122. iv) The officers advice was defective in this respect. Further on her own assessment visual effect was quite obviously relevant to the issue of openness, and the committee could not reasonably have thought otherwise. I hope I will be forgiven for not referring in detail to the arguments of counsel before this court, which substantially reflected the reasoning respectively of the High Court and the Court of Appeal. I note that Mr Village QC for Samuel Smith made a further criticism of para 7.122, not adopted by Lindblom LJ, that the officer treated the fact that the site abutted the existing quarry as reducing its impact on openness. Discussion With respect to Lindblom LJs great experience in this field, I am unable to accept his analysis. The issue which had to be addressed was whether the proposed mineral extraction would preserve the openness of the Green Belt or otherwise conflict with the purposes of including the land within the Green Belt. Those issues were specifically identified and addressed in the report. There was no error of law on the face of the report. Paragraph 90 does not expressly refer to visual impact as a necessary part of the analysis, nor in my view is it made so by implication. As explained in my discussion of the authorities, the matters relevant to openness in any particular case are a matter of planning judgement, not law. Lindblom LJ criticised the officers comment that openness is commonly equated with absence of built development. I find that a little surprising, since it was very similar to Lindblom LJs own observation in the Lee Valley case (para 23 above). It is also consistent with the contrast drawn by the NPPF between openness and urban sprawl, and with the distinction between buildings, on the one hand, which are inappropriate subject only to certain closely defined exceptions, and other categories of development which are potentially appropriate. I do not read the officer as saying that visual impact can never be relevant to openness. As to the particular impacts picked out by Lindblom LJ, the officer was entitled to take the view that, in the context of a quarry extension of six hectares, and taking account of other matters, including the spatial separation noted by her in para 7.124, they did not in themselves detract from openness in Green Belt terms. The whole of paras 7.121 to 7.126 of the officers report address the openness proviso and should be read together. Some visual effects were given weight, in that the officer referred to the restoration of the site which would be required. Beyond this, I respectfully agree with Hickinbottom J that such relatively limited visual impact which the development would have fell far short of being so obviously material a factor that failure to address it expressly was an error of law. For similar reasons, with respect to Mr Villages additional complaint, I see no error in the weight given by the officer to the fact that this was an extension of an existing quarry. That again was a matter of planning judgement not law. Conclusion For these reasons, I would allow the appeal and confirm the order of the High Court dismissing the application.

This issue in this appeal is whether the Appellant, as local planning authority, properly understood the meaning of the word openness in the national planning policies applying to mineral working in the Green Belt, as expressed in the National Planning Policy Framework (NPPF). Paragraph 90 of the NPPF (in its original 2012 form) provides: Certain other forms of development are not inappropriate in the Green Belt provided that they preserve the openness of the Green Belt and do not conflict with the purposes of including land in the Green Belt. These are: mineral extraction; The application in issue in this case was for the extension of the operational face of Jackdaw Crag Quarry. This is a magnesian limestone quarry 1.5 kilometres to the south west of Tadcaster, North Yorkshire, owned and operated by the Third Respondent, Darrington Quarries. The Appellants Planning and Regulatory Functions Committee on 9 February 2016 accepted their officers recommendation that planning permission be granted. The officers report detailed a wide range of planning considerations. Under the heading Landscape impact the report summarised the views of the Appellants Principal Landscape Architect, who did not object in principle to the proposal, but drew attention to the potential landscape impacts and the consequent need to ensure that mitigation measures were maximised. In a section headed Impacts of the Green Belt the report referred to the consultation response from the First Respondent, including comments addressing the openness of the Green Belt. The First and Second Respondent brought judicial review proceedings of the decision to grant planning permission. They said, among other things, that the officers report erred in its analysis of openness in paragraph 90 of the NPPF in that it did not consider visual impact. The High Court (Hickinbottom J) found no error as the officers report was not required to take into account visual impact from the development. Disagreeing, the Court of Appeal (Lindblom and Lewison LJJ) held that the officers report was defective at least in failing to make clear that, under para 90 of the NPPF, visual impact was potentially relevant; and, further, that on the officers findings visual impact was quite obviously relevant and therefore a necessary part of the assessment. The planning permission was quashed. The Supreme Court unanimously allows the Appellant and Third Respondents appeal. Lord Carnwath gives the sole judgment, with which the other Justices agree. On a proper reading of the NPPF in its proper historic context visual quality of landscape is not in itself an essential part of openness for which the Green Belt is protected [5]. While the text of paragraph 90 of the NPPF has changed from that in Planning Policy Guidance 2: Green Belts (published 1995, amended in 2001), there has been no significant change of approach [12]. The concept of openness in paragraph 90 of the NPPF is a broad policy concept which is the counterpart of urban sprawl and is linked to the purposes to be served by the Green Belt. Openness is not necessarily a statement about the visual qualities of the land, nor does it imply freedom from all forms of development [22]. The question is, therefore, whether visual impact was a consideration which, as a matter of law or policy, was necessary to be taken into account, or was so obviously material as to require such direct consideration [32]. Whether the proposed mineral extraction would preserve the openness of the Green Belt or otherwise conflict with the purposes of including land within the Green Belt was specifically identified and addressed in the officers report. Paragraph 90 of the NPPF does not expressly or impliedly mandate the consideration of visual impact as part of such an analysis [39]. The officers report does not suggest that visual impact can never be relevant to openness [40]. The relevant paragraphs of the officers report addressing openness must be read together. Some visual effects were given weight in the consideration of the restoration of the site. The relatively limited visual impact fell far short of being so obviously material that failure to address it expressly was an error of law, as did the fact that the proposed development was an extension to the quarry. These were matters of planning judgement and not law [41].

This appeal is concerned with the entitlement of a taxpayer to deduct input VAT and claim repayment of surplus input VAT. It concerns the interpretation of articles 167 and 168(1) of Council Directive (EC) 2006/112/EC of 28 November 2006 on the common system of value added tax (the Principal VAT Directive or the PVD) and the case law of the Court of Justice of the European Union (CJEU) relating to those articles. In short, the question is whether a taxpayer can deduct as input tax the VAT which it has incurred in purchasing entitlements to an EU farm subsidy, the Single Farm Payment (SFP). The taxpayer has used those entitlements to annual subsidies over several years and intends to use money resulting from the receipt of those subsidies to fund its current and future business activities, which currently involve only taxable supplies. The factual background to this appeal involves an interesting business model. Frank A Smart & Son Ltd (FASL) is a Scottish company which carries on a farming business in Aberdeenshire. FASL is wholly owned by Mr Frank Smart, who is its sole director. Mr Smart and his wife are the partners in a partnership which owns Tolmauds Farm, a farm of about 200 hectares which the partnership leases to FASL for a rent of 30,000 per year. FASL produces beef cattle and certain crops at Tolmauds Farm. FASLs whole output from its business was and is taxable under the VAT regime. FASL received SFPs from the Scottish Government. SFPs were agricultural subsidies which between 2005 and 2014 were paid to farmers who had eligible land at their disposal on 15 May of each year and who met the requirements of ensuring plant and animal health and maintaining the land in question in Good Agricultural and Environmental Condition (GAEC). The farmer did not have to cultivate the land or stock it with animals in order to meet the GAEC requirement. When the scheme was initiated in 2005, farmers in the United Kingdom were allocated initial units of entitlement to single farm payments (SFPEs) for no consideration. The SFPEs were tradeable and a market in them developed over time. FASL took advantage of the market in SFPE units to accumulate a fund for the development of its business. With the assistance of bank funding, it spent about 7.7m between 2007 and 2012 on purchasing 34,477 SFPE units in addition to its initial allocation of 194.98 units for Tolmauds Farm. In this period FASL paid VAT on the SFPE units which it purchased and it has sought to deduct that VAT as input tax. In order to receive the SFPs to which the purchased SFPE units entitled it, FASL leased a further 35,150 hectares of land under seasonal lets. FASL did not cultivate or stock this land. The leases were typically qualified by an agreement, entered into after the lease, which allowed the landlord to stock the land or cultivate it himself, provided that the ground was kept in GAEC. This was done to preserve FASLs entitlement to SFPs. The rent payable for the seasonal lets was generally about 1 per acre but could be up to 10 per acre. The result of this business model was that between 2010 and 2013 (in each case FASLs financial year ending on 30 September) FASLs income from subsidies, which were principally SFPs, dwarfed its income from cattle sales from Tolmauds Farm. FASL received SFPs of 1,166,290 in 2010, 1,761,205 in 2011, 2,488,949 in 2012 and 3,285,650 in 2013. The parties presented the court with agreed figures derived from the profit and loss accounts of FASL in those financial years: Cattle Sales Cattle subsidies (incl SFPs) Costs of Sales SFP Amortisation Net Profits 2010 99,284 1,202,908 2011 48,601 1,795,589 2012 2013 97,530 280,997 2,515,057 3,312,597 (53,925) (1,141,159) (38,666) (111,885) (1,766,118) (1,835,693) (275,389) (917,840) (37,079) 534,910 2,499,085 (41,812) During the years 2010 to 2013, Mr Frank Smart was paid no directors salary or bonus but FASL paid him dividends of 20,000 in each of 2010 and 2012 and of 15,000 in each of 2011 and 2013. None of the SFPs have been withdrawn from FASLs bank account for Mr Smarts personal use or for his benefit. The First tier Tribunal (FTT), to whom FASL appealed against HMRCs refusal to allow it to deduct VAT of 1,054,852.28 in its quarterly VAT returns between December 2008 and June 2012, made important findings of fact (in para 38 of its decision) which have a bearing on the outcome of this appeal. The FTT found that when it purchased the SFPE units, FASL intended to apply the income which it received from the SFPs to pay off its overdraft and to develop its business operations. The SFPs were accumulated in FASLs bank account and have been used to pay off its overdraft. Tolmauds Farm was worked during the relevant period by Mr Smart and one of his sons, Roderick, on a full time basis and another son assisted for part of that period. FASL had no other employees. During the relevant period FASL did not increase its stock numbers on the farm significantly. But FASL had been contemplating three principal developments of its business. First, from about 2011, FASL was considering establishing a windfarm. It spent over 119,000 on preliminary investigations, including technical information and costings, on investigating community responses and on a planning application and enquiries. Secondly, other proposed developments have included the construction of further farm buildings, including cattle courts and a Dutch barn. FASL has undertaken site preparation works for an additional cattle court and has made the needed planning applications. Thirdly, FASL has been considering the purchase of neighbouring farms, which were expected to come on to the market for sale. Based on those findings of fact, the FTT concluded (para 39) that the acquisition of the SFPE units was a funding exercise which related to FASLs business overheads in its farming enterprise. FASL had raised finance for its future economic activities as a whole. There was a direct and immediate link between the expenditure and FASLs future taxable supplies. The FTT stated the conclusion based on its findings of primary fact that the funding opportunity afforded by the purchase of the SFPE units did not form a separate business activity of FASL but was a wholly integrated feature of the farming enterprise and not a separate enterprise (para 42). The FTT therefore allowed FASLs appeal. HMRC appealed to the Upper Tribunal (Lord Tyre), which confirmed the FTTs findings of fact, which were by then uncontroversial, and refused the appeal, finding that the FTT had not erred in law. HMRC then appealed with the permission of the Upper Tribunal to the Inner House of the Court of Session. An Extra Division of the Inner House (Lord Menzies, Lord Brodie and Lord Drummond Young) in a judgment delivered by Lord Drummond Young dated 8 December 2017 ([2017] CSIH 77) dismissed HMRCs appeal. HMRC now appeals to this court with its permission. The VAT system Before setting out HMRCs challenge it may be useful to discuss the basic structure of the VAT system so far as relevant. In order to understand the case law, which I will discuss, it is necessary also to set out relevant provisions of the PVD as they show the central importance to the question of deductibility, which arises in this appeal, of the connection between input expenditure and the economic activity which a taxable person is carrying on or intends to carry on. Article 2(1) of the PVD imposes VAT on: the supply of goods for consideration within the territory (a) of a member state by a taxable person acting as such (c) the supply of services for consideration within the territory of a member state by a taxable person acting as such; Article 9(1) of the PVD defines taxable person and economic activity: 1. Taxable person shall mean any person who, independently, carries out in any place any economic activity, whatever the purpose or results of that activity. Any activity of producers, traders or persons supplying services, including mining and agricultural activities and activities of the professions, shall be regarded as economic activity. The exploitation of tangible or intangible property for the purposes of obtaining income therefrom on a continuing basis shall in particular be regarded as an economic activity. In the provision of goods or services for consideration there is often a chain of production or supply from raw material to finished product. At its simplest, VAT is a tax on the value added by a supplier of goods to its purchases of raw materials or goods upon sale of the product. The same principle extends to the supply of services. Under the common system of VAT in the United Kingdom and throughout the European Union, the taxation of the value so added by the particular supplier is achieved by calculating the tax due on the output of the supplier at the specified rate (output tax) and deducting from that sum the VAT which that supplier has paid on the components of that output or on general overheads of the business which are cost components of its taxable outputs (input tax). The principle is articulated in article 1(2) of the PVD which provides: The principle of the common system of VAT entails the application to goods and services of a general tax on consumption exactly proportional to the price of the goods and services, however many transactions take place in the production and distribution process before the stage at which the tax is charged. On each transaction, VAT, calculated on the price of the goods or services at the rate applicable to such goods or services, shall be chargeable after deduction of the amount of VAT borne directly by the various cost components. The mechanism, by which the deductions mentioned in article 1(2) are effected, is set out, so far as relevant, in articles 167 and 168, which provide: Article 167 A right of deduction shall arise at the time the deductible tax becomes chargeable. Article 168 In so far as the goods and services are used for the purposes of the taxed transactions of a taxable person, the taxable person shall be entitled, in the member state in which he carries out these transactions, to deduct the following from the VAT which he is liable to pay: (a) the VAT due or paid in that member state in respect of supplies to him of goods or services, carried out or to be carried out by another taxable person If a taxable person uses goods and services, on which it has paid VAT, both for its own transactions in respect of which VAT is deductible and for its own transactions in respect of which VAT is not deductible, article 173 provides that only the proportion of the VAT that is attributable to the former transactions may be deducted. The PVD and its predecessor directives have been implemented in the United Kingdom by the Value Added Tax Act 1994, which in section 1(1) charges VAT on the supply of goods and services in the United Kingdom. Section 4 provides: (1) VAT shall be charged on any supply of goods or services made in the United Kingdom, where it is a taxable supply made by a taxable person in the course or furtherance of any business carried on by him. (2) A taxable supply is a supply of goods or services in the United Kingdom other than an exempt supply. Sections 24 to 26 implement the regime for deduction of input tax which is now set out in the PVD. Section 24 provides: (1) Subject to the following provisions of this section, input tax, in relation to a taxable person, means the following tax, that is to say (a) VAT on the supply to him of any goods or services; being goods or services used or to be used for the purpose of any business carried on or to be carried on by him. (2) output tax, in relation to a taxable person, means VAT on supplies which he makes (5) Where goods or services supplied to a taxable person are used or to be used partly for the purposes of a business carried on or to be carried on by him and partly for other purposes (a) VAT on supplies shall be apportioned so that only so much as is referable to the taxable persons business purposes is counted as that persons input tax Section 25(2) empowers the taxable person to take credit at the end of each prescribed accounting period for the input tax which is allowable under section 26 and to deduct that amount from any output tax due from it. The prescribed accounting periods are quarterly. Section 26 provides: (1) The amount of input tax on which a taxable person is entitled to credit at the end of any period shall be so much of the input tax for that period (that is input tax on supplies, acquisitions and importations in the period) as is allowable by or under regulations as being attributable to supplies within subsection (2) below. (2) The supplies within this subsection are the following supplies made by the taxable person in the course or furtherance of his business taxable supplies (a) Accordingly, the VAT legislation provides for the taxable person to make taxable supplies, the cost components of which may give rise to input tax which is deductible from the output tax due on those taxable supplies. The taxable person may also make exempt supplies, defined in section 31 and Schedule 9, which do not give rise to a right to deduct input tax. Further, the taxable person may engage in activities which are not economic activities under article 9 of the PVD and are outside the scope of the VAT regime. VAT incurred by the taxable person on supplies which are used as components of such non economic activities are not deductible. With that introduction, I turn to HMRCs challenge. HMRCs challenge HMRC submit that the Inner House erred in law because, on a proper analysis, FASL acquired the SFPE units to generate the receipt of SFPs, which was a form of investment income outside the scope of VAT. The receipt of the SFPs was a non economic activity. Input tax incurred in acquiring the SFPE units was not recoverable because there was a direct and immediate link between the expenditure on those units and the receipt of the SFPs. There was no direct and immediate link between the acquisition of the SFPE units and a taxable output transaction by FASL. Secondly, HMRC submit that the Inner House erred in treating the VAT incurred on the purchase of the SFPE units as deductible on the basis that it was a general overhead of FASLs business. This is again because the expenditure was directly and immediately related to the receipt of the SFPs, which was outside the scope of the VAT system. Thirdly, HMRC submit that the FTT, the Upper Tribunal and the Inner House each erred in taking into account an irrelevant consideration, namely the evidence of Mr Smarts intention, as the director of FASL, to use the funds generated by the receipt of the SFPs to fund the development of FASLs business which would involve the making of taxable supplies in future. Mr Kieron Beal QC, who presented the case for HMRC skilfully, makes two central submissions. First, he relies on the judgment of the CJEU in BLP Group plc v Customs and Excise Comrs (Case C 4/94) [1996] 1 WLR 174 (BLP) in support of the proposition that VAT which a taxable person has paid on costs incurred directly and immediately in relation to an exempt supply cannot be reclaimed as input VAT even if the outcome of the expenditure is to produce funds which are used or will be used to subsidise the taxable persons downstream taxable activities. Secondly, he submits that there is no reason in fact or law for reaching a different conclusion in relation to costs incurred directly and immediately in relation to a transaction which is outside the scope of VAT. If there is any doubt on this matter, HMRC invite the court to refer a question or questions to the CJEU under article 267 of the Treaty on the Functioning of the European Union (the TFEU). FASLs response Mr David Small, advocate, in a succinct and skilful submission, founds on the principle of neutrality: the VAT system gives fully taxable traders, in other words people, such as FASL, who make only taxable supplies, a right to recover all input tax incurred in raising finance for their business so long as (i) the finance which they raise is spent on funding the business which goes on to make further taxable supplies and (ii) the financing exercise itself remains outside the scope of VAT because it does not involve the taxable person in making any taxable or exempt supplies. FASL does not dispute that if it were in the future to use part of the funds, which it has obtained through the receipt of SFPs and kept in its bank account, on downstream activities which were outside the scope of VAT, that use would restrict the input tax to which it had been entitled and might give rise to an obligation to repay a proportionate part of any deduction which it had made or any repayment of VAT which it had received from HMRC. Disagreeing with HMRC, FASL submits that the case law of the CJEU is clear and supports its position. Discussion (i) Overview I am persuaded that Mr Small is correct in his submission that FASL is entitled to deduct input VAT incurred in its acquisition of the SFPE units and that the tribunals and the Inner House did not err in law in so concluding. Because the answer to the question lies in an analysis of the jurisprudence of the CJEU in relevant cases, and because HMRC submit that the matter is not acte clair, it is necessary to examine the relevant cases with care. Before turning to the cases about which there is a dispute, it is necessary to set the scene by considering Mohr v Finanzamt Bad Segeberg (Case C 215/94) [1996] ECR I 959; [1996] STC 328, in which the CJEU held that an undertaking by a farmer to discontinue milk production, for which he received compensation, did not constitute a supply of services by him to the EC institutions or the competent national authorities with the result that the compensation was not subject to VAT. The CJEU in its judgment (paras 19 23) observed that VAT was a tax on consumption, and that the authorities on payment of compensation obtained no goods or services for their own use from the farmer but acted in the common interest of promoting the proper functioning of the Communitys milk market. It is not contested in this appeal that the sales on the market of the SFPE units to FASL were transactions which fell to be treated as taxable supplies. It is also not contested that a farmers actions to qualify himself to receive SFPs did not amount to the provision of a service to the relevant authorities and that the receipt of SFPs was outside the scope of VAT. The central question in the appeal therefore is whether the receipt of the SFPs, which were transactions outside the scope of VAT, prevented FASL from deducting the VAT which it has paid on the purchase of the SFPE units. (ii) The disputed case law In BLP a management holding company sold shares in a subsidiary company and sought to recover as input tax the VAT which it had paid on invoices for professional services connected to the sale. The share sale was an exempt transaction. But BLP argued that it was entitled to deduct the VAT as input tax because the purpose of the sale was to raise funds to pay off debts which had arisen as a result of its taxable transactions. The legal question turned on the interpretation of the predecessors of articles 1(2), 168 and 173 of the PVD, namely article 2(2) of EC Council Directive 67/227 (the First Directive) and article 17(2) and (5) of the EC Council Directive 77/388 (the Sixth Directive) and in particular the words goods and services are used for the purposes of his taxable transactions in article 17(2), which remain in article 168 of the PVD (para 15 above). The CJEU held in para 19 of its judgment: The use [in article 17(5)] of the words for transactions shows that to give the right to deduct under [article 17(2)], the goods or services in question must have a direct and immediate link with the taxable transactions, and that the ultimate aim pursued by the taxable person is irrelevant in that respect. The CJEU went on to point out that the Sixth Directive provided a right to deduct VAT on goods and services used for exempt transactions only by way of exception. It recognised (para 25) that if BLP had taken out a bank loan, instead of selling shares, it would have been able to deduct VAT on accountants professional services required for that purpose because the costs of those services would form part of the companys overheads and hence of the cost components of its products. Thus it held (in para 28): article 2 of the First Directive and article 17 of the Sixth Directive are to be interpreted as meaning that, except in the cases expressly provided for by those Directives, where a taxable person supplies services to another taxable person who uses them for an exempt transaction, the latter person is not entitled to deduct the input VAT paid, even if the ultimate purpose of the transaction is the carrying out of a taxable transaction. It is clear that this ruling in terms relates only to the use of services on exempt transactions. But as HMRC set great store by this case and submit that its reasoning extends to services used on a form of fund raising which is outside the scope of VAT, it is necessary also to cite para 24 of the CJEUs judgment in BLP, which suggests that policy considerations might point to a wider exclusion of the right to deduct: Moreover, if BLPs interpretation were accepted, the authorities, when confronted with supplies which, as in the present case, are not objectively linked to taxable transactions, would have to carry out inquiries to determine the intention of the taxable person. Such an obligation would be contrary to the VAT systems objectives of ensuring certainty and facilitating application of the tax by having regard, save in exceptional cases, to the objective character of the transaction in question. In BLP, the objective character of the transactions was that the services were used for an exempt transaction, namely the sale of shares in a subsidiary by a holding management company. When addressing the subsequent case law of the CJEU I will have to consider how, when a taxable person legitimately claims that costs of services are part of its overheads, the tax authorities are to ascertain that those costs are eventually cost components of its products or activities in taxable transactions. In Midland Bank plc v Customs and Excise Comrs (Case C 98/98) [2000] 1 WLR 2080, the bank was the representative member of a group of companies, one of which, Samuel Montagu & Co Ltd, provided taxable services to one of its clients in relation to a proposed corporate takeover and engaged a firm of solicitors to provide legal services in that connection. To simplify matters I will present Samuel Montagu & Co Ltd as the bank because the group was treated as a single person for the purposes of VAT. In a dispute in relation to the proposed takeover, the bank was sued for damages for negligence and the bank engaged the same firm of solicitors to represent it in the legal proceedings. The bank then sought to deduct as input tax the whole of the VAT which it paid in respect of its legal fees on the ground that it was to be attributed to its taxable supplies to its client in the takeover. The Customs and Excise Commissioners (CEC) argued that the VAT incurred on the legal fees relating to the claim for damages was attributable to the banks business generally and, as the bank made both taxable and exempt supplies, fell to be apportioned in accordance with article 17(5) of the Sixth Directive (now article 173 of the PVD). The dispute gave rise to questions (i) whether there needed to be a direct and immediate link between a particular input transaction and particular output transactions in order to entitle the taxable person to deduct VAT as input tax and (ii) if so, what was the nature of that link. In relation to the first question the CJEU applied BLP but (in paras 22 and 23) confirmed, as an exception to the rule in BLP, that: entitlement to deduct, once it has arisen, is retained even if the economic activity envisaged does not give rise to taxed transactions or the taxable person has been unable to use the goods or services which gave rise to the deduction in the context of taxable transactions by reason of circumstances beyond his control. In support of that exception it cited Intercommunale voor Zeewaterontzilting (INZO) v Belgian State (Case C 110/94) [1996] ECR I 857, paras 20 and 21 and Belgian State v Ghent Coal Terminal NV (Case C 37/95) [1998] ECR I 1, para 24. It held (in para 24 and dispositif (1) of its judgment) that: in principle, the existence of a direct and immediate link between a particular input transaction and a particular output transaction or transactions giving rise to entitlement to deduct is necessary before the taxable person is entitled to deduct input VAT and in order to determine the extent of such entitlement. In relation to the second question the CJEU declined to define what amounted to a direct and immediate link because of the diversity of professional and commercial transactions and left it to national courts to apply the test to the facts of the individual case. But it stated (para 33 and dispositif 2) that a taxable person which carries out taxable and non taxable transactions could deduct the entirety of VAT as input tax only if it could show by objective evidence that the expenditure involved in the acquisition of the services was part of the various cost components of the taxable output transaction. In Abbey National plc v Customs and Excise Comrs (Case C 408/98) [2001] 1 WLR 769, a life assurance company, Scottish Mutual Assurance plc (SM), in addition to its life assurance business, carried on business leasing premises for professional and commercial use. SM opted to charge VAT on the rent received from its commercial tenants. SM later sold a property in Aberdeen to a third party in a transaction which CEC, in accordance with domestic legislation, treated as a transfer as a going concern so that no supply of goods or services had taken place. As a result, the transfer was not a taxable transaction. SM sought to deduct as input tax the whole of the VAT which it had paid on professional services relating to the sale, while CEC took the view that only part of the tax was deductible and sought to apportion the VAT in accordance with article 17(5) of the Sixth Directive. The case is important because, like the present appeal, it concerns a claim to deduct as input tax VAT incurred on a transaction outside the scope of VAT. In his opinion Advocate General Jacobs contrasted the CJEUs approach in BLP in relation to an exempt transaction with other case law which recognised a right to deduct as input tax VAT incurred as part of the overheads of a taxable persons business. In his view, what mattered was whether the taxed supply was a cost component of a taxable output, and not whether the most closely linked transaction was itself taxable. It was inherent in an exempt transaction that it broke the chain between a supply and the taxable persons taxable economic activities. As a result, VAT incurred on supplies used by the taxable person for an exempt transaction could not be deducted from VAT paid on a subsequent output supply by that person (para 35). Where no supply of goods or services had taken place in a transaction outside the scope of VAT, the chain between a supply to the taxable person and that persons subsequent taxable economic activity was not broken. One was required to look beyond the immediate transaction to see whether the supply, in respect of which a claim to deduct VAT was made, formed a cost component of some other taxable transaction, including in the form of general overheads (paras 38, 42 and 46). I will consider below whether Mr Small is correct in his contention that the CJEU has in its later case law adopted the reasoning of the Advocate General. To simplify the later discussion of the case law concerning fund raising transactions, I will refer to the transaction on which the supply was used, such as the sale of the subsidiary in BLP, the transfer of the office in Abbey National, and the purchase of SFPEs and the steps taken to obtain the SFPs in this case as the initial transaction and, adopting the phrase which Mr Small derived from later CJEU case law, will call the taxable persons subsequent transaction or transactions, of which he asserts the relevant supply is a cost component, as the downstream transaction. It is, admittedly, a simplification to speak of subsequent transactions because, as the Advocate General recognised, there may not always be such a chronological sequence in economic reality or inherent in the VAT system (para 41). But it is nonetheless the norm. The CJEU in its judgment did not expressly adopt the Advocate Generals distinction between the chain breaking effect of the use of a supply in an initial transaction which is an exempt transaction and the absence of that break in an initial transaction outside the scope of VAT. But the CJEUs reasoning in this case is not only consistent with the Advocate Generals approach but also difficult to reconcile with its reasoning in BLP unless it was accepting his approach. In particular, the court rejected the principal position of the United Kingdom Government (para 20) that, since the costs incurred to effect the transfer were used for the purposes of an initial transaction which was not taxable, there was no right to deduct the input VAT paid on those costs. The CJEUs reasoning started (para 24) with the principle of neutrality, namely that the deduction system is meant to relieve the taxable person entirely of the burden of the VAT payable or paid in the course of all his economic activities (ie his activities that are themselves subject in principle to VAT paid by the recipient of his goods or services and accounted to the tax authorities by the taxable person). Referring to BLP and Midland Bank, the CJEU held (para 28) that the right to deduct VAT borne by goods and services presupposed that the expenditure incurred in acquiring them was part of the cost components of taxable output transactions (ie including taxable downstream transactions). The CJEU found no direct and immediate link between the professional services and one or more taxable outputs because it rejected Abbey Nationals arguments, including that the transfer of the property should be treated as if it were a taxable transaction. But that was not the end of the matter as the CJEU held that the costs of the professional services formed part of the taxable persons overheads and as such were cost components of the products of a business. The services used by SM for the purposes of the transfer thus had a direct and immediate link with the whole economic activity of that taxable person (para 36). As the taxable person effected downstream transactions which were subject to VAT and exempt transactions, it could only deduct (under article 17(5) of the Sixth Directive) the proportion of the VAT which was attributable to the taxable transactions (para 42 and dispositif). The CJEU thus looked through the initial transaction and recognised a right to deduct by reference to such downstream transactions as were economic activities. In Kretztechnik AG v Finanzamt Linz (Case C 465/03) [2005] 1 WLR 3755; [2005] ECR I 4357, an Austrian company, which developed and distributed medical equipment, raised capital by a share issue on the Frankfurt Stock Exchange. The Austrian tax authority disallowed a deduction of input tax which Kretztechnik had paid on the supply to it of services linked to the share issue, which the national tax authority treated as exempt from VAT. The company challenged the assessment to tax and this gave rise to questions whether the share issue was within the scope of In his opinion Advocate General Jacobs repeated the analysis which he had VAT and, if not, whether there was a right to deduct input tax on the ground that the services in respect of which the deduction of input tax was claimed were used for the purposes of the companys downstream taxable transactions. As I will show, the CJEU treated the share issue as being outside the scope of VAT and supported the right to deduct the VAT charged on the expenses incurred for the supplies acquired in connection with a share issue. adopted in his opinion in Abbey National (paras 35 and 46). He stated: 73. if a trader uses the services of a broker or valuator when acquiring a commodity, the cost of those services may be said to be directly, immediately and exclusively linked to the acquisition. That does not however determine whether the VAT on the services is deductible. The right to deduct must be determined by the output transactions for the purposes of which the services are used. The transactions in question will usually be the onward supply of the commodity or the goods or services for which it is used or in which it is incorporated. The right to deduct will depend on whether that supply is taxed or not. 74. Thus, if the transaction with which the input is most closely linked is one which falls entirely outside the scope of VAT because it is in any event not a supply of goods or services, it is irrelevant for the purpose of determining deductibility. What matters is the link, if any, with such output supplies, and whether they are taxed or exempt 75. The question to be asked in [Kretztechniks] case is therefore whether the capital raised by the share issue was used for the purposes of one or more taxed output transactions. The CJEUs judgment on the deductibility of VAT on the services provided to Kretztechnik is wholly consistent with the Advocate Generals approach in its disregard for an initial transaction which is outside the scope of the VAT system. The court stated: 34. The deduction system is meant to relieve the trader entirely of the burden of the VAT payable or paid in the course of all his economic activities. The common system of VAT consequently ensures complete neutrality of taxation of all economic activities, whatever their purpose or results, provided that they are themselves subject in principle to VAT: see, to that effect Rompelman v Minister van Financin (Case C 268/83) [1985] ECR 655 para 19; Belgian State v Ghent Coal Terminal NV para 15; Gabalfrisa [SL v Agencia Estatal de Administracin Tributaria] (Joined Cases C 110/98 to C 147/98) [2000] ECR I 1577, para 44; the Midland Bank case [2000] 1 WLR 2080, 2097 2098, para 19, and the Abbey National case [2001] 1 WLR 769, 785, para 24. 35. It is clear from the last mentioned condition that, for VAT to be deductible, the input transactions must have a direct and immediate link with the output transactions giving rise to a right of deduction. Thus, the right to deduct VAT charged on the acquisition of input goods or services presupposes that the expenditure incurred in acquiring them was a component of the cost of the output transactions that gave rise to the right to deduct (see the Midland Bank case, para 30, and the Abbey National case, para 28, and also Cibo Participations SA v Directeur regional des impts du Nord Pas de Calais (Case C 16/00) [2001] ECR I 6663, para 31). In this case, regard being had to the fact that, first, a 36. share issue is an operation not falling within the scope of the Sixth Directive and, second, that operation was carried out by [Kretztechnik] in order to increase its capital for the benefit of its economic activity in general, it must be considered that the costs of the supplies acquired by that company in connection with the operation concerned form part of its overheads and are therefore, as such, component parts of the price of its products. Those supplies have a direct and immediate link with the whole economic activity of the taxable person (see the BLP Group case para 25; the Midland Bank case, para 31; the Abbey National case, paras 35 and 36, and the Cibo Participations case, para 33). The CJEU, disregarding the share issue itself, held that article 17(1) and (2) of the Sixth Directive conferred the right to deduct in its entirety the VAT charged on the expenses incurred by a taxable person for the various supplies acquired by him in connection with a share issue, provided that all the transactions undertaken by the taxable person in the context of his economic activity constitute taxed transactions (para 38 and dispositif 2). The next relevant case in chronological sequence was Investrand BV v Staatssecretaris van Financin (Case C 435/05) [2007] ECR I 1315 which concerned the sale by a company in 1989 of a substantial shareholding in another company (company A). The CJEU decided the case without the assistance of an opinion from the Advocate General and followed its decisions in Midland Bank, Abbey National and Kretztechnik. The sale of the shares was treated as an activity outside the scope of VAT and the central question was whether the relevant costs were overheads related to the taxpayer companys economic activity as a whole (para 24). It is nonetheless of interest because in my view it casts light on later judgments of the CJEU and I will return to the case in this judgment. The consideration for the 1989 sale was a fixed sum and a further sum which depended upon the profits earned by company A between 1989 and 1992. At the time of the sale and until 1 January 1993 the taxpayer company was a passive holding company which took no part in the management of the companies in which it invested. From 1 January 1993 the taxpayer company provided management services to company A. A dispute arose between the taxpayer company and the purchaser of company A over the calculation of the sum due by reference to company As profits. The taxpayer company incurred professional costs in an arbitration on that matter and sought to deduct the VAT which it paid on those costs in the financial year 1996, which was at a time that it was carrying on economic activity. The CJEU rejected the taxpayers claim in essence because the taxpayer company would have incurred the professional costs whether or not it had commenced economic activity after 1 January 1993 (paras 32 33). It distinguished Kretztechnik on the basis that in that case the costs were incurred in relation to a share issue intended to increase the taxable persons capital for the benefit of its economic activity (paras 35 37). Accordingly, the CJEU held (para 38 and dispositif): the costs for advisory services which a taxable person obtains with a view to establishing the amount of a claim forming part of his companys assets and relating to a sale of shares prior to his becoming liable to VAT do not, in the absence of evidence establishing that the exclusive reason for those services is to be found in the economic activity, within the meaning of [the Sixth] Directive, carried out by the taxable person, have a direct and immediate link with that activity and, consequently, do not give rise to a right to deduct the VAT charged on them. In other words, the VAT on inputs which were incurred in relation to a companys non economic activity and which had no link to its subsequent economic activities would not be deductible. The CJEU returned to the issue of deductibility of VAT in the context of fund raising by a taxable person in Securenta Gttinger Immobilienanlagen und Vermgensmanagement AG v Finanzamt Gttingen (Case C 437/06) [2008] ECR I 4177; [2008] STC 3473. In this case the taxpayer company, Securenta, carried out both economic and non economic activities. It acquired capital for its business by the issue of shares and atypical silent partnerships and sought to deduct the input tax which it had paid for services relating to its raising of capital in this way. A dispute about the extent of its entitlement to deduct resulted in a reference to the CJEU. The relevant question, as reformulated by the court, was how the right to deduct input tax was to be determined in the case of a taxpayer who carries out both economic and non economic activities. The CJEU observed (para 26) that Securenta carried on three downstream activities, namely (i) non economic activities outside the scope of VAT, (ii) economic activities which were within the scope of the Sixth Directive but were exempt and (iii) taxed economic activities. The court repeated its ruling (in Abbey National para 28 and other cited cases) that in order for the input VAT to give rise to a right to deduct the expenditure incurred on the fund raising must be a component of the cost of the output transactions that gave rise to the right to deduct (para 27). If Securentas downstream activities had been solely economic activities, the supplies of services would have had a direct and immediate link with those economic activities, but part of Securentas downstream activities were non economic (para 29). The CJEU therefore held (para 31 and dispositif 1): where a taxpayer simultaneously carries out economic activities, taxed or exempt, and non economic activities outside the scope of the Sixth Directive, deduction of the VAT relating to expenditure connected with the issue of shares and atypical silent partnerships is allowed only to the extent that that expenditure is attributable to the taxpayers economic activity within the meaning of article 2(1) of that Directive. More recently, the CJEU has called into question its ruling in BLP in the light of its developing jurisprudence attributing input expenditure on the raising of capital to the general overheads of an undertaking. In Skatteverket v AB SKF (Case C 29/08) [2009] ECR I 10413; [2010] STC 419 (SKF), the parent company which managed an industrial group proposed to sell a wholly owned subsidiary and a minority stake in another company, which had formerly been a wholly owned subsidiary, to obtain funds to finance other activities of the group. It proposed to engage professional services in the sale and sought a ruling from the Swedish Revenue Law Commission on whether it would be entitled to deduct input VAT paid on those services. The tax authority challenged the affirmative answer given by the Commission and the Swedish Court made a reference to the CJEU. In his opinion, Advocate General Mengozzi endorsed the distinction which Advocate General Jacobs made in Abbey National between the chain breaking effect of an exempt transaction and the absence of such an effect where the fund raising transaction is outside the scope of VAT (paras 69 and 79). He opined (para 89(3)) that where the taxable person acquires supplies of services in order to carry out a share disposal which is an exempt transaction, he does not have the right to deduct input VAT on those services, even when the disposal of shares is a transaction which contributes to the restructuring of the taxable persons industrial activities. The CJEU disagreed with his conclusion in relation to an exempt transaction involving a sale of shares in circumstances which were analogous to the facts of the case and held (para 73) that there was a right to deduct input VAT paid on services acquired for the purposes of a disposal of shares if there is a direct and immediate link between the costs associated with the input services and the overall economic activities of the taxable person. It held that the referring court should take account of all the circumstances surrounding the transactions to determine whether the costs incurred were likely to be incorporated in the price of the shares sold or whether they were among only the cost components of transactions within the scope of the taxable persons economic activities. The CJEUs reasoning, based on prior case law, on the way to this conclusion is instructive. It reasoned: i) The right of deduction is an integral part of the VAT scheme and is necessary to achieve neutrality of taxation of all economic activities (paras 55 56); ii) In principle there needs to be a direct and immediate link between a particular input transaction and a particular output transaction or transactions giving rise to an entitlement to deduct before a taxable person is entitled to deduct input VAT to determine the extent of that entitlement: the expenditure incurred in acquiring the supplies must be a component of the cost of the output transactions that gave rise to the right to deduct (para 57); iii) But, absent that link between an input transaction and specific output transactions, the taxable person has a right to deduct where the costs of the services in question are part of his general costs and, as such, components of the price of the goods or services which he supplies, there thus being a direct and immediate link between the costs and the persons economic activity as a whole (para 58); iv) On the other hand, where the taxable person acquires goods or services and uses them for the purposes of transactions that are exempt or do not fall within the scope of VAT, no output tax can be collected or input tax deducted (para 59). The CJEU stated (para 60): It follows that whether there is a right to deduct is determined by the nature of the output transactions to which the input transactions are assigned. Accordingly, there is a right to deduct when the input transaction subject to VAT has a direct and immediate link with one of more output transactions giving rise to the right to deduct. If that is not the case, it is necessary to examine whether the costs incurred to acquire the input goods or services are part of the general costs linked to the taxable persons overall economic activity. In either case, whether there is a direct and immediate link is based on the premise that the cost of the input services is incorporated either in the cost of particular output transactions or in the cost of goods or services supplied by the taxable person as part of his economic activities. Applying this reasoning to the circumstances of SKFs proposed transaction, the CJEU advised that the referring court would have to ascertain whether the costs incurred were likely to be incorporated in the price of the shares which SFK intended to sell or whether they were only among the cost components of SKFs products (para 62). It referred to the cases which I have discussed (Midland Bank, Abbey National, Kretztechnik and Securenta), acknowledging that they concerned financial output transactions which were outside the scope of VAT. But it went on to observe that the main difference between an exempt share sale and a share sale which was outside the scope of VAT was whether the taxable company was or was not involved in the management of the companies whose shares were being sold. There was therefore a risk of infringement of the principle of fiscal neutrality through treating objectively similar transactions differently for tax purposes. It held (para 68) that if the costs relating to the disposals of shareholdings are considered to form part of a taxable persons general costs in cases where the disposal itself is outside the scope of VAT, the same tax treatment must be allowed where the disposal is classified as an exempt transaction. In my view it is implicit in the CJEUs reasoning that it accepted the distinction which Advocate General Jacobs made in his opinions in Abbey National and Kretztechnik but recognised the need to modify the result for the purpose of VAT of an exempt initial transaction in order to avoid discriminatory fiscal treatment. It is important to consider further the statement in para 59 of the judgment, summarised in para 44(iv) above. It was that in contrast to the circumstance where the costs of services are part of a taxable persons general costs and components of the price of the goods and services which he supplies (para 58). where goods and services acquired by a taxable person are used for purposes of transactions that are exempt or do not fall within the scope of VAT, no output tax can be collected or input tax deducted (para 59) In order to be consistent with the CJEUs reasoning outlined above, that statement, when applied in the context of a fund raising transaction such as a sale of shares, must be a reference to the downstream transactions of which the input costs form a cost component, and not the initial fundraising transaction, unless the cost of the inputs was a component of the price of the shares in the initial transaction. It is also noteworthy that the cases to which the CJEU referred in para 59 of its judgment as vouching its proposition of law did not involve an initial fund raising transaction and a downstream transaction. Proceedings brought by Uudenkaupungin kaupunki (Case C 184/04) [2006] ECR I 3039; [2008] STC 2329 concerned the costs of a building which was initially used in a non taxable activity but later was used in a taxable activity. The relevant questions concerned the meaning of article 20 of the Sixth Directive and, in particular, whether during the adjustment period for which it provided the taxable person could seek to deduct input tax, when there was no entitlement to deduct at the outset. In Hausgemeinschaft Jrg und Stephanie Wollny v Finanzamt Landshut (Case C 72/05) [2006] ECR I 8297; [2008] STC 1617, a household business had constructed a building as a business asset and made private use of rooms within the building. The business had deducted as input tax the VAT it had paid on its construction and the dispute with the German tax authorities was over the mechanism for calculating the liability to VAT for the private use under articles 6(2)(a) and 11A(1)(c) of the Sixth Directive. Vereniging Noordelijke Land en Tuinbouw Organisatie v Staatssecretaris van Financin (Case C 515/07) [2009] ECR I 839; [2009] STC 935 concerned an organisation which promoted the interest of the agricultural sector, a non taxable activity, and provided taxable services to its members. The case concerned the extent to which VAT relating to the goods and services which the organisation acquired could be deducted from the VAT which it paid on its taxable services. In my view, it is clear that in SFK the CJEU has not extended the reasoning of BLP to apply it to fund raising transactions which are outside the scope of VAT. On the contrary, in order to avoid discriminatory treatment of taxable persons, it has extended the reasoning in the cases about share disposals that are outside the scope of VAT to share disposals which are exempt, by requiring an examination as to whether the costs associated with the input services are incorporated in the price of the shares sold in the initial transaction or in the prices of the taxable persons products in downstream transactions. If the latter, the costs would be among only the cost components of transactions within the scope of the taxable persons economic activities. The next case which I have to consider is also important because it vouches the direct and immediate link between an input incurred in the context of an initial transaction, which is not an economic activity, and the taxable persons general economic activity in downstream transactions. It also confirms the CJEUs approach to that link where there is a significant time lapse between the input transaction and the downstream activity. In Sveda UAB v VMI (Case C 126/14) EU:C:2015:712; [2016] STC 447, a Lithuanian company, Sveda, entered into an agreement with the Lithuanian Ministry of Agriculture in which it undertook to construct a Baltic mythology recreational and discovery path and to offer it to the public free of charge. The Ministry undertook to pay 90% of the construction costs and Sveda was to pay the balance. Sveda undertook to provide the path to the public free of charge for five years. Sveda sought to deduct as input tax VAT which it paid on the acquisition or production of capital goods for the construction of the path. The Lithuanian tax authorities refused to allow the deduction and Sveda appealed that decision. On appeal the Supreme Administrative Court found that Sveda intended to carry out economic activities in the future as it would sell food or souvenirs to visitors to the recreational path. It referred to the CJEU the question (as re formulated by the CJEU) whether article 168 of the PVD must be interpreted as granting a taxable person the right to deduct input VAT paid for the production or acquisition of capital goods, for the purposes of a planned economic activity related to rural and recreational tourism, which (i) are directly intended for use by the public free of charge, and (ii) may be a means of carrying out taxed transactions. The CJEU answered the question in the affirmative, provided that a direct and immediate link is established between the expenses associated with the input transactions and an output transaction or transactions giving rise to the right to deduct or with the taxable persons economic activity as a whole and stated that this was a matter for the referring court to determine on the basis of objective evidence (para 37 and dispositif). In reaching this conclusion, the CJEU stated (para 19) that a taxable person may be acting for the purposes of an economic activity within the meaning of article 9(1) of the PVD when it acquires goods for the purposes of an economic activity even if the goods are not used immediately for that economic activity. If the taxable person is so acting, the right to deduct arises immediately when the goods or services are delivered (para 20), but their use in an economic activity may occur some time later. The CJEU continued (para 21): Whether a taxable person acts as such for the purposes of an economic activity is a question of fact which must be assessed in the light of all the circumstances of the case, including the nature of the asset concerned and the period between the acquisition of the asset and its use for the purposes of the taxable persons economic activity (see inter alia, to that effect, the judgment in Klub OOD v Direktor na Direktsia Obzhalvane I upravlenie na izpalnenieto Varna pri Tsentralno upravlenie na Natsionalnata agentsia za prihodite (Case C 153/11), paras 40 and 41 and the case law cited). It is for the referring court to make that assessment. The CJEU held that the court has to determine whether there is a direct and immediate link between the particular input transaction and either (i) a particular output transaction or transactions, or (ii) the taxable persons economic activity as a whole because the expenditure incurred on the input transaction is part of its general costs and as such is a component of the price of the goods or services which it supplies in a downstream transaction. In so doing, the court must consider all the circumstances and take account only of transactions that are objectively linked to the taxable persons economic activity (paras 27 29). See also Finanzamt Kln Nord v Becker (Case C 104/12) EU:C:2013:99 (21 February 2013, unreported), paras 22, 23, 33 and 35. The CJEU (para 23) concluded from the Lithuanian courts findings of fact that Sveda acquired or produced capital goods for the recreational path with the intention, confirmed by objective evidence, of carrying out an economic activity and did, consequently, act as a taxable person within the meaning of article 9(1) of the Directive. It also recorded (para 30) the finding of fact by the Lithuanian court that Svedas expenditure incurred on the construction of the recreational path would come partly within the price of the goods and services which it would provide in the context of its planned economic activity. The CJEU went on to comment on the doubts of the referring court whether there was a direct link between the input transactions and the planned economic activity as a whole because the path was intended to be used by the public free of charge. It stated: 32. In that regard, the case law of the court makes it clear that, where goods or services acquired by a taxable person are used for purposes of transactions that are exempt or do not fall within the scope of VAT, no output tax can be collected or input tax deducted (judgment in Eon Aset Menidjmunt OOD v Direktor na Direktsia Obzhalvane I upravlenie na izpalnenieto Varna pri Tsentralno upravlenie na Natsionalnata agentsia za prihodite (Case C 118/11) EU:C:2012:97, para 44 and the case law cited). In both cases, the direct and immediate link between the input expenditure incurred and the economic activities subsequently carried out by the taxable person is severed. 33. First, in no way does it follow from the order for reference that the making available of the recreational path to the public is covered by any exemption under the VAT Directive. Second, given that the expenditure incurred by Sveda in creating that path can be linked, as is apparent from para 23 of this judgment, to the economic activity planned by the taxable person, that expenditure does not relate to activities that are outside the scope of VAT. 34. Therefore, immediate use of capital goods free of charge does not, in circumstances such as those in the main proceedings, affect the existence of the direct and immediate link between input and output transactions or with the taxable persons economic activities as a whole and, consequently, that use has no effect on whether a right to deduct VAT exists. 35. Thus, there does appear to be a direct and immediate link between the expenditure incurred by Sveda and its planned economic activity as a whole, which is, however, a matter for the referring court to determine. I observe that in para 32 the CJEU repeated the interpretation, which it gave in SKF at para 59, which I have discussed in paras 47 and 48 above and to which I return below. The CJEU also recognised that a taxable person having obtained a deduction might later use the goods or services acquired in the input transaction for purposes other than its economic activity. If that were shown to have occurred, the taxable person would have to repay the relevant input VAT to the tax authorities (para 36). The final case which I must consider is Direktor na Direktsia Obzhalvane i danacho osiguritelna praktica Sofia v Iberdrola Inmobiliaria Real Estate Investments EOOD (Case C 132/16) EU:C:2017:683; [2017] BVC 39 (Iberdrola). In this case the property developer, Iberdrola, which wished to construct 300 apartments in a holiday village, entered into an undertaking with the municipality to reconstruct a wastewater pump station, which the municipality owned, to serve both its proposed development and the wider holiday village. Without that reconstruction, Iberdrola would not have been able to connect its development to the pump station. A dispute arose with the Bulgarian tax authorities as to whether Iberdrola could deduct as input tax the VAT which it incurred on paying a third party construction company for the works on the pump station. The CJEU held that a taxable person has the right to deduct input VAT in respect of a supply of services consisting of the construction or improvement of a property owned by a third party when that third party enjoys the results of those services free of charge and when those services are used both by the taxable person and the third party in the context of their economic activity, in so far as those services do not exceed that which is necessary to allow that taxable person to carry out the taxable output transactions and where their costs are included in the price of those transactions (para 40 and dispositif). In so holding, the CJEU followed its reasoning in SKF and Sveda in recognising that there could be a direct and immediate link between an input and either (i) particular output transactions or (ii) the taxable persons economic activity as a whole. This link would exist if the cost of the input was in the first case a cost component of the particular transactions and in the second case if it was a cost component of the price of goods and services which it supplies (paras 27 32). In this review of the CJEUs case law I have sought to set out the development of the jurisprudence and have focussed attention on the proposition recorded in SKF (para 59) and Sveda (para 32) that where goods or services acquired by a taxable person are used for purposes of transactions that are exempt or do not fall within the scope of VAT, no output tax can be collected or input tax deducted. This is because Mr Beal invites the court to make a reference to the CJEU under article 267 of the TFEU if it disagrees with his submission which I have recorded in paras 21 and 22 above. He supports that invitation by referring to the judgment of the Court of Appeal of England and Wales in Revenue and Customs Comrs v Chancellor, Masters and Scholars of the University of Cambridge [2018] EWCA Civ 568; [2018] STC 848, in which the court decided to make a reference to the CJEU because it concluded that the correct approach to be taken to the issue of attribution in that case was not acte clair. I am satisfied that there is no need for a reference in the present appeal. This is because, as I will seek to show, there are findings of fact that entitled the FTT to conclude that FASL when it acquired the SPFEs was acting as a taxable person because of its aim of accumulating sums to develop its taxable business through capital expenditure on assets which it would use to generate taxable output transactions. The statements in para 59 of SKF and para 32 of Sveda are wholly consistent with the principle of the neutrality of VAT enshrined in article 2(2) of the PVD. Thus in Investrand, which I discussed in para 39 above, the expenditure on the arbitration related to a financial claim arising out of a transaction carried out while Investrand was not a taxable person and the fact that the costs relating to the arbitration were incurred after it had become a taxable person was irrelevant because the expenditure had no connection with Investrands activities as a taxable person. Similarly, on the facts in Uudenkaupungin kaupunki (para 48 above), absent the arrangements under article 20 of the Sixth Directive, the intention to use and initial use of the building for a non taxable activity would have prevented the recovery as input tax of VAT incurred on its construction notwithstanding the later decision to use it for a taxable activity because when the costs were incurred they were not incurred by a taxable person acting as such. Similarly, in Wellcome Trust Ltd v Customs and Excise Comrs (Case C 155/94) [1996] ECR I 3013; [1996] STC 945, it was because the purchase and sale of shares by a charitable trust was not an economic activity that the VAT paid on the fees for professional services relating to those transactions were not recoverable; there was no downstream economic activity to which the costs could be linked. Since the hearing in this appeal and the preparation of this judgment in draft, the Eighth Chamber of the CJEU has issued its judgment on the Court of Appeals reference in the University of Cambridge case on 3 July 2019 (Case C 316/18) EU:C:2019:559. As the CJEU records (para 9) the university is a not for profit educational institution whose principal activity is the provision of educational services, which are VAT exempt, but which also makes taxable supplies including commercial research, the sale of publications, etc. The universitys activities are financed in part by charitable donations and endowments, which it places in a fund and invests. The university has claimed a right to deduct input VAT relating to fees which it has paid to third party managers of the fund on the basis that the income generated by the fund has been used to finance the whole range of its activities. The CJEU (para 19) interpreted the questions of the Court of Appeal in the reference as asking, in essence: whether article 168(a) of the VAT Directive must be interpreted as meaning that a taxable person that (i) is carrying out both taxable and exempt activities, (ii) invests the donations and endowments that it receives by placing them in a fund, and (iii) uses the income generated by that fund to cover the costs of all of those activities is entitled to deduct, as an overhead, input VAT paid in respect of the costs associated with that investment. The CJEU answered that question in the negative. Its reasoning is as follows. First, the collection of donations and endowments is not an economic activity and is outside the scope of the PVD. VAT paid in respect of costs incurred in connection with such collection is not deductible, regardless of the reason for the receipt (para 29). Secondly, the activity of collection and the activity of the investment of the collected funds are treated for VAT purposes as one non economic activity as the investment is merely a direct continuation of the non economic activity of collection. Accordingly, input VAT paid in respect of costs associated with the investment is also non deductible (para 30). Thirdly, and in my view critically, the CJEU distinguished the case on its facts from the line of authority which I have discussed and of which Kretztechnik is a part. It stated (para 31): It is true that the fact that costs are incurred in the acquisition of a service in the context of a non economic activity does not, in itself, preclude those costs giving rise to a right to deduct in the context of the taxable persons economic activity, if they are incorporated into the price of particular output transactions or into the price of goods and services provided by the taxable person in the context of that economic activity (see, to that effect, judgment of 26 May 2005, Kretztechnik, C 465/03, EU:C:2005:320, para 36). But, referring to the documents before the court, it concluded that the costs of management of the funds were not incorporated into the price of a particular output transaction. It also concluded, by reference to those documents, that the costs were incurred to generate resources to finance all of the universitys output transactions, thereby allowing the price of its goods and services to be reduced. The costs therefore were not components of the price of goods and services provided by the university and could not form part of its overheads. The VAT therefore was not deductible (para 32). In my view, the ruling that the income was used to reduce all of the costs of the universitys goods and services prevented the fund managers fees from being a component of the costs of those goods and services and thus part of the universitys overheads, which is the second alternative in Kretztechnik. The University of Cambridge judgment, which the CJEU has delivered without requiring an opinion from an Advocate General, is therefore an application of established CJEU jurisprudence which I have discussed above and summarise below. (iii) Summary of the case law case law: I derive the following propositions which are relevant to this appeal from the i) As VAT is a tax on the value added by the taxable person, the VAT system relieves the taxable person of the burden of VAT payable or paid in the course of that persons economic activity and thus avoids double taxation. This is the principle of deduction set out in article 1(2) and operated in article 168 of the PVD and vouched, for example, in Rompelman v Minister van Financien (Case C 268/83) [1985] ECR 655, para 19; Abbey National, para 24; Kretztechnik, para 34 and SKF, paras 55 56. ii) There must be a direct and immediate link between the goods and services which the taxable person has acquired (in other words the particular input transaction) and the taxable supplies which that person makes (in other words its particular output transaction or transactions). This link gives rise to the right to deduct. The needed link exists if the acquired goods and services are part of the cost components of that persons taxable transactions which utilise those goods and services: see for example Midland Bank, paras 24 and 30; Abbey National, para 28; Kretztechnik, para 35; Securenta, para 27; SFK, para 57 and HMRC v University of Cambridge, para 31. iii) Alternatively, there must be a direct and immediate link between those acquired goods and services and the whole of the taxable persons economic activity because their cost forms part of that businesss overheads and thus a component part of the price of its products: see for example BLP, para 25; Midland Bank, para 31; Abbey National, paras 35 and 36; Kretztechnik, para 36; SKF, para 58 and HMRC v University of Cambridge, para 31. iv) Where the taxable person acquires professional services for an initial fund raising transaction which is outside the scope of VAT, that use of the services does not prevent it from deducting the VAT payable on those services as input tax and retaining that deduction if its purpose in fund raising, objectively ascertained, was to fund its economic activity and it later uses the funds raised to develop its business of providing taxable supplies. See, for example, Abbey National, paras 34 36; Kretztechnik, paras 36 38; Securenta, paras 27 29 and SKF, para 64. The same may apply if an analogous transaction involving the sale of shares is classified as an exempt transaction: SKF, para 68. v) Where the cost of the acquired services, including services relating to fund raising, are a cost component of downstream activities of the taxable person which are either exempt transactions or transactions outside the scope of VAT, the VAT paid on such services is not deductible as input tax. See for example Securenta, paras 29 and 31; SKF, paras 58 60 and Sveda, para 32. Where the taxable person carries on taxable transactions, exempt transactions and transactions outside the scope of VAT, the VAT paid on the services it has acquired has to be apportioned under article 173 of the PVD. vi) The right to deduct VAT as input tax arises immediately when the deductible tax becomes chargeable: article 167 of the PVD, Securenta, paras 24 and 30 and SKF, para 55. As a result, there may be a time lapse between the deduction of the input tax and the use of the acquired goods or services in an output transaction, as occurred in Sveda. Further, if the taxable person acquired the goods and services for its economic activity but, as a result of circumstances beyond its control, it is unable to use them in the context of taxable transactions, the taxable person retains its entitlement to deduct: Midland Bank, paras 22 and 23. vii) The purpose of the taxable person in carrying out the fund raising is a question of fact which the court determines by having regard to objective evidence. The CJEU states that the existence of a link between the fund raising transaction and the persons taxable activity is to be assessed in the light of the objective content of the transaction: Sveda, para 29; Iberdrola, para 31. The ultimate question is whether the taxable person is acting as such for the purposes of an economic activity. This is a question of fact which must be assessed in the light of all the circumstances of the case, including the nature of the asset concerned and the period between its acquisition and its use for the purposes of the taxable persons economic activity: Eon Aset Menidjmunt OOD v Direktor na Direktsia Obzhalvane I upravlenie na izpalnenieto Varna pri Tsentralno upravlenie na Natsionalnata agentsia za prihodite (Case C 118/11) EU:C:2012:97; [2012] STC 982, para 58; Klub OOD v Direktor na Direktsia Obzhalvane I upravlenie na izpalnenieto Varna pri Tsentralno upravlenie na Natsionalnata agentsia za prihodite (Case C 153/11) EU:C:2012:163; [2012] STC 1129, paras 40 41 and Sveda, para 21. Application to the facts of this case I have set out the factual background in paras 2 7 above. There was objective evidence that FASL when carrying out its fund raising activity was carrying out a taxable business and was contemplating using the funds raised on three principal developments a windfarm, the construction of further farm buildings and the acquisition of neighbouring farmland. I do not detect in the jurisprudence of the CJEU any basis for distinguishing expenditure incurred in a fund raising exercise which takes the form of a sale of shares from a fund raising exercise that involves the receipt of a subsidy over several years. The fact that the subsidies were included in FASLs profit and loss account and counted as the businesss income for income tax purposes is not a basis for distinguishing the share sale cases such as Kretztechnik and Securenta. I do not view the annual payment of the subsidies under the SFP scheme as a separate transaction from the acquisition of the entitlement to those subsidies which is capable of breaking the link between the purchase of the SFPE units and the deployment of the net proceeds of the subsidies in FASLs subsequent economic activities. In any event the FTT was not bound to hold that the acquisition of the SFPE units and the receipt of the subsidies were separate transactions. On the FTTs findings of fact, the purchase of the SFPE units was part of an exercise raising funds for FASLs economic activities. The underlying principle is the principle of neutrality which relieves the taxable person of the burden of VAT payable and paid in the course of all its economic activities: Rompelman, para 19; Belgian State v Ghent Coal Terminal NV, para 15; Gabalfrisa SL v Agencia Estatal de Administracin Tributaria (Cases C 110/98 to C 147/98) EU:C:2000:145; [2000] ECR I 1577; [2002] STC 535, para 44. While it is not clear from the FTTs findings when any of FASLs projects will come to fruition, I am persuaded that the FTT was entitled to conclude that FASL when it incurred the costs of the purchase of the SFPE units was acting as a taxable person because it was acquiring assets in support of its current and planned economic activities, namely farming and the windfarm. On that basis FASL was entitled to an immediate right of deduction of the VAT paid on the purchase of the SFPE units and is entitled to retain that deduction or repayment so long as it uses the SFPs which it received as cost components of its economic activities. A start up business can acquire goods and services to support its future taxable supplies and claim VAT paid on those acquisitions as input tax; so too in principle can an existing business which proposes to expand its economic activity. On the facts found, FASL does not carry out and does not propose to carry out downstream non economic activities or exempt transactions. Therefore, no question of apportionment under article 173 of the PVD arises. The task for HMRC I recognise that a claim for deduction which depends on the future behaviour of the taxable person, such as the claim in this case, may create practical difficulties for HMRC in administering the VAT system fairly and, in particular, in avoiding unwarranted repayments of VAT. But it is an established part of the VAT system that a taxable person is entitled to an immediate deduction of the VAT which it has paid (para 60(vi) above). It is also well established that a taxable person can claim to deduct as input tax VAT which it has paid on the acquisition of goods or services although it will not use those goods and services as components of taxable transactions immediately: Rompelman, para 22; Lennartz v Finanzamt Mnchen III (Case C 97/90) [1991] ECR I 3795, paras 13 16 and Sveda, para 20. The recognition that fund raising costs may, where the evidence permits, be treated as general overheads of a taxable persons business means that the taxable person must be able to provide objective evidence to support the connection between the fund raising transaction and its proposed economic activities. The taxpayer also needs to maintain adequate banking arrangements and records to vouch the later use of the funds so raised to demonstrate its entitlement to deduct and to retain the deduction, if investigated. As the CJEU recorded in Sveda (para 36) the taxpayer will have to repay input VAT if it does not use the input goods or services for the purposes of its economic activity. HMRC has power to charge VAT under regulation 3 of the Value Added Tax (Supply of Services) Order 1993 (SI 1993/1507), where a taxable person uses services supplied to it for its business for a purpose other than a business use, by treating that use as a supply of services in the course of its business. This may involve HMRC in more investigations than the CJEU envisaged in BLP (para 24). But this supervision of the subsequent use of the raised funds, with which the services were associated, seems to me to be an inevitable consequence of the CJEUs interpretation of the PVD. Conclusion I would dismiss the appeal.

This appeal is concerned with the entitlement of a taxpayer to deduct input value added tax (VAT) and claim repayment of surplus input VAT. It concerns the interpretation of articles 167 and 168(1) of Council Directive (EC) 2006/112/EC of 28 November 2016 on the common system of value added tax (the Principal VAT Directive) and the case law of the Court of Justice of the European Union (CJEU) relating to those articles. In short, the question is whether a taxpayer can deduct as input tax the VAT which it has incurred in purchasing entitlements to an EU farm subsidy, the Single Farm Payment (SFP). The taxpayer has used those entitlements to annual subsidies over several years and intends to use money resulting from the receipt of those subsidies to fund its current and future business activities, which currently involve only taxable supplies. Frank A Smart & Son Ltd (FASL) is a Scottish company which carries on a farming business in Aberdeenshire. FASL is wholly owned by Mr Frank Smart, who is its sole director. Mr Smart and his wife are the partners in a partnership which owns Tolmauds Farm, which it leases to FASL. FASL received SFPs from the Scottish Government. SFPs were agricultural subsidies which between 2005 and 2014 were paid to farmers who met certain requirements. When the scheme was initiated, farmers in the United Kingdom were allocated initial units of entitlement to single farm payments (SFPEs) for no consideration. The SFPEs were tradeable and a market in them developed. FASL took advantage of the market in SFPE units to accumulate a fund for the development of its business. It spent about 7.7m between 2007 and 2012 on purchasing 34,377 SFPE units in addition to its initial allocation of 194.98 units for Tolmauds Farm. In this period FASL paid VAT on the SFPE units which it purchased and it has sought to deduct or claim repayment of that VAT as input tax. HMRC refused to allow FASL to deduct VAT of 1,054,852.28 in its returns between December 2008 and June 2012. FASL appealed to the First tier Tribunal (FTT). The FTT allowed the appeal. The FTT found that, when it purchased the SFPE units, FASL intended to apply the income which it received from the SFPs to pay off its overdraft and to develop its business operations. FASL was also contemplating three principal developments of its business, including establishing a windfarm, constructing further farm buildings and purchasing neighbouring farms. Based on those findings, the FTT concluded that the funding opportunity afforded by the purchase of the SFPE units did not form a separate business activity of FASL but was a wholly integrated feature of the farming enterprise. HMRC appealed to the Upper Tribunal (Lord Tyre), which refused the appeal. HMRC appealed to the Inner House of the Court of Session. An Extra Division of the Inner House (Lord Menzies, Brodie and Drummond Young) dismissed the appeal. HMRC appealed to the Supreme Court. The Supreme Court unanimously dismisses the appeal. Lord Hodge gives the sole judgment with which the other Justices agree. The Supreme Court considered the Principal VAT Directive [11 16], the Value Added Tax Act 1994 [17 19] and the relevant CJEU case law [25 64]. It derived the following propositions [65]: (1) As VAT is a tax on the value added by the taxable person, the VAT system relieves the taxable person of the burden of VAT payable or paid in the course of that persons economic activity and thus avoids double taxation. (2) There must be a direct and immediate link between the goods and services which the taxable person has acquired (in other words the particular input transaction) and the taxable supplies which that person makes (in other words its particular output transaction). This link gives rise to the right to deduct. The needed link exists if the acquired goods and services are part of the cost components of that persons taxable transactions which utilise those goods and services. (3) Alternatively, there must be a direct and immediate link between those acquired goods and services and the whole of the taxable persons economic activity because their cost forms part of that businesss overheads and thus a component part of the price of its products. (4) Where the taxable person acquires professional services for an initial fund raising transaction which is outside the scope of VAT, that use of the services does not prevent it from deducting the VAT payable on those services as input tax and retaining that deduction if its purpose in fund raising, objectively ascertained, was to fund its economic activity and it later uses the funds raised to develop its business of providing taxable supplies. The same may apply if an analogous transaction involving the sale of shares is classified as an exempt transaction. (5) Where the cost of the acquired services, including services relating to fund raising, are a cost component of downstream activities of the taxable person which are either exempt transactions or transactions outside the scope of VAT, the VAT paid on such services is not deductible as input tax. Where the taxable person carries on taxable transactions, exempt transactions and transactions outside the scope of VAT, the VAT paid on the services it has acquired has to be apportioned. (6) The right to deduct VAT as input tax arises immediately when the deductible tax becomes chargeable. As a result, there may be a time lapse between the deduction of the input tax and the use of the acquired goods or services in an output transaction. Further, if the taxable person acquired the goods and services for its economic activity but, as a result of circumstances beyond its control, it is unable to use them in the context of taxable transactions, the taxable person retains its entitlement to deduct. (7) The purpose of the taxable person in carrying out the fund raising is a question of fact which the court determines by having regard to objective evidence. The existence of a link between the fund raising transaction and the persons taxable activity is to be assessed in the light of the objective content of the transaction. The ultimate question is whether the taxable person is acting as such for the purposes of an economic activity. This is a question of fact which must be assessed in the light of all the circumstances of the case, including the nature of the asset concerned and the period between its acquisition and its use for the purposes of the taxable persons economic activity. In light of the foregoing, the Court considers that FASL, when it incurred the costs of the SFPE units, was acting as a taxable person because it was acquiring assets in support of its current and planned economic activities, namely farming and the windfarm. On that basis, FASL was entitled to an immediate right of deduction of the VAT paid on the purchase of the SFPE units and is entitled to retain that deduction or repayment so long as it uses the SFPs which it received as cost components of its economic activities. Moreover, on the facts founds, FASL does not carry out and does not propose to carry out downstream non economic activities or exempt transactions. Therefore, no question of apportionment arises [68].

On 26 October 2010 this Court issued its judgment in Cadder v HM Advocate [2010] UKSC 43, 2010 SLT 1125. It held that the Crowns reliance on admissions made by an accused who had no access to a lawyer while he was being questioned as a detainee under section 14 of the Criminal Procedure (Scotland) Act 1995 gave rise to a breach of his right to a fair trial, having regard to the decision of the European Court of Human Rights in Salduz v Turkey (2008) 49 EHRR 421. This was because the leading and relying on incriminating statements made by the appellant while being interviewed by the police in such circumstances was a violation of his rights under article 6(3)(c) read in conjunction with article 6(1) of the European Convention on Human Rights: see Cadder v HM Advocate, para 63. The evidence that was in question in Cadder consisted of incriminating statements that the appellant made when he was being questioned while in detention at a police station. The applicant in Salduz too had been taken into custody before he was interrogated during his detention by police officers of the anti terrorism branch of the Izmir Security Directorate. But the facts of those cases by no means exhaust the situations in which the Crown may seek to rely on answers to questions that have been put to the accused by the police. The Court now has before it four references by judges of the High Court of Justiciary which have been required by the Lord Advocate under paragraph 33 of Schedule 6 to the Scotland Act 1998. Three of them are cases where the evidence in question was obtained by the police otherwise than by questioning at a police station following detention under section 14 of the 1995 Act. The fourth is concerned with whether the ratio of the decision in Salduz extends to lines of enquiry which have been derived from answers that the accused gave to questions while he was being detained in the police station. Common to all four cases is the fact that incriminating answers were given to questions put by the police when the accused did not have access to legal advice. In each case this occurred before the judgment was given in Cadder. The issue that the first three references raise is whether the decision in Salduz to which Cadder gave effect has established that anyone who has been charged with an offence, so that article 6 is engaged, and is then questioned by the police is entitled to access to a lawyer at that stage; or whether the right of access to a lawyer applies only where the accused is being subjected to police questioning while in custody. These cases can be grouped together under the general heading pre detention questioning. I propose to deal with them in a separate judgment: Ambrose v HM Advocate [2011] UKSC 43. The issue in the fourth reference, which is the subject of this judgment, is whether the Salduz principle extends to the use of any evidence whatever, the existence of which was discovered as a result of answers given by the accused while in custody without access to legal advice; or whether the principle does not extend to evidence which, although its existence was derived from those answers, has an independent life of its own and does not require to be linked to those answers in order to support the Crowns case. Evidence of this kind has been referred to as the fruit of the poisonous tree: see Stephen C Thaman, Fruits of the Poisonous Tree in Comparative Law, (2010) 16 Southwestern Journal of International Law 333, 335, fn 5. The use of such evidence was at one time thought to have been excluded in the United States of America, but the doctrine has been relaxed in favour of admissibility by decisions of the US Supreme Court. In Murray v United States 487 US 533 (1988), paras 7 8, the test that was applied by Scalia J was whether the search pursuant to a warrant was a genuinely independent source of the information relied on by the prosecutor. The question which we have to decide depends on an analysis of the jurisprudence of the European Court of Human Rights at Strasbourg. The facts This is a case which has not yet gone to trial, so the names of those involved have been anonymised. The reference has been made at the request of the Lord Advocate by the trial judge, Lord Bracadale. The accused, referred to as P, has been indicted in the High Court of Justiciary on a charge of assault and rape which was alleged to have taken place on 10 and 11 October 2009. On 11 October 2009 he was detained under section 14 of the 1995 Act in connection with the allegation which had been made against him by the complainer. He was taken to a police station where he was interviewed. He was not given access to legal advice prior to or during the interview. He was asked where he had been on the date of the alleged rape. The locus of the complaint was a short walking distance from a pub where he and the complainer met. He said that, prior to the alleged assault and rape, he had taken a powdered substance at another pub that had provoked an adverse reaction. His interview then continued in these terms: Q Are there people that you, you could say that would back up how you were reacting to that? A Erm, yeah, yeah, there would be yeah. Q Who are they? A Erm could say my best mate I suppose Q Whos that? He then gave his friends name and address to the police and added that his friend would be able to back him up. The police subsequently took a statement from his friend in which he spoke to the accuseds reaction after he had taken a drug and provided support for what the accused had said about this. But he also described having a telephone conversation with the accused on the morning of 11 October 2009 in which the accused described meeting a woman the previous night and having consensual sexual intercourse with her. The accused lodged a devolution minute in which he submitted that his rights under article 6(3) would be contravened if the Crown were permitted to elicit evidence of his police interview, and that the evidence of his friend about the telephone conversation was incriminatory evidence which had been obtained as a direct result of his replies during the police interview and that the Crown should not be permitted to lead this evidence. A diet of debate was then fixed, prior to which written submissions were lodged on behalf of the Crown and the accused. In its written submissions the Crown accepted that any incriminatory statements that the accused made during his police interview without having had access to legal advice were inadmissible. But it indicated that it proposed to lead the friends evidence at the trial, and in particular to elicit from him evidence of what the accused said to him during his telephone conversation with the accused. At the diet of debate, prior to any argument, the then Lord Advocate intimated that she required the court to make a reference to this court. The questions that were then referred by the trial judge are in these terms: (i) Whether the act of the Lord Advocate in leading and relying on evidence obtained from information disclosed during the course of a police interview with an accused person conducted in accordance with section 14 of the Criminal Procedure (Scotland) Act 1995 without the accused person having had access to legal advice would be incompatible with the accused persons rights under article 6(1) and 6(3)(c) of the European Convention on Human Rights, having regard in particular to the decision of the Supreme Court of the United Kingdom in Cadder v HM Advocate 2010 SLT 1125. (ii) Whether the act of the Lord Advocate in leading and relying on evidence in these proceedings from Crown witness number 13 [SF] (whose identity was disclosed to the police, and thereby the Crown, during the course of a police interview with the accused conducted in accordance with section 14 of the Criminal Procedure (Scotland) Act 1995 on 11 October 2009 without the accused having had access to legal advice), would be incompatible with the accuseds rights under article 6(1) and 6(3)(c) of the European Convention on Human Rights. In Cadder v HM Advocate 2010 SLT 1125, para 48 I said that, although it was held in Gfgen v Germany (2010) 52 EHRR 1 that there had been no violation of articles 6(1) and 6(3) as the evidence that had been secured as a result of interrogation in that case did not have bearing on the applicants conviction and sentence, the decision served a warning that the Salduz principle could not be confined to admissions made without access to legal advice during police questioning. In para 50 I said that the guarantees that are otherwise available under the Scottish system were incapable of removing the disadvantage that a detainee will suffer if he says something which enables the police to obtain incriminating evidence from other sources which is then used against him at his trial. The question that this reference raises is whether the Convention jurisprudence shows that there is an exclusionary rule to this effect of the kind described in Salduz as my observations in these paragraphs might be taken to have suggested, or whether evidence which was obtained because of things learned because of what the detainee said during such police questioning but exists independently of it will normally be admissible. Does the rule extend to evidence derived from his answers but which can speak for itself, without it being necessary to refer for support or explanation to anything the detainee said in the course of his police interview? As this is a devolution issue, guidance as to how these questions should be answered must be found in the jurisprudence of the European Court of Human Rights at Strasbourg. The position as regards evidence obtained from the accused which is not derived from anything that the accused said to the police at his interview is not in doubt. As the court is primarily concerned with the right to remain silent, the right not to incriminate oneself does not extend to incriminating evidence that has been obtained from him other than by reference to what he has said. In Saunders v United Kingdom (1996) 23 EHRR 313, para 69 the Court observed that, as commonly understood in the legal systems of the contracting parties to the Convention and elsewhere the right not to incriminate oneself does not extend to the use in criminal proceedings of material which may be obtained from the accused through the use of compulsory powers but which has an existence independent of the will of the suspect such as, inter alia, documents acquired pursuant to a warrant, breath, blood and urine samples and bodily tissue for DNA testing. It returned to the point in Jalloh v Germany (2006) 44 EHRR 667, para 102 where it said: The Court has consistently held, however, that the right not to incriminate oneself is primarily concerned with respecting the will of an accused person to remain silent. As commonly understood in the legal systems of the contacting parties to the Convention and elsewhere, it does not extend to the use in criminal proceedings of material which may be obtained from the accused through the use of compulsory powers but which has an existence independent of the will of the suspect such as, inter alia, documents acquired pursuant to a warrant, breath, blood, urine, hair or voice samples and bodily tissue for the purpose of DNA testing. The court said in Jalloh, para 101 that in examining whether a procedure has extinguished the very essence of the privilege against self incrimination, it will have regard, in particular, to the nature and degree of the compulsion, the existence of any relevant safeguards in the procedures and the use to which any material so obtained is put. But the question whether respecting the will of an accused person to remain silent means that anything that is derived from what he said at a police interview which was incompatible with his rights under articles 6(1) and 6(3)(c) must always be excluded was not resolved by that statement. Where the only reason why the answers that he gave at his interview are inadmissible is that he did not have access to a lawyer when he was being interviewed, the decision in Salduz must be the starting point. But it is only the starting point, as it will be necessary to look at what can be derived from what the Strasbourg court has said since judgment in that case was given. The Advocate Depute submitted that, as Strasbourg has not spoken, evidence of this kind should be regarded prima facie as admissible. For the accused Mr Auchincloss said that he was not contending for an absolute exclusionary rule. He directed his argument instead to the particular circumstances of this case. His point was that, but for what the accused told the police when he was interviewed, the police would not have gone to his friend at all. The effect of imparting this information to the police was that he had incriminated himself. That was enough for the friends evidence about the telephone conversation to be inadmissible. Background The general rule, so far as Strasbourg is concerned, is that the rules about the admissibility of evidence are for the contracting states. In Schenk v Switzerland (1988) 13 EHRR 242, which was a case about unlawful telephone tapping, the court said in para 46: While article 6 of the Convention guarantees the right to a fair trial, it does not lay down any rules on the admissibility of evidence as such, which is therefore primarily a matter for regulation under national law. The court therefore cannot exclude as a matter of principle and in the abstract that unlawfully obtained evidence of the present kind may be admissible. It has only to ascertain whether Mr Schenks trial as a whole was fair. The same approach to cases raising questions about article 6 rights generally is to be found in a great many cases. In Gfgen v Germany (2010) 52 EHRR 1, paras 162 163 the court said: 162. While article 6 guarantees the right to a fair hearing, it does not lay down any rules on the admissibility of evidence as such, which is primarily a matter for regulation under national law. 163. It is, therefore, not the role of the court to determine, as matter of principle, whether particular types of evidence for example, evidence obtained unlawfully in terms of domestic law may be admissible. The question which must be answered is whether the proceedings as a whole, including the way in which the evidence was obtained, were fair. This involves an examination of the unlawfulness in question and, where the violation of another Convention right is concerned, the nature of the violation found. As Lord Bingham of Cornhill said in Brown v Stott 2001 SC (PC) 43, 50, what a fair trial requires cannot be the subject of a single, unvarying rule or collection of rules. Article 6(1) has been interpreted broadly by reading into it a number of other rights to which the accused person is entitled. Their purpose is to give effect, in a practical way, to the fundamental and absolute right to a fair trial. This approach is to be found also in Salduz, para 52, where the court took the following propositions as its starting point for the issue it was addressing in that case: National laws may attach consequences to the attitude of an accused at the initial stages of police interrogation which are decisive for the prospects of the defence in any subsequent criminal proceedings. In such circumstances, article 6 will normally require that the accused be allowed to benefit from the assistance of a lawyer already at the initial stages of police interrogation. However, this right has so far been considered capable of being subject to restrictions for good cause. The question, in each case, has therefore been whether the restriction was justified and, if so, whether, in the light of the entirety of the proceedings, it has not deprived the accused of a fair hearing, for even a justified restriction is capable of doing so in certain circumstances. It is not for this court to say how the matter should be dealt with in domestic Scots law: see Fraser v HM Advocate [2011] UKSC 24, 2011 SLT 515, para 11. But it is proper for it to take note of how the law stands on this issue as part of the background because the domestic requirement of fairness will need to be satisfied in any event for such evidence to be admissible. As Lord Justice Clerk Thomson said in Chalmers v HM Advocate 1954 JC 66, 81, the law has to reconcile two principles: (1) that no accused person is bound to incriminate himself, and (2) that what an accused person says is admissible evidence against him, provided he says it freely and voluntarily. There is no reason to think that what the accuseds friend says the accused said to him in the telephone conversation was not said freely and voluntarily. It was, in part at least, incriminatory, as the accused is said to have admitted to having had sexual intercourse with the complainer at the locus, albeit consensually. But this, of itself, does not make it inadmissible. The assumption is, however, that the police would not have obtained this evidence but for what the accused told the police when he was interviewed. The question is whether, if the Crown cannot show that the assumption is incorrect, the fact that the source of their information was the accused himself renders the friends evidence inadmissible. The Advocate Depute submitted that no clear answer to this question emerges from the Scottish case law. There is no doubt as to where the law stands if, as in Chalmers, the evidence which the police discovered as a result of what they were told by the accused when he was interviewed would not have been relevant without linking it to what was said by the accused. Lord Justice General Cooper said that he regarded the appellants visit under the surveillance of the police to the cornfield where the purse was found as part and parcel of the same transaction as the interrogation: 1954 JC 66, 76: if the interrogation and the statement which emerged from it are inadmissible as unfair, the same criticism must attach to the conducted visit to the cornfield. He returned to the point later on the same page, when he said: The significance of the episode is plain, for it showed that the appellant knew where the purse was. If the police had simply produced, and proved the finding of, the purse, that evidence would have carried them little or no distance in this case towards implicating the appellant. It was essential that the appellant should be linked up with the purse, either by oral confession or by its equivalent tacit admission of knowledge of its whereabouts as a sequel to the interrogation. The effect of the decision in Salduz, as explained in Cadder, is that evidence of that kind, which must inevitably be linked to what the detainee said to the police without access to a lawyer while he was being interviewed if it is to be used to incriminate him, will always be inadmissible. That is what I had in mind when I drew attention in Cadder, paras 48 and 50, to the fact that exclusion of evidence on the Salduz principle could not be confined to the admissions made during police questioning. As for the position where the evidence that has been discovered as a result of what was said at the police interview can speak for itself, the guiding principle in Scots law is to be found in Lawrie v Muir 1950 JC 19. It was laid down by a full bench in that case that an irregularity in the method by which evidence has been obtained does not necessarily make that evidence inadmissible in a criminal prosecution. Lord Justice General Cooper explained the basis for this approach at p 26: From the standpoint of principle it seems to me that the law must strive to reconcile two highly important interests which are liable to come into conflict (a) the interest of the citizen to be protected from illegal or irregular invasions of his liberties by the authorities, and (b) the interest of the State to secure that evidence bearing upon the commission of crime and necessary to enable justice to be done shall not be withheld from Courts of law on any merely formal or technical ground. Neither of these objects can be insisted upon to the uttermost. He went on at p 27 to approve Lord Justice Clerk Aitchisons statement in HM Advocate v McGuigan 1936 JC 16 at p 18, that an irregularity in the obtaining of evidence does not necessarily make that evidence inadmissible. The irregularity in Lawrie was that the inspectors had conducted a search of the appellants premises which they had no right to carry out. But the decision has a much wider application. It was referred to by the Scottish Law Commission in their Research Paper on the Law of Evidence of Scotland, written by I D Macphail, later the Hon Lord Macphail, (1979, reissued and updated 1987) when it was considering the effect of the decision in Chalmers. They took from what Lord Justice General Cooper said at p 76 that the evidence of the finding of the purse by the police would not have been treated as inadmissible if it had been capable of being led as relevant evidence without reference to the appellants confession. In para 21.04 they concluded that, while logic might demand that such evidence should, together with the confession, be inadmissible, logic must yield in favour of a flexible rule which was consistent with the modern Scottish decisions on illegal searches and seizures in criminal cases. It is no doubt true, as the Advocate Depute said, that no clear answer emerges from the Scottish case law. But there is good reason to think that the approach laid down in Lawrie v Muir, which is entirely consistent with the approach of the Strasbourg court to national rules as to the admissibility of evidence, would be adopted. The law of England and Wales is to the same effect. Section 58 of the Police and Criminal Evidence Act 1984 provides that a person arrested and held in custody in a police station or other premises shall be entitled, if he so requests, to consult a solicitor privately at any time. Section 76(4) provides that a confession that is wholly or partly excluded does not affect the admissibility of any facts discovered as a result of the confession. Under section 78(1) of that Act a breach of section 58 may lead to the exclusion of evidence as to what the person said under police questioning, including any evidence that has been derived from it. But evidence improperly obtained in this way is not invariably inadmissible, as section 78(1) requires the court to have regard to all the circumstances. Ultimately the question is whether it would or would not be fair to admit the evidence: R v Looseley [2001] UKHL 53, [2001] 1 WLR 2060 (a case of entrapment), per Lord Nicholls of Birkenhead at para 19. The question that the reference raises, therefore, is whether there is anything in the Strasbourg jurisprudence which lays down that any evidence discovered as a result of what a detainee who was without access to a lawyer said during his police interview must always, as a rule, be held to be inadmissible in the absence of compelling circumstances to restrict the right of access. If that were so, it would be a considerable innovation on what, so far, has been thought to be the position in Scots law. Discussion Nothing that was said in Salduz offers any guidance as to how this question should be answered. The point was not in issue in that case. In para 54 the court said that the assistance of a lawyer to ensure respect of the right of an accused not to incriminate himself presupposed that the prosecution in a criminal case will seek to prove their case without resort to evidence obtained through methods of coercion or oppression in defiance of the will of the accused. Reference was made in a footnote to Jalloh v Germany (2006) 44 EHRR 667, para 100 and to Kolu v Turkey, application no 35811/97, para 51. Neither of these cases was concerned with evidence that was derived from what was said during interrogation by the police. But Gfgen v Germany (2010) 52 EHRR 1 was a case of that kind. The applicant abducted and killed a child and then demanded a ransom from his family. He was arrested by the police, who had kept him under surveillance after he collected the ransom payment. Hoping that the child was still alive, the police questioned him about the childs whereabouts. In reply to their questions the applicant said that the child was being held by another kidnapper. He was then allowed to consult a lawyer. Under later questioning he indicated that the boy had been kidnapped by two other people who had hidden him in a hut by a lake. Early the next day he was subjected to threats of extreme violence if he did not tell the police where the child was. For fear of being exposed to the measures he was threatened with he disclosed the whereabouts of the childs body. He was then taken to the place which he had indicated and, while being filmed, pointed out its precise location. In para 173 the court noted that it was being called upon to examine the consequences for a trials fairness of the admission of real evidence obtained as a result of an act which qualified as inhuman treatment in breach of article 3, but falling short of torture. It referred to what it had said in paras 166 167 in its review of the relevant principles, where it stated that incriminating real evidence obtained as a result of acts of violence should never be relied on as proof of a victims guilt, irrespective of its probative value. The court went on in para 173 to observe that, in its case law to date, it had not yet settled the question whether the use of such evidence will always render a trial unfair, irrespective of other circumstances of the case. It had however found that the use of statements obtained as a result of a persons treatment in breach of article 3, and the use of real evidence obtained as a direct result of acts of torture, made the proceedings as a whole automatically unfair, in breach of article 6: Gmen v Turkey (application no 72000/01) (unreported) given on 17 October 2006, paras 73 74. There then followed this important paragraph, in which the court picked up a point that it had already noted in para 69: 174. The Court notes that there is no clear consensus among the contracting states to the Convention, the courts of other states and other human rights monitoring institutions about the exact scope of application of the exclusionary rule. In particular, factors such as whether the impugned evidence would, in any event, have been found at a later stage, independently of the prohibited method of investigation, may have an influence on the admissibility of such evidence. In para 73 the court referred to indications in the case law of the United States that the exclusionary rule does not apply where the connection between the illegal police conduct and the discovery of the evidence was so remote as to dissipate the taint, as where the police relied on an independent source to find the evidence or where it would ultimately have been discovered even had no violation of any constitutional provision taken place. In para 74 it referred to the judgment of the Supreme Court of Appeal in South Africa in Mthembu v The State (379/2007) [2008] ZASCA 51, where the impugned evidence was excluded because there was an inextricable link between the accuseds torture and the nature of the evidence that was produced. In para 33 of its judgment the court said that there was no suggestion that the discoveries would have been made in any event and that, if they had, the outcome might have been different. There is an obvious link between the situation that was before the court in Gfgen and that in Chalmers. Under the law as set out in Chalmers, the evidence that the accused pointed out the precise location of the body to the police would have been held to have been inadmissible. It was part and parcel of the same transaction as the interrogation. But that is not this case. The court in Gfgen, which was primarily concerned with the consequences of a violation of article 3, did not find it necessary to resolve this issue to which it drew attention in para 174. It held that, having regard to the particular circumstances of that case, the failure to exclude the impugned evidence did not have a bearing on the applicants conviction and sentence, so there had been no violation of articles 6(1) and 6(3): paras 187 188. In a joint partly dissenting opinion Judges Rozakis, Tlkens, Jebens, Ziemele, Bianku and Power said that in their view there had been a violation of those articles, but this was because the evidence had been obtained as a direct result of a violation of article 3. Where the boundary lies between what the Convention requires to be automatically excluded because it is derived from what the person has said and what is not remains unclear. There have been no other cases that deal with the issue since Gfgen to which we can look for guidance. But at least it can be said that the Strasbourg court has not suggested that leading evidence of the fruits of questioning that is inadmissible because the accused did not have access to a lawyer when he was being interviewed will always and automatically violate the accuseds rights under article 6(1) and 6(3)(c). In Salduz para 53 the court said that the principles which it had outlined in para 52 (see para 14, above) were in line with the generally recognised international standards. The same point emerges from the passages in Gfgen to which I have just referred: see para 22, above. So I think that regard can be had to the position in England and Wales which is dealt with in section 76 of the Police and Criminal Evidence Act 1984, as Lord Brown has explained: see para 32, below. Subject to the courts discretionary power to exclude it under section 78(1), evidence derived from an involuntary statement which can be adduced without having to rely on that statement is admissible. And further assistance may be found in the approach which was taken to this issue in the Supreme Court of Canada in Thomson Newspapers Ltd v Canada (Director of Investigation and Research) [1990] 1 SCR 425, to which the Courts attention does not appear to have been drawn in Gfgen. Among the issues that were before the court in that case was the question whether section 17 of the Combines Investigation Act 1970, which provides that the Restrictive Trade Practices Commission may order that a person be examined on oath and make production of books, papers, records or other documents, was inconsistent with the provisions of sections 7 and 8 of the Canadian Charter of Rights and Freedoms. Section 7 includes among its provisions the right not to be deprived of liberty except in accordance with the principles of fundamental justice. It was argued that section 17 was contrary to two principles of fundamental justice, namely the right against self incrimination and the right to remain silent. One of the questions in the case was whether the protection of article 7 extended to derivative evidence. Two other provisions of the Charter were relevant to this issue: section 11(c), which provides that a person is protected against being compelled to give evidence in proceedings that have been brought against him, and section 13, which provides the person with a limited right against self incrimination. The court was divided on the question whether the use of derivative evidence, which fell outside the protections of articles 11(c) and 13, was nevertheless contrary to the principles of fundamental justice. Wilson J, in a dissenting opinion said that because there was a direct causal relationship between the compelled testimony and the derivative evidence the privilege against self incrimination, if it was to be meaningful, requires that neither the testimony nor the evidence derived from it should be used against him: para 69. Lamer J, declined to pronounce on this issue: para 5. But La Forest, LHeureux Dub and Sopinka JJ said that, to the extent that it authorised an order to compel the production of documents, section 17 did not contravene section 7 of the Charter: paras 225, 270, 327. The reasons that La Forest J gave for holding that there was no breach of the principles of fundamental justice are particularly instructive. He said that there were serious grounds on which objection can be raised to an absolute rule that testimonial immunity must always extend to evidence derived from compelled testimony: 199. While allowing the Crown to use such evidence in criminal proceedings may in a formal sense be equivalent to permitting direct reliance on the compelled testimony itself, there is an important difference between the type of prejudice that will be suffered in the two cases. It is only when the testimony itself has to be relied on that the accused can be said to have been forced to actually create self incriminatory evidence in his or her own trial. The compelled testimony is evidence that simply would not have existed independently of the exercise of the power to compel it; it is in this sense evidence that could have been obtained only from the accused. 200. By contrast, evidence derived from compelled testimony is, by definition, evidence that existed independently of the compelled testimony. This follows logically from the fact that it was evidence which was found, identified or understood as a result of the clues provided by the compelled testimony. Although such evidence may have gone undetected or unappreciated in the absence of the compelled clues, going undetected or unappreciated is not the same thing as non existence. The mere fact that the derivative evidence existed independently of the compelled testimony means that it could have been found by some other means, however low the probability of such discovery may have been. He went on to say in para 202 that the fact that the derivative evidence exists independently of the compelled testimony also means that its quality as evidence and its relevance to the issues in the trial do not depend on its past connection with the compelled testimony. These are matters which can be determined independently of any consideration of its connection with the testimony of the accused. One must, of course, be careful about drawing conclusions from a Canadian case, as the provisions of the Charter differ both in their structure and their wording from those of the Convention. But the concept of fundamental justice is by no means alien to the European concept of a fair trial, which lies at the heart of article 6(1). So I think that the reasoning which La Forest J set out in these paragraphs can be regarded as providing support for the conclusion that I would draw from what Strasbourg has said so far on this issue. This is that there is no absolute rule that the fruits of questioning of an accused without access to a lawyer must always be held to be a violation of his rights under article 6(1) and 6(3)(c) of the Convention. It is one thing if the impugned evidence was created by answers given in reply to such impermissible questioning. The leading of such evidence will be a breach of the accuseds Convention rights unless there are compelling reasons to restrict the right of access: Cadder, para 55. It is another thing if the evidence existed independently of those answers, so that those answers do not have to be relied upon to show how it bears upon the question whether the accused is guilty of the offence with which he has been charged. So far as the accuseds Convention rights are concerned, there is no rule that declares that evidence of that kind must always be held to be inadmissible. The question whether it should be admitted has to be tested, as in domestic law, by considering whether the accuseds right to a fair trial would be violated by the leading of the evidence. Conclusion I would answer question (i) of the questions referred, which is addressed to the issue of principle, in the negative. There is no absolute rule to this effect, as the wording of the question suggests. I would decline to answer question (ii), as it raises a question for determination by the trial judge. The question for him will be whether, if the Crown were to lead and rely on the friends evidence about the telephone conversation, the accused would, in all the circumstances, be deprived of his fundamental right under article 6(1) to a fair trial. LORD BROWN I have had the advantage of reading Lord Hopes judgment in draft and am in full agreement with all that he says and with the way in which he proposes we should deal with the two questions raised by this Reference. The conclusion he arrives at is, to my mind, entirely consistent with the position which I believe to be clearly established under English law and, I hope we may all agree, none the worse for that. Although Lord Hope (at para 18) has already referred to section 78(1) of the Police and Criminal Evidence Act 1984 (PACE) and noted its obvious relevance in the context of any breach of section 58 of PACE, it is, I think, worth setting out its terms verbatim and briefly then looking also at section 76 of PACE. Section 78(1) of PACE is a general provision under the heading Exclusion of unfair evidence and provides: In any proceedings the court may refuse to allow evidence on which the prosecution proposes to rely to be given if it appears to the court that, having regard to all the circumstances, including the circumstances in which the evidence was obtained, the admission of the evidence would have such an adverse effect on the fairness of the proceedings that the court ought not to admit it. Section 76, under the heading Confessions, provides (I summarise) that, notwithstanding that it may be true, a disputed confession shall not be admissible in evidence unless the prosecution prove it not to have been obtained by oppression or in consequence of anything said or done which was likely, in the circumstances existing at the time, to render unreliable any confession which might be made by him in consequence thereof. Particularly noteworthy for present purposes, however, is section 76(4): The fact that a confession is wholly or partly excluded in pursuance of this section shall not affect the admissibility in evidence (a) of any facts discovered as a result of the confession; or (b) where the confession is relevant as showing that the accused speaks, writes or expresses himself in a particular way, of so much of the confession as is necessary to show that he does so. As Lord Bingham of Cornhill observed in A v Home Secretary (No 2) [2006] 2 AC 221, 249 (at para 16): [T]here is an obvious anomaly in treating an involuntary statement as inadmissible while treating as admissible evidence which would never have come to light but for the involuntary statement. But this is an anomaly which the English common law has accepted, no doubt regarding it as a pragmatic compromise between the rejection of the involuntary statement and the practical desirability of relying on probative evidence which can be adduced without the need to rely on the involuntary statement. I too sought to deal with the point at para 161: Several of your Lordships have remarked on the tensions in play and have noted the balances struck by the law, different balances according to whether one is focusing on the executive or the judicial arm of the state. Essentially it comes to this. Two types of information are involved: first, the actual statement extracted from the detainee under torture (the coerced statement); second, the further information to which the coerced statement, if followed up, may lead (the fruit of the poisoned tree as it is sometimes called). Generally speaking it is accepted that the executive may make use of all information it acquires: both coerced statements and whatever fruits they are found to bear. So far as the courts are concerned, however, the position is different. Generally speaking the court will shut its face against the admission in evidence of any coerced statement (that of a third party is, of course, in any event inadmissible as hearsay); it will, however, admit in evidence the fruit of the poisoned tree. The balance struck here (a pragmatic compromise as . [Lord Bingham describes it]) appears plainly from section 76 of the Police and Criminal Evidence Act 1984. There is, moreover, this too to be said: whereas coerced statements may be intrinsically unreliable, the fruits they yield will have independent evidential value. If, then, as I believe, the position is that the facts discovered as a result even of a coerced confession are (subject always to the courts discretionary power under section 78(1) to exclude evidence) admissible in evidence although not, of course, evidence that it was the accuseds statement that led to the discovery of the fact, ie the situation in Chalmers v HM Advocate [1954] JC 66 itself (see section 76(5) and (6) of PACE) the position cannot be different (and certainly the prosecution cannot be under greater inhibition) with regard to facts discovered (as here) as a result of a police interview notwithstanding the wrongful failure to provide the accused with legal assistance. If there would be a discretion in the court to admit evidence of, say, a bomb found with the accuseds fingerprints all over it discovered by the police as a result of a confession extracted from him by torture, it surely must be in the courts discretion to admit oral evidence from the friend in the particular circumstances of the present appeal.

In Cadder v HM Advocate [2010] UKSC 43, the Supreme Court held, having regard to the decision of the European Court of Human Rights in Salduz v Turkey (2008) 49 EHRR 421, that the Crowns reliance on admissions made by an accused who had no access to a lawyer while he was being questioned as a detainee at a police station was a violation of his rights under Article 6(3)(c) read with Article 6(1) of the European Convention on Human Rights. The question in this case is whether the Salduz principle extends to the use of any evidence whatever, the existence of which was discovered as a result of answers given by the accused while in custody without access to legal advice; or whether evidence which, although derived from those answers, has an independent life of its own and does not require to be linked to those answers in order to support the Crowns case will normally be admissible. The accused has been indicted at the High Court of Justiciary on a charge of assault and rape. He was detained under section 14 of the Criminal Procedure (Scotland) Act 1995, and was taken to a police station and interviewed. He was not given access to legal advice prior to or during the interview. He was asked where he had been on the date of the alleged rape, and replied that, prior to the alleged incident, he had taken a powdered substance at another pub that had provoked an adverse reaction. He stated that his best friend could back up his statement. The police subsequently took a statement from the friend, who confirmed what the accused had said about his reaction to the drug. But he also described having a telephone conversation with the accused the next morning, when the accused described meeting a woman the previous night and having consensual sex with her. The accused submitted that his rights under Article 6(3) would be contravened if the Crown were permitted to elicit evidence of his police interview, that the evidence of his friend about the telephone conversation was incriminatory evidence which had been obtained as a direct result of his replies during the police interview, and that the Crown should not be permitted to lead this evidence. When this point came before the trial judge for debate the Lord Advocate asked him to refer the issue to this Court. The questions referred by the trial judge are: 1. Whether the act of the Lord Advocate in leading and relying on evidence obtained from information disclosed during the course of a police interview with an accused person without the accused person having had access to legal advice would be incompatible with that persons rights under Article 6(1) and (3)(c) of the Convention, having regard in particular to the decision in Cadder; and 2. Whether the act of the Lord Advocate in leading and relying on the evidence of the friend in these proceedings would be incompatible with the accuseds rights under those Articles. The Supreme Court unanimously allows the appeal. It answers question 1 in the negative, and declines to answer question 2, leaving it to the trial judge to decide whether, if the Crown were to lead and rely on the friends evidence about the telephone conversation, the accused would, in all the circumstances, be deprived of his fundamental right to a fair trial. Lord Hope gives the main judgment, with which Lords Dyson, Kerr and Clarke agree. Lord Brown gives a short concurring judgment. The Salduz principle is not restricted to admissions made without access to legal advice during police questioning (Gafgen v Germany (2010) 52 EHRR 1). The question is whether the rule extends to evidence derived from a detainees answers but which can speak for itself, without it being necessary to refer for support or explanation to anything the detainee said in his police interview [9]. In this case, the statement allegedly made by the accused to his friend in the telephone call was at least partly incriminatory, in relation to the fact of sexual intercourse taking place at the locus. But this of itself does not make it inadmissible. The assumption is that the police would not have obtained this evidence but for what the accused told the police when he was arrested. If that is the case, the question is whether the fact that the source of the friends information was the accused himself renders the friends evidence inadmissible [15]. The guiding principle in Scots law is Lawrie v Muir 1950 JC 19, which states that an irregularity in the method by which evidence has been obtained does not necessarily make that evidence inadmissible in a criminal prosecution [17]. The law of England and Wales is to the same effect (Section 76(4) of the Police and Criminal Evidence Act 1984l. Ultimately the question is whether it would be fair to admit the evidence [18]. In Gafgen, the ECtHR noted that there is no clear consensus about the exact scope of application of the exclusionary rule. In particular, factors such as whether the impugned evidence would, in any event, have been found at a later stage, independently of the prohibited method of investigation, may have an influence on the admissibility of such evidence [22]. Where the boundary lies between what the Convention requires to be automatically excluded because it is derived from what the person has said and what is not remains unclear [23], and there have been no other cases dealing with the issue since Gafgen. Strasbourg has not, however, suggested that leading evidence of the fruits of questioning that is inadmissible because the accused did not have access to a lawyer when he was being interviewed will always and automatically violate the accuseds rights under Article 6(1) and (3)(c). Regard can be had to the position in England and Wales, where, subject to the courts discretionary power to exclude it under section 78(1), evidence derived from an involuntary statement which can be adduced without having to rely on that statement is admissible [24]. Assistance may also be found in the Canadian Supreme Court case of Thomson Newspapers Ltd v Canada (Director of Investigation and Research) [1990] 1 SCR 425, where attention was drawn to the distinction between evidence that simply would not have existed independently of the exercise of the power to compel it; and evidence derived from compelled testimony which is, by definition, evidence that existed independently of the compelled testimony [25]. This supports the conclusion to be drawn from what Strasbourg has said so far on this issue: that there is no absolute rule that the fruits of questioning of an accused without access to a lawyer must always be held to be a violation of his rights under Article 6(1) and (3)(c). It is one thing if the impugned evidence was created by answers given in reply to such impermissible questioning. It is another if the evidence existed independently of those answers, so that those answers do not have to be relied upon to show how it bears upon the question whether the accused is guilty of the offence in question. The question whether such evidence should be admitted has to be tested by considering whether the accuseds right to a fair trial would be violated by the leading of the evidence [27].

This is an appeal by Dorset County Council (the council) from an order of the Court of Appeal (Maurice Kay LJ, who is Vice President of the Court of Appeal, Black LJ and Rafferty LJ), [2013] EWCA Civ 553; [2013] PTSR 987, allowing an appeal by the respondents from an order of Supperstone J (the judge) dated 2 October 2012, [2012] EWHC 2634 (Admin); [2013] PTSR 302, in which he dismissed an application for judicial review of the decision of the council to reject five applications made under section 53(5) of and Schedule 14 to the Wildlife and Countryside Act 1981 ("the 1981 Act") for modification orders to a definitive map and statement ("the DMS"). The claim concerns five routes over which the respondents say that the public enjoy vehicular public rights of way (including with mechanically propelled vehicles) which were not recorded on the DMS. The first issue in this appeal and the principal issue which was considered in the courts below is whether, for the purposes of paragraph 1 of Schedule 14 to the 1981 Act as applied by section 67(6) of the Natural Environment and Rural Communities Act 2006 (the 2006 Act), a map which accompanies an application made under section 53(5) of the 1981 Act is drawn to the prescribed scale only if it is derived from a map originally so drawn without being enlarged or reduced in any way. The judge answered that question in the affirmative but the Court of Appeal disagreed. In this appeal the council seeks the restoration of the order made by the judge. If the appeal succeeds, any public rights of way which were the subject of the five applications will have been extinguished. In this judgment I will focus on the first issue. There is a second issue, which only arises if the councils appeal on the first issue fails. The applications were submitted by Mr Jonathan Stuart, who is a member of the Friends of Dorset's Rights of Way (FDRW). The first respondent, the Trail Riders Fellowship (TRF), took over the conduct of the applications from FDRW in October 2010. The second respondent, Mr David Tilbury, is a member of FDRW. The council is the surveying authority, as defined in section 66(1) of the 1981 Act, for the area in which the proposed ''byways open to all traffic" ("BOATs") are located. The intervener, Mr Graham Plumbe, represents the interests of the Green Lanes Protection Group and affected land owners. He supports the councils appeal. The legal framework Section 53 of the 1981 Act imposes a duty on a surveying authority to keep a DMS of the public rights of way in its area under continuous review. So far as material, it provides: (2) As regards every definitive map and statement, the surveying authority shall (a) as soon as reasonably practicable after the commencement date, by order make such modifications to the map and statement as appear to them to be requisite in consequence of the occurrence, before that date, of any of the events specified in subsection (3); and (b) as from that date, keep the map and statement under continuous review and as soon as reasonably practicable after the occurrence, on or after that date, of any of those events, by order make such modifications to the map and statement as appear to them to be requisite in consequence of the occurrence of that event. (3) The events referred to in subsection (2) are as follows . (c) the discovery by the authority of evidence which (when considered with all other relevant evidence available to them) shows . (i) that a right of way which is not shown in the map and statement subsists or is reasonably alleged to subsist over land in the area to which the map relates, being a right of way to which this Part applies; (ii) that a highway shown in the map and statement as a highway of a particular description ought to be there shown as a highway of a different description; or (iii) that there is no public right of way over land shown in the map and statement as a highway of any description, or any other particulars contained in the map and statement require modification. (5) Any person may apply to the authority for an order under subsection (2) which makes such modifications as appear to the authority to be requisite in consequence of the occurrence of one or more events falling within paragraph (b) or (c) of subsection (3); and the provisions of Schedule 14 shall have effect as to the making and determination of applications under this subsection. As the judge put it in his para 6, there are three categories of public highway: footpaths, bridleways, and byways open to all traffic, known as BOATs. Section 66 of the 1981 Act defines a BOAT as a highway over which the public have a right of way for vehicular and all other kinds of traffic, but which is used by the public mainly for the purpose for which footpaths and bridleways are so used. Schedule 14 to the 1981 Act provides: 1. Form of Applications An application shall be made in the prescribed form and shall be accompanied by (a) a map drawn to the prescribed scale and showing the way or ways to which the application relates; and (b) copies of any documentary evidence (including statements of witnesses) which the applicant wishes to adduce in support of the application. 2. Notice of Applications (1) Subject to sub paragraph (2), the applicant shall serve a notice stating that the application has been made on every owner and occupier of any land to which the application relates. (3) When the requirements of this paragraph have been complied with, the applicant shall certify that fact to the authority. (4) Every notice or certificate under this paragraph shall be in the prescribed form. 3. Determination by authority (1) As soon as reasonably practicable after receiving a certificate under paragraph 2(3), the authority shall (a) investigate the matters stated in the application; and (b) after consulting with every local authority whose area includes the land to which the application relates, decide whether to make or not to make the order to which the application relates. 5. Interpretation (1) In this Schedule 'prescribed' means prescribed by regulations made by the Secretary of State. The material regulations made by the Secretary of State are the Wildlife and Countryside (Definitive Maps and Statements) Regulations 1993 (the 1993 Regulations), which provide: 2. Scale of definitive maps A definitive map shall be on a scale of not less than 1:25,000 but where the surveying authority wishes to show on a larger scale any particulars required to be shown on the map, in addition, an inset map may be used for that purpose. 6. Provisions supplementary to regulations 4 and 5 Regulations 2 and 3 above shall apply to the map contained in a modification or reclassification order as they apply to a definitive map. 8. Application for a modification order (1) An application for a modification order shall be in the form set out in Schedule 7 to these Regulations or in a form substantially to the like effect, with such insertions or omissions as are necessary in any particular case. (2) Regulation 2 above shall apply to the map which accompanies such an application as it applies to the map contained in a modification or reclassification order. The form of application set out in Schedule 7 provides for an applicant who wishes, for example, to add a BOAT to the DMS (whether by upgrading an existing path shown on the map or by adding the path for the first time) to identify the points from and to which the proposed BOAT runs and its route as shown on the map accompanying this application. Section 67 of the 2006 Act provides: Ending of certain existing unrecorded public rights of way (1) An existing public right of way for mechanically propelled vehicles is extinguished if it is over a way which, immediately before commencement (a) was not shown in a definitive map and statement, or (b) was shown in a definitive map and statement only as a footpath, bridleway or restricted byway. But this is subject to subsections (2) to (8). (3) Subsection (1) does not apply to an existing public right of way over a way if (a) before the relevant date, an application was made under section 53(5) of the Wildlife and Countryside Act 1981 for an order making modifications to the definitive map and statement so as to show the way as a byway open to all traffic, (b) before commencement, the surveying authority has made a determination under paragraph 3 of Schedule 14 to the 1981 Act in respect of such an application, or (c) before commencement, a person with an interest in land has made such an application and, immediately before commencement, use of the way for mechanically propelled vehicles (i) was reasonably necessary to enable that person to obtain access to the land, or (ii) would have been reasonably necessary to enable that person to obtain access to a part of that land if he had had an interest in that part only. (4) 'The relevant date' means (a) in relation to England, 20th January 2005; (6) For the purposes of subsection (3), an application under section 53(5) of the 1981 Act is made when it is made in accordance with paragraph 1 of Schedule 14 to that Act. Section 130(1) of the Highways Act 1980 provides: It is the duty of the highway authority to assert and protect the rights of the public to the use and enjoyment of any highway for which they are the highway authority, including any roadside waste which forms part of it. The factual background and procedural history I take this from the agreed statement of facts and issues. The following five applications were made for modification orders under section 53(5). (1) On 14 July 2004 application T338 was made in relation to a route at Bailey Drove so as to add a BOAT to part of the route and to upgrade to a BOAT on two other parts of the route, which were at the time shown as a footpath (to the west) and a bridleway (to the east). (2) On 25 September 2004 application T339 was made in relation to a route consisting of two bridleways in the parishes of Cheselbourne and Dewlish so as to upgrade them to a BOAT. (3) On 21 December 2004 application T350 was made in relation to a route in the parish of Tarrant Gunville so as to add a BOAT to part of the route and to upgrade to a BOAT the remainder of the route, which at the time was shown as a bridleway. (4) On 21 December 2004 application T353 was made in relation to a route in the parish of Beaminster so as to upgrade the same to a BOAT from its existing status of bridleway. (5) On 21 December 2004 application T354 was made in relation to a route in the parish of Beaminster so as to add a BOAT to two parts of the route not shown on the DMS and to upgrade to a BOAT two further parts of the route which were at the time shown as bridleways. Accompanying each application was a map showing the route in question. Each map was produced using a computer software program entitled Anquet and digitally encoded maps which derived originally from OS maps drawn to a scale of l:50,000. The computer software program allowed the user to view or print out maps (or parts of maps) at a range of scales. In my opinion importantly, it was expressly agreed in the statement of facts and issues that the enlarged maps that were reproduced as a result of this process were all to a presented scale of 1:25,000 or larger, in that measurements on the maps corresponded to measurements on the ground by a fixed ratio whereby a measurement of 1 cm on the map corresponds to a measurement of no more than 250 metres on the ground. It does not appear that the council had any difficulty in considering the applications. Each of the applications was acknowledged by the council by early 2005 and there was no indication that the applications were defective until 2009. The council made no complaint about them until 7 October 2010, when, perhaps because of objections to the applications on their merits, a meeting took place of the councils Roads and Rights of Way Committee, at which it rejected all five applications on the ground that they were accompanied by computer generated enlargements of OS maps and not by maps drawn to a scale of not less than 1:25,000. As the judge noted at his para 13, under the heading Reasons for Recommendation, the following was recorded: For the transitional provisions in the Natural Environment and Rural Communities Act 2006 to apply so that public rights of way for mechanically propelled vehicles are not extinguished the relevant application must have been made before 20 January 2005 and must have been made in strict compliance with the requirements of Schedule 14 to the Wildlife and Countryside Act 1981. The applications in question were accompanied by computer generated enlargements of OS maps and not by maps drawn to a scale of not less than 1:25,000. In each case none of the other exemptions in the 2006 Act are seen to apply and so the applications should be refused. On 2 November 2010 the council communicated its decision to Mr Tilbury, who appealed to the Secretary of State on behalf of TRF but the Secretary of State declined to determine the appeals on the basis of lack of jurisdiction. Subsequently permission to apply for judicial review seeking an order that the decision of 2 November 2010 be quashed and that a mandatory order be granted requiring the council to determine the applications was refused on paper. It was however subsequently granted after an oral hearing before Edwards Stuart J and the matter was fully argued before the judge, who on 2 October 2012 upheld the decision of the council on the ground that the application map did not comply with the legal requirements. He further held that the extent of the non compliance was not within the scope of the principle de minimis non curat lex. The judge refused permission to appeal to the Court of Appeal. Permission to appeal was granted on the first point by Sullivan LJ. It was however refused on the de minimis point. As stated above, on 20 May 2013, the Court of Appeal reversed the decision of the judge on the first point. However, it refused an application for permission on the de minimis point on the basis that, if the appeal had failed on the first point, the non compliance could not sensibly be described as de minimis. The parties agreed that the first question can be stated as follows. Does a map which accompanies an application and is presented at a scale of no less than 1:25,000 satisfy the requirement in paragraph 1(a) of Schedule 14 of being drawn to the prescribed scale in circumstances where it has been "digitally derived from an original map with a scale of 1:50,000? Discussion This is a short point. It involves the construction of two particular provisions which I have already set out. By paragraph 1 of Schedule 14 to the 1981 Act, an application for a modification order must be made in the prescribed form and must be accompanied by a map (a) which was drawn to the prescribed scale, (b) which was not less than 1:25,000 and (c) which showed the way or ways to which the application related. No distinction has been drawn between the five applications. They either all complied or they all failed to comply. It is accepted that they were each accompanied by a map. It is I think also accepted that each of the maps showed the way or ways to which the application related. The question is therefore whether each of the maps was drawn to a scale of not less than 1:25,000. On the face of it that question must be answered in the affirmative. Paragraph 1 of Schedule 14 provides that the map must be drawn to the prescribed scale and by paragraph 5 prescribed means prescribed by the 1993 Regulations. By regulation 2 of those Regulations, A definitive map shall be on a scale of not less than 1:25,000 and, by regulation 8(2), regulation 2 applies to a map accompanying an application. As I read these provisions, no distinction is drawn between a map drawn to the prescribed scale and a map on a scale of not less than 1:25,000. On the ordinary and natural meaning of these provisions it appears to me that the map referred to in paragraph 1(a) of Schedule 14 is the map which must be drawn to the prescribed scale. Only one map accompanied each application. In each case it was the map produced as described above to a presented scale of 1:25,000 or larger, in that measurements on the map corresponded to measurements on the ground by a fixed ratio whereby a measurement of 1 cm on the map corresponds to a measurement of no more than 250 metres on the ground. Thus each such map was on a scale of not less than 1:25,000 and, in my opinion, satisfied regulations 2 and 8(2) of the 1993 Regulations. In my opinion each such map also satisfied paragraph 1(a) of Schedule 14 on the basis that it was drawn to the same scale. To my mind only one map had to comply with the prescribed criteria in each case, namely the map which accompanied the application, which I will call the application map. So far as I am aware no one has suggested that the application map was not a map, whether it was a photocopy of an existing map or an enlargement of a map. In any event I would hold that it was plainly a map. It was submitted on behalf of the council (and held by the judge) that, where the application map was based upon or drawn from a previous map, the relevant map was any map from which the application map was derived but not the application map itself. I agree with the Court of Appeal that there is nothing in the language of the relevant statutes or regulations to warrant that conclusion. It was also suggested that it must have been intended that the application map should be on a scale of 1:25,000 and exhibit all the detail which would appear on an OS map on that scale. Of course, it could have been so provided by statute or regulation. As Maurice Kay LJ said at his para 10, such a statutory requirement is not unknown. For example, section 1(3) of the Commons Act 1899 refers to a plan, adding that for this purpose an OS map shall, if possible, be used. More recently, regulation 5 of the Petroleum (Production) (Landward Areas) Regulations 1995, which is concerned with licence applications, requires an application to be accompanied by two copies of an OS map on a scale of 1:25,000, or such other map or chart as the Secretary of State may allow. I agree with Maurice Kay LJ that the scheme with which we are concerned is not so specific. Nor is it prescriptive as to features which must be shown on the map, apart from the requirement that it must show the way or ways to which the application relates. It is of course well known (and not in dispute) that an original OS map with a scale of 1:25,000 depicts more physical features than an original OS map of the same site with a scale of 1:50,000. However, again I agree with Maurice Kay LJ that, since paragraph 1(a) permits the use of a map which is not produced by OS (or any other commercial or public authority), it cannot be said to embrace a requirement that the application map must include the same features as are depicted on an original 1:25,000 OS map. I appreciate that, as was submitted on behalf of the council, an original OS map on a scale of 1:25,000 might well have been of more use to the council than an enlarged OS map originally produced on a scale of 1:50,000 but, for good or ill, no such requirement was included in the statutory provisions. In any event this point seems to me to have been afforded more emphasis that it merits. The council of course already has OS maps on a scale of 1:25,000 which it can readily consult. If it has any questions which are relevant to the application it can raise them with the applicant. Further, it is in my opinion important to note that the council expressly concedes in its case that in theory an applicant might himself be able to create an accurate map at 1:25,000 which nevertheless contained only such detail as an OS 1:50,000 map. Moreover, he could do so in manuscript without reference to an OS map. It seems to me to follow from that concession that, if used as the application map, such a map would comply with the statutory provisions. Moreover, that is so even if one would ordinarily expect the application map to be based on the OS 1:25,000 map. Some reliance was placed on the fact that an OS map would ordinarily be used but I do not see how that helps to construe a provision which defines what must be done but makes no reference to such a requirement. There is in evidence an extract of an online road map (not an OS map) on a scale of 1:25,000 which shows the claimed route in red but on which a number of public roads and village names are missing. It satisfies the relevant provisions notwithstanding the fact that it contains very little information. It satisfies the provisions because it is a map, because it is on a scale of not less than 1:25,000 and, critically, because it shows the way to which the application related. So far as I am aware, the council accepts that an application map so drawn is not objectionable but, even if it did not, I would so hold. If that is correct, it follows that it is not necessary that the application map should be an OS map. As Maurice Kay LJ said in his para 10, the application map may include more or fewer features than those marked on an OS map of the same scale. And, as he said at para 11, the provision that the map must show the way or ways to which the application relates is a flexible requirement; sometimes more details will be required and sometimes fewer, depending on the way in question and its location. This is I think a critical point because it shows that the application map may have very few of the details on the ordinary OS map on a scale of 1:25,000. I recognize that, without any requirement of scale, an applicant (who is quite likely to be a lay person) might produce a map of any scale. It is therefore understandable that the application map should have to be on a reasonable scale for the purposes of clarity. Any scale chosen would have an element of arbitrariness but, since the DMS has to be on a scale of not less than 1:25,000, it was no doubt thought to make practical sense for the application map to be on the same scale. It does not follow that it should have all the same features as the OS map. Some reliance is placed on the fact that the prescribed scale applies in the same terms to the application map as it does to the DMS (regulations 2 and 6) and that, whatever might be reasonable for an applicant, it would be odd if the DMS itself could be prepared on something other than an OS base. In my opinion, that argument ignores the different contexts in which the rule applies. The authority is under a public law obligation to prepare and maintain the DMS in proper form, which duty must itself imply that it should be at least professionally prepared to a quality and detail equivalent to the OS map. Given the availability of the OS map, it would be irrational for the authority not to use it. The same does not apply to a lay applicant, who has no public law duty, and whose sole function is to put the relevant material before the authority for investigation by them. Indeed the draftsman may deliberately have adopted a form of definition which is sufficiently flexible for both contexts. It is not, so far as I am aware, part of the councils case that the application map was not drawn within the meaning of paragraph 1(a) of Schedule 14. However, there have been some suggestions to this effect, notably by Mr Plumbe, which Maurice Kay LJ considered at paras 12 to 14. He considered in para 12 whether the words drawn to a scale of not less than 1:25,000 mean that the application map in question must have been originally drawn to that scale rather than enlarged or reproduced to it. He said that he could see no good reason for giving the requirement such a narrow construction. What was important was the scale of the application map. The word drawn did not need to imply a reference to the original creation but was more sensibly construed as being synonymous with produced or reproduced. He said at para 13 that he reached that conclusion on the basis of conventional interpretation but that he was fortified by an approach which takes account of technological change. He referred to R (Quintavalle) v Human Fertilisation and Embryology Authority [2003] 2 AC 687 at para 9, where Lord Bingham said that courts had frequently had to grapple with the question whether a modern invention or activity falls within old statutory language, and approved the decision of Walton J in Grant v Southwestern and County Properties Ltd [1975] Ch 185, where he held that a tape recording fell within the expression document in the Rules of the Supreme Court. Maurice Kay LJ concluded in para 14: All this leads me to the view that, whilst I am confident that drawn was never intended to be construed as being confined to originally drawn, it should also now be given a meaning which embraces later techniques for the production of maps. For practical purposes, when a computer is used to translate stored data into a printed map, it can properly be said that the computer and the printer are, on human command, drawing the map which emerges to the scale which has been selected. I find no difficulty in this approach in circumstances in which the requirements do not prescribe that the submitted map depicts the features which are depicted on an original 1:25,000 OS map. I agree. Finally, some reliance was placed upon evidence provided by OS at the request of the council. They were asked this question: Where: 1.1 digital raster mapping is originally produced by the OS at 1:50,000 scale (the Original Product); 1.2 an image is taken from the Original Product and enlarged to a 1:25,000 scale; and 1.3 a facsimile copy of that enlarged image is produced in printed form (the Map) Is the Map properly to be regarded as being at a scale of 1:50,000 or 1:25,000? The answer was as follows: As described in the question the map would be properly to be regarded as a 1:50,000 scale OS map enlarged to 1:25,000. It was submitted on behalf of the council that the scale of the maps as presented by the respondents was indeed (larger than) 1:25,000, but this was only because they had all been enlarged from their original scale. It was submitted that the answer to the issue posed in para 2 above, namely whether an application map is drawn to the prescribed scale only if it is derived from a map originally so drawn without being enlarged or reduced in any way, is no. In my opinion the true answer to that question was yes. The Map is a reference to the application map. It was conceded that the scale of the map as presented was larger than 1:25,000. Since, as I see it, the question is what was the scale of the map as presented, ie the application map, it follows that the map complied with the statutory requirements. For the reasons given above, the fact that it was taken from a map on a smaller scale is irrelevant. For all these reasons I would dismiss the appeal on the first issue. The question posed in para 17 above was this. Does a map which accompanies an application and is presented at a scale of no less than 1:25,000 satisfy the requirement in paragraph 1(a) of Schedule 14 of being drawn to the prescribed scale in circumstances where it has been "digitally derived from an original map with a scale of 1:50,000"? I would answer the question yes, provided that the application map identifies the way or ways to which the application relates. The second issue Since Lord Carnwath and Lord Toulson answer the first question in the same way, it follows that the appeal will be dismissed and the second question will not arise. I am sympathetic to Lord Carnwaths general approach to the construction of provisions like section 67(3) of the 2006 Act and I am doubtful whether Parliament can have intended such a narrow approach as was approved by the Court of Appeal in Maroudas v Secretary of State for the Environment, Food and Rural Affairs [2010] EWCA Civ 280 to which he refers at para 65. However, I am conscious that we heard no submissions on the correctness of Maroudas and I see the force of the conclusions expressed by the other members of the Court. In these circumstances, since it is not necessary to do so, I prefer to express no view upon the second question unless and until it arises on the facts of a particular case. LORD TOULSON: On the question whether the applications submitted by Mr Stuart to the council satisfied the statutory requirements, I agree with Lord Clarke and the Court of Appeal. Paragraph 1 of Schedule 14 to the Wildlife and Countryside Act 1981 required applications for the modification of a definitive map and statement to be in the prescribed form and accompanied by (a) a map drawn to the prescribed scale and showing the way or ways to which the application relates (emphasis added), and (b) any documentary evidence on which the applicant wished to rely. Prescribed means prescribed by the Wildlife and Countryside (Definitive Maps and Statements) Regulations 1993 (the Regulations). Regulation 8(1) required each application to be in the form set out in Schedule 7 to the Regulations or in a form substantially to the like effect; and regulation 8(2) provided that regulation 2 should apply to the map which accompanied the application in the same way as it applied to the map contained in a modification order. Regulation 2 provided that a definitive map shall be on a scale of not less than 1/25,000 (emphasis added). I do not construe the words drawn to the prescribed scale as meaning more than be on a scale of not less than 1/25,000. More particularly, I do not see the word drawn as mandating a particular method of production. I agree with Maurice Kay LJ that linguistically drawn may sensibly be regarded as synonymous with produced. But the construction of a statute is not simply a matter of grammar, and the question arises whether in the particular context the expression drawn to the prescribed scale should be given a narrower interpretation in order to serve its statutory purpose. While I respect the arguments of Lord Neuberger and Lord Sumption, I am not persuaded by them. I regard the OS as a red herring. It does not feature in the Regulations. I do not see a proper basis for the admission of the evidence given by the OS, and I do not consider it legitimate to use the OS as a tool in construing the Regulations. As Maurice Kay LJ pointed out, the application for a modification order triggers an investigation. It is the start of a process. The natural purpose of the requirement placed on the applicant is to enable the council properly to understand and investigate the claim. For that purpose one would expect a plan on a 1/25,000 scale as presented to be sufficient, and this case provides an illustration. (On receipt of the applications in 2005, an officer prepared maps in the usual way for the Roads and Rights of Way Committee, but the applications had not been considered by the committee when the R (Warden and Fellows of Winchester College) v Hampshire County Council [2009] 1 WLR 138 case was decided.) The reason for requiring a plan showing the way or ways to which the application related is self evident. As to the purpose underlying the prescription of a scale of 1/25,000, rather than simply requiring a map, I respectfully consider that para 27 of Lord Clarkes judgment offers a sufficient and credible explanation. For those reasons, which I am conscious are no more than a summary of the reasons given by Lord Clarke and Maurice Kay LJ, I agree with their conclusion. The issue regarding the effect of section 67(6) of the Natural Environment and Rural Communities Act 2006 therefore does not arise for decision, but it has been fully argued and I have come ultimately to agree with Lord Neuberger and Lord Sumption. The context of the 2006 Act was that off road use of motorised vehicles had become a subject of considerable controversy in rural areas. The 2006 Act was the culmination of a lengthy process involving considerable public consultation and pre legislative parliamentary scrutiny, in the course of which a large number of applications were made for modifying definitive maps to re classify former RUPPs (roads used as public paths) as BOATs (byways open to all traffic). The publication in January 2005 of the Bill which became the 2006 Act coincided with the publication of a lengthy joint report by the Department for the Environment, Food and Rural Affairs and the Countryside Agency of a research project on the use of motor vehicles on BOATs. The purpose of the relevant part of the 2006 Act was to extinguish any unrecorded public rights of way for motor vehicles (by section 67) and to place restrictions on the creation of any fresh rights (by section 66). Section 67 is subject to certain exceptions, the relevant one being under subsection (3)(a). This exception applies to an existing right of way if before the relevant date, an application was made under section 53(5) of the Wildlife and Countryside Act 1981 for an order making modifications to the definitive map and statement so as to show the way as a byway open to all traffic. The relevant date was 20 January 2005: subsection (4)(a). The obvious purpose of setting this date was to exclude applications made during the legislative process in an attempt to avoid the guillotine. Section 53(5) of the 1981 Act included the words that the provisions of Schedule 14 shall have effect as to the making and determination of applications under this subsection. I have referred in para 36 to the requirement under paragraph 1 of Schedule 14 for the application to be made in the prescribed form and to be accompanied by (a) a map drawn to the prescribed scale and showing the way or ways to which the application relates and (b) any documentary evidence on which the applicant wished to rely. Those provisions, ie section 67(3) of the 2006 Act read with section 53(5) and Schedule 14 paragraph 1 of the 1981 Act, might have been considered sufficient as an ordinary matter of construction to limit the exception created by section 67(3) to cases where an application conforming with the requirements of the 1981 Act had been made before 20 January 2005. But the drafter provided reinforcement by section 67(6): For the purposes of subsection (3), an application under section 53(5) of the 1981 Act is made when it is made in accordance with paragraph 1 of Schedule 14 to that Act. That subsection, as it appears to me, made it clear for the removal of doubt that section 67(3) of the 2006 Act applied only to an application made in time and in compliance with the formal requirements of paragraph 1 of Schedule 14. Put in negative terms, the saving provided by section 67(3) does not include applications purportedly made before the cut off date which were substantially defective, whether or not the defects might otherwise have been cured in one way or another. It is well understandable in the circumstances in which the 2006 Act was passed that Parliament should not have wished councils to be burdened potentially with a mass of non conforming applications made in an attempt to beat the deadline. I was initially attracted by Lord Carnwaths argument for a more flexible approach, based on the precedents of the Oxfordshire City Council case and the Inverclyde District Council case which he cites, but it is a truism that every statute must be construed in its own context. On full consideration I am persuaded that Lord Neuberger and Lord Sumption are right, having regard to the language of the statute and the legislative context to which I have referred. LORD CARNWATH: Ground 1 prescribed scale My initial reaction on reading the papers in this case was that the appeal should succeed on the first ground, substantially for the reasons given by Lord Neuberger and Lord Sumption. It is an easy assumption that the draftsman must have had in mind an OS 1:25,000 map, or something of equivalent detail and quality. However, I am persuaded that this approach is too simplistic. The draftsman could have so specified but did not. Once it is accepted (as it is) that the word drawn does not connote any particular form of physical production, and that the plan need not be as detailed as an OS map (even one of 1:50,000 scale), nor professionally prepared, I see no convincing answer to the Court of Appeals analysis. The fact that in practice applicants do normally use OS maps, or that there would be no hardship in requiring them to do so, does not seem to me to assist on the question of construction. I would therefore dismiss the appeal on the first ground for the reasons given by Lord Clarke. This conclusion makes it strictly unnecessary to decide the second ground. This challenges the principle that only strict compliance will suffice to save an application under section 67(6) of the 2006 Act (as decided in R (Warden and Fellows of Winchester College) v Hampshire County Council [2008] EWCA Civ 431, [2009] 1 WLR 138). However, since the point has been fully argued and may be material in other cases, it may be helpful to consider it. Furthermore, as will be seen, I regard it as somewhat artificial to separate the two issues, as the courts below have had to do (being bound by the decision of the Court of Appeal in that case). At this level we are able to take a broader view. Ground 2 strict compliance The second issue turns on the construction of section 67(6) of the 2006 Act. It needs to be read in its full statutory context, as already set out by Lord Clarke. The starting point is section 53 of the 1981 Act in Part III, which imposes a duty on authorities to keep the definitive map under continuous review, and to make modifications so far as required by the occurrence of any of the events specified in subsection (3). Those events are (in summary): (a) the coming into operation of any enactment or instrument, or any other event whereby a highway is stopped up, altered or extinguished or a new way created; (b) the expiration of a period sufficient to give rise to a presumption of dedication; or (c) the discovery by the authority of evidence which (when considered with all other relevant evidence available to them) shows (i) that a right of way which is not shown in the map and statement subsists or is reasonably alleged to subsist over land in the area to which the map relates, being a right of way to which this Part applies; (ii) that a highway shown in the map and statement as a highway of a particular description ought to be there shown as a highway of a different description; . Subsection (5) allows any person to apply to the authority for an order under subsection (2) making such modifications as appear to the authority to be requisite in consequence of an event within paragraph (b) or (c) of subsection (3); and provides that: the provisions of Schedule 14 shall have effect as to the making and determination of applications under this subsection. Schedule 14 paragraph 1 provides that the application is to be made in the prescribed form, and accompanied by (a) a map drawn to the prescribed scale and showing the way or ways to which the application relates and (b) copies of any documentary evidence (including statements of witnesses) which the applicant wishes to adduce in support of the application. Section 67 of the 2006 Act provides for the extinguishment, subject to defined exceptions, of hitherto unrecorded rights of way for mechanically propelled vehicles. It applied generally from the date of commencement, which for England was 2 May 2006 (defined under section 107(4)). This date applied also to the exceptions under subsection (3)(b) and (c). By contrast subsection (3)(a), which applies in this case, was related to an earlier relevant date, defined for England as 20 January 2005 (section 67(4)). As explained to Parliament, this was the date on which ministers, following consultation, announced their intention to legislate, in the form of a document The governments framework for action. That paper did not contain any proposal for a cut off date for applications prior to the commencement of the Act. That was introduced in the course of the parliamentary proceedings, in response to concerns that the authorities would be flooded by protective applications in the period before the 2006 Act took effect. The critical subsection is section 67(6), by which for these purposes an application under section 53(5) of the 1981 Act is made when it is made in accordance with paragraph 1 of Schedule 14 to that Act. In the Winchester case an application for modification had been made before the relevant date, but had not been accompanied by the supporting documentary evidence as required by Schedule 14 paragraph 1(b). In those circumstances the court held that it had not been made in accordance with that paragraph before the relevant date and therefore did not come within the exception. Dyson LJ, with whom the other members of the court agreed, said: In my judgment, section 67(6) requires that, for the purposes of section 67(3), the application must be made strictly in accordance with paragraph 1. That is not to say that there is no scope for the application of the principle that the law is not concerned with very small things (de minimis non curat lex). Indeed this principle is explicitly recognised in regulation 8(1) of the 1993 Regulations. Thus minor departures from paragraph 1 will not invalidate an application. But neither the Tilbury application nor the Fosberry application was accompanied by any copy documents at all, although it was clear from the face of the applications that both wished to adduce a substantial quantity of documentary evidence in support of their applications. In these circumstances, I consider that neither application was made in accordance with paragraph 1. (para 54) That approach was followed in Maroudas v Secretary of State for the Environment, Food and Rural Affairs [2010] EWCA Civ 280, in which the only substantive judgment was again given by Dyson LJ. The present proceedings In the present case, before Supperstone J, it was argued that the defect which he had found in relation to the scale of the plan was no more than a minor departure permissible under the Winchester principle. He rejected that submission, holding that there were material differences between the presentation of the claimed ways on the application maps and their presentation on a 1:25,000 scale map, and that there was no difficulty in compliance (paras 41 43). Permission to appeal that aspect of the judgment was refused. In this court, Mr Pay asks us to hold that the reasoning in the Winchester case was erroneous, with the consequence that failure to comply strictly with the Regulations was not necessarily fatal to the application. In short, he submits that Dyson LJ was wrong to adopt a different approach under section 67(6) than would have been applied to an application under section 53(5) apart from the 2006 Act. Under general principles, he submits, failure to comply with procedural requirements, even those of more than minor significance, does not necessarily make an application void, and so incapable of having legal effect. Under the modern law, the question depends not on whether the procedural provision is mandatory or directory, or indeed whether the defect can be described as minor or de minimis, but (as Lord Steyn explained R v Soneji [2005] UKHL 49; [2006] 1 AC 340, para 23) the emphasis is on the consequences of non compliance, . posing the question whether Parliament can fairly be taken to have intended total invalidity. Applying those principles, he submits, the alleged defects in this case were not such as to render the application void. Their consequences were of no serious significance, since the authority were given all the information they needed to identify the proposal, to prepare their own more detailed plans (as indeed they did shortly after receipt of the application), and to carry out their own investigations. It was therefore properly treated from the outset as a legally effective application for the purposes of Schedule 14 paragraph 1 of the 1981 Act, even if the authority would have been entitled to require the substitution of a compliant plan. It was thus, as at the date of its submission, made in accordance with that paragraph under section 67(6) of the 2006 Act. For the authority, Mr Laurence QC supports the Winchester decision substantially for the reasons given by the Court of Appeal (in substance accepting his own submissions on behalf of the landowners in that case). Before discussing those submissions it is necessary to look in more detail at the reasoning of Dyson LJ in the earlier cases. Dyson LJs reasoning The Winchester case involved two separate applicants. It is sufficient to refer to the facts relating to the first, Mr Tilbury. His application, made in June 2001 to the Hampshire County Council, was to modify the definitive map to upgrade a bridleway to a BOAT. The application referred to an appended list of documents, which identified some 25 maps and plans (the earliest dating back to 1739) with his comments. He did not include copies of these maps. It was treated as a valid application by the authority, which on 22 March 2006 resolved to make modifications accordingly. This decision was challenged by landowners affected by the route, on the grounds that there had been no valid application or determination within the time limits set by section 67 (inter alia) because the application had not been accompanied by copies of all the documentary evidence relied on. The application was heard in the High Court by George Bartlett QC (President of the Lands Tribunal, and a judge with great practical experience in this field), who rejected the challenge ([2007] EWHC 2786 Admin). In short he held that the requirement to submit documents was a procedural requirement which could be waived by the authority without affecting the validity of the application (paras 38 40). Alternatively, he interpreted the requirement to adduce the evidence to be relied on as not extending to evidence already before the council (para 45). In the Court of Appeal, Dyson LJ did not disagree with the judges approach in relation to the treatment of an application under section 53(5) of the 1981 Act itself. He distinguished this from the question before the court under section 67: This question is not the wider question of whether it was open to the council to treat an application which was not made in accordance with that paragraph as if it had been so made because the failure could be characterised as a breach of a procedural requirement rather than a breach which was so fundamental that (to use the judge's language) the application failed to constitute an application at all. I readily accept that the wider question is relevant and important in the context of applications made under section 53(5) generally and whether an authority has jurisdiction to make a determination pursuant to paragraph 3 of Schedule 14. But the question that arises in relation to section 67(6) is not whether the council had jurisdiction to waive breaches of the requirements of paragraph 1. It is whether the applications were made in accordance with paragraph 1 . (paras 36 37) The purpose of section 67(6), he thought, was to define the moment at which a qualifying application is made because timing is critical for the purpose of determining whether subsection (1) is disapplied (para 38) That moment was when an application was made in accordance with paragraph 1. A subsequent waiver of the obligation to accompany the application with copies of documentary evidence could not operate to treat such an application as having been made in accordance with paragraph 1 when it was not (para 38). In his view section 67(6) required strict compliance with each of the elements of paragraph 1, regardless apparently of considerations of practical utility. He rejected, for example, an argument that strict insistence that an application be accompanied by copy documents serves no real purpose and confers no obvious advantage over providing a list of the documents particularly where the authority is already in possession of, or has access to, such documents. Such considerations might be relevant to the question whether a failure to comply with paragraph 1 should be waived, but not to whether an application has been made in accordance with paragraph 1 (paras 44 45). Similarly he was unmoved by arguments that strict interpretation could lead to absurdity, for example if the application listed a number of documents but by oversight omitted some of them, the absurdity possibly being sharpened by the fact that the authority has the originals in its possession . Even a defect of that kind was relevant only to the question of waiver, not to validity for the purpose of section 67(6) (paras 48 49). The only exception he allowed was if copies were impossible to obtain, on the basis of the principle that law does not compel the impossible (para 50). The consequences of that narrow approach are strikingly illustrated by the following case, Maroudas v Secretary of State [2010] EWCA Civ 280. The court reversed the judgment of the Administrative Court ([2009] EWHC 628 (Admin), Judge Mackie QC), to which reference can be made for a fuller account of the history. The proceedings had taken the form of an application to quash the decision of the Secretary of State, made by an inspector in May 2008 following a hearing, to confirm a modification order made in response to an application originally made under section 53(5). The application had been made as long ago as February 1997, several years before the cut off date later adopted in the 2006 Act. It had not itself been signed or dated, nor accompanied by a plan showing the way in question. However the council had helpfully responded a month later enclosing a summary and plan, and asking for confirmation that the proposed reclassification extended to the whole of the identified route. The applicant replied by signed letter asking for the whole route to be included. The authority apparently proceeded to deal with it on that basis as a valid application. As far as one can judge from the reports, no objection was taken to the form of the application until the hearing before the inspector some 11 years later. By an unfortunate coincidence (from the applicants point of view) the hearing took place on 30 April 2008, the day after the promulgation of the Winchester judgment, on which the objector was thus able to rely. On these facts the judge upheld the inspectors decision to treat the application as validly made by the relevant date. As he observed, there had been nothing opportunistic about the application, made long before any hint of the proposals which led in due course to the 2006 legislation. Although he was bound by the Winchester decision, and he accepted that the defects in the original application could not be treated as minor, he was entitled to look at the substance of the matter, which was that by the time the letter of 22 April 1997 was written it was perfectly clear what the application related to. There was a map, as one sees from enclosed is a summary plan of the application in the letter of 25 March 1997, and a signature and a date. No one would, or could, have been misled about what happened after that. Mr Maroudas rightly had to accept that he would have no grounds at all for his application if, instead of the exchange of letters, the council had gone through the bureaucratic, or some would say necessary, step of returning the form to [the applicant] to sign and amend, rather than resolving the matter on an exchange of correspondence. That seems to me to move proper strictness into unnecessary bureaucracy . (para 25) The Court of Appeal disagreed. In particular, the applicants failure to sign and date the application, and his failure to submit a plan, were not cured by the subsequent exchanges: the lack of a date and signature in the application form can in principle be cured by a dated and signed letter sent shortly after the submission of the form, where the omissions are pointed out and the council is asked to treat the application as bearing the date of the letter and the signature of the author of the letter. But the lack of a date and, in particular, the lack of a signature are important omissions. The signature is necessary to prove that the application is indeed that of the person by whom it is purportedly made. If the application form remains unsigned for a substantial period of time, I would not regard that as a minor departure from the statutory requirement that it should be signed. The fact that the application was unsigned for some 10 weeks in this case is of itself a strong reason for holding that there was a substantial departure from the strict requirements of paragraph 1 of Schedule 14. The final point is that the plan enclosed with the council's letter of 25 March was not sent back by Mr Drinkwater with his letter of 22 April. Mr Drinkwater never sent an accompanying map. The absence of an accompanying map is an important omission just as is the absence of documentary evidence on which an applicant wishes to rely (as Winchester demonstrates). Mr Coppel's case is that the plan which was enclosed with the council's letter of 25 March was the accompanying map and that by his letter Mr Drinkwater was agreeing with the council that it should so treat it. But Mr Drinkwater's letter says nothing about the enclosed plan. There is nothing to indicate that he even looked at it. In view of his indifference to what the council was asking, it seems unlikely that he would have had any interest in the plan at all. (paras 36, 38) Discussion I start from the general principle that procedural requirements such as those in the 1981 Act should be interpreted flexibly and in a non technical way. There are close parallels with the provisions relating to applications to register village greens, considered by the Court of Appeal in Oxfordshire County Council v Oxford City Council [2006] Ch 43 (approved on this point by Lord Hoffmann in the House of Lords: [2006] 2 AC 674, para 61). The question there was the power to amend an application for registration, in the absence of any specific provision in the regulations permitting amendment. In giving the judgment of the Court of Appeal (paras 101 112), I cited the guidance of Lord Keith, dealing with similar arguments in a case concerning the amendment of details submitted under an outline planning permission: Inverclyde District Council v Lord Advocate (1981) 43 P & CR 375. He said: This is not a field in which technical rules would be appropriate, there being no contested lis between opposing parties. The planning authority must simply deal with the application procedurally in a way which is just to the applicant in all the circumstances. That being so, there is no good reason why amendment of the application should not be permitted at any stage, if that should prove necessary in order that the whole merits of the application should be properly ascertained and decided upon. (p 397) The Inverclyde case has added relevance in the present context since it also involved a time limit. Conditions on the permission imposed a three year time limit for submission of details. Further, the Act in question there provided that an application for approval made after that date should be treated as not made in accordance with the terms of the permission. The general development order governing submission of details contained no specific provision for amendment. The authority accepted that amendments could be made within the three year time limit, but not after it had expired. Of that Lord Keith said simply that: an amendment which would have the effect of altering the whole character of the application, so as to amount in substance to a new application, would not be competent. Such a flexible approach is particularly appropriate in the context of an application to modify the definitive map. A developer submitting details under an outline planning permission is doing so generally for his own benefit, and it is his responsibility to make sure that the details comply with the planning permission and other requirements. In a case of any complexity, the details will generally be professionally prepared. By contrast, under section 53 of the 1981 Act the primary duty to keep the definitive map up to date and in proper form rests with the authority, as does the duty (under section 53(3)(c)) to investigate new information which comes to their attention about rights omitted from the map. An application under section 53(5), which may be made by a lay person with no professional help, does no more than provide a trigger for the authority to investigate the new information (along with other information already before them) and to make such modification as appears to [them] to be requisite. The deputy judge in the Winchester case cited the guidance given by Lord Woolf MR in R v Secretary of State for the Home Department, Ex p Jeyeanthan [2000] 1 WLR 354 (a judgment noted with approval by Lord Steyn in R v Soneji para 19). In a passage headed What should be the approach to procedural irregularities?, Lord Woolf referred to recent authority qualifying the traditional mandatory/directory test, and said: the right approach is to regard the question of whether a requirement is directory or mandatory as only at most a first step. In the majority of cases there are other questions which have to be asked which are more likely to be of greater assistance than the application of the mandatory/directory test. The questions which are likely to arise are as follows. 1. Is the statutory requirement fulfilled if there has been substantial compliance with the requirement and, if so, has there been substantial compliance in the case in issue even though there has not been strict compliance? (The substantial compliance question.) 2. Is the non compliance capable of being waived, and if so, has it, or can it and should it be waived in this particular case? (The discretionary question.) I treat the grant of an extension of time for compliance as a waiver. 3. If it is not capable of being waived or is not waived then what is the consequence of the non compliance? (The consequence question.) Which questions arise will depend upon the facts of the case and the nature of the particular requirement. The advantage of focusing on these questions is that they should avoid the unjust and unintended consequences which can flow from an approach solely dependent on dividing requirements into mandatory ones, which oust jurisdiction, or directory, which do not. If the result of non compliance goes to jurisdiction it will be said jurisdiction cannot be conferred where it does not otherwise exist by consent or waiver. (p 362C F) I find this passage particularly helpful since it distinguishes clearly between two logically distinct issues: first, whether as a matter of construction a particular procedural rule is capable of being satisfied (fulfilled) by substantial compliance; secondly, whether even if the rule is not so satisfied a failure to comply can as a matter of discretion be waived by the relevant authority. For most practical purposes the distinction is immaterial. However, it can be significant in a case such as the present where timing is important. In my view, if the statutory rule properly construed can be satisfied by substantial compliance, it is no misuse of language to say that an application made before the relevant time, in a form which meets that standard, is made in accordance with the rule. As I understand his two judgments, Dyson LJ proceeded on the basis that any flexibility in the exercise of the section 53(5) procedure could only be explained as a matter of waiver by the authority. It therefore had no relevance to whether the application itself had been made in accordance with the statutory requirements for the purpose of section 67 at the relevant time. Indeed, in Maroudas he appears to have gone even further. The only latitude allowed was the possibility of curing the defects by a submission made shortly after the initial application. Later waiver by the authority of any procedural deficiencies, even if made long before the cut off date, would not be enough. In my view, with respect, this approach was too narrow. For the reasons I have given, this is not a context in which either statute needs to be read as requiring more than substantial compliance to achieve validity. The words in accordance with in section 67(6) do not necessarily imply anything more than compliance which would in any event be required by the terms of section 53(5) and Schedule 14. Dyson LJ appears to have attached importance to the statutory purpose of defining the moment by reference to which section 67(1) is disapplied. But the same could have been said of the planning condition in the Inverclyde case. It is not clear why that consideration should require a different approach under section 67 than under the governing section. There remains a legitimate question as to the purpose of section 67(6). If it merely reproduces the effect of section 53(5) taken with Schedule 14, why was it necessary to include it at all? Mr Pays answer is that it was probably intended to make clear that the date was to be fixed by reference only to paragraph 1 of Schedule 14, without regard to the provision (in paragraph 2) for service on landowners. I see some force in that suggestion. It can be said against it that paragraph 2 as it stands leaves no room for ambiguity on that point, since it requires in terms a notice that the application has been made. On that view section 67(6) adds nothing. However, the same point could be made of section 67(7). Even without it, there would have been no reason to read subsection (3)(c)(i) as requiring the applicant to be using, or able to use, the right of way in question. Alternatively, it may be that the purpose of section 67(6) was simply to make clear that what was required was a substantially complete application; in other words a bare application would not be sufficient, if it was not accompanied by the relevant information required by the rule (whether or not precisely in the prescribed form). It has to be remembered that section 67(3) was retrospective in effect. In the Inverclyde case there would have been no obvious hardship in tying the applicant to the three year limit set by the condition, of which he had notice at the time of the permission. By contrast, the cut off date under section 67(3) was deliberately fixed by reference to the date of the announcement of the legislation, and so as to allow no further opportunity for an applicant to improve his position. The legislative purpose no doubt was to identify for preservation genuine applications made before that date. This was understandable as a means of limiting pre emptive applications in the period before the Act came into effect. But that purpose did not justify or require subjecting them retrospectively to standards of procedural strictness which had no application at the time they were made. It is unnecessary for present purposes to determine whether the Winchester case was correctly decided on its own facts. Nor should this judgment be seen as encouragement to resurrect applications rejected in reliance on it. I would however question its extension to a case, such as Maroudas where the defects in the original application had been resolved to the satisfaction of the authority, and waived by them, long before the cut off date. I would respectfully echo the comment of the deputy judge in Maroudas that this was to move proper strictness into unnecessary bureaucracy. As was conceded, it would have been simple for the applicant, if required to do so, to have resubmitted the application in strictly correct form, but neither the authority nor anyone else thought that necessary. Without a crystal ball he would have had no reason to do so. Yet that wholly excusable failure resulted more than a decade later in the application and all that followed being declared invalid. I would have expected the draftsman to have used much clearer wording in section 67(6) if he had intended to achieve such a surprising and potentially harsh result. Conclusion As I suggested at the beginning of this judgment, there is some overlap in the two grounds of appeal. Under ground 1, for the reasons given by Lord Clarke, the wording of the definition does not on an ordinary reading bear the interpretation urged on us by the appellants. By the same token, under ground 2, the fact that the draftsman has not thought it necessary to define more precisely the form and contents of the application map can itself be taken as an indication against implying a requirement for unusually strict compliance, under either section 53 or section 67. For these reasons I would dismiss the appeal on both grounds. LORD NEUBERGER: (dissenting) Introductory The relevant facts and statutory provisions have been set out by Lord Clarke, and they need not be repeated. Two questions arise. The first is whether the applications submitted to the Dorset County Council by Jonathan Stuart on behalf of the Friends of Dorsets Rights of Way (the Applications), purportedly made under section 53(5) of the 1981 Act (section 53(5)), complied with the requirements of paragraph 1(a) of Schedule 14 to that Act (Schedule 14), in the light of the requirement in regulation 8(2) of the 1993 Regulations. The second question, which only arises if the answer to the first question is no, concerns the consequences of such non compliance in the light of the provisions of section 67 of the 2006 Act. In disagreement with Lord Clarke and the Court of Appeal, and in agreement with Supperstone J, I consider that the answer to the first question is that the Applications did not comply with the requirements of paragraph 1(a) of Schedule 14 as the accompanying map was not to the required scale, and that the answer to the second question is that the Applications were ineffective as a result of section 67, and in particular subsection (6) thereof. My reasons for these conclusions are as follows. The validity of the Applications: the 1:25,000 scale requirement The Applications were accompanied by documents which were enlarged photocopies of plans which had been prepared on a scale of 1:50,000, and which, as a result of the enlargement exercise, were on a scale of around 1:20,000. In those circumstances, the first question is whether such enlarged photocopies constituted maps drawn to the prescribed scale within paragraph 1(a) of Schedule 14, which as a result of regulation 8(2) and regulation 2 of the 1993 Regulations had to be on a scale of not less than 1:25,000. A map of a particular area is a document which shows in reduced, two dimensional form, normally with markings, symbols or annotations, what is on the ground in that area. It is almost inevitable that the map accompanying an application under section 53(5) will be a copy (either in printed form or a photocopy of a printed form) of an original map drawn by an individual, a group of individuals or a machine. The court was told that, in the experience of those involved in these proceedings, a photocopy of the appropriate section of a published copy of the relevant OS map is invariably used by applicants under section 53(5). That is entirely unsurprising, although there is no reason why the map accompanying a section 53(5) application should not be a copy of another published map, or an original plan, drawn for the purpose of the application, provided, of course, that it is drawn to the prescribed scale. Where an applicant uses a copy of an original map, the appellant council contends that the document only complies with the requirements of paragraph 1(a) of Schedule 14 if it is a copy of a map which was prepared on a scale of at least 1:25,000, whereas the respondent applicants argue that it complies with these requirements if the copy is on a scale of at least 1:25,000, even if the map from which the copy was made was on a scale of less than 1:25,000. The words used in paragraph 1 of Schedule 14 and in regulations 8(2) and 2 of the 1993 Regulations could justify either contention as a matter of pure language, although, as explained in para 90 below, I consider that the more natural meaning is that contended for by the appellant council. For that reason, but also for two other reasons, I prefer the appellants case. First, the purpose of imposing a minimum scale for the accompanying map was, in my view, because it could be expected to show a level of detail which would not normally be shown on a map prepared on a smaller scale. That would enable the council to appreciate the nature of the land and the various features close to the way in question. The only justification for the imposition of a minimum scale on the respondents case could be that a smaller scale plan would not show the way clearly, but that is a fanciful suggestion in my opinion, not least because paragraph 1(a) of Schedule 14 already contains a requirement that the way be show[n] on the plan, and that must mean clearly show[n]. It is true that applicants could draw their own map showing no detail, but that unlikely possibility is not an answer to the point that those responsible for the 1993 Regulations must have envisaged (rightly as events have turned out) that an OS map would normally be the document from which the copy map was made. Given that OS maps to a scale of 1:25,000 are easily obtainable in respect of all parts of England and Wales, it would be very eccentric for an applicant to incur the cost and time of preparing, or paying someone else to prepare, a new plan or map to that scale for the purpose of a section 53(5) application. That point is underlined by the fact, already mentioned, that applicants appear invariably to use photocopies of OS maps, and the fact that definitive maps are always based on OS maps. Secondly, it is not an entirely natural use of language to describe an enlarged photocopy of a map originally prepared on a scale of 1:50,000, as drawn on a higher scale. To my mind at any rate, a map is drawn to a certain scale if it is originally prepared to that scale. One might fairly describe a doubly magnified photocopy of a 1:50,000 map as being on a scale of 1:25,000, but I do not think that it would be naturally described as having been drawn to a scale of 1:25,000. The word drawn in paragraph 1 of Schedule 14 must, of course, be given a meaning which is appropriate in the light of modern technology and practice, but I do not see how that impinges on the natural meaning of the expression in the present case. Thirdly, the operative regulation in the present case, regulation 8(2) of the 1993 Regulations, states that regulation 2 is to apply to an application. Regulation 2 contains the express requirement A definitive map shall be on a scale of not less than 1:25,000. It appears to me therefore incontrovertible that if a map satisfies regulation 8(2), it must also satisfy regulation 2. With due respect to those who think otherwise, I do not see how regulation 2 can have one meaning in relation to a definitive map and another meaning in relation to a map accompanying an application. Bearing in mind the public importance of a definitive map, it strikes me as very unlikely that the drafter of the 1993 Regulations could have envisaged that such a map could be an enlarged photocopy of a map which had been prepared on a scale of significantly less than 1:25,000. I also note that regulation 2 is foreshadowed by section 57(2) of the 1981 Act, which refers to Regulations which can prescribe the scale on which maps are to be prepared: again, it does not seem to me to be a natural use of language to describe a doubly magnified photocopy of a 1:50,000 scale map as prepared on a scale of 1:25,000. The effect of section 67 of the 2006 Act on the Applications The status of the Applications if the maps which accompanied them failed to comply with the requirements of paragraph 1 of Schedule 14 requires a little analysis. Confining myself for the moment to the 1981 Act and the 1993 Regulations, it appears to me that the following three propositions are correct. First, the council could have treated the Applications as valid, and effectively waived the failure to comply with the map scale requirements. Secondly, if the council had taken the point that the enlarged photocopies did not comply with the requirements of paragraph 1 of Schedule 14, then the defect could not simply have been treated as if it had not existed. Thirdly, in such an event, subject to any special reason to the contrary (eg the applicants not having availed themselves of ample opportunity to do so after warnings), the applicants would have been entitled to remedy the defect on the Applications by submitting maps which were properly compliant with paragraph 1 of Schedule 14. In relation to each of these three propositions, it seems to me that Lord Steyns observations in R v Soneji [2005] UKHL 49, [2006] 1 AC 340, paras 14 and 23, are in point. He said that where Parliament casts its commands in imperative form without expressly spelling out the consequences of a failure to comply, the emphasis ought to be on the consequences of non compliance, and posing the question whether Parliament can fairly be taken to have intended total invalidity, which is ultimately a question of statutory construction. As to the first proposition, it seems to me that the purpose of the requirement in paragraph 1(a) of Schedule 14 is to enable the council to whom a section 53(5) application is made to be assisted as to the identity, location, extent and surroundings of the way, when dealing with the application. Accordingly, if the council is content to accept a less helpful or informative map than it was entitled to insist on, that is a matter for the council, and there is no basis for holding the application invalid. As to the second proposition in para 92 above, the notion that the defect could simply have been overlooked seems to me to fly directly in the face of the conclusion that paragraph 1 of Schedule 14, when read together with the 1993 Regulations, requires a section 53(5) application to be accompanied by a map drawn to a certain minimum scale. If an application does not comply with that requirement, and the failure is not waived by the council, the application is invalid as it stands. Unless it can be said that the failure is de minimis (a suggestion which was rightly rejected by Supperstone J in this case), the court would not be giving effect to the statute if it simply overlooked the defect. That brings one to the third proposition in para 92 above. I do not consider that it would be consistent with the purpose of the 1981 Act, and in particular section 53 and Schedule 14, if an application which was defective because it was accompanied by a map on too small a scale, could not be validated by the subsequent provision of a map on the appropriate scale. On the contrary. The point was well put in Inverclyde District Council v Lord Advocate (cited and followed by Carnwath LJ in Oxfordshire County Council v Oxford City Council [2005] EWCA Civ 175, [2006] Ch 43, paras 106 109), by Lord Keith, who held that it was open to an applicant to amend an application after the final date by which the application had had to be made. He said that [t]he planning authority must simply deal with the application procedurally in a way which is just to the applicant in all the circumstances. That being so, there is no good reason why amendment of the application should not be permitted at any stage. Accordingly, in the absence of any other statutory provisions, I would have held that, although the Applications were invalid for the purposes of section 53(5) because they did not comply with the requirements of Schedule 14, they could effectively be saved by the applicant submitting maps drawn to the stipulated scale. Having said that, such a conclusion is not available in my opinion in this case, because the provisions of section 67 of the 2006 Act, on which Mr Plumbe (a chartered surveyor who intervened on this appeal) rightly placed great emphasis in his brief submission, apply in this case. Section 67(1) extinguishes a certain type of public right of way (namely one for mechanically propelled vehicles) if it is not shown in a definitive map. Paragraphs (a) to (c) of section 67(3) exclude certain ways from the ambit of section 67(1); only para (a) is directly in point, and it refers to ways in respect of which an application was made under section 53(5) of the [1981 Act]. However, and here lies the problem for the respondents, section 67(6) states that [f]or the purposes of subsection (3), an application under section 53(5) of the 1981 Act is made when it is made in accordance with paragraph 1 of Schedule 14 to that Act. As Mr Laurence QC says on behalf of the appellant council, the observations of Lord Steyn in Soneji cannot apply to the position under section 67, because this is a case where Parliament [has] expressly spel[led] out the consequences of a failure to comply with its command, in that section 67(1) expressly provides that a right of way is extinguished unless (for present purposes) section 67(3)(a) applies. To adopt the words of Lord Woolf MR in R v Secretary of State for the Home Department, Ex p Jeyeanthan [2000] 1 WLR 354, quoted by Lord Carnwath in para 72, Parliament in section 67(1) and (6) has spelled out the consequence of the non compliance, and as the result of non compliance goes to jurisdiction jurisdiction cannot be conferred where it does not otherwise exist by consent or waiver. Unless section 67(6) is mere surplusage, it seems to me that it can only sensibly be interpreted as meaning that, if a section 53(5) application has been made, but that application does not comply with the requirements of paragraph 1 of Schedule 14, then it is not to be treated as an application for the purposes of section 67(3)(a). As that is what happened in the present case, it must follow that the ways the subject of the Applications have been extinguished pursuant to section 67(1). It seems to me impossible to give section 67(6) any meaning if it does not have the effect for which Mr Laurence QC contends. The ingenious notion that it was intended to make it clear that only paragraph 1, and not paragraph 2, of Schedule 14 had to be complied with is wholly unconvincing, because, as Lord Carnwath says in para 77, it is clear from the wording of paragraph 2 itself that it only applies after an application has been made. I find the notion that section 67(6) is surplusage very difficult to accept. It is not as if the choice was between a strained meaning and no meaning, as the natural effect of the words of the subsection is as I have described. And that meaning appears to me to be entirely consistent with the purpose of section 67, which is to extinguish certain rights of way if they are not registered, subject to certain exemptions including those ways subject to section 53(5) applications. While it may seem harsh, it seems to me quite consistent with the purpose of the section to exclude from that class of exemption cases where the application is defective (even though it may otherwise be saveable). I do not consider that the court would be performing its duty of reflecting the intention of Parliament as expressed in legislation if it effectively ignored or discarded a subsection simply because it did not like the consequences, or it considered that they were rather harsh. It is said on behalf of the respondents by Mr Pay, who presented his arguments very well, that section 67 was retrospective in its effect and it is therefore appropriate to interpret a provision such as section 67(6) generously to a party who has made a defective section 53(5) application. I am unpersuaded by that. First, the effect of section 67 was only backdated to the moment when the Government announced its intention to enact it. Secondly, the respondents case does not involve interpreting section 67(6) so much as discarding it. Thirdly, there is no correlation between the retrospectivity and the timing of the failure to comply or opportunity to remedy the failure to comply. It is also said that there is some surplusage in section 67 anyway. Although that was not gone into in any detail, I am unconvinced that it is true. However, even if it is, I do not see how it would assist the respondents case. The notion that my conclusion as to the effect of section 67(6) leads to absurdity, because an application could thereby be invalidated by virtue of a small oversight, does not impress me. It is an argument which can be raised in relation to any provision, whether contractual or statutory, which requires a step, which has potentially beneficial consequences for the person who is to take it, to be taken by a certain date which cannot be moved. An obvious example is the service of a statutory or contractual notice: if a defective notice is served and is not corrected before the stipulated date, then the right to serve the notice, and the consequential benefits, are irretrievably lost, even if the defect was due to an oversight. Conclusion For these reasons (which on the second question are very similar to those contained in the judgment of Dyson LJ in R (Warden and Fellows of Winchester College) v Hampshire County Council [2008] EWCA Civ 431, [2009] 1 WLR 138), and for the reasons given in the brief judgment of Lord Sumption, I would have allowed this appeal. LORD SUMPTION: (dissenting) There are two reasons why regulations 2 and 8 of the Wildlife and Countryside (Definitive Maps and Statements) Regulations 1993 (SI 1993/12) might have prescribed the use of a map on a scale of not less 1:25,000. One is because a map on that scale showing the relevant byway could be expected to show more of the surrounding detail than a map on a smaller scale. The other is that it was desired to ensure that the map should be visible without unduly straining the eyesight of those using it. In my opinion it is manifest that the requirement was imposed for the first of those reasons and not for the second. It is true that the Regulations do not specify what maps of the prescribed scale must be used and that different maps may vary in the amount of surrounding detail shown. It is also true that an applicant supplying a map under regulation 8 might in theory satisfy the requirement by producing a 1:25,000 scale map with less surrounding detail than some 1:50,000 scale maps. It is also true that he might satisfy it by producing a home made map on which the byway was shown with little or no surrounding detail (although this course would clearly not be open to a local authority producing a definitive map under regulation 2). But I do not regard this as relevant to the construction of the Regulations, because I decline to construe them on the assumption that applicants could be expected to complete their applications in the most obtuse and unhelpful manner consistent with the language. In my opinion the Regulations have been drafted on the assumption that a map would be used in which a 1:25,000 scale map would have sufficient surrounding detail, and in any event more than a 1:50,000 map. A magnified copy of a 1:50,000 map is therefore not the same thing as a 1:25,000 map, and does not comply with regulation 8. Section 67(6) of the Natural Environment and Rural Communities Act 2006 provides that for the purposes of subsection (3) an application seeking modifications to the definitive map means one which complies with Schedule 14, paragraph 1 of the Wildlife and Countryside Act 1981. That means one which includes a map drawn on the prescribed scale. The application in this case was therefore not an application of the kind referred to in section 67(3) of the 2006 Act. It follows that on the relevant date any right of way for mechanically propelled vehicles was extinguished. Since the defect might in theory have been made good after the relevant date, this may be described as a technical point. But sometimes technicality is unavoidable. Where the subsistence of rights over land depend on some state of affairs being in existence at a specified date, it is essential that that state of affairs and no other should be in existence by that date and not later. have allowed the appeal. For these reasons, which are the same as those of Lord Neuberger, I would

Councils (known in this context as surveying authorities) are required by section 53 of the Wildlife and Countryside Act 1981 to maintain a definitive map and statement of the public rights of way in their local area. Under the 1981 Act, members of the public may apply to surveying authorities for an order modifying the definitive map and statement in light of new evidence of the existence of a public right of way. Schedule 14 to the 1981 Act specifies in paragraph 1 that such applications must be accompanied by a map drawn to the prescribed scale and showing the way or ways to which the application relates. The scale is prescribed by the Wildlife and Countryside (Definitive Maps and Statements) Regulations 1993, which provide by Regulation 2 that a definitive map shall be on a scale of not less than 1:25,000 and by regulation 3 that maps accompanying an application for a modification order must also comply with regulation 2. The Natural Environment and Rural Communities Act 2006, section 67, extinguished all unrecorded rights of way for mechanically propelled vehicles in England as of 2 May 2006. However, such rights of way could be preserved if an application for a modification order had been made before 20 January 2005. Section 67(6) specifies that an application under this section is made when it is made in accordance with paragraph 1 of Schedule 14 to the 1981 Act. Before the deadline, the Friends of Dorsets Rights of Way made five applications to Dorset County Council (the appellant) under the 1981 Act for orders modifying the definitive map and statement to show various byways open to all traffic. The maps accompanying the applications were produced using a computer program which printed out maps which were to a presented scale of 1:25,000 or larger but which were derived originally from Ordnance Survey 1:50,000 maps. The Trail Riders Fellowship (the first respondent) has now taken over conduct of those applications. On 7 October 2010, the council rejected all of the applications on the basis that the accompanying maps were not drawn to a scale of not less than 1:25,000. If the councils decision is upheld, the vehicular rights of way in question will no longer exist. Supperstone J upheld the councils decision on the basis that: (i) the application maps did not comply with the statutory requirements; and (ii) applying the decision of the Court of Appeal in the case of R (Warden and Fellows of Winchester College) v Hampshire County Council [2008] EWCA Civ 431 (Winchester), the applications were invalid because the extent of the non compliance was not negligible (de minimis). The Court of Appeal allowed the appeal, holding that (i) the maps did comply with the statutory requirements, but (ii) if the appeal had failed on the first point, the non compliance could not sensibly be described as de minimis. The Supreme Court dismisses the councils appeal on the basis of point (i) and upholds the Court of Appeals decision that the maps did comply with statutory requirements by a majority of 3 2. Lord Clarke gives the leading judgment; Lord Toulson and Lord Carnwath agree with Lord Clarke. Lord Sumption and Lord Neuberger would both have decided in the appellant councils favour on point (i). Point (ii) therefore does not arise. Had point (ii) arisen, Lord Neuberger, Lord Sumption and Lord Toulson would have held that the effect of non compliance with the statutory provisions is that the applications would not have been valid, while Lord Carnwath would have held, contrary to Winchester, that they would nonetheless have been valid. Lord Clarke prefers not to express a view on point (ii). (i) Did the maps submitted with the applications comply with the statutory requirements? Lord Clarke explains that the only question is whether the maps were drawn to a scale of not less than 1:25,000 [18 19]. He holds that they were. Each map was in fact produced to a presented scale of 1:25,000 or larger [20]. The statute and regulations could have but did not require that a map with the amount of detail of an Ordnance Survey 1:25,000 map be used, and the mere fact that one might ordinarily expect the use of an Ordnance Survey 1:25,000 map does not tell us whether that is a requirement [22 25]. Maps drawn to a scale of 1:25,000 without any reference at all to an Ordnance Survey map would satisfy the statutory provisions, even if they contained only as much detail as an Ordnance Survey 1:50,000 map [25 26]. Although the prescribed scale requirement applies to the application map and the definitive map and statement in the same terms, it is important to note that the surveying authority is under a public law duty to prepare and maintain the definitive map and statement to a professional standard, whereas lay applicants are only required to put relevant material before the surveying authority for investigation [28]. A map could be drawn by a computer program [29 30]. Lord Toulson [35, 40] and Lord Carnwath [51] agree with Lord Clarke. Lord Neuberger and Lord Sumption would have allowed the appeal in relation to point (i); each agrees with the other [106, 109]. Lord Neuberger considers that: the most natural meaning of Schedule 14 is that it requires that, where an applicant uses a copy of an original map, the original map must have been prepared on a scale of at least 1:25,000 [86 87]; the justification for the use of a minimum scale must have been that such a map would normally show more contextual detail [88]; it is not natural to say that a map is drawn to a certain scale if it has not been prepared to that scale [90]; and the terms in question must have had the same meaning in relation to both the definitive map and the map accompanying an application [91]. Lord Sumption says that the Regulations were drafted on the assumption that a 1:25,000 scale map would have more detail than a 1:50,000 map. A magnified 1:50,000 map is therefore not the same thing as a 1:25,000 map [107]. (ii) Does non compliance with the statutory requirements mean that the maps are invalid? Lord Neuberger explains that the ultimate question of one of statutory construction: can Parliament fairly be taken to have intended that the applications would be totally invalid if they did not comply with the statutory requirements [93]? Prior to the deadline imposed by the 2006 Act, it would have been open to the council to waive the defect by accepting a non compliant application, or to the applicant to validate the application after its submission by providing compliant maps. The defect could not simply have been overlooked unless it could be said that the defect was de minimis (a suggestion rightly rejected by the first instance judge) [92 97]. But under section 67 of the 2006 Act, Parliament has spelled out the consequence of non compliance: a non compliant application is not to be treated as a valid application, and there is no jurisdiction to waive or amend the defect [99]. Any other interpretation would deprive section 67(6) of the 2006 Act of all meaning [100 105]. Lord Sumption agrees: the point may be technical, but the technicality is unavoidable [108]. Lord Toulson agrees with the approach taken by Lord Neuberger and Lord Sumption [41]. He notes that all statutes must be construed in their own context but in this case section 67(6) puts the answer beyond doubt [48 50]. Lord Carnwath starts from the principle that procedural requirements such as those in the 1981 Act should be interpreted flexibly and in a non technical way [69], and adds that such a flexible approach is particularly appropriate given that the primary duty to keep the definitive map up to date rests on the surveying authority and that the effect of the statute is retrospective [71, 78]. In this context, substantial compliance with the statutory provisions would suffice to achieve validity. Winchester was therefore too narrowly decided [73 75]. Section 67(6) is simply included for clarity [77]. He would therefore have dismissed the appeal on this basis as well (and notes that the grounds are closely related) [80 81]. Lord Clarke is sympathetic to Lord Carnwaths general approach but prefers not to express a view on the issue until it arises on the facts of a particular case [34].

In this case, Virgin Atlantic Airways Ltd wishes to recover damages exceeding 49,000,000 for the infringement of a European Patent which does not exist in the form said to have been infringed. The Technical Board of Appeal (TBA) of the European Patent Office (EPO) has retrospectively amended it so as to remove with effect from the date of grant all the claims said to have been infringed. The TBA found that in the form in which the patent was originally granted the relevant claims were invalid because they had been anticipated by prior article Virgin says that it is nevertheless entitled to recover damages for infringement because before the TBA had issued its decision, the English courts had held the patent to be valid and specifically rejected the objection based on prior article Their case is that this conclusion and the finding of validity on which it is based are res judicata notwithstanding the later but retrospective decision of the TBA. A similar argument had succeeded before the Court of Appeal in very similar circumstances in Coflexip SA v Stolt Offshore MS Ltd (No 2) [2004] FSR 708 and Unilin Beheer BV v Berry Floor NV [2007] FSR 635. The Court of Appeal, conceiving itself to be bound by these decisions and regarding them as correct in principle, arrived at the same conclusion. The statutory framework The appeal perfectly illustrates the problems arising from the system of parallel jurisdiction for determining the validity of European patents. Part II of the Patents Act 1977 gives effect to the principal provisions of the European Patent Convention. Section 77(1) of the Act provides that a European Patent (UK), i.e. one which is granted for the United Kingdom or for states including the United Kingdom, is to be treated as if it were a patent granted under the Act, and that the proprietor of a European Patent (UK) shall accordingly as respects the United Kingdom have the same rights and remedies, subject to the same conditions, as the proprietor of a patent under this Act. Section 77(2) (4A) deal with the revocation or amendment of a European Patent by the EPO (EPO): 77 Effect of European Patent (UK) . (2) Subsection (1) above shall not affect the operation in relation to a European patent (UK) of any provisions of the European Patent Convention relating to the amendment or revocation of such a patent in proceedings before the EPO. (3) Where in the case of a European patent (UK) (a) proceedings for infringement, or proceedings under section 58 above, have been commenced before the court or the comptroller and have not been finally disposed of, and (b) that the patent is only partially valid, it is established in proceedings before the EPO the provisions of section 63. apply as they apply to proceedings in which the validity of a patent is put in issue and in which it is found that the patent is only partially valid. (4) Where a European patent (UK) is amended in accordance with the European Patent Convention, the amendment shall have effect for the purposes of Parts I and III of this Act as if the specification of the patent had been amended under this Act; but subject to subsection (6)(b) below. (4A) Where a European patent (UK) is revoked in accordance with the European Patent Convention, the patent shall be treated for the purposes of Parts I and III of this Act as having been revoked under this Act. The provisions of section 63 to which section 77(3) refers deal with the power of the Comptroller in a case where a patent is found to be only partially valid to grant relief in respect of that part which is found to be valid and infringed. Section 77(2) of the Act refers to the provisions of the European Patent Convention relating to the amendment or revocation. This is a reference to article 68 of the Convention, and indirectly to article 64. They provide: Article 64 Rights conferred by a European patent (1) A European patent shall, subject to the provisions of paragraph 2, confer on its proprietor from the date [of publication of the mention of its grant], in each Contracting State in respect of which it is granted, the same rights as would be conferred by a national patent granted in that State. (2) If the subject matter of the European patent is a process, the protection conferred by the patent shall extend to the products directly obtained by such process. (3) Any infringement of a European patent shall be dealt with by national law. Article 68 Effect of revocation or limitation of the European patent The European patent application and the resulting European patent shall be deemed not to have had, from the outset, the effects specified in articles 64 and 67, to the extent that the patent has been revoked or limited in opposition, limitation or revocation proceedings. Part V of the Convention provides for opposition procedure before the Opposition Division of the EPO and on appeal from them to the TBA. A European patent may be opposed on the ground (among others) that the invention is not patentable by reason of lack of novelty. The procedure is available to any one affected, provided that it is initiated within nine months of the grant. Under articles 101 and 111 of the Convention, the Opposition Division and the TBA are empowered to revoke a patent found to be invalid or to accept an amendment proposed by the patentee which will cause the patent to satisfy the requirements of the Convention. The effect of these provisions is that the English courts have the same jurisdiction to determine questions of validity and infringement in the case of a European patent as they have for domestic patents, but that concurrent jurisdiction over questions of validity is exercisable by the EPO. There is, however, an important difference between the legal effect of a decision in the two jurisdictions. Both are decisions in rem. They determine the validity of the patent not only as between the parties to the proceedings, but generally. But the English courts jurisdiction over the question of validity is purely national. A decision of an English court declaring a patent invalid, or (which will normally follow) revoking it, will have effect in the United Kingdom only, whereas a corresponding decision of the EPO, which was the authority by which the patent was granted, will have effect in all the states for which the patent was granted. These considerations make it highly desirable to avoid inconsistent decisions if it can be done. National procedures for achieving this differ from one contracting state to another. In England, there are established procedures for staying English proceedings in which the validity of a European patent is in issue, if there are concurrent opposition procedures in the EPO. However the value of these procedures is somewhat diminished by the current practice of the High Court, which is based on dicta of Jacob LJ in Unilin Beheer BV v Berry Floor NV [2007] FSR 635, at para 25 and on the subsequent decision of the Court of Appeal in Glaxo Group Ltd v Genentech Inc (Practice Note) [2008] Bus LR 888. Their effect is that the primary consideration on an application for a stay is the probable duration of the proceedings before the two tribunals. If the question of validity would be likely to be resolved quicker in the English court than in the EPO, it would normally be appropriate not to stay the English proceedings. The consequences of this practice are particularly serious in a case where the English courts win the race to judgment if, as the Court of Appeal decided in Unilin, the effect is to bind the parties to a decision of the English court that the patent is valid notwithstanding that the EPO which granted it subsequently decides that it should be revoked or amended ab initio. In Glaxo Group Ltd v Genentech Inc, at para 83 Mummery LJ, delivering the judgment of the court thought that this consequence was inherent in the existence of concurrent systems of adjudication: . the possibility of the duplication of proceedings contesting the validity of a patent granted by the EPO is inherent in the system established by the Convention. In practice national courts exercise exclusive jurisdiction on infringement issues and they have concurrent jurisdiction with the EPO on validity issues. As Mr Daniel Alexander appearing for the claimant said, the contracting states and the UK Parliament contemplated that the national patents courts should be able to determine the same issues of patentability as the EPO. The resultant legislation allowed the determination by the national court and the EPO at the same time. Indeed, there is nothing in the Convention or the 1977 Act to prevent the commencement of revocation proceedings in the Patents Court on the very date of the grant of the patent by the EPO. It is undoubtedly right that the draftsmen of both the Convention and the Patents Act 1977 envisaged concurrent jurisdiction over questions of validity, but it may be doubted whether they envisaged anything like the consequence which has come about in this case. The facts The patent in suit is a European patent for a seating system and passenger accommodation unit for a vehicle, granted to Virgin and published on 30 May 2007. The seat, which was designed in about 2005, reclines to provide a flat bed. It is commonly used in long haul aircraft. Zodiac Seats UK Ltd (as it is now called) manufactures a seating unit called the Solar Eclipse in the United Kingdom. It has been supplied to a number of international airlines. On 30 July 2007, two months after the grant of the patent, Virgin began proceedings against Zodiac in the High Court claiming an injunction and damages on the footing that its seats infringed the patent. Zodiac defended the action on the ground that its seats did not fall within the claims of the patent. But, they said, if the claims were wide enough to cover their seats, then the patent was invalid on account of prior art and for added matter. They also, on 29 February 2008, opposed the validity of the patent in the EPO, along with a number of airlines who had bought their seats and were at risk of infringement proceedings if the patent was valid. Initially, no application was made for a stay of the English proceedings. There was a certain amount of argument before us about the significance of this fact, if any. For present purposes, however, it is enough to say that under the Glaxo v Genentech guidelines, an application for a stay would not necessarily have succeeded. The English action was heard by Lewison J. He gave judgment in January 2009, holding that Zodiacs Solar Eclipse seats did not infringe the patent. He recorded that if the claims of the patent had been wide enough to cover Zodiacs seating system, he would have held it to be invalid for added matter. But he rejected every other ground of invalidity advanced. Virgin appealed against the decision on infringement, and Zodiac cross appealed on validity. On 31 March 2009, some two months after Lewison Js judgment, the Opposition Division of the EPO upheld the patent subject to minor amendments which are agreed to be immaterial to the present dispute. Zodiac and other opponents of the patent immediately indicated their intention to appeal to the TBA. This gave rise to a brief correspondence between the parties solicitors about what would happen if the English Court of Appeal held the patent to be valid but the TBA later held it to be invalid in some relevant respect. Zodiacs solicitors proposed that if the appeal on validity succeeded in England, the making of any final order by the Court of Appeal should be stayed until the final determination of the opposition proceedings in the EPO. Virgins solicitors refused, on their clients behalf, to agree. They then wrote on the same day to the Court of Appeal informing them of the progress and likely course of the opposition proceedings, and summarising their correspondence with Zodiacs solicitors. On 12 May 2009, the Civil Appeals Office replied that Lord Justice Jacob has directed that he will not grant a stay of proceedings at present, however, parties can apply for a stay following judgment in the Court of Appeal if it is still possibly relevant. That direction was given without prior notice to either party and without inviting any observations from those acting for Zodiac. The Appeal was heard in October 2009 by Jacob and Patten LJJ and Kitchin J. On 22 October, they gave judgment reversing Lewison Js decision on validity and holding the patent to have been valid and infringed. They specifically rejected the argument based on prior article Zodiac then made the application for a stay of the order apparently envisaged in Jacob LJs direction of 12 May 2009, pending an application for permission to appeal to the Supreme Court and the conclusion of the opposition proceedings in the EPO. In a further judgment handed down on 21 December 2009 the Court of Appeal refused the application. The main ground on which they refused it was that it was pointless to stay the order on the appeal, because the effect of the decision in Unilin was that any later decision of the TBA revoking the patent would make no difference. This was because the decision of the Court of Appeal would bind the parties per rem judicatam. On 12 January 2010 the Court of Appeal sealed an order making a declaration that the patent was valid and infringed, together with an injunction and an enquiry as to damages. The injunction was qualified so as to allow the delivery of seats to Delta under an existing contract, upon Zodiac undertaking to pay 10,000 to Virgin for each seat delivered, but otherwise covered all future infringements. At this stage, the decision of the TBA on the opposition proceedings was due to be given on 20 April 2010. In the event, however, this was postponed to 9 September 2010 as a result of the disruption of flights following the eruption of the Eyjafjalajkull volcano in Iceland. When the adjourned date came, the TBA varied the decision of the Opposition Division. They held that all the claims found in England to have been infringed were invalid by reason of prior art, and accepted amendments proposed by Virgin removing them from the patent. By that time, however, the appeal proceedings had been completed and permission to appeal on the merits of the Court of Appeals findings had been refused by the Supreme Court. As a result of this decision, further applications were made by Zodiac to the Court of Appeal to vary the Court of Appeals order and to discharge the injunction. The injunction was discharged by consent on 1 December 2010. The application to vary the courts order was heard by the Court of Appeal (Smith, Jacob and Patten LJJ) in February 2011. So far as relevant to this appeal, the variations actually sought were (i) the replacement of the declarations made by new declarations making it clear that the patent held to be valid was the unamended patent; (ii) the discharge of the order for delivery up of the allegedly infringing articles; (iii) the discharge of the order for an enquiry as to damages; and (iv) the release of Zodiac from its undertaking to pay 10,000 per seat delivered to Delta and the repayment of the 3,600,000 already paid under it. Judgment was given on 23 February 2011. The Court of Appeal held (following the same numbering) (i) that the declaration would not be varied; (ii) that the order for delivery up would be discharged because it was redundant in the light of the amendment of the patent; (iii) that the order for an enquiry as to damages would stand, because it was no more than the mechanism for working out the effect of the Court of Appeals decision that the patent was valid, and that decision was res judicata; and (iv) that the 3,600,000 was not repayable because it was an advance referable to (among other things) the damages to be assessed in the enquiry. To complete the story, on 27 July 2012 Floyd J gave judgment in three actions against customers who had bought and were using Zodiacs seating units; actions to which Zodiac were also joined. They had been sued by Virgin on the footing that the Solar Eclipse seating units infringed the amended patent. Floyd J held that they did not. His judgment confirms that Zodiacs seating units do not infringe the patent in the form which it is now deemed to have taken from the moment it was granted. The issue The order of the Court of Appeal of 12 January 2010 upholding the validity of the patent and directing an enquiry as to damages can now be varied only by way of appeal, and no further avenues of appeal are open. It is therefore right to start by pointing out that this is not an appeal against that order. The fundamental question is whether Zodiac is entitled to contend upon the enquiry as to damages that there have been no damages because the patent has been retrospectively amended so as to remove the claims held to have been infringed. This depends on whether the Court of Appeal was right to say that its order declaring the patent to be valid continued to bind the parties per rem judicatam notwithstanding that the patent was later amended on the footing that it was not valid in the relevant respects. Res judicata: general principles Res judicata is a portmanteau term which is used to describe a number of different legal principles with different juridical origins. As with other such expressions, the label tends to distract attention from the contents of the bottle. The first principle is that once a cause of action has been held to exist or not to exist, that outcome may not be challenged by either party in subsequent proceedings. This is cause of action estoppel. It is properly described as a form of estoppel precluding a party from challenging the same cause of action in subsequent proceedings. Secondly, there is the principle, which is not easily described as a species of estoppel, that where the claimant succeeded in the first action and does not challenge the outcome, he may not bring a second action on the same cause of action, for example to recover further damages: see Conquer v Boot [1928] 2 KB 336. Third, there is the doctrine of merger, which treats a cause of action as extinguished once judgment has been given upon it, and the claimants sole right as being a right upon the judgment. Although this produces the same effect as the second principle, it is in reality a substantive rule about the legal effect of an English judgment, which is regarded as of a higher nature and therefore as superseding the underlying cause of action: see King v Hoare (1844) 13 M & W 494, 504 (Parke B). At common law, it did not apply to foreign judgments, although every other principle of res judicata does. However, a corresponding rule has applied by statute to foreign judgments since 1982: see Civil Jurisdiction and Judgments Act 1982, section 34. Fourth, there is the principle that even where the cause of action is not the same in the later action as it was in the earlier one, some issue which is necessarily common to both was decided on the earlier occasion and is binding on the parties: Duchess of Kingstons Case (1776) 20 St Tr 355. Issue estoppel was the expression devised to describe this principle by Higgins J in Hoysted v Federal Commissioner of Taxation (1921) 29 CLR 537, 561 and adopted by Diplock LJ in Thoday v Thoday [1964] P 181, 197 198. Fifth, there is the principle first formulated by Wigram V C in Henderson v Henderson (1843) 3 Hare 100, 115, which precludes a party from raising in subsequent proceedings matters which were not, but could and should have been raised in the earlier ones. Finally, there is the more general procedural rule against abusive proceedings, which may be regarded as the policy underlying all of the above principles with the possible exception of the doctrine of merger. It is only in relatively recent times that the courts have endeavoured to impose some coherent scheme on these disparate areas of law. The starting point is the statement of principle of Wigram V C in Henderson v Henderson (1843) 3 Hare 100, 115. This was an action by the former business partner of a deceased for an account of sums due to him by the estate. There had previously been similar proceedings between the same parties in Newfoundland in which an account had been ordered and taken, and judgment given for sums found due to the estate. The personal representative and the next of kin applied for an injunction to restrain the proceedings, raising what would now be called cause of action estoppel. The issue was whether the partner could reopen the matter in England by proving transactions not before the Newfoundland court when it took its own account. The Vice Chancellor said: In trying this question I believe I state the rule of the Court correctly when I say that, where a given matter becomes the subject of litigation in, and of adjudication by, a Court of competent jurisdiction, the Court requires the parties to that litigation to bring forward their whole case, and will not (except under special circumstances) permit the same parties to open the same subject of litigation in respect of matter which might have been brought forward as part of the subject in contest, but which was not brought forward, only because they have, from negligence, inadvertence, or even accident, omitted part of their case. The plea of res judicata applies, except in special cases, not only to points upon which the Court was actually required by the parties to form an opinion and pronounce a judgment, but to every point which properly belonged to the subject of litigation, and which the parties, exercising reasonable diligence, might have brought forward at the time. Now, undoubtedly the whole of the case made by this bill might have been adjudicated upon in the suit in Newfoundland, for it was of the very substance of the case there, and prima facie, therefore, the whole is settled. The question then is whether the special circumstances appearing upon the face of this bill are sufficient to take the case out of the operation of the general rule. Wigram V Cs statement of the law is now justly celebrated. The principle which he articulated is probably the commonest form of res judicata to come before the English courts. For many years, however, it was rarely invoked. The modern law on the subject really begins with the adoption of Wigram V Cs statement of principle by the Privy Council in Yat Tung Investment Co Ltd v Dao Heng Bank Ltd [1975] AC 581. Yat Tung was an appeal from Hong Kong, in which the appellant sought to unsuccessfully avoid the exercise by a mortgagee of a power of sale in two successive actions, contending on the first occasion that the sale was a sham and that there was no real sale, and on the second that the sale was fraudulent. Lord Kilbrandon, giving the advice of the Board, distinguished at 589 590 between res judicata and abuse of process: The second question depends on the application of a doctrine of estoppel, namely res judicata. Their Lordships agree with the view expressed by McMullin J that the true doctrine in its narrower sense cannot be discerned in the present series of actions, since there has not been, in the decision in no. 969, any formal repudiation of the pleas raised by the appellant in no. 534. Nor was Choi Kee, a party to no. 534, a party to no. 969. But there is a wider sense in which the doctrine may be appealed to, so that it becomes an abuse of process to raise in subsequent proceedings matters which could and therefore should have been litigated in earlier proceedings. Lord Kilbrandon referred to the statement of Wigram V C in Henderson v Henderson as the authority for the wider sense of res judicata, classifying it as part of the law relating to abuse of process. The implications of the principle stated in Henderson v Henderson were more fully examined by the House of Lords in Arnold v National Westminster Bank plc [1991] 2 AC 93. The question at issue in that case was whether in operating a rent review clause under a lease, the tenants were bound by the construction given to the very same clause by Walton J in earlier litigation between the same parties over the previous rent review. The Court of Appeal had subsequently, in other cases, cast doubt on Walton Js construction, and the House approached the matter on the footing that the law (or perhaps, strictly speaking, the perception of the law) had changed since the earlier litigation. Lord Keith of Kinkel began his analysis by restating the classic distinction between cause of action estoppel and issue estoppel: Cause of action estoppel arises where the cause of action in the later proceedings is identical to that in the earlier proceedings, the latter having been between the same parties or their privies and having involved the same subject matter. In such a case the bar is absolute in relation to all points decided unless fraud or collusion is alleged, such as to justify setting aside the earlier judgment. The discovery of new factual matter which could not have been found out by reasonable diligence for use in the earlier proceedings does not, according to the law of England, permit the latter to be re opened. (104D E) Issue estoppel may arise where a particular issue forming a necessary ingredient in a cause of action has been litigated and decided and in subsequent proceedings between the same parties involving a different cause of action to which the same issue is relevant one of the parties seeks to re open that issue. (105E) The case before the committee was treated as one of issue estoppel, because the cause of action was concerned with a different rent review from the one considered by Walton J. But it is important to appreciate that the critical distinction in Arnold was not between issue estoppel and cause of action estoppel, but between a case where the relevant point had been considered and decided in the earlier occasion and a case where it had not been considered and decided but arguably should have been. The tenant in Arnold had not failed to bring his whole case forward before Walton J. On the contrary, he had argued the very point which he now wished to reopen and had lost. It was not therefore a Henderson v Henderson case. The real issue was whether the flexibility in the doctrine of res judicata which was implicit in Wigram V Cs statement extended to an attempt to reopen the very same point in materially altered circumstances. Lord Keith of Kinkel, with whom the rest of the Committee agreed, held that it did. Lord Keith first considered the principle stated by Wigram V C that res judicata extended to every point which properly belonged to the subject of litigation and which the parties exercising reasonable diligence might have brought forward at the time. He regarded this principle as applying to both cause of action estoppel and issue estoppel. Cause of action estoppel, as he had pointed out, was absolute in relation to all points decided unless fraud or collusion is alleged. But in relation to points not decided in the earlier litigation, Henderson v Henderson opened up the possibility that cause of action estoppel may not apply in its full rigour where the earlier decision did not in terms decide, because they were not raised, points which might have been vital to the existence or non existence of a cause of action (105B). He considered that in a case where the earlier decision had decided the relevant point, the result differed as between cause of action estoppel and issue estoppel: There is room for the view that the underlying principles upon which estoppel is based, public policy and justice, have greater force in cause of action estoppel, the subject matter of the two proceedings being identical, than they do in issue estoppel, where the subject matter is different. (108G H) The relevant difference between the two was that in the case of cause of action estoppel it was in principle possible to challenge the previous decision as to the existence or non existence of the cause of action by taking a new point which could not reasonably have been taken on the earlier occasion; whereas in the case of issue estoppel it was in principle possible to challenge the previous decision on the relevant issue not just by taking a new point which could not reasonably have been taken on the earlier occasion but to reargue in materially altered circumstances an old point which had previously been rejected. He formulated the latter exception at 109B as follows: In my opinion your Lordships should affirm it to be the law that there may be an exception to issue estoppel in the special circumstance that there has become available to a party further material relevant to the correct determination of a point involved in the earlier proceedings, whether or not that point was specifically raised and decided, being material which could not by reasonable diligence have been adduced in those proceedings. One of the purposes of estoppel being to work justice between the parties, it is open to courts to recognise that in special circumstances inflexible application of it may have the opposite result. This enabled the House to conclude that the rejection of Walton Js construction of the rent review clause in the subsequent case law was a materially altered circumstance which warranted rearguing the very point that he had rejected. Arnold is accordingly authority for the following propositions: (1) Cause of action estoppel is absolute in relation to all points which had to be and were decided in order to establish the existence or non existence of a cause of action. (2) Cause of action estoppel also bars the raising in subsequent proceedings of points essential to the existence or non existence of a cause of action which were not decided because they were not raised in the earlier proceedings, if they could with reasonable diligence and should in all the circumstances have been raised. (3) Except in special circumstances where this would cause injustice, issue estoppel bars the raising in subsequent proceedings of points which (i) were not raised in the earlier proceedings or (ii) were raised but unsuccessfully. If the relevant point was not raised, the bar will usually be absolute if it could with reasonable diligence and should in all the circumstances have been raised. It was submitted to us on behalf of Virgin that recent case law has re categorised the principle in Henderson v Henderson so as to treat it as being concerned with abuse of process and to take it out of the domain of res judicata altogether. In these circumstances, it is said, the basis on which Lord Keith qualified the absolute character of res judicata in Arnold v National Westminster Bank by reference to that principle is no longer available, and his conclusions can no longer be said to represent the law. I do not accept this. The principle in Henderson v Henderson has always been thought to be directed against the abuse of process involved in seeking to raise in subsequent litigation points which could and should have been raised before. There was nothing controversial or new about this notion when it was expressed by Lord Kilbrandon in Yat Tung. The point has been taken up in a large number of subsequent decisions, but for present purposes it is enough to refer to the most important of them, Johnson v Gore Wood & Co [2002] 2 AC 1, in which the House of Lords considered their effect. This appeal arose out of an application to strike out proceedings on the ground that the plaintiffs claim should have been made in an earlier action on the same subject matter brought by a company under his control. Lord Bingham took up the earlier suggestion of Lord Hailsham of St. Marylebone LC in Vervaeke v Smith [1983] 1 AC 145, 157 that that the principle in Henderson v Henderson was both a rule of public policy and an application of the law of res judicata. He expressed his own view of the relationship between the two at p 31 as follows: Henderson v Henderson abuse of process, as now understood, although separate and distinct from cause of action estoppel and issue estoppel, has much in common with them. The underlying public interest is the same: that there should be finality in litigation and that a party should not be twice vexed in the same matter. This public interest is reinforced by the current emphasis on efficiency and economy in the conduct of litigation, in the interests of the parties and the public as a whole. The bringing of a claim or the raising of a defence in later proceedings may, without more, amount to abuse if the court is satisfied (the onus being on the party alleging abuse) that the claim or defence should have been raised in the earlier proceedings if it was to be raised at all. I would not accept that it is necessary, before abuse may be found, to identify any additional element such as a collateral attack on a previous decision or some dishonesty, but where those elements are present the later proceedings will be much more obviously abusive, and there will rarely be a finding of abuse unless the later proceeding involves what the court regards as unjust harassment of a party. It is, however, wrong to hold that because a matter could have been raised in earlier proceedings it should have been, so as to render the raising of it in later proceedings necessarily abusive. That is to adopt too dogmatic an approach to what should in my opinion be a broad, merits based judgment which takes account of the public and private interests involved and also takes account of all the facts of the case, focusing attention on the crucial question whether, in all the circumstances, a party is misusing or abusing the process of the court by seeking to raise before it the issue which could have been raised before. The rest of the Committee, apart from Lord Millett, agreed in terms with Lord Binghams speech on this issue. Lord Millett agreed in substance in a concurring speech. He dealt with the relationship between res judicata and the Henderson v Henderson principle at pp 58H 59B as follows: Later decisions have doubted the correctness of treating the principle as an application of the doctrine of res judicata, while describing it as an extension of the doctrine or analogous to it. In Barrow v Bankside Members Agency Ltd [1996] 1 WLR 257, Sir Thomas Bingham MR explained that it is not based on the doctrine in a narrow sense, nor on the strict doctrines of issue or cause of action estoppel. As May LJ observed in Manson v Vooght [1999] BPIR 376, 387, it is not concerned with cases where a court has decided the matter, but rather cases where the court has not decided the matter. But these various defences are all designed to serve the same purpose: to bring finality to litigation and avoid the oppression of subjecting a defendant unnecessarily to successive actions. While the exact relationship between the principle expounded by Sir James Wigram V C and the defences of res judicata and cause of action and issue estoppel may be obscure, I am inclined to regard it as primarily an ancillary and salutary principle necessary to protect the integrity of those defences and prevent them from being deliberately or inadvertently circumvented. It was clearly not the view of Lord Millett in Johnson v Gore Wood that because the principle in Henderson v Henderson was concerned with abuse of process it could not also be part of the law of res judicata. Nor is there anything to support that idea in the speech of Lord Bingham. The focus in Johnson v Gore Wood was inevitably on abuse of process because the parties to the two actions were different, and neither issue estoppel nor cause of action estoppel could therefore run (Mr Johnsons counsel conceded that he and his company were privies, but Lord Millett seems to have doubted the correctness of the concession at p 60D E, and so do I). Res judicata and abuse of process are juridically very different. Res judicata is a rule of substantive law, while abuse of process is a concept which informs the exercise of the courts procedural powers. In my view, they are distinct although overlapping legal principles with the common underlying purpose of limiting abusive and duplicative litigation. That purpose makes it necessary to qualify the absolute character of both cause of action estoppel and issue estoppel where the conduct is not abusive. As Lord Keith put it in Arnold v National Westminster Bank at p 110G, estoppel per rem judicatam, whether cause of action estoppel, or issue estoppel is essentially concerned with preventing abuse of process. It may be said that if this is the principle it should apply equally to the one area hitherto regarded as absolute, namely cases of cause of action estoppel where it is sought to reargue a point which was raised and rejected on the earlier occasion. But this point was addressed in Arnold, and to my mind the distinction made by Lord Keith remains a compelling one. Where the existence or non existence of a cause of action has been decided in earlier proceedings, to allow a direct challenge to the outcome, even in changed circumstances and with material not available before, offends the core policy against the re litigation of identical claims. Application to the present case If this case is to be determined according to these general principles of the modern law, there can, I think, be little doubt about the answer. The Court of Appeal decided, before the result of the opposition proceedings in the EPO, that in its unamended form the patent was valid and infringed. It follows that Zodiac are estopped from asserting on the enquiry as to damages that in its unamended form the patent was invalid or was not infringed. This estoppel is a true cause of action estoppel. The Court of Appeal has determined in favour of Virgin issues essential to the existence of the cause of action for infringement of the unamended patent, which are the basis of the claim for damages. However, the point which Zodiac seek to make on the enquiry is that the unamended patent has been retrospectively amended. It no longer exists, and is deemed never to have existed, in the form on which these issues were adjudicated by the Court of Appeal. Zodiacs reliance on the retrospective amendment is a new point which was not raised before. It could not have been raised before, because the decision of the TBA retrospectively amending the patent was made after the order giving effect to the judgment of the Court of Appeal. There are two related reasons why Zodiac cannot be precluded from relying on the decision of the TBA on the enquiry as to damages. One is that they are relying on the more limited terms of a different patent which, by virtue of the decision of the TBA, must at the time of the enquiry be treated as the only one that has ever existed. The other is that Zodiac are not seeking to reopen the question of validity determined by the Court of Appeal. The invalidity of the patent may be the reason why the TBA amended the patent, but the defendant is relying on the mere fact of amendment, not on the reasons why it happened. The patent cases How then did the Court of Appeal come to a different conclusion? The answer is that they followed a line of cases culminating in the decision of the Court of Appeal in Unilin Beheer BV v Berry Floor NV [2007] FSR 635, which had held that a patentee whose patent has been held to be valid is entitled to claim damages for its infringement without regard to a subsequent revocation of the patent. This has been held to be so, even though it has always been the law in England (as it is under the European Patent Convention) that the revocation of a patent for invalidity relates back to the date of grant: see, currently, section 75(3) of the Patents Act 1977. The decisions which support the Court of Appeals conclusion are Poulton v Adjustable Cover and Boiler Block Co [1908] 2 Ch 430, Coflexip SA v Stolt Offshore MS Ltd (No 2) [2004] FSR 708 and Unilin itself. The facts in Poulton were that the court had held the patent to be valid and infringed and had ordered an enquiry as to damages. An attempt to have the patent declared invalid for prior use had been rejected. After the judgment, the defendant found a further and better instance of prior use on the basis of which he successfully petitioned for the revocation of the patent. He then sought to rely on the revocation on the enquiry as to damages. The question presently before this court was not argued. The defendants case was that the revocation of the patent was a decision in rem which itself gave rise to an estoppel against the world. There was therefore, it was said, an estoppel against an estoppel. Parker J rejected this argument. The Court of Appeal (Vaughan Williams, Fletcher Moulton and Buckley LJJ) also rejected it in an extempore judgment delivered on a Friday afternoon after an argument in which no authority was cited on the ambit of the law of res judicata other than the Duchess of Kingstons Case (1776) 20 St Tr 355. Vaughan Williams LJ appears to have thought that the revocation of the patent operated only from the date it occurred, but he held that it did not matter whether the patent was valid or not, nor whether the revocation was retrospective. This was because the Court having declared it to be valid, it must be treated as valid as between the same parties notwithstanding its subsequent revocation. Fletcher Moulton LJ considered that it was enough that the patent had been declared to be a valid patent at the time of the judgment. That was determinative on an enquiry as to damages in the same proceedings. Buckley LJ did not feel so clear on this point as my learned brothers, but considered that their view could be justified on the footing that the enquiry as to damages was no more than the working out of the effect of the judgment on liability. The decision may have been in accord with the law of res judicata as it was then thought to be, before the implications of Henderson v Henderson were appreciated or the doctrine had acquired its modern flexibility. What is clear is that without special facts the grounds on which Poulton was decided cannot be reconciled with the modern law on the subject. The real origin of the principle applied by the Court of Appeal in the present case was a much more recent case, namely the decision of the Court of Appeal in Coflexip SA v Stolt Offshore MS Ltd (No 2) [2004] FSR 708. The patent in this case related to a system for laying flexible flowlines in the seabed in subsea oil installations. The facts were substantially the same as in Poulton. The court had rejected a challenge to the validity of the patent based on prior art, and had held that the only infringement alleged in the pleadings (relating to the performance of a contract for the Magnus Swift field) was made out. The court gave judgment for the patentee, ordering an enquiry as to damages. In accordance with the ordinary practice, the enquiry as to damages extended not just to the Magnus Swift field infringement but to fourteen other similar infringements. While it was in progress a third party, relying upon different prior art in parallel proceedings, succeeded in having the patent revoked. The majority of the Court of Appeal (Peter Gibson LJ and Sir Martin Nourse) held that they were bound by Poulton and that the defendant was estopped. They rejected the submission that it was no longer good law, for two reasons. The first was based on Lord Keiths distinction in Arnold between cause of action estoppel and issue estoppel. The second was that unless the defendant was estopped, the patentee would be harassed by two successive proceedings in which he would be required to defend the validity of the patent. Neuberger LJ dissented. He distinguished between strict cause of action estoppel (i.e. where the same issue had been decided in the earlier proceedings) and abuse of process cause of action estoppel (where the unsuccessful party wishes to reargue the point by reference to new material or a new argument not put before the court before). Neuberger LJ assigned the Magnus Swift field infringement to the second category of cause of action estoppel, because the defendant was seeking to rely not on the prior art which had led to the revocation of the patent in the parallel proceedings, but on the mere fact of revocation, which was a decision in rem, and decisive irrespective of the ground for it. He regarded the fourteen other alleged infringements raised only on the enquiry as being governed by the principles relating to issue estoppel. He considered that the estoppel was not absolute in either case. In my opinion the majority in Coflexip were mistaken on both of the points which they made, for substantially the reasons given by Neuberger LJ in his dissenting judgment. The point can best be tested by reference to the Magnus Swift field infringement, which unquestionably turned on cause of action estoppel. I would for my part leave open the question whether the same applied to the other fourteen infringements, which has given rise to a certain amount of controversy since: see Hormel Foods Corp v Antilles Landscape Investments NV [2005] RPC 657, Unilin Beheer BV v Berry Floor NV [2007] FSR 635 at paras 47 48. The essential fallacy in the majoritys reasoning in Coflexip lay in their view that Lord Keith in Arnold had held that cause of action estoppel was always absolute. He did not. He held that it was absolute only in relation to points actually decided on the earlier occasion. Because of this mistake, the majority had no regard to the fact that the consequences of the patents revocation had not been decided on the earlier occasion, and could not have been because it had not happened. As for the policy considerations, they were also wrong, as it seems to me, to suppose that the court would be rehearing on the enquiry the question of validity decided by the judgment on liability. The revocation of the patent was an act in rem which determined the status of the patent as against the world. It had been revoked by the authority which had granted it and must be treated as never having existed. Although the patent had been revoked on the ground of invalidity, the issue which the defendant wished to raise on the enquiry was not invalidity but revocation. The revocation would be decisive regardless of the ground on which it was ordered. In Unilin Beheer BV v Berry Floor NV [2007] FSR 635 the Court of Appeal reached the same conclusion. The facts were in some ways an even more exacting test of the principle, because the policy considerations invoked in Coflexip could not possibly have justified the outcome in Unilin. This was because, as in the present case, the patent was retrospectively amended by the EPO to limit its scope to valid claims, after the English court had given judgment in favour of the patentee. The vexation associated with the pursuit of two proceedings challenging the validity of the patent was an inescapable feature of the statutory scheme which conferred concurrent jurisdiction on questions of validity on both the English court and the EPO. It can hardly be said that the vexation inherent in there being two perfectly proper proceedings concurrently is made more tolerable by ignoring the outcome of one of them. It was common ground in Unilin that the court was bound by Coflexip, and there was therefore only limited consideration of the merits of the principle decided in that case. The argument was directed to a different issue, namely whether the law stated in Coflexip was inconsistent with the scheme of the legislation relating to European patents, and therefore impliedly excluded where such a patent was revoked or amended by the EPO. In his judgment in Unilin, Jacob LJ said that he was not sorry to reach the conclusion that he did: (i) it was conducive to certainty because it enabled the parties to get a final decision on validity from an English court without waiting to find out who has won until the slowest horse in the race gets there; and (ii) any injunction against future infringements will be discharged if the EPO subsequently revokes or amends the patent. I have to say that I do not find either of these considerations convincing. Jacob LJ plainly assumed that the slowest horse would usually be the EPO. That assumption was not necessarily correct, especially in the light of the availability of at least one and potentially two tiers of appeal in England. The truth is that the effect of the decision in Coflexip is not to introduce certainty in this field but to make the outcome dependent on the wholly adventitious question which of two concurrently competent jurisdictions completes its procedures first. In the present case, the Court of Appeal may have reached a different conclusion if the Opposition Division of the EPO had reached the conclusion subsequently reached by the TBA. Permission to appeal the decision on validity to this court might well have been granted if the eruption of the Icelandic volcano had not deferred the decision of the TBA to a date after the application for permission had been resolved. The fate of 49m must surely depend on more substantial and predictable considerations than these. As for the discharge of any injunction restraining future infringements, this was a point also made by the majority in Coflexip (see para 137), but to my mind it simply underlines the irrationality of their conclusion. Logically, if the defendant is bound by the courts declaration that the patent is valid although it has been revoked or amended, he should be equally bound whether the remedy sought is damages or an injunction. The distinction between past and future infringements makes no sense in a case where a single cause of action embraces both and the revocation or amendment is by statute effective ab initio. In my opinion Poulton is no longer good law, and Coflexip was wrongly decided. It follows that Unilin was also wrongly decided because it proceeded on the premise of the law stated in Coflexip. The point with which Unilin was actually concerned, namely whether there is a different rule for European patents arising from the scheme of the relevant legislation, has been argued before us but it does not arise, because the anomaly in English law to which that point is directed does not exist. Accordingly, where judgment is given in an English court that a patent (whether English or European) is valid and infringed, and the patent is subsequently retrospectively revoked or amended (whether in England or at the EPO), the defendant is entitled to rely on the revocation or amendment on the enquiry as to damages. Once the enquiry is concluded, different considerations will arise. There will then be a final judgment for a liquidated sum. At common law, that judgment could be challenged on the ground that the patent had later been revoked or amended only by way of appeal, and then only if an appeal is still open. I doubt whether an implied statutory right to reopen it could be derived from the scheme of the Patents Act 1977, but that is a question which will have to await a case in which it arises. Disposal I would allow the appeal and declare that Zodiac are entitled to rely on the amendment of Virgins patent in answer to their claim for damages on the enquiry. The Glaxo v Genentech guidelines I add a brief observation on the procedural implications. If I had concluded that the defendant was estopped from relying on the revocation or amendment of the patent once the court had adjudged it to be valid, that would have had important implications for the question whether English proceedings should be stayed pending a decision in concurrent opposition proceedings in the EPO. On that footing, it would in my opinion have been essential to stay the English proceedings so that the decision of the EPO would not be rendered nugatory by the operation of the law of res judicata. On that hypothesis, it would have been difficult to defend the guidance given by the Court of Appeal in Glaxo Group Ltd v Genentech Inc [2008] Bus LR 888 to the effect that the English court should normally refuse a stay of its own proceedings if it would be likely to resolve the question of validity significantly earlier. The effect of that guidance is to put more litigants in the impossible situation in which successive decisions of the Court of Appeal placed the parties in this case. As it is, the problem has not gone away, even on the footing that those decisions are overruled. In the first place, a similar problem may well arise if the patent is revoked by the EPO after a judgment has been given for a liquidated sum. Second, that problem is aggravated by the fact that a decision of the English court on validity is directly effective only in the United Kingdom, whereas the EPOs decision, being the decision of the authority which granted the patent, is directly effective in every country for which the patent was granted. Third, even if the EPO opposition proceedings are concluded in time to affect the English proceedings, the uncertainty and waste of costs involved do little credit to our procedures. This is not a suitable occasion, nor is the Supreme Court the appropriate tribunal to review the guidelines, but I think that they should be re examined by the Patents Court and the Court of Appeal. LORD NEUBERGER (with whom Lady Hale, Lord Clarke and Lord Carnwath agree) The factual background The facts of this case are fully set out by Lord Sumption in paras 8 15 of his judgment, but it is worth summarising them. Virgin was the registered proprietor of a European patent (UK) (the Patent) granted out of the European Patent Office (EPO). They began infringement proceedings (the English proceedings) in the High Court against Zodiac, who were manufacturing and selling an allegedly infringing product. Zodiac denied infringement, and counterclaimed for revocation of the Patent on the grounds, inter alia, that it was invalid in the light of prior article Those proceedings resulted in a hearing in front of the Court of Appeal, which (i) decided that the Patent was valid, (ii) declared that Zodiacs product infringed it, and (iii) ordered an assessment of damages (the assessment) [2009] EWCA Civ 1062 and 1513. Meanwhile, opposition proceedings in the EPO had been initiated by Zodiac in respect of the Patent. Following the decision of the Court of Appeal in the English proceedings, the opposition proceedings came before the Technical Board of Appeal (TBA). During the course of the hearing before the TBA, Virgin abandoned the claims which Zodiac had been held to infringe, and the Patent was amended accordingly. Virgin then contended that Zodiacs product infringed one or more of the surviving claims of the Patent, as amended, but Floyd J concluded that the amendment limited the scope of the Patent so as to render Zodiacs product no longer infringing [2012] EWHC 2153 (Pat). It is common ground that the consequence of this is that the Patent is to be treated as limited in its scope pursuant to the amendment, with retrospective effect from its priority date. Virgin contend that, because the English proceedings have been finally determined in their favour on validity and infringement, it is not now open to Zodiac to rely in the assessment on the subsequent amendment of the Patent, by virtue of res judicata. In other words, Virgins contention is that the assessment should proceed on the basis that Zodiac are precluded from contending that they are not liable for any damages for infringement in the light of the amendment of the Patent. If that contention is right, then it seems likely that Virgin will recover damages probably running to tens of millions of pounds, whereas if it is wrong, they will presumably recover nothing. Res judicata and the authorities on the point in this appeal relation to res judicata, and I agree with his exposition. Virgins contention is that res judicata compels the conclusion that, where a patent has been held by a court to be valid and infringed as between the patentee and an alleged infringer, but it is subsequently revoked (or amended so that the alleged infringer would no longer be held to infringe), the patentee is nonetheless entitled to damages from the alleged infringer as if the patent had not been revoked (or relevantly amended). This contention receives support from three previous decisions of the Court of Appeal, which were followed by the Court of Appeal in this case. Those decisions are Poulton v Adjustable Cover and Boiler Block Co [1908] 2 Ch 430, Coflexip SA v Stolt Offshore MS Ltd (No 2) [2004] FSR 708, and Unilin Beheer BV v Berry Floor NV [2007] FSR 635. Poulton and Coflexip both involved an assessment of damages following a hearing at which the alleged infringer had unsuccessfully challenged the patentee on the validity and infringement of a purely British patent, in the English courts, but, before the assessment of damages had taken place, the patent had been revoked in other proceedings which were also in the English courts. The present case, like Unilin, is concerned with a European patent, in respect of which issues of validity and infringement have been determined by the English courts, but, before the assessment of damages has taken place, validity is being, or has been, considered by the EPO in opposition proceedings. In paras 17 26 of his judgment, Lord Sumption summarises the law in In Poulton [1908] 2 Ch 430, 437, Vaughan Williams LJ explained that the judgment obtained by the patentee made the question whether there had been an infringement of a patent then valid res judicata as between the parties to the action, and operated as a complete estoppel between them. On the following page, he said that the subsequent order of revocation could not affect the already existing estoppel, by virtue of which the defendants were prevented from denying that which had been finally determined to be the truth of the matter as between [the] parties involved in [the] action, and he therefore concluded that the alleged infringer could not rely on the subsequent revocation of the patent on the assessment of damages. At first sight, one can see the force of that reasoning. It is well established that the fact that an identical issue is determined differently in two different sets of proceedings is irrelevant to the rights of the parties to each set of proceedings inter se. Thus, in the normal run of things, where A has lost against B on an issue in one case, it is simply irrelevant to As legal obligations and rights as against B if C subsequently defeats B on the very same issue (except it may help A to obtain permission to appeal out of time see Arnold v National Westminster Bank plc [1991] 2 AC 93, 109F 110C but that is rather a different matter). That is because the determination of most issues in litigation can only bind the parties to the litigation (and their privies). The point is starkly illustrated by In re Waring, Westminster Bank v Burton Butler [1948] Ch 221. In that case, Jenkins J held that (i) an annuitant under a will was bound by a decision of the Court of Appeal in earlier litigation, where the will trustees and he were parties, as to the effect of tax legislation on his rights, but (ii) another annuitant was entitled to rely on a subsequent, more favourable, decision of the House of Lords on the point in a different case, because he had not been a party to the earlier litigation. Whilst Jenkins J acknowledged that the result may appear to be anomalous, in reality it was a clear and principled application of the fundamental rule. Discussion In my view, however, the same cannot be said of the reasoning of the Court of Appeal in Poulton [1908] 2 Ch 430, and in the three cases which followed it (including this case). It seems to me that the mistake of the courts in those four decisions was attributable to the fact that they did not have appropriate regard to the statutory provisions relating to patents, which reflect the nature of a patent and the effect of its revocation. They therefore treated the subsequent decision to revoke the patent as no more than a later determination by another court in other proceedings between different parties. The essential point is that, although the decision to revoke the patent was indeed made in proceedings involving different parties, the effect of the Patents Act 1977 (and its statutory predecessors) (the Patents Act) and the European Patent Convention (the EPC) whose relevant provisions are set out in paras 3 7 of Lord Sumptions judgment, was that the revocation did not just have effect between those parties. The revocation of the patent deprived the patentee of the rights which the patent had bestowed on him as against the world; furthermore, it did so retrospectively. In other words, the effect of the revocation was that everyone was entitled to conduct their affairs as if the patent had never existed. The failure to consider the nature of a patent and the effect of its revocation led the Court of Appeal into error, as it failed to take into account the fact that the issue of res judicata was being raised by the (former) patentee in connection with a particular statutory right. In this connection, it is worth referring to an observation of Lord Bridge in Thrasyvoulou v Secretary of State for the Environment [1990] 2 AC 273, 289C D: In relation to adjudications subject to a comprehensive self contained statutory code, the presumption must be that where the statute has created a specific jurisdiction for the determination of any issue which establishes the existence of a legal right, the principle of res judicata applies to give finality to that determination unless an intention to exclude the principle can properly be inferred as a matter of construction of the relevant statutory provisions. I do not suggest that the Patents Act or the EPC created a specific jurisdiction, but the observation emphasises that an issue of res judicata in connection with a patent case cannot be considered correctly without proper regard to the effect of that Act and the EPC. In Poulton [1908] 2 Ch 430 and the cases which followed it, the Court of Appeal failed to focus on the point that the effect of the Patents Act was that the revocation meant that, as against the world, the patentee had never had a valid patent. They wrongly concluded that cause of action estoppel applied so as to preclude the alleged infringer from relying on the revocation of the patent in the assessment, because they failed correctly to formulate the point which the alleged infringer wished to take on the assessment. The alleged infringer was bound by strict cause of action estoppel from running any argument that it had run on validity or infringement, but there was no such strict rule to prevent it from contending that the patent had, as a matter of fact, been revoked. Not merely was that an argument which had not been run in the earlier proceedings: it was an argument which, ex hypothesi, could not have been run in the earlier proceedings. Accordingly, following the reasoning in Arnold, it was a fact which the court could at least have contemplated permitting the alleged infringer to rely on in the assessment. In my view, however, it goes further than that. Absent special factors, principle, fairness and commercial sense support the view that the fact that the patent in issue had been revoked was a point which the alleged infringer should have been entitled to rely on in the assessment. It was a new, centrally important, uncontroversial fact, and to deny the alleged infringer the ability to raise it would be to give effect to a monopoly right which the patentee never should have had. Further, while not enough of a point on its own, it can fairly be said that, far from increasing litigation, permitting Zodiac to rely on the amendment of the Patent, would serve to put an end to the assessment. On the facts of this case, Zodiac are not seeking to challenge any of the conclusions reached by the Court of Appeal in the English proceedings. They accept that they cannot say that the Patent, in its unamended form, is susceptible to attack on the grounds raised in the English proceedings, or that Zodiacs product did not infringe the Patent in that form, or that Virgin is not entitled to an assessment of damages. All that Zodiac are seeking to do is to contend that the damages on the assessment should be assessed at nil (or, perhaps, a nominal figure), because, as the Patent has been amended in the course of the EPO proceedings, it is now retrospectively to be treated as amended, so that Zodiacs product does not infringe, and so Virgin have suffered no damage. Further, Zodiac are not seeking to relitigate or raise a point which was determined by the Court of Appeal in the English proceedings. Indeed, they could not have raised the point that the Patent had been amended during those proceedings, for the very good reason that it had not been revoked. Zodiac are simply seeking to rely on a highly relevant event which occurred after the determination of those proceedings, and which self evidently would have a very significant effect on the assessment. It is true that the grounds upon which the TBA concluded that the Patent in its original form had to be amended were grounds on which Zodiac had unsuccessfully relied before the Court of Appeal, namely invalidity over the prior article However, Zodiac are not seeking to rely on those grounds in the assessment: they are simply seeking to rely on the fact that the Patent has been amended. The position would be the same if validity had not been in issue in the English proceedings. The purpose of res judicata is not to punish a party for failing to take a point, or for failing to take a point properly, any more than to punish a party because the court which tried its case may have gone wrong. It is, as explained above, to support the good administration of justice, in the public interest in general and in the parties interest in particular. Assessed from either perspective, it seems to me wrong to prevent a person who has been held to infringe a patent from invoking in proceedings thereafter a subsequent revocation or amendment of the patent, in order to avoid liability for infringement (at least in the absence of exceptional facts). The inappropriateness of relying, as the Court of Appeal did, on the approach in the normal run of cases is highlighted by the fact that the decision between the will trustees and one annuitant in Waring [1948] Ch 221 was not binding as between the will trustees and another annuitant. On the other hand, the decision to revoke the patent in a case such as this and Poulton [1908] 2 Ch 430 can be relied on by everyone, even though the decision may have been reached in proceedings in which only one person and the patentee (or its privy) was involved. The point may also be made by considering a hypothetical case, instanced in argument by Lord Sumption, where, after the Court of Appeal found for Virgin on validity and infringement, another court decided that Xs product, which was identical to that of Zodiac, did not infringe the Patent. That would not have been a decision which would have assisted Zodiac in any way, as the position of Zodiac and X would have been analogous to that of the two annuitants in Waring. A decision on infringement is in personam, so it only binds the parties to the action (and their privies), whereas a decision that a patent is invalid (or must be amended) is in rem, so it binds the world, just as the patent, so long as it is in force, can be enforced against the world. The policy of the Patents Act is that valid patents are enforceable against the world, even if an infringer is honestly and reasonably unaware of the existence of the patent. Equally, if a patent is revoked (or amended), the policy is that the revocation (or amendment) takes effect retrospectively, and that this can be relied on by the world. I find it hard to see why someone who has failed in an attack on the patent should not be entitled, like anyone else, to rely on the points that the patent has been revoked (or amended), and that the revocation (or amendment) is retrospective in its effect, whether in legal proceedings or in another context. This conclusion is supported by another point. As Virgin accept, any injunction restraining Zodiac from infringing the Patent granted at the end of the English proceedings either became ineffective or would have to be discharged, following the amendment of the Patent in the EPO proceedings. In my view, there is a logical difficulty with the notion that Zodiac cannot rely on the fact that the Patent was retrospectively amended when it comes to the assessment, if they can rely on the amendment in order to discharge or to ignore the injunction. It is true that the injunction is prospective and the assessment retrospective, but the amendment is both prospective and retrospective in its effect. Fletcher Moulton LJ rightly said in Poulton [1908] 2 Ch 430, 439, that [t]he order of revocation is in the nature of a judgment in rem which terminates the res, and he was also right when he added that [i]t has no further effect so far as estoppel is concerned. However, where he went wrong was to conclude that this meant that the fact and consequences of the revocation could not be relied on by a person who had previously been held to be an infringer, for instance when damages come to be assessed. He acknowledged that [a]s regards the world at large, every one is bound by the fact that the patent ceased to exist, and, as a matter of legal principle and consistency, as well as a matter of common sense and fairness, I consider that every one includes a party who has previously been held to infringe it. So far as the interests of patentees are concerned, it is inherent in the grant of a patent under the Patents Act that, however often its validity may be unsuccessfully challenged in earlier litigation, it may none the less be revoked (or amended), and with retrospective effect, at some point by a court or by the EPO. A patentee therefore must appreciate that it can never be sure that a decision of a court that the patent is valid will settle the question for good. It is true that an unsuccessful challenge to the validity of a patent by a particular person will normally give rise to a res judicata to prevent that person raising another challenge, but, as is common ground, it would not enable the patentee to rely on the patent against that person once the patent had been revoked, at least in respect of what would be infringements after its revocation. Other matters When seeking to justify a conclusion that, though it applies, res judicata does not preclude a point being taken, it can be dangerous to invoke the observation of Lord Keith in Arnold [1991] 2 AC 93, 109B, that estoppel is intended to work justice between the parties, because it is only too easy to fall back on it as an excuse for an unprincipled departure from, or an unprincipled exception to, the rule. However, in a case where the rule has been relied on, I consider that it is helpful for a court which is inclined to accept the argument that it does not prevent a point being taken, to consider whether that outcome would work justice between the parties. In this case, as in cases such as Poulton, it seems to me that it would be positively unjust, as between the parties, for a (former) patentee to recover damages for infringement of a patent after the patent has been irrevocably and retrospectively revoked (or, as in this case, relevantly amended). And I can see no public interest in such an outcome. There is no question of extra further litigation, as it is undeniable that the Patent has been revoked (or amended); indeed, further litigation will be avoided as the assessment need not proceed. In the course of his submissions on behalf of Virgin, Mr Crow QC relied on the doctrine of merger, viz the principle whereby whatever rights a claimant has against a defendant are treated as merged into the order made in the proceedings. I do not think that that aspect takes the point at issue on this appeal any further. Mr Crow realistically did not suggest that it would cause any problems if we were to overturn a decision which had stood for over a hundred years and had been followed and applied in the last ten years. We therefore do not have to address the problem which was faced by the House of Lords in Hindcastle Ltd v Barbara Attenborough Associates Ltd [1997] AC 70, when they decided to overturn an early twentieth century decision of the Court of Appeal which had stood for around a century. We were taken to some articles on the attitude of the courts of Germany, France and the Netherlands to the point raised in these proceedings. I am not confident that we have a full and accurate picture of the position in those three jurisdictions, but it seems clear that, to put it at its very lowest, there is not a consistent approach which could be said to reflect Virgins contention in this case. Indeed, my strong impression is that Zodiacs contention is closer to the practice in those three countries. However, as Mr Crow submits, that is of little weight, as this is the sort of issue which has to be resolved by reference to domestic law, and is not the subject of any attempt to harmonise practices across the EPC territories. As to the temporal limit of Zodiacs right to rely on the amendment of the Patent in the assessment of damages, I have no doubt that they could raise the amendment until judgment for the assessed damages had been drawn up, or passed and entered to use the time honoured legal expression. While the court would, I think, have power to refuse to do so, I would expect it normally to agree to reopen such a judgment if any revocation or amendment was raised before the assessed damages had been paid. If the Patent had been amended after the order had been formally passed and entered, but before the damages had been paid, I suspect that the only course open to Zodiac would have been to seek to appeal against the award of damages, relying on the amendment as new evidence, as strict cause of action estoppel (indeed merger) would apply. Once the damages had been paid, it seems to me that an alleged infringer would have to try and raise a restitutionary claim if it wished to recover the damages on the ground that the patent had been revoked or varied. I express no view on the strength of such a claim, which may well be highly dependent on the facts of the particular case. This conclusion renders it unnecessary to consider whether, if Poulton was rightly decided, it would none the less be open to Zodiac to rely on the amendment of the Patent in the assessment, because the amendment was effected in the EPO rather than in a domestic court. I find it slightly difficult to consider that hypothetical question, not merely because I would be proceeding on an artificial hypothesis, but also because my reasons for concluding that Poulton was wrongly decided in relation to a UK patent apply a fortiori to a European patent. Conclusion Genentech Inc (Practice Note) [2008] Bus LR 888. Accordingly, for these reasons, which follow those of Lord Sumption, and with whose reasoning I agree, I would allow Zodiacs appeal, and overrule the decisions in Poulton and Coflexip. It also follows that I disagree with the reasoning of the Court of Appeal in Unilin. I also agree with what Lord Sumption says in para 38 about the guidance given by the Court of Appeal in Glaxo Group Ltd v

Virgin obtained judgment from the English Court of Appeal (the CA) against Zodiac for damages to be assessed for the infringement of certain claims (the relevant claims) in a European Patent. The CA found their patent to have been valid and infringed by Zodiac. Subsequently, the Technical Board of Appeal (the TBA) of the European Patent Office (the EPO) ruled that that the relevant claims were invalid because they had been anticipated in prior art, and retrospectively amended the patent so as to remove, with effect from the date of grant, all the relevant claims. Virgin submitted that it was nevertheless entitled to recover damages for infringement because the CAs conclusions that the patent (including the relevant claims) was valid and that the relevant claims were infringed by Zodiac were res judicata as between it and Zodiac on the subsequent assessment of damages, and that it was not open to Zodiac to reply on the TBAs amendment to the patent, as this would be inconsistent with the orders made by the CA. That argument had succeeded before the CA in similar circumstances in previous cases, and the CA had followed those decisions in the present case. Zodiacs case is that the unamended patent has been retrospectively amended, and that the relevant claims therefore no longer exist, and are deemed never to have existed. It submits that no issue of res judicata arises because that was not the situation considered by the CA. The Supreme Court unanimously allows the appeal and declares that Zodiac are entitled to rely on the amendment of patent in answer to Virgins claim for damages on the enquiry. Lord Sumption gives the lead judgment, Lord Neuberger gives a concurring judgment, and the other members of the Court agree with both judgments. After a review of the law of res judicata [17 26], the Court gives two related reasons why Zodiac cannot be precluded from relying on the decision of the TBA on the enquiry as to damages. One is that it is relying on the more limited terms of a different patent which, by virtue of the TBAs decision, must at the time of the enquiry be treated as the one that existed at the relevant time, whereas the unamended patent, relied on by Virgin, must be treated as if it had never existed. The second reason is that Zodiac is not seeking to reopen the validity of the relevant claims, which was one of the questions determined by the CA. The invalidity of those claims may be the reason the TBA amended the patent, but Zodiac is relying on the mere fact of amendment, not the reasons why it happened [27, 53, 54]. The CA reached a different conclusion because it followed a line of cases holding that a patentee, whose patent (in proceedings against a particular defendant) is found to be valid and infringed, is entitled to claim damages from the defendant for the infringement without regard to a subsequent revocation of the patent, even though as a matter of English law the revocation of a patent for invalidity relates back to the date of grant [28, 48]. The Court holds that this line of cases was wrongly decided. Their major fallacy is the assumption that cause of action estoppel was absolute generally rather than absolute only as regards points actually determined by the earlier decision. Accordingly, the decisions in those cases had no regard to the fact that the consequences of the patents subsequent revocation had not been, and could not have been, determined, or even taken into account, in the earlier decision, because it had not happened by the time of that decision. They were also wrong to suppose that, by taking into account the subsequent revocation, a court would be rehearing the question of validity decided by the judgment on liability. The revocation was a decision in rem determining the status of the patent as against the world [32, 48]. It had been revoked by the authority which had granted it and it must be treated as never having existed. The issue raised on the enquiry was not invalidity but revocation [32]. Accordingly, where judgment is given in an English court that a patent (whether English or European) is valid and infringed, and that patent is subsequently revoked or amended (whether in England or at the EPO), the defendant is entitled to rely on the revocation or amendment on the enquiry as to damages [35]. The Supreme Court also proposed that the current procedural guidelines laid down by the CA, which propose that the English court should normally refuse to stay its own proceedings if it would be likely to resolve the question of validity significantly earlier than the EPO, should be re examined [38, 69].

An agreement to arbitrate disputes has positive and negative aspects. A party seeking relief within the scope of the arbitration agreement undertakes to do so in arbitration in whatever forum is prescribed. The (often silent) concomitant is that neither party will seek such relief in any other forum. If the other forum is the English court, the remedy for the party aggrieved is to apply for a stay under section 9 of the Arbitration Act 1996. The issue on this appeal is whether, if the other forum is a foreign jurisdiction outside the European rgime of the Brussels Regulation (EC) No 44/2001 and the Lugano Convention, the English court has any and if so what power to declare that the claim can only properly be brought in arbitration and/or to injunct the continuation or commencement of the foreign proceedings. (It is clear that injunctive relief in relation to foreign proceedings within the Brussels/Lugano space is impermissible under the Regulation and Convention: West Tankers Inc v Allianz SpA (formerly RAS Riunione Adriatica di Sicurta SpA) (The Front Comor) (Case 185/07) [2009] 1 AC 1138. By order dated 16 April 2010, Burton J granted the respondent, Aes Ust Kamenogorsk Hydropower Plant LLP (AESUK), such a declaration together with an injunction in relation to the bringing of proceedings against it by the appellant, Ust Kamenogorsk Hydropower Plant JSC (JSC): [2010] 2 All ER (Comm) 1033. By order dated 1 July 2011 the Court of Appeal dismissed JSCs appeal against the judges order: [2012] 1 WLR 920. The perhaps unusual feature is that AESUK has not commenced, and has no intention or wish to commence, any arbitration proceedings. Its contention is simply that JSC should not pursue or be free to pursue court proceedings against it. If JSC commences arbitration proceedings, then no doubt AESUK will defend them. Background AESUK is the current grantee and lessee of a 25 year concession granted by agreement dated 23 July 1997 entitling it to operate an energy producing hydroelectric plant in Kazakhstan. From 1997 to 2007, the concession was held by its parent or affiliate company, Tau Power BV. JSC is the current owner and grantor of the concession, having succeeded to the concessions original owner and grantor, the Republic of Kazakhstan. The concession agreement is governed by Kazakh law (clause 31), but contains a London arbitration clause (clause 32). It was common ground below and it remains common ground, at least for the purposes of this appeal, that this clause is governed by and to be construed in accordance with English law. It is therefore unnecessary to consider authority in this area such as C v D [2007] EWCA Civ 1282, Sulamrica Cia Nacional de Seguros SA v Enesa Engenharia SA [2012] EWCA Civ 638 and Arsanovia Ltd v Cruz City 1 Mauritius Holdings [2012] EWHC 3702 (Comm). The arbitration clause provides in summary that, subject to provisions contained in clauses 17.8 and 17.9, any dispute or difference arising out of or in connection with any matter or thing in relation to the provisions of the concession agreement and the transactions contemplated by the parties that cannot be resolved by negotiation should be settled by arbitration in accordance with the Rules of Conciliation and Arbitration of the International Chamber of Commerce (the ICC) to be conducted in London. Relations between the owners and holders of the concession have for some years been fraught. Burton J summarised the history in paras 5 to 10 of his judgment, and it is unnecessary to repeat it here. Some salient facts suffice. First, during the period when it owned the concession, the Republic of Kazakhstan brought proceedings in Kazakhstan against AESUKs predecessors in title, Tau Power BV, and on 8 January 2004 obtained from the Kazakh Supreme Court a ruling that the arbitration clause was invalid. This was on two grounds: that the arbitration agreement included tariff disputes, which would put such disputes beyond the control of the Republic contrary to its public policy; and that the reference in clause 32 to the Rules of the ICC was not a reference to the ICC and left the arbitral body unspecified. Burton J and the Court of Appeal held that they were not bound by the Kazakh courts conclusions in relation to an arbitration agreement subject to English law, and that neither ground was sustainable. Tariff disputes were in fact outside the arbitration agreement, by reason of the reference to clauses 17.8 and 17.9, under which they fell to be dealt with by an expert; and the reference in clause 32 to the ICC was plainly sufficient to mean that any arbitration was to be by the ICC. There is no appeal to this Court in relation to these matters. On 12 June 2009 JSC brought proceedings against AESUK in the Specialist Inter District Economic Court of East Kazakhstan Oblast (the Economic Court), alleging that AESUK had failed to supply information concerning concession assets pursuant to a request duly made under the concession agreement. AESUKs application to stay these proceedings under the arbitration clause was dismissed on 28 July 2009 on the ground that the clause had been annulled by the Supreme Courts ruling of 8 January 2004. On 31 July 2009 AESUK issued proceedings before the English Commercial Court claiming declarations that the arbitration clause was valid and enforceable and a without notice interim anti suit injunction restraining JSC from pursuit of the proceedings before the Economic Court. AESUKs attempt to rely on this injunction in the Kazakh courts was rejected by the Economic Court on 5 August 2009 and on an appeal to the East Kazakhstan Regional Court on 11 September 2009. Both the Economic Court and the Regional Court also held that JSC was entitled to the information which it had requested. Meanwhile on 21 August 2009 the interim injunction granted by the English Commercial Court was continued by consent pending a challenge by JSC to the jurisdiction of the English courts and amended to provide that JSC would withdraw its request for information the subject of the Kazakh proceedings. However, despite being requested, JSC did not undertake either that it would not resubmit a request for information or that it would not commence further proceedings in Kazakhstan. Hence, the continuation of the present proceedings, leading to Burton Js and the Court of Appeals judgments and orders. Burton Js order The order dated 16 April 2010 giving effect to Burton Js judgment declares in paragraph 2 that JSC cannot bring, and orders in paragraph 3 that JSC is restrained from bringing the claim, the subject matter of the [Kazakhstan proceedings], or any other claim arising out of or in connection with any matter or thing in relation to the provisions of the Concession Agreement ., save only for [excepted matters], otherwise than by commencing arbitration proceedings in the International Chamber of Commerce in London and pursuant to its Rules. By its order dated 1 July 2011 giving effect to its judgment, the Court of Appeal simply dismissed the appeal against Burton Js order. In its terms and form, Burton Js order was and is a final order, as to both the declaration and the injunction which it granted. Indeed, in para 1 of his judgment, Burton J recorded that he was being asked to give final relief on AESUKs arbitration claim form, and in the final para 54 to 56 of his judgment, referring back to para 21, he concluded that AESUK was entitled to the grant of (limited) final declaratory and injunctive relief. In these paragraphs, he made clear that he regarded an injunction in the wording of his later order as limited in a way which would avoid any concern about usurpation or ouster of the jurisdiction of the arbitrators, if any arbitration were to take place, and would give the opportunity . for any proper challenge to be made to the jurisdiction of the arbitrators or the applicability of the arbitration clause. Rix LJ, giving the main judgment in the Court of Appeal with which his colleagues agreed, addressed the nature of the order made by commenting (para 108) that it might possibly be said that a binding declaration as to the existence of the arbitration agreement trespassed on the theoretical possibility that an arbitral tribunal might one day have to grapple with that very issue, that he did not himself think that it would do, but that he need not decide that question here, for the judge has been cautious not to give such a declaration and the operator [AESUK] as respondent in this appeal has not sought to go further than the judge has gone. Before the Supreme Court, both sides have in their submissions treated the judges order as a final order; and so in terms it is. Neither side has sought to have the order, if it stands, corrected or qualified. Appeals lie against orders, and parties are entitled and correct to take orders at their face value. Burton Js order was in terms a final order declaring that certain claims could only properly be pursued in arbitration, and restraining their pursuit in any other forum. If an arbitration were to be commenced, by either side, in the future, it would not, under Burton Js order, be open to the respondent to object to its commencement or to the jurisdiction of the arbitral tribunal by submissions which contradicted the terms of the declaration made and injunction ordered by Burton J. The Supreme Court can and should consider the order on that basis. Further, if the court has, consistently with the scheme of the Arbitration Act 1996, power to make any sort of declaration about arbitral jurisdiction, then Rix LJ was, in my view, right that there is no objection to its being a final and binding declaration. The issue The issue is therefore whether the English court has power to declare that the claim can only properly be brought in arbitration and/or to injunct the continuation or commencement of proceedings brought in any other forum outside the Brussels/Lugano rgime. Although Lord Goldsmith in his oral submissions laid some emphasis on the primacy of the declaratory relief claimed by AESUK and ordered by Burton J, in my opinion the claim and order for injunctive relief are more important. Before the court could order final injunctive relief, it had to conclude that there was a binding and applicable arbitration agreement as JSCs own case in fact correctly stated at para 67. The order for injunctive relief carried by itself the basis of an issue estoppel in any future proceedings, precluding JSC from denying the existence or validity of such an agreement. The rival submissions regarding the courts power turn primarily on the scope and effect of the Arbitration Act 1996. Mr Toby Landau QC for AESUK advances a simple case. Independently of that Act, the court has a general inherent power to declare rights and further, under section 37 of the Senior Courts Act (formerly the Supreme Court Act) 1981: The High Court may by order (whether interlocutory or final) grant an injunction or appoint a receiver in all cases in which it appears to the court to be just and convenient to do so. Despite its generality, there are statements limiting the application of section 37 to two situations: (a) where one party can show that the other party has invaded, or threatens to invade, a legal or equitable right of the former for the enforcement of which the latter is amenable to the jurisdiction of the court, and (b) where one party to any action has behaved, or threatens to behave, in a manner which is unconscionable: South Carolina Insurance Co v Assurantie Maatschappij De Zeven Provincien NV [1987] AC 24, 40B D, per Lord Brandon, with whose speech Lord Bridge and Lord Brightman agreed without qualification. Lord Mackay and Lord Goff voiced a reservation as to whether section 37 should be so limited, and Lord Mustill in Channel Tunnel Group Ltd v Balfour Beatty Construction Ltd [1993] AC 334, 362B left the point open. It is unnecessary to say more about this here, since, on Mr Landaus case, the first situation applies. JSC has invaded or is threatening to invade AESUKs legal right not to be sued in Kazakhstan. Absent any contrary reason, there is, AESUK submits, no reason why the court should not exercise both its declaratory powers and its powers under section 37. To do so would support the commitment to arbitration contained in the arbitration clause. In contrast, JSC although it invokes the supposed policy interests of international users of London arbitration opposes the deployment of such powers in order to frustrate the arbitration clause. The negative aspect of an arbitration agreement and exclusive choice of court clause At points in his submissions, Lord Goldsmith QC, representing JSC, suggested that any negative obligation inherent in an arbitration agreement is a mere ancillary to current or intended arbitral proceedings. As a matter of interpretation of a straightforward agreement to arbitrate disputes in a particular forum (like that in this case: para 7 above), there is no basis for any such limitation. The negative aspect of an arbitration agreement is a feature shared with an exclusive choice of court clause. In each case, the negative aspect is as fundamental as the positive. There is no reason why a party to either should be free to engage the other party in a different forum merely because neither party wishes to bring proceedings in the agreed forum. Nor is there any basis for treating the Arbitration Act 1996 as affecting the interpretation of an arbitration agreement in this respect, although it is JSCs case that the effect of the Act is to preclude the court from granting relief to enforce the negative aspect of an arbitration agreement unless and until arbitral proceedings are on foot or proposed (see para 29 et seq below). The case law also contains no support for JSCs argument that the negative aspect of an arbitration agreement is enforceable only when an arbitration is on foot or proposed. It is true that in most of the cases an arbitration was on foot, but none of the statements of principle identify this as relevant or critical. The case law is worth considering more closely not only to make this good, but also as background to a consideration of JSCs submissions on the effect of the Arbitration Act. Both prior to the Arbitration Act 1996 and indeed subsequently until the present case the negative aspect was well recognised, and it was well established that the English courts would give effect to it, where necessary by injuncting foreign proceedings brought in breach of either an arbitration agreement or an exclusive choice of court clause. Further, such relief was treated as the counterpart of the statutory power to grant a stay of domestic proceedings to give effect to an arbitration agreement. A stay is not made conditional upon arbitration being on foot, proposed or brought. If there is power under section 37 to injunct the commencement or continuation of foreign proceedings, no reason is evident why the exercise of this power should depend upon such a condition. In each case it is, on the face of it, for either party to commence any arbitration it wishes at any time, or not to do so. In Pena Copper Mines Ltd v Rio Tinto Co Ltd (1911) 105 LT 846, an English law contract provided for any matter in difference to be referred to arbitration under the Arbitration Act 1889 (and for an award to be a condition precedent to any liability in respect thereof), but Rio Tinto began Spanish court proceedings. No arbitration was on foot. The Pena company expressed itself perfectly willing to refer any dispute to arbitration, but that does not mean that it proposed to do so itself and no such condition was imposed upon it. After referring to the statutory power to stay which would have existed had Rio Tinto commenced English court proceedings, the Court of Appeal ordered Rio Tinto to desist from the Spanish proceedings. The arbitration clause involved, in Cozens Hardy MRs words, probably an express negative, but . certainly an implied negative, a contract that they will not sue in a foreign court (pages 850 851), and Rio Tintos conduct in suing in Spain was, in Fletcher Moulton LJs words, certainly contrary to their contractual duties (page 852). That an award was a condition precedent to any liability cannot have been decisive. By the 1990s it had come to be thought that the power to injunct foreign proceedings brought in breach of contract should be exercised only with caution, because English courts will not lightly interfere with the conduct of proceedings in a foreign court: see eg Sokana Industries Inc v Freyre & Co Inc [1994] 2 Lloyds Rep 57, 66, per Colman J. But in Aggeliki Charis Cia Maritime SA v Pagnan SpA (The Angelic Grace) [1995] 1 Lloyds Rep 87, where the parties had agreed to arbitrate all disputes in London (an award not being a condition precedent to liability) and owners commenced such an arbitration while charterers sued in court in Venice, the Court of Appeal held, citing Pena Copper and other authority, that courts ought not to feel diffident about granting an anti suit injunction, if sought promptly. Without it the claimant would be deprived of its contractual rights in a situation where damages would be manifestly an inadequate remedy. The time had come, in Millett LJs words, to lay aside the ritual incantation that this is a jurisdiction which should only be exercised sparingly and with great caution. An injunction should be granted to restrain foreign proceedings in breach of an arbitration agreement on the simple and clear ground that the defendant has promised not to bring them. The principle was endorsed in the context of exclusive choice of court clauses by the House of Lords in Donohue v Armco Inc [2001] UKHL 64; [2002] 1 All ER 749, a decision recognising (para 24) that strong reasons are required to outweigh the prima facie entitlement to an injunction. In that case, a claim for fraud conspiracy was brought against Mr Donohue in New York in breach of an agreement providing for the exclusive jurisdiction of the English courts. Mr Donohue was refused an anti suit injunction because strong reasons (in the form of alleged participation in the alleged fraud of other New York defendants not party to any exclusive jurisdiction agreement) existed why the New York proceedings should continue. But the consideration that Mr Donohue had not commenced English proceedings on the substance of the matter played no part in the reasoning. Indeed the House recognised that he would continue to have a prima facie right to recover any damage he suffered in consequence of the continuation of the New York proceedings against him contrary to the exclusive jurisdiction clause: paras 36 and 48 per Lord Bingham and Lord Hobhouse. Lord Hobhouse also encapsulated the principle in Turner v Grovit [2001] UKHL 65; [2002] 1 WLR 107, when he said: 25 . Under English law, a person has no right not to be sued in a particular forum, domestic or foreign, unless there is some specific factor which gives him that right. A contractual arbitration or exclusive jurisdiction clause will provide such a ground for seeking to invoke the right to enforce the clause. The applicant does not have to show that the contractual forum is more appropriate than any other; the parties' contractual agreement does that for him. . 27 The applicant for a restraining order must have a legitimate interest in making his application and the protection of that interest must make it necessary to make the order. Where the applicant is relying upon a contractual right not to be sued in the foreign country (say because of an exclusive jurisdiction clause or an arbitration clause), then, absent some special circumstance, he has by reason of his contract a legitimate interest in enforcing that right against the other party to the contract. In the West Tankers case at first instance ([2005] EWHC 454 (Comm), paras 13, 59 and 72), Colman J referred to The Angelic Grace and Donohue v Armco, when granting a permanent injunction restraining the pursuit of the Italian legal proceedings which he had held to be in breach of a London arbitration agreement. That aspect of the decision was not questioned when the matter came before the Court of Appeal and the House of Lords, where Lord Hoffmann said, [2007] 1 Lloyds Rep 391, para 10: By section 37(1) of the Supreme Court Act 1981 the High Court has jurisdiction to grant an injunction (whether interlocutory or final) in all cases in which it appears to the court to be just and convenient to do so. The English courts have regularly exercised this power to grant injunctions to restrain parties to an arbitration agreement from instituting or continuing proceedings in the courts of other countries: see The Angelic Grace [1995] 1 Lloyd's Rep 87. He went on to refer to the courts power to grant an interim injunction under section 44, to which I revert below. The interpretation subsequently given to the Brussels Regulation by the Court of Justice in West Tankers (Case C 185/07) now means that an English court can no longer enforce contractual rights (or prevent oppression of the sort found to exist in Turner v Grovit) by injuncting a party within its jurisdiction from commencing or continuing proceedings in a foreign court within the Brussels/Lugano regime. But that limitation is irrelevant in this case. Unless the Arbitration Act 1996 requires a different conclusion, the negative aspect of a London arbitration agreement is therefore a right enforceable independently of the existence or imminence of any arbitral proceedings. The scheme of the Arbitration Act 1996 JSC submits that it is contrary to the terms, scheme, philosophy and parliamentary intention of the Arbitration Act 1996 for an English court to determine that foreign proceedings involve a breach of an arbitration agreement or issue either declaratory or injunctive relief on that basis other than when arbitral proceedings are on foot or proposed and only then under the provisions of the Act. The Arbitration Act contains a complete and workable set of rules for the determination of jurisdictional issues. The general rule is that the arbitral tribunal should consider jurisdictional issues in the first instance with the only exception to that general rule for a party asserting arbitral jurisdiction to be found in section 32. Unless and until one or other party commences an arbitration, the court should keep a distance. Any more general power contained in section 37 has been superseded by the Act, or should at least no longer be exercised. During the hearing before the Supreme Court there was discussion as to the extent to which JSC was submitting that there was no longer any jurisdiction to rely on section 37, or simply that it would be wrong in principle to do so, in a context such as the present. This discussion arose because, in the Court of Appeal, different counsel then appearing for JSC was, for good or bad reason, concerned that JSC should not descend into the arena of discretionary arguments and, as he saw it, risk submitting to the jurisdiction (para 91 of the judgment of Rix LJ). Counsel therefore confined his submissions to statutory or principled objection[s] to the jurisdiction of the court (para 94). The Supreme Court is content to accept that this leaves it open to JSC to argue now both that there is no longer any jurisdiction to exercise the power otherwise contained in section 37 and, alternatively, that it would be wrong in principle to do so in the present context, absent perhaps very special circumstances not here present. JSC points out correctly that the 1996 Act embodies, (from Mustill and Boyd, Commercial Arbitration: (2001) Companion Volume to 2nd Ed, preface endorsed by Lord Steyn) a new balancing of the relationships between parties, advocates, arbitrators and courts which is not only designed to achieve a policy proclaimed within Parliament and outside, but may also have changed their juristic nature: Lesotho Highlands Development Authority v Impregilo SpA [2005] UKHL 43, [2006] 1 AC 221, para 17. The Act was also a response to international criticism that the Courts intervene more than they should in the arbitral process, thereby tending to frustrate the choice the parties have made to use arbitration rather than litigation as the means for resolving their disputes: Report on Arbitration of the Departmental Advisory Committee (DAC) 1996 (with Lord Justice Saville as its chair), paragraphs 20 22. This criticism was addressed by the third of the general principles with which the Act, unusually, begins: 1. General principles. The provisions of this Part are founded on the following principles, and shall be construed accordingly (a) the object of arbitration is to obtain the fair resolution of disputes by an impartial tribunal without unnecessary delay or expense; (b) the parties should be free to agree how their disputes are resolved, subject only to such safeguards as are necessary in the public interest; (c) in matters governed by this Part the court should not intervene except as provided by this Part. JSCs submissions in this area give rise to two questions. The first is the extent to which it is correct to regard the 1996 Act as a complete and workable set of rules for the determination of all jurisdictional issues in all situations. The other is what is meant by the word should in section 1(c). As to the first, section 1(c) is limited to matters governed by this Part, and it is clear that the drafters of the Act were not attempting a complete code of arbitration law. The DAC Report 1996 stated expressly that The Bill does not purport to provide an exhaustive code on the subject of arbitration, but that they had sought to include what we consider to be the more important common law principles, whilst preserving all others, in so far as they are consistent with the provisions of this Bill (see clause 81). Clause 81 became section 81, reading Nothing in this Part shall be construed as excluding the operation of any rule of law consistent with the provisions of this Part in particular, any rule of law as to (a) matters which are not capable of settlement by arbitration; (b) the effect of an oral arbitration agreement; or (c) the refusal of recognition or enforcement of an arbitral award on grounds of public policy. The DAC Report instances confidentiality as another subject deliberately left outside the scope of the Act. The use of the word should in section 1(c) was also a deliberate departure from the more prescriptive shall appearing in article 5 of the UNCITRAL Model Law. Article 5 reads that In matters governed by this Law, no court shall intervene except where so provided in this Law. Article 5 had been the subject of forceful critique in A New Arbitration Act?, the 1989 report on the UNCITRAL Model Law by the DAC at a time when its chair was Lord Justice Mustill, who had also represented the United Kingdom at UNCITRAL. Even in matters which might be regarded as falling within Part 1, it is clear that section 1(c) implies a need for caution, rather than an absolute prohibition, before any court intervention. It is in these circumstances that the question now arises whether it is consistent with the 1996 Act for the English court to determine whether there is a valid and applicable arbitration agreement covering the subject matter of actual or threatened foreign proceedings and, if it holds that there is, to injunct the commencement or continuation of the foreign proceedings. JSC points to sections 32 and 72 of the Act as the means by which a challenge to the jurisdiction may, under certain conditions, be pursued during an arbitration and to section 67 as the means by which an award may be challenged for lack of jurisdiction. It submits, that, if AESUK convoked an arbitral tribunal, the arbitrators could rule on their jurisdiction under section 30, their ruling could be tested under sections 32, 67 and/or 72 and the court could in the meantime be asked to give interim relief under section 44. Sections 30, 32 and 72 and Kompetenz Kompetenz Section 30 provides that an arbitral tribunal may rule on its own substantive jurisdiction: 30 Competence of tribunal to rule on its own jurisdiction. (1) Unless otherwise agreed by the parties, the arbitral tribunal may rule on its own substantive jurisdiction, that is, as to (a) whether there is a valid arbitration agreement, (b) whether the tribunal is properly constituted, and (c) what matters have been submitted to arbitration in accordance with the arbitration agreement. (2) Any such ruling may be challenged by any available arbitral process of appeal or review or in accordance with the provisions of this Part. Section 30 reflects the principle of Kompetenz Kompetenz, discussed in Dallah Real Estate and Tourism Holding Co v Ministry of Religious Affairs of the Government of Pakistan [2010] UKSC 46, [2011] 1 AC 763. In short, any tribunal convoked to determine a dispute may, as a preliminary, consider and rule upon the question whether the dispute is within its substantive jurisdiction, without such ruling being binding on any subsequent review of its determination by the court under sections 32, 67 or 72 of the 1996 Act. However, a tribunal cannot by its preliminary ruling that it has substantive jurisdiction to determine a dispute confer upon itself a substantive jurisdiction which it does not have. Absent a submission specifically tailored to embrace them (as to which there is no suggestion here), jurisdictional issues stand necessarily on a different footing to the substantive issues on which an award made within the tribunals jurisdiction will be binding. In Dallah, I put these points as follows (para 24): . Arbitrators (like many other decision making bodies) may from time to time find themselves faced with challenges to their role or powers, and have in that event to consider the existence and extent of their authority to decide particular issues involving particular persons. But, absent specific authority to do this, they cannot by their own decision on such matters create or extend the authority conferred upon them. Lord Collins said (para 84) that it does not follow, from the general principle that a tribunal has power to consider its own jurisdiction: that the tribunal has the exclusive power to determine its own jurisdiction, nor does it follow that the court of the seat may not determine whether the tribunal has jurisdiction before the tribunal has ruled on it. Nor does it follow that the question of jurisdiction may not be re examined by the supervisory court of the seat in a challenge to the tribunals ruling on jurisdiction. Still less does it mean that when the award comes to be enforced in another country, the foreign court may not re examine the jurisdiction of the tribunal. Section 32 enables the court to determine any question as to the substantive jurisdiction of a tribunal on the application of a party to arbitral proceedings, provided that the application is made by agreement of all the other parties or, subject to the court being satisfied of various matters, with the tribunals permission. Section 44 provides for the court to have for the purposes of and in relation to arbitral proceedings, and on the application of a party or proposed party to the proceedings, the same power of making orders about certain listed matters as it has for purposes of and in relation to legal proceedings. The listed matters include the making of an interim injunction, but, save in case of urgency, the court is only to act on an application made under section 44 with the permission of the tribunal or the agreement of the other parties to the arbitral proceedings. Section 72 permits a party alleged to be a party to arbitral proceedings but who takes no part in them to take his jurisdictional challenge directly to the court without waiting for the tribunal to address the matter. In support of its submissions, JSC relies upon cases in which commercial judges have refused to permit the pursuit of court proceedings for a declaration as to the existence of a binding arbitration clause brought by a claimant in current or proposed arbitration proceedings: ABB Lummus Global Ltd v Keppel Fels Ltd [1999] 2 Lloyds Rep 24; Vale do Rio Doce Navegaceo SA v Shanghai Bao Steel Ocean Shipping Co Ltd [2000] 2 All ER (Comm) 70. In Vale do Rio, Thomas J observed that it could not have been the intention that a party to a disputed arbitration agreement could obtain the decision of the courts on its existence without being subject to the restrictions contained in section 32 by the simple step of not appointing an arbitrator (para 53). Although he concluded (para 60) that the court had no jurisdiction to allow the application, earlier, in noting the change from shall to should in section 1(c), he had said that it is clear that the general intention was that the court should usually not intervene outside the specific circumstances specified in Part 1 of the 1996 Act (para 52). These cases have no direct bearing on the present situation. Here, no arbitration proceedings are on foot and AESUK does not intend or wish to institute any. Sections 30, 32, 44 and 72 of the Act are all in terms inapplicable. No arbitration tribunal exists to determine its own competence under section 30. The principle of Kompetenz Kompetenz or, in an anglicised version suggested by Lord Sumption, jurisdiction competence makes sense where a tribunal is asked to exercise a substantive jurisdiction and hears submissions at the outset as to whether it has such a jurisdiction. Even then, the court has the last word in establishing whether the substantive jurisdiction actually exists. But the principle has no application where no arbitration is on foot or contemplated. On JSCs case, a party wishing relief in relation to foreign proceedings brought or threatened contrary to an arbitration agreement, must however commence, or should be required to undertake to commence, an arbitration against the other party who is rejecting the existence or application of any arbitration agreement. Further, the only substantive relief that JSC could suggest might be sought in such an arbitration would be an order, within the power afforded by section 48(5)(a) of the 1996 Act, not to commence or continue any foreign proceedings; and the efficacy of any such order as arbitrators might make, in any such arbitration, if they held that they had jurisdiction, would depend upon the court determining for itself that the tribunal had jurisdiction, and then enforcing the tribunals order under either section 44 or section 66 of the Act with the backing of the courts contempt jurisdiction. In these circumstances, there is, in my opinion, every reason why the court should be able to intervene directly, by an order enforceable by contempt, under section 37. To do so cannot be regarded, in the DACs words, as intervene[ing] in the arbitral process, thereby tending to frustrate the choice the parties have made to use arbitration rather than litigation as the means for resolving their disputes. On the contrary, JSC has complete freedom of choice in relation to the arbitration agreement. In denying that the court has any relevant jurisdiction, JSC is seeking to benefit by AESUKs reliance on an arbitration agreement, while itself denying its existence. A party is entitled to benefit by the existence of an arbitration agreement, but normally only by asserting it, e.g. by commencing an arbitration or applying for a stay under section 9. Those must however be the last things that JSC is willing to do. As to section 32, there is no party to arbitral proceedings who could apply to the court to determine any question of arbitral jurisdiction, and there are no other parties or tribunal with whose consent or permission any such application would have to be made and no tribunal whose substantive jurisdiction could be the subject of such an application. Section 44 Similarly, the courts powers listed in section 44 are exercisable only for the purposes of and in relation to arbitral proceedings and depend upon such proceedings being on foot or proposed: see section 44(3). That alone is sufficient in my opinion to lead to a conclusion that section 44 has no bearing on the question whether section 37 empowers the court to restrain the commencement or continuation of foreign proceedings in the light of an arbitration agreement under which neither party wishes to commence an arbitration. I should however say something further about JSCs submission that section 44(2)(e) embraces the granting of an interim injunction to restrain the pursuit of foreign proceedings during a current or proposed arbitration. The careful limitation of the courts power to the granting of an interim injunction militates, he argues, against the existence of any general power to injunct foreign proceedings under section 37, even on an interim basis in relation to current or proposed arbitral proceedings, let alone on a permanent basis in their absence. It is helpful to set out section 44 in full: Court powers exercisable in support of arbitral proceedings. (1) Unless otherwise agreed by the parties, the court has for the purposes of and in relation to arbitral proceedings the same power of making orders about the matters listed below as it has for the purposes of and in relation to legal proceedings. (2) Those matters are (a) the taking of the evidence of witnesses; (b) the preservation of evidence; (c) making orders relating to property which is the subject of the proceedings or as to which any question arises in the proceedings (i) for the inspection, photographing, preservation, custody or detention of the property, or (ii) ordering that samples be taken from, or any observation be made of or experiment conducted upon, the property; and for that purpose authorising any person to enter any premises in the possession or control of a party to the arbitration; (d) the sale of any goods the subject of the proceedings; (e) the granting of an interim injunction or the appointment of a receiver. (3) If the case is one of urgency, the court may, on the application of a party or proposed party to the arbitral proceedings, make such orders as it thinks necessary for the purpose of preserving evidence or assets. (4) If the case is not one of urgency, the court shall act only on the application of a party to the arbitral proceedings (upon notice to the other parties and to the tribunal) made with the permission of the tribunal or the agreement in writing of the other parties. (5) In any case the court shall act only if or to the extent that the arbitral tribunal, and any arbitral or other institution or person vested by the parties with power in that regard, has no power or is unable for the time being to act effectively. (6) If the court so orders, an order made by it under this section shall cease to have effect in whole or in part on the order of the tribunal or of any such arbitral or other institution or person having power to act in relation to the subject matter of the order. (7) The leave of the court is required for any appeal from a decision of the court under this section. Section 44(2) is the modern successor to the First Schedule to the Arbitration Act 1934 and section 12(6) of the Arbitration Act 1950 section 44(2)(e) corresponds with paragraph 8 of the First Schedule and section 12(6)(h) of the 1950 Act. The matters listed in section 44 are all matters which could require the courts intervention during actual or proposed arbitral proceedings. The power to grant an interim injunction is expressed in general terms, but is limited, save in cases of urgency, to circumstances in which either the tribunal permits an application to the court or all the other parties agree to this in writing. There is no power to grant a final injunction, even after an award. There is authority (not requiring review on this appeal) that section 44(3) can include orders urgently required pending a proposed arbitration to preserve or enforce parties substantive rights eg an order to allow inspection of an agents underwriting records or to submit a proposed transfer to a central bank: see Hiscox Underwriting Ltd v Dickson Manchester & Co Ltd [2004] 2 Lloyds Rep 438; Cetelem SA v Roust Holdings Ltd [2005] EWCA Civ 618; [2005] 1 WLR 3555. Such orders can be said to be for the purposes of and in relation to arbitral proceedings. But orders restraining the actual or threatened breach of the negative aspect of an arbitration agreement may be required both where no arbitration proceedings are on foot or proposed, and where the case is not one of urgency (and so not within section 44(3)). They enforce the negative right not to be vexed by foreign proceedings. This is a right of a different character both to the procedural rights with which section 44 is mainly, at least, concerned, and to the substantive rights to which the Hiscox and Cetelem cases hold that it extends. In Starlight Shipping Co v Tai Ping Insurance Co Ltd (The Alexandros T) [2007] EWHC 1893 (Comm); [2008] 1 All ER (Comm) 593, Cooke J addressed the inter relationship of section 44 of the 1996 Act and section 37 of the Senior Courts Act 1981 in a context where proceedings were being pursued in China in apparent breach of an arbitration agreement and where arbitral proceedings were also current. He treated both sections as potentially available, adding that the matters relevant under section 44 could also bear on, though not govern in the same way, the exercise of the general discretion under section 37 (para 29). He considered that the contractual right to have disputes referred to arbitration must be an asset falling within section 44(3). In the upshot, he gave interim relief under section 44, on the basis that the matter was urgent under section 44(3) because the arbitral tribunal would not be able to issue an award restraining the claimants in the Chinese proceedings from pursuing such proceedings speedily enough or, therefore, effectively under section 44(5). At the same time, he also made an interim order under section 37, pointing out inter alia that The difference between an order of this court and that of the arbitrators is that remedies for contempt are available if an order of this court should be breached (para 31). The better view, in my opinion, is that the reference in section 44(2)(e) to the granting of an interim injunction was not intended either to exclude the Courts general power to act under section 37 of the 1981 Act in circumstances outside the scope of section 44 of the 1996 Act or to duplicate part of the general power contained in section 37 of the 1981 Act. Where an injunction is sought to restrain foreign proceedings in breach of an arbitration agreement whether on an interim or a final basis and whether at a time when arbitral proceedings are or are not on foot or proposed the source of the power to grant such an injunction is to be found not in section 44 of the 1996 Act, but in section 37 of the 1981 Act. Such an injunction is not for the purposes of and in relation to arbitral proceedings, but for the purposes of and in relation to the negative promise contained in the arbitration agreement not to bring foreign proceedings, which applies and is enforceable regardless of whether or not arbitral proceedings are on foot or proposed. Colman J in Sokana Industries Inc v Freyre & Co Inc [1994] 2 Lloyds Rep 57 was correct on this point when he held that the courts power to make orders for the purpose of and in relation to a reference in section 12(6) of the Arbitration Act 1950 did not include the granting of relief consisting of either a final or an interim injunction to restrain an alleged breach of a London Chamber of Commerce arbitration agreement consisting in the commencement of proceedings in Florida. There was no power to serve the proceedings out of the jurisdiction on the defendants in Sokana Industries because it was not made under the Arbitration Act 1950 or . 1979. The current position is in my opinion different. Although Part 62 of the Civil Procedure Rules is divided into Parts, including Part I, headed Claims under the 1996 Act and Part II, headed Other Arbitration Claims, the text of these Parts indicates in my view that Part I relates to circumstances in which, if there were an arbitration, it would be subject to the 1996 Act, rather than to the old law, and that it covers matters relating to an arbitration agreement, independently of any arbitral proceedings. Thus, CPR62.2 provides: (1) In this Section of this Part arbitration claim means (a) any application to the court under the 1996 Act; (b) a claim to determine (i) whether there is a valid arbitration agreement; (ii) whether an arbitration tribunal is properly constituted; or what matters have been submitted to arbitration in accordance with an arbitration agreement; (c) a claim to declare that an award by an arbitral tribunal is not binding on a party; and (d) any other application affecting (i) arbitration proceedings (whether started or not); or (ii) an arbitration agreement. Under CPR62.5, governing service out of the jurisdiction, the court may give permission to serve an arbitration claim form out of the jurisdiction if (b) the claim is for an order under section 44 of the 1996 Act; or (c) the claimant (i) seeks some other remedy or requires a question to be decided by the court affecting an arbitration (whether started or not), an arbitration agreement or an arbitration award; and (ii) the seat of the arbitration is or will be within the jurisdiction or the conditions in section 2(4) of the 1996 Act are satisfied. I regard these provisions as wide enough to embrace a claim under section 37 to restrain foreign proceedings in breach of the negative aspect of an arbitration agreement. In circumstances where an arbitration claim includes under CPR62.2(d) any other application affecting (i) arbitration proceedings (whether started or not); or (ii) an arbitration agreement, the requirement in CPR62.5(c)(ii) that the seat of the arbitration is or will be within the jurisdiction must be read as satisfied if the seat of any arbitration, if any were to be commenced or proposed under the arbitration agreement, would be within the jurisdiction. In so far as Thomas J in Vale do Rio considered (para 59) that the predecessor to CPR62.2 (the then CPR PD 49G) included provisions equivalent to the present CPR62.2(1)(b),(c) and (d) out of an abundance of caution . to spell out the terms of the 1996 Act (or just possibly to cater for an oral arbitration agreement), I would respectfully disagree. Thomas J was in any event concerned with a point on the construction of the 1996 Act, which as he correctly said could not possibly be affected by the view taken of CPR PD 49G. His statement that the language might just possibly cater for an oral arbitration agreement itself opens the possibility, which I think correct, that the drafters were not confining themselves to issues, regarding arbitration agreements, arising under the provisions of 1996 Act. I add only that in the present case, although leave was in fact obtained under CPR PD 6B, paragraph 3.1(2) and CPR62.5(1)(b) and (c), the court would appear also to have had jurisdiction to give leave for service out of the jurisdiction under CPR PD 6B(6)(c), on the ground that, treating the arbitration agreement as the contract, the claim was made in respect of a contract where the contract . (c) is governed by English law. Section 9 Returning to the scheme of Part I of the 1996 Act, the principal focus is on the commencement, conduct, consequences and court powers with regard to an actual or proposed arbitration. In addition, Part I starts with sections 1 to 8 identifying the nature and certain features of the arbitration agreements to which it applies while sections 9 to 11 deal with stays of domestic legal proceedings where such an agreement exists. Section 9 runs contrary to JSCs general case, since it represents a situation in which the court, rather than the arbitral tribunal, rules in the first instance on arbitral jurisdiction, and does so bindingly. The Court of Appeal in Fiona Trust and Holding Corp v Privalov [2007] EWCA Civ 20; [2007] 1 All ER (Comm) 891, para 36 and Lightman J in Albon (t/a NA Carriage Co) v Naza Motor Trading Sdn Bhd (No 3) [2007] EWHC 665 (Ch); [2007] 2 All ER 1075, paras 14 to 20 correctly so held. However, JSC relies upon section 9, as supplementing its case on the general scheme of the 1996 Act and on the particular implications of sections such as sections 30, 32, 67 and 72, in another respect. Given that the court under section 9 determines the existence or otherwise of arbitral jurisdiction conclusively and at the outset, JSC points out that this is expressly provided by the Act. In contrast, the Act makes no reference to, and so it submits implicitly excludes, any power to injunct the commencement or continuation of foreign proceedings. I do not accept JSCs case on this point. Section 9 reflects, in domestic law, the requirement in article II(3) of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (United Nations 1958) that: II.3. The court of a Contracting State, when seized of an action in a matter in respect of which the parties have made an agreement within the meaning of this article, shall, at the request of one of the parties, refer the parties to arbitration, unless it finds that the said agreement is null and void, inoperative or incapable of being performed. Nothing in the New York Convention requires Contracting States to have in their law any equivalent power to that which section 37 includes in respect of foreign proceedings in breach of an arbitration agreement. The silence in Part 1 is in this respect unremarkable. Section 37 of the Senior Courts Act 1981 More generally, JSCs case depends upon a conclusion that the Arbitration Act 1996 either limits the scope, or as a matter of general principle qualifies the use, of the general power contained in section 37, so that it is no longer permissible to deploy section 37 to injunct foreign proceedings begun or threatened in breach of an arbitration agreement. Again, I cannot accept JSCs case. Section 37 is a general power, not specifically tailored to situations where there is either an arbitration agreement or an exclusive choice of court clause. To adopt words of Lord Mustill in the Channel Tunnel case, [1993] AC 334, 360E F, with reference to the relationship between section 37 and the previous arbitration legislation (the Arbitration Act 1950): Under section 37(1) by contrast the arbitration clause is not the source of the power to grant an injunction but is merely a part of the facts in the light of which the court decides whether or not to exercise a power which exists independently of it. The court may as a result need to be very cautious: in the exercise of its general powers under section 37 so as not to conflict with any restraint which the legislature may have imposed on the exercise of the new and specialised powers. (p 364B C). However, it is, in my opinion, entirely understandable that Parliament should not have thought to carve out from section 37 of the Senior Courts Act or to reproduce in the 1996 Act one aspect of a general power conferred by section 37. It cannot be deduced from the fact that it did not do so that it intended that the general power should never be exercised in any context associated with arbitration. On the contrary, it would be astonishing if Parliament should, silently and without warning, have abrogated or precluded the use by the English court of its previous well established jurisdiction under section 37 in respect of foreign proceedings commenced or threatened in breach of the negative aspect of an arbitration agreement. One would have expected the intended inapplicability of section 37 to have been made very clear in both the DAC Report and the Act. The 1996 Act does in Schedule 3 or 4 provide for other presently immaterial amendments or repeals in respect of provisions in what was the Supreme Court Act and is now the Senior Courts Act 1981. The Angelic Grace [1994] 1 Lloyds Rep 168 in particular was a highly prominent decision, expressed in emphatic terms during the very period when the DAC was preparing the Bill for the Act and its own report. Nothing in the DAC report of 1996 addresses either it or the long standing and well recognised jurisdiction which was its subject matter. Yet a regime under which the English court could no longer enforce the negative rights of a party to a London arbitration agreement by injunctive relief restraining foreign proceedings would have been, and would have been seen, as a radical diminution of the protection afforded by English law to parties to such an arbitration agreement. It would have aroused considerable interest and, no doubt, concern. The only sensible inference is that the drafters of the Act never contemplated that it could or would undermine the established jurisprudence on anti suit injunctions. It was only later that the Court of Justice in Luxembourg restricted the use of such injunctions; and then only in relation to foreign proceedings in the area covered by the Brussels/Lugano rgime and on the basis of the mutual trust affirmed to exist between courts within that regime. The interest and concern that this aroused witnesses to the interest that would have been aroused had the Bill or 1996 Act been seen as having any such radical intention or effect in relation to courts worldwide. The West Tankers case [2009] AC 1138 suggests that it did not occur to anyone until this case that it did. Conclusion The power to stay domestic legal proceedings under section 9 and the power to determine that foreign proceedings are in breach of an arbitration agreement and to injunct their commencement or continuation are in truth opposite and complementary sides of a coin. Subject to the recent European inroad, that remains the position. The general power provided by section 37 of the 1981 Act must be exercised sensitively and, in particular, with due regard for the scheme and terms of the 1996 Act when any arbitration is on foot or proposed. It is also open to a court under section 37, if it thinks fit, to grant any injunction on an interim basis, pending the outcome of current or proposed arbitration proceedings, rather than a final basis. But, for the reasons I have given, it is inconceivable that the 1996 Act intended or should be treated sub silentio as effectively abrogating the protection enjoyed under section 37 in respect of their negative rights under an arbitration agreement by those who stipulate for an arbitration with an English seat. In some cases where foreign proceedings are brought in breach of an arbitration clause or exclusive choice of court agreement, the appropriate course will be to leave it to the foreign court to recognise and enforce the parties agreement on forum. But in the present case the foreign court has refused to do so, and done this on a basis which the English courts are not bound to recognise and on grounds which are unsustainable under English law which is accepted to govern the arbitration agreement. In these circumstances, there was every reason for the English courts to intervene to protect the prima facie right of AESUK to enforce the negative aspect of its arbitration agreement with JSC. It follows that Burton J had jurisdiction under section 37 of the Senior Courts Act 1981 to make the order that he did, and that there was nothing wrong in principle with his exercise of his power to do so. The Court of Appeal was right so to conclude, and the appeal should be dismissed.

The appellant is the owner of a hydroelectric power plant in Kazakhstan. The respondent is the current operator of that plant. The concession agreement between the parties contains a clause providing that any disputes arising out of, or connected with, the concession agreement are to be arbitrated in London under International Chamber of Commerce Rules. For the purposes of this appeal the parties are agreed that the arbitration clause is governed by English law. The rest of the concession agreement is governed by Kazakh law. Relations between the owners and holders of the concession have often been strained. In 2004 the Republic of Kazakhstan, as the previous owner and grantor of the concession, obtained a ruling from the Kazakh Supreme Court that the arbitration clause was invalid. In 2009 the appellant, as the current owner and grantor of the concession, brought court proceedings against the respondent in Kazakhstan seeking information concerning concession assets. The respondents application to stay those proceedings under the contractual arbitration clause was dismissed on the basis that the Kazakh Supreme Court had annulled the arbitration clause by its 2004 decision. Shortly thereafter the respondent issued proceedings in England seeking (a) a declaration that the arbitration clause was valid and enforceable and (b) an anti suit injunction restraining the appellant from continuing with the Kazakh proceedings. An interim injunction was granted by the English Commercial Court and the appellant subsequently withdrew the request for information which was the subject of the Kazakh proceedings. However, the respondent remained concerned that the appellant would seek to bring further court proceedings in Kazakhstan in breach of the contractual agreement that such disputes should be subject to arbitration in London. As a result the respondent continued with the proceedings. The English Commercial Court found that they were not bound to follow the Kazakh courts conclusions in relation to an arbitration clause governed by English law and refused to do so. The Commercial Court duly granted both the declaratory and final injunctive relief sought. The appellant appealed to the Supreme Court of the United Kingdom on the grounds that English courts have no jurisdiction to injunct the commencement or continuation of legal proceedings brought in a foreign jurisdiction outside the Brussels Regulation/Lugano regime where no arbitral proceedings have been commenced or are proposed. The Supreme Court unanimously dismisses the appeal. The English courts have a long standing and well recognised jurisdiction to restrain foreign proceedings brought in violation of an arbitration agreement, even where no arbitration is on foot or in contemplation. Nothing in the Arbitration Act 1996 (the 1996 Act) has removed this power from the courts. The judgment of the court is given by Lord Mance. An arbitration agreement gives rise to a negative obligation whereby both parties expressly or impliedly promise to refrain from commencing proceedings in any forum other than the forum specified in the arbitration agreement. This negative promise not to commence proceedings in another forum is as important as the positive agreement on forum [21 26]. Independently of the 1996 Act the English courts have a general inherent power to declare rights and a well recognised power to enforce the negative aspect of an arbitration agreement by injuncting foreign proceedings brought in breach of an arbitration agreement even where arbitral proceedings are not on foot or in contemplation [19 23]. There is nothing in the 1996 Act which removes this power from the courts; where no arbitral proceedings are on foot or in prospect the 1996 Act neither limits the scope nor qualifies the use of the general power contained in section 37 of the Senior Courts Act 1981 (the 1981 Act) to injunct foreign proceedings begun or threatened in breach of an arbitration agreement [55]. To preclude the power of the courts to order such relief would have required express parliamentary provision to this effect [56]. The 1996 Act does not set out a comprehensive set of rules for the determination of all jurisdictional questions. Sections 30, 32, 44 and 72 of the 1996 Act only apply in circumstances where the arbitral proceedings are on foot or in contemplation; accordingly they have no bearing on whether the court may order injunctive relief under section 37 of the 1981 Act where no arbitration is on foot or in contemplation [40]. The grant of injunctive relief under section 37 of the 1981 Act in such circumstances does not constitute an intervention as defined in section 1(c) of the 1996 Act; section 1(c) is only concerned with court intervention in the arbitral process [41]. The reference in section 44(2)(e) of the 1996 Act to the power of the court to grant an interim injunction for the purposes of and in relation to arbitral proceedings was not intended to exclude or duplicate the courts general power to grant injunctive relief under section 37 of the 1981 Act [48]. Service out of the jurisdiction may be affected under Civil Procedure Rule 62.2 which provides for service out where an arbitration claim affects arbitration proceedings or an arbitration agreement; this provision is wide enough to embrace a claim under section 37 to restrain foreign proceedings brought or continued in breach of the negative aspect of an arbitration agreement [49].

These appeals concern the impact of a cap on housing benefit (HB), in cases of deemed under occupation of social sector housing, on those with disabilities and on women living in sanctuary scheme accommodation. The cap was imposed by Regulation B13 of the Housing Benefit Regulations 2006 (SI 2006/213) (Reg B13). Reg B13 was introduced with effect from 1 April 2013, by way of amendment of the 2006 Regulations by the Housing Benefit (Amendment) Regulations 2012 (SI 2012/3040), as further amended by the Housing Benefit (Amendment) Regulations 2013 (SI 2013/665). It was a politically controversial matter, described as either a bedroom tax or removal of the spare room subsidy according to political viewpoint. Its merits are not a matter for the court, nor is there any challenge to the legality of the cap as it applies in general. The issues before the court are narrower. The appeals are from two judgments of the Court of Appeal, differently constituted, in judicial review proceedings. The claimants either have disabilities, or live with dependent family members who have disabilities, or live in what are known as sanctuary scheme homes (accommodation specially adapted to provide protection for women at severe risk of domestic violence). They are all tenants of registered social landlords and they all receive or received HB. They challenge the validity of Reg B13, as it applies to them, on equality grounds. More specifically, they contend that there has been a violation of their rights under article 14 of the European Convention on Human Rights (ECHR), taken with article 8 and/or article 1 of the First Protocol (A1P1) and in As case that there has been a breach by the Secretary of State of the Public Sector Equality Duty (PSED) under the Equality Act 2010. They are supported in their challenges by the Equality and Human Rights Commission (EHRC), which was given permission to intervene. In the first set of proceedings, issued by MA and others, some of the claims (including MAs claim) were resolved. When the case reached the Court of Appeal the claims remaining in issue were those of Jacqueline Carmichael, Richard Rourke, Mervyn Drage, JD and James Daly. Their claims were rejected by the Divisional Court (Laws LJ and Cranston J) [2013] EWHC 2213 (QB); [2013] PTSR 1521, and the Court of Appeal (Lord Dyson MR, Longmore and Ryder LJJ) [2014] EWCA Civ 13; [2014] PTSR 584. The other appeal arises from proceedings brought separately by A and the Rutherford family. Their claims were dismissed at first instance by different judges, but their appeals were heard together, and both succeeded in the Court of Appeal (Lord Thomas of Cwmgiedd CJ and Tomlinson and Vos LJJ) [2016] EWCA Civ 29. A, who is in a sanctuary scheme, succeeded under article 14 on the ground of sex discrimination, but failed in her claim under the Equality Act. The Rutherfords succeeded under article 14 on the ground of disability discrimination. The Secretary of State is the respondent in the MA case and is the appellant in relation to A and the Rutherfords. (In the case of A, there is a cross appeal against the rejection of her Equality Act claim.) The key facts relating to the individual claimants are summarised in appendix 1 to this judgment. Housing benefit and Regulation B13 HB is a means tested benefit provided under section 130 of the Social Security Contributions and Benefits Act 1992 and subordinate regulations. (It is due to be replaced eventually by Universal Credit, which is in the process of being rolled out across parts of the United Kingdom.) Its purpose is to help claimants with their rental costs. There is a prescribed mechanism for determining in each case the appropriate maximum housing benefit (AMHB). Section 130A of the 1992 Act, as inserted by section 30(2) of the Welfare Reform Act 2007 and amended by section 69(3) of the Welfare Reform Act 2012, allows regulations to provide for the amount of the claimants rental liability to be taken into account in calculating the AMHB to be less than the actual liability. The AMHB is calculated by reference to the eligible rent. Reg B13 provides for adjustment of the eligible rent and AMHB in the area of social sector housing. The relevant parts are as follows: (1) The maximum rent (social sector) is determined in accordance with paras (2) to (4). (2) The relevant authority must determine a limited rent by (a) determining the amount that the claimants eligible rent would be in accordance with regulation 12B(2) (b) where the number of bedrooms in the dwelling exceeds the number of bedrooms to which the claimant is entitled in accordance with paras (5) to (7), reducing that amount by the appropriate percentage set out in para (3); (3) The appropriate percentage is (a) 14% where the number of bedrooms in the dwelling exceeds by one the number of bedrooms to which the claimant is entitled; and (b) 25% where the number of bedrooms in the dwelling exceeds by two or more the number of bedrooms to which the claimant is entitled. (4) Where it appears to the relevant authority that in the particular circumstances of any case the limited rent is greater than it is reasonable to meet by way of housing benefit, the maximum rent (social sector) shall be such lesser sum as appears to that authority to be an appropriate rent in that particular case. (5) The claimant is entitled to one bedroom for each of the following categories of person whom the relevant authority is satisfied occupies the claimants dwelling as their home (and each person shall come within the first category only which is applicable) (a) Act); (b) (ba) a child who cannot share a bedroom; (c) (d) (e) two children of the same sex; two children who are less than ten years old; a child a couple (within the meaning of Part 7 of the a person who is not a child; (6) The claimant is entitled to one additional bedroom in any case where (9) a relevant person is a person who requires (a) overnight care; or (b) a relevant person is a qualifying parent or carer. In this regulation relevant person means the claimant; (a) the claimants partner; (b) a person (P) other than the claimant or the (c) claimants partner who is jointly liable with the claimant or the claimants partner (or both) to make payments in respect of the dwelling occupied as the claimants home; (d) Ps partner. A person who requires overnight care is defined in Reg 2(1) in terms which have the effect of not including any child. HB is payable at a reduced rate to claimants with an income above the applicable amount: Social Security Contributions and Benefits Act 1992, section 130(1). Regulations determine the applicable amount and what income is to be taken into account. The applicable amount is set at a level which is intended to cover a claimants basic living needs other than rent. Discretionary Housing Payments There is also a statutory scheme for enabling Discretionary Housing Payments (DHPs) to be made to persons who are entitled to HB and/or council tax benefit: Child Support, Pensions and Social Security Act 2000, section 69. As the title indicates, such payments are discretionary. The scheme is funded by central government and administered by local authorities. By the terms of the Discretionary Financial Assistance Regulations (SI 2001/1167), made under section 69 of the 2000 Act, an award may be made for such period as the authority considers appropriate in the particular circumstances of the case, and the authority is required to give reasons for its decision. There is no statutory right of appeal, but such decisions are in principle subject to judicial review. The practice is for the Department of Work and Pensions to make an annual DHP grant to local authorities in respect of their anticipated expenditure. Equality rights Two sets of equality rights are in issue: a) under article 14 of the ECHR, taken together with article 8 and/or A1P1, and b) under the Equality Act 2010. Article 14 provides: The enjoyment of the rights and freedoms set forth in this Convention shall be secured without discrimination on any ground such as sex, race, colour, language, religion, political or other opinion, national or social origin, association with a national minority, property, birth or other status. The claimants other than A contend that Reg B13 operates so as to cause unlawful disability discrimination. It is common ground that disability falls within other status. A contends that Reg B13 operates so as to cause unlawful sex discrimination. Article 8 protects private and family life. A1P1 protects rights in respect of property and possessions, and it is common ground that HB falls within its scope. Section 149 of the Equality Act is headed Public Sector Equality Duty. It provides in part: (1) A public authority must, in the exercise of its functions, have due regard to the need to eliminate discrimination ; (a) (b) advance equality of opportunity between persons who share a relevant protected characteristic and persons who do not share it; (c) (3) Having due regard to the need to advance equality of opportunity between persons who share a relevant protected characteristic and persons who do not share it involves having due regard, in particular, to the need to remove or minimise disadvantages suffered by persons (a) who share a relevant protected characteristic that are connected to that characteristic; (b) take steps to meet the needs of persons who share a relevant protected characteristic that are different from the needs of persons who do not share it; Disability and sex are among the protected characteristics set out in section 149(7) of the Equality Act. Evolution of Regulation B13 The evolution of Reg B13 is described in detail in the judgments given in the case of MA and others by the Divisional Court (paras 20 to 33) and the Court of Appeal (paras 15 to 36). Paragraphs 20 to 33 of the judgment of Laws LJ in the Divisional Court are reproduced at appendix 2 to this judgment. In summary, as part of its policy for curbing public expenditure the government aimed to ensure that social sector tenants of working age who were occupying premises with more bedrooms than they required should, wherever possible, move into smaller accommodation. It was recognised at an early stage that a policy based purely on numbers of rooms and occupants would cause problems for some with disabilities, and there was a debate within government and Parliament about how such problems should be addressed. The government initially decided that, rather than creating general exceptions for persons with disabilities (or certain categories of persons with disabilities), their needs should be met as necessary through a scheme of discretionary housing payments based on individual assessments. Regulation B13 as first introduced by SI 2012/3040 did not include para 6 (The claimant is entitled to one additional bedroom in any case where (a) the claimant or the claimants partner is (or each of them is) a person who requires overnight care; or (b) the claimant or the claimants partner is (or each of them is) a qualifying parent or carer.) This para was added by SI 2013/665. The EHRC correctly pointed out in its written case, para 8, that there has been a change in the structure of the under occupation criteria now contained in Reg B13. When under occupation criteria were first introduced, the provision for determining the number of bedrooms required by a household depended entirely on the number of occupants, their ages and sexes, and whether any of them were a couple. Para 6 contains provision for some disability related need. The result is a composite provision, structured on the basis of a non disabled norm but with provision for certain classes of disability related need. Parts of Reg B13 in its current form owe their origin to the decision of the Court of Appeal in Burnip v Birmingham City Council [2012] EWCA Civ 629; [2013] PTSR 117. This arose from a provision in Reg 13D(3) of the Housing Benefit Regulations 2006 (introduced by regulation 7 of the Housing Benefit (Local Housing Allowance and Information Sharing) Amendment Regulations 2007 (SI 2007/2868) and amended by regulation 2(6) of the Housing Benefit (Amendment) Regulations 2010 (SI 2010/2835) which came into force on 1 April 2011), in similar terms to Reg B13(5). The court heard appeals in three cases. In Burnip and a second case the claimants were adults with disabilities who required the presence of a carer throughout the night. By the time that the matter reached the Court of Appeal, there had been a legislative amendment which met those cases (by allowing an additional bedroom where the claimant or claimants partner required overnight care). The third case, Gorry v Wiltshire County Council, concerned a family including two children of the same sex who suffered from severe disabilities which made it inappropriate for them to share a bedroom. The court held that in each case there had been discrimination under article 14, because Reg B13 had a disparate adverse impact on persons with disabilities, and that the discrimination had not been justified. The court recognised that DHPs had a valuable role to play but it did not consider that they provided an adequate response to the problem in the types of case with which the court was concerned. The reasons for the courts decision that the discrimination was not justified were given by Henderson J, with whom Maurice Kay LJ (para 23) and Hooper LJ (para 25) agreed. Henderson J emphasised (para 64) that he was not suggesting a general exception from the normal bedroom test for disabled people of all kinds. The exception, he said, was sought only for a very limited category of claimants, namely those whose disability was so severe that an extra bedroom was needed for a carer to sleep in, or in cases like that of Mr Gorry where separate bedrooms were needed for children who, in the absence of disability, could reasonably be expected to share a room. He observed that such cases were by their nature likely to be relatively few in number, easy to recognise, not open to abuse and unlikely to undergo change or need regular monitoring. He added that the fact that Parliament had now legislated for cases like that of Mr Burnip could be viewed as recognition by Parliament of the justice of such claims. Ten months later, Reg B13 was amended to insert para (5)(ba), which covered Mr Gorrys case. In reaching this conclusion the court applied the test whether the Secretary of Judgments under review In the MA proceedings the Court of Appeal accepted that Reg B13 had a discriminatory effect on some people with disabilities, but it held that the discrimination was justified, primarily because the Secretary of State was entitled to take the view that it was not practicable to exempt an imprecise class of persons to whom the bedroom criteria would not apply because they needed extra bedroom space by reason of disability. The DHP scheme had the benefit of flexibility and was also appropriate because the nature of a persons disability and disability related needs may change over time. States policy was manifestly without reasonable foundation. The court rejected the argument that the case of Mrs Carmichael, who needed to sleep in a separate room from her husband on account of her disability, was materially indistinguishable from the Gorry situation of children who were unable to sleep in the same room, which had now been catered for by the new provision contained in Reg B13(5)(ba). The court held that the Secretary of State was entitled to provide greater protection for a child than an adult because the best interests of a child are a primary consideration, citing R (JS) v Secretary of State for Work and Pensions (Child Poverty Action Group intervening) [2013] EWHC 3350, paras 42 to 46 (Elias LJ). The court also rejected the allegation of a breach of the PSED. It emphasised (para 83) that the principal question in relation to the PSED is not whether the decision (or outcome) is justifiable, but whether, in the process leading to the making of the decision, the decision maker had due regard to the relevant considerations, citing the review of the case law by McCombe LJ in R (Bracking) v Secretary of State for Work and Pensions [2013] EWCA Civ 1345, [2014] EqLR 60, para 26. It upheld the finding of the Divisional Court that the effects of the HB cap were properly considered. In the proceedings relating to A and the Rutherford family, the Court of Appeal held that the situation of the Rutherford family, who included a child with disabilities requiring an overnight carer on certain days of the week, was indistinguishable from that of an adult with disabilities requiring an overnight carer, to which the decision in Burnip and Reg B13(6) applied. As explained at para 7, a child who requires overnight care does not come within the statutory definition of a person who requires overnight care. The court held that the reasoning in Burnip applied also in the case of A, a female victim of domestic violence living in accommodation adapted under a sanctuary scheme, because the category of persons in such schemes was limited to a relatively small number of victims (albeit growing), who were easy to identify, not liable to abuse the scheme, unlikely to undergo change and not in need of regular monitoring. The court therefore held that there had been a breach of article 14 in both cases. As to the PSED, the court held that the Secretary of State had properly considered the questions of disability based discrimination and gender based discrimination. Did the courts apply the right test? The primary contention of the claimants in MA is that the Divisional Court and the Court of Appeal applied the wrong test in asking themselves whether the discriminatory treatment about which the claimants complained was manifestly without reasonable foundation. In a case involving disability discrimination, weighty reasons for justification were required. It was wrong, they submitted, to see the case as one involving a matter of general economic or social policy, to which the manifestly without reasonable foundation test was appropriate. No objection was being raised to the general policy of Reg B13. The objection was to the application of the policy in a way which unjustifiably discriminated against a group of people with disabilities. The Divisional Court and the Court of Appeal based their approach on the judgment of Lady Hale, with which the other members of the court agreed, in Humphreys v Revenue and Customs Comrs [2012] 1 WLR 1545. It is necessary to set out the relevant passage at some length: 15. The proper approach to justification in cases involving discrimination in state benefits is to be found in the Grand Chambers decision in Stec v United Kingdom (2006) 43 EHRR 1017. The benefits in question were additional benefits for people who had to stop work because of injury at work or occupational disease. They were entitled to an earnings related benefit known as reduced earnings allowance. But on reaching the state pension age, they either continued to receive reduced earnings allowance at a frozen rate or received instead a retirement allowance which reflected their reduced pension entitlement rather than reduced earnings. Women suffered this reduction in benefits earlier than men because they reached state pension age at 60 whereas men reached it at 65. 16. The court repeated the well known general principle that A difference of treatment is, however, discriminatory if it has no objective and reasonable justification; in other words, if it does not pursue a legitimate aim or if there is not a reasonable relationship of proportionality between the means employed and the aim sought to be realised. (para 51) However, it explained the margin of appreciation enjoyed by the contracting states in this context, at para 52: The scope of this margin will vary according to the circumstances, the subject matter and the background. As a general rule, very weighty reasons would have to be put forward before the court could regard a difference in treatment based exclusively on the ground of sex as compatible with the Convention. On the other hand, a wide margin is usually allowed to the state under the Convention when it comes to general measures of economic or social strategy. Because of their direct knowledge of their society and its needs, the national authorities are in principle better placed than the international judge to appreciate what is in the public interest on social or economic grounds, and the court will generally respect the legislatures policy choice unless it is manifestly without reasonable foundation. 17. The phrase manifestly without reasonable foundation dates back to James v United Kingdom (1986) 8 EHRR 123, para 46, which concerned the compatibility of leasehold enfranchisement with article 1 of the First Protocol. In the Stec case 43 EHRR 1017, the court clearly applied this test to the states decisions as to when and how to correct the inequality in the state pension ages, which had originally been introduced to correct the disadvantaged position of women. Similarly, the decision to link eligibility for reduced earnings allowance to the pension system was reasonably and objectively justified, given that this benefit is intended to compensate for reduced earning capacity during a persons working life: para 66. The Grand Chamber applied the Stec test again to social security benefits in Carson v United Kingdom (2010) 51 EHRR 369, para 61, albeit in the context of discrimination on grounds of country of residence and age rather than sex. 18. The same test was applied by Lord Neuberger of Abbotsbury (with whom Lord Hope of Craighead, Lord Walker of Gestingthorpe and Lord Rodger of Earlsferry agreed) in R (RJM) v Secretary of State for Work and Pensions [2009] AC 311, which concerned the denial of income support disability premium to rough sleepers. Having quoted para 52 of the Stec case 43 EHRR 1017 he observed, at para 56, that this was an area where the court should be very slow to substitute its view for that of the executive, especially as the discrimination is not on one of the express, or primary grounds. He went on to say that it was not possible to characterise the views taken by the executive as unreasonable. He concluded, at para 57: The fact that there are grounds for criticising, or disagreeing with, these views does not mean that they must be rejected. Equally, the fact that the line may have been drawn imperfectly does not mean that the policy cannot be justified. Of course, there will come a point where the justification for a policy is so weak, or the line has been drawn in such an arbitrary position, that, even with the broad margin of appreciation accorded to the state, the court will conclude that the policy is unjustifiable. 19. Their Lordships all stressed that this was not a case of discrimination on one of the core or listed grounds and that this might make a difference. In R (Carson) v Secretary of State for Work and Pensions [2006] 1 AC 173, both Lord Hoffmann and Lord Walker drew a distinction between discrimination on grounds such as race and sex (sometimes referred to as suspect) and discrimination on grounds such as place of residence and age, with which that case was concerned. But that was before the Grand Chambers decision in the Stec case 43 EHRR 1017. It seems clear from Stec, however, that the normally strict test for justification of sex discrimination in the enjoyment of the Convention rights gives way to the manifestly without reasonable foundation test in the context of state benefits. The same principles were applied to the sex discrimination involved in denying widows pensions to men in Runkee v United Kingdom [2007] 2 FCR 178, para 36. If they apply to the direct sex discrimination involved in the Stec and Runkee cases, they must, as the Court of Appeal observed, at para 50, apply a fortiori to the indirect sex discrimination with which we are concerned. Lady Hale added (para 22) that the fact the test is less stringent than the weighty reasons normally required to justify sex discrimination did not mean that the justifications put forward should escape careful scrutiny. On analysis the discrimination may be found to lack a reasonable basis. What Lady Hale said in the context of sex discrimination applies equally to disability discrimination, as Lord Dyson MR rightly held in the present case (para 59). Lord Dyson also emphasised that the fact that the court should apply the manifestly without reasonable foundation test, and should exercise considerable caution before interfering with the scheme approved by Parliament, did not lessen the need for careful scrutiny of the reasons advanced by the Secretary of State in justification of the scheme (para 60). In the present case counsel for the claimants pointed out that in Humphreys the unsuccessful appellant did not argue for anything other than the test established in the Stec and RJM cases (para 20). It is therefore necessary to ask whether there is good reason to depart from what Lady Hale said in that case. The fundamental reason for applying the manifestly without reasonable foundation test in cases about inequality in welfare systems was given by the Grand Chamber in Stec (para 52). Choices about welfare systems involve policy decisions on economic and social matters which are pre eminently matters for national authorities. The claimants seek to counter that point by arguing that this case involves no challenge to a decision of that kind. They have no quarrel with the policy of Reg B13. Their complaint is at a lower level and involves no question of economic or social judgment. Their complaint is simply that the manner of implementation of the policy discriminates against a vulnerable group, and that it is right to require weighty reasons to justify the discrimination rather than the broader policy itself. Rejecting that argument, Lord Dyson MR said (paras 54 to 55) that although the precise detail and scope of the Regulations may not be matters of high policy in themselves, they formed an integral part of a high policy decision and could not be dismissed as technical detail; that the law in this area would suffer from undesirable uncertainty if the test were to vary according to whether the challenge were to high level policy or lower level policy; and that there was no hint of such a distinction in the European or domestic case law. It was argued before this court that the rationale for the approach in Humphreys does not apply in the present case. In Humphreys the challenge was to a rule of the Child Tax Credit Regulations 2002 (SI 2002/2007) that there should be a single payment of child tax credit (CTC) for any child, and that it should be made to the parent with the main responsibility for the child. The revenue accepted that the scheme was indirectly discriminatory against men, but the court found that there was objective justification. The purpose of CTC was to help with meeting the needs of the household with primary responsibility for the childs care. A choice had to be made whether, and if so how, the CTC should be split where parents had separated. The fact that men were less likely to receive CTC than women was not related to their gender in such a way as to show a lack of equal respect. It reflected the fact that men were more likely to be non resident parents, and therefore less likely to need the CTC. The decision that there should be a single payment of CTC in respect of any child was a necessary part of achieving the governments economic and social policy. By contrast, it was said that Reg B13 bears unequally on those with disabilities because of their need in many cases for larger accommodation and it is not necessary for it to do so. I will come on to consider the group of people who have a particular medical need for an additional bedroom, but the argument which I am presently considering goes too far. The claimants objections to Reg B13 relate to their social as well as medical needs. The broad question which faced the Secretary of State in relation to Reg B13 and its potential impact on those with disabilities was whether to try to deal comprehensively with all problems of those who have any kind of disability (including social needs not dissimilar to those of other groups) within the precise rules of the regulation, or whether to accommodate them by a linked system of discretionary benefits. This is in my view a clear example of a question of economic and social policy, integral to the structure of the welfare benefit scheme, and it would not be appropriate to depart from the courts normal approach. Otherwise, it would be too easy for a skilled lawyer to circumvent the general rule by couching the discrimination complaint in terms of an attack on matters of detail. I accept that examples can be found of state benefit cases where European courts have spoken of a need for weighty reasons to justify discrimination. The decision of the Grand Chamber in Andrejeva v Latvia (2009) 51 EHRR 28 is one such example. Latvian state pension rules discriminated against the applicant on grounds of her nationality. The Strasbourg court said that while a wide margin of appreciation is usually allowed to the state under the Convention when it comes to measures of economic or social strategy, in a case where nationality was the sole criterion for differential treatment very weighty reasons would have to be put forward to justify it. In that case there was, on the face of it, no reasonable foundation for such discrimination, and in those circumstances it was for the state to produce a good reason to justify it. In the language of Lady Hale in Humphreys, on careful scrutiny the discrimination had no reasonable justification. Other examples cited in argument included Zeman v Austria (Application No 23960/02, 29 June 2006); Luczak v Poland (Application No 77782/01, 27 November 2007), Markin v Russia (2002) 56 EHRR 8 and Vrountou v Cyprus (App No 33631/06, 13 October 2015). None of them contain a statement of general principle inconsistent with Humphreys. I would affirm what was said in Humphreys in the passage cited above. It follows that in this case the courts have applied the correct test. The next question is whether they misapplied it. Has the test been misapplied? As a fall back to their argument that the wrong test has been applied, the claimants in MA contend that the courts below failed to give the Reg B13 scheme sufficiently careful scrutiny and that, as a matter of principle, the availability of DHPs could not justify a reduction in the HB to which persons suffering from disabilities would be entitled but for Reg B13. The impact of Reg B13 on those with disabilities was considered by the government and Parliament in depth. This is apparent from Laws LJs resume of the evolution of the policy (appendix 2). The reasons for the decision not to apply a general exemption from Reg B13 for those suffering from disabilities, but instead to make good the shortfall in cases where it would be inappropriate to expect someone with a disability to move house (or make good the shortfall by other means such as taking a lodger), were also explained in witness statements by Beverley Walsh, a senior civil servant in the Department of Work and Pensions. The essential point she made was that the impact of Reg B13 on those with disabilities was not uniform, but depended to a large degree on the nature and extent of their disabilities, as well as on their personal and social circumstances (such as whether they relied heavily on a local support network and whether suitable alternative accommodation was available, particularly if their present accommodation had been adapted to meet their individual needs). Some with disabilities would be significantly affected by the cap based on bedroom criteria; others would be no more affected than someone without disability. In MA the Divisional Court and the Court of Appeal concluded after careful scrutiny that the Secretary of States decision to structure the scheme as he did was reasonable. In general terms I agree. There was certainly a reasonable foundation for the Secretary of States decision not to create a blanket exception for anyone suffering from a disability within the meaning of the Equality Act (which covers anyone who has a physical or mental impairment that has a more than minimal long term effect on the ability to do normal daily activities) and to regard a DHP scheme as more appropriate than an exhaustive set of bright line rules to cover every contingency. However, that is not the end of the matter, for there are some people who suffer from disabilities such that they have a transparent medical need for an additional bedroom. Burnip and Gorry were in that category. Even before the decision in those cases there had been an amendment of the Regulations to include one additional bedroom in any case where the claimant or the claimants partner is a person who requires overnight care (or in any case where both of them are). Burnip was such a case. Gorry was a case where children required separate bedrooms for disability reasons. In those cases, which were rightly identified by the Court of Appeal as ones where the individuals medical condition was easy to recognise and gave rise to the need for a separate bedroom, there was no reasonable cause to apply the same cap on HB as if the bedrooms were truly under occupied. (Henderson J said that such cases were likely to be few, but I do not see that as a significant factor in itself.) That brings me to the cases of Jacqueline Carmichael and the Rutherford family. They are counterparts to Gorry and Burnip respectively. Mrs Carmichael cannot share a bedroom with her husband because of her disabilities. Her position is directly comparable to that of the Gorry children, who could not share a bedroom because of their disabilities. But Mrs Carmichael is caught by Reg B13 because para (5)(ba), which was introduced to meet the Gorry situation is confined to a child who cannot share a bedroom. The Rutherfords need a regular overnight carer for their grandson who has severe disabilities. Their position is comparable to that of Mr Burnip, who needed an overnight carer. But the Rutherfords are caught by Reg B13 because para (6)(a), which covers the Burnip situation, does not extend to a child who requires overnight care. There is no reasonable justification for these differences. The Court of Appeal in MA was persuaded (para 79) that there was an objective reasonable justification for treating Mrs Carmichael less favourably than a child in like circumstances, because the best interests of children are a primary consideration. I can see that there may be some respects in which differential treatment of children and adults regarding the occupation of bedrooms may have a sensible explanation. Expecting children to share a bedroom is not the same as expecting adults to do so. But I cannot, with respect, see a sensible reason for distinguishing between adult partners who cannot share a bedroom because of disability and children who cannot do so because of disability. And the same applies also to distinguishing between adults and children in need of an overnight carer. There is also an ironic and inexplicable inconsistency in the Secretary of States approach in the Carmichael and Rutherford cases which Lord Thomas CJ exposed in the latter at para 73: He [the Secretary of State] justified the distinction between making provision for a bedroom for disabled children but not for disabled adults by reference to the best interests of the child and explained the different treatment on that basis. On that basis, it seems to us very difficult to justify the treatment within the same regulation of carers for disabled children and disabled adults, where precisely the opposite result is achieved; provision for the carers of disabled adults but not for the carers of disabled children. Lord Thomas CJ added that the court accepted that DHPs were intended to provide the same sum of money, but it was not persuaded that this justified the different treatment of children and adults in respect of the same essential need within the same regulation. I agree. I would therefore dismiss the Secretary of States appeal in the Rutherford case, but I would allow Mrs Carmichaels appeal and would hold that in her case there has been a violation of article 14, taken with article 8. (In these circumstances A1P1 adds nothing and does not require further consideration.) The other claimants in MA are James Daly, Mervyn Drage, JD and Richard Rourke. Mr Daly occupies a two bedroom property. His severely disabled son, Rian, stays with him regularly, but he is not within the list of those who qualify for a bedroom under Reg B13(5) because he spends less than half his time with his father. This has nothing to do with the fact of his disability. Mr Daly may have a powerful case for a DHP award, so that he can continue to pay his rent from state benefits for Rians sake, but I accept the Secretary of States argument that he has no proper basis for challenging the HB and DHP structure on equality grounds. Mr Drage is the sole occupier of a three bedroom flat, which is full of accumulated papers. He suffers from an obsessive compulsive disorder. His hoarding of papers is no doubt connected to his mental illness, but that is very far from showing that he has a need for three bedrooms. It is not unreasonable for his claim for benefit to cover his full rent to be considered on an individual basis under the DHP scheme. JD lives with his adult daughter, AD, who is severely disabled, in a specially constructed three bedroom property. They have no objective need for that number of bedrooms. Because the property has been specially designed to meet her complex needs, there may be strong reasons for JD to receive state benefits to cover the full rent, but again it is not unreasonable for that to be considered under the DHP scheme. Richard Rourke and his step daughter live in a three bedroom property. One of the bedrooms is used for the storage of equipment. It is another example of a case where it is not unreasonable for Mr Rourkes claim for benefit sufficient to cover the whole of the rent to be considered on an individual basis under the DHP scheme. I would therefore dismiss the claims of the MA claimants, other than Mrs Carmichael, that they have suffered unlawful disability discrimination. Sanctuary schemes A and her son live in a three bedroom house. A has said in a witness statement that when she moved there she only needed a two bedroom property, but that there was a shortage of two bedroom properties and she accepted the offer of a three bedroom property. This was prior to the events giving rise to her need for protection under the sanctuary scheme, which led to its adaptation to provide a high level of security, but the adaptations did not involve using the third bedroom. There is no objective need for her to have three bedrooms, one of which is unoccupied, but she is understandably loath to move (even if suitable alternative accommodation could be found and made appropriately secure), because she has lived in her present property for many years, she knows her neighbours well and she feels safe where she is. Those are powerful reasons, but they have nothing to do with the number of bedrooms. Many other people may have very strong reasons for continuing to live in a larger property than they currently need in terms of size. The Court of Appeal said in As case that while it had great sympathy with the Secretary of States arguments for saying that it fell into the broad class for which DHPs were appropriate, Burnip obliged the court to hold otherwise (paras 54 to 55). Like Burnip, A fell into an easily recognisable class few in number. I have already said that I do not see the likely number of people affected as a critical factor in itself (para 42). To favour those in a small group with strong societal reasons for staying in a bigger property than they need over those in a larger group with equally strong or possibly stronger reasons would be truly irrational. The distinction between Burnip and A is that in Burnip there was a transparent medical need for an additional bedroom, whereas A has no need for a three bedroom property. As case for staying where she is, strong as that case would appear to be, has nothing to do with the size of the property; Mr Burnips case had everything to do with the size of the property and its ability to accommodate a carer. Notwithstanding my considerable sympathy for A and other women in her predicament, I would allow the Secretary of States appeal in As case. I add that for as long as A, and others in a similar situation, are in need of the protection of sanctuary scheme housing, they must of course receive it; but that does not require the court to hold that A has a valid claim against the Secretary of State for unlawful sex discrimination. Lady Hale has reached a different conclusion. She considers that Reg 13B operates so as to discriminate against women such as A who are victims of gender based violence, in breach of their rights under article 14 taken with article 8 of the ECHR. Lady Hales starting point is that while A has no need for more bedroom space than is allowed for under Reg B13(5), she has a different type of need, that is, a need to stay where she is because it has been adapted as part of a scheme to provide her with a safe haven. Lady Hale says that her case cannot be equated with other people who may have a compelling case for staying where they are, because even if such people have a status for the purpose of article 14, their cases would need individual evaluation (para 78). I agree that not everybody who could make out a strong case for remaining where they are could necessarily be fitted into a relevant status. An everyday example would be a person who lives close to and is the primary carer for an elderly parent, who is dependent on that person for being able to continue to live in the elderly parents own home. Whether the parent would be able to bring himself or herself within articles 8 and 14 in such circumstances would be debatable. But the carer may be able to show a powerful case that there is a need for her to live where she does, even if she happens to have a spare bedroom; and that, leaving aside humanitarian considerations, the cost of state care for the parent would be likely far to exceed any saving by reducing the carers HB. I agree also with Lady Hale about the need for individual evaluation, and it was this consideration which primarily led the Secretary of State to decide that cases of need for reasons unconnected with the size of the property should be dealt with through the DHP scheme. Take also the case of JD and AD (referred to in para 53). Just as in As case, their property has been specially adapted to provide AD with an environment where she can live in safety. Lady Hales observation (in para 76) that because of its special character, it will be difficult (if not impossible) for her to move elsewhere and would certainly put the State to further expense may equally be said of AD, but the court is unanimous that it is not unreasonable for JD and ADs need for housing benefit to be considered under the DHP scheme, notwithstanding the differences between HB and DHP to which Lady Hale has referred in para 77 ADs disabilities are at the severe end of the spectrum, but there can be degrees of disability, and the alterations to a property to accommodate the persons needs may be on a larger or smaller scale. These are matters which the Secretary of State may legitimately say require individual evaluation. Such examples could be multiplied, but the point remains the same. It was recognised from the time that Reg B13 was mooted that there will be some people who have a very powerful case for remaining where they are, on grounds of need unrelated to the size of the property. For reasons explained in the evidence (to which I have referred in para 40), it was decided not to try to deal with cases of personal need unrelated to the size of the property by general exemptions for particular categories but to take account of them through DHPs. Lady Hale has observed that it has not been demonstrated that there would be insuperable practical difficulties in drafting an exemption from Reg B13 for victims of gender based violence who are in a sanctuary scheme and who need for that reason to stay where they are. In her witness statement on behalf of the Secretary of State in As case, Ms Walsh drew an analogy between adaptations made to properties for persons with disabilities and adaptations made under sanctuary schemes. She made the point that the type of adaptations made and their cost is likely to vary from case to case, and by implication that they may be more easy or less easy to replicate. These factors would be relevant in considering the strength of the case for saying that the person concerned needs to stay where they are. A herself has emphasised that she regards the support of neighbours and family as critical, and that may well be so. But that is a personal factor which may not necessarily apply, or apply to the same degree, to other victims of domestic violence. It is also a factor which may apply as strongly to the elderly or persons with disabilities. So while I agree that there would have been no insuperable practical difficulty in drafting an exemption from the size criteria for victims of gender violence who are in a sanctuary scheme and who need for that reason to stay where they are, deciding whether they really needed to stay in that particular property would at least in some cases require some form of evaluation. I leave aside the question debated in the evidence about whether some people in a sanctuary scheme might safely be able to make use of a spare room by taking in someone else such as a family member. Likewise I do not suppose that there would be insuperable practical difficulties in drafting exemptions to meet other categories of people who may justifiably claim to have a need to remain where they are for reasons unconnected with the size of the accommodation, but this would again require an evaluative process. Lady Hale considers that there is a further point of distinction between As case and ADs case in that the state has a positive duty to provide effective protection to victims of gender based violence. I do not think it necessary for present purposes to go into a comparative analysis of the duty of the state to A and AD, because I do not see that the duty to victims of gender based violence mandates the means by which such protection is provided. A has not established that the adoption of Reg B13 has deprived her, or is likely to deprive her, of a safe haven. Ultimately, whether the Secretary of State could practicably have adopted a different approach is surely not the test. I have understood the court to be unanimous that the test is that laid down in Humphreys, to which I have referred. Applying that test, and recognising the need for careful scrutiny, I do not consider that the approach taken by the Secretary of State was manifestly without reasonable foundation. Public Sector Equality Duty As Lord Dyson MR said, the PSED is a duty on the part of a public authority to follow a form of due process, that is, an obligation to have due regard to the need to eliminate discrimination, and advance equality of opportunity, between those with and without a relevant protected characteristic. (See para 24 above.) In relation to those with disabilities, the Divisional Court and the Court of Appeal in the MA case reached the concurrent conclusion on the evidence that the Secretary of State had fulfilled the duty. Lord Dyson MR, at para 91, accepted that it was not sufficient for a decision maker to have a vague awareness of his legal duties. Rather, he must have a focused awareness of the duties under section 149 of the Equality Act and, in a disability case, their potential impact on people with disabilities. On the history of events (see appendix 1) and the evidence, especially of Beverley Walsh, the courts were well entitled to reach the conclusion that they did. In relation to sex discrimination, in June 2012 the Department of Work and Pensions published an updated Equality Impact Assessment which considered the impact on those likely to be affected and their distribution, including by gender. It did not address the group of those within sanctuary schemes. The Court of Appeal concluded in As case at para 59: It is clear that the Secretary of State did address the question of gender based discrimination. Those within the sanctuary schemes who would be adversely affected by Regulation B13 were in fact few in number. It was not in the circumstances a breach of the PSED to fail to identify in the Equality Impact Assessment this very small group of those within the sanctuary schemes who had a need for an extra room; this was a very tiny and specific group. I agree but I would make a further and more fundamental point. As As case illustrates, there is no automatic correlation between being in a sanctuary scheme and having a need for an extra bedroom. The reason that A has three bedrooms is not that she needs three bedrooms, but that no two bedroom properties were available when she first moved there. As I have said (at paras 56 to 58) her reasons for wanting to stay where she is are strong but unrelated to the size of the property. The fact that people may have strong personal or social reasons for wanting to stay in their property for reasons unrelated to the number of bedrooms (of which A is one example in her particular circumstances) was recognised and was planned to be taken account of through DHPs. Lady Hale takes a different view on this issue, as she does on the issue of discrimination under articles 8 and 14 of the ECHR, but no useful purpose would be served by going back over the ground which separates us. I would therefore dismiss As cross appeal under the Equality Act. Appendix 1: Factual Summaries Cases concerning adults with disabilities 1. Mrs Carmichael lives with her husband in a two bedroom flat. She has spina bifida, hydrocephalus, double incontinence, inability to weight bear and recurring pressure sores. Her husband is her full time carer. She needs a special bed with an electronic mattress. She also needs a wheelchair beside the bed. Her husband cannot share the same bed, and there needs to be adequate space for her husband and nurses to attend to her needs. There is not enough space for him to have a separate bed in the same room. Their rent was previously met in full by HB, but this was reduced by 14% under Reg B13. The shortfall is presently covered by an award of DHP. 2. Richard Rourke is a widower and lives with his step daughter in a three bedroom bungalow. Both have disabilities. They each occupy one bedroom and the third is used to store equipment. His rent was met in full by HB, but this was reduced by 25% under Reg B13 on the basis that he is under occupying two bedrooms. (The fact that one bedroom is occupied on a part time basis by his stepdaughter appears to have been overlooked, but that is not the basis of his legal challenge in these proceedings.) 3. Mervyn Drage lives on his own in a three bedroom flat. He has significant mental health problems including obsessive compulsive disorder. He does not sleep in any of his bedrooms, which are all full of papers that he has accumulated. His rent used to be met in full by HB, but this was reduced by 25% under Reg B13. 4. JD lives with her adult daughter, AD, in a specially constructed three bedroom property. AD has cerebral palsy with quadriplegia, learning difficulties, double incontinence and she is registered blind. She requires 24 hour care and support. JD provides full time care for her. The rent was met by a combination of HB and other statutory benefits. The HB was reduced by 14% under Reg B13. The shortfall is presently covered by an award of DHP. Cases concerning children with disabilities 5. James Daly is the father of Rian, a child who has severe disabilities. Rian is a full time wheel chair user and has other health problems including incontinence. He requires help with all aspects of daily living. Rians parents are separated and they share his care. Rian stays with his father every weekend, at least one day during the week and for part of school holidays. Mr Daly occupies a two bedroom property. His rent used to be met in full by HB. This was reduced by 14% under Reg B13. 6. Susan Rutherford is the grandmother of a teenage boy, Warren, who suffers from profound mental and physical disability. He requires 24 hour care by two people. He has been looked after by his grandmother since he was a few months old. She has been helped by her husband, Paul, since their marriage some years ago. They live in a three bedroom house adapted for their accommodation. Respite care is provided by carers who stay overnight two nights a week. Without that help Warrens grandparents would not be able to cope and he would have to go into a care home. The rent for the property used to be met in full by HB, but this was reduced by 14% under Reg B13. Sanctuary scheme accommodation 7. A lives in a three bedroom house with her son, who was conceived by her as a result of rape by a man with whom she had been in a relationship for a brief period. He has been exceptionally violent towards her and made threats regarded by the police as serious. Under a sanctuary scheme her property has been adapted to provide a high level of security and she receives on going security monitoring. Her rent used to be met in full by HB, but this was reduced by 14% under Reg B13. The shortfall is covered by an award of DHP. R (MA and others) v Secretary of State for Work and Pensions Appendix 2: Extract from the Judgment of Laws LJ [2013] PTSR 1521, paras 20 33 EVOLUTION OF THE POLICY 20. The proposed bedroom criteria measure was announced by the government in the 22 June 2010 budget: 2010 Budget Responsibility, freedom, fairness: a five year plan to re build the economy (HC 61). It is plain from the published budget statement that this and other welfare reforms were part and parcel of the Governments deficit reduction strategy, though other justifications, in terms of enterprise and fairness, were also claimed (reforming the welfare system to reward work para 1.31; tackle welfare dependency and unaffordable spending para 1.92). Against that general background I may turn to the evidence concerning the manner and extent of the consideration given by the Government, as the prospective policy was elaborated over time, to the needs of the disabled. (1) OFFICIALS ADVICE 21. In a submission to the Minister for Welfare Reform of 20 August 2010 it was acknowledged that [there] are likely to be a number of social sector tenants who cannot be found suitable alternative social sector accommodation of the right size, and specific reference is made to those caring full time for a disabled person . On 21 January 2011 officials recorded the ministers agreement that any exemptions eg because the claimant is unable to work due to a disability, should be contingent on their landlord being unable to offer any suitable sized accommodation, and the minister was asked to consider other groups as possible candidates for exemption. By 12 August 2011 it was being said there was a strong case for exempting disabled claimants where significant adaptations have been made to their properties. It was suggested that the minister announce a 20m per annum increased DHP package for . 2013/14 and 2014/15, funded by an increase in the planned reduction rates from 23% to 25%. At paras 6 15 of the officials paper of 12 August 2011 there is a detailed discussion of the background and the options available see also Annex A to the paper. It includes the statement, at para 9, that [there] is a strong case for an exemption from the size criteria measure for disabled people living in adapted accommodation or properties that have been specially suited to their needs. In Annex A the officials canvassed arguments for their recommendation of an increase to the DHP pot (DHPs are payable, as Henderson J observed in Burnips case [2013] PTSR 117, para 46, from a capped fund). 22. From August 2011 onwards there was a consistent view within government that the most workable solution to the difficulties for the disabled arising from the impact of the bedroom criteria was an increase in what could be made available through DHPs. In response to the paper of 12 August 2011, the minister had asked for more information on the likely reaction of the Treasury and the lobby (a shorthand for various interested groups). In a paper of 2 September 2011 officials note that the lobby had singled out those living in significantly adapted accommodation as a group which should be exempted. They indicate (para 4) that they have given consideration to the possibility of exempting this group and other hard cases, and state: trying to define significantly adapted accommodation for exemption purposes would not be workable. Such an exemption would be difficult and expensive to deliver effectively, especially within universal credit. It would either be too broad brush or leave out many other, equally deserving cases. We therefore recommend in our submission of 12 August increasing the DHP pot by 20m in 2013/14 and 2014/15. This approach would enable local authorities to make decisions at a local level about which cases should be prioritised for financial help to meet any shortfall caused by this measure. The officials note, however, at para 7: A DHP approach is likely to attract criticism for lacking the certainty . that only an exemption would appear to be able to offer in these cases . this approach may produce inconsistencies in the way individual cases are treated across different parts of the country. At para 8 the officials refer to a survey carried out by them, to which 56 local authorities and housing associations had responded, and which (together with meetings with various stakeholders) is helping to inform our approach to implementation as well as highlighting the pressure points most likely to be raised in the Lords Committee stages of the Welfare Reform Bill. They set out ten key bullet points from the survey. Three of them were: For those providers questioned there appears to be a shortage of both one bed homes and much larger four+ homes. The majority of providers allocate homes to underoccupying households to a certain extent. It is more common in smaller two bed homes than bigger homes. Most authorities allocate to underoccupiers most commonly for disabled needs and due to lack of suitable stock. 23. On 29 September 2011 officials informed the minister that the Treasury declined to agree the proposed means of funding the suggested DHP package, and accordingly suggested a revised approach: that the HB reduction rates be revised upwards, to 14% and 25% for one and two excess bedrooms respectively, and [that] we use the increased level of savings to provide a 25m DHP package to mitigate the impact of this measure in a targeted way. In the same document they report amendments received from two members of the House of Lords which proposed six categories of case for exemption from the reductions. The officials set out arguments against these proposals, of which the first was affordability (most of these would significantly erode savings). Then, at para 16 this appears: DHPs provide a targeted means of mitigating the impact of this measure from a limited funding pot. It is also in line with a localised approach which will allow local authorities to take into account the circumstances of individual households. More detail is given in the Annex to the submission of 29 September 2011. Thus: 18. Although the discretionary nature of DHPs can run the risk of uncertainty for individuals, it does have a number of advantages: It would enable LAs to provide additional help to claimants based upon a local level decision about need. It would deliver mitigation in a targeted way that ensures limited funds are not wasted on cases where the shortfall can be met by the individual . We will also allocate this money to local authorities in a way that broadly reflects need in relation to the impact of this measure. At para 20 of the Annex the officials state: Based on average weekly losses from the size criteria, 25m annual funding [sc the proposed DHP package] would be sufficient to remove approx 35,000 claimants from the impacts of the social sector size criteria. At para 21: We will monitor demand for DHPs in relation to this measure and how they are being used by local authorities. (2) CHILDRENS COMMISSIONERS PAPER 24. In January 2012 the Childrens Commissioner (established by the Children Act 2004) published a Child Rights Impact Assessment of the Welfare Reform Bill. I should refer briefly to this given Ms Markus submissions on section 149 of the [Equality Act 2010] and the PSED. In section 2 the commissioner opines that the proposed reductions in HB in the public sector will have deleterious effects on children: Such penalties are likely to have a particular impact on disabled children, where spare rooms may be needed for equipment storage and/or overnight carers, unless they are excluded from the Bill. We understand that the DWPs intention is to make provision for overnight carers where this is required; however, the [equality impact assessment] says that there will be provision for a bedroom for overnight carers for the claimant or their partner, but does not mention carers for children. Children waiting for an adoptive family . will also be affected, as will children whose care is shared by separated parents [Other examples are given]. (3) EQUALITY IMPACT ASSESSMENT AND THE JULY AND AUGUST 2012 CIRCULARS 25. In June 2012 the Department for Work and Pensions (DWP) published an updated equality impact assessment on the proposed size criteria for HB. Para 9 refers to the proposal, as it had become, to add 30m per year to the DHP fund from 2013 14, stating that it was expected to mitigate some of the impacts of the measure, in particular the effects on disabled people and those with foster caring responsibilities. Paras 20 21 describe the departments ongoing discussions with stakeholders. Paras 22 et seq offer a breakdown of the numbers of HB claimants thought likely to be affected (660,000 altogether), the distribution of losses among them (from 5 to 25 and over per week), the numbers who might float off HB altogether, tenure types (as between local authority and housing association tenants), regional distribution of those affected, and distribution by reference to family circumstances and gender. There is specific reference to disabled persons, who are accepted, at para 42, as more likely to be affected by the introduction of size criteria, and there is a prediction, at paras 43 44, that 56% 63% of those affected will be disabled, depending on the sense attributed to disability. Para 59 describes the departments plans for monitoring and evaluation of the policys effects. 26. In July 2012 Circular HB/CTB A4/2012 was issued to local authorities. The background to the 2012 Regulations is explained, and the effect of the changes summarised. Para 9 reacts to the judgments in Burnips case [2013] PTSR 117, which it will be recalled had been handed down on 15 May 2012. The circumstances of the first two claimants, who needed the presence of carers throughout the night, are dealt with in the Regulations (the closing words of Regulation 13D(3), identical as I have said to B13(5) for those renting in the public sector). The circular concentrated on the third case in the appeal from Burnips case, that of Mr Gorry: 9. Due [sic] to [the decision in Burnips case] those whose children are said to be unable to share a bedroom because of severe disabilities will be able to claim [HB] for an extra room from the date of the judgment, 15 May 2012. However it will remain for local authorities to assess the individual circumstances of the claimant and their family and decide whether their disabilities are genuinely such that it is inappropriate for the children to be expected to share a room. This will involve considering not only the nature and severity of the disability but also the nature and frequency of care required during the night, and the extent and regularity of the disturbance to the sleep of the child who would normally be required to share the bedroom. This will come down to a matter of judgment on the facts. DHPs are addressed later in the circular. At that stage the extra 30m was aimed specifically at two groups: Disabled people living in accommodation that has been substantially adapted to their needs, . [and] Foster carers including those between foster placements (para 52). This follows: 54. There are many reasons, as well as those mentioned in para 52, why it may not be appropriate for someone with a disability to either move house or make up any shortfall in rent themselves. A good example of this may be an individual or family who rely heavily on a local support network. In circumstances such as these it may be appropriate to use the DHP fund to make up the shortfall in their rent. Then after describing various means by which affected persons might be able to make up the shortfall caused by the reduction in their HB, this appears: 67. For those claimants who cannot cover a reduction in [HB] from their own resources and who have a compelling case for remaining in their current accommodation, there is the DHP fund . 27. On 1 August 2012 Circular HB/CTB A6/2012 was issued. It was specifically concerned with the Burnip case: more particularly with facts such as those of Mr Gorrys appeal. It indicated, at para 2, that the DWP had sought permission to appeal the decision to the Supreme Court. The advice given in para 9 of Circular HB/CTB A4/2012 was replicated in para 8. Para 7 also had this: When a claimant says that their children cannot share a bedroom, [local authorities] should expect to be provided with sufficient medical evidence to satisfy themselves that these factors [sc claimed severe disability] are sufficiently weighty in the individual case to make it inappropriate for the children to share a bedroom on a continual basis. Only in such circumstances will they be justified in making an exception to the normal application of the size criteria and granting HB on the basis of an additional bedroom. (4) CIRCULAR HB/CTB U2/2013 28. Circular HB/CTB U2/2013was issued on 12 March 2013. As I have foreshadowed it is material to the third ground of challenge (the deployment of guidance to prescribe the means of calculating the appropriate maximum HB). It indicated, at para 5, that the Secretary of State did not propose to pursue the appeal (or prospective appeal) in Burnips case [2013] PTSR 117. This follows: 6. This means that from the date of the Court of Appeal judgment on 15 May 2012, local authorities (LAs) should allow an extra bedroom for children who are unable to share because of their severe disabilities following the guidelines as set out in paras 7 to 10 below. 7. When a claimant says that their children are unable to share a bedroom, it will be for LAs to satisfy themselves that this is the case, for example, a claim is likely to be supported by medical evidence and many children are likely to be in receipt of disability living allowance (DLA) for their medical condition. In addition LAs must consider not only the nature and severity of the disability, but also the nature and frequency of care required during the night, and the extent and regularity of the disturbance to the sleep of the child who would normally be required to share the bedroom. In all cases this will come down to a matter of judgement on facts of each individual case. 8. It should be noted that the judgment does not provide for an extra bedroom in other circumstances, for example, where the claimant is one of a couple who is unable to share a bedroom or where an extra room is required for equipment connected with their disability. (5) THE DHP GUIDANCE MANUAL, APRIL 2013 29. This document of April 2013 (the Discretionary Housing Payments Guidance Manual) (the DHP Guidance Manual) contains very full guidance as to the use of DHPs. It reminds authorities, at para 1.10, that their DHP funds are cash limited. It reviews the whole scheme. It canvasses the possibility of allowing applications in advance from persons affected by the HB, at paras 4.5 6, and making an award not limited in time to a disabled claimant likewise affected, at para 5.3. A Good Practice Guide is included in the DHP Guidance Manual. It contains a substantial discussion of the HB. It states: 1.10 The Government has provided additional funding towards DHPs following the introduction of the benefit cap. This additional funding is intended to support those claimants affected by the benefit cap who, as a result of a number of complex challenges, cannot immediately move into work or more affordable accommodation. in living Specific types of case are then enumerated, at para 1.11, and carefully discussed, and worked examples are given. I should note these passages: 2.5 For claimants specially adapted accommodation, it will sometimes be more cost effective for them to remain in their current accommodation rather than moving them into accommodation which needs to be adapted. We therefore recommend that local authorities identify people who fall into this group and invite a claim for DHPs. 2.7 The allocation of the additional funding for disabled people broadly reflects the impact of this measure and the additional funding needed to support this group. However, due to the discretionary nature of the scheme, LAs should not specifically exclude any group affected by the removal of the spare room subsidy or any other welfare reform. It is important that LAs are flexible in their decision making. Other types of case discussed include adopters (paras 2.9 11) and foster carers, in particular (para 2.13) carers for two or more unrelated foster children. 30. At paras 5.4 5.5 the Good Practice Guide poses a series of practical questions under two heads, The households medical circumstances, health or support needs and Other circumstances. The bullet points under the latter head (13 in number) demonstrate a series of different cases, none of them necessarily involving disability, in which the claimant may encounter particular difficulty or hardship in seeking alternative accommodation in response to the reduction in his/her HB which the local authority may think it right to consider in deciding whether to make an award of DHP. I will just set out the first two instances: Is the claimant fleeing domestic violence? This may mean they need safe accommodation on an emergency basis so the concept of having time to shop around for a reasonably priced property is not appropriate. Does the household have to live in a particular area because the community gives them support or helps them contribute to the district? (6) STATEMENTS IN PARLIAMENT 31. I turn next to the parliamentary debates on the 2012 Regulations. It will be recalled that the Regulations were subject to the affirmative resolution procedure. On 15 October 2012 in the House of Lords the Parliamentary Under Secretary of State, Lord Freud, referred to the 30m addition to the DHP fund for 2013 14, of which 5m was to be earmarked for foster carers. Concern was expressed in the debate as to the dramatic consequences that these regulations will have for disabled people. Lord Freud stated (Hansard (HL Debates) 15 October 2012, col GC485): As noble Lords will remember, the 30m is divided so that 25m is to cover people with significant adaptations. We estimate that there are around 35,000 claimants, particularly wheelchair users, who have accommodation adapted to their needs . The core question, raised by [Lord McKenzie and Lady Hollis] was whether there is suitable accommodation. I know it is a concern. Clearly, it varies across the country. This is not about making people move into it. Many will prefer to stay. What will happen in practice is that there will be a very varied effect on individuals. One can tier up the problems and end up with someone in a very difficult position. We had some examples today. This is exactly where we would expect the DHP to come into effect. A lot of people will decide that they will have enough money or that they will be able to take in a lodger or take extra work. Those are the kind of decisions that we expect to happen in the marketplace. There will, of course, be a residue of bigger problems. 32. In the House of Commons on 16 October 2012 the minister, Mr Webb, answered a question about what the position would be where a disabled or elderly tenant had had adaptations made to his accommodation. He said: We looked at whether we could simply exclude any house that had had any adaptation done to it. It quickly became apparent that there is a spectrum of adaptations . Trying to define in legislation that this or that type of adaptation was or was not exempt was very complex. Rather than having a blanket exemption for a ramp or a stair rail, we have allocated money to local authorities [sc the 30m DHP], which broadly matches what we think would be the cost of protecting people in the circumstances that the Hon gentleman had described . 33. At Prime Ministers Questions on 7 March 2013 the Prime Minister stated that people with severely disabled children are exempt [from the bedroom criteria]: Hansard (HC Debates) 6 March 2013, col 949. On 12 March 2013 the Secretary of State, in a written ministerial statement, referred to the DHP Guidance to be issued the following month (and which I have described above) and indicated that he would closely monitor and adjust the implementation of the policy . to ensure that the needs of these groups [ priority groups other than foster carers and armed forces personnel] are effectively addressed in the longer term: Hansard (HC Debates) 12 March 2013, col 10WS. LADY HALE: (dissenting in the A case) (with whom Lord Carnwath agrees) It is perhaps unfortunate that two very different sorts of case, raising very different issues about the removal of the spare room subsidy, should have been dealt with together. As Lord Toulson has demonstrated, the disability cases are about whether people need extra space because of their disability. The link between the number of bedrooms for which housing benefit is paid and their needs is direct and obvious. The regulation denies them the benefit they need to pay for the amount of space they need. The case of A, and others like her in sanctuary schemes, is different. Her need is not for space but to stay where she is. The effect of the regulation is to deny her the benefit she needs in order to stay in the accommodation she needs. In my view this is unjustified discrimination against her on grounds of her sex. But the reasons are quite different from the reasons in the disability cases. It has been recognised for a long time, both nationally and internationally, that the State has a positive obligation to provide effective protection for vulnerable people against ill treatment and abuse, not only from agents of the State but also from private individuals. The aim of such protection is effective deterrence: prevention of the abuse taking place at all is a far more effective remedy than punishment or compensation after the event. Several of the Convention rights may be violated by the failure to provide effective protection. Thus, in the well known case of X and Y v The Netherlands (1985) 8 EHRR 235, the failure of the authorities to provide the protection of the criminal law for a mentally disabled young woman against sexual abuse was a violation of the right to respect for private life under article 8. In Z v United Kingdom (2001) 34 EHRR 3, the failure to provide the protection of the child care system for a family of children against prolonged neglect by their parents was a violation of their right not to be subjected to ill treatment under article 3. In Opuz v Turkey (2009) 50 EHRR 28, the failure to provide the protection of the criminal law or a safe haven scheme for a wife against repeated violent attacks by her husband was a violation of her rights under article 3. Significantly, in Opuz v Turkey, the court also recognised that this failure was a breach of article 14, the right to the equal enjoyment of the Convention rights, because gender based violence such as this has been internationally recognised as a form of discrimination against women. The court quoted, among other things, article 1 of the Convention on the Elimination of All Forms of Discrimination against Women (CEDAW) which defines discrimination as: [A]ny distinction, exclusion or restriction made on the basis of sex which has the effect or purpose of impairing or nullifying the recognition, enjoyment or exercise by women, irrespective of their marital status, on a basis of equality of men and women, of human rights and fundamental freedoms in the political, economic, social, cultural, civil or any other field. Obviously, to deny women protection against gender based violence, such that they cannot live an equal life with men, is discrimination against them in the enjoyment of their fundamental rights. As the United Nations Commission on Human Rights put it, in resolution 2003/45: [A]ll forms of violence against women occur within the context of de iure and de facto discrimination against women and the lower status accorded to women in society and are exacerbated by the obstacles women often face in seeking remedies from the state. It is greatly to the credit of the United Kingdom that domestic law began to develop more effective remedies against gender based violence in the 1970s, following the recognition of the problem in the Report of the House of Commons Select Committee on Violence in Marriage (1974 75) HC 553. It was widely recognised that the criminal law is often an ineffective remedy. The shocking facts of Ms As case, not unlike the shocking facts of Opuz v Turkey, but with a far more robust response from the criminal justice system, show all too clearly that there is a class of dangerous and determined abusers who will not be put off by the criminal law, however effectively it is deployed. Parliaments of all political persuasions have recognised that what is needed are, firstly, ways of getting the abuser out of the home, beginning with the Domestic Violence and Matrimonial Proceedings Act 1976 and now contained in Part IV of the Family Law Act 1996, together with the Domestic Violence, Crime and Victims Act 2004, and secondly, ways of getting alternative accommodation for the victim, beginning with the Housing (Homeless Persons) Act 1977 and now contained in Part VII of the Housing Act 1996. Sanctuary schemes are a further development. They recognise the positive obligation of the State to provide a safe haven for a comparatively small number of victims who are at risk of really serious violence. The state has provided Ms A with such a safe haven. It allocated her a three bedroom house when she did not need one. That was not her choice. It later fortified that house and put in place a detailed plan to keep her and her son safe. Reducing her housing benefit by reference to the number of bedrooms puts at risk her ability to stay there. Because of its special character, it will be difficult if not impossible for her to move elsewhere and that would certainly put the State to yet further expense. Given these very special circumstances, I am tempted to regard this as an interference with her and her sons right to respect for their home. But in any event, denying her the benefit she needs in order to be able to stay there is discrimination in the sense described in Thlimmenos v Greece (2000) 31 EHRR 154: treating her like any other single parent with one child when in fact she ought to be treated differently. Indeed, the appellant does not seriously dispute that Ms A needs to stay where she is. The Secretary of State accepts that she needs to stay in a sanctuary scheme and probably in this very house. The justification suggested for the interference, or the discrimination, is the availability of discretionary housing payments to make up the shortfall in her rent. But if the discretionary housing payment scheme is not good enough to justify the discrimination against the Rutherford and Carmichael households, it is not good enough to justify the discrimination against Ms As household either. Its deficiencies were acknowledged in the Court of Appeals decision in Burnip v Birmingham City Council [2012] EWCA Civ 629; [2013] PTSR 117, para 46. They are well summed up by Mr Drabble QC on behalf of the Rutherford and Carmichael families: it is discretionary, cash limited and produces less certainty; it has a stricter means test; it offers different and less attractive routes of judicial challenge; it can be onerous to make applications; and it encourages short term, temporary and conditional awards. For a woman in a sanctuary scheme to have to endure all those difficulties and uncertainties on top of the constant fear and anxiety in which she lives cannot be justified. This is not a question of the allocation of scarce public resources: it is rightly acknowledged that public resources will have to meet this need one way or another. Obviously, her circumstances may change, just as the size of any household, and the age and sex of its members may change. The housing benefit scheme already caters for such changes. It could cater for a relevant change in her circumstances. Nor has it been demonstrated that there are insuperable practical difficulties in the way of drafting an exception to the size criteria in regulation B13 to cater for victims of gender based violence who are in sanctuary schemes and need for that reason to stay where they are. Such cases cannot be equated with other people who would prefer to stay where they are, even if they have quite a compelling case for doing so, such as carers for older people who need to stay near their support networks or even disabled people living in specially adapted accommodation, like JD and AD. In the first example, it is not clear that this group would constitute a status for article 14 purposes. But even if it did, their needs will require individual evaluation, perhaps in the context of a social care needs assessment, before it is clear that staying where they are is the right or only solution. Such an evaluation can only take place in the context of the discretionary housing payment scheme, despite its disadvantages. But if the need is clearly established, then it would be irrational to refuse to meet it. In the second example, the disability is indeed a status for article 14 purposes, and I have found the case of JD and AD an extremely difficult one and have been tempted to dissent in their case too. But the distinction between them and the victims of the sex discrimination entailed in gender based violence, is that the state has a positive obligation to provide effective protection against gender based violence and for this small group of victims this is the only way to make that protection effective. I would reach this conclusion without consideration of the public sector equality duty. However, I cannot accept that it was properly complied with in this case. The Secretary of State was required to have due regard to the need to (a) eliminate discrimination, harassment, victimisation and any other conduct that is prohibited by or under this Act; (b) advance equality of opportunity between persons who share a relevant protected characteristic and persons who do not share it (Equality Act 2010, section 149(1)). Advancing equality of opportunity involves having due regard, in particular, to the need to (a) remove or minimise disadvantages suffered by persons who share a relevant protected characteristic that are connected to that characteristic; (b) take steps to meet the needs of persons who share a relevant protected characteristic that are different from the needs of persons who do not share it; (section 149(3)). The Equality Impact Statement prepared in June 2012 addressed the impact on gender in three paragraphs, noting that more women than men would be affected by the size criteria, because there are more female than male housing benefit claimants, but concluding that there was no differential impact by gender. There was nothing about women who are victims of gender based violence or those within sanctuary schemes. The Court of Appeal concluded that because there would be very few in sanctuary schemes who would be adversely affected by regulation B13, it was not a breach of the public sector equality duty to fail to identify them (para 59). Although gender based violence is recognised by the European Court of Human Rights and elsewhere as a form of discrimination against women, it is perhaps unlikely to be a form of discrimination prohibited by the 2010 Act, which I take to be the scope of section 149(1)(a) of that Act. But it is undoubtedly a disadvantage suffered by people, namely women, who share a relevant protected characteristic within the meaning of section 149(3)(a) and produces needs that are different from those of people who do not share it within the meaning of section 149(3)(b). This brings it within the need to enhance equality of opportunity to which due regard is to be had under section 149(1)(b). In my view, therefore, the public sector equality duty requires public authorities at least to consider the impact of their decisions and actions on the victims of gender based violence. This is not much to ask. People in sanctuary schemes may be small in number but victims of gender based violence are many. Public authorities should take their needs into account when developing their policies. They are likely to make better decisions as a result. And they will be able to explain them better. I would therefore dismiss the appeal of the Secretary of State in Ms As case and allow her cross appeal. I agree with Lord Toulsons judgment on the disability cases.

These cases relate to the cap on housing benefit introduced by the Secretary of State under Regulation B13 of the Housing Benefit Regulations 2006 (SI 2006/2013) (Reg B13), often described as the removal of the spare room subsidy or the bedroom tax. The cap is determined according to a number of factors, including whether the number of bedrooms in the home exceeds the number the claimant is entitled to. The number of bedrooms a claimant is entitled to depends on the number of occupants, their ages and sexes and whether any are a couple. A claimant is entitled to an additional bedroom in some specific situations relating to disability need. There is also a statutory scheme for enabling Discretionary Housing Payments (DHPs) to be made to individuals entitled to housing benefit who may require an extra room. As the title indicates, these are discretionary. The claimants in these appeals all live in social sector housing where the number of bedrooms exceeds the number to which they are entitled to under Reg B13. Their housing benefit has been capped accordingly. They are challenging the validity of Reg B13 as it applies to their individual circumstances on the basis that it violates their right to non discrimination under article 14 of the European Convention on Human Rights (ECHR), in conjunction with their right to family life under article 8 and/or property under article 1 of the First Protocol (there is no dispute that housing benefit falls within the scope of these latter articles). They also contend there has been a breach by the Secretary of State of the Public Sector Equality Duty (PSED) under the Equality Act 2010 (the Equality Act), which obliges public authorities to have due regard to the need to eliminate discrimination and advance equality of opportunity between persons who share protected characteristics and those that do not. Mrs Carmichael, Mr Rourke, Mr Drage, JD and Mr Daly (the MA claimants), all either have disabilities or live with family members who have disabilities (see Appendix 1 for details of the claimants factual circumstances). Their cases were heard together in the Court of Appeal which accepted that Reg B13 had a discriminatory effect on some people with disabilities, but held that the discrimination was justified. The MA claimants needs could be met as necessary though the DHP scheme based on individual assessments. The Court also found that there had been no breach of the PSED. The MA claimants challenge these decisions. The Rutherford family and A had their cases heard together in the Court of Appeal (differently constituted). The Rutherfords succeeded in their claim on the ground of disability discrimination. A lives in a sanctuary scheme house (accommodation specially adapted to provide protection for women under severe risk of domestic violence); her claim succeeded on the grounds of sex discrimination. Both A and the Rutherfords Equality Act claims were rejected. The Secretary of State appeals the Court of Appeals decision to allow the Rutherfords and As discrimination claims. A cross appeals the rejection of her Equality Act claim. In respect of the MA claimants discrimination claims, the Supreme Court unanimously allows the appeal of Mrs Carmichael and dismisses the other claimants appeals. The MA claimants appeals under the Equality Act are unanimously dismissed. The Secretary of States appeal in respect of the Rutherford family is unanimously dismissed. The Secretary of States appeal in respect of A is allowed, and As cross appeal is dismissed, by a majority of 5 to 2. Lord Toulson gives the lead judgment. Lady Hale gives a dissenting judgment in relation to A in respect of both the Secretary of States appeal and As cross appeal, with which Lord Carnwath agrees. The normal test in cases involving questions of economic and social policy is whether the discrimination is manifestly without reasonable foundation. The question of how to deal with the impact of Reg B13 on individuals with disabilities is a clear example of a question of economic and social policy; the housing benefit cap scheme is integral to the structure of the welfare benefit scheme. The Court of Appeal was therefore correct to apply this test [28 38]. In respect of the application of the test, the Court of Appeal was correct that the Secretary of States decision to structure the housing benefit cap scheme as he did was reasonable [40 41]. However, some people with disabilities have a transparent medical need for an additional bedroom. Reg B13 recognises this and entitles claimants to an additional bedroom in the case of children (but not adults) who cannot share a bedroom because of their disabilities or adults (but not children) in need of an overnight carer [42]. Mrs Carmichael, is an adult who cannot share a room with her husband due to her disabilities. The Rutherfords require a regular overnight carer for their grandson with severe disabilities. There appears to be no reason to distinguish between adult partners who cannot share a bedroom because of disability and children who cannot do so because of disability; or between adults and children in need of an overnight carer. The decisions in relation to Mrs Carmichael and the Rutherfords were therefore manifestly without reason [46 49]. In relation to the other MA claimants, their need for an additional bedroom is not connected, or not directly connected, to their/their family members disability. Therefore, whilst there may be good reasons for them to receive state benefits to cover the full rent, it is not unreasonable for their claims to be considered on an individual basis under the DHP scheme [51 54]. A, has a strong case for staying in her current house; it has been adapted under the sanctuary scheme and she feels safe where she is [58]. However, there is no automatic correlation between being in a sanctuary scheme and requiring an extra bedroom: the reason that A currently has an additional bedroom is that no two bedroom properties were available when she moved. The Court has considerable sympathy for A as she has strong social and personal reasons for staying, however, these are unrelated to the property size. The fact that people may have strong reasons unrelated to the number of bedrooms, for wanting to stay in their property is taken account of through the DHPs. It therefore does not follow that A has a valid claim for unlawful sex discrimination [59 64]. Although the state has a positive duty to provide effective protection to victims of gender based violence the means by which such protection is provided is not mandated and A has not established that Reg B13 will deprive her of a safe haven [65]. The PSED is a duty on the part of a public authority to follow a form of due process [67]. On the history of events and the evidence, the Secretary of State properly considered the potential impact of the housing benefit cap scheme on individuals with disabilities [68]. Although the Secretary of State did not specifically consider the impact of Reg B13 on those within sanctuary schemes, he did address the question of gender discrimination [69 70]. The MA claimants appeal, and As cross appeal, under the Equality Act, are therefore dismissed [71]. Lady Hale, with whom Lord Carnwath agrees, would have dismissed the Secretary of States appeal in respect of A. The state has a positive obligation to provide effective protection for victims of domestic violence [73]. A failure to do so constitutes discrimination as it has been internationally recognised that gender based violence is a form of discrimination against women [74]. Sanctuary schemes provide such protection [75]. As reduction in housing benefit puts at risk her ability to stay there and therefore constitutes discrimination [76]. DHPs are not good enough to justify this discrimination; it is not acceptable for A to endure the additional difficulties and uncertainties involved in obtaining them [77]. Lady Hale would also have allowed As cross appeal. The PSED was not properly complied with as there was no assessment of the impact of Reg B13 on victims of gender based violence; a disadvantage suffered by women who share a protected characteristic [79 80].

In our society, a great deal of intellectual effort is devoted to tax avoidance. The most sophisticated attempts of the Houdini taxpayer to escape from the manacles of tax (to borrow a phrase from the judgment of Templeman LJ in W T Ramsay Ltd v Inland Revenue Comrs [1979] 1 WLR 974, 979) generally take the form described in Barclays Mercantile Business Finance Ltd v Mawson [2004] UKHL 51; [2005] 1 AC 684, para 34: . structuring transactions in a form which will have the same or nearly the same economic effect as a taxable transaction but which it is hoped will fall outside the terms of the taxing statute. It is characteristic of these composite transactions that they will include elements which have been inserted without any business or commercial purpose but are intended to have the effect of removing the transaction from the scope of the charge. The present appeals are concerned with composite transactions of this nature, designed to avoid the payment of income tax on bankers bonuses. They are among a number of cases concerning broadly similar schemes. In each case, the scheme was intended to take advantage of Chapter 2 of Part 7 of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA), as amended by Schedule 22 to the Finance Act 2003 (Chapter 2). Although the schemes were also designed to avoid the payment of national insurance contributions, it is unnecessary to discuss that aspect, as it is common ground that the position in that regard is the same as in relation to income tax. The background and context of Chapter 2 It may be helpful to begin by considering the relevant legislation. Chapter 2 is best understood against the background of the previous law, and in its context within Part 7 of ITEPA. Under ordinary principles of tax law, where an employee receives shares as part of his remuneration, he is liable to income tax on the value of the shares, less any consideration which he may have given for them, in accordance with the decision of the House of Lords in Weight v Salmon (1935) 19 TC 174. That case concerned a situation where the managing director of a company had been allowed to subscribe for shares at par as a reward for successful performance. The position where an employee is granted a conditional share option was considered by the House of Lords in Abbott v Philbin [1961] AC 352. That was a case where a companys senior employees had been given an option to subscribe for its shares at the then current market price, the option being exercisable at any time within the next ten years. The employees were thus incentivised to increase the companys prosperity. The option was non transferable and would expire on the employees death or retirement. It was held that income tax was chargeable on the realisable monetary value of the option at the date of its acquisition, rather than on the value realised when it was subsequently exercised, as the Revenue had argued. Lord Reid said at p 376: I can sum up my view by saying that conditions and restrictions attached to or inherent in an option may affect its value, but are only relevant on the question whether the option is a perquisite if they would in law or in practice effectively prevent the holder of the option from doing anything when he gets it which would turn it to pecuniary account. The decision in Abbott v Philbin was reversed by section 25 of the Finance Act 1966 (later consolidated as section 186 of the Income and Corporation Taxes Act 1970), which removed any charge to income tax on the grant of employees share options, and instead imposed a charge on the gain realised when the option was exercised, assigned or released. Section 78 of the Finance Act 1972 subsequently conferred an exemption from the charge in relation to approved share option schemes, on the view that such schemes could perform valuable social and economic functions. Those provisions applied only to share option schemes. They did not apply to share incentive schemes under which an employee subscribed for, or was awarded, shares to which restrictions might be attached for a prescribed period, and which might become more valuable on the lifting of the restrictions. An employee might, for example, be awarded shares subject to the condition that they would be forfeited if performance targets were not met. Until 1998, the Revenue took the view that no charge to income tax arose when shares of that type were acquired. Nor, until the 1972 Act, was there any specific charge to income tax when the restrictions attached to the shares were lifted. Section 79 of the 1972 Act, however, imposed a charge to income tax on the value of employment related shares (less any consideration given) when the restrictions were lifted, or the employee ceased to have a beneficial interest in the shares, or a period of seven years elapsed from their acquisition, whichever was the earliest. The timing of the charge reflected the fact that it was at the point when the risk of forfeiture was lifted that the value of the shares could most easily be determined and realised. Approved share option schemes were excluded from the scope of the charge. Another exception related to shares which were not subject to any restrictions other than those applicable to all shares of the same class, where the majority of the shares of that class were acquired otherwise than in pursuance of offers to employees. The latter exception has a counterpart in the modern legislation, in section 429 of ITEPA, to which it will be necessary to refer later. That remained the broad outline of the income tax regime applicable to share options and share incentive schemes until 1998. By then, the Revenue had received legal advice, in relation to remuneration provided in the form of shares subject to forfeiture, that the Abbott v Philbin principle applied, so that a charge to tax arose at the time when the shares were first awarded, on a value reduced by the risk of forfeiture. It appears from contemporaneous documents (a Budget news release issued on 17 March 1998, and the explanatory notes which accompanied the subsequent Bill) that the advice gave rise to two problems. First, it was considered fairer to tax shares which were subject to the risk of forfeiture at the point when the risk was lifted or, if earlier, when the shares were sold, rather than when the shares were acquired. That was because it was at the point when the restriction was lifted that the value of the shares could most easily be determined, and that the employee was often able to realise their value. Secondly, it was considered necessary to prevent tax avoidance schemes involving remuneration in shares subject to forfeiture from being set up in order to exploit the new understanding of the legal position. Parliament addressed those problems by enacting section 50 of the Finance Act 1998, which inserted sections 140A to 140C into the Income and Corporation Taxes Act 1988. The general effect of those provisions was to remove the charge to income tax when an employee received shares on terms which meant that they might later be forfeited, unless the shares could still be subject to the risk of forfeiture more than five years later. Instead, there was a charge to income tax on the market value of the shares when the risk of forfeiture was lifted or, if sooner, when the shares were sold. Sections 140A to 140C of the 1988 Act were re enacted as the original Chapter 2 of ITEPA, but a few months later a new and more complex Chapter 2 was substituted by the Finance Act 2003. The substituted Chapter 2 formed part of an amended Part 7 of ITEPA, introduced to close loopholes, prevent avoidance and deal with other anomalies, according to the explanatory notes. Part 7, as amended, was considered by this court in Grays Timber Products Ltd v Revenue and Customs Comrs [2010] UKSC 4; [2010] 1 WLR 497. That case concerned Chapter 3D of Part 7, but, in a judgment with which the other members of the court agreed, Lord Walker discussed the wider context. As he explained, the provisions of Part 7 reflect three different legislative purposes. Those purposes have already become clear from the discussion of the historical background: . First there is Parliaments recognition that it is good 4. for the economy, and for social cohesion, for employees to own shares in the company for which they work. Various forms of incentive schemes are therefore encouraged by favourable tax treatment . Second, if arrangements of this sort are to act as 5. effective long term incentives, the benefits which they confer have to be made contingent, in one way or another, on satisfactory performance. This creates a problem because it runs counter to the general principle that employee benefits are taxable as emoluments only if they can be converted into money, but that if convertible they should be taxed when first acquired. That principle was stated by Lord Radcliffe in Abbott v Philbin [1961] AC 352, 379 . 6. The principle of taxing an employee as soon as he received a right or opportunity which might or might not prove valuable to him, depending on future events, was an uncertain exercise which might turn out to be unfair either to the individual employee or to the public purse. At first the uncertainty was eased by extra statutory concessions. But Parliament soon recognised that in many cases the only satisfactory solution was to wait and see, and to charge tax on some chargeable event (an expression which recurs throughout Part 7) either instead of, or in addition to, a charge on the employees original acquisition of rights. 7. That inevitably led to opportunities for tax avoidance. The ingenuity of lawyers and accountants made full use of the wait and see principle embodied in these changes in order to find ways of avoiding or reducing the tax charge on a chargeable event, which might be the occasion on which an employees shares became freely disposable (Chapter 2) or the occasion of the exercise of conversion rights (Chapter 3). The third legislative purpose is to eliminate opportunities for unacceptable tax avoidance. Much of the complication of the provisions in Part 7 (and especially Chapters 3A, 3B, 3C and 3D) is directed to counteracting artificial tax avoidance. In the only other judgment delivered in that case, Lord Hope commented at para 56 that if there is any theme in the Act it is one of anti avoidance and the closing down of perceived tax loopholes. The provisions of Chapter 2 As section 417 of ITEPA states, Part 7 contains special rules about cases where securities, interests in securities, or securities options are acquired in connection with an employment. In terms of section 420(1), the following (amongst other things) are securities: (a) shares in any body corporate (wherever incorporated) . (b) debentures, debenture stock, loan stock, bonds, certificates of deposit and other instruments creating or acknowledging indebtedness In terms of section 420(5), the following (amongst other things) are not securities: (b) money and statements showing balances on a current, deposit or savings account Section 421B(8) defines the expression employment related securities as meaning securities or an interest in securities to which Chapters 2 to 4 apply. In terms of section 421B(1), those chapters apply to securities, or an interest in securities, acquired by a person where the right or opportunity to acquire the securities or interest is available by reason of an employment of that person or any other person. In terms of section 421B(2), securities, or an interest in securities, are acquired at the time when the person acquiring the securities or interest becomes beneficially entitled to them. As was explained earlier, the award to an employee of shares in a company by reason of his employment gives rise under ordinary tax rules to a charge to income tax on the market value of the shares at that time, even where the shares are subject to a condition or restriction affecting their value. But Chapter 2 creates a special regime for employment related securities if they are restricted securities or a restricted interest in securities at the time of their acquisition. Those expressions are defined by section 423(1): (1) For the purposes of this Chapter employment related securities are restricted securities or a restricted interest in securities if (a) there is any contract, agreement, arrangement or condition which makes provision to which any of subsections (2) to (4) applies; and (b) the market value of the employment related securities is less than it would be but for that provision. In relation to section 423(1)(a), it is argued on behalf of the banks in the present appeals that the shares in question are restricted securities by virtue of section 423(2). It provides: This subsection applies to provision under which (a) there will be a transfer, reversion or forfeiture of the employment related securities, or (if the employment related securities are an interest in securities) of the interest or the securities, if certain circumstances arise or do not arise; (b) as a result of the transfer, reversion or forfeiture the person by whom the employment related securities are held will cease to be beneficially entitled to the employment related securities, and that person will not be entitled on the transfer, (c) reversion or forfeiture to receive in respect of the employment related securities an amount of at least their market value (determined as if there were no provision for transfer, reversion or forfeiture) at the time of the transfer, reversion or forfeiture. Section 424 sets out a number of exceptions. It is relevant to note subsections (b) and (c): Employment related securities are not restricted securities or a restricted interest in securities by reason only that any one or more of the following is the case that person [ie, the person by whom they are (b) held] may be required to offer for sale or transfer the employment related securities on the employee ceasing, as a result of misconduct, to be employed by the employer or a person connected with the employer, or (c) the employment related securities (or the securities in which they are an interest) may be redeemed on payment of any amount. Section 425(2) confers an exemption from income tax in respect of the acquisition of employment related securities where they are restricted securities by virtue of section 423(2) at the time of the acquisition, and will cease to be restricted securities by virtue of that provision within the next five years. The exemption from tax is optional: the employer and employee may elect that it is not to apply, in which case a charge to income tax will arise in accordance with Abbott v Philbin. Section 426 imposes a tax charge in relation to the securities if a chargeable event occurs. For present purposes, the relevant chargeable event is the securities ceasing to be restricted securities. Section 429, however, allows an exemption from the charge under section 426 where, put shortly, a whole class of shares in a company is affected by the same restriction, all the shares of the class are affected in the same way by the chargeable event, and either (a) the company is employee controlled by virtue of holdings of shares of the class, or (b) the majority of the companys shares of the class are held by persons unrelated to the company. It follows that where section 429 applies (as, for example, where the company is owned by its employees, or where most of the shares of the class awarded to the employees are held by members of the public, and the other requirements of the section are met), the recipient of the shares is given the same favourable income tax treatment as the recipient of shares under an approved share option scheme. Subsequent to the date of the schemes with which these appeals are concerned, section 429 was amended by paragraph 6 of Schedule 2 to the Finance (No 2) Act 2005 so as to exclude its application to tax avoidance schemes. Other Chapters It is also relevant to note Chapter 3A, comprising sections 446A to 446J. As section 446A(1) explains, Chapter 3A applies in certain cases where the market value of employment related securities (or other relevant securities or interests in securities) is reduced by things done otherwise than for genuine commercial purposes. Things done otherwise than for genuine commercial purposes include anything done as part of a scheme or arrangement the main purpose, or one of the main purposes, of which is the avoidance of tax (section 446A(2)). Section 446B applies where the market value of employment related securities at the time of their acquisition has been reduced by at least 10% as a result of things done otherwise than for genuine commercial purposes within the previous seven years. In such circumstances, it imposes a tax charge on the difference between the securities actual market value and the market value which they would have had if it had not been artificially depressed. Section 446B does not apply, however, where section 425(2) applies: section 446B(3). Section 446E has the effect of adjusting the charge under section 426, if such a charge arises, where the market value of the securities is artificially low immediately after the chargeable event, or on 5 April in any year (there being, in those circumstances, a deemed chargeable event on that date). Artificially low is defined as meaning reduced by at least 10% as a result of things done otherwise than for genuine commercial purposes within the seven years preceding the chargeable event (or, if section 425(2) applies, the seven years preceding the acquisition of the securities). Chapter 3B deals in a broadly similar manner with cases where the market value is artificially enhanced; Chapter 3C with securities acquired for less than market value; and Chapter 3D with securities disposed of for more than market value. The schemes in outline Before considering in detail the facts of the individual appeals, it may be helpful to explain briefly how, in broad terms, schemes of the kind in issue were designed to work. The modus operandi can be summarised as follows. The bank decided to award discretionary bonuses to certain of its employees, but to pay the amount of the bonuses into a scheme designed to take advantage of the provisions of Chapter 2, so that the employees would avoid liability to income tax. Rather than paying the bonuses directly to the employees, the bank instead used the amount of the bonuses to pay for redeemable shares in a special purpose offshore company set up solely for the purpose of the scheme. The shares were then awarded to the employees in place of the bonuses. Conditions were attached to the shares which were intended to enable them to benefit from the exemptions from income tax conferred by sections 425(2) and 429. Once the exemptions had accrued, the shares were redeemable by the employees for cash. Employees resident and domiciled in the United Kingdom, who were liable to capital gains tax, could however defer the redemption of their shares until they had held them for two years, by which time the rate of tax chargeable, with the benefit of business taper relief, was only 10%. A typical scheme therefore involved carrying out the following pre ordained steps: (1) The bank decided which of its employees would receive discretionary bonuses, and the amount of those bonuses. (2) Company Z was created in an offshore jurisdiction. Care was taken that Company Z was not an associated company of the bank for the purposes of section 429. (3) A special class of redeemable shares in Company Z was created. As shares, these were securities as defined in section 420(1)(a). The shares were subject to a short term restriction designed to satisfy the requirements of section 423(2). (4) The restriction involved a contingency which was unlikely to occur but might conceivably do so. In cases where the occurrence of the contingency lay beyond the control of those involved in the scheme, hedging arrangements were entered into so that the employees were compensated in the event of the restriction being activated. (5) Directly or indirectly, the bank paid the aggregate amount of the bonuses to Company Z as the price of the shares. (6) The purchaser received the shares and allocated beneficial interests to the employees identified at step (1) in amounts equal to the amounts that the bank had decided to award them as bonuses. Exemption from a charge to income tax on the employees acquisition of the shares was asserted under section 425(2), on the basis that the shares were restricted securities by virtue of section 423(2). (7) A short time later, the restriction was removed from the shares. Exemption from a charge to tax on this event was asserted under section 429. (8) A short time after that, the employees became entitled to redeem their shares, and many did so. No liability to income tax arose by reason of the redemption. (9) Some employees who were resident and domiciled in the UK continued to hold their shares for the two years necessary to mitigate a charge to capital gains tax using taper relief. They then redeemed their shares. (10) In due course Company Z was wound up. It is necessary next to consider in greater detail the facts of each of the present appeals, and the reasoning of the tribunals and courts below on the issues which remain in dispute. In the following summary, some immaterial details have been simplified. The UBS case During the tax year 2003/2004 UBS AG, a well known bank, devised an employee bonus scheme which was designed to take advantage of the provisions of Chapter 2 as explained above. It had no purpose other than tax avoidance, and such consequential advantages as would flow from tax avoidance. The scheme involved the carrying out of a number of pre ordained steps according to a detailed timetable. Once the structure of the scheme had been finalised, a brochure was sent to the employees explaining it in detail and inviting their participation. 426 employees agreed to participate. Some of the documentation required under the scheme, such as board minutes of the vehicle company, was pre drafted. The scheme was then implemented as planned. On 23 January 2004 UBS agreed which of its employees were to be awarded a discretionary bonus for the tax year 2003/2004, and the amount of their bonuses. On 28 January, UBS subscribed 91,880,000 (1,000 per share) for 91,880 non voting shares in a company called ESIP Ltd, incorporated in Jersey a few days earlier for the purposes of the scheme. That sum was the equivalent of the cash payments which the employees would otherwise have received as cash bonuses. The following day UBS awarded 91,856 shares to the employees who had agreed to participate, in amounts corresponding to the amounts of their bonuses, and the remaining shares to trustees of a UBS employee benefit trust. The employees were notified of the face value of their awards. ESIP was required, as a condition of UBSs subscription for the shares, to deposit the subscription price in an interest bearing account until 20 February 2004. Article 2(7) of ESIPs articles of association, as adopted on 26 January 2004, set out the rights of holders of the shares to participate in dividends and surplus assets on a winding up, and also to redeem all or any of their shares on 22 March 2004, 22 March 2006 or 22 June 2006 for the same amount as they would have received if there had been a winding up on the relevant redemption date. Article 2(14) provided for an immediate and automatic sale of the shares to the UBS employee benefit trust if on any date during the three week period from 29 January to 19 February 2004 the closing value of the FTSE 100 Index exceeded a trigger level, defined as 6.5% above its closing value on 28 January. In that event, the shares were to be sold for a price equal to 90% of their market value on the date of the sale if no restrictions (including for the avoidance of doubt under [article 2(14)]) applied to those shares. It was not likely that the FTSE 100 would exceed the trigger level during the relevant period, but there was a genuine possibility that it might: the trigger level was set so as to create a probability of between 6 and 12%. It is a matter of agreement that the forced sale provision had the effect of reducing the market value of the shares when they were acquired by the employees by an amount which was more than de minimis. The forced sale provision had no rationale other than tax avoidance: its only purpose was to make the shares restricted securities by virtue of section 423(2) of ITEPA. The First tier Tribunal (Dr David Williams and Mr David Earle) found that the risk taken as the trigger event had been deliberately chosen as one that a counterparty was prepared to offset entirely, as will shortly be explained. As a condition of UBSs subscription for the shares, ESIP applied about 3% of the 91,880,000 in purchasing call options from UBS relating to the FTSE 100 with an expiry date of 20 February 2004. The effect of the call options was that, if the FTSE 100 exceeded the trigger level, ESIP would make a gain, resulting in an increase of about 10% in its net assets. It followed that, if the forced sale provision were triggered, although the employees would be required to sell their shares for 90% of their unrestricted market value, they would not be materially worse off as a result, since the unrestricted market value of the shares would be equal to approximately 110% of the value they would have had if the trigger event had not occurred. The amount they would receive would thus be approximately equivalent to the original subscription price, which in turn was equal to the cash bonuses which the employees would otherwise have received. The words not be materially worse off are taken from the agreed statement of facts and issues. More precisely, the First tier Tribunal found that the effect of the hedging was that, if the trigger event occurred, the employees would receive 99.2% of the value which their shares would otherwise have had. There was a remote possibility that the employees might even receive slightly more than 100%. The First tier Tribunal noted that there had been a deliberate decision that the call option arrangements should not completely neutralise the effect of any trigger event: The aim was at first that there should be a complete offset between the loss to an employee if the trigger event occurred with the result communicated to senior management that there would be no reduction in value in the payout to the employee. He or she would receive the same whether or not the trigger event occurred. At some point someone thought a deliberate near miss was better than an exact hit in terms of offsetting the loss. As the trigger event did not occur, this was not tested . [T]he reality was that the scheme as a whole was carefully designed so that employees could not suffer any significant loss if the trigger event was realised. The reality of the risk was that an employee stood about a 10% chance of losing 0.8% of the bonus amount to be weighed against the opportunity to remove a 41% tax charge. (para 105) The First tier Tribunal summarised the effect of the scheme as follows, at para 135: The effect was that, at the close of the relevant period, ESIP Ltd would either have shares unaffected by the trigger event, or shares affected by the trigger event plus the benefits from the options. The scheme was originally so constructed that the values of the beneficial interests of individuals in the shares would have been the same under either of those two outcomes. This was then altered to create a small loss. The effect of the trigger event was the reduction in the value of the [shares] by a predetermined amount. The options purchased were of such a value that the sums received under the options if the trigger event occurred totalled slightly less than the loss in the value of the shares, again by a predetermined amount. Both figures were artificial in the sense that neither was determined by, or could be influenced by, any event outside the control of those establishing the scheme, or could alter once the shares and options were purchased. UBS as employer and the individual recipients as employees knew from the start of the scheme that the employees, as shareholders, would receive the money paid in by UBS from one or both of the parallel elements a few weeks later save, in the unlikely occurrence of the trigger event, to a deliberately determined and insignificant extent. In the event, the FTSE 100 did not exceed the trigger level during the relevant period, and so the shares ceased to be subject to the forced sale provision on 19 February 2004, and the call options did not pay out. Once the relevant period had expired without a forced sale taking place, ESIP was required, as a further condition of UBSs subscription for the shares, to buy shares in UBS during the last five days of February 2004, so that the value of each ESIP share was then linked to the performance of the UBS share price. On 26 February 2004 UBS reminded the employees of their entitlement to redeem the shares during the following month, and explained how to do so. On 22 March 2004, about 50% of the shares were redeemed for 977.50 per share. Almost all the remaining shares continued to be held by employees. Dividends were paid on the shares in November 2004 (13 per share) and December 2005 (20 per share). On 22 March 2006 and 22 June 2006, further shares were redeemed, for about 1,519 per share and 1,429 per share respectively, reflecting a large increase in the value of UBS shares. The remaining 44 shares were redeemed in November 2006 when a resolution was passed to wind up ESIP. The case came before the First tier Tribunal as an appeal from a determination made by the Revenue that the sums allocated to the employees as bonuses at the start of the scheme were liable to income tax and national insurance contributions as earnings from their employment. The First tier Tribunal dismissed the appeal. The First tier Tribunal accepted that the shares were securities as defined in the legislation. They were real shares. It was possible for employees to hold them for over two years, and some did so. If they did so, they received dividends. The shares were also employment related securities: the employees acquired the shares by reason of their employment. The arrangements were not a sham in the sense explained by Diplock LJ in Snook v London and West Riding Investments Ltd [1967] 2 QB 786, 802: they were not intended to deceive. In considering whether the shares were restricted securities within the meaning of section 423, the First tier Tribunal initially left to one side what has been described in these proceedings as the Revenues broad Ramsay argument (by reference to the case of W T Ramsay Ltd v Inland Revenue Comrs [1982] AC 300), to the effect that the scheme should be ignored and the employees held liable to income tax as if they had received cash payments directly. On that basis, it accepted that the scheme was an arrangement for the purposes of section 423(1)(a). It accepted that the forced sale provision was not a sham. It also accepted that the effect of that provision was to reduce the market value of the shares at the time of their acquisition by the employees by a small amount, so as to satisfy the requirements of section 423(1)(b). It did not, however, accept that it was an arrangement which made provision to which section 423(2) applied. In forming that view, the First tier Tribunal focused on the requirement in section 423(2)(c) that the employee will not be entitled on the transfer, reversion or forfeiture to receive in respect of the employment related securities an amount of at least their market value (determined as if there were no provision for transfer, reversion or forfeiture) at the time of the transfer, reversion or forfeiture. It considered that that requirement was not satisfied, since the effect of the call options was that the employees were entitled on a forced sale to virtually the same amount as they would have received if there were no forced sale provision. This reasoning assumed that, if there were no provision for transfer, reversion or forfeiture, then there would be no call options: the First tier Tribunal compared the amount which the employees were entitled to receive in respect of their securities on a forced sale, taking account of the triggering of the call options, with the market value of the securities on the hypothesis that neither the forced sale provisions nor the call options existed. On that basis, the First tier Tribunal found that the shares were not restricted securities. The Upper Tribunal (Henderson J and Mr Charles Hellier) took a different view. It considered that section 423(2)(c) required the market value of the shares on the date of the forced sale to be determined as if there were no provision for transfer, reversion or forfeiture, but did not require the call options to be disregarded. In other words, whereas the First tier Tribunal had compared the employees entitlements with a market value determined as if there were neither a forced sale provision nor the call options designed to neutralise its effect, the Upper Tribunal construed section 423(2)(c) as requiring only the first of these to be ignored. The statutory hypothesis, in its view, was a situation in which the shares were not subject to the forced sale provision, but in all other respects including the existence and triggering of the call options was the same as it actually was. On that basis, the Upper Tribunal found that the employees were entitled on a forced sale to receive only 90% of the market value of their shares on that date, determined as if there were no forced sale provision. The requirement laid down in section 423(2)(c) was therefore met. The Court of Appeal (Rimer, Kitchin and Christopher Clarke LJJ) agreed, stating that it was plain that the ordinary and natural sense of the words in question was that they required no more than that the forced sale provision be ignored. This question of statutory construction is no longer in issue. It illustrates, however, the artificial consequences which result if the legislation is applied to a scheme of this nature. Although it is inconceivable that there would in fact have been call options in the absence of the forced sale provision (since their sole rationale was to neutralise the effect of that provision), it is only if section 423(2)(c) is construed as requiring the market value to be assessed on that unreal basis that its requirements can be satisfied. Returning to the decision of the First tier Tribunal, it next considered whether, applying the Ramsay approach and on a realistic appraisal of the facts, the scheme fell outside the intended scope of Chapter 2 altogether. It concluded that it did. It observed that Chapter 2 was intended to deal with a real, practical problem, and that in examining whether the scheme was within Chapter 2 it was necessary, following the speech of Lord Nicholls of Birkenhead in Inland Revenue Comrs v Scottish Provident Institution [2004] UKHL 52; 2005 1 SC (HL) 33; [2004] 1 WLR 3172, to look at the commercial reality of what was happening, and to be alert to a situation where the arrangements, viewed realistically and as a whole, did not create restricted securities. In the view of the First tier Tribunal, the reality was that, had the scheme not been in place, the employees would have received a bonus as part of their pay in February 2004. That bonus would have been earnings, and therefore subject to deduction of income tax and national insurance contributions, leaving in most cases a net sum of 59% of the original entitlement. Under the scheme, the employees instead received beneficial interests in shares with a right to encash those interests. If the rights were encashed without the forced sale provision being triggered, the employees received the same sums as would have been received as earnings, but without any deduction of income tax or national insurance contributions. Alternatively, in the less probable event of a forced sale, the employees might receive slightly less (or, possibly, slightly more) than that sum, but again with no deduction of income tax or national insurance contributions. In short, but for the scheme, an employee would have received 59 from UBS if paid earnings, but under the scheme would probably receive 100, and in any event over 99. The scheme therefore delivered a significant gain in the bonus receivable by employees as compared with the receipt of earnings, whatever the outturn of the scheme arrangements, although there was the possibility of an insignificant difference as between the outturns under the probable and improbable alternatives. Further, if employees so chose, the timetable of the arrangements was much the same as applied to the receipt of earnings. The scheme had no purpose other than tax avoidance. In those circumstances, the scheme could not be regarded as one providing restricted securities within the scope of Chapter 2. It was in reality a mechanism for the payment of cash bonuses, and the employees should therefore be taxed as if they had received cash rather than securities. The Upper Tribunal disagreed with the First tier Tribunals conclusion. It observed that it was incorrect to say that the employees received the same sums when their shares were redeemed as they would have received as earnings: by that time, ESIP had invested its assets in UBS shares, with the result that the sums received reflected the performance of those investments. This had only a limited effect on those who redeemed their shares at the earliest opportunity, because of the short period of time during which the assets had been invested, but it had a greater effect on those who held their shares for longer: see para 36 above. The Upper Tribunal concluded that there was no intellectually coherent way of equating the payment in by the employer with the ultimate payment out to the employee. The scheme could not be treated as merely an artificially contrived method of paying money to employees. The Upper Tribunal therefore allowed UBSs appeal. The Court of Appeal agreed that the argument that the scheme should be treated as merely a mechanism for the payment of cash should be rejected. It also heard argument on a narrower Ramsay argument in respect of which the Revenue sought permission to appeal. That argument, which had been raised before the First tier Tribunal but was not argued before the Upper Tribunal, proceeded on the basis that the ESIP shares were securities, but not restricted securities within the meaning of section 423, with the consequence that a charge to tax arose in respect of the market value of the shares at the time when they were acquired by the employees. The argument centred on UBSs admission that the forfeiture condition had no commercial purpose and had been inserted purely for the purpose of tax avoidance, and on the contention that the hedging provisions rendered the forfeiture condition unreal from a commercial perspective. The argument was rejected, and permission to appeal on that ground was refused. Rimer LJ, with whose judgment the other members of the court agreed, considered that there was no scope for arguing that the shares were other than securities . acquired in connection with an employment within the meaning of sections 417(1) and 420. They were therefore securities for the purposes of Chapter 2; and, provided that they satisfied the conditions of section 423, they were also restricted securities. In relation to section 423, Rimer LJ commented that he did not understand the argument that because the forfeiture provision had no commercial rationale, the shares could not be restricted securities. He did not follow on what basis it could be said that the certain circumstances referred to in section 423(2)(a) could only be circumstances included other than for tax avoidance purposes. There appeared to him to be no justification for any such distinction. The circumstances in which the securities in question might be forfeited were real, even though their inclusion in the scheme was tax motivated. If the shares were restricted securities within the meaning of section 423, from where in Chapter 2, he asked rhetorically, did one derive the conclusion that Chapter 2 could not apply simply because the scheme was driven by considerations of tax avoidance? In forming that view, Rimer LJ was influenced by the inability of all counsel to explain the rationale of the tax exemption conferred by section 429, which he described as the section at the heart of the appeals. The DB case During the tax year 2003/2004 DB Group Services (UK) Ltd (DB), the main employer in the group headed by Deutsche Bank AG, another well known bank, decided to pay discretionary bonuses to employees by means of a scheme designed to take advantage of the provisions of Chapter 2. This was an off the shelf scheme devised by Deloitte and Touche LLP and marketed by them to DB. Deloitte also played a central role in coordinating its implementation by all involved in accordance with a detailed timetable. The scheme was generically similar to the UBS scheme, but differed from it in some respects. Prior to the implementation of the scheme, DB decided which of its employees were to be awarded a discretionary bonus for the tax year 2003/2004, and the amount of their bonuses. The scheme was explained to the relevant employees in advance of its implementation, and they were offered the opportunity to participate. They were informed that the scheme allowed for their bonus to be delivered to them in the form of shares in a vehicle company. Some 300 employees agreed to take part. On 6 February 2004 DB paid 91,300,000 (1,000 per share) in respect of 91,300 redeemable shares in a company, incorporated in the Cayman Islands for the purposes of the scheme, called Dark Blue Investments Ltd (Dark Blue). That company invested its assets in low risk investments. The shares were allocated to the employees the same day, in amounts corresponding to the bonuses which they would otherwise have received. The shares carried voting rights and a right to participate in dividends. They could be redeemed for a price intended to reflect their market value on various dates between 8 July 2004 and 8 December 2006. In order for the shares to qualify as restricted securities by virtue of section 423(2), the memorandum and articles of Dark Blue contained a provision under which the shares were to be forfeited if, before 2 April 2004, the person who held or was beneficially entitled to them ceased to be employed by DB, or notice was given to or by that individual of termination of employment, for any reason other than redundancy, death or disability, or without cause. The shares could not be transferred during that period. For practical purposes, therefore, an employee would forfeit his shares if he voluntarily resigned or was dismissed for misconduct during a period of about eight weeks. Neither contingency was likely to occur, not least because its occurrence lay largely within the control of the employee, for whom it would have significant financial consequences. Furthermore, by virtue of section 424(b) of ITEPA, shares are not restricted securities by reason only of a provision for forfeiture in the event of dismissal for misconduct: see para 17 above. In the event, there was no employee to whom the provision applied. The First tier Tribunal found that the forfeiture provision resulted in a reduction in the market value of the shares on 6 February 2004 which was not negligible. At the highest estimate, the reduction might be of the order of 2 3%. 42% of the Dark Blue shares were redeemed at the first opportunity in July 2004, at a price of 1,003.73 per share. The rest were redeemed between then and December 2006 at prices reflecting the value of the underlying investments at the date of redemption. The case came before the First tier Tribunal as an appeal from a determination that the sums allocated to the employees as bonuses at the start of the scheme were liable to income tax and national insurance contributions as earnings from their employment. The First tier Tribunal heard the appeal immediately before that of UBS, and dismissed it. The First tier Tribunal again considered the case initially by leaving the Revenues broad Ramsay argument out of account. On that basis, it accepted that the shares were securities, on the same grounds as in the UBS case. It accepted that the forfeiture provision satisfied the requirements of section 423(1)(a), being one to which section 423(2) applied. The market value of the securities was less than it would be but for that provision, as required by section 423(1)(b). It followed that, leaving aside the wider challenge to the scheme, the shares met the definition of restricted securities by virtue of section 423(2). Looking at the scheme as a whole, however, the First tier Tribunal described it as a contrived and closely coordinated series of events so that the various individual requirements of Chapter 2 were met but without regard to any other aim or purpose than that of triggering the various exemptions in the Chapter: para 102. DB and the other entities involved merely carried out a predetermined sequence of events, funded entirely by DB, so that its funds were transferred to its employees. The funding of the scheme was derived entirely from the sums which DB had allocated to providing employees with bonuses for the financial year in question. The only purpose of the scheme was to utilise the exemptions in sections 425 and 429 so that the employees paid no income tax or national insurance contributions on the sums transferred to them. All those involved in the scheme played assigned roles undertaken either to achieve the desired reduction in taxation or to receive a fee for facilitating that aim. Dark Blue was purely a vehicle for the scheme. The shares were created solely so that they could be treated as restricted securities within Chapter 2. In the view of the First tier Tribunal, Parliament had not intended to provide the double exemption from income tax under sections 425 and 429 for artificial arrangements with no commercial purpose. It therefore concluded that the scheme was not within Chapter 2. As in the UBS case, it passed directly from that conclusion to a decision that the employees should be taxed as if they had received cash. The Upper Tribunal heard the appeal together with that in the UBS case. It agreed that, leaving the Ramsay argument to one side, the shares were restricted securities qualifying for exemption under section 425. For similar reasons to those which it had given in the UBS case, however, it considered that the First tier Tribunal had pushed the Ramsay principle well beyond permissible bounds. There was in its view no permissible construction of Chapter 2 which could lead to the conclusion that it was inapplicable to the facts of the case. It concluded, however, that notwithstanding the great pains which had been taken to ensure that Dark Blue was not formally controlled by DB, nevertheless actual control existed on the facts. DB was therefore an associated company of Dark Blue, with the consequence that the scheme did not qualify under section 429 for exemption from the charge imposed under section 426 on the lifting of the restrictive condition. The Court of Appeal also heard the appeal together with that in the UBS case. It reversed the Upper Tribunals decision on the question of control, but agreed with it that the Revenues broad Ramsay argument should be rejected. As in the UBS case, it permitted the Revenue to present a narrower Ramsay argument to the effect that the shares were not restricted securities within the meaning of Chapter 2, so that the employees should be taxed on their receipt of the shares. That argument was however rejected for the same reasons as in the UBS case, and permission to appeal on that ground was refused. The Ramsay approach As the House of Lords explained in Barclays Mercantile Business Finance Ltd v Mawson, in a single opinion of the Appellate Committee delivered by Lord Nicholls, the modern approach to statutory construction is to have regard to the purpose of a particular provision and interpret its language, so far as possible, in the way which best gives effect to that purpose. Until the case of W T Ramsay Ltd v Inland Revenue Comrs [1982] AC 300, however, the interpretation of fiscal legislation was based predominantly on a linguistic analysis. Furthermore, the courts treated every element of a composite transaction which had an individual legal identity (such as a payment of money, transfer of property, or creation of a debt) as having its own separate tax consequences, whatever might be the terms of the statute. As Lord Steyn said in Inland Revenue Comrs v McGuckian [1997] 1 WLR 991, p 999, in combination those two features a literal interpretation of tax statutes, and an insistence on applying the legislation separately to the individual steps in composite schemes allowed tax avoidance schemes to flourish to the detriment of the general body of taxpayers. The significance of the Ramsay case was to do away with both those features. First, it extended to tax cases the purposive approach to statutory construction which was orthodox in other areas of the law. Secondly, and equally significantly, it established that the analysis of the facts depended on that purposive construction of the statute. Thus, in Ramsay itself, the terms loss and gain, as used in capital gains tax legislation, were purposively construed as referring to losses and gains having a commercial reality. Since the facts concerned a composite transaction forming a commercial unity, with the consequence that the commercial significance of what had occurred could only be determined by considering the transaction as a whole, the statute was construed as referring to the effect of that composite transaction. As Lord Wilberforce said: The capital gains tax was created to operate in the real world, not that of make belief. As I said in Aberdeen Construction Group Ltd v Inland Revenue Comrs [1978] AC 885, it is a tax on gains (or I might have added gains less losses), it is not a tax on arithmetical differences. To say that a loss (or gain) which appears to arise at one stage in an indivisible process, and which is intended to be and is cancelled out by a later stage, so that at the end of what was bought as, and planned as, a single continuous operation, there is not such a loss (or gain) as the legislation is dealing with, is in my opinion well and indeed essentially within the judicial function. (p 326) Unfortunately, the Committee commented in Barclays Mercantile at para 34, the novelty for tax lawyers of this exposure to ordinary principles of statutory construction produced a tendency to regard Ramsay as establishing a new jurisprudence governed by special rules of its own. In the Barclays Mercantile case the Committee sought to achieve some clarity about basic principles (para 27). It summarised the position at para 32: The essence of the new approach was to give the statutory provision a purposive construction in order to determine the nature of the transaction to which it was intended to apply and then to decide whether the actual transaction (which might involve considering the overall effect of a number of elements intended to operate together) answered to the statutory description. As Lord Nicholls of Birkenhead said in MacNiven v Westmoreland Investments Ltd [2003] 1 AC 311, 320, para 8: The paramount question always is one of interpretation of the particular statutory provision and its application to the facts of the case. As the Committee commented, this is a simple question, however difficult it may be to answer on the facts of a particular case. This approach has proved to be particularly important in relation to tax avoidance schemes as a result of two factors identified in Barclays Mercantile at para 34. First, tax is generally imposed by reference to economic activities or transactions which exist, as Lord Wilberforce said, in the real world. Secondly, tax avoidance schemes commonly include elements which have been inserted without any business or commercial purpose but are intended to have the effect of removing the transaction from the scope of the charge. In other words, as Carnwath LJ said in the Court of Appeal in Barclays Mercantile, [2002] EWCA Civ 1853; [2003] STC 66, para 66, taxing statutes generally draw their life blood from real world transactions with real world economic effects. Where an enactment is of that character, and a transaction, or an element of a composite transaction, has no purpose other than tax avoidance, it can usually be said, as Carnwath LJ stated, that to allow tax treatment to be governed by transactions which have no real world purpose of any kind is inconsistent with that fundamental characteristic. Accordingly, as Ribeiro PJ said in Collector of Stamp Revenue v Arrowtown Assets Ltd [2003] HKCFA 46; (2003) 6 ITLR 454, para 35, where schemes involve intermediate transactions inserted for the sole purpose of tax avoidance, it is quite likely that a purposive interpretation will result in such steps being disregarded for fiscal purposes. But not always. As was noted in Barclays Mercantile at para 35, there have been a number of cases since Ramsay in which it was decided that elements inserted into a transaction without any business or commercial purpose did not prevent the composite transaction from falling within a charge to tax, or bring it within an exemption from tax, as the case might be. Examples include Inland Revenue Comrs v Burmah Oil Co Ltd 1982 SC (HL) 114, Furniss v Dawson [1984] AC 474, Carreras Group Ltd v Stamp Comr [2004] UKPC 16; [2004] STC 1377, Inland Revenue Comrs v Scottish Provident Institution and Tower M Cashback LLP 1 v Revenue and Customs Comrs [2011] UKSC 19; [2011] 2 AC 457. In each case the court considered the overall effect of the composite transaction, and concluded that, on the true construction of the relevant statute, the elements which had been inserted without any purpose other than tax avoidance were of no significance. But it all depends on the construction of the provision in question. Some enactments, properly construed, confer relief from taxation even where the transaction in question forms part of a wider arrangement undertaken solely for the purpose of obtaining the relief. The point is illustrated by the decisions in MacNiven v Westmoreland Investments Ltd [2001] UKHL 6; [2003] 1 AC 311 and Barclays Mercantile itself. The position was summarised by Ribeiro PJ in Arrowtown Assets, para 35, in a passage cited in Barclays Mercantile: The ultimate question is whether the relevant statutory provisions, construed purposively, were intended to apply to the transaction, viewed realistically. References to reality should not, however, be misunderstood. In the first place, the approach described in Barclays Mercantile and the earlier cases in this line of authority has nothing to do with the concept of a sham, as explained in Snook. On the contrary, as Lord Steyn observed in McGuckian at p 1001, tax avoidance is the spur to executing genuine documents and entering into genuine arrangements. Secondly, it might be said that transactions must always be viewed realistically, if the alternative is to view them unrealistically. The point is that the facts must be analysed in the light of the statutory provision being applied. If a fact is of no relevance to the application of the statute, then it can be disregarded for that purpose. If, as in Ramsay, the relevant fact is the overall economic outcome of a series of commercially linked transactions, then that is the fact upon which it is necessary to focus. If, on the other hand, the legislation requires the court to focus on a specific transaction, as in MacNiven and Barclays Mercantile, then other transactions, although related, are unlikely to have any bearing on its application. Scottish Provident On the same date as Barclays Mercantile, Lord Nicholls also delivered the opinion of the Committee, similarly constituted, in the Scottish Provident case. The case concerned a scheme designed to take advantage of a change in the law governing the taxation of gains and losses made by mutual life offices on the grant or disposal of options to buy or sell gilts. Under the scheme, the life office, SPI, granted Citibank the option to buy a quantity of gilts from it at a strike price of 70, well below their anticipated market value at the time the option was exercised, in return for a premium. Under the law then in force, the premium was exempt from tax. After the law had changed, Citibank exercised the option, requiring SPI to sell the gilts to it at a loss. Under the law then in force, the loss was allowable for tax purposes. In order to ensure that no real loss could be suffered by either party, the scheme also provided for Citibank to grant an option to SPI, entitling it to buy a matching quantity of gilts from the bank at a strike price of 90, calculated so that the overall movements of money between the parties were equivalent. It was anticipated that both options would be exercised, but there was a possibility that they might not be. In the event, both options were exercised, and neither gilts nor money changed hands. The question which arose under the relevant statutory provision was whether the option which SPI granted gave Citibank an entitlement to gilts. If the option was considered in isolation, then plainly it did. If, however, the option was viewed as part of a larger scheme by which Citibanks right to buy the gilts from SPI was cancelled by SPIs right to buy the same gilts from Citibank, then in a commercial sense Citibank had no real entitlement to gilts. The special commissioners found in favour of SPI, on the basis that there was a genuine possibility that both options would not be exercised. That was held by the Committee to be an error of law. It stated: 22. the uncertainty arises from the fact that the parties have carefully chosen to fix the strike price for the SPI option at a level which gives rise to an outside chance that the option will not be exercised. There was no commercial reason for choosing a strike price of 90. From the point of view of the money passing (or rather, not passing), the scheme could just as well have fixed it at 80 and achieved the same tax saving by reducing the Citibank strike price to 60. It would all have come out in the wash. Thus the contingency upon which SPI rely for saying that there was no composite transaction was a part of that composite transaction; chosen not for any commercial reason but solely to enable SPI to claim that there was no composite transaction. It is true that it created a real commercial risk, but the odds were favourable enough to make it a risk which the parties were willing to accept in the interests of the scheme. 23. We think that it would destroy the value of the Ramsay principle of construing provisions such as [the provision in question] as referring to the effect of composite transactions if their composite effect had to be disregarded simply because the parties had deliberately included a commercially irrelevant contingency, creating an acceptable risk that the scheme might not work as planned. We would be back in the world of artificial tax schemes, now equipped with anti Ramsay devices. The composite effect of such a scheme should be considered as it was intended to operate and without regard to the possibility that, contrary to the intention and expectations of the parties, it might not work as planned. Thus, on the basis that the statutory provision was properly construed as being concerned with a real and practical entitlement to gilts, it did not apply to a legal entitlement which was intended and expected to be cancelled by an equal and opposite obligation, even if there was a risk that the arrangement might not work as intended. The present appeals It is necessary now to return to the statutory provisions in issue in the present appeals. Rather than dealing with the arguments in the way in which they were presented, in terms of broader and narrower versions of a Ramsay approach, it seems to me to be preferable to begin with the interpretation of the legislation, and the fundamental question whether it can be given a purposive interpretation going beyond its literal terms: that is to say, whether a Ramsay approach is possible at all, and if so, the purposive construction on which it is to be based. If those issues are determined in the Revenues favour, the question next arises how, on its proper interpretation, the legislation is to be applied to the facts. It is at that stage that what have been described as the broad and the narrow approaches require to be considered. Purposive construction As counsel for UBS and DB emphasised, ITEPA contains no explanation of the purpose of Chapter 2 upon which a purposive interpretation might be based. Nor do its provisions anywhere indicate that restrictive conditions attached to securities purely for tax avoidance purposes fall outside the scope of Chapter 2. Furthermore, Parliament dealt with certain kinds of tax avoidance in Chapters 3A to 3D, but made no provision in respect of schemes of the kind with which these appeals are concerned. In the light of these considerations, and bearing in mind that Part 7 generally, and Chapter 2 in particular, are extensive and highly detailed, counsel argued that it was impossible to attribute to Parliament an unexpressed intention to exclude schemes of the present kind from the ambit of Chapter 2. It cannot be denied that these are forceful arguments, and the Court of Appeal found them persuasive. Nevertheless, the context of Chapter 2 provides some indication of what Parliament intended. Part 7 is clearly concerned with particular taxation issues which arise when employees are remunerated in shares and other securities. As was noted in para 12 above, the purposes of Part 7 were identified in broad terms in Grays Timber Products as being threefold: to promote employee share ownership, particularly by encouraging (1) share incentive schemes; (2) since such schemes require benefits to be contingent on future performance, creating a problem if tax is charged on the acquisition of the shares in accordance with Abbott v Philbin, to wait and see in such cases until the contingency has fallen away; and (3) to counteract consequent opportunities for tax avoidance. The background to Chapter 2, explained more fully in paras 3 11 above, supports that view. Fiscal legislation concerning employment related securities had its origins in anomalies which arose where shares awarded to employees as a form of remuneration, for business or commercial reasons, were subject to restrictions designed to incentivise future performance. The taxation of the shares in accordance with general principles of the law of taxation, as established in Weight v Salmon and more particularly in Abbott v Philbin, had the effect that the sum charged to tax failed to reflect the economic gain realised by the employee in the event that the shares increased in value as intended. Parliaments response was to impose a charge to tax when the restrictions were lifted (subject to the exemption of favoured arrangements), rather than when the shares were acquired. Chapter 2, as originally enacted, re enacted provisions introduced in 1988 in order to prevent the application of Abbott v Philbin, and forestall consequent opportunities for tax avoidance. The amended version of Chapter 2 with which these appeals are concerned was enacted shortly afterwards to address aspects of the previous provisions which were considered to leave them vulnerable to avoidance or to create anomalies. The structure of the legislation continued to be based on the exemption of restricted securities from income tax when the shares were acquired, and the imposition of a charge to tax when the restrictive conditions were lifted, subject to a widely drawn exemption from the latter charge. It is in the context explained in para 74, and against the background described in para 75, that it is necessary to consider the scope of the exemption on acquisition conferred by section 425(2), and more specifically the question whether, in section 423(1), the words any contract, agreement, arrangement or condition which makes provision to which any of subsections (2) to (4) applies should be construed as referring to provision with a genuine business or commercial purpose. Approaching the matter initially at a general level, the fact that Chapter 2 was introduced partly for the purpose of forestalling tax avoidance schemes self evidently makes it difficult to attribute to Parliament an intention that it should apply to schemes which were carefully crafted to fall within its scope, purely for the purpose of tax avoidance. Furthermore, it is difficult to accept that Parliament can have intended to encourage by exemption from taxation the award of shares to employees, where the award of the shares has no purpose whatsoever other than the obtaining of the exemption itself: a matter which is reflected in the fact that the shares are in a company which was brought into existence merely for the purposes of the tax avoidance scheme, undertakes no activity beyond its participation in the scheme, and is liquidated upon the termination of the scheme. The encouragement of such schemes, unlike the encouragement of employee share ownership generally, or share incentive schemes in particular, would have no rational purpose, and would indeed be positively contrary to rationality, bearing in mind the general aims of income tax statutes. More specifically, it appears from the background to the legislation that the exemption conferred by section 425(2), in respect of the acquisition of securities which are restricted securities by virtue of section 423(2), was designed to address the practical problem which had arisen of valuing a benefit which was, for business or commercial reasons, subject to a restrictive condition involving a contingency. The context was one of real world transactions having a business or commercial purpose. There is nothing in the background to suggest that Parliament intended that section 423(2) should also apply to transactions having no connection to the real world of business, where a restrictive condition was deliberately contrived with no business or commercial purpose but solely in order to take advantage of the exemption. On the contrary, the general considerations discussed in para 77 above, and the approach to construction explained in paras 64 and 68 above, point towards the opposite conclusion. One answer which counsel for UBS and DB give to that argument is based on the supposed absence of any rationale for the exemption conferred by section 429. This point impressed the Court of Appeal: understandably so, since although these appeals are not directly concerned with section 429, the absence of any rationale for the exemption conferred by that provision would undermine an analysis based on the premise that Parliament possessed some rational intention in enacting sections 423 and 425. As was explained in para 19 above, however, the exemption conferred by section 429 is confined to two specific situations falling within the broader class of cases qualifying for exemption under section 425: namely cases where a class of shares in a company is affected by the same restriction, which is lifted on the occurrence of a similar event, and either (a) the company is employee controlled by virtue of holdings of shares of the class, or (b) the majority of the companys shares of the class are held by persons unrelated to the company. In relation to the first of these situations, it is understandable that Parliament should have intended to encourage employee share ownership in companies which were employee controlled by virtue of such shareholdings. Such an intention would be consistent with the general approach described in paras 74 and 75 above. The second situation is one which has long received special treatment, as was explained in para 7 above. The distinctive feature of that situation, as counsel for the Revenue explained, is that there is only a tenuous link between the increase in the value of the shares, consequent upon the lifting of the restrictive condition, and the employment relationship: a similar increase in value will be enjoyed by all holders of shares of the relevant class in similar circumstances, and most of those shareholders are not employees of the company, or otherwise related to it. The counter argument based on Chapter 3A As explained earlier, in arguing against a construction of Chapter 2 which would exclude tax avoidance schemes of the present kind, counsel for UBS and DB emphasised that Parliament had dealt expressly and in detail with tax avoidance in Chapters 3A to 3D, the first of those chapters being the most directly relevant to the present case. In those circumstances, it was argued, Parliament could not be taken to have had any wider, unexpressed, intention to counter tax avoidance. That argument was accepted by the Court of Appeal. Chapter 3A contains detailed anti avoidance provisions directed at securities with an artificially depressed market value. In some circumstances, the existence of such provisions might support an inference that Parliaments intentions in relation to anti avoidance had been exhaustively expressed. That is not however the position in relation to Chapters 2 and 3A. As explained earlier at para 21, the provision in Chapter 3A concerned with taxation on the acquisition of employment related securities is section 446B. That provision applies where the market value of employment related securities at the time of their acquisition has been reduced by at least 10% as a result of things done otherwise than for genuine commercial purposes (including anything done as part of a tax avoidance scheme) within the period of seven years ending with the acquisition. Section 446B does not apply where section 425(2) applies, that is to say where the securities are restricted securities by virtue of section 423(2): section 446B(3). As was pointed out on behalf of UBS and DB, section 446B(3) presupposes that securities can be restricted securities for the purposes of section 425 even though their value has been reduced by measures taken as part of a tax avoidance scheme. That is indeed obvious. A share incentive scheme with performance related conditions, for example, could fall within section 425, on the basis that the shares were restricted securities, even though the share price on the date of acquisition had been artificially depressed. Whether a condition attached to the shares renders them restricted securities, and whether the share price has been artificially depressed, are two separate questions. In other words, section 446B is concerned with the artificial manipulation of the market value of shares at the time of their acquisition by measures taken during the preceding seven years. It does not entail that all securities whose value has been reduced by tax avoidance measures are necessarily restricted securities. It has nothing to say about the circumstances in which the exemption conferred by section 425(2) should be granted, or specifically about the circumstances in which securities are to be treated as restricted securities as defined in section 423. That question depends on the proper interpretation and application of section 423. Mutatis mutandis, the same applies to the similar argument advanced by UBS and DB on the basis of section 446E, discussed at para 22 above. Conclusion on purposive construction In summary, therefore, the reference in section 423(1) to any contract, agreement, arrangement or condition which makes provision to which any of subsections (2) to (4) applies is to be construed as being limited to provision having a business or commercial purpose, and not to commercially irrelevant conditions whose only purpose is the obtaining of the exemption. Application to the facts In the UBS case, the condition whether the FTSE 100 rose by a specified amount during a three week period was completely arbitrary. It had no business or commercial rationale beyond tax avoidance. Such a condition is simply not relevant to the application of section 423, if, for the reasons already explained, that section is concerned with provision having a genuine business or commercial purpose. Applying section 423 to the facts, viewed from a commercially realistic perspective, it follows that the condition to which the UBS shares were subject should be disregarded, with the consequence that the shares are not restricted securities within the meaning of that section. That conclusion is fortified by another aspect of the facts of the UBS case. The economic effect of the restrictive condition was in any event nullified by the hedging arrangements, except to an insignificant and pre determined extent (namely 0.8% at most see para 32 above). The fact that what the First tier Tribunal described as a deliberate near miss was designed into the scheme, rather than a complete offsetting of the risk, is immaterial. Paras 22 and 23 of the opinion in Scottish Provident, cited at para 70 above, are in point. As the Committee stated, the effect of the scheme should be considered as it was intended to operate. So considered, the benefit to the employee was not truly dependent on the contingency set out in the condition. The restrictive condition in the DB case was simpler but equally artificial. Leaver provisions in employee benefit arrangements often serve a genuine business or commercial purpose. But that cannot be said of the condition attached to the Dark Blue shares. The forfeiture provision operated for only a very short period, during which the possibility that it might be triggered lay largely within the control of the employee who would be adversely affected. It had no business or commercial purpose, and existed solely to bring the securities within the scope of section 423(2). Paras 22 and 23 of the opinion in Scottish Provident are again in point. DB deliberately included a contingency which created a minor risk, but one which the parties were willing to accept in the interests of the scheme. The scheme should therefore be considered as it was intended to operate, without regard to the possibility that it might not work as planned. The appeals thus belong to the line of cases mentioned in Barclays Mercantile, where it was decided that elements which have been inserted into a transaction without any business or commercial purpose did not, as the case might be, prevent the composite transaction from falling within a charge to tax or bring it within an exemption from tax (para 35). That was the approach adopted, for example, in Inland Revenue Comrs v Burmah Oil Co Ltd in relation to what Lord Diplock described as a pre ordained series of transactions . into which there are inserted steps that have no commercial purpose apart from the avoidance of a liability to tax which in the absence of those particular steps would have been payable (p 124). Where a purposive construction so requires, one can proceed in such a case in the manner described by Lord Brightman in Furniss v Dawson at p 527: . the inserted steps are to be disregarded for fiscal purposes. The court must then look at the end result. Precisely how the end result will be taxed will depend on the terms of the taxing statute sought to be applied. The proper basis of taxation: shares or cash? Since the restrictive conditions attached to the shares do not make provision to which section 423 applies, it follows that the shares are not restricted securities within the meaning of that section. Is that the end result, in Lord Brightmans phrase, or is it appropriate to go further and disregard other steps: namely, the use of the bonus funds to buy shares in the vehicle companies, the award of the shares to the employees, and the subsequent redemption of the shares for cash? Those steps were disregarded by the First tier Tribunal, so that the end result was that the employees were treated as though they had been paid in cash. In the broad version of its Ramsay argument, the Revenue invited this court to adopt the same approach. The schemes, it argued, were simply vehicles for passing cash bonuses to employees without paying income tax and national insurance contributions. The shares, although genuine, functioned merely as a cash delivery mechanism. They were not designed or intended to have any other function. In agreement with the Upper Tribunal and the Court of Appeal, I find this argument unpersuasive. In the first place, the employees actually received shares, not cash. Subject to one qualification, the vehicle companies did not hold cash. The qualification is that ESIP held cash during the period prior to 27 February 2004; but the cash was not at the disposal of the employees, since they could not redeem their shares until almost four weeks later. Throughout the intervening period, ESIPs funds were invested in UBS shares. Dark Blues assets were invested in low risk investments. In both cases, therefore, the realisable value of the shares depended on the performance of the assets in which the companies funds were invested, as shares normally do. The amount of cash for which the shares might be redeemed was neither fixed nor ascertainable when the shares were acquired, and was unlikely to be the same as the bonus which had initially been allocated to the employees. In the event, the difference turned out to be modest in the case of the employees who redeemed their shares at the earliest opportunity, but matters could have turned out differently. I would not, however, attach the significance which the Upper Tribunal did to the fact that, in the case of the UBS employees who held their shares for longer, the redemption price diverged more widely from their initial bonus allocation. If the shares were properly treated as equivalent to cash on the first redemption date, that cash was then at the disposal of the employees, and their choice to leave it invested in shares could not affect that position. If the shares were not restricted securities, their recipients therefore fall to be taxed in respect of their receipt of the shares in accordance with ordinary taxation principles. That is broadly as the Revenue contended in the narrower version of their argument, subject to one qualification. The Revenue argued that the shares should be valued for income tax purposes without regard to the restrictive conditions, since those conditions were not intended to be commercially relevant. I am unable to agree. The shares were subject to conditions which, as the First tier Tribunal found, had the effect of reducing their value on the date of acquisition by a small amount (below the 10% threshold which would bring section 446B into play). Applying ordinary taxation principles, as laid down in Abbott v Philbin, the value of the shares has to be assessed as at the date of their acquisition, taking account of those conditions. To disregard the conditions would be to treat the employees as having received a more valuable perquisite than they actually received. It is however also necessary to take account of the call options purchased by ESIP out of the sum paid by UBS for its subscription for the shares. Since the options offset the risk to shareholders arising from the conditions, they presumably enhanced the value of the shares and are therefore relevant to the valuation of the perquisite received by the employees. This point illustrates the need to apply the Ramsay approach with sensitivity to the particular fiscal context which is relevant: the conditions have to be disregarded for the purpose of deciding whether the shares were restricted securities, since that is necessary in order to apply Chapter 2 as Parliament intended; but they do not have to be disregarded for the purpose of assessing the value of the perquisite, since ordinary taxation principles require the tax to be based on its true value. Money? A further argument advanced by the Revenue was that the shares could not be regarded as restricted securities because they were money, and therefore excluded from the definition of securities, for the purposes of Chapter 2, by section 420(5)(b). The shares were said to be money on the basis that the commercial reality of the scheme was the payment of cash: in particular, the shares were always intended to be redeemable for cash. It may well be that, in an appropriate case, the statutory term money, construed purposively, might apply to arrangements which, viewed realistically, were no more than disguised or artificially contrived methods of paying cash to employees. For the reasons explained in para 92, however, that approach cannot be applied on the facts of the present appeals. It is also apparent from some of the examples of securities given in section 420(1)(b), such as debentures, certificates of deposit, and other instruments creating or acknowledging indebtedness, that the ability to redeem an instrument for cash does not render it money. Indeed, the implication of section 424(c) is that redeemable shares are included within the scope of Chapter 2. Conclusion The error of the Court of Appeal in these cases lies, in my opinion, in adopting a literal construction of Chapter 2, and applying it to a correspondingly formal analysis of the facts. Adopting a purposive construction of Chapter 2, the conditions relied upon in order to bring the shares in question within the scope of the exemption conferred by section 425(2) failed to make provision of the kind required by section 423(1)(a): that is to say, provision having a business or commercial purpose, as distinct from provision whose only purpose was the obtaining of the exemption. That does not however mean that the conditions are to be disregarded for all fiscal purposes. Income tax is payable on the value of the shares as at the date of their acquisition in accordance with Abbott v Philbin, account being taken of any effect which the conditions may have had. I would allow the appeals on that basis, subject to such adjustments to the assessments as may be necessary to reflect any effect which the conditions may have had on the value of the shares as at the date of their acquisition.

The appeals, brought by the Commissioners for Her Majestys Revenue and Customs (HMRC), are concerned with schemes which were designed to avoid the payment of income tax on bankers bonuses, by taking advantage of exemptions under Chapter 2 of Part 7 of the Income Tax (Earnings and Pensions) Act 2003, as amended by Schedule 22 to the Finance Act 2003 (ITEPA). In particular, under section 425(2) of ITEPA, an exemption is conferred on the award to employees of restricted securities, defined by section 423 as shares which are subject to provision for their forfeiture if some contingency occurs. Under the schemes, the banks decided to award discretionary bonuses to their employees, but rather than paying the bonuses to them directly, the banks instead used the amount of the bonuses to pay for redeemable shares in offshore companies set up for the purposes of the schemes. The shares were then awarded to the employees in place of the bonuses. Conditions were attached to the shares making them subject to forfeiture if a contingency occurred, so as to qualify for the exemption. In the UBS case, the contingency was a specified rise in the FTSE 100 within the next three weeks. The contingency was unlikely to occur, and it was also hedged against so that the employees would lose out slightly, but not significantly, if it did occur. In the DB case, the contingency was the employees being dismissed for misconduct or voluntarily resigning within the next six weeks. Once the exemptions had accrued, the shares were redeemable by the employees for cash. HMRC decided that tax should be assessed as if the employees had been paid in cash the amount of the bonuses allocated to them. UBS and DBs appeals to the First Tier Tribunal were dismissed. The Upper Tribunal heard the cases together and allowed UBSs appeal. DBs appeal was dismissed on the basis that the scheme failed to comply with a technical requirement for exemption. The Court of Appeal dismissed HMRCs appeal in the UBS case, and allowed DBs appeal. The Supreme Court unanimously allows HMRCs appeals. Lord Reed gives the lead judgment, with which the other Justices agree. Lord Reed explains that the case of W T Ramsay Ltd v Inland Revenue Comrs [1982] AC 300 extended the purposive approach to statutory construction, which was orthodox in other areas of the law, to tax cases. It also established that the analysis of the facts depends on that purposive construction of the statute [61 62]. Taxing statutes generally draw their life blood from real world transactions with real world economic effects. Where an enactment is of that character, and a transaction, or an element of a composite transaction, has no purpose other than tax avoidance, it can usually be said that to allow tax treatment to be governed by transactions which have no real world purpose of any kind is inconsistent with that fundamental characteristic. Where schemes involve intermediate transactions inserted for the sole purpose of tax avoidance, it is quite likely that a purposive interpretation will result in such steps being disregarded for fiscal purposes [64]. In the present appeals, Lord Reed begins by asking whether a purposive interpretation of the legislation is possible. The context of Chapter 2, and the background to its enactment, provide some indication of Parliaments intention. The purposes of Part 7 were broadly identified in Grays Timber Products Ltd v Revenue and Customs Comrs [2010] UKSC 4 as being: (i) to promote employee share ownership by encouraging share incentive schemes; (ii) since such schemes require benefits to be contingent on future performance, creating a problem if tax is charged on the acquisition of the shares, to wait and see in such cases until the contingency has fallen away; and (iii) to counteract consequent opportunities for tax avoidance [74]. The background to the enactment of Chapter 2 indicates that it was intended to address practical problems, and to forestall opportunities for tax avoidance [75]. It is difficult to accept that Parliament intended to encourage, by exemption from taxation, the award of shares to employees, when the award of such shares has no purpose other than the obtaining of the exemption itself [77]. The section 425(2) exemption, in respect of the acquisition of securities which are restricted securities by virtue of section 423(2), was designed to address practical problems arising from valuing a benefit which was, for business or commercial reasons, subject to a restrictive condition involving a contingency. Nothing suggests that Parliament intended that section 423(2) should also apply to restrictive conditions that have no business or commercial purpose, but are deliberately contrived solely to take advantage of the exemption [78]. This is not undermined by the section 429 exemption, which is confined to two specific situations falling within the broader section 425 exemption, whose purposes are consistent with the general approach to Chapter 2 [80]. The fact that Parliament has expressly dealt with tax avoidance in Chapters 3A to 3D does not support the inference that Parliaments intentions in relation to anti avoidance had been exhaustively expressed [82]. Lord Reed concludes that the reference in section 423(1) to any contract, arrangement or condition which makes provision to which any of subsections (2) to (4) applies is to be construed as being limited to provision having a business or commercial purpose, and as not applying to commercially irrelevant conditions whose only purpose is the obtaining of the exemption [85]. In the UBS case, Lord Reed finds that the condition was completely arbitrary, and had no business or commercial rationale. Further, the economic effect of the restrictive condition was nullified by the hedging arrangements, except to an insignificant and pre determined extent. Accordingly, the condition should be disregarded, with the consequence that the shares are not restricted securities within the meaning of section 423 [86 7]. The condition in the DB case operated only for a very short period, during which the possibility that it might be triggered lay largely within the control of the employee who would be adversely affected. It had no business or commercial purpose, and thus fell outside section 423 [88]. Having found that the exemption does not apply, Lord Reed holds that the proper basis for taxation of the bonuses is as shares, and not as cash. The shares did not simply function as a cash delivery mechanism: the amount of cash for which the shares might be redeemed was neither fixed nor ascertainable when the shares were acquired [92]. The value of the shares has to be assessed as at the date of their acquisition, and the restrictive conditions must be taken into account, as ordinary taxation principles require the tax to be based on the shares true value [94 5].

Biometric data such as DNA samples, DNA profiles and fingerprints is of enormous value in the detection of crime. It sometimes enables the police to solve crimes of considerable antiquity. There can be no doubt that a national database containing the data of the entire population would lead to the conviction of persons who would otherwise escape justice. But such a database would be controversial. It is not permitted by our law. Parliament has, however, allowed the taking and retention of data from certain persons. The questions raised by these appeals are whose data may be retained and for how long. originally enacted, provided: Section 64 of the Police and Criminal Evidence Act 1984 (PACE), as (1) If (a) fingerprints or samples are taken from a person in connection with the investigation of an offence; and (b) he is cleared of that offence, they must be destroyed as soon as is practicable after the conclusion of the proceedings. (3) If (a) fingerprints or samples are taken from a person in connection with the investigation of an offence; and (b) that person is not suspected of having committed the offence, they must be destroyed as soon as they have fulfilled the purpose for which they were taken. Section 64(1A) of PACE was enacted by section 82 of the Criminal Justice and Police Act 2001. It is still in force. It provides: (1A) Where(a) fingerprints, impressions of footwear or samples are taken from a person in connection with the investigation of an offence, and (b) subsection (3) below does not require them to be destroyed, the fingerprints, impressions of footwear or samples may be retained after they have fulfilled the purposes for which they were taken but shall not be used by any person except for purposes related to the prevention or detection of crime, the investigation of an offence, the conduct of a prosecution or the identification of a deceased person or of the person from whom a body part came. It will be seen at once that section 64(1A) does not specify any time limit for the retention of the data or any procedure to regulate its destruction. These are matters which are addressed in guidelines issued by the Association of Chief Police Officers (the ACPO guidelines) entitled Exceptional Case Procedure for Removal of DNA, Fingerprints and PNC Records and published on 16 March 2006. So far as is material, these provide: it is important that national consistency is achieved when considering the removal of such records. Chief Officers have the discretion to authorise the deletion of any specific data entry on the [Police National Database] owned by them. They are also responsible for the authorisation of the destruction of DNA and fingerprints associated with that specific entry. It is suggested that this discretion should only be exercised in exceptional cases. Exceptional cases will by definition be rare. They might include cases where the original arrest or sampling was found to be unlawful. Additionally, where it is established beyond doubt that no offence existed, that might, having regard to all the circumstances, be viewed as an exceptional circumstance. In R (S) v Chief Constable of the South Yorkshire Police and R (Marper) v Chief Constable of the South Yorkshire Police [2004] 1 WLR 2196 (Marper UK) the claimants sought judicial review of the retention by the police of their fingerprints and DNA samples on the grounds inter alia that it was incompatible with article 8 of the European Convention on Human Rights (ECHR). The majority of the House of Lords held that the retention did not constitute an interference with the claimants article 8 rights, but they unanimously held that any interference was justified under article 8(2). The ECtHR disagreed: see its decision in S and Marper v United Kingdom (2008) 48 EHRR 1169 (Marper ECtHR). In considering whether retention of data in accordance with the ACPO guidelines was proportionate and struck a fair balance between the competing public and private interests, the court said at para 119: In this respect, the Court is struck by the blanket and indiscriminate nature of the power of retention in England and Wales. The material may be retained irrespective of the nature or gravity of the offence with which the individual was originally suspected or of the age of the suspected offender; fingerprints and samples may be takenand retainedfrom a person of any age, arrested in connection with a recordable offence, which includes minor or non imprisonable offences. The retention is not time limited; the material is retained indefinitely whatever the nature or seriousness of the offence of which the person was suspected. Moreover, there exist only limited possibilities for an acquitted individual to have the data removed from the nationwide database or the materials destroyed; in particular, there is no provision for independent review of the justification for the retention according to defined criteria, including such factors as the seriousness of the offence, previous arrests, the strength of the suspicion against the person and any other special circumstances. The court concluded at para 125: that the blanket and indiscriminate nature of the powers of retention of the fingerprints, cellular samples and DNA profiles of persons suspected but not convicted of offences, as applied in the case of the present applicants, fails to strike a fair balance between the competing public and private interests and that the respondent State has overstepped any acceptable margin of appreciation in this regard. Accordingly, the retention at issue constitutes a disproportionate interference with the applicants right to respect for private life and cannot be regarded as necessary in a democratic society. On 16 December 2008, the Secretary of the State for the Home Department announced the Governments preliminary response to the ECtHR decision. The data of children under the age of 10 would be removed from the database immediately and the Government would issue a White Paper and consult on bringing greater flexibility and fairness into the system by stepping down some individuals over timea differentiated approach, possibly based on age, or on risk, or on the nature of the offences involved. The White Paper, Keeping the Right People on the DNA Database, was published on 7 May 2009. It contained a series of proposals for the retention of data, the details of which are immaterial for present purposes. On 28 July 2009, ACPOs Director of Information wrote to all chief constables (including the respondent Commissioner) saying that the final draft for publication of new guidelines was not expected to take effect until 2010 and that until that time the current retention policy on fingerprints and DNA remains unchanged. On 11 November 2009, after the consultation period had ended, the Secretary of State made a written ministerial statement outlining a revised set of proposals. Again, the details are not material. It was decided to include these proposals in the Crime and Security Act 2010 (the 2010 Act) which had its first reading on 19 November 2009. The 2010 Act received the Royal Assent on 8 April 2010, but the relevant provisions (sections 14, 22 and 23) have not been brought into effect. Section 23 provides that the Secretary of State must make arrangements for a National DNA Database Strategy Board (Database Board) to oversee the operation of the National DNA Database (section 23(1)); the Database Board must issue guidance about the immediate destruction of DNA samples and DNA profiles which are or may be retained under PACE (section 23(2)); and any chief officer of a police force in England and Wales must act in accordance with any such guidance issued (section 23(3)). The Coalition Government stated in the Queens Speech on 25 May 2010 that it intended to seek amendment of the 2010 Act by bringing forward legislative proposals (in Chapter 1 of Part 1 of the Protection of Freedoms Bill) along the lines of the Scottish system. This system permits retention of data for no more than three years if the person is suspected (but not convicted) of certain sexual or violent offences, and permits an application to be made to a Sheriff by a Chief Constable for an extension of that period (for a further period of not more than two years, although successive applications may be made): see sections 18 and 18A of the Criminal Procedure (Scotland) Act 1995, as inserted by sections 83(2) and 104 of the Police, Public Order and Criminal Justice (Scotland) Act 2006. GC and C issued proceedings for judicial review of the retention of their data on the grounds that, in the light of Marper ECtHR, its retention was incompatible with their article 8 rights. Recognising that there was an irreconcilable conflict between Marper UK and Marper ECtHR and that the former decision was binding on it, the Divisional Court (Moses LJ and Wyn Williams J) dismissed both judicial review challenges on 16 July 2010 and in both cases granted a certificate pursuant to section 12 of the Administration of Justice Act 1969 that the cases were appropriate for a leapfrog appeal to the Supreme Court. The facts of these two cases can be stated briefly. On 20 December 2007, GC was arrested on suspicion of common assault on his girlfriend. He denied the offence. A DNA sample, fingerprints and photographs were taken after his arrest. On the same day, he was released on police bail without charge. Before the return date of 21 February 2008, he was informed that no further action would be taken. On 23 March 2009, GCs solicitors requested the destruction of the DNA sample, DNA profile and fingerprints. The Commissioner refused to do so on the grounds that there were no exceptional circumstances within the meaning of the ACPO guidelines. On 17 March 2009, C was arrested on suspicion of rape, harassment and fraud. His fingerprints and a DNA sample were taken. He denied the allegations saying that they had been fabricated by his ex girlfriend and members of her family. No further action was taken by the police in respect of the harassment and fraud allegations. On 18 March 2009, he was charged with rape. On 5 May 2009 at Woolwich Crown Court, the prosecution offered no evidence and C was acquitted. C requested the destruction of the data and its deletion from the police database. On 12 November and again on 2 February 2010, the Commissioner informed C that his case was not being treated as exceptional within the meaning of the ACPO guidelines and his request was refused. The issue It is common ground that, in the light of Marper ECtHR, the indefinite retention of the appellants data is an interference with their rights to respect for private life protected by article 8 of the ECHR which, for the reasons given by the ECtHR, is not justified under article 8(2). It is agreed that Marper UK cannot stand. The issue that arises on these appeals is what remedy the court should grant in these circumstances. On behalf of C, Mr Fordham QC submits that the court should grant a declaration under section 8(1) of the Human Rights Act 1998 (HRA) that the retention of Cs biometric data is unlawful. Section 8(1) provides that In relation to any act (or proposed act) of a public authority which the court finds is (or would be) unlawful, it may grant such relief or remedy, or make such order, within its powers as it considers just and appropriate. He seeks no other relief. On behalf of GC, Mr Cragg seeks an order quashing the ACPO guidelines and a reconsideration of the retention of GCs data within 28 days. The primary submission of Lord Pannick QC (on behalf of the Commissioner of Police of the Metropolis) is that the correct remedy is to grant a declaration of incompatibility under section 4 of the HRA. The primary submission of Mr Eadie QC (on behalf of the Secretary of State) is that, although there is no fundamental objection to a declaration of incompatibility, it is not necessary to grant one. The arguments in support of a declaration of incompatibility Section 6 of the HRA provides: (1) It is unlawful for a public authority to act in a way which is incompatible with a Convention right. (2) Subsection (1) does not apply to an act if (a) as the result of one or more provisions of primary legislation, the authority could not have acted differently; or (b) in the case of one or more provisions of, or made under, primary legislation which cannot be read or given effect in a way which is compatible with the Convention rights, the authority was acting so as to give effect to or enforce those provisions. In summary, Lord Pannick and Mr Eadie say that it is not possible to read or give effect to section 64(1A) of PACE in a way which is consistent with Marper ECtHR. They accept that section 64(1A) confers a discretionary power on the police to retain the data obtained from a suspect in connection with the investigation of an offence. That is why they concede that section 6(2)(a) of the HRA is not in play. But they say that it is a power which, save in exceptional circumstances, must be exercised so as to retain the data indefinitely in all cases. Section 64(1A) cannot, therefore, be read or given effect so as to permit the power to be exercised proportionately in the way described in Marper ECtHR. The hands of the police are tied by section 64(1A) and that position is faithfully reflected in the ACPO guidelines. Two arguments are advanced in support of this submission. The first (and principal) argument is that to interpret section 64(1A) as requiring police authorities to comply with article 8 would defeat the statutory purpose of establishing a scheme for the protection of the public interest free from the limits and protections required by article 8. It would rewrite the statutory provision in a manner inconsistent with a fundamental feature of the legislative scheme which is that, instead of being destroyed, data taken from all suspects shall be retained indefinitely. It is this feature of the scheme which leads Lord Rodger to invoke authorities such as Padfield v Minister of Agriculture, Fisheries and Food [1968] AC 997. Parliament intended that the discretion conferred by section 64(1A) should be exercised to promote the statutory policy and object that data taken from all suspects in connection with the investigation of an offence should be retained indefinitely. Accordingly, any exercise of the discretion conferred by section 64(1A) which does not meet this statutory policy and object would frustrate the intention of Parliament. The second argument is that the nature of the changes to the ACPO guidelines that would be required in order to make them compatible with the ECHR is such that, for reasons of institutional competence and democratic accountability, these should be left to Parliament to make. The choice of compatible scheme involves a difficult and sensitive balancing of the interests of the general community against the rights of the individual and a number of different schemes would be compatible. Neither the police nor the court (in the event of a judicial review challenge to the scheme devised by the police) is equipped to make the necessary policy choices. Thus, for example, only Parliament is constitutionally and institutionally competent to decide whether to adopt the Scottish model in preference to the 2010 Act model. Discussion The first argument This argument is based on the premise that it was the intention of Parliament that, save in exceptional cases, the data taken from all suspects in connection with the investigation of an offence should be retained indefinitely. It goes without saying that, if that premise is correct, section 64(1A) of PACE can only be interpreted as conferring a discretion which must be exercised so as to give effect to that intention. The conclusion necessarily follows from the premise. On that hypothesis, a purposive interpretation of the statute inevitably leads to the conclusion that the first argument is correct. But I do not accept the premise. It is uncontroversial that Parliament intended (i) to abrogate section 64(1) of PACE and remove the obligation to destroy data as soon as practicable after the conclusion of the proceedings if the suspect is cleared of the offence; (ii) to create a scheme for the retention of the data taken from a suspect, whether or not he is cleared of the offence and whether or not he is even prosecuted; and (iii) that the data was to be retained so that it might be used for purposes related to the prevention or detection of crime, the investigation of an offence, the conduct of a prosecution or the identification of a deceased person or of the person from whom a body part came (to use the language of section 64(1A)). I shall refer to these purposes as the statutory purposes. It is also clear that, in order to promote the statutory purposes, Parliament must have intended that an extended, even a greatly extended, database should be created. But in my view that is as far as it goes. To argue from the premise that Parliament intended that a greatly extended database should be created to the conclusion that it intended that, save in exceptional circumstances, the data should be retained indefinitely in all cases is a non sequitur. Parliament did not prescribe the essential elements of the scheme by which the statutory purposes were to be promoted. That task was entrusted to the police, no doubt with the assistance of the Secretary of State. If it had been intended to require a scheme whose essential elements included an obligation that, save in exceptional circumstances, the data lawfully obtained from all suspects should be retained indefinitely, that could easily have been expressly stated in the statute. If that had been intended, surely section 64(1A) would have said in terms that, save in exceptional circumstances, the fingerprints and samples taken shall in every case be retained indefinitely after they have fulfilled the purpose for which they were taken. This would have been the obvious way of expressing that intention. The grant of an apparently unfettered discretion (signalled by the unqualified use of the word may) was certainly not the obvious way of expressing that intention. The natural meaning of the word may is permissive, not mandatory. As I have said, it is clear that Parliament intended to get rid of the requirement to destroy data after it has served its immediate purpose and to permit the retention of data in order to fulfil the statutory purposes. But the statute is silent as to how the statutory purposes are to be fulfilled. There is no reason to suppose that Parliament must have intended that this should be achieved in a disproportionate way so as to be incompatible with the ECHR. Lord Rodger suggests that Mr Fordhams argument entails the proposition that under section 64(1A) the police were free to do what they liked and that the subsection contains nothing to delimit the exercise of their discretion. I agree that, if this is the effect of Mr Fordhams argument, it would cast doubt as to its correctness. But section 64(1A) clearly delimits the exercise of the discretion. It must be exercised to enable the data to be used for the statutory purposes. I would add that the discretion must be exercised in a way which is proportionate and rationally connected to the achievement of these purposes. Thus, for example, the police could not exercise the power to retain the data only of those suspected of minor offences; or only of serious offences of a particular type; or only of suspects of a certain age or gender; or only for a short period. But it is possible to exercise the discretion in a rational and proportionate manner which respects and fulfils the statutory purpose and does not involve the indefinite retention of data taken from all suspects, regardless of their age and the nature of the alleged offence. The Commissioner and the Secretary of State assert that a fundamental feature (possibly the fundamental feature) of section 64(1A) is that data should be retained for use from all suspects indefinitely. But, although expressed in different words, this is the same as the premise argument that I have already rejected. For the reasons I have given for rejecting that argument, it is not possible to extract this fundamental feature from the statute, whether one looks at its language alone or in the context of the mischief which it was intended to cure. In my view, the fundamental feature of section 64(1A) is that it gives the police the power to retain and use data from suspects for the stated statutory purposes of preventing crime, investigation of offences and the conduct of prosecutions. But that does not justify a blanket or disproportionate practice. Neither indefinite retention nor indiscriminate retention can properly be said to be fundamental features of section 64(1A). As I have said, following the judgment of the ECtHR the Secretary of State for the Home Department took steps to take the DNA of children under the age of 10 off the database. If the meaning of section 64(1A) is that, save in exceptional cases, there is a duty to retain samples taken from all suspects indefinitely, then surely this amendment to the ACPO guidelines was ultra vires section 64(1A). That is not, however, suggested by Lord Pannick or Mr Eadie. It seems to me that, once it is accepted that section 64(1A) permits a scheme which does not insist on the indefinite retention of data in all cases, then the extreme position advocated by the Commissioner and the Secretary of State cannot be maintained. So what did Parliament intend if it was not a scheme of indefinite retention in all cases? The obvious answer is a proportionate scheme which gives effect to the statutory purposes and is compatible with the ECHR. The fact that it is possible to create a number of different schemes all of which would meet these criteria does not matter. Section 64(1A) gives a power. Powers can often be lawfully exercised in different ways. The Commissioner and the Secretary of State seek support for the first argument from two sources. The first is the Explanatory Notes to the 2001 Act which explained at para 210: An additional measure has been included to allow all fingerprints and DNA samples lawfully taken from suspects during the course of an investigation to be retained and used for the purposes of prevention and detection of crime and the prosecution of offences. This arises from the decisions of the Court of Appeal (Criminal Division) in R v Weir and R v B (Attorney General's Reference No 3/199) May 2000. These raised the issue of whether the law relating to the retention and use of DNA samples on acquittal should be changed. In these two cases compelling DNA evidence that linked one suspect to a rape and the other to a murder could not be used and neither could be convicted. This was because at the time the matches were made both defendants had either been acquitted or a decision made not to proceed with the offences for which the DNA profiles were taken. Currently section 64 of PACE specifies that where a person is not prosecuted or is acquitted of the offence the sample must be destroyed and the information derived from it can not be used. The subsequent decision of the House of Lords overturned the ruling of the Court of Appeal. The House of Lords ruled that where a DNA sample fell to be destroyed but had not been, although section 64 of PACE prohibited its use in the investigation of any other offence, it did not make evidence obtained as a failure to comply with that prohibition inadmissible, but left it to the discretion of the trial judge. The Act removes the requirement of destruction and provides that fingerprints and samples lawfully taken on suspicion of involvement in an offence or under the Terrorism Act can be used in the investigation of other offences. This new measure will bring the provisions of PACE for dealing with fingerprint and DNA evidence in line with other forms of evidence. But this does not advance matters. It shows that Parliament intended to remove the requirement of destruction of data and that fingerprints and samples lawfully taken on suspicion of involvement in an offence . can be used in the investigation of other offences. But that sheds no light on whether it was intended that there should be a policy of blanket indefinite retention. The Commissioner and the Secretary of State draw attention to the words an additional measure has been included to allow all [data]to be retained (emphasis added). But in my view this is an insufficient foundation on which to base a conclusion that the true meaning of section 64(1A) is that, save in exceptional circumstances, biometric data must be retained indefinitely in all cases. Even if all means all data taken from all suspects, the Explanatory Notes do not say that data must be retained in all cases, still less do they say anything about how long the data must or may be kept. There is no indication in the Notes that Parliament intended all material to be kept indefinitely even if it was not necessary to do so in an individual case within the meaning of article 8(2) of the ECHR. The second source is certain passages in speeches of the House of Lords in Marper UK. The issue there was whether section 64(1A) and the ACPO guidelines were compatible with article 8 and 14 of the ECHR: see para 6 of the speech of Lord Steyn. At para 2, Lord Steyn said: But as a matter of policy it is a high priority that police forces should expand the use of such evidence where possible and practicable. But that is a statement at a high level of generality. Lord Steyn was not purporting to define the statutory purpose with any precision. At para 39 Lord Steyn addressed the submission on behalf of the appellants that the legislative aim (of assisting in the investigation of crimes in the future) could be achieved by less intrusive means. He considered the conclusion of Sedley LJ in the Court of Appeal that the degree of suspicion should be considered in individual cases before a decision was made whether or not to retain the data. He rejected this suggestion saying: this would not confer the benefits of a greatly expanded database and would involve the police in interminable and invidious disputes (subject to judicial review of individual decisions) about offences of which the individual had been acquitted. I have already accepted that Parliament intended that the exercise of the section 64(1A) power should lead to a greatly expanded database and that Lord Steyn was rejecting the idea that the scheme contemplated by section 64(1A) should involve assessment of the degree of suspicion on a case by case basis. But he was not saying that, subject to exceptional circumstances, section 64(1A) required the introduction of a scheme under which the data taken from all suspects would be retained indefinitely, since any other interpretation would undermine the statutory purpose. At para 78, Lady Hale said that the whole community (as well as the individuals whose samples are collected) benefits from there being as large a database as it is possible to have. The present system is designed to allow the collection of as many samples as possible and to retain as much as possible of what it has. That is undoubtedly true. But the system included the ACPO guidelines. It was, therefore, not contentious that the system was designed to catch and retain as many samples as possible. Moreover, leaving ECHR issues aside, section 64(1A) does allow the collection and retention of as many samples as possible. Lady Hale was not, however, saying that section 64(1A) required the collection and retention of as many samples as possible. Similarly, at para 88 Lord Brown said that the benefits of the larger database brought about by the now impugned amendment to PACE were manifest. The more complete the database, the better the chance of detecting criminals and of deterring future crime. But here too, Lord Brown was not considering the question whether section 64(1A) conferred a power which, save in exceptional circumstances, could only be exercised by requiring the retention of the data taken from all suspects indefinitely. The question whether, leaving ECHR issues aside, section 64(1A) required the retention of the data taken from all suspects indefinitely was not in issue in Marper UK. The focus of the argument in Marper UK was on whether section 64(1A) and the ACPO guidelines were compatible with the ECHR. In particular, it was on whether article 8(1) was engaged and whether the ACPO scheme was justified under article 8(2). The context of the observations relied on to support the first argument was the practice of the police, save in exceptional cases, to retain all data indefinitely. There was no debate on whether, if article 8(1) was engaged and the ACPO guidelines could not be justified under article 8(2), section 64(1A) could be read and given effect in a way compatible with the ECHR. So I reject the submission that Marper UK provides support for the submission that underpins the first argument, namely that it was the intention of Parliament that, save in exceptional cases, the data of all suspects should be retained indefinitely. In my view, section 64(1A) permits a policy which (i) is less far reaching than the ACPO guidelines; (ii) is compatible with article 8 of the ECHR; and (iii) nevertheless, promotes the statutory purposes. Those purposes can be achieved by a proportionate scheme. It is possible to read and give effect to section 64(1A) in a way which is compatible with the ECHR and section 6(2)(b) of the HRA cannot be invoked to defeat the claim that the ACPO guidelines are unlawful by reason of section 6(1) of the HRA. For the reasons that I have given, to interpret section 64(1A) compatibly with article 8 does not impermissibly cross the line where, to use the words of Lord Bingham in Sheldrake v Director of Public Prosecutions [2005] 1 AC 264, para 28, it would be incompatible with the underlying thrust of the legislation, or would not go with the grain of it, or would call for legislative deliberation, or would change the substance of a provision completely, or would remove its pith and substance, or would violate a cardinal principle of the legislation. This conclusion is consistent with the decision in R (L) v Commissioner of Police of the Metropolis [2010] 1 AC 410. The claimant was employed by an agency providing staff for schools. The agency required her to apply under section 115(1) of the Police Act 1997 for an enhanced criminal record certificate giving the prescribed details of every relevant matter relating to her which was recorded in central records, since she was a prospective employee who was being considered for a position involving regularly being involved with persons under the age of 18. Section 115(7) provided that, before issuing a certificate, the Secretary of State shall request the chief police officer of every relevant police force to provide any information which, in the chief officers opinion (a) might be relevant for the purpose described in the statement under subsection (2), and (b) ought to be included in the certificate. The Commissioner of Police of the Metropolis disclosed certain information about the claimant which was included in the certificate. She sought judicial review of the decision to disclose the information on the ground that her article 8 rights had been violated. On behalf of the Secretary of State, it was submitted that the words any information and ought to be included in section 115(7) showed that Parliament intended widespread disclosure of relevant material and a narrow exception. This interpretation was supported by the protective purpose of the legislation: see p 416G. That was the practice under the relevant police guidelines. It is true that there was no issue in that case about section 6(2) of the HRA. That is why the analogy cannot be pressed too far. But in essence it was being argued in the context of article 8(2) of the ECHR that it was a fundamental feature of the Police Act 1997 that all relevant information could (and should) be disclosed in a criminal record certificate, since anything less would defeat the fundamental protective purpose of the statute. These submissions are similar to those advanced in the present case. But they were rejected. Despite the protective purpose of the legislation and the use of the word any, at para 44, Lord Hope said that the words ought to be included should be read and given effect in a way that was compatible with the applicants article 8 rights. At para 81, Lord Neuberger MR adopted a broad interpretation of section 115(7)(b) and said that, in deciding whether the information ought to be included, there would be a number of different, sometimes competing, factors to weigh up. For all these reasons, I would reject the first argument advanced on behalf of the Commissioner and the Secretary of State. The second argument The second argument is that Parliament could not have intended to entrust the creation of a detailed scheme pursuant to section 64(1A) to the police (with or without the assistance of the Secretary of State) subject only to the judicial review jurisdiction of the court. It is said that the creation of guidelines for the exercise of the section 64(1A) power is a matter for Parliament alone and that it could not have been intended that section 64(1A) should grant a broad discretion to the police such as is contended for by Mr Fordham. This is because the context involves high policy, balancing the public interest in the effective detection, prosecution and prevention of crime against individual freedoms. It is a matter of political controversy, as evidenced by the different policy solutions of the previous and present Government. There are choices to be made between a variety of compatible legislative schemes. These choices are for Parliament alone. The police are in no position, constitutionally or institutionally, to choose between them. It is important to note the scope of this argument. It is not that Parliament could not have granted the police a discretionary power to retain data otherwise than on a blanket indefinite basis. If it had wished to grant such a power to the police, Parliament obviously could have done so. Rather, the argument is that the constitutional and institutional limits on the competence of the police are such that Parliament could not have intended to grant such a power to them. I cannot accept this argument. No question of constitutional competence arises here. Parliament is entitled to give the police the power to create a scheme. No doubt it would have envisaged that a national scheme would be produced such as the ACPO guidelines. The Secretary of State is accountable to Parliament for the scheme so that the democratic principle is preserved. There are circumstances in which institutional competence is a factor in the courts deciding the extent to which it should pay deference to a decision of the executive and allow a discretionary area of judgment. But we are not concerned with the courts judicial review jurisdiction in the present context. We are concerned with a question of statutory interpretation. There is no reason in principle why the police (together with the Secretary of State) should be less well equipped than Parliament to create guidelines for the exercise of the section 64(1A) power. In creating a proportionate scheme, they have to strike a balance. That is inherent in any exercise of this kind, whether it is performed by the executive or Parliament. The police guidelines that were in play in L were not the product of work by Parliament. Policy and guidance documents of this kind, often in areas of acute sensitivity, are frequently created by the executive. Provided that they fulfil the purposes of the enabling statute, they are valid and enforceable. In my view, the fact that difficult decisions would have to be made in producing guidelines for the exercise of the section 64(1A) power is not a sufficient reason for concluding that Parliament could not have intended to give the power to produce them to the police and the Secretary of State. What relief, if any, should be granted? The Biometric Data In deciding what relief to grant, it is important to have regard to the present state of play. As previously stated, Chapter 1 of Part 1 of the Protection of Freedoms Bill includes proposals along the lines of the Scottish model. The history of the varying responses to Marper ECtHR shows that it is not certain that it will be enacted. But we were told by Mr Eadie that it is the present intention of the Government to bring the legislation into force later this year. In shaping the appropriate relief in the present case, I consider that it is right to proceed on the basis that this is likely to happen, although not certain to do so. In these circumstances, in my view it is appropriate to grant a declaration that the present ACPO guidelines (amended as they have been to exclude children under the age of 10), are unlawful because, as clearly demonstrated by Marper ECtHR, they are incompatible with the ECHR. It is important that, in such an important and sensitive area as the retention of biometric data by the police, the court reflects its decision by making a formal order to declare what it considers to be the true legal position. But it is not necessary to go further. Section 8(1) of the HRA gives the court a wide discretion to grant such relief or remedy within its powers as it considers just and appropriate. Since Parliament is already seised of the matter, it is neither just nor appropriate to make an order requiring a change in the legislative scheme within a specific period. The ECtHR has recently decided that, where one of its judgments raises issues of general public importance and sensitivity, in respect of which the national authorities enjoy a discretionary area of judgment, it may be appropriate to leave the national legislature a reasonable period of time to address those issues: see Greens and MT v United Kingdom (Application Nos 60041/08 and 60054/08) (ECtHR, 23 November 2010) at paras 113 115. This is an obviously sensible approach. The legislature must be allowed a reasonable time in which to produce a lawful solution to a difficult problem. Nor would it be just or appropriate to make an order for the destruction of data which it is possible (to put it no higher) it will be lawful to retain under the scheme which Parliament produces. In these circumstances, the only order that should be made is to grant a declaration that the present ACPO guidelines (as amended) are unlawful. If Parliament does not produce revised guidelines within a reasonable time, then the appellants will be able to seek judicial review of the continuing retention of their data under the unlawful ACPO guidelines and their claims will be likely to succeed. The Photographs of GC Mr Cragg raises a discrete issue about the photographs that were taken of GC when he was arrested. Section 64A of PACE confers a power to take, use and retain photographs of arrested persons who are not subsequently convicted of the offence for which they were arrested. In the application for judicial review, the issue of whether the retention of the photographs violated GCs article 8 rights was mentioned in what Moses LJ described as a passing reference in the claim form and in paragraph 20 of the grounds. At para 43, Moses LJ said: the issues of justification for their retention cannot now properly be considered where the Commissioner has had no opportunity to give evidence as to justification. Lord Pannick submits that, in view of the manner in which the issue was raised in the Divisional Court, the consequent absence of any evidence as to justification and the absence of any substantive judgment on the issue from the Divisional Court, the Supreme Court should express no opinion on this part of the appeal, but leave the matter to be determined if and when the point is properly raised in another case. I accept these submissions. I should also mention that Mr Fordham raises a discrete point about information held on the Police National Computer about C. This was the subject of two agreed issues which were dealt with by the Divisional Court at paras 24 26 and 46 47 of the judgment of Moses LJ. It is common ground that the retention of this information raises no separate issues from those raised by the retention of Cs DNA material and his fingerprints. Conclusion For the reasons that I have given, I would allow the appeals and grant a declaration that the present ACPO guidelines are unlawful because they are incompatible with article 8 of the ECHR. I would grant no other relief. I agree with the judgment of Lord Dyson. I have, however, a little that LORD PHILLIPS would add to his reasoning. Section 3 of the Human Rights Act 1998 (the HRA) requires this Court, in so far as it is possible to do so, to interpret legislation in a way which is compatible with Convention rights. Sometimes this results in the Court according to a statutory provision a meaning that conflicts with the natural meaning of a statutory provision see Ghaidan v Godin Mendoza [2004] UKHL 30; [2004] 2 AC 557. In summarising the effect of that decision in Sheldrake v Director of Public Prosecutions [2004] UKHL 43; [2005] 1 AC 264, para 28 Lord Bingham of Cornhill stated that the interpretative obligation under section 3 was very strong and far reaching and might require the court to depart from the legislative intention of Parliament. This is not a case where the HRA requires the Court to accord to a statutory provision a meaning which it does not naturally bear. There is no difficulty in giving section 64(1A) of PACE, set out in para 3 of Lord Dysons judgment (section 64(1A)), an interpretation which is compatible with article 8 of the Convention, as interpreted by the Strasbourg Court in S and Marper v United Kingdom (2008) 48 EHRR 1169. The section gives a discretionary power to the police to retain samples taken from a person in connection with the investigation of an offence. Section 3 of the HRA imposes a duty on the police, as a public authority, in so far as it is possible to do so, to give effect to the power conferred on them in a way which is compatible with Convention rights. There is nothing in the wording of section 64(1A), giving it its natural meaning, which either requires or permits the police to exercise the power conferred on them in a manner which is incompatible with article 8. In order to hold that section 64(1A) is incompatible with the Convention it is thus necessary to identify some matter, extrinsic to the wording of the section itself, that compels one to interpret the section as either requiring or permitting the police to exercise the power conferred on them in a manner incompatible with article 8. Such a matter needs to be extraordinarily cogent in order to overcome the effect of section 3 of the HRA. I have not been able to identify any such matter. In R (S) v Chief Constable of the South Yorkshire Police; R (Marper) v Chief Constable of the South Yorkshire Police [2004] UKHL 39; [2004] 1 WLR 2196 the House of Lords held, wrongly as the Strasbourg Court was to rule, that in so far as section 64(1A) interfered with article 8 rights the interference was justified under article 8(2). In so far as Parliament considered the matter when enacting section 64(1A) it is likely to have taken the same view. Parliament may well have considered that the Convention did not require any restriction to be placed on the exercise of the power conferred by section 64 (1A). It does not follow, however, that Parliament must be presumed to have intended that, if the Convention did require the power to be exercised subject to constraints, the police should none the less be required, or permitted, to disregard those constraints. The effect of section 64(1A) was to reverse the requirement of the previous section 64 of PACE that fingerprints and samples should be destroyed when a suspect was cleared of an offence. The purpose of this reversal was plainly that the police should be permitted to establish a database of such material obtained from those suspected of criminal activity. I see no basis for concluding, however, that Parliament intended that the establishment and maintenance of this database should be untrammelled by any requirements that might be imposed by the Convention. While those requirements limit the circumstances in which material can be retained by application of the familiar test of proportionality, they do not prohibit the maintenance of a database that satisfies that test. Had Parliament foreseen that the Convention required restrictions on the power conferred by section 64(1A) the likelihood is that Parliament, guided by the executive, would itself have wished to define those restrictions rather than leaving them to be determined by executive action. That can be deduced from the fact that Parliaments reaction to Strasbourgs ruling in S and Marper (2008) 48 EHRR 1169 was to pass amending legislation and that the present Government intends to introduce an amending Bill. I do not consider, however, that it follows from this that one must interpret section 64(1A) as requiring the police to exercise the power conferred by that section in a manner which infringes the requirements of the Convention, or even as permitting the police to disregard those requirements. For these additional reasons I can see no warrant for making a declaration of incompatibility, convenient though this might be, and concur in the order proposed by Lord Dyson. LADY HALE Whether and in what circumstances the police should be able to keep the DNA samples and profiles, fingerprints and photographs of people who have been arrested but not convicted is a deeply controversial question. The Government is promoting the Protection of Freedoms Bill which will adopt in England and Wales the present system in Scotland. This allows retention only for a limited period and in respect of certain crimes. It reflects a strong popular sentiment that the police should not be keeping such sensitive material relating to innocent people, even if they are only allowed to use it for purposes related to the prevention or detection of crime, the investigation of an offence, the conduct of a prosecution (Police and Criminal Evidence Act 1984, section 64(1A), as substituted by the Criminal Justice and Police Act 2001, section 82). If the popular press is any guide to public opinion, the decision of the European Court of Human Rights in S and Marper v United Kingdom (2008) 48 EHRR 1169 is one which captures the public mood in Britain much more successfully than many of its other decisions. Among the arguments marshalled against retaining the data are these: (a) The agencies of the state cannot be trusted to use such information only for the permitted purposes, nor can the state be trusted not to enlarge those purposes in future. DNA samples, in particular, might be put to many more controversial uses should the state feel so inclined. (b) Serious bodies have cast doubt upon the usefulness of retaining it even for the permitted purposes. Both the Human Genetics Commission (Nothing to hide, nothing to fear? Balancing individual rights and the public interest in the governance and use of the national DNA Database, November 2009) and the Nuffield Council on Bioethics (The forensic use of bioinformation: ethical issues, September 2007) suggest that the value of casting the net so wide has not yet been proved. (c) The Equality and Human Rights Commission argue, in their intervention in this case, that the premise on which such data are kept, that people who are arrested are more likely than the general population to be involved in future offending, is unsustainable. (d) Liberty point out, in their intervention, that certain sections of the population, in particular men and people from the black and minority ethnic communities, run a disproportionate risk of arrest and therefore of having their data taken and kept. This is a detriment with a discriminatory impact. (e) The detriment is the stigma, certainly felt and possibly perceived by others, involved in having ones data on the database. This stigma, together with wider concerns about potential misuse, is sufficient to outweigh the benefits in the detection and prosecution of crime. Among the arguments marshalled in favour of retaining the data are these: (a) Those of a more trusting nature find it difficult to imagine that there is a serious risk that the agencies of the state will indeed misuse this information for more sinister purposes. The risk would in any event be much reduced if DNA samples were destroyed and only profiles, fingerprints and photographs retained. (b) As to their usefulness, the Chief Constable of the West Midlands gave evidence on 22 March 2011 to the House of Commons Public Bill Committee hearing on the Protection of Freedoms Bill that between 2 and 3 per cent of the 36,000 hits on the database would be lost if the proposals in the Bill became law. These may only be a small proportion of the total, but among the 1000 or so crimes which would not be solved some would be very serious. (c) It is not clear that the underlying premise is indeed that people who have been arrested but not charged or convicted are more likely than the general population to commit crimes. After all, the Act also allows the police to keep data they have collected from people who have never been arrested, provided that they consent. The reality is that arrest gives the police the opportunity compulsorily to collect the data: it is not the reason why they do so. (d) The discriminatory impact of disproportionate arrest rates among male and black and minority ethnic members of the population could as logically be addressed by compiling a national database of everyone, rather than by restricting it to people involved in the criminal justice system. There is now a proliferation of national databases holding data on large sections of the population which data can be put to far more detrimental uses than this. (e) Any stigma felt or perceived is irrational, at least if the information is used for its permitted purposes. A person who might otherwise have been among the usual suspects arrested for a crime may be eliminated before he even gets to the police station. A person who is rightly arrested, prosecuted and convicted because a match is found does not deserve our sympathy. We should be concentrating on the quality of the scientific evidence as to sampling and matching rather than on the feelings of those whose samples have been kept. The feelings of the victims of crime are at least as important as the feelings of the criminals. They too have a human right to have their physical and mental integrity protected by the law, and it is in this context that DNA evidence, in particular, has proved most useful. We are not called upon to resolve that debate in this case. It is common ground that the decision of the House of Lords in R (S) v Chief Constable of the South Yorkshire Police; R (Marper) v Chief Constable of the South Yorkshire Police [2004] 1 WLR 2196 (Marper UK) cannot stand in the light of the decision of the European Court of Human Rights in S and Marper v United Kingdom (2008) 48 EHRR 1169. The only question is what we should do about it in this case. This is, as I understand it, a question governed by legal principle and the Human Rights Act 1998 and not by our particular preferences for how the United Kingdom should solve the problem. There are three broad options open to the court: (i) We could decide, in the light of the individual facts of the cases before us, whether the retention of data in each case is compatible with the appellants Convention rights. If it is not, we could make declarations to that effect and even mandatory orders for the deletion and destruction of the data involved. (ii) We could declare that the current ACPO guidelines, approved in Marper UK, are unlawful, without determining what would be lawful in the cases before us. (iii) We could declare that section 64(1A) of PACE is incompatible with the Convention rights, thus leaving the current guidelines in place and everything done under them lawful until Parliament enacts a replacement either by primary legislation or under the fast track remedial procedure laid down in section 10 of the Human Rights Act. The choice between (i) or (ii), on the one hand, and (iii), on the other hand, depends upon the difficult and important question (see Lord Mance in Doherty v Birmingham City Council [2008] UKHL 57, [2009] 1 AC 367, para 141) of the meaning and scope of section 6(2)(b) of the Human Rights Act. This, rather than the policy debate outlined above, is the important issue in this case. If it is resolved in favour of (i) or (ii) and against (iii), then the choice between (i) and (ii) depends upon what the court considers a just and appropriate remedy under section 8(1) of the 1998 Act. I should say at once that on both issues I agree with the conclusions reached by Lord Dyson. Under section 6(1) of the Act, it is unlawful for a public authority to act in a way which is incompatible with a Convention right. But the sovereignty of Parliament requires that exceptions be made for certain things which are done pursuant to an Act of the United Kingdom Parliament. As the annotations to the Act (by Peter Duffy QC and Paul Stanley) in Current Law Statutes explain, the exceptions are all designed to prevent section 6 being used to circumvent the general principle of the Act embodied in sections 3(2)(b) and 4(6)(a), that incompatible primary legislation shall remain fully effective unless and until repealed or modified. In that event, the most that the court can do is make a declaration under section 4(2) that the Act is incompatible and leave it to Parliament to decide what, if anything, to do about it. It follows, however, that the exceptions must be read along with section 3(1). Section 3(1) requires that So far as it is possible to do so, primary legislation and subordinate legislation must be read and given effect in a way which is compatible with the Convention rights. This obligation is laid upon everyone, not just upon the courts. Two exceptions to the general rule in section 6(1) are provided by section 6(2). Section 6(2)(a) has presented little difficulty: it provides that subsection (1) does not apply if as the result of one or more provisions of primary legislation, the authority could not have acted differently. This covers situations where the public authority was required by an incompatible Act of Parliament to do as it did (or perhaps where it had a choice between various courses of action, each of which was incompatible with the Convention rights). Although section 6(2)(a) does not say so, it must be read subject to section 3(1). So both the public authority and the courts, in deciding whether or not the authority could have acted differently, will have first to decide whether the Act of Parliament can be read or given effect in a way which is compatible rather than incompatible with the Convention rights. If the Act can be read compatibly, then it follows that the authority could have acted differently and will have no defence if it has acted incompatibly. Section 6(2)(b) makes the link with section 3(1) explicit, but has caused much more difficulty in practice. It provides that section 6(1) does not apply to an act (or failure to act) if in the case of one or more provisions of, or made under, primary legislation which cannot be read or given effect in a way which is compatible with the Convention rights, the authority was acting so as to give effect to or enforce those provisions. So the first question is always whether the primary legislation can be read or given effect in a compatible way. If it can, that is an end of the matter: see Manchester City Council v Pinnock [2010] UKSC 45, [2010] 3 WLR 1441, paras 93 to 103. In that case, both the provision requiring the court to make a possession order in respect of a demoted tenancy and the provision empowering the local authority to seek one could be read and given effect in a compatible way. This bears out the prediction by Beatson and others, in Human Rights: Judicial Protection in the United Kingdom (2008), para 6 23, that cases where legislation cannot be read down under section 3 are likely to be rare. However, if the legislation cannot be so read or given effect, the second question is whether the public authority was acting so as to give effect to or enforce it. As to this, it is possible to detect some differences of opinion among the judges. Some have taken the view that the fact that there may be choices involved in whether or not to give effect to or enforce the incompatible provision makes no difference: the authority was acting so as to give effect to or enforce it. Others, most notably Lord Mance in Doherty, would draw a distinction between the court, which might have no choice but to give effect to an incompatible provision, and the public authority bringing the proceedings, which could choose whether or not to do so and should be guided by Convention values when making its decisions. Fortunately, we do not have to resolve that debate. This case is about the first question: can section 64(1A) be read and given effect compatibly with the Convention rights? In my view it clearly can. This is for two principal reasons. The first relates to the requirement to read that is, interpret statutory language compatibly with the Convention rights. In this case, to say that section 64(1A) cannot be so read involves reading may be retained as must be retained, save in exceptional circumstances. This would be doing the reverse of what section 3(1) requires. In other words, it would be reading into words which can be read compatibly with the Convention rights a meaning which is incompatible with those rights. It would be giving the broad discretion provided in section 64(1A) an unnatural or strained meaning to require it to be given effect in an incompatible way. That view is reinforced by the fact that it was the clear intention of Parliament to legislate compatibly rather than incompatibly with the Convention rights. Section 64(1A) was introduced into PACE by section 82 of the Criminal Justice and Police Act 2001. When the Bill which became that Act was introduced into Parliament, it was prefaced by the ministerial statement required by section 19(1)(a) of the Human Rights Act. The Home Secretary, Mr Straw, stated that In my view the provisions of the Criminal Justice and Police Bill are compatible with the Convention rights. He was not alone in that view. After all, the House of Lords in Marper UK unanimously took the view that section 64(1A) was compatible with the Convention rights. But this does not suggest to me that Parliaments intention was that the apparent discretion which it conferred should inevitably be read incompatibly with the Convention rights should that view later prove to be unfounded. Quite the reverse. The second relates to the requirement in section 3(1) that legislation be given effect compatibly with the Convention rights. As Lord Rodger emphasised in Ghaidan v Godin Mendoza [2004] UKHL 30, [2004] 2 AC 557, para 107, section 3(1) contains not one, but two, obligations. In retrospect, that is what the Court of Appeal had in mind in the case which became In re S (Minors) (Care Order: Implementation of Care Plan) [2002] UKHL 10, [2002] 2 AC 291: that the courts power to make a care order giving the local authority enhanced (that is, determinative) parental responsibility for a child should be given effect in such a way as to prevent the local authority exercising that responsibility incompatibly with the Convention rights of either the child or his parents. Also in retrospect, one can see that the proper remedy for incompatible actions by the local authority is a free standing action under section 7(1)(a) of the Human Rights Act, rather than by the care court adopting powers which contradicted the cardinal principle of the separation of powers between court and local authority in care proceedings. In re S is the strongest case in favour of the position adopted by the Chief Constable and the Secretary of State in this case. They have to argue that, despite ostensibly giving the police a discretion, the cardinal principle was, not that data may be kept, but that they must be kept. The ACPO guidelines could say only one thing. Further, they must argue that that principle is so fundamental to the legislative purpose that only Parliament can modify it if it turns out that those guidelines are incompatible with the Convention rights. I can readily accept that it may be desirable for Parliament rather than the Association of Chief Police Officers to put something in its place. But I cannot see how it was possible for the discretion conferred by section 64(1A) to be exercised in accordance with ACPO guidelines when it was first enacted but it is not possible for it to be so exercised now. In other words, if it was possible to read and give effect to section 64(1A) by means of ACPO guidelines when it was first enacted, it must be possible to do so now. And ACPO as a public authority has to act compatibly with the Convention rights. For these reasons, therefore, section 64(1A) is not incompatible with the Convention rights and cannot be so declared. However, the need for a consistent national approach must be relevant to the choice between remedy (i) and remedy (ii). The court is empowered by section 8(1) to grant such relief or remedy in relation to an unlawful act as it considers just and appropriate. There would be nothing to stop ACPO promulgating some new and Convention compliant guidelines. Now that Marper UK has been overruled, they clearly should set about doing so unless Parliament does it for them within a reasonably short time. But I certainly accept that the system will not work if different police forces adopt different policies. So it would not be appropriate (such a flexible word) for this court to make mandatory decisions in individual cases unless and until it becomes clear that neither ACPO or Parliament is prepared to make the difficult choices involved. I therefore agree that we should declare the current guidelines unlawful but grant no further relief. LORD JUDGE I agree with the reasoning and conclusions of the majority of the members of the Court. In deference to the contrary views I shall add some brief words of my own. The insertion of section 64(1A) in the Police and Criminal Evidence Act 1984 (the 1984 Act) by section 82 of the Criminal Justice and Police Act 2001 resulted in the promulgation of the Retention Guidelines for Nominal Records on the Police National Computer (the ACPO Guidelines) 2006. Thereafter in England and Wales the retention of biometric data (DNA samples) was governed by these guidelines which derived their authority from section 64(1A). The judicial examination of these provisions in England and Wales culminated in a decision of the House of Lords in R (S and Marper) v Chief Constable of the South Yorkshire Police [2004] 1 WLR 2196 that the retention of DNA samples did not constitute an interference with the rights granted by article 8 of the European Convention of Human Rights, or if it did, that the interference was modest and proportionate. The Grand Chamber of the European Court of Human Rights disagreed, and concluded that the system created by the ACPO Guidelines constituted an interference with article 8 rights. (S v United Kingdom (2008) 48 EHRR 1169). Taking account of the decision and applying its reasoning we are all agreed that the decision of the House of Lords should no longer be treated as authoritative. Therefore these appeals must be allowed. The forensic battle is directed at the consequences which should now flow. The starting point is the reasoning of the Grand Chamber which identified the way in which different member states addressed the retention issue, and acknowledged that even following acquittal, it was permissible, subject to specific limitations within the domestic arrangements, for DNA samples to be retained. What however was required of any arrangements for retention was an approach which discriminated between different kinds of cases and for the application of strictly defined storage periods for data, even in more serious cases. Attention was drawn to the position in Scotland where the legislative arrangements permitted the retention of the DNA of unconvicted individuals, limited in the case of adults to those charged with violent or sexual offences and even then, for three years only, with the possibility of an extension for a further two years with judicial agreement. These arrangements were not criticised. Indeed the court acknowledged that the retention of DNA profiles represented the legitimate purpose of assisting in the identification of future offenders. In short the existence of the legislative provisions for the retention of DNA samples was endorsed, but criticism was directed at the blanket and indiscriminate nature of the power of retention found in the ACPO Guidelines. Accordingly nothing in the judgment of the Court leads to the conclusion that a different, less all encompassing scheme deriving its authority from section 64(1A) would contravene article 8, or that the law in relation to DNA samples should revert to the former wide ranging prohibition against the retention of samples of any kind which was the striking feature of section 64 of the 1984 Act as originally enacted. Rather the judgement confirmed that legislative arrangements may provide for the retention of the DNA samples of those acquitted of criminal offences. That is what section 64(1A), reversing the provisions of section 64, permits. In these circumstances it was open to ACPO to reconsider and amend the guidelines (as indeed, at least in part, it did) in the light of the decision of the European Court, and it would be open to ACPO to do so in the light of the decision of this court. Section 64(1A) does not preclude an amendment to the Guidelines which addresses the criticisms. In other words, although the process of further amendment to the arrangements for the retention of DNA samples in England and Wales has been and continues to be addressed through legislation, this was not and is not the only way to provide for the protection of article 8 rights against the current scheme for their indiscriminate retention. In my judgment section 64(1A) is Convention compliant, whereas the ACPO Guidelines in their present form are not. Accordingly, the retention of the DNA samples of these appellants was unlawful, but a declaration of incompatibility would be inappropriate. LORD KERR Lord Rodger and Lord Brown in powerfully reasoned judgments, which I initially found persuasive, have concluded that section 64(1A) of the Police and Criminal Evidence Act 1984 (PACE) had as its purpose the institution of a scheme for the indefinite retention of biometric data taken from all suspects (with very limited exceptions) in connection with the investigation of offences. On that account they found that, despite the seemingly permissive language of the subsection, the Association of Chief Police Officers (ACPO), to whom the task of drawing up guidelines for the implementation of section 64(1A) had been entrusted, were obliged to ensure that, instead of being destroyed as previously required by section 64(1) of PACE, samples taken from suspects would be retained indefinitely and so remain available to the police on the national DNA database. If indefinite retention of data was indeed section 64(1A)s unmistakable purpose, I would have readily agreed that the discretion that samples may be retained after they have fulfilled the purposes for which they were taken would have to be exercised so as to give effect to that intention. That, as Lord Rodger has said, would be the inevitable consequence of the application of the principle for which Padfield v Minister of Agriculture, Fisheries and Food [1968] AC 997 is the seminal authority: that a discretion conferred with the intention that it should be used to promote the policy and objects of the Act can only be validly exercised in a manner that will advance that policy and those objects. More pertinently, the discretion may not be exercised in a way that would frustrate the legislations objectives. Everything therefore depends on what one decides is the true intention or purpose of the legislation. This is not as easy a question to answer as the simple formulation, what was the purpose of the legislation, suggests. As Lord Brown has pointed out in para 145 of his judgment, the search for the purpose of a particular item of legislation may have to follow a number of avenues and may require consideration of several aspects of the enactment what is the grain of the legislation, what its underlying thrust etc. An important factor in the conclusion on this critical question which Lord Rodger has identified is the fact that Parliament clearly saw the need for retreat from the position that had hitherto obtained under section 64(1) and (3) of PACE as originally enacted. Those subsections were in these terms: (1) If (a) fingerprints or samples are taken from a person in connection with the investigation of an offence; and (b) he is cleared of that offence, they must be destroyed as soon as is practicable after the conclusion of the proceedings. (3) If (a) fingerprints or samples are taken from a person in connection with the investigation of an offence; and (b) that person is not suspected of having committed the offence, they must be destroyed as soon as they have fulfilled the purpose for which they were taken. As Lord Rodger has pointed out, the decision of the House of Lords in Attorney Generals Reference (No 3 of 1999) [2001] 2 AC 91 brought to the attention of the public and Parliament the effect of these provisions. Potentially useful evidence was not being used for reasons that, as Lord Steyn put it, were contrary to good sense (p 118). No doubt reaction to the experience in that case contributed to Parliaments decision to enact section 64(1A) but did it, as Lord Rodger has concluded, lead to Parliaments resolve that samples taken from suspects would be retained indefinitely and so remain available to the police on the national DNA database? In my judgment, and largely for the reasons given by Lord Dyson, it did not. In the first place, if that was Parliaments intention it chose a curious way to achieve it. A simple, unambiguous provision to that effect would not have been difficult to devise. And if the purpose of the legislation was to obtain a blanket, universally applied (apart from exceptional cases) policy, why would Parliament have left the practicalities of implementing the policy to ACPO? The drafting of the provision at a level of generality surely suggests that Parliament intended a measure of flexibility to be a feature of its application. This is unsurprising. The history of evolving knowledge as to the use to which DNA evidence could be put provided the clearest possible reasons not to adopt over prescriptive rules that might impede its full exploitation in circumstances unforeseen at the time of their enactment. Just as it was judged, in retrospect, to be unwise to have an immutable requirement to destroy all samples from certain categories of suspects and defendants, so also it would be unwise to substitute that obligation with a blanket requirement to retain all samples. Various members of the Appellate Committee of the House of Lords in R (S) v Chief Constable of the South Yorkshire Police; R (Marper) v Chief Constable of the South Yorkshire Police [2004] 1 WLR 2196 described the benefits that can flow from the maintenance of an expanded database for DNA samples and I am in respectful agreement with all that Lord Steyn, Lady Hale and Lord Brown had to say on this subject in that case. But I do not consider that it necessarily follows that an inflexible policy requiring retention of virtually every sample taken from suspects and defendants is needed in order to have a viable and worthwhile resource. Whatever view one takes of the competing policy arguments on this issue, however, it is, to my mind, quite clear that Parliament did not intend that this was the only way in which the legislation could be implemented. Not only does section 64(1A) use the permissive may in relation to the retention of samples but subsection (3) is retained in its original state, albeit that it may now be disapplied in a variety of circumstances outlined in section 64(3AA) to (3AD). This seems to me clearly to indicate recognition that there should be limits on the retention of samples but, not surprisingly, Parliament did not attempt to forecast comprehensively what those limits should be. The structure of the new section 64 is strongly suggestive of an intention to devise a scheme that would respond to developments in this field, not least any view that might be taken as to the human rights implications that might come to be recognised. As Lord Dyson has put it, Parliaments intention must be taken to have been to create a proportionate scheme which is compatible with ECHR. There is nothing to impel the conclusion that Parliament intended that the scheme could not adapt to whatever the compatibility requirements were found to be. On the contrary, there is every reason to suppose that Parliament intended that the scheme could be adapted to meet those requirements as and when they became apparent. What the Commissioner and the Secretary of States argument resolves to is that, in interpreting section 64, we should recognise that an underlying, not expressly articulated, purpose was that the samples had to be retained indefinitely, regardless of the circumstances in which they were taken or of the circumstances of the individual from whom they had been taken. There is nothing in the language of the section itself that compels such an exclusive interpretation. Indeed, as Lord Phillips has pointed out, acceptance of this argument would involve reading more into section 64(1A) than its ordinary language conveys. ACPOs guidelines were an essential complement to the statutory scheme. Those guidelines have been altered (in relation to children under 10) as a result of the decision of the Grand Chamber in S and Marper v United Kingdom (2008) 48 EHRR 1169. There is no lawful impediment to ACPO devising and implementing guidelines that take full account of the other features which Strasbourg has decreed are necessary for the operation of the scheme to be Convention compliant. Classifications (as to which categories of offences or individuals should require retention of samples) and long stop provisions (as to the period that they should be retained) are well within the institutional reach of ACPO. So also are the circumstances in which exceptions to the guidelines can be permitted. ACPO chose the exceptionality criteria. They may equally change those criteria. And because there is no legal impediment in them doing so, then under section 6 of HRA, they or Parliament must. Section 6(2)(b) can only come into play if ACPO cannot act. If it can, then it must. Because Parliamentary change is imminent, however, and because significant policy issues need to be considered, it is not unreasonable to leave this to Parliament. I therefore agree with the order proposed by Lord Dyson. I also agree with all that Lord Dyson has had to say on the argument that Parliament could not have intended to entrust the creation of a detailed scheme pursuant to section 64(1A) to the police subject only to the judicial review jurisdiction of the court. As he has said, the scope of the argument is confined. It is to the effect that, although it could have done so if it had considered it appropriate, Parliament must be taken not to have intended to grant such a power because of the constitutional and institutional limits on the competence of the police. But Parliament does not appear to have felt such qualms in giving the initial responsibility for the devising of guidelines to ACPO and, as Lord Dyson has pointed out, no question of constitutional competence arises. Finally, I agree with Lord Dysons conclusion on the discrete issue of GCs photographs. DISSENTING JUDGMENTS ON THE APPROPRIATE RELIEF LORD RODGER In September 1984 Sir Alec Jeffreys made his ground breaking discovery of DNA fingerprints. A few weeks later, on 31 October, the Police and Criminal Evidence Act 1984 (PACE) was enacted. Within a few years Sir Alecs discovery was being used routinely in the criminal courts in this country. Section 64(1) of PACE, as originally enacted in ignorance of this major development that lay just ahead, provided: If (a) fingerprints or samples are taken from a person in connection with the investigation of an offence; and (b) he is cleared of that offence, they must be destroyed as soon as is practicable after the conclusion of the proceedings. In January 1997 an unidentified intruder raped and assaulted a woman in her home in London. Swabs were taken from her and were found to contain semen. A DNA profile was obtained from the semen and placed on the national DNA database. In January 1998 a man was arrested for an unrelated offence of burglary. A saliva sample was taken from him and a DNA profile was derived from it. In August of the same year the man was acquitted of the burglary and, by virtue of section 64(1) of PACE, his sample should have been destroyed. In fact, however, his profile was left on the DNA database and in October a match was made between this profile and the DNA profile derived from the semen in the swabs taken from the woman who had been raped in January 1997. The man was arrested and a DNA profile was obtained from a hair plucked from him. As was to be expected, this profile also matched the DNA derived from the semen. At his trial for the rape the judge held, however, that, since the material which had led to his identification should have been destroyed as required by section 64(1), the evidence relating to the profile from the plucked hair was not admissible. The man was acquitted. The Attorney General referred the matter to the Court of Appeal who agreed with the judge but referred the point to the House of Lords. In Attorney Generals Reference (No 3 of 1999) [2001] 2 AC 91 the House reversed the Court of Appeal. The speech of Lord Steyn, with which the other members of the appellate committee agreed, was notable for his observation, at p 118, that the austere interpretation of the Court of Appeal produced results which were contrary to good sense. For present purposes, that case is important because it alerted the public and politicians to the fact that the obligation under section 64(1) of PACE to destroy samples if the suspect was acquitted meant that evidence which might lead to the detection and prosecution of the perpetrators of other crimes would be lost. Just a few weeks after their Lordships decision, in the course of the second reading debate on the Criminal Justice and Police Bill, the Home Secretary introduced Part IV of the Bill which, he explained, was designed, inter alia, to amend section 64(1) of PACE to prevent evidence being lost in this way. The Home Secretary referred to Lord Steyns speech as demonstrating the need for the change: Hansard (HC Debates), 29 January 2001, col 42. This history shows beyond doubt that Parliaments purpose in enacting section 82 of the Criminal Justice and Police Act 2001, which inserted section 64(1A) into PACE, was to ensure that, in future, instead of being destroyed, samples taken from suspects would be retained indefinitely and so remain available to the police on the national DNA database. This would protect the public by facilitating the detection and prosecution of the perpetrators of crimes. Section 64(1A) provides: (1A) Where (a) fingerprints, impressions of footwear or samples are taken from a person in connection with the investigation of an offence, and (b) subsection (3) below does not require them to be destroyed, the fingerprints, impressions of footwear or samples may be retained after they have fulfilled the purposes for which they were taken but shall not be used by any person except for purposes related to the prevention or detection of crime, the investigation of an offence, the conduct of a prosecution or the identification of a deceased person or of the person from whom a body part came. After this provision came into force, in accordance with guidelines from the Association of Chief Police Officers (ACPO) the police proceeded to retain data indefinitely and so to build up their DNA database of samples and profiles obtained from people who had been suspected of crimes, even if they had not been prosecuted or had been acquitted. In due course in two appeals to the House of Lords this system was challenged as being in violation of the suspects article 8 Convention rights: R (S) v Chief Constable of the South Yorkshire Police; R (Marper) v Chief Constable of the South Yorkshire Police [2004] 1 WLR 2196. In the leading speech Lord Steyn said, at p 2198E F, para 2, that as a matter of policy it is a high priority that police forces should expand the use of [DNA] evidence where possible and practicable. He went on to refer to public disquiet that the obligation to destroy samples under the unamended section 64(1) of PACE had sometimes enabled defendants who had in all likelihood committed grave crimes to walk free. Baroness Hale of Richmond observed, at p 2219G H, para 78, that The present system is designed to allow the collection of as many samples as possible and to retain as much as possible of what it has. The benefit to the aims of accurate and efficient law enforcement is thereby enhanced. In the light of such considerations the House of Lords held unanimously that the system did not violate the appellants article 8 Convention rights. To Strasbourg, however, the matter appeared differently. In S v United Kingdom (2008) 48 EHRR 1169 the Grand Chamber first held unanimously and contrary to the majority view in the House of Lords that the English system did indeed involve an interference with suspects article 8 rights. Then, when considering the proportionality of that interference, the court observed, at pp 1200 1201, para 119: In this respect, the Court is struck by the blanket and indiscriminate nature of the power of retention in England and Wales. The material may be retained irrespective of the nature or gravity of the offence with which the individual was originally suspected or of the age of the suspected offender; fingerprints and samples may be taken and retained from a person of any age, arrested in connection with a recordable offence, which includes minor or non imprisonable offences. The retention is not time limited; the material is retained indefinitely whatever the nature or seriousness of the offence of which the person was suspected. Moreover, there exist only limited possibilities for an acquitted individual to have the data removed from the nationwide database or the materials destroyed; in particular, there is no provision for independent review of the justification for the retention according to defined criteria, including such factors as the seriousness of the offence, previous arrests, the strength of the suspicion against the person and any other special circumstances. The court went on to conclude, at p 1202, para 125: that the blanket and indiscriminate nature of the powers of retention of the fingerprints, cellular samples and DNA profiles of persons suspected but not convicted of offences, as applied in the case of the present applicants, fails to strike a fair balance between the competing public and private interests and that the respondent State has overstepped any acceptable margin of appreciation in this regard. Accordingly, the retention at issue constitutes a disproportionate interference with the applicants right to respect for private life and cannot be regarded as necessary in a democratic society. In response to the European Courts judgment the last Parliament passed the Crime and Security Act 2010, section 14 of which was designed to amend section 64 of PACE with a view to establishing a regime for the retention and destruction of DNA material and profiles that would be compatible with article 8 as interpreted by the European Court. The new Government, which came into office in May 2010, decided, however, not to commence this legislation Instead, in Chapter 1 of Part 1 of the Protection of Freedoms Bill, it has put fresh legislative proposals, along similar lines to the legislation in Scotland, before Parliament. There were indications in the European Courts judgment that a system along those lines would indeed be compatible with article 8. As in the earlier legislation, the complex proposals include provision for a National DNA Database Strategy Board to oversee the operation of the DNA database. Obviously, in the light of the European Courts judgment the indefinite retention of the data relating to the appellants under the existing system is incompatible with their article 8 rights. The decision of the House of Lords to the contrary in R (S) v Chief Constable of the South Yorkshire Police; R (Marper) v Chief Constable of the South Yorkshire Police [2004] 1 WLR 2196 must accordingly be overruled. That is accepted by the respondent, the Metropolitan Police Commissioner, and by the Home Secretary, who has intervened in the proceedings. Where the Commissioner and the Home Secretary part company with the appellants is as to the order, if any, which the court should pronounce in these circumstances. In effect, for the appellant C Mr Fordham QC argued that section 64(1A) is worded (may be retained) so as to give the Commissioner and chief constables an open discretion as to whether data should be retained and, if so, for how long and subject to what conditions. The position was therefore quite straightforward. By virtue of section 6(1) of the Human Rights Act 1998 the Commissioner and chief constables were obliged to exercise that discretion so as to establish and maintain a system for the retention of samples and data that would comply with suspects article 8 Convention rights as they are now to be interpreted in the light of the decision of the European Court. It was unlawful for them not to do so. Mr Fordham indicated that he would be content for the court to pronounce a declaration to this effect, without making any order for the removal of the data relating to his client. While adopting the bulk of Mr Fordhams submissions, on behalf of the appellant GC, Mr Cragg asked the court to go further and indicate that in his case the position should be put right within 28 days. Mr Fordhams argument is, of course, unanswerable if he is right to say that the crucial words (may be retained) in section 64(1A) confer a wide indeed open discretion on the Commissioner and the chief constables whose forces retain the samples and data that make up the national DNA database. If that is correct, then, even though, when section 64(1A) came into force, ACPO issued guidelines requiring that subject to a narrow exception all the DNA samples and data relating to suspects should be retained indefinitely, the Association could with equal propriety have issued completely different guidelines which would have resulted in a system that did not provide for the indefinite retention of the samples and data. On that interpretation, any credit for the creation of the present DNA database is to be accorded to ACPO for choosing, of its own freewill, to issue the guidelines which it did. More particularly, since ACPO had been, and still was, free to adopt other completely different guidelines, ACPO could now issue fresh guidelines which would produce a system that was compatible with the European Courts judgment. The key question, therefore, is whether Mr Fordhams construction of section 64(1A) as conferring this wide discretion on the police is correct. On behalf of the Commissioner Lord Pannick QC argued that it is not. He drew attention to the context, which I have already described, in which Parliament enacted section 64(1A). This showed that Parliament had set out to cure the mischief that the original version of section 64(1) of PACE meant that suspects samples and data were removed from the database even although as Attorney Generals Reference (No 3 of 1999) demonstrated the retention of that material could potentially result in the detection and prosecution of serious criminals. Parliament plainly intended that in future this material should be retained on the DNA database indefinitely. In other words, under section 64(1A) the police had to retain it indefinitely. Mr Fordham said, rhetorically, that, if this were correct, then the Home Secretary could have brought proceedings against the police if they had failed to retain the material indefinitely. Accepting the challenge, Mr Eadie QC said that, while the matter would probably have been sorted out in a different way, if necessary, such proceedings could indeed have been brought. It is useful to notice just how far reaching Mr Fordhams argument is: essentially, under section 64(1A) the police were free to do what they liked. On his approach the provision contained nothing to delimit the exercise of their discretion. When listening to his argument, at times I felt that unconsciously, of course he was intent on pulling down one of the most important bulwarks which our predecessors so painstakingly erected against arbitrary acts of the executive. In Car Owners Mutual Insurance Co Ltd v Treasurer of the Commonwealth of Australia [1970] AC 527, 537E F, Lord Wilberforce observed that in a statutory framework it is impossible to conceive of a discretion not controlled by any standard or consideration stated, or to be elicited from, the terms of the Act. He was, of course, reflecting the thinking in Padfield v Minister of Agriculture, Fisheries and Food [1968] AC 997 where Lord Reid had said, at p 1030B D, that Parliament must have conferred the discretion with the intention that it should be used to promote the policy and objects of the Act, the policy and objects of the Act must be determined by construing the Act as a whole and construction is always a matter of law for the court. Following that classic authority, in my view the power which was conferred on the police by section 64(1A) had to be exercised in accord with the policy and objects of that enactment. As I have explained, the policy and objects of Parliament in enacting section 64(1A) were plainly that DNA samples and data derived from suspects should be retained indefinitely so that a large and expanding database should be available to aid the detection and prosecution of the perpetrators of crimes. The police were therefore bound to exercise the power given to them by section 64(1A) in order to promote that policy and those objects. This meant, in effect, that, subject to possible very narrow exceptions (e g, those suspected of a crime which turned out not to be a crime at all), the police had to retain on their database the samples and profiles of all suspects. In short, the police were under a duty to do so. By a slightly different route this analysis reaches the same result as the older well known line of authority to the effect that, on the proper construction of a statute as a whole and in its context, it can sometimes be seen that a power granted to, say, an official, court or other body in the public interest must be regarded as having been coupled with an implied duty on the recipient to exercise the power in the circumstances envisaged for its exercise. See, for instance, Julius v Lord Bishop of Oxford (1880) 5 App Cas 214; Attorney General v Antigua Times Ltd [1976] AC 16, 33F G, per Lord Fraser of Tullybelton. In my view, therefore, given the policy and objects of the enactment, before the decision of the European Court the police could not have exercised their power under section 64(1A) by choosing to retain samples and data for, say, only three years (or any other period deliberately not prescribed in the legislation) and then destroying them. Similarly, given the policy and objects of the enactment, the police could not have exercised the power to detain material indefinitely by choosing to delete material from those against whom, in their view, suspicion fell below some arbitrary level not recognised in the legislation. Any such exercise of their power would have defeated, rather than promoted, the policy of the enactment and would therefore have been unlawful. In the light of the European Courts decision, it can now be seen that the policy and objects of section 64(1A), to create a virtually comprehensive and expanding database of DNA profiles from suspects, violate the article 8 Convention rights of unconvicted suspects. Given that the Protection of Freedoms Bill has been introduced into Parliament, there is good reason to believe that legislation will be passed in the foreseeable future to establish a new system. The question in the present proceedings is whether in the meantime, by virtue of section 3(1) of the HRA or otherwise, the police must read and give effect to section 64(1A) in a way that is compatible with article 8 as interpreted by the European Court and whether they act unlawfully if they do not. Since I reject Mr Fordhams argument that section 64(1A) gives the police an open discretion as to what to do, I also reject his further, seductive, argument that, having regard to section 6(1) of the HRA, they can and should simply exercise that discretion in such a way as to establish a lawful system that meets the requirements of the Strasbourg court for example, by choosing to retain samples and data for only three years, subject, perhaps, to a power in an independent body to extend the period for some further defined period (as under the Scottish legislation), or by only retaining the material from those suspected of certain classes of crimes, or by only retaining the material from those against whom there is a high degree of suspicion etc. All of those suggested steps would have been inconsistent with the policy and objects of section 64(1A) as originally enacted. So they could only be adopted now, in order to comply with the European Courts decision, if section 3(1) of the HRA makes that not only possible but indeed obligatory. Section 3 provides: (1) So far as it is possible to do so, primary legislation and subordinate legislation must be read and given effect in a way which is compatible with the Convention rights. (2) This section (a) applies to primary legislation and subordinate legislation whenever enacted; (b) does not affect the validity, continuing operation or enforcement of any incompatible primary legislation; and (c) does not affect the validity, continuing operation or enforcement of any incompatible subordinate legislation if (disregarding any possibility of revocation) primary legislation prevents removal of the incompatibility. The opening phrase in subsection (1) shows that there are limits to the duty which it imposes. The words of Lord Nicholls of Birkenhead in In Re S (Minors) (Care Order: Implementation of Care Plan) [2002] 2 AC 291, 313, para 40, are a useful guide to where those limits lie: For present purposes it is sufficient to say that a meaning which departs substantially from a fundamental feature of an Act of Parliament is likely to have crossed the boundary between interpretation and amendment. This is especially so where the departure has important practical repercussions which the court is not equipped to evaluate. In such a case the overall contextual setting may leave no scope for rendering the statutory provision Convention compliant by legitimate use of the process of interpretation. Mr Fordham submitted that the fundamental feature of section 64(1A) was the retention of the material for the purposes of creating a DNA database, not the indefinite retention of the material with a view to establishing a virtually comprehensive database of DNA material from suspects. In my view that submission is unrealistic. The truth is that Parliament wanted to eliminate the danger, which existed under the pre existing legislation, that valuable evidence would be lost and potential prosecutions of the guilty based on the latest science would be jeopardised if material had to be removed from the database. Providing for the material to be retained on the database indefinitely was therefore the fundamental feature of the amending legislation which inserted section 64(1A) into PACE. That being so, section 3(1) of the HRA does not oblige or permit the courts or the police to read or give effect to section 64(1A) in a way that departs substantially from that fundamental feature. And it is quite obvious that any reading of section 64(1A) which would be apt to obviate the defects identified in the existing system by the European Court would depart very substantially indeed from that fundamental feature of the provision would, indeed, contradict it. It is therefore nothing to the point that, from a linguistic point of view, the provision might easily be read as though it said that samples may be retained, consistently with the suspects article 8 Convention rights. The hypothetical additional words, though few in number, would have the effect, and would be intended to have the effect, of altering the provision so as, say, to limit the samples and data that were to be retained and the time for which they could be retained, and to impose a duty to remove them after that time and so to negate the defining feature of the legislation. In other words, the court would have crossed the line from interpreting to amending the legislation. Amending section 64(1A) in that way is something which only Parliament can do. Parliament showed itself willing to pass amending legislation in the Crime and Security Act 2010. The fact that the new Government decided not to commence that legislation, but chose to introduce a Bill providing for a different scheme shows that there is a range of possible ways to bring the system into line with the requirements of article 8 and room for doubt about which is the best policy to adopt. This court is in no position to weigh the competing practical advantages and disadvantages of the possible solutions. These are further features which confirm that the necessary changes require legislation and cannot be made by any legitimate interpretation, however extensive, under section 3(1): In Re S (Minors) (Care Order: Implementation of Care Plan) [2002] 2 AC 291, 313, para 40, per Lord Nicholls. Section 64(1A) is therefore incompatible with suspects article 8 Convention rights and cannot be made compatible under section 3(1) of the HRA. Section 3(2)(b) ensures that in these circumstances the continuing operation of section 64(1A) is unaffected. Section 6(1) and (2) provide: (1) It is unlawful for a public authority to act in a way which is incompatible with a Convention right. (2) Subsection (1) does not apply to an act if (a) as the result of one or more provisions of primary legislation, the authority could not have acted differently; or (b) in the case of one or more provisions of, or made under, primary legislation which cannot be read or given effect in a way which is compatible with the Convention rights, the authority was acting so as to give effect to or enforce those provisions. Like sections 3(2) and 4(6), section 6(2) is concerned to preserve the primacy and legitimacy of primary legislation. See Aston Cantlow and Wilmcote with Billesley Parochial Church Council v Wallbank [2004] 1 AC 546, 556 557, para 19, per Lord Nicholls, cited with approval by Lord Hoffmann in R (Hooper) v Secretary of State for Work and Pensions [2005] 1 WLR 1681, 1696, para 51. If that is correct and section 3(1) of the HRA cannot be invoked in the present case, then section 64(1A) continues to operate, and Parliament intends it to operate, in the same way as when enacted. It therefore falls to be interpreted and applied just as when enacted. It is accepted that section 6(2)(a) applies to cases where the legislation, which cannot be read compatibly with Convention rights, imposed a duty on a public authority to act in one particular way the authority could not have acted differently. It follows, of course as Lord Hoffmann remarked in Hooper [2005] 1 WLR 1681, 1696, para 49 that, by contrast, section 6(2)(b) assumes that the public authority could have acted differently but nevertheless excludes liability if it was giving effect to a statutory provision which cannot be read as Convention compliant in accordance with section 3. Since the Convention non compliant provision continues to operate, any public authority which is exercising a power conferred by it must continue do so in a way that promotes the object and purposes for which the provision confers the power and these are, ex hypothesi, incompatible with Convention rights. As Lord Hoffmann noted, section 6(2)(b) assumes, however, that under the relevant legislation the public authority could have acted in more than one way. For example, it might be that a public authority could have adopted either of two schemes, A and B, both of which would have promoted the policy and objects of the legislation. So it cannot be said that, when it chose to adopt scheme A, the public authority could not have acted differently. Nevertheless, since, when it adopted scheme A, the authority was promoting the policy and objects of the primary legislation and so was acting to give effect to the legislation, section 6(2)(b) disapplies section 6(1) and ensures that the authority was acting lawfully. In this way the primacy and legitimacy of the provision of primary legislation are preserved. For all the reasons which I have set out, in the present case, in substance the police could really not have acted differently: in order to promote the object and purposes of section 64(1A) of PACE, they had to retain all the samples which they did, indefinitely. If that is so, then what the police did, and continue to do, falls within section 6(2)(a) and is accordingly lawful. Even if one assumes, however, that, while promoting the policy and objects of the legislation, the police could, for example, have recognised a slightly wider exception and so created a slightly different system, that does not matter. The same goes if, while promoting the policy and objects of the legislation, the police could have chosen not to recognise even the very narrow exception which they did and could have decided to retain the samples and data relating to absolutely all suspects. In either event, even though the police could have done something (slightly) different, by doing what they actually did and are still doing, they were acting and are continuing to act so as to give effect to section 64(1A). Section 6(2)(b) of the HRA accordingly applies and so the police have at all times acted, and continue to act, lawfully. In these circumstances section 64(1A) is incompatible with suspects article 8 Convention rights. Even though Parliament and the Government have the matter under review, I consider that the better course is for this court to grant a declaration of incompatibility in terms of section 4(2) of the HRA. Cf Bellinger v Bellinger [2003] 2 AC 467, 482, para 55, per Lord Nicholls. I would accordingly allow the appeals to the extent of making a declaration that section 64(1A) of the Police and Criminal Evidence Act 1984 is incompatible with the article 8 Convention rights of suspects. LORD BROWN On 4 December 2008 the Grand Chamber of the ECtHR in S v UK (2008) 48 EHRR 1169 condemned on article 8 grounds the scheme for the indefinite retention of biometric data adopted in England and Wales pursuant to section 64(1A) of the Police and Criminal Evidence Act 1984 (PACE). The critical issue for decision on these appeals is whether, following that decision and pending the enactment by Government of a fresh legislative scheme compatible with article 8, the police have been acting unlawfully in continuing to operate the indefinite retention scheme. That in turn depends upon whether section 64(1A) can or cannot be read or given effect in a way which is compatible with the Convention rights within the meaning of section 6(2)(b) of the Human Rights Act 1998 (the HRA). Before turning to address this issue it is necessary to sketch out something of the background to the appeal and the circumstances in which the point now arises for decision. These appellants are two amongst the 850,000 odd unconvicted persons whose profiles are kept on the national DNA database, their fingerprints and samples having been taken from them when they were arrested as suspects (from 2003, whether or not they were actually charged). This database has built up following Parliaments introduction on 11 May 2001 of section 64(1A) of PACE in substitution for the original section 64(1) which had required the destruction of a suspects fingerprints and samples as soon as practicable after he was cleared. Section 64(1A) provides so far as is material: Where . fingerprints, impressions of footwear or samples are taken from a person in connection with the investigation of an offence . [they] may be retained after they have fulfilled the purposes for which they were taken but shall not be used by any person except for purposes related to the prevention or detection of crime, the investigation of an offence, the conduct of a prosecution or the identification of a deceased person or of the person from whom a body part came. In 2004 this change in the law was unsuccessfully challenged, principally on article 8 grounds, all the way up to the House of Lords, by two complainants: S, an eleven year old boy with no previous convictions who had been acquitted of attempted robbery, and Mr Marper, a man of 38, also of good character, whose case was discontinued following his arrest on the charge of harassing his partner: R (S) v Chief Constable of the South Yorkshire Police; R (Marper) v Chief Constable of the South Yorkshire Police [2004] 1 WLR 2196. Lady Hale alone amongst the Appellate Committee thought that the retention and storage of DNA profiles constituted an interference with the claimants rights under article 8. But each member of the Committee, Lady Hale included, was quite clear that, even if it did, it was readily justifiable under article 8(2). Lord Steyn described such evidence as having the inestimable value of cogency and objectivity (para 1) and said that as a matter of policy it is a high priority that police forces should expand the use of such evidence where possible and practicable (para 2). At para 3 he observed that: It can play a significant role in the elimination of the innocent, the correction of miscarriages of justice and the detection of the guilty. At para 36 Lord Steyn dealt with a submission that retention is not in accordance with law (on the basis that a law which confers a discretion must indicate the scope of that discretion: Silver v United Kingdom (1983) 5 EHRR 347, 372, para 88): The discretion involved in the power to retain fingerprints and samples makes allowance for exceptional circumstances, eg where an undertaking to destroy the fingerprints or sample was given or where they should not have been taken in the first place, as revealed by subsequent malicious prosecution proceedings. At para 38 Lord Steyn observed that the expansion of the database by the retention confers enormous advantages in the fight against serious crime and at para 39 he remarked upon the benefits of a greatly extended database. Lord Rodger and Lord Carswell agreed with Lord Steyn. Lady Hale agreed that retention and storage of DNA samples and profiles was readily justifiable for the reasons given by Lord Steyn and myself. She added: The whole community, as well as the individuals whose samples are collected, benefits from there being as large a database as it is possible to have. The present system is designed to allow the collection of as many samples as possible and to retain as much as possible of what it has. The benefit to the aims of accurate and efficient law enforcement is thereby enhanced. (para 78) I myself suggested (para 88): that the benefits of the larger database . are so manifest . that the cause of human rights generally (including the better protection of society against the scourge of crime which dreadfully afflicts the lives of so many of its victims) would inevitably be better served by the databases expansion than by its proposed contraction. The more complete the database, the better the chance of detecting criminals, both those guilty of crimes past and those whose crimes are yet to be committed. The better chance too of deterring from future crime those whose profiles are already on the database. And I pointed out too that: The larger the database, the less call there will be to round up the usual suspects. Instead, those amongst the usual suspects who are innocent will at once be exonerated. These views notwithstanding, the Grand Chamber in Strasbourg, as already indicated, on the application of the same complainants, some four years later unanimously condemned the scheme as unjustifiable under article 8. It is sufficient for present purposes to quote just three paragraphs from the Courts lengthy judgment: 119 . the Court is struck by the blanket and indiscriminate nature of the power of retention in England and Wales. The material may be retained irrespective of the nature or gravity of the offence with which the individual was originally suspected or of the age of the suspected offender; fingerprints and samples may be taken and retained from a person of any age, arrested in connection with a recordable offence, which includes minor or non imprisonable offences. The retention is not time limited; the material is retained indefinitely, whatever the nature or seriousness of the offence of which the person was suspected. Moreover, there exist only limited possibilities for an acquitted individual to have the data removed from the nationwide database or the materials destroyed; in particular, there is no provision for independent review of the justification for the retention according to defined criteria, including such factors as the seriousness of the offence, previous arrests, the strength of the suspicion against the person and any other special circumstances. 125 In conclusion, the Court finds that the blanket and indiscriminate nature of the powers of retention of the fingerprints, cellular samples and DNA profiles of persons suspected but not convicted of offences, as applied in the case of the present applicants, fails to strike a fair balance between the competing public and private interests and that the respondent State has overstepped any acceptable margin of appreciation in this regard. 134 . In accordance with article 46 of the Convention, it will be for the respondent State to implement, under the supervision of the Committee of Ministers, appropriate general and/or individual measures to fulfil its obligations to secure the rights of the applicants and other persons in their position to respect for their private life. Before turning to the circumstances in which these particular appellants had their fingerprints and samples taken and the precise nature of the argument they advance on this appeal, it is convenient first to indicate something of the response to the Grand Chambers judgment, on the part both of the Government and of the police. So far as the Government was concerned, the then Home Secretary in a Press Release on 16 December 2008 indicated that the Home Office would institute a consultation process but that meantime: The DNA of children under ten the age of criminal responsibility should no longer be held on the database. There are around 70 such cases [we are told that there were in fact 96], and we will take immediate steps to take them off. (S and Mr Marpers data was also removed.) On 7 May 2009 the Home Office published a White Paper, Keeping the Right People on the DNA Database, setting out certain key proposals for the future and inviting views upon them. The White Paper also considered what should happen to the 850,000 odd profiles already on the national DNA database. On 28 July 2009 ACPOs Director of Information wrote to all Chief Constables indicating that new guidelines were not expected to take effect until 2010 and that: Until that time, the current retention policy on fingerprints and DNA remains unchanged. ACPO strongly advise that decisions to remove records should not be based on proposed changes. It is therefore vitally important that any applications for removals of records should be considered against current legislation and the Retention Guidelines Exceptional Case Procedure . Those Guidelines, which have remained essentially the same since section 64(1A) was introduced, provide: Chief Officers have the discretion to authorise the deletion of any specific data entry on the PNC owned by them. They are also responsible for the authorisation of the destruction of DNA and fingerprints associated with that specific entry. It is suggested that this discretion should only be exercised in exceptional cases . Exceptional cases will by definition be rare. They might include cases where the original arrest or sampling was found to be unlawful. Additionally, where it is established beyond doubt that no offence existed, that might, having regard to all the circumstances, be viewed as an exceptional circumstance. On 11 November 2009, following the consultation period, the Home Secretary made a written Ministerial statement outlining a revised set of proposals for the retention of fingerprints and DNA data (Hansard (HC Debates), 11 November 2009, col 25WS). It was originally intended to implement these by way of order making powers under the Policing and Crime Act 2009 but, following strong opposition to the introduction of a new scheme by secondary rather than primary legislation, the proposed new scheme was included in the Crime and Security Act 2010, introduced in the House of Commons on 19 November 2009 and receiving Royal Assent on 8 April 2010. Following a change of government in May 2010, however, rather than bringing the Crime and Security Act into force, the incoming government instead announced its proposal for new legislation designed essentially to mirror the Scottish system and this finally, by the Protection of Freedoms Bill 2011, introduced in the House of Commons as recently as 11 February 2011, it has now set in train. For reasons which will shortly become clear, it is unnecessary for the purposes of this judgment to indicate anything of the detailed nature of the various proposals which at one time or another have been considered for enactment in substitution for the existing scheme so as to achieve compatibility with article 8 pursuant to the Grand Chamber judgment. It is sufficient to indicate that a wide range of differing schemes have been canvassed and considered and that arriving at the preferred solution has inevitably involved complex and sensitive choices. It is similarly unnecessary to describe in any detail the facts of these appellants cases and the following brief summary will suffice. GC is 41. On 20 December 2007, following his girlfriends complaint that he had assaulted her (albeit without causing her injury), he voluntarily attended the police station and was arrested on suspicion of common assault. He strongly denied the allegation, explaining rather that he had been defending himself against attack by her. Following the taking of DNA samples, fingerprints and a photograph, GC was released on police bail without charge. Before 21 February 2008, when he was due to surrender to his bail, GC was told that no further action would be taken against him. GCs fingerprints (but not DNA) had in fact been taken previously and retained in connection with a firearms offence for which he had been sentenced at the Central Criminal Court on 18 February 1992 to seven years imprisonment. C is 34, a man of good character. On 17 March 2009 he was arrested on suspicion of rape, harassment and fraud following allegations made the previous day by a former girlfriend and members of her family, allegations which C strenuously denied. The same day, Cs fingerprints and DNA samples were taken. Although no further action was taken in relation to the alleged harassment and fraud, on 18 March 2009 C was charged with rape. On 5 May 2009, however, the prosecution offered no evidence on the rape charge and C was accordingly acquitted. Both appellants, through solicitors, applied to the respondent Police Commissioner to have their fingerprints and DNA data deleted from police records GC on 23 March 2009, C on 19 August 2009 (in each case, of course, after the Grand Chambers decision in S v UK). Consistently with ACPOs guidelines, however, both applications were refused. The appellants then issued judicial review proceedings, GC on 11 December 2009, C on 9 February 2010. The applications were heard together by the Divisional Court (Moses LJ and Wyn Williams J) on 15 July 2010 and on 16 July 2010 were dismissed, the Divisional Court correctly holding itself bound by the decision of the House of Lords in S and Marper v Chief Constable of the South Yorkshire Police (the subsequent Grand Chamber decision notwithstanding). The Divisional Court did, however, certify a point of law of general importance and, with the consent of all parties, granted a certificate pursuant to section 12 of the Administration of Justice Act 1969, thus enabling the matter to proceed directly to this court. Before this court, Mr Fordham QC for C and Mr Cragg for GC both submit that, in the light of the Grand Chambers judgment, the earlier decision of the House of Lords can no longer stand and the existing scheme must now be recognised to be unlawful so much, indeed, is clear and conceded. Pursuant to section 6 of the HRA, their argument then continues, the police must now therefore cease retaining their data incompatibly with their article 8 rights. Instead, they submit, the police must take account of the various criticisms made by the Grand Chamber of the existing scheme, must devise a new, compatible scheme, and must then deal with these appellants requests (and any other outstanding or future requests) for the removal of information from the national DNA database this, indeed, in GCs case, within 28 days, contends Mr Cragg. Not so, submit Lord Pannick QC for the Metropolitan Police Commissioner and Mr Eadie QC for the Home Secretary (properly joined in the proceedings as an interested party). It is, they submit, for the government, not for the police, to devise and enact a new scheme; the police meantime have no alternative but to continue operating the existing scheme pursuant to section 64(1A) of PACE. Their case is founded on section 6(2)(b) of the HRA which, they argue, disapplies section 6(1) and thus relieves the police of liability for continuing to operate what the Grand Chamber has ruled to be (in international law) an unlawful scheme. The most the appellants are entitled to is a declaration of incompatibility pursuant to section 4 of the HRA. As I indicated at the outset, this is the critical issue in the appeal and plainly it centres upon the proper understanding of, and interplay between, sections 3, 4 and 6 of the HRA which (as to their most material parts) I now set out: 3(1) So far as it is possible to do so, primary legislation and subordinate legislation must be read and given effect in a way which is compatible with the Convention rights. 4(2) If the court is satisfied that [a provision of primary legislation] is incompatible with a Convention right, it may make a declaration of that incompatibility. 6(1) It is unlawful for a public authority to act in a way which is incompatible with a Convention right. 6(2) Subsection (1) does not apply to an act if (a) as the result of one or more provisions of primary legislation, the authority could not have acted differently; or (b) in the case of one or more provisions of, or made under, primary legislation which cannot be read or given effect in a way which is compatible with the Convention rights, the authority was acting so as to give effect to or enforce those provisions. The precise symmetry between section 3(1) and section 6(2)(b) will at once be noted: each invites consideration of whether legislation can be read or given effect in a way which is [Convention] compatible section 3 indicating what must be done if this is possible, section 6(2)(b) indicating the consequence (the disapplication of section 6(1)) if it is not. At first blush the respondents argument appears distinctly unpromising. Section 64(1A) is, after all, couched in terms that appear to confer on the police an open discretion: samples may be retained. On the face of it, therefore, the police appear to be in a position to act compatibly with the article 8 rights of those whose samples have been taken and this, indeed, even without resort to section 3. But suppose there were some doubt about this, why would that not fall to be resolved by the interpretative imperative of section 3? How can it be appropriate, in the face of such a strong statutory direction, to place upon section 64(1A) a construction which denies the police the ability to exercise their data retention power compatibly? I confess to having come only comparatively late to the conclusion that, difficult though the respondents argument initially appears, it is in fact correct. Section 6(2)(b) has long been recognised to give rise to difficulty at the margins see, for example, the judgments respectively of Lord Hope, Lord Walker and Lord Mance in Doherty v Birmingham City Council [2009] AC 367. Clearly, as Lord Hoffmann observed in R (Hooper) v Secretary of State for Work and Pensions [2005] 1 WLR 1681, 1696, para 49, section 6(2)(b) assumes that the public authority could have acted differently but nevertheless excludes liability if it was giving effect to a statutory provision which cannot be read as Convention compliant in accordance with section 3. This, as was pointed out, was in contradistinction to section 6(2)(a) which applies when a public authority could not have acted differently when, in other words, the authority has been compelled by primary legislation to act in a way ex hypothesi incompatible with Convention rights. Superficially, of course, the very assumption that a public authority could have acted differently appears to postulate that the power in question could therefore have been exercised compatibly with Convention rights. Plainly, however, section 3 notwithstanding, it cannot follow that the power must therefore in all cases be exercised compatibly else section 6(2)(b) could never come into play. A simple illustration of section 6(2)(b) in operation is, of course, where primary legislation confers a power on a public authority and where a decision to exercise that power (or, as the case may be, not to exercise it) would in every case inevitably give rise to an incompatibility. R v Kansal (No 2) [2002] 2 AC 69 was just such a case and in such situations it can readily be understood why section 6(2)(b) applies. Otherwise, instead of giving effect to a provision conferring a power, the public authority would have to treat the provision (in cases where not to exercise it would give rise to incompatibility) as if it imposed a duty or, in cases where any exercise of the power would give rise to incompatibility (as in Kansal (No 2) itself), would have to abstain from ever exercising the power. In either instance, it is obvious, Parliaments will would be thwarted. I would take this opportunity to resile from what I myself said in the latter part of para 118 of my own judgment in Hooper. I was surely right to say in the first part of that paragraph: Plainly it is not the case that section 6(2)(b) applies whenever a statutory discretion falls to be exercised in a particular way to ensure compliance with a Convention right. This occurs in a host of different situations and, so far as I am aware, no one has ever suggested that, had the discretion not been exercised compatibly, the public authority would nevertheless have been protected against a domestic law claim by the section 6(2)(b) defence on the basis that otherwise a power would be turned into a duty. I was, however, wrong to suggest that the situation would be no different if to secure Convention compliance the statutory discretion had to be exercised in every case. It now seems to me that the underlying question in all these cases indeed, the determinative question in every case lying between the two extremes I have thus far dealt with is: what essentially was Parliament intent on achieving by this legislation? Is it or is it not something which could realistically be achieved consistently with the observance of Convention rights? If it is, then it must be so construed and applied. If, however, it is not, then section 6(2)(b) will apply: the legislation will be incompatible, a declaration of incompatibility may be made, and the public authority will be immune from liability. In short, the question to be asked in deciding whether section 6(2)(b) applies is essentially the same question as is more usually asked under section 3 when deciding whether or not, by a strained construction of apparently incompatible legislation, it is possible to read and give effect to it compatibly with Convention rights. Would such a construction depart substantially from a fundamental feature of the legislation? Would it be inconsistent with the underlying thrust of the legislation? Would it go with the grain of the legislation? Would it violate a cardinal principle of the legislation? Would it remove its pith and substance? Would it create an entirely different scheme? The Court must not cross the boundary from interpretation into legislation. All these familiar concepts and phrases are to be found in the well known cases on section 3 but their importance has hitherto not perhaps been fully recognised in the context also of section 6(2)(b). It is time to return to section 64(1A) of PACE and in the light of these considerations to ask whether realistically it could be construed for all the world as if, in enacting it, the government was leaving it to individual police forces or even to ACPO acting on their joint behalf to decide upon just what sort of scheme should be implemented for the future retention of biometric data. Is it really suggested that the police could and should then (in 2001) of their own volition have decided that, instead of retaining data indefinitely, they would retain it for only, say, one year or five years, or different periods in different cases and so forth? And if this was not open to them in 2001, how then could it become so merely because of the Grand Chambers condemnation of the indefinite scheme some years later? As Lord Nicholls observed in Ghaidan v Godin Mendoza [2004] 2 AC 557, 572, para 33, when indicating the limits of the courts section 3 powers: There may be several ways of making a provision Convention compliant, and the choice may involve issues calling for legislative deliberation. It is difficult to think of any case in which that objection to a section 3 construction applies more obviously than here. Lord Steyn reflected the same objection in the same case (para 49): Interpretation could not provide a substitute scheme. It is surely plain that legislative deliberation was required here. DNA retention can only sensibly operate on a national basis and section 64(1A), properly understood, in my judgment not merely authorised but required precisely the sort of scheme for the indefinite retention of biometric data that the House of Lords came to describe (and, indeed, so enthusiastically to support, in my case unrepentingly) in S and Marper. Realistically it was just not possible to construe the section differently, least of all as authorising the police to create for themselves a fundamentally different scheme which would achieve compatibility with the requirements of article 8 as subsequently identified by the Grand Chamber. Of course, some degree of latitude was given to the police as to how precisely the retention scheme was to operate. But this was essentially to decide what narrow categories should be excluded from its scope cases of the sort described by Lord Steyn at para 36 of S and Marper (see para 125 above) and, indeed, in the ACPO Guidelines (see para 129 above). The discretion could not sensibly be construed as extending to the basic nature of the scheme: whether retention should be indefinite or time limited. That section 64(1A) was intended to introduce a database for the indefinite retention of DNA samples is surely clear from the very circumstances in which this legislative change was brought about the deeply disturbing circumstances in which a violent rapist and a brutal murderer had both gone free because of the unsatisfactory existing scheme see Attorney Generals Reference (No 3 of 1999) [2001] 2 AC 91 and In re British Broadcasting Corporation [2010] 1 AC 145 and, indeed, to my mind clear also from the speeches in the House in S and Marper to which I have already referred. One of the specific issues before the House in S and Marper was, it should be noted: (4) if the retention of fingerprints and DNA profiles and/or samples is an unjustified interference with the appellants Convention rights, whether it would be possible to give section 64(1A) a Convention compatible interpretation under section 3 of the 1998 Act (Lord Steyns judgment at para 17) an issue, of course, as Lord Steyn observed at para 57, that in the event fell away. In short, the argument before the House assumed that section 64(1A) called for the indefinite retention of data and that, if this was incompatible with article 8, the appellants then needed to resort to section 3 of HRA for their requests for data removal to succeed. The appellants here submit that, following the Grand Chamber judgment, it was open to the police to adjust their data retention policy to meet the newly recognised requirements of article 8 in just the same way as they were required by this court in R (L) v Commissioner of Police of the Metropolis [2010] 1 AC 410 on article 8 grounds to adjust their previous approach to the disclosure of information for the purposes of enhanced criminal record certificates (ECRCs) pursuant to section 115(7) of the Police Act 1997. In my judgment, however, the two situations are entirely different: in L all that the courts decision required of the police was that in future they give no less weight to the statutory requirement that in their opinion the information ought to be included in the certificate than the requirement that they think it might be relevant (and in borderline cases give the prospective employee an opportunity to say why the information ought not to be disclosed). There was no requirement whatever for fresh policy choices to be made let alone legislative deliberation or democratic accountability. Rather the court was well able to decide the limited adjustment that needed to be made. Contrast the position in the present case. The Grand Chamber, in para 134 of its judgment (see para 126 above), can hardly have been expecting the police, rather than the Government, to implement the newly required measures under the supervision of the Committee of Ministers. Correspondingly, the States reaction to the Grand Chambers judgment was that it was plainly for Government, not the police, to devise and implement a new and Convention compliant scheme. It was, indeed, the Home Office rather than the police who decided that children under ten should be removed from the database (see para 127 above). No less significantly, the perceived need for a fully legitimate parliamentary solution to the problem was manifested by the political insistence upon the new scheme being introduced by primary and not merely secondary legislation. If this was not appropriate by secondary legislation, how much less so by revised ACPO guidelines. Even if it is suggested that section 64(1A) does not preclude ACPO from now amending their Guidelines to address the Grand Chambers criticisms in S v UK, that with respect is not a sufficient answer to the section 6(2)(b) defence. As I have said (para 143 above), the section 6(2)(b) defence necessarily postulates that the public authority could act differently. The critical question is whether they could do so consistently with the essential scheme and thrust of the legislation and a good test of that, I would suggest, is to ask whether it can really be said to be their duty to do so and to be unlawful and wrong for them not to do so. The whole purpose of section 6(2)(b) is to safeguard a public authority from liability (and, indeed, from misplaced criticism) in circumstances where in truth it is acting (as for my part I have no doubt that the police are acting here) perfectly properly. It follows from all this that, in common with Lord Rodger, with whose judgment on the section 6 issue I respectfully agree, I would hold that it is not unlawful (under domestic law) for the respondent police commissioner to continue to hold the appellants data on the national DNA database. As to whether this Court should now make a declaration of incompatibility in respect of section 64(1A) I hold no strong view. Nowhere is this identified as an issue before us and frankly I find it difficult to see any possible need or use for it in the present circumstances. But if others think it desirable, I would be quite content with that. I would add that, even had I concluded that the police could now act compatibly with article 8 under section 64(1A), I should certainly not have thought it just and appropriate within the meaning of section 8 of the HRA to require them to change their existing practice pending the introduction of a new legislative data retention scheme. It may be, indeed, that the strength of this reaction to the respondents fall back argument under section 8, on true analysis, reinforces the correctness of my primary conclusion on the section 6 issue: quite simply it would be wrong for the police to change their approach to section 64(1A) before Parliament so dictates and this court cannot properly direct them to do so. If anyone is to be criticised for the failure of the existing database to meet the States obligations under article 8, it is surely the Government, not the police. In my judgment they have a section 6(2)(b) defence to these claims.

Section 64 of the Police and Criminal Evidence Act 1984 (PACE) required the destruction of samples or fingerprints taken from a person in connection with the investigation of an offence if he was cleared of that offence. Section 64(1A) of PACE, enacted by section 82 of the Justice and Police Act 2001 (the 2001 Act), replaced that statutory obligation to destroy data with a discretion. Section 64(1A) provides that samples taken in connection with the investigation of an offence may be retained after they have fulfilled the purposes for which they were taken. Section 64(1A) was supplemented by guidelines issued by the Association of Chief Police Officers (ACPO). These guidelines provided that data should be destroyed only in exceptional cases. The polices retention policy was challenged in R (S) v Chief Constable of the South Yorkshire Police and R (Marper) v Chief Constable of South Yorkshire Police [2004] 1 WLR 2196 (Marper UK). The claimants argued that the retention by the police of their finger prints and DNA samples was incompatible with article 8 of the European Convention on Human Rights (the ECHR). The majority of the House of Lords held that retention did not constitute an interference with the claimants article 8 rights and they held unanimously that in any event any such interference was justified under article 8(2). However, in 2008, the European Court of Human Rights (ECtHR) disagreed: see S and Marper v United Kingdom (2008) 48 EHRR 50 (Marper ECtHR). It found the indefinite retention of data to be an interference which was not justified under Article 8(2). The Governments immediate response was to remove children under the age of 10 from the database. They then opened a consultation period to consider the appropriate legislative reform. This resulted in legislation which, following the change of government in May 2010, was not brought into force. The Coalition Government is promoting new legislation to take account of the ECtHRs judgment. In December 2007, GC was arrested on suspicion of common assault on his girlfriend. He denied the offence. A DNA sample, fingerprints and photographs were taken after his arrest. On the same day he was released on police bail without charge and was subsequently informed that no further action would be taken. In March 2009, C was arrested on suspicion of rape, harassment and fraud. His finger prints and a DNA sample were taken. He denied the allegations. He was charged in respect of the rape allegation but no further action was taken in respect of the harassment and fraud allegations. In the Woolwich Crown Court in May 2009, the prosecution offered no evidence and C was acquitted. In both cases, the appellants requested the destruction of the data taken. Their requests were refused as there were no exceptional circumstances within the meaning of the ACPO guidelines. The appellants issued proceedings for judicial review of the retention of their data on grounds that, in light of Marper ECtHR, its retention was incompatible with their article 8 rights. In the circumstances, the Divisional Court (Moses LJ and Wyn Williams J) dismissed the applications for judicial review and granted a certificate that the cases were appropriate for a leapfrog appeal to the Supreme Court: [2010] EWHC 2225 (Admin). The Supreme Court, by a majority, allows the appeals (Lords Rodger and Brown dissenting). Lord Dyson gives the lead judgment. The majority grant a declaration that the present ACPO guidelines are unlawful because they are incompatible with article 8 of the ECHR. They grant no other relief. Interpretation of section 64(1A) of PACE It is common ground that Marper UK should be overruled. It is also agreed that in light of Marper ECtHR, the indefinite retention of the appellants data under the current retention policy is a breach of article 8 ECHR. The only issue in these appeals, therefore, is what the court should do about that in the present circumstances. Section 3 of the Human Rights Act 1998 (HRA) requires the court, insofar as it is possible to do so, to interpret legislation in a way which is compatible with Convention rights. It is uncontroversial that the statutory purpose of section 64(1A) was to remove the requirement to destroy data after it had served its immediate purpose so as to create a greatly extended database. The extended database was to facilitate the prevention of crime, the investigation of offences and the conduct of prosecutions. However, this does not mean that Parliament intended that, save in exceptional circumstances, the data should be retained indefinitely. Rather, Parliament conferred a discretion on the police to retain data. The natural meaning of the word may in section 64(1A) is permissive not mandatory. There is no reason to suppose that Parliament must have intended its statutory purpose to be achieved in a disproportionate way so as to be incompatible with article 8: [23] [24], [88] [89]. The police were entrusted with setting out the precise means of achieving the statutory purpose: [26]. There is no reason in principle why the police, with the input of the Secretary of State, should be less well equipped than Parliament to create guidelines for the exercise of this power: [40] [44]. Accordingly, it is possible to read section 64(1A) in a way which is compatible with article 8 ECHR as interpreted in Marper ECtHR. A declaration of incompatibility is not appropriate and section 6(2)(b) of the HRA is not engaged: [35], [55], [69]. Lords Rodger and Brown dissent. They would have dismissed the appeals. In their view, the history shows that Parliament's purpose in enacting section 64(1A) was to ensure that in future samples taken from suspects would be retained indefinitely: [94] [97]. Therefore, the police had no choice but to retain the data: [108] [109]. In their view, it is not possible to interpret section 64(1A) in accordance with section 3 HRA: [115], [146] [147]. However, since the police could not have acted differently in substance, what they did and what they continue to do, falls within section 6(2)(a) or section 6(2)(b) HRA and is lawful: [119]. Appropriate relief The present intention of the government is to bring the new legislation into force later this year. In these circumstances, in relation to biometric data it is sufficient to grant a declaration under section 8(1) HRA that the present ACPO guidelines are unlawful because they are incompatible with the ECHR. Where Parliament is seised of the matter, it is not appropriate to make an order requiring a change in the legislative scheme within a specific period or an order requiring destruction of data: [45] [49], [73], [91] [92]. It is, however, open to ACPO to reconsider and amend the guidelines in the interim: [73], [81], [90]. Lord Rodger would have preferred to grant a declaration of incompatibility under section 4 HRA: [121]. In relation to the photographs of GC, in view of the manner in which the issue was raised in the Divisional Court and the consequent lack of any substantive judgment, the Supreme Court expresses no opinion on this part of the appeal: [50] [51].

These appeals raise issues as to the respective duties of the Secretary of State and the First tier Tribunal, on an appeal against refusal of an application to vary leave to enter or remain under the Immigration Act 1971, more particularly as to the operation of the so called one stop procedures. The Master of the Rolls (para 40), echoing words of Jackson LJ, described the law in this field as an impenetrable jungle of intertwined statutory provisions and judicial decisions. It is difficult to disagree, although on this occasion the judiciary must share some of the blame. The Patels Mr Patel and his wife arrived from India in the United Kingdom on 24 March 2009. He had been granted leave to enter as a working holiday maker until 6 March 2011, and she as his dependent wife. Their only child was born here in 2010. On 26 February 2011, they applied for further leave to remain in the UK, relying on article 8 of the European Convention on Human Rights, and rule 395C of the Immigration Rules. Their application was refused by the Secretary of State on 30 March 2011. That refusal was neither combined with, nor followed by, a decision to remove the family from the United Kingdom. They had a right of appeal to the First tier Tribunal, but that was dismissed on 14 July 2011. The merits of the refusal on the issues there raised are no longer in dispute. On further appeal to the Upper Tribunal they took a new point. This was that, in the light of the decision of the Court of Appeal in R (Mirza) v Secretary of State for the Home Department [2011] EWCA Civ 159, [2011] Imm AR 484, followed in Sapkota v Secretary of State for the Home Department [2011] EWCA Civ 1320, [2012] Imm AR 254, the Secretary of States failure to make a removal decision at the same time as, or shortly after, the decision to refuse leave to remain was unlawful. This argument, which failed before the Upper Tribunal and the Court of Appeal, is the principal issue in this court. Mr Alam Mr Alam, a citizen of Bangladesh, entered the country on 26 August 2007, as a Tier 4 student with leave to remain until 12 April 2011. On 1 April 2011 he applied for leave to remain to continue his studies. On 20 April 2011 the Secretary of State refused his application on the basis that he had not produced the required documentation. The bank statements submitted with his application were more than a month old, and therefore did not, as required by the guidance under the Points Based System, show that he had held the necessary level of funds for a consecutive period ending no more than one month before the application. By the time of the hearing before the tribunal, on 10 June 2011, he had produced the appropriate bank statements. The tribunal held that, for the purposes of his appeal under the rules, this new material was excluded from consideration by section 85A of the Nationality, Immigration and Asylum Act 2002 (which had come into effect between the date of his appeal and the date of the hearing). However, the immigration judge held that this did not prevent him taking it into account in the appeal under article 8 of the Convention, on the basis that, since he clearly meets the requirements of the rules, it was not proportionate to the aims of immigration control to refuse his application. The Upper Tribunal reversed that decision, holding that the judge had erred in treating the new evidence as showing effective compliance with the rules for the purpose of article 8. The tribunal accepted that the appellant having been in the country undertaking studies for some four years had thereby formed some sort of protected private life for the purposes of article 8. But no other aspect of his life in this country was relied on. His family ties were all with his native Bangladesh, to which he wished to return after his studies. Although the new evidence was not directly relevant under article 8, it took account of the unusual circumstances in which the right to prove compliance with the rules had been lost: I have considered the circumstances in which the claimant has failed to meet the Rules: viz. that he is one of a necessarily fixed class whose ability to prove compliance with the Rules has changed by operation of law since he began his appeal proceedings. Those circumstances do, to some extent, diminish the State's interest in removing the claimant, merely in order to maintain the integrity of the Rules. If the claimant's article 8 rights had been any stronger, I might well have concluded in the circumstances that his removal in consequence of the immigration decision would be disproportionate. As it is, however, I consider that the balance falls to be struck in favour of the Secretary of State. (para 22) Mr Anwar Mr. Anwar, a citizen of Pakistan, entered on 26 February 2010 with leave to remain as a student until 1 April 2011. On 31 March 2011 he applied to extend his leave as a Tier 4 student to enable him to complete his course. The application was supported by a Confirmation of Acceptance for Studies (CAS), which recorded that he had been assessed by reference to a document entitled ACCA examination Financial Accounting (F3). The F3 document itself was not included with the application. On 10 May 2011 the Secretary of State refused the application because, contrary to the relevant guidance, it had not included a document referred to in the CAS, and accordingly no points had been awarded for the CAS. On his appeal to the First tier Tribunal the appellant produced the relevant document, claiming that it had in fact been sent with his application form. The tribunal allowed his appeal, but their decision was set aside by the Upper Tribunal, which held that on the balance of probabilities he had not sent the relevant document with his application. That factual finding is not now in dispute. Although there was a reference to the European Convention in the grounds of appeal to the First tier tribunal, no separate appeal on human rights grounds was pursued at the hearing before either tribunal. The Court of Appeal heard the appeals of Mr Alam and Mr Anwar together, and dismissed them both on 13 July 2012. The arguments were wide ranging, summarised by Sullivan LJ under eight grounds. Most are no longer in issue. The issues According to the agreed statement, the following issues are said to arise in the appeals to this court: Patel i) Whether there is an obligation on the Secretary of State to issue a decision to remove at the same time as or immediately after refusing an individuals application for variation of leave to remain in the United Kingdom. ii) Whether there is an obligation on the Secretary of State to issue a one stop notice under section 120 of the 2002 Act when refusing an individuals application for variation of leave to remain in the United Kingdom. iii) Whether the Secretary of States refusal to vary an individuals leave to remain in the United Kingdom is unlawful if it is issued in isolation from a one stop notice or a decision to remove. Alam/Anwar iv) Whether the conclusion of the majority in AS (Afghanistan) v Secretary of State for the Home Department [2009] EWCA Civ 1076, [2011] 1 WLR 385, that an appeal to the FTT covers not only any ground before the Secretary of State when she made the decision under appeal but also any grounds raised in response to a one stop notice issued under section 120 of the 2002 Act, even if they had not been the subject of any decision by the Secretary of State and did not relate to the decision under appeal, is correct. v) Whether the statements and evidence filed by Mr Alam and Mr Anwar to the FTT amounted to additional grounds under section 120 of the 2002 Act which the FTT was obliged to consider and determine, notwithstanding the bar in section 85A of that Act. vi) In an article 8 case, when balancing the demands of fair and firm immigration control against the disruption to the family or private life of a person if removed for non compliance with the Immigration Rules, whether the nature and degree of the non compliance is significant or, as the Court of Appeal has held (in Miah v Secretary of State for the Home Department [2012] EWCA Civ 261; [2013] QB 35), irrelevant. While these issues were agreed between the parties, and they conveniently identify the main matters on which we heard submissions, it will be necessary to consider in due course the extent to which they do properly arise for decision on these appeals. For example, the question of an obligation to serve notices under section 120 (issue (ii)) does not arise in any of the three cases, since such notices were in fact served in all of them. The statutory provisions The Immigration Act 1971, and the rules made under it, constitute the principal statutory framework for the control of immigration, and the Secretary of States functions in that respect. Both the statute and the rules have been subject to frequent amendment and addition. The issues in the present appeals turn principally on the provisions of the Nationality, Immigration and Asylum Act 2002 which established a new statutory code relating to appeals against immigration decisions, including the so called one stop notices under section 120. In relation to the Secretary of States powers of removal, it will be necessary also to consider the Immigration and Asylum Act 1999 section 10, and the Immigration, Asylum and Nationality Act 2006 section 47. The starting point is section 3 of the 1971 Act. It provides that a person who is not a British citizen may not enter the United Kingdom except with leave under the Act. Where leave is given for a limited period, it may be varied by restricting, enlarging or removing the limit on its duration (section 3(3)). Section 3C (added by the 2002 Act) is entitled Continuation of leave pending variation decision. It applies where a person with limited leave applies, before the leave expires, for a variation of the leave. Subsection (2) has the effect that the leave is extended during any period when (a) the application for variation is neither decided nor withdrawn, (b) an appeal under section 82(1) of the 2002 Act could be brought while the appellant is in the United Kingdom, or an appeal brought while the appellant is within the United Kingdom is pending. By section 3C(4), a person may not make a further application for variation of his leave while it is extended under this section, but that does not prevent a variation of the application already made. It is common ground that such a variation may include grounds unrelated to those in the initial application. This provision needs to be understood also in the context of section 92 of the 2002 Act. That makes clear that for most categories of immigration decision, other than asylum or human rights claims made from within the United Kingdom and those decisions listed in subsection (2), an appeal must be brought from outside the country. Section 3C provides a limited exception for applications to extend existing leave made before its expiry. Section 82(1) of the 2002 Act confers a right of appeal to the tribunal in respect of an immigration decision. By section 82(2) immigration decision is defined as including (inter alia) a refusal to vary leave to enter or remain if the result of the refusal is that the person has no leave to remain (para (d)); and a decision that a person is to be removed by way of directions under either section 10 of the 1999 Immigration and Asylum Act or section 47 of the Immigration, Asylum and Nationality Act 2006 (paras (g), (ha)). Section 84 enumerates the possible grounds of appeal which include: (a) that the decision is not in accordance with immigration rules; (c) that the decision is unlawful under section 6 of the Human Rights Act 1998 as being incompatible with the appellants Convention rights; (e) that the decision is otherwise not in accordance with the law; (f) that the person taking the decision should have exercised differently a discretion conferred by immigration rules; (g) that removal of the appellant from the United Kingdom in consequence of the immigration decision would breach the United Kingdoms obligations under the Refugee Convention or would be unlawful under section 6 of the Human Rights Act 1998 as being incompatible with the appellants Convention rights. Section 85 is headed Matters to be considered. Its present form, along with section 85A, is derived from amendments made by the UK Borders Act 2007, which were brought into effect, subject to transitional provisions, on 23 May 2011. It provides: (1) An appeal under section 82(1) against a decision shall be treated by the Tribunal as including an appeal against any decision in respect of which the appellant has a right of appeal under section 82(1). (2) If an appellant under section 82(1) makes a statement under section 120, the Tribunal shall consider any matter raised in the statement which constitutes a ground of appeal of a kind listed in section 84(1) against the decision appealed against. (3) Subsection (2) applies to a statement made under section 120 whether the statement was made before or after the appeal was commenced. (4) On an appeal under section 82(1), 83(2) or 83A(2) against a decision the Tribunal may consider evidence about any matter which it thinks relevant to the substance of the decision, including evidence which concerns a matter arising after the date of the decision. (5) But subsection (4) is subject to the exceptions in section 85A. The exceptions in section 85A include the following: (3) Exception 2 applies to an appeal under section 82(1) if (a) the appeal is against an immigration decision of a kind specified in section 82(2)(a) or (d), (b) the immigration decision concerned an application of a kind identified in immigration rules as requiring to be considered under a Points Based System, and (c) the appeal relies wholly or partly on grounds specified in section 84(1)(a), (e) or (f). (4) Where Exception 2 applies the Tribunal may consider evidence adduced by the appellant only if it (a) was submitted in support of, and at the time of making, the application to which the immigration decision related, (b) relates to the appeal in so far as it relies on grounds other than those specified in subsection (3)(c), (c) is adduced to prove that a document is genuine or valid, or (d) is adduced in connection with the Secretary of States reliance on a discretion under immigration rules, or compliance with a requirement of immigration rules, to refuse an application on grounds not related to the acquisition of points under the Points Based System. This provision, which is relevant to the Alam and Anwar appeals, needs a little unravelling. It is not in dispute that exception 2 applied to both appeals, because the applications had fallen to be considered under the Points Based System. Accordingly, (under subsection (4)(a)) the tribunal was unable to consider the new evidence in support of the case under the rules. It could only consider it (under subsection (4)(b)) in so far as it related to grounds other than those specified in (3)(c), that is grounds other under section 84(1)(a), (e) or (f). Such other grounds include the human rights grounds under section 84(1)(c) and (g). Accordingly, consideration of the new evidence so far as relevant to such grounds, in particular article 8 of the Convention, was not excluded. Section 86 deals with the determination of the appeal. The tribunal is required to determine any matter raised as a ground of appeal and any matter which section 85 requires it to consider. It must allow the appeal in so far as it thinks that a decision against which the appeal is brought or is treated as being brought was not in accordance with the law. It may also allow the appeal on the grounds that a discretion exercised in making such a decision should have been exercised differently (section 86(3)(b)), but refusal to depart from the immigration rules is not treated as the exercise of a discretion for these purposes (section 86(6)). One stop notice Section 120 of the 2002 Act applies to a person (a) who has made an application to enter or remain in the UK, or (b) in respect of whom an immigration decision has been taken or may be taken. By subsection (2): The Secretary of State or an immigration officer may by notice in writing require the person to state: (a) his reasons for wishing to enter or to remain in the United Kingdom, (b) any grounds on which he should be permitted to enter or remain in the United Kingdom, and (c) any grounds on which he should not be removed from or required to leave the United Kingdom. There is no express provision dealing with the form of the response, nor imposing on the Secretary of State any express duty to consider it or determine the issues raised by it. Under section 85(2) as already noted, the tribunal, hearing an existing appeal under section 82(1), is required to consider any matter raised in the section 120 statement if it constitutes a ground of appeal of a kind listed in section 84(1) against the decision appealed against. Furthermore, by section 96, the section 120 notice opens the way for the Secretary of State to issue a certificate limiting the scope for subsequent appeal. Thus section 96(2) precludes an appeal against an immigration decision (the new decision) in respect of a person where the Secretary of State or an immigration officer certifies: (a) that the person received notice under section 120 by virtue of a decision other than the new decision, (b) that the new decision relates to an application which relies on a matter that should have been, but has not been raised in a statement made in response to that notice, and (c) that, in the opinion of the Secretary of State or the immigration officer, there is no satisfactory reason for that matter not having been raised in a statement in response to that notice. Removal decisions The Secretary of States powers of removal are defined by section 10 of the 1999 Act and section 47 of the 2006 Act. The former provides that a person who is not a British citizen may be removed from the United Kingdom, in accordance with directions given by an immigration officer, if (a) having only a limited leave to enter or remain, he does not observe a condition attached to the leave or remains beyond the time limited by the leave; By subsection (9) the reasonable costs of complying with the direction must be met by the Secretary of State. Section 47 of the 2006 Act, as originally enacted, provided: (1) Where a persons leave to enter or remain in the United Kingdom is extended by section 3C(2)(b), the Secretary of State may decide that the person is to be removed from the United Kingdom, in accordance with directions to be given by an immigration officer if and when the leave ends. Again the costs of compliance must be met by the Secretary of State (section 47(4)). For completeness, I note that on 8 May 2013 (after the time relevant for the present appeals) a new form of the section was inserted, providing for notice of a pre removal decision (which includes the decision on an application to vary leave to remain) to be given at the same time as the removal direction under section 47. This change was designed to deal with a practical problem arising from Sapkota which had been highlighted by a subsequent decision of the Upper Tribunal (upheld by the Court of Appeal). It is not directly material to the present appeals. The Patel appeals There is no dispute now as to the merits of the refusal of leave to remain in the Patel cases, under either the rules or the Convention. The sole issue is one of law relating to the form in which the decision was made, more particularly its segregation (the word used in some of the cases) from the decision to direct removal. The failure to issue such a direction, it is said, was not only unlawful in itself, but also undermined the validity of the previous decision to refuse leave to remain. A similar issue in relation to service of a section 120 notice, although identified in the agreed statement, does not arise on the facts of the case, since such a notice was in fact served. In support of this argument, Mr Malik relies principally on the decisions of the Court of Appeal in the cases of Mirza [2011] Imm AR 484 and Sapkota [2012] Imm AR 254 to which I have already referred. It was held, in summary, (in Mirza) that a policy of separating the refusal of leave to remain from the decision to remove was contrary to the policy and objectives of the 2002 Act to deal compendiously with all issues on the lawfulness of a persons residence in the United Kingdom; and consequently (in Sapkota) that an unjustified deferral of the removal decision would mean that the actual immigration decision was not in accordance with the law. Those judgments, and the subsequent Court of Appeal authorities, are discussed in detail in the judgment of the Master of the Rolls in the present case. Without disrespect to the judges involved in those decisions, or to Mr Maliks determined arguments in support of them, I do not propose to add materially to the voluminous discussion which this issue has already generated. It is sufficient to say that I am in entire agreement with the reasons of the Court of Appeal for not following them. The powers to issue removal directions under section 10 of the 1999 Act and section 47 of the 2006 Act (like the power to issue notices under section 120 of the 2002 Act) are just that powers. Their statutory purpose is as part of the armoury available to the Secretary of State for the enforcement of immigration control. Any extra protection provided to an appellant is incidental. Neither section can be read as imposing an obligation to make a direction in any particular case, still less as providing any link between failure to do so and the validity of a previous immigration decision. As Burnton LJ said in the Court of Appeal [2013] 1 WLR 63, para 73: This language is clearly and unequivocally the language of discretion, not duty, and it is simply not open to the court to interpret it as imposing a duty. For the court to do so is to amend the legislation, not to interpret it. The contrary argument depends to my mind on a misapplication of the so called Padfield principle (Padfield v Minister of Agriculture, Fisheries and Food [1968] AC 997). Under that principle, it is clear that discretionary powers conferred by statute must not be used in such a way as to thwart or run counter to the policy or objects of the Act (per Lord Reid, at p 1030C D)). It can no doubt be said that one of the purposes of the 2002 Act was to reduce the scope for repeat appeals, and that, as Laws LJ observed, the legislation leans in favour of what are called one stop appeals (JM (Liberia) v Secretary of State for the Home Department [2006] EWCA Civ 1402; [2007] Imm AR 293, para 23). It may be also, as Mr Malik submits, that the exercise of the Secretary of States powers has the incidental effect in some cases of adding to the range of matters an appellant is able to raise by way of appeal during the period that his leave is extended under section 3C. However, neither such general observations nor such incidental effects can be translated into an overriding policy requiring the Secretary of State to act in a particular way, nor into a right for the appellant to insist that he does so. It is to be borne in mind also that exercise of the powers to direct removal, which alone are at issue in the Patel case, is likely to involve both public cost and personal hardship or indignity. The Secretary of State does not thwart the policy of the Act if she proceeds in the first instance on the basis that unlawful overstayers should be allowed to leave of their own volition (as on the evidence the great majority do). The Upper Tribunal observed in the present case, commenting on its concerns at the implications of the decision in Sapkota: For every person whose real claim is one outside the Rules, there are many who merely want a decision in accordance with the Rules and would either voluntarily depart or make a fresh application if that appeal were to be unsuccessful. Further, the developing jurisprudence of the Upper Tribunal has moved beyond the proposition that human rights only arise on removal decisions, to cases where variation of leave applications may need to take into account a wide variety of aspects of private life under article 8 rights, thereby enabling an independent assessment of this claim to remain without the person concerned running the risk of breaking the law. (para 32) It follows that the Secretary of State was under no duty in the Patels case to issue removal directions at the time of the decision to refuse leave to remain, and that the actual decision was not invalidated by the failure to do so. In so far as the decisions of the Court of Appeal in the cases of Mirza and Sapkota indicate the contrary, they were in my view wrongly decided. It is unnecessary to consider whether the Court of Appeal was entitled as a matter of precedent to depart from them. No such inhibition affects this court. The Alam/Anwar appeals I have set out above the agreed issues said to arise in these appeals. The practical problem faced by the appellants arises from their failure to produce relevant information as required under the Points Based System at the relevant time. Each appellant was able to adduce the relevant evidence in response to the section 120 notice, but was barred by exception 2 of section 85A from relying on it directly in support of his appeal. The issue in short is whether an indirect route could be found to achieve a favourable result. The proposed route depends on using the evidence before the tribunal in support of a putative appeal against the refusal of leave to remain, relying not on the rules, but on human rights grounds (article 8 of the Convention), and thus taking it outside the scope of exception 2. This in turn depends on two propositions: first, that the tribunal was obliged to consider the new evidence in that context (scope of appeal), and secondly, that, if it had done so, the evidence that the rules could have been complied with would significantly improve the human rights case under article 8 (merits of appeal). I would accordingly dismiss the Patel appeals. Scope of appeal The first issue was the subject of detailed discussion in AS (Afghanistan) v Secretary of State for the Home Department [2011] 1 WLR 385. The Court of Appeal by a majority held that section 85(2) was to be construed as imposing a duty on the tribunal to consider any potential ground of appeal raised in response to a section 120 notice, even if it was not directly related to the issues considered by the Secretary of State in the original decision. In AQ (Pakistan) v Secretary of State for the Home Department [2011] EWCA Civ 833; [2011] Imm AR 832), it was held that majoritys approach did not require consideration of events subsequent to the Secretary of States decision. That issue does not arise in the present cases, where the new evidence related to material which was available at the time of the decisions. Turning to the judgments in AS itself, it would be difficult to expand on or improve the depth of legal and contextual analysis to be found in the judgments of all three judges. The fact that the analysis led such experienced judges to opposite conclusions suggests that the path to enlightenment will not be found by attempting a similar exercise in this judgment. The problem lies in the drafting of the relevant provisions, which defies conventional analysis. It is not only obscure in places and lacking in detail, but contains pointers in both directions. On the one hand, the words against the decision appealed against in section 85(2) suggest a focus on the content of the original decision. As Arden LJ said: A ground of appeal is not a ground of appeal against the decision appealed against if it would not, if accepted, lead to its reversal, as opposed to its being superseded by a new decision on the new evidence that leave to enter or remain should be granted. (para 30) On the other hand the first ground of appeal under section 84(1) is that the immigration decision is not (not was not) in accordance with the Rules; and in considering that question the tribunal is specifically empowered (subject to the exceptions in section 85A) to have regard to evidence concerning a matter arising after the date of appeal. Moore Bick LJ (with whom Sullivan LJ agreed) thought that the reference to the decision appealed against did not imply a limitation to the original grounds. Having decided that the decisions referred to sections 85(1) and (2) were immigration decisions of the kind identified in section 82(1), he said at para 79: . the natural meaning of these provisions is to impose on the tribunal a duty to consider matters raised by the appellant insofar as they provide grounds for challenging a substantive decision of a kind identified in section 82 that affects his immigration status. On the face of it they do not restrict that duty to considering grounds that relate to the reasons for that decision or to the original grounds of appeal. There was a similar lack of agreement on the effect of section 85(4), and in particular of the reference to matters relevant to the substance of the decision appealed against. That seems a curiously ambiguous term, which can fairly be read as referring either to the substantive effect of the decision or to the substantive reasons underlying it. Arden LJ took the latter view, which she saw as supporting her interpretation of section 85(2) (paras 31 2). At para 30 she adopted as plainly correct the approach of the Asylum and Immigration Tribunal (EA (Nigeria) v Secretary of State for the Home Department [2007] UKAIT 00013), which had read these words as meaning that the new evidence had to be relevant to the decision actually made, and had added at para 6 that: a decision on a matter under the Immigration Rules is a decision on the detailed eligibility of an individual by reference to the particular requirements of the rule in question in the context of an application that that person has made. Sullivan LJ took the opposite view, seeing section 85(4) as consistent with his view that the tribunals consideration was not limited to the grounds considered by the Secretary of State: Since section 85(2) is concerned with statements of additional grounds which must include any reasons why an appellant should be allowed to remain, and which are expressly not confined to the reasons why he should be allowed to remain under rule x of the Rules, I am not persuaded that the reference to the decision appealed against must be a reference to the decision to refuse to vary leave to remain under rule x, rather than the decision to refuse to vary leave to remain, being one of the immigration decisions as defined by section 82 (2). Such an approach to section 85 (2) would be consistent with the reference in section 85 (4) to the substance of the decision. (para 113) Moore Bick LJ thought that section 85(4) itself had little bearing on the issues before the court, since it was concerned only with the evidence which the tribunal could consider (para 83). However, his understanding of the word substance in this context, agreeing with that of Sullivan LJ, is apparent from his earlier discussion of the appropriate response to a section 120 notice. He saw its purpose as to impose on the appellant a duty to put forward any grounds he may have for challenging the substance of the decision made against him, rather than simply the grounds on which it was made (para 80, emphasis added). The broader approach of the majority seems to me to gain some support from the scheme of section 3C, under which (as is common ground) the initial application for leave to remain, if made in time, can later be varied to include wholly unrelated grounds without turning it into a new application or prejudicing the temporary right to remain given by the section. Thus the identity of the application depends on the substance of what is applied for, rather than on the particular grounds or rules under which the application is initially made. The same approach can be applied to the decision on that application, the identity or substance of which in the context of an appeal is not dependent on the particular grounds first relied on. It is of interest that, at an earlier stage, the broader approach seems to have accorded with the reading of those responsible within the Home Office for advice to immigration officers. The Immigration Directorates Instructions, issued in September 2006, noted that it was not possible under section 3C to make a second application, but continued: On the other hand, it is possible to vary the grounds of an application already made, even by introducing something completely new. A student application can be varied so as to include marriage grounds. If an application is varied before a decision is made, the applicant will be required to complete the necessary prescribed form to vary his application. If an application is varied post decision, it would be open to the applicant to submit further grounds to be considered at appeal Once an application has been decided it ceases to be an application and there is no longer any application to vary under section 3C(5). So any new information will fall to be dealt with during the course of the appeal rather than as a variation of the original application. (para 3.2 emphasis added) The same approach is supported by the current edition of Macdonalds Immigration Law & Practice 8th ed (2010) para 19.22 (under the heading The tribunal as primary decision maker). The only implicit criticism made of the majority approach in AS is that it did not go far enough. They observe that even without a section 120 notice the tribunal should be free to consider any matter including a matter arising after the decision which is relevant to the substance of the decision regardless of whether a one stop notice has been served. The substance of the decision is not the decision makers reasoned response to the particular application or factual situation that was before it but is one of the immigration decisions enumerated in section 82 and a matter includes anything capable of supporting a fresh application to the decision maker Whether or not such an extension of the majoritys reasoning can be supported, that passage indicates that the broader approach in itself is not controversial. In the end, although the arguments are finely balanced, I prefer the approach of the majority in AS. Like Sullivan LJ, I find a broad approach more consistent with the coherence of this part of the Act. He noted that the standard form of appeal, echoing the effect of the section 120 notice, urged appellants to raise any additional ground at that stage, on pain of not being able to do so later, and observed: . it seems to me that appellants would have good reason to question the coherence of the statutory scheme if they were then to be told by the AIT that it had no jurisdiction to consider the additional ground that they had been ordered by both the Secretary of State and the AIT to put forward. (para 99) Merits of appeal The second issue is the materiality to the human rights case of evidence that the appellant could in fact have complied with the rules, even though he failed to do so. The argument is that, if it is shown that the appellant could have met the substantive requirements of the rules, the failure to do so should be regarded as purely formal, and that accordingly, in the proportionality balance required by article 8, the objectives of immigration control should carry relatively less weight. A variant of this argument, referred to as the near miss principle, is that the degree of failure to meet the requirements of the rules may be relevant in the proportionality balance. Support for such an approach is said to be found in the judgment of Sedley LJ (agreed by Rimer and Sullivan LJJ) in Pankina v Secretary of State for the Home Department [2010] EWCA Civ 719; [2011] QB 376. The main issue in that case was the extent to which it was permissible for mandatory criteria relevant to the Points Based System to be contained in guidance rather than rules submitted to Parliament under section 3(2) of the 1971 Act. That issue has since been considered in the Supreme Court in R (Alvi) v Secretary of State for the Home Department (Joint Council for the Welfare of Immigrants intervening) [2012] UKSC 33; [2012] 1 WLR 2208 and R (New College London Ltd) v Secretary of State for the Home Department (Migrants Rights Network intervening) [2013] UKSC 51, [2013] 1 WLR 2358. However Sedley LJ also considered the application of article 8 under such a system. He said at paras 45 46: There appears to me, in this situation, to be no escape from the proposition that in exercising her powers, whether within or outside the rules of practice for the time being in force, the Home Secretary must have regard and give effect to applicants' Convention rights. This will mean in most cases evaluating the extent and quality of their family and private life in the United Kingdom and the implications, both for them and for the United Kingdom, of truncating their careers here. That in turn will require consideration of the significance of the criteria by which their eligibility has been gauged and found wanting. It is one thing to expect an applicant to have the necessary academic and linguistic qualifications: here a miss is likely to be as good as a mile. It is another for an applicant to fall marginally or momentarily short of a financial criterion which in itself has no meaning: its significance is as a rough and ready measure of the applicant's ability to continue to live without reliance on public funds. Having 800 in the bank, whether for three continuous months or simply at the date of application, is no doubt some indication of this; but people who are able to meet the test may fall on hard times after obtaining indefinite leave to remain, and others who fail it would, if allowed to remain, never become a charge on public funds. The Home Office has to exercise some common sense about this if it is not to make decisions which disproportionately deny respect to the private and family lives of graduates who by definition have been settled here for some years and are otherwise eligible for Tier 1 entry. If the Home Secretary wishes the rules to be blackletter law, she needs to achieve this by an established legislative route. The court can be seen in that passage to have endorsed the view that, at least in relation to financial criteria, a near miss (a marginal or momentary shortfall) might affect the consideration of proportionality under article 8. That view did not affect the results in any of the cases before it. In the only one to which it might have been relevant (Mrs Maleckia), it was held that there was in any event no prospect of success under article 8 (para 53). Mr Malik also relies on other cases, before and since, which have adopted a similar approach without reference to Pankina. In SB (Bangladesh) v Secretary of State for the Home Department [2007] EWCA Civ 28, the court when allowing an appeal against the tribunals decision on other grounds agreed with them that the fact that the appellant only just failed to qualify for admission was a fact to be counted in her favour. Ward LJ, at para 30, adopted the observation of Collins J in Lekstaka v Immigration Appeal Tribunal [2005] EWHC 745 (Admin) para 38 that: one is entitled to see, whether in all the circumstances, this case falls within the spirit of the Rules or the policies, even if not within the letter. Ward LJ added: That seems to us to be the right approach. As Simon Brown L.J. said in Ekinci at paragraph 16: Even if strictly he fails to qualify so that the ECO would be prohibited from granting leave to enter, given the obvious article 8 dimension to the case the ECO would refer the application to an Immigration Officer who undoubtedly has a discretion to admit someone outside the Rules. And if entry were to be refused at that stage, then indeed a section 59 right of appeal would certainly arise in which, by virtue of section 65(3), (4) and (5) the adjudicator would have jurisdiction to consider the appellant's human rights. (I note in passing that those comments of Simon Brown LJ were made with reference to the rather different appeal provisions of the Immigration and Asylum Act 1999, and were directed specifically to a case with an obvious article 8 dimension.) More recently, in R (Mansoor) v Secretary of State for the Home Department [2011] EWHC 832 (Admin), Blake J, sitting on this occasion in the Administrative Court, held that on the facts the interference with the applicants family life was such as to make it disproportionate under article 8 to remove her, notwithstanding that she was unable to satisfy a relevant criterion in the rules. He said, at para 35 (without specific reference to Pankina): the terms of the immigration rules are not a legitimate aim in their own right A judgment needs to be made as to how significant the aim, and how far the removal of the particular claimant in the circumstances of her case is necessary to promote that aim. The mere fact a genuine spouse lawfully admitted with her British citizen husband and settled children can no longer meet one requirement of the rules through no fault of her own is unlikely to amount to a weighty reason to justify interference with family life here that is otherwise to be respected. The opposite approach is supported by the judgment of Stanley Burnton LJ (agreed by Maurice Kay and Lewison LJJ) in Miah v Secretary of State for the Home Department [2013] QB 35. In that case the applicant was refused leave to remain as a Tier 2 (General) Migrant at a time when he was two months short of the five years continuous residence necessary to support a case for indefinite leave to remain under the rules. It was argued that, in assessing whether his removal should be permitted under article 8.2 of the Convention, the weight to be given to the maintenance of immigration controls should be diminished because he had missed satisfying the rules by only a small margin. Burnton LJ observed that, as formulated in the skeleton submissions of Mr Malik (appearing for the appellant in that case as in the present), the argument was not so much near miss as sliding scale, by virtue of which There is an inverse relationship between the degree to which there is compliance with the rules and the immigration policy imperative which demands that unsuccessful applicants be removed (paras 9 10). In rejecting that argument, Burnton LJ referred to a passage in the speech of Lord Bingham in Huang v Secretary of State for the Home Department [2007] 2 AC 167, in which he discussed the long established and central role of the immigration rules in determining those to whom leave to enter or remain should be granted. Although the near miss argument as such was not in issue in that case, Burnton LJ thought it inconsistent with Lord Binghams approach. He said at para 14: I find Lord Bingham's reference in para 6 to rules, to be administratively workable, [requiring] that a line be drawn somewhere and in para 16 to the general administrative desirability of applying known rules if a system of immigration control is to be workable, predictable, consistent and fair as between one applicant and another; the damage to good administration and effective control if a system is perceived by applicants internationally to be unduly porous, unpredictable or perfunctory to be helpful and generally inconsistent with a near miss principle. He referred to two previous Court of Appeal judgments (not cited in Pankina) in which similar arguments had been rejected: Mongoto v Secretary of State for the Home Department [2005] EWCA Civ 751, and R (Rudi) v Secretary of State for the Home Department [2007] EWCA Civ 1326. In the latter case, citing Mongoto, I said of the near miss argument: 28. This argument is, in my view, based on a misconception. The Secretary of State is of course entitled to have a policy. The promulgation of the policy normally creates a legitimate expectation that it will be applied to those falling within its scope unless there is good reason for making an exception. So much is trite law. It is also trite law that the existence of the policy does not excuse the decision maker from due consideration of cases falling outside it. However, the law knows no near miss principle. There is no presumption that those falling just outside the policy should be treated as though they were within it, or given special consideration for that reason. Faced with the conflict between the approach taken in these authorities and that of Pankina Burnton LJ had no difficulty in preferring the former, which he regarded as binding on the court (paras 21 25). He could see no principled basis for distinguishing, as Sedley LJ had proposed, between rules to which the near miss principle did and did not apply. In particular he disagreed with Sedley LJ that a financial criterion has in itself no meaning, and could therefore be distinguished from other rules, such as those relating to academic qualifications, in respect of which a miss is as good as a mile. In conclusion he said at paras 25 26: Finally, quite apart from authority, I prefer the approach stated in Mongotos case and Rudis case. A rule is a rule. The considerations to which Lord Bingham referred in Huangs case require rules to be treated as such. Moreover, once an apparently bright line rule is regarded as subject to a near miss penumbra, and a decision is made in favour of a near miss applicant on that basis, another applicant will appear claiming to be a near miss to that near miss. There would be a steep slope away from predictable rules, the efficacy and utility of which would be undermined. For these reasons, I would dismiss the appeal in relation to the near miss argument. In my judgment, there is no near miss principle applicable to the Immigration Rules. The Secretary of State, and on appeal the tribunal, must assess the strength of an article 8 claim, but the requirements of immigration control are not weakened by the degree of non compliance with the Immigration Rules. The difference between the two positions may not be as stark as the submissions before us have suggested. The most authoritative guidance on the correct approach of the tribunal to article 8 remains that of Lord Bingham in Huang. In the passage cited by Burnton LJ Lord Bingham observed that the rules are designed to identify those to whom on grounds such as kinship and family relationship and dependence leave to enter should be granted, and that such rules to be administratively workable, require that a line be drawn somewhere. But that was no more than the starting point for the consideration of article 8. Thus in Mrs Huangs own case, the most relevant rule (rule 317) was not satisfied, since she was not, when the decision was made, aged 65 or over and she was not a widow. He commented at para 6: Such a rule, which does not lack a rational basis, is not to be stigmatised as arbitrary or objectionable. But an applicant's failure to qualify under the rules is for present purposes the point at which to begin, not end, consideration of the claim under article 8. The terms of the rules are relevant to that consideration, but they are not determinative. Thus the balance drawn by the rules may be relevant to the consideration of proportionality. I said much the same in Rudi. Although I rejected the concept of a near miss principle, I did not see this as inconsistent with the Collins Js words in Lekstaka: Collins J's statement, on which the court relied [in SB], seems unexceptionable. It is saying no more, as I read it, than that the practical or compassionate considerations which underlie the policy are also likely to be relevant to the cases of those who fall just outside it, and to that extent may add weight to their argument for exceptional treatment. He is not saying that there arises any presumption or expectation that the policy will be extended to embrace them. (para 31(ii)) (My reference to exceptional treatment needs to be read now in the light of Huang para 20 in which Lord Bingham made clear that, contrary to previous Court of Appeal case law, there was no separate test of exceptionality.) Although the context of the rules may be relevant to the consideration of proportionality, I agree with Burnton LJ that this cannot be equated with a formalised near miss or sliding scale principle, as argued for by Mr Malik. That approach is unsupported by Strasbourg authority, or by a proper reading of Lord Binghams words. Mrs Huangs case for favourable treatment outside the rules did not turn on how close she had come to compliance with rule 317, but on the application of the family values which underlie that rule and are at the heart also of article 8. Conversely, a near miss under the rules cannot provide substance to a human rights case which is otherwise lacking in merit. It is important to remember that article 8 is not a general dispensing power. It is to be distinguished from the Secretary of States discretion to allow leave to remain outside the rules, which may be unrelated to any protected human right. The merits of a decision not to depart from the rules are not reviewable on appeal: section 86(6). One may sympathise with Sedley LJs call in Pankina for common sense in the application of the rules to graduates who have been studying in the UK for some years (see para 47 above). However, such considerations do not by themselves provide grounds of appeal under article 8, which is concerned with private or family life, not education as such. The opportunity for a promising student to complete his course in this country, however desirable in general terms, is not in itself a right protected under article 8. The present appeals I have discussed the respective arguments on this point in some detail because of its general importance and the conflicting statements found in some of the judgments. However, I can deal relatively shortly with the two cases before us. The near miss argument was not advanced in the same form before the Court of Appeal, apparently because it was thought to be precluded by Miah. Even if otherwise well founded, it is not in my view available to Mr Anwar, since no separate human rights grounds were advanced on his behalf before either tribunal. So the issue as to whether the tribunal would have been obliged to consider them, and with what effect, did not arise. In Mr Alams case the human rights case was considered at both levels, but ultimately failed before the Upper Tribunal on its merits. The Upper Tribunal fairly gave some weight to the unusual circumstances in which he had lost his ability to rely on the new evidence (as a result of a change in the rules after the start of the appeal). But there was little or nothing to weigh on the other side of the balance, apart from the time he had spent in this country as a student under the rules. It would be surprising if that status, derived entirely from the rules, was sufficient in itself to add weight to a case for favourable treatment outside the rules. I see no error in the approach of the Upper Tribunal. Conclusion For these reasons, I would dismiss all three appeals. LORD MANCE (with whom Lord Kerr, Lord Reed and Lord Hughes agree) I would also dismiss these appeals for the reasons given by Lord Carnwath. Anything that we say about AS (Afghanistan) v Secretary of State for the Home Department [2009] EWCA Civ 1076, [2011] 1 WLR 385 is obiter, since in the case of Anwar no separate human rights ground was advanced in either tribunal and in the case of Alam the Upper Tribunal held correctly that there is nothing in any human rights point that was raised. If we were to disagree with the majority approach in AS, that would raise a problem of precedent for lower courts, but since I would on balance also favour leaving the majority view undisturbed, that problem does not arise. In fact, it appears that the whole area of appeals is likely to be reshaped by the Immigration Bill 2013 (HC Bill 110), so that the majority approach in AS and any view we express about the correct approach are likely to become irrelevant in future cases. The issue arising under section 85(2) of the Nationality, Immigration and Asylum Act 2002 which was addressed in AS is undoubtedly a difficult and very arguable one, and the arguments for and against the rival approaches are comprehensively discussed in AS. As I see it, the essential question was well defined by Sullivan LJ at paras 111 113. It is whether the decision appealed against to which section 85(2) refers is the generic decision to refuse leave to remain (i.e. in the present cases, within section 82(2)(d)), or the particular decision to refuse leave under a particular head, for example under a particular rule of the Immigration Rules or on a Human Rights ground. The majority approach in AS does not mean that section 85(2) enables an appellant, who has sought leave to remain, to go outside the scope of a leave to remain application by adding or substituting an appeal under a different head of section 82(2), e.g. by asserting a wrongful refusal of entry clearance or of a certificate of entitlement: see sections 82(2)(b) or (c)). To that extent, it seems to me that the majority approach is not open to the criticism that it amounts to re reading section 85(2) as if it used the words against a decision of a kind listed in section 82(2) or omitted the words against the decision appealed against altogether. Where the Secretary of State chooses to give a section 120(2) notice, the aim is to flush out any new (a) reasons for wishing to enter or remain and/or (b) grounds for being permitted to enter or remain and/or (c) grounds for not being removed or required to leave the UK. The statement in response need not repeat reasons or grounds set out in the existing application or decision which is the occasion for giving the notice: section 120(3). When section 85(2) requires the Tribunal to consider any matter raised in the [section 120] statement which constitutes a ground of appeal of a kind listed in section 84(1) against the decision appealed against, it is therefore referring to new reasons or grounds not previously covered by the decision appealed against. So long as they [constitute] a ground of appeal of a kind listed in section 84(1), they can be relied upon. By inference, it can be said, it is or becomes legitimate to treat them as constituting a ground of appeal, even though they were not raised before or decided by the Secretary of State. So, instead of relying on the Immigration Rules to justify leave to remain, an appellant can rely on a Human Rights ground, as Alam sought to do. And in AS itself, it would follow that the majority was correct to hold that an appellant could invoke a different Immigration Rule to justify leave to remain in the case of AS herself: that she qualified under the International Graduate Scheme, rather than as a person intending to establish herself in business, in the other case of NV, on the basis that she had ten years residence, rather than on the basis that she was a student. Section 3C(4) of the 1971 Act certainly provides some forceful arguments to the contrary of the majority conclusion in AS. But I am inclined to think that Moore Bick and Sullivan LJJ deal sufficiently in their paras 84 86 and 102 with the problem of reconciling their conclusion with section 3C(4). Essentially, it is up to the Secretary of State to decide whether to serve a section 120 notice. It is true that the majority approach to section 85(2) means that an applicant may open up issues which would otherwise be closed, at least until conclusion of the existing appeal (after which the applicant, if unsuccessful in the appeal, would be an overstayer). But it does at the same time close down some further applications which the appellant might, whether as an overstayer or from abroad, make. The fact that the Tribunal will, in a wider area, become primary decision maker appears to me relatively indecisive, bearing in mind that it anyway acts as decision maker in some significant areas. The overlap argument advanced by Sullivan LJ at para 106 also seems to me relevant, if one is considering the advantages and disadvantages of each solution. help identify at what level of detail that decision is to be considered. On the other hand, I am not persuaded that there is anything in the substance point based on section 85(4). Moore Bick LJ (para 83), rather than Sullivan LJ (para 113) was in my view right on this. Section 85(4) is dealing only with evidence which goes to the substance (heart) of the decision, but does not

These appeals concern refusals of leave to remain. Mr Patel and his wife, Mrs Patel (the Patels), arrived from India in the UK on 24 March 2009. Mr Patel had been granted leave to enter as a working holiday maker until 6 March 2011, and Mrs Patel had been granted leave as his dependant wife. Their only child was born here in 2010. On 26 February 2011, the Patels applied for further leave to remain, relying on article 8 (right to respect for family and private life) of the European Convention on Human Rights (the Convention), and rule 395C of the Immigration Rules (the rules). Their application was refused by the Secretary of State on 30 March 2011. That refusal was neither combined with, nor followed by, a decision to remove the family from the UK. The Patels argued that the Secretary of States failure to make a removal decision at the same time as, or shortly after, the decision to refuse leave to remain was unlawful. This argument was unsuccessful in both the Upper Tribunal and the Court of Appeal. Mr Alam, a Bangladeshi citizen, entered the UK on 26 August 2007 as a Tier 4 student with leave to remain until 12 April 2011. On 1 April 2011 he applied for leave to remain to continue his studies, and on 20 April 2011 the Secretary of State refused his application on the basis that he had not produced the required documentation. The bank statements submitted with his application were more than a month old and therefore did not show the necessary level of funds for a consecutive period ending no more than one month before the application. Mr Alam produced the appropriate bank statements by the First tier tribunal hearing, at which it was held that, whilst this new material was excluded from consideration by section 85A of the Nationality, Immigration and Asylum Act 2002 (the 2002 Act, which had come into effect between the date of his appeal and the date of his hearing), this material could be taken into account in the appeal under article 8 of the Convention. The tribunal concluded that, since Mr Alam met the requirements of the rules, it would be disproportionate to refuse his application. The Upper Tribunal reversed this decision, holding that Mr Alams article 8 rights were not sufficiently strong to make his removal disproportionate. Mr Anwar, a Pakistani citizen, entered the UK on 26 February 2010 with leave to remain as a student until 1 April 2011. He applied to extend his leave as a Tier 4 student to enable him to complete his course. This application was supported by a Confirmation of Acceptance for Studies (CAS). On 10 May 2011 the Secretary of State refused the application because it had not included a document referred to in the CAS. On his appeal to the First tier Tribunal Mr Anwar produced the relevant document. The First tier Tribunal allowed his appeal, but this decision was set aside by the Upper Tribunal. Although there was a reference to the Convention in the grounds of appeal to the First tier Tribunal, no separate appeal on human rights grounds was pursued at the hearing before either tribunal. The Court of Appeal heard the appeals of Mr Alam and Mr Anwar together and dismissed them both. The Supreme Court unanimously dismisses all three appeals. Lord Carnwath, with whom the rest of the Court agrees, gives the majority judgment. In the Patel appeal the Court holds that the Secretary of State was under no duty to issue removal directions at the time of the decision to refuse leave to remain, and that the actual decision was not invalidated by her failure to do so. In the Alam and Anwar appeals, although the First tier tribunal was obliged under section 120 of the 2002 Act to consider the new evidence filed, this evidence did not significantly improve their respective cases under article 8 of the Convention. The sole issue in the Patel appeal relates to the segregation of the decision to refuse leave to remain from the decision to direct removal. The Patels argued, relying on the Court of Appeal decisions in Mirza [2011] Imm AR 484 and Sapkota [2012] Imm AR 254, that the failure to issue such a direction was not only unlawful in itself, but also undermined the validity of the previous decision to refuse leave to remain [25 26]. The Court agrees with the Court of Appeals reasons for not following the decisions in Mirza and Sapkota. Neither section 10 of the 1999 Immigration and Asylum Act nor section 47 of the Immigration, Asylum and Nationality Act 2006, which define the Secretary of States powers of removal, can be read as imposing an obligation to make a direction in any particular case, still less as providing any link between failure to do so and the validity of a previous immigration decision [27]. The Secretary of State was under no duty in the Patels case to issue removal directions at the time of the decision to refuse leave to remain, and the actual decision was not invalidated by failure to do so. Insofar as the decisions of the Court of Appeal in Mirza and Sapkota indicate the contrary, they were wrongly decided [30]. The Alam and Anwar appeals raise the issue of whether the statements and evidence filed by Mr Alam and Mr Anwar to the First tier Tribunal amounted to additional grounds under section 120 of the 2002 Act, which the First tier Tribunal was obliged to consider and determine notwithstanding the bar in section 85A of that Act [10]. Whether the evidence before the tribunal in support of a putative appeal against the refusal of leave to remain can be taken on human rights grounds depends on two propositions: that the tribunal was obliged to consider the new evidence in that context, and secondly, that, if it had done so, the evidence that the rules could have been complied with would significantly improve the human rights case under article 8 [33]. In Mr Anwars case no separate human rights grounds were advanced on his behalf before either tribunal and so the issue as to whether the tribunal would have been obliged to consider them, and if so to what effect, does not arise [58]. On the first proposition, the Court holds (agreeing with the majority in AS(Afghanistan) v Secretary of State [2011] 1 WLR 385) that section 85(2) of the 2002 Act imposes a duty on the tribunal to consider any potential ground of appeal raised in response to a section 120 notice, even if it does not directly relate to the issues considered by the Secretary of State in the original decision [34 44]. On the second proposition, in Mr Alams case the human rights case was considered but failed before the Upper Tribunal. Some weight was given to the circumstances in which he lost his ability to rely on the new evidence, but against this there was only the time he had spent in this country as a student under the rules. It would be surprising if that status, derived entirely from the rules, was sufficient in itself to add weight to a case for favourable treatment outside the rules. The Court holds that there was no error in the Upper Tribunals approach [59].

This litigation concerns claims by Marks and Spencer plc (M&S) for group relief in respect of losses sustained by two of their subsidiaries: Marks and Spencer (Deutschland) GmbH (MSD), which was resident in Germany; and Marks and Spencer (Belgium) NV (MSB), which was resident in Belgium. The claims were originally made and refused by the Revenue (HMRC) more than ten years ago. They raise questions about the availability of cross border group relief and the method of quantifying such relief as is available which, despite having been the subject of nine separate hearings since the case was first considered in December 2002, have still not yet been resolved. The appeals come before the Court at this stage on an application by M&S for a reference to the Court of Justice of the European Communities. On 14 October 2011 the Court of Appeal gave judgment on five issues which had been identified as arising in the case: Marks and Spencer plc v Revenue and Customs Commissioners [2011] EWCA Civ 1156, [2012] STC 231. The Court of Appeal found in favour of M&S on four of these issues and in favour of HMRC on the other one. It gave the parties permission to appeal on all issues. M&S had intended to seek a reference on the first issue, but on 21 February 2013 the CJEU gave judgment in Case C 123/11 Proceedings brought by A Oy. M&S submit that any doubt that might have existed on the first issue has been dispelled by that ruling, that a reference is no longer necessary and that it can now be answered in their favour. HMRC had objected to M&Ss application for a preliminary ruling on the ground that the answer to the first issue was already clear. As matters now stand, however, they simply invite this Court to determine this issue in their favour. So the hearing on M&Ss application for a reference became a substantive hearing of the appeal on the first issue. Background M&S began to expand its business into other countries in 1975. By the end of the 1990s it had sales outlets in more than 34 countries, with a network of subsidiaries and franchises. But by that date it had already begun to incur losses, and in March 2001 it decided to withdraw from its continental European activity. It was able to sell its French and Spanish subsidiaries to third parties, but no purchasers could be found for MSD and MSB. MSD ceased trading in August 2001 and was dissolved following liquidation on 14 December 2007. MSB ceased trading on 22 December 2001 and was dissolved following liquidation on 27 December 2007. The first group relief claims were made between 2000 and 2003 at a time when neither subsidiary was in liquidation. They concerned MSDs losses for the years 1998 to 2001 and MSBs losses for the years 2001 and 2002. Claims for the same losses by the same companies for the same years were made on three subsequent occasions in response to what M&S describe as factual and jurisprudential developments: on 20 March 2007, when both companies were in liquidation; on 12 December 2007, just before the companies were dissolved; and on 11 June 2008, on behalf of MSB following the dissolution of that company. The claims for the years from 2000 onwards were governed by the self assessment rules in Schedule 18 to the Finance Act 1998 and were within the statutory time limits. HMRC maintain that the claims for years prior to 2000, which were governed by the corporation tax pay and file rules in Schedule 17A to the Taxes Act 1988, were out of time when they were included in the claims that were made on the three occasions subsequent to the making of the first claims between 2000 and 2003. The basic contention underlying all these claims was that the provisions in United Kingdom legislation which restricted group relief claims to losses of UK resident companies and, after the Finance Act 2000, losses of UK branches of non resident companies were contrary to article 43 EC (now article 49 TFEU) on the freedom of establishment, and were thus unlawful. On 17 December 2002 the Special Commissioners held that there had been no breach of that article: Marks and Spencer plc v Halsey (Inspector of Taxes) [2003] STC (SCD) 70. Park J on appeal decided to refer the matter to the ECJ: [2003] EWHC 1945 (Ch). He sought a preliminary ruling on two questions. The first was the compatibility of the UK provisions with article 43 EC. The second was what difference the facts of M&Ss case might make to the answer to the first question. The ECJ gave its ruling in its judgment of 13 December 2005: Case C 446/03 Marks & Spencer plc v David Halsey (Her Majestys Inspector of Taxes) [2005] ECR I 10837. It ruled that the answer to the first question was that article 43 EC did not preclude provisions of a Member State which prevented a resident parent company from claiming group relief for losses incurred by a subsidiary established in another Member State. The restriction was justified by three grounds when taken together: preserving the balanced allocation of the power to impose taxes between Member States; preventing losses being taken into account twice in different Member States; and preventing the risk of tax avoidance if the taxpayer were to be free to choose the Member State in which to claim relief: paras 42 51. As to the proportionality of the restriction, however, the ECJ went on to say this: 55 In that regard, the Court considers that the restrictive measure at issue in the main proceedings goes beyond what is necessary to attain the essential part of the objectives pursued where: the non resident subsidiary has exhausted the possibilities available in its State of residence of having the losses taken into account for the accounting period concerned by the claim for relief and also for previous accounting periods, if necessary by transferring those losses to a third party or by offsetting the losses against the profits made by the subsidiary in previous periods, and there is no possibility for the foreign subsidiarys losses to be taken into account in its state of residence for future periods either by the subsidiary itself or by a third party, in particular where the subsidiary has been sold to that third party. 56 Where, in one Member State, the resident parent company demonstrates to the tax authorities that those conditions are fulfilled, it is contrary to article 43 EC and 48 EC to preclude the possibility for the parent company to deduct from its taxable profits in that Member State the losses incurred by its non resident subsidiary. The debate then returned to the United Kingdom. Park J gave effect to the ruling of the ECJ on 10 April 2006: Marks and Spencer plc v Halsey (Inspector of Taxes) [2006] EWHC 811 (Ch), [2006] STC 1235. He held that the no possibilities test referred to in para 55 of the ECJs judgment required an analysis of the recognised possibilities legally available given the objective facts of the companys situation at the relevant time, and that the test was to be applied at the date when the group relief claim was made. He remitted the case to the Special Commissioners, but both parties appealed against his decision. The Court of Appeal upheld the judges findings: [2007] EWCA Civ 117, [2008] STC 526. The case then returned to the Tax Chamber of the First Tier Tribunal: Marks and Spencer plc v Revenue and Customs Commissioners [2009] UKFTT 64 (TC); [2009] UKFTT 231 (TC); [2009] SFTD 757, and proceeded from there to the Upper Tribunal [2010] UKUT 213 (TCC), [2010] STC 2470 and then to a second Court of Appeal, whose decisions are now under appeal to this court. The issues that arose in the second Court of Appeal were summarised by Moses LJ in [2012] STC 231, para 4 as follows: (i) Is the test that the ECJ established to identify those circumstances in which it would be unlawful to preclude cross border relief for losses, the no possibilities test, to be applied (as the Revenue contend) at the end of the accounting period in which the losses crystallised rather than (as M&S contends) the date of claim? This question involves deciding whether the Court of Appeal in the first appeal reached a binding decision on that issue and whether it remains binding on this court in light of subsequent decisions of the ECJ. (ii) Can sequential/cumulative claims be made (as M&S contends) by the same company for the same losses of the same surrendering company in respect of the same accounting period? The Revenue assert that that is not a question decided by the Court of Appeal and is precluded both by UK fiscal rules and by the underlying jurisprudence of the ECJ. (iii) If a surrendering company has some losses which it has or can utilise and others which it cannot, does the no possibilities test (as the Revenue contend) preclude transfer of that proportion of the losses which it has no possibility of using? (iv) Does the principle of effectiveness require M&S to be allowed to make fresh pay and file claims now that the ECJ has identified the circumstances in which losses may be transferred cross border, when at the time M&S made those claims there was no means of foreseeing the test established by the court? (v) What is the correct method of calculating the losses available to be transferred? The Court of Appeal refused HMRCs appeal on the first, second, third and fifth issues. It refused M&Ss appeal on the fourth issue. As both parties sought and obtained permission to appeal to this court, all five issues remain to be decided. They have been re stated in a slightly amended form in the statement of facts and issues. For present purposes only the first issue need be set out here. It is in these terms: In Case C 446/03 Marks & Spencer v Halsey, did the ECJ decide that it was contrary to article 43 EC to preclude cross border loss relief in the Member State of the claimant company (a) only where the taxpayer can show, on the basis of the circumstances existing at the end of the accounting period in which the losses in question arose, that there was no possibility of the losses in question being utilised in the Member State of the surrendering company in that accounting period, in any previous accounting period or in future accounting periods (as HMRC contend), or (b) where the taxpayer can show, on the basis of the circumstances existing at the date of the claim, that there has been no possibility of utilising the losses in the Member State of the surrendering company in any accounting period prior to the date of the claim and no possibility of such utilisation in the accounting period in which the claim is made or in future accounting periods (as M&S contend)? Issue 1 in the courts below The question which Park J had to resolve, when the case returned to him after the ECJ had given its ruling, was whether the facts by reference to which the conditions set out in para 55 had to be satisfied were those which existed or could be foreseen at the end of the accounting period in which the losses arose, or those which existed at the date of the claim. He held that the relevant time was the date of the claim: [2006] STC 1235, paras 44 46. He said that the end of the accounting period was too soon. It would be likely to rule out virtually every case. He found it hard to imagine any case in which German or Belgian law would not provide for some possibility of relief for the losses at the end of an accounting period in which MSD or MSB made a loss and was still carrying on its trade. The date of the claim provided a rational basis for applying para 55, and if a company claimed group relief at a time when those criteria are satisfied it should get the relief. The first Court of Appeal also held that the relevant time was the date when the claim was made: [2008] STC 526, para 32 42. Chadwick LJ said in para 36 that he could find no support in the reasoning which underlay the approach of the ECJ for the proposition that the para 55 conditions must be satisfied at the end of the surrender period: It is important to keep in mind, as it seems to me, that the question whether the United Kingdom tax authorities are precluded by Community law from applying the restriction on group relief imposed by domestic law does not arise until a claim for group relief is made by the claimant company. The claim must be accompanied by a notice from the surrendering company. At the least the surrendering company must consent to the use of its losses by the claimant company; and (as I have said) it may well be that the claimant company can be required to provide some formal confirmation from the surrendering company that the losses are not available in its state of residence. The question whether the United Kingdom tax authorities are precluded by Community law from applying the restriction on group relief imposed by domestic law turns on whether the para 55 conditions are satisfied. I can see no reason in principle why the latter question whether the para 55 conditions are satisfied should not be answered by reference to the facts as they are when the former question arises. The second Court of Appeal did not agree: [2012] STC 231. Moses LJ said in para 29 that the principled objection to allowing the question whether the para 55 conditions are satisfied to be answered by reference to the facts as they are at the time of the claim is that it gives an option or choice as to where the losses may be relieved, and that that option was recognised by the ECJ as substantially jeopardising fiscal sovereignty. In other words, the claimant company should not be given an opportunity to take steps that might bring about a situation in which it could make a cross border claim. Placing the relevant moment at the end of the accounting period in which the losses were made denied it that opportunity. In paras 30 and 31 he gave further reasons for disagreeing with the reasoning of Park J and the first Court of Appeal. But in para 33 he recognised that there was a question as to whether it was open to his court to do so. HMRC contended that it was open to his court to depart from the decision in the first Court of Appeal because subsequent decisions of the ECJ demonstrated that it fell into error, and that his court should follow those subsequent decisions. Moses LJ said that he was more than happy to follow the approach of Chadwick LJ in Cond Nast Publications Ltd v Customs and Excise [2006] EWCA Civ 976; [2006] STC 1721, para 44, that the Court of Appeal could refuse to follow its own earlier decision where the judgment of the ECJ under consideration in the earlier case had been the subject of further consideration, and consequent interpretation, explanation or qualification, by the Court in a later judgment. But he was unable to find anything in Case C 231/05 Proceedings brought by Oy AA [2007] ECR I 6373; [2008] STC 991 or Lidl Belgium GmbH & Co KG v Finanzamt Heilbronn Case C 414/06 [2008] ECR I 3601; [2008] STC 3229 which followed the ruling in Marks & Spencer v Halsey that suggested that the Court thought that it was departing from or going beyond what it had previously decided, although it had every opportunity to do so. He concluded therefore that his court was bound by the decision of the first Court of Appeal, and that its decision as to the date for assessment of the para 55 conditions was binding on his court: paras 46 48. The subsequent cases in the Court of Justice In Oy AA [2007] ECR I 6373 a Finnish parent company wished, for non fiscal and genuine commercial reasons, to support an ailing subsidiary which was established in the United Kingdom by transferring profits to secure its financial position. The question was whether it could deduct those transfers from its taxable income in Finland. Finnish law limited a companys right to make intra group transfers from its taxable business income to cases where a national parent company holds at least nine tenths of the shares of another national company. The ECJ said that restricting the deductibility of intra group transfers in this way was apt to safeguard the allocation of powers to impose taxes between Member States, and to combat tax avoidance by deliberately transferring income by means of intra group transfers to companies resident in low taxation jurisdictions. It ensured that profits earned by group companies in Finland were subject to taxation there according to the principle of territoriality: para 65. Two of the three justifications referred to in para 51 of Marks & Spencer were therefore satisfied. Safeguarding the allocation of the power to impose taxes could not be achieved by a corresponding, less restrictive national provision, and the law in question was proportionate. So article 43 EC did not preclude a system such as that in issue in that case: para 67. There is nothing in this ruling that departs from, or modifies, the justifications referred to in Marks & Spencer or its view in para 46, which it repeated in para 55 of Oy AA, that to give companies the option to have their losses taken into account in the Member State in which they are established or in another Member State would significantly jeopardise a balanced allocation of power to impose taxes between Member States. In Lidl Belgium GmbH & Co KG [2008] ECR I 3601 the parent company, Lidl Belgium, was resident in Germany and had a permanent establishment in Luxembourg. Its permanent establishment incurred a loss which the parent company sought to deduct from its tax base in Germany. This was contrary to German law, as the permanent establishment was not subject to taxation in Germany. The question was whether the national tax regime was precluded by article 43 EC. The Court followed the same approach as it had adopted in Marks & Spencer and Oy AA. As in Oy AA, it held that the national legislation could be justified by the need to safeguard the allocation of power to tax between the Member States and the need to prevent tax avoidance: para 41. It recognised, as it did in Marks & Spencer, para 55, that a measure which restricted the freedom of establishment goes beyond what is necessary to obtain the objectives pursued where a non resident subsidiary has exhausted the possibilities for having the losses incurred in the Member State where it is situated taken into account for the accounting period concerned and previous accounting periods, and where there is no possibility for that subsidiarys loss to be taken into account in that State for future periods. But Luxembourg tax legislation provided for the possibility of deducting a taxpayers losses in future tax years, and the claimant had not shown that the conditions laid down in para 55 of Marks & Spencer were satisfied. Here again there is a straightforward application of the principles established by Marks & Spencer. Once again the Court recognised the legitimate interest which the Member States have in preventing conduct which is liable to undermine the right to exercise the powers of taxation which are vested in them, and that to give a company the right to elect to have its losses taken into account in the Member State in which it has its seat or in another Member State would seriously undermine a balanced allocation of the power to impose taxes between the Member States concerned. In Case C 337/08 X Holding BV v Staatssecretaris van Financin [2010] ECR I 01215 a tax scheme which permitted a parent company to form a single tax entity with its resident subsidiary, but prevented it from doing this with a non resident subsidiary, was held to be justified on the application of the principles established in Marks & Spencer and applied in Oy AA and Lidl. As Moses LJ found when he examined these cases in the Court of Appeal, there is nothing in them which assists, either one way or the other, in the determination of the question raised by the first issue. Moses LJ did not, of course, have the benefit of considering the Courts judgment of 21 February 2013 in A Oy. It is this judgment which is said by M&S to confirm the soundness of their submission that the question whether cross border relief in the Member State of the claimant company is precluded should be determined on the basis of the circumstances existing at the date of the claim and not at the end of the accounting period in which the losses arose. They say that it shows that the contrary view by Moses LJ is no longer tenable. A was a Finnish undertaking with a subsidiary in Sweden, referred to as B. Following trading losses, B closed its sales outlets but remained bound by two long term leases. A planned to merge with B for reasons that could be justified commercially and to make it possible for Bs leases to be transferred to A. The effect of that operation would be that the assets, liabilities and residual obligations of B would be transferred to A and that the Finnish parent would no longer have a subsidiary in Sweden. A sought an advance decision as to whether, once the operation had been carried out, it would be able to deduct Bs losses in accordance with the Finnish law on income tax. When it received a negative answer it sought a preliminary ruling from the CJEU on the question whether article 49 TFEU, as it now is, precluded legislation under which that deduction could not be made while allowing for that possibility if the merger was with a resident subsidiary. Advocate General Kokott was of the opinion that further development of the courts case law since Marks & Spencer had altered the scope of the justifications referred to in that judgment, that they could be referred to for examining the need for a national measure only if the prevention of double use of losses was recognised as an independent justification, that a justification based on the allocation of taxation powers among the Member States alone was no longer appropriate and that the possibility that the Swedish subsidiary might have its accumulated losses taken into account in its State of residence was irrelevant: paras 47 54. But she went on nevertheless in paras 55 59 to consider whether the conditions in Marks & Spencer for the losses of a non resident subsidiary to be taken into account in the parent companys Member State were fulfilled. In her opinion the Marks & Spencer exception was formulated very restrictively, so that there must be no possibility for the foreign subsidiarys losses to be taken into account in its State of residence for past or future periods either by itself or a third party. In A Oys case the merger arose from a free decision of the parent company. The taxable company still had the option of using the Swedish losses in the future by resuming trading and through the resulting profits. Cessation of trading raised the possibility of choosing the tax scheme applicable to those losses which, according to the courts case law, the taxable company did not have. The Finnish provision was necessary for attaining the objective of preserving the allocation of taxing powers among Member States, and the disadvantages it caused were reasonably proportionate: para 68. The Court did not follow either of the two approaches indicated by the Advocate General. The task which it set itself was to consider whether the difference in treatment between resident and non resident companies was appropriate for ensuring the objective pursued and did not go beyond what was necessary to achieve that objective: para 39. It considered all three of the justifications referred to in para 43 of Marks & Spencer taken together, and concluded that the legislation pursued legitimate objectives compatible with the Treaty which were justified by overriding interests in the public interest: paras 40 46. It then turned in para 48 to the question whether the legislation was necessary to attain those objectives: 48. With respect to the proportionality of the obstacle to freedom of establishment, it must be observed, first, that granting the parent company the possibility of taking into account the losses of its non resident subsidiary in connection with a cross border merger is not a priori such as to allow the parent company to choose freely from one year to the next the tax scheme applicable to the subsidiarys losses (see, a contrario, X Holding, para 31). 49. It follows, secondly, from the courts case law that a restrictive measure such as that at issue in the main proceedings goes beyond what is necessary to attain the essential part of the objectives pursued in a situation in which the non resident subsidiary has exhausted the possibilities available in its State of residence of having the losses taken into account (see, to that effect, Marks & Spencer, para 55). It is for the parent company to show that that is the case (see, to that effect, Marks & Spencer, para 56). As for the facts of that case, As argument was that, once the merger had been carried out, B would be liquidated and A would no longer have a subsidiary or permanent establishment in Sweden. So neither of those two companies would appear to have the possibility of relying in Sweden, after the merger, on the losses incurred in Sweden before the merger. The Courts response to this argument in para 52 was that those specific circumstances were not in themselves capable of showing that there was no possibility of taking into account the losses that exist in the subsidiarys State of residence: 53. Thus several Member States which have intervened in the case consider, on the contrary, that the possibility of taking Bs losses into account in Sweden continues to exist. The German Government submits that those losses can be deducted from the income, admittedly very small, which B continues to receive in Sweden. It adds that B is still involved in leases which could be assigned. The French Government also submits that Swedish law allows companies to take losses into account in previous tax years or on the occasion of the taxation of capital gains made on the assets and liabilities of the merged company. The Italian Government submits that Sweden is entitled to evaluate the assets transferred and to tax the merged company on the profit thus realised. 54. It is therefore for the national court to determine whether A has in fact proved that B has exhausted all the possibilities of taking account of the losses which exist in Sweden. The Court observed in para 55 that, were the referring court to reach the conclusion that such proof had been produced, denial to A of the possibility of deducting from its taxable profits the losses incurred by its non resident subsidiary, in the context of the proposed merger, would be contrary to articles 49 TFEU and 56 TFEU. It held in para 56 that those articles did not preclude national legislation to that effect. But it added this qualification: Such national legislation is none the less incompatible with European Union law if it does not allow the parent company the possibility of showing that its non resident subsidiary has exhausted the possibilities of taking those losses into account and that there is no possibility of their being taken into account in its State of residence in respect of future tax years either by itself or by a third party. M&S submit that there are several points in this judgment that are relevant to the first issue. First, it held that the fact that A exercised a free choice in undertaking the merger did not preclude relief: para 48. In other words, the principle that a taxpayer should not be able to choose the country in which to relieve losses does not extend to steps which pose no threat to an entitlement to cross border relief. Steps which are taken simply in order to show that the para 55 conditions are met do not threaten the balanced allocation of taxing powers. Secondly, the judgment suggests that the mere fact that losses could be carried forward under local law at the end of the accounting period does not of itself mean that the para 55 conditions are not met. Reference was made to this possibility in para 50 of the judgment, but this did not lead to a conclusion that the para 55 conditions were not met. It was still necessary for the national court to examine whether, on the facts, all possibilities of using the losses had been exhausted: para 54. That being so, there was no principled reason for insisting that the relevant date should be the end of the accounting period in which the losses were incurred. Discussion The point which the first issue raises comes down, in the end, to a choice between what Moses LJ described as the principled approach contended for by HMRC and the one contended for by M&S. The approach for which M&S contend looks instead to the practical consequences if the relevant date is to be taken to be the end of the accounting period in which the losses in question arose. Park J identified the objection to HMRCs approach in the judgment which he delivered when the case returned to him after the ECJ had given its ruling: [2006] STC 1235, para 46. He said that the end of the accounting period was too soon. As he saw it, the choice of that date would be likely to rule out virtually every case. So he held that it should be the date when the claim was made. On the other hand, there is Moses LJs point that to prefer the date of the claim would afford the claimant company the opportunity to bring about a situation in which the para 55 conditions would be satisfied. That would mean that in the period up to the appeal the claimant would be free to choose whether to bring about a situation in which the losses could be transferred cross border: [2012] STC 231, para 30. The CJEUs judgment in A Oy has made it easier to decide between the two alternatives. Mr Ewart QC for HMRC said that giving the claimant a choice, for whatever reason, as to where its profits were to be taxed would upset the balanced allocation of the power to impose taxes. That was the critical justification for the rule in Marks & Spencer that provisions of the kind in issue were not precluded by Community law. M&S had not shown that there was any principled reason for selecting the date of the claim. To choose that date would open up the possibility of choice as to where to seek relief for losses that crystallised in the accounting period. A line had to be drawn somewhere, and the date to which to look was the date when the loss crystallised. A Oy had to be approached with caution, as it was a pre transaction case. In any event the balanced allocation rule was not just about tax avoidance. To allow losses to be brought in from another Member State was bound to upset that balance. It would require a quite extreme case to justify upsetting that balance, and voluntary acts such as liquidation after the loss had crystallised should be excluded. Mr Milne QC for M&S did not dispute the need to avoid upsetting the balanced allocation of the power to impose taxes. He agreed that the para 55 conditions were designed to ensure that there was no double use of the claim for relief. The questions that had to be addressed were essentially practical questions. It was a factual exercise. During the course of the hearing he altered his position as to the date as at which the entitlement to relief was to be determined. In its written case M&S said that the most obvious date was, as Chadwick LJ held, the date of the claim. But Mr Milne suggested that the facts should be examined at the time when the question was asked, which was the date when the claim was being scrutinised. A Oy had clarified the landscape. The Advocate Generals approach was very similar to that of Moses LJ, but that was not what the CJEU decided. The facts of the case showed that B was involved in leases that could still be assigned, so there were assets that could be realised. Yet the Court still left it to the national court to determine whether A had in fact proved that B had exhausted all the possibilities of taking account of the losses and that there was no possibility of their being taken into account in respect of future tax years: paras 54, 56. That was best done, said Mr Milne, by looking to the facts as they were at the date of the first instance hearing. I agree with Mr Milne that the exercise that is to be carried out is essentially a factual one, and the claimant company ought to be given an opportunity to deal with it in as realistic a manner as possible. The approach contended for by HMRC would mean that there would be no realistic chance of satisfying the para 55 conditions at all. It would hardly ever be possible, if regard is had only to how matters stood at the end of the relevant accounting period, to exclude entirely the possibility that the losses in question might be utilised in the Member State of the surrendering company unless, of course, this was prevented by its local law. The balanced allocation principle does not require to be supported by an approach which restricts the claimant company to that extent. This is made clear by the way the issue was dealt with in A Oy: see para 48. The use of the present tense in the Courts description of the matters to be determined by the national court in paras 54 and 56 might be taken as suggesting that the facts that are to be examined are the facts as they are at the date of the inquiry. But they are equally consistent with the proposition that, while the date of the inquiry is the date when the facts are being considered, the date as at which they are to be taken to be established is the date when the proceedings are commenced. Mr Milne did not present any detailed argument for preferring the date of the inquiry to the date that both Park J and the first Court of Appeal held to be the correct date, which was the date of the claim. The First Tier Tribunal at [2009] UKFTT 64 (TC), para 42 and the Upper Tribunal at [2010] STC 2470, paras 56 57 took the same view, holding that the date of the claim was appropriate in relation to the pay and file years: see also para 69(2) of Schedule 18 to the Finance Act 1998 which, for self assessment years, uses the phrase at the time the claim is made. There is no indication in any of these judgments that selecting the date of the claim is likely in practice to give rise to any difficulty. On the contrary, that date has the advantage of certainty, as the facts to be inquired into will not be susceptible to change between the making of the claim and the commencement of the inquiry. For these reasons I would reject the choice that Mr Milne made in the course of the hearing and hold that the entitlement to cross border relief is to be examined, as stated in alternative (b) in the first issue, on the basis of the circumstances existing at the date of the claim. The question whether successive claims can be made, and with what effect, must be left over for consideration under the second issue. The national court will, of course, be alert to the possibility that the claimant company may simply be choosing in which Member State it should be taxed. The para 55 conditions are designed to exclude that possibility. But the judgment in A Oy shows that the mere fact that losses can be carried forward at the end of the accounting period in which they arose does not mean that the para 55 conditions cannot be met. Moreover the fact that the merger that was contemplated in that case was not seen as a ground for denying the possibility of taking the losses into account, on the ground that it allowed the parent company to choose freely from one year to the next the tax scheme applicable to its subsidiarys losses, shows that the decisions to wind up MSD and MSB are not open to objection on that ground either. What M&S was doing can be attributed to the fact that the companies had ceased trading six years earlier, and not to the exercise of an option to choose where to seek relief for the losses that had been incurred. There is no reason to think that what it did must be seen as a threat to the balanced allocation of taxing powers. The principle that lies behind HMRCs approach must, of course, be respected. But it does not justify the choice of date for which they contend which, as Park J said, is too soon to give the claimant company a reasonable opportunity of showing that the para 55 conditions are satisfied. Conclusion I would answer the first issue by rejecting the alternative contended for by I would hold that the question for inquiry is whether the claimant company has been able to show, on the basis of the circumstances known at the date when it makes its claim, that there has been no possibility of the losses in question being utilised in the Member State of the surrendering company in any accounting period prior to the date of the claim and no possibility of such utilisation in the accounting period in which the claim is made or in any future accounting periods. The consequence of this finding is that the third issue does not need to be answered. The parties will be heard as to the answers to be given to the three remaining issues at a later date.

These appeals raise questions about the availability of cross border group relief and the method of quantifying such relief. These questions arise in respect of claims made by Marks and Spencer plc (M&S) for group relief in respect of losses sustained by two of its subsidiaries: Marks and Spencer (Deutschland) GmbH (MSD), which was resident in Germany; and Marks and Spencer (Belgium) NV (MSB), which was resident in Belgium. In March 2001, M&S decided to withdraw from its continental European activity. MSD ceased trading in August 2001 and was dissolved following liquidation on 14 December 2007. MSB ceased trading on 22 December 2001 and was dissolved following liquidation on 27 December 2007. Between 2000 and 2008, M&S made several group relief claims in relation to losses sustained by MSD and MSB. The basic contention underlying all these claims was that the provisions in United Kingdom legislation which restricted group relief claims to losses of UK resident companies and, after the Finance Act 2000, losses of UK branches of non resident companies, were contrary to article 43 EC (now article 49 TFEU) on the freedom of establishment, and were thus unlawful. The first claims were originally made and refused by the Revenue (HMRC) more than ten years ago. The matter came before Park J, who made a reference to the CJEU. The CJEU ruled that article 43 EC did not preclude provisions of a Member State which prevented a resident parent company from claiming group relief for losses incurred by a subsidiary established in another Member State. The CJEU also ruled that it is contrary to articles 43 and 48 EC to preclude the possibility for the parent company to deduct from its taxable profits in that Member State the losses incurred by its non resident subsidiary where, in one Member State, the resident parent company satisfies two conditions: (i) the non resident subsidiary has exhausted the possibilities available in its State of residence of having the losses taken into account for the accounting period concerned by the claim for relief and also for previous accounting periods; and (ii) there is no possibility for the foreign subsidiarys losses to be taken into account in its state of residence for future periods either by the subsidiary itself or by a third party, in particular where the subsidiary has been sold to that third party. In giving effect to the CJEUs ruling, Park J, with whom the Court of Appeal agreed, held that the no possibilities test required an analysis of the recognised possibilities legally available given the objective facts of the companys situation at the relevant time, and that the test was to be applied at the date when the group relief claim was made. On the basis of that approach, the matter then made its way through the Tax Chamber of the First Tier Tribunal, and the Upper Tribunal, before reaching the Court of Appeal. Moses LJ, with whom Etherton and Lloyd LJJ agreed, disagreed with Park Js approach. They considered that the claimant should not be given an opportunity to take steps that might bring about a situation in which it could make a cross border claim. However, they concluded that they were bound by previous authority and could not depart from it. In the Supreme Court, four issues arise for consideration. The parties will be heard as to the answers to be given to three of those issues at a later date. The first of those issues addressed in this appeal concerns whether the CJEU decided it was contrary to article 43 EC to preclude cross border group relief in the Member State of the claimant company: (a) only where the taxpayer can show, on the basis of the circumstances existing at the end of the accounting period in which the losses in question arose, that there was no possibility of the losses in question being utilised in the Member State of the surrendering company in that accounting period, in any previous accounting period or in future accounting periods (as HMRC contend); or (b) where the taxpayer can show, on the basis of the circumstances existing at the date of the claim, that there has been no possibility of utilising the losses in the Member State of the surrendering company in any accounting period prior to the date of the claim and no possibility of such utilisation in the accounting period in which the claim is made or in future accounting periods (as M&S contend). The Supreme Court unanimously dismisses HMRCs appeal and adopts approach (b). Lord Hope gives the judgment of the Court. The exercise to be carried out is essentially a factual one. The claimant company ought to be given an opportunity to deal with it in as realistic a manner as possible. It would hardly ever be possible, if regard is had only to how matters stood at the end of the relevant accounting period, to exclude entirely the possibility that the losses in question might be utilised in the Member State of the surrendering company unless, of course, this was prevented by its local law. The CJEUs judgment in February 2013 in Case 123/11 Proceedings brought by A Oy makes clear that the claimant company is not required to be restricted to such an extent [30]. There is no indication that selecting the date of the claim is likely in practice to give rise to any difficulty. On the contrary, that date has the advantage of certainty, as the facts to be inquired into will not be susceptible to change between the making of the claim and the commencement of the inquiry. The entitlement to cross border relief is to be examined, as stated in approach (b), on the basis of the circumstances existing at the date of the claim [31]. The national court will, of course, be alert to the possibility that the claimant company may simply be choosing in which Member State it should be taxed. However, what M&S was doing can be attributed to the fact that the companies had ceased trading six years earlier, and not to the exercise of an option to choose where to seek relief for the losses that had been incurred. There is no reason to think that what it did must be seen as a threat to the balanced allocation of taxing powers [32]. Therefore, the question for inquiry is whether the claimant company has been able to show, on the basis of the circumstances known at the date when it makes its claim, that there has been no possibility of the losses in question being utilised in the Member State of the surrendering company in any accounting period prior to the date of the claim and no possibility of such utilisation in the accounting period in which the claim is made or in any future accounting periods [33].

Nadine Montgomery gave birth to a baby boy on 1 October 1999 at Bellshill Maternity Hospital, Lanarkshire. As a result of complications during the delivery, the baby was born with severe disabilities. In these proceedings Mrs Montgomery seeks damages on behalf of her son for the injuries which he sustained. She attributes those injuries to negligence on the part of Dr Dina McLellan, a consultant obstetrician and gynaecologist employed by Lanarkshire Health Board, who was responsible for Mrs Montgomerys care during her pregnancy and labour. She also delivered the baby. Before the Court of Session, two distinct grounds of negligence were advanced on behalf of Mrs Montgomery. The first concerned her ante natal care. It was contended that she ought to have been given advice about the risk of shoulder dystocia (the inability of the babys shoulders to pass through the pelvis) which would be involved in vaginal birth, and of the alternative possibility of delivery by elective caesarean section. The second branch of the case concerned the management of labour. It was contended that Dr McLellan had negligently failed to perform a caesarean section in response to abnormalities indicated by cardiotocograph (CTG) traces. The Lord Ordinary, Lord Bannatyne, rejected both grounds of fault: [2010] CSOH 104. In relation to the first ground, he based his decision primarily on expert evidence of medical practice, following the approach laid down by the majority in Sidaway v Board of Governors of the Bethlem Royal Hospital and the Maudsley Hospital [1985] AC 871. He also concluded that, even if Mrs Montgomery had been given advice about the risk of serious harm to her baby as a consequence of shoulder dystocia, it would have made no difference in any event, since she would not have elected to have her baby delivered by caesarean section. That decision was upheld by the Inner House (Lord Eassie, Lord Hardie and Lord Emslie): [2013] CSIH 3; 2013 SC 245. The appeal to this court has focused on the first ground of fault. The court has been invited to depart from the decision of the House of Lords in Sidaway and to re consider the duty of a doctor towards a patient in relation to advice about treatment. The court has also been invited to reverse the findings of the Lord Ordinary in relation to causation, either on the basis that his treatment of the evidence was plainly wrong, or on the basis that, instead of applying a conventional test of but for causation, he should instead have applied the approach adopted in the case of Chester v Afshar [2004] UKHL 41; [2005] 1 AC 134. Before considering those issues, we shall explain in greater detail the relevant facts and the approach adopted by the courts below. The facts Mrs Montgomery studied molecular biology at Glasgow University and graduated with a BSc. She then worked for a pharmaceutical company as a hospital specialist. She was described by the Lord Ordinary as a clearly highly intelligent person. Her mother and sister are both general medical practitioners. In 1999 Mrs Montgomery was expecting her first baby. She is of small stature, being just over five feet in height. She suffers from insulin dependent diabetes mellitus. Women suffering from diabetes are likely to have babies that are larger than normal, and there can be a particular concentration of weight on the babies shoulders. Because of her diabetes, Mrs Montgomerys was regarded as a high risk pregnancy requiring intensive monitoring. She therefore attended the combined obstetric and diabetic clinic at Bellshill Maternity Hospital, under the care of Dr McLellan, throughout her pregnancy. The widest part of a babys body is usually the head. If the head successfully descends through the birth canal, in a normal birth the rest of the body will descend uneventfully. Since the widest part of the body of a baby whose mother is diabetic may be the shoulders the head may descend but the shoulders can be too wide to pass through the mothers pelvis without medical intervention. This phenomenon, known as shoulder dystocia, is the prime concern in diabetic pregnancies which proceed to labour. It was described by Dr Philip Owen, an expert witness who gave evidence on behalf of the Board, as a major obstetric emergency associated with a short and long term neonatal and maternal morbidity [and] an associated neonatal mortality. That evidence is consistent with guidance issued by the Royal College of Obstetricians and Gynaecologists, which states that there can be a high perinatal mortality and morbidity associated with the condition, even when it is managed appropriately. Maternal morbidity is also increased: in 11% of cases of shoulder dystocia there is postpartum haemorrhage, and in 3.8% fourth degree perineal tears. The guidance advises that help should be summoned immediately when shoulder dystocia occurs. When the mother is in hospital this should include assistance from midwives, an obstetrician, a paediatric resuscitation team and an anaesthetist. According to the evidence in this case, about 70% of cases of shoulder dystocia can be resolved by what is known as a McRoberts manoeuvre. This involves two midwives or nurses taking hold of the mothers legs and forcing her knees up towards her shoulders, so as to widen the pelvic inlet by means of hyperflexion. An attempt can also be made to manoeuvre the baby by suprapubic pressure. This procedure involves the doctor making a fist with both hands and applying pressure above the mothers pubis, in order to dislodge the babys shoulder and push the baby down into the pelvis. Another procedure which may be attempted is a Zavanelli manoeuvre. This involves pushing the babys head back into the birth canal, to the uterus, so as to be able to perform an emergency caesarean section. Another possible procedure is a symphysiotomy. This is a surgical procedure which involves cutting through the pubic symphysis (the joint uniting the pubic bones), so as to allow the two halves of the pelvis to be separated. According to Dr McLellans evidence, in some cases the mother may be entirely unaware that shoulder dystocia has occurred. It is clear, however, that when shoulder dystocia happens and the mother knows of it, dealing with it is, at least, an unpleasant and frightening experience for her. It also gives rise to a variety of risks to her health. Shoulder dystocia also presents risks to the baby. The physical manoeuvres and manipulations required to free the baby can cause it to suffer a broken shoulder or an avulsion of the brachial plexus the nerve roots which connect the babys arm to the spinal cord. An injury of the latter type may be transient or it may, as in the present case, result in permanent disability, leaving the child with a useless arm. The risk of a brachial plexus injury, in cases of shoulder dystocia involving diabetic mothers, is about 0.2%. In a very small percentage of cases of shoulder dystocia, the umbilical cord becomes trapped against the mothers pelvis. If, in consequence, the cord becomes occluded, this can cause the baby to suffer from prolonged hypoxia, resulting in cerebral palsy or death. The risk of this happening is less than 0.1%. Mrs Montgomery was told that she was having a larger than usual baby. But she was not told about the risks of her experiencing mechanical problems during labour. In particular she was not told about the risk of shoulder dystocia. It is agreed that that risk was 9 10% in the case of diabetic mothers. Unsurprisingly, Dr McLellan accepted that this was a high risk. But, despite the risk, she said that her practice was not to spend a lot of time, or indeed any time at all, discussing potential risks of shoulder dystocia. She explained that this was because, in her estimation, the risk of a grave problem for the baby resulting from shoulder dystocia was very small. She considered, therefore, that if the condition was mentioned, most women will actually say, Id rather have a caesarean section. She went on to say that if you were to mention shoulder dystocia to every [diabetic] patient, if you were to mention to any mother who faces labour that there is a very small risk of the baby dying in labour, then everyone would ask for a caesarean section, and its not in the maternal interests for women to have caesarean sections. During her fortnightly attendances at the clinic, Mrs Montgomery underwent ultrasound examinations to assess foetal size and growth. The final ultrasound examination was on 15 September 1999, at 36 weeks gestation. Dr McLellan decided that Mrs Montgomery should not have a further ultrasound examination at 38 weeks, because she felt that Mrs Montgomery was becoming anxious as a result of the information revealed by the scans about the size of her baby. That sense of anxiety related to her ability to deliver the baby vaginally. Based on the 36 weeks ultrasound, Dr McLellan estimated that the foetal weight at birth would be 3.9 kilograms. She made that estimate on the assumption that the baby would be born at 38 weeks. This is important because Dr McLellan gave evidence that, if she had thought that the babys weight was likely to be greater than 4 kilograms, she would have offered Mrs Montgomery a caesarean section. In keeping with general practice Dr McLellan would customarily offer a caesarean section to diabetic mothers where the estimated birth weight is 4.5 kilograms. She decided to reduce that threshold to 4 kilograms in Mrs Montgomerys case because of her small stature. As Dr McLellan was aware, estimating birth weight by ultrasound has a margin of error of plus or minus 10%. But she decided to leave this out of account, stating that if you do that you would be sectioning virtually all diabetics. By the time of the 36 week examination, Dr McLellan had already made arrangements for Mrs Montgomerys labour to be induced at 38 weeks and 5 days. She accepted in evidence that she should have estimated the babys birth weight as at 38 weeks and 5 days, rather than 38 weeks, and that the estimated birth weight would then have been over 4 kilograms which was, of course, beyond the threshold that she herself had set. In the event, the baby was born on the planned date and weighed 4.25 kilograms. At the 36 week appointment, Dr McLellan noted that Mrs Montgomery was worried about [the] size of [the] baby. In her evidence, she accepted that Mrs Montgomery had expressed concern at that appointment about the size of the foetus and about the risk that the baby might be too big to be delivered vaginally. Dr McLellan also accepted that it was possible that Mrs Montgomery had expressed similar concerns previously. Certainly, she said, such concerns had been mentioned more than once. She stated that Mrs Montgomery had not asked her specifically about exact risks. Had Mrs Montgomery done so, Dr McLellan said that she would have advised her about the risk of shoulder dystocia, and also about the risk of cephalopelvic disproportion (the babys head becoming stuck). In the absence of such specific questioning, Dr McLellan had not mentioned the risk of shoulder dystocia, because, as we have already observed, it was her view that the risk of serious injury to the baby was very slight. In accordance with her practice in cases where she felt (in her words) that it was fair to allow somebody to deliver vaginally, Dr McLellan advised Mrs Montgomery that she would be able to deliver vaginally, and that if difficulties were encountered during labour then recourse would be had to a caesarean section. Mrs Montgomery accepted that advice. But if she had requested an elective caesarean section, she would have been given one. Mrs Montgomery said in evidence that if she had been told of the risk of shoulder dystocia, she would have wanted Dr McLellan to explain to her what it meant and what the possible risks of the outcomes could be. If she had considered that it was a significant risk to her (and, in light of what she had subsequently learned, she would have assessed it as such) she would have asked the doctor to perform a caesarean section. As we have explained, Dr McLellan gave evidence that diabetic patients who had been advised of the risk of shoulder dystocia would invariably choose the alternative of delivery by caesarean section. She also gave evidence that Mrs Montgomery in particular would have made such an election: since I felt the risk of her baby having a significant enough shoulder dystocia to cause even a nerve palsy or severe hypoxic damage to the baby was low I didnt raise it with her, and had I raised it with her then yes, she would have no doubt requested a caesarean section, as would any diabetic today. Mrs Montgomerys labour was induced by the administration of hormones, as Dr McLellan had planned. After several hours, labour became arrested. The strength of the contractions was then augmented by the administration of further hormones over a further period of several hours, so as to overcome whatever was delaying progress towards vaginal delivery. When the babys head nevertheless failed to descend naturally, Dr McLellan used forceps. At 5.45 pm the babys shoulder became impacted at a point when half of his head was outside the perineum. Dr McLellan had never dealt with that situation before. She described it as very stressful for Mrs Montgomery and for all the staff in theatre, including herself. Mr Peter Stewart, an expert witness led in support of Mrs Montgomerys case, described the situation as every obstetricians nightmare. An anaesthetist gave Mrs Montgomery a general anaesthetic so as to enable the Zavanelli manoeuvre (ie pushing the baby back into the uterus, in order to perform an emergency caesarean section) to be attempted. Dr McLellan decided however that she had no other option but to try to complete the delivery. She pulled the babys head with significant traction to complete the delivery of the head. In order to release the shoulders, she attempted to perform a symphysiotomy, and succeeded to some extent in cutting through the joint. No scalpels with fixed blades were available, however, and the blades she used became detached before the division of the joint had been completed. Eventually, with just a huge adrenalin surge, Dr McLellan succeeded in pulling the baby free, and delivery was achieved at 5.57 pm. During the 12 minutes between the babys head appearing and the delivery, the umbilical cord was completely or partially occluded, depriving him of oxygen. After his birth, he was diagnosed as suffering from cerebral palsy of a dyskinetic type, which had been caused by the deprivation of oxygen. He also suffered a brachial plexus injury resulting in Erbs palsy (ie paralysis of the arm). All four of his limbs are affected by the cerebral palsy. If Mrs Montgomery had had an elective caesarean section her son would have been born uninjured. Mr Stewart gave evidence that Dr McLellans failure to inform Mrs Montgomery of the risk of shoulder dystocia was contrary to proper medical practice, whether or not Mrs Montgomery had asked about the risks associated with vaginal delivery. In cross examination, however, counsel for the defender put the following question to him: And if Dr McLellan had said your baby appears to be on the 95th centile or whatever, so its borderline large, it's the top end of the normal size, its largish We know that you are diabetic. We know you are whatever height you are, we've estimated the size as best we can all the way through, there are risks but I don't think the baby is so big that vaginal delivery is beyond you and I think we should try for vaginal delivery and if anything comes up we will go to caesarean section. Now if that was the general tenor of the discussion, could you criticise that? I know it's very vague and it's very difficult because it's another hypothesis, Mr Stewart and I appreciate that but yes I would . are you able to answer that question? Mr Stewart replied that he was able to go along with that, with the caveat that you would then say to the patient, Are you happy with that decision?. Professor James Neilson, another expert witness led in support of Mrs Montgomerys case, gave evidence that, if she expressed concerns about the size of her baby, then it was proper practice to discuss the potential problems that could arise because of the babys size. That discussion would have included the risk of shoulder dystocia, and the option of an elective caesarean section. Dr Owen gave evidence that what had been said by Dr McLellan was an adequate response to Mrs Montgomerys expressions of concern about the size of her baby and her ability to deliver vaginally. Another expert witness led on behalf of the Board, Dr Gerald Mason, considered that it was reasonable not to have discussed shoulder dystocia with Mrs Montgomery, as the risks of a serious outcome for the baby were so small. Like Dr McLellan, he considered that, if doctors were to warn women at risk of shoulder dystocia, you would actually make most women simply request caesarean section. He accepted however that if a patient asked about risks then the doctor was bound to respond. The judgments of the courts below The Lord Ordinary was invited by counsel to accept that Mrs Montgomery should have been informed of the risk of shoulder dystocia if vaginal delivery was proposed and that she should have been advised about the alternative of delivery by caesarean section. He rejected that contention. Following the approach in Sidaway, he decided that whether a doctors omission to warn a patient of inherent risks of proposed treatment constituted a breach of the duty of care was normally to be determined by the application of the test in Hunter v Hanley 1955 SC 200, 206 or the equivalent Bolam test (Bolam v Friern Hospital Management Committee [1957] 1 WLR 582, 587). It therefore depended on whether the omission was accepted as proper by a responsible body of medical opinion. In light of the expert evidence given on behalf of the Board (and Dr Stewarts evidence in cross examination), which could not be rejected as incapable of standing up to rational analysis (cf Bolitho v City and Hackney Health Authority [1998] AC 232, 241 243), that test was not met. The Lord Ordinary accepted, following the speech of Lord Bridge in Sidaway, that there might be circumstances, where the proposed treatment involved a substantial risk of grave adverse consequences, in which a judge could conclude, notwithstanding any practice to the contrary, that a patients right to decide whether to consent to the treatment was so obvious that no prudent medical practitioner could fail to warn of the risk, save in an emergency or where there was some other cogent clinical reason for non disclosure. The Lord Ordinary was referred to the way in which the matter had been put by Lord Woolf MR in Pearce v United Bristol Healthcare NHS Trust [1999] PIQR P 53, para 21: was there a significant risk which would affect the judgment of a reasonable patient? That did not, in the Lord Ordinarys judgment, alter the test in Sidaway because he considered that, in order to be significant, a risk must be a substantial risk of grave adverse consequences. The circumstances of the present case did not in his view fall within the scope of that exception. Although there was a significant risk of shoulder dystocia, that did not in itself require a warning, since in the vast majority of . cases . shoulder dystocia was dealt with by simple procedures and the chance of a severe injury to the baby was tiny. The Lord Ordinary declined to follow the approach adopted in Jones v North West Strategic Health Authority [2010] EWHC 178 (QB), [2010] Med LR 90, a case on similar facts where it had been held that the risk of shoulder dystocia was in itself sufficiently serious for the expectant mother to be entitled to be informed. The Lord Ordinary also accepted, again following the speech of Lord Bridge in Sidaway, that a doctor must, when questioned specifically by a patient about risks involved in a particular treatment proposed, answer truthfully and as fully as the questioner requires. He held however that there had been no breach of that duty. He rejected Mrs Montgomerys evidence that she had asked Dr McLellan about the risks inherent in vaginal delivery and about other options. He accepted that Mrs Montgomery had raised concerns with Dr McLellan about her ability to deliver such a large baby vaginally: indeed, that was not in dispute. But the expression of such concerns did not in his opinion result in any duty to explain the risks involved. In order for a duty to explain the risks to arise, Mrs Montgomery would have had to have raised questions of specific risks involved in vaginal delivery. In her appeal to the Inner House of the Court of Session, Mrs Montgomery again argued that she ought to have been informed of the risk of shoulder dystocia, and should have been offered and advised about the alternative of delivery by caesarean section. The reclaiming motion was refused for reasons set out in an opinion delivered by Lord Eassie. Lord Eassie rejected the argument that there had been, in recent judicial authority (in particular, Pearce v United Bristol Healthcare NHS Trust), a departure from the approach adopted in Sidaway, so as to require a medical practitioner to inform the patient of any significant risk which would affect the judgment of a reasonable patient. The decision in Sidaway was understood by Lord Eassie as normally requiring only of a doctor, in advising a patient of risks, to follow the practice of a responsible body of medical practitioners. He accepted, in the light of the opinion of Lord Bridge in Sidaway, and the later case of Bolitho v City and Hackney Health Authority [1998] AC 232, that there might be exceptional cases in which the court should not regard as determinative medical practice as to what should be conveyed to the patient where the risk was so obviously substantial that the court could say that no practitioner could reasonably omit to warn the patient. This was not such a case, however. The relevant risk was not the possibility of shoulder dystocia occurring but the much smaller risk of a grave adverse outcome. The second limb of Mrs Montgomerys case in relation to the advice that she should have received was founded, as we have explained, on the observation of Lord Bridge in Sidaway that when questioned specifically by a patient about risks, it is the doctors duty to answer truthfully and as fully as the questioner requires. The Lord Ordinary had rejected Mrs Montgomerys evidence that she had repeatedly asked Dr McLellan about the risks of vaginal delivery. But it was argued on her behalf that her undisputed expression to her doctor of concerns about the size of her baby, and her ability to deliver the baby vaginally, was in substance a request for information about the risks involved in her delivering the baby vaginally, and was equally apt to trigger a duty to advise of the risks. This argument was also rejected. Lord Eassie stated that communication of general anxieties or concerns, in a manner which does not clearly call for the full and honest disclosure of factual information in reply, falls short of qualifying under Lord Bridge's observation. Mrs Montgomerys concerns had been of a general nature only. Unlike specific questioning, general concerns set no obvious parameters for a required response. Too much in the way of information . may only serve to confuse or alarm the patient, and it is therefore very much a question for the experienced practitioner to decide, in accordance with normal and proper practice, where the line should be drawn in a given case. Since the Lord Ordinary and the Extra Division both found that Dr McLellan owed no duty to Mrs Montgomery to advise her of any risk associated with vaginal delivery, the question of how Mrs Montgomery might have reacted, if she had been advised of the risks, did not arise. Both the Lord Ordinary and the Extra Division nevertheless dealt with the matter. The relevant question, as they saw it, was whether Mrs Montgomery had established that, had she been advised of the very small risks of grave adverse consequences arising from shoulder dystocia, she would have chosen to have a caesarean section and thus avoided the injury to the baby. The Lord Ordinary described the evidence in relation to this matter as being in fairly short compass, and said that it is as follows. He then quoted the passage in Mrs Montgomerys evidence which we have narrated at para 18. Mrs Montgomery was not challenged on this evidence. Notwithstanding that, the Lord Ordinary did not accept her evidence. He considered that because (1) the risk of a grave adverse outcome from shoulder dystocia was minimal, (2) the risks of an elective caesarean section would also have been explained to her, (3) Dr McLellan would have continued to advocate a vaginal delivery, and (4) Mrs Montgomery said in evidence that she was not arrogant enough to demand a caesarean section when it had not been offered to her, she would not have elected to have that procedure, even if she knew of the risks of shoulder dystocia. Before the Extra Division, counsel pointed out that the Lord Ordinary had purported to narrate the entire evidence bearing on this issue, but had omitted any reference to the evidence given by Dr McLellan that had she raised the risk of shoulder dystocia with Mrs Montgomery, then yes, she would have no doubt requested a caesarean section, as would any diabetic today. Lord Eassie considered however that this evidence was given in the context of a discussion about professional practice in the matter of advising of the risks of shoulder dystocia, rather than a focused consideration of the likely attitude and response of the pursuer as a particular individual. The fact that the Lord Ordinary did not refer to this evidence did not, in Lord Eassies view, betoken a failure to take into account material and significant evidence. As Lord Simonds had observed in Thomas v Thomas 1947 SC (HL) 45, 61; [1947] AC 484, 492, an appellate court was entitled and bound, unless there is compelling reason to the contrary, to assume that [the trial judge] has taken the whole of the evidence into his consideration. An alternative argument was advanced on behalf of Mrs Montgomery on the issue of causation. It was submitted that the response which the patient would have given to advice about risks, had she received it, should not be determinative. It was sufficient that a risk of grave adverse consequences, of which there was ex hypothesi a duty to advise, had in fact materialised. This submission was based on the House of Lords decision in Chester v Afshar. That was a case where the patient had undergone elective surgery which carried a small risk of cauda equina syndrome, about which she had not been advised. She developed the condition. The judge at first instance found that, had the claimant been advised of the risk, as she ought to have been, she would have sought advice on alternatives and the operation would not have taken place when it did. She might have agreed to surgery at a future date, in which event the operation would have involved the same small risk of cauda equina syndrome. The House of Lords held by a majority that causation was established. The Lord Ordinary declined to apply the approach adopted in Chester v Afshar, on the basis that the instant case was materially different on its facts. Lord Eassie also distinguished Chester from the present case. The birth of a baby could not be deferred: one was not in the area of truly elective surgery. Moreover, there was a specific, positive finding that Mrs Montgomery would not have elected to undergo a caesarean section if she had been warned about the risk of shoulder dystocia. Sidaway In Maynard v West Midlands Regional Health Authority [1984] 1 WLR 634, 638, the House of Lords approved the dictum of Lord President Clyde in Hunter v Hanley 1955 SC 200, 205, that the true test for establishing negligence in diagnosis or treatment on the part of a doctor is whether she has been proved to be guilty of such failure as no doctor of ordinary skill would be guilty of if acting with ordinary care. Lord Scarman, in a speech with which the other members of the House agreed, stated (ibid): A case which is based on an allegation that a fully considered decision of two consultants in the field of their special skill was negligent clearly presents certain difficulties of proof. It is not enough to show that there is a body of competent professional opinion which considers that theirs was a wrong decision, if there also exists a body of professional opinion, equally competent, which supports the decision as reasonable in the circumstances. It is not enough to show that subsequent events show that the operation need never have been performed, if at the time the decision to operate was taken it was reasonable in the sense that a responsible body of medical opinion would have accepted it as proper. In that part of his speech, Lord Scarman followed the approach adopted in Bolam v Friern Hospital Management Committee [1957] 1 WLR 582, a case concerned with advice as well as with diagnosis and treatment, where McNair J directed the jury that a doctor was not guilty of negligence if she had acted in accordance with a practice accepted as proper by a responsible body of medical practitioners skilled in that particular article The question whether the same approach should be applied (as it had been, in Bolam itself) in relation to a failure to advise a patient of risks involved in treatment was considered by the House of Lords in Sidaway v Board of Governors of the Bethlem Royal Hospital and the Maudsley Hospital which was, of course, decided in 1985, two years after the Maynard decision. In Sidaways case this question was approached by the members of the House in different ways, but with a measure of overlap. At one end of the spectrum was Lord Diplock, who considered that any alleged breach of a doctors duty of care towards his patient, whether it related to diagnosis, treatment or advice, should be determined by applying the Bolam test: The merit of the Bolam test is that the criterion of the duty of care owed by a doctor to his patient is whether he has acted in accordance with a practice accepted as proper by a body of responsible and skilled medical opinion . To decide what risks the existence of which a patient should be voluntarily warned and the terms in which such warning, if any, should be given, having regard to the effect that the warning may have, is as much an exercise of professional skill and judgment as any other part of the doctors comprehensive duty of care to the individual patient, and expert medical evidence on this matter should be treated in just the same way. The Bolam test should be applied. (pp 893, 895) Lord Diplock provided some reassurance to members of the judiciary: But when it comes to warning about risks, the kind of training and experience that a judge will have undergone at the Bar makes it natural for him to say (correctly) it is my right to decide whether any particular thing is done to my body, and I want to be fully informed of any risks there may be involved of which I am not already aware from my general knowledge as a highly educated man of experience, so that I may form my own judgment as to whether to refuse the advised treatment or not. No doubt if the patient in fact manifested this attitude by means of questioning, the doctor would tell him whatever it was the patient wanted to know . (p 895) There was on the other hand no obligation to provide patients with unsolicited information about risks: The only effect that mention of risks can have on the patient's mind, if it has any at all, can be in the direction of deterring the patient from undergoing the treatment which in the expert opinion of the doctor it is in the patient's interest to undergo. (p 895) At the other end of the spectrum was the speech of Lord Scarman, who took as his starting point the patients right to make his own decision, which may be seen as a basic human right protected by the common law (p 882). From that starting point, he inferred: If, therefore, the failure to warn a patient of the risks inherent in the operation which is recommended does constitute a failure to respect the patients right to make his own decision, I can see no reason in principle why, if the risk materialises and injury or damage is caused, the law should not recognise and enforce a right in the patient to compensation by way of damages. (pp 884 885) In other words, if (1) the patient suffers damage, (2) as a result of an undisclosed risk, (3) which would have been disclosed by a doctor exercising reasonable care to respect her patients right to decide whether to incur the risk, and (4) the patient would have avoided the injury if the risk had been disclosed, then the patient will in principle have a cause of action based on negligence. Lord Scarman pointed out that the decision whether to consent to the treatment proposed did not depend solely on medical considerations: The doctor's concern is with health and the relief of pain. These are the medical objectives. But a patient may well have in mind circumstances, objectives, and values which he may reasonably not make known to the doctor but which may lead him to a different decision from that suggested by a purely medical opinion. (pp 885 886) 47. 48. material, the doctor will not be liable if upon a reasonable assessment of his patient's condition he takes the view that a warning would be detrimental to his patient's health. 50. Lord Bridge of Harwich, with whom Lord Keith of Kinkel agreed, accepted that a conscious adult patient of sound mind is entitled to decide for herself whether or not she will submit to a particular course of treatment proposed by the doctor. He recognised the logical force of the North American doctrine of informed consent, but regarded it as impractical in application. Like Lord Diplock, he emphasised patients lack of medical knowledge, their vulnerability to making irrational judgments, and the role of clinical judgment in assessing how best to communicate to the patient the significant factors necessary to enable the patient to make an informed decision (p 899). 51. Lord Bridge was also unwilling to accept without qualification the distinction drawn by the Supreme Court of Canada, in Reibl v Hughes [1980] 2 SCR 880, between cases where the question is whether the doctor treated the patient in accordance with acceptable professional standards and cases concerned with the patients right to know what risks are involved in undergoing treatment. In Lord Bridges view, a decision what degree of disclosure of risks is best calculated to assist a particular patient to make a rational choice as to whether or not to undergo a particular treatment must primarily be a matter of clinical judgment (p 900). It followed that the question whether non disclosure of risks was a breach of the doctors duty of care was an issue to be decided primarily on the basis of expert medical evidence, applying the Bolam test (p 900; emphasis supplied). 52. Nevertheless, his Lordship qualified his adherence to the Bolam test in this context in a way which narrowed the gap between his position and that of Lord Scarman: But even in a case where, as here, no expert witness in the relevant medical field condemns the non disclosure as being in conflict with accepted and responsible medical practice, I am of opinion that the judge might in certain circumstances come to the conclusion that disclosure of a particular risk was so obviously necessary to an informed choice on the part of the patient that no reasonably prudent medical man would fail to make it. The kind of case I have in mind would be an operation involving a substantial risk of grave adverse consequences, as, for example, the ten per cent risk of a stroke from the operation which was the subject of the Canadian case of Reibl v Hughes, 114 DLR (3d) 1. In such a case, in the absence of some cogent 53. clinical reason why the patient should not be informed, a doctor, recognising and respecting his patient's right of decision, could hardly fail to appreciate the necessity for an appropriate warning. (p 900) In relation to this passage, attention has tended to focus on the words a substantial risk of grave adverse consequences; and, in the present case, it was on those words that both the Lord Ordinary and the Extra Division concentrated. It is however important to note that Lord Bridge was merely giving an example (The kind of case I have in mind would be ) to illustrate the general proposition that disclosure of a particular risk [may be] so obviously necessary to an informed choice on the part of the patient that no reasonably prudent medical man would fail to make it. In relation to that proposition, it is also important to note, having regard to the last sentence in the passage quoted, that the standard is that of a doctor who recognises and respects his patients right of decision and is exercising reasonable care (ie is reasonably prudent). Reading the passage as a whole, therefore, the question for the judge is whether disclosure of a risk was so obviously necessary to an informed choice on the part of the patient that no doctor who recognised and respected his patients right of decision and was exercising reasonable care would fail to make it. So understood, Lord Bridge might be thought to arrive at a position not far distant from that of Lord Scarman. 54. Lord Bridge also said (at p 898): I should perhaps add at this point, although the issue does not strictly arise in this appeal, that, when questioned specifically by a patient of apparently sound mind about risks involved in a particular treatment proposed, the doctor's duty must, in my opinion, be to answer both truthfully and as fully as the questioner requires. 55. Lord Templeman implicitly rejected the Bolam test, and approached the issue on the basis of an orthodox common law analysis. He noted, like Lord Diplock and Lord Bridge, the imbalance between the knowledge and objectivity of the doctor and the ignorance and subjectivity of the patient, but accepted that it was the right of the patient to decide whether or not to submit to treatment recommended by the doctor, and even to make an unbalanced and irrational judgment (p 904). In contract, it followed from the patients right to decide whether to accept proposed treatment that the doctor impliedly contracts to provide information which is adequate to enable the patient to reach a balanced judgment, subject always to the doctors own obligation to say and do nothing which the doctor is satisfied will be harmful to the patient (p 904). The obligation of the doctor to have regard to the best interests of the patient but at the same time to make available to the patient sufficient information to enable the patient to reach a balanced judgment (pp 904 905) also arose as a matter of a duty of care. Lord Templemans formulation of the doctors duty was, like Lord Scarmans, not confined to the disclosure of risks: the discussion of the possible methods of treatment (p 904), and therefore of reasonable alternatives to the treatment recommended, is also necessary if the patient is to reach a balanced judgment. 56. Lord Templeman thus arrived, by a different route, at an outcome not very different from that of Lord Scarman. Although Lord Scarman drew on the language of human rights, his reasoning was in substance the same as Lord Templemans: the doctors duty of care followed from the patients right to decide whether to undergo the treatment recommended. It would therefore be wrong to regard Sidaway as an unqualified endorsement of the application of the Bolam test to the giving of advice about treatment. Only Lord Diplock adopted that position. On his approach, the only situation, other than one covered by the Bolam test, in which a doctor would be under a duty to provide information to a patient would be in response to questioning by the patient. 57. 58. The significance attached in Sidaway to a patients failure to question the doctor is however profoundly unsatisfactory. In the first place, as Sedley LJ commented in Wyatt v Curtis [2003] EWCA Civ 1779, there is something unreal about placing the onus of asking upon a patient who may not know that there is anything to ask about. It is indeed a reversal of logic: the more a patient knows about the risks she faces, the easier it is for her to ask specific questions about those risks, so as to impose on her doctor a duty to provide information; but it is those who lack such knowledge, and who are in consequence unable to pose such questions and instead express their anxiety in more general terms, who are in the greatest need of information. Ironically, the ignorance which such patients seek to have dispelled disqualifies them from obtaining the information they desire. Secondly, this approach leads to the drawing of excessively fine distinctions between questioning, on the one hand, and expressions of concern falling short of questioning, on the other hand: a problem illustrated by the present case. Thirdly, an approach which requires the patient to question the doctor disregards the social and psychological realities of the relationship between a patient and her doctor, whether in the time pressured setting of a GPs surgery, or in the setting of a hospital. Few patients do not feel intimidated or inhibited to some degree. 59. There is also a logical difficulty inherent in this exception to the Bolam test, as the High Court of Australia pointed out in Rogers v Whitaker (1992) 175 CLR 479, 486 487. Why should the patients asking a question make any difference in negligence, if medical opinion determines whether the duty of care requires that the risk should be disclosed? The patients desire for the information, even if made known to the doctor, does not alter medical opinion. The exception, in other words, is logically destructive of the supposed rule. Medical opinion might of course accept that the information should be disclosed in response to questioning, but there would then be no exception to the Bolam test. 60. Lord Bridges other qualification of the Bolam test achieves an uneasy compromise, describing the issue as one to be decided primarily by applying the Bolam test, but allowing the judge to decide that disclosure of a particular risk was so obviously necessary to an informed choice on the part of the patient that no reasonably prudent medical man would fail to make it, the reasonably prudent medical man being a doctor, recognising and respecting his patients right of decision. 61. Superficially, this resembles the qualification of the Bolam test subsequently stated by Lord Browne Wilkinson in Bolitho v City and Hackney Health Authority [1998] AC 232, 243: that notwithstanding the views of medical experts, the court may conclude that their opinion is incapable of withstanding logical analysis. Lord Browne Wilkinson however expressly confined his observations to cases of diagnosis and treatment, as distinct from disclosure of risk. In cases of the former kind, the court is concerned with matters of medical skill and judgment, and does not usually find a doctor guilty of negligence if she has followed a practice accepted as proper by a responsible body of doctors skilled in the relevant field. That is however subject to Lord Browne Wilkinsons qualification where the court is satisfied that the professional practice in question does not meet a reasonable standard of care. In cases concerned with advice, on the other hand, the application of the Bolam test is predicated on the view that the advice to be given to the patient is an aspect of treatment, falling within the scope of clinical judgment. The informed choice qualification rests on a fundamentally different premise: it is predicated on the view that the patient is entitled to be told of risks where that is necessary for her to make an informed decision whether to incur them. 62. The inherent instability of Lord Bridges qualification of the Bolam test has been reflected in a tendency among some judges to construe it restrictively, as in the present case, by focusing on the particular words used by Lord Bridge when describing the kind of case he had in mind (a substantial risk of grave adverse consequences), and even on the particular example he gave (which involved a 10% risk of a stroke), rather than on the principle which the example was intended to illustrate. The subsequent case law 63. In the present case, as in earlier cases, the Court of Session applied the Bolam test, subject to the qualifications derived from Lord Bridges speech. In England and Wales, on the other hand, although Sidaways case remains binding, lower courts have tacitly ceased to apply the Bolam test in relation to the advice given by doctors to their patients, and have effectively adopted the approach of Lord Scarman. 64. The case of Pearce v United Bristol Healthcare NHS Trust [1999] PIQR P 53 is particularly significant in this context. The case concerned an expectant mother whose baby had gone over term. Her consultant obstetrician took the view that the appropriate course was for her to have a normal delivery when nature took its course, rather than a caesarean section at an earlier date, and advised her accordingly. In the event, the baby died in utero. The question was whether the mother ought to have been warned of that risk. In a judgment with which Roch and Mummery LJJ agreed, Lord Woolf MR said (para 21): In a case where it is being alleged that a plaintiff has been deprived of the opportunity to make a proper decision as to what course he or she should take in relation to treatment, it seems to me to be the law, as indicated in the cases to which I have just referred, that if there is a significant risk which would affect the judgment of a reasonable patient, then in the normal course it is the responsibility of a doctor to inform the patient of that significant risk, if the information is needed so that the patient can determine for him or herself as to what course he or she should adopt. 65. In support of that approach, the Master of the Rolls referred in particular to the passage from Lord Bridges speech in Sidaway which we have quoted at para 52. In Lord Bridges formulation, as we have explained, the question for the judge was whether disclosure of a risk was so obviously necessary to an informed choice on the part of the patient that no doctor who recognised and respected his patients right of decision and was exercising reasonable care would fail to make it. In our view, the Master of the Rolls was correct to consider that a significant risk which would affect the judgment of a reasonable patient would meet that test. Lord Woolfs approach is also consistent with that adopted in Sidaway by Lord Templeman (information which is adequate to enable the patient to reach a balanced judgment), as well as with the test favoured by Lord Scarman (that a reasonable person in the patient's position would be likely to attach significance to the risk). It does not, on the other hand, have anything to do with the Bolam test. 66. The Extra Division correctly pointed out in the present case that Lord Woolf spoke of a significant risk, whereas Lord Bridge, when describing the kind of case he had in mind, had referred to a substantial risk. In so far as significant and substantial have different shades of meaning, significant is the more apt adjective. Lord Bridge accepted that a risk had to be disclosed where it was obviously necessary to an informed choice; and the relevance of a risk to the patients decision does not depend solely upon its magnitude, or upon a medical assessment of its significance. 67. The point is illustrated by the case of Wyatt v Curtis [2003] EWCA Civ 1779, which concerned the risk of around 1% that chickenpox during pregnancy might result in significant brain damage. The Court of Appeal applied the law as stated in Pearce, observing that it was no less binding on the court than Sidaway. Sedley LJ stated: Lord Woolfs formulation refines Lord Bridge's test by recognising that what is substantial and what is grave are questions on which the doctor's and the patient's perception may differ, and in relation to which the doctor must therefore have regard to what may be the patient's perception. To the doctor, a chance in a hundred that the patient's chickenpox may produce an abnormality in the foetus may well be an insubstantial chance, and an abnormality may in any case not be grave. To the patient, a new risk which (as I read the judge's appraisal of the expert evidence) doubles, or at least enhances, the background risk of a potentially catastrophic abnormality may well be both substantial and grave, or at least sufficiently real for her to want to make an informed decision about it. (para 16) 68. It is also relevant to note the judgments in Chester v Afshar. The case was concerned with causation, but it contains relevant observations in relation to the duty of a doctor to advise a patient of risks involved in proposed treatment. Lord Bingham of Cornhill said that the doctor in question had been under a duty to warn the patient of a small (1% 2%) risk that the proposed operation might lead to a seriously adverse result. The rationale of the duty, he said, was to enable adult patients of sound mind to make for themselves decisions intimately affecting their own lives and bodies (para 5). Lord 69. Steyn cited with approval para 21 of Lord Woolf MRs judgment in Pearce. Lord Walker of Gestingthorpe referred to a duty to advise the patient, a warning of risks being an aspect of the advice (para 92). He also observed at para 92 that during the 20 years which had elapsed since Sidaways case, the importance of personal autonomy had been more and more widely recognised. He added at para 98 that, in making a decision which might have a profound effect on her health and well being, a patient was entitled to information and advice about possible alternative or variant treatments. In more recent case law the English courts have generally treated Lord Woolf MRs statement in Pearce as the standard formulation of the duty to disclose information to patients, although some unease has on occasion been expressed about the difficulty of reconciling that approach with the speeches of Lord Diplock and Lord Bridge in Sidaways case (see, for example, Birch v University College London Hospital NHS Foundation Trust [2008] EWHC 2237 (QB)). Significantly, the guidance issued by the Department of Health and the General Medical Council has treated Chester v Afshar as the leading authority. Comparative law 70. The court has been referred to case law from a number of other major common law jurisdictions. It is unnecessary to discuss it in detail. It is sufficient to note that the Supreme Court of Canada has adhered in its more recent case law to the approach adopted in Reibl v Hughes, and that its approach to the duty of care has been followed elsewhere, for example by the High Court of Australia in Rogers v Whitaker (1992) 175 CLR 479 and subsequent cases. 71. The judgment of Mason CJ, Brennan, Dawson, Toohey and McHugh JJ in Rogers v Whitaker identifies the basic flaw involved in approaching all aspects of a doctors duty of care in the same way: Whether a medical practitioner carries out a particular form of treatment in accordance with the appropriate standard of care is a question in the resolution of which responsible professional opinion will have an influential, often a decisive, role to play; whether the patient has been given all the relevant information to choose between undergoing and not undergoing the treatment is a question of a different order. Generally speaking, it is not a question the answer to which depends upon medical standards or practices. Except in those cases where there is a particular danger that the provision of all relevant information will harm an unusually nervous, disturbed or volatile patient, no special medical skill is involved in disclosing the information, including the risks attending the proposed treatment. (pp 489 490: original emphasis) 72. The High Court of Australia in Rogers also reformulated the test of the materiality of a risk so as to encompass the situation in which, as the doctor knows or ought to know, the actual patient would be likely to attach greater significance to a risk than the hypothetical reasonable patient might do: a risk is material if, in the circumstances of the particular case, a reasonable person in the patient's position, if warned of the risk, would be likely to attach significance to it or if the medical practitioner is or should reasonably be aware that the particular patient, if warned of the risk, would be likely to attach significance to it. (p 490) 73. That is undoubtedly right: the doctors duty of care takes its precise content from the needs, concerns and circumstances of the individual patient, to the extent that they are or ought to be known to the doctor. In Rogers v Whitaker itself, for example, the risk was of blindness in one eye; but the plaintiff was already blind in the other eye, giving the risk a greater significance than it would otherwise have had. In addition, she had asked anxiously about risks. Expressions of concern by the patient, as well as specific questions, are plainly relevant. As Gummow J observed in Rosenberg v Percival (2001) 205 CLR 434, 459, courts should not be too quick to discard the second limb (ie the possibility that the medical practitioner was or ought reasonably to have been aware that the particular patient, if warned of the risk, would be likely to attach significance to it) merely because it emerges that the patient did not ask certain kinds of questions. Conclusions on the duty of disclosure 74. The Hippocratic Corpus advises physicians to reveal nothing to the patient of her present or future condition, for many patients through this cause have taken a turn for the worse (Decorum, XVI). Around two millennia later, in Sidaways case Lord Templeman said that the provision of too much information may prejudice the attainment of the objective of restoring the patients health (p 904); and similar observations were made by Lord Diplock and Lord Bridge. On that view, if the optimisation of the patients health is treated as an overriding objective, then it is unsurprising that the disclosure of information to a patient should be regarded as an aspect of medical care, and that the extent to which disclosure is appropriate should therefore be treated as a matter of clinical judgment, the appropriate standards being set by the medical profession. 75. Since Sidaway, however, it has become increasingly clear that the paradigm of the doctor patient relationship implicit in the speeches in that case has ceased to reflect the reality and complexity of the way in which healthcare services are provided, or the way in which the providers and recipients of such services view their relationship. One development which is particularly significant in the present context is that patients are now widely regarded as persons holding rights, rather than as the passive recipients of the care of the medical profession. They are also widely treated as consumers exercising choices: a viewpoint which has underpinned some of the developments in the provision of healthcare services. In addition, a wider range of healthcare professionals now provide treatment and advice of one kind or another to members of the public, either as individuals, or as members of a team drawn from different professional backgrounds (with the consequence that, although this judgment is concerned particularly with doctors, it is also relevant, mutatis mutandis, to other healthcare providers). The treatment which they can offer is now understood to depend not only upon their clinical judgment, but upon bureaucratic decisions as to such matters as resource allocation, cost containment and hospital administration: decisions which are taken by non medical professionals. Such decisions are generally understood within a framework of institutional rather than personal responsibilities, and are in principle susceptible to challenge under public law rather than, or in addition to, the law of delict or tort. 76. Other changes in society, and in the provision of healthcare services, should also be borne in mind. One which is particularly relevant in the present context is that it has become far easier, and far more common, for members of the public to obtain information about symptoms, investigations, treatment options, risks and side effects via such media as the internet (where, although the information available is of variable quality, reliable sources of information can readily be found), patient support groups, and leaflets issued by healthcare institutions. The labelling of pharmaceutical products and the provision of information sheets is a further example, which is of particular significance because it is required by laws premised on the ability of the citizen to comprehend the information provided. It would therefore be a mistake to view patients as uninformed, incapable of understanding medical matters, or wholly dependent upon a flow of information from doctors. The idea that patients were medically uninformed and incapable of understanding medical matters was always a questionable generalisation, as Lord Diplock implicitly acknowledged by making an exception for highly educated men of experience. To make it the default assumption on which the law is to be based is now manifestly untenable. 77. These developments in society are reflected in professional practice. The court has been referred in particular to the guidance given to doctors by the General Medical Council, who participated as interveners in the present appeal. One of the documents currently in force (Good Medical Practice (2013)) states, under the heading The duties of a doctor registered with the General Medical Council: Work in partnership with patients. Listen to, and respond to, their concerns and preferences. Give patients the information they want or need in a way they can understand. Respect patients right to reach decisions with you about their treatment and care. 78. Another current document (Consent: patients and doctors making decisions together (2008)) describes a basic model of partnership between doctor and patient: The doctor explains the options to the patient, setting out the potential benefits, risks, burdens and side effects of each option, including the option to have no treatment. The doctor may recommend a particular option which they believe to be best for the patient, but they must not put pressure on the patient to accept their advice. The patient weighs up the potential benefits, risks and burdens of the various options as well as any non clinical issues that are relevant to them. The patient decides whether to accept any of the options and, if so, which one. (para 5) In relation to risks, in particular, the document advises that the doctor must tell patients if treatment might result in a serious adverse outcome, even if the risk is very small, and should also tell patients about less serious complications if they occur frequently (para 32). The submissions on behalf of the General Medical Council acknowledged, in relation to these documents, that an approach based upon the informed involvement of patients in their treatment, rather than their being passive and potentially reluctant recipients, can have therapeutic benefits, and is regarded as an integral aspect of professionalism in treatment. 80. 79. Earlier editions of these documents (Good Medical Practice (1998), and Seeking patients consent: The ethical considerations (1998)), in force at the time of the events with which this case is concerned, were broadly to similar effect. No reference was made to them however in the proceedings before the Court of Session. In addition to these developments in society and in medical practice, there have also been developments in the law. Under the stimulus of the Human Rights Act 1998, the courts have become increasingly conscious of the extent to which the common law reflects fundamental values. As Lord Scarman pointed out in Sidaways case, these include the value of self determination (see, for example, S (An Infant) v S [1972] AC 24, 43 per Lord Reid; McColl v Strathclyde Regional Council 1983 SC 225, 241; Airedale NHS Trust v Bland [1993] AC 789, 864 per Lord Goff of Chieveley). As well as underlying aspects of the common law, that value also underlies the right to respect for private life protected by article 8 of the European Convention on Human Rights. The resulting duty to involve the patient in decisions relating to her treatment has been recognised in judgments of the European Court of Human Rights, such as Glass v United Kingdom (2004) EHRR 341 and Tysiac v Poland (2007) 45 EHRR 947, as well as in a number of decisions of courts in the United Kingdom. The same value is also reflected more specifically in other international instruments: see, in particular, article 5 of the Convention for the Protection of Human Rights and Dignity of the Human Being with regard to the Application of Biology and Medicine: Convention on Human Rights and Biomedicine, concluded by the member states of the Council of Europe, other states and the European Community at Oviedo on 4 April 1997. 81. The social and legal developments which we have mentioned point away from a model of the relationship between the doctor and the patient based upon medical paternalism. They also point away from a model based upon a view of the patient as being entirely dependent on information provided by the doctor. What they point towards is an approach to the law which, instead of treating patients as placing themselves in the hands of their doctors (and then being prone to sue their doctors in the event of a disappointing outcome), treats them so far as possible as adults who are capable of understanding that medical treatment is uncertain of success and may involve risks, accepting responsibility for the taking of risks affecting their own lives, and living with the consequences of their choices. In the law of negligence, this approach entails a duty on the part of doctors to take reasonable care to ensure that a patient is aware of material risks of injury that are inherent in treatment. This can be understood, within the traditional framework of negligence, as a duty of care to avoid exposing a 82. person to a risk of injury which she would otherwise have avoided, but it is also the counterpart of the patients entitlement to decide whether or not to incur that risk. The existence of that entitlement, and the fact that its exercise does not depend exclusively on medical considerations, are important. They point to a fundamental distinction between, on the one hand, the doctors role when considering possible investigatory or treatment options and, on the other, her role in discussing with the patient any recommended treatment and possible alternatives, and the risks of injury which may be involved. 83. The former role is an exercise of professional skill and judgment: what risks of injury are involved in an operation, for example, is a matter falling within the expertise of members of the medical profession. But it is a non sequitur to conclude that the question whether a risk of injury, or the availability of an alternative form of treatment, ought to be discussed with the patient is also a matter of purely professional judgment. The doctors advisory role cannot be regarded as solely an exercise of medical skill without leaving out of account the patients entitlement to decide on the risks to her health which she is willing to run (a decision which may be influenced by non medical considerations). Responsibility for determining the nature and extent of a persons rights rests with the courts, not with the medical professions. 84. Furthermore, because the extent to which a doctor may be inclined to discuss risks with a patient is not determined by medical learning or experience, the application of the Bolam test to this question is liable to result in the sanctioning of differences in practice which are attributable not to divergent schools of thought in medical science, but merely to divergent attitudes among doctors as to the degree of respect owed to their patients. 85. A person can of course decide that she does not wish to be informed of risks of injury (just as a person may choose to ignore the information leaflet enclosed with her medicine); and a doctor is not obliged to discuss the risks inherent in treatment with a person who makes it clear that she would prefer not to discuss the matter. Deciding whether a person is so disinclined may involve the doctor making a judgment; but it is not a judgment which is dependent on medical expertise. It is also true that the doctor must necessarily make a judgment as to how best to explain the risks to the patient, and that providing an effective explanation may require skill. But the skill and judgment required are not of the kind with which the Bolam test is concerned; and the need for that kind of skill and judgment does not entail that the question whether to explain the risks at all is normally a matter for the judgment of the doctor. That is not to say that the doctor is required to make disclosures to her patient if, in the reasonable exercise of medical judgment, she considers that it would be detrimental to the health of her patient to do 86. so; but the therapeutic exception, as it has been called, cannot provide the basis of the general rule. It follows that the analysis of the law by the majority in Sidaway is unsatisfactory, in so far as it treated the doctors duty to advise her patient of the risks of proposed treatment as falling within the scope of the Bolam test, subject to two qualifications of that general principle, neither of which is fundamentally consistent with that test. It is unsurprising that courts have found difficulty in the subsequent application of Sidaway, and that the courts in England and Wales have in reality departed from it; a position which was effectively endorsed, particularly by Lord Steyn, in Chester v Afshar. There is no reason to perpetuate the application of the Bolam test in this context any longer. 87. The correct position, in relation to the risks of injury involved in treatment, can now be seen to be substantially that adopted in Sidaway by Lord Scarman, and by Lord Woolf MR in Pearce, subject to the refinement made by the High Court of Australia in Rogers v Whitaker, which we have discussed at paras 77 73. An adult person of sound mind is entitled to decide which, if any, of the available forms of treatment to undergo, and her consent must be obtained before treatment interfering with her bodily integrity is undertaken. The doctor is therefore under a duty to take reasonable care to ensure that the patient is aware of any material risks involved in any recommended treatment, and of any reasonable alternative or variant treatments. The test of materiality is whether, in the circumstances of the particular case, a reasonable person in the patients position would be likely to attach significance to the risk, or the doctor is or should reasonably be aware that the particular patient would be likely to attach significance to it. 88. The doctor is however entitled to withhold from the patient information as to a risk if he reasonably considers that its disclosure would be seriously detrimental to the patients health. The doctor is also excused from conferring with the patient in circumstances of necessity, as for example where the patient requires treatment urgently but is unconscious or otherwise unable to make a decision. It is unnecessary for the purposes of this case to consider in detail the scope of those exceptions. 89. Three further points should be made. First, it follows from this approach that the assessment of whether a risk is material cannot be reduced to percentages. The significance of a given risk is likely to reflect a variety of factors besides its magnitude: for example, the nature of the risk, the effect which its occurrence would have upon the life of the patient, the importance to the patient of the benefits sought to be achieved by the treatment, the alternatives available, and the risks involved in those alternatives. The assessment is therefore fact sensitive, and sensitive also to the characteristics of the patient. 90. Secondly, the doctors advisory role involves dialogue, the aim of which is to ensure that the patient understands the seriousness of her condition, and the anticipated benefits and risks of the proposed treatment and any reasonable alternatives, so that she is then in a position to make an informed decision. This role will only be performed effectively if the information provided is comprehensible. The doctors duty is not therefore fulfilled by bombarding the patient with technical information which she cannot reasonably be expected to grasp, let alone by routinely demanding her signature on a consent form. 91. Thirdly, it is important that the therapeutic exception should not be abused. It is a limited exception to the general principle that the patient should make the decision whether to undergo a proposed course of treatment: it is not intended to subvert that principle by enabling the doctor to prevent the patient from making an informed choice where she is liable to make a choice which the doctor considers to be contrary to her best interests. 92. There are, of course, arguments which can be advanced against this approach: for example, that some patients would rather trust their doctors than be informed of all the ways in which their treatment might go wrong; that it is impossible to discuss the risks associated with a medical procedure within the time typically available for a healthcare consultation; that the requirements imposed are liable to result in defensive practices and an increase in litigation; and that the outcome of such litigation may be less predictable. 93. The first of these points has been addressed in para 85 above. In relation to the second, the guidance issued by the General Medical Council has long required a broadly similar approach. It is nevertheless necessary to impose legal obligations, so that even those doctors who have less skill or inclination for communication, or who are more hurried, are obliged to pause and engage in the discussion which the law requires. This may not be welcomed by some healthcare providers; but the reasoning of the House of Lords in Donoghue v Stevenson [1932] AC 562 was no doubt received in a similar way by the manufacturers of bottled drinks. The approach which we have described has long been operated in other jurisdictions, where healthcare practice presumably adjusted to its requirements. In relation to the third point, in so far as the law contributes to the incidence of litigation, an approach which results in patients being aware that the outcome of treatment is uncertain and potentially dangerous, and in their taking responsibility for the ultimate choice to undergo that treatment, may be less likely to encourage recriminations and litigation, in the event of an adverse outcome, than an approach which requires patients to rely on their doctors to determine whether a risk inherent in a particular form of treatment should be incurred. In relation to the fourth point, we would accept that a departure from the Bolam test will reduce the predictability of the outcome of litigation, given the difficulty of overcoming that test in contested proceedings. It appears to us however that a degree of unpredictability can be tolerated as the consequence of protecting patients from exposure to risks of injury which they would otherwise have chosen to avoid. The more fundamental response to such points, however, is that respect for the dignity of patients requires no less. The disclosure of risks in the present case 94. Approaching the present case on this basis, there can be no doubt that it was incumbent on Dr McLellan to advise Mrs Montgomery of the risk of shoulder dystocia if she were to have her baby by vaginal delivery, and to discuss with her the alternative of delivery by caesarean section. The Court of Session focused upon the consequent risk that the baby might suffer a grave injury, a risk which was relatively small. The risk of shoulder dystocia, on the other hand, was substantial: on the evidence, around 9 10%. Applying the approach which we have described, the exercise of reasonable care undoubtedly required that it should be disclosed. Quite apart from the risk of injury to the baby (a risk of about 1 in 500 of a brachial plexus injury, and a much smaller risk of a more severe injury, such as cerebral palsy, or death), it is apparent from the evidence (summarised at paras 8 12 and 21 above) that shoulder dystocia is itself a major obstetric emergency, requiring procedures which may be traumatic for the mother, and involving significant risks to her health. No woman would, for example, be likely to face the possibility of a fourth degree tear, a Zavanelli manoeuvre or a symphysiotomy with equanimity. The contrast of the risk involved in an elective caesarean section, for the mother extremely small and for the baby virtually non existent, is stark and illustrates clearly the need for Mrs Montgomery to be advised of the possibility, because of her particular circumstances, of shoulder dystocia. This conclusion is reinforced by Dr McLellans own evidence (summarised at paras 13 and 19 above), that she was aware that the risk of shoulder dystocia was likely to affect the decision of a patient in Mrs Montgomerys position, and that Mrs Montgomery herself was anxious about her ability to deliver the baby vaginally. 95. There is no question in this case of Dr McLellans being entitled to withhold information about the risk because its disclosure would be harmful to her patients health. Although her evidence indicates that it was her policy to withhold information about the risk of shoulder dystocia from her patients because they would otherwise request caesarean sections, the therapeutic exception is not intended to enable doctors to prevent their patients from taking an informed decision. Rather, it is the doctors responsibility to explain to her patient why she considers that one of the available treatment options is medically preferable to the others, having taken care to ensure that her patient is aware of the considerations for and against each of them. Causation 96. As we have explained, the Lord Ordinary found that, even if Mrs Montgomery had been informed of the risk of shoulder dystocia and had been told of the alternative of a caesarean section, she would not have elected to undergo that procedure. That finding was upheld by the Extra Division. 97. This court has reiterated in a number of recent cases, including McGraddie v McGraddie [2013] UKSC 58; 2014 SC (UKSC) 12; [2013] 1 WLR 2477 and Henderson v Foxworth Investments Ltd [2014] UKSC 41; 2014 SLT 775; [2014] 1 WLR 2600, that appellate courts should exercise restraint in reversing findings of fact made at first instance. As was said in Hendersons case at para 67, in the absence of some other identifiable error, such as (without attempting an exhaustive account) a material error of law, or the making of a critical finding of fact which has no basis in the evidence, or a demonstrable misunderstanding of relevant evidence, or a demonstrable failure to consider relevant evidence, an appellate court will interfere with the findings of fact made by a trial judge only if it is satisfied that his decision cannot reasonably be explained or justified. It is in addition only in comparatively rare cases that this court interferes with concurrent findings of fact by lower courts. As Lord Jauncey of Tullichettle explained in Higgins v J & C M Smith (Whiteinch) Ltd 1990 SC (HL) 63, 82: Where there are concurrent findings of fact in the courts below generally this House will interfere with those findings only where it can be shown that both courts were clearly wrong. 98. As has been observed in the Australian case law, the issue of causation, where an undisclosed risk has materialised, is closely tied to the identification of the particular risk which ought to have been disclosed. In the present case, the Lord Ordinary focused on the risk of a severe injury to the baby, and said, in relation to causation: I have already said that the real risk of grave consequences arising should shoulder dystocia occur were very small indeed. Given the very small risks the first question must be for the court: has the pursuer established on the basis of the but for test, a link between the failure to advise her of said risks and damage to the child. Or to put the matter another way, has the pursuer established that had she been advised of the said risks she would have chosen a caesarean section and thus avoided the damage to the child? (emphasis supplied) 99. As we have explained, the Lord Ordinary described the evidence in relation to that matter as being in short compass, and said that it is as follows. He then quoted the passage in Mrs Montgomerys evidence which we have narrated at para 18. Having rejected that evidence as unreliable, he accordingly found that causation had not been established. 100. Like the Lord Ordinary, the Extra Division approached the question of causation on the basis that the relevant issue was what [Mrs Montgomery] would have done if advised of the risk of grave consequences arising should shoulder dystocia occur, rather than what she would have done if advised of the risk of shoulder dystocia, and of the potential consequences of that complication. As we have explained, counsel pointed out that the Lord Ordinary had purported to narrate the entire evidence bearing on the issue, but had omitted any reference to the evidence given by Dr McLellan that had she raised the risk of shoulder dystocia with Mrs Montgomery, then yes, she would have no doubt requested a caesarean section, as would any diabetic today (para 19 above). The Extra Division observed that that evidence had been given in the context of a discussion about professional practice in relation to advising of the risks of shoulder dystocia, rather than a focused consideration of the likely attitude and response of Mrs Montgomery. 101. That particular piece of evidence did not however stand alone. It was consistent with the evidence given by Dr McLellan to the effect that diabetic women in general would request an elective caesarean section if made aware of the risk of shoulder dystocia (para 13 above). Her position was that it was precisely because most women would elect to have a caesarean section if informed of the risk of shoulder dystocia (contrary, in her view, to their best interests), that she withheld that information from them. That was also consistent with the evidence of the Boards expert witness, Dr Gerald Mason, that if doctors were to warn women at risk of shoulder dystocia, you would actually make most women simply request caesarean section (para 25 above). 102. The Lord Ordinarys failure to refer to any of this evidence does not in our view fall within the scope of Lord Simondss dictum in Thomas v Thomas 1947 SC (HL) 45, 61, that an appellate court is entitled and bound, unless there is compelling reason to the contrary, to assume that [the trial judge] has taken the whole of the evidence into his consideration. That is an important observation, but it is subject to the qualification, unless there is compelling reason to the contrary. In the present case, the Lord Ordinary not only failed to refer to any of this evidence, but also made the positive statement that The evidence in relation to the [issue of causation] is in fairly short compass. It is as follows before quoting only the passage from the evidence of Mrs Montgomery. The apparent implication of that statement was that there was no other relevant evidence. Those circumstances constitute a compelling reason for concluding that there was a failure by the Lord Ordinary to consider relevant evidence; a failure which also affected the decision of the Extra Division. 103. More fundamentally, however, the consequence of our holding that there was a duty to advise Mrs Montgomery of the risk of shoulder dystocia, and to discuss with her the potential implications and the options open to her, is that the issue of causation has to be considered on a different footing from that on which it was approached by the Lord Ordinary and the Extra Division. They had in mind the supposed reaction of Mrs Montgomery if she had been advised of the minimal risk of a grave consequence. The question should properly have been addressed as to Mrs Montgomerys likely reaction if she had been told of the risk of shoulder dystocia. On that question, we have Dr McLellans unequivocal view that Mrs Montgomery would have elected to have a caesarean section. The question of causation must also be considered on the hypothesis of a discussion which is conducted without the patients being pressurised to accept her doctors recommendation. In these circumstances, there is really no basis on which to conclude that Mrs Montgomery, if she had been advised of the risk of shoulder dystocia, would have chosen to proceed with a vaginal delivery. 104. Approaching the issue of causation in that way, we have therefore concluded that the evidence points clearly in one direction. We have mentioned the passages in the evidence of Mrs Montgomery, Dr McLellan and Dr Mason in which the likely response of Mrs Montgomery, or of women in her position in general, if advised of the risk of shoulder dystocia, was discussed. We have also mentioned Dr McLellans evidence that Mrs Montgomery had been anxious about her ability to deliver the baby vaginally, and had expressed her concerns to Dr McLellan more than once. Although the Lord Ordinary expressed serious reservations about the extent to which Mrs Montgomerys evidence had been affected by hindsight, he had no such misgivings about Dr McLellan: she was found to be an impressive witness in relation to the informed consent aspect of the case, and her evidence was credible and reliable. In the light of that assessment, and having regard to her evidence in particular, the only conclusion that we can reasonably reach is that, had she advised Mrs Montgomery of the risk of shoulder dystocia and discussed with her dispassionately the potential consequences, and the alternative of an elective caesarean section, Mrs Montgomery would probably have elected to be delivered of her baby by caesarean section. It is not in dispute that the baby would then have been born unharmed. 105. It is unnecessary in these circumstances to consider whether, if Mrs Montgomery could not establish but for causation, she might nevertheless establish causation on some other basis in the light of Chester v Afshar. Conclusion 106. For these reasons, we would allow the appeal. LADY HALE: 107. In the third (2010) edition of their leading work on Principles of Medical Law, Andrew Grubb, Judith Laing and Jean McHale confidently announced that a detailed analysis of the different speeches of the House of Lords in Sidaway v Board of Governors of the Bethlem Royal Hospital and the Maudsley Hospital [1985] AC 871 was no longer necessary. A combination of the 2008 Guidance provided by the General Medical Council, the decision of the Court of Appeal in Pearce v United Bristol Healthcare NHS Trust [1999] PIQR P 53 and the decision of the House of Lords in Chester v Afshar [2005] 1 AC 134 meant that it could now be stated with a reasonable degree of confidence that the need for informed consent was firmly part of English law (para 8.70). This case has provided us with the opportunity, not only to confirm that confident statement, but also to make it clear that the same principles apply in Scotland. 108. It is now well recognised that the interest which the law of negligence protects is a persons interest in their own physical and psychiatric integrity, an important feature of which is their autonomy, their freedom to decide what shall and shall not be done with their body (the unwanted pregnancy cases are an example: see Rees v Darlington Memorial Hospital NHS Trust [2003] UKHL 52, [2004] 1 AC 309). Thus, as Jonathan Herring puts it in Medical Law and Ethics (2012), 4th ed, p 170), the issue is not whether enough information was given to ensure consent to the procedure, but whether there was enough information given so that the doctor was not acting negligently and giving due protection to the patients right of autonomy. 109. An important consequence of this is that it is not possible to consider a particular medical procedure in isolation from its alternatives. Most decisions about medical care are not simple yes/no answers. There are choices to be made, arguments for and against each of the options to be considered, and sufficient information must be given so that this can be done: see the approach of the General Medical Council in Consent: patients and doctors making decisions together (2008), para 5, quoted by Lord Kerr and Lord Reed at para 77 and approved by them at paras 83 to 85. 110. Pregnancy is a particularly powerful illustration. Once a woman is pregnant, the foetus has somehow to be delivered. Leaving it inside her is not an option. The principal choice is between vaginal delivery and caesarean section. One is, of course, the normal and natural way of giving birth; the other used to be a way of saving the babys life at the expense of the mothers. Now, the risks to both mother and child from a caesarean section are so low that the National Institute for Health and Clinical Excellence (NICE clinical guideline 132, [new 2011] [para 1.2.9.5]) clearly states that For women requesting a CS, if after discussion and offer of support (including perinatal mental health support for women with anxiety about childbirth), a vaginal birth is still not an acceptable option, offer a planned CS. 111. That is not necessarily to say that the doctors have to volunteer the pros and cons of each option in every case, but they clearly should do so in any case where either the mother or the child is at heightened risk from a vaginal delivery. In this day and age, we are not only concerned about risks to the baby. We are equally, if not more, concerned about risks to the mother. And those include the risks associated with giving birth, as well as any after effects. One of the problems in this case was that for too long the focus was on the risks to the baby, without also taking into account what the mother might face in the process of giving birth. 112. It was well recognised in 1999 that an insulin dependent diabetic mother could have a larger than average baby. This brings with it a 9 to 10% risk of mechanical problems in labour, either that the babys head will fail to descend or, worse still, that it will descend but the babys shoulders will be too broad to follow the head through the birth canal and will therefore get stuck. Desperate manoeuvres are then required to deliver the baby. As the Royal College of Obstetricians and Gynaecologists state in their Guideline No 42 on Shoulder Dystocia (2005), There can be a high perinatal mortality and morbidity associated with the condition, even when it is managed appropriately. Maternal morbidity increased, is also particularly postpartum haemorrhage (11%) and fourth degree perineal tears (3.8%), and their incidence remains unchanged by the manoeuvres required to effect delivery. No one suggests that this was not equally well known in 1999. The risk of permanent injury to the baby is less than the risk of injury to the mother, but it includes a very small risk of catastrophic injury resulting from the deprivation of oxygen during delivery, as occurred in this case. 113. These are risks which any reasonable mother would wish to take into account in deciding whether to opt for a vaginal delivery or a caesarean section. No doubt in doing so she would take serious account of her doctors estimation of the likelihood of these risks emerging in her case. But it is not difficult to understand why the medical evidence in this case was that, if offered a caesarean section, any insulin dependent pregnant woman would take it. What could be the benefits of vaginal delivery which would outweigh avoiding the risks to both mother and child? 114. We do not have a full transcript of the evidence, but in the extracts we do have Dr McLellan referred to explaining to a mother who requested a caesarean section why it may not be in the mothers best interest and later expressed the view that its not in the maternal interests for women to have caesarean sections. Whatever Dr McLellan may have had in mind, this does not look like a purely medical judgment. It looks like a judgment that vaginal delivery is in some way morally preferable to a caesarean section: so much so that it justifies depriving the pregnant woman of the information needed for her to make a free choice in the matter. Giving birth vaginally is indeed a unique and wonderful experience, but it has not been suggested that it inevitably leads to a closer and better relationship between mother and child than does a caesarean section. 115. In any event, once the argument departs from purely medical considerations and involves value judgments of this sort, it becomes clear, as Lord Kerr and Lord Reed conclude at para 85, that the Bolam test, of conduct supported by a responsible body of medical opinion, becomes quite inapposite. A patient is entitled to take into account her own values, her own assessment of the comparative merits of giving birth in the natural and traditional way and of giving birth by caesarean section, whatever medical opinion may say, alongside the medical evaluation of the risks to herself and her baby. She may place great value on giving birth in the natural way and be prepared to take the risks to herself and her baby which this entails. The medical profession must respect her choice, unless she lacks the legal capacity to decide (St Georges Healthcare NHS Trust v S [1999] Fam 26). There is no good reason why the same should not apply in reverse, if she is prepared to forgo the joys of natural childbirth in order to avoid some not insignificant risks to herself or her baby. She cannot force her doctor to offer treatment which he or she considers futile or inappropriate. But she is at least entitled to the information which will enable her to take a proper part in that decision. 116. As NICE (2011) puts it, Pregnant women should be offered evidence based information and support to enable them to make informed decisions about their care and treatment (para 1.1.1.1). Gone are the days when it was thought that, on becoming pregnant, a woman lost, not only her capacity, but also her right to act as a genuinely autonomous human being. 117. These additional observations, dealing with the specific example of pregnancy and childbirth, are merely a footnote to the comprehensive judgment of Lord Kerr and Lord Reed, with which I entirely agree. Were anyone to be able to detect a difference between us, I would instantly defer to their way of putting it. I would allow this appeal. This is an important point. The relative importance attached by patients to quality as against length of life, or to physical appearance or bodily integrity as against the relief of pain, will vary from one patient to another. Countless other examples could be given of the ways in which the views or circumstances of an individual patient may affect their attitude towards a proposed form of treatment and the reasonable alternatives. The doctor cannot form an objective, medical view of these matters, and is therefore not in a position to take the right decision as a matter of clinical judgment. In Lord Scarmans view, if one considered the scope of the doctor's duty by beginning with the right of the patient to make her own decision whether she would or would not undergo the treatment proposed, it followed that the doctor was under a duty to inform the patient of the material risks inherent in the treatment. A risk was material, for these purposes, if a reasonably prudent patient in the situation of the patient would think it significant. The doctor could however avoid liability for injury resulting from the occurrence of an undisclosed risk if she could show that she reasonably believed that communication to the patient of the existence of the risk would be detrimental to the health (including the mental health) of her patient. It followed from that approach that medical evidence would normally be required in order to establish the magnitude of a risk and the seriousness of the possible injury if it should occur. Medical evidence would also be necessary to assist the court to decide whether a doctor who withheld information because of a concern about its effect upon the patients health was justified in that assessment. The determination of the scope of the doctors duty, and the question whether she had acted in breach of her duty, were however ultimately legal rather than medical in character. 49. Lord Scarman summarised his conclusions as follows (pp 889 890): To the extent that I have indicated I think that English law must recognise a duty of the doctor to warn his patient of risk inherent in the treatment which he is proposing: and especially so, if the treatment be surgery. The critical limitation is that the duty is confined to material risk. The test of materiality is whether in the circumstances of the particular case the court is satisfied that a reasonable person in the patient's position would be likely to attach significance to the risk. Even if the risk be

The appellant, Nadine Montgomery, gave birth on 1 October 1999 at Bellshill Maternity Hospital, Lanarkshire. As a result of complications during delivery, her baby was born with serious disabilities. Mrs Montgomery sought damages on behalf of her son alleging negligence of the respondent Boards employee, Dr McLellan, who was responsible for her care during her pregnancy and labour. Mrs Montgomery has diabetes. Women with diabetes are more likely to have large babies and there is a 9 10% risk of shoulder dystocia during vaginal delivery (the babys shoulders being too wide to pass through the mothers pelvis). Though this may be resolved by emergency procedures during labour, shoulder dystocia poses various health risks to the woman and baby. Mrs Montgomery had raised concerns about vaginal delivery but Dr McLellans policy was not routinely to advise diabetic women about shoulder dystocia as, in her view, the risk of a grave problem for the baby was very small, but if advised of the risks of shoulder dystocia women would opt for a caesarean section, which was not in the maternal interest. Following the decision of the House of Lords in Sidaway v Board of Governors of the Bethlem Royal Hospital and the Maudsley Hospital [1985], the Lord Ordinary held that whether a doctors omission to warn a patient of risks of treatment was a breach of her duty of care was normally to be determined by the application of the Bolam test (Bolam v Frierm Hospital Management Committee [1957] i.e., whether the omission was accepted as proper by a responsible body of medical opinion, which could not be rejected as irrational. Given the expert medical evidence for the Board, the Bolam test was not met. The Lord Ordinary accepted that where treatment involves a substantial risk of grave adverse consequences, in some cases a judge could conclude that a patients right to decide whether to consent to that treatment was so obvious that no prudent doctor could fail to warn of the risk. In the Lord Ordinarys view, the risk of shoulder dystocia, though significant, did not in itself require a warning since in most cases shoulder dystocia was dealt with by simple procedures and the chance of a severe injury to the baby was tiny. Following Sidaway, he also noted that if a patient asks about specific risks, the doctor must answer, but did not accept that Mrs Montgomery asked such questions. The Inner House of Session refused Mrs Montgomerys reclaiming motion and upheld the Lord Ordinarys conclusion. Since both courts held that no duty owed was to her, the issue of causation did not arise. Both nonetheless held that Mrs Montgomery had not shown that, had she been advised of the risk, she would have elected to undergo a caesarean, thus avoiding the risks to the baby. The Supreme Court unanimously allows the appeal. Lord Kerr and Lord Reed give the lead judgment with which Lord Neuberger, Lady Hale, Lord Clarke, Lord Wilson and Lord Hodge agree. Lady Hale gives a concurring judgment. Lord Kerr and Lord Reed find that since Sidaway, it has become clear that the paradigm of the doctor patient relationship implicit in the speeches in that case has ceased to reflect reality. It would be a mistake to view patients as uninformed, incapable of understanding medical matters, or wholly dependent on information from doctors. This is reflected in the General Medical Councils guidance. Courts are also increasingly conscious of fundamental values such as self determination. [74 80] Societal and legal changes point towards an approach to the law which treats patients so far as possible as adults capable of understanding that medical treatment is uncertain of success and may involve risks, of accepting responsibility for risks affecting their lives, and of living with the consequences of their choices. This entails a duty on doctors to take reasonable care to ensure that a patient is aware of material risks inherent in treatment. Further, because the extent to which a doctor may be inclined to discuss risks with patients is not determined by medical learning or experience, applying the Bolam test to this question is liable to result in the sanctioning of differences in practice attributable not to divergent schools of thought in medicine, but merely to divergent attitudes among doctors as to the degree of respect owed to their patients. [81 85] Lord Kerr and Lord Reed reason that an adult of sound mind is entitled to decide which, if any, of the available treatments to undergo, and her consent must be obtained before treatment interfering with her bodily integrity is undertaken. The doctor is under a duty to take reasonable care to ensure that the patient is aware of any material risks involved in proposed treatment, and of reasonable alternatives. A risk is material if a reasonable person in the patients position would be likely to attach significance to it, or if the doctor is or should reasonably be aware that their patient would be likely to attach significance to it. Three further points emerge: first, assessing the significance of a risk is fact sensitive and cannot be reduced to percentages. Second, in order to advise, the doctor must engage in dialogue with her patient. Third, the therapeutic exception is limited, and should not be abused. [86 91] In the present case, Dr McLellan ought to have advised Mrs Montgomery of the substantial risk of shoulder dystocia. The Court of Session focused on the relatively small consequent risk of grave injury to the baby. However, shoulder dystocia itself is a major obstetric emergency; the contrast with the tiny risks to the woman and baby involved in an elective caesarean is stark. [94] On causation, the courts below had in mind the supposed reaction of Mrs Montgomery if advised of the minimal risk to the baby of a grave injury consequent on shoulder dystocia. The lower courts should have focused on her likely reaction if advised of the risk of shoulder dystocia itself. Dr McLellans unequivocal view was that Mrs Montgomery would choose a caesarean if so advised; indeed that is precisely why she withheld that information. [101, 103] The Lord Ordinary considered the doctor to be an impressive witness. The only reasonable conclusion is that had Dr McLellan discussed dispassionately with Mrs Montgomery the risk of shoulder dystocia, the potential consequences, and the alternatives, she probably would have elected for a caesarean section. [104] Lady Hale reasons that it is impossible to consider a particular procedure in isolation from its alternatives. Pregnancy is a powerful illustration. Where either mother or child is at heightened risk from vaginal delivery, doctors should volunteer the pros and cons of that option compared to a caesarean. We are concerned not only with risks to the baby, but also risks to the mother. [109 114] Dr McLellans view that caesareans are not in maternal interests is a value judgment; once the argument departs from purely medical considerations, the Bolam test is inapposite. A patient is entitled to take into account her own values and her choices must be respected, unless she lacks capacity. She is at least entitled to information enabling her to take part in the decision. [114 115]

The liability of employers for deaths caused by mesothelioma has pre occupied courts and legislators over recent years. The present appeals concern claims to pass the burden of this liability on to insurers, made either by employers or in the case of insolvent employers by the personal representatives of former employees using the mechanism of the Third Party (Rights against Insurers) Act 1930. The appeals concern employers liability insurance. This is in contrast with Bolton MBC v Municipal Mutual Insurance Ltd [2006] EWCA Civ 50, [2006] 1 WLR 1492 where public liability insurance was in issue. Employers liability focuses necessarily upon the relevant employment relationships and activities. Public liability relates to any of the insureds relationships and to activities affecting the world at large. Another feature of employers liability is that, under the Employers Liability (Compulsory Insurance) Act 1969 (the ELCIA), it has since 1 January 1972 been compulsory for every employer other than local authorities carrying on any business in Great Britain to insure, and maintain insurance, under one or more approved policies with an authorised insurer or insurers against liability for bodily injury or disease sustained by his employees, and arising out of and in the course of their employment in Great Britain in that business, but except in so far as regulations otherwise provide not including injury or disease suffered or contracted outside Great Britain The appeals arise because the relevant insurers maintain that the employers liability insurances which they issued respond (or, better, could only have responded) to mesothelioma which developed (or, possibly, manifested itself) as a disease during the relevant insurance periods all long past. In contrast, the relevant employers and personal representatives maintain that the insurances respond to mesothelioma which develops and manifests itself later; all that is required, they say, is exposure of the victim during the insurance period to asbestos in circumstances where the law attributes responsibility for the mesothelioma to such exposure. These alternative bases of response (or triggers of liability) have been loosely described as an occurrence (or manifestation) basis and an exposure (or causation) basis. It is in issue whether the ELCIA, after it came into force, mandated any particular basis of response. A secondary issue, arising if the insurances only respond on an occurrence basis, is whether the aetiology of mesothelioma justifies a conclusion that there was during the relevant insurance period an occurrence sufficient to trigger liability under the insurances. Burton J, [2008] EWHC 2692 (QB), concluded that the relevant insurances all responded on an exposure basis. The Court of Appeal, [2010] EWCA Civ 1096, by a majority (Rix and Stanley Burnton LJJ), upheld the judge in relation to some of the insurances (particularly those covering disease contracted during the relevant insurance period); but they concluded that others (particularly those covering disease sustained during the insurance period) responded only on an occurrence or manifestation basis. Smith LJ would have upheld the judges judgment in its entirety. The full judgments in both courts repay study. They have been of great assistance to this court and make it possible to go directly to the heart of the issues. Mesothelioma is a hideous disease that is inevitably fatal. In most cases, indeed possibly in all cases, it is caused by the inhalation of asbestos fibres: Sienkiewicz v Greif (UK) Ltd [2011] UKSC 10, [2011] 2 AC 229, para 1, per Lord Phillips. It is a cancer of the pleura, which are thin linings around the lungs and on the inside of the rib cage. It is usually undetectable until shortly before death. Its unusual features include what Burton J in this case at para 30 described as the unknowability and indescribability of its precise pathogenesis. In particular, it is impossible to know whether any particular inhalation of asbestos (at least any occurring more than ten or so years prior to diagnosability) played any or no part in such development. Because of this unusual feature, the law has developed a special rule. The special rule was the product of judicial innovation in Fairchild v Glenhaven Funeral Services Ltd [2002] UKHL 22; [2003] 1 AC 32 and in Barker v Corus UK Ltd [2006] UKHL 20; [2006] 2 AC 572. It was modified by statutory intervention in the form of the Compensation Act 2006, section 3. Leaving aside exposures occurring within the ten or so years prior to diagnosability, the rule can now be stated as being that when a victim contracts mesothelioma each person who has, in breach of duty, been responsible for exposing the victim to a significant quantity of asbestos dust and thus creating a "material increase in risk" of the victim contracting the disease will be held to be jointly and severally liable in respect of the disease. Burton Js findings in the present case justify certain further propositions, mostly also corresponding with the summary in Lord Phillips judgment in Sienkiewicz (para 19): (i) A significant proportion of those who contract mesothelioma have no record of occupational exposure to asbestos. The likelihood is that (vi) in their case the disease results from inhalation of asbestos dust that is in the environment. There is, however, a possibility that some cases of mesothelioma are "idiopathic", i.e. attributable to an unknown cause other than asbestos. (ii) The more fibres that are inhaled, the greater the risk of contracting mesothelioma. (iii) There is usually a very long period between the exposure to asbestos and the development of the first malignant cell. Typically this can be at least 30 years. (iv) For a lengthy period (perhaps another five years) after the development of the first malignant cell, there remains a possibility of dormancy and reversal, but at a point (Burton J thought a further five years or so before the disease manifested itself, and was thus diagnosable) a process of angiogenesis will occur. This involves the development by malignant cells of their own independent blood supply, so assuring their continuing growth. (v) The mechanism by which asbestos fibres cause mesothelioma is still not fully understood. It is believed that a cell has to go through 6 or 7 genetic mutations before it becomes malignant, and asbestos fibres may have causative effect on each of these. It is also possible that asbestos fibres have a causative effect by inhibiting the activity of natural killer cells that would otherwise destroy a mutating cell before it reaches the stage of becoming malignant. Mesothelioma currently claims about 3000 lives a year in the United Kingdom. This speaks to the common use of asbestos materials up to the 1960s and 1970s. In Annex I to his judgment Rix LJ set out the insuring clauses of the various forms of policy wording in use from time to time. Subject to re ordering to reflect the development of the language, Annex A to this judgment includes the same and some further wording. It can be seen that the Excess policies and the first two MMI policies promise to indemnify the insured employer against liability if at any time during the period of insurance (or of any renewal) any employee shall sustain under the earlier policies personal injury by accident or disease or under the later policies [any] bodily injury or disease in the case of the first Excess policy while engaged in the service of the Employer or in other cases arising out of and in the course of [his] employment by the insured employer. In the case of the Independent policy, the insurer, under the recital, promised to indemnify the employer during the period of insurance or of any renewal. The insuring clause itself contains no express limitation to any period. It promises indemnity against all sums for which the employer shall be liable for damages for such injury or disease if any employee shall sustain bodily injury or disease arising out of and in the course of his employment by the Insured in connection with the Contract specified or type of work described in the Schedule. The third MMI policy and the BAI policies were in more developed form. The former promises indemnity in respect of legal liability for sums payable as compensation for bodily injury or disease (including death resulting from such bodily injury or disease) suffered by any employee when such injury or disease arises out of and in the course of employment by the Insured and is sustained or contracted during the currency of this Policy. The latter promised indemnity against all sums which the Insured may become liable to pay to any Employee . in respect of any claim for injury sustained or disease contracted by such Employee during the period of insurance or any renewal. The insurers party to the present appeals have at all times represented only a small part of the employers liability insurance market. By far the larger part of the market consists of companies who until the late 1960s (when competition rules intervened) operated a tariff system which bound them to adopt a specified policy form and specified rates. Until 1948 tariff insurance was focused on Workmens Compensation Act claims, but in 1948 legislative changes (in particular the abolition by the Law Reform (Personal Injuries) Act 1948 of the doctrine of common employment) made a common law claim for future accruing causes of action much more attractive. It may well have been in anticipation of these changes that the tariff companies introduced a new form of policy in May 1948, still in widespread use today, providing indemnity if any employee shall sustain any personal injury by accident or disease caused during the period of insurance. Under this tariff wording, sustain looks to the occurrence of an accident or development of a disease at any time, while caused makes clear that the trigger to cover is that the accident or disease has been caused during the insurance period. The present insurers were non tariff companies, and have always been free to set their own wordings. From dates after the insurances the subject of this appeal, three of the insurers in fact ceased to use the wordings set out in Annex A, and themselves moved expressly to causation based wordings Excess in about 1976, Independent in the mid 1980s, and BAI in 1983. As a matter of insurance practice, however, until the decision in Bolton in 2006, all these wordings, whether tariff or non tariff and whether using the language caused, sustain or sustained or contracted, paid out on long tail claims (including the mesothelioma claims which became increasingly frequent in the 1980s) by reference to the date(s) of exposure. Where successive employers with different insurers had exposed a particular employee victim to asbestos, liability was in practice apportioned between the employers, and so insurers, broadly according to the extent of exposure for which each employer was responsible. The rival cases Insurers submit that all the wordings in Annex A require the injury or disease to occur during the period of insurance or of any renewal. In the alternative, if the use of the word contracted in the third MMI policy and the BAI policies or the different formulation of the Independent policy leads to any different conclusion in any of such cases, they submit that this leaves unaffected the clear meaning of the Excess and first two MMI policy wordings. The employers and interested employees contend that all these policies are to be understood as operating on an exposure or causation basis. The implications of these alternative interpretations are clear. On insurers primary contention, the policies set out in Annex A would not respond to current mesothelioma claims. It is unlikely that most of them would have responded to many, if any, mesothelioma claims, since it was only in the 1980s that such claims began to emerge to any great extent. Policies written on a causation basis since the dates indicated in paragraph 10 above would also not respond to current mesothelioma claims. Insurers response is that any insurance must be read according to its terms. Until 1 January 1972, when the ELCIA came into force, it was not obligatory for employers to have any form of employers liability insurance. Further, viewed on an occurrence or manifestation basis, the policies would pick up long tail claims arising from exposure occurring at any time in the past. In this connection, it is to be noted that various long tail diseases were well recognised perils from the era of Workmens Compensation legislation before 1948. Instances were scrotal cancer, pneumoconiosis and more specifically (from the time of Merewether and Prices 1930 Report on Effects of Asbestos Dust on the Lungs and Dust Suppression in the Asbestos Industry) asbestosis. All these would only develop over and could manifest themselves after considerable periods of years. Following upon the 1930 report, The Asbestos Industry Regulations 1931 (SI 1931/1140) were introduced to regulate factories handling and processing raw fibre, and in 1969 The Asbestos Regulations 1969 (SI 1969/690) extended this regulation more widely it appears in the light of an appreciation that mesothelioma could result from exposure to small quantities of asbestos dust (see In re T & N Ltd (No 3) [2006] EWHC 1447 (Ch), [2007] 1 All ER 851, para 118). The Court of Appeals conclusions The force of insurers case rests in the use of the word sustain, whether in connection with the phrase personal injury by accident or disease or bodily injury or disease or in the conjunction injury or disease . sustained or contracted or injury sustained or disease contracted. Rix and Stanley Burnton LJJ concluded that the word sustain looked prima facie at the experience of the suffering employee rather than its cause (paras 232 and 343). Insurances responding to injury or disease sustained during the insurance period would not, on this basis, cover mesothelioma sustained long afterwards. Rix LJ had some compunction about the result because of what he (though not Stanley Burnton LJ) felt was a tension with the commercial purpose of employers liability insurance in the extraordinary context of mesothelioma (para 235). Rix LJ would have liked to hold that mesothelioma sufferers sustained sufficient injury on exposure to asbestos to trigger the insurances in force at the date of such exposure, but felt bound by Bolton to conclude the contrary (paras 277 289). However, Rix LJ, though not Stanley Burnton LJ, considered that the particular wording of the Independent insurances did not explicitly require the injury or disease to be sustained during the insurance period, and could be read as covering the sustaining of injury at any time arising out of and in the course of employment during the insurance period (paras 300 and 350). Rix and Stanley Burnton LJJ differed as to the significance of the ELCIA extension provisions included in the Independent wording, the third MMI wording and the second BAI wording, as quoted in Annex A. Rix LJ thought that the ELCIA required employers to insure on a causation basis (paras 184 and 186) although, since he also expressed the view that an insurance arranged and maintained on a sustained basis could comply with the ELCIA, he may perhaps only have meant required in practice. At all events, he held that the ELCIA extension provisions covered liability incurred to the personal representatives of employees on a causation basis, while enabling insurers to recoup themselves so far as possible from the relevant employers in respect of liability they would not otherwise have had to meet (paras 292, 300 and 302). Stanley Burnton LJ did not agree that the ELCIA required causation wording (para 342), but considered that it required insurance to be taken out and maintained in respect of ex employees, or at least those who were or had been employed at any time after the coming into force of ELCIA (para 342; and see Rix LJs comments at paras 305 307). Rix, Smith and Stanley Burnton LJJ were all agreed that, where provision was made for disease contracted, this could and should be construed as introducing cover on a causation basis, even if or though wording such as injury (or disease) sustained could only respond on an occurrence basis. Analysis Annex A sets out the insuring clauses. Insurers case is, as I have said, rooted most strongly in the word sustain, particularly when it is used by itself, rather than in conjunction with a more ambivalent alternative in the phrase sustained or contracted. The natural meaning of the word sustain, taken in isolation and as defined in the Shorter Oxford English Dictionary from an appropriate date (1965, 3rd ed), is, with respect to injury, undergo, experience, have to submit to, or, possibly, to have inflicted upon one, suffer the infliction of. But the insurance cover granted (and no doubt required) extended expressly beyond injury by accident to embrace disease. This was achieved by less natural conjunctions, such as sustain [any] personal injury by accident or disease or sustain [any] bodily injury or disease. Conscious perhaps that the verb sustain does not fit naturally with the concept of disease, some companies (MMI in its third wording and BAI in its first and second wordings) introduced the different verb contracted in the formulations sustained or contracted or injury sustained or disease contracted. This use of contracted with respect to disease is considerably more natural, but is clearly open to an interpretation that it looks back to the initiating or causative factor of the disease, and (whatever the answer on that point) highlights a question whether any substantial difference exists in this connection between such wordings and other wordings referring more awkwardly to the sustaining of personal injury by disease or the sustaining simply of disease. To resolve these questions it is necessary to avoid over concentration on the meaning of single words or phrases viewed in isolation, and to look at the insurance contracts more broadly. As Lord Mustill observed in Charter Reinsurance Co Ltd v Fagan [1977] AC 313, 384, all such words must be set in the landscape of the instrument as a whole and, at p 381, any instinctive response to their meaning must be verified by studying the other terms of the contract, placed in the context of the factual and commercial background of the transaction. The present case has given rise to considerable argument about what constitutes and is admissible as part of the commercial background to the insurances, which may shape their meaning. But in my opinion, considerable insight into the scope, purpose and proper interpretation of each of these insurances is to be gained from a study of its language, read in its entirety. So, for the moment, I concentrate on the assistance to be gained in that connection. A first point, made very clearly below by Rix LJ (para 263), is that the wordings on their face require the course of employment to be contemporaneous with the sustaining of injury. This leaves open what is meant either by sustaining or by injury. Rix LJ thought that the Independent wording could be understood differently in effect, as if it had expressly read: If any person who is under a contract of service or apprenticeship with the Insured shall at any time sustain bodily injury or disease arising out of and in the course of his employment by the Insured during the policy period in connection with the Contract specified or type of work described in the Schedule . That interpretation assumes that sustain in this context equates with the occurrence, rather than causation, of the injury or disease, and only arises for consideration if that assumption is correct. A second point is that the insurance wordings demonstrate a close link between the actual employment undertaken during each insurance period and the premium agreed to be payable for the risks undertaken by insurers in respect of that period. Premium is linked expressly to actual wages, salaries and earnings during the insurance period under the Excess policies, the first MMI wording and the BAI policies. The second and third MMI wordings contemplate that premium may be linked to wages, salaries and earnings, and, to the extent that any inference regarding the general nature and scope of cover under these standard wordings can be drawn from such a link, it must be capable of being drawn whether or not premium was actually so linked in any particular case. As to the Contractors Combined Policy issued by the Independent, it is a probable inference that the estimates which were provided and were to be updated will have included, in respect of the employers liability cover in section 1, wages, salaries and other earnings paid. Finally, the Independent cover is linked to the actual contract or work which the employer is undertaking during the insurance period. These links are in my view significant. True, premium may sometimes be calculated on a rough and ready basis. Minor discrepancies between the premium calculation and the risk may be understandable: see e.g. Ellerbeck Collieries, Ld v Cornhill Insurance Co [1932] 1 KB 401, 418, per Greer LJ (who pointed out that any such discrepancy there was more apparent than real, since workmen not earning wages because off work would not actually be at risk of any fresh accident, even though they would remain susceptible to certification for disablement). Here the position is quite different. Great care is taken in all the policies to tie premium to the actual employment undertaken during the insurance period, and in the case of the Excess, Independent and MMI policies to tie cover to a business, contract or activities described in the schedule. The natural expectation is that premium is measured by reference to actual employment or work during the insurance period because it is the risks attaching to such employment or work which are being undertaken by insurers. At the very least, the drawing of this link makes improbable the contention advanced by some of the insurers that the present insurances were apt to pick up liabilities emerging during the insurance period which could be attributable to employment and activities undertaken and negligent conduct committed at times long past. The number of employees, their employment activities and the risks involved at those times could be very different. The significance which attaches to the employment current during the insurance period is underlined by legal and practitioner texts. As long ago as 1912, MacGillivray on Insurance (1st ed), pp 966 wrote: The nature and scope of the employers business must be clearly defined in the insurance policy, and workmen employed outside the scope of the assureds business as described in the policy will not be covered In the section on Employers Liability Insurance in Stone & Coxs Accident, Fire and Marine Year Book (1957), pp 688 689, the authors stressed the importance of identifying any special hazards, such as signs of careless management or lack of control or careless workmen, and observed: The surveying of Employers Liability risks has probably become more general than formerly. Apart from the question of the possibilities of accident, there is now the serious question of disability due to disease and in particular the disease known as pneumoconiosis. In 1974 MMI produced a Guide to Insurance Officers in Local Government, which it said that it would like to see on the desk of every insurance officer for ready reference at any time; this, after noting that employers liability was almost invariably dealt with by a separate policy and that its importance had been increased by the ELCIA, went on: "7. Premiums are usually based on wages and salaries this is not only a convenient yardstick but is logical since loss of earnings usually represents a substantial part of claims. Rates of premiums vary according to the nature of the work of the labour force, and the claims experience. 8. A feature of employers liability claims is the length of time which often elapses between the date of the accident and the final settlement, and the cost of servicing claims tends to be high. Injury caused at work during the period of insurance even though it may not be diagnosed till years afterwards can be a liability under the policy." I note in parenthesis that 1974 was the year in which MMI changed from a pure sustain form of wording to a form covering bodily injury or disease suffered, when sustained or contracted during the currency of the policy. Yet there is no suggestion in the Guide of any change in substance. It is in this light improbable that the present insurances can or should be read as offering cover in respect of ancient, as opposed to current, employment and activities. But there is a third point. If insurances in the present form only address risks arising from employment during the insurance period, then, on insurers case, there is a potential gap in cover as regards employers breaches of duty towards employees in one period which only lead to injury or disease in another later period. If the employment relationship spans both insurance periods and the employer remains insured with the same insurers in both periods, there may be no problem. The employee is employed at all relevant times and the insurance may be viewed as a single continuing contract. The policy wordings set out in Annex A, with their references to insurance during the period of insurance or during any subsequent renewal period, would support the latter view. But, even in the days of more stable long term employment and insurance relationships, employees could and would move employment or retire, or employers would cease business, or change insurers. On the basis that the insurances only cover risks arising from employment during the insurance period, there would be no cover unless the liability arose from and in the course of and involved injury or disease during the currency of the same employment and the same insurance (including any renewal). Fourthly, on insurers case, employers would as a result be vulnerable to any decision by insurers not to renew; and such a decision might arise from the simple performance by employers of their common law duty to disclose past negligence to insurers upon any renewal. Employers who discovered or came to appreciate that they had been negligent in the course of past activities in respects that had not yet led to any manifest disease (e.g. by exposing their employees to asbestos) would have such a duty. Insurers could then, on their own case, simply refuse any renewal or further cover. Employers could then have to disclose that refusal also to any further insurers to whom they made a proposal for cover. One response made by insurers to such problems is that they would not arise in the large bulk of cases. That is no doubt true. Most employers liability cases involve short tail claims: typically, an accident involving injury. It is not surprising if the language of the insurances fits more easily with situations in which cause and effect coincide in time. But, by the same token, this does not mean that the underlying risk being assumed was in either partys mind limited to circumstances in which a cause gave rise to an effect during one and the same insurance period. Rix LJ, in accepting that cover depended upon injury being sustained in the sense of experienced during the insurance period, was influenced by the thought that this was not an absurd or meaningless interpretation. The insurance could operate entirely successfully in some 99% of cases (para 235). In the light of this Courts recent decision in Rainy Sky SA v Kookmin Bank [2011] UKSC 50, [2011] 1 WLR 2900, para 30, this, in my view, gives too little weight to the implications of the rival interpretations and to the principle that where a term of a contract is open to more than one interpretation, it is generally appropriate to adopt the interpretation which is most consistent with business common sense. The 1% of cases in which there might be no cover could not be regarded as insignificant. Well before 1948, there was general awareness of the existence of long tail diseases which would only develop and manifest themselves after considerable periods of years (see para 12 above; and see also Cartledge v E Jopling & Sons Ltd [1963] AC 758). The connection between asbestos exposure and mesothelioma became generally known in the mid 1960s, following the publication in 1965 of Newhouse and Thompsons report on Mesothelioma of pleura and peritoneum following exposure to asbestos in the London area and a Sunday Times article. Yet on insurers case, the present insurances would not cover any situation where, after the termination of employment or the expiry of an insurance, injury or disease developed from an employers breach of duty to a relevant employee during an insurance period. A fifth point concerns the way in which the policies deal with the issue of extra territorial scope. The first Excess wording stands apart from the others in its treatment of that issue. Cover only exists in respect of any employee in the employers service who shall sustain any personal injury by accident or disease while engaged in the service of the employer in Great Britain, Northern Ireland, the Isle of Man or Channel Islands, in work forming part of the process in the employers business. As soon as one postulates a delay in time between the causation and experiencing of a disease, it becomes apparent that this wording could operate to very curious effect if sustain looks to the latter rather than the former. A disease (e.g. a cancer) experienced during employment could be covered although caused by pre employment exposure, while a disease caused by employment would not be covered if only experienced while working abroad. The natural inference to draw from the references to being engaged in the employers service and in work forming part of the employers business process is that it was envisaged that the accident or disease would and should arise out of such service and work, rather than merely occur during it. That points to an underlying focus on causation, even if the assumption was that in the majority of cases causation and experiencing of any injury by accident or disease would coincide. As to the other policies, at the very least, the way they deal with territorial issues throws doubt on any proposition that their wordings are so carefully or well chosen that a court should be careful to stick literally to whatever might be perceived as their natural meaning. They address territorial scope by specific exclusions, but the cover and the exclusions use different language. Thus, although the second and third Excess wordings cover liability to employees who sustain personal injury by accident or disease, the territorial exclusion is in respect only of accidents occurring outside Great Britain, etc, leaving it unclear how disease, whether caused or developing outside Great Britain, should be dealt with. The Independent wording also covers liability to employees who sustain bodily injury or disease, while the territorial exclusion is for injury, illness, loss or damage caused elsewhere than in Great Britain, etc. While the contrast in language is capable of lending some support to a view that sustain looks to experiencing, rather than to causation, an alternative possibility is that the two words were understood as having the same effect and that the cover was understood as focused on causation. The language of this exclusion thus cuts both ways, as Rix LJ recognised (para 297). A similar position applies to the contrast between injury or disease sustained and injury or disease caused outside Great Britain, etc. under the first two MMI wordings. Under the third wording, the language of the cover and the exclusion have been deliberately matched. Under the BAI wordings, however, there is an incongruity between cover for injury sustained or disease contracted and the exclusion in respect of liability for accidents . arising outside the United Kingdom. Again, this leaves the position in respect of disease unclear, and the difference between injury sustained and accidents arising can be read either as deliberate or as suggesting that no significance was attached to the difference or that the real concern was with causation. The history and Workmens Compensation Acts Much attention was, both below and before the Supreme Court, paid to the development of employees rights to compensation in respect of personal injury and disease, at common law and under the scheme of the Workmens Compensation Acts (WCAs). The WCAs were in force from 1897 until replaced in 1948 under the National Insurance (Industrial Injuries) Act 1946. The history and a number of the decisions under the WCAs were examined by Rix LJ in paras 126 to 165 of his judgment. He concluded that such an examination yields in the present context not a lot. To a considerable extent, I agree and I shall not repeat the whole exercise, but identify some potentially relevant aspects. Etymologically, some of the language presently in issue can be traced back to statutory language found in the Employers Liability Act 1880 and the WCA 1897. The 1880 Act modified the common law doctrine of common employment, by entitling employees to recover common law compensation for injury caused by specified matters for which employers were responsible, provided that they gave notice, within six weeks of sustaining the injury of its cause and the date at which it was sustained. The 1897 Act, applying to personal injury by accident arising out of and in the course of employment, also required notice to be given of the accident as soon as it occurred, stating the cause of the injury and the date at which it was sustained. These Acts therefore distinguished the causation and the sustaining of an injury, but not in any presently relevant context. Further, any reference to sustaining disappeared from the Workmens Compensation scheme in the 1906 Act, which amended the scheme to require a notice stating the cause of the injury and the date at which the accident happened. The 1906 WCA also expressly extended the scheme to cover certain diseases specified in section 8. In that context, it provided that, where a workman was certified as disabled or suspended from employment or died due to a disease and the disease is due to the nature of any employment in which the workman was employed at any time within the twelve months previous the date of the disablement or suspension, whether under one or more employers, then he or his dependants shall be entitled to compensation under this Act as if the disease or such suspension . were a personal injury by accident arising out of and in the course of that employment . Section 8(a) provided: The disablement or suspension shall be treated as the happening of the accident. Under section 8(c), the compensation was recoverable from the employer last employing the employee within the previous twelve months, providing the employee furnished that employer with particulars of all his other employers in the employment to the nature of which the disease was due. It was not necessary to prove that the disease actually arose from the last employment, merely to prove that the relevant employment gave rise to a risk of such a disease: Blatchford v Staddon and Founds [1927] AC 461. The 1906 Act may be regarded in this respect as involving an early statutory instance of the kind of liability recognised in Fairchild v Glenhaven Funeral Services Ltd [2002] UKHL 22, [2003] 1 AC 32 and Barker v Corus UK Ltd [2006] UKHL 20, [2006] 2 AC 572. However, failing such particulars, the last employer could excuse himself upon proving that the disease was not contracted whilst the workman was in his employment (section 8(c)(i)). The last employer might also join any other employer (within the last twelve months) and it was provided that upon proof that the disease was in fact contracted whilst the workman was in the employment of that other employer, that other employer shall be the employer from whom the compensation is to be recoverable (section 8(c)(ii)). Finally, section 8(c)(iii) provided that: if the disease is of such a nature as to be contracted by a gradual process, any other employer within the last twelve months was liable to make such contributions as might be agreed or determined by arbitration under the Act. Under this scheme, therefore, compensation for disease was initially based upon the nature of the employment and its potential for causing, rather than upon proof that it caused, such a disease. The paternal benevolence of the Legislature (as Visc Sumner put it in Blatchford: p 469) is well known, and if the price of that benevolence is paid by the last employer, who thus has to bear others burdens, that is nothing new in this kind of legislation. However, the last relevant employer could seek, in specified circumstances, to avoid or to pass on to another employer responsibility by proof that the disease was not actually contracted in his employment. Alternatively, in the case of a disease of such a nature as to be contracted by a gradual process, all relevant employers within the last twelve months would be liable to contribute. The scheme was, as I see it, concerned with either the risk of or actual causation, and in its use of the word contracted it appears to me to have been directing attention to the causation, rather than the mere experiencing or manifestation, of disease. The WCA scheme was the subject of further amendment by the 1925 Act. Section 43 superseded section 8 of the 1906 Act as regards scheduled diseases, while section 47 made specific provision for the introduction of a parallel scheme covering silicosis. Effect was given to this by inter alia the Metal Grinding Industries (Silicosis) Scheme which came into force in July 1927, making provision for obtaining compensation from the last employer within the previous three years, and giving such employer rights to look to other such employers within the last five years. An insurance covering employers liability in this connection was considered in Smith & Son v Eagle Star (1933) 47 Ll. L.R. 88, (1934) 48 Ll. L.R. 67. Mr Hill had been employed in processes giving rise to silicosis for some 20 years. For the last two of these years, from 31 March 1928 to 16 June 1930, he worked for Smith & Son. From 30 June 1927 to 17 June 1930, Smith & Son had an insurance against WCA liability in respect of any personal injury or disease which at any time during the continuance of this policy shall be sustained or contracted by any workmen . The policy was expressly extended to cover any liability in connection with any claim made by employees in respect of silicosis, and the decision of the Court of Appeal rested on this ground. But Scrutton LJ also examined the main policy language, and in particular what was meant by contracted. He noted that there has been a good deal of discussion in the Courts about a disease which is gradually contracted commencing at some stage and through the process going on increasing the disease until at last it results in total disablement (p 70), and concluded that the word was not to be read as first contracted, but in the sense of influenced or increased until it ultimately comes to total disablement. This, although not directly focusing on the first development of a disease from some earlier cause, suggests a flexible view of the word contracted, directed once again to the employments responsible for causing the disease. Confirmation that this was Scrutton LJs view can be found in the earlier case of Ellerbeck Collieries Ltd v Cornhill Insurance Co [1932] 1 KB 401. Two workmen who had been in the colliery companys service for many years were on respectively 11 and 12 March 1929 (dates they were actually off work) certified as suffering from miners nystagmus. The Cornhill had on 8 March 1929 issued the colliery company with a three month provisional cover note insuring in terms matching the wording of the insuring clause in the first Excess wording (i.e. against liability in respect of any employee who shall sustain any personal injury by accident or disease while engaged in the service of the employer). Failing a satisfactory survey, the cover note actually expired on 18 March 1929. The first point decided was whether the employees had sustained personal injury by accident or disease during the period of validity of the cover note (8 to 18 March 1929). It was held that they did. The judgments in the Court of Appeal are of interest for a number of reasons. First, both Scrutton LJ (p 408) and Greer LJ (p 417) approached the question of construction on the basis that the policy was intended to protect the employers against their liability to their workmen under the WCAs. Scrutton LJ added that it seems to me that the policy was intended to cover the liability of the employers for the results of industrial diseases caused by the employment (p 409). His description of the policy, covering in terms any employee sustaining personal injury by accident or disease in service, as intended to cover liability . for the results of diseases caused by the employment fits precisely with the analysis which I consider correct (paragraphs 18 28 above). Second, Scrutton LJ went on to refer to the difficulties in saying when an industrial disease, such as miners nystagmus or lead poisoning, begins, and in these circumstances the difficulty for an employee to pick the proper employer to sue. He described the way in which Parliament, by what became section 43 of the WCA 1925, had addressed such difficulties by providing a conventional and artificial means for enabling the workman to get compensation, leaving the various employers to fight out their proportion of the liability between themselves (p 409). He said that the last employer, liable under the WCA scheme, then claims on the insurance company on the ground that he is liable to make compensation for an injury by disease, and the date of the injury or disablement is by statute and certificate fixed as happening between the dates for which he is provisionally covered (p 411). On this basis, and in the light of the House of Lords decision in Blatchford, Scrutton LJ concluded that he was bound to hold that an accident has happened within the period of the provisional cover against the consequences of which the insurance company is bound to indemnify the employer (p 413). In short, the conventional and artificial provisions of the WCA defined what constituted an accident and when personal injury by accident or disease was sustained for the purposes of the insurance. Greer LJ, more shortly, adopted the same approach (p 418). Only Slesser LJ (p 421) expressed a reservation about the possibility that the artificial deeming provisions of section 43(a) of the WCA 1925 might only apply as between employee and employer, and that it might have been necessary to consider separately the date of the sustaining of injury as between the employer and the insurer, had there been any admissible evidence that the two employees had actually contracted the scheduled disease before the granting of the statutory medical certificate. Commercial purpose and practice Much general evidence was directed or elicited before Burton J in relation to the commercial purpose of the present insurances, and to practice relating to their operation in the years before the present issue arose. It was argued that there was, prior to the decision in Bolton, a universal usage of the insurance industry to pay out mesothelioma or similar claims under [employers liability] policies by reference to the date of inhalation/exposure whatever the wording, or an estoppel by convention to like effect. Burton J rejected the argument (paras 180 to 201, esp. para 201), for the reasons that, first, there was no evidence relating to years earlier than the 1980s which could be put down to any kind of arguable usage, second, any usage was not certain, not least because of the multiplicity of approaches to or bases for it and, third, it was not binding. It was not incorporated into the insurance contracts. No issue of estoppel by convention was pursued to the Court of Appeal (Rix LJ, para 24, and Stanley Burnton LJ, paras 332 and 335) and the issue of a universal custom was only pursued by Zurich Insurance Company (Rix LJ, para 24). By a multiplicity of approaches to or bases for insurers practice, Burton J was referring to evidence that insurers followed the practice they did in some cases because they believed that their contracts were to be interpreted on a causation/exposure basis, in others because they believed that the aetiology of diseases such as mesothelioma was such that injury was in fact sustained (in the sense of experienced) at the date of inhalation, while yet others may have failed to realise that their historically relevant wordings had been on a different basis to the causation wordings to which they had since switched or may have failed to address their minds to any relevant issue at all in relation to an insured who was usually a longstanding repeat client. Rix LJ (para 228) contented himself with agreeing with Burton Js reasoning on this aspect, while Stanley Burnton LJ noted and agreed in particular with Burton Js second reason, relating to the believed aetiology of mesothelioma (para 335). Smith LJ, on the other hand, treated the commonly held understanding that diseases such as mesothelioma involved injury at the date of inhalation as part of the factual matrix of all the insurance contracts (paras 322 323), and considered against that background that no difference in meaning should be held to exist between policies using sustained and causation wording, until the time when the two sides of the insurance industry should be considered to have appreciated that some diseases, including mesothelioma, do not occur until many years after exposure to the causative agent (para 327). She put that as around the time of the decision in Bolton, after which parties using a sustained wording must be taken to have meant only to cover injuries actually occurring during the policy period (para 327). The argument of a binding usage was not pursued before the Supreme Court, rightly so for the reasons given by the judge and the majority in the Court of Appeal. Equally, there has been no suggestion of estoppel by convention, along the lines recognised as possible in Chartbrook Ltd v Persimmon Homes Ltd [2009] UKHL 38, [2009] 1 AC 1101, para 47. However, on the issues of policy interpretation, Mr Stuart Smith QC for Zurich Insurance, maintained before the Supreme Court an argument that there was a consensus based on market practice, whereby, for one reason or another, such policies would respond to long tail diseases by reference to the date of exposure, and that this could constitute relevant background to their construction. Assuming that, short of a binding usage or estoppel by convention, a practice, if known to or shared by the relevant parties, could in some circumstances be relevant background (see e.g. Reardon Smith Line Ltd v Yngvar Hansen Tangen [1976] 1 WLR 989), still, in my opinion the argument fails in the present case. It fails in particular in the light of the judges findings, even in relation to policies made in and after the 1980s. A practice based on a mistaken understanding, by only some insurers, that the policies operated on a causation basis cannot be relevant background to the interpretation of every policy; on the judges findings other insurers do not appear to have understood that the policies operated on that basis. A practice based on a mistaken understanding by others in the market as to when long tail diseases could be said to have been experienced or to involve injury is likewise an unpromising start for construing all policies; if the understanding were good, it would mean that such diseases fell within the policies, even though the policy cover was restricted to injury or disease experienced during the policy period. The understanding would not therefore carry any imperative to read a sustained wording as meaning caused. Before the Supreme Court, both employers and employees continued to rely upon the evidence given at trial regarding the general purpose of employers liability insurance as part of the background to the interpretation of the present insurances. Rix LJ (paras 223 to 235) gave it some weight as such, but Stanley Burnton LJ thought that there was little if any assistance to be gained by reference to the commercial purpose of EL insurance, as this was simply to provide the cover defined in the policy (para 333). The Supreme Court was provided with a useful summary of the considerable volume of evidence relied upon in this connection. It consisted in general of answers given by insurers, two at least of them with experience going back to the 1940s. They were asked (frequently in response to leading though not inadmissible on that score questions in cross examination) about their or others views, understandings or perceptions as to the purpose of the policies, and the way in which these would or should respond, in relation to injuries arising from exposure in the course of activities during the policy period. In my judgment, Stanley Burnton LJ was right to reject such evidence as inadmissible. The parties cannot be asked what they meant by their contract, and, failing any binding usage, it is equally inadmissible to ask other persons operating in the market to give general evidence as to what they would have understood the parties to have meant by the words used in the context in which they were used. The evidence does not seem to have amounted to more than that. However, I do not agree with Stanley Burnton LJs suggestion that no useful conclusions can be drawn about the commercial purpose of the policies, save that it was to provide the defined cover. In my opinion, relevant conclusions about the general nature and purpose of the individual policies can be drawn in this case, just as they could in the case of the different (and wordier) instrument in issue in In re Sigma Finance Corporation [2009] UKSC 2, [2012] 1 All ER 571 (see especially paras 10, 12 and 37). They can be drawn from an overall consideration of the individual insurance wordings, and particularly from the features which tie cover to the employees and activities during the relevant policy period and the five points considered in paragraphs 18 to 28 above. Further, if the policies are on any view apt to cover employers liability for long tail diseases which initiate during, but only manifest themselves years after, the original policy period, one may look with scepticism at an interpretation which distinguishes this situation from other situations where a long tail disease is caused but does not strictly begin during the policy period, and only manifests itself years later. This is particularly so if a conclusion that the latter diseases fell outside the policy cover meant that they would or might well not fall within any subsequent employers liability policy. ELCIA 1969 Section 1 of the ELCIA provides: 1. (1) Except as otherwise provided by this Act, every employer carrying on any business in Great Britain shall insure, and maintain insurance, under one or more approved policies with an authorised insurer or insurers against liability for bodily injury or disease sustained by his employees, and arising out of and in the course of their employment in Great Britain in that business, but except in so far as regulations otherwise provide not including injury or disease suffered or contracted outside Great Britain (3) For the purposes of this Act (a) approved policy means a policy of insurance not subject to any conditions or exceptions prohibited for those purposes by regulations. 4. (1) Provision may be made by regulations for securing that certificates of insurance in such form and containing such particulars as may be prescribed by the regulations, are issued by insurers to employers entering into contracts of insurance in accordance with the requirements of this Act . (2) . the employer shall during the currency of the insurance and such further period (if any) as may be provided by regulations (a) comply with any regulations requiring him to display copies of the certificate of insurance for the information of his employees; . The only conditions or exceptions ever prohibited were certain exemptions from liability. Under section 3, the ELCIA did not however apply to local authority employers, such as most of MMIs insureds. Under section 4, provision might be made for certificates of insurance to be issued to employers, and in that event the employer was, obliged during the currency of the insurance and such further period (if any) as may be provided by regulations to comply with any regulations requiring him to display copies of the certificate of insurance for the information of his employees. In reaching his conclusions on the ELCIA (para 16 above), Rix LJ engaged in an impressive analysis, to which I would refer (paras 166 to 186). The only doubt this leaves is how, if the ELCIA requires a causation wording, an employer could properly insure on a wording which only covered injury sustained in the sense of experienced (see para 186 and paragraph 16 above). The scope of the ELCIA is, as Rix LJ indicated, open to three alternative analyses: that it requires cover in respect of (i) all future liability incurred during the insurance period, whenever the negligence or injury, or (ii) liability for all future injury or disease sustained (in the sense of experienced) by employees during the insurance period, whenever the negligence, or (iii) liability for all negligence or breach of statutory duty during the insurance period giving rise to liability as in (ii). The retrospectivity of cover involved in (i) and (ii) is unlikely to have been intended. The only one of the three possibilities not involving a degree of retrospectivity is (iii). A duty on every employer to insure, and maintain, insurance is consistent with a requirement to have the insurance in place during, though to maintain it after, the relevant insurance period. The provision, contemplated by section 4, for copies of insurance certificates to be issued by insurers and to be displayed by any employer for the information of his employees during the currency of the insurance and such further period as may be provided by regulations indicates, first, a desire to assure employees of their insurance protection during the relevant insurance period, and, secondly, an awareness that this assurance might need to remain in place after such insurance period; it is therefore suggestive of (iii), rather than (i) or (ii). As Rix LJ observed, it is only cover in accordance with (iii) that can give an employee the assurance that any injury or disease suffered as an employee and arising out of and in the course of [his] employment will be covered by insurance, the benefit of which would, if necessary, be available to him at the time under the Third Party (Rights against Insurers) Act 1930. An obligation to have a policy in force only at or by the time when injury is actually experienced would leave employees or ex employees at the mercy of compliance with the statute by their employers or ex employers at uncertain future dates. It would also leave such employees or ex employees at the mercy of employers who, for whatever reason, ceased to carry on business either in Great Britain or (for example due to insolvency) at all. Further, if injury or disease suffered or contracted bears the same meaning as insurers suggest that injury or disease sustained or contracted bears, then an employee, who had the misfortune to succumb to a disease abroad caused by his employment or previous employment in Great Britain, would not be covered (unless regulations intervened to ensure that he was). Stanley Burnton LJ thought that any issue as to the nature of the insurance required under ELCIA was resolved by its use of the word sustained, rather than caused. He went on to conclude that the ELCIA covered any injury sustained (in the sense of experienced) during a period of insurance, by anyone who was then or had at any previous time been an employee. However, that latter conclusion introduces a retrospectivity into the scope of the ELCIA, which, as already indicated, I think unlikely to have been intended. The statute could have used the tariff wording of causation instead of sustained. But in the statutory language the word sustained is not coupled with a phrase such as during the period of the insurance. Even if sustained means experienced in the context of the statute, the statute may require insurance on what is effectively a causation basis; the words sustained by his employees may well mean sustained at any future time by his current employees. The key to the meaning of the statutory language seems to me the combination of the phrases arising out of and in the course of their employment in Great Britain and not including injury or disease suffered or contracted outside Great Britain. Together, and for reasons given in the last two paragraphs, they indicate a statutory requirement to insure in respect of activities during the course of employment in Great Britain which may in the future give rise in or out of Great Britain to liability to the employees involved in such activities. In my judgment, therefore, the conclusion which gives proper effect to the protective purpose of the legislation is that the ELCIA requires insurance on a causation basis. The ELCIA extension provision to the Independent and second BAI wordings (see Annex A), as well as a similar extension provision to the MMI policy intended for insureds who were not local authorities, achieved this result expressly in relation to policies written subsequent to the coming into force of the ELCIA, at least for the purpose of ensuring that employees claims were covered by insurance. Any other subsequent insurances not containing that extension provision should, if possible, be read as providing the relevant employers cover required by statute. This is a powerful tool in the interpretation of such insurances. Bolton M.B.C. v Municipal Mutual Insurance Ltd The Court of Appeal in the present case was bound by its previous decision in Bolton MBC v Municipal Mutual Insurance Ltd [2006] EWCA Civ 50, [2006] 1 WLR 1492 on public liability policies. The majority regarded that case as, in effect, determining the meaning which must be put on the word sustained in the present employers liability policies: see paras 284, per Rix LJ, and 339, per Stanley Burnton LJ, who however also found the logic of Longmore LJs judgment convincing in relation to the latter type of policies. Smith LJ on the other hand considered that public liability and employers liability insurances gave rise to different considerations (para 328). In my opinion, that is right. Employers liability policies are subject to particular terms and considerations, analysed above (particularly in paragraphs 18 28 and, in the case of policies effected after the coming into effect of the ELCIA, paragraphs 41 46). These considerations are not or certainly not necessarily applicable to public liability insurances. The present case was concerned with employers liability not public liability insurances, and it may well be that not all the relevant facts relating to the latter are before us. We certainly have not heard full argument on the proper conclusions which may be drawn regarding the basis of liability or trigger generally applicable under the latter. In these circumstances, I would proceed on the basis that we are not bound by Bolton, that this does not involve any view about the correctness or otherwise of Bolton, but only that it is unnecessary to consider what the position generally may be under public liability policies. Assuming that, in relation to public liability insurance, the position generally is as stated in Bolton, that does not alter the conclusions which I reach. It merely means, in their light, that public liability insurance generally and the present employers liability policies operate on different bases, because of their different backgrounds, terms and purposes. Contracted There is no difficulty about treating the word contracted as looking to the causation or initiation of a disease, rather than to its development or manifestation. In relation to the two BAI wordings and the third MMI wording, this interpretation obtains strong support from the general nature and purpose of the relevant policies, derived from their immediate context and terms and analysed in paragraphs 18 to 28 and 41 above. To the limited extent that the WCA background may assist to inform the meaning of later policies, it can be seen overall as a legislative scheme which was concerned with either the risk of or actual causation (para 32 above). Even if, in the phrase sustained or contracted or injury sustained or disease contracted, the word sustained is to be understood as meaning experienced, that would reflect no more than the fact that the cause and effect of an injury commonly coincide; I would still unhesitatingly conclude, as did the Court of Appeal, that the word contracted used in conjunction with disease looks to the initiating or causative factor of the disease. Sustained The majority of the Court of Appeal considered that it was impossible to view policies with pure sustained wordings as operating by reference to the initiating or causative factor of a disease. They did so primarily by reference to the wording of the insuring clauses. In my view, as indicated in paragraphs 18 19 above, a broader approach is necessary. The general nature and purpose of these policies can be derived from their immediate context and terms, analysed in paragraphs 18 to 28 and 41 above. It is true, as Rix LJ said, that phrases such as injury sustained by an employee or an employee who shall sustain injury, in either case by accident or disease, appear to address the impact of the accident or disease on the employee. But the underlying focus of the insurance cover is on the employees and activities current during the insurance period. The cover would be potentially incomplete, and employers would be potentially exposed to uninsured risks, were sustained to be understood as meaning developed or manifested. This is so, even before the ELCIA came into force. Any policies written subsequent to the coming into force of the ELCIA either afford cover consistent with the Acts requirements by virtue of an ELCIA extension provision, or, to the extent that this is not the case, should be construed, if at all possible, as meeting employers obligations under that Act. In my view, such obligations included taking out insurance in respect of negligence during the insurance period affecting an employee in a manner giving rise to bodily injury or disease then or at any subsequent time. On this basis, I consider that, although the word sustained may initially appear to refer to the development or manifestation of such an injury or disease as it impacts employees, the only approach, consistent with the nature and underlying purpose of these insurances both before and after the ELCIA, is one which looks to the initiation or causation of the accident or disease which injured the employee. The disease may properly be said to have been sustained by an employee in the period when it was caused or initiated, even though it only developed or manifested itself subsequently. Disease sustained, read as meaning experienced or incurred Rix LJ was attracted by the submission that, even if sustaining disease meant experiencing or incurring it during the period of the insurance, long tail diseases could be said to have been sustained during the period of insurance in this sense. He asked rhetorically whether an employee who had inhaled asbestos had not sustained an injury in the form of an assault of the fibres, as a result of which he was worse off through having dangerous fibres in his lungs (para 280). He noted that, although there was at most trivial injury or damage, and nothing that could create actionable damage, nevertheless, when mesothelioma develops, it is the risk of mesothelioma created by the exposure which is the damage (see . Barker ) and it is the exposure, and the risk of mesothelioma, that is the damage (para 281). He only felt bound to reject this analysis (para 284) because of the Court of Appeals previous decision in Bolton. It may be that in the case of some long tail diseases, the victim can be said to have incurred or caught them at the same time as the initial ingestion or scratch giving rise to them. But it is clear that this is not the position with inhalation of asbestos in relation to either asbestosis or mesothelioma. No cause of action arises from exposure or inhalation alone: Rothwell v Chemical & Insulating Co Ltd [2007] UKHL 39, [2008] 1 AC 281. Further, for reasons which I develop in paragraphs 64 65 below, the exposure and risk are not by themselves damage in any sense known to the law. Damage is only incurred when mesothelioma develops. Only when it develops does the victim incur damage which is legally relevant, and even then this is not because any physical link necessarily exists or can be proved between the mesothelioma and the original exposure. The rule in Fairchild and Barker imposes liability for the mesothelioma upon persons who have exposed the victim to asbestos, and so created a risk of mesothelioma. But it is not a rule which, even as between employers and employees, deems the latter to have suffered injury or disease at the time of any exposure. And, even if it were viewed simply as a rule imposing retrospective liability on employers for exposing their employees to the risk of mesothelioma, the insurance policies do not insure risks of physical injury or disease, but only actual injury or disease. The application of the insurances in respect of mesothelioma At the outset of these appeals, the application of the insurances in respect of mesothelioma suffered by employees exposed to asbestos during their employment by an insured employer did not appear controversial. This changed after a question from Lord Phillips on day 4 of the hearing, followed by a later written note. All the same, the transcript pages containing any argument on the point numbered only 40 out of a total of some 1140. So far as Mr Edelman made any submissions on this point, in his written case or orally, they were to this effect: if the correct analysis of the Houses decision in Fairchild be that an employer who exposes an employee to asbestos is deemed to have caused that employees mesothelioma, then employers liability insurances held by the employer on a causation basis should respond; but, if the policies do not respond on a causation basis, there is no justification for treating the employee as having suffered injury or a disease during their currency, because employers cannot prove that any particular inhalation caused any injury. This led to some discussion, particularly with counsel for employers and employees, of the points which I have already addressed in paragraphs 50 52 above. The point now expressed forcefully by Lord Phillips in his judgment is that exposure to the risk of mesothelioma is the correct analysis of the Fairchild principle, at least as subsequently interpreted, and that such exposure can satisfy neither the concept of injury nor the concept of causation for the purposes of the policies. If that is right, then the present insurance claims must all fail. Indeed, the great bulk of insurance claims settled by other insurers (e.g. former tariff insurers) or by the present insurers under the causation policies they have issued in more recent years (paragraph 10 above) should presumably also have failed. The only exception may be the case of an employee exposed to asbestos in only one employment by an employer holding insurance throughout with only one insurer. In such a case it might (perhaps) be said that, whichever particular inhalation(s) may have been responsible for the employees mesothelioma, it (or they) must have been insured. Even then, the logic of the Supreme Courts reasoning in Fairchild and Sienkiewicz v Greif (UK) Ltd [2011] UKSC 10, [2011] 2 AC 229 might lead to the conclusion that causation was still unprovable in the light of the possibilities of environmental or idiopathic causation of mesothelioma. Rules regarding causation are created by the courts for the purpose of determining when liability arises in particular contexts. Normally, they reflect a common sense understanding of what is ordinarily understood when we speak of a cause in a particular context. In their leading work on Causation in the law (Clarendon Press, 2nd ed 1985) Professor H. L. A. Hart and Tony Honor examined both this understanding and its relationship to legal decision making. Generally, but not always, a cause must involve an act or omission that was at least a sine qua non of the injury in respect of which responsibility attaches (the but for test). But sometimes two separate acts or omissions may each independently have been sufficient to give rise to that injury (as when A and B simultaneously, but independently shoot C dead), and then we may as a matter of legal policy accept a weaker causal relationship for the imposition of responsibility: see p lxv in the preface to and p 123 of the 2nd edition. Other cases where causal requirements have been relaxed include Bonnington Castings Ltd v Wardlaw [1956] AC 613; there, materially contributing to part of an accumulation of dust which cumulatively led to pneumoconiosis gave rise to liability for the whole disease (although it has been suggested that some apportionment might now be possible in fact and law). Another relevant authority is McGhee v National Coal Board [1973] 1 WLR 1; there, liability for dermatitis was held to exist because the defendant had materially contributed to part of the claimants exposure to dirt, any part of which might, independently of any other, have given rise to the abrasion leading to the claimants dermatitis. It was recognised that this involved liability based on materially contributing to the risk of the injury. Lord Reid at p.4G H described the result as reached taking a broader view of causation, and Lord Wilberforce at p 5G viewed it as involving a conclusion as to the causal connection that had to exist between the default and the disease complained of. The contrary view (viz, that proof of risk was insufficient without proof that the risk caused or materially contributed to the disease) had a logic which Lord Wilberforce acknowledged, but rejected for policy and evidential reasons set out at p.6C F. In Fairchild, McGhee was seen as a precursor of the decision there reached. Putting aside the possibility of an idiopathic or environmental cause, a Fairchild type situation exists when (a) there are two separate potential causes exposing the claimant to the same risk, one involving an act or omission by the defendant, (b) either one of which causes would have been sufficient to give rise to the injury, and (c) one of which did so, but (d) neither of which can as a matter of probability be shown to have done so. Taking into account the later decisions in Barker v Corus and Sienkiewicz, the Fairchild principle extends to any case where there has been an act or omission exposing a person to asbestos, which exposure may have caused the mesothelioma, but which cannot be shown as a matter of probability to have done so. On that basis, the House held in Barker v Corus that each or any persons liability should only be proportionate to the extent that he had exposed another to the risk of mesothelioma. Parliament by the Compensation Act 2006 reversed that conclusion and made each such person liable in respect of the whole of the damage caused by the mesothelioma. Lord Phillips in his judgment addresses the basis of Fairchild in the light of Barker v Corus, the 2006 Act and Sienkiewicz. He accepts that, if Fairchild is now correctly to be understood as a special rule deeming employers who have exposed an employee to asbestos to have caused any subsequently suffered mesothelioma, then the insurance policies should apply (para 109). But he concludes that Fairchild must be understood as creating liability not for the disease, but for the creation of the risk of causing the disease. It follows in his view that employers and employees gain no assistance from the special rule in asserting that mesothelioma suffered by any person was caused or initiated in any particular policy period. On this basis, even though the insurances respond to injuries caused or initiated during their periods, the employers and employees fail for want of proof. It is not fruitful to repeat the exercise undertaken in Barker v Corus of examining in detail the significance of the speeches in Fairchild. The House was not agreed about this in Barker, but the majority speeches of Lords Hoffmann, Scott and Walker were at pains to reject any analysis of Fairchild as proceeding upon a fiction that each exposure had caused or materially contributed to the disease: see paras 31, 61 and 104; they each also referred to the liability created by Fairchild as being not for causing the disease, but for materially increasing the risk of the mesothelioma which was in fact suffered: paras 31, 36 and 40, 53, 61 and 113. Lord Rodger (dissenting) perceived the majority to be misinterpreting Fairchild by failing to acknowledge that it was based on an equation of materially increasing risk with materially contributing to causation, an equation which he thought had been accepted as sufficient causation in Bonnington Castings Ltd v Wardlaw [1956] AC 613 and McGhee v National Coal Board [1973] 1 WLR 1. It is on the apparently bright line distinction said to have been drawn by the majority in Barker between materially contributing to increasing the risk of, and causing, a disease that Lord Phillips now founds his judgment in these appeals. The Compensation Act 2006 applies where a person who has exposed someone to asbestos is liable in tort in connection with damage caused to the latter by mesothelioma whether by reason of having materially increased a risk or for any other reason (section 3(1)(d)). It makes the former person liable in respect of the whole of the damage (section 3(2)(a)). On its face, the Act assumes rather than creates the liability, and only alters the measure of recovery. That was the view expressed in Sienkiewicz by Lords Phillips, Rodger and Brown (paras 70, 131 and 183). However, on further analysis, the distinction identified in paragraphs 58 59 above proves more elusive. Even in Barker itself, Lord Walker described exposing the employee to the risk of mesothelioma as being equated with causing his injury and the result as an explicit variation of the ordinary requirement as to causation (para 104), and spoke of the rule as one by which exposure to the risk of injury is equated with legal responsibility for that injury (para 109). However, it is conceivable that he meant that the ordinary requirement of causation of the disease was entirely replaced by another liability creating rule. It is in the later authority of Sienkiewicz that the difficulty of drawing any clear cut distinction between creating a risk and causation of the disease becomes most apparent. Lord Phillips there stated that the rule in its current form was that the person responsible for the exposure and thus creating a material increase in risk of the victim contracting the disease will be held to be jointly and severally liable for causing the disease (para 1). Later, he said that the law was presently contained in Fairchild and Barker which had developed the common law by equating materially increasing the risk with contributing to the cause in specified and limited circumstances (para 70). That was the analysis of Fairchild advanced by Lord Rodger in Barker v Corus (paras 73 and 83) but rejected there by the majority. Lord Brown in Sienkiewicz spoke of a more relaxed approach to causation (para 178) and flexibility in the approach to causation (para 187). I referred to Fairchild and Barker as involving a special rule of causation (para 188), and Lord Kerr referred to them as involving a modification of the previously applicable legal rules in relation to the causation element in employers liability claims (para 196) and to adjustments in the burden of proof (paras 198 and 200). Lord Rodger was, on the other hand, loyal to the majority view in Barker by referring to liability as based on materially increas[ing] the risk (para 113), and Lord Dyson was cautious in speaking of materially increasing the risk of contracting the disease as sufficient to satisfy the causal requirements for liability (para 207). Lord Phillips has in para 123 set out a passage from an extra judicial commentary written by Lord Hoffmann in Perspectives on Causation (2011), p 8. In it, Lord Hoffmann describes the two ways in which the changes introduced by Fairchild and Barker could be characterised, one as changing the causal requirements for an action for damages for mesothelioma ; all that is necessary is to prove that the risk has been increased and that the specific exposure may have provided the actual agent; the other as creat[ing], exceptionally, a cause of action for the increased risk of mesothelioma, rather than for the disease itself. Lord Hoffmann notes that the House in Barker (Lord Rodger dissenting) adopted the second explanation of what had happened in Fairchild. But in the next sentence, not quoted by Lord Phillips, Lord Hoffmann went on: Parliament almost immediately reversed this decision by a statute giving effect to the first explanation, which had been advocated by Lord Rodger in his dissenting speech. Lord Hoffmanns extra judicial (or judicial) words cannot by themselves alter the true effect of a statute, but his comments do again show that the suggested distinction is more fluid than might at first appear. It is relevant to look more closely at what Barker decides. In Barker, Lord Hoffmann spoke of Fairchild as applying an exceptional and less demanding test for the necessary causal link between the defendants conduct and the damage (para 1) and of the requirement of a sufficient causal link between the defendants conduct and the claimants injury (para 17). In his note in Perspectives on Causation, he picked up this language with references to the causal requirements of the relevant rule and to the issues in cases of mesothelioma and analogous situations as involving the causal requirements for an action for damages for mesothelioma. Lady Hale in Barker also viewed the common law rules governing the measure of recovery as closely linked to the common laws approach to causation, and said that there was no reason in principle why the former rules should not be modified as the latter approach is courageously developed to meet new situations (para 122). In paras 123 and 124, she made clear that in her view the issue in Barker could be seen as arising from the expanded perceptions or developed concept of causation which the law had accepted. These citations all suggest that it is both possible and appropriate to characterise the position achieved by the common law after Barker v Corus as one concerned with the issue of the causal requirements or causal link, as between the defendants conduct and the disease, which the common law requires in order for there to be an action for mesothelioma. But analysis of the rule arrived at after Fairchild and Barker justifies further propositions. Despite the apparent clarity of the suggested distinction between liability for a risk and for a disease, no cause of action at all exists unless and until mesothelioma actually develops. Neither the exposure to asbestos nor the risk that this may one day lead to mesothelioma or some other disease is by itself an injury giving rise to any cause of action: see Rothwell v Chemical & Insulating Co Ltd [2007] UKHL 39, [2008] 1 AC 281; the House there decided that not even the emergence of pleural plaques marking the past exposure to asbestos constituted injury for the purpose of giving a cause of action. In order to fall within the principle in Fairchild and Barker, the development of mesothelioma is a pre condition: see Barker, per Lord Hoffmann (para 48) and Lord Scott (para 53). Lady Hale went further, stressing that she in fact agreed with Lord Rodgers view that the damage which is the gist of these actions is the mesothelioma and its physical and financial consequences. It is not the risk of contracting mesothelioma (para 120). In reality, it is impossible, or at least inaccurate, to speak of the cause of action recognised in Fairchild and Barker as being simply for the risk created by exposing someone to asbestos. If it were simply for that risk, then the risk would be the injury; damages would be recoverable for every exposure, without proof by the claimant of any (other) injury at all. That is emphatically not the law: see Rothwell and the statements in Barker itself, cited above. The cause of action exists because the defendant has previously exposed the victim to asbestos, because that exposure may have led to the mesothelioma, not because it did, and because mesothelioma has been suffered by the victim. As to the exposure, all that can be said (leaving aside the remote possibility that mesothelioma may develop idiopathically) is that some exposure to asbestos by someone, something or some event led to the mesothelioma. In the present state of scientific knowledge and understanding, there is nothing that enables one to know or suggest that the risk to which the defendant exposed the victim actually materialised. What materialised was at most a risk of the same kind to which someone, who may or may not have been the defendant, or something or some event had exposed the victim. The actual development of mesothelioma is an essential element of the cause of action. In ordinary language, the cause of action is for or in respect of the mesothelioma, and in ordinary language a defendant who exposes a victim of mesothelioma to asbestos is, under the rule in Fairchild and Barker, held responsible for and in respect of both that exposure and the mesothelioma. This legal responsibility may be described in various ways. For reasons already indicated, it is over simple to describe it as being for the risk. Another way is to view a defendant responsible under the rule as an insurer, but that too is hardly a natural description of a liability which is firmly based on traditional conceptions of tort liability as rooted in fault. A third way is to view it as responsibility for the mesothelioma, based on a weak or broad view of the causal requirements or causal link appropriate in the particular context to ground liability for the mesothelioma. This third way is entirely natural. It was adopted by Lords Reid and Wilberforce in McGhee, by Lord Hoffmann, Lady Hale and (possibly) Lord Walker in Barker and by Lord Hoffmann in his extra judicial commentary. It seems to have received the perhaps instinctive endorsement of a number of members of this Court, including myself, in Sienkiewicz. Ultimately, there is no magic about concepts such as causation or causal requirements, wherever they appear. They have the meanings assigned to them and understood in ordinary usage in their context. A logician might disagree with a reference to causation or a causal link in a particular context, but that is not the test of meaning: see Lord Wilberforces words in McGhee, p 6C F (cited in para 56 above). The present appeals concern the meanings we assign to the concept of causation, first in the context of considering employers liability to their employees and then in considering the scope of employers insurance cover with respect to such liability. It is instructive in this connection to look more closely at the Compensation Act 2006. Section 3(3) states that section 3(2) does not prevent (a) one responsible person from claiming a contribution from another, or (b) a finding of contributory negligence. Section 3(4) goes on to provide that [I]n determining the extent of contributions of different responsible persons in accordance with subsection (3)(a), a court shall have regard to the relative lengths of the periods of exposure for which each was responsible . Section 3(3) necessarily relates to the legal bases for claiming contribution or asserting contributory negligence, which are to be found in, respectively, the Civil Liability (Contribution) Act 1978 and the Law Reform (Contributory Negligence) Act 1945. The 1978 Act addresses the situation where two or more persons are liable in respect of the same damage (section 1(1)), while section 2(1) provides for contribution in such situations to be such as may be found by the court to be just and equitable having regard to the extent of that persons responsibility for the damage in question. Although under section 3(4) of the 2006 Act, the court must have regard to the relative lengths of the exposure for which each was responsible, the same damage which is a pre condition to the application of the 1978 Act must be the mesothelioma. It cannot be the risk created by the person by or from whom contribution is sought, because each person and exposure creates a separate risk, and no one person or exposure creates the total risk resulting from all exposures. The 2006 Act, by its reference to the 1978 Act, thus assumes that every person, who has exposed to asbestos a victim who later experiences mesothelioma, incurs responsibility for the mesothelioma. That language again fits an analysis whereby the rule in Fairchild and Barker identifies the appropriate weak or broad causal link between the exposure and the mesothelioma. A similar position applies under the 1945 Act. Under section 1(1), that Act applies [w]here any person suffers damage as the result partly of his own fault and partly of the fault of any other person or persons. In that event, the damages recoverable are to be reduced to such extent as the court thinks just and equitable having regard to the claimants share in the responsibility for the damage. The application of this section, as contemplated by the 2006 Act, is only possible on the basis that a mesothelioma sufferer may be said to have suffered the mesothelioma partly as the result . of the fault of anyone who has exposed him to asbestos. In other words, the rule in Fairchild and Barker must have been viewed by the drafters in my opinion entirely understandably as establishing a causal link, between the exposure and the mesothelioma, sufficient for it to be said that the mesothelioma was the result of each (and every) exposure. A similar view is also implicit in the provisions of the Act drafted on the basis that insurers who would commonly of course be employers liability insurers would be among the persons by or for whose benefit or against whom contribution would be sought in cases of multiple responsible persons: see section 3(7)(b) and (10)(a) of the 2006 Act. Those provisions necessarily assume that employers liability insurances, written generally on a causation basis, would respond to Fairchild/Barker type liability incurred by employers. Ultimately, the present appeals raise the questions how the present employers liability insurance policies respond as a matter of construction in circumstances within the rule in Fairchild and Barker. Where two contracts are linked, the law will try to read them consistently with each other. This is so with language in a bill of lading, incorporated from a charterparty: The Njegos [1936] P 90. A similar approach applies to language in a reinsurance incorporated from the insurance: Forsikringsaktieselskapet Vesta v Butcher [1989] AC 852 and Groupama Navigation et Transports v Catatumbo CA Seguros [2000] 2 Lloyds Reports 350, even though there is no guarantee that a reinsurance will in every possible circumstance that may develop pick up every liability that may be held to exist under an insurance: see Wasa International Insurance Co Ltd v Lexington Insurance Co [2009] UKHC 40, [2010] 1 AC 180. The intention under the present insurances must be taken to have been that they would respond to whatever liability the insured employers might be held to incur within the scope of the risks insured and within the period in respect of which they were insured. Thus, as Scrutton and Greer LJJ accepted in the Ellerbeck Collieries case (paragraph 34 above), an employers liability insurance could have been expected to respond to the conventional and artificial definition in the WCAs as to what constituted an accident and when personal injury by accident or disease was sustained for the purposes of employers liability to employees. Furthermore, if the common law during or even after the currency of an insurance develops in a manner which increases employers liability, compared with previous perceptions as to what the common law was, that is a risk which the insurers must accept, within the limits of the relevant insurance and insurance period. Eady J correctly identified this in Phillips v Syndicate 992 Gunner [2003] EWHC 1084 (QB), [2004] Lloyds Insurance and Reinsurance Reports 426, 429 (left). The declaratory theory does not presume the existence of an ideal system of the common law, which the judges from time to time reveal in their decisions. But it does mean that, when judges state what the law is, their decisions do . have a retrospective effect in the sense that the law as stated will, generally speaking, be applicable not only to the case coming before [them] but, as part of the common law, to other comparable cases which come before the courts, whenever the events which are the subject of those cases: Kleinwort Benson Ltd v Lincoln CC [1999] 2 AC 349, 378G H, per Lord Goff. The declaratory theory is a pragmatic tool, essential when cases can only come before the court some time, perhaps some years after the relevant events occurred, and when the law [must] be applied equally to all, and yet be capable of organic change (p 379A). A similar principle must, generally speaking, apply in relation to a statute such as the Compensation Act 2006, which changes or corrects the common law to what Parliament perceives to be a more appropriate result for the purposes of all future cases coming before the courts, whenever the events giving rise to them. In the case of that Act, the result was one which the courts might as a matter of common law well have themselves accepted (and which indeed Lord Rodger in his powerful dissent in Barker v Corus believed that the common law had accepted) in Fairchild. Concluding, as I have done, that the present insurances covered employers liability for injuries or diseases caused during the relevant insurance periods, the question is whether they cover employers liability for mesothelioma arising under the rule in Fairchild and Barker from having exposed employees to asbestos during such periods. It is not in dispute that, if the rule is characterised as a rule of deemed causation, then the policies must respond. A parallel example, so familiar that it is easy to overlook, is the vicarious liability to an employee, A, which rests on any employer, B, who has not himself been negligent but must answer vicariously for the negligence of another employee, C. We have no hesitation in saying that the employer B has in such a case caused the injury or disease suffered by A. But this is so in reality only because a rule of law requires us to equate the acts or omissions of C with those of B. The argument, accepted by Lord Phillips, is that the rule in Fairchild and Barker is not one of deemed causation of or, therefore, liability for the disease, but one of liability for the risk created by the exposure. For reasons which I have set out, I regard this distinction as too simple. The liability arises only because of the incurring of the disease and is for the disease. A condition of such liability is that the employer (negligently) exposed the victim to asbestos. The insurance policies, read as operating on a causation basis, are aimed at covering liability generated by employers activities during their insurance periods: see paragraphs 18 28 and 41 above; unless liability for mesothelioma flowing from negligent exposure during an insurance period is covered by the policies, this aspect of employers activities will not in practice be covered at all. In my view, these considerations justify a conclusion that, for the purposes of the insurances, liability for mesothelioma following upon exposure to asbestos created during an insurance period involves a sufficient weak or broad causal link for the disease to be regarded as caused within the insurance period. It would, I think, have been anomalous and unjust if the law by deeming there to have been causation of the disease could have created policy liability (which is common ground), but the law by insisting that the liability in respect of mesothelioma was for the risk of causation achieved a quite different result. As I have sought to show, it is not in any event accurate to treat the liability as being either solely or strictly for the risk. The risk is no more than an element or condition necessary to establish liability for the mesothelioma. The reality, reinforced by provisions in the 2006 Act, is that the employer is being held responsible for the mesothelioma. For this purpose, the law accepts a weak or broad causal link. The link is to exposure which may but cannot be shown on the ordinary balance of probabilities to have played a role in the actual occurrence of the disease. But for the purposes of the policies the negligent exposure of an employee to asbestos can properly be described as having a sufficient causal link or being sufficiently causally connected with subsequently arising mesothelioma for the policies to respond. The concept of a disease being caused during the policy period must be interpreted sufficiently flexibly to embrace the role assigned to exposure by the rule in Fairchild and Barker. Viewing the point slightly more broadly, if (as I have concluded) the fundamental focus of the policies is on the employment relationship and activities during the insurance period and on liability arising out of and in course of them, then the liability for mesothelioma imposed by the rule in my opinion fulfils precisely the conditions under which these policies should and do respond. Conclusion I would therefore dismiss the appeals by insurers so far as they concern the policies with contracted wordings. I would allow the appeals against insurers, and dismiss the appeal by the Independent, so far as they concern policies with sustained wordings. ANNEX A The policy wordings (dates are approximate) (1) Excess First Wording (late 1940s): Whereas . (hereinafter called The Employer) carrying on the business of . has made a proposal . this Policy witnesseth that in consideration of the payment of . as premium to the Company on the estimated total amount, as set forth in the Schedule hereto, of the wages, salaries, and other earnings of Employees, a description of whom is set forth in the said Schedule (which premium is subject to adjustment as hereinafter provided) the Company agrees to indemnify the Employer in the manner following, namely That if at any time during the period commencing on theday of19 , and ending on theday of19 (both days inclusive) and for such further period or periods as may be mutually agreed upon, any employee in the Employer's immediate service shall sustain any personal injury by accident or disease while engaged in the service of the Employer in Great Britain, Northern Ireland, the Isle of Man or the Channel Islands, in work forming part of or process in the business above mentioned, and in case the Employer shall be liable to damages for such injury, either under or by virtue of the Common Law, the Fatal Accidents Acts 1846 to 1908, or the Law Reform (Miscellaneous Provisions) Act 1934, the Company will indemnify the Employer The Schedule required a description of the insured companys employees and their estimated total wages, salary and other earnings. Condition 1 of the policy further provided that: the Employer shall truly record in a wages book the name of every employee and the amount of wages, salary and other earnings paid to him. Second Wording (late 1950s to 1960s): Whereas the Employer . carrying on the business described in the . Schedule has made . a written proposal and declaration, containing particulars and statements which it is hereby agreed are the basis of this Contract . and has paid the premium mentioned in the Schedule, which premium is subject to adjustment as hereinafter provided, this Policy witnesseth that if at any time during the period of the indemnity as stated in the Schedule or during any subsequent period for which the Company may accept premium for the renewal of this Policy any person of a description mentioned in the Schedule who is under a contract of service or apprenticeship with the Employer shall sustain personal injury by accident or disease arising out of and in the course of employment by the Employer in work forming part of the process in the business mentioned in the Schedule, the Company will indemnify the Employer against liability at law for damages in respect of such injury or disease The policy provided that the Company should not be liable under it in respect of accidents occurring elsewhere than in Great Britain, Northern Ireland, the Isle of Man or the Channel Islands. The policy provided that premiums were to be regulated by the amount of wages, salaries, or other earnings paid to employees by the employer during each period of insurance, with a wages book being kept open to inspection for that purpose and the employer supplying the correct amounts within one month of the expiry of each insurance period. Condition 1 and the Schedule were in similar form to those in the first wording. Third Wording (1970 to 1976) After a recital in the same form as the second wording, this wording provided: that if at any time during the period of the indemnity as stated in the Schedule or during any subsequent period for which the Company may accept premium for the renewal of this Policy any person of a description mentioned in the Schedule who is under a contract of service or apprenticeship with the Employer shall sustain personal injury by accident or disease arising out of and in the course of employment by the Employer in the business mentioned in the Schedule, the Company will indemnify the Employer against liability at law for damages in respect of such injury or disease Under the third wording, there was the same territorial limitation as under the second wording in relation to accidents occurring elsewhere than in Great Britain, etc. Premiums were also regulated by reference to wages, salaries, etc. and condition 1 and the Schedule were in the same terms as in the second wording. (2) Independent Sole wording in Issue (1972 to 1987): This was a Contractors Combined Policy, covering Employers Liability (section 1), Public Liability (section 2) and Loss of or Damage to Contract Works (section 3). It provided: NOW THIS POLICY WITNESSETH that during the Period of Insurance or during any subsequent period for which the Company may accept payment for the continuance of this Policy and subject to the terms, exceptions and conditions contained herein and or endorsed hereon, the Company will indemnify the Insured as hereinafter specified. SECTION 1 EMPLOYERS' LIABILITY If any person who is under a contract of service or apprenticeship with the Insured shall sustain bodily injury or disease arising out of and in the course of his employment by the Insured in connection with the Contract specified or type of work described in the Schedule the Company will indemnify the Insured against all sums for which the Insured shall be liable at law for damages for such injury or disease The Policy provided that the Company was not to be liable for injury, illness, loss or damage caused elsewhere than in Great Britain, the Isle of Man or the Channel Islands. As a result of the ELCIA 1969 making insurance in respect of employers liability compulsory, the Independent wording also contained the further provision (the ELCIA extension provision): "AVOIDANCE OF CERTAIN TERMS AND RIGHT OF RECOVERY The indemnity granted by section 1 of this Policy is deemed to be in accordance with the provisions of any law relating to compulsory insurance of liability to employees in Great Britain. It is agreed the Insured shall repay to the Company all sums paid by the Company which the Company would not have been liable to pay but for the provisions of such law. " The policy Schedule contains spaces for entry of first, annual and minimum premium, as well as of the name of the Principal for whom the insured is undertaking work, the details of the contract or type of work covered by the policy and its situation. Condition 7 provides that the premium is based on estimates provided by the Insured, for record keeping, for the supply of updated information as required by the Company within one month of the expiry of each insurance period and for adjustment of the premium on that basis. (3) MMI First Wording (1949 to 1958) the Company hereby agrees that if at any time during the period of insurance specified in the schedule or thereafter during any subsequent period for which the Insured shall agree to pay and the Company shall agree to accept a renewal premium of the amount specified in the said schedule, or of such other amount as the Company shall from time to time require, any person under a contract of service with the Insured shall sustain any personal injury by accident or disease arising out of and in the course of his employment by the Insured in their activities described in the schedule and if the Insured shall be liable to pay damages for such injury or disease then, subject to the terms and conditions contained herein or endorsed hereon, the Company shall indemnify the Insured against all sums for which the Insured shall be so liable The policy was expressed not to apply to or include liability in respect of injury or disease caused elsewhere than in Great Britain, Northern Ireland, the Isle of Man or the Channel Islands. Condition 5 regulated premiums by reference to wages, salaries, etc, and made provision for a wages book and adjustment to like effect to the Excess second wording. The policy Schedule provided for the classification of staff and employees according to departments and job description, with corresponding figures for estimated total remuneration. Second Wording (1958 to 1974) the Company hereby agrees that if at any time during the First Period of Insurance specified in the said Schedule or during any subsequent period for which the Insured shall agree to pay and the Company shall agree to accept a renewal premium of the amount specified as the Renewal Premium in the said Schedule or of such other amount as the Company shall from time to time require, any person under a contract of service with the Insured shall sustain any bodily injury or disease arising out of and in the course of his employment by the Insured in the Insured's activities described in the said Schedule and if the Insured shall be liable to pay damages for such injury or disease or for death resulting from such injury or disease then, subject to the terms, exceptions and conditions contained herein or endorsed hereon or set out in the Schedule to this Policythe Company will indemnity the Insured against all sums for which the Insured shall be so liable. Like the first wording, this wording contained a territorial exclusion of liability in respect of injury or disease caused elsewhere than in Great Britain, etc. The policy Schedule provided for the entry of the Estimates (if any) on which the premium is calculated, including in particular any such estimate of wages, salaries, etc. paid to staff, and cross referred to condition 7, which provided that, if the premium had been based on any estimates, an accurate record should be kept (of actual amounts), the insured should provide insurers with such particulars and information as might be required within one month of the expiry of the policy period and the premium adjusted accordingly. Third Wording (1974 to 1992) The Company agrees to indemnify the Insured in respect of all sums without limit as to amount which the Insured shall be legally liable to pay as compensation for bodily injury or disease (including death resulting from such bodily injury or disease) suffered by any person under a contract of service or apprenticeship with the Insured when such injury or disease arises out of and in the course of employment by the Insured and is sustained or contracted during the currency of this Policy. The policy Schedule contemplated a premium adjustable in accordance with condition 5, which in turn provided (in like manner to condition 7 of the second wording) for the adjustment of any premium so calculated by reference to actual amounts at the end of the policy period. (4) BAI First Wording (1953 to 1974) . the Company willindemnify the Insured against all sums of money which the Insured may become liable to pay to any Employee engaged in the direct service of the insured or any dependent of such Employee in respect of any claim for injury sustained or disease contracted by such Employee betweenandboth inclusive The policy carried the note: This policy does not cover the insureds liability for accidents to workmen arising outside the United Kingdom. Conditions 1 and 2 made elaborate provision for the regulation of premiums by the amount of wages, salaries, or other earnings paid to employees by the employer during each period of insurance, with pay sheets and books of account being kept open to inspection for that purpose and the employer making a return, and the premium being adjusted, subject to a minimum, at the end of each insurance period. Second Wording (1974 to 1983) the Company willindemnify the Insured against all sums of money which the Insured may become legally liable to pay in respect of any claim for injury sustained or disease contracted by any person engaged in and upon the service of the Insured and being in the Insured's direct employment under a Contract of Service or Apprenticeship between theday ofand theday ofboth inclusive This wording also excluded insurers from liability in respect of accidents to employees arising outside the United Kingdom. Like the Independent and third MMI wordings, the BAI second wording also included the ELCIA extension provision. Conditions 1 and 2 provided for the regulation and adjustment of premiums by reference to actual wages, salaries, etc. during each insurance period, in like terms to conditions 1 and 2 in the first wording. (5) Zurich The Municipal First Select wording (1993 to 1998) The INSURER will indemnify the INSURED in respect of all sums which the INSURED may become legally liable to pay as damages and claimants' costs and expenses in respect of Injury sustained during the Period of Insurance by any EMPLOYEE arising out of and in the course of employment by the INSURED in the BUSINESS within the Geographical Limits. The Municipal Second Select wording (1998 ) The INSURER will indemnify the INSURED in respect of all sums which the INSURED may become legally liable to pay as damages and claimants' costs and expenses in respect of Injury caused during the Period of Insurance to any EMPLOYEE arising out of and in the course of employment by the INSURED in the BUSINESS within the Geographical Limits. The tariff wording (1948 ) if any person under a contract of service or apprenticeship with the Insured shall sustain any personal injury by accident or disease caused during the period of insurance and arising out of and in the course of his employment by the Insured in the business above mentioned and if the Insured shall be liable to pay damages for such injury or disease the Association shall indemnify the Insured against all sums for which the Insured shall be so liable. LORD CLARKE Like other members of the Court, I agree with Lord Mance on the construction issue. Thus I agree that, for the purposes of the EL policies, mesothelioma is sustained or contracted when the process that leads to the disease is initiated as a result of the wrongful exposure of the employee to the asbestos fibre or fibres which cause the disease. I do not wish to add to Lord Mances reasoning on the construction issue. I do however wish to add some words of my own on the causation issue which sharply divides Lord Phillips and Lord Mance. I wish to say shortly why I prefer the conclusion of Lord Mance to that of Lord Phillips. As I see it, the effect of Fairchild, Barker and Sienkiewicz may be summarised in this way. An employer who, in breach of duty, has exposed an employee to asbestos is liable in damages if the employee subsequently suffers the disease. The employees cause of action is not that he was exposed to the risk of mesothelioma. He has no claim unless he in fact suffers the disease. It is the disease which represents the damage which completes the cause of action and it is only then that his cause of action accrues and the relevant time limit begins to run. It is axiomatic that, in order to succeed in tort, the employee must show a sufficient causal link between the breach of duty, namely the exposure to asbestos, and the disease which represents the damage, namely mesothelioma. The effect of the majority opinion in Barker is that, where there are two or more employers who have exposed the claimant to the risk of mesothelioma, they are not jointly and severally liable to the claimant for the whole of the consequences of the disease but only severally liable for an aliquot part. That decision was reversed by the Compensation Act 2006, so that such employers are jointly and severally liable for the whole of the consequences. The question in this appeal is whether the employers liability insurers are liable to indemnify the employers in respect of that liability. It would in my opinion be a remarkable result if they were not. Lord Phillips notes at para 109 that Mr Edelman QC accepted that, if the correct analysis of the special rule, which (using Lord Phillips definitions) was the result of the combined effect of the special approach in Fairchild and Barker and the Compensation Act 2006, was that the employers were deemed to have caused mesothelioma by exposing the employees to asbestos dust, the insurers would be liable. Lord Phillips accepts that that concession was correctly made. I agree, for the reasons he gives at paras 109 to 114. The question is therefore whether the correct analysis of the special rule is indeed that the employers were deemed to have caused the mesothelioma. I accept that in such a case the employee cannot show on the balance of probabilities that the employers negligence caused the disease. The effect of Fairchild and Sienkiewicz was however that the employer is liable where the exposure contributed to the risk that the employee would suffer the disease and where the employee in fact suffers the disease. That is not in dispute. Lord Phillips says at para 124 that the majority in Barker drew the vital distinction between being liable for contributing to the cause of the disease and being liable for the creation of the risk of causing the disease. He quotes para 2 of Lord Hoffmanns speech as follows: Is any defendant who is liable under the exception deemed to have caused the disease? On orthodox principles, all defendants who have actually caused the damage are jointly and severally liable. Or is the damage caused by a defendant in a Fairchild case the creation of a risk that the claimant will contract the disease? In that case, each defendant will be liable only for his aliquot contribution to the total risk of the claimant contracting the disease a risk which is known to have materialised. Lord Phillips further notes that at para 125 Lord Hoffmann advanced the thesis that the basis of liability was the wrongful creation of the risk or chance of causing the disease and that the damage that the defendant should be regarded as having caused was the creation of such risk or chance. See also the passages to like effect referred to by Lord Mance at para 61. I accept that Lord Hoffmann and others did indeed advance that view of Fairchild but it is I think important to note that it was in the context of the question whether, in a case of two or more employers, each was severally liable for a proportion of the consequences of the mesothelioma or whether each was jointly and severally liable for the whole. Lord Hoffmann cannot have intended to hold, without more, that the basis of liability was the wrongful creation of the risk or chance of causing the disease because there would be no liability at all but for the subsequent existence of the mesothelioma. It seems to me that, whether the majority in Barker were correct or not, there is no escape from the conclusion that, in all these cases, where it is not possible to show that the particular employer caused the claimant to suffer mesothelioma, the underlying question is who should be held responsible for causing the mesothelioma which in fact struck down the employee. None of the cases is authority for the proposition that causation is irrelevant. On the contrary, the quest is for the employer who can fairly be held liable for the consequences of the disease and therefore for the employer who can fairly be said to have caused the disease. The courts have embarked on similar quests over the years. Lord Mance has given a number of examples. As Lord Mance shows at para 56, they include Bonnington and McGhee, where Lord Reid was prepared to take a broad view of causation and Lord Wilberforce rejected a traditional approach for policy or evidential reasons. In my opinion the reasoning in Sienkiewicz is of some significance in this context. Lord Mance has given the relevant references in para 61. Thus, as Lord Mance observes, at para 61 Lord Phillips said that Fairchild and Barker had developed the common law by equating materially increasing the risk with contributing to the cause in specified and limited circumstances. Lord Mance further refers to Lord Brown speaking of a more relaxed approach to causation and flexibility in the approach to causation at paras 178 and 187. Lord Mance had himself referred to Fairchild and Barker as involving a special rule of causation at para 188, and Lord Kerr referred to them as involving a modification of the previously applicable legal rules in relation to the causation element in employers liability claims at para 196 and to adjustments in the burden of proof at paras 198 and 200. Again, as Lord Mance observes at para 61 above, Lord Dyson referred (at para 207) to materially increasing the risk of contracting the disease as sufficient to satisfy the causal requirements for liability (para 207). Both Mr Beloff QC and Mr Stuart Smith QC addressed these issues in their oral submissions. They both in effect submitted that the effect of Fairchild, Barker and Sienkiewicz was that the employers were deemed to have caused mesothelioma by exposing the employees to asbestos dust. They both recognised that the ordinary rule of causation could not apply and that some element of policy or doctrine was required in order to explain Fairchild. Mr Stuart Smith submitted that the effect of Fairchild was that each material exposure to asbestos dust is doctrinally held responsible for the mesothelioma. Mr Beloffs submission was to much the same effect. He relied upon a dictum of Lord Walker in Barker at para 109: A rule of law by which exposure to risk of injury is equated with legal responsibility for that injury entails the possibility that an employer may be held liable for an injury which was not in fact caused by that exposure (though in the present state of medical science, that fact can be neither proved nor disproved). The injury is of course the mesothelioma, which is necessary to complete the cause of action. On that basis it seems to me that Lord Walkers statement that the risk of injury is equated with legal responsibility for the injury is in effect to say that, by creating the risk of mesothelioma in the future, the employer is deemed to have caused the mesothelioma, if it should develop in the future. It appears to me that these conclusions are supported by Lord Mances analysis of section 3 of the Compensation 2006 at paras 67 and 68, with which I agree and to which I do not wish to add anything. Given Mr Edelmans concession that, if that is correct, the employers are liable under the policies (and this Courts acceptance of it) I would hold that the causation point does not assist the insurers. I would only add this. It appears to me that, once it is held that, on these facts, the employers are liable to the employees, it would be remarkable if the insurers were not liable under the policies. Rather as in AXA, the whole purpose of the policies was to insure the employers against liability to their employees. That purpose would be frustrated if the insurers submissions on this point were accepted. I agree with Lord Mance, for the reasons he gives at paras 69 73 that these policies respond to these claims. For these reasons, I too would dismiss the appeals by insurers so far as they concern the policies with contracted wordings. I would allow the appeals against insurers, and dismiss the appeal by the Independent, so far as they concern policies with sustained wordings. LORD DYSON I too agree with Lord Mance on the construction issue. As to the causation issue, I agree with the reasoning of Lord Mance and Lord Clarke. Accordingly, I would dismiss the appeals by insurers in so far as they concern the policies with contracted wordings. I would allow the appeals against insurers, and dismiss the appeal by the Independent, so far as they concern policies with sustained wordings. LORD PHILLIPS Introduction So called long tail industrial diseases have raised peculiar difficulties in the field of tort. These diseases result from the effect on the body of exposure to noxious substances. The effect can be long, drawn out and mysterious, in as much as medical science has not yet identified the precise mechanism, or chain of causation, by which the noxious substance causes the disease. Mesothelioma is a long tail disease in which the problems raised have been particularly acute. The problems arise in the application of principles of law that do not ordinarily give rise to difficulty. An employer will be liable in damages if by an act or omission that is negligent or in breach of statutory duty he causes physical harm to an employee. In the vast majority of cases there will be no difficulty in identifying the moment at which the negligence or breach of duty causes the physical harm, for the harm will take the form of an obvious injury. This is not the position in respect of mesothelioma. Asbestos dust, inhaled into the lungs, is the agency that causes mesothelioma, but as long as forty or fifty years may elapse before the effects on the body of dust inhaled culminate in symptoms of mesothelioma. Once the symptoms are felt, the disease will develop swiftly to bring about an inevitable and extremely unpleasant death. Where a victim of mesothelioma was exposed to asbestos dust over a period of years it is impossible, even with hindsight, to determine on balance of probabilities whether dust inhaled in a particular year caused or contributed to the development of the mesothelioma. It follows that, where the victim worked for a series of employers, each of whom exposed him to asbestos dust, it is impossible to prove on balance of probability that any particular employer caused or contributed to the victims mesothelioma. This means that the normal principles of the law of tort provide no remedy to the employee or his dependants. The manifest injustice of this position led the House of Lords in Fairchild v Glenhaven Funeral Services Ltd [2002] UKHL 22; [2003] 1 AC 32 and Barker v Corus UK Ltd [2006] UKHL 20; [2006] 2 AC 572 to create what I shall describe as a special approach to causation in respect of mesothelioma, whose effect was immediately varied by Parliament by section 3 of the Compensation Act 2006. I shall describe the composite result achieved by the House of Lords and Parliament as the special rule. I shall examine the nature of this special rule in due course. Its effect was, however, to place each employer in the same position as that employer would have been under at common law if it were proved, on balance of probability, that its negligence or breach of duty in exposing the employee to asbestos dust had contributed to causing the employees mesothelioma. These developments of the law of tort have formed the backdrop to the issue that has occupied almost all of the eight days that this Court has devoted to this appeal. I shall call this issue the construction issue. The construction issue relates to the true construction of a number of policies of insurance against employers liabilities (EL policies) with similar, but not identical, provisions as to the cover provided. The EL policies provided cover by reference to specific periods usually of a year. The central issue relates to the event or events that, on true construction of each policy, had to occur within the period of the policy in order to render the insurer liable to indemnify the employer in respect of liability for causing an employees mesothelioma. The policies provided cover in respect of diseases sustained or contracted during the period of the policy. The meaning of each of those words, in its context, lies at the heart of the construction issue. It does not seem that the construction issue initially received a great deal of consideration. Insurers treated the policies as if they covered an employer whose breach of duty within the period of the policy had contributed to causing the disease and regarded this requirement as satisfied if the employer was held liable because he had exposed the employee to asbestos dust during that period. Where more than one insurer was liable on this basis, they apportioned liability according to the period of exposure covered by each. The attitude of four of the five insurers party to this appeal changed as a result of the decision of the Court of Appeal in Bolton Metropolitan Borough Council v Municipal Mutual Insurance Ltd [2006] EWCA Civ 50; [2006] 1 WLR 1492. Those insurers are MMI, Excess, BAI and Independent, each of which is in run off. I shall describe them collectively as the insurers. Their opponents I shall describe collectively as the employers, although they embrace solvent employers, individuals claiming under the Third Party (Rights against Insurers) Act 1930, and Zurich, which has a community of interest with these. Bolton concerned the scope of cover of a public liability policy (PL policy) in relation to liability for causing mesothelioma. The policy provided cover in respect of an injury that occurs during the currency of the policy. The argument proceeded on the premise that the chain of causation of mesothelioma, once it was diagnosed, could be traced back to the initial inhalation of asbestos dust. The issue was whether the mesothelioma could properly be said to have occurred at the time of the initial inhalation. The Court of Appeal held that it could not. The injury only occurred, at earliest, at the stage of development of the disease at which malignancy occurred. This was, on the evidence, ten years, give or take a year, from the date on which it became possible to diagnose the existence of the tumour but very many years after the initial inhalation of asbestos dust. This decision led the insurers to take the point that a similar approach should be taken to the interpretation of the cover afforded by the EL policies. Mesothelioma was not, on true construction of the policies, sustained or contracted at the time of the initial inhalation of asbestos dust. It was only sustained or contracted at the much later stage when, as a consequence of the process initiated by asbestos dust, an actionable injury in the form of malignancy, developed. Before Burton J, the Court of Appeal and this Court the construction issue has been argued at great length and in great detail. I agree, as do the other members of the Court, with the conclusions reached by Lord Mance on the construction issue. These conclusions have application not merely to mesothelioma but to employers liabilities in relation to other long tail industrial diseases such as asbestosis and pneumoconiosis. For the purpose of EL policies, these diseases are sustained or contracted when the process that leads to the disease is initiated as a result of the wrongful exposure of the employee to the noxious substance that causes, or contributes to the cause or the extent of, the disease. Throughout the hearing of this appeal there has lurked a second issue. It has not been the subject of argument below, nor does it feature in the agreed Statement of Facts and Issues. This is, perhaps, because it relates to a point that does not arise out of Bolton. It has always been there for the taking, but insurers have not hitherto chosen to raise it, perhaps because its consequences are unattractive. It arises out of a problem that is similar to that which led the House of Lords to formulate the special approach in Fairchild and Barker. It is not possible for an employer to prove that an employees mesothelioma was, in fact, caused in whole or in part by any particular period of exposure to asbestos dust. Thus the employer cannot prove, on balance of probability, that the mesothelioma for which he has been held liable under the special rule was, in fact, initiated in any particular policy year. How, then, can he prove that his liability falls within the scope of the cover, even if the policy bears the construction contended for by the employers and upheld by this Court? How can he prove that his liability arises out of disease sustained or contracted within the policy period, giving these words the same meaning as initiated? I shall call this issue the causation issue. The causation issue and the judgments below Although the causation issue was not raised in argument below, it was dealt with, at least implicitly, in the judgments of both courts. Burton J at first instance, and Rix and Stanley Burnton LJJ in the Court of Appeal proceeded on the basis that, in the case of a mesothelioma victim, exposing the victim to asbestos dust could be treated as equivalent to causing his disease. This approach was based on the special rule. Thus Burton J at paras 42 to 58 summarised, without significant comment, what he described as the special mesothelioma jurisprudence as it was at the time of his judgment. This included Fairchild, Barker and the 2006 Compensation Act. He thereafter proceeded on the basis that exposing a mesothelioma victim to asbestos dust could be treated as having been equivalent to causing the victim to contract the disease. Thus, when summarising his conclusions at para 243 he said: I conclude, in relation to the policies in issue before me, that they respond, just as would policies with caused wording, to claims against insurers where employers are liable on the basis of inhalation by employees during the policy period. They respond, consistently with other EL policies, in respect of mesothelioma claims, on an exposure basis. For the purposes of these policies, injury is sustained when it is caused and disease is contracted when it is caused, and the policies fall to be so construed. Rix LJ drew a distinction between the meaning of contracted and sustained. Contracted referred to the time of the diseases causal origins para 245. He felt constrained by Bolton, however, to hold that no injury was sustained until the disease reached the malignant stage. Implicit in his judgment was the premise that exposure to asbestos dust during the period of the policy could be treated as the causal origin of the disease see for example his comments at para 244. A difficult passage in his judgment at paras 280 283, when considering the meaning of injury, suggests that this premise was founded on the special rule. Thus he was able to conclude that the disease was contracted at the time that the victim was exposed to asbestos dust albeit that injury was not sustained at that point. In a short judgment Stanley Burnton LJ adopted similar reasoning. He stated, at para 338: We are agreed that in any year in which there was substantial exposure to asbestos, mesothelioma was caused by that exposure during that year. The fact that the disease did not develop for some years does not break the chain of causation. Submissions on the causation issue The causation issue was not raised by the insurers as a discrete issue. It none the less surfaced in a passage of the written case for Excess that was addressing the employers case that personal injury by disease was sustained at the moment of inhalation of asbestos dust that triggered the process of sustaining personal injury by disease. One of the arguments advanced by Excess in answer to this submission read as follows: Medically and empirically, one cannot be said to have suffered an injury on a particular day because it cannot be known in (say) a 10 year occupational exposure period on which of the 3652 days the fatal dose was inhaled (and it may be on more than one). It is likely that any ingestion on a particular day was irrelevant to the development of the final condition. There has been a tendency on the part of the claimants to treat inhalation as a single event from which an unbroken line can be drawn to malignancy. It is not. Inhalation (and hence on this theory) injury may occur over several thousands of days. Each day does not bring injury. Any particular day cannot therefore be selected as injury day. To overcome problems of medical causation in a personal injury action against an employer, the House of Lords extended the McGhee principle to mesothelioma in Fairchild. However this was a rule of causation and not definition. There is no such rule in insurance policies which defines what amounts to an injury. The Supreme Court in Sienkiewicz stressed the limits of the Fairchild exception in no uncertain terms, and it is submitted that it would be quite wrong for it now to invade the law of contract. A liability policy responds only to indemnify against a liability (i.e. actionable injury). There is no such liability on inhalation. Injury occurs when the claimant has a personal injury by disease. Thus Excess took the point that the special rule could not properly be invoked to establish that, on true construction of the contracts of insurance, injury was sustained upon inhalation of asbestos dust. This passage appeared after a submission at para 209 that it was only possible to equate the inhalation of a culpable quantity of asbestos dust with sustaining personal injury by disease by, inter alia, creating a special rule governing the response of EL policies in respect of mesothelioma, and possibly other long tail diseases. This proved to be what counsel for the employers sought to do when invited by the Court to address the causation issue. They did so in short oral submissions that cannot, when taken together, have occupied more than half an hour of the eight day hearing. The relevant submissions made by Mr Beloff QC for Akzo and AMEC and the Local Authorities are reported at pp 120 122 of the transcript for 15 December 2011. He started by observing that we had to cut the Gordian knot. He suggested that we should do so by equating creation of a risk with causing bodily injury. This he submitted was permissible because the object of the policy was to provide cover to an employer who, in breach of duty to employees, caused them compensatable damage. Were this approach not adopted, it would be impossible to show that any of a number of insurers providing cover over a period of years was liable. The law should rebel against such a result. In support of this submission Mr Beloff cited a statement by Lord Walker of Gestingthorpe in Barker at para 109 suggesting that the special approach to mesothelioma equated the exposure to the risk of injury with legal liability for the injury. Mr Stuart Smith QC for Zurich dealt with the causation issue at rather greater length in a passage reported at pp 126 to 131 of the same transcript. He started by accepting that it was impossible to know when the metabolic changes that led to the development of mesothelioma in fact occurred. Fairchild dealt with this problem by creating a doctrinal rule under which each significant exposure to asbestos dust was held to be responsible for the mesothelioma. Thus doctrinally the process of developing mesothelioma started upon inhalation. This doctrinal framework for the application of the law of tort was that within which policies of insurance against tortious liability had to operate. Mr Stuart Smith agreed with this summary of his argument advanced by Lord Mance: If the law of tort treats someone, an employee, as having sustained a personal injury and treats the employer as liable to pay damages for such personal injury, then the policy answers. These submissions on behalf of the employers raise the following questions: i) Will the policies respond to fictional or doctrinal events that are deemed to have occurred under the special rule? If so: ii) Does the special rule deem that events have occurred to which the policies should respond? If not: iii) Can this Court properly reformulate the special rule in such a way as to require the policies to respond? Will the policies respond to fictional or doctrinal events? On the premise that he failed on the construction issue, Mr Edelman accepted that, if the correct analysis of the special rule was that the employers were deemed to have caused the mesothelioma by exposing the victims to asbestos dust, then the policies should properly respond. Because of the view that I take of the next two questions I do not need to decide whether the concession was properly made. I have, however, concluded that it was. The policies exist to provide protection against employers liability in tort. If the law of tort, whether laid down by the courts or by Parliament, resorts to legal or doctrinal fictions, it seems logical that the policies should respond as if the fictions were facts. A purposive approach to construction of the policies would lead to this result. Two examples illustrate this approach. Ellerbeck Collieries Ltd v Cornhill Insurance Co Ltd [1932] 1 KB 401 involved a policy of insurance against liability under the Workmens Compensation Act 1925. The terms of the policy entitled the employer to indemnity if at any time during the currency of the insurance any employee sustained any personal injury by accident or disease. The 1925 Act imposed a fictitious test for identifying when an industrial disease was sustained, namely the date on which a certifying surgeon issued a certificate that the employee was suffering from the disease. On the strength of a certificate issued within the currency of a policy of insurance an employer was held liable to two workmen who had, in fact, sustained the relevant disease before the period of the insurance began. The Court of Appeal held that this liability fell within the cover of the policy. The argument for applying the fictional date was a strong one because, as Greer LJ observed at p 417, the policy was intended to cover the employers liability under the Act. The parallel between Ellerbeck and the present case would have been stronger had the relevant policies been taken out after the special rule had been created. In Rothwell v Chemical & Insulating Co Ltd [2007] UKHL 39, [2008] AC 281 the House of Lords held that pleural plaques caused by exposure to asbestos dust did not constitute actionable injury because they produced no adverse physical effects. The Scottish Parliament responded to this decision by introducing the Damages (Asbestos related Conditions) (Scotland) Act 2009 (the Scottish Act). That Act provides by section 1 that asbestos related pleural plaques constitute a personal injury which is not negligible and that accordingly they constitute actionable harm for the purpose of an action for damages for personal injury. In AXA General Insurance Ltd v HM Advocate [2011] UKSC 46, [2011] 3 WLR 871 the Supreme Court rejected a challenge by insurers to the lawfulness of this Act. The Scottish Act effected a limited alteration to the common law in decreeing that asymptomatic pleural plaques constituted non negligible personal injury and thus actionable damage. Lord Mance at para 88 suggested that the main target of the legislation was employers insurers. He went on at para 89 to consider whether the Act would, in fact, alter the meaning to be given to bodily injury under a policy of insurance: A Scottish Act will not on the face of it change the legal effect of an English insurance contract, even in Scotland. However, depending upon the particular policy language, the scope of the concept of bodily injury under a worldwide policy may respond to different conceptions of bodily injury in different parts of the world. Here, the question would be whether it would respond to a development or change, such as that introduced retrospectively by the 2009 Act, in the conception of bodily injury. I say no more about the answer, which may be elicited in another context or suit. While Lord Mance left open the effect of the Scottish Act on the construction of policies of liability insurance, Lord Brown was in no doubt that the effect of the Scottish Act was to subject insurers to liabilities to which they would not have been subject prior to that Act. He referred at para 80 to the undoubted, and deliberate, impact of the legislation upon pending claims. Earlier, at para 77, he drew an analogy with the effect of the decision in Fairchild on EL insurers liability: Had the House of Lords in Rothwell decided that asymptomatic pleural plaques of themselves constitute a non negligible personal injury and thus actionable damage decided in other words that in this particular context the common law should develop in this admittedly novel way the appellants would doubtless have deplored the decision but they could certainly not have questioned its legitimacy. No doubt they would have resented the fact that, as a consequence of the decision, they would unexpectedly have had to pay out on claims resulting from the employees exposure to asbestos upwards of 20 years (quite likely up to 40 years) previously. But they could no more have advanced an [article 1, Protocol 1] challenge to this development of the law than they could have challenged the House of Lords decision some four years earlier in Fairchild v Glenhaven Funeral Services Ltd [2003] 1 AC 32 to adopt a less stringent than the usual but for test for establishing the necessary causal connection between an employers negligence and a claimants condition in, most notably, mesothelioma cases. Employers (and their liability insurers) necessarily take the risk of the common law developing in ways which may adversely affect them with regard to personal injury claims. In this passage Lord Brown assumed that the effect of Fairchild was to bring employers liabilities in respect of mesothelioma within the scope of the cover afforded by EL policies. I am about to consider whether he was correct in this. I agree, however, with the general principle expressed in the last sentence of the extract from his judgment that I have just cited. It is for this reason that I would give an affirmative answer to the first of the three questions posed at para 108 above. I turn to the second. What is the special rule? The employers submissions on the causation issue proceed on the premise that the special rule deems exposure to asbestos dust of an employee who is subsequently diagnosed with mesothelioma to have been a cause of the mesothelioma. I have reached the conclusion that that premise is unsound. In Sienkiewicz v Greif (UK) Ltd [2011] UKSC 10; [2011] 2 AC 229 I summarised the special rule as follows at para 1: When a victim contracts mesothelioma each person who has, in breach of duty, been responsible for exposing the victim to a significant quantity of asbestos dust and thus creating a material increase in risk of the victim contracting the disease will be held to be jointly and severally liable for causing the disease. This is certainly the effect of the special rule, but in order to discover the juridical basis of the rule it is necessary first to identify the basis of the special approach adopted by the House of Lords in Fairchild and Barker and then to consider the effect of section 3 of the Compensation Act, which adapted the special approach into the special rule. The special approach In Sienkiewicz, at para 70, I stated that Fairchild and Barker developed the common law by equating materially increasing the risk with contributing to the cause in specified and limited circumstances, which include ignorance of how causation in fact occurs. As I shall show, this was not an accurate summary of the special approach adopted in those cases. In Fairchild the House of Lords confronted the position where a mesothelioma victim had worked consecutively for a number of employers, each of which had exposed him to asbestos dust. One or more of these had caused his mesothelioma, but because of the limits of medical knowledge it was not possible, on balance of probability, to identify which. In these circumstances their Lordships adopted a special approach that enabled them to find that each of the employers was jointly and severally liable for the mesothelioma. In doing so they purported to be following a similar approach adopted by the House of Lords in McGhee v National Coal Board [1973] 1 WLR 1. They were not, however, all agreed as to the basis of that approach. Lord Hutton, at para 109, held that it was based on the drawing of a factual or legal inference leading to the conclusion that the breach of duty [in exposing the employee to asbestos dust] was a cause of the disease. The majority of the House did not agree. Lord Bingham said, at para 35: I prefer to recognise that the ordinary approach to proof of causation is varied than to resort to the drawing of legal inferences inconsistent with the proven facts. Lord Nicholls of Birkenhead said, at para 42: So long as it was not insignificant, each employer's wrongful exposure of its employee to asbestos dust, and, hence, to the risk of contracting mesothelioma, should be regarded by the law as a sufficient degree of causal connection. This is sufficient to justify requiring the employer to assume responsibility for causing or materially contributing to the onset of the mesothelioma when, in the present state of medical knowledge, no more exact causal connection is ever capable of being established." Lord Hoffmann at para 65 rejected the suggestion that the House in McGhee held that materially increasing the risk of the disease should be treated as equivalent to material contributing to the injury. He concluded: I would respectfully prefer not to resort to legal fictions and to say that the House treated a material increase in risk as sufficient in the circumstances to satisfy the causal requirements for liability. Lord Rodger of Earlsferry did not agree. His reasoning was close to that of Lord Hutton. He held, at para 168: Following the approach in McGhee I accordingly hold that, by proving that the defendants individually materially increased the risk that the men would develop mesothelioma due to inhaling asbestos fibres, the claimants are taken in law to have proved that the defendants materially contributed to their illness. What then happened has been summarised by Lord Hoffmann in Perspectives on Causation (2011) at p 8: There are two ways in which one could characterise this change in the substantive law of negligence. One is to say that the causal requirements for an action for damages for mesothelioma have been changed; all that is necessary is to prove that the risk has been increased and that the specific exposure may have provided the actual agent. The other is to say that the House created, exceptionally, a cause of action for the increased risk of mesothelioma rather than for the disease itself. In the former case, satisfying the new causal requirement would entitle the claimant to sue for the whole injury caused by contracting the disease. In the latter case, he would be able to sue only for the loss caused by the risk of his contracting the disease having been increased. That would be a proportion of the injury caused by the disease, depending on the extent to which the risk had also been created by other causes. In Barker v Corus the House of Lords (Lord Rodger of Earlsferry dissenting) adopted the second explanation of what had happened in Fairchild. I believe that this summary of the position is essentially correct. The majority in Barker were persuaded that justice would best be served if the special approach adopted in Fairchild were applied in such a way as to render each defendant who had wrongfully exposed the claimant to asbestos dust severally liable for that proportion of the mesothelioma that represented the proportion of the wrongful exposure attributable to that defendant. This was achieved by holding that the liability of each defendant resulted from adding to the risk that the employee would contract mesothelioma. It did not result from an implication that each defendant had actually contributed to the cause of the disease. At the start of his speech at para 2 Lord Hoffmann drew the vital distinction between being liable for contributing to the cause of the disease and being liable for the creation of the risk of causing the disease: Is any defendant who is liable under the exception deemed to have caused the disease? On orthodox principles, all defendants who have actually caused the damage are jointly and severally liable. Or is the damage caused by a defendant in a Fairchild case the creation of a risk that the claimant will contract the disease? In that case, each defendant will be liable only for his aliquot contribution to the total risk of the claimant contracting the disease a risk which is known to have materialised. Lord Hoffmann went on to adopt the latter analysis as the basis of liability in Fairchild. At para 31 he held that the majority in Fairchild had not proceeded upon the fiction that a defendant who had created a material risk of mesothelioma was deemed to have caused or materially contributed to the contraction of the disease. The creation of a material risk of mesothelioma was sufficient for liability. At para 35 he advanced the thesis that the basis of liability was the wrongful creation of the risk or chance of causing the disease and that the damage that the defendant should be regarded as having caused was the creation of such risk or chance. Liability for the mesothelioma that developed should be apportioned according to the contribution that each defendant made to the risk that mesothelioma would be contracted. Lord Scott of Foscote and Lord Walker of Gestingthorpe expressly agreed with both Lord Hoffmanns conclusion that liability for the mesothelioma fell to be apportioned and with his reasons for so concluding. Lord Scott held at para 53 that it was essential to keep firmly in mind that liability in Fairchild was not imposed on any of the defendant employers on the ground that the employers breach of contract had caused the mesothelioma. That causative link had not been proved against any of them. It was imposed because each, by its breach of duty, had materially contributed to the risk that the employee would contract mesothelioma. At para 61 he emphasised that the Fairchild principle was not based on the fiction that each defendant had actually caused the eventual outcome. It was based on subjecting the victim to a material risk. Lord Walker, having stated that he was in full agreement with Lord Hoffmanns reasons went on at para 104 to make a statement that was inconsistent with them, this being to the same effect as the statement relied on by Mr Beloff see para 106 above. Lord Walker stated that the decision in Fairchild equated exposing the victim to the risk of injury with causing his injury. This was the same mistake as I made in Sienkiewicz see para 117 above. Had this been the case, each defendant would have been jointly and severally liable for the injury. Lord Walker went on to say, however, that the result in Fairchild was achieved, not by some fiction, but as an explicit variation of the ordinary requirement as to causation. At para 113 he stated that Fairchild was decided by the majority, not on the fictional basis that the defendants should be treated as having caused the victims damage, but on the factual basis that they had wrongfully exposed him to the risk of damage. Lady Hale did not adopt Lord Hoffmanns thesis that the creation of risk constituted the damage for which each defendant was liable. In general, however, she agreed with the majority. She held that in Fairchild, for the first time in our legal history defendants were made liable for damage even though they might not have caused it at all. It was not said that the defendants had caused or materially contributed to the harm. All that could be said was that each had contributed to the risk of harm. In these circumstances it was sensible and fair to apportion liability for the harm in proportion to the contribution that each had made to the risk of harm. Lord Rodger of Earlsferry vigorously dissented from the reasoning of the majority and from the result in so far as it apportioned liability. He observed at para 71 that the majority were not so much reinterpreting as rewriting the key decisions in McGhee and Fairchild. At para 85 he stated that the new analysis that the House was adopting would tend to maximise the inconsistencies in the law. I have some sympathy with the observations of Lord Rodger. It would, I think, have been possible for the House in Barker to have defined the special approach in Fairchild as one that treated contribution to risk as contribution to the causation of damage. The important fact is, however, that the majority did not do so. They were at pains to emphasise that the special approach was not based on the fiction that the defendants had contributed to causing the mesothelioma. Liability for a proportion of the mesothelioma resulted from contribution to the risk that mesothelioma would be caused and reflected the possibility that a defendant might have caused or contributed to the cause of the disease. This was no obiter expression of opinion. It formed the basis of the substantive decision that liability was severable and not joint. The special rule The special approach rendered each employer who had wrongfully exposed a mesothelioma victim to asbestos dust liable for a proportion of the mesothelioma without creating any inference or legal fiction that the employer in question had actually contributed to causing the disease. Section 3 of the Compensation Act altered the position by imposing joint and several liability on those who were only severally liable under the special approach. Did the special rule that resulted involve a different basis of liability to that which formed the basis of the special approach? This question is considered by Jonathan Morgan in his interesting Chapter 4 of Perspectives on Causation headed Causation, Politics and Law: The English and Scottish Asbestos Saga. At p 79 he poses the following question: Has Parliament, by implication, therefore also reversed Lord Hoffmanns principled reinterpretation of Fairchild? Is the nature of Fairchild liability now after all for causing mesothelioma and not increasing risk? Mr Morgan gives a negative answer to this question, expressing the view that Barker has altered the jurisprudential basis of the Fairchild liability irrevocably. I agree that section 3 of the Compensation Act did not alter the jurisprudential basis of the special approach laid down by the House of Lords in Fairchild and Barker. All that it did was to alter the effect of the special approach by making each defendant jointly and severally liable for the whole of the injury sustained. Section 3(1) provides that the section applies where (c) because of the nature of mesothelioma and the state of medical science, it is not possible to determine with certainty whether it was the exposure [for which the defendant was responsible]or another exposure which caused the victim to become ill, and (d) the responsible person is liable in tort(whether by reason of having materially increased a risk or for any other reason). It is not possible to read section 3 as imposing a different basis of liability to that identified by the majority in Barker. The consequence of the special rule Having regard to its jurisprudential basis I cannot see how the employers can found upon the special rule as identifying the policy year or years in which a victims mesothelioma is initiated. The position is that it is impossible to prove on balance of probability when mesothelioma is initiated, or contracted, or sustained, giving each of those words the same meaning. The special rule does not fill the gap for it raises no implication or fictional assumption as to when mesothelioma is initiated. The consequence is that if claimants have to show that mesothelioma was initiated in a particular policy year in order to establish that insurers are liable they are unable to do so. Should this Court redefine the special rule in order to engage the EL policies? The special approach of the majority in Barker had the object of ensuring that employers who had wrongfully subjected their employees to asbestos dust should bear what the majority considered to be a fair share of responsibility for their wrongdoing. It does not seem likely that the majority gave consideration to the implications for the responsibility of EL insurers of the manner in which this object was achieved. Should this Court now redefine the special rule with the object of enabling claims to be brought under the EL policies? This would, I think, involve holding that the majority in Barker erred in their analysis and that the true basis of the special approach in Fairchild was that contribution to risk should be deemed to be contribution to causation. I would give a firm No to this question. The adoption of the special approach in Fairchild has provoked considerable criticism, both judicial and academic. An example of the former is to be found in the judgment of Lord Brown in Sienkiewicz. An example of the latter is Mr Morgans closely reasoned Chapter 4 of Perspectives on Causation. But the object of the special approach in Fairchild and Barker was at least to ensure that those who had breached the duties that they owed to their employees did not escape liability because of scientific uncertainty. It would be judicial law making of a different dimension to create a legal fiction as to the policy years in which cases of mesothelioma were initiated in order to render liable insurers who could not otherwise be shown to be liable. The Secretary of State has intervened in this appeal and has submitted that, should the claims of employees or their dependants not be met by insurers, they are likely to be a burden on the public purse. It is open to question whether this is a proper consideration, even when considering whether the special rule should be redefined for what are essentially reasons of policy. In any event it seems to me that the position is somewhat more complex than the Secretary of State suggests. The burden of claims in respect of mesothelioma on a scale that was never anticipated is reducing both employers and insurers to insolvency. If this Court were to redefine the special rule so as to impose liability for mesothelioma claims on EL insurers where it could not otherwise be made out, this would in many cases be at the expense of others with claims on the same insurers founded on facts and not legal fictions. The liabilities in respect of mesothelioma will increase the overall shortfall on the part of insurers and this is also likely to have implications for the public purse. So far as I am concerned, however, these considerations have little relevance. Even if there were a compelling case for contending that a means should be found to render EL insurers liable, my reaction would be that this was a matter for Parliament not the courts. It would be wrong in principle for this Court to depart from the reasoning of the majority in Barker for the sole purpose of imposing liability on EL insurers.

These appeals concern the obligations of insurance companies under various contracts of employers liability (EL) insurance. In particular, the appeals concern the scope of the insurers obligations to indemnify employers against their liabilities towards employees who have contracted mesothelioma following exposure to asbestos. Mesothelioma has an unusually long gestation period, which can be in excess of 40 years between exposure to asbestos and manifestation of the disease. The insurers maintain that the EL policies only cover mesothelioma which manifested as a disease at some point during the relevant policy period. In contrast, the employers submit that the insurance policies respond to mesothelioma caused by exposure to asbestos during the relevant policy period but which develops and manifests itself sometime later. The usual rule in negligence cases is that the claimant must establish on the balance of probabilities that the defendants negligence caused his injury or disease. In Fairchild v Glenhaven Funeral Services Ltd [2002] UKHL 22 and Barker v Corus UK Ltd [2006] UKHL 20 the House of Lords developed an exception to this general principle in cases involving mesothelioma caused by exposure to asbestos. The effect of this special rule is that an employer is liable where exposure to asbestos contributed to the risk that the employee would suffer mesothelioma and where the employee in fact develops the disease. The insurers submit that the special rule in Fairchild/Barker is not applicable when deciding, for the purposes of an EL insurance policy, whether an employees mesothelioma was caused by exposure to asbestos during a particular policy year. At first instance Burton J held that the policies should all be interpreted as having a causation wording. He therefore held that the liability trigger under the EL policy was when the employee inhaled the asbestos and not the date when the malignant lesion developed. A majority of the Court of Appeal (Rix and Stanley Burnton LJJ) upheld the judge in relation to some of the EL insurance policies (particularly those covering disease contracted during the relevant insurance period); however they concluded that other policies (particularly those covering disease sustained during the insurance period) responded only on an occurrence or manifestation basis. These appeals to the Supreme Court raise two issues: (i) On the correct construction of the EL policies, is mesothelioma sustained or contracted at the moment when the employee is wrongfully exposed to asbestos or at the moment when the disease subsequently manifests in the employees body? (ii) Does the special rule in Fairchild/Barker apply when determining whether, for the purposes of the EL policies, an employee sustained or contracted mesothelioma during a particular policy period? The Supreme Court dismisses the insurers appeal by a 4 1 majority; Lord Phillips dissenting on the second issue. Lord Mance gives the main judgment. To resolve the meaning of the EL policies it is necessary to avoid over concentration on the meaning of single words or phrases viewed in isolation, and to look at the insurance contracts more generally [19]. Several features point the way to the correct construction. First, the wordings of the policies on their face require the course of employment to be contemporaneous with the sustaining of the injury [20]. Second, the wordings demonstrate a close link between the actual employment undertaken during each period and the premium agreed by the parties for the risks undertaken by the insurers in respect of that period. Third, on the insurers case there is a potential gap in cover as regards employers breaches of duty towards employees in one period which only lead to disease or injury in another later period [24]. Fourth, on the insurers case employers would be vulnerable to any decision by the insurers not to renew the policy. A decision not to renew might arise from the employers complying with their duty to disclose past negligence upon any renewal. Employers who discovered that they had been negligent in the course of past activities in respects that had not yet led to any manifest disease would have such a duty. The insurers could then simply refuse any renewal or further cover [25]. Fifth, the way most of the policies deal with extra territorial issues throws doubt on any suggestion that the wordings are so carefully chosen that a court should stick literally to whatever might be perceived as their natural meaning [28]. Section 1 of the Employers Liability Compulsory Insurance Act 1969 also points the way to the correct interpretation. This states that every employer shall insure, and maintain insuranceagainst liability for bodily injury or disease sustained by his employees, and arising out of and in the course of their employment. In order to give proper effect to the protective purpose of that legislation, the Act requires insurance on a causation basis [47]. There is no difficulty in treating the word contracted as looking to the causation of a disease, rather than its development or manifestation. The word contracted used in conjunction with disease looks to the initiating or causative factor of the disease [49]. While the word sustained may initially appear to refer to the manifestation of an injury, the nature and underlying purpose of the EL insurances is one which looks to the initiation or causation of the accident or disease which injured the employee. Accordingly a disease may properly be said to have been sustained by an employee in the period when it was caused or initiated, even though it only developed or manifested itself later [50]. In relation to the second issue, the question is whether the EL policies cover employers liability for mesothelioma arising under the special rule in Fairchild/Barker [71]. Under that rule the law accepts a weak or broad causal link between the employers negligence and the employees mesothelioma. When construing the EL policies the concept of a disease being caused during the policy period must be interpreted sufficiently flexibly to embrace the role assigned to exposure by the Fairchild/Barker rule [74]. The purpose of the EL policies was to insure the employers against liability to their employees. Once it is held that the employers are liable to the employees, it would be remarkable if the insurers were not liable under the policies [88]. Accordingly, for the purposes of the EL policies, the negligent exposure of an employee to asbestos during the policy period has a sufficient causal link with subsequently arising mesothelioma to trigger the insurers obligation to indemnify the employer [74]. Lord Phillips dissents on the second issue. The special approach developed in Fairchild/Barker raises no implication or fictional assumption as to when mesothelioma is initiated. The consequence is that if claimants have to show that mesothelioma was initiated in a particular policy year in order to establish that insurers are liable they are unable to do so. This conclusion is not affected by section 3 of the Compensation Act 2009, which did not alter the jurisprudential basis of the Fairchild/Barker approach [132] [133].

These proceedings arise from the fact that the foundation structures of two offshore wind farms at Robin Rigg in the Solway Firth, which were designed and installed by MT Hjgaard A/S (MTH), failed shortly after completion of the project. The specific issue to be determined is whether MTH are liable for this failure. As Jackson LJ said in the Court of Appeal, the resolution of that issue turns on how the court should construe the somewhat diffuse documents which constituted, or were incorporated into, the design and build contract in this case. Accordingly, I turn first to consider the relevant provisions of the contractual documentation. The relevant provisions of the Technical Requirements and J101 In May 2006, the appellants, two companies in the E.ON group (E.ON), sent tender documents to various parties including MTH, who in due course became the successful bidders. The tender documents included Employers Requirements, Part I of which included the Technical Requirements (the TR). Section 1 of the TR set out the General Description of Works and Scope of Supply. Part 1.6 set out the so-called Key Functional Requirements, which included this: The Works, together with the interfaces detailed in Section 8, shall be designed to withstand the full range of operational and environmental conditions with minimal maintenance. The Works elements shall be designed for a minimum site specific design life of twenty (20) years without major retrofits or refurbishments; all elements shall be designed to operate safely and reliably in the environmental conditions that exist on the site for at least this lifetime. Section 3 of the TR was concerned with the Design Basis (Wind Turbine Foundations). Part 3.1 was entitled Introduction, and it included the following (divided into sub-paragraphs for convenience): (i) It is stressed that the requirements contained in this section and the environmental conditions given are the MINIMUM requirements of [E.ON] to be taken into account in the design. (ii) It shall be the responsibility of [MTH] to identify any areas where the works need to be designed to any additional or more rigorous requirements or parameters. There were other references elsewhere to the stated requirement being a minimum. Para 3.1.2 of the TR required MTH to submit a detailed Foundation Design Basis document, which was required to contain, among other things, a statement as to the Contractors design choices, including, but not limited to, departures from, or aspects not covered by, standards, if any. Part 3.2 of the TR was headed Design Principles, and para 3.2.2 was concerned with General Design Conditions, para 3.2.2.1 being directed to the Tender Stage Design, and para 3.2.2.2 to the Detailed Design Stage. Para 3.2.2.2 is of central importance for present purposes, and, for convenience, I shall treat it as divided into numbered sub-paragraphs. Para 3.2.2.2(i) required MTH to prepare the detailed design of the foundations in accordance with a document known as J101, using the integrated analysis method (which was one of the four methods addressed in J101). Para 3.2.2.2(ii) went on to state that: The design of the foundations shall ensure a lifetime of 20 years in every aspect without planned replacement. The choice of structure, materials, corrosion protection system operation and inspection programme shall be made accordingly. J101 was a reference to an international standard for the design of offshore wind turbines published by Det Norske Veritas (DNV), an independent classification and certification agency based in Norway. J101 included a statement that its objectives included the provision of an internationally acceptable level of safety by defining minimum requirements for structures and structural components, as well as being a contractual reference document, and a guideline. Section 2 of J101 contained design principles which were, among other things, aimed at limiting the annual probability of failure to be in the range of one in 10,000 to one in 100,000 - para C201. Section 7 of J101 dealt with the design of steel structures, and para K104 provided: The design fatigue life for structural components should be based on the specified service life of the structure. If a service life is not specified, 20 years should be used. Section 9 of J101 dealt with the design and construction of grouted connections. Part A included reference to shear keys, which, it was explained, can reduce the fatigue strength of the tubular members and of the grout. Part B of section 9 set out a number of equations applicable to such a design, including one (the Equation) which showed how the interface shear strength due to friction is to be calculated, namely: Precisely what the Equation actually means need not be spelled out. What is important for present purposes is that it was stated beneath the Equation that should be taken as 0.00037 Rp for rolled steel surfaces (Rp being the outer radius of the pile, and being the height of surface irregularities). Para 3.2.3.2 of the TR required MTHs design to accord with international and national rules, circulars, EU directives executive orders and standards applying to the Site and it went on to state that a defined hierarchy of standards shall apply, as listed. Ignoring those standards which were irrelevant or not in force, the first in the list was J101. Para 3.2.5 required the contractor to design and construct grouted connections in accordance with J101. Para 3.2.6 stated that [a]ll parts of the Works, except wear parts and consumables, shall be designed for a minimum service life 20 years (sic). Meteorological Mast. Para 3b.5.1 stated: Section 3b of the TR was headed Design Basis for Offshore Substations and The design of the structures addressed by this Design Basis shall ensure a lifetime of 20 years in every aspect without planned replacement. The choice of structure, materials, corrosion protection system operation and inspection programme shall be made accordingly. Para 3b.5.6 provided that [a]ll parts of the Works, except wear parts and consumables shall be designed for a minimum service life 20 years. Section 4 of the TR dealt with Approvals and Certification. Para 4.4.3 provided that MTH should obtain a Foundation Design Evaluation Conformity Statement from the Certifying Authority within six months of the commencement date. Section 10 of the TR covered Structural Design and Fabrication (Wind Turbine Foundations), and para 10.1.1 required MTH to appoint an accredited Certifying Authority to independently evaluate the adequacy of his foundation design. Para 10.5.1 was in these terms: The Contractor shall determine whether to employ shear keys within the grouted connection. If shear keys are used, the design and detailing shall take due account of their presence for both strength and fatigue design to the satisfaction of the Certifying Authority and the Engineer. If shear keys are to be omitted then the Contractor shall demonstrate with test data that the grouted connection is capable of transmitting axial loads at the grout/steel interface without dependence upon flexural (normal) contact pressures, which may not always be present, to the satisfaction of the Certifying Authority and the Engineer. Such demonstration shall also account for joint performance under different temperature conditions. Para 10.24.9 of the TR stated that the recorded potential difference exceedance was not so great as to cause accelerated anode depletion to such extent that the anode material provided is fully utilised before the end of the structure operational 20 year life. Having been selected as the contractor for the works, MTH duly set about preparing its tender in accordance with Employers Requirements and J101. MTHs design provided for (i) monopiles with a diameter of just over four metres, (ii) transition pieces about eight metres long, weighing approximately 120 tonnes, and (iii) grouted connections without shear keys. MTH explained at the time that no shear keys were specified because, taking as 0.00037 Rp, application of the Equation indicated that the grouted connections, as designed, had more than sufficient axial capacity to take the axial load. After E.ON had accepted MTHs tender, MTH duly commenced design work, and in November 2006 it submitted a detailed Foundation Design Basis document, as required by para 3.1.2 of the TR. The relevant provisions of the contract On 20 December 2006 E.ON and MTH entered into a written contract (the Contract) under which MTH agreed to design, fabricate and install the foundations for the proposed turbines. Part C of the Contract contained a List of Definitions. Fit for Purpose was defined as fitness for purpose in accordance with, and as can properly be inferred from, the Employers Requirements. Employers Requirements was stated to include the TR, which were themselves attached as Part I of the Contract. And Good Industry Practice meant those standards, practices, methods and procedures conforming to all Legal Requirements to be performed with the exercise of skill, diligence, prudence and foresight that can ordinarily and reasonably be expected from a fully skilled contractor who is engaged in a similar type of undertaking or task in similar circumstances in a manner consistent with recognised international standards. Clause 2.1 of Part D of the Contract provided that any failure by the Engineer or his Representative to spot defects or mistakes by the contractor would not exempt the contractor from liability. Clause 5.3 of Part D stated that in the event of inconsistencies, the order of precedence of the contractual documents should be as follows: (a) (b) (c) and draft programme; (d) (e) (f) volumes 2A, 2B and 3 of the contractors tender return. the form of agreement; the conditions of contact and the List of Definitions; the commercial schedules and the schedule of prices, payment profile the Employers Requirements; the annexes to the Employers Requirements; Clause 8.1 of Part D required MTH in accordance with this Agreement, [to] design, manufacture, test, deliver and install and complete the Works in accordance with a number of requirements, including (iv) in a professional manner in accordance with modern commercial and engineering, design, project management and supervisory principles and practices and in accordance with internationally recognised standards and Good Industry Practice; (viii) so that the Works, when completed, comply with the requirements of this Agreement ; (ix) so that [MTH] shall comply at all times with all Legal Requirements and the standards of Good Industry Practice; (x) so that each item of Plant and the Works as a whole shall be free from defective workmanship and materials and fit for its purpose as determined in accordance with the Specification using Good Industry Practice; (xv) so that the design of the Works and the Works when Completed by [MTH] shall be wholly in accordance with this Agreement and shall satisfy any performance specifications or requirements of the Employer as set out in this Agreement. Clause 30 of Part D of the Contract was headed Defects after taking over. Clause 30.2 provided that MTH shall be responsible for making good any defect or damage arising from defective materials, workmanship or design, any breach by [MTH] of his obligations under this Agreement or Works not being Fit for Purpose, which may appear or occur before or during the Defects Liability Period. That period was defined in clause 30.1 as being a period of 24 months from the date E.ON takes over the Works from MTH. Clause 30.3 required E.ON to give notice forthwith of any such defects to MTH. Clause 30.4 extended that Period in certain limited circumstances. Clause 30.10 required E.ON to produce a Defects Liability Certificate once the Defects Liability Period has expired and MTH has satisfied all its obligations under clause 30. Clause 33.9 of Part D of the Contract entitled MTH to apply, within 28 days of the issue of a Defects Liability Certificate, for a Final Certificate of Payment, and to accompany the application with a final account; clause 33.10 provided for the consequential issue of a Final Certificate of Payment; and clause 33.11 provided the Final Certificate of Payment is conclusive. Clause 42.3 of Part D of the Contract stated that: [E.ON] and [MTH] intend that their respective rights, obligations and liabilities as provided for in this Agreement shall alone govern their rights under this Agreement. Accordingly, the remedies provided under this Agreement in respect of or in consequence of: any breach of contract; or (a) any negligent act or omission; or (b) (c) death or personal injury; or (d) loss or damage to any property, are, save in the case of Misconduct, to be to the exclusion of any other remedy that either may have against the other under the law governing this Agreement or otherwise. Subsequent events MTH duly proceeded with the design and construction of the two wind farms (the Works), and, on its instructions, Rambll Danmark A/S supplied in June 2007 a detailed design for the grouted connections, which did not include shear keys. Pursuant to para 10.1.1 of the TR, MTH appointed DNV as the Certifying Authority, and DNV evaluated and approved MTHs foundation designs. Pursuant to para 4.4.3 of the TR, DNV issued Foundation Design Evaluation Conformity Statements for the various phases of the works. MTH began the installation of foundations in the Solway Firth in December 2007, and completed the Works in February 2009. During 2009 a serious problem came to light at Egmond aan Zee wind farm, where the grouted connections did not have shear keys. Those connections started to fail, and the transition pieces started to slip down the monopiles. DNV carried out an internal review during late summer 2009, and discovered that there was an error in the value given for in the note to the Equation mentioned in para 7 above. It was wrong by a factor of about ten. This meant that the axial capacity of the grouted connections in wind farm foundations at various locations including Egmond aan Zee and Robin Rigg had been substantially over-estimated. On 28 September 2009, DNV sent a letter to MTH and others in the industry, alerting them to the situation (and DNV subsequently revised J101 to correct the error). In April 2010 the grouted connections at Robin Rigg started to fail, as they had done a year earlier at Egmond aan Zee, and the transition pieces began to slip down the monopiles. Very sensibly E.ON and MTH deferred any legal dispute and set about finding a practical solution to the problem. It was agreed between the parties that E.ON would develop a scheme of remedial works. Those remedial works were commenced in 2014. In order to ascertain who should bear the cost of the remedial works, the parties embarked upon the present proceedings. In very summary terms, the parties respective positions were as follows. MTH contended that it had exercised reasonable skill and care, and had complied with all its contractual obligations, and so should have no liability for the cost of the remedial works. By contrast E.ON contended that MTH had been negligent and also had been responsible for numerous breaches of contract, and they claimed declarations to the effect that MTH was liable for the defective grouted connections. The parties in due course agreed the cost of the remedial works in the sum of 26.25m, leaving the court to decide which of them should bear that cost. The case came before Edwards-Stuart J, and after an eight-day hearing in November 2013, he gave judgment in April 2014 - [2014] EWHC 1088 (TCC). He rejected the suggestion that MTH had been negligent, and he also rejected a number of allegations of breach of contract made by E.ON. However, he found for E.ON primarily on the ground that (i) clause 8.1(x) of the contract required the foundations to be fit for purpose, (ii) fitness for purpose was to be determined by reference to the TR, and (iii) para 3.2.2.2(ii) (and also para 3b.5.1) of the TR required the foundations to be designed so that they would have a lifetime of 20 years. He also held that this conclusion was also supported by clauses 8.1(viii) and (xv). MTH appealed to the Court of Appeal, and after a two-day hearing in February 2015, they handed down their decision two months later, allowing the appeal for reasons given by Jackson LJ, with whom Patten and Underhill LJJ agreed - [2015] EWCA Civ 407. Jackson LJ accepted that, if one was confined to the TR, para 3.2.2.2(ii) appeared to be a warranty [on the part of MTH] that the foundations will function for 20 years. However, in the light of the provisions of the Contract, he said that there was an inconsistency between [paras 3.2.2.2(ii) and 3b.5.1 of the TR] on the one hand and all the other contractual provisions on the other hand, and that the other contractual provisions should prevail. He went on to describe paras 3.2.2.2(ii) and 3b.5.1 of the TR as too slender a thread upon which to hang a finding that MTH gave a warranty of 20 years life for the foundations. The meaning of para 3.2.2.2(ii) of the TR The central question on this appeal is whether, in the light of para 3.2.2.2(ii) (and para 3b.5.1) of the TR, which refer to ensuring a life for the foundations (and the Works) of 20 years, MTH was in breach of contract, despite the fact that it used due care and professional skill, adhered to good industry practice, and complied with J101. Before turning to that issue, however, it is appropriate to deal with an argument raised by Mr Streatfeild-James QC in the course of his excellent submissions on behalf of MTH. He suggested that it was unlikely that the parties could have intended that there should be what Jackson LJ characterised as a warranty that the foundations will function for 20 years, in the light of those parts of clauses 30, 33 and 42 of the Contract set out in paras 18 to 20 above. In summary, he argued that (i) the effect of clause 30 was that, subject to some relatively limited exceptions in clause 30.4, MTH was obliged to rectify any defect in the Works which occurred within 24 months of the Works being handed over, (ii) the effect of clause 42.3 was that any claim by E.ON in respect of a defect appearing thereafter was barred, and (iii) the notion that there was no room for claims outside the 24-month period was reinforced by clauses 33.9 and 33.10. In my opinion, there is no answer to that analysis so far as it is directed to the effect of clauses 30, 33 and 42 of the Contract. Clause 42.3 makes it clear that the provisions of clause 30 (and any other contractual term which provides for remedies after the Works have been handed over to E.ON) are intended to operate as an exclusive regime. And that conclusion appears to me to be supported by the terms of clause 33.9 and 33.10, because they tie in very well with the notion that there should be no claims after the Final Certificate, which is to be issued very shortly after the 24-month period. Accordingly, if, as E.ON argue, para 3.2.2.2(ii) of the TR amounts to a warranty that the foundations will last for 20 years, there would be a tension between that provision and clauses 30, 33 and 42 of the Contract. However, I do not consider that the tension would be so problematic as to undermine the conclusion that para 3.2.2.2(ii) amounted to warranties as described by Jackson LJ. In the light of the normal give and take of negotiations, and the complex, diffuse and multi-authored nature of this contract, it is by no means improbable that MTH could have agreed to a 20-year warranty provided that it could have the benefit of a two-year limitation period, save where misconduct was involved. It would simply mean that the rights given to E.ON by paras 3.2.2.2(ii) were significantly less valuable than at first sight they may appear, because any claim based on an alleged failure in the foundations which only became apparent more than two years after the handover of the Works would normally be barred by clause 42.3. In this case, of course, there is no problem, because the foundations failed well within the 24-month period. However, in my view, although it would therefore be possible to give effect to para 3.2.2.2(ii) of the TR as a 20-year warranty as described by Jackson LJ, the points canvassed in paras 27 to 29 above justify reconsidering the effect of para 3.2.2.2(ii). It appears to me that there is a powerful case for saying that, rather than warranting that the foundations would have a lifetime of 20 years, para 3.2.2.2(ii) amounted to an agreement that the design of the foundations was such that they would have a lifetime of 20 years. In other words, read together with clauses 30 and 42.3 of the Contract, para 3.2.2.2(ii) did not guarantee that the foundations would last 20 years without replacement, but that they had been designed to last for 20 years without replacement. That interpretation explains the reference in para 3.2.2.2(ii) to design, and it obviates any tension between the terms of para 3.2.2.2(ii) and the terms of clauses 30 and 42.3. Rather than the 20-year warranty being cut off after 24 months, E.ON had 24 months to discover that the foundations were not, in fact, designed to last for 20 years. On the basis of that interpretation, E.ONs ability to invoke its rights under para 3.2.2.2(ii) would not depend on E.ON appreciating that the foundations were failing (within 24 months of handover), but on E.ON appreciating (within 24 months of handover) that the design of the foundations was such that they will not last for 20 years. That, of course, raises the question as to what, on that reading, was precisely meant by ensur[ing] a lifetime of 20 years, given that the forces of nature, especially at sea, are such that a lifetime of 20 years, or any other period, could never in practice be guaranteed. The answer is to be found in J101. As explained in para 7 above, J101 requires the annual probability of failure to be in the range of one in 10,000 to one in 100,000, and specifically provides that, if a service life is not specified in a contract 20 years should be used, which ties in with the proposition, agreed between the parties, that an offshore wind farm is typically designed for a 20-year lifetime. This aspect could be expanded on substantially by reference to the detailed terms, requirements and recommendations of J101. In particular, one of the two so-called Limit States in terms of loadbearing requirements, FLS, is calculated by reference to the design life of the structure in question: hence para C201 of section 2 and para K104 of section 7 referred to in para 7 above. However, the simple point is that J101, while concerned with making recommendations and requirements linked to the intended life of a structure to which it applies, makes it clear that there is a risk, which it quantifies, of that life being shortened. That risk is, in my view, the risk which should be treated as incorporated in para 3.2.2.2(ii) - if it is indeed concerned with the designed life of the Works. I turn then to the central issue on this appeal. It is unnecessary to decide whether para 3.2.2.2(ii) is a warranty that the foundations will have a lifetime of 20 years or a contractual term that the foundations will be designed to have such a lifetime. The former meaning has been taken as correct by the parties and by the courts below, but, for the reasons given in paras 28 to 31 above, I am currently inclined to favour the latter meaning. On the other hand, as the TR were produced and, to an extent, acted on before the Contract was agreed, it may be questionable whether it would be right to interpret the TR by reference to clauses of the Contract. However, it is clear that, if para 3.2.2.2(ii) is an effective term of the Contract, it was breached by MTH whichever meaning it has, and therefore the issue need not be resolved. The enforceability of para 3.2.2.2(ii) according to its terms: introductory E.ONs case is that para 3.2.2.2(ii) of the TR is incorporated into the Contract, because (i) clause 8.1(x) of the Contract required the Works to be fit for purpose, (ii) Part C of the Contract equated fitness for purpose with compliance with the Employers Requirements, (iii) Part C also defined Employers Requirements as including the contents of the TR, and (iv) the TR included para 3.2.2.2(ii), which specifically refers to the foundations having a life of 20 years. On that basis, E.ON argues that para 3.2.2.2(ii) was clearly infringed, and, as it was a term of the Contract, it must follow that MTH is, as Edwards-Stuart J held, liable for breach of contract. By contrast, MTH supports the reasoning of Jackson LJ, and contends that it is clear that the Contract stipulated that the Works must be constructed in accordance with the requirements of J101 (and with appropriate care), and it is unconvincing to suggest that a provision such as para 3.2.2.2(ii) of the TR renders MTH liable for faulty construction, given that the Works were constructed fully in accordance with J101 (and with appropriate care). MTH contends that the references to a 20-year life in various provisions of the TR, including para 3.2.2.2(ii), ultimately do no more than reflect the fact that, as envisaged by J101, Part 1.6 of the TR specifies a design life for the Works. MTH also adopts Jackson LJs description of the contractual documentation as being of multiple authorship [and] contain[ing] much loose wording, and that it includes many ambiguities, infelicities and inconsistencies (quoting Lord Collins in In re Sigma Finance Corp (in administrative receivership) [2010] 1 All ER 571, para 35). More specifically, MTH makes the points that the TR are in their nature technical rather than legal, and that if the parties had intended MTH to warrant that the foundations would have a 20-year lifetime, or that they would be designed to have a 20-year life, a term to that effect would have been included in plain terms, probably as a Key Functional Requirement in para 1.6 of the TR. As already explained, it appears to me that, if one considers the natural meaning of para 3.2.2.2(ii) of the TR, it involved MTH warranting either that the foundations would have a lifetime of 20 years (as Jackson LJ accepted) or agreeing that the design of the foundations would be such as to give them a lifetime of 20 years. As Mr Streatfeild-James realistically accepted, the combination of the terms of clause 8.1(x) of the Contract and the definitions of Employers Requirements and Fit for Purpose result in the provisions of the TR being effectively incorporated into the Contract - unsurprisingly as they are included in the contractual documentation as Part I. In those circumstances, I consider that there are only two arguments open to MTH as to why the paragraph should not be given its natural effect (and while they are separate arguments, they can fairly be said to be mutually reinforcing). The first argument is that such an interpretation results in an obligation which is inconsistent with MTHs obligation to construct the Works in accordance with J101. The second argument is that para 3.2.2.2(ii) is simply too slender a thread on which to hang such an important and potentially onerous obligation. The enforceability of para 3.2.2.2(ii) according to its terms: inconsistency with J101 There have been a number of cases where courts have been called on to consider a contract which includes two terms, one requiring the contractor to provide an article which is produced in accordance with a specified design, the other requiring the article to satisfy specified performance criteria; and where those criteria cannot be achieved by complying with the design. The reconciliation of the terms, and the determination of their combined effect must, of course, be decided by reference to ordinary principles of contractual interpretation (as recently discussed in Wood v Capita Insurance Services Ltd [2017] 2 WLR 1095, paras 8 to 15 and the cases cited there), and therefore by reference to the provisions of the particular contract and its commercial context. However, it is worth considering some of the cases where such an issue has been discussed. Thorn v The Mayor and Commonalty of London (1876) 1 App Cas 120 has been treated as the first decision on this point (including in the judgments discussed in paras 39 to 43 below), although it seems to me to be only of indirect relevance. The contractor successfully tendered for work involving the replacement of the existing Blackfriars Bridge pursuant to an employers invitation, which stated that the work was to be carried out pursuant to a specification. The specification included wrought iron caissons which were to form the foundations of the piers as shewn on [certain] drawings (p 121). It subsequently turned out that the caissons as designed would not answer to their purpose, and the plan of the work was altered, causing consequential expense and delay to the contractor (p 122). The contractors claim was based on the contention that the employer had impliedly warranted that the bridge could be built according to the specification. The unanimous rejection of the existence of such a warranty by the House of Lords does not directly relate to the issue in this case. However, it is worth noting that, as reconstruction of the bridge had been completed, the employer was not responsible for the contractors losses and expenses flowing from the defective specification (at least on the basis of an implied warranty). Rather more to the point, the speeches of Lord Chelmsford (at pp 132 to 133) and Lord OHagan (at p 138) strongly indicate that a contractor who bids on the basis of a defective specification provided by the employer only has himself to blame if he does not check their practicality and they turn out to be defective. The Hydraulic Engineering Co Ltd v Spencer and Sons (1886) 2 TLR 554 appears to me to be more directly in point. In that case, the defendants contracted to make and deliver to the plaintiffs 15 cast iron cylinders. The contract provided that the cylinders would be cast according to specifications and plans provided by the plaintiffs, and also that the cylinders would be able to stand a pressure of 25 cwt per square inch. The Court of Appeal, upholding Coleridge CJ, rejected the defendants contention that, because the flaw was the inevitable result of the plan upon which the plaintiffs ordered them to do the work the defendants could not be held liable for a defect caused by that plan (to quote from the report of counsels argument). Lindley LJ said that it was manifest that the defendants thought that they could cast the cylinders on [the] pattern [sent by the plaintiffs] without defects. Although he accepted that the defect was unavoidable, he said that [t]here was no doubt that it was a defect and the [defendants] were therefore liable. Lord Esher MR and Lopes LJ agreed. A similar view was taken in Scotland by the Inner House in A M Gillespie & Co v John Howden & Co (1885) 22 SLR 527, where a customer ordered a ship from shipbuilders pursuant to a contract which required the ship to carry 1,800 tons deadweight, and which also required the ship to be built according to a model approved by the customer. The ship as built was unable to carry 1,800 tons deadweight, and the shipbuilders argued that they should not be liable for damages because it would have been impossible to construct a ship capable of carrying 1,800 tons according to the model approved by the customer. Upholding the Sheriff- Substitute, Lord Rutherfurd-Clark (with whom Lords Craighill and Young agreed) said at p 528 that this [was] no defence, as [t]he fact remains that the [shipbuilders] undertook a contract which they could not fulfil and they are consequently liable in damages for the breach. The issue has also come up in the courts of Canada. In The Steel Company of Canada Ltd v Willand Management Ltd [1966] SCR 746, the respondents were claiming for repair work to three defective roofs on buildings which they had constructed for the appellants. The respondents argued that the defects were not their fault, as they had constructed the buildings under a contract which required them to comply with the requirements of the appellants, and the defects resulted from defects in those requirements. Reversing the Ontario Court of Appeal, the Supreme Court of Canada rejected this argument on the ground that the contract also contained a term that the respondent guaranteed that all work would remain weather tight and that all material and workmanship would be first class and without defect. In the course of giving the judgment of the court, Ritchie J at p 751 rejected the respondents contention, which was supported by a decision of the courts of New York, that they guaranteed only that, as to the work done by it, the roof would be weather-tight in so far as the plans and specifications with which it had to comply would allow, and at pp 753 to 754 approved a statement in the then current (8th) edition of Hudsons Building and Engineering Contracts, p 147, to this effect: generally the express obligation to construct a work capable of carrying out the duty in question overrides the obligation to comply with the plans and specifications, and the contractor will be liable for the failure of the work notwithstanding that it is carried out in accordance with the plans and specification. Nor will he be entitled to extra payment for amending the work so that it will perform the stipulated duty. The reasoning of the Canadian Supreme Court was fairly recently applied by the Court of Appeal for British Columbia in Greater Vancouver Water District v North American Pipe & Steel Ltd 2012 BCCA 337, where a clear and unambiguous provision whereby a supplier warrant[ed] and guarantee[d] that the supplied goods were free from all defects arising from faulty design was held to apply in full, notwithstanding the immediately preceding warranty by the supplier that the goods would conform to all applicable specifications, and that those specifications were unsatisfactory and led to the defect complained of. The law on the topic was well summarised by Lord Wright in Cammell Laird and Co Ltd v The Manganese Bronze and Brass Co Ltd [1934] AC 402, 425, where he said that [i]t has been laid down that where a manufacturer or builder undertakes to produce a finished result according to a design or plan, he may be still bound by his bargain even though he can show an unanticipated difficulty or even impossibility in achieving the result desired with the plans or specification. After referring to Thorn as being [s]uch a case, he mentioned Gillespie v Howden (1885) 12 R 800, where the Court of Session held it was no defence to a shipbuilder who had contracted to build a ship of a certain design and of a certain carrying capacity, that it was impossible with the approved design to achieve the agreed capacity: the shipbuilder had to answer in damages. Lord Wright then went on to explain that [t]hough this is the general principle of law, its application in respect of any particular contract must vary with the terms and circumstances of that contract. Where a contract contains terms which require an item (i) which is to be produced in accordance with a prescribed design, and (ii) which, when provided, will comply with prescribed criteria, and literal conformity with the prescribed design will inevitably result in the product falling short of one or more of the prescribed criteria, it by no means follows that the two terms are mutually inconsistent. That may be the right analysis in some cases (and it appears pretty clear that it was the view of the Inner House in relation to the contract in A M Gillespie). However, in many contracts, the proper analysis may well be that the contractor has to improve on any aspects of the prescribed design which would otherwise lead to the product falling short of the prescribed criteria, and in other contracts, the correct view could be that the requirements of the prescribed criteria only apply to aspects of the design which are not prescribed. While each case must turn on its own facts, the message from decisions and observations of judges in the United Kingdom and Canada is that the courts are generally inclined to give full effect to the requirement that the item as produced complies with the prescribed criteria, on the basis that, even if the customer or employer has specified or approved the design, it is the contractor who can be expected to take the risk if he agreed to work to a design which would render the item incapable of meeting the criteria to which he has agreed. Turning to the centrally relevant contractual provisions in the instant case, it seems to me that MTHs case, namely that the obligation which appears to be imposed by para 3.2.2.2(ii) is inconsistent with the obligation imposed by para 3.2.2.2(i) to comply with J101, faces an insurmountable difficulty. The opening provision of Section 3, para 3.1, (i) stresse[s] that the requirements contained in this section are the MINIMUM requirements of [E.ON] to be taken into account in the design, and (ii) goes on to provide that it is the responsibility of [MTH] to identify any areas where the works need to be designed to any additional or more rigorous requirements or parameters. In those circumstances, in my judgment, where two provisions of Section 3 impose different or inconsistent standards or requirements, rather than concluding that they are inconsistent, the correct analysis by virtue of para 3.1(i) is that the more rigorous or demanding of the two standards or requirements must prevail, as the less rigorous can properly be treated as a minimum requirement. Further, if there is an inconsistency between a design requirement and the required criteria, it appears to me that the effect of para 3.1(ii) would be to make it clear that, although it may have complied with the design requirement, MTH would be liable for the failure to comply with the required criteria, as it was MTHs duty to identify the need to improve on the design accordingly. As to the facts of the present case, para 3.2.2.2(i) could indeed be said to require that (as recorded in the note to the Equation in J101) should be taken as 0.00037 Rp for rolled steel surfaces, and, as explained above, this was a mistake, in that it substantially over-estimated the connection strength. However, given the terms of para 3.1(i), this figure for was a MINIMUM requirement, and, if para 3.2.2.2(ii) was to be complied with, the value of stipulated by J101 had to be decreased (as it happens by a factor of around ten). Furthermore, para 3.1(ii) makes it clear that MTH should have identified that there was a need for a more rigorous requirement than being taken as 0.00037 Rp to ensure that the design was satisfactory, or at least complied with para 3.2.2.2(ii). It is right to add that, even without para 3.1(i) and (ii), I would have reached the same conclusion. Even in the absence of those paragraphs, it cannot have been envisaged that MTH would be in breach of its obligations under para 3.2.2.2(i) if it designed the foundations on the basis of being less than 0.00037 Rp for rolled steel surfaces. Accordingly, at least in relation to the Equation, it represented a minimum standard even in the absence of paras 3.1(i) and (ii), and therefore there would have been no inconsistency between para 3.2.2.2(i) and 3.2.2.2(ii). I also draw assistance in reaching that conclusion from the cases discussed in paras 38 to 43 above. The notion that the Contractor might be expected to depart from the stipulations of J101, where appropriate, is also supported by para 3.1.2 of the TR, which specifically envisages that the Contractors Foundation Design Basis document may include departures from standards, and J101 is expressly treated as a standard in para 3.2.3.2. In addition, given that satisfaction of the Equation is required to justify the absence of shear keys, E.ONs contention is assisted by the terms of para 10.5.1, which starts by stating that MTH shall determine whether to employ shear keys within the grouted connection; had shear keys been provided, the problems which arose would, it appears, have been averted. The enforceability of para 3.2.2.2(ii) according to its terms: too slender a thread MTH relies on a number of factors to support the contention that para 3.2.2.2(ii) of the TR is too weak a basis on which to rest a contention that it had a liability to warrant that the foundations would survive for 20 years or would be designed so as to achieve 20 years of lifetime. First, it is said that the diffuse and unsatisfactorily drafted nature of the contractual arrangements, with their ambiguities and inconsistencies, should be recognised and taken into account. The contractual arrangements are certainly long, diffuse and multi-authored with much in the way of detailed description in the TR, and belt and braces provisions both in the TR and the Contract. However, that does not alter the fact that the court has to do its best to interpret the contractual arrangements by reference to normal principles. As Lord Bridge of Harwich said, giving the judgment of the Privy Council in Mitsui Construction Co Ltd v Attorney General of Hong Kong (1986) 33 BLR 7, 14, inelegant and clumsy drafting of a badly drafted contract is not a reason to depart from the fundamental rule of construction of contractual documents that the intention of the parties must be ascertained from the language that they have used interpreted in the light of the relevant factual situation in which the contract was made, although he added that the poorer the quality of the drafting, the less willing any court should be to be driven by semantic niceties to attribute to the parties an improbable and unbusinesslike intention. In this case, para 3.2.2.2(ii) is clear in its terms in that it appears to impose a duty on MTH which involves the foundations having a lifetime of 20 years (although, as discussed in paras 27 to 32, there is room for argument as to its precise effect). I do not see why that can be said to be an improbable [or] unbusinesslike interpretation, especially as it is the natural meaning of the words used and is unsurprising in the light of the references in the TR to the design life of the Works being 20 years, and the stipulation that the requirements of the TR are minimum. Secondly, MTH argues that it is surprising that such an onerous obligation is found only in a part of a paragraph of the TR, essentially a technical document, rather than spelled out in the Contract. Given that it is clear from the terms of the Contract that the provisions of the TR are intended to be of contractual effect, I am not impressed with that point. Thirdly, MTH suggests that, given the other obligations with regard to design, manufacture, testing, delivery, installation and completion expressly included, or impliedly incorporated, in clause 8.1 of the Contract, it is unlikely that an additional further and onerous obligation was intended to have been included in the TR. The trouble with that argument is that it involves saying that para 3.2.2.2(ii) adds nothing to other provisions of the TR or the contract. I accept that redundancy is not normally a powerful reason for declining to give a contractual provision its natural meaning especially in a diffuse and multi-authored contract (see In re Lehman Bros International (Europe) (in administration) (No 4) [2017] 2 WLR 1497, para 67). However, it is very different, and much more difficult, to argue that a contractual provision should not be given its natural meaning, and should instead be given no meaning or a meaning which renders it redundant. Fourthly, MTH argues that, if the parties had intended a warranty or term such as is contended for by E.ON, it would not have been tucked away in para 3.2.2.2 of the TR, but would, for instance, have been a Key Functional Requirement in Section 1.6 of the TR. Section 1.6 is concerned with general provisions about the two proposed wind farms, and there is no reference in it to any specific component, in particular the foundations. In any event, as mentioned in para 4 above, the Key Functional Requirements include a requirement for a minimum site specific design life of twenty (20) years without major retrofits or refurbishments, and there is no definition of that expression. Jackson LJ said below, in para 91, If a structure has a design life of 20 years, that does not mean that inevitably it will function for 20 years, although it probably will. Assuming (without deciding) that that is correct, it seems to me that there is a powerful case for saying that, given a Key Functional Requirement is that there is a minimum 20-year design life, it is scarcely surprising that a provision dealing with the General Design Conditions at the Detailed Design Stage includes a provision which has the effect for which E.ON contends in this case. Fifthly, MTH contends that the TR are concerned in a number of places (eg paras 1.6, 3.2.6 and 3b.5.6) with emphasising that the design life of the Works or various components of the Works should be 20 years, which does not carry with it a warranty that the Works, or foundations, will last for 20 years or that they will be designed to last for 20 years, and so it is unlikely that para 3.2.2.2(ii) was concerned with imposing a greater obligation on MTH. The points I have already made at the end of para 49 and the end of para 50 above appear to me to answer this contention. Sixthly, MTH points out that para 3.2.2.2(ii) was concerned with planned maintenance and should not be given the sort of broad effect which E.ONs case involves. It appears to me that the reference to planned maintenance at the end of the first sentence of para 3.2.2.2(ii) emphasises that the design of the foundations should not simply be such as to last for 20 years, but should be able to do so without the need for planned maintenance. Conclusion In these circumstances, I would allow E.ON’s appeal and restore the order made at first instance by Edwards-Stuart J.

This appeal arises from the fact that the foundation structures of two offshore wind farms at Robin Rigg in the Solway Firth, which were designed and installed by the respondent, MT Hjgaard A/S (MTH), failed shortly after completion of the project. The dispute concerns who bears the remedial costs in the sum of 26.25m. In May 2006, the appellants, two companies in the E.ON group (E.ON), sent tender documents to various parties including MTH, who in due course became the successful bidders. The tender documents included E.ONs Technical Requirements. The Technical Requirements laid out minimum requirements that were to be taken into account by the contractor, i.e. ultimately MTH. Amongst other things, the Technical Requirements called for the foundations to be in accordance with a document known as J101. J101 was a reference to an international standard for the design of offshore wind turbines published by an independent classification and certification agency. J101 provides for certain mathematical formulae to calculate aspects of the foundation structures. One such formula included , which was given a specific value. Only later, a review showed that the value given for was wrong by a factor of about ten. This error meant that the strength of the foundation structures had been substantially over estimated. Having been selected as the contractor for the works, MTH duly set about preparing its tender in accordance with E.ONs requirements and J101. Finally, E.ON and MTH entered into a contract under which MTH agreed to design, fabricate and install the foundations for the proposed turbines. Clause 8.1(x) of this contract stated that MTH should carry out the works so that they shall be fit for its purpose. Fit for Purpose was ultimately defined in a way that it included adherence to the Technical Requirements. The parties agreed to carry out remedial work immediately after the foundation structures started failing. These proceedings concern the question as to who should bear the cost of the remedial works. The High Court found for E.ON that Clause 8.1(x) of the contract ultimately referred to the Technical Requirements. Para 3.2.2.2 of the Technical Requirements and another provision, para 3b.5.1, required the foundations to be designed so that they would have a lifetime of twenty years. As they were not, MTH was held liable. On appeal, the Court of Appeal found otherwise. There was an inconsistency between paras 3.2.2.2 (and para 3b.5.1) of the Technical Requirements on the one hand and other contractual provisions (in particular adherence to J101) on the other hand. The Court of Appeal ruled that the other contractual provisions should prevail. The Supreme Court unanimously allows E.ONs appeal. Lord Neuberger gives the judgment, with which Lord Mance, Lord Clarke, Lord Sumption, and Lord Hodge agree. The central issue in this appeal is whether para 3.2.2.2 (and para 3b.5.1) of the Technical Requirements was infringed [27, 33]. The second limb of para 3.2.2.2 reads: The design of the foundations shall ensure a lifetime of twenty years in every aspect without planned replacement. Taking into account other aspects of the Technical Requirements, this can be read in two ways: either as a warranty that the foundations will actually have a lifetime for twenty years, or as an undertaking to provide a design that can objectively be expected to have a lifetime of twenty years. Although there is some force in the latter argument, especially in the contracts (exclusive) remedies regime [27 32], the question does not warrant an answer in this appeal. The foundations neither had a lifetime of twenty years, nor was their design fit to ensure one [24 32]. Therefore, the effect of para 3.2.2.2 according to its terms would be to render MTH liable. The reference to J101, the international design standard, which included the flawed value attributed to , does not require a different construction which would deviate from the natural language of para 3.2.2.2. Both J101 and para 3.2.2.2. are part of the same contract. The reconciliation of various terms in a contract, and the determination of their combined effect must be decided by reference to ordinary principles of contractual interpretation [37, 48]. While each case must turn on its own facts, the courts are generally inclined to give full effect to the requirement that the item as produced complies with the prescribed criteria, even if the customer or employer has specified or approved the design. Thus, generally speaking, the contractor is expected to take the risk if he agreed to work to a design which would render the item incapable of meeting the criteria to which he has agreed [38 44]. The Technical Requirements expressly prescribe only a minimum standard. It was the contractor, i.e. MTHs, responsibility to identify areas where the works needed to be designed in a more rigorous way (para 3.1.(1)). Further, it was contemplated that MTH might go beyond certain standards, including J101 (para 3.1.2) [45 47]. Finally, para 3.2.2.2 of the Technical Requirements is not too weak a basis on which to rest a contention that MTH had a liability to warrant that the foundations would survive for twenty years or would be designed so as to achieve twenty years of lifetime. Applying the ordinary principles of interpretation, in a complex contract, this interpretation gives way to the natural meaning of para 3.2.2.2 and is not improbable or unbusinesslike [48 51].

This case is about the criteria for judging whether the living arrangements made for a mentally incapacitated person amount to a deprivation of liberty. If they do, then the deprivation has to be authorised, either by a court or by the procedures known as the deprivation of liberty safeguards, set out in the Mental Capacity Act 2005 (the Mental Capacity Act). If they do not, no independent check is made on whether those arrangements are in the best interests of the mentally incapacitated person, although of course the health or social care bodies who make the arrangements do so in the hope and belief that they are the best which can practicably be devised. It is no criticism of them if the safeguards are required. It is merely a recognition that human rights are for everyone, including the most disabled members of our community, and that those rights include the same right to liberty as has everyone else. The statutory background The deprivation of liberty safeguards were introduced into the Mental Capacity Act by the Mental Health Act 2007. In a sense the wheel has turned full circle. Throughout the 19th century it was assumed that persons of unsound mind (then known as either lunatics or idiots) should be kept in some form of confinement and reformers concentrated upon providing more and better institutions where they could live. But it was also recognised that there was a risk of unjustified confinement and assumed that some form of judicial certification was the best protection against this. This was therefore the approach adopted under the Mental Deficiency Acts of 1913 and 1927, under which publicly funded institutions were established for people whose mental handicaps ranged from the severe (known as idiots), through the moderate (known as imbeciles), to the mild (known as feeble minded). Those Acts did not provide for a voluntary status for patients who were able to consent to their admission to hospital, nor did they provide for an informal status for those who lacked the capacity to consent but raised no objection to their admission. However, unlike the institutions providing for people with mental illnesses, the institutions in question were not prohibited from admitting patients without formal certification. During the 1950s, therefore, this was first encouraged for patients admitted for a short time; and the Report of the Royal Commission on the Law relating to Mental Illness and Mental Deficiency 1954 1957 (chaired by Lord Percy), recommended that this could and should become the general practice without waiting for legislative reform (1957, Cmnd 169). Certification was seen, not only as bringing with it some stigma, but also as inconsistent with the goal of normalising the care and treatment of these patients and bringing it into line with the care and treatment of people with physical disorders and disabilities. A legislative basis for such informal admissions to hospital was provided by section 5(1) of the Mental Health Act 1959, now contained in section 131(1) of the Mental Health Act 1983 (the 1983 Act): Nothing in this Act shall be construed as preventing a patient who requires treatment for mental disorder from being admitted to any hospital or registered establishment in pursuance of arrangements made in that behalf and without any application, order or direction rendering him liable to be detained under this Act . But that, of course, begged the question of the underlying law: on what legal basis could a person who lacked the capacity to decide to go into hospital or indeed anywhere else be admitted and treated there, whether for mental or physical disorder? The answer came in the case of In re F (Mental Patient: Sterilisation) [1990] 2 AC 1. The House of Lords confirmed that there was no one authorised by law to consent to treatment on behalf of an adult who lacked the capacity to consent for himself, nor was there any jurisdiction in the courts to give such consent. It was, however, lawful for him to be given such treatment and care as was necessary in his own best interests. In cases of doubt or dispute, moreover, the High Court could declare whether or not proposed treatment would be lawful. That principle has now been given statutory backing in section 5 of the Mental Capacity Act; as originally enacted, however, section 6(5) of the Act was designed to make it clear that this did not permit hospitals or other carers to deprive a person of his liberty. This was prompted by the litigation concerning HL. Quite how far the necessity principle might extend at common law was tested in the case of R v Bournewood Community and Mental Health NHS Trust, ex p L [1999] 1 AC 458. HL was autistic and profoundly mentally disabled. He had lived in a hospital for many years before being discharged to live with paid foster carers, Mr and Mrs E. One day he became agitated at his day centre and, as the foster carers could not be contacted, a social worker and doctor were called, he was sedated and taken to A & E, where he was examined by a psychiatrist. The psychiatrist assessed that he needed in patient treatment, but by then he appeared fully compliant, and so he was admitted informally. Although the plan was to return him to Mr and Mrs E as soon as the hospital staff thought it possible, their contact with him was restricted and he would have been prevented from leaving had he tried to do so. Habeas corpus and judicial review proceedings were brought on his behalf. These succeeded in the Court of Appeal (whereupon HL was promptly sectioned under the Mental Health Act), but failed in the House of Lords. The majority held that the hospital had not detained him. Lord Nolan and Lord Steyn held that it had. Lord Steyn expressed himself with some force, at p 495: Counsel for the trust and the Secretary of State argued that L was in truth always free not to go to the hospital and subsequently to leave the hospital. This argument stretches credulity to breaking point. The truth is that for entirely bona fide reasons, conceived in the best interests of L, any possible resistance by him was overcome by sedation, by taking him to hospital and by close supervision of him in hospital and, if L had shown any sign of wanting to leave, he would have been firmly discouraged by staff and, if necessary, physically prevented from doing so. The suggestion that L was free to go was a fairy tale. Nevertheless, both he and Lord Nolan agreed with the majority that what had been done was justified by the necessity principle and that section 131(1) covered, not only a patient who was able to and did give a valid consent, but also a patient who was unable to do so. The case then went to the European Court of Human Rights as HL v United Kingdom (2004) 40 EHRR 761. The court agreed with Lord Steyn that HL had been deprived of his liberty. It found violations, both of the right to liberty, in article 5(1) of the Convention for the Protection of Human Rights and Fundamental Freedoms, and of the right of a detained person to speedy access to a court which can order his release if his detention is not lawful, in article 5(4). Article 5(1)(e) permits the lawful detention of persons of unsound mind, but that detention has to conform to the Convention standards of legality, and the doctrine of necessity did not provide HL with sufficient protection against arbitrary deprivation of his liberty. The court was struck by the difference between the careful machinery for authorising the detention and treatment of compulsory patients under the Mental Health Act and the complete lack of any such machinery for compliant incapacitated patients such as HL. Key passages from the judgment are these: 89. It is not disputed that in order to determine whether there has been a deprivation of liberty, the starting point must be the specific situation of the individual concerned and account must be taken of a whole range of factors arising in a particular case such as the type, duration, effects and manner of implementation of the measure in question. The distinction between a deprivation of, and restriction upon, liberty is merely one of degree or intensity and not one of nature or substance. 90. . The majority of the House of Lords specifically distinguished actual restraint of a person (which would amount to false imprisonment) and restraint which was conditional upon his seeking to leave (which would not constitute false imprisonment). The court does not consider such a distinction to be of central importance under the Convention. Nor, for the same reason, can the court accept as determinative the fact . that the regime applied to the applicant (as a compliant incapacitated patient) did not materially differ from that applied to a person who had the capacity to consent to hospital treatment, neither objecting to their admission to hospital. The court recalls that the right to liberty is too important in a democratic society for a person to lose the benefit of Convention protection for the single reason that he may have given himself up to be taken into detention, especially when it is not disputed that that person is legally incapable of consenting to, or disagreeing with, the proposed action. 91. the court considers the key factor in the present case to be that the health care professionals treating and managing the applicant exercised complete and effective control over his care and movements from the moment he presented acute behavioural problems on 22 July 1997 to the date he was compulsorily detained on 29 October, 1997. Accordingly, the concrete situation was that the applicant was under continuous supervision and control and was not free to leave. Any suggestion to the contrary was, in the Courts view, fairly described by Lord Steyn as stretching credulity to breaking point and as a fairy tale. It therefore became necessary for this country to introduce some such machinery for the many thousands of mentally incapacitated people who are regularly deprived of their liberty in hospitals, care homes and elsewhere. The Mental Health Act 2007 amended the Mental Capacity Act accordingly. Section 6(5) was repealed and replaced with sections 4A and 4B. Deprivation of liberty is not permitted under the Act save in three circumstances: (i) it is authorised by the Court of Protection by an order under section 16(2)(a); (ii) it is authorised under the procedures provided for in Schedule A1, which relates only to deprivations in hospitals and in care homes falling within the meaning of the Care Standards Act 2000 (see Schedule A1, para 178); (iii) it falls within section 4B, which allows deprivation if it is necessary in order to give life sustaining treatment or to prevent a serious deterioration in the persons condition while a case is pending before the court. The safeguards have the appearance of bewildering complexity, much greater than that in the comparable provisions for detaining mental patients in hospital under the Mental Health Act; but their essence is to secure professional assessment, by people independent of the hospital or care home in question, of (a) whether the person concerned lacks the capacity to make his own decision about whether to be accommodated in the hospital or care home for the purpose of care or treatment (Schedule A1, para 15), and (b) whether it is in his best interests to be detained (para 16). The procedures are administrative, but the authorisation can be challenged in the Court of Protection under section 21A. There have been far fewer authorisations under Schedule A1 than was predicted before the amendments came into force, although the numbers are rising (from 7157 applications in 2009 2010 to 11,887 in 2012 13). There have also been very few cases coming before the Court of Protection seeking authority to deprive someone of his liberty in a setting other than a hospital or care home (it is not known how many of the 88 applications made in 2012 were challenges under section 21A or for orders under section 16). It would not be at all surprising if those arranging for the care of people with severe learning disabilities were reluctant to see those arrangements, made in what they think are the best interests of the people concerned, as also depriving them of their liberty. As with detention under the Mental Health Act, they may worry that it carries a stigma. They may also baulk at the bureaucracy of the procedures and the time they take. They may even see the procedures as a return to the bad old days before the Mental Health Act 1959, when all mental patients were seen as prisoners rather than patients or residents like any others. Legal formalities may be seen as the antithesis of the normalisation which it is the object of both the Mental Health and the Mental Capacity Acts to achieve. The facts of the two cases before us are a good illustration of the sort of benevolent living arrangements which many might find difficult to characterise as a deprivation of liberty. What follows are the facts as they were when the cases were heard in the Court of Protection, which is now a long time ago. The facts: P (otherwise known as MIG) and Q (otherwise known as MEG) v Surrey County Council MIG and MEG are sisters who first became the subject of care proceedings under the Children Act 1989 in 2007, when they were aged respectively 16 and 15. MIG has a learning disability at the lower end of the moderate range or the upper end of the severe range. She also has problems with her sight and her hearing. She communicates with difficulty and has limited understanding, spending much of her time listening to music on her iPod. She needs help crossing the road because she is unaware of danger. MEG has a learning disability at the upper end of the moderate range, bordering on the mild. Her communication skills are better than her sisters and her emotional understanding is quite sophisticated. Nevertheless, she may have autistic traits and she exhibits challenging behaviour. Until 2007 they lived with their mother and from 1997 also with their step father. They were ill treated and neglected there. They were removed from home after siblings made allegations of sexual abuse against their step fathers father, and then against their step father and their mother. Their step father was later convicted of raping their half sister and their mother of indecently assaulting her. At the time of the final hearing before Parker J in 2010, MIG (then aged 18) was living with a foster mother with whom she had been placed when she was removed from home. She was devoted to her foster mother (whom she regarded as her mummy). Her foster mother provided her with intensive support in most aspects of daily living. She had never attempted to leave the home by herself and showed no wish to do so, but if she did, the foster mother would restrain her. She attended a further education unit daily during term time and was taken on trips and holidays by her foster mother. She was not on any medication. MEG (then aged 17) had originally been placed with a foster carer, who was unable to manage her severe aggressive outbursts, and so she was moved to a residential home. She mourned the loss of that relationship and wished she was still living with her foster carer. The home was an NHS facility, not a care home, for learning disabled adolescents with complex needs. She had occasional outbursts of challenging behaviour towards the other three residents and sometimes required physical restraint. She was also receiving tranquillising medication. Her care needs were met only as a result of continuous supervision and control. She showed no wish to go out on her own and so did not need to be prevented from doing so. She was accompanied by staff whenever she left. She attended the same further education unit as MIG and had a much fuller social life than her sister. In 2008, when the sisters were aged 17 and 16, the care proceedings were transferred to the Court of Protection, the interim care orders expired, and Court of Protection proceedings were issued instead. (The Court of Protection has jurisdiction over people aged 16 or more, whereas a family court cannot make a care order once a child has reached 17: Children Act 1989, s 31(3).) On 15 April 2010, Parker J decided that the sisters living arrangements were in their best interests and concluded that they did not amount to a deprivation of liberty: [2010] EWHC 785 (Fam), [2011] Fam Law 29 (sub nom In re MIG and MEG). The Court of Appeal agreed: [2011] EWCA Civ 190 [2012] Fam 170. Wilson LJ, who gave the leading judgment, laid stress on the relative normality of the sisters lives, compared with the lives they might have at home with their family (paras 28, 29), together with the absence of any objection to their present accommodation (para 26). Mummery LJ was also impressed with the greater fulfilment in an environment more free than they had previously had (para 52). Smith LJ, on the other hand, thought their previous arrangements were not relevant, but stressed that what may be a deprivation of liberty for one person may not be for another (para 40). The facts: Cheshire West and Chester Council v P P was aged 38 at the time of the Court of Protection hearing. He was born with cerebral palsy and Downs syndrome and required 24 hour care to meet his personal care needs. Until he was 37 he lived with his mother, who was his principal carer, but her health began to deteriorate and the local social services authority concluded that she was no longer able to look after P. In 2009 they obtained orders from the Court of Protection that it was in Ps best interests to live in accommodation arranged by the local authority. Since November 2009, he had been living in Z house. This was not a care home. It was a spacious bungalow, described by an independent social worker as cosy and with a pleasant atmosphere, and close to Ps family home. At the time of the final hearing, he shared it with two other residents. There were normally two staff on duty during the day and one waking member of staff overnight. P received 98 hours additional one to one support each week, to help him to leave the house whenever he chose. He went to a day centre four days a week and a hydrotherapy pool on the fifth. He also went out to a club, the pub and the shops, and saw his mother regularly at the house, the day centre and her home. He could walk short distances but needed a wheel chair to go further. He also required prompting and help with all the activities of daily living, getting about, eating, personal hygiene and continence. He wore continence pads. Because of his history of pulling at these and putting pieces in his mouth, he wore a body suit of all in one underwear which prevented him getting at the pads. Intervention was also needed to cope with other challenging behaviours which he could exhibit. But he was not on any tranquillising medication. By the time of the final hearing before Baker J in April 2011, the principal issue was whether these arrangements amounted to a deprivation of liberty. Baker J held that P was completely under the control of the staff at Z House, that he could not go anywhere, or do anything, without their support and assistance (para 59). Further, the steps required to deal with his challenging behaviour lead to a clear conclusion that, looked at overall, P is being deprived of his liberty (para 60). Nevertheless it was in his best interests for those arrangements to continue: [2011] EWHC 1330 (Fam). The Court of Appeal substituted a declaration that the arrangements did not involve a deprivation of liberty: [2011] EWCA Civ 1257, [2012] PTSR 1447. Munby LJ, who delivered the leading judgment with which Lloyd and Pill LJJ agreed, developed the concept of relative normality adopted in P and Q, and considered it appropriate to compare Ps life, not with that which he had enjoyed before when living with his mother, but with that which other people like him, with his disabilities and difficulties, might normally expect to lead. As Lloyd LJ put it, It is meaningless to look at the circumstances of P in the present case and to compare them with those of a man of the same age but of unimpaired health and capacity. the right comparison is with another person of the same age and characteristics as P (para 120). What is a deprivation of liberty? In cases under the Human Rights Act 1998, the courts have frequently to consider how far their duty, in section 2(1), to take into account the jurisprudence of the European Commission and Court of Human Rights goes. That problem does not trouble us in this case. Section 64(5) of the Mental Capacity Act states that: In this Act, references to a deprivation of a persons liberty have the same meaning as in article 5(1) of the Human Rights Convention. As the object was to avoid the violation identified in HL 40 EHRR 761, it seems clear that we are expected to turn to the jurisprudence of the Strasbourg Court to find out what is meant by a deprivation of liberty in this context. There is no case in Strasbourg which concerns the type of placements with which we are here concerned. However, there have been several relevant decisions in Strasbourg since the judgments in the courts below. The most important is probably the decision of the Grand Chamber in Stanev v Bulgaria (2012) 55 EHRR 696, because this concerned the placement of a mentally disabled man in a care home rather than a hospital. The Court summarised the general principles in the context of people with mental disorders or disabilities. It is therefore convenient to repeat each of those principles, together with an explanation of the previous case law from which it is taken. First, 115. The Court reiterates that the difference between deprivation of liberty and restrictions on liberty of movement, the latter being governed by article 2 of Protocol No 4, is merely one of degree or intensity, and not one of nature or substance. Although the process of classification into one or other of these categories sometimes proves to be no easy task in that some borderline cases are a matter of pure opinion, the Court cannot avoid making the selection upon which the applicability or inapplicability of article 5 depends. In order to determine whether someone has been deprived of his liberty, the starting point must be his concrete situation and account must be taken of a whole range of criteria such as the type, duration, effects and manner of implementation of the measures in question. This is a reference back to the well known cases of Guzzardi v Italy (1980) 3 EHRR 333, paras 92 93, where the same points were made, derived from Engel v Netherlands (1976) 1 EHRR 647, paras 58 and 59, and to Storck v Germany (2005) 43 EHRR 6, para 71, where they were repeated. Guzzardi was a case of internal exile, where a suspected Mafioso was confined to a small area on an island with various other restrictions designed to prevent his engaging in Mafia activities. This was held to deprive him of his liberty. Secondly, 116. In the context of deprivation of liberty on mental health grounds, the court has held that a person could be regarded as having been detained even during a period when he was in an open hospital ward with regular unescorted access to the unsecured hospital grounds and the possibility of unescorted leave outside the hospital. This is a reference to Ashingdane v United Kingdom (1985) 7 EHRR 528, para 42. Ashingdane was concerned with the rather different question of whether article 5 could protect a patient from being detained in a secure hospital such as Broadmoor when he did not need to be there. But the court accepted that a compulsory patient is deprived of his liberty in the hospital where he is detained, irrespective of the openness or otherwise of the conditions there. Thirdly, 117. Furthermore, in relation to the placement of mentally disordered persons in an institution, the Court has held that the notion of deprivation of liberty does not only comprise the objective element of a persons confinement in a particular restricted space for a not negligible length of time. A person can only be considered to have been deprived of his liberty if, as an additional subjective element, he has not validly consented to the confinement in question. (Emphasis supplied) This is again a reference to Storck v Germany 43 EHRR 6, para 74. That case concerned a young woman who had twice been admitted to a private clinic for psychiatric treatment. The first time she had gone there with her father, had been placed in a locked ward and forcibly medicated, had tried to escape and been returned to the clinic by the police. The court held that she could not be taken to have consented to her confinement. The second time she had presented herself to the clinic and had not tried to escape, so the court accepted the factual finding of the national court that she had not been confined against her will. Fourthly, 118. The court has found that there was a deprivation of liberty in circumstances such as the following: (a) where the applicant, who had been declared legally incapable and admitted to a psychiatric hospital at his legal representatives request, had unsuccessfully attempted to leave the hospital; (b) where the applicant had initially consented to her admission to a clinic but had subsequently attempted to escape; and (c) where the applicant was an adult incapable of giving his consent to admission to a psychiatric institution which, nonetheless, he had never attempted to leave. (a) is a reference to Shtukatarov v Russia (2008) 54 EHRR 962, para 108; (b) is another reference to Storck, at para 76; and (c) is a reference to HL v United Kingdom 40 EHRR 761, at para 90 (see para 7 above). Fifthly, 119. The court has also held that the right to liberty is too important in a democratic society for a person to lose the benefit of Convention protection for the single reason that he may have given himself up to be taken into detention, especially when it is not disputed that person is legally incapable of consenting to, or disagreeing with, the proposed action. The first reference is to De Wilde, ooms and Versyp v Belgium (No 1) (1971) 1 EHRR 373, paras 64 65, and the second is again to HL v United Kingdom 40 EHRR 761, para 90 (see para 7 above). Finally, and for completeness, 120. In addition, the court has had occasion to observe that the first sentence of article 5(1) must be construed as laying down a positive obligation on the state to protect the liberty of those within its jurisdiction. Otherwise, there would be a sizeable gap in the protection from arbitrary detention, which would be inconsistent with the importance of personal liberty in a democratic society. The state is therefore obliged to take measures providing effective protection of vulnerable persons, including reasonable steps to prevent a deprivation of liberty of which the authorities have or ought to have knowledge. Thus, having regard to the particular circumstances of the cases before it, the court has held that the national authorities responsibility was engaged as a result of detention in a psychiatric hospital at the request of the applicants guardian and detention in a private clinic. The references are once again to Storck and to Shtukaturov. On occasions, therefore, the state may be accountable even for arrangements which it has not itself made. The applicant in Stanev had spent many years in a social care home where conditions were so bad that the court also found they amounted to inhuman and degrading treatment for the purpose of article 3. But the court also considered that (i) the objective requirement of deprivation of liberty was met because he had been kept at the home, in a mountain region far from his home town, needing permission to go out to the nearest village and leave of absence to visit his home, entirely at the discretion of the homes management which kept his identity papers and managed his finances, and accordingly he was under constant supervision and was not free to leave the home without permission (para 128); and (ii) the subjective element was met because he could understand his situation and had expressed his wish to leave, thus setting the case apart from the decision in HM v Switzerland (2002) 38 EHRR 314, where the court found that there was no deprivation of liberty as the applicant had been placed in a nursing home purely in her own interests and after her arrival there had agreed to stay (para 131). HM v Switzerland concerned an old lady who was placed, by order of the authorities confirmed by the courts, in a care home because of severe neglect in her own home. It is a difficult case, not least because the Swiss legislation in question referred to the deprivation of liberty. In deciding that she had not been deprived of her liberty, the Strasbourg court referred to the fact that she had freedom of movement and was able to entertain social contacts with the outside world (para 45), that she hardly felt the effects of her stay and was undecided as to which solution she in fact preferred (para 46), that after she had moved there she agreed to stay (para 47), but in particular the fact that the Cantonal Appeals Commission placed the applicant in the foster home in her own interests in order to provide her with the necessary medical care, as well as satisfactory living conditions and hygiene, and also taking into consideration the comparable circumstances in the case of Nielsen v Denmark (para 48). There was a powerful dissent from Judge Jorundsson, who pointed out that it was clear that she was not permitted to leave the institution and go home; and that if she did, she would have been brought back (para O 16). This reference to the benevolent purpose of the placement is inconsistent with the later Grand Chamber decisions of Creanga v Romania (2012) 56 EHRR 361, para 93, and Austin v United Kingdom (2012) 55 EHRR 14, para 58. There it was stated that an underlying public interest motive has no bearing on the question whether that person has been deprived of his liberty . The same is true where the object is to protect, treat or care in some way for the person taken into confinement, unless that person has validly consented to what would otherwise be a deprivation of liberty (para 58). In HL v United Kingdom, the Court distinguished HM v Switzerland principally on the basis that she had often stated that she was willing to enter the nursing home and, within weeks of being there, she had agreed to stay, although it also referred to a regime entirely different to that applied to the present applicant (para 93). However, the court has also distinguished it in four later cases concerning placements in social care homes rather than in hospitals. In Stanev v Bulgaria 55 EHRR 696, the court distinguished it on the basis that she had agreed to stay whereas the applicant in that case had at no time consented to the placement or accepted it tacitly. In DD v Lithuania (Application no 13469/06), 14 February 2012, the Court distinguished it on the same basis, coupled with the procedural safeguards, including judicial scrutiny, which were in place to protect HM (para 147). In Kedzior v Poland (Application no 45026/07), 16 October 2012, the government relied upon HM v Switzerland, but the court did not refer to it in its assessment. Finally, in Mihailovs v Latvia (Application no 35939/10), 22 January 2013, the court referred to it, not during its assessment of the objective element of confinement but only during its assessment of the subjective element of consent (see para 135). The Court did not refer in its assessment in any of these later cases to Nielsen v Denmark (1988) 11 EHRR 175, which concerned a 12 year old boy placed in a childrens psychiatric unit by his mother (who alone had parental responsibility for him). The court held, by a majority of nine to seven, that he had not been deprived of his liberty. The restrictions to which he was subject were no more than the normal requirements for the care of a child of 12 years of age receiving treatment in hospital. The conditions . did not, in principle, differ from those obtaining in many hospital wards where children with physical disorders are treated (para 72). Hence his hospitalisation did not amount to a deprivation of liberty within the meaning of article 5, but was a responsible exercise by his mother of her custodial rights in the interest of the child (para 73). The seven dissenting judges considered that placing a 12 year old boy who was not mentally ill in a psychiatric ward for several months against his will was indeed a deprivation of liberty. It would appear, therefore, that the case turns on the proper limits of parental authority in relation to a child. As already mentioned (para 4 above) there is no equivalent in English law to parental authority over a mentally incapacitated adult. In any event, the Strasbourg court was not deterred from finding a deprivation of liberty in the cases of Stanov, DD, Kedzior and Mihailovs by the fact that the placements were arranged by the person who had been appointed legal guardian of the applicant. In all these cases, the applicant lacked the legal capacity to consent to the placement. In Shtukaturov v Russia 54 EHRR 962, decided in 2008, the applicant had been placed in a psychiatric hospital at the request of his legal guardian, which in Russian law was regarded as a voluntary admission. Although he lacked the de jure legal capacity to decide for himself, this did not necessarily mean that he was de facto unable to understand his situation (para 108). Indeed, he had evinced his objections. The subjective element of lack of consent was made out (para 109). The court took the same view in DD (para 150) and in Kedzior (para 58). Thus it appeared to give some weight to the objections of a person who lacked legal capacity when deciding that the subjective element was made out despite the consent of the persons legal guardian. But in Mihailovs, the court seems to have gone further. In relation to one of the care home placements, the court held that there was a deprivation of liberty, because although the applicant lacked legal capacity he subjectively perceived his compulsory admission there as such a deprivation (para 134). In relation to a later placement, however, he did not raise any objections or attempt to leave and the court concluded that he had tacitly agreed to stay there and thus had not been deprived of his liberty (paras 139, 140). In contrast, of course, in HL v United Kingdom, the patient was deprived of his liberty in the hospital despite his apparent compliance. The Strasbourg case law, therefore, is clear in some respects but not in others. The court has not so far dealt with a case combining the following features of the cases before us: (a) a person who lacks both legal and factual capacity to decide upon his or her own placement but who has not evinced dissatisfaction with or objection to it; (b) a placement, not in a hospital or social care home, but in a small group or domestic setting which is as close as possible to normal home life; and (c) the initial authorisation of that placement by a court as being in the best interests of the person concerned. The issue, of course, is whether that authorisation can continue indefinitely or whether there must be some periodic independent check upon whether the placements made are in the best interests of the people concerned. The arguments The first and most fundamental question is whether the concept of physical liberty protected by article 5 is the same for everyone, regardless of whether or not they are mentally or physically disabled. Munby LJ in Ps case appears to have thought that it is not, for he criticised the trial judge for failing to grapple with the question whether the limitations and restrictions on Ps life at Z house are anything more than the inevitable corollary of his various disabilities. The truth, surely, is they are not. Because of his disabilities, P is inherently restricted in the kind of life he can lead. Ps life, wherever he may be living, whether at home with his family or in the home of a friend or in somewhere like Z House is, to use Parker Js phrase, dictated by his disabilities and difficulties (para 110). In the same way, both Lloyd LJ in that case, and Smith LJ in P and Q, thought that a persons life had to be compared with that of another person with his same characteristics. What was a deprivation of liberty for some people might not be a deprivation for others. The answer given by Mr Richard Gordon QC, who appears instructed by the Official Solicitor on behalf of all three appellants, is that this confuses the concept of deprivation of liberty with the justification for imposing such a deprivation. People who lack the capacity to make (or implement) their own decisions about where to live may justifiably be deprived of their liberty in their own best interests. They may well be a good deal happier and better looked after if they are. But that does not mean that they have not been deprived of their liberty. We should not confuse the question of the quality of the arrangements which have been made with the question of whether these arrangements constitute a deprivation of liberty. Allied to the inevitable corollary argument it might once have been suggested that a person cannot be deprived of his liberty if he lacks the capacity to understand and object to his situation. But that suggestion was rejected in HL v United Kingdom. In any event, it is quite clear that a person may be deprived of his liberty without knowing it. An unconscious or sleeping person may not know that he has been locked in a cell, but he has still been deprived of his liberty. A mentally disordered person who has been kept in a cupboard under the stairs (a not uncommon occurrence in days gone by) may not appreciate that there is any alternative way to live, but he has still been deprived of his liberty. We do not have any difficulty in recognising these situations as a deprivation of liberty. We should not let the comparative benevolence of the living arrangements with which we are concerned blind us to their essential character if indeed that constitutes a deprivation of liberty. The whole point about human rights is their universal character. The rights set out in the European Convention are to be guaranteed to everyone (article 1). They are premised on the inherent dignity of all human beings whatever their frailty or flaws. The same philosophy underpins the United Nations Convention on the Rights of Persons with Disabilities (CRPD), ratified by the United Kingdom in 2009. Although not directly incorporated into our domestic law, the CRPD is recognised by the Strasbourg court as part of the international law context within which the guarantees of the European Convention are to be interpreted. Thus, for example, in Glor v Switzerland, Application No 13444/04, 30 April 2009, at para 53, the Court reiterated that the Convention must be interpreted in the light of present day conditions and continued: It also considers that there is a European and Worldwide consensus on the need to protect people with disabilities from discriminatory treatment (see, for example, Recommendation 1592 (2003) towards full inclusion of people with disabilities, adopted by the Parliamentary Assembly of the Council of Europe on 29 January 2003, or the United Nations Convention on the Rights of Persons with Disabilities, which entered into force on 3 May 2008). The second question, therefore, is what is the essential character of a deprivation of liberty? It is common ground that three components can be derived from Storck, paras 74 and 89, confirmed in Stanev, paras 117 and 120, as follows: (a) the objective component of confinement in a particular restricted place for a not negligible length of time; (b) the subjective component of lack of valid consent; and (c) the attribution of responsibility to the state. Components (b) and (c) are not in issue here, but component (a) is. Ms Jenni Richards QC, who appears for both the local authorities involved, relies heavily on the statement in Guzzardi v Italy, which is repeated in all the later cases, that the difference between restriction and deprivation of liberty is one of fact and degree in which a number of factors may be relevant. Simply asking whether a person is confined is not enough except in obvious cases. The starting point is always upon the concrete situation of the particular person concerned and account must be taken of a whole range of criteria such as the type, duration, effects and manner of implementation of the measures in question: 3 EHRR 333, para 92. The presence or absence of coercion is also relevant. Thus there is no single touchstone of what constitutes a deprivation of liberty in this or any other context. She contrasts the concrete situations of those who were held to have been deprived of their liberty in hospitals or care homes with others who were not: in particular in this context, Nielsen v Denmark and HM v Switzerland. She also refers to Haidn v Germany (Application no 6587/04), 13 January 2011, para 82, where the court expressed serious doubts whether instructing the applicant to live in an old peoples home which he was not to leave without his custodians permission amounted to a deprivation rather than a restriction of liberty. However, the court did not have to decide the question, as the applicant was complaining about his preventive detention in prison after the expiry of his sentence for serious sexual offences. Mr Gordon argues that, in this context, the answer is clear: it is, as expressed in HL v United Kingdom 40 EHRR 761, para 91, whether the concrete situation of the person concerned is that he [is] under continuous supervision and control and [is] not free to leave the accommodation where he has been placed. By free to leave he means what Munby J meant in JE v DE [2007] 2 FLR 1150, para 115: The fundamental issue in this case . is whether DE was deprived of his liberty to leave the X home and whether DE has been and is deprived of his liberty to leave the Y home. And when I refer to leaving the X home and the Y home, I do not mean leaving for the purpose of some trip or outing approved by SCC or by those managing the institution: I mean leaving in the sense of removing himself permanently in order to live where and with whom he chooses . Freedom to leave in this sense was the crucial factor, not only in HL v United Kingdom, where the complainant was placed in a hospital, but also in Stanev v Bulgaria, where the complainant was placed in a care home, as were the complainants in DD v Lithuania, Kedzior v Poland, and Mihailovs v Latvia. In each of these, the courts focus when considering the confinement question was on whether the complainant was under the complete supervision and control of the staff and not free to leave. The fact that these were social care settings with relatively open conditions was no more determinative than had been the open hospital conditions in Ashingdane. In these more recent cases, HM v Switzerland, another care home placement, has consistently been distinguished because of the complainants willingness to be in the home, rather than because of the conditions within the home. Although Nielsen has not been departed from, it is to be regarded as a case of substituted consent, and thus not fulfilling component (b). In none of the more recent cases was the purpose of the confinement which may well have been for the benefit of the person confined considered relevant to whether or not there had been a deprivation of liberty. If the fact that the placement was designed to serve the best interests of the person concerned meant that there could be no deprivation of liberty, then the deprivation of liberty safeguards contained in the Mental Capacity Act would scarcely, if ever, be necessary. As Munby J himself put it in JE v DE [2007] 2 FLR 1150, para 46: I have great difficulty in seeing how the question of whether a particular measure amounts to a deprivation of liberty can depend upon whether it is intended to serve or actually serves the interests of the person concerned. For surely this is to confuse . two quite separate and distinct questions: Has there been a deprivation of liberty? And, if so, can it be justified? This view has been confirmed by the rejection in Austin v United Kingdom 55 EHRR 359, para 58, with specific reference to the care and treatment of mentally incapacitated people, of any suggestion by the House of Lords in Austin v Comr of Police of the Metropolis [2009] AC 564 that a beneficial purpose might be relevant (and see also MA v Cyprus (Application No 41872/10), 23 July 2013 and Creanga v Romania 56 EHRR 361). Nevertheless, while a benevolent or beneficial purpose may be irrelevant, the context of the measures may not. Mr Paul Bowen QC, for the Equality and Human Rights Commission, has analysed the deprivation of liberty cases into two types. Type 1 consists of those situations which are catered for in article 5(1), including the detention of convicted criminals and of persons of unsound mind. In such cases, the Strasbourg Court has not had to concern itself with questions of degree, because the confinement is always potentially justifiable. Hence a person can be deprived of his liberty in an open prison, in an unlocked hospital ward, or in the ordinary conditions of a care home. The problem lies with type 2 cases, where deprivation of liberty is not catered for in the exhaustive list of permissible deprivations in article 5(1)(a) to (f) and thus what has happened, if it is a deprivation, cannot be justified. This was the position in Guzzardi v Italy, which concerned preventive measures against a suspected Mafioso, and for that matter in the English control order cases (such as Secretary of State for the Home Department v JJ [2008] AC 385), which concerned preventive measures against suspected terrorists. It was also the position in Austin v United Kingdom, which concerned kettling to maintain public order at a demonstration. Ms Richards rejects any such distinction. Indeed it cannot be found in the Strasbourg case law, which, as we have seen, repeats all the principles irrespective of the context. Nevertheless, we may find it helpful in understanding some of its decisions: for example, why it was not a deprivation of liberty to kettle people at Oxford Circus for some seven hours (Austin) while it was a deprivation to confine a person for several hours in a police station (Creanga) or in a sobering up centre (Litwa v Poland (2001) 33 EHRR 1267). We may therefore find it most helpful to consider how the question has been approached in the particular context, in this case the placement of mentally incapacitated people, whose lawful detention in any setting designed for their care is always potentially justifiable under article 5(1)(e). Discussion In my view, it is axiomatic that people with disabilities, both mental and physical, have the same human rights as the rest of the human race. It may be that those rights have sometimes to be limited or restricted because of their disabilities, but the starting point should be the same as that for everyone else. This flows inexorably from the universal character of human rights, founded on the inherent dignity of all human beings, and is confirmed in the United Nations Convention on the Rights of Persons with Disabilities. Far from disability entitling the state to deny such people human rights: rather it places upon the state (and upon others) the duty to make reasonable accommodation to cater for the special needs of those with disabilities. Those rights include the right to physical liberty, which is guaranteed by article 5 of the European Convention. This is not a right to do or to go where one pleases. It is a more focussed right, not to be deprived of that physical liberty. But, as it seems to me, what it means to be deprived of liberty must be the same for everyone, whether or not they have physical or mental disabilities. If it would be a deprivation of my liberty to be obliged to live in a particular place, subject to constant monitoring and control, only allowed out with close supervision, and unable to move away without permission even if such an opportunity became available, then it must also be a deprivation of the liberty of a disabled person. The fact that my living arrangements are comfortable, and indeed make my life as enjoyable as it could possibly be, should make no difference. A gilded cage is still a cage. For that reason, I would reject the relative normality approach of the Court of Appeal in the case of P [2012] PTSR 1447, where the life which P was leading was compared with the life which another person with his disabilities might be leading. To some extent this approach was premised on the relevance of the reason for and purpose of the placement (para 76), derived from the House of Lords decision in Austin, and later disapproved by the Grand Chamber. It is in any event inconsistent with the view that people with disabilities have the same rights as everyone else. I have much more sympathy with the relative normality approach in P and Q, where the lives which MIG and MEG were living were compared (by the majority) with the ordinary lives which young people of their ages might live at home with their families. This seems both sensible and humane. But the fact remains that the lives which MIG and MEG were leading were not the same as those which would be led by other teenagers of their age. Their comparative normality in the sense of their home like quality does not answer the question of whether in other respects they involved a deprivation of liberty for which the state was responsible. So is there an acid test for the deprivation of liberty in these cases? I entirely sympathise with the desire of Munby LJ to produce such a test and thus to avoid the minute examination of the living arrangements of each mentally incapacitated person for whom the state makes arrangements which might otherwise be required. Ms Richards is right to say that the Guzzardi test is repeated in all the cases, irrespective of context. If any of these cases went to Strasbourg, we could confidently predict that it would be repeated once more. But these cases are not about the distinction between a restriction on freedom of movement and the deprivation of liberty. P, MIG and MEG are, for perfectly understandable reasons, not free to go anywhere without permission and close supervision. So what are the particular features of their concrete situation on which we need to focus? The answer, as it seems to me, lies in those features which have consistently been regarded as key in the jurisprudence which started with HL v United Kingdom 40 EHRR 761: that the person concerned was under continuous supervision and control and was not free to leave (para 91). I would not go so far as Mr Gordon, who argues that the supervision and control is relevant only insofar as it demonstrates that the person is not free to leave. A person might be under constant supervision and control but still be free to leave should he express the desire so to do. Conversely, it is possible to imagine situations in which a person is not free to leave but is not under such continuous supervision and control as to lead to the conclusion that he was deprived of his liberty. Indeed, that could be the explanation for the doubts expressed in Haidn v Germany. The National Autistic Society and Mind, in their helpful intervention, list the factors which each of them has developed as indicators of when there is a deprivation of liberty. Each list is clearly directed towards the test indicated above. But the charities do not suggest that this court should lay down a prescriptive list of criteria. Rather, we should indicate the test and those factors which are not relevant. Thus, they suggest, the persons compliance or lack of objection is not relevant; the relative normality of the placement (whatever the comparison made) is not relevant; and the reason or purpose behind a particular placement is also not relevant. For the reasons given above, I agree with that approach. Application in the case of P In the case of P, the Court of Appeal should not have set aside the decision of the judge for the reasons they gave. Does it follow that the decision of the judge should be restored? In my view it does. In paragraph 46 of his judgment, he correctly directed himself as to the three components of a deprivation of liberty derived from Storck; he reminded himself that the distinction between a deprivation of and a restriction of liberty is one of degree or intensity rather than nature or substance; and he held that a key factor is whether the person is, or is not, free to leave. This may be tested by determining whether those treating and managing the patient exercise complete and effective control of the persons care and movements (para 46(5)). It is true that, in paragraph 48, he summarised the further guidance given by the Court of Appeal in P and Q, including the relevance of an absence of objection and the relative normality of the persons life, which in my view are not relevant factors. But when he considered the circumstances of Ps life at the Z house, he remarked (para 58) upon the very great care taken by the local authority and the staff of Z House to ensure that Ps life was as normal as possible, but continued (para 59): On the other hand, his life is completely under the control of members of staff at Z House. He cannot go anywhere or do anything without their support and assistance. More specifically, his occasionally aggressive behaviour, and his worrying habit of touching and eating his continence pads, require a range of measures, including at time physical restraint, and, when necessary, the intrusive procedure of inserting fingers into his mouth whilst he is being restrained. In my view, in substance the judge was applying the right test, derived from HL v United Kingdom, and his conclusion that looked at overall, P is being deprived of his liberty (para 60) should be restored. Application in the case of P (MIG) and Q (MEG) Wilson LJ found MEGs case difficult and only reached the conclusion that she had not been deprived of her liberty after protracted thought: [2012] Fam 170, para 34. He relied upon the small size of the adolescent home, her lack of objection to life there, her attendance at the educational unit; her good family contact; and her fairly active social life. It is, however, very difficult to see how her case can be distinguished from that of P, who also enjoyed all of those features. She did not require the sort of restraint which P required because of his incontinence pads, but she did sometimes require physical restraint and she received medication to control her anxiety. Above all, the staff did exercise control over every aspect of her life. She would not be allowed out without supervision, or to see people whom they did not wish her to see, or to do things which they did not wish her to do. MIGs case was different in one important respect. She was living in an ordinary family home, and also going out to attend an educational unit, and enjoying good family contact. Both Parker J and Wilson LJ were concerned that if these arrangements constituted a deprivation of liberty for which the state was responsible, then so too would HLs placement with his foster carers: but no one had suggested this indeed, the restriction on contact with them was one of the features relied upon in concluding that the hospital had deprived HL of his liberty. But the court was not called upon to confront that issue. The reality is that MIGs situation is otherwise the same as her sisters, in that her foster mother and others responsible for her care exercised complete control over every aspect of her life. She too would not be allowed out without supervision, or to see anyone whom they did not wish her to see, or to do things which they did not wish her to do. If the acid test is whether a person is under the complete supervision and control of those caring for her and is not free to leave the place where she lives, then the truth is that both MIG and MEG are being deprived of their liberty. Furthermore, that deprivation is the responsibility of the state. Similar constraints would not necessarily amount to a deprivation of liberty for the purpose of article 5 if imposed by parents in the exercise of their ordinary parental responsibilities and outside the legal framework governing state intervention in the lives of children or people who lack the capacity to make their own decisions. Several objections may be raised to the conclusion that both MIG and MEG are being deprived of their liberty. One is that neither could survive without this level of supervision and control: but that is to resurrect the comparison with other people sharing their disabilities and to deny them the same concept of liberty as everyone else. Another is that they are both content with their placements and have shown no desire to leave. If the tacit acceptance of the applicant was relevant in Mihailovs, why should the same tacit acceptance of MIG and MEG not be relevant too? I have found this the most difficult aspect of the case. But Mihailovs was different because he had a level of de facto understanding which had enabled him to express his objections to his first placement. The Strasbourg court accepts that there are some people who are not capable of expressing a view either way and this is probably the case with both MIG and MEG. As HL 40 EHRR 761 shows, compliance is not enough. Another possible distinction is that, if either of them indicated that they wanted to leave, the evidence was that the local authority would look for another placement: in other words, they were at least free to express a desire to leave. In the end, none of these suggested distinctions is satisfactory. Nor, in my view, should they be. It is very easy to focus upon the positive features of these placements for all three of the appellants. The local authorities who are responsible for them have no doubt done the best they could to make their lives as happy and fulfilled, as well as safe, as they possibly could be. But the purpose of article 5 is to ensure that people are not deprived of their liberty without proper safeguards, safeguards which will secure that the legal justifications for the constraints which they are under are made out: in these cases, the law requires that they do indeed lack the capacity to decide for themselves where they should live and that the arrangements made for them are in their best interests. It is to set the cart before the horse to decide that because they do indeed lack capacity and the best possible arrangements have been made, they are not in need of those safeguards. If P, MIG and MEG were under the same constraints in the sort of institution in which Mr Stanev was confined, we would have no difficulty in deciding that they had been deprived of their liberty. In the end, it is the constraints that matter. Policy Because of the extreme vulnerability of people like P, MIG and MEG, I believe that we should err on the side of caution in deciding what constitutes a deprivation of liberty in their case. They need a periodic independent check on whether the arrangements made for them are in their best interests. Such checks need not be as elaborate as those currently provided for in the Court of Protection or in the Deprivation of Liberty safeguards (which could in due course be simplified and extended to placements outside hospitals and care homes). Nor should we regard the need for such checks as in any way stigmatising of them or of their carers. Rather, they are a recognition of their equal dignity and status as human beings like the rest of us. Conclusion I would therefore allow both appeals. In the case of P I would restore the declaration of the judge. In the case of MIG and MEG I would make a declaration that their living arrangements at the relevant time constituted a deprivation of liberty within the meaning of section 64(5) of the Mental Capacity Act 2005. LORD NEUBERGER Having read the judgment of Lady Hale, with which Lord Kerr and Lord Sumption agree, and the judgment of Lord Carnwath and Lord Hodge, with which Lord Clarke agrees, I have come to the conclusion that I agree with Lady Hale. The issues raised by these appeals are both difficult and important, and the reasons which Lord Carnwath and Lord Hodge advance for differing from Lady Hale plainly merit serious consideration. Accordingly, I propose to explain the reasons for my conclusion, while avoiding retreading the ground covered by Lady Hale so far as I can. I start with the proposition that, particularly in the field of mental health, it would be highly desirable to have as much authoritative guidance, or, as Lord Carnwath and Lord Hodge put it, as focussed a test, as possible in order to decide whether the circumstances of a particular case involve a deprivation of liberty falling within article 5.4 or a restriction on liberty falling outside article 5. Psychiatrists, social workers, local authorities, charities, and no doubt many others responsible for the health and welfare of those suffering from mental and physical impairment, as well as those people whose liberty is being interfered with, need, and are entitled to, as much in the way of clear guidance as it is possible for the courts to give. Of course, the issue of whether a particular case involves deprivation or restriction must depend on the specific facts of that case, but that does not mean that there can be no focussed guidance. It is also true that, however clear the guidance, there will be cases where it will be difficult to decide which side of the line the facts fall, but that is not a reason for the courts not seeking to minimise the uncertainty. On the contrary. Accordingly, at least in principle, the approach proposed by Lady Hale appears to me to be attractive, and should be adopted unless there is good reason not to do so. Lord Carnwath and Lord Hodge suggest that there are two reasons for not adopting that approach, both of which reasons merit serious consideration. The first reason is that the Strasbourg jurisprudence has not gone as far as Lady Hales analysis, and this is a case where we cannot properly go beyond Strasbourg in the light of section 64(5) of the Mental Capacity Act 2005. The second reason is that Lady Hales analysis produces an undesirable or inappropriate outcome in cases such as those of P and Q in the appeal involving Surrey County Council. So far as the first reason is concerned, it is true that there has been no decision of the Strasbourg court involving the combination of factors which arise in the present cases. It is also true that, in almost every decision to which we were referred, the Strasbourg court has been at pains to emphasise that the question whether article 5.4 is engaged is highly fact sensitive, and that the distinction between deprivation and restriction is matter of degree or intensity. However, it is self evident that this does not mean that this court cannot seek to extract specific principles from those decisions, and then apply them to the facts of the cases before us. In agreement with Lady Hale, I consider that the Strasbourg court decisions do indicate that the twin features of continuous supervision and control and lack of freedom to leave are the essential ingredients of deprivation of liberty (in addition to the area and period of confinement). In that connection, see Guzzardi v Italy (1980) 3 EHRR 333, para 95 (supervision carried out strictly and on an almost constant basis [and] not able to leave his dwelling between 10 pm and 7 am), HL v United Kingdom (2004) 40 EHRR 761, para 91 (under continuous supervision and control and not free to leave), Storck v Germany (2005) 43 EHRR 96, para 73 (continuous supervision and control and not free to leave), Kedzior v Poland (Application No 45026/07) 16 October 2012, para 57 (constant supervision and not free to leave), Stanev v Bulgaria (2012) 55 EHRR 696, para 128 (constant supervision and not free to leave), and Mihailovs v Latvia [2013] ECHR 65, para 132 (under constant supervision and not free to leave). The factors which are relied on by Lord Carnwath and Lord Hodge to support the point that these cases differ from those decided by the Strasbourg court are as follows: a) the person concerned lacks capacity to decide upon her placement but has not evinced dissatisfaction with or objection to it; the placement is in a small group or domestic setting which is as close as possible to normal home life; b) c) d) a court authorised that placement for the best interests of the person concerned; and the regime is no more intrusive or confining than is required for the protection and well being of the person concerned. It is convenient to take factor (d) first, followed by factor (a), and then factor (c), and finally factor (b). As to factor (d), the Grand Chamber made it clear in Austin v United Kingdom (2012) 55 EHRR 359, para 58 that the fact that the object is to protect treat or care in some way for the person taken into confinement has no bearing on the question whether that person has been deprived of his liberty, although it might be relevant to the subsequent inquiry whether the deprivation of liberty was justified . To the same effect, the Grand Chamber said in Creanga v Romania (2012) 56 EHRR 361, para 93 that the purpose of measures by the authorities depriving applicants of their liberty no longer appears decisive for the courts assessment of whether there has in fact been a deprivation of liberty, on the basis that the purpose is to be taken into account only at a later stage of its analysis, when examining the compatibility of the measure with article 5.1. So far as factor (a) is concerned, I consider that it would be inappropriate to hold that, if certain conditions amounted to a deprivation of liberty in the case of a person who had the capacity to object and did object, they may, or even worse would, not do so in the cases of a person who lacked the capacity to object. On one view, such a conclusion would mean that, however confining the circumstances, they could not amount to a deprivation of liberty if the person concerned lacked the capacity to object. That cannot possibly be right. Alternatively, there would be a different test for those who were unable to object and those who could do so. That would be a recipe for uncertainty. In addition, the notion that the absence of objection can justify what would otherwise amount to deprivation of liberty is contrary to principle. It is true, and indeed sensible, that a persons consent (provided that it is freely and properly given) may serve to defeat a contention that she has been deprived of her liberty. However, it involves turning that principle on its head to say that the absence of objection will justify what would otherwise be a deprivation of liberty save in those rare circumstances where the absence of objection can be said to amount to consent, as in Mihailovs v Latvia, paras 138 139. Further, if factor (a) had validity, it would tend to undermine the universality of human rights to which Lady Hale rightly refers. Over and above this, it seems to me that the principle referred to by the Grand Chamber in the decisions in para 66 would be infringed. I also draw support from the closing comments of the Strasbourg court in HL v United Kingdom 40 EHRR 761, para 90, where, after stating that a person should not lose the benefit of Convention protection for the single reason that he may have given himself up to be taken into detention, the court added especially when it is not disputed that that person is legally incapable of consenting to, or disagreeing with, the proposed action. I am unimpressed with factor (c). The courts involvement in cases such as those to which these appeals relate is not equivalent to that of a court sentencing a criminal to a specific term of imprisonment. It is deciding that the circumstances of an innocent and vulnerable person, suffering from disability, are such that there must be an interference with his liberty. If that interference would otherwise amount to a deprivation of liberty, I find it hard to understand why it should be otherwise simply because the court has approved it. The courts approval will almost always justify the deprivation from its inception, but, again, it is hard to see why it should continue to justify it for a potentially unlimited future. The only reason which can be advanced to justify such a conclusion is, as I see it, based on the purpose of the interference with liberty which brings one back to the observations in the Grand Chamber referred to in para 8 above. Factor (b) forms the basis upon which Lord Carnwath and Lord Hodge rest their view that P and Q have not been deprived of their liberty. It is a fair point that the Strasbourg court has never had to consider a case where a person was confined to what may be described as an ordinary home. However, I cannot see any good reason why the fact that a person is confined to a domestic home, as opposed to a hospital or other institution, should prevent her from contending that she has been deprived of her liberty. In that connection, however, I note that article 5.4 was held to be infringed in Guzzardi v Italy 3 EHRR 333, where, as mentioned above, the Grand Chamber referred to the applicant not being able to leave his dwelling between 10 pm and 7 am. I agree with Lord Carnwath and Lord Hodge that many people might react with surprise at simply being told that a person living in a domestic setting could complain of deprivation of liberty, but that is a point of little weight, particularly as such people may well retract the surprise when the consequences either way under article 5 are explained. In the case of children living at home, what might otherwise be a deprivation of liberty would normally not give rise to an infringement of article 5 because it will have been imposed not by the state, but by virtue of what the Strasbourg court has called the rights of the holder of parental authority, which are extensive albeit that they cannot be unlimited (see Nielsen v Denmark (1988) 11 EHRR 175, para 72, a decision which, at least on its facts, is controversial, as evidenced by the strength of the dissenting opinions). However, it is fair to say that, while this point would apply to adoptive parents, I doubt that it would include foster parents (unless, perhaps, they had the benefit of a residence order). But in the great majority of cases of people other than young children living in ordinary domestic circumstances, the degree of supervision and control and the freedom to leave would take the situation out of article 5.4. And, where article 5.4 did apply, no doubt the benignly intimate circumstances of a domestic home would frequently help to render any deprivation of liberty easier to justify. I do not accept that the cases cited by Lord Carnwath and Lord Hodge cast doubt on the notion that such confinement can fall within article 5.4. The comparison of the restrictions in the hospital in Nielsen v Denmark 11 EHRR 175, para 70 with a real home was made in connection with consideration of the contention that the treatment given at the hospital and the conditions under which it was administered were inappropriate in the circumstances. The case involved a child, and was decided on the basis that his mother was exercising her article 8 rights responsibly, in good faith and on the basis of medical advice see para 71. Indeed, the strength of the minority view to the contrary in that decision is a measure of the importance which the Strasbourg court attaches to the protection afforded by article 5.4. HM v Switzerland (2002) 38 EHRR 314 does not assist on the issue, not least because it turned on the consent given by the applicant, as explained in HL v United Kingdom 40 EHRR 761 para 93. HL itself seems to assist Lady Hales conclusion to the extent that, as explained by the Grand Chamber in Stanev v Bulgaria 55 EHRR 696, para 118, the court there held that there was a deprivation of liberty where the applicant was an adult incapable of giving his consent to admission to a psychiatric institution which, nonetheless, he had never attempted to leave. The serious doubts expressed in Haidn v Germany [2011] ECHR 39, para 82 take matters no further, not least because the factual circumstances are unclear. Accordingly, I agree with Lady Hale that the appeal of P and Q against Surrey County Council, as well as the appeal of P against Cheshire West and Chester Council, should be allowed. LORD KERR For the reasons given by Lady Hale and Lord Neuberger, with which I agree, I would allow these appeals. While there is a subjective element in the exercise of ascertaining whether ones liberty has been restricted, this is to be determined primarily on an objective basis. Restriction or deprivation of liberty is not solely dependent on the reaction or acquiescence of the person whose liberty has been curtailed. Her or his contentment with the conditions in which she finds herself does not determine whether she is restricted in her liberty. Liberty means the state or condition of being free from external constraint. It is predominantly an objective state. It does not depend on ones disposition to exploit ones freedom. Nor is it diminished by ones lack of capacity. The question whether one is restricted (as a matter of actuality) is determined by comparing the extent of your actual freedom with someone of your age and station whose freedom is not limited. Thus a teenager of the same age and familial background as MIG and MEG is the relevant comparator for them. If one compares their state with a person of similar age and full capacity it is clear that their liberty is in fact circumscribed. They may not be conscious, much less resentful, of the constraint but, objectively, limitations on their freedom are in place. All children are (or should be) subject to some level of restraint. This adjusts with their maturation and change in circumstances. If MIG and MEG had the same freedom from constraint as would any child or young person of similar age, their liberty would not be restricted, whatever their level of disability. As a matter of objective fact, however, constraints beyond those which apply to young people of full ability are and have to be applied to them. There is therefore a restriction of liberty in their cases. Because the restriction of liberty is and must remain a constant feature of their lives, the restriction amounts to a deprivation of liberty. Very young children, of course, because of their youth and dependence on others, have an objectively ascertainable curtailment of their liberty but this is a condition common to all children of tender age. There is no question, therefore, of suggesting that infant children are deprived of their liberty in the normal family setting. A comparator for a young child is not a fully matured adult, or even a partly mature adolescent. While they were very young, therefore, MIG and MEGs liberty was not restricted. It is because they can and must now be compared to children of their own age and relative maturity who are free from disability and who have access (whether they have recourse to that or not) to a range of freedoms which MIG and MEG cannot have resort to that MIG and MEG are deprived of liberty. Lord Clarke has commended the judgment of Parker J in the case of P and Q as setting out the factors relevant to an assessment of whether they are deprived of their liberty. The judgment is indeed a model of clarity but it is because it proceeds on the premise that liberty is to be judged subjectively that I cannot agree with it. Although the Strasbourg court has not had to confront precisely the situation in which the parties in these cases find themselves, it is clear, in my view, that the approach adopted by that court to the question of a deprivation of liberty is primarily rooted in an objective assessment of the conditions which are said to amount to that state. Thus in Stanev v Bulgaria (2012) 55 EHRR 696 and the cases which preceded it, the European Court of Human Rights was careful to point out that the starting point was the concrete situation of the person concerned. The rubric employed to describe the criteria to be taken into account, the type, duration, effects and manner of implementation of the measures confirms the paramount importance of an objective assessment. The subjective element in deprivation of liberty is the absence of valid consent to the confinement in question see para 117 of Stanev. This must be distinguished from passive acquiescence to the deprivation, particularly where that stems from an inability to appreciate the fact that ones liberty is being curtailed. In para 118 (c) the court said that deprivation of liberty occurs when an adult is incapable of giving his consent to admission to a psychiatric institution, even though he had never attempted to leave it. And, as Lady Hale has pointed out (in para 24 of her judgment) the court also said in para 119 that the right to liberty was too important to be lost simply because a person had given himself up to detention, especially where he is legally incapable of consenting to or disagreeing with it. Benevolence underpinning a regime which restricts liberty is irrelevant to an assessment of whether it in fact amounts to deprivation. Lord Carnwath and Lord Hodge suggest (in para 90 of their judgment) that the fact that a regime is no more intrusive or confining than is required for the protection and welfare of the person concerned, while principally relevant to justification of restriction of liberty, may also be taken into account in deciding whether the restriction amounts to deprivation of liberty. I cannot agree. The suggestion has echoes of some oblique observations in HM v Switzerland (2004) 38 EHRR 314 where it was found that the applicant had been placed in a nursing home in her own interests. But, as Lady Hale has pointed out (in para 28) this is inconsistent with later Grand Chamber decisions in Creanga v Romania (2012) 56 EHRR 361, and Austin v United Kingdom (2012) 55 EHRR 359. In Creanga the court said (at para 93) that the purpose of the measures which deprived applicants of their liberty was no longer decisive for the courts assessment of whether there has in fact been a deprivation of liberty. This factor was to be taken into account only at a later stage of [the courts] analysis, when examining the compatibility of the measure with article 5.1 of the Convention, in other words, whether the deprivation was justified. And in Austin at para 58 the point is made even more directly. There it was said that the courts jurisprudence made it clear that an underlying public interest motive has no bearing on the question whether [the] person has been deprived of his liberty, although it might be relevant to the subsequent inquiry whether the deprivation of liberty was justified under one of the subparagraphs of article 5.1. These statements are consistent with the analysis of whether liberty has been deprived as involving principally an objective assessment. Placing restrictions on someones liberty for their own good or even to make available to them a range of activities that they might not otherwise be capable of does not transform the restrictions into something less than constraints. To suggest that the purpose of the restriction is relevant to whether it amounts to a deprivation of liberty is to conflate the object of the restraints with their true character. If, as Lord Carnwath and Lord Hodge have suggested, section 64(5) of the Mental Capacity Act 2005 ties us yet closer to the jurisprudence of Strasburg than does section 2 of the Human Rights Act 1998, this does not alter the requirement that we meet and deal with the claim that the restrictions on Ps and MIGs and MEGs liberty amount to a deprivation under article 5 of the Convention for the Protection of Human Rights and Fundamental Freedoms, even if there is no clear and constant line of authority from the European Court of Human Rights on similar facts to those which arise in the present appeals. Reference has been made to Lord Dysons judgment in Ambrose v Harris [2011] 1 WLR 2435 para 88, where he said that it may be possible to find a sufficiently clear indication in the Strasbourg jurisprudence of how the European court would resolve the question. But Lord Carnwath and Lord Hodge state that, in the absence of such a clear indication, this court should be cautious about extending a concept as sensitive as deprivation of liberty beyond the meaning which it would be regarded as having in ordinary usage para 93 of their judgment. With respect, I do not agree that caution is the appropriate reaction to an absence of authoritative guidance from Strasbourg. This court, in common with all public authorities, has the duty under section 6 of the Human Rights Act not to act in a way which is incompatible with a Convention right. That statutory obligation, to be effective, must carry with it the requirement that the court determine if the Convention right has the effect claimed for, whether or not Strasbourg has pronounced upon it. This court must therefore resolve the question of whether a claim to a Convention right is viable or not, even where the jurisprudence of the Strasbourg court does not disclose a clear current view. In any event for the reasons given by Lady Hale, it is apparent that two central features of the current Strasbourg jurisprudence point clearly to the conclusion that there is a deprivation of liberty in these cases. These are that the question of whether there has been a deprivation is to be answered primarily by reference to an objective standard and that the subjective element of the test is confined to the issue of whether there has been a valid and effective consent to the restriction of liberty. I do not accept that this clear guidance can be substituted with an ordinary usage approach to the meaning of deprivation of liberty. If deprivation of liberty is to be judged principally as an objective condition, then MIG, MEG and P are unquestionably subject to such deprivation, no matter how their situation might be regarded by those using ordinary language. LORD CARNWATH AND LORD HODGE We gratefully adopt the bulk of Lady Hales judgment, including her exposition of the legislative history, the relevant jurisprudence, and the facts of the cases before us. There is much common ground. We agree that the comparator should in principle be a person with unimpaired health and capacity for the reasons which the judgment advances. We also see real value in the clarity of a focused test as it would greatly assist the psychiatrists and other professionals who have to administer the Mental Capacity Act 2005 (the 2005 Act). We also recognise the arguments in favour of a policy of periodic supervision of arrangements made under that Act to safeguard those who have an incapacity in order to ensure that those arrangements are in their best interests. That is consistent with a commitment to give effective protection to vulnerable persons. On the other hand, as she recognises, there are legitimate concerns about the potential bureaucracy of the statutory procedures, and about including within the test the sort of benevolent living arrangements which many might find difficult to characterise as a deprivation of liberty (para 10). There is also common ground that the approach proposed by Lady Hale goes further than any existing Strasbourg case law. As she says, Strasbourg has not yet ruled on a case which combines the following features of the cases before us: (a) a person who lacks both legal and factual capacity to decide upon his or her own placement but who has not evinced dissatisfaction with or objection to it; (b) a placement, not in a hospital or social care home, but in a small group or domestic setting which is as close as possible to normal home life; and (c) the initial authorisation of that placement by a court as being in the best interests of the person concerned. To those we would add a fourth: (d) that the regime is no more intrusive or confining than is required for the protection and well being of the person concerned. We recognise that this fourth point, like the purpose of a regime, is principally relevant to the justification of that regime rather than the analysis of its nature: see Austin v United Kingdom (2012) 55 EHRR 359, para 58. But in our view the degree of intrusion is nonetheless relevant to the latter. The Strasbourg jurisprudence seems to us of added significance where, as Lady Hale notes (para 19), section 64(5) of the 2005 Act ties the concept of deprivation of liberty into article 5(1) of the Convention for the Protection of Human Rights and Fundamental Freedoms by providing that it will have the same meaning. As the Strasbourg court is the authoritative interpreter of the Convention, it appears to us that under the 2005 Act we are more closely tied to its interpretation of the Convention than we are under section 2(1) of the Human Rights Act 1998. In effect Parliament has decided that it is to the Strasbourg jurisprudence that we must turn to find out what is meant by deprivation of liberty. Even if we are wrong in suggesting that section 64(5) constrains us more than section 2 of the 1998 Act, we have clear and recent authority from a nine Justice Bench that we should follow a clear and constant line of decisions, especially those of the Grand Chamber (Manchester City Council v Pinnock (Secretary of State for Communities and Local Government Intervening) [2011] 2 AC 104, per Lord Neuberger (giving the judgment of the court) at para 48). See also R (Chester) v Secretary of State for Justice [2013] UKSC 63, [2013] 3 WLR 1076 per Lord Sumption at para 121. We accept that the mere fact that Strasbourg has not yet had occasion to consider a case with this combination of factors does not of itself preclude us from forming our own view of how it would decide the matter if cases such as the present were to come before it. As Lord Dyson said, in Ambrose v Harris (Procurator Fiscal, Oban) [2011] 1 WLR 2435, para 88, it may be possible to find a sufficiently clear indication in the Strasbourg jurisprudence of how the European court would resolve [the] question. However, short of such a clear indication, we should be cautious about extending a concept as sensitive as deprivation of liberty beyond the meaning which it would be regarded as having in ordinary usage. We can see the attractions of a universal test, applicable to all regardless of any physical or mental disabilities, as Lady Hale proposes (para 46). But it is not a concept which we can find reflected in the Strasbourg cases. The court has remained wedded to a case specific test. It has consistently reaffirmed the need for an examination of the concrete situation taking into account a whole range of criteria such as the type, duration, effects and manner of implementation of the measure in question; and that the difference between deprivation of liberty and restrictions on liberty was merely one of degree or intensity, and not one of nature or substance. Turning to the individual cases discussed by Lady Hale, we would attach particular importance to Stanev v Bulgaria (2012) 55 EHRR 696, as a recent Grand Chamber decision in which the court also took the opportunity to review the early cases. It is important however to keep in mind that the focus of the judgment was on state run social care institutions, such as the one in issue in that case, rather than the more domestic environments with which we are concerned. The relevant facts have been sufficiently summarised by Lady Hale (para 26). We would highlight the following points in the judgment: (a) The test is not hard edged. The court repeated its standard Engel formula: In order to determine whether someone has been deprived of his liberty, the starting point must be his concrete situation and account must be taken of a whole range of criteria such as the type, duration, effects and manner of implementation of the measure in question (para 115) (b) The court summarised the effect of previous decisions in comparable cases: The court has found that there was a deprivation of liberty in circumstances such as the following: (a) where the applicant, who had been declared legally incapable and admitted to a psychiatric hospital at his legal representatives request, had unsuccessfully attempted to leave the hospital (see Shtukaturov v Russia (2008) 54 EHRR 962, para 108); (b) where the applicant had initially consented to her admission to a clinic but had subsequently attempted to escape (see Storck v Germany (2005) 43 EHRR 96, para 76); and (c) where the applicant was an adult incapable of giving his consent to admission to a psychiatric institution which, nonetheless, he had never attempted to leave (see HL v United Kingdom (2004) 40 EHRR 761, paras 89 94). (c) It is true that the court attached weight to the fact that he was under constant supervision and was not free to leave the home without permission whenever he wished (para 128), but this was not treated as conclusive in itself; it was only one of a number of factors leading to the overall assessment. (d) The court noted (at para 130) its previous holding that the fact that a person lacks legal capacity does not necessarily mean that he is unable to comprehend his situation (see Shtukaturov, at para 108) In Stanev itself, the subject was well aware of his situation, and had expressed his desire to leave the social care home. Unlike HM (see below) it could not be said that he had consented to or tacitly accepted his placement there (para 130 131). It is notable that all the cases cited in the courts review related to people living in institutions of some kind, not in ordinary homes. Conversely, we have been referred to no Strasbourg case in which detention has been found in comparable circumstances to the present. A number of cases, in which no deprivation of liberty was found, contain pointers in the other direction: i) ii) iii) In Nielsen v Denmark (1988) 11 EHRR 175 it was significant that restrictions on the child applicants freedom of movement and contacts were no different from restrictions which might be imposed on a child in an ordinary hospital, the conditions being as similar as possible to a real home (para 70). In HM v Switzerland (2002) 38 EHRR 314 it was relevant that, though not able to go home (para 32), she had freedom of movement, was able to maintain social contact with the outside world and hardly felt the effects of her stay (paras 45 46). The case was regarded as comparable to Nielsen v Denmark (para 48). In HL v United Kingdom (2004) 40 EHRR 761, para 93 the court distinguished HM on the grounds that the nursing home in that case was an open institution which allowed freedom of movement and encouraged contacts with the outside world and offered a regime entirely different from that in HL. (It is true that in Stanev 55 EHRR 696, HM was distinguished in part on the basis that HM, unlike Stanev, had agreed to stay (para 131). However, that is not the ground on which HM was actually decided, and the fuller discussion in HL shows that such assumed agreement was only part of the story.) iv) In Haidn v Germany (Application No 6587/04) 13 January 2011, the subject, following release from detention on probation, was required by the court to live in an old peoples home, which he could not leave without his custodians permission (para 82). The court expressed serious doubts whether there was a deprivation of liberty, although did not need to decide the point. None of these cases is conclusive. As Lady Hale has shown, different interpretations are possible. However, if we are to look, in Lord Dysons words, for a clear indication of how Strasbourg would decide the matter, we are not persuaded that they provide sufficient support for the general test proposed by Lady Hale. We are concerned that nobody using ordinary language would describe people living happily in a domestic setting as being deprived of their liberty. We recognise that the concept in the Convention may be given an autonomous meaning by the Strasbourg court. But we are struck by how the judges in the courts below, with far more experience than we ourselves can claim, have laboured to keep the concept of deprivation of liberty in touch with the ordinary meaning of those words. Although we agree with some of the criticisms made of the Court of Appeal's relevant comparator approach, we understand what the judges were striving to achieve. We also share the concern of some of the judges below as to how such a test would have applied to HL, once returned from hospital to the placement with his foster parents, as required by the courts decision in that case. It is true as Lady Hale says (para 53) that no one suggested in that case that his position there would involve a deprivation of liberty. But that, surely, was because it had not occurred to anyone (including the court) that such a placement in an ordinary home environment could constitute a deprivation of liberty for the purpose of article 5, even though the degree of control for practical purposes would be the same as before. The present cases No doubt P and Q can be said to have had their liberty restricted, by comparison with a person with unimpaired health and capacity. But that is not the same as a deprivation of liberty. Parker J summarised their position in this way: 228 In neither placement in my judgment is there confinement in a restricted space for a not negligible length of time. [P] is living in a foster home and goes to college during the day; [Q] is living in a residential home and goes to college during the day. In the evenings they return to their respective homes 229 The concrete situation is that each lives exactly the kind of life that she would be capable of living in the home of her own family or a relative: their respective lives being dictated by their own cognitive limitations. In our view that is entirely consistent with the Strasbourg jurisprudence and we would uphold her decision. In P v Cheshire West and Chester Council Baker J took a different view, on the facts of that case. Lady Hale has summarised the judges reasoning. He concluded: 59. On the other hand, his life is completely under the control of members of staff at Z House. He cannot go anywhere or do anything without their support and assistance. More specifically, his occasional aggressive behaviour, and his worrying habit of touching and eating his continence pads, require a range of measures, including at times physical restraint, and, when necessary, the intrusive procedure of inserting fingers into his mouth whilst he is being restrained. The Court of Appeal took a different view. While we agree with Lady Hales criticisms of parts of their reasoning, we see some force in their point that occasional restraint for purely therapeutic purposes should not be enough in itself to tip restriction over the edge into deprivation. As Munby LJ said: The measures described by the judge as applied from time to time to P are far removed from the physical or chemical restraints which one sometimes finds, for example, in mental hospitals. They are, in truth, the kinds of occasional restraint that anyone caring for P in whatever setting for example, his own mother if he was still living at home would from time to time have to adopt. ([2012] PTSR 1447, para 113) However, we think that this is too narrow a reading of the judges assessment overall and was not enough in itself to justify the court interfering with his decision in what in our view was a marginal case. Although we might not have reached the same decision, we are satisfied that he directed himself correctly on the legal principles, and that his conclusion was one which was reasonably open to him on the particular facts of the case. For these reasons, we would dismiss the appeal in P & Q but, in agreement with the majority, allow the appeal in P v Cheshire West. LORD CLARKE Introduction I agree with the conclusions and reasoning of Lord Carnwath and Lord Hodge. As I see it, the question in these appeals is whether, on the facts found, the appellants were deprived of their liberty or whether their liberty was interfered with. This is a question of fact which, as so often, depends upon all the circumstances of the case. The jurisprudence of the European Court of Human Rights (ECtHR), which is discussed in detail by others, shows to my mind that, in order to answer the question, it is necessary to conduct a multi factorial exercise which involves a balancing of a number of considerations. The ECtHR has not held that there is only one question (or acid test), namely whether the individual concerned is free to leave. Its approach is more nuanced than that. As Smith LJ put it in P and Q [2012] Fam 170, para 40, whether in each case MIG and MEG was deprived of her liberty or whether her liberty was merely interfered with is a question of fact and degree. It is essentially a jury question and thus a question for the trial judge. Given that it involves a balancing of many different considerations, the decision of the judge should not be interfered with by an appellate court unless it concludes that the judge has erred in principle or that the judge was wrong. An appellate court should not simply substitute its own view for that of the judge. In these cases the judges of first instance, Parker J in P and Q and Baker J in P, were very experienced in this field so that their opinions deserve great respect. In P and Q Parker J conducted a careful analysis of the facts relevant to each case: see paras 207 to 237. In para 224 she concluded (in my opinion correctly) that mere lack of capacity to consent cannot in itself create a deprivation of liberty. If it did, everyone placed by a local authority would be considered to be deprived of their liberty. She then said this: 225. Freedom to leave has to be assessed against the background that neither wants to leave their respective homes, there is no alternative home save that of their mother where neither wishes to live, and neither appears to have the capacity to conceptualise any alternative unfamiliar environment. I have been told and I accept that if the local authority felt that either was actively unhappy where they were placed, then other arrangements would be made. 226. In my view it is necessary to analyse what specific measures or restraints are in fact required. The judge then referred to Salford City Council v GJ [2008] EWHC 1097 (Fam), [2008] 2 FLR 1295 a case in which declaration had been made as to the lawfulness of certain measures and continued in this way. 227. No such declarations or authorisations were sought here. Specifically no authorisation was sought to prevent either from leaving the placement. No declaration was sought that it was lawful to administer Risperidone to MEG. In the draft order submitted at the hearing the relevant declarations sought in the event that I concluded that there was a deprivation of liberty were that each should live in their respective homes, attend C College, and have contact with family members as set out in the schedule to the draft order. There was no reference to medication. No more specific measures were referred to in the draft order, or in the care plans which were sought to be authorised. On the basis, as I have found, that placement in itself and lack of consent in itself is not sufficient to create a deprivation of liberty in the circumstances of this case, then there must in my judgment be some other specific course of action adopted or measure taken whereby restraints or restrictions are placed upon an individual of sufficient degree and intensity to constitute a deprivation of liberty. The guidance in the Deprivation of Liberty Safeguards Code supports this analysis. 228. In neither placement in my judgment is there confinement in a restricted space for a not negligible length of time. MIG is living in a foster home and goes to college during the day; MEG is living in a residential home and goes to college during the day. In the evenings they return to their respective homes. In their circumstances, and by comparison with the considerations in the control order cases, neither is subject to any form of house arrest or curfew. 229. The concrete situation is that each lives exactly the kind of life that she would be capable of living in the home of her own family or a relative: their respective lives being dictated by their own cognitive limitations. Each is subject to limitations on her own autonomy and freedom of movement and ability to enjoy activities by being guided or accompanied in order to provide for her own immediate protection. 233. With specific regard to the measures said to amount to deprivation of liberty here, and to the Deprivation of Liberty Safeguards Code set out above, it is relevant that: i) Each was under the age of majority when admitted under the powers conferred by the Care Orders to their respective homes. Neither was admitted using restraint or medication. ii) The question of where each is to live is for the court, and no decision has been taken by MIG's foster mother (who is not staff) or the staff of B Home that either cannot leave; iii) Each lacks freedom and autonomy dictated by their own disability, rather than because it is imposed on them by their carers. Each is under the continuous supervision and control of her carers (and in the case of MIG, of her foster family rather than staff) so as to meet her care needs rather than to restrain her in any way. iv) MEG is accommodated as a child in need. v) Neither is restrained save for immediate purpose of ensuring safety, and, in the case of MEG, for her immediate protection and that of others when she has an outburst. In my view the case of neither does this cross the line so as to constitute deprivation of liberty. vi) Medication is not administered to MEG so as to restrain her from leaving or to restrain her activities generally. In my view this does not cross the line either. vii) Neither is in a locked environment. viii) If either wished to leave in the immediate sense each would be restrained or brought back for their safety. If either were unhappy in their residential settings other arrangements would be sought. ix) Neither is deprived of social contacts, and in the school environment they can associate with whom they will, subject to the teachers or other support staff in that environment. Specific controls are placed on their contact with their mother and stepfather, but these controls are imposed not by their carers, but by court order. The arrangements in relation to contact with HG and SG are dictated by practicalities. x) Neither is in their respective homes all the time. They go to college for significant periods of time, where it is not suggested that either is deprived of her liberty, notwithstanding their respective lack of capacity to consent to attending college or to restraints on leaving that environment during the school day. xi) Some relatives support their placements and some do not. None actively objects to the placement. No relative objects to the care regime. No request by any interested person for either to be released into their care has been refused. xii) The fact that MEG is living in a residential home does not mean that she is deprived of her liberty. It is, to quote McFarlane J in LLBC v TG, JG and KR1, an ordinary care home where only ordinary restrictions on liberty applied; xiii) As in LLBC v TG, JG and KR, the subjects of these proceedings have at all times been the subject of either care orders or Court of Protection orders, under whose auspices they have been placed originally, and each person with an interest in the care and other arrangements for MIG and MEG has and has had the ability to apply to the court; xiv) No challenge to their placements has been made and the case has proceeded without any active attempt to invite the court to authorise deprivation of liberty until the final hearing; xv) No other arrangements less restrictive or invasive could be devised that would meet their care needs. 234. I have not met MIG or MEG but I have read much about them and heard much too. Their wishes and feelings are manifest and clearly expressed. They plainly have no subjective sense of confinement. In a non legal sense they have the capacity to consent to 1 [2007] EWHC 2640, [2009] 1 FLR 414, per McFarlane J at [105(i)] their placements. I cannot imagine that any person visiting MIG at the home of JW, or MEG at B Home would gain any sense of confinement or detention. 235. Those circumstances are in my judgment very far from the paradigm example of imprisonment. I have set out that part of Parker Js judgment in detail because it seems to me to set out the many relevant factors with clarity and to demonstrate why she was entitled to hold that MIG and MEG were not deprived of their liberty. For my part, I see no reason to hold that the judge reached a wrong conclusion. In particular I agree with the conclusions of Lord Carnwath and Lord Hodge that nobody using ordinary language would describe people living happily in a domestic setting as being deprived of their liberty. I am not persuaded that the ECtHR would so hold. A more measured conclusion would be that MIGs liberty was interfered with and not that she had been deprived of her liberty. The same is true of MEG. In conclusion, I would stress that, contrary to the view expressed by Lord Kerr in para 80, I do not read Parker J as adopting a subjective approach. As I see it she is essentially carrying out an objective assessment of the various factors in arriving at her conclusion. I have tried to do the same. This is not a comparative exercise with other people in different circumstances but an assessment of the position of MIG and MEG on the facts of their particular cases. For these reasons, in agreement with Lord Carnwath and Lord Hodge, I would dismiss the appeals in P and Q v Surrey County Council. Applying the same approach in P v Cheshire West and Chester Council, I would again decline to interfere with the conclusions of the judge at first instance, Baker J, and would allow the appeal.

These appeals concern the criteria for judging whether the living arrangements made for a mentally incapacitated person amount to a deprivation of liberty. If they do, the deprivation must be authorised by a court or by the procedures known as the deprivation of liberty safeguards (DOLS) in the Mental Capacity Act 2005 (the Act) and subject to regular independent checks. P and Q (otherwise known as MIG and MEG) are sisters who became the subject of care proceedings in 2007 when they were respectively 16 and 15. Both have learning disabilities. MIG was placed with a foster mother to whom she was devoted and went to a further education unit daily. She never attempted to leave the foster home by herself but would have been restrained from doing so had she tried. MEG was moved from foster care to a residential home for learning disabled adolescents with complex needs. She sometimes required physical restraint and received tranquillising medication. When the care proceedings were transferred to the Court of Protection in 2009, the judge held that these living arrangements were in the sisters best interests and did not amount to a deprivation of liberty. This finding was upheld by the Court of Appeal. P is an adult born with cerebral palsy and Downs syndrome who requires 24 hour care. Until he was 37 he lived with his mother but when her health deteriorated the local social services authority obtained orders from the Court of Protection that it was in Ps best interests to live in accommodation arranged by the authority. Since November 2009 he has lived in a staffed bungalow with other residents near his home and has one to one support to enable him to leave the house frequently for activities and visits. Intervention is sometimes required when he exhibits challenging behaviour. The judge held that these arrangements did deprive him of his liberty but that it was in Ps best interests for them to continue. The Court of Appeal substituted a declaration that the arrangements did not involve a deprivation of liberty, after comparing his circumstances with another person of the same age and disabilities as P. The Supreme Court, unanimously in the appeal of P, and by a majority of 4 to 3 in the appeal of MIG and MEG, allows the appeals. MIG, MEG and P have all been deprived of their liberty. Lady Hale, with whom Lord Sumption agrees, gives the main judgment. Lord Neuberger agrees with Lady Hale in an additional judgment and Lord Kerr agrees with Lord Neuberger and Lady Hale, also in a separate judgment. Lord Carnwath and Lord Hodge give a joint judgment dissenting in the appeal of MIG and MEG. Lord Clarke agrees with them in an additional judgment. The DOLS were introduced into the Act following the case of HL v United Kingdom (2004) 40 EHRR 761, which found that the treatment of a severely mentally disabled adult after his informal admission to hospital amounted to a deprivation of his liberty by the hospital. Their purpose is to secure independent professional assessment of (a) whether the person concerned lacks the capacity to make his own decision about whether to be accommodated in the hospital or care home for care or treatment, and (b) whether it is in his best interests to be detained [8 9]. The European Court of Human Rights (ECtHR) has established general principles relating to the deprivation of liberty of people with mental disorders or disabilities, albeit that it has not yet had to decide a case involving, as here, a person without capacity, who appears content with their care placement, which is in a small group or domestic setting as close to home life as possible, and which has been initially authorised by a court [32]. The general principles make it clear that it is important not to confuse the question of the benevolent justification for the care arrangements with the concept of deprivation of liberty. Human rights have a universal character and physical liberty is the same for everyone, regardless of their disabilities [45]. What would be a deprivation of liberty for a non disabled person is also a deprivation for a disabled person [46]. The key feature is whether the person concerned is under continuous supervision and control and is not free to leave [49]. The persons compliance or lack of objection, the relative normality of the placement and the purpose behind it are all irrelevant to this objective question [50, 87]. It follows that in Ps case the judge applied the right test and his decision should be restored [51]. MIG and MEG were also both under continuous supervision and not free to leave the place where they lived. The deprivation of their liberty was the responsibility of the state and therefore different from similar constraints imposed by parents in the exercise of their ordinary parental responsibilities [54]. Accordingly the decisions of the courts below must set aside and a declaration made that their living arrangements constitute a deprivation of liberty within the meaning of s 64(5) of the Act. Periodic independent checks are needed for such vulnerable people to ensure that the arrangements remain in their best interests, although it is not necessary that the checks be as elaborate as those currently provided for in the Court of Protection or in the DOLS [57 58]. Lord Carnwath, Lord Hodge and Lord Clarke would have upheld the decision of the judge in both cases. They consider that the degree of intrusion is relevant to the concept of deprivation of liberty, and in the appellants cases the care regime is no more intrusive or confining than required for the protection and well being of the persons concerned [90]. The ECtHR has yet to decide a case of this kind and it is far from clear that it would adopt a universal test which disregarded any disabilities. It remains wedded to a case specific test [94]. They are concerned that nobody using ordinary language would describe persons living happily in a domestic setting, like MIG and MEG, as being deprived of their liberty [99].

This is a remarkable case in more than one respect. The appeal depends upon whether the Court is bound to stay action 2006 Folio 815 (the 2006 proceedings) under Article 27 of Regulation 44/2001 of the Council of the European Union (the Regulation) and, if not, whether it should do so under Article 28. Before Burton J (the judge), the respondents expressly disclaimed any intention to rely upon Article 27 but relied upon Article 28 in support of a submission that the court should stay the 2006 proceedings in favour of proceedings in Greece. The judge refused to grant a stay and gave summary judgment for the appellants against the respondents. The judge granted the respondents permission to appeal to the Court of Appeal on various grounds, including a ground based on Article 27. The Court of Appeal (Longmore, Toulson and Rimer LJJ) held that it was bound to stay the action under Article 27. It also gave some consideration to Article 28 but held that it was not necessary to reach a final conclusion in that regard because of its decision under Article 27. It declined to consider the issues relevant to summary judgment on the ground that, if there was to be a stay, those issues should be determined by the courts in Greece. The facts and the 2006 proceedings I can take the relevant events from the judgment of Longmore LJ in the Court of Appeal. He in turn took them from the judgment of the judge. On 3 May 2006 the vessel Alexandros T sank and became a total loss 300 miles south of Port Elizabeth, with considerable loss of life. Her owners were Starlight Shipping Company (Starlight). They made a claim against their insurers, who denied liability on the basis that the vessel was unseaworthy with the privity of the assured, namely Starlight. The insurers also said that Starlight had failed properly to report and repair damage to the vessel in accordance with Class Rules. Starlight, through their solicitors Messrs Ince & Co, made a number of serious allegations against the insurers which fell into two categories, as summarised by Longmore LJ at para 4: (1) allegations of misconduct by the insurers and their underwriters involving alleged tampering with and bribing of witnesses, in particular the bosun, a Mr Miranda, to give false evidence, coupled with other allegations of spreading false and malicious rumours (described for some reason as malicious scuttlebutt) against Starlight in the course of purported investigation of their claims; and (2) deliberate failure by the insurers to pay up under the policy, said to have had consequential financial impact upon Starlight, and to have led to substantial recoverable loss and damage. The insurers also relied upon material non disclosure. Those allegations were made before the issue of proceedings and, in particular, in a letter dated 18 July 2006 from Ince & Co to the insurers solicitors, who were Hill Dickinson LLP, then Hill Taylor Dickinson, whom I will together call HD. On 15 August 2006 Starlight issued the 2006 proceedings in the Commercial Court against various insurers. The first four defendants have been described as the Company Market Insurers (CMI) and the fifth to seventh defendants as the Lloyds Market Insurers (LMI). The policies issued by both the CMI and the LMI contained exclusive jurisdiction clauses. They provided for English law and each party expressly agreed to submit to the exclusive jurisdiction of the Courts of England and Wales. Overseas Marine Enterprises Inc (OME) were identified in the policies as managers. In paras 5 to 8 of his judgment Longmore LJ spelled out in some detail issues between the parties in the 2006 proceedings. It is plain that the points raised by Ince & Co to which I have referred were both pleaded and central to the issues between the parties in those proceedings. Thus, in para 7 Longmore LJ referred to a witness statement in which Mr Crampton of Lax & Co, who were now acting for Starlight, asserted that the allegations made by the insurers in defence of the claim were based on false evidence which they had obtained from the bosun. He also relied upon significant payments said to have been made to the bosun on behalf of the insurers in this connection. In addition, a witness statement was introduced in support of a proposed amendment of the claim form alleging that Starlight had sustained losses beyond the measure of indemnity in the relevant policy. It was alleged that, but for the failure of the insurers to pay under the policy, Starlight would have purchased a replacement vessel and had lost between US$ 45 million and US$ 47.7 million by way of increased capital cost and chartering losses. However, on 14 December 2007, Tomlinson J refused to allow the amendment on the basis of the decision of the Court of Appeal in Sprung v Royal Insurance [1999] Lloyds Rep IR 111, approving the decision in The Italia Express (no. 2) [1992] 2 Lloyds Rep 281. As Longmore LJ explained in para 1, as a matter of English law, an insurer commits no breach of contract or duty sounding in damages for failure promptly to pay an insurance claim.1 The law deems interest on sums due under a policy to be adequate compensation for late payment; this is so, even if an insurer deliberately 1 Toulson LJ noted at paras 74 and 75 that the present state of English law was criticised by the Law Commission and the Scottish Law Commission in para 2.87 of a joint consultation paper on Insurance Law; Post Contract Duties (LCCP201/SLCDP152) published on 20 December 2011. The Commissions have provisionally proposed that the law should be reformed. withholds sums which he knows to be due under a policy. If parties agree that English law is to apply to a policy of insurance, this principle is part of what they have agreed. English law, moreover, gives no separate contractual remedy to an insured who complains that an insurer has misconducted himself before settling a claim. In either case the remedy of the insured is to sue the insurer and, if no settlement is forthcoming, proceed to judgment. The trial was fixed for 14 January 2008. The settlements On 13 December 2007, which was the day before the hearing before Tomlinson J referred to above, the 2006 proceedings had been settled between Starlight and OME and the LMI for 100% of the claim, but without interest and costs, in full and final satisfaction of the claim. It was a term of the settlement agreement that Starlight would obtain a stay by way of a Tomlin Order, and a Tomlin Order by consent between Starlight and the LMI was accordingly made on 20 December 2007, backdated to 14 December, in these terms: Save for the purposes of carrying into effect the terms agreed between the Claimant and the Fifth to Seventh Defendants, all further proceedings between the Claimant and the Fifth to Seventh Defendants shall be stayed with effect from 14 December 2007 or such earlier date as may be agreed between the parties or otherwise ordered hereafter. A similar settlement agreement dated 3 January 2008 was made between Starlight and OME and the CMI and a similar Tomlin Order was made on 7 January 2008, but with immediate effect. In each settlement agreement the Assured were defined as being [OME] and Starlight as Managers and/or Owners and/or Associated and/or Affiliated Companies for their respective right and interest in the ship Alexandros T. The CMI settlement agreement then provided: 1. Each Underwriter agrees to pay on or before 18 January 2008 their due proportions of the sum of US$16m being 100% of their due proportions of the sum insured being 50% of the US$32m without interest or costs. 2. The Assured and Claimant agree to accept the EURO equivalent of each Underwriters due proportion of US$16m in full and final settlement of all and any claims it may have under Policy No 302/CF 000220Z against the Underwriters in relation to the loss of Alexandros T, including all claims for interest and costs (including in respect of all costs orders made to date in the proceedings) but without effect to any other insurance policy in which each Underwriter may be involved. 3. The Assured and Claimant agree to Indemnify each Underwriter against any claim that might be brought against it by any of the Assureds or the Claimant's associated companies or organisations or by any mortgagee in relation to the loss of Alexandros T or under Policy No 302/CF000220Z. 4. Following the signing of this agreement, and in consideration of the promises herein, the Claimant and the Underwriters will apply to stay the Proceedings as against the Underwriters, the Proceedings to be stayed for all purposes save for the purposes [of] carrying the terms agreed herein into effect, such stay to have effect from the first obtainable date after 27 December 2007 5. Following the due and proper payment by the Underwriters of the amount specified in paragraph 1 above, the Assured and Claimant and the Underwriters agree to file a consent order dismissing the Proceedings, with no order as to costs. 6. This agreement is subject to English law and to the exclusive jurisdiction of the High Court in London. 2. The underwriters agree to pay on or before 24 December 2007 the sum of US$8M being 100% of their due proportions of the sum insured being 25% of US$32m without interest or costs 3. The Assured and claimant agree to accept the EURO equivalent of US$8M in full and final settlement of all and any claims it may have under Policy No against the Underwriters signing below in relation to the loss of Alexandros T 4. The Assured and Claimant agree to indemnify the underwriters signing below against any claim that might be brought against them by any of the Assureds or the Claimant's associated companies or organisations or by any mortgagee in relation to the loss of Alexandros T or under Policy The LMI settlement agreement provided in similar but not identical terms: 5. This agreement is subject to English law and the jurisdiction of the High Court of London. The Greek proceedings After setting out the terms of the settlement agreements, Longmore LJ wryly observed at the end of para 12 of his judgment that one might have expected that to be that, but it was not to be. He described what then happened in paras 13 to 15. More than three years later, in April 2011, nine sets of Greek proceedings, in materially identical form, (Greece 1), were issued by Starlight, by OME, by their co assureds under an associated Fleet Policy and by individual officers of those companies, against the LMI and the CMI, some of their employees or underwriters, and HD and some of their partners and employees (the HD defendants). The claims are for compensation for loss of hire and loss of opportunity by Starlight totalling approximately US$ 150 million and for pecuniary compensation due to moral damage amounting to 1 million. The claims also include similarly substantial claims by the other claimants in respect of alleged acts, all done unlawfully and in breach of good faith for the alleged purpose of avoiding the performance by the defendants of their legal obligations. All the claims rely upon breaches of the Greek Civil and Criminal Code. However the factual allegations, which Longmore LJ noted had been said by the judge to be entirely familiar, include the allegation that the appellants were responsible for using false affidavits of witnesses (primarily Mr Miranda) with intention to harm the claimants, described thus by Mr Crampton in a statement summarising the Greek claims: The underwriters pursued this criminal effect by intentionally fabricating false evidence with the purpose that the underwriters (who were responsible for the payment of insurance indemnity for the vessel) avoid paying this insurance indemnity, contrary to their contractual obligations and their legal obligations and in particular contrary to the provisions of the insurance contract, providing for the timely payment of the insurance indemnity. They also include the claim that the appellants were asserting and disseminating false information to third parties, although they were aware of their falsity, damaging the claimants reputation and credibility with the purpose that the underwriters (who were responsible for the payments of the insurance indemnity for the vessel) avoid paying the insurance indemnity, contrary to their contractual obligation and their legal obligation and in particular contrary to provisions of the insurance contract providing for the timely payment of the insurance indemnity Mr Crampton then turned to what he called the [i]ntentional fabrication of false evidence for defrauding the English court and [t]he moral instigation alternatively complicity of the underwriters to perjury and on the defrauding of the court by the underwriters. He summarised the position in this way in paragraph 20 of his witness statement: The essence of the complaint against the Defendants in the Greek proceedings concerns the allegation that the Defendants obtained false evidence in Greece from the bosun of the Alexandros T, Aljess Miranda This evidence was then deployed in these proceedings in England and also in the Greek proceedings. There is a substantial section of the Greek pleadings relating to the financial consequences of the failure by the insurers to comply with their obligations under the policy and the way in which they allegedly handled the investigations. In a further set of proceedings, known as Greece 2, two additional heads of loss are claimed by Starlight and OME, arising out of substantially the same allegations. As Longmore LJ put it in para 15, in apparent recognition of the problem raised by the fact that such claims had either not been brought in England or had been ruled out as a matter of English law by Tomlinson J, Mr Crampton, in paragraph 27 of his witness statement, explained that the claims are advanced in two ways in the Greek pleadings: first, that as a result of the underwriters intention to avoid payment of the insurance indemnity, eventually resulting in late payment of the policy proceeds, the claimants missed the opportunity to use the policy proceeds to invest in three vessels (not just the one referred to in the 2006 proceedings); and, secondly, that, as a result of the defendants actions in acquiring the false evidence of Mr Miranda, his clients were not able to insure the vessels and without insurance they would not have been able to trade them and could not purchase them. He stated that his clients would amend their pleadings prior to the hearing of the disputes in Greece so as to clarify this head of claim, such that no claim is made in respect of the late payment of the policy proceeds. The expert evidence from the defendants is that it is not possible to amend the pleadings in the Greek courts, but, treating the proposed draft amendment, which he exhibited, as a clarification, it did not seem to the judge that it in any way cured the defect, if defect there was. It is further said that the insurance of the three potential new vessels was rendered impossible, since all the London insurers refused to quote for the vessels because of the refusal of the defendant underwriters to quote for them and because of the defamatory accusations spread as to the unseaworthiness of the Alexandros T. All these allegations arise out of the alleged manner in which the defendants handled Starlight's claim in respect of the Alexandros T, and, even though the consequences and the consequential losses have expanded, and the claim for moral damages has been included, and although it seems that Starlight now rely on an expanded affidavit of Mr Miranda, the allegations, even though put into the context of Greek law, were said by the judge to be materially identical to those made prior to the settlement agreement. The acts complained of are all said to have constituted delicts under Greek law akin to the torts of defamation and malicious falsehood under English law. The present position Since the issue of the Greek proceedings, as Longmore LJ explained in para 16 (and the judge at his para 14), the insurers have taken further steps and brought further proceedings in England as follows. By applications issued in the 2006 proceedings on 25 July and 3 August 2011, the CMI and the LMI respectively sought, pursuant to the Tomlin Orders (if necessary after lifting the stay imposed by them) summary relief pursuant to CPR Part 24 by way of declarations and damages against Starlight. The LMI, because permission was given to them to join OME as a third party, also sought summary relief pursuant to Part 24 against OME (which filed an acknowledgment of service and a defence) to enforce the LMI settlement agreement, to which it also was a party. In addition, fresh proceedings (2011 Folio 702) were commenced by the LMI, without prejudice to their case that sufficient relief could and would be obtained in the 2006 proceedings, against both Starlight and OME, and, after an acknowledgment of service and defence were filed, an application was made under Part 24 for similar relief to the claim in the 2006 proceedings. The LMI also brought fresh proceedings (2011 Folio 1043) against Starlight's co assured and, again after acknowledgments of service and defence had been filed, sought declaratory relief and damages for breach of the exclusive jurisdiction clause in their insurance policies, by virtue of the issue of the Greek proceedings by those co assured. Also in fresh proceedings (2011 Folio 894), the CMI brought claims against OME and the same co assured in respect of similar claims for breach of the exclusive jurisdiction clause in the policy, and in respect of OME by reference to breach of the terms of the settlement agreement. Judgment in default was entered by the CMI against all those defendants on 26 October (amended on 14 November) 2011. Those proceedings are not the subject of this appeal and no issue therefore currently arises with respect to them. Finally, and by separate application, the HD defendants were joined as defendants in the 2006 proceedings so that, in due course, they too might be able In summary, the claims made in the various proceedings are these. to claim relief by seeking declaratory relief within the original proceedings. Starlight and their associates applied to stay both the 2006 proceedings in their current form and 2011 Folios 702 and 1043. (a) The 2006 proceedings. (1) The CMI claim against Starlight and, through Part 20 proceedings, against OME (i) a declaration that the Greek claims fall within the terms of the release in the CMI settlement agreement; (ii) a declaration that the bringing of the Greek claims was a breach of the release in the settlement agreement; (iii) damages for breach of the release in the settlement agreement; (iv) a declaration that the bringing of the Greek claims was a breach of the jurisdiction clauses in the settlement agreement and the policies; (v) damages for breach of the jurisdiction clauses in the policies and CMI settlement agreement; and (vi) an indemnity under clause 3 of that agreement in respect of claims brought by Starlight and/or its associated companies in the various Greek proceedings; (2) the LMI claim against Starlight (i) declarations that the LMI settlement agreement settles any claim against them by Starlight in respect of the loss of the Alexandros T and covers Starlights claims in the Greek proceedings (para 3); (ii) a declaration that Starlight is in breach of that agreement in bringing the Greek proceedings; (iii) damages for breach of the settlement agreement; and (iv) a declaration that the agreement entitles the LMI to an indemnity against Starlight in respect of the matters covered by the indemnity, which includes all claims by Starlight and its associated companies in the Greek proceedings; and (3) the LMI claims against OME by Part 20 proceedings: (i) like relief to that which the LMI claim against Starlight, as summarised above; and possibly (ii) damages for breach of the exclusive jurisdiction clause in the policy, although this claim is not repeated among the prayers. (b) Action 2011 Folio 702. The LMI claim against Starlight and OME: (i) declarations that the LMI settlement agreement settles any claim against them by Starlight and/or OME in respect of the loss of the Alexandros T and covers Starlights and/or OMEs claims in the Greek proceedings; (ii) damages for breach of that agreement; (iii) damages for breach of the jurisdiction clause in the policy; and (iv) damages for breach of the jurisdiction clause in the settlement agreement. (c) Action 2011 Folio 1043. The LMI claim against five of Starlights co assureds for breach of their policy jurisdiction clauses. The decisions of the judge and the Court of Appeal The insurers sought to enforce the settlement agreements referred to in the Tomlin Orders and, in a judgment handed down on 19 December 2011, having refused a stay under Article 28, the judge held that they were entitled to summary judgment for (inter alia) a declaration that the matters sought to be raised in Greece were part of the settlement of the claim and that Starlight (and OME) are bound to indemnify the insurers against any costs incurred and any sums that may be adjudged against them in the Greek proceedings. As stated above, the Court of Appeal held that it was bound to stay the 2006 proceedings and 2011 Folio 702 and 1043 under Article 27, made no final determination of the position under Article 28 and declined to consider the issues of summary judgment. The Court of Appeal also held that it was not too late for the respondents to rely upon Article 27 or Article 28. The issues In this Court the appellants challenge the correctness of the Court of Appeals conclusion under Article 27 and, on the respondents cross appeal, submit that the judge was correct to refuse a stay under Article 28. If the appellants succeed under both articles, the case will have to be remitted to the Court of Appeal to consider the respondents appeal from the summary judgment granted by the judge. Article 27 The questions for decision under Article 27 are whether, in the events which happened, the Court of Appeal was wrong to hold that it was not too late for the respondents to rely upon Article 27, whether the proceedings in Greece and the proceedings in England involve the same cause of action, whether they are between the same parties and which court was the court first seised. For reasons which will appear, I will defer consideration of the too late point until after consideration of the other issues. Article 27 must be construed in its context. The immediate context of Articles 27 and 28 is that they form part of Section 9 of Chapter II of the Regulation, which must be read in the light of Recitals 2 and 15 of the preamble. It is apparent from Recital 2 that the Regulation aims, in the interests of the proper functioning of the internal market, to put in place: Provisions to unify the rules of conflict of jurisdiction in civil and commercial matters and to simplify the formalities with a view to rapid and simple recognition and enforcement of judgments from Member States bound by this Regulation. Recital 15 provides: In the interests of the harmonious administration of justice it is necessary to minimise the possibility of concurrent proceedings and to ensure that irreconcilable judgments will not be given in two Member States. There must be a clear and effective mechanism for resolving cases of lis pendens and related actions and for obviating problems flowing from national differences as to the determination of the time when a case is regarded as pending. For the purposes of this Regulation that time should be defined autonomously. The mechanism referred to in Recital 15 is provided by Section 9 of Chapter II of the Regulation, which includes Articles 27 and 28: Section 9 Lis pendens related actions Article 27 1. Where proceedings involving the same cause of action and between the same parties are brought in the courts of different member states, any court other than the court first seised shall of its own motion stay its proceedings until such time as the jurisdiction of the court first seised is established. 2. Where the jurisdiction of the court first seised is established, any court other than the court first seised shall decline jurisdiction in favour of that court. Article 28 1. Where related actions are pending in the courts of different member states, any court other than the court first seised may stay its proceedings. 2. Where these actions are pending at first instance, any court other than the court first seised may also, on the application of one of the parties, decline jurisdiction if the court first seised has jurisdiction over the actions in question and its law permits the consolidation thereof. 3. For the purposes of this Article, actions are deemed to be related where they are so closely connected that it is expedient to hear and determine them together to avoid the risk of irreconcilable judgments resulting from separate proceedings. Article 29 Where actions come within the exclusive jurisdiction of several courts, any court other than the court first seised shall decline jurisdiction in favour of that court. Article 30 For the purposes of this Section, a court shall be deemed to be seised: 1. at the time when the document instituting the proceedings or an equivalent document is lodged with the court, provided that the plaintiff has not subsequently failed to take the steps he was required to take to have service effected on the defendant, or 2. if the document has to be served before being lodged with the court, at the time when it is received by the authority responsible for service, provided that the plaintiff has not subsequently failed to take the steps he was required to take to have the document lodged with the court." The Regulation is the successor to the Brussels Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters 1968 (the Brussels Convention), in which the equivalent provisions to Articles 27 and 28 were Articles 21 and 22 respectively. The Court of Justice of the European Union (the CJEU) has held that the principles developed in its case law with regard to Articles 21 and 22 of the Brussels Convention apply equally to Articles 27 and 28 of the Regulation: see Folien Fischer AG v Ritrama SpA (Case C 133/11) [2013] QB 523 at paras 31 and 32. The CJEU was of course previously the European Court of Justice (ECJ). Although some of the decisions to which I refer were made by the ECJ, for simplicity I will refer to all the European decisions as those of the CJEU. The CJEU has laid down a number of general principles which are of some importance. They include the important principle that a court in a Member State must not grant an anti suit injunction to restrain the bringing or continuing of proceedings in another Member State, whether to restrain an abuse of process or to restrain proceedings brought or continued in breach of an exclusive jurisdiction clause: see eg Turner v Grovit (Case C 159/02) [2005] 1 AC 101 and West Tankers Inc v Allianz SpA (The Front Comor) (Case C 185/07) [2009] 1 AC 1138. They also include the following, with specific reference to Articles 27 and First, the purpose of Article 27 is to prevent the courts of two Member States from giving inconsistent judgments and to preclude, so far as possible, the non recognition of a judgment on the ground that it is irreconcilable with a judgment given by the court of another Member State: Gubisch Maschinenfabrik KG v Palumbo (Case C 144/86) [1987] ECR 4861 at para 8. Second, the objective of Article 28 is to improve co ordination of the exercise of judicial functions within the European Union and to avoid conflicting and contradictory decisions, thus facilitating the proper administration of justice: see eg The Tatry (Case C 406/92) [1999] QB 515 at paras 32, 52 and 55 and Sarrio SA v Kuwait Investment Authority [1999] 1 AC 32, per Lord Saville at 39F H. The CMI claims: same causes of action? 28. It is convenient to consider first the position of the CMI claims. The first specific question is whether the 2006 proceedings involve the same cause or causes of action as the Greek proceedings, by which I mean Greece 1 and Greece 2. The principles of EU law which are relevant to the determination of this question are in my opinion clear. They have been considered in a number of cases in the CJEU and are essentially as submitted on behalf of the CMI. They may be summarised in this way. i) ii) iii) iv) The phrase "same cause of action" in Article 27 has an independent and autonomous meaning as a matter of European law; it is therefore not to be interpreted according to the criteria of national law: see Gubisch at para 11. In order for proceedings to involve the same cause of action they must have "le mme objet et la mme cause". This expression derives from the French version of the text. It is not reflected expressly in the English or German texts but the CJEU has held that it applies generally: see Gubisch at para 14, The Tatry at para 38 and Underwriting Members of Lloyds Syndicate 980 v Sinco SA [2009] Lloyd's Rep IR 365, per Beatson J at para 24. Identity of cause means that the proceedings in each jurisdiction must have the same facts and rules of law relied upon as the basis for the action: see The Tatry at para 39. As Cooke J correctly stated in JP Morgan Europe Ltd v Primacom AG [2005] 2 Lloyd's Rep 665 at para 42, The expression 'legal rule' or 'rule of law' appears to mean the juridical basis upon which arguments as to the facts will take place so that, in investigating 'cause' the court looks to the basic facts (whether in dispute or not) and the basic claimed rights and obligations of the parties to see if there is co incidence between them in the actions in different countries, making due allowance for the specific form that proceedings may take in one national court with different classifications of rights and obligations from those in a different national court. Identity of objet means that the proceedings in each jurisdiction must have the same end in view: see The Tatry at para 41, Gantner Electronic GmbH v Basch Exploitatie Maatschappij BV (Case C 111/01) [2003] ECR I 4207 at para 25, Primacom at para 42 and Sinco at para 24. v) The assessment of identity of cause and identity of object is to be made by reference only to the claims in each action and not to the defences to those claims: see Gantner at paras 24 32, where the CJEU said this in relation to Article 21 of the Brussels Convention: . in order to determine whether two claims brought between the same parties before the courts of different Contracting States have the same subject matter, account should be taken only of the claims of the respective applicants, to the exclusion of the defence submissions raised by a defendant. See also to similar effect Kolden Holdings Ltd v Rodette Commerce Ltd [2008] 1 Lloyd's Rep 434, per Lawrence Collins LJ at para 93 and Research in Motion UK Ltd v Visto Corporation [2008] 2 All ER (Comm) 560, per Mummery LJ at para 36. vi) It follows that Article 27 is not engaged merely by virtue of the fact that common issues might arise in both sets of proceedings. I would accept the submission on behalf of the CMI that this is an important point of distinction between Articles 27 and 28. Under Article 28 it is actions rather than claims that are compared in order to determine whether they are related. vii) After discussing Gubisch, The Tatry, Sarrio, The Happy Fellow [1998] 1 Lloyds Rep 13 and Haji Ioannou v Frangos [1999] 2 Lloyds Rep 337, Rix J summarised the position clearly and, in my opinion, accurately in Glencore International AG v Shell International Trading and Shipping Co Ltd [1999] 2 Lloyds Rep 692 at 697: It would appear from these five cases, of which the first two were in the European Court of Justice, and the latter three in the domestic Courts of England, that, broadly speaking, the triple requirement of same parties, same cause and same objet entails that it is only in relatively straightforward situations that art 21 bites, and, it may be said, is intended to bite. After all, art 22 is available, with its more flexible discretionary power to stay, in the case of related proceedings which need not involve the triple requirement of art 21. There is no need, therefore, as it seems to me, to strain to fit a case into art 21. The European Court, when speaking in Gubisch (at para 8) of the purpose, in the interests of the proper administration of justice within the European Community, of preventing parallel proceedings in different jurisdictions and of avoiding in so far as it is possible and from the outset the possibility of irreconcilable decisions, was addressing arts 21 and 22 together, rather than art 21 by itself. Thus a prime example of a case within art 21 is of course where party A brings the same claim against party B in two jurisdictions. Such a case raises no problem. More commonly, perhaps, the same dispute is raised in two jurisdictions when party A sues party B to assert liability in one jurisdiction, and party B sues party A in another jurisdiction to deny liability, or vice versa. In such situations, the respective claims of parties A and B naturally differ, but the issue between them is essentially the same. The two claims are essentially mirror images of one another. Gubisch and The [Tatry] are good examples of this occurrence. On the other hand, Sarrio v KIA is a case where the same claimant was suing the same defendant on different bases giving rise to different issues and different financial consequences, and where liability on one claim did not involve liability (or non liability) on the other. Haji Ioannou v Frangos illustrates the situation where even though the cause is the same, and even though there is some overlap in the claims and issues, nevertheless different claims, there the proprietary claim to trace, may raise sufficiently different issues of sufficient importance in the overall litigation for it to be concluded that the objet differs. The authority of The Happy Fellow at first instance may be somewhat shaken by the reservations expressed by Lord Justice Saville on appeal, but it too may be said to illustrate the process of analysing the claims and issues in the respective proceedings to identify whether they are the same. Where, for instance, there is no dispute over a shipowners right to limit should he be found liable (a separate question, which need not even be resolved at the time when a limitation action is commenced or a decree given), I do not for myself see why it should be held that the liability action and the limitation action involve the same cause of action for the purposes of art 21. How do these principles provide an answer to the question whether the 2006 proceedings involve the same cause or causes of action as the Greek proceedings? It is necessary to consider the claims advanced by the CMI and the LMI separately and, in the case of each cause of action relied upon, to consider whether the same cause of action is being relied upon in the Greek proceedings. In doing so, the defences advanced in each action must be disregarded. The essential question is whether the claims in England and Greece are mirror images of one another, and thus legally irreconcilable, as in Gubish and The Tatry, in which case Article 27 applies, or whether they are not incompatible, as in Gantner, in which case it does not. Thus in Gantner a claim for damages for repudiation of a contract and a claim for the price of goods delivered before the repudiation could both have succeeded and the fact that a set off of the damages would make the price less beneficial to the seller did not make them incompatible. And in Maersk Olie & Gas A/S v Firma M de Haan en W De Boer (Case C 39/02) [2004] ECR I 9657 owners of a vessel which damaged a pipeline (owned by Maersk) sought a declaration that they were entitled to limit their liability under the 1957 International Convention relating to the Limitation of Liability of Owners of Sea going Ships and the Dutch legislation that gave effect to it and that a limitation fund be established. Maersk subsequently commenced proceedings in Denmark claiming compensation for damage to the pipeline. The CJEU held that the causes of action were not the same: see paras 35 to 39. The CJEU underlined both the principle in Gantner that account should be taken only of the claims and not of the defences advanced and the principle in The Tatry that the cause of action comprised both the facts and the legal rule invoked as the basis of the application. It held on the facts, at para 38, that: the unavoidable conclusion is that, even if it be assumed that the facts underlying the two sets of proceedings are identical, the legal rule which forms the basis of each of those applications is different. The action for damages is based on the law governing non contractual liability, whereas the application for the establishment of a liability limitation fund is based on the 1957 Convention and the Netherlands legislation which gives effect to it. The CJEU thus distinguished Gantner and The Tatry on the basis that in those cases, by contrast, the claim brought in the second set of proceedings mirrored that brought in the first set. What then is the position on the facts? The CMI advance the claims referred to in para 18 above under three heads, each of which relies upon provisions either of the CMI settlement agreement or the policies. It is convenient to consider the claims under the three heads in this order: indemnity, exclusive jurisdiction and release. Indemnity claims These are based on clause 3 of the settlement agreement set out above. The claims are simple. By clause 3 the Assured as defined agreed to indemnify the CMI against any claim that might be brought against them by any of the Assureds or the Claimants associated companies or organisations or by any mortgagee in relation to the loss of Alexandros T or under the relevant policy. The CMI say that the Greek proceedings are in respect of such claims and that they are entitled to be indemnified against the consequences of those proceedings. They say that that claim under clause 3 does not give rise to the same claim or cause of action as any claim or cause of action in the Greek proceedings. They say that, on the contrary, it assumes that the Greek proceedings will proceed and that the claimants in Greece may succeed. I would accept that submission. In my opinion, none of the causes of action relied upon in the Greek proceedings has identity of cause or identity of object with the CMIs claim for an indemnity. As to cause, the subject matter of the two claims is different. The former are claims in tort (or its Greek equivalent) and the claim for an indemnity is a claim in contract. As to object, that of the Greek proceedings is to establish a liability under Greek law akin to tort, whereas, as for example in the case of a claim on an insurance policy, the object of the CMIs claim is to establish a right to be indemnified in respect of such a liability. Further, whereas Starlight and its co assureds and the individual officer claimants in the Greek proceedings are seeking each to recover its or his own loss, the indemnity clause will, if the indemnity claim is otherwise good, entitle the CMI to recover from Starlight not just any sum awarded in Greece to Starlight, but also any sums awarded to any of Starlights co claimants. So the object of the English indemnity claim against Starlight differs from, and is in fact much wider than, the object of Starlights claim in the Greek proceedings. Moreover, the claim for an indemnity in the 2006 proceedings in England does not interfere in any way with the Greek proceedings or vice versa. There is no attempt in Greece to impugn the settlement agreements or the indemnity agreements contained in them. The respondents do not assert, for example, that the indemnities do not apply to some or all of the Greek claims. I would determine this point in favour of the CMI on this simple basis. The CMIs cause of action for an indemnity under clause 3 of the settlement agreement is not the same cause of action as any of the causes of action relied upon in Greece, which are tortious. The respective causes of action have neither the same object (le mme objet) nor the same cause (la mme cause). Exclusive jurisdiction clauses The same is in my opinion true of the CMIs claims that the respondents have brought the proceedings in Greece in breach of the exclusive jurisdiction clauses in the settlement agreement and/or in the insurance policies. Clause 6 of the settlement agreement expressly provides that it is subject to English law and the exclusive jurisdiction of the High Court in London. The CMI say that, in bringing the Greek proceedings, the respondents are in breach of clause 6 and that they are entitled to damages as a result. They do not seek an anti suit injunction to restrain the Greek proceedings. They simply seek a declaration that the claims brought by Starlight and OME in Greece 1 and Greece 2 fall within the scope of the settlement agreement. Moreover the respondents do not assert in the Greek proceedings that the settlement agreements do not preclude the bringing of their claims in Greece. It may be that the reason they do not advance that argument is that they would be met with the response that a dispute as to the meaning and effect of the settlement agreements is subject to the English jurisdiction clause so that the court in Greece would have to decline jurisdiction. However that may be, they do not in fact advance the argument. It follows that in this respect too the Greek proceedings are not the mirror image of the English proceedings or vice versa and that the cause or causes of action based on an alleged breach of clause 6 of the CMI settlement agreements are not the same cause or causes of action as are advanced by the respondents in Greece. They do not have le mme objet et la mme cause. As I see it, the position is the same in the case of the alleged breach of the exclusive jurisdiction clauses in the insurance policies. There is an established line of cases in England to the effect that claims based on an alleged breach of an exclusive jurisdiction clause or an arbitration clause are different causes of action from claims for substantive relief based on a breach of the underlying contract for the purposes of Article 21 of the Brussels Convention and Article 27 of the Regulation: see eg Continental Bank NA v Aeakos Compania Naviera SA [1994] 1 WLR 588 per Steyn LJ (giving the judgment of the Court of Appeal) at 595H 596C; Alfred C Toepfer International GmbH v Molino Boschi Sarl [1996] 1 Lloyds Rep 510 per Mance J at 513; Toepfer International GmbH v Socit Cargill France [1997] 2 Lloyds Rep 98, per Colman J at 106; Sinco per Beatson J at paras 50 and 54; and WMS Gaming Inc v Benedetti Plus Giocolegale Ltd [2011] EWHC 2620 (Comm) per Simon J at para 32. Those cases support the conclusion that the claims of the CMI in the 2006 proceedings for breach of the exclusive jurisdiction clauses in the insurance policies (or indeed in the settlement agreement) do not involve the same cause or causes of action within the meaning of Article 27 as the respondents claims in (or akin to) tort in the Greek proceedings. I understand that this point has been reserved for decision by the Court of Appeal but, as I see it at present, nothing in the relief sought by the CMI offends the principle of mutual trust and confidence which underlies the Regulation: see eg Erich Gasser GmbH v MISAT Srl (Case C 116/02) [2005] QB 1. The CMI do not seek to stop the Greek proceedings or to restrain Starlight and OME from pursuing them. They merely seek declarations as to the true position under the settlement agreements which are both governed by English law and subject to the exclusive jurisdiction of the English courts and under the clauses in the insurance contracts which also provide for the exclusive jurisdiction of the English courts. This has the advantage that the courts with exclusive jurisdiction decide what is the true meaning of the settlement agreements and the jurisdiction clauses. Release The same is also, in my opinion, true of the claims based on what are called the release provisions in the CMI settlement agreement. It is said that the provision that the sums agreed to be paid under the CMI settlement agreement are to be paid in full and final settlement of all and any claims it may have under the policy precludes the payment of any further sums arising out of the loss of the vessel insured. It is said that, in the light of the agreement, the CMI are entitled to a declaration that the Greek claims fall within the terms of the agreement, that they are entitled to a declaration that the bringing of those claims is a breach of the agreement and that they are entitled to damages for that breach. The question is whether these claims involve le mme objet et la mme cause as the claims in the Greek proceedings. In my opinion they do not for the same reasons as in the case of the claims for an indemnity and the claims arising out of the exclusive jurisdiction clauses. The Greek claims are claims in tort and these are contractual claims. The factual bases for the two claims are entirely different. Moreover the object of the two claims is different. This is to my mind clear in the case of the claims for damages for breach of the release provisions in the settlement agreements and for a declaration that the bringing of the Greek claims is a breach of the settlement agreement. The nature of the claims is almost identical to the nature of the claims for breach of the jurisdiction agreements. In both cases the alleged breach is the bringing of the claims in Greece. Moreover, like the claims for an indemnity, the claim for damages for breach of the settlement agreement assumes that the claims in Greece may succeed. Is the position different in respect of the claim for a declaration that the Greek claims fall within the terms of the release in the settlement agreements? In my opinion the answer is no. All these claims have the same thing in common. It is that the legal basis for the claims in Greece is different from the legal basis of the claims in England. In Greece the legal basis for the claims is tortious, whereas in England the legal basis of the claims is contractual. It is thus not a case like Gubisch, where, as the CJEU put it at para 15, the same parties were engaged in two legal proceedings in different Contracting States which were based on the same cause of action, that is to say the same contractual relationship. The cause was therefore the same. Equally the objet of the actions was the same, namely to determine the effect if any of the contract. As the CJEU put it at para 16, the action to enforce the contract was aimed at giving effect to it, while the action for its rescission or discharge was aimed precisely at depriving it of any effect. The question whether the contract was binding lay at the heart of the two actions. That is not true here because the object of the English action is to enforce the contract, whereas the object of the Greek proceedings is to establish a different liability in tort. Lord Mance takes a different view in one respect. So far as the claims for damages for breach of the releases in the settlement agreements, the claims for a declaration and damages for breach of the jurisdiction clauses and the claims for indemnities are concerned, there is no difference between us. However, so far as the claims for a declaration that the Greek claims fall within the terms of the release in the settlement agreements is concerned, Lord Mance takes a different view. He notes in para 140 the terms in which the claims are pleaded. The formulation in paragraph 18(a) above, which was adopted by the respondents, is in fact derived from the declaration made by the judge. However, to my mind nothing turns on this difference. Moreover, I do not see that it makes any difference that the respondents discharged their obligations under the settlement agreements. The critical point is that on the facts here the legal basis of the claims in tort in Greece is different from the legal basis of the contractual claims in England. It is true that, if successful, a declaration that the tortious claims have been settled or released will or may afford the appellants a defence to the Greek proceedings but the cases show that defences are irrelevant. Viewed through the perspective of the claims, the two claims are not the mirror image of one another. Even if (contrary to my view) the two sets of proceedings had in this respect le mme objet they did not have la mme cause, whereas the cases show that, in order to involve the same cause of action, they must have both le mme objet et la mme cause. The position would be different if the CMI were to advance a claim in the English proceedings claiming a declaration that they are not liable to the respondents in Greece. That claim would be the mirror image of the claims being brought by the respondents in Greece and would fall within the principles laid down in Gantner and The Tatry. In fact, after the judge had delivered his judgment, the CMI did, as I understand it, make an application for such a negative declaration in the light of the fact that Starlight and OME had commenced Greece 2. We were told that in the event the application was never determined and that the CMI do not pursue it. It has been confirmed that any such claim has now been abandoned. For these reasons, subject to a possible reference to the CJEU discussed in paras 58 59 below, I would hold that Article 27 does not apply to any of the causes of action advanced by or against the CMI. I appreciate that, in reaching these conclusions I have reached a different view from that of the Court of Appeal. Before I express my reasons, I should say that I suspect that the focus of the argument in the Court of Appeal was somewhat different from that in this Court. The reasons are I think twofold. First, in para 40 of his judgment Longmore LJ distinguished Sinco on the basis that the difference between this case and that is that in that case, in contradistinction to this, there was no settlement agreement which could, as he put it, supposedly deny the Greek claimants the right to bring proceedings at all. I do not see that as correct. As explained above, the CMI do not seek to deny the respondents the right to commence proceedings in Greece but merely say that the causes of action in the two sets of proceedings are different. The second point is perhaps more significant. In para 46 Longmore LJ correctly notes that the CMIs case is that the bringing of the Greek proceedings is a breach of the jurisdiction clauses in the policies and a breach of the terms of the settlement agreement and, again correctly, states that the primary relief claimed by the CMI in England is a declaration that Starlight will be liable to indemnify the CMI against any costs incurred in the Greek proceedings and any liability in those proceedings. I have already given my reasons for concluding that those are different causes of action from the causes of action in tort relied upon by the respondents in Greece. They are not a mirror image of one another. As I see it, the Court of Appeal treated the question as a broad one focusing on the overall result in each jurisdiction. This can be seen from paras 47 to 50 of Longmore LJs judgment. In paras 46 and 47 he summarised the claims of both the CMI and the LMI. He then said this at paras 48 and 49: 48. It is clear that the first 3 paragraphs of the LMI application are in terms an assertion that LMI are not liable in respect of the claims in Greece. CMI's allegation that the Greek claimants are in breach of the settlement agreements is in effect a similar assertion. It may be said that there are other causes of action in the English proceedings which are not exactly mirror images of the allegations in the Greek proceedings but to the extent that they are not, they are essentially the same in the sense that the key assertion in Greece is that there are non contractual claims and the key assertion in England is that those non contractual claims have been compromised by the settlement agreements. The claims for damages and indemnity are in any event parasitic on the central contention that, once a settlement had been reached, all matters in issue had been compromised. It is, of course, elementary that Article 27 has regard to causes of action rather than proceedings and that is why it is necessary to concentrate on the allegations relating to the settlement agreement. It is certainly the case that there is a considerable risk of inconsistent judgments if one of the sets of proceedings is not stayed and the rationale behind Article 27 therefore favours a stay if the Greek court was the court first seised. 49. I therefore conclude that, in so far as the English proceedings assert non liability by reason of the settlement agreements, there is an identity of issues and the respective causes of action are the same. To the extent that allegations are made in England that the Greek parties are in breach of the settlement agreements or in breach of the exclusive jurisdiction clauses in either the insurance policy or the settlement agreements themselves (and that they should therefore indemnify the insurers for the cost of the Greek proceedings) they are parasitic and dependent on the basic cause of action in England for a declaration of non liability. They cannot proceed in their own right until the underlying question of the ambit of the settlement agreements as a defence to the Greek actions in tort has been resolved. In my opinion that analysis is not consistent with the principles laid down by the CJEU set out above. As already stated, those principles require a comparison of the claims made in each jurisdiction and, in particular, consideration of whether the different claims have le mme objet et la mme cause without regard to the defences being advanced. As I see it, Article 27 involves a comparison between the causes of action in the different sets of proceedings, not (as in Article 28) the proceedings themselves. In para 48 Longmore LJ recognises that there are causes of action in the English proceedings which are not (as he puts it) exactly mirror images of the allegations in the Greek proceedings but says that, to the extent that they are not, they are essentially the same in the sense that the key assertion in Greece is that there are non contractual claims and the key assertion in England is that those non contractual claims have been compromised by the settlement agreements. And at the end of para 49 he says that the claims in England cannot proceed in their own right until the underlying question of the ambit of the settlement agreements as a defence to the Greek action in tort has been resolved. I respectfully disagree with that approach. It focuses on the nature of the settlement agreements as a defence to the Greek action in tort, which the authorities in the CJEU show is irrelevant. Given the fact that defences are irrelevant, the analysis cannot involve a broad comparison between what each party ultimately hopes to achieve. The analysis simply involves a comparison between the claims in order to see whether they have the same cause and the same object. In so far as Andrew Smith J treated the question as a broader one in Evialis SA v SIAT [2003] 2 Lloyds Rep 377 I respectfully disagree with him, although, as Beatson J observed in Sinco at para 50, Evialis was distinguishable on the facts because the insured had brought a substantive claim in the English proceedings in addition to their claim in the Italian proceedings, which rendered the former a mirror image of the latter. This case can be distinguished on the same basis, at least in the case of the CMIs claims. I also note in connection with Sinco that at para 40 Longmore LJ observed that the difference between that case and this was that in that case there was no settlement agreement which could supposedly deny the right of the Greek claimants to bring proceedings at all. For the reasons I have given I would respectfully disagree with that approach. A settlement agreement might be a defence to a claim. It could not deny the right of the Greek claimants to bring proceedings at all. For these reasons I would hold that Article 27 has no application to the case of the CMI. Moreover, subject to one point discussed at paras 58 59 below, I would not order a reference to the CJEU on this question because the relevant principles are clearly set out in its jurisprudence and are acte clair. In these circumstances, where none of the causes of action in the English proceedings is the same as the causes of action in the Greek proceedings, it is not necessary in the case of the CMI to consider the other issues which might arise, namely the position in relation to other parties and which court was the court first seised for the purposes of Article 27. The LMI claims: same causes of action? Save possibly for two points, the position of the LMI is essentially the same as in the case of the CMI. The first point is that the jurisdiction clause in clause 5 of the LMI settlement agreement differs from that in clause 6 of the CMI settlement agreement in that it does not expressly provide for the exclusive jurisdiction of the High Court in London but merely for the jurisdiction of the High Court in London. However, subject to its detailed provisions, Article 23 of the Regulation provides that, where parties have agreed that a court or the courts of a Member State shall have jurisdiction, that court or those courts shall have jurisdiction and, moreover, that such jurisdiction shall be exclusive unless the parties have agreed otherwise. The question whether the parties had agreed otherwise was discussed by the judge at paras 19 to 23 of his judgment, where he held that the parties had not agreed otherwise and that clause 5 of the LMI was an exclusive jurisdiction clause. No appeal was brought against that part of the judges ruling. The second point is this. I had understood during the argument that the LMI were seeking a negative declaration of the kind which the CMI were not. It now appears that I was mistaken. I understand that the LMI had indicated an intention of doing so if the CMI proceeded with an application for permission to do so but, since they did not, nor did the LMI, who have now expressly stated that, like the CMI, they will not do so. As I see it, in these circumstances the position of the LMI is the same as that of the CMI. The causes of action advanced in England in the 2006 action and in 2011 Folio 702, as summarised on behalf of the LMI, are claims by the LMI against Starlight and OME based on clauses 3, 4 and 5 of the LMI settlement agreement. Those advanced in 2011 Folio 1043 are claims by the LMI against the co assureds to enforce the English jurisdiction clause in the insurances. Since, on this basis, the relief sought by the LMI is not a declaration of non liability, the conclusions and reasoning set out above on the question whether the causes of action are the same apply to it. It follows that I would allow the appeals of both the CMI and the LMI on the Article 27 point. However these conclusions are subject to the question whether any of the issues discussed above should be referred to the CJEU. Left to myself, I would not refer any of them because the principles of European law are clear and the only question is how they should be applied in the instant case. However, Lord Mance has arrived at a different view from me on the question whether Article 27 applies to the claims by both the CMI and the LMI for a declaration that the Greek claims fall within the terms of the release in the settlement agreements or that under the agreements the tort claims have been settled. In short he is of the view that those claims are essentially for declarations of non liability. In these circumstances, I have reached the conclusion that the position is the same as I previously considered it to be when I thought that the LMI were seeking a declaration of non liability. That is that, unless the CMI and the LMI abandon those claims within 14 days, we should refer the question whether the claims for those declarations involve the same cause of action as the claims in Greece within the meaning of Article 27. Lord Neuberger has also given reasons why, absent such abandonment, this question should be referred. On the other hand, if the CMI and the LMI do abandon those claims, I would allow both their appeals under Article 27 and refuse a mandatory stay of the proceedings under it. If they do not abandon those claims, I would allow the appeals under Article 27 in respect of the other claims but refer the question referred to above to the CJEU and defer a decision on that issue until the CJEU has determined the question. Seisin under Article 27 It is not I think in dispute (and is in any event correct) that a court is only seised of claims by or against new parties from the date that those parties are added to the proceedings. In relation to the 2006 proceedings, the English court was only seised of claims against OME once OME was joined to the proceedings on 20 September 2011 and, for example, to the extent that the LMI in action 2011 Folio 702 are seeking declarations relying on the settlement agreement as a settlement of or defence to Starlight's and OME's claims in the Greek proceedings, the English courts were only seised of that action in 2011. It follows that, in each of those cases the court first seised was the Greek court and not the English court, and that, to the extent that the LMI advance claims for a declaration that the Greek claims fall within the terms of the release in the settlement agreement or that under the agreement the tort claims have been settled, unless the English court is the court first seised, they will be entitled to a stay under Article 27. The same is essentially true of the CMI claims. The question is which court is first seised of what in circumstances where some of the claims brought in England are different from and based on different causes of action from those brought in Greece and one of them in each case, namely the claim for the declaration or declarations referred to above, is based on the same cause of action. The approach of the parties is starkly different. It is submitted on behalf of the appellants that the answer is to be found in the language of Articles 27 and 30 and is that the court first seised is that in which the proceedings were first brought and that the court remains the court first seised of the proceedings even where those proceedings are subsequently amended by the addition of new claims or otherwise. It is submitted on behalf of the respondents, by contrast, that if a new claim is added by amendment, the court is seised of the proceedings so far as that amendment is concerned when the amendment is made and not at the time of the institution of the original, unamended proceedings. It seems to me that there is considerable force in the appellants analysis of the language of the Regulation but the respondents case has support both in the English cases and in the textbooks. In the course of this judgment I will consider the issues (interesting as they are) only briefly because I have reached the conclusion that, if the appellants persist in their claims for the declarations referred to in paras 58 and 59 above and this issue is critical for the resolution of the appeal, the proper course is to refer the question to the CJEU. The case for the appellants can be summarised thus. Article 27 is concerned with proceedings involving the same cause of action. So, for the purposes of deciding whether to grant a stay of its proceedings under Article 27, the court must compare the cause or causes of action in each set of proceedings. It is Article 30 that determines when the court is deemed to be seised and, by Article 30(1), it provides that (subject to the limited exceptions at the end of Article 30(1) and in Article 30(2)), it is deemed to be seised when the document instituting the proceedings or an equivalent document is lodged with the court. Where the question is which of two courts is first seised, the two dates on which the courts are deemed to be seised are compared and the court deemed to be seised first is the court first seised. The appellants also rely upon the transitional provisions in Article 66, which they say support the proposition that proceedings have only one date upon which they are instituted and is inconsistent with the idea that they can have several such dates as and when new claims are added by amendment. The appellants say that in this case the answer is that the English court was the court first seised because the Greek court was not seised until some five years later. They say that this is a simple rule which is easy to apply and that there is no warrant in the language of the Regulation for concluding that it was intended that the court should be seised anew each time a new claim is added by amendment, which would be complicated and unnecessary and give rise to endless interlocutory disputes. The appellants criticise Longmore LJ for asking in para 52 whether it can be said that the English court was first seised of the relevant causes of action now pursued in Greece and for noting that Article 27 only has regard to "causes of action" rather than proceedings. They say that that is inconsistent with Articles 27 and 30 because Article 27(1) uses the word "proceedings" twice and it is used again in Article 30(1). They recognise that for the purpose of deciding whether there is le mme objet or la mme cause the court must look to the claims made but, for the purpose of deciding which court is deemed to be "first seised" under Article 27, the autonomous test in Article 30 is applied. Finally, they say that Article 30 does not mention "causes of action" and that the Court of Appeal overlooked the word "proceedings" used twice in Article 27, and did not refer to Article 30 at all. Moreover, although the word "proceedings" is not defined in the Regulation, it appears nearly 50 times in the Regulation used as a word of general application. The uses of the word show that issues or causes of action (or claims) may change during the course of the "proceedings". The appellants further criticise Longmore LJ in the Court of Appeal by reference to paras 53 and paras 64 66. They contrast the reference in para 53 to Article 27 having regard only to causes of action rather than proceedings, with the reference in para 64, with apparent approval, to this quote from the judgment of Saville LJ in The Happy Fellow at pages 17 18: article 21 is concerned with proceedings and article 22 with actions. The questions are whether the proceedings involve the same cause or object or whether the actions are related. It is thus a misreading of the Convention to ask which Court is first seised of issues which are or might be raised within the proceedings or actions. If such were the case, then the articles would achieve precisely the opposite of their intended purpose which is, to achieve the proper administration of justice within the Community . " Saville LJ was there considering the position under what is now Article 28. However the appellants say that the word action in Article 28 means the same as proceedings in Article 27 and that Longmore LJ was correct in paras 64 66 and wrong in para 53. Although the appellants case has to my mind the merit of simplicity and of the avoidance of time consuming and expensive satellite litigation, the respondents say that it is simplistic and contrary to both principle and authority. It is fair to say that there is considerable support in the authorities and the text books for the proposition that the new claims added to the 2006 proceedings, which were founded on the Greek proceedings and thus made second in time, were new claims, that the English court should be regarded as seised of them only when they were added to the 2006 proceedings and that the Greek court was the court first seised within the meaning of Article 27. In the important case of FKI Engineering Ltd v Stribog Ltd [2011] 1 WLR 3264, which was itself a case on Article 28, the Court of Appeal considered Article 27 and a number of cases decided under it. At para 84 Rix LJ said that the essence of the cases was that, where the same cause of action or the same parties are introduced only by way of service, or amendment, the relevant proceedings are only brought at the time of such service or amendment, not at the time of the institution of the original, unamended proceedings. Neither Mummery LJ nor Wilson LJ expressed a different view. The respondents also rely upon Sinco per Beatson J at paras 61 to 68 and, in that connection, upon this comment in Briggs on Civil Jurisdiction and Judgments, 5th edition, 2009 at para 2.235, page 327, note 1: In [Sinco] the proposition that an English court was first seised of a claim for damages for breach of a jurisdiction clause, which could only have been brought before the English court after the objected to proceedings were instituted before the foreign court, was rather challenging. And in Research in Motion UK Ltd v Visto Corporation [2007] EWHC 900 (Ch), Lewison J said at para 19: It is also common ground that the counterclaim is to be treated as an action in its own right for the purposes of the judgment regulation. It seems to me that once RIM's English non infringement action is out of the way the only relevant proceedings are Visto's counterclaim and the Italian proceedings. Of those two, the Italian court is plainly the first seised. Indeed it cannot be otherwise since the very fact of the Italian claim is part of the foundation of the counterclaim. The respondents rely upon Briggs at para 2.235, where, as I read it, their case is supported, although some doubts are expressed as to the desirability of this approach. The respondents also relied upon the 15th edition, 2012 of Dicey, Morris and Collins on The Conflict of Laws at paras 12 060 and 12 069, where they say this: 12 060. Each lis between a plaintiff and a defendant has to be considered individually to determine which court was seised of it first in time, and article 27 applied accordingly. 12 069. Where a claim form which has been issued and served is amended by the addition of an additional claim, or by the introduction of a claim or counterclaim against another party, the material question is whether the date of seisin in respect of the additional claim is the date on which the amended claim form is reissued (which may, depending on the circumstances, be only after obtaining the permission of the court), or the date of the original issue. As it is difficult to see how a court can be said to be seised of a claim which has not been made and does not appear in the claim form, it cannot be correct that as long as a claim form has been issued and served, the court already has temporal priority over any issue which may later be added by amendment. It would follow from a conclusion that the court is not seised of the new claim until the amended claim form is reissued that the defendant may be able to pre empt the amendment by commencing an action of his own in another Member State. The court seised with such pre emptive proceedings will obviously be regarded as being seised later than the court before which the original action was brought, but institution of the later action may serve to prevent the proposed, and now duplicative, amendment of the original action; and there is no basis in the Regulation for refusing to give effect to a use of the rules which might be characterised as sharp practice. Finally, the respondents rely upon Fentiman on International Commercial Litigation, 2010, at para 11.27: Principle suggests that an amended claim arising from the same facts as the original claim might be consolidated with the original claim for the purposes of Article 30 but not where the facts arose subsequently. In the latter case it does no violence to the expressions 'actions' or 'proceedings' to differentiate the claims. While these expressions of view undoubtedly provide strong support for the respondents submissions, some of them seem to me to be expressed in a somewhat tentative way and I am not sure that the textbook writers grapple with the points made by the appellants on the language of the Regulation. However that may be, as indicated earlier, I am of the opinion that this issue is by no means acte clair and, if the appellants maintain their claim or claims in England for a declaration that the Greek claims fall within the terms of the release in the settlement agreements or that under the agreements the tort claims have been settled, I would refer an appropriate question to the CJEU before forming a concluded view with regard to the applicability to that claim or claims. If they abandon them, I would hold that the respondents are not entitled to a stay under Article 27, refuse them a mandatory stay in respect of all the claims and allow the appellants appeal. Article 28 The question whether those claims which are not within Article 27 should be stayed depends upon whether they should be stayed under Article 28. As stated above, in the exercise of his discretion the judge refused the respondents application for a stay under Article 28. The appellants say that he was right to do so. The respondents case is that the English court was second seised for the purpose of Article 28 and that a stay should be granted as a matter of discretion. Seisin under Article 28 It is plain from the express terms of Article 28(1) that the discretion in Article 28 is limited to any court other than the court first seised. It follows that, if the English court was first seised, it has no discretion to stay. Article 28 moreover applies to related actions pending in the courts of different member states and, by Article 28(3), actions are deemed to be related where they are so closely connected that it is expedient to hear and determine them together to avoid the risk of irreconcilable judgments resulting from separate proceedings. It is not in dispute in these appeals that the various proceedings are related proceedings for the purposes of Article 28 and I would in any event so hold. The questions remain whether the actions are pending, whether the English court is the court first seised and, if it is not, how the discretion should be exercised. In Stribog the Court of Appeal considered the correct approach to Article 28. It held that two questions arise, namely (1) whether the two sets of proceedings are related, taking account of any amendments which have been made at the time of the enquiry and (2) which set of proceedings were commenced first? Rix LJ expressed the position clearly at paras 119 and 120. He explained that it is only when there are related and pending actions in separate member states that Article 28 comes into issue. The question whether they are related is, as he put it, the Article 28(3) question. He then said: 119. The question of when seisin occurs and thus which of the courts is the court first seised is the article 30 question. FKIs submission in effect seeks to roll the two questions together and ask: which of the two courts is the first to be seised of an action which at the time of its seisin was a related action? This is the concept of the first related action, a concept found in neither article 28 nor article 30. Stribog on the other hand asks: once you have found two related and pending actions and seek to stay one of them, invoking article 28, which of the two courts was the first to achieve seisin of one or other of those actions? 120. In my judgment, the latter question is the correct one, and is to be preferred to the former . See also per Mummery LJ at paras 40 to 44, where he stressed in particular that the question is whether the court concerned is seised of an action and not of a particular issue in an action. He also stressed that the time at which the comparison between the two actions is made is the time of the hearing of the application for the stay. Wilson LJ noted at paras 132 134 that Mummery and Rix LJJ asked the relevant questions in a slightly different order: Mummery LJ asked which court was first seised in a pending action before asking whether the actions were related, whereas Rix LJ preferred to ask them in the reverse order. Wilson LJ said that he did not see why the order matters but that Rix LJ seemed to have the terminology of Article 28 on his side. I agree. The question whether the actions are pending is closely related to the question whether the English court remains first seised. The respondents say that there was no action pending in England when the Greece 1 proceedings were commenced. In the alternative they say that, if the original action is still alive, the English court is not first seised because the claims now brought are entirely new claims, which they say should be equated with new proceedings. I will consider these points in turn. On the first point, the appellants say, by contrast, that the 2006 proceedings are still on foot, and thus pending, having been stayed but not finally concluded. I would accept the appellants submissions. The settlement agreements were in this respect in identical terms. It was a term of them that Starlight would obtain a stay by way of Tomlin Orders. The orders were both in the same terms, which are standard in such cases, and (as quoted in para 7 above) provided that save for the purposes of carrying into effect the terms agreed all further proceedings shall be stayed. It appears to me that, on the true construction of those orders, the actions remained unstayed for the purposes of carrying into effect the terms agreed and were otherwise stayed. As I see it, in so far as the actions remained unstayed, it follows that the court remained seised of them, presumably at least until there was no longer any need for the terms agreed to be carried out. It is plain from the language of Article 28(1) that the court first seised means the court first seised of the action, which must mean first seised of the proceedings, not of particular claims or causes of action within the proceedings. It seems to me to follow that, in so far as the appellants are seeking to enforce the provisions of the settlement agreements, as they are, the English court remains first seised. I arrive at this conclusion by a construction of Article 28(1) and of the Tomlin Order. The appellants were able to pursue these claims without issuing further proceedings. In this regard I would accept the analysis of the judge at paras 24 to 29. I would adopt the analysis of Sir Andrew Morritt V C in Bargain Pages Ltd v Midland Independent Newspapers Ltd [2003] EWHC 1887 (Ch) and I would not follow the reasoning of the Court of Appeal in Hollingsworth v Humphrey, (1987) CAT 1244. What then of the parts of the actions which are stayed under the Tomlin Orders? These would include the claims for breach of the exclusive jurisdiction clauses in the policies of insurance, which do not depend upon the terms of the settlement agreements. The appellants rely upon principles developed by the English courts as a matter of English, not European, law. However, this is in my opinion a permissible approach. Article 30 of the Regulation provides for the circumstances in which a court is deemed to be seised. I recognise of course that the concept of seisin is an autonomous European law device but Article 30 does not make express provision for the circumstances in which it ceases to be seised. In these circumstances, it seems to me to be appropriate for national courts to have regard both to the nature of seisin in European law and to their own procedural rules in deciding whether their courts are no longer seised of a particular set of proceedings. The appellants rely upon the decision of the Court of Appeal in Rofa Sport Management AG v DHLK International (UK) Ltd [1989] 1 WLR 902, where the Court of Appeal held that a stay of proceedings is not equivalent to a dismissal or discontinuance and therefore that an action in which all further proceedings have been stayed, even if by consent of all parties after a settlement, remains in being. See in particular per Neill LJ at 909H to 910D and 911A C. He concluded that, for the sake of clarity and certainty, the word stay in an order should not be treated as a possible equivalent of a dismissal or discontinuance. Although the action cannot continue without an order of the court, nor can it, he said, be regarded as dead in the same way as an action which has been dismissed or discontinued by order. I agree. The reasoning in Rofa supports the conclusion that in circumstances in which the 2006 proceedings have been stayed and not dismissed or discontinued the court remains seised of them. It is not and could not be disputed that the court was seised of the proceedings in accordance with Article 30 when the claim form in the 2006 proceedings was issued. It is not suggested that the appellants failed to take any of the steps referred to in Article 30(1) or (2) which would have nullified that effect. The question is whether anything happened subsequently from which it can be inferred that the court was no longer seised. I would answer that question in the negative. Although Rofa was not a decision on the construction of the Regulation, the correct approach is to consider whether anything occurred which could lead to the conclusion that the approach adopted there should not be applied to the stay incorporated in the Tomlin Orders and, if not, whether there is anything which leads to the conclusion that the court is not still seised of the proceedings. I would answer both those questions in the negative. Although it is true that the CMI settlement agreements contained a provision that, on payment of the settlement sum, the parties would file a consent order dismissing the proceedings, no such consent order was made or filed. The LMI settlement agreement does not contain any such provision. In all these circumstances, I can see no sensible basis upon which it can be said that the English court is no longer seised of the proceedings. There remain significant disputes arising out of the settlement agreements and the insurances. The second point taken on behalf of the respondents under this head is that, even if the original action is still alive, the claims now brought are new claims, which should be equated with, or treated as, new proceedings. They rely upon this dictum of Rix LJ in Stribog at para 129: Seventhly, there is nothing in the ECJ or English jurisprudence to support the judges approach in this case. It is possible that the introduction of entirely new causes of action or parties is to be recognised as the bringing of entirely new proceedings, so that the timing of seisin (the article 30 question) has to be looked at from that point of view, as occurs for the purposes of article 27. Even so, it is not clear to me that in this connection article 27 and article 28 work in the same way: for article 27 is worded in terms of the bringing of actions with the same parties and the same cause of action (Where proceedings are brought in the courts) whereas article 28 is worded in terms of the pendency of related actions (Where related actions are pending in the court) (emphasis added). That emphasises that the article 28 question is asked with relation to pending actions, and not, as the article 27 question is asked, with relation to the bringing of actions. In any event, the judge is in my respectful judgment mistaken to think that any amendment is analogous to the bringing of new causes of action or the addition or substitution of new parties. For my part, I would not accept that approach as applied to Article 28. In para 68 above I referred to the statement of Rix LJ at para 84 of Stribog. In para 63 of his judgment in the instant case Longmore LJ quoted para 84, where Rix LJ said that, where proceedings are amended to add new claims, the court is only seised of the relevant proceedings so far as the new claims are concerned at the time of the amendment. Immediately after the quote, Longmore LJ correctly pointed out that those observations were made in relation to Article 27 and not Article 28. He then quoted the second sentence from the above quotation from para 129 of Rix LJs judgment. Longmore LJ then asked whether this tentative expression of view in relation to "the introduction of entirely new causes of action" being tantamount to "the bringing of entirely new proceedings" means, for the purpose of this case, that the Greek courts are to be regarded as first seised of the relevant related action? He said at para 64 that, in his opinion it did not. He gave two reasons. He said that in the first place Rix LJ had already quoted the passage from the judgment of Saville LJ in The Happy Fellow which I set out in para 66 above. At para 65 Longmore LJ said that, in the second place, Rix LJ provided his tentative response to his tentative view in the remainder of paragraph 129 which he then quoted. That response is to my mind telling. Longmore LJ then expressed his conclusion at para 66. He expressed doubt about Rix LJs distinction between entirely new causes of action as opposed to partially new causes of action. However that may be, his conclusion seems to me to be contained in the last two sentences of para 66: As Saville LJ said in The Happy Fellow it is a misreading of Article 28 to ask which court is first seised of issues; it must likewise be wrong in an Article 28 context to ask which court is first seised of causes of action. That is Article 27 territory because, for the purpose of Article 28, one has to ask which court is first seised of an action, not a cause of action and, still less, an issue. On that basis Longmore LJ concluded at para 67 that, if the original English action and the subsequent Greek actions are related, as he concluded they are, it was the English court that was the court first seised. I agree. First, the contrary view seems to me to be inconsistent with the two stage approach to Article 28 adopted in Stribog. As Longmore LJ observed at para 66, in the context of Article 28 it is wrong in principle to ask which court is first seised of a cause of action, because Article 28 is concerned with related actions as a whole. Secondly, I would accept the appellants submission that on the facts of this case the claims now brought are not (as Rix LJ put it) entirely new. On the contrary, applying the broad and common sense approach favoured by Lord Saville in Sarrio, the claims now brought by the appellants are unquestionably related to the original action within the meaning of Article 28. I would only add in conclusion that it seems to me that it would be very odd indeed if a court which is seised of proceedings and stays those proceedings by way of a Tomlin order on the express terms that it retains jurisdiction to take further steps by way of implementation or policing of the order were prevented from exercising that jurisdiction, either by lifting the stay or otherwise, on the ground that it was no longer seised of the proceedings. It seems to me to be at least arguable that those steps should properly be treated as part of the existing proceedings. They might perhaps be treated as part of the same procedural unit as discussed by the CJEU in Purrucker v Vallz Prez (No 2) (Case C 296/10) [2011] Fam 312 at para 80. The case was on very different facts but was concerned with two paragraphs in a regulation which were identical to Articles 27 and 30 of the Regulation. In any event to treat the enforcement action as something entirely new seems to me to be wrong. It is never easy to decide what is an entirely new claim, what is a new claim and what is an expansion of an old claim. These claims are not new or entirely new because they are brought by way of enforcement of the outcome of the original dispute, in the same way as execution on a money judgment. In these circumstances it makes sense to hold that these claims, which largely arise out of the settlement agreements, arise out of the attempts made by the respondents to avoid the effect of those agreements and, in particular, the exclusive jurisdiction agreements. This solution would, as I see it, be consistent with the overall policy of the Regulation to avoid a multiplicity of proceedings. However, I can see that there is scope for argument under this head and, if the issue of first seised were critical to the decision, it might be appropriate to refer an appropriate question to the CJEU. I therefore turn to the issue of discretion on the assumption that the English court is second seised for the purposes of Article 28. Discretion On that assumption, the question arises whether the action or actions should be stayed as a matter of discretion. The judge held that no such stay should be granted. Given that the shape of the case has changed considerably since the matter was before the judge, it appears to me that this Court should consider for itself whether to grant a stay. I have reached the clear conclusion that it should not. I have reached that conclusion essentially for the reasons advanced on behalf of the appellants. They may be summarised in this way. In Owens Bank Ltd v Bracco (Case C 129/92) [1994] QB 509, at paras 74 79, Advocate General Lenz identified a number of factors which he thought were relevant to the exercise of the discretion. They can I think briefly be summarised in this way. The circumstances of each case are of particular importance but the aim of Article 28 is to avoid parallel proceedings and conflicting decisions. In a case of doubt it would be appropriate to grant a stay. Indeed, he appears to have approved the proposition that there is a strong presumption in favour of a stay. However, he identified three particular factors as being of importance: (1) the extent of the relatedness between the actions and the risk of mutually irreconcilable decisions; (2) the stage reached in each set of proceedings; and (3) the proximity of the courts to the subject matter of the case. In conclusion the Advocate General said at para 79 that it goes without saying that in the exercise of the discretion regard may be had to the question of which court is in the best position to decide a given question. On the facts here those questions can be considered together. As I see it, the issues are not dissimilar from those considered by Cooke J in Primacom at para 65, where he said this: Even if I had found that these two sets of proceedings and the German proceedings were related within the meaning of article 28, 'the strong presumption' which 'lies in favour of the applicant' on an application for a stay would be overridden here by virtue of the terms of the SSFA. Although the ECJ decision in Gasser means that a stay is mandatory where article 27 applies, there is no reason why weight should be given to that decision in the context of article 28, where a discretion is given to the court, the jurisdiction of which has been agreed by the parties as exclusive. It is nothing to the point that an English court could not have issued an anti suit injunction to prevent the German proceedings (as per C 159/02 Turner v Grovit [[2005] 1 AC 101]). The injustice of giving precedence to proceedings brought in breach of an exclusive jurisdiction clause where the parties have agreed that England is the appropriate forum is self evident. To breach the clause and to gain the benefit of priority for the German courts by such breach offends justice, where the court has a discretionary decision to make. In my opinion, similar considerations apply here. Although the true construction of the settlement agreements and the question whether Starlight and OME are in breach of them is ultimately a matter for the court which finally determines the summary judgment application or for the court at trial, there is a strong argument (to put it no higher) that the Greek proceedings have been brought by Starlight and OME in breach of the settlement agreements, which are subject to the exclusive jurisdiction of the English courts and/or in breach of the exclusive jurisdiction clauses in the insurance contracts. I would reject the submission that those considerations are impermissible in the light of the decision in Gasser. It was there held that, if the criteria for ordering a mandatory stay under Article 27 are satisfied, then the court second seised must stay its proceedings even if the court second seised has jurisdiction under an exclusive jurisdiction clause falling within Article 23. That conclusion was reached on the basis that, under Article 27, where there are two sets of proceedings which involve the same cause of action and the same parties, the court second seised is obliged to order a stay. The Regulation only permits one set of proceedings to continue. The position is quite different under Article 28, which clearly contemplates that where there are two related sets of proceedings they may proceed in parallel. That conclusion follows from the proposition that the grant of a stay is discretionary and not mandatory. In these circumstances, I can see no reason why, in exercising that discretion under Article 28, the court second seised should not take into account the fact that the parties had previously agreed (or arguably agreed) an exclusive jurisdiction clause in favour of that court. On the contrary, depending upon the circumstances of the particular case, that seems to me to be likely to be a powerful factor in support of refusal of a stay. After all, Recital 14 expressly provides: The autonomy of the parties to a contract, other than an insurance, consumer or employment contract, where only limited autonomy to determine the courts having jurisdiction is allowed, must be respected subject to the exclusive grounds of jurisdiction laid down in this Regulation. There is a close relationship between the claims in England and the subject matter of the claims in Greece. The natural court to consider the issues raised by the CMI and the LMI is the High Court in England because they raise contractual questions governed by English law and because it is at least arguable that the parties have agreed that they should be decided by the High Court, where the proceedings are more advanced than in Greece. After all, the judge granted summary judgment as long ago as December 2011. The court in Greece will then have the benefit of the decision of the court which, in the Advocate Generals language, is in the best position to decide these issues. Once there is a final judgment of the English courts, it will be recognisable in Greece, as elsewhere in the EU and will assist the Greek court. In this way, the principles of mutual trust upon which the Regulation is founded will be respected and there will be no risk of irreconcilable judgments. In these circumstances I would uphold the decision of the judge in refusing a stay under Article 28. There is no need for a reference to the CJEU because the question I would have referred does not arise given my conclusion on the exercise of discretion. It was at one time suggested that there is a referable question as to whether Article 28 gives the court second seised a choice between staying the proceedings under Article 28(1) and declining jurisdiction under Article 28(2). However, that suggestion was abandoned before the hearing. I would in any event have rejected it as unarguable. There is no support whatever for it in the language of Article 28 and none of the sources referred to supports the conclusion. The discretion is to stay or not to stay under Article 28(1) and to decline or not to decline jurisdiction under Article 28(2). The Court may thus both refuse to stay and refuse to decline jurisdiction. As the Advocate General explained in Bracco, all depends upon the circumstances. Too late? The remaining question is whether the Court of Appeal was wrong to reject submissions made on behalf of the appellants that it was too late for the respondents to rely upon Article 27. This is another part of the case where the facts seem to me to be startling. The appeal on this point is brought by the LMI and not the CMI but it is I think accepted that, if the appeal succeeds, the CMI will be able to take advantage of it. The most important point raised by this part of the appeal is whether the courts had a discretion to hold that the LMI should not be permitted to rely upon various procedural acts and omissions on the part of the respondents in response to their attempt at a late stage to rely upon Article 27 of the Regulation or whether, once the point was brought to its attention, the Court of Appeal was bound to consider Article 27 (as quoted at para 24 above) because it expressly provides that, where the conditions are satisfied any court other than the court first seised shall of its own motion stay its proceedings until such time as the jurisdiction of the court first seised is established. I have reached the conclusion that the answer is that the appellants were entitled to rely upon the acts or omissions of the respondents and that, having regard to what had happened before Judge Mackie QC and the judge, the Court of Appeal was not bound to take the point of its own motion. Moreover, subject to a possible reference, I would hold that the Court of Appeal should have considered the acts or omissions of the respondents and have held that it was too late for the respondents to rely upon Article 27. The question of the scope of the Court of Appeals duty to take the point of its own motion in circumstances of this kind is however an important point on the construction of Article 27 and, if it were necessary for the determination of the appeal, I would refer it to the CJEU. However, if the LMI abandon their claim or claims for a declaration of non liability a reference will not be necessary for the determination of the appeal. If they do not, my present view is that it will. The relevant chronology, which I take from the Statement of Facts and Issues, is briefly as follows. I will omit references to the CMI proceedings, in which the applications were heard at the same time as those in the LMI proceedings. By application notice dated 3 August 2011, the LMI applied for wide ranging relief against Starlight to enforce the LMI settlement agreement. By application notice dated 18 August 2011 the LMI sought permission to join OME and to serve OME out of the jurisdiction. As explained earlier, the LMI commenced 2011 Folio 702 against Starlight and OME in order to enforce the LMI settlement agreement. They also commenced 2011 Folio 1043 only against the co assureds, which was an action founded solely on the exclusive jurisdiction clause in the policies. On 20 September 2011 the LMI obtained permission from Judge Mackie QC to issue a Part 20 claim against OME in 2006 Folio 815 and, lest it be needed, to serve that Part 20 claim form and the claim forms in 2011 Folios 702 and 1043 out of the jurisdiction and to serve them on Lax & Co in London. The applications were supported by a witness statement by their solicitor, Mr Zavos, in which he referred both to possible stays under Article 27 and Article 28 giving reasons why stays should not be granted. The orders gave notice to each of Starlight, OME and the co assureds that: You may apply within seven days after the date of service of this Order on you to have the Order set aside or varied. This time limit does not apply to an application to dispute the jurisdiction of the Court in respect of which the procedure in CPR Part 11 as modified by CPR Part 58 applies No such application was made. Starlight did not serve evidence within the time provided in the CPR. However, on 4 November 2011 they served evidence which included an express request by Mr Crampton of Lax & Co that the relief sought by the appellants on the merits be denied, alternatively that the matter be referred to a full trial, with provision for disclosure and exchange of witness and expert evidence. On 7 November Starlight, OME and the co assureds each filed a defence on the merits in the relevant action, having first obtained an extension of time for doing so. Each of the defences included a paragraph which stated: The claims in the Greek Proceedings fall outside the jurisdiction clause in the policy and the jurisdiction clause in the Settlement Agreement. It is respectfully denied therefore that the High Court of Justice of England and Wales has jurisdiction to determine the claims in the Greek Proceedings The grounds on which Starlight, OME and the co assureds opposed the appellants claims and applications for summary relief, were in summary that the claims brought in the Greek proceedings (1) did not fall within the scope of the releases contained in the LMI settlement agreement or the CMI settlement agreement; (2) did not fall within the scope of the indemnities contained in the settlement agreements; and (3) did not fall within the scope of the jurisdiction clauses contained in the settlement agreements or in the policies. Following service of the defences, the LMI applied for summary judgment in all the actions and all the applications were fixed to be heard on 28 and 29 November at the same time as the application for summary relief against Starlight in the 2006 proceedings. In their skeleton argument prepared for those hearings, which were served on 23 November 2011, the LMI included the following: 71. There has been no application for a mandatory stay under Article 27 of the Judgments Regulation in respect of the [LMIs] claims to enforce the jurisdiction clause in the contract of insurance, and to enforce the terms of the [LMI] Settlement Agreement. This is (no doubt) because the claims are different claims from the claims advanced by the Assureds in Greece. On 25 November 2011, Starlight, OME, and the co assureds, through their former counsel, James Drake QC and Emma Hilliard, provided their skeleton argument to the court, which expressly disavowed any application under Article 27, in these terms: 69. It is well established that in order for Article 27 to operate there must, when comparing the two sets of proceedings in issue, be three identities: of parties, of cause, and of objet: see generally Briggs & Rees, Civil Jurisdiction and Judgments (5th ed 2009) at paras 2 227 to 2 231. 70. Starlight does not here contend that there is here an identity of cause and objet between the Greek proceedings and the Insurers applications. Although designed to preclude in so far as possible, and from the outset a clash of verdicts, the operation of Article 27 (as distinct from Article 28) is highly restricted in its actual operation. Comparison must be made between the claims made in the two actions, regardless of possible defences, to see whether they proceed on essentially the same facts and under the same rule of law. In the footnotes they referred to the cases I have discussed earlier, including Gubisch, Gantner and The Tatry. It is thus plain that before the matter came before the judge the respondents had made a clear and reasoned decision not to rely upon Article 27. Moreover, there is no reason to think that the judge did not consider the points they made and accept them. They relied only on Article 28. They did so pursuant to an application made by application notice dated 24 November 2011. However that application was out of time. So, by further application notices in each action dated 28 November 2011, the respondents applied for permission to make the Article 28 application out of time, and for relief from sanctions pursuant to CPR Part 3. The sanction referred to was that imposed by CPR Part 11, which provides that a defendant who files an acknowledgment of service and fails to apply to the court within the time allowed under the CPR for an order declaring that it has no jurisdiction or should not exercise any jurisdiction which it may have, is to be treated as having accepted that the court has jurisdiction to try the claim: CPR rule 11(5). As stated in para 19 above, the judge dismissed the stay application under Article 28 and held that the appellants were entitled to summary judgment. He held that (1) each of the claims made by Starlight, OME, and the co assureds against the appellants in Greece is in breach of the exclusive English jurisdiction agreement in the policies; (2) each of the claims made by Starlight and OME against the appellants in Greece is in breach of the jurisdiction agreements in the settlement agreements which provide for exclusive English jurisdiction; (3) each of the claims made by Starlight and OME against the appellants in Greece is in breach of the terms of the settlement agreements; (4) each of Starlight, OME and the co assureds is liable in damages to the insurers for breach of contract and under Section 50 of the Senior Courts Act 1981; and (5) each of Starlight and OME is bound to indemnify and hold the insurers harmless against each of the claims in the Greek proceedings pursuant to the indemnities in the settlement agreements. The judge handed down his judgment on 19 December 2011 and fixed 2 February 2012 for the hearing of consequential applications. In the meantime, on 7 December 2011 Thomas Cooper had replaced Lax & Co as the respondents solicitors. On 24 January 2012 draft grounds of appeal were served which included for the first time reliance on Article 27. They were considered in a somewhat amended form by the judge. The judge granted permission to appeal on a number of grounds including the Article 27 point. As to that he said that he would not have given permission on that point alone, as he put it, not least because the Article 27 case could become the subject of an independent application at first instance at any time hereafter. He recognised that this would have the effect of turning the Court of Appeal into a first instance court but concluded that it could be argued without the need for further evidence and without a great addition of time. In the Court of Appeal the appellants relied upon the provisions of CPR Part 11, but the Court of Appeal held that it did not apply because applications under Articles 27 and 28 are not challenges to the jurisdiction. It further held that it was bound to take the Article 27 point of its own motion. The LMI say that the Court of Appeal was wrong on both points. CPR Part 11 provides, so far as relevant as follows: (1) A defendant who wishes to (a) dispute the court's jurisdiction to try the claim; or (b) argue that the court should not exercise its jurisdiction, may apply to the court for an order declaring that it has no such jurisdiction or; should not exercise any jurisdiction which it may have. (2) A defendant who wishes to make such an application must first file an acknowledgment of service in accordance with Part 10. (3) A defendant who files an acknowledgment of service does not, by doing so, lose any right that he may have to dispute the courts jurisdiction. (4) An application under this rule must (a) be made within 14 days after filing an acknowledgment of service; and (b) be supported by evidence. (5) If the defendant (a) files an acknowledgment of service; and (b) does not make such an application within the period specified in paragraph (4), he is to be treated as having accepted that the court has jurisdiction to try the claim. (6) An order containing a declaration that the court has no jurisdiction or will not exercise its jurisdiction may also make further provision including (a) setting aside the claim form; (b) setting aside service of the claim form; (c) discharging any order made before the claim was commenced or before the claim form was served; and (d) staying the proceedings. In an action in the Commercial Court such as this CPR 11(4) is varied by CPR 58.7(2) so that the application under CPR 11(1) must be made within 28 days after filing an acknowledgment of service and not 14 days. As I understand it acknowledgments of service were filed in each case. The position under CPR Part 11 is different from the position under the former Rules of the Supreme Court, under which the equivalent rule, namely RSC Order 12 rule 8(1), did not include an application for a stay. By contrast CPR 11(1)(b) applies to an application for an order that the court should not exercise its jurisdiction. An application for a stay is precisely that. An application for a stay under Article 27 is thus an application within CPR 11(1)(b). The applicant must file an acknowledgment of service and must make an application within 28 days. The respondents did not do that. Nor did they seek an extension of time to so do within the CPR. It is arguable that the effect of CPR 11(5) is that their failure to do so means that they are treated as accepting that the court both has jurisdiction and that it is free to exercise it. The difficulty is that the wording of paragraph (5) may only relate to the existence of the jurisdiction rather than the exercise of it. This point was left open in Texan Management Ltd v Pacific Electric Wire & Cable Company Ltd [2009] UKPC 46 at paras 68 and 69. However that may be, the LMI rely upon the voluntary submission to the jurisdiction evidenced by the acknowledgment of service and the service of a defence. They also rely upon the clear and unequivocal statement of the respondents position in their skeleton argument before the judge. It is plain from the terms of the concession quoted at para 106 above that serious thought had been given to the question both of whether to make the concession and of the basis on which it was to be made. In these circumstances, unless there is some rule of European law to the contrary, it appears to me that the Court of Appeal should have considered whether, in the exercise of their discretion to permit argument on a new point, they should exercise that discretion in favour of the respondents or not. Moreover, it appears to me that, given the clear basis on which the concession was made and, given that the judgment had proceeded on that basis, the Court of Appeal should have held that it had a discretion under CPR rule 11(1) to permit an application under the rule to be made out of time but should have refused to exercise it. However it is said that on the true construction of Article 27, the court, including on these facts the Court of Appeal, has a duty to consider the application of Article 27 of its own motion whenever the point is taken. This strikes me as extremely improbable. I would accept the submissions of the LMI in this respect. The CJEU has recognised the importance of national rules of procedure. Thus, for example, in Shevill v Presse Alliance SA (Case C 69/93) [1995] 2 AC 18 the CJEU said: 35. the object of the [Brussels] Convention is not to unify the rules of substantive law and of procedure of the different contracting states, but to determine which court has jurisdiction in disputes relating to civil and commercial matters in relations between the contracting states and to facilitate the enforcement of judgments: see Kongress Agentur Hagen G.m.b.H vs Zeehaghe B.V. (Case C 365/88) [1990] E.C.R. 1 1845, 1865, para. 17. 36. Moreover, the court has consistently held that, as regards procedural rules, reference must be made to the national rules applicable by the national court, provided that the application of those rules does not impair the effectiveness of the Convention: paragraphs 19 and 20 of [Kongress Agentur Hagen G.m.b.H. vs Zeehaghe B.V. (Case C 365/88) [1990] E.C.R. 1 1845]." I would accept the LMIs submission that Article 27 is part of European law and overrides national law which is incompatible with it. It does not however follow from this proposition that English procedural rules were overridden. A national procedural rule must not impair the effectiveness of Article 27. It must not render the exercise of rights conferred by EU law impossible or excessively difficult: Amministrazione delle Finanze dello Stato v SpA San Giorgio (Case 199/82) [1983] ECR 3595, [1985] 2 CMLR 658. This is the principle of effectiveness, which involves considering whether the rule can operate consistently with Article 27, or whether it is incompatible with it. The procedural rule should not be less favourable than those governing similar domestic actions, which is the principle of equivalence: see eg Interfact Ltd v Liverpool City Council [2011] QB 744, Kapferer v Schlank and Schlick GmbH (Case C 234/04) [2006] ECR I 2585 at paras 19 to 22, Kbler v Austria (Case C 224/01) [2004] QB 848; and Eco Swiss China Time Ltd v Benetton International NV (Case C 126/97) [1999] ECR I 3055. I refer only to Interfact, where the Court of Appeal refused to exercise its discretion to allow cases to be reopened under CPR 52.17, so as to give a remedy for infringement of a provision of European law. Lord Judge CJ, delivering the judgment of the Court of Appeal, said : 41 In general, EU law does not require national courts to disapply their own procedural rules in order to secure the vindication of EU rights. In Kapferer v Schlank & Schick GmbH the Austrian Supreme Court was seised of an appeal in which the respondent had failed to lodge within the time stipulated a respondent's notice taking a point on jurisdiction under the Brussels Convention. The court referred to the Court of Justice the questions whether it was, nevertheless, bound to take the point of EU law of its own motion and whether EU law required a national court to review and set aside a final judicial decision in circumstances where it later became apparent that the decision of the court was in breach of EU law. The Court of Justice held that a national court is not so bound 44 . [Kapferer] establishes as a matter of general principle that EU law does not require a national court to reopen a final judicial decision, even if failure to do so would make it impossible to remedy an infringement of a provision of EU law: see the Kapferer case, at para 21; Amministrazione dell'Economia e delle Finanze and Agenzia delle Entrate v Fallimento Olimpiclub Srl (Case C 2/08) [2009] ECR I 7501, para 23; Asturcom Telecommunicaciones SL v Rodrguez Nogueira (Case C 40/08) [2010] 1 CMLR 865 para 37. 49. The Court of Justice has upheld national time limits and limitation periods on grounds of legal certainty and the need to ensure finality in decision making, even though the effect has been to preclude enforcement of an EU law right: see, for example, Palmisani v Istituto Nazionale della Previdenza Sociale (INPS) (Case C 261/95) [1997] ECR I 4025; Fantask A/S v Industriministeriet (Ehrvervsministeriet) (Case C 188/95) [1997] ECR 1 6783. Finally, I would accept these submissions made by the LMI. Under English law a final judgment on the merits should not be set aside without very solid grounds: Brown v Dean [1910] AC 373 at 374, per Lord Loreburn. Interest republicae ut sit finis litium. This is part of the common tradition of the legal systems of the Member States: Rewe Zentralfinanz eG and Rewe Zentral AG v Landwirtschaftskammer fr das Saarland (Case C 33/76) [1976] E.C.R. 1989. As quoted above, in Interfact the Court of Appeal rejected the argument that, where an appellate court has a discretion to exercise under national procedural law to allow a final judgment to be challenged on appeal, it must exercise that discretion so as to remedy the infringement of EU law. In my judgment, there is no sensible basis upon which it can be said that the time limit under CPR 11(4), which can in an appropriate case be extended under CPR 3.1(2)(a), is contrary to EU law. The time limit satisfies the principle of equivalence because it is the same rule that applies in all cases. It fulfils a legitimate aim, namely making sure that points going to whether the proceedings are to be tried on their substantive merits in England are taken promptly and without unnecessary costs. It satisfies the principle of legal certainty because parties need to know where they stand. The absence of a time limit would allow a litigant to take the point years afterwards. Moreover, the time limit does not render the right to apply for a stay under Article 27 (or Article 28) impossible or excessively difficult to exercise. It allows sufficient time for the point to be raised, especially given the express rule permitting an extension of time in appropriate cases. As to the expression of its own motion in Article 27, there are a number of different parts of the Regulation that have a similar provision. On the facts here the potential for a stay under Article 27 was before the courts on at least two occasions. The position was explained to Judge Mackie QC on the without notice application referred to above. There is no reason to think that he did not give consideration to the position. More importantly perhaps the position was explained to the judge in the skeleton arguments to which I have referred. He was given both reasons and authority on the question whether a stay should be granted under Article 27. It seems to me that the judge was entitled to accept those submissions, which were made on the respondents behalf by experienced counsel and solicitors. For these reasons I would hold that the Court of Appeal should have refused to allow the respondents to rely upon Article 27 in the Court of Appeal. That said, I would accept that the meaning and effect of the duty to consider Article 27 of its own motion are matters of some potential importance and I have (somewhat reluctantly) reached the conclusion that they are not acte clair. I would therefore refer an appropriate question to the CJEU if it were necessary in order to resolve the appeal. If the appellants abandon the claims to the declarations referred to in paras 58 and 59 above, such a reference will not be necessary because, for the reasons given above, I would allow the appeals under Article 27 in their entirety. It seems to me that rather different considerations apply to Article 28 and that the Court of Appeal were entitled to consider Article 28 as part of the appeal from the decision of the judge who had considered it in detail. CONCLUSIONS For these reasons I would invite the CMI and the LMI to consider whether they wish to pursue their claims for declarations (referred to in paras 58 and 59 above) that the Greek claims fall within the terms of the release in the settlement agreements or that under the agreements the tort claims have been settled. As Lord Neuberger observes, those are the claims described in para 18(a)(1)(i), 18(a)(2)(i) and 18(b)(i) above. They should indicate their position within 14 days of this judgment being handed down. If they persist in their claims, some limited questions should be referred to the CJEU as described above. The decision whether to stay those claims would then await the result of the reference, although I would allow the appeal under Article 27 in respect of the other claims. If they abandon them, I would allow all the appeals of both the CMI and the LMI under Article 27. I would in any event dismiss the respondents cross appeal under Article 28 and I would hold that their application for a stay under Article 28 should be refused as a matter of discretion. The parties should make written submissions on the form of order and costs within 21 days of the handing down of this judgment. Finally, I would like to thank all counsel and solicitors for their assistance in this unusual and in some respects difficult case. LORD NEUBERGER Subject to one point, I entirely agree with Lord Clarkes reasoning and conclusions. The one point concerns the issue discussed in paras 44 46 and 58 59 of Lord Clarkes judgment and in Lord Mances judgment. That issue is whether (i) LMIs claim in England for a declaration that the Greek claims have been settled, and (ii) CMIs claim in England for a declaration that the Greek claims were compromised (the English declaration claims, described in para 18(a)(1)(i), 18(a)(2)(i) and 18(b)(i) of Lord Clarkes judgment) should be stayed under Article 27. In my view, if that issue remains live, it should be referred to the CJEU, as I do not regard it as acte clair. I see the force of Lord Clarkes view that the English declaration claims do not have le mme objet et la mme cause, if one gives that expression a very narrow effect. I also accept that, particularly in the light of the existence of Article 28, there is good reason to give Article 27 a relatively narrow meaning, as Rix J pointed out in Glencore International AG v Shell International Trading and Shipping Co Ltd [1999] 2 Lloyds Rep 692, 697. I also accept that the decisions of the CJEU cited by Lord Clarke at paras 26 28 of his judgment support the contention that Article 27 has a relatively narrow ambit of application. However, it is also important to appreciate that the fundamental purpose of Article 27, as explained by the CJEU, is to ensure that judgments obtained in one member state are enforceable in other member states, and that the consequence of this is that one should avoid mutually inconsistent judgments. The purpose of Article 27 is to help achieve that end. It seems to me that, if the Greek court were to give Starlight and OME judgment for a particular sum in respect of its Greek claims, and the English court were to give judgment in favour of LMI and CMI in the form of a declaration that those very claims have been settled or compromised, the two judgments would be incompatible as a matter of principle and logic. It is not possible for a court to award a claimant damages in respect of a claim which has been compromised with the defendant. To put the point another way, to say that a defendant currently owes a claimant damages in respect of a claim which the defendant has settled or compromised with the claimant involves an illogicality. Accordingly, it seems to me that there is a real case for saying that the English declaration claims should be stayed. The difference between the English declaration claims and CMIs and LMIs claims in England for an indemnity and damages for breach of the settlement agreements (the English indemnity and damages claims, as described in paras 18(a)(1)(iii), (v) and (vi), 18(a)(2)(iii) and (iv) and 18(b)(ii), (iii) and (iv) of Lord Clarkes judgment) may appear to be relatively small, but I believe that there is a crucial distinction, as a result of which it is acte clair that the English damages and indemnity claims do not fall foul of Article 27. The crucial difference is that, if those claims were successful, they could not lead to inconsistent judgments in England and Greece. I accept that, if they were successful, the English indemnity and damages claims could be fairly said to neutralise, at any rate in commercial terms, any benefit to Starlight and OME of a judgment in the Greek claims. However, crucially in my view, success for LMI and CMI in the English indemnity and damages claims would not be logically inconsistent in any way with success for Starlight in the Greek claims. It is not inconsistent (although it is commercially pointless) to say that a defendant is liable to pay a claimant a sum by way of damages, while the claimant is bound to indemnify the defendant in respect of the whole of that sum (or is bound to pay an equivalent sum to the defendant). Indeed, the indemnity is not merely logically consistent with the liability: it is positively meaningless without the liability for damages, and the liability for damages, though rendered nugatory by the indemnity, is not logically inconsistent with the indemnity. LORD MANCE General I am in substantial but not complete agreement with the reasoning and conclusions reached in the course of the judgment prepared by Lord Clarke, although, ultimately, as will appear, we agree on the proper disposition of these appeals. The differences between Lord Clarke and myself relate to the significance and operation of article 27 of the Council Regulation (EC) No 44/2001 (the Brussels Regulation) with regard to the respondents Greek claims. I have no difficulty in agreeing with Lord Clarkes conclusions regarding the English claims made by CMI and LMI for damages for (i) breach of the exclusive jurisdiction clauses in the Settlement Agreements and insurance policies and (ii) indemnity under clauses 3 and 4 of the respective Settlement Agreements. Such claims do not assert that there is no tort liability because of the Settlement Agreements. They assert (i) that the respondents are claiming in the wrong jurisdiction and (ii) that the respondents have agreed to indemnify them in respect of any tort claims (valid or not) by the respondents themselves as well as by others arising from the loss of the vessel. However, I do not accept the reasoning by which Lord Clarke reaches his conclusions with regard to these claims for damages and the further release claims (as Lord Clarke conveniently calls them) which he addresses in paras 40 to 59 of his judgment. This difference becomes important in relation to the first head of the release claims, as I shall show. One strand of Lord Clarkes reasoning is that the English claims based on the Settlement Agreements cannot be the mirror image of the Greek tort claims, because they involve contract and tort claims and cannot constitute the same cause of action: para 34, third sentence, para 41, second and third sentences and para 43, second and last sentences. Another strand is that it is relevant or conclusive that the English and Greek claims do not interfere with each other, and, in particular, that the Greek claims do not impugn the settlement agreements: para 35, first and second sentences and para 37, in its entirety. Neither of these strands of reasoning is in my opinion sustainable, for reasons which I will explain. The release claims The release claims need a little analysis. There are three heads. The first head is summarised by the respondents themselves and by Lord Clarke (para 18(a)) as involving claims for declarations that the Greek claims fall within the terms of the release. But this head is in fact pleaded by LMI as a claim for a declaration that the Greek claims have been settled (application notice, para (1) 1 and 3), while CMI plead that the Greek claims were compromised (particulars of additional claim, para 10) and follow this with a claim for a declaration that the Greek claims fall within clause 2 of the CMI Settlement Agreement (particulars of additional claim, para 27(a)). These are clear statements (right or wrong as they may prove to be) that the Greek claims have been settled or compromised within the terms of the Settlement Agreements. The second and third heads are claims for a declaration that the bringing of the Greek claims was a breach of the release in each of the Settlement Agreements and for damages for such breach. They must stand or fall together. They raise different considerations from the first head. The first head of release claim The English claims that the Greek claims have been settled or were compromised are in my opinion mirror images of the Greek tort claims. The English pleas mean, and can only mean that the English claimants are not liable for the Greek tort claims. The legal effect of these English statements is (under English eyes and, I am confident, European law) that the Greek claims are no more. If an English court were to give a judgment to that effect, and there was no prior Greek judgment or other reason for non recognition, the Greek court ought under the Brussels Regulation to accept it. It cannot make any difference to the application of article 27 that the reason for non liability is a contractual settlement agreement. The only point of enforcing the contract is to show that there are no valid Greek tort claims. The Greek claims aim to enforce tort liabilities. The first head of the English claims aims to establish that there are no such valid tort liabilities, because they have been settled. The Greek and English claims cannot stand together. The concepts used in article 27 (such as cause of action or the concept of same object which one must read into the English text) are autonomous European concepts: Gubisch v Palumbo Case 144/86, [11] and The Tatry Case C 406/92, [47]. In the latter case, the European Court of Justice said that the cause of action comprises the facts and the rule of law relied on as the basis of the action and that the object of the action for the purposes of article [27] means the end the action has in view [39] [41]. An analysis of the cases helps to understand what was meant. Gubisch v Palumbo happened to concern a situation where the mirror image claims were in a general sense contractual. The German claim was for the price of machinery delivered. The later Italian claim by the buyer was, firstly, that there was no liability because he had revoked his offer before it had reached the seller for acceptance strictly, this was not a contractual claim, but a claim that there was no contract and, secondly, that, if there was a contract, his consent was vitiated and the contract should be set aside for mistake or on the ground of the sellers fraud, or, thirdly, that any contract had been discharged on account of the sellers late delivery. Both the question referred and the Court of Justices summary of the facts embraced all three aspects of the Italian claim: see e.g. judgment [2] and [4]. The subsequent reasoning and the answer given refer to mirror image claims, one seeking enforcement, the other seeking rescission or discharge, of a contract: see [13] and [15] and the Courts answer. The Court said [17] that it must be held that the two actions have the same subject matter, for that concept cannot be restricted so as to mean two claims which are entirely identical. The absence of express reference at these points to the first Italian claim (that no contract had ever been concluded) cannot mean that the Court was drawing any distinction between that claim and the other two. On the contrary, the inference is that it saw it as posing no different issue. It could not have made any difference to the Court of Justices conclusions if, instead of or in addition to some or all of the pleas actually made in the Italian proceedings, the Italian claimants had alleged that the contract had been rescinded or discharged under some separate subsequent agreement, whether, for example, by novation or by some compromise relating to the parties past dealings or outstanding issues. Nor, in a situation in which concurrent contract and tort claims are possible (see e.g. Henderson v Merrett Syndicates Ltd [1994] UKHL 5; [1995] 2 AC 145), could it be crucial to the application of article 27 whether the foreign claim was being pursued in contract or tort, when the later English claim asserted a settlement agreement wide enough to cover both. Lord Clarke cites at para 28(iii) a useful encapsulation by Cooke J in JP Morgan Europe Ltd v Primacom AG [2005] 2 Lloyds Rep 665, [42], of the meaning of the expression legal rule or rule of law which the Court of Justice used in The Tatry Case C 406/92, [39]. Cooke J suggested that, in investigating cause, it was necessary, after looking at the basic facts, to look at the basic claimed rights and obligations of the parties. Here, the basic claimed rights and obligations of the parties are, in Greece, that the English claimants are liable in tort, and, in England, under the first head which asserts that the Greek claims have been settled, that there is no or no further liability for the Greek claims. The way in which article 27 was applied in The Tatry is also of interest. Having said that the cause of action comprises the facts and the rule of law relied on as the basis of the action [39], the Court of Justice went on: 40 Consequently, an action for a declaration of non liability, such as that brought in the main proceedings in this case by the shipowners, and another action, such as that brought subsequently by the cargo owners on the basis of shipping contracts which are separate but in identical terms, concerning the same cargo transported in bulk and damaged in the same circumstances, have the same cause of action. Here, the English claim that the Greek claims fall within the release and have been settled or compromised concerns, and seeks to negative, the same tort claims as the Greek actions seek to enforce. It can make no difference that the Greek claimants have not sought, pre emptively, to refer to, address or impugn in their Greek claims a possible defence (the Settlement Agreements) that might be raised in the Greek proceedings. One would not expect them to do so, any more than the German claimants in Gubisch v Palumbo addressed or would be expected to address every or any of the multiple arguments that the Italian claimants later deployed. The fact that the English claims do not seek directly to interfere with the Greek claims is also irrelevant. It would anyway be impermissible to claim in England an injunction restraining the Greek proceedings, but, quite apart from that, article 27 and the principle in Gubisch v Palumbo do not depend upon one set of proceedings seeking directly to prevent another. They derive from the principle that Member States must recognise each others judgments, and the aim of avoiding inconsistent judgments. As to the same object, the end which the Greek and English proceedings have in view is the same in each case, to decide the issue of liability for the torts alleged in Greece. That this is what is meant by the same object is clear from both Gubisch v Palumbo and The Tatry. The matter is directly addressed in the latter case in paras 42 to 45: 42 The question accordingly arises whether two actions have the same object when the first seeks a declaration that the plaintiff is not liable for damage as claimed by the defendants, while the second, commenced subsequently by those defendants, seeks on the contrary to have the plaintiff in the first action held liable for causing loss and ordered to pay damages. 43 As to liability, the second action has the same object as the first, since the issue of liability is central to both actions. The fact that the plaintiff's pleadings are couched in negative terms in the first action whereas in the second action they are couched in positive terms by the defendant, who has become plaintiff, does not make the object of the dispute different. 44 As to damages, the pleas in the second action are the natural consequence of those relating to the finding of liability and thus do not alter the principal object of the action. Furthermore, the fact that a party seeks a declaration that he is not liable for loss implies that he disputes any obligation to pay damages. 45 In those circumstances, the answer to the fifth question is that, on a proper construction of Article 21 of the Convention, an action seeking to have the defendant held liable for causing loss and ordered to pay damages has the same cause of action and the same object as earlier proceedings brought by that defendant seeking a declaration that he is not liable for that loss. The reference in [44] to a partys claim for a declaration of non liability implying that it disputes any obligation to pay damages is equally applicable to the present English claims that the Greek tort claims fall within the release or have been settled or compromised. The English claims imply that the Greek claims are disputed. In short, the issue of liability is central to both the Greek and the English proceedings here, as it was to the Dutch and English proceedings in The Tatry. Not merely the same cause of action but also the same object is involved in the present case, as it was in The Tatry. The two sets of proceedings would, if pursued to judgment, lead to judgments which were legally and directly incompatible. It is therefore necessary under article 27 to consider whether it is the Greek or the English courts which fall in this connection to be regarded as first seised. The second and third heads of the release claims The second and third heads are more elusive. Claims for a declaration that the bringing of the Greek claims was a breach, and for damages for the breach, of the release in the Settlement Agreements may on one view be seen as little different from the claims made under the first head. But I have come to the conclusion that this would be wrong. The second and third heads postulate, and for present purposes at least we must accept, that the releases contain some positive continuing promise which the respondents by their Greek claims are now breaching. The terms of the releases were in each case (clause 2 in the case of CMI, clause 3 in the case of LMI) that the respondents would accept underwriters due proportion of the relevant payment in full and final settlement of all and any claims it may have under Policy no. against the Underwriters in relation to the loss of Alexandros T. One must make the assumption, for present purposes, that the Greek tort claims fall within this agreement. The difficulty is that the agreement was performed, in the sense that there was not merely an accord, but an accord and satisfaction. All policy claims were thus not just agreed to be settled, but they actually were settled, and, if and to the extent that that is the nature of the second and third heads of English release claim, they would not in reality differ from the first head. The question therefore arises, what if any outstanding promise could there be left to perform which the second and third heads claim to enforce? I have come to the conclusion that the acceptance of the sums paid in full and final settlement involves, certainly very arguably, a continuing outstanding promise not further to pursue claims of the nature identified in clauses 2 and 3 respectively. Even after the settlement, the pursuit of such claims could cause CMI and LMI loss. Most obviously, such loss could consist in the costs of defending the Greek claims. If they let the Greek proceedings go undefended, it could, subject to issues arising from the potential recognition of any Greek judgment under the Brussels Regulation, include the amount of any judgment awarded against them in the Greek proceedings. Likewise potentially, though subject to additional questions arising from any potential issue estoppel or application of the rule in Henderson v Henderson (1843) 3 Hare 100, even if they unsuccessfully defended the Greek claims. The consequences Accordingly, the second and third heads of release claims, analysed as I have analysed them, are outside the scope of article 27. As regards the first head, the remaining issue is whether the Greek or the English courts fall for the relevant purpose to be regarded as first seised. In so far as the first head of release claims was added into the pre existing English proceedings by an amendment made after the Greek proceedings were begun, is it to be viewed discretely as a new claim of which the English court is second seised? Or does it fall to be viewed as part, by amendment, of a single set of English proceedings commenced well before any Greek proceedings? I agree with Lord Clarke at para 60 that a court is only seised of claims by or against new parties from the date that those parties are added to the proceedings. In relation to the 2006 proceedings, the English court was only seised of claims against OME once OME was joined to the proceedings on 20 September 2011 and, as against OME therefore, the English courts were only seised of the first head of release claims made by CMI and LMI in 2011. Since the first head of release claims is in my opinion the mirror image of the Greek tort claims, article 27 must, on that basis, apply to preclude the pursuit of the first head of release claims as against OME in England. The respondents submit that article 27 also applies to preclude the pursuit in the English proceedings of the first head of claim against Starlight, which was party to the English proceedings from their outset. The Court of Appeal accepted this submission. CMI and LMI challenge it. Lord Clarke has in his paras 61 to 71 set out and discussed the respective submissions. To my mind, the sense of the Regulation as well as the case law and the academic guidance all point in one direction. The chronological priority contemplated by the Regulation cannot be gained, or subverted, by the addition by amendment of a new claim in proceedings otherwise second brought (any more than it can be affected by the addition of new claimants or defendants, as Lord Clarke accepts: para 60). To the authorities under the current Regulation to which Lord Clarke refers, I would only add that similar thinking is to be found under the predecessor provisions of Article 21 and 22 of the Brussels Convention in the decisions at both levels in Grupo Torras SA v Shekh Fahad Al Sabah [1995] 1 Lloyds Rep 374, 418 419 (Mance J) and [1996] 1 Lloyds Rep 7, 24 (CA). Conclusion It follows that the conclusions I would reach, were all the issues to be finally decided now, would be that: The first head of English release claims would be precluded under i) article 27, having regard to what I conclude are in this respect the prior Greek claims. ii) All the remaining heads are outside the scope of article 27 and are permissible. It is however necessary to consider whether these conclusions are founded on principles of European law which are so clear that no reference to the Court of Justice is required. A reference to the Court of Justice In relation to the conclusion expressed in para 161ii, we are all in agreement in our conclusions. Any differences in reasoning regarding article 27 are irrelevant, and no reference is necessary. As to para 161i, Lord Clarke would reach the opposite conclusion to that which I have expressed and he considers in the light of my judgment that a reference is called for, if the English appellants persist in their first head of release claims. With the latter view I agree. The differences between Lord Clarkes and my reasoning are not, I believe, simple differences regarding the application to facts of clear principles of European law. I might by myself have thought that all the relevant principles of European law were clear, but I certainly do not dissent from the proposition that the differences, being material to our respective conclusions, require a reference. If the appellants wish to persist in, rather than abandon, the first head of release claims, there should accordingly be a reference as Lord Clarke suggests. Ultimately, therefore, although by different reasoning, Lord Clarke and I arrive at the same conclusions regarding the appropriate disposition of these appeals.

On 3 May 2006, the vessel Alexandros T sank and became a total loss 300 miles south of Port Elizabeth with considerable loss of life. Her owners were Starlight Shipping Company (Starlight). Starlight made a claim against their insurers, who denied liability on the basis that the vessel was unseaworthy with the privity of Starlight. In response, Starlight made a number of serious allegations against their insurers including allegations of misconduct involving tampering with and bribing of witnesses. On 15 August 2006, Starlight issued proceedings in the Commercial Court against various insurers (the 2006 proceedings). One group of insurers was described as the Company Market Insurers (CMI) and the other group was described as the Lloyds Market Insurers (LMI). Before the hearing, the 2006 proceedings were settled between Starlight and the insurers and the proceedings were stayed by way of a Tomlin Order. In April 2011, nine sets of Greek proceedings, in materially identical form, were issued by Starlight although they were expressed as torts actionable in Greece. The insurers sought to enforce the earlier settlement agreements. Starlight applied for a stay of these proceedings, firstly pursuant to Article 28 then Article 27 of Council Regulation (EC) No 44/2001 (the Regulation) The judge refused to grant a stay under Article 28 and gave summary judgment to the insurers. The Court of Appeal held that it was bound to stay the 2006 proceedings under Article 27, which provides for a mandatory stay, and it was not therefore necessary to reach a final determination of the position under Article 28. Before the Supreme Court, the insurers challenge the correctness of the Court of Appeals conclusion under Article 27 and submit that the judge was correct to refuse a stay under Article 28. Starlight cross appeal on the Article 28 point. Subject to the possibility of a reference to the CJEU on some limited questions, the Supreme Court unanimously allows the CMIs and LMIs appeal. Lord Clarke gives the lead judgment, with which Lord Sumption and Lord Hughes agree. Lord Neuberger agrees adding a short judgment of his own. Lord Mance agrees with the result. Article 27 Article 27 must be construed in its context. The purpose of Article 27 is to prevent the courts of two Member States from giving inconsistent judgments and to preclude, so far as possible, the non recognition of a judgment on the ground that it is irreconcilable with a judgment given by the court of another Member State [23, 27]. In the case of each cause of action relied upon, it is necessary to consider whether the same cause of action is being relied upon in the Greek proceedings. In doing so, the defences advanced in each action must be disregarded [29]. The essential question is whether the claims in England and Greece are mirror images of each other and thus legally irreconcilable [30]. There are three heads of claim in England: indemnity, exclusive jurisdiction and release [32]. None of the causes of action relied upon in the Greek proceedings has identity of cause or identity of object with the CMIs claim for an indemnity. The subject matter of the claims is different. The Greek proceedings are claims in tort (or its Greek equivalent) and the claims in England are claims in contract. As to object, that of the Greek proceedings is to establish a liability under Greek law akin to tort, whereas the object of the CMIs claim is to establish a right to be indemnified in respect of such a liability and to claim damages for breach of the exclusive jurisdiction clauses [34]. The same is true of the CMIs claims in respect of the exclusive jurisdiction clauses in the settlement agreement and/or in the insurance policies [36]. The causes of action based upon an alleged breach of the settlement agreement are not the same causes of action as are advanced in Greece [37]. The same is also true of the claims based on the release provisions in the CMI settlement agreement [40]. The Greek claims are claims in tort and the English proceedings are contractual claims. The factual bases for the two claims are entirely different. Moreover, the object of the two claims is different [41]. The Supreme Court is unanimous that that is the position with regard to the claims for damages for breach of the release provisions in the settlement agreements. However, in so far as the insurers claim declarations, while the majority reaches the same conclusion, Lord Mance reaches a different conclusion on the basis that the claims for declarations in the two jurisdictions are mirror images of each other. The court unanimously decides that, unless the insurers abandon those claims for declarations, the relevant question should be referred to the CJEU for an opinion [59]. In the event, the CMI have now abandoned their claims for declarations based on the release provisions and it is not necessary to refer the question to the CJEU. It follows that the CMIs appeals under Article 27 are allowed. The position of the LMI is essentially the same as in the case of the CMI [55]. If the LMI do the same within the time permitted, their appeals will also be allowed under Article 27. A similar position has been reached in respect of LMIs submission that the appeals under Article 27 should have been rejected by the Court of Appeal as being too late [123]. Article 28 The discretion to stay claims under Article 28 is limited to any court other than the court first seised [74]. On the assumption that the English court is second seised for the purposes of Article 28, the question arises whether the actions should be stayed as a matter of discretion [91]. The circumstances of each case are of particular importance but the aim of Article 28 is to avoid parallel proceedings and conflicting decisions. In a case of doubt it would be appropriate to grant a stay [92]. However, the natural court to consider the issues raised by CMI and LMI is the High Court in England because they raise contractual questions governed by English law and because it is at least arguable that the parties have agreed that they should be decided by the High Court, where the proceedings are more advanced than in Greece [96]. The decision of the judge in refusing a stay under Article 28 is upheld and the cross appeal is dismissed [97, 125].

When the court issued its previous judgment on this appeal ([2013] UKSC 15), it allowed the parties an opportunity to make written submissions as to the form of the order to be made. The Commissioners then made submissions inviting the court to make a further reference to the Court of Justice of the European Union under article 267 of the Treaty on the Functioning of the European Union. LMUK made submissions opposing such a reference and inviting the court to dismiss the appeal. Summarising matters developed at much greater length in the submissions, the Commissioners have put forward two principal arguments in favour of a further reference. First, they submit that a national court is obliged under EU law to make a further reference if it finds the ruling of the CJEU on the first reference to be incomplete or unsatisfactory. In support of that submission, they refer to the judgment in Wnsche Handelsgesellschaft GmbH & Co v Federal Republic of Germany (Case 69/85) [1986] ECR 947, in which the court said at para 15 that the authority of a preliminary ruling does not preclude the national court from properly taking the view that it is necessary to make a further reference before giving judgment. The court added that such a procedure may be justified when the national court encounters difficulties in understanding or applying the judgment, when it refers a fresh question of law to the court, or when it submits new considerations which might lead the court to give a different answer to a question submitted earlier. Secondly, the Commissioners submit that there must be an issue of EU law raised in the present appeal on which a decision is necessary, and which cannot be considered to be acte clair, given the difference of view on the court. In relation to the first point, LMUK point out correctly that the court did not in its earlier judgment question the European courts ruling on any question of EU law. On the contrary, the court recognised the binding character of the European courts judgment on questions as to the validity, meaning or effect of any EU instrument: see paras 56, 103 and 119. The court proceeded however on the basis of a more comprehensive consideration of the facts of the case than that set out in the reference to the European court: see for example paras 38, 40, 48 and 49. A different view of the facts from that on which the European court had based its ruling might of course necessitate a further reference in order to obtain further guidance, but it cannot be said that it would necessarily do so. On a different view of the facts, the difficulty which had led to the reference might no longer arise. That was the position in the present case, in the view of the majority of the court. They considered that, with the benefit of hindsight, there had in reality been no need for a reference in the first place: see paras 30, 87 and 118. They noted that the European court had itself considered that the case raised no new point of law: see paras 34, 55, 87 and 118. They considered the judgment of the European court in order to identify the principles which it had applied to the incomplete account of the facts which it had been requested to consider: see for example para 56. They then applied the principles established by the case law of the European court to the more comprehensive account of the facts which, in their judgment, this court required to consider: see paras 73 75 and 78 82. On that view of the case, there is no question of EU law which now requires to be elucidated, and therefore no need for a further reference. In relation to the second point, as I have explained the majority of the court considered that the case could be decided by applying well established principles to the particular facts. They also noted, as I have mentioned, that the European court had dealt with the reference on the basis that it raised no new point of law. That was also acknowledged by the minority of the court: para 129. Although the minority of the court questioned the approach adopted in the majority judgments to the application of EU law and to the judgment of the European court, those criticisms were not accepted by the majority, and they are not regarded by the court as now requiring or justifying a further reference. In so far as the minority raised issues of fairness under domestic law, they raise no issue of European law suitable for the European court. In the circumstances, including the European courts own assessment that the case raised no new point of EU law, the court does not consider that a further reference to the European court is necessary. It would be unfortunate if the position were otherwise, bearing in mind that this litigation has already lasted since 2003. Hilary Term [2013] UKSC 15 On appeal from: [2007] EWCA Civ 938 JUDGMENT Her Majesty's Revenue and Customs (Appellant) v Aimia Coalition Loyalty UK Limited (formerly known as Loyalty Management UK Limited) (Respondent) Lord Hope, Deputy President before Lord Walker Lord Wilson Lord Reed Lord Carnwath JUDGMENT GIVEN ON 13 March 2013 Heard on 24 and 25 October 2012 Appellant Philippa Whipple QC Suzanne Lambert (Instructed by VAT & Duties Litigation Team, Solicitor's Office, HM Revenue and Customs) Respondent David Milne QC Michael Conlon QC (Instructed by Hogan Lovells International LLP) LORD REED Introduction 1. This appeal concerns the well known Nectar scheme. Its essential elements as at the relevant time can be summarised as follows. A member of the scheme has an account with Aimia Coalition Loyalty UK Ltd, formerly called Loyalty Management UK Ltd (LMUK), the promoter of the scheme, and is issued with a Nectar card. When a member purchases goods or services from a retailer which has agreed with LMUK to participate in the scheme in relation to the issue of points, the retailer swipes the Nectar card and the members account with LMUK is electronically credited with a number of points. The member is then entitled to use the points to receive goods or services, either at no cost or at a reduced cost, from a retailer which has agreed with LMUK to participate in the scheme in relation to the redemption of points. When the member receives goods or services from that retailer, the retailer swipes the Nectar card and the members account with LMUK is electronically debited with the number of points which have been redeemed. 2. The scheme involves four parties: (1) the promoter of the scheme, LMUK; (2) the members of the scheme (collectors); (3) retailers of goods and services (sponsors), who pay for their customers, if they produce a Nectar card, to have points credited to their accounts with LMUK when they have purchased goods or services and their cards are swiped; and (4) other retailers of goods and services (redeemers), from whom collectors receive goods and services, at no cost or at a reduced cost, when their cards are swiped and points are debited to their accounts. 3. The scheme depends upon a network of contracts between LMUK and the three other parties. First, LMUK agrees with the collectors the terms upon which their accounts are operated, including an obligation on the part of LMUK that it will ensure that the collectors can obtain points when they purchase goods or services from sponsors, and that it will make goods and services available to the collectors at no cost, or at a reduced cost, when they redeem their points. LMUK provides the members with information about the identities of sponsors and redeemers, the particular goods and services which can be obtained using the points, and the number of points required in order to receive the goods or services in question. 4. Secondly, LMUK agrees with the sponsors that it will credit collectors accounts with the points for which the sponsor has agreed to pay and will secure that goods and services are made available to collectors on their redemption of the points. In return, the sponsors make payments to LMUK based on the number of points credited to collectors accounts, at an agreed value per point, together with an annual marketing fee. Each sponsor is granted by LMUK the exclusive right to participate in the Nectar scheme in a particular market sector. The contract entered into between LMUK and each sponsor provides that their agreement does not create a relationship of partnership or agency. 5. Thirdly, LMUK agrees with the redeemers that they will provide collectors with specified goods and services upon the redemption of the applicable number of points, and will in addition provide a number of other services to LMUK, in return for the payment of service charges by LMUK based on the number of points redeemed, at an agreed value per point. That value is lower than the value agreed with the sponsors. In relation to the other services which redeemers are required to supply, they must for example provide LMUK with information about problems affecting the quality or availability of goods and services, provide customer data and other information which LMUK requires for marketing purposes, grant permission for the use of their names and brands in marketing material, handle complaints by collectors and replace faulty goods. The commercial arrangements between LMUK and each of the redeemers are negotiated individually. The sponsors and collectors are not involved in these negotiations and are not normally in a position to know what arrangements have been made. In particular, since a sponsor or collector does not normally know the agreed redemption value of the points, it is not normally in a position to know the price paid by LMUK to a redeemer for the provision of particular goods and services: a price which will however be less than the amount which the sponsor paid LMUK for the issue of the points in question to the collector. 6. The three contracts involved in the scheme, described in the preceding paragraphs, are separate from, and should not be confused with, the contracts between the sponsors and the collectors, or the contracts between the collectors and the redeemers. In particular, the purchase of goods or services by a collector from a sponsor is a separate transaction, between different parties, from the crediting of points by LMUK to a collectors account, or the payment of LMUK by a sponsor in respect of those points. 7. As is apparent from this summary of the arrangements, which reflects the findings of fact made by the Value Added Tax and Duties Tribunal (the tribunal), to refer to points being issued, purchased and redeemed is to speak metaphorically. The points are a means of describing the collectors contractual rights to receive goods and services at no cost or at a reduced cost. The sponsors pay LMUK for the grant of those rights to collectors. LMUK uses part of its receipts from the sponsors to pay the redeemers to provide collectors with the goods and services in accordance with their rights. LMUK derives its profits from the difference between its receipts from the sponsors and its payments to the redeemers. In essence, therefore, when sponsors pay LMUK for the points issued to collectors, they are paying LMUK for granting the collectors the right to receive goods and services in exchange for their points. The redeemers provide the collectors with the goods and services to which their points entitle them, and LMUK pays the redeemers the redemption value of the points. It is thus by means of the redeemers performance of their contractual obligations to LMUK that LMUK fulfils the obligations which it has undertaken to the sponsors and collectors and so carries on its business. Since points are used by collectors to obtain goods or services, they may be regarded as a means of payment for those goods or services. The amount paid for the right to obtain the goods or services is the amount paid to LMUK by the sponsors for the issue of the points which the collector uses. The amount received by the redeemer, following the provision of the goods or services, is the lesser amount which it is paid by LMUK. It is common ground that the provision of points to collectors in return for payment by the sponsors is a taxable supply by LMUK. When LMUK charges VAT on the payments which it receives from the sponsors, it is therefore charging VAT on the amount which it receives as consideration for granting to collectors the right to receive goods and services in exchange for the points. The redeemers in turn charge VAT on the payments which they receive from LMUK. The VAT is charged at the standard rate, regardless of whether the goods and services provided to the collectors are zero rated or exempt, on the basis that it is charged in respect of a service supplied by the redeemers to LMUK. The facts of this case, as I have described them, are both complex and unusual. In particular, the business operated by LMUK differs in fundamental respects from sales promotion or customer loyalty schemes which are operated by retailers as part of their own business, and under which the issue of points or vouchers does not involve a taxable supply. That being so, LMUKs business cannot be assumed to fall within the scope of decided cases concerned with schemes of the latter kind. Rather than relying upon inexact analogies with other forms of business, it is essential to bear in mind the particular characteristics of the business carried on by LMUK when considering the issue raised in the present appeal. The issue in dispute is whether LMUK is entitled to deduct as input tax the VAT element of the payments which it makes to the redeemers. LMUK contends that the payments are the consideration for the redeemers supply to it of the services for which it has contracted with them. Since that supply is made to LMUK for the purpose of its business, it maintains that it is entitled to deduct the VAT as input tax in accordance with article 17 of Council Directive 77/388/EEC of 17 May 1977 (the Sixth Directive), as implemented by the Value Added Tax Act 1994. The Commissioners on the other hand decided in 2003 that the payments were third party consideration for the redeemers supply of goods and services to collectors, and that any VAT charged on such a supply was therefore not deductible by LMUK as input tax. LMUK appealed to the tribunal against that decision. The relevant legislation The relevant EU legislation is contained in Council Directive 67/227/EEC of 11 April 1967 on the harmonisation of legislation of Member States concerning turnover taxes (the First Directive), and the Sixth Directive, as amended by Council Directive 95/7/EC of 10 April 1995. These are translated into domestic law by the Value Added Tax Act 1994. It is sufficient to refer to the EU provisions. Article 2 of the First Directive describes the basic system of value added tax: The principle of the common system of value added tax involves the application to goods and services of a general tax on consumption exactly proportional to the price of the goods and services, whatever the number of transactions which take place in the production and distribution process before the stage at which tax is charged. On each transaction, value added tax, calculated on the price of the goods or services at the rate applicable to such goods or services, shall be chargeable after deduction of the amount of value added tax borne directly by the various cost components. The common system of value added tax shall be applied up to and including the retail trade stage. Article 2 of the Sixth Directive provides: The following shall be subject to value added tax: (1) the supply of goods or services effected for consideration within the territory of the country by a taxable person acting as such . Articles 5 and 6 define supply of goods and supply of services respectively. The former means the transfer of the right to dispose of tangible property as owner. The latter means, generally, any transaction which does not constitute a supply of goods within the meaning of article 5. Article 11 defines the taxable amount. It provides, so far as relevant: (A) Within the territory of the country 1. The taxable amount shall be: (a) in respect of supplies of goods and services, everything which constitutes the consideration which has been or is to be obtained by the supplier from the purchaser, the customer or a third party for such supplies. Article 17(2) allows a taxable person the right, in so far as the goods and services are used for the purpose of his taxable transactions, the right to deduct VAT due or paid in respect of goods or services supplied or to be supplied to him by another taxable person. The decision of the tribunal The tribunal allowed LMUKs appeal against the Commissioners decision ([2005] BVC 2628). It considered that the transactions in question could only be understood in the context of the arrangements between LMUK, the sponsors, the redeemers and the collectors viewed as a whole. Assessing the commercial and economic reality of the case on that basis, the tribunal concluded that the proper analysis of the transaction under which a [redeemer] provides goods to a [collector] in return for points is that the [redeemer] is providing a service to [LMUK] in assisting it to discharge its obligation to [collectors] (para 60). The tribunal reached the same conclusion in relation to the provision of services to collectors. The tribunal further concluded that LMUKs payments to redeemers were consideration only for the supply of the service which it received from them. In that regard, the tribunal applied the principle, established by the case law of the Court of Justice of the European Union, that the concept of consideration requires a direct link between the goods or services provided and the consideration received. The tribunal considered that LMUK was provided by redeemers with a In the view of the tribunal, the only taxable supply for which LMUK provided consideration was therefore the supply of services to itself. Since that was a supply to a taxable person for the purpose of its business, it followed that the VAT element of the amounts for which the redeemers invoiced LMUK was deductible as input tax. The tribunal declined to make a preliminary reference to the Court of Justice, observing that the real issue in the appeal did not concern the interpretation of the relevant directives but rather concerned the correct analysis of the facts. The decision of the High Court The Commissioners appealed against the tribunals decision: it is relevant to recall that an appeal lies on a point of law only. The appeal was allowed by the High Court ([2007] STC 536). Lindsay J noted that, when goods were provided by a redeemer to a collector, that must be a supply of goods to the collector. That followed from the definition of a supply of goods in article 5(1) of the Sixth Directive (the transfer of the right to dispose of tangible property as owner) as interpreted by the Court of Justice, notably in Auto Lease Holland BV v Bundesamt fr Finanzen (Case C 185/01) [2003] ECR 1 1317; [2005] STC 598: a case to which it will be necessary to return. Since there were passages in the tribunals decision where it had said that goods should be regarded as being supplied to LMUK, it followed that the tribunal had in that respect erred in law. Lindsay J considered that this error was material to the tribunals decision. Lindsay J stated that whether a redeemers provision of goods or services to a collector was wholly for points or partly for points, what the redeemer received had to include what LMUK became obliged to pay him upon his having supplied the collector. On that basis the service charge paid by LMUK to the redeemer was third party consideration for that supply. It followed that the payments made by LMUK to the redeemers could not also be consideration for the supply of services to LMUK. Ultimately, Lindsay J stated that he preferred the argument of the Commissioners because it seems to me the more consistent with the requirements, illustrated in Auto Lease and the coupon cases, that one should stand back and look at the characteristics of the provision and payment in issue in a relatively robust and commonsensical way (para 78). In that regard, emphasis was placed upon the fact that the payments made by LMUK were related to the number of points redeemed, and upon the absence of any separately identifiable fee for the services provided to LMUK other than the provision of goods and services to collectors. The decision of the Court of Appeal LMUKs appeal against the decision of the High Court was allowed by the Court of Appeal ([2008] STC 59). Chadwick LJ, in a judgment with which the other members of the Court of Appeal agreed, regarded the decision of the House of Lords in Customs and Excise Commissioners v Redrow Group plc [1999] 1 WLR 408; [1999] STC 161 as authority for two propositions: first, that a supplier could be treated as making, in the same transaction, both a supply of services to one person and a supply of different services to another person; and secondly, that in addressing a claim for input tax by one of those persons, the relevant questions were (1) whether that person had made a payment to the supplier, (2) whether the payment was consideration for the services supplied to him, and (3) whether the services were used or to be used in the course of a business carried on by that person. Applying the approach adopted by Lord Millett in the case of Customs and Excise Commissioners v Plantiflor Ltd [2002] UKHL 33; [2002] 1 WLR 2287; [2002] STC 1132, to which it will be necessary to return, Chadwick LJ observed that it might be said that LMUK made a supply of services to the collectors: it granted them rights which they could exercise to obtain goods and services. When a collector received goods and services from a redeemer, the redeemer made two different supplies. One was the supply of the goods and services to the collector; the other was the supply to LMUK of the services of providing the rewards to the collector and providing the agreed information and other services to LMUK. In relation to the supply by the redeemer to LMUK, the answer to each of the three relevant questions identified in Redrow was an affirmative: (1) LMUK made a payment to the redeemer, (2) that payment was consideration for services supplied by the redeemer to LMUK, since LMUK received something of value in return for the payment, and (3) the services supplied by the redeemer to LMUK were used or to be used in the course of LMUK's business of operating the scheme. It followed that there was a supply of services by the redeemer to LMUK and that the supply was made for a consideration. If that was correct, it was not in dispute that LMUK was entitled to input tax credit in respect of the VAT paid on that supply. Chadwick LJ also observed that it was important to keep in mind the tribunals finding that the collectors right to receive goods and services was a right which he acquired when he was credited with points. The sponsor paid LMUK for the issue of the points, and thus for the grant of that right. LMUK accounted to the tax authorities for the output tax. The tax authorities therefore received VAT at that time on the supply of the right to receive goods and services in exchange for the points. If, when the collector exercised that right, the provision of the goods or services was treated as a taxable supply to him, the tax authorities would receive not only VAT on the amount paid for the right to obtain those goods and services but also VAT on the amount paid to satisfy that right. If, on the other hand, the provision of the goods and services to the collector formed part of a service supplied by the redeemer to LMUK, the tax authorities would still receive from LMUK the VAT chargeable on the amount paid for the collectors right to obtain those goods and services (and on any additional amount paid by the collector when it exercised that right) but account would also be taken of LMUKs entitlement to deduct as input tax the VAT element of the amount which it had to pay in order to satisfy that right. The Court of Appeal declined to make a reference to the Court of Justice. Chadwick LJ observed that the real issue in the appeal was not as to the interpretation of Community legislation, or as to the effect to be given to judgments of the Court of Justice, but as to how principles which were not in doubt should be applied to the particular facts. That was an issue which the Court of Justice would expect the national court to resolve. The preliminary reference The Commissioners appealed against the decision of the Court of Appeal to the House of Lords. It is that appeal which is now before this court. The House referred the following questions to the Court of Justice for a preliminary ruling: In circumstances where a taxable person (the promoter) is engaged in the business of running a multi participant customer loyalty rewards programme (the scheme), pursuant to which the promoter enters into various agreements as follows: (a) Agreements with various companies referred to as sponsors under which the sponsors issue points to customers of the sponsors (collectors) who purchase goods or services from the sponsors and the sponsors make payments to the promoter; (b) Agreements with the collectors which include provisions such that, when they purchase goods and/or services from the sponsors, they will receive points which they can redeem for goods and/or services; and (c) Agreements with various companies (known as redeemers) under which the redeemers agree, among other things, to provide goods and/or services to collectors at a price which is less than would otherwise be payable or for no cash payment when the collector redeems the points and in return the promoter pays a service charge which is calculated according to the number of points redeemed with that redeemer during the relevant period; 1. How are articles 14, 24 and 73 of the Council Directive 2006/112/EC of 28 November 2006 [the VAT Directive] (formerly Articles 5, 6 and 11(A)(1)(a) of Council Directive 77/388/EEC of 17 May 1977 [the Sixth Directive]) to be interpreted where payments are made by the promoter to the redeemers? 2. In particular, are those provisions to be interpreted such that the payments of the kind made by the promoter to redeemers are to be characterised as: (a) consideration solely for the supply of services by the redeemers to the promoter; or (b) consideration solely for the supply of goods and services by the redeemers to the collectors; or (c) consideration in part for the supply of services by the redeemers to the promoter and in part for the supply of goods and/or services by the redeemers to the collectors? 3. If the answer to question 2 is (c), so that the service charge is consideration for two supplies by the redeemers, one to the promoter and the other to the collectors, what are the criteria laid down by Community law to determine how a charge such as the service charge is to be apportioned between those two supplies? The House of Lords reasons for concluding that it was necessary that a preliminary reference should be made are not recorded. Although the case was not straightforward, the view of the tribunal and of the Court of Appeal, that the issue in the case was as to how established principles should be applied to the particular facts, was one for which there was in my view much to be said. More importantly, it is apparent from what followed that the reference did not make sufficiently clear to the Court of Justice what the central issues were, as they emerged from the judgment of the Court of Appeal: issues which had appeared to the highest court in this country to be of such difficulty that a reference was required. Nor did the reference direct the attention of the Court of Justice to the facts found by the tribunal which bore most directly upon those issues. In relation to the facts, for example, the statement that the sponsors issue points to customers was a very compressed, and potentially misleading, way of describing the arrangement under which the sponsors computer communicates electronically with LMUK when a collectors card is swiped, LMUK then credits the collectors account with the rights represented by points, and the sponsor pays LMUK for the grant of those rights. That compressed description gave no indication of how different the arrangement was from that involved in a typical loyalty rewards scheme, where a retailer issues points to its customers: on the contrary, it tended to suggest that the LMUK scheme was of a similar character. Nor was it explained that, unlike the position in a typical loyalty rewards scheme, where no identifiable consideration is given for the issuing of points (as, for example, in Kuwait Petroleum (GB) Ltd v Customs and Excise Commissioners (Case C 48/97) [1999] STC 488, the issuing of points by LMUK was accepted by both parties to be a taxable supply. Nor was it explained that LMUK therefore accounted for VAT on the consideration given for the supply to collectors of the right to receive rewards. In relation to the issues emerging from the judgment of the Court of Appeal, one such was what might be described as the Redrow issue: that is to say, whether, considering the transactions in question in the context of the scheme as a whole, the payments made by LMUK to the redeemers were most aptly regarded as the consideration paid for the supply of services to it by the redeemers, which it required for the purposes of its business: services which included the provision of goods and services to collectors. A second issue, closely related to the first, was whether the principle that VAT is neutral in its effect upon taxable persons required that LMUK, having accounted for VAT on its supply of the right to receive the goods and services provided by redeemers, should be able to deduct the VAT element of the costs which it incurred in order to satisfy that right. As a consequence of these aspects of the reference, a situation was created in which, instead of the dialogue between the Court of Justice and national courts which is the essence of the preliminary reference procedure, there was a danger that the ruling of the Court of Justice would fail to address the issues which lay at the heart of the appeal before the referring court. The Court of Justice joined the reference with another, in the case of Baxi Group Ltd v Commissioners for Her Majestys Revenue and Customs [2008] STC 491, which was concerned with a loyalty scheme of an entirely different character. It appears to have considered that both cases alike involved the straightforward application of established principles, since it determined them without a submission from the Advocate General. In terms of article 20, paragraph 5 of its Statute, it may do so only where it considers that the case raises no new point of law. The preliminary ruling In its judgment Commissioners for Her Majestys Revenue and Customs v Loyalty Management UK Ltd and Baxi Group Ltd (Joined Cases C 53/09 and C 55/09) [2010] STC 2651, the Court of Justice reformulated the questions so as to ask the following: whether, in the context of a customer loyalty reward scheme such as those at issue in the main proceedings: payments made by the operator of the scheme at issue to redeemers who supply loyalty rewards to customers must be considered, in Case C 53/09, as third party consideration for a supply of goods to those customers, and/or, as the case may be, for a supply of services made by those redeemers for the benefit of those customers, and/or as the consideration for a supply of services made by those redeemers for the benefit of the operator of that scheme. The court answered the question which it had formulated as follows: Payments made by the operator of the scheme concerned to redeemers who supply loyalty rewards to customers must be regarded, in Case C 53/09, as being the consideration, paid by a third party, for a supply of goods to those customers or, as the case may be, a supply of services to them. It is, however, for the referring court to determine whether those payments also include the consideration for a supply of services corresponding to a separate service. The judgment of the Court of Justice In its judgment, the court made a preliminary observation about the limited nature of the reference, and the fact that it did not touch on the relationship between LMUK and the sponsors: It must also be stated, in relation to Case C 53/09, that neither the questions referred by the national court nor the views exchanged before the Court of Justice touched on the relationship between the sponsors and the operator of the loyalty reward scheme, namely LMUK. Consequently, the court will confine its assessment to the questions as referred by the national court. (para 32) It is readily understandable that the Court of Justice should have made that preliminary observation. The case law of the court, including its judgment in the present case, indicates that, when determining the relevant supply in which a taxable person engages, regard must be had to all the circumstances in which the transaction or combination of transactions takes place. In the present case, in particular, it would be impossible to answer the questions on a proper footing without considering as a whole the relationships between LMUK, the sponsors, the collectors and the redeemers. The Court of Justice was not however in a position to consider the matter in that way. This preliminary observation also implied that the assessment by the Court of Justice would leave out of account matters which had been regarded as being of importance in the national proceedings. In particular, the tribunal and the Court of Appeal had, as I have explained, attached significance to the undisputed fact that LMUK made taxable supplies when it granted to collectors, in return for payment by the sponsors, the right to receive goods and services from redeemers. The Court of Justice then carried out an evaluation of the facts of the case on that limited basis. It stated that it was evident from the orders for reference that the loyalty rewards schemes at issue in both the present case and the Baxi case were designed to encourage customers to make their purchases from particular traders. To that end, the court said, LMUK, in the present case, and Baxis sub contractor, @1, in the Baxi case, provide a number of services linked to the operation of those schemes (para 41). The court appears therefore to have inferred from the reference that the present case, like the Baxi case, concerned a scheme operated by traders with the assistance of a third party. That approach does not however fully reflect the facts found by the tribunal, by which this court is bound. LMUK did not provide a number of services linked to the operation of the scheme: it operated the scheme. The scheme was established by LMUK. It was designed to earn profits for LMUK, and to provide benefits to its millions of members (according to the evidence, 40% of UK households), as well as to the retailers who took part. The court did not mention that the services provided by LMUK included the supply of the right to receive the rewards. Nor did it mention that the payments made by LMUK to redeemers for the provision of the rewards were met out of the consideration which it received from sponsors for the supply of the right to receive the rewards. As I have explained, these matters had not been focused in the reference. They had however played an important part in the reasoning of the Court of Appeal. On the basis of its assessment of the economic reality, the Court of Justice concluded, in the first place, that loyalty rewards were supplied by the redeemers to the collectors. That much was not in dispute between the parties, and had been understood by the Court of Appeal. The court then considered whether the transactions between the collectors and the redeemers constituted supplies of goods or services to the collectors within the meaning of the Sixth Directive. In a case where the transaction involved the provision of goods, the court held that that must constitute a supply of goods within the meaning of article 5(1) of the Sixth Directive, since there was a transfer by the redeemer to the collector of the right to dispose of tangible property as owner. In a case where the transaction did not constitute a supply of goods, it held that it must constitute a supply of services within the meaning of article 6(1) of the Sixth Directive, since the transaction did not constitute a supply of goods, and article 6(1) defines the expression supply of services as meaning any transaction which does not constitute a supply of goods. These matters also were not in dispute and had been understood by the national courts. The court next considered whether the supply of goods or services by the redeemer to the collector was a taxable supply. As I have explained, that depended upon whether the supply was effected for consideration. The court noted that it followed from its case law that, in order for that requirement to be satisfied, there must be a direct link between the goods or service provided and the consideration received. These matters had been understood by the national courts. The court then addressed the possibility that collectors might have provided consideration for the supply of the rewards when they purchased goods and services from sponsors. It noted that the price which customers paid to the sponsors was the same whether the customers were collectors or not. The court referred to its earlier judgment in Kuwait Petroleum (GB) Ltd v Customs and Excise Commissioners (Case C 48/97) [1999] STC 488. That case had concerned a loyalty rewards scheme operated by a petrol retailer, under which customers received points which they could exchange for goods. Since the customers paid the same price for their petrol regardless of whether they took the points or not, the court held that the price could not be regarded as containing an element representing the value of the points or of the goods for which they were exchanged. The sale of the petrol which gave rise to the award of points, on the one hand, and the supply of goods in exchange for the points, on the other hand, were therefore two separate transactions. In the view of the court, it followed that, in the case at hand, the sale of goods and services giving rise to the award of points, on the one hand, and the supply of goods and services in return for points, on the other hand, were also two separate transactions. So far as it went, that conclusion was uncontentious. What is however significant is that the court did not address the possibility that the sponsors might have provided consideration for the supply of the rewards when they paid LMUK for the points issued to collectors, as the Court of Appeals judgment had suggested. The court again left out of account the fact (1) that the award of points was a taxable supply by LMUK, separate from the supply of goods or services by the sponsor, (2) that, as a consequence of LMUKs having made that supply, the collectors were entitled to receive goods and services at no cost or at a reduced cost, and LMUK had to make goods and services available to them on that basis, and (3) that it paid redeemers to provide those goods and services on that basis. These features had not been present in the Kuwait case. The court continued at para 57: In that regard, it is evident from the order for reference in Case C 53/09 that the exchange of points by the customers with the redeemers gives rise to the making of a payment by LMUK to those redeemers. The amount of that payment is the sum total of the charges, which are of a fixed amount for each point redeemed against all or part of the price of the loyalty reward. In that context, it must be considered that, as maintained by the United Kingdom Government, that payment corresponds to the consideration for the supply of the loyalty rewards. On the basis of the approach to the facts which the court had adopted, its conclusion is unsurprising. As I have explained, however, the terms of the reference resulted in the courts approaching the facts on a different basis from that which the referring court was bound to adopt. It left out of account a number of matters found by the tribunal and relied upon by LMUK before the national courts, including (1) the fact that sponsors pay LMUK for the grant to collectors of the right to receive goods and services, (2) the fact that LMUK meets the cost of the provision of goods and services to collectors out of those payments, (3) the fact that LMUK has, in return for those payments, granted collectors the right to receive goods and services without further payment or at a reduced cost, (4) the fact that collectors obtaining goods and services from redeemers are therefore exercising a right which has already been paid for, (5) the fact that the provision of goods and services by the redeemers is the means by which LMUK discharges its obligations to sponsors and collectors and (6) the fact that the payments made by LMUK to redeemers are therefore an essential cost of its business. More generally, as I have explained, the court does not appear to have assessed the transactions in question in the context of the arrangements considered as a whole, or determined on that basis what they amounted to in terms of economic reality. Nor is it apparent that the court took into account, in reaching its conclusion, the fact that (1) LMUK was agreed to make a taxable supply when it granted to collectors the right to receive goods and services at no cost or at a reduced cost, and (2) collectors receiving goods and services on that basis were therefore exercising a right for which LMUK had already been paid, and the consideration for which had already been subject to VAT. The court is not of course to be criticised for failing to take these matters into account. As I have explained, they were not focused in the reference, and the court understandably confined its assessment to the matters raised in the questions referred. The question whether there was also a supply of services to the promoter of the scheme was considered by the court principally in relation to the scheme with which the Baxi case was concerned. That scheme was of a different character from the Nectar scheme. It was an in house scheme under which Baxi issued points to its own customers, which they could redeem in order to obtain rewards in the form of goods. The operation of the scheme had been subcontracted to an operator, @1, which purchased the rewards and supplied them to customers in return for points. Baxi paid @1 the retail sale price of the rewards. The court held that there was a supply of goods by @1 to the customers. It was against that background that the court considered Baxis contention that (in the courts words) the consideration for the payment did not correspond to a supply of goods, but to a complex service under which the supply of rewards to customers was one of a number of services. On the facts of the case, the court concluded that the payments made by Baxi could be divided into two elements, each of which corresponded to a separate service: the supply of the rewards to the customers on the one hand, and the service supplied by @1 to Baxi on the other. In relation to the present case, the court stated at para 64: By contrast, in Case C 53/09, LMUK has, in both its written and oral observations, asserted that the payments which it makes to the redeemers are not the consideration for two or more separate services. It is, however, for the referring court to determine whether that is the case. The issues now arising The first issue which now arises is how this court should apply the ruling of the Court of Justice. Article 267 TFEU confers on the Court of Justice jurisdiction to give preliminary rulings concerning (a) the interpretation of the Treaties and (b) the validity and interpretation of acts of the institutions, bodies, offices or agencies of the Union. In the present case, it is the courts jurisdiction to rule on the interpretation of the VAT directives which is relevant. On the other hand, putting the matter very broadly, the evaluation of the facts of the case, and the application of EU law to those facts, are in general functions of the national courts. The relevant principles were summarised more precisely by the Court of Justice in AC ATEL Electronics Vertriebs GmbH v Hauptzollamt Mnchen Mitte (Case C 30/93) [1994] ECR I 2305, paras 16 18: 16. On that point, it should be borne in mind that Article [267] of the Treaty is based on a clear separation of functions between the national courts and the Court of Justice, so that, when ruling on the interpretation or validity of Community provisions, the latter is empowered to do so only on the basis of the facts which the national court puts before it (see the judgment in Case 104/77 Oehlschlger v Hauptzollamt Emmerich [1978] ECR 791, point 4). It is not for the Court of Justice, but for the national court, to 17. ascertain the facts which have given rise to the dispute and to establish the consequences which they have for the judgment which it is required to deliver (see the judgment in Case 17/81 Pabst & Richarz v Hauptzollamt Oldenburg [1982] ECR 1331, paragraph 12). 18. It is, moreover, solely for the national court before which the dispute has been brought, and which must assume the responsibility for the subsequent judicial decision, to determine in the light of the particular circumstances of each case both the need for a preliminary ruling in order to enable it to deliver judgment and the relevance of the question which it submits to the court (see the judgments in Case 247/86 Alsatel v Novasam [1988] ECR 5987, paragraph 8, and in Case C 127/92 Enderby v Frenchay Health Authority and Secretary of State for Health [1993] ECR I 5535, paragraph 10). As I have explained, the Court of Justice recognised that the reference in the present case raised no new point of law. The court however endeavoured to clarify how established principles applied in the circumstances of the case, so far as they emerged from the reference. It is particularly unfortunate in those circumstances that, as I have explained, the reference failed to reflect fully either the facts on the basis of which this court must proceed or the issues at the heart of the dispute, with the consequence that the Court of Justice did not fully address those facts or those issues. The Court of Justices analysis of the legal issues focused in the reference, on the basis of the facts as it understood them, is not open to question. This court is required by section 3(1) of the European Communities Act 1972 (as amended by section 3 of and the Schedule to the European Union (Amendment) Act 2008) to determine any question as to the validity, meaning or effect of any EU instrument in accordance with any relevant decision of the European Court. Nevertheless, this courts responsibility for the decision of the present case on the basis of all the relevant factual circumstances, and all the arguments presented, requires it to take into account all the facts found by the tribunal, including those elements left out of account by the Court of Justice, and to consider all those arguments, including those which were not reflected in the questions referred. That responsibility under domestic law is also recognised in EU law, as the Court of Justice explained at paragraphs 17 and 18 of its AC ATEL judgment. In the exceptional circumstances of this case, this court cannot therefore treat the ruling of the Court of Justice as dispositive of its decision, in so far as it was based upon an incomplete evaluation of the facts found by the tribunal or addressed questions which failed fully to reflect those arguments. This court must nevertheless reach its decision in the light of such guidance as to the law as can be derived from the judgment of the Court of Justice. In that regard, important aspects of the judgment include the statement that consideration of economic realities is a fundamental criterion for the application of the common system of VAT (para 39), and the statement that, where a transaction comprises a bundle of features and acts, regard must be had to all the circumstances in which the transaction in question takes place (para 60). Before turning to consider the present case on that basis, it is necessary to say something about the principal authorities which are relied upon by the parties in support of their contentions. The Redrow line of authority LMUK seeks support for its contentions from the approach adopted by the House of Lords in Customs and Excise Commissioners v Redrow Group plc [1999] 1 WLR 408; [1999] STC 161. That case concerned a sales incentive scheme under which Redrow, a firm of housebuilders, promoted the sale of its houses to prospective customers by arranging for estate agents to value and market the customers existing homes. This was done on the basis that the cost would be borne by Redrow, provided the customer bought a Redrow house. The House concluded that there was a supply of services by the estate agents to the customers, and simultaneously a supply of services by the estate agents to Redrow. Since the latter supply was received by Redrow for the purposes of its business, it followed that Redrow was entitled to deduct the VAT which it had paid as input tax. The critical reasoning appears in the speeches of Lord Hope of Craighead and Lord Millett, with which the other members of the Committee agreed. Lord Hope said at pp 412 413: Questions such as who benefits from the service or who is the consumer of it are not helpful. The answers are likely to differ according to the interest which various people may have in the transaction. The matter has to be looked at from the standpoint of the person who is claiming the deduction by way of input tax. Was something being done for him for which, in the course or furtherance of a business carried on by him, he has had to pay a consideration which has attracted value added tax? The fact that someone else in this case, the prospective purchaser also received a service as part of the same transaction does not deprive the person who instructed the service and who has had to pay for it of the benefit of the deduction. Lord Milletts reasoning was similar, at p 418: The fact is that the nature of the services and the identity of the person to whom they are supplied cannot be determined independently of each other, for each defines the other. Where, then, should one begin? One should start with the taxpayer's claim to deduct tax. He must identify the payment of which the tax to be deducted formed part; if the goods or services are to be paid for by someone else he has no claim to deduction. Once the taxpayer has identified the payment the question to be asked is: did he obtain anything anything at all used or to be used for the purposes of his business in return for that payment? This will normally consist of the supply of goods or services to the taxpayer. But it may equally well consist of the right to have goods delivered or services rendered to a third party. The grant of such a right is itself a supply of services. Applying this reasoning to the present case, LMUK argues that it is in a similar situation to Redrow. LMUK pays the redeemers and obtains services in return, including the provision of goods and services to the collectors in fulfilment of its contractual obligations towards them, which it uses for the purposes of its business. Following the approach adopted in Redrow, it is therefore entitled to deduct input tax. LMUK seeks to draw further support from the decision of the House of Lords in Customs and Excise Commissioners v Plantiflor Ltd [2002] UKHL 33; [2002] 1 WLR 2287; [2002] STC 1132. Plantiflor sold horticultural goods by mail order, and contracted with its customers to arrange for the delivery of the goods by Parcelforce and to meet the cost of that delivery, in return for the payment by its customers of a charge for postage. It contracted with Parcelforce for the delivery of the goods in return for payment of the postage charge. Plantiflor argued that it was not accountable for output tax on the postage charges paid by its customers, since it received those payments merely as the agent of its customers rather than as consideration for any service provided by itself: it maintained that the charges were the consideration for a service supplied to the customers by Parcelforce. The majority of the House however rejected that analysis, holding that Plantiflor was acting as a principal and received consideration from its customers for providing them with the service of arranging the delivery of the plants. Parcelforce made two supplies: it supplied to the customers the service of delivering the plants they had ordered, and it supplied to Plantiflor the service of delivering the goods which it had sold. These authorities were followed by the Court of Appeal in WHA Ltd v Customs and Excise Commissioners [2004] STC 1081. WHA was an insurance claims handler which acted on behalf of motor breakdown insurers. It entered into agreements with garages under which it authorised and paid for repairs to policyholders cars. The issue was whether it could deduct the VAT element of the repair bills as input tax. The Court of Appeal held that it could. It received a service from the garages, namely the carrying out of the repairs, and it did so for the purposes of its business, since it was discharging its obligations to the insurers. Although there were other beneficiaries of the repairs, namely the car owners, that did not prevent the repairs being a supply of services to WHA. That decision is currently under appeal to this court. The Commissioners contend that the decision of the Court of Justice in the present case is incompatible with that line of authority, and in particular with both the reasoning and the conclusion reached in Redrow, which should therefore not be followed. I cannot however find anything in the courts judgment which directly engaged with the issues considered in those cases. That indeed is part of the problem with which this court is faced, since the decision of the Court of Appeal in this case was based upon the application of the principles established in Redrow. I see no reason to question the correctness of the conclusions reached on the facts of Redrow and Plantiflor (it would not be appropriate to express any view in relation to WHA, since it is under appeal). Nor do I question the reasoning. On the contrary, the passages which I have cited from the speeches of Lord Hope and Lord Millett appear to me to provide valuable guidance. I would at the same time stress that the speeches in Redrow should not be interpreted in a manner which would conflict with the principle, stated by the Court of Justice in the present case, that consideration of economic realities is a fundamental criterion for the application of VAT. Previous House of Lords authority had emphasised the importance of recognising the substance and reality of the matter (Customs and Excise Commissioners v Professional Footballers Association (Enterprises) Ltd [1993] 1 WLR 153, 157; [1993] STC 86, 90), and the judgments in Redrow cannot have been intended to suggest otherwise. On the contrary, the emphasis placed upon the fact that the estate agents were instructed and paid by Redrow, and had no authority to go beyond Redrows instructions, and upon the fact that the object of the scheme was to promote Redrows sales, indicates that the House had the economic reality of the scheme clearly in mind. When, therefore, Lord Hope posed the question, Was something being done for him for which, in the course or furtherance of a business carried on by him, he has had to pay a consideration ?, and Lord Millett asked, Did he obtain anything anything at all used or to be used for the purposes of his business in return for that payment?, those questions should be understood as being concerned with a realistic appreciation of the transactions in question. Reflecting the point just made, it is also necessary to bear in mind that consideration paid in respect of the provision of a supply of goods or services to a third party may sometimes constitute third party consideration for that supply, either in whole or in part. The speeches in Redrow should not be understood as excluding that possibility. Economic reality being what it is, commercial businesses do not usually pay suppliers unless they themselves are the recipient of the supply for which they are paying (even if it may involve the provision of goods or services to a third party), but that possibility cannot be excluded a priori. A business may, for example, meet the cost of a supply of which it cannot realistically be regarded as the recipient in order to discharge an obligation owed to the recipient or to a third party. In such a situation, the correct analysis is likely to be that the payment constitutes third party consideration for the supply. It is also important to bear in mind that decisions about the application of the VAT system are highly dependent upon the factual situations involved. A small modification of the facts can render the legal solution in one case inapplicable to another. I would therefore hesitate to treat the judgments in Redrow as laying down a universal rule which will necessarily determine the identity of the recipient of the supply in all cases. Given the diversity of commercial operations, it may not be possible to give exhaustive guidance on how to approach the problem correctly in all cases. Auto Lease Holland The Commissioners on the other hand rely upon the decision of the Court of Justice in Auto Lease Holland BV v Bundesamt fr Finanzen (Case C 185/01) [2003] ECR 1 1317; [2005] STC 598. That case was concerned with fuel management agreements between Auto Lease, a vehicle leasing company, and its lessees, under which a lessee could fill up his vehicle in the name and at the expense of Auto Lease, using a credit card issued by a credit card company, DKV. The lessee paid a monthly sum to Auto Lease based on his likely consumption of fuel, with a balancing sum being paid at the end of the year. Auto Lease contended that it was entitled to deduct the VAT paid on the fuel as input tax, on the basis that it was the recipient of the supply of the fuel. The Court of Justice rejected the contention. It noted in the first place that the expression "supply of goods" was defined by article 5(1) of the Sixth Directive as meaning the transfer of the right to dispose of tangible property as owner. The court continued: 34. It is common ground that the lessee is empowered to dispose of the fuel as if he were the owner of that property. He obtains the fuel directly at filling stations and Auto Lease does not at any time have the right to decide in what way the fuel must be used or to what end. 35. The argument to the effect that the fuel is supplied to Auto Lease, since the lessee purchases the fuel in the name and at the expense of that company, which advances the cost of that property, cannot be accepted. As the Commission rightly contends, the supplies were effected at Auto Lease's expense only ostensibly. The monthly payments made to Auto Lease constitute only an advance. The actual consumption, established at the end of the year, is the financial responsibility of the lessee who, consequently, wholly bears the costs of the supply of fuel. 36. Accordingly, the fuel management agreement is not a contract for the supply of fuel, but rather a contract to finance its purchase. This decision does not appear to me to assist the Commissioners in the present case. Although the Court of Justice referred to it in its judgment, it did so in the context of identifying the recipient of a supply of goods in a situation where redemption goods are provided by a redeemer to a collector. As the court held, the recipient of that supply is the collector. That conclusion is not in dispute in this appeal: indeed, it was not in dispute before the Court of Justice. The present case The only issue which this court has to determine is whether LMUK is entitled to deduct as input tax the VAT element of the payments which it makes to the redeemers. As the Court of Justice has explained many times, VAT is chargeable on each transaction in the production and distribution process only after deduction of the amount of VAT borne directly by the costs of the various price components. The court has consistently stressed that the deduction system is meant to relieve the trader entirely of the burden of the VAT payable or paid in the course of all his economic activities, and that the VAT system consequently ensures complete neutrality of taxation of all economic activities, whatever their purpose or results, provided that they are subject in principle to VAT (see for example the statement of the Grand Chamber to that effect in Halifax plc & Others v Customs and Excise Commissioners (Case C 255/02) [2006] Ch 387 para 78). The right to deduct VAT, as an integral part of the VAT scheme, has been described by the court as a fundamental principle underlying the common system of VAT, which in principle may not be limited (see, for a recent statement to that effect, Commissioners for Her Majestys Revenue and Customs v RBS Deutschland Holdings GmbH (Case C 277/09) [2010] ECR I 13805, paras 38 39). The consequence of the deduction of input VAT is that the tax is charged, at each stage in the production and distribution process, only on the added value and is ultimately borne only by the final consumer (see, for a recent statement to that effect, Lebara Ltd v Revenue and Customs Commissioners (Case C 520/10) [2012] STC 1536, paras 24 25). In the present case, the Court of Justice focused upon the relationship between redeemers and collectors. Since collectors are usually final consumers of the goods and services provided by redeemers, the principle described in paragraph 75 would suggest, at first sight, that final taxation should take place at the stage of that supply. Since no monetary consideration is paid by the collector in so far as the goods or services are exchanged for points, but a payment is subsequently made by LMUK which is based on the value of the points as agreed with the redeemer, it would be possible, if these aspects of the present case were considered in isolation, to conclude that that payment should be regarded as third party consideration for that supply, and taxed accordingly. As I have explained, however, there is another dimension to the case, which the Court of Justice was not requested to consider, and which it therefore left out of account. The appeal before this court is concerned with the claim of LMUK, a taxable person, to deduct input tax. LMUKs business is of an unusual character. Through the Nectar scheme, it provides collectors with a contractual right to obtain goods and services from redeemers in exchange for points. It is common ground before this court that that is a taxable supply, and that the taxable amount is the whole of the consideration which is received by LMUK. The counterpart of the right supplied to collectors is an obligation on the part of LMUK to procure that redeemers provide goods and services in exchange for points. The payments made to redeemers constitute the cost of fulfilling that obligation, and are therefore a cost of LMUKs business. Applying the principles summarised in paragraphs 73 and 74 above, VAT should be chargeable on LMUKs taxable supplies only after deduction of the VAT borne by LMUKs necessary costs. The most obvious of those costs, as I have explained, is the cost of securing that goods and services are provided to collectors in exchange for their points: that is to say, the payments made by LMUK to the redeemers. The principles summarised in paragraphs 73 and 74 therefore indicate that LMUK should be authorised to deduct from the VAT for which it is accountable the VAT charged by the redeemers, so that it accounts for VAT only on the added value for which it is responsible. Only in that way will VAT be completely neutral as regards LMUK. It is implicit in that approach that the transaction between a redeemer and LMUK involves a taxable supply by the former to the latter. That analysis appears to me to be consistent with economic reality. LMUK carries on a genuine business for its own benefit. It issues the points in its own name and on its own behalf: it is not a mere cipher for the sponsors. As a matter of economic reality, the payments which it makes to redeemers are an essential cost of its business. Its business model is to sell the right to receive goods and services, pay redeemers to provide the goods and services, and derive a profit from the difference between its income from the sponsors and its expenditure on the redeemers. There is a legal relationship between the redeemer and LMUK pursuant to which there is reciprocal performance. In accepting points, which have no inherent value, in exchange for goods or services, the redeemer is acting in a manner which is only explicable because of its agreement with LMUK, under which LMUK will pay it for doing so. LMUK pays it for doing so because its business is dependent on redeemers accepting points in exchange for the provision of goods and services. The only economically realistic explanation of LMUKs behaviour is the value to LMUK itself of the redeemers acceptance of points in exchange for the provision of goods and services. In these circumstances, it can in my view be said that the remuneration received by the redeemer represents the value to LMUK of the service which the redeemer provides (cf Tolsma v Inspecteur der Omzetbelasting Leeuwarden (Case C 16/93) [1994] STC 509, para 14; First National Bank of Chicago v Customs and Excise Commissioners (Case C 172/96) [1999] QB 570; [1998] STC 850, paras 26 to 29). The approach described in the foregoing paragraphs is consistent with the fundamental principle, as the Court of Justice has described it, that a taxable person is entitled to deduct the VAT payable in the course of his economic activities. The alternative approach described in paragraph 76 is not. This approach is also consistent with the application of the guidance given in Redrow. If one asks whether, when the redeemer accepts points in exchange for the provision of goods or services to a collector, something is being done for LMUK for which, in the course or furtherance of its business, it has to pay a consideration, the answer seems to me to be in the affirmative, for the reasons given in paragraph 80. If one asks, what about taxation of the supply to the final consumer, the answer is that the Commissioners have decided to treat the issue of the points to the collectors that is to say, the award of the right to obtain goods and services from redeemers as a taxable supply. The taxable amount is agreed to be the whole of the consideration received by LMUK for the grant of those rights: an amount which exceeds the value received by the redeemers from LMUK when the rights are exercised. No question arises in this appeal as to whether that tax treatment is correct. Because of the principle of tax neutrality, however, that tax treatment has implications for the question in issue. As the Court of Appeal pointed out, if the provision of goods or services by redeemers were treated as a taxable supply to the collector (other than to the extent to which any monetary consideration might be paid by the collector), the tax authorities would receive not only VAT on the amount received by LMUK for supplying the right to receive those goods and services, but also VAT on the amount which LMUK must pay to satisfy that right. If, on the other hand, the consideration paid by LMUK to the redeemers is regarded as the consideration for the supply of a service to LMUK (a service which encompasses the provision of goods and services to collectors), the tax authorities will still receive VAT from LMUK on the difference between the value of the supplies which it makes in the course of its business (ie its receipts from the supply of the right to receive such goods and services) and the value of the supplies which it receives for the purposes of that business (ie the cost to LMUK of satisfying that right). The tax authorities will thus recover VAT on the value added by the taxable transactions entered into by LMUK, taking the issue and redemption of points as a whole. That conclusion is in accordance with the basic principle of VAT. Conclusion For these reasons, I would be inclined to uphold the decision of the Court of Appeal and dismiss the appeal. The parties should however be afforded an opportunity to make written submissions on the form of order to be made. LORD HOPE I think that it was a pity that a preliminary ruling was sought in this case. I agree with Chadwick LJs observation in the Court of Appeal that the real issue is not one as to the interpretation of Community legislation or as to the effect to be given to judgments of the Court of Justice, but rather as to how principles that are not themselves in doubt should be applied to particular facts: Loyalty Management UK Limited v Commissioners for HM Revenue and Customs [2007] EWCA Civ 938, [2008] STC 59, para 66. The CJEU seems to have taken a similar view. It did not seek an opinion from the Advocate General before it proceeded to judgment, indicating that in its view the case raised no new point of law. This places the reader at a disadvantage, as its judgment lacks the depth of reasoning which a judgment informed by an opinion would have provided. It is quite rare for the domestic court to find itself in this position. The recent case of OBrien v Ministry of Justice (Case C393/10) [2012] 2 CMLR 25 is an excellent example of the guidance that the CJEU normally gives on issues of EU law and there are, of course, many more. I also think that the questions that were referred, although agreed to by the parties and approved by the House of Lords, tended to obscure what became the real issue when the case was argued in Luxembourg. For this reason the CJEU can hardly be blamed for not addressing that issue directly when it was conducting its analysis. The situation was also complicated by the fact that in the case of Baxi Group Ltd (Case C 55/09), which was referred by the House to the CJEU at the same time, there was a separate set of questions designed to fit the facts of that case. The CJEU analysed the Baxi Group Ltd case separately in the same judgment. Its analysis of the facts of that case may have influenced its analysis of the present case to the disadvantage of its treatment of the case for LMUK. The issue Chadwick LJ said that the issue in the present case was whether there was a supply of redemption services by the redeemer to LMUK for the purposes of VAT: para 33. This is how LMUK put its case in paragraph 29 of its written observations to the CJEU: LMUKs analysis is that the redeemers made supplies to both LMUK (redemption services) and the collectors (rewards) and that the recipient in either case can deduct VAT which it pays, subject to the normal rules. Only LMUKs analysis results in the VAT being deductible (subject to the normal rules) by the person who has actually paid the VAT and ensures that the UK Government collects VAT on the amount of the consideration actually paid by the final consumer. [emphasis added] The words both and in either case in this analysis are important. They directed attention to the fact that LMUKs argument was that the redeemers were making supplies in both directions. The Revenues argument, on the other hand, was encapsulated in question (2)(b) of the reference (see para 29, above). It asked whether the provisions of articles 14, 24 and 73 of Council Directive 2006/112/EC of 28 November 2006 were to be interpreted, where payments were made by the promoter to the redeemers, such that those payments were to be characterised as consideration solely for the supply of goods and/or services by the redeemers to the customers. In paragraph 9 of its written observations the Revenue said that the correct analysis was that the relevant supplies were made by the redeemers to the collectors, and that the consideration given by LMUK to the redeemers was third party consideration for those supplies. The questions in paragraphs (2) (c) and (3) of the reference then asked whether the consideration was in part for the supply of services by the redeemers to LMUK and in part for supplies by the redeemers to the customers and, if so, what the criteria are for an apportionment. Their inclusion in the reference was unfortunate, as they tended to divert attention from the way the case was presented when it reached the CJEU. This was not, in the event, an analysis which was argued for by either party. It was not LMUKs case by that stage that the consideration that it paid to the redeemers was in part for the supply of services by the redeemers to it and in part for the supply of goods and services to the customers, and that the consideration could or should be apportioned accordingly. A question which directed attention to the argument that the redeemers made supplies both to LMUK and the collectors, and that the recipient in either case could deduct the VAT which it paid on the consideration for the supply, was not included in the reference. In his submissions to this court Mr Milne QC renewed the case which he had presented to the CJEU. He said that apportionment was not what his clients wanted, and emphasised that it had not been a live issue before the tribunal. LMUKs case, looked at from its point of view (see Customs and Execise Commissioners v Redrow Group plc [1999] 1 WLR 408, 412; [1999] STC 161, 166), was that services were supplied to it by the redeemers for which it paid consideration and, that as the payment it made to the redeemers attracted VAT, it was entitled to deduct input tax on that amount. The scheme required the co operation of both the sponsors and the redeemers. The redeemers were accountable for the VAT payable on the consideration which they received both for their supplies to the customers and for the services provided by them to LMUK. The customers, assuming that they were traders (as some of them were), and LMUK were both entitled to the benefit of the doctrine of fiscal neutrality. In para 33 of its judgment the Court said that the essence of the questions that were put to it in LMUKs case was whether payments made by LMUK to the redeemers must be considered as third party consideration for supplies to or for the benefit of customers (which was the Revenues case), or as the consideration for the supply of services made by the redeemers for the benefit of LMUK. This was an incomplete appreciation of the alternative analyses on which the Courts interpretation of the EU legislation was sought. The argument for the Revenue was that LMUKs ability to deduct the input tax on the consideration which it paid to the redeemers for the services that they provided for its benefit was excluded by the fact that the payments that it made to the redeemers were third party consideration for the goods or services provided by the redeemers to the customers. LMUKs argument was that the treatment of the consideration passing between it and the redeemers should be considered separately from that passing between the redeemers and the customers. A summary of the observations submitted to the CJEU is set out in paras 34 to 37 of the judgment. The Revenues case is appropriately summarised in para 36, that the payments made by LMUK to the redeemers must be regarded as third party consideration for supplies of goods and services to the customers. LMUKs case is summarised in para 34. The summary is in these terms: In Case C 53/09, LMUK argues that the payments which it made to the redeemers constitute the consideration for services supplied to it by the redeemers. Those services, it submits, consist of various contractually agreed services, including the redeemers undertaking to supply goods or services to customers without charge or at a reduced price. This formulation takes the point made by LMUK in paragraph 29 of its written observations. But it does not recognise the argument that the redeemers made supplies both to the collectors and to LMUK, and that the recipient in either case could deduct the VAT which it paid. The judgment The Courts reply to these observations begins in para 38. The obvious point is made in that paragraph that the system of VAT involves the application of a general tax on consumption which is exactly proportional to the price of the goods and services. In para 39 of the judgment reference is then made to economic realities as a fundamental consideration for the application of the system. Two examples are given: first, the meaning of place of business and, secondly, the identification of the person to whom goods are supplied. The second example is said to be illustrated by Auto Lease Holland BV v Bundesamt fr Finanzen (Case C 185/01) [2003] ECR I 1317. Having asked itself what the nature was of the transactions under the schemes at issue, the Court said in para 42 that the economic reality was that loyalty rewards were supplied by the redeemers to the customers. So far as it goes, this point was not in dispute. But no mention is made of the effect of applying the economic reality test to the argument that there was also a supply of services by the redeemers to LMUK. Here again the significance of the way LMUK put its case in paragraph 29 of its written observations, where the word both was used, appears to have been overlooked. In para 43 of its judgment the Court asks itself whether the supply of the rewards constituted a supply of goods or services effected for consideration by a taxable person. The conclusion is then drawn in para 49 that the redeemers were supplying goods and services to the customers within the meaning of articles 5(1) and 6(1) of the Sixth Directive. This is unsurprising. But it does not advance the argument, as it was already common ground between the parties. In para 50 the Court asks itself the question whether these supplies were carried out for consideration. In para 56 the point is made that article 11.A(1)(a) of the Sixth Directive provides that the consideration may be obtained from a third party. There then follows para 57, which is in these terms: In that regard, it is evident from the order for reference in Case C 53/09 that the exchange of points by the customers with the redeemers gives rise to the making of a payment by LMUK to those redeemers. The amount of that payment is the sum total of the charges, which are of a fixed amount for each point redeemed against all or part of the price of the loyalty reward. In that context, it must be considered that, as maintained by the United Kingdom Government, that payment corresponds to the consideration for the supply of the loyalty rewards. [emphasis added] At first sight the sentence which I have emphasised determines this appeal in favour of the Revenue. But the proposition which I have emphasised does not include the word solely. Nor is any mention made of the point that LMUK made in paragraph 29 of its observations, where the word both was used: that the redeemers were supplying services to LMUK too, and that the payments which LMUK made to the redeemers could also be seen as consideration for services supplied to it by the redeemers. If that proposition was being rejected at this stage on the ground that it was not in accordance with the economic reality, this is not clearly stated. Nor is any reason given here for its rejection. In paras 58 to 63 of the judgment there is an analysis of the issues raised by Baxi Group Ltd (Case C 55/09), where it was contended by Baxi that the consideration for the payment by it to the redeemer did not correspond to a supply of goods but to a complex advertising service under which the supply of loyalty rewards to customers was one of a number of services. The conclusion that the Court drew from its analysis of the facts of that case, assisted by a question directed to this issue, was that the payment could be divided into two elements, each of which corresponded to a separate service. This was because it was possible to identify a profit margin consisting of the difference between the retail sale price of the loyalty rewards to the customer paid by Baxi and the price at which those rewards were purchased by the redeemer. Its conclusion was that the payment was the consideration for two separate supplies. It was in part consideration, paid by the third party Baxi, for a supply of goods to the customers and in part consideration for the supply of services to Baxi. The answer to the question how, in view of that conclusion, the payment was to be apportioned between these two supplies was given in para 63. The judgment then sets out the conclusion that, in contrast to its conclusion in Baxi, the Court reached in LMUKs case. It is set out in para 64 as follows : By contrast, in Case C 53/09, LMUK has, in both its written and oral observations, asserted that the payments which it makes to the redeemers are not the consideration for two or more separate [supplies]. It is, however, for the referring court to determine whether that is the case. The first sentence is a correct statement as far as it goes. It distinguished LMUKs case from that of Baxi. But, for the reasons already mentioned, it does not address the question that needed to be answered. Here again, as in para 57 of its judgment, the Court seems to have overlooked the point that LMUK made in paragraph 29 of its observations that services were also supplied to LMUK by the redeemers in return for consideration paid by LMUK. If that proposition was being rejected, once again this is not clearly stated. The question which is then sent back to the referring court is not in point. LMUK was not asserting, and did not seek to argue before us, that the payments made to the redeemers were the consideration for two or more separate supplies. Lastly, there are the answers that the Court gives in para 65 to the questions referred in each case. The answer to the questions referred in LMUKs case is as follows: [P]ayments made by the operator of the scheme concerned to redeemers who supply loyalty rewards to customers must be regarded as being the consideration, paid by a third party, for a supply of goods to those customers or, as the case may be, a supply of services to them. It is, however, for the referring court to determine whether those payments also include the consideration for a supply of services corresponding to a separate [supply]. This answer brings together the points that the Court made in paras 57 and 64. Here again, it respectfully seems to me, the point that is really in issue in this case is not answered. The question sent back to the referring court must be taken to be the same as that which the Court set out in para 64. An affirmative answer to it would lead to the making of an apportionment of the consideration between the two separate services. But LMUK is not contending that there should be an apportionment. The CJEU then sets out a proposition for which LMUK was not contending and did not contend when the case came back to this court. The response We are, of course, obliged to treat any question as to the meaning or effect of any EU instrument as a question of law which must be determined as such in accordance with the principles laid down by and any relevant decision of the CJEU: section 3 of the European Communities Act 1972, as substituted by the European Union (Amendment) Act 2008, section 3 and the Schedule, Part 1. And where a question is referred to the CJEU for a preliminary ruling, it is our duty to give effect to the Courts ruling as to how the instrument must be interpreted according to the principles of EU law. We must be loyal to our Treaty obligations. But I do not read the ruling contained in this judgment as determining how the principles that it sets out are to be applied to the facts of this case. That is our responsibility. The problem that we face in looking to the judgment for guidance is that it does not say that the payments made by the promoters to the redeemers are to be characterised solely as consideration for the supplies by the redeemers to the customers. Nor does it say that the proposition that the redeemers made supplies in both directions and that the recipients of those supplies could deduct VAT on the payments they made must be rejected. That, as I understand the competing arguments which were advanced before us, is what is really at issue. In this situation it must be treated as an issue of fact for us to decide. It is worth recalling that in para 38 of his judgment in the Court of Appeal Chadwick LJ said that the passages which he had quoted from the speeches in Customs and Excise Commissioners v Redrow Group Plc provided clear authority for the propositions (a) that there is no reason why, in a VAT context, a supplier (S) may not be treated as making, in the same transaction, both a supply of services to one person (P1) and a supply of different services to another person (P2); and (b) that, in addressing a claim for input tax credit by P2, to whom services have been supplied in these circumstances, the relevant question are (i) did P2 make a payment to S, (ii) was that payment consideration for services supplied to P2 and (iii) were those services used or to be used in the course of a business carried on by P2. Having considered the speeches in Customs and Excise Commissioners v Plantiflor Ltd [2002] 1 WLR 2287; [2002] STC 1132 and the judgment of Neuberger LJ in WHA Ltd and another v Customs and Excise Commissioners [2004] STC 1081, Chadwick LJ observed in para 51 that the argument that found favour with Lindsay J in the present case which was that, in a case where it was possible to identify different supplies to different recipients in the same transaction, only one could be the relevant supply for VAT purposes was not self evident. His own conclusion was to the contrary. Mr Milne invited us to endorse that conclusion. As he put it, the fact that there was a supply to the customers did not eliminate the possibility of their having also been the supply of a service to LMUK. The ruling that has been obtained from the CJEU does not, as I have sought to show, address this issue. The question then is whether the judgment lays down any principles which are determinative of this issue. Mrs Whipple QC for the Revenue said that the question in this case all the way up has been: to whom was the supply made? She submitted that it must be taken from what the Court said in para 39 of its judgment that this question must be answered by considering the economic realities, as this was a fundamental criterion for the application of the system of VAT: Customs and Excise Commissioners v DFDS A/S (Case C 260/95) [1997] 1 WLR 1037, para 23 and Planzer Luxembourg Srl v Bundeszentralamt fr Steuern (Case C 73/06) [2007] ECR I 5655, para 43. The judgment in Auto Lease Holland [2003] ECR I 1317, paras 35 and 36 showed how this test was to be applied to identify the person to whom the goods are supplied. The case of Redrow was wrongly decided. The economic realities of the case could show that the supply was to a third party, not to the person who paid the consideration. That was the position in this case. The problem with this approach is that it does not exclude the possibility that there may, as a matter of economic reality, be two or more supplies within the same transaction. Mrs Whipple said that one must start with the economic reality, and I have no difficulty in accepting that. But what the economic reality is in a given case must surely be a question of fact for the domestic court. The statement that the Court makes in para 42 of its judgment that the economic reality is that the loyalty rewards are supplied by the redeemers to the customers is only part of the story. This is shown by the fact that the Court said in para 64 that it was for the referring court to determine whether the payments that LMUK makes to the redeemers were the consideration for two or more separate services. Presumably the test which it would have to apply, if it were to address this question, would be to consider the economic realities. If that is a question which it is proper to send back to the referring court, why is it not open to it to examine the question that the Court itself did not answer whether it is possible, upon consideration of the economic realities, to identify two different supplies by the redeemers to two different recipients in the same transaction? If, as the Court of Appeal held, it is possible to identify different supplies by the redeemers to different recipients in the transaction by which LMUK pays consideration to the redeemers, what then? It is not easy to see why the economic realities test should exclude the possibility there can be more than one relevant supply for VAT purposes. It seems to me that the judgment leaves it open to this court to determine whether, in fact and as a matter of economic reality, the redeemers may not be treated as having made, in the same transaction, both a supply of services to the customers and a supply of different services to LMUK or, as LMUK put its case in paragraph 29 of its written observations, the redeemers made supplies both to LMUK (redemption services) and to the customer (rewards). For the reasons the Court of Appeal gave, I would answer that question in the affirmative. Mrs Whipple argued strongly to the contrary. She submitted that it followed from the CJEUs judgment that Customs and Excise Commissioners v Redrow Group plc, which the Court of Appeal applied to the facts of this case, was wrongly decided. But I am unable to find anything in the CJEUs judgment that drives us to that conclusion. The only statement of principle which it contains is that consideration of economic realities is a fundamental criterion for the application of VAT: para 39. I do not see this as undermining the way the questions of fact were determined in Redrow or the conclusion by the appellate committee that, as the services in respect of which Redrow claimed input tax deductions were supplied for a consideration paid to it in return, it was entitled to the benefit of the deduction. I am not persuaded that Redrow was wrongly decided. I acknowledge, however, that some of the reasoning in Redrow needs to be adjusted in the light of later authority. I would not wish to alter what I said at [1999] 1 WLR 408, 412H 413A: was something being done for the person claiming the deduction for which, in the course or furtherance of a business carried on by him, he has had to pay a consideration which has attracted value added tax? But I think that Lord Millett went too far at p 418 G when he said that the question to be asked is whether the taxpayer obtained anything anything at all used or to be used for the purposes of his business in return for that payment. Payment for the mere discharge of an obligation owed to a third party will not, as he may be taken to have suggested, give rise to the right to claim a deduction. A case where the taxpayer pays for a service which consists of the supply of goods or services to a third party requires a more careful and sensitive analysis, having regard to the economic realities of the transaction when looked at as a whole. It may lead to the conclusion that it was solely third party consideration, or it may not. Conclusion For the reasons I have given, do I not see the CJEUs judgment as precluding a finding in LMUKs favour that the redeemers should be treated as having made, in the same transaction and as a matter of economic reality, both a supply of goods and services to the customers and a supply of different services to LMUK, and that LMUK is entitled to input tax credit on the consideration in return for which those different services were supplied to it. In my opinion the only conclusion that can properly and fairly be reached in this case is that the Court of Appeals decision should be affirmed. For these reasons, and for the further reasons given by Lord Reed, I would make the order that he proposes. LORD WALKER I am doubtful whether I can usefully add anything to the thorough and closely reasoned judgments of Lord Hope and Lord Reed, with which I am in full agreement. But as this Court is divided I think it right to restate, as briefly as I can, what I see as the essential reasons for dismissing this appeal. Anyone with even a passing acquaintance with value added tax is familiar with the basic concept of the fiscal neutrality of a chain of transactions which, however short or long, leaves the burden of the tax on the ultimate consumer. In BLP Group Plc v Customs & Excise Commissioners (Case C 4/94) [1996] 1 WLR 174, 190, [1995] ECR I 983, 993, [1995] STC 424, 430, para 30, the Advocate General (Lenz) referred to . an ideal image of chains of transactions . intended to attach to each transaction only so much VAT liability as corresponds to the added value accruing in that transaction, so that there is to be deducted from the total amount the tax which has been occasioned by the preceding link in the chain. In a simple chain (a wholly linear series of transactions) each transaction in the chain must be considered separately to determine what output tax is payable and what credit is available for input tax. But in developed economies wholly linear series of transactions are relatively unusual. Increasingly, businesses are organised so as to rely on subcontracting and outsourcing. Consumers are increasingly encouraged to obtain packages of goods and services put together by entrepreneurs. Many marketing schemes (such as that run by LMUK during the period now under consideration) operate through a construct of contractual relationships of some sophistication. It is a construct that is more like a web than a chain. In cases of that sort it is still necessary, in determining the proper amounts of output tax and input tax, to look separately at different parts of the web of transactions. But in determining the economic reality it is also necessary to look at the matter as a whole. This Court was not shown any authority establishing that a payment by A to B cannot be both consideration for a service supplied to A by B, and (as third party consideration) an element of the consideration paid for a supply by B to C (in this case, the collector, who is usually, but not always, also the final consumer). That negative proposition was adopted by Lindsay J in the Chancery Division in his once and one way only theory: [2007] STC 536, paras 58 and 76 to 80. In support of it he relied on EC Commission v Germany (Case C 427/98), [2002] ECR I 8315, [2003] STC 301. That was a case about a simpler promotional scheme for reduction of the retailers price for goods on presentation of a coupon distributed by the manufacturer to potential retail customers. But the Court of Justices decision related to the amount of tax on the supply by the retailer to the customer. It did not rule that the manufacturer must suffer a loss of input tax credit when it reimbursed the retailer, and it would have been inconsistent to have made such a ruling. Like Lord Hope and Lord Reed I consider that Customs & Excise Commissioners v Redrow Group Plc [1999] 1 WLR 408 and Customs & Excise Commissioners v Plantiflor Ltd [2002] 1 WLR 2287 were correctly decided, and are still good law. Lord Milletts unqualified language (anything anything at all) at p 418 may be capable of being misunderstood, but in context (including his explanation at p 417 of BLP Group Plc v Customs & Excise Commissioners) it must be understood as referring to anything that can properly be regarded as a taxable supply. Mrs Whipple QC suggested in her oral submissions that Plantiflor was an exception of a relatively small and insignificant category of cases of delivery. But if that expression is taken, in the common modern usage, to cover the delivery of a variety of packages of outsourced services, it can be seen as more than a small or insignificant category. The Court of Justice did not discern any significant issue of EU law arising on this case. The issue of economic reality is for the national court. I was one of the Law Lords who, five years ago, directed a reference to the Court of Justice, but with hindsight I recognise that it was unnecessary, and that it would have been better not to have made a reference. For these reasons, and for the much fuller reasons stated by Lord Hope and Lord Reed, I would make the order proposed by Lord Reed. LORD CARNWATH (with whom Lord Wilson agrees) (dissenting) Luxembourg has spoken In the light of the CJEU judgment, I would have regarded the appeal as bound to succeed. With respect to my colleagues, I find it difficult to see how their contrary view can be compatible with our responsibilities under the European Communities Act 1972. Criticism is made in the majority judgments of the form of the questions referred to the court, and even of the fact that a reference was made at all. I find this very surprising. The decision to refer was made by a panel of the House of Lords (Lords Hoffmann, Walker, and Mance, one of whom is a member of the present panel), following an oral hearing on 3 April 2008. Although there is no formal record of the reasons, they can be inferred from the Commissioners request, which pointed to an apparent conflict between the decision of the House in Redrow and the CJEU judgment in Auto Lease. The questions were then agreed by the parties in the normal way, submitted to the House on 30 June 2008, and adopted for the purpose of the reference. They were substantially in the form of the draft appended to in the Commissioners petition of appeal. LMUKs notice of objection, dated 16 November 2007, and signed by the counsel for LMUK (who had appeared successfully in the Court of Appeal), challenged the need for a reference; but LMUK did not take material issue with the form of questions proposed, then or later. We must assume that they were thought by all, including the members of the House and LMUK, to be the questions which needed answers in order to determine the appeal. I do not see how we can, properly or responsibly, go behind either the decision of the House to make the reference, or the questions which were then approved with LMUKs consent. Nor, still less (with respect to Lord Reed), do I believe that it is appropriate or fair for us now to decide that there were other relevant facts , necessary for the determination, but which, through oversight of ourselves and the parties, were not drawn to the attention of the court; and, further, that the true issues were not questions of law at all, so that we are free to redetermine them for ourselves as questions of fact, without regard to the CJEUs conclusions on them. Those are to me entirely novel and controversial propositions, on which at the very least I would have wished to hear submissions from the parties. As it happened, there was a significant delay between the agreement of the questions in June 2008 and the formal order making the reference on 15 December 2008, which was registered by the CJEU on 6 February 2009. This delay, as I understand it, was caused principally by the decision to link this case with the Baxi case. The history is summarised in a letter to the judicial office dated 19 February 2009 from LMUKs solicitors. In that letter, they complained of the delay and of the handling of the case by the office, but they made no criticism of the form of the questions. At some point, certainly before May 2009, new counsel (Mr Milne QC) was instructed. The hearing in the CJEU took place in January 2010. If at any time during that period LMUKs representatives had formed the view that the questions were defective in some way, they had plenty of time to seek to amend or supplement them. The real issue two supplies or one Lord Hope (para 89 above) defines what he calls the real issue by reference to a paragraph in LMUKs written observations to the CJEU: LMUKs analysis is that the redeemers made supplies to both LMUK (redemption services) and the collectors (rewards) and that the recipient in either case can deduct VAT which it pays, subject to the normal rules. Only LMUKs analysis results in the VAT being deductible (subject to the normal rules) by the person who has actually paid the VAT and ensures that the UK Government collects VAT on the amount of the consideration actually paid by the final consumer. (para 29, Lord Hopes emphasis) Lord Hope attaches importance to the words both and in either case, as showing the nature of LMUKs case. It was not that the consideration was to be apportioned between the two forms of supply; rather that, following Redrow, and looking at the matter solely from LMUKs own point of view (regardless of the collectors position), the whole consideration was paid for services supplied to LMUK, which was accordingly entitled to deduct input tax on the whole amount. If this was seen by LMUK as the real issue, it is strange that they took no steps to ensure that it was adequately reflected in the submitted questions. In LMUKs notice of objection to HMRCs petition, the sole issue was said to be whether the supplies were made to LMUK notwithstanding that third parties, namely the Collectors, also benefited de facto from the making of such supplies. The Commissioners suggested alternative of apportionment was said to have no merit in it. Against that background, I can only infer that the omission of a question directed specifically to Chadwick LJs formulation was a matter of deliberate choice, presumably because it was thought unlikely to succeed in Europe. As Lord Hope recognises, it is hard to criticise the CJEU for failing to answer an issue which had not been raised in the questions referred to it, even if mentioned in some of the subsequent observations. I note in passing Mr Milnes separate complaint about the lack of any specific reference, either in the questions, or in the Courts response, to the issue of deduction of input tax as such. I found this difficult to understand. Since deduction of input tax was what the case had been about from the outset, it is fanciful to suggest that there was any doubt in anyones mind of the context in which the questions were asked. It was referred to in terms in the European Commissions observations (see below), and the Court began its judgment by accurately summarising the course of proceedings below, beginning with LMUKs claim to deduct input VAT on its payments of service charges to the redeemers (para 13). Absence of an Advocate Generals Opinion In agreement with Lord Hope, I think it was unfortunate that there was no Advocate Generals Opinion in this case. This is by no means unusual. Published figures show that it happens in more than 40% of the cases decided by the court. But those figures say nothing about the relative importance of the various cases, or the level of the court from which they have been referred. Article 20, paragraph 5, of the CJEU Statute provides: Where it considers that the case raises no new point of law, the Court may decide, after hearing the Advocate General, that the case shall be determined without a submission from the Advocate General. I can understand that this case was thought to raise no new point of law, as such. The underlying principles had been discussed in many previous judgments. However, it was a reference by the highest court in this country. It should have been clear from the judgments below, and the submissions, that it had raised serious differences as to the correct application of those principles, including questions as to the authority of the leading House of Lords decision in the light of subsequent European authority. The court itself does not as a matter of practice comment directly on domestic cases, but the Advocate General may have more flexibility in that respect, and more opportunity to look at the issues in a wider context. Experience shows that the Advocate Generals Opinion can often provide a fuller discussion of the principles and their practical application, against which the sometimes sparse reasoning of the judgment can be easier to understand and apply. In this case, at least in retrospect, as the present controversy demonstrates, it was an unfortunate omission. On the other hand, it is important to note that United Kingdom interpretation was supported by the European Commission in written observations. They provide some useful background information, and to that extent did something to fill the gap left by the absence of an Advocate Generals opinion. In particular they addressed the possibility of a more comprehensive view, not dissimilar to that adopted by the Lord Reed: 21. One possible approach to such schemes would be to say that there is no such thing as a free gift. Loyal customers pay for those gifts as part of the price of goods they buy; customers who are not loyal, moreover, pay for the gifts enjoyed by those who are loyal. The cost of operating a loyalty scheme is a cost of business for the trader, and at any given level of profit there is no difference between lowering the price for all customers and selectively lowering the price for loyal customers by giving them more products for the same price. Nor is there any difference between giving loyal customers additional quantities of the products normally supplied by the trader and giving them other goods or services. Again, this is a form of price discrimination in favour of loyal customers: it is no different from granting them a quantity discount or for that matter a cash rebate. Over time, the customer has paid a certain amount for the whole of goods received by him, including those presented as being free. Accordingly, he should bear the VAT on that amount, which is the total of his consumption. There is no reason to charge additional VAT in respect of the free goods, because in reality he (together with the customers who are not loyal) has already paid for them. They rejected this approach as inconsistent with Kuwait Petroleum. They then considered whether the inclusion of the services made any difference to the analysis: 26. The circumstances of the present cases appear at first sight to fall within that analysis. However, in an apparent attempt to evade its consequences, the creators of the loyalty schemes concerned have introduced a nuance: the payments made to the redeemers, that is to say the persons supplying the goods to the customers, are described as payments for services. Those services are said to be redemption services (compendiously described in point 8 of the order for reference in Case C 53/09) or marketing services (in Case C 55/09). In the Commissions view the inclusion of the services did not make a material difference. The economic reality of the situation was that the redeemer was being paid to provide goods to the customers, and nothing more. Even if there can be said to be a service element, it is purely ancillary, and the core of the transaction is the supply of goods. (para 27) Accordingly, the payments were to be regarded as third party consideration for the supply of the goods, and no input VAT is deductible in respect of those payments. Such payments could be considered as including payment for services to promoters only in so far as it is possible to identify a service separate from the provision of the goods and to determine the price of that service. The courts reasoning In spite of the criticisms which can be made of some aspects of the judgment, I do not myself find any serious uncertainty about what the court has decided and why. In substance the court adopted the Commissions reasoning. It is important to read the judgment in the light of the words of the directive, and the previous European case law, and without any preconceptions derived from domestic case law, or from an independent view as to how the tax should operate. There are as I see it three crucial points underlying the courts decision. First, the supply of loyalty rewards by the redeemers to the collectors was to be treated as a distinct transaction, separate from the other elements of the rewards scheme (para 55). As the court noted (para 32), this approach accorded with the form of the questions and the submissions of the parties, and also with previous case law (Kuwait Petroleum [1999] ECR I 2323, para 28). That being so, it is unsurprising (as Lord Reed acknowledges paras 36 38 above) that the court did not undertake a broader analysis of the relationships between LMUK and the other parties involved. While I acknowledge the apparent attractions of Lord Reeds analysis and the elegance with which it is presented, the decision of the court is to my mind clear on this point and binding on us. Nor did I understand LMUK to argue otherwise. Secondly, the taxable event under the directive (article 2.1) is a supply of goods or services for consideration. In relation to any transaction, it is therefore necessary to start by identifying the relevant supply in respect of which tax is said to be chargeable or deductible. Thirdly, the amount of the charge to tax on the one hand, and the right to deduct on the other, are governed by two provisions of the Directive respectively: i) Article 11, which defines the taxable amount as everything which constitutes the consideration which has been or is to be obtained by the supplier from the purchaser, the customer or a third party for such supplies. ii) Article 17(2), which allows a taxable person the right, in so far goods and services are used for the purpose of his taxable transactions, to deduct value added tax due or paid in respect of goods or services supplied or to be supplied to him by another taxable person. It is noteworthy that these two provisions are not directly matched. From the point of view of the person making the supply, and accounting for the tax, the taxable amount is not limited to consideration from the recipient of the goods, but includes consideration from third parties. Conversely, the person seeking to deduct tax has to show, not merely that he gave consideration and paid tax in connection with his own taxable transactions. He must show also that the tax was paid in respect of goods or services supplied to him. Consideration given by a third party is taken into account in assessing the taxable amount, but there is no corresponding provision giving the person paying third party consideration the right to deduct. Applied to the facts of this case, if one ignores for the moment the incidental information and other support services given to LMUK by the redeemers, the CJEUs interpretation of those provisions is readily understandable. As is now common ground, the goods were supplied by the redeemers to the collectors, not to LMUK, who merely paid third party consideration for them. Article 17(2) gives LMUK no right to deduct, even though the consideration was paid in respect of their taxable transactions, because it was not paid in respect of supplies received by them. It is true that the redeemers had a contractual obligation to LMUK to make the supplies to the collectors. But there is nothing in the words of the directive to suggest that the mere fulfilment of a contractual obligation of this kind is to be equated with the supply of a service. This approach can be seen as a natural extension of the courts reasoning in Auto Lease Holland BV v Bundesant fr Finanzen (Case C 185/01) [2003] ECR I 1317. Under the fuel management agreement between Auto Lease and its lessees, the cost of petrol supplied to lessees was paid for by Auto Lease (through a credit card arrangement) and reimbursed by lessees by monthly payments and an annual balancing charge. It was held that there was no relevant supply to Auto Lease. The fuel management agreement was not a contract for the supply of fuel, but rather a contract to finance its purchase. The fuel was purchased not by Auto Lease, but by the lessee having a free choice as to its quality and quantity, as well as the time of purchase. (para 36). So here, the agreement between LMUK and the redeemers, so far as relates to the supply of goods, is no more than a contract to finance their purchase, the choice of goods and the time of purchase being left entirely to the collectors. Does the addition of the information and other services make any difference? The courts answer (para 58 64) was no, unless the services can be separately identified, and part of the consideration properly apportioned to them. That was possible in respect of Baxi but not LMUK. There is nothing surprising about that conclusion. Once it is accepted that the contractual obligation to supply the goods does not in itself amount to the taxable supply of a service to LMUK, there is no reason why the provision of such incidental services should fundamentally alter the position in relation to the goods element of the transaction, as opposed to any value properly attributable to the services as such. Other interpretations might have been possible. Arguably, a broader, more purposive interpretation might have led the court to an approach similar to that proposed by Lord Reed, and in line with that of the Court of Appeal in this case. That might also have had the attraction of avoiding what appears to be an element of double taxation if the scheme is looked at as a whole (as Lord Reed suggests para 84 above). However, that is (or should be) water under the bridge. Interpretation of the directive is ultimately a matter for the CJEU, not the domestic courts. We are bound to follow their lead. LMUKs submissions Mr Milne QC, for LMUK, submitted that, properly understood, the judgment is not inconsistent with the reasoning of the Court of Appeal. The finding that the payments were third party consideration for supply of rewards to customers did not exclude the possibility of their being at the same time consideration for redemption services supplied to LMUK. On the contrary, the judgment acknowledged that possibility in paragraph 64, by leaving it to the referring court to determine whether those payments also include the consideration for the supply of services corresponding to a separate supply. Accordingly there is nothing in the judgment to undermine the reasoning of Chadwick LJ, or the decisions in Redrow and Plantiflor on which it was based. In his oral submissions, Mr Milne relied strongly on the decision of the CJEU in Case C 165/86 Leesportefeuille Intiem CV v Staatssecretaris van Financin [1989] 2 CMLR 856 (Intiem), and the comments of the Advocate General in Case C 338/98 EC Commission v Netherlands [2004] 1 WLR 35; [2003] STC 1506. They showed that there could be a taxable supply of goods to one person, notwithstanding that delivery was to a third party. He also relied on a table, showing hypothetical payments and their tax consequences, as indicating that LMUKs argument alone was consistent with the underlying principle of fiscal neutrality. As a fall back position, Mr Milne argued for an apportionment on the basis that the service charge should be split between the cost incurred by the redeemer in providing the rewards, and the difference between such cost and the total service charge; alternatively on the basis of the market value of the services provided to LMUK less the cost of the rewards. He suggested that the issue might be remitted to a new tribunal for determination. Discussion Fairly read, it is impossible in my view to read the judgment as leaving open the possibility that the whole consideration might be taken as in respect of supplies both to LMUK and to the collectors. Even if that possibility was not addressed in terms, the judgment as a whole, particularly the reasoning in the Baxi case, leaves no serious doubt what the answer would have been. The court considered the argument that the payments should be treated, not as payment for supply of goods, but rather for a complex advertising service under which the supply of loyalty rewards to customers is one of a number of services (para 59). That argument was clearly rejected. The element of the payments, representing the price of the rewards and the cost of packaging and delivery, was treated solely as consideration for the supply of goods to collectors, only the profit margin being allocated to the services to Baxi (paras 61 63). That reasoning is inconsistent with the proposition that, other than by apportionment, the consideration could be treated at the same time as being in respect of supplies to both parties. Paragraph 64 of the judgment must be seen in that context. It cannot be read as leaving open the issue of whether the whole consideration could be treated as in respect of two different supplies. Although the issue of apportionment had not previously been raised in the LMUK case, and had been rejected by LMUK itself as without merit, it was included in the questions before the court, and therefore required an answer. Paragraph 64 follows the treatment of the same issue in the Baxi case, where it did arise. As I read paragraph 64, it is simply covering the same issue for the sake of completion in the LMUK case, indicating that, in the absence of any relevant findings before the court, it must be left to the domestic courts to determine. Intiem I turn to the argument based on Intiem. The company operated a business involving the distribution by its employees of a catalogue to customers at their homes. The employees used their own cars for deliveries. At the end of each working day, they were able to refuel at the companys expense at a filling station near the companys office, under a contractual arrangement between the company and the station. The filling station then invoiced Intiem for the petrol so supplied to employees. The issue referred to the CJEU was whether the company could deduct the full amount of tax on the petrol so supplied, notwithstanding that it was supplied in fact to the employees. That question was answered in the affirmative. Having noted that the right to deduct applied to goods and services connected with the pursuit of the taxable persons business, the Court said: 14 It must accordingly be concluded that this deduction system must be applied in such a way that its scope corresponds as far as possible to the sphere of the taxable persons business activity. Where, in such circumstances, article 17 (2) of the Sixth Directive restricts the taxable persons right of deduction, as regards the value added tax on supplied goods, to the tax due or paid in respect of goods . supplied to him, the purpose of that provision cannot be to exclude from the right of deduction the value added tax paid on goods which, although sold to the taxable person in order to be used exclusively in his business, were physically delivered to his employees. As the Advocate General had said: The fact that the petrol is pumped directly into the tank of the employees car and is used on account of the undertaking in no way affects the legal and economic reality of the transaction In economic terms, the petrol with which Intiem is invoiced and for which it has to pay constitutes one of its production cost components which bears the value added tax charged on it at the previous stage ([1989] 2 CMLR at p 861) That judgment was distinguished in Case C 338/98 EC Commission v Netherlands [2004] 1 WLR 35; [2003] STC 1506, where, under Dutch legislation, an employer was able to pay employees allowances for use of their cars in the employers business and a standard 12% deduction was allowed by way of input VAT. That arrangement was held to be incompatible with the relevant EU legislation for a number of reasons. The Court noted (para 37), and implicitly accepted, the Commissions identification of three significant differences from the facts of Intiem: first, there was no agreement between the employer and the supplier; secondly, the goods were not used exclusively for the employers business; and thirdly, the taxable employer was not invoiced by the taxable supplier. The Court arrived at its conclusion on the true interpretation of the Sixth Directive, while accepting that it might not appear fully consistent with certain objectives pursued by that Directive such as fiscal neutrality and the avoidance of double taxation (para 55). Mr Milne submits that this case is analogous to Intiem, rather than the Netherlands case, in that, while the goods are physically supplied to the customers, that is in pursuance of contracts between LMUK and the Redeemers, and invoiced accordingly, and it is done wholly for the purposes of LMUKs business. Attractively though the argument was put, the short answer is that it is irreconcilable with the CJEUs decision in this case. The Court has clearly decided that, on the facts of this case, and notwithstanding the contractual position, economic reality lies in treating the rewards as goods supplied to the collectors and not, directly or indirectly, as part of services supplied to LMUK. Previous House of Lords authorities It remains to consider how the judgment in this case affects the reasoning and conclusions of the House of Lords in the Redrow and Plantifor. The relevant facts and the essential reasoning of the House of Lords in each case have been described by Lord Reed. Like him, I see no reason to doubt the correctness of the decision in either case, but hesitate to regard either as laying down a universal rule. The Commissioners position on the correctness of the decision in Redrow has fluctuated. Lindsay J recorded, and in effect adopted, their submission (presented at that time by Mr Vajda QC) that Redrow was distinguishable on the facts: Mr Vajda draws attention to the very different facts of Redrow. There it was Redrow not the prospective house purchaser who chose the estate agents and gave instructions to them. Redrow obtained a contractual right as against the estate agents and could even prevent or override changes in the agents' instruction which the house purchasers might otherwise have been minded to make By contrast, says Mr Vajda, it was not LMUK that selected the particular goods or services enjoyed by way of reward by Collectors, nor, (in the sense that no Collector was bound to use points in all his acquisitions but could deal with retailers who were not Suppliers) was it LMUK that selected who it was that was to supply them. LMUK had no role in determining whether goods or services should be acquired by Collectors only by the use of points or wholly by cash or partly for one and partly for the other or in what proportions between the two forms of satisfaction. Nor is it the case that such provision as is made to Collectors is exclusively at LMUK's expense; in all cases where points alone did not suffice the Collectors, too, would bear some expense. In Redrow it was easy enough to see the legal and financial characteristics that were there being examined as pointing to a supply to Redrow but the overriding characteristics of the Programme suggest a provision to Collectors, says Mr Vajda, with third party consideration for that provision coming from LMUK (para 72 73) Similar submissions were made in the Commissioners written observations to the CJEU, when it was asserted that the House of Lords reached the correct result in the Redrow case, but for the wrong reasons. By contrast, before us Mrs Whipple for the Commissioners submitted that neither the reasoning nor the conclusion in Redrow was compatible with the CJEU decision in the present case. The House of Lords had been wrong to focus on the position from the point of view of the taxpayer, rather than determining the economic reality of the transaction. On that view, the estate agency services were supplied to the householders, albeit subject to a measure of control by Redrow. Lord Hope was right to acknowledge that reality (clearly the estate agents were supplying services to prospective purchasers), but wrong to think that it could stand with a finding that tax was deductible by the person who instructed the service and who has had to pay for it of the benefit of the deduction ([1999] 1 WLR 408, 412). I prefer the Commissioners earlier view. The facts of Redrow differed markedly from those of the present case, for the reasons Mr Vajda gave. Although the prospective purchasers benefited, Redrow did not merely pay for the services, but exercised a high degree of control and received benefits for purposes directly related to its own business objectives. By contrast, in the present case LMUK had no direct or indirect interest in the reward goods themselves; their interest was only in the fulfilment of obligations previously undertaken as part of the rewards scheme as a whole. As Lord Reed has noted, Redrow was followed and applied in Plantiflor, though the outcome in the latter case was victory for the Commissioners. It is unnecessary to repeat his description of the case. Mrs Whipple submitted that the decision in Plantifor is compatible with the reasoning of the CJEU in the present case. As she put it in her printed submissions, in terms with which I readily agree: There plainly are cases which fall properly within the delivery model referred to by Lord Millett as being cases where the arrangements consist of the right to have goods delivered or services rendered to a third party. A typical example is where A contracts with B to have flowers delivered to C. The economic reality of those arrangements is that A and B contract, on terms that As payment is to B, for services provided to A, those services consisting of delivery to C. In CEC v Plantifor, Plantifor contracted with Parcelforce to have flowers delivered to its customers. The supply was by Parcelforce to P of the service of delivering Ps goods (plants and garden products) to Ps customers pursuant to a contract for delivery made between Parcelforce and P, and for a consideration payable by P. The House of Lords correctly identified the VAT supply as being, on these facts, by Parcelforce to P, and not to Ps customer. I do not find it necessary or useful to consider in detail the other cases to which we have been referred. They merely serve to illustrate, as Lord Reed has said, how difficult and fact sensitive the issues may be in individual cases. Other issues I have noted that the CJEU left open the possibility of an apportionment of the service charge, and LMUK has proposed that the issue should be referred back to the Tribunal. I agree with Mrs Whipple that this point is not open to them at this stage, having clearly and repeatedly declined hitherto to make it a part of their case. It would be contrary to well established principles to remit the case to the Tribunal for findings on factual issues which could have been but were not raised when the matter was originally before them. Both parties have claimed that the principles of fiscal neutrality support their respective cases. I have found this a somewhat elusive concept on the facts of this case. It must be assumed that so far as appropriate this aspect has been taken into account by the CJEU in their decision. We were told by Mr Milne that they were shown the tables which are before us, and which appear to show an element of double taxation looking at the scheme as a whole. However, as I have indicated, where third party consideration is involved, a potential for imbalance is inherent in the definitions respectively of the taxable amount and of the right to deduct. It is clear from the CJEU case law that the principle of neutrality is not to be treated as an overriding principle of interpretation such as to justify a departure from the words of the directive (see for example EC Commission v Netherlands cited above). Conclusion For these reasons, I would have allowed the appeal, and restored the order of Lindsay J.

The Respondent (LMUK) operates the Nectar loyalty card scheme (the scheme). As part of the scheme, it enters into contracts with certain retailers (redeemers). Under such contracts, each redeemer is required to provide customers (collectors) with goods and services wholly or partly in exchange for Nectar points. That they do so is essential to the functioning of the scheme. The collectors earn such points through purchases made from other retailers (sponsors), who pay LMUK for allowing them to do so. Those payments are subject to VAT, on the basis that LMUK provides a taxable supply of services. The Respondent pays each redeemer a service charge for allowing customers to exchange points for goods or services. LMUK sought to deduct the VAT element of the service charge as input tax on the basis that, under the relevant EU legislation, the service charge was paid by LMUK to the redeemers for a service supplied to it for the purpose of its business. The Appellant (the Commissioners) maintained that under that legislation the service charge constituted third party consideration for the redeemers supply of goods and services to collectors, and that therefore LMUK could not deduct input tax. When the issue came before the House of Lords, it referred the question of how to characterise the service charge under EU law to the Court of Justice of the European Union (CJEU). The CJEU concluded that the service charges amounted, at least in part, to third party consideration. When the case returned to the Supreme Court, it nevertheless decided ([2013] UKSC 15) by a majority of three to two that LMUK was entitled to deduct the VAT element of the service charge. It did so on the basis that, having regard to the contractual relationships between LMUK, the sponsors, the collectors and the redeemers, the service charge was paid by LMUK to the redeemers for a service supplied to LMUK for the purpose of its business. The Court respectfully declined to follow the CJEUs characterisation of the service charge as third party consideration on the basis that the terms of the reference to it by the House of Lords had precluded the CJEU from considering all relevant aspects of the relationships between the parties involved in the Nectar scheme. The Court allowed the parties an opportunity to make written submissions as to the form of the order it should make. The Commissioners invited the Court to make a further reference to the CJEU on two principal grounds. First, they argued that a national court is obliged under EU law to make a further reference if it finds the ruling of the CJEU on the first reference to be incomplete or unsatisfactory. Second, they argued that there must be an issue of EU law raised in the present appeal on which a decision is necessary and which cannot be considered to be reasonably clear, as the Supreme Court decided the case by a narrow majority. LMUK opposed a further reference and invited the Court to dismiss the appeal. The Supreme Court unanimously refuses the Commissioners request for a further reference to the CJEU and dismisses the appeal. Lord Reed gives the judgment of the Court. The Court rejects the Commissioners first principal argument [4 5]. It notes that its previous judgment had not questioned the CJEUs ruling on any question of EU law, but rather had proceeded on the basis of a more comprehensive account of the facts than the CJEU was afforded. The Courts previous judgment had, first, considered that the CJEUs judgment had identified the relevant principles of law but had applied them to the incomplete factual scenario it had been presented with by the House of Lords and, second, applied those principles to the fuller factual account of which it was apprised. As such, no question of EU law now arises and a further reference is not necessary. The Court also rejects the Commissioners second principal argument [6]. It does so on the basis that, in the Courts previous judgment, the majority considered that the case could be decided by applying well established principles to the facts of the case. Further, the majority and the minority both acknowledged that the CJEU judgment dealt with the case on the basis that it raised no new point of law. The issues raised by the minority in the previous judgment, so far as relating to EU law, are not considered to require or justify a further reference to the CJEU. As a result of the above findings, the Court does not consider a further reference to the CJEU to be necessary. It also notes that it would be unfortunate if the position were otherwise, given that this litigation commenced in 2003 [7].

Mr Martin Fowler is a qualified diver, resident in the Republic of South Africa. During the 2011/12 and 2012/13 tax years he undertook diving engagements in the waters of the UK Continental Shelf. Although his status has yet to be determined, the preliminary issue which is the subject of this appeal requires it to be assumed that he undertook those engagements as an employee, rather than as a self employed contractor. HMRC claim, but Mr Fowler denies, that the income which he earned from those diving engagements is subject to UK taxation. That depends on how the double taxation treaty between the UK and South Africa (the Treaty) applies to a person in his position. In a nutshell, the Treaty provides for employment income to be taxed in the place where it is earned, in the present case in the UK, but for the earnings of self employed persons to be taxed only where they are resident, in Mr Fowlers case in South Africa. Thus far the answer might appear to be simple. If (as is to be assumed) Mr Fowler was an employee, then he should be taxable only in the UK. But the matter is complicated by two factors. The first is that employed divers doing the particular kind of diving work in UK waters which Mr Fowler did are, under UK tax law, to be treated as if they were self employed for income tax purposes. The second is that terms used in the Treaty, if not defined in the Treaty itself, are to be given the meaning which they have in the tax law, or the general law, of the state seeking to recover tax, here the UK. Thus, if the effect of the UK tax laws requirement to treat Mr Fowler as if he was self employed is to govern the meaning of relevant terms in the Treaty, the outcome might be that he was to be treated as self employed under the Treaty, and therefore taxable, if at all, in South Africa. This was the conclusion of the majority in the Court of Appeal, from which HMRC appeals to this court. In fact, such an outcome could mean that Mr Fowler was not taxable in either country, because the question whether he was taxable in South Africa would not be governed by the meaning of Treaty terms established by reference to UK tax law. He would probably be treated in South Africa as an employee. To the extent that domestic South African tax legislation did not tax the earnings of residents employed abroad he would not be taxable there or in the UK. There is no general provision in this Treaty, as there is in many others, to deal with what is called double non taxation. But the question whether South Africa did tax the earnings of its residents employed abroad was not investigated in these proceedings so it would be inappropriate to place any weight on this consideration in construing the Treaty. The Treaty The Double Taxation Treaty between the UK and South Africa takes the form of a Convention ( and is described in the Treaty as the Convention) which came into force in the UK by means of the Double Taxation Relief (Taxes on Income) (South Africa) Order 2002 (SI 2002/3138), being annexed to the order in the form of a Schedule. Its preamble recites that it had been agreed for the purpose of promoting and strengthening the economic relations between the two countries, avoiding double taxation and preventing fiscal evasion. For present purposes the most relevant provisions are as set out below. Other provisions will be mentioned in due course. Article 1 headed Persons Covered provides that: This Convention shall apply to persons who are residents of one or both of the Contracting States. Article 2 headed Taxes Covered provides in paragraph (1) that: This Convention shall apply to taxes on income and on capital gains imposed on behalf of a Contracting State or of its political subdivisions, irrespective of the manner in which they are levied. Article 3 is a definition provision. Paragraph (1) contains a number of specific definitions, some exclusive and some non exclusive, and all under the preamble unless the context otherwise requires. Only three need be quoted. the term business includes the performance of (d) professional services and of other activities of an independent character; (g) business; the term enterprise applies to the carrying on of any (h) the terms enterprise of a Contracting State and enterprise of the other Contracting State mean respectively an enterprise carried on by a resident of a Contracting State and an enterprise carried on by a resident of the other Contracting State; There is no definition of employment. Article 3(2) is all important: As regards the application of the provisions of this Convention at any time by a Contracting State, any term not defined therein shall, unless the context otherwise requires, have the meaning that it has at that time under the law of that State for the purposes of the taxes to which this Convention applies, any meaning under the applicable tax laws of that State prevailing over a meaning given to the term under other laws of that State. Looking at article 3 as a whole, the following points may be noted. First, paragraph (2) provides an always speaking means of ascertaining the meaning of terms in the Treaty which are undefined therein. It is always speaking because it requires meaning to be ascertained by reference to the national law of a Contracting State at that time, that is at the time when the Treaty falls to be applied. Secondly, the terms of the Treaty which fall to be given meaning for the purposes of this appeal are employment, business and enterprise. Employment is not a defined term, so that article 3(2) applies to it with full force. But enterprise is defined, and business has a partial definition, in both cases in article 3(1). Article 7 is concerned with business profits. Its relevant provisions are as follows: (1) The profits of an enterprise of a Contracting State shall be taxable only in that state unless the enterprise carries on business in the other Contracting State through a permanent establishment situated therein. If the enterprise carries on business as aforesaid, the profits of the enterprise may be taxed in the other state but only so much of them as is attributable to that permanent establishment. (6) Where profits include items of income or capital gains which are dealt with separately in other articles of this Convention, then the provisions of those articles shall not be affected by the provisions of this article. Applying the definitions in article 3(1) quoted above, if Mr Fowler had been, within the meaning of the Treaty, carrying on an enterprise by his diving activities on the UK continental shelf, it would nonetheless have been an enterprise of South Africa and the profits taxable (if at all) there. This is because it is common ground that he had no permanent establishment in the UK. Article 14 is about income from employment. It is only necessary to consider paragraph (1): Subject to the provisions of articles 15, 17 and 18 of this Convention, salaries, wages and other similar remuneration derived by a resident of a Contracting State in respect of an employment shall be taxable only in that State unless the employment is exercised in the other Contracting State. If the employment is so exercised, such remuneration as is derived therefrom may be taxed in that other State. It is to be noted that article 14(1) does not prohibit the state in which an employee is resident from taxing him on his income earned abroad. It merely permits (but does not require) the state where he is working to tax him. In such a case article 21 then avoids double taxation, by requiring the state where the employee is resident to give credit for the tax paid in the state where he works. Nonetheless states may choose, in certain circumstances, not to tax resident employees on all or part of their foreign earnings. Article 17 deals with pensions and annuities. Paragraph (1) provides that: Subject to the provisions of paragraph (2) of article 18 of this Convention: (a) pensions and other similar remuneration paid in consideration of past employment, and (b) any annuity paid, to an individual who is a resident of a Contracting State shall be taxable only in that State. Articles 7, 14 and 17 illustrate one of the main methods by which the Treaty seeks to avoid double taxation, namely by identifying specific categories of income (or profits) and providing for each to be taxable in one or other Contracting State. Thus employment income is taxed where it is earned, whereas business profits are (subject to the rules about permanent establishment) taxable where the relevant business enterprise is resident. By contrast with employment income, pensions are taxable where the employee is resident. The other main method by which double taxation is avoided is by requiring credit to be given by one contracting state for tax charged or paid in the other. Article 21 headed Elimination of Double Taxation is the main provision to this effect. Article 24 headed Mutual Agreement Procedure enables a taxpayer to raise an objection to double taxation, leading to resolution by discussion between the competent tax authorities of both states. Finally, the recited objective of dealing with tax evasion is dealt with by provisions for exchange of information and mutual assistance in tax collection in articles 25 and 25A (as, respectively, substituted and inserted by the Schedule to the Double Taxation Relief and International Tax Enforcement (South Africa) Order 2011 (SI 2011/2441)). Guidance as to how the Treaty is to be interpreted as a whole is to be found in the Vienna Convention on the Law of Treaties, concluded in May 1969, in OECD commentaries on the OECD Model Tax Convention (the MTC), on which the Treaty is based, and in some UK authorities. Beginning with the Vienna Convention, article 31 provides, so far as is relevant, that: 1. A treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose. 4. A special meaning shall be given to a term if it is established that the parties so intended. Articles 7 and 14 of the Treaty have their origin in similar but differently numbered provisions in the MTC. The predecessors of articles 7 and 14 are articles 7 and 15 of the MTC. The OECD Commentary on article 15 notes, at para 8.1, that: It may be difficult, in certain cases, to determine whether the services rendered in a State by an individual resident of another State, and provided to an enterprise of the first State (or that has a permanent establishment in that State), constitute employment services, to which article 15 applies, or services rendered by a separate enterprise, to which article 7 applies or, more generally, whether the exception applies. The Commentary recognises that in different states, the national law may focus on either the form or on the substance of the relationship (paras 8.2 8.7). At para 8.7 it is acknowledged that the domestic law of the state applying the MTC is likely to prevail, but subject to two qualifications. The first is that the context may require otherwise (see again para 8.7). This qualification is of course expressly made in article 3(2) of the Treaty. The second qualification (expressed in para 8.11) is that: The conclusion that, under domestic law, a formal contractual relationship should be disregarded must, however, be arrived at on the basis of objective criteria. For instance, a State could not argue that services are deemed, under its domestic law, to constitute employment services where, under the relevant facts and circumstances, it clearly appears that these services are rendered under a contract for the provision of services concluded between two separate enterprises. Conversely, where services rendered by an individual may properly be regarded by a State as rendered in an employment relationship rather than as under a contract for services concluded between two enterprises, that State should logically also consider that the individual is not carrying on the business of the enterprise that constitutes that individuals formal employer The OECD Commentaries are updated from time to time, so that they may (and do in the present case) post date a particular double taxation treaty. Nonetheless they are to be given such persuasive force as aids to interpretation as the cogency of their reasoning deserves: see Revenue and Customs Comrs v Smallwood (2010) 80 TC 536, para 26(5) per Patten LJ. Existing UK authority gives some relevant general guidance on the interpretation of double taxation treaties. In Comrs for Her Majestys Revenue and Customs v Anson [2015] STC 1777 this court was considering the UK / USA Treaty. It was common ground that article 31 of the Vienna Convention applied. At paras 110 111, giving the leading judgment, Lord Reed said: Article 31(1) of the Vienna Convention requires a treaty to be interpreted in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose. It is accordingly the ordinary (contextual) meaning which is relevant. As Robert Walker J observed at first instance in Memec [1996] STC 1336 at 1349, 71 TC 77 at 93, a treaty should be construed in a manner which is international, not exclusively English. [111] That approach reflects the fact that a treaty is a text agreed upon by negotiation between the contracting governments. The terms of the 1975 Convention reflect the intentions of the US as much as those of the UK. They are intended to impose reciprocal obligations, as the background to the UK/US agreements from 1945 onwards makes clear. In the Smallwood case the Court of Appeal was considering the UK / Mauritius double tax treaty. At paras 26 29 Patten LJ provided a useful summary of the correct approach to interpretation, largely based on dicta of Mummery J in Inland Revenue Comrs v Commerzbank AG [1990] STC 285. The whole passage repays reading, but para 29 is worth quoting in full: As explained earlier, the provisions of the DTA [the UK / Mauritius double tax treaty] are given statutory effect in relation to the taxpayers concerned by section 788 TA 1988 [the Income and Corporation Taxes Act 1988 (ICTA)] as a form of relief against what would otherwise be the relevant tax liability under UK law. But the DTA is not concerned to alter the basis of taxation adopted in each of the Contracting States as such or to dictate to each Contracting State how it should tax particular forms of receipts. Its purpose is to set out rules for resolving issues of double taxation which arise from the tax treatment adopted by each countrys domestic legislation by reference to a series of tests agreed by the Contracting States under the DTA. The criteria adopted in these tests are not necessarily related to the test of liability under the relevant national laws and are certainly not intended to resolve these domestic issues. Although this passage was about a different treaty implemented under earlier legislation, its description of what the DTA was and was not concerned with is equally applicable to the UK / South Africa Treaty. The relevant UK tax legislation Tax on the earnings of employees is regulated by the Income Tax (Earnings and Pensions) Act 2003 (ITEPA). Section 4 defines employment, as follows: Employment for the purposes of the employment income Parts (1) includes in particular In the employment income Parts employment any employment under a contract of any employment under a contract of (a) service, (b) apprenticeship, and (c) Crown. In those Parts employed, employee and any employment in the service of the (2) employer have corresponding meanings. Sections 6 and 7 of ITEPA deal with employment income (section 6(5) as amended by section 882(1) of, and paragraph 585 of Schedule 1 to, the Income Tax (Trading and Other Income) Act 2005 (ITTOIA)). The relevant parts are as follows: 6. Nature of charge to tax on employment income (1) The charge to tax on employment income under this Part is a charge to tax on (a) general earnings, and (b) specific employment income. The meaning of employment income, general earnings and specific employment income is given in section 7. (5) Employment income is not charged to tax under this Part if it is within the charge to tax under Part 2 of ITTOIA 2005 (trading income) by virtue of section 15 of that Act (divers and diving supervisors). 7. Meaning of employment income, general earnings and specific employment income. (1) This section gives the meaning for the purposes of the Tax Acts of employment income, general earnings and specific employment income. There follow detailed and precise definitions of each of those terms, the detail of which does not matter. The Tax Acts referred to in section 7(1) include ITEPA and ITTOIA. Section 5 of ITTOIA contains the primary charging provision on trading profits, in the simplest possible terms: 5. Charge to tax on trade profits Income tax is charged on the profits of a trade, profession or vocation. Section 15, dealing with the income of certain divers and diving supervisors is central to this appeal. It provides: 15 Divers and diving supervisors (1) This section applies if a person performs (a) the duties of employment as a diver or diving supervisor in the United Kingdom or in any area designated by the duties consist wholly or mainly of Order in Council under section 1(7) of the Continental Shelf Act 1964 (c 29), (b) seabed diving activities, and (c) any employment income from the employment would otherwise be chargeable to tax under Part 2 of ITEPA 2003. (2) The performance of the duties of employment is instead treated for income tax purposes as the carrying on of a trade in the United Kingdom. (3) For the purposes of this section the following are seabed diving activities taking part as a diver in diving operations (a) concerned with the exploration or exploitation of the seabed, its subsoil and their natural resources, and (b) any such diving operations. acting as a diving supervisor in relation to Certain points about section 15 are plain, and common ground. First, it only applies to a particular class of employed divers, whose employment income would otherwise be taxable under ITEPA. Secondly, the types of divers covered are defined by reference to a particular kind of diving, and only if undertaken in UK or related waters. Thirdly, it may therefore apply only to part of the activities of divers under a particular contract of employment, since they might also be engaged to do other types of diving as well, or diving of the specified type in other waters. The reason for this particular tax treatment of this class of divers was a matter of some debate in submissions before this court. But the FtT found that it was because, at least at the time of the enactment of the precursor to section 15, section 29 of the Finance Act 1978, this class of divers commonly incurred their own costs, and therefore deserved the more generous expenses regime afforded to the self employed, by comparison with employees. The FtT relied on an opinion to that effect published by the Office of Tax Simplification in March 2011, in preference to broader but less persuasive observations by the Financial Secretary to the Treasury in February 1978 when announcing the intention to introduce section 29: Hansard (HC Debates), 3 February 1978, written answers, col 359. There is no good reason to doubt that essentially factual finding by the FtT. It is clear that it was not a purpose of the deeming provision in section 15(2) to resolve some legal or factual uncertainty about whether such divers were genuinely employed or self employed. On the contrary, section 15 applies only to employed divers. ITTOIA contains two other deeming provisions similar to section 15(2), in section 9(1) relating to farming and market gardening and in section 12(2) relating to the profits of mines and quarries. But neither of these provisions, or their underlying purposes, shed useful light on the issues in this appeal. Deeming provisions There are useful but not conclusive dicta in reported authorities about the way in which, in general, statutory deeming provisions ought to be interpreted and applied. They are not conclusive because they may fairly be said to point in different directions, even if not actually contradictory. The relevant dicta are mainly collected in a summary by Lord Walker in DCC Holdings (UK) Ltd v Revenue and Customs Comrs [2011] 1 WLR 44, paras 37 39, collected from Inland Revenue Comrs v Metrolands (Property Finance) Ltd [1981] 1 WLR 637, Marshall v Kerr [1995] 1 AC 148; 67 TC 56 and Jenks v Dickinson [1997] STC 853. They include the following guidance, which has remained consistent over many years: (1) The extent of the fiction created by a deeming provision is primarily a matter of construction of the statute in which it appears. (2) For that purpose the court should ascertain, if it can, the purposes for which and the persons between whom the statutory fiction is to be resorted to, and then apply the deeming provision that far, but not where it would produce effects clearly outside those purposes. (3) But those purposes may be difficult to ascertain, and Parliament may not find it easy to prescribe with precision the intended limits of the artificial assumption which the deeming provision requires to be made. (4) A deeming provision should not be applied so far as to produce unjust, absurd or anomalous results, unless the court is compelled to do so by clear language. (5) But the court should not shrink from applying the fiction created by the deeming provision to the consequences which would inevitably flow from the fiction being real. As Lord Asquith memorably put it in East End Dwellings Co Ltd v Finsbury Borough Council [1952] AC 109, at 133: The statute says that you must imagine a certain state of affairs; it does not say that having done so, you must cause or permit your imagination to boggle when it comes to the inevitable corollaries of that state of affairs. Analysis Mr Jonathan Schwarz for Mr Fowler persuaded a majority of the Court of Appeal (Henderson and Baker LJJ), and has sought to persuade this court, that section 15 of ITTOIA compels us to treat a qualifying diver as carrying on a trade for all purposes under UK income tax law and therefore also under the Treaty as required by article 3(2), with the result that article 7 rather than article 14 applies to the taxation of his earnings. As Henderson LJ put it in the Court of Appeal at para 38: What, then, is the state of affairs which section 15(2) requires us to imagine? In my judgment there can be no room for doubt about the answer to this question. It is that the relevant duties of Mr Fowlers actual employment are instead to be treated for income tax purposes as the carrying on of a trade in the UK. Accordingly, in the imaginary world which we have to enter, the actual earnings of Mr Fowler from his employment must instead be regarded as profits (or, more accurately, as receipts which form part of a computation of trading income) of the trade which he is now deemed to have carried on. It follows that this deemed trade is the only source, for income tax purposes, from which taxable income can arise to Mr Fowler in respect of his relevant activities. Like Lewison LJ and Marcus Smith J in the Upper Tribunal I have, with respect, reached the opposite conclusion. My reasons follow. The starting point is that the question which of articles 7 and 14 of the Treaty applies to Mr Fowlers diving activities depends upon the true construction of those articles, in the context of the Treaty as a whole and its purposes, with the meaning of terms within those articles ascertained as required by article 3(2) by reference to UK income tax law. The relevant terms are, in article 7, profits and enterprise of a contracting state and, in article 14, salaries, wages and other similar remuneration and employment. Nothing in the Treaty requires articles 7 and 14 to be applied to the fictional, deemed world which may be created by UK income tax legislation. Rather they are to be applied to the real world, unless the effect of article 3(2) is that a deeming provision alters the meaning which relevant terms of the Treaty would otherwise have. This much is confirmed by paragraph 8(11) of the OECD Commentary quoted above, and it would be contrary to the requirement to treat the Treaty as a bilateral international agreement to do otherwise, as required by the dicta in the Anson case. Were it not for section 15 of ITTOIA, there would be no doubt that article 14, not article 7, would apply to Mr Fowlers diving activities, at least on the necessary but as yet untested assumption that he really was an employee. The meaning of employment is laid down in section 4 of ITEPA, and his remuneration plainly constitutes employment income within sections 6 and 7. UK tax law would not regard him as making profits from a trade, or his business as being that of an establishment. So the question is whether section 15 gives a different meaning to the relevant terms. That is not how a deeming provision works generally, nor does section 15(2) in particular. Section 15(1) uses employment and employment income in exactly the same way as is prescribed by sections 4, 6 and 7 of ITEPA, and the phrase performance of the duties of employment in section 15(2) again uses employment in the same way. Section 15 is about the taxation of income arising from the performance of those duties of employment but, introduced by the word instead, provides that the income is to be taxed as if, contrary to the fact, it was profits of a trade. Section 15 also uses trade in its conventional sense and does not therefore alter the meaning of enterprise in article 7, it being common ground that enterprise is descriptive of a business, and that business includes trade. In short, nothing in section 15 purports to alter the settled meaning of the relevant terms of the Treaty, viewed from the perspective of UK tax law. Rather it takes the usual meaning of those terms as its starting point, and erects a fiction which, applying those terms in their usual meaning, leads to a different way of recovering income tax from qualifying divers. Furthermore section 15 creates this fiction not for the purpose of deciding whether qualifying employed divers are to be taxed in the UK upon their employment income, but for the purpose of adjusting how that income is to be taxed, specifically by allowing a more generous regime for the deduction of expenses. This appears clearly from the express language of section 6(5) of ITEPA, which recognises that the income being charged to tax under section 15 is indeed employment income. If one asks, as is required, for what purposes and between whom is the fiction created, it is plainly not for the purpose of rendering a qualifying diver immune from tax in the UK, nor adjudicating between the UK and South Africa as the potential recipient of tax. It is for the purpose of adjusting the basis of a continuing UK income tax liability which arises from the receipt of employment income. Therefore to apply the deeming provision in section 15(2) so as to alter the meaning of terms in the Treaty with the result of rendering a qualifying diver immune from UK taxation would be contrary to its purpose. It would also produce an anomalous result. Nor should article 3(2) of the Treaty be construed so as to bring a qualifying diver within article 7 rather than article 14. To do so would be contrary to the purposes of the Treaty. This is because, as is recognised by article 2(1), the Treaty is not concerned with the manner in which taxes falling within the scope of the Treaty are levied. Section 15, understood in the light of section 6(5) of ITEPA, charges income tax on the employment income of an employed diver, but in a particular manner which includes the fiction that the diver is carrying on a trade. For those reasons I would allow this appeal.

Mr Martin Fowler is a qualified diver who is resident in the Republic of South Africa. During the 2011/12 and 2012/13 tax years he undertook diving engagements in the waters of the UKs continental shelf. HMRC says Mr Fowler is liable to pay UK income tax for this period. Whether he is liable depends on the application of a Double Taxation Treaty between the UK and South Africa. Article 7 of the Treaty provides that self employed persons are taxed only where they are resident (i.e. South Africa), whereas article 14 provides that employees may be taxed where they work (i.e. the UK). For the purposes of this appeal, the parties have assumed that Mr Fowler was an employee. Mr Fowler claims he is nevertheless not liable to pay tax in the UK. His case centres on a deeming provision in section 15 of the UKs Income Tax (Trading and Other Income) Act 2005 (ITTOIA). This provides that an employed seabed diver is treated as self employed for the purposes of UK income tax. A previous provision of this kind was originally enacted in the 1970s in order to allow employed seabed divers, who commonly paid for their own expenses, to access the more generous regime tax deductible expenses which was available to the self employed. Mr Fowler argues that, since he is treated as self employed for income tax purposes, he must be treated as self employed under the Treaty and is therefore only taxable in South Africa. HMRC, on the other hand, says ITTOIA does not affect whether someone is an employee, but only regulates the manner in which an employee is taxed. The issue has divided the courts below. The First tier Tribunal (Tax Chamber) was persuaded by Mr Fowlers arguments but the Upper Tribunal (Tax and Chancery Chamber) allowed HMRCs appeal. The Court of Appeal was divided on the question, with the majority agreeing with Mr Fowler. HMRC now appeals to the Supreme Court. The Supreme Court unanimously allows HMRCs appeal, holding that (if the parties factual assumptions are correct) Mr Fowler should be treated as an employee and is subject to UK income tax. Lord Briggs gives the only judgment. Expressions in the Treaty such as salaries, wages and other remuneration, employment and enterprise should be given their ordinary meaning unless domestic legislation alters the meaning which they would otherwise have [18; 30]. Section 15 of ITTOIA provides that a person who would otherwise be taxed as an employee is instead treated as self employed for the purposes of domestic income tax. Deeming provisions of this kind create a statutory fiction which should be followed as far as required for the purposes for which the fiction was created. The courts will recognise the consequences of that fiction being real, but not where this will produce unjust, absurd or anomalous results [27]. Although section 15 uses the expressions income, employment and trade, it does not alter the meaning of those terms but takes their ordinary meaning as the starting point for a statutory fiction [31 32]. Properly understood, it taxes the income of an employed diver in a particular manner which includes the fiction that the diver is carrying on a trade. That fiction is not created for the purpose of rendering a qualifying diver immune from tax in the UK, or for adjudicating between the UK and South Africa as potential recipients of tax, but to adjust the basis of a continuing UK income tax liability [33]. Since the Treaty is not concerned with the manner in which taxes are levied, it would be contrary to the purposes of the Treaty to redefine its scope by reference to ITTOIA. It would also be contrary to the purpose of ITTOIA and would produce an anomalous result [33 34].

Helredale playing field (the Field) is situated in Whitby, North Yorkshire, and it is owned by Scarborough Borough Council. The specific issue raised on this appeal is whether it should be registered as a town or village green under section 15 of the Commons Act 2006. The point of principle which this issue raises concerns the meaning of the expression as of right in section 15(2), and, more precisely, whether use is as of right when it is contemplated by the statutory provision under which a public body acquired and holds the land in question. This point, in turn, requires this Court to consider the reasoning of the House of Lords in R (Beresford) v Sunderland City Council [2004] 1 AC 889. The factual and legal background The factual background to the appeal is set out very fully in an excellent report prepared by Vivian Chapman QC, dated 28 July 2010, whose findings are accepted as accurate by the parties to these proceedings. For the purpose of this appeal, it is only necessary to set out his conclusions in very summary terms. The Field is some two hectares in extent, and it was acquired as part of a larger parcel of land, amounting to some fourteen hectares, under a conveyance dated 20 June 1951, by the statutory predecessor of Scarborough Borough Council, Whitby Urban District Council (and I shall refer to the two Councils simply as the Council), acting pursuant to their powers under section 73(a) of the Housing Act 1936, which permitted a local authority to acquire any land as a site for the erection of houses. The Council then developed most of the fourteen hectares for housing, and laid out and maintained the Field as recreation grounds pursuant to section 80(1) of the 1936 Act, with the consent of the Minister as required by that section. Sections 73 and 80 of the 1936 Act were repealed and substantially re enacted in the Housing Act 1957, whose provisions were in turn repealed and substantially re enacted (albeit with more amendments) in the Housing Act 1985. Section 12(1) of the 1985 Act (which is in Part II, concerned with provision of housing accommodation) is in virtually identical terms to section 80(1) of the 1936 Act (save that the Minister has been replaced by the Secretary of State), and it provides as follows: A local housing authority may, with the consent of the Secretary of State, provide and maintain in connection with housing accommodation provided by them under this Part (a) buildings adapted for use as shops, (b) recreation grounds, and (c) other buildings or land which, in the opinion of the Secretary of State, will serve a beneficial purpose in connection with the requirements of the persons for whom the housing accommodation is provided. (Denning J explained in a case on the effectively identically worded section 80(1) of the 1936 Act, HE Green and Sons v Minister of Health (No 2) [1948] 1 KB 34, 41, that the section did not require the use of buildings, recreation grounds or other buildings or land to be restricted to the persons for whom the housing accommodation is provided, and that the use could also validly extend to other members of the public.) Subsequent to the acquisition of the fourteen hectares, the Council acquired other land adjoining or close to the Field, which it then developed for housing. For at least the last fifty years, the relevant facts relating to the Field are as follows. It is surrounded by land consisting of three residential estates which were developed as local authority housing. It has four entrances, which are open at all times, and which have notices requiring dogs to be kept on leads and dog owners to clear up after their dogs. It has the appearance of a municipal recreation ground, mostly laid to grass, including a football pitch, and it is crossed by a hard surface path. The Council maintains the Field, in the sense of arranging for the regular mowing of the grass in summer and the marking out of the football pitch (currently once a year, but previously more frequently). The Field is used extensively and openly by local inhabitants for informal recreation, largely, but not exclusively, for children playing and walking dogs. Until 2005, the football pitch was used for local league football matches with the Councils licence. The procedural history On 12 October 2007, Vivienne Wright, acting on behalf of the Helredale Neighbourhood Council, of which she was secretary, applied to the North Yorkshire County Council (NYCC) to register the Field as a town or village green under section 15 of the 2006 Act. follows: Section 15 of the 2006 Act provides, so far as relevant to this appeal, as (1) Any person may apply to the commons registration authority to register land to which this Part applies as a town or village green in a case where subsection (2). applies. (2) This subsection applies where (a) a significant number of the inhabitants of any locality, or of any neighbourhood within a locality, have indulged as of right in lawful sports and pastimes on the land for a period of at least 20 years; and (b) they continue to do so at the time of the application. In order to determine the application, NYCC decided to appoint Mr Chapman to conduct an inquiry, which he duly held over two days in April 2010. Following that, he produced a report in July 2010, as mentioned above. (It was followed by a supplementary report in September 2010, but nothing hangs on that for present purposes). Apart from making detailed findings, including those summarised above, Mr Chapman concluded in his report that, although a significant number of the inhabitants of [the] locality [had] indulged in lawful sports and pastimes on the land for a period of at least 20 years their use had not been as of right. In other words, as Sullivan LJ put it in the Court of Appeal, the inspector concluded that although the use of the Field met all of the other requirements of section 15(2), the local inhabitants use of the Field for recreational purposes had been by right and not as of right [2013] 1 WLR 1521, para 3. Accordingly, Mr Chapman recommended that the application to register the Field as a town or village green be rejected. This recommendation was considered and accepted by NYCC on 8 October 2010. Christine Barkas, a member of the Neighbourhood Council applied for judicial review of this decision. Her application failed before Langstaff J [2011] EWHC 3653 (Admin), and her appeal to the Court of Appeal was dismissed for reasons given by Sullivan LJ in a judgment with which Richards and McFarlane LJJ agreed. She now appeals to this Court. The issue raised by this appeal The basic issue which the appeal raises is a short one: where land is provided and maintained by a local authority pursuant to section 12(1) of the Housing Act 1985 or its statutory predecessors, is the use of that land by the public for recreational purposes as of right within the meaning of section 15(2)(a) of the Commons Act 2006? NYCC, with the support of the Council, contend that the answer is no, whereas Ms Barkas, on behalf of the Neighbourhood Council, argues that the answer is yes. In the course of her argument, Ms Lieven QC, who appears for NYCC, and is supported by Mr Laurence QC, who appears for the Council, made it clear that she challenged part of the reasoning, and the ultimate decision, of the House of Lords in Beresford, although her primary contention is that it is distinguishable. As explained below the decision is on any view not without its difficulties. Accordingly, I propose first to consider the issue by reference to principle and one or two earlier decisions of the House of Lords, and only then to turn to Beresford. The meaning of as of right The origin of the expression as of right in the definition of town or village green in section 22(1) of the Commons Registration Act 1965, which is effectively for present purposes the statutory predecessor of section 15(2) of the 2006 Act, was authoritatively discussed by Lord Hoffmann in R v Oxfordshire County Council, Ex p Sunningwell Parish Council [2000] 1 AC 335, 349D 351H. As he said, it originates from the law relating to the acquisition of easements by prescription. Before examining what Lord Hoffmann said, it is, I think, helpful to explain that the legal meaning of the expression as of right is, somewhat counterintuitively, almost the converse of of right or by right. Thus, if a person uses privately owned land of right or by right, the use will have been permitted by the landowner hence the use is rightful. However, if the use of such land is as of right, it is without the permission of the landowner, and therefore is not of right or by right, but is actually carried on as if it were by right hence as of right. The significance of the little word as is therefore crucial, and renders the expression as of right effectively the antithesis of of right or by right. In his discussion on the point in Sunningwell, Lord Hoffmann began by explaining that [a]ny legal system must have rules of prescription which prevent the disturbance of long established de facto enjoyment, and went on to explain that a combination of statutory and common law had resulted in such enjoyment having to be twenty years nec vi, nec clam, nec precario; not by force, nor stealth, nor the licence of the owner. He went on to explain that each of these three vitiating circumstances would amount to a reason why it would not have been reasonable to expect the owner to resist the exercise of the right, namely, in the first case, because rights should not be acquired by the use of force, in the second, because the owner would not have known of the user and in the third, because he had consented to the user, but for a limited period. For the avoidance of doubt, I should interpose that the reference to a limited period clearly includes an indefinite period (as would arise under an unlimited but revocable permission), and that the word limited was meant to be contrasted with permanent. Lord Hoffmann ended his discussion by citing with approval Lord Lindleys statement in Gardner v Hodgsons Kingston Brewery Co Ltd [1903] AC 229, 239 that the words as of right were intended to have the same meaning as the older expression nec vi, nec clam, nec precario, a view also expressed by Lord Davey at [1903] AC 229, 238. In the subsequent case of R (Lewis) v Redcar and Cleveland Borough Council (No 2) [2010] 2 AC 70, which was concerned with the 2006 Act, Lord Walker confirmed at para 20 that as of right is sufficiently described by the tripartite test nec vi, nec clam, nec precario [as] established by high authority. (I would be prepared to accept that it is possible that, as Lord Carnwath suggests, there may be exceptional cases involving claims to village greens where this does not apply, but I am doubtful about that). And at para 30, Lord Walker accepted as a general proposition that, if a right is to be obtained by prescription, the persons claiming that right must by their conduct bring home to the landowner that a right is being asserted against him, so that the landowner has to choose between warning the trespassers off, or eventually finding that they have established the asserted right against him. stated in Gale on Easements (19th edition, 2012), para 4 115: In relation to the acquisition of easements by prescription, the law is correctly The law draws a distinction between acquiescence by the owner on the one hand and licence or permission from the owner on the other hand. In some circumstances, the distinction may not matter but in the law of prescription, the distinction is fundamental. This is because user which is acquiesced in by the owner is as of right; acquiescence is the foundation of prescription. However, user which is with the licence or permission of the owner is not as of right. Permission involves some positive act or acts on the part of the owner, whereas passive toleration is all that is required for acquiescence. The concept of acquiescence in this context was explained in the opinion delivered by Fry J (with which Lord Penzance expressed himself as being in entire accord at p 803), in Dalton v Henry Angus & Co (1881) 6 App Cas 740, 774, where he said: I cannot imagine any case of acquiescence in which there is not shown to be in the servient owner: 1, a knowledge of the acts done; 2, a power in him to stop the acts or to sue in respect of them; and 3, an abstinence on his part from the exercise of such power. That such is the nature of acquiescence and that such is the ground upon which presumptions or inferences of grant or covenant may be made appears to me to be plain Further in the recent case of Lawrence v Fen Tigers Ltd [2014] 2 WLR 433, para 43, I expressed the view that, as the Court of Appeal held in Sturges v Bridgman (1879) 11 Ch D 852, it appeared to accord with principle that: [T]ime does not run for the purposes of prescription unless the activities of the owner (or occupier) of the putative dominant land can be objected to by the owner of the putative servient land. The notion that an easement can only be acquired by prescription if the activity concerned is carried on as of right for 20 years, ie nec vi, nec clam, nec precario, would seem to carry with it the assumption that it would not assist the putative dominant owner if the activity was carried on of right for 20 years, as no question of force, stealth or permission could apply. Was the public use in this case as of right? In the present case, the Councils argument is that it acquired and has always held the Field pursuant to section 12(1) of the 1985 Act and its statutory predecessors, so the Field has been held for public recreational purposes; consequently, members of the public have always had the statutory right to use the Field for recreational purposes, and, accordingly, there can be no question of any inhabitants of the locality having indulged in lawful sports and pastimes as of right, as they have done so of right or by right. In other words, the argument is that members of the public have been using the Field for recreational purposes lawfully or precario, and the 20 year period referred to in section 15(2) of the 2006 Act has not even started to run and indeed it could not do so unless and until the Council lawfully ceased to hold the Field under section 12(1) of the 1985 Act. In my judgment, this argument is as compelling as it is simple. So long as land is held under a provision such as section 12(1) of the 1985 Act, it appears to me that members of the public have a statutory right to use the land for recreational purposes, and therefore they use the land by right and not as trespassers, so that no question of user as of right can arise. In Sunningwell at pp 352H 353A, Lord Hoffmann indicated that whether user was as of right should be judged by how the matter would have appeared to the owner of the land, a question which must, I should add, be assessed objectively. In the present case, it is, I think, plain that a reasonable local authority in the position of the Council would have regarded the presence of members of the public on the Field, walking with or without dogs, taking part in sports, or letting their children play, as being pursuant to their statutory right to be on the land and to use it for these activities, given that the Field was being held and maintained by the Council for public recreation pursuant to section 12(1) of the 1985 Act and its statutory predecessors. It is true that this case does not involve the grant of a right in private law, which is the normal issue where the question whether a use is precario arises. Indeed, the fact that the right alleged in this case is not a conventional private law right, but a public law right, was rightly acknowledged by Ms Lieven. Thus, it is a right principally enforceable by public rather than by private law proceedings. It is also a right which is clearly conditional on the Council continuing to devote the Field to the purpose identified in section 12(1) of the 1985 Act (and it is unnecessary for present purposes to go into the question of what steps the Council would have to take to remove the Field from the ambit of the section). Accordingly, the right alleged by the Council to be enjoyed by members of the public over the Field is not precisely analogous to a public or private right of way. However, I do not see any reason in terms of legal principle or public policy why that should make a difference. The basic point is that members of the public are entitled to go onto and use the land provided they use it for the stipulated purpose in section 12(1), namely for recreation, and that they do so in a lawful manner. It is worth expanding on this. Section 12(1) of the 1985 Act and its statutory predecessors bestow a power on a local (housing) authority to devote land such as the Field for public recreational use (albeit subject to the consent of the Minister or Secretary of State), at any rate until the land is removed from the ambit of that section. Where land is held for that purpose, and members of the public then use the land for that purpose, the obvious and natural conclusion is that they enjoy a public right, or a publicly based licence, to do so. If that were not so, members of the public using for recreation land held by the local authority for the statutory purpose of public recreation would be trespassing on the land, which cannot be correct. Of course, a local authority would be entitled to place conditions on such use such as on the times of day the land could be accessed or used, the type of sports which could be played and when and where, and the terms on which children or dogs could come onto the land. Similarly, the local authority would clearly be entitled to withdraw the licence permanently or temporarily. Thus, if and when it lawfully is able, and decides, to devote the land to some other statutorily permitted use, the local authority may permanently withdraw the licence; and if, for instance, when the land is still held under section 12(1), the local authority wants to hold a midsummer fair to which the public will be charged an entrance fee, it could temporarily withdraw the licence. I agree with Lord Carnwath that, where the owner of the land is a local, or other public, authority which has lawfully allocated the land for public use (whether for a limited period or an indefinite period), it is impossible to see how, at least in the absence of unusual additional facts, it could be appropriate to infer that members of the public have been using the land as of right, simply because the authority has not objected to their using the land. It seems very unlikely that, in such a case, the legislature could have intended that such land would become a village green after the public had used it for twenty years. It would not merely be understandable why the local authority had not objected to the public use: it would be positively inconsistent with their allocation decision if they had done so. The position is very different from that of a private owner, with no legal duty and no statutory power to allocate land for public use, with no ability to allocate land as a village green, and who would be expected to protect his or her legal rights. I draw support from observations in Hall v Beckenham Corporation [1949] 1 KB 716, a case which concerned the liability for nuisance of a local authority in respect of activities by members of the public on land held by the local authority under section 164 of the Public Health Act 1875. That section permits a local authority to acquire and maintain lands for the purpose of being used as public walks or pleasure grounds and to make bye laws as to their use, which can include the power to remove those who disobey the bye laws. Finnemore J said at p 727 that the local authority had no general right to turn people out because they do not like them, and could only act against people in the park who offend against their bye laws, or who commit some offence. At p 728, he observed that So long as a member of the public behaves himself in the ordinary way, committing no criminal offence and observing the bye laws, the [local authority] cannot stop his doing what he likes in this recreation ground. This conclusion followed from a pithy opinion given by Lord Halsbury LC in Lambeth Overseers v London County Council [1897] AC 625, which concerned the question whether the county council, which owned and maintained a park under a power accorded by a local Act of Parliament, were in rateable occupation of it. At pp 630 631, Lord Halsbury said that: there is no possibility of beneficial occupation to the county council; they are incapable by law of using it for any profitable purpose; they must allow the public the free and unrestricted use of it. In other words, members of the public had the statutory right to use the land for recreational purposes. It was suggested by Mr Edwards QC in his argument for Ms Barkas that, even if members of the public were not trespassers, they were nonetheless not licensees or otherwise lawfully present when they were on the Field. I have considerable difficulty with that submission. As against the owner (or more accurately, the person entitled to possession) of land, third parties on the land either have the right to be there and to do what they are doing, or they do not. If they have a right in some shape or form (whether in private or public law), then they are permitted to be there, and if they have no right to be there, then they are trespassers. I cannot see how someone could have the right to be on the land and yet be a trespasser (save, I suppose, where a person comes on the land for a lawful purpose and then carries out some unlawful use). In other words a tolerated trespasser is still a trespasser. Furthermore, the fact that the landowner knows that a trespasser is on the land and does nothing about it does not alter the legal status of the trespasser. As Fry J explained, acquiescence in the trespass, which in this area of law simply means passive toleration as is explained in Gale (or, in the language of land covenants, suffering), does not stop it being trespass. This point was well made by Dillon LJ in Mills v Silver [1991] Ch 271, 279 280, where he pointed out that there cannot be [a] principle of law that no prescriptive right can be acquired if the user has been tolerated without objection by the servient owner as it would be fundamentally inconsistent with the whole notion of acquisition of rights by prescription. Accordingly, as he added at p 281, mere acquiescence in or tolerance of the user cannot prevent the user being user as of right for purposes of prescription. Thus, if a trespass has continued for a number of years, then the fact that it has been acquiesced in (or passively tolerated or suffered) by the landowner will not prevent the landowner claiming that it has been and is unlawful, and seeking damages in respect of it (subject to the constraints of the Limitation Act 1980). For the same reason, if such a trespass has continued for 20 years and was otherwise as of right, it will be capable of giving rise to a prescriptive right. On the other hand, if the landowner has in some way actually communicated agreement to what would otherwise be a trespass, whether or not gratuitously, then he cannot claim it has been or is unlawful at least until he lawfully withdraws his agreement to it. For the same reason, even if such an agreed arrangement had continued for 20 years, there can be no question of it giving rise to a prescriptive right because it would clearly have been precario, and therefore by right. For these reasons, I would hold that this appeal should fail, but before reaching a final decision, it is necessary to address the decision in Beresford, which forms the lynch pin of the case advanced for Ms Barkas. The proceedings in Beresford The relevant factual basis on which Beresford was decided (as opposed to the fuller facts as explained by Lord Carnwath in his judgment below) are contained in paras 17 19 and 24 of Lord Scotts judgment and paras 89 90 of Lord Walkers judgment. The land in question had been acquired under what Lord Walker called very wide powers contained in the New Towns Act 1965 by Washington Development Corporation, for no specific purpose, although they gave active consideration to the possibility of developing the land as a sports centre, for which an entry fee would be charged. In 1973, the land was identified as parkland/open space/playing field for planning purposes in the local New Town Plan. In 1974, it was grassed over, following which it was continuously used by the public for recreational use. In 1977, the development corporation had placed some benches on the land, and arranged for the mowing of the grass in the summer (which was continued by their successors). The possibility of a sports centre had not been abandoned in 1989, when the land was transferred to the Commission for the New Towns, who considered that it also had commercial development potential. Seven years later the land was acquired by the city council under a transfer which restricted its use to that of courts, health facilities, leisure or recreation, or other similar community related uses. Section 3 of the 1965 Act empowered a development corporation to acquire, hold, manage and dispose of land and other property, to carry on any business or undertaking, and generally to do anything necessary or expedient for the purposes or incidental purposes of the new town. Section 21(1) of the 1965 Act provided that [a]ny land being, or forming part of, a common, open space or fuel or field garden allotment, which has been acquired for the purposes of this Act by a development corporation may be used by them, or by any other person, in any manner in accordance with planning permission. Open space is defined in section 54 of the 1965 Act as any land laid out as a public garden, or used for purposes of public recreation, or land being a disused burial ground. The 1965 Act was repealed and replaced by the New Towns Act 1981, and sections 4 and 21(1) of the later Act are effectively in identical terms to their statutory predecessors, and section 80 of the 1981 Act has a similar definition of open space to section 54 of the 1965 Act. At first instance and in the Court of Appeal, although the city council raised no argument based on the 1981 Act, they successfully argued that the land had been used by the public with the licence of the city council and their predecessors, on the basis that such a licence should be implied from their providing seating and mowing the grass. That was the only issue when the appeal was first argued before the House in May 2003. After argument had concluded, the House asked to be addressed on the point that members of the public had a statutory right to use the land for recreation. Having heard further argument, the House of Lords allowed the appeal, rejecting the city councils case both on the implied licence found below and in so far as it was based on statute. In other words, the House of Lords rejected the city councils case on the first and original point, namely that mowing the grass or erecting benches could justify the judges finding that there was an implied licence, and they also rejected the city councils case on the second point, raised by the House itself, and based on statute. The first point in Beresford: the meaning of as of right The observations of three of the four Law Lords who gave reasoned opinions on the first of those two issues are supportive of the reasoning set out in paras 14 28 above. Lord Bingham accepted at para 5 that a licence could be implied if the facts warranted it, but said in the following paragraph that such an implication could not be justified from mere inaction of a landowner and quoted with approval the observation of Dillon LJ in Mills. Lord Rodger at para 58 explained that English law distinguishes between an owner who grants a temporary licence and an owner who merely acquiesces, citing the passage quoted in para 17 above from an earlier edition of Gale. Lord Walker said at para 79 that [a]cquiescence denotes passive inactivity and added that it would be quite wrong to treat a landowners silent passive acquiescence as having the same effect as permission communicated. At para 80, he quoted what, as he put it, Dillon LJ very clearly, and to my mind very compellingly said in Mills. Mr Edwards contends, however, that Lord Scotts analysis in paras 43 50 justifies the argument which I have described and rejected in paras 27 and 28 above, namely that there can be cases where a person uses land with the permission of the landowner, but is nonetheless using the land as of right rather than by right. In para 43, Lord Scott rightly accepted that merely standing by, with knowledge of the use, and doing nothing about it, which he described as toleration or acquiescence, is consistent with the use being as of right. But he then said that he was unable to accept that an implied permission is necessarily in the same state as mere acquiescence or toleration: the word necessarily is rather odd, because, as was explained in the other three opinions, implied permission and mere acquiescence or toleration are clearly and fundamentally different in this area of law. Lord Scott then said that he was unable to accept that an implied permission [or even an express permission] is necessarily inconsistent with the use being as of right. I must confess that I find it hard to understand the basis upon which this was said, but, if it was intended to have the effect argued for by Mr Edwards, it is wrong in principle and unsupported by, indeed I think inconsistent with, the other opinions. I find paras 44 50 of Lord Scotts opinion problematical. To subject them to a detailed exegesis in this judgment would result in an unnecessarily lengthy judgment, as, while they contain statements which are correct, they also contain some statements which are in my opinion wrong and a number of others which are questionable. For present purposes, it suffices to identify two points of disagreement. First, I do not agree with Lord Scotts view in para 47 that public use of a site, on which the owner has erected a sign permitting use as a village green, would be as of right. It would amount to a temporary permissive use so long as the permission subsists, as the public use would be by right. Secondly, Lord Scotts conclusion in para 48 that, when using the land for recreation, members of the public were certainly not trespassers should ineluctably have led him to decide that the publics use of the land had been by right and not, as he did decide, as of right. It is true that Lord Hutton (who gave no reasons of his own) agreed with the reasons of Lord Bingham, Lord Rodger and Lord Walker; Lord Rodger agreed with the reasons of Lord Bingham and Lord Walker; Lord Walker agreed with the reasons of Lord Rodger and Lord Bingham; and Lord Bingham agreed with the reasons of Lord Scott, Lord Rodger and Lord Walker. Accordingly, I suppose it could be argued that Lord Scotts opinion represented the view of all five Law Lords. However, while Lord Binghams agreement with Lord Scotts reasoning is admittedly somewhat mystifying, that argument cannot stand in the light of the reasoning in the other three reasoned opinions. Even if the argument has any substance, I would still hold that paras 43 50 in Beresford cannot be relied on, as they include passages which are simply wrong in principle and contrary to well established authority, as well as being inconsistent with the other reasoned opinions. The second point in Beresford: the effect of statute I turn, then, to the more difficult aspect of the decision in Beresford, namely the rejection of the city councils case based on the 1981 Act. Lord Bingham dealt with the point very shortly in para 9, simply saying that none of the statutory provisions to which the House had been referred conferred a right on members of the public to use the land for recreation, adding that counsel for the city council who had not himself sought to raise this contention earlier, found it hard to argue otherwise. Lord Hutton, as mentioned, simply agreed with Lord Bingham, Lord Rodger and Lord Walker. At para 62, Lord Rodger agreed with Lord Walkers reasons for holding that neither the designation of the land as open space in the New Town Plan nor any of the statutes conferred [a] right [to use the land] in this case. The only two Law Lords who considered the issue in any detail were Lord Scott and Lord Walker. At paras 24 30, Lord Scott considered various arguments, based on section 21(1) of the 1981 Act and section 10 of the Open Spaces Act 1906. He plainly thought that there was force in the argument that either statutory provision may have justified the conclusion that the public use of the land was by right. However, he did not consider that it was open to the House to consider either argument as it had been expressly disclaimed by counsel for the city council (see paras 26 and 30). As for Lord Walker, at para 86, after referring to Hall, and observing that A local resident who takes a walk in a park owned by a local authority might indignantly reject any suggestion that he was a trespasser, he said that the notion of an implied statutory licence has its attractions. At para 87, he mentioned cases where land is vested in local authorities under section 10 of the 1906 Act, which, he explained, expressly provides that inhabitants of the locality are beneficiaries of a statutory trust of a public nature; in such cases, he thought, it would be very difficult to regard those who use the park or other open space as trespassers (even if that expression is toned down to tolerated trespassers) (a view shared by Lord Scott para 30). In para 88, he said that such a case would raise difficult issues, but as the facts of the Beresford case did not give rise to a trust, those issues did not arise. After setting out the facts in para 89, Lord Walker said at para 90 that [i]n short, there is no evidence of any formal appropriation of the land as recreational open space, and that there was no material from which to infer an appropriation, adding that appropriation as [an] open space would have been inconsistent with the sites perceived development potential. (And I agree with Sullivan LJ at para 34 in the Court of Appeal that Lord Walker was plainly not limiting the word appropriate to a case covered by section 122 of the Local Government Act 1972). He then went on to say in paras 90 91 that the fact that the recreational use by the public of the land was not inimical to the city councils interests did not prevent that use from being as of right. He concluded at para 92 that he would allow the appeal for the reasons which he had given as well as those of Lord Bingham and Lord Rodger, although he added that the decision may be thought to stretch the concept of a town or village green close to, or even beyond, the limits which Parliament is likely to have intended. As I see it, detailed consideration was given in none of the opinions in Beresford to any argument which could have been raised by the city council on specific statutory provisions. Lord Bingham and Lord Rodger dismissed the relevance of any statutory provision out of hand, not least, no doubt, because the city council did not rely on any of them. Lord Scott mentioned two provisions, section 21 of the 1981 Act and section 10 of the 1906 Act, but decided that neither could be considered because the city council disclaimed reliance on them. And Lord Walker ultimately simply relied on the fact that the city council (and their predecessors) had acquired the land under very wide powers for no specific purpose, had never subsequently appropriated the land for any specific purpose, and had envisaged an ultimate use of the land which was not for free public recreation. Should Beresford be followed, distinguished or disapproved on the second point? In the light of the decision on this second point in Beresford, there are, in principle, three possible courses open to us. The first, urged by Mr Edwards, is to hold that the facts of this case are, in principle, indistinguishable from those in Beresford, and to follow the reasoning in Beresford, and allow this appeal. The second, which was the approach adopted by the Court of Appeal and is the primary case advanced by Ms Lieven, is that we should distinguish Beresford, and dismiss this appeal. The third possible course, which is the alternative case of Ms Lieven, and which was not open to the Court of Appeal, is that we should overrule this aspect of the decision in Beresford. Even assuming Beresford was rightly decided on this point, I am wholly unpersuaded that it would undermine the conclusion I have provisionally reached at para 29 above. It is said that the views of Lord Walker at para 87 and Lord Scott at para 30, when they opined that land held as open space under section 10 of the 1906 Act is used by the public by right, do not support NYCCs case because they were obiter and because such land is expressly stated by section 10 to be held in trust to allow, and with a view to, the enjoyment thereof by the public as an open space. No doubt, those observations were obiter, but they are still worthy of respect, and once land is statutorily held by a council for the purposes of public recreation, it is hard to see why members of the public only have the right to use the land for that purpose if there is a super added trust to that effect. Be that as it may, I consider that the significant point for present purposes is that Lord Walker plainly thought that it was an important, indeed, it would appear, a crucial, factor in his reasoning that the land in Beresford had been acquired for no particular purpose and had never been appropriated for public recreational use. Not only was there no evidence of any such appropriation, but, he said at para 90, such an appropriation would have been inconsistent with the desire to develop the land. The facts of the present case are very different. The Field was, as I see it, appropriated, in the sense of allocated or designated, as public recreational space, in that it had been acquired, and was subsequently maintained, as recreation grounds with the consent of the relevant Minister, in accordance with section 80(1) of the 1936 Act: public recreation was the intended use of the Field from the inception. I am clearly of the view, therefore, that Beresford can, and ought to, be distinguished. In the present case, the land concerned was acquired and maintained by the local authority as public recreation grounds under a specific statutory power namely section 80(1) of the 1936 Act, now section 12(1) of the 1985 Act, and accordingly members of the public have used the land for recreation by right. By contrast, in Beresford, at least as the House of Lords concluded, the land concerned was neither acquired nor appropriated for any specific use, and, in so far as there was an intended use it was not for free public access; therefore there was no basis for justifying the view that the use of the land by the public was by right. The more difficult question, to my mind, is whether we should go further and hold that Beresford was wrongly decided on this point. I was considerably attracted by the notion that, as it was unnecessary to do so in order to dispose of this appeal, we should not positively say that the reasoning in Beresford should no longer be relied on, but should merely express considerable concerns about the decision, and emphasise its very limited scope in the light of the unsatisfactory nature of the arguments which were and were not taken. However, having considered the matter further, and in particular having considered the points made in argument by Lady Hale and the points made by Lord Carnwath in paras 70 86 of his judgment, I am satisfied that this would be unnecessarily cautious. I am quite satisfied that we should grasp the nettle and say that the decision and reasoning in Beresford should no longer be relied on, rather than leaving the law in a state of uncertainty, and requiring money and time to be expended on yet further proceedings. I consider that Beresford was wrongly decided for the reasons given by Lord Carnwath, and, while it would be wrong to repeat those reasons, it is right to express my reasoning in summary form, especially in view of my hesitation in giving the decision its quietus. It seems to me clear on the facts, which are helpfully summarised by Lord Carnwath in para 73, that the city council and its predecessors had lawfully allocated the land for the purpose of public recreation for an indefinite period, and that, in those circumstances, there was no basis upon which it could be said that the public use of the land was as of right: it was by right. The point made in para 24 above applies. I should add that, quite apart from this, I also share the mystification expressed about the reasoning in Beresford by Sullivan LJ in the Court of Appeal in this case in the passage quoted by Lord Carnwath in para 85 below. Conclusion For these reasons, which are very similar to those of Sullivan LJ in the Court of Appeal, I would dismiss this appeal. LORD CARNWATH (with whom Lady Hale, Lord Reed and Lord Hughes agree) I agree that, on the arguments presented to us, the appeal should be dismissed for the reasons given by Lord Neuberger. Those arguments have proceeded on the footing that in effect the sole issue is whether the use of the recreation ground by local inhabitants has been as of right or by right, the latter expression being treated as equivalent to by licence (or precario) in the classic tripartite formulation (nec vi, nec clam, nec precario) as endorsed by Lord Hoffmann in the Sunningwell case. On that basis, I have no doubt that the use by the local inhabitants in this case was by right as Lord Neuberger has explained (para 20 29). That would be sufficient to dispose of this appeal. However, since the underlying issue is of some general importance and as we are being asked to review the decision of the House in Beresford, I think it desirable also to look at the matter in a wider context. Before turning to the speeches in that case in more detail I shall make two more general points about the context in which the rights are here asserted. Local rights I start with an important, if obvious, point. The Commons Registration Act 1965 was concerned with town or village greens, not with public open space in general. Three categories were defined in section 22: land [a] which has been allotted by or under any Act for the exercise or recreation of the inhabitants of any locality or [b] on which the inhabitants of any locality have a customary right to indulge in lawful sports and pastimes or [c] on which the inhabitants of any locality have indulged in such sports and pastimes as of right for not less than 20 years. The common feature was the link in each case with the inhabitants of a particular locality. The mischief towards which the Act was principally directed was the uncertainty over the extent and nature of land subject to such rights. Category (c), as the only one which had continuing effect, is reproduced in amended form in the 2006 Act. There was no suggestion in the Act itself, or any of the preceding reports or debates, of any intention to include within its ambit other forms of public open space, owned and managed by public authorities under statutes such as the Open Spaces Act 1906. (As explained by Lord Neuberger, para 5, even the apparently restrictive wording of the statute in the present case did not prevent its use by the public generally.) The link with a locality was material not only to proof of qualifying user, but also to the rights resulting from registration. The 1965 Act itself gave no indication on that issue. However in Oxfordshire County Council v Oxford City Council [2006] 2 AC 674 it was established that the rights so created were available to the relevant inhabitants (para 69 per Lord Hoffmann). I take that to mean that in principle they were available to the inhabitants of the relevant locality (the local inhabitants: per Lord Scott para 104 106), rather than to the public at large. That case was decided by reference to events before the amendments made by the Countryside and Rights of Way Act 2000. It was unnecessary for the House to decide whether it would make any difference if the registration was attributable to use by inhabitants of a neighbourhood under the amended definition, rather than of a locality. It may be that in practice, once land is registered under the Act, no attempt is (or can realistically be) made by owners or others to distinguish between different groups of users. However, it seems clear in principle that a local link of some kind remains an essential feature both of the use and of the resulting rights. For present purposes, it is enough to emphasise that local recreational land, ancient or modern, within the scope of the 1965 Act was conceptually different from land held by public authorities for general recreational use. There was no indication then or since of any intention to include the latter within its ambit. That fact cannot itself govern the issue of statutory interpretation, but it justifies some caution before accepting an interpretation which significantly widens the scope of the legislation beyond what was intended. The as of right test in context The as of right/by right dichotomy is attractively simple. In many cases no doubt it will be right to equate it with the Sunningwell tripartite test, as indicated by judicial statements cited by Lord Neuberger (paras 15 16). However, in my view it is not always the whole story. Nor is the story necessarily the same story for all forms of prescriptive right. This was a point made by Lord Scott in Beresford: It is a natural inclination to assume that these expressions, claiming right thereto (the 1832 Act), as of right (the 1932 Act and the 1980 Act) and as of right in the 1965 Act, all of which import the three characteristics, nec vi, nec clam, nec precario, ought to be given the same meaning and effect. The inclination should not, however, be taken too far. There are important differences between private easements over land and public rights over land and between the ways in which a public right of way can come into existence and the ways in which a town or village green can come into existence. To apply principles applicable to one type of right to another type of right without taking account of their differences is dangerous. (para 34) On the same theme he commented on the differences between public rights of way on the one hand and town or village greens on the other: Public rights of way are created by dedication, express or implied or deemed. Town or village greens on the other hand must owe their existence to one or other of the three origins specified in section 22(1) of the 1965 Act Dedication by the landowner is not a means by which a town or village green, as defined, can be created. So acts of an apparently dedicatory character are likely to have a quite different effect in relation to an alleged public right of way than in relation to an alleged town or village green. (para 40) While I share Lord Neubergers reservations on other parts of Lord Scotts speech, his observations on this point appear to me both valid and important. Lord Scotts analysis shows that the tripartite test cannot be applied in the abstract. It needs to be seen in the statutory and factual context of the particular case. It is not a distinct test, but rather a means to arrive at the appropriate inference to be drawn from the circumstances of the case as a whole. This includes consideration of what Lord Hope has called the quality of the user, that is whether the user for at least 20 years was of such amount and in such manner as would reasonably be regarded as being the assertion of a public right (R (Lewis) v Redcar and Cleveland Borough Council (No 2) [2010] 2 AC 70, para 67). Where there is room for ambiguity, the user by the inhabitants must in my view be such as to make clear, not only that a public right is being asserted, but the nature of that right. This is not a live issue in most contexts in which the tripartite test has to be applied, whether under this legislation or otherwise, because there is no room for ambiguity. It was not an issue in Sunningwell itself, where the land was in private ownership, and there was no question of an alternative public use. Twenty years use for recreation by residents, the majority of whom came from a single locality, was treated as an effective assertion of village green rights. Similar considerations apply in highway cases. Thus, for example, in Cumbernauld and Kilsyth District Council v Dollar Land (Cumbernauld) Ltd 1992 SC 357 (Inner House); 1993 SC 44 (HL): it was common ground that there was here a clearly delineated route, that it had been used for at least 20 years since at least May 1967, that it connected two public places and that the public use was sufficient in quantity throughout that period to constitute a public right of way. (Inner House p 362) This was sufficient to meet the requirements of the relevant section 3(3) of the Prescription and Limitation (Scotland) Act 1973, by which a public right of way was established if it has been possessed by the public for a continuous period of twenty years openly, peaceably and without judicial interruption Where members of the public have travelled regularly between two points along a defined route for twenty years, the natural and only reasonable inference was the assertion of a highway right. The same cannot necessarily be said of recreational use of land in public ownership. Where land is owned by a public authority with power to dedicate it for public recreation, and is laid out as such, there may be no reason to attribute subsequent public use to the assertion of a distinct village green right. The point can also be tested by reference to the general proposition (cited by Lord Neuberger, para 16) that, if a right is to be obtained by prescription, the persons claiming that right must by their conduct bring home to the landowner that a right is being asserted against him, so that the landowner has to choose between warning the trespassers off, or eventually finding that they have established the asserted right against him. It follows that, in cases of possible ambiguity, the conduct must bring home to the owner, not merely that a right is being asserted, but that it is a village green right. Where the owner is a public authority, no adverse inference can sensibly be drawn from its failure to warn off the users as trespassers, if it has validly and visibly committed the land for public recreation, under powers that have nothing to do with the acquisition of village green rights. This does not mean of course that land in public ownership can never be subject to acquisition of village green rights under the 2006 Act. That is demonstrated by the Trap Grounds case (Oxfordshire County Council v Oxford City Council [2006] 2 AC 674). Although the land was in public ownership, it had not been laid out or identified in any way for public recreational use, and indeed was largely inaccessible ( 25% of the surface area of the scrubland is reasonably accessible to the hardy walker: para 1, quoting the inspectors report). It was held that the facts justified the inference that the rights asserted were rights under the 1965 Act. The differences between different forms of prescriptive right may also be relevant to the evaluation of the owners conduct. As Lord Scott pointed out, most forms of prescription are based on the fiction of a notional grant, or (in the case of highways) dedication, at or before the commencement of the relevant period of use. (The implications of this powerful and troubling idea in the law of easements, are discussed in the Law Commission report: Making Land Work: Easements, Covenants, and Profits Prendre Law Com No 327 para 3.87.) That fiction starts from the assumption that the equivalent rights could have been created by voluntary act of the owner. In the present context, by contrast, there is, as Lord Scott pointed out, no equivalent means at common law of creating a village green, whether by dedication or by other voluntary act of the owner. Nor was such a power created by the Commons Registration Act 1965. As noted above, village greens arising from statute or custom, the only two means of creation of such rights before the Act, were dealt with separately. The modern village green resulting from 20 years user was an entirely new statutory creation. The rights came into being only upon registration following the qualifying period of use. There was no notional grant at the beginning of the period. On the contrary the underlying assumption is that before registration there was no such right, real or notional. In this context the concept as of right is more than usually artificial: the asserted right not only did not exist but could not have existed. I will return to this point below when commenting on the approach of Lord Bingham and Lord Rodger in Beresford to the issue of encouragement. Beresford Against that background I turn to consider the judgments of the House in Beresford itself. For the most part I am content to adopt the comments of Lord Neuberger on the speeches in that case. However, I would go further. It is important to bear in mind that the proceedings were by way of judicial review of the decision of the county council, as registration authority, not to register the land as a village green. Subject to issues of law or of rationality, the factual issues were for the authority to resolve on the material before it. In my view, when the factual and legal background of the case is properly understood, it is apparent that there was no error of law in the authoritys approach to the case, nor that of Smith J at first instance. In that respect it is necessary to look beyond the speeches in the House, which do not give the full picture. Partial, but not wholly consistent, accounts appear in the speeches of Lord Scott (paras 17 19), Lord Rodger (para 53), and Lord Walker (para 89). Lord Scott and Lord Rodger focussed principally on the identification of the land in the 1973 New Town Plan as parkland/open space/playfield, following which in about 1974 it was laid out and grassed over (using excavated soil from the development of the shopping centre), and public recreational use began. Lord Walker by contrast did not mention the New Town Plan as such, noting only that the land was not acquired for any particular purpose, and that the corporation was not under an obligation to appropriate it for any specific purpose (para 89(a)). He attached more importance to the ambitious but unrealised plans for a sports complex, pending which, as he put it, recreational use of the area by local inhabitants was tolerated (but not enjoyed by any overt licence (para 89(b)). The fullest account of the factors leading to the authoritys decision is in the judgment of Smith J at first instance ([2001] 1 WLR 1327). Having summarised in general terms the history of what became known as the Sports Arena site, she referred in more detail to the material before the authority. This took the form principally of a report from its Director of Administration having taken legal advice. (The authority do not seem to have thought it necessary to organise any form of public local inquiry, such as has been seen in other cases, including the present.) The main points in the Directors report and the authoritys reasoning based on it (paras 11 15) can be summarised as follows: i) Over a number of years there had been discussion of a sports and recreation centre development, dating back to a planning brief of 1967. ii) The Arena site was identified as parkland/open space/major playing field in the 1973 New Town Plan. iii) The most informative document in the archive had been a handwritten draft report to the Corporation's Chief Officer's Committee, dated 1982, which showed that at that time, the upgrading of the Arena was under consideration. It had referred to a 1977 board paper indicating that until a sports complex could be provided, the arena was to be used for `recreational sporting use and other activities on a town scale such as jazz band parades, displays and sporting events'. In 1980 the Board had requested that the level of publicity for the Arena should be increased, and some minor works of improvement were carried out in anticipation of increased usage. v) iv) The 1982 draft report advised that complete reconstruction of the Arena would be required if it were to be developed as an athletic field and football pitch, and that the alternative would be to leave the arena in its current little used condition until such time as a sports hall facility is built. In 1989 the site was transferred to the Commission for New Towns (CNT). It was retained by them, as having potential for commercial use, when Princess Anne Park was transferred to the Sunderland City Council in 1991. Documents compiled by that council in 1992 and 1994 described the land respectively as an amenity open space, and as an unused track which belonged to the CNT and whose future use was uncertain. In 1996, the land was transferred to the council subject to a covenant restricting any future development to a community related purpose. In 1998, the council granted planning permission for the erection of a College of Further Education on a site including the Arena, with a view to sale to the City of Sunderland College. The application to register the land as a village green, at the instance of a group of local residents including Mrs Beresford, followed shortly afterwards. vii) The Director advised the committee (in terms no doubt reflecting legal advice) that the determining issue, in accordance with Sunningwell was whether the user had been as of right, and that it was not enough to defeat the claim that the use had been tolerated by the landowner. He added: vi) In `traditional' parks which are fenced and have opening hours, enjoyment by the public (inhabitants of the locality) will be by virtue of a licence during the hours of daylight. However, not all parks conform to this `traditional model' the Princess Anne Park for example and it would be bizarre if these were all town and village greens. This would suggest that if it is apparent from the circumstances that the land in question has been made available to the public, and that their use has not simply been tolerated but in effect encouraged, a licence should be implied (sic) from the circumstances viii) The committee agreed: [In this case] everyone using the site would have been aware of the perimeter seating and that the grass was kept cut. It is difficult to conceive that anyone could have imagined that this was other than a recreational area provided for use by the public for recreation. Against this background, the `implied licence' argument is strong and it is considered that on this basis the enjoyment has not been `as of right'. Members considered that there was evidence of an implied licence since the site is publicly owned land, specifically laid out as an arena with seating, which is adjacent to Princess Anne Park and which has been maintained by the Council and the Washington Development Corporation before it. Members agreed with the comment in the report that `it is difficult to conceive that anyone could have imagined that this was other than a recreational area, provided for use by the public for recreation'. The other information contained in section 2 of the report, whilst not in itself conclusive, supported the view that the Sports Arena was intended for public use. Smith J at first instance confirmed that decision. Like the authority she attached importance to the fact of public ownership: In my judgment, the fact that land is in public ownership is plainly a relevant matter when one is considering what conclusion a reasonable person would draw from the circumstances of user. It is well known that local authorities do, as part of their normal functions, provide facilities for the use of the public and maintain them also at public expense. It is not part of the normal function of a private landowner to provide facilities for the public on the land. Public ownership of the land is plainly a relevant consideration. ([2001] 1 WLR 1327, para 45) I have set out this reasoning in some detail, because in my view the approach of the authority, and that of Smith J, were unimpeachable in common sense and in law. Unfortunately, by the time the case had reached the House of Lords this simple approach had become obscured. As appears from Lord Scotts account (paras 20 23), the presentation of the arguments before the House, seems to have led to an artificial separation of the implied licence issue, from the issues raised by the public ownership of the land. He notes that in the Court of Appeal ([2002] QB 874) Dyson LJ, while upholding Smith Js reasoning in general, had expressed the view that public ownership on its own . was a factor of little weight (para 30). Possibly in response to that indication, the parties in the House of Lords concentrated their arguments on the implied licence issue, and Neither counsel dealt with the implications of the public ownership of the sports arena. It was left to the House itself, after the conclusion of the hearing, to call for further argument on that aspect. Even at that stage counsel for the authority preferred to maintain the original implied licence argument as a distinct issue, without reference to public ownership. This seems to have been based on a concern that reliance on public ownership would have the improbable implication that such public land could never not be subject to modern village green rights (see the arguments as reported at [2004] 1 AC 889, 892D E). As I have shown (by reference to the Trap Grounds case) that concern was misplaced. Further the public ownership issue seems to have been seen as one going, not so much to the quality of the user and the inferences to be drawn from it (as Smith J had held), but to the distinct question whether any of the relevant statutes had conferred on the local residents and others a right to use the sports arena (per Lord Rodger para 62). Furthermore, none of the speeches looked in detail at the powers of the New Towns Act 1965 (or the replacement 1981 Act), under which the new towns authority was acting. I share Sullivan LJs surprise (para 36) at the limited attention given to this aspect in the speeches in the House. I can only assume that this was because the very full material apparently provided to the House on this aspect concentrated on powers specifically dealing with open space (see paras 9, 24ff, 87), rather than other matters relevant to the authoritys use of its land. Lord Scott (para 24) referred to the provisions of the 1981 Act (sections 21, 80) relating to open space as defined, noting the breadth of the freedom given to new town corporations in dealing with such land. However, in my view, there was no reason for resort to those specific provisions to justify or explain the use which the corporation made of the land. The statutory powers of new town corporations under the 1965 Act, as compared with many other forms of public authority at the time, were indeed set very wide. Their purposes under section 3 were to secure the laying out and development of the new town in accordance with proposals approved in that behalf under the following provisions of this Act, and their powers included power . generally to do anything necessary or expedient for the purposes of the new town or for purposes incidental thereto. Section 6 provided for the submission and approval by the Minister of their proposals for the development of land within the area of the new town. By subsection 6(2) it was envisaged that planning permission for the development proposals so approved would be granted by special development order under the Town and Country Planning Act 1962. This statutory framework in my view provides a complete answer to Lord Walkers concern as to the lack of any formal appropriation of the land as recreational open space (para 90). As Lord Neuberger has observed, he does not seem to have been using the word appropriation in any specific statutory sense. In any event, the general powers conferred by section 3 were amply sufficient to include making land such as this available for public recreation, pending any further development proposals. Assuming (in the absence of any indication to the contrary) that the 1973 plan was duly submitted to and approved by the Minister under section 6, the proposal for recreational use of the arena area would have become a formal and approved part of its proposals for the use of the land in its area. Planning permission would have been required for the change of use for that purpose, but would normally have been granted as a matter of course by special development order pursuant to section 6(2). It was immaterial that this use might have been seen as temporary pending implementation of the more ambitious proposals described in the 1982 draft report. It was a valid exercise of the corporations powers to permit such temporary use, and the publics enjoyment was no less real and authorised. I can see no basis, with respect, for Lord Walkers observation that, as he put it, recreational use of the area by local inhabitants was merely tolerated. It was contradicted by the Directors conclusion, accepted by the authority, that the use by the public had not simply been tolerated but in effect encouraged (para 24(vii) above). Finally I come back to the relevance of the acts of encouragement by the authority, in the light of comments by Lord Bingham and Lord Rodger. In his concurring judgment, Lord Bingham rejected arguments that the encouragement of public use by mowing the land and laying out benches was inconsistent with the use as of right. He noted that the 1965 Act had drawn heavily on principles relating to the acquisition of public or private rights of way, observing: in neither of these instances could acts of encouragement by the servient owner be relied on to contend that the user by the dominant owner had not been as of right. Such conduct would indeed strengthen the hand of the dominant owner (para 7) Similarly, Lord Rodger noted that the authority may . have encouraged these activities, but commented: The mere fact that a landowner encourages an activity on his land does not indicate, however, that it takes place only by virtue of his revocable permission. (para 60) However, the parallel is not direct. If the inference is to be of a notional public right during the period of user, it is easy to see why acts of encouragement may be seen as lending weight to that inference. But the same thinking cannot readily be applied in the context of the creation of a modern village green. There is no basis for inferring a prior public right, real or notional, and therefore no reason for the owners acts of encouragement to be treated as lending force to such an inference. On the contrary, where they are acts of a public authority, they lend force to the alternative inference that they are done under other statutory powers. For the same reason I cannot accept Lord Binghams following comment. He continued: Here the conduct is in any event equivocal: if the land were registered as a town or village green, so enabling the public to resort to it in exercise of a legal right and without the need for any licence, one would expect the council to mow the grass and provide some facilities for those so resorting, thus encouraging public use of this valuable local amenity. It is hard to see how the self same conduct can be treated as indicating that the public had no legal right to use the land and did so only by virtue of the council's licence. (para 7) I find this hard to follow. If land in the ownership of a public authority had been validly registered as a village green, it might well be a reasonable inference that acts of maintenance were attributable to that status. But that has no relevance to the position during a period of public use before registration, when there were no village green rights, actual or notional. The explanation for acts of maintenance by the authority during that period has to be found elsewhere. The reasonable inference was not that the public had no rights, but that the land had been committed to their use under other powers. the present case: In conclusion I note what Sullivan LJ said about the decision in Beresford in I confess that I find it difficult to understand why the statutory approval of the corporation's new town plan 1973 by the minister, which had the effect of granting planning permission for the development of the land as parkland/open space/playing field', when coupled with the subsequent laying out and grassing over of the land, was not sufficient to amount to an appropriation of the land as recreational open space in the sense in which Lord Walker used that word. (para 36) I agree. If appropriation in that sense was required, then the new town plan provided it. However such legal analysis is not necessary to support the registration authoritys decision. As I have said, on the material before them they were clearly entitled to reach the conclusion that the use by the public was implicitly approved by the corporation; indeed there was no reason to infer anything else. For these reasons, I would not only dismiss the present appeal, but I would hold that the decision and reasoning of the House of Lords in Beresford should no longer be relied on.

Helredale playing field (the Field) is situated in Whitby, North Yorkshire, and is owned by Scarborough Borough Council (the Council). The issue raised in this appeal is whether the Field should be registered as a town or village green under section 15 of the Commons Act 2006. The Field is approximately two hectares and was acquired in 1951 by the predecessor local authority of the Council, who maintained the Field as recreation grounds pursuant to section 80(1) of the Housing Act 1936, now section 12(1) of the Housing Act 1985. For at least the last fifty years, the Field has been used extensively and openly by local inhabitants for informal recreation. The Council arranges for the regular mowing of the grass and the marking out of the football pitch. In October 2007 the Helredale Neighbourhood Council applied to the North Yorkshire County Council to register the Field as a town or village green under section 15 of the 2006 Act. Section 15 allows an application to register land as a town or village green where a significant number of inhabitants of the locality have indulged as of right in lawful sports and pastimes on the land for at least 20 years. An inquiry commissioned by North Yorkshire County Council concluded that, although a significant number of the inhabitants had indulged in lawful sports and pastimes on the land for at least 20 years, their use had not been as of right. North Yorkshire County Council accordingly rejected the application to register the Field as a town or village green in October 2010. Christine Barkas, a member of the Neighbourhood Council, applied for judicial review of this decision. Her application was unsuccessful and the Court of Appeal unanimously dismissed her subsequent appeal. Ms Barkas now appeals to this court. The Supreme Court unanimously dismisses the appeal. Lord Neuberger gives the main judgment, and Lord Carnwath gives a full supporting judgment. The other members of the Court agree with both judgments. The court rules that so long as land is held under a provision such as section 12(1) of the 1985 Act, members of the public have a statutory right to use the land for recreational purposes, and therefore use the land by right rather than as of right. The issue Where land is provided and maintained by a local authority pursuant to section 12(1) of the Housing Act 1985 or its statutory predecessors, is the use of that land by the public for recreational purposes as of right within the meaning of section 15(2)(a) of the Commons Act 2006 [12]? The meaning of as of right If a person uses privately owned land of right or by right, the use is rightful because it has been permitted by the landowner. However, if the use of such land is as of right, a number of cases relating to the acquisition of rights of way and other easements by prescription establish that it means that the use is without the permission of the landowner. Accordingly such use is not of right or by right, but is carried on as if it were by right, hence as of right. The significance of the word as is therefore crucial, making the expression as of right effectively the antithesis of of right or by right [14]. Rules of prescription have been created by a combination of statutory and common law under which the de facto enjoyment of land has to have been for twenty years not by force, nor stealth, nor licence of the owner before prescriptive rights are acquired. These three vitiating factors set out the circumstances in which it would have been reasonable to expect the owner to resist the exercise of the right [15]. Was the public use in this case as of right? So long as land is held under a provision such as section 12(1) of the 1985 Act, members of the public have a statutory right to use the land for recreational purposes, and therefore they use the land by right and not as trespassers, so that no question of use as of right can arise. A reasonable local authority in the Councils position would have regarded the presence of members of the public on the Field, walking with or without dogs, taking part in sports, or letting their children play, as being pursuant to their statutory right to be on the land and to use it for these activities [21]. Where the owner of the land is a local, or other public, authority which has lawfully allocated the land for public use, it is impossible to see how, at least in the absence of unusual additional facts, it could be appropriate to infer that members of the public have been using the land as of right simply because the authority has not objected to their using the land. It seems very unlikely that, in such a case, the legislature could have intended that such land would become a village green after the public had used it for twenty years. It would not merely be understandable why the local authority had not objected to the public use: it would be positively inconsistent with their decision to allocate the land for public use if they had done so. The position is very different from that of a private owner, with no legal duty and no statutory power to allocate land for public use, with no ability to allocate land as a village green, and who would be expected to protect his or her legal rights [24]. The proceedings in Beresford The decision in Beresford v Sunderland City Council, in which the House of Lords held that the publics use for more than 20 years of land maintained by the local authority with that authoritys knowledge was as of right, should no longer be relied on. It is clear on the facts in that case that the city council and its predecessors had lawfully allocated the land for the purpose of public recreation for an indefinite period, and that, in those circumstances, there was no basis upon which it could be said that the public use of the land was as of right rather than by right [48 49]. Lord Carnwaths concurring judgment analyses the as of right test in context and explores Beresford in greater detail [51 87].

This appeal raises a question of contractual interpretation. It concerns an indemnity clause in an agreement dated 13 April 2010 (the SPA) for the sale and purchase of the entire issued share capital of a company, Sureterm Direct Limited (the Company), which carries on business as a specialist insurance broker, primarily offering motor insurance for classic cars. The sellers of the Company were the respondent, Mr Andrew Wood (Mr Wood), who owned 94% of its share capital, and Mr Christopher Kightley and Mr Howard Collinge, who owned 1% and 5% of its share capital respectively. Each was a director of the Company and Mr Wood was its managing director. The purchaser was Capita Insurance Services Ltd (Capita). Mr Wood remained as managing director of the Company until the end of 2010. He brought proceedings against Capita arising out of the termination of his employment and Capita brought a counterclaim against him under the indemnity provision in the SPA, which is the subject matter of this appeal. Mr Kightley and Mr Collinge were, but are no longer, parties to the proceedings. It is not necessary to set out in any detail the circumstances in which Capita came to make its claim under the indemnity. It suffices to summarise Capitas claim as follows. In about August 2008 the Company began to sell motor insurance through online aggregator sites such as Confused.com. The sales were not completed online: potential customers obtained a quotation from the Company on the aggregator site and the Company then contacted the potential customer directly with a view to confirming their risk details before selling them the appropriate insurance policy. Shortly after Capitas purchase of the Companys share capital, employees of the Company raised concerns about the Companys sales processes, which had resulted in some customers paying substantially more than they had been quoted online. The employees alleged that the Company had presented customers with higher quotations without informing them why the quotations had increased. The Company had thus increased its own arrangement fees when neither the underwriting premium nor the risk profile had changed significantly. The Company responded to the allegations by carrying out a review of its sales between January 2009 and January 2011. This review revealed that in many cases the Companys telephone operators had misled customers into believing that an underwriter had required a higher premium or that their risk profile was worse than it was or had pressurised the customer to make sure that a sale was made. Capita and the Company were obliged to inform the Financial Services Authority (FSA) of the findings and did so on 16 December 2011. The FSA informed them that the customers had been treated unfairly and had suffered detriment and that there would have to be redress. After the FSA had conducted a risk assessment visit to the Company in November 2012, Capita and the Company agreed with the FSA to conduct a remediation scheme to pay compensation to customers who were identified as potentially affected by the Companys mis selling. Capita alleges that it, the Company and Capitas other subsidiaries have suffered loss as a result of the mis selling or suspected mis selling of insurance products in the period before the completion of the sale under the SPA. Capitas claim is for 2,432.883.10, comprising an estimate of the compensation at 1.35m, interest of about 400,000 and the costs of the remediation scheme. It is appropriate to record that some of Capitas allegations are disputed, including the extent of the mis selling and any detriment to customers. Other than, perhaps, the facts narrated in para 4 above (which do not appear to be disputed), they are not facts by reference to which the SPA is to be construed. But the circumstances in which Capita and the Company were required to set up the remediation scheme are of some importance because Mr Wood contends that they fall outside the scope of the indemnity clause which is the subject matter of this action. In particular, the requirement to compensate was not the result of a claim by one or more of the Companys customers or a complaint by those customers to the FSA or another public authority. It resulted, as I have said, from information about the internal review which Capita and the Company gave the FSA and the requirement by the FSA that compensation should be paid to the customers. Contractual interpretation In his written case counsel for Capita argued that the Court of Appeal had fallen into error because it had been influenced by a submission by Mr Woods counsel that the decision of this court in Arnold v Britton [2015] AC 1619 had rowed back from the guidance on contractual interpretation which this court gave in Rainy Sky SA v Kookmin Bank [2011] 1 WLR 2900. This, he submitted, had caused the Court of Appeal to place too much emphasis on the words of the SPA and to give insufficient weight to the factual matrix. He did not have the opportunity to develop this argument as the court stated that it did not accept the proposition that Arnold had altered the guidance given in Rainy Sky. The court invited him to present his case without having to refer to the well known authorities on contractual interpretation, with which it was and is familiar. It is not appropriate in this case to reformulate the guidance given in Rainy Sky and Arnold; the legal profession has sufficient judicial statements of this nature. But it may assist if I explain briefly why I do not accept the proposition that Arnold involved a recalibration of the approach summarised in Rainy Sky. The courts task is to ascertain the objective meaning of the language which the parties have chosen to express their agreement. It has long been accepted that this is not a literalist exercise focused solely on a parsing of the wording of the particular clause but that the court must consider the contract as a whole and, depending on the nature, formality and quality of drafting of the contract, give more or less weight to elements of the wider context in reaching its view as to that objective meaning. In Prenn v Simmonds [1971] 1 WLR 1381 (1383H 1385D) and in Reardon Smith Line Ltd v Yngvar Hansen Tangen [1976] 1 WLR 989 (997), Lord Wilberforce affirmed the potential relevance to the task of interpreting the parties contract of the factual background known to the parties at or before the date of the contract, excluding evidence of the prior negotiations. When in his celebrated judgment in Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896 Lord Hoffmann (pp 912 913) reformulated the principles of contractual interpretation, some saw his second principle, which allowed consideration of the whole relevant factual background available to the parties at the time of the contract, as signalling a break with the past. But Lord Bingham in an extra judicial writing, A new thing under the sun? The interpretation of contracts and the ICS decision Edin LR Vol 12, 374 390, persuasively demonstrated that the idea of the court putting itself in the shoes of the contracting parties had a long pedigree. Lord Clarke elegantly summarised the approach to construction in Rainy Sky at para 21f. In Arnold all of the judgments confirmed the approach in Rainy Sky (Lord Neuberger paras 13 14; Lord Hodge para 76; and Lord Carnwath para 108). Interpretation is, as Lord Clarke stated in Rainy Sky (para 21), a unitary exercise; where there are rival meanings, the court can give weight to the implications of rival constructions by reaching a view as to which construction is more consistent with business common sense. But, in striking a balance between the indications given by the language and the implications of the competing constructions the court must consider the quality of drafting of the clause (Rainy Sky para 26, citing Mance LJ in Gan Insurance Co Ltd v Tai Ping Insurance Co Ltd (No 2) [2001] 2 All ER (Comm) 299 paras 13 and 16); and it must also be alive to the possibility that one side may have agreed to something which with hindsight did not serve his interest: Arnold (paras 20 and 77). Similarly, the court must not lose sight of the possibility that a provision may be a negotiated compromise or that the negotiators were not able to agree more precise terms. This unitary exercise involves an iterative process by which each suggested interpretation is checked against the provisions of the contract and its commercial consequences are investigated: Arnold para 77 citing In re Sigma Finance Corpn [2010] 1 All ER 571, para 10 per Lord Mance. To my mind once one has read the language in dispute and the relevant parts of the contract that provide its context, it does not matter whether the more detailed analysis commences with the factual background and the implications of rival constructions or a close examination of the relevant language in the contract, so long as the court balances the indications given by each. Textualism and contextualism are not conflicting paradigms in a battle for exclusive occupation of the field of contractual interpretation. Rather, the lawyer and the judge, when interpreting any contract, can use them as tools to ascertain the objective meaning of the language which the parties have chosen to express their agreement. The extent to which each tool will assist the court in its task will vary according to the circumstances of the particular agreement or agreements. Some agreements may be successfully interpreted principally by textual analysis, for example because of their sophistication and complexity and because they have been negotiated and prepared with the assistance of skilled professionals. The correct interpretation of other contracts may be achieved by a greater emphasis on the factual matrix, for example because of their informality, brevity or the absence of skilled professional assistance. But negotiators of complex formal contracts may often not achieve a logical and coherent text because of, for example, the conflicting aims of the parties, failures of communication, differing drafting practices, or deadlines which require the parties to compromise in order to reach agreement. There may often therefore be provisions in a detailed professionally drawn contract which lack clarity and the lawyer or judge in interpreting such provisions may be particularly helped by considering the factual matrix and the purpose of similar provisions in contracts of the same type. The iterative process, of which Lord Mance spoke in Sigma Finance Corpn (above), assists the lawyer or judge to ascertain the objective meaning of disputed provisions. On the approach to contractual interpretation, Rainy Sky and Arnold were saying the same thing. The recent history of the common law of contractual interpretation is one of continuity rather than change. One of the attractions of English law as a legal system of choice in commercial matters is its stability and continuity, particularly in contractual interpretation. The Sale and Purchase Agreement The SPA is a detailed and professionally drafted contract. It provided for the sale and purchase of the Companys share capital (clause 3) for the consideration of 7,681,661 payable on completion (clause 4), and it also provided for deferred consideration (Schedule 8). Clause 1 contained the following definitions which are relevant to the construction of the disputed indemnity: Authority means any local, national, multinational, governmental or non governmental authority, statutory undertaking, agency or public or regulatory body (whether present or future) which has jurisdiction over the Business or any decision, consent or licence which is required to carry out the Business and Authorities shall be construed accordingly. Company means Sureterm Direct Ltd Completion Date means the date of this Agreement. Employees has the meaning given to it at paragraph 6 of Schedule 4 [which refers to a list of all of the employees employed by the Company]. FSA means the Financial Services Authority and any body which supersedes it. Regulatory Authority means any body by which any part of the Business is or was regulated pursuant to any Applicable Financial Services Laws (including, but not limited to, the FSA, the Personal Investments Authority Ltd, the General Insurance Standards Council, the Insurance Brokers Registration Council and including the Financial Services Ombudsman and any voluntary regulatory body with whose rules the Company has agreed to comply). Relevant Person means an Employee or a former employee of the Company and any dependant of an Employee or a former employee of the Company. Shares means all of the issued shares in the capital of the Company. Warranties means the Tax Warranties and the warranties set out in Schedule 4. Clause 7 dealt with warranties and indemnities. Each of the sellers severally warranted to the buyer on a proportionate basis in terms of the Warranties (clause 7.1); the Warranties were qualified by matters which had been fairly disclosed in the disclosure letter (clause 7.2); and where a Warranty was qualified by an expression such as so far as the Sellers are aware that referred to the actual knowledge of the sellers, who confirmed that they had made due and careful enquiry of the Companys compliance manager, IT Director and HR Director (clause 7.3). The indemnity clause whose interpretation is in dispute is clause 7.11. It provided: The Sellers undertake to pay to the Buyer an amount equal to the amount which would be required to indemnify the Buyer and each member of the Buyers Group against all actions, proceedings, losses, claims, damages, costs, charges, expenses and liabilities suffered or incurred, and all fines, compensation or remedial action or payments imposed on or required to be made by the Company following and arising out of claims or complaints registered with the FSA, the Financial Services Ombudsman or any other Authority against the Company, the Sellers or any Relevant Person and which relate to the period prior to the Completion Date pertaining to any mis selling or suspected mis selling of any insurance or insurance related product or service. This clause must be seen in its contractual context. Schedule 4 contained 30 pages of detailed warranties. In Part 12 of that Schedule, which concerned litigation, disputes and investigations, the sellers warranted that they were not aware of circumstances which were likely to give rise to any investigation or enquiry by any Authority (para 12.4) and that no breach of contract, tort, statutory duty or law had been committed for which the Company was or might be liable (para 12.5). Part 14 which was concerned with compliance and regulatory matters included the following para: 14.1 (a) The Company conducts, and has conducted the Business in accordance with the requirements of all Competition laws and Applicable Financial Services Laws applicable to the business and has not been and is not being investigated for any alleged non compliance or infringement of such Competition Laws and Applicable Financial Services Laws. (c) The Company has no reason to believe that any action will be taken against it in relation to any of its current or past activities based on any alleged non compliance or infringement of any Competition Laws and Applicable Financial Services Laws. Part 14 also contained detailed warranties that the Company had complied with its regulatory obligations and that correspondence between the Company and all Regulatory Authorities had been disclosed, that the Company, its officers and employees had not been subject to any regulatory sanction and that no such sanction was likely or pending; and that the Company had not been subject to a regulatory investigation and, so far as the Sellers were aware, there were no circumstances which could give rise to a visit by any Regulatory Authority. Clause 8 of the SPA provided for limitations on the sellers liability in Schedule 5, which in para 1 provided that the aggregate maximum liability of all claims under the SPA (with one exception) would not exceed the purchase price and that the liability of each seller would not exceed his proportionate liability (ie 94%, 5% and 1%). That limitation applied to claims under clause 7.11 as well as under the warranties. But paragraph 3 of Schedule 5 imposed time limits on the warranties by providing: 3.1 Save in respect of a Warranty Claim or a claim under the Tax Covenant notified in writing to the Sellers prior to such a date, the Sellers will cease to be liable: (a) for any claim under the tax warranties or under the Tax Covenant on the seventh anniversary of Completion; and (b) anniversary of Completion. for any other Warranty Claim on the second Thus in contrast to the indemnity under clause 7.11, the warranties relating to, among other things, regulatory compliance, had a lifespan of only two years. In a judgment dated 14 October 2014 ([2014] EWHC 3240 (Comm)) Popplewell J decided the preliminary issue of the interpretation of the indemnity clause and held, in effect, that it required Mr Wood to indemnify Capita even if there had been no claim or complaint by a customer. The Court of Appeal (Patten LJ, Gloster LJ and Christopher Clarke LJ) in a judgment written by Christopher Clarke LJ ([2015] EWCA Civ 839) disagreed. In its order dated 30 July 2015 the Court of Appeal declared that Mr Woods liability under the indemnity in clause 7.11 of the SPA: cannot arise unless the matter in respect of which indemnity is sought follows and arises out of either (i) a claim made against the Company, a Seller or a Relevant Person or (ii) a complaint registered with the FSA, the Financial Services Ombudsman or any other Authority against the Company, a Seller or a Relevant Person and, in either case, the claim or complaint (a) relates to the period prior to the Completion Date and (b) pertains to any mis selling or suspected mis selling of any insurance or insurance related product. Capita appeals against that order, arguing that the contractual indemnity is not confined to loss arising out of a claim or complaint. In this case both Popplewell J and the Court of Appeal have considered and weighed both the language of the disputed clause 7.11 and the commercial considerations. They have both started by examining the language but have reached opposing conclusions. This disagreement is not caused by any failure to apply the correct principles but is, in my view, the result of an opaque provision which, as counsel for each party acknowledged, could have been drafted more clearly. I have concluded that the Court of Appeal has come to the correct view as to the meaning of this difficult clause. I set out below my reasons, which are essentially the same as those which Christopher Clarke LJ presented. Discussion Clause 7.11 has not been drafted with precision and its meaning is avoidably opaque. My preliminary view of the meaning of the clause on a first reading was consistent with the view which the Court of Appeal favoured, namely that the indemnity covered loss and damage which (a) followed and arose out of claims or complaints against the Company, the Sellers or any Relevant Person, (b) related to the period before completion and (c) pertained to the mis selling or suspected mis selling of insurance products or services. But it is necessary to place the clause in the context of the contract as a whole, to examine the clause in more detail and to consider whether the wider relevant factual matrix gives guidance as to its meaning in order to consider the implications of the rival interpretations. The contractual context is significant in this case. The indemnity in clause 7.11 is an addition to the detailed warranties in Schedule 4. The mis selling which clause 7.11 addresses is also covered by the warranty in paragraph 14.1 of Schedule 4 (para 18 and para 19 above). But liability for the Schedule 4 warranties is time limited by Schedule 5. In particular paragraph 3.1(b) of that Schedule (para 20 above) required the Company to claim within two years of the completion of the sale and purchase. The scope of the clause 7.11 indemnity, breach of which gives rise to a liability which is unlimited in time, falls to be assessed in the context of those time limited warranties. All of the parties to the SPA were commercially sophisticated and had experience of the insurance broking industry. Capita was not involved in the management of the Company before the share purchase. The Sellers were the directors and the only shareholders of the Company. They were the people who knew or ought to have known how the Company had operated its business; Capita would in all probability not have that knowledge. The parties to the SPA would have known this. That lack of knowledge explains why Capita required the disclosures in the disclosure letter and the detailed warranties in Schedule 4; but it does not assist the court to determine the scope of the indemnity clause. The court is not aware of the negotiations which led to the SPA; they are not relevant to the task of interpreting that agreement: Chartbrook Ltd v Persimmon Homes Ltd [2009] AC 1101. Business common sense suggests that Capita had an interest in obtaining as broad an indemnity against the adverse consequences of mis selling as it could obtain. But the sellers had given warranties of compliance with regulatory requirements, which covered such mis selling, subject to the agreed limits of quantum and time. The sellers were exposed to a potential liability under those warranties for the two years after the Completion Date, during which Capita could learn of the Companys sales practices. One may readily infer that they had an interest in minimising their further exposure to liability after that time had elapsed. Business common sense is useful to ascertain the purpose of a provision and how it might operate in practice. But in the tug o war of commercial negotiation, business common sense can rarely assist the court in ascertaining on which side of the line the centre line marking on the tug o war rope lay, when the negotiations ended. I therefore turn to examining the clause in more detail before returning to the commercial context. In order to illustrate the competing contentions of the parties Popplewell J helpfully divided clause 7.11 into its constituent parts. I set that presentation out below with the addition in (B) of the sub headings (i) and (ii) to assist my exegesis. Clause 7.11 thus divided provides: The Sellers undertake to pay to the Buyer an amount equal to the amount which would be required to indemnify the Buyer and each member of the Buyers Group against (1) all actions, proceedings, losses, claims, damages, costs, charges, expenses and liabilities suffered or incurred, and (2) all fines, compensation or remedial action or payments imposed on or required to be made by the Company following and arising out of claims or complaints (A) registered with the FSA, the Financial Services Ombudsman or any other authority against the Company, the Sellers or any Relevant Person (B) (i) and which relate to the period prior to the Completion Date (ii) pertaining to any mis selling or suspected mis selling of any insurance or insurance related product or service. Counsel for Capita submitted that the clause should be read by treating (2) and (A) as a composite phrase so that the Sellers were bound to indemnify against both (1) and (2+A), each of which was subject to the two conditions in (B). This meant that it was only the fines etc in (2) which had to follow on or arise out of claims or complaints made to the FSA or other Authority against the Company etc as provided in (A). Thus, it was submitted, the indemnity covered all liabilities in (1) provided only that (i) they related to the period prior to the completion date and (ii) pertained to any mis selling or suspected mis selling of insurance products etc. Counsel for Mr Wood submitted that the clause was properly construed by treating both (1) and (2) as being subject to three conditions, namely (A), B(i) and (B)(ii). He submitted that (A) should be read as if there was a comma after claims, so that it provided as a condition for the triggering of the indemnity under (1) or (2) that there must be either claims by customers, or complaints made to the regulatory authorities, in each case against the Company, the Sellers or any Relevant Person. Thus, on his approach, either a claim by a customer against the Company, the Sellers or an employee or former employee of the Company, or a complaint to a regulatory authority against the Company, the Sellers or an employee or former employee of the Company would trigger the indemnity if the two conditions in (B) were met. Both counsel accepted that, because of the breadth of the terms used in (1), the types of loss and damage in (1) covered all of the types of loss and damage in (2). Thus it was suggested that (2) must have been included only for the avoidance of doubt. This means that on Mr Woods approach (2) was otiose while on Capitas approach the composite (2+A) was otiose. I find the latter proposition remarkable and unlikely for two reasons. First, and to my mind most significantly, (A) would serve no purpose by restricting the source of loss and damage if (A) governed only (2) and therefore (1) was unrestricted. (A) would not restrict the scope of the indemnity in any way. On Mr Woods construction the words in (A) have a purpose as they limit the scope of both (1) and the otiose (2). Secondly, if one airbrushes out (2+A) as otiose, the clause does not specify against whom the actions, proceedings and claims in (1) are directed. The clause would read: The Sellers undertake to pay to the Buyer an amount equal to the amount which would be required to indemnify the Buyer and each member of the Buyers Group against all actions, proceedings, losses, claims, damages, costs, charges, expenses and liabilities suffered or incurred, and which relate to the period prior to the Completion Date pertaining to any mis selling or suspected mis selling of any insurance or insurance related product or service. The identity of the persons against whom the relevant claims etc could be made so as to trigger the sellers indemnity would, on Capitas approach, be left to implication. There must be a limit on who such persons could be as it would be absurd for Capita to have a claim against the Sellers for indemnity resulting from any mis selling on its part before the Completion Date. But, even assuming that the target was mis selling by or on behalf of the Company, it is far from obvious that the delimited class of persons would be the Company, the Sellers or any Relevant Person. Capita made three further points against Mr Woods interpretation. First, there is an element of tautology as the claims in (1) are said in (A) to follow and arise out of claims. But as Christopher Clarke LJ observed, tautology in commercial contracts is not unknown and the verbal exuberance (or torrential drafting) of (1) makes tautology difficult to avoid. Secondly, Capita pointed out that there is a comma after incurred at the end of (1) and no comma after Company at the end of (2). This could support the separation of (1) from (2) and the conjunction of (2) and (A). Similarly, Mr Woods interpretation would involve inserting in (A) a comma after claims and also after any other Authority so as to limit both the claims and the regulatory complaints to those against the Company, the Sellers or any Relevant Person. Again in agreement with Christopher Clarke LJ I do not think that the use of commas in this clause is a strong pointer in favour of Capitas interpretation, both because there are no set rules for the use of commas and in any event the draftsmans use of commas in this clause is erratic. Thirdly, the draftsman used an adjectival participle at the start of (A) (following and arising out of) and changed tone by using a relative pronoun (and which) at the start of (B). But the use of the adjectival participle does not tie (A) exclusively into (2) because in (B) the adjectival participle (pertaining to) unquestionably applies to both (1) and (2). These detailed points of style and syntax are of little assistance in construing an admittedly opaque clause. I return to the commercial context and the practical consequences of the rival interpretations. On Mr Woods interpretation it requires a customer or customers to make a claim, or complaint to the regulatory authorities, against the Company, the sellers or a Relevant Person in order to trigger the indemnity. Thus if a whistle blower alerted the regulatory authorities of suspected or actual mis selling, or if (as in fact occurred) management, complying with their regulatory obligations, reported such mis selling to the FSA, which ordered the payment of compensation, the indemnity would not be triggered. Yet in each case, the mis selling before the date of completion causes the Company loss. The general purpose of clause 7.11, to indemnify Capita and its group against losses occasioned by mis selling is clear. Had clause 7.11 stood on its own, the requirement of a claim or complaint by a customer and the exclusion of loss caused by regulatory action which was otherwise prompted might have appeared anomalous. But clause 7.11 is in addition to the wide ranging warranties in Part 14 of Schedule 4 (paras 18 and 19 above) which probably covered the circumstances which eventuated. Capita had two years after completing the purchase to examine the sales practices of the Companys employees and so uncover any regulatory breaches in order to make a claim under the Schedule 4 indemnities. Prima facie that was not an unreasonable time scale. Indeed, Capita was able to send its findings to the FSA within 20 months of the Completion Date. It is not contrary to business common sense for the parties to agree wide ranging warranties, which are subject to a time limit, and in addition to agree a further indemnity, which is not subject to any such limit but is triggered only in limited circumstances. From Capitas standpoint the SPA may have become a poor bargain, as it appears that it did not notify the sellers of a warranty claim within two years of Completion. But it is not the function of the court to improve their bargain. In this case, the circumstances which trigger that indemnity are to be found principally in a careful examination of the language which the parties have used. Conclusion I would therefore dismiss the appeal.

Capita Insurance Services Limited (Capita) entered into an agreement (the SPA) with the respondent for the sale and purchase of the entire issued share capital of Sureterm Direct Limited (the Company), a company which primarily offers motor insurance for classic cars. Shortly after Capitas purchase of the Companys share capital, employees of the Company raised concerns about the Companys sale processes. A Company review revealed that in many cases the Companys telephone operators had misled customers to make a sale. Capita and the Company informed the Financial Services Authority (FSA) of the findings. Capital and the Company agreed to to pay compensation to customers affected by the mis selling. Clause 7.11 of the SPA was an indemnity clause. It provided the Sellers undertake to pay to the Buyer an amount equal to the amount which would be required to indemnify the Buyer [] against all actions, proceedings, losses, claims, damages, costs, charges, expenses and liabilities suffered or incurred, and all fines, compensation or remedial action or payments imposed on or required to be made by the Company following and arising out of claims or complaints registered with the FSA, the Financial Services Ombudsman or any other Authority against the Company, the Sellers or any Relevant Person and which relate to the period prior to the Completion Date pertaining to any mis selling or suspected mis selling of any insurance or insurance related product or service. Capita brought a claim against the respondent under clause 7.11 alleging that it suffered loss as a result of the mis selling of insurance products in the period before the completion of the sale. The respondent claimed that the circumstances fell outside the scope of clause 7.11 as the requirement to compensate which had arisen was not as a result of a claim by the Companys customers or a complaint by those customers to the FSA or another public authority. The High Court held that clause 7.11 required the respondent to indemnify Capita even if there had been no claim or complaint. The Court of Appeal disagreed. It declared that the indemnity under clause 7.11 was confined to loss arising out of a claim or complaint. Capita appeals against the Court of Appeals order, arguing that it had fallen into error because it had been influenced by the respondents submission that the decision of the Supreme Court in Arnold v Britton [2015] AC 1619 had rowed back from the guidance on contractual interpretation which the Supreme Court gave in Rainy Sky SA v Kookmin Bank [2011] 1 WLR 2900. Capita argued that this had caused the Court of Appeal to place too much emphasis on the words of the SPA and to give insufficient weight to the factual matrix. Capita submitted that clause 7.11 should be construed so that only the fines, compensation or remedial action or payments imposed on the Company had to arise out of complaints made to the FSA against the Company. The Supreme Court unanimously dismisses Capitas appeal. Lord Hodge gives the lead judgment, with which the other Justices agree. Contractual Interpretation The court must ascertain the objective meaning of the contractual language. It must consider the contract as a whole and, depending on the nature, formality and quality of its drafting, give more or less weight to elements of the wider context in reaching its view as to that objective meaning [10]. Where there are rival meanings, the court can reach a view as to which construction is more consistent with business common sense. However, in striking a balance between the indications given by the language and the practical implications of competing constructions, the court must consider the quality of the drafting of the clause. It must be alive to the possibility that one side may have agreed something which in hindsight did not serve his interest, or that a provision may be a negotiated compromise [11]. It does not matter whether the detailed analysis commences with the factual background and the practical implications of rival constructions or with an examination of the contractual language, so long as the court balances the indications given by each [12]. Textualism and contextualism are not conflicting paradigms in a battle for the exclusive occupation of the field of contractual interpretation [13]. On the approach to contractual interpretation, Rainy Sky and Arnold were saying the same thing [14]. Clause 7.11 The Court of Appeal was correct on the meaning of clause 7.11 [25]. Careful examination of the contractual language identifies the circumstances which trigger the clause [42]. Capitas suggested construction is unlikely for two reasons. Firstly, the suggestion that only the fines, compensation or remedial action or payments imposed on the Company had to arise out of complaints made to the FSA against the Company would not restrict the scope of the warranty in any way. The source of loss and damage in the rest of the clause would remain unlimited. Secondly, it would have the effect that the clause would fail to specify against whom the relevant actions, proceedings and claims in the remainder of the clause could be made. There must be a limit on who such persons could be as it would be absurd for Capita to have a claim against the Sellers for indemnity resulting from any mis selling on its part before the Completion Date [33 35]. The contractual context is also significant in this case. The mis selling which clause 7.11 addresses is also covered by the Schedule 4 warranties, which concern compliance and regulatory matters. The scope of clause 7.11, breach of which gives rise to a liability unlimited in time, must be assessed in the context of the detailed and time limited warranties in Schedule 4 [27]. Capita had two years after completing the purchase to make a claim under Schedule 4. That was not an unreasonable time scale. It is not contrary to business common sense for the parties to agree wide ranging warranties, which are subject to a time limit, and to agree a further indemnity, which is not subject to any such limit but is triggered only in limited circumstances [40]. The SPA may have become a bad bargain from Capitas standpoint, as it appears it did not notify the sellers of a warranty claim within two years of Completion. But it is not the function of the court to improve their bargain [41].

This appeal raises an important question about the application of copyright law to the technical processes involved in viewing copyright material on the internet. The owner of a copyright has the exclusive right to do or to authorise a number of acts defined in sections 16 to 26 of the Copyright, Designs and Patents Act 1988. Broadly speaking, it is an infringement to make or distribute copies or adaptations of a protected work. Merely viewing or reading it is not an infringement. A person who reads a pirated copy of a protected book or views a forgery of a protected painting commits no infringement although the person who sold him the book or forged the painting may do. The ordinary use of the internet will involve the creation of temporary copies at several stages. Copies will be created in the course of transmission in internet routers and proxy servers. Where a web page is viewed by an end user on his computer, without being downloaded, the technical processes involved will require temporary copies to be made on screen and also in the internet cache on the hard disk. The screen copy is self evidently an essential part of the technology involved, without which the web page cannot be viewed by the user. It will remain on screen until the user moves away from the relevant web page. The function of the internet cache is somewhat more complex. It is a universal feature of current internet browsing technology. It would be possible to design browsing software without an internet cache, but in the present state of technology the result would be that the internet would be unable to cope with current volumes of traffic and would not function properly. The cache may be deliberately cleared by the end user, but otherwise it will in the ordinary course be overwritten by other material after an interval which will depend on its capacity and on the volume and timing of the end users internet usage. The above is a crude, but for present purposes sufficient, description of the technical processes. Like most things in the digital world, their operation is capable of being modified. The capacity of the internet cache may within limits be modified by altering the browser settings on the users computer. Deleted material can sometimes be retrieved by special software or highly proficient technicians. But this refinement is not characteristic of the ordinary use of the internet and can for present purposes be ignored. The important point is that in none of these cases does the end user set out to make a copy of the web page unless he chooses to download it or print it out. His object is to view the material. The copies temporarily retained on the screen or the internet cache are merely the incidental consequence of his use of a computer to do that. The question which arises on this appeal is whether they are nonetheless infringing copies unless licensed by the rights owner. The appellant is a professional association of public relations professionals who, among other things, monitor news coverage on behalf of clients. One way of doing this is to use on line monitoring or search services. This appeal is about the services provided to members of the association by the Meltwater group of companies. The Meltwater companies use automated software programmes to create anindex of words appearing on newspaper websites. Meltwaters customers provide them with search terms of interest to them, and Meltwater produces a monitoring report listing the results of a search of the index for those keywords. For each search hit, the monitoring report will present the opening words of the article, the keyword together with several words on either side of it, and a hyperlink (in the form of a reproduction of the headline) which enables the user to access the article on the relevant source website. It should, however, be noted that if that website has a paywall, the link will not enable the user to avoid it. He will have to pay for access to the material behind the paywall on the same terms as anyone else. Meltwater sends the monitoring report to the customer by email or the customer accesses it on the Meltwater website. A number of points are common ground. It is common ground that Meltwater agreed to take a licence from the publishers of the newspapers to provide their service on terms which have been settled by the Copyright Tribunal. It is also common ground, and has been from an early stage of these proceedings, that Meltwaters customers require a licence to receive the service in its present form. This is because in its present form the service automatically involves the transmission of the monitoring report by e mail. The email copy is not temporary. It is stored on the recipients hard drive until the end user chooses to delete it. The real question on this appeal is whether Meltwaters customers would need a licence to receive its service if the monitoring report were made available only on Meltwaters website. Obviously, to the extent that the customer downloads the report from the website he is making a copy that will infringe the newspapers copyright unless he is licensed. But what if he merely views the material on the website? Proudman J held that he also needed a licence for that, and the Court of Appeal agreed with her. The issue has reached this court because it affects the operation of a service which is being made available on a commercial basis. But the same question potentially affects millions of non commercial users of the internet who may, no doubt unwittingly, be incurring civil liability by viewing copyright material on the internet without the authority of the rights owner, for example because it has been unlawfully uploaded by a third party. Similar issues arise when viewers watch a broadcast on a digital television or a subscription television programme via a set top box. Directive 2001/29/EC Temporary copies created as part of the technical processes involved in viewing copyright material on a computer are dealt with by section 28A of the Copyright, Designs and Patents Act 1988. Section 28A was added to the Act by regulation in 2003 to give effect to Directive 2001/29/EC of 22 May 2001 on the harmonisation of certain aspects of copyright and related rights in the information society. It is not disputed that the effect of the Directive and the English statutory provision is the same, and it is convenient to refer to the terms of the Directive. Directive 2001/29/EC originated in Commission Green Paper on Copyright and Related Rights in the Information Society, published in July 1995, which identified as an issue the use of data processing systems to reproduce copyright material in a form which cannot be apprehended directly by the human senses, i.e. as digital code. This would make it necessary to decide, among other things, whether the right of a copyright owner to control the reproduction of his work should come into play in the ordinary use (digitization, intermediate copies, downloading into main memory) of the computers and other equipment which characterize the information society. This was followed, after a period for consultation, by a proposal of the EC Commission issued in its final form in December 1997, which identified very clearly the problem which has arisen on this appeal. It addressed the prospect of the commercial transmission from digital databases of music, films or other copyright material as digital signals over the internet or other high speed networks for display or downloading, which would dispense with the need for physical media of transmission and storage such as books, disks, tapes, and the like. On the one hand the EU has traditionally afforded, as a matter of policy, a high level of protection for intellectual property rights, and the widespread use of these technologies was likely to facilitate piracy. On the other, it is clear that there was concern that the over rigid application of copyright law devised for physical media of transmission or storage would retard the commercial development of the internet and other form of electronic media technology. In particular, there was uncertainty about the status of temporary or incidental reproductions in the electronic environment. Article 9(2) of the Berne Convention for the Protection of Literary and Artistic Works authorised signatory states to legislate for limited exceptions to the authors exclusive right to authorise the reproduction of his work: It shall be a matter for legislation in the countries of the Union to permit the reproduction of such works in certain special cases, provided that such reproduction does not conflict with a normal exploitation of the work and does not unreasonably prejudice the legitimate interests of the author. The problem, as the Commission saw it in 1997, was that different member states had made use of the liberty conferred by article 9(2) to legislate in different ways for the treatment of copyright works made available in digital form and these differences were liable to impede the development of the internal market. The purpose of the Directive, a draft of which was annexed to the proposal, was to harmonise the rules across the EU. Directive 2001/29/EC was an internal market measure designed to adapt and supplement existing copyright law to respond adequately to economic realities such as new forms of exploitation (Recital 5). Its object was to ensure a high level of protection for copyrights, while modifying those rights to allow the ordinary use of the internet. Recital 31 declared: A fair balance of rights and interests between the different categories of rightholders, as well as between the different categories of rightholders and users of protected subject matter must be safeguarded. The existing exceptions and limitations to the rights as set out by the Member States have to be reassessed in the light of the new electronic environment. Recital 33 referred directly to the problem of temporary copies in the following terms: The exclusive right of reproduction should be subject to an exception to allow certain acts of temporary reproduction, which are transient or incidental reproductions, forming an integral and essential part of a technological process and carried out for the sole purpose of enabling either efficient transmission in a network between third parties by an intermediary, or a lawful use of a work or other subject matter to be made. The acts of reproduction concerned should have no separate economic value on their own. To the extent that they meet these conditions, this exception should include acts which enable browsing as well as acts of caching to take place, including those which enable transmission systems to function efficiently, provided that the intermediary does not modify the information and does not interfere with the lawful use of technology, widely recognised and used by industry, to obtain data on the use of the information. A use should be considered lawful where it is authorised by the rightholder or not restricted by law. Chapter II of the Directive deals with Rights and Exceptions. The rights of the copyright owner are dealt with separately in articles 2, 3 and 4 under three heads: reproduction rights, communication rights and distribution rights respectively. Article 5 then qualifies these rights. Article 5.1 creates an exception for temporary copies which applies only to the reproduction right defined by article 2. It provides: 1. Temporary acts of reproduction referred to in Article 2, which are transient or incidental [and] an integral and essential part of a technological process and whose sole purpose is to enable: (a) a transmission in a network between third parties by an intermediary, or (b) a lawful use of a work or other subject matter to be made, and which have no independent economic significance, shall be exempted from the reproduction right provided for in Article 2. 5. The exceptions and limitations provided for in paragraphs 1, 2, 3 and 4 shall only be applied in certain special cases which do not conflict with a normal exploitation of the work or other subject matter and do not unreasonably prejudice the legitimate interests of the rightholder. Chapters III and IV then make extensive provision for the enforcement of copyright owners rights in the digital world. The case law of the Court of Justice The Court of Justice of the European Union has considered article 5.1 in three recent cases which have laid down broad principles for application by national courts. They are, in the order in which they were decided, (Case C 5/08) Infopaq International A/S vs Danske Dagblades Forening (Infopaq I) [2010] F.S.R. 495; (Case C 403/08) Football Association Premier League Ltd v QC Leisure and Others and (Case C 429/08) Karen Murphy v Media Protection Services Ltd (Premier League) [2012] 1 CMLR 769; and (Case C 302/10) Infopaq International A/S vs Danske Dagblades Forening (Infopaq II), 17 January 2012. It should be noted that only the first of these cases was cited to Proudman J or the Court of Appeal. Neither the Premier League case or Infopaq II had been decided at the time when they gave judgment. Infopaq I In Infopaq I [2010] F.S.R. 495, at [54], the Court of Justice paraphrased article 5.1 as making the exemption for an act of reproduction dependent on five conditions being fulfilled: the act is temporary; it is transient or incidental; it is an integral and essential part of a technological process; the sole purpose of that process is to enable a transmission in a network between third parties by an intermediary of a lawful use of a work or protected subject matter; and the act has no independent economic significance. This formulation has been repeated in this form in the subsequent case law, and it is undoubtedly convenient. It is, however, important to remember that it is a paraphrase. Notwithstanding that the five conditions are laid out in five separate sub paragraphs, they are not free standing requirements. They are overlapping and repetitive, and each of them colours the meaning of the others. They have to be read together so as to achieve the combined purpose of all of them. This is, as the case law demonstrates, what the Court of Justice has always done. In particular, it was the approach of the Court of Justice in Infopaq I itself, which was a reference from Denmark concerning commercial media monitoring service, Infopaq, which was not unlike Meltwaters. The issue was about Infopaqs data capture process, i.e. the electronic search process by which it identified relevant newspaper extracts. It was not, as the present case is, about the method by which the result of the search was communicated to Infopaqs clients. However, Infopaqs methods did make it necessary to consider generally how article 5.1 applied to the storage and viewing of digital data. They involved the creation of copies at four successive stages: (i) the creation of a scanned image of the original article, (ii) the conversion of that image into a searchable text file, (iii) the extraction of the keywords from that text file together with the five words on either side, and their storage as a text file, and (iv) the printing out and retention of copy (iii). The issue turned on the temporary or transient character of copies made in the course of this procedure. It was held that article 5.1 might apply to (i), (ii) and (iii), if the national court was satisfied that these copies were deleted automatically, i.e. without any discretionary human intervention, when the technical need for them had passed. On the other hand, (iv) was not transient because the print outs were destroyed only when a human agent decided to destroy them. Although the Court of Justice was directly concerned only with the first two conditions, it construed them in the light of the third. In substance what the court held was that the requirement of the third condition that the copying should be an integral and essential part of a technological process meant that it could only be regarded as temporary or transient if it was inherent in the technological process that the copy would be deleted when that process was complete. The courts analysis began by drawing attention to the fact that the exception in article 5.1 was a derogation from the rights conferred on copyright owners: 56 For the interpretation of each of those conditions in turn, it should be borne in mind that, according to settled case law, the provisions of a Directive which derogate from a general principle established by that Directive must be interpreted strictly (Criminal Proceedings against Kapper (C 476/01) [2004] E.C.R. 1 5205, ECJ at [72], and Commission of the European Communities v Spain (C 36/05) [2006] E.C.R. 1 10313 ECJ at [31]). 57 This holds true for the exemption provided for in art.5(1) of Directive 2001/29, which is a derogation from the general principle established by that Directive, namely the requirement of authorisation from the rightholder for any reproduction of a protected work. 58 This is all the more so given that the exemption must be interpreted in the light of art.5(5) of Directive 2001/29, under which that exemption is to be applied only in certain special cases which do not conflict with a normal exploitation of the work or other subject matter and do not unreasonably prejudice the legitimate interests of the rightholder. At paras 61 64 the court summarised the position in this way: 61 The court finds, in the light of the third condition referred to in [54] of this judgment, that a temporary and transient act of reproduction is intended to enable the completion of a technological process of which it forms an integral and essential part. In those circumstances, given the principles set out in [57] and [58] of this judgment, those acts of reproduction must not exceed what is necessary for the proper completion of that technological process. 62 Legal certainty for rightholders further requires that the storage and deletion of the reproduction not be dependent on discretionary human intervention, particularly by the user of protected works. There is no guarantee that in such cases the person concerned will actually delete the reproduction created or, in any event, that he will delete it once its existence is no longer justified by its function of enabling the completion of a technological process. 63 This finding is supported by recital 33 in the preamble to Directive 2001/29 which lists, as examples of the characteristics of the acts referred to in art.5(1) thereof, acts which enable browsing as well as acts of caching to take place, including those which enable transmission systems to function efficiently. Such acts are, by definition, created and deleted automatically and without human intervention. 64 In the light of the foregoing, the court finds that an act can be held to be transient within the meaning of the second condition laid down in art.5(1) of Directive 2001/29 only if its duration is limited to what is necessary for the proper completion of the technological process in question, it being understood that that process must be automated so that it deletes that act automatically, without human intervention, once its function of enabling the completion of such a process has come to an end. Addressing the question of copy (iii) (the text file containing the keyword extracts), the court added, 66 . It is for the national court to ascertain whether the deletion of that file is dependent on the will of the user of the reproduction and whether there is a risk that the file might remain stored once the function of enabling completion of the technological process has come to an end. The Premier League case In the important case of Football Association Premier League Ltd v QC Leisure and Karen Murphy v Media Protection Services Ltd [2012] 1 CMLR 769, the ambit of article 5.1 arose in the context of a dispute about the fourth and fifth conditions, which had not been considered in Infopaq I. It was, however, impossible to form a view about the effect of those conditions without construing article 5.1 as a whole, and examining the function of each of the five conditions. This is what the Court of Justice did. The facts were that Mrs. Murphy had subscribed to a pay TV service in Greece and acquired a Greek satellite decoder, but used it without the authority of the rights owner to receive broadcasts of football matches in her pub in the United Kingdom, where they were viewed by her customers. The copies said to infringe were the temporary copies made in the memory of the decoder and on the television screen in the course of the streaming of the material. Functionally, these were similar to the copies made in the internet cache and on the screen of a personal computer. On any view, the infringement alleged was against the consumption of the copyright material by Mrs Murphy and the customers in her pub as end users. At paras 162 164, the court reminded itself that while any exception from the prima facie right of the copyright owner to control reproduction must be strictly construed, that right had to be balanced against the purpose of the exception, which was to encourage the development and operation of new technologies and the rights of users who wished to use those technologies. It was held that Mrs. Murphy was protected by article 5(1). The first question was whether the allegedly infringing copies made in the cache of Mrs Murphys decoder were made for one of the two purposes specified in sub paragraphs (a) and (b) of article 5.1. Since they were not made for the purpose of the transmission of the material through a network, it was necessary for Mrs Murphy to rely on sub paragraph (b). This required her to establish that the copies were made to enable some other use which was lawful. The court held that they were. It put the matter in this way: 168 As is apparent from recital 33 in the preamble to the Copyright Directive, a use should be considered lawful where it is authorised by the right holder or where it is not restricted by the applicable legislation. 169 Since in the main proceedings the use of the works at issue is not authorised by the copyright holders, it must be determined whether the acts in question are intended to enable a use of works which is not restricted by the applicable legislation. 170 In this regard, it is undisputed that those ephemeral acts of reproduction enable the satellite decoder and the television screen to function correctly. From the television viewers' standpoint, they enable the broadcasts containing protected works to be received. 171 Mere reception as such of those broadcaststhat is to say, the picking up of the broadcasts and their visual displayin private circles does not reveal an act restricted by EU legislation or by that of the United Kingdom, as indeed follows from the wording of Question 5 in Case C 403/08, and that act is therefore lawful. Furthermore, it follows from [77][132] of the present judgment that such reception of the broadcasts must be considered lawful in the case of broadcasts from a Member State other than the United Kingdom when it is brought about by means of a foreign decoding device. 172 Accordingly, the acts of reproduction have the sole purpose of enabling a lawful use of the works within the meaning of art.5(1)(b) of the Copyright Directive. 173 Acts of reproduction such as those at issue in the main proceedings thus satisfy the fourth condition laid down by that provision. This section of the judgment is critical to an understanding of the current issue and to the whole of the jurisprudence of the court upon it. EU law might have treated any use of copyright material apart from its transmission through a network as unlawful, if it lacked the authority of the copyright owner. A suggestion was in fact made by the Economic and Social Committee that the Commissions original proposal should be amended (expanded and clarified) so that [a]ny reproduction that in effect is consumption of the work should be unlawful if it occurred without the copyright owners authority: see OJ C 407/32, 28.12.98, at paragraph 3.7.1.2. The suggestion was not, however, adopted, and in the Premier League case the Court of Justice decisively rejected an attempt to arrive at the same result on the construction of article 5.1 as issued. Because Mrs. Murphys use of the material was not contrary to the applicable legislation, it was held to be lawful for the purpose of article 5.1(b) even though it was not authorised by the rights owner. In a later section of its judgment, the court went on to hold that Mrs Murphys use of the material infringed the separate communication right defined by article 3 of the Directive, and was to that extent unlawful. That did not, however, affect its conclusion that her use of the material was lawful for the purpose of article 5.1(b). This was because article 5.1 was concerned only with the ambit of the reproduction right defined in article 2. The only requirement was therefore that the relevant use should be consistent with EU legislation governing the reproduction right, including article 5.1 itself. The court then turned to the fifth condition, which is concerned with the economic significance of the use made of the material. The Court interpreted this condition as meaning that the use made of the material by the alleged infringer must not have any economic value other than that which was inherent in its mere reception and viewing: 174 So far as concerns, finally, the fifth condition laid down by that provision, these acts of reproduction carried out in the course of a technological process make access to the protected works possible. Since the latter have an economic value, access to them necessarily has economic significance. 175 However, if the exception laid down in art.5(1) of the Copyright Directive is not to be rendered redundant, that significance must also be independent in the sense that it goes beyond the economic advantage derived from mere reception of a broadcast containing protected works, that is to say, beyond the advantage derived from the mere picking up of the broadcast and its visual display. 176 In the main proceedings, the temporary acts of reproduction, carried out within the memory of the satellite decoder and on the television screen, form an inseparable and non autonomous part of the process of reception of the broadcasts transmitted containing the works in question. Furthermore, they are performed without influence, or even awareness, on the part of the persons thereby having access to the protected works. 177 Consequently, those temporary acts of reproduction are not capable of generating an additional economic advantage going beyond the advantage derived from mere reception of the broadcasts at issue. 178 It follows that the acts of reproduction at issue in the main proceedings cannot be regarded as having independent economic significance. Consequently, they fulfil the fifth condition laid down in art.5(1) of the Copyright Directive. 179 This finding, and the finding set out in [172] of the present judgment [that the copying had the purpose of enabling a lawful use], are moreover borne out by the objective of that provision, which is intended to ensure the development and operation of new technologies. If the acts at issue were not considered to comply with the conditions set by art.5(1) of the Copyright Directive, all television viewers using modern sets which, in order to work, need those acts of reproduction to be carried out would be prevented from receiving broadcasts containing broadcast works, in the absence of an authorisation from copyright holders. That would impede, and even paralyse, the actual spread and contribution of new technologies, in disregard of the will of the EU legislature as expressed in recital 31 in the preamble to the Copyright Directive. Finally, the court dealt briefly with the requirement of article 5.5 that the exception should be applied only in special cases which do not conflict with a normal exploitation of the work or other subject matter and do not unreasonably prejudice the legitimate interests of the rightholder. It held that in view of the considerations which had led it to hold that article 5.1 applied, article 5.5 must be regarded as satisfied also. I shall return to this point in the context of Infopaq II, where the reasoning is repeated in expanded form. Infopaq II Infopaq II was a second reference in the same case as Infopaq I. It concerned the third, fourth and fifth conditions, which had not been directly in issue on the previous reference. The court substantially repeated what it had said in the Premier League case about the test of lawfulness under article 5.1(b) and it decided on that basis that the fourth condition was satisfied. No further discussion of that point is called for here. The other issues related to the third condition (integral and essential part of a technological process), the fifth condition (no independent economic significance), and the effect of article 5.5. The Danish courts problem with the third condition was that the courts previous emphasis on the absence of human intervention appeared to rule out the application of article 5.1 to the scanned copy which initiated the process, since the original article had to be manually inserted into the scanner. In dealing with this question, the court pointed out that in Infopaq 1 it had been concerned to emphasise that it was the deletion of a temporary copy which must not depend on human intervention. It had not said that there must be no human intervention at any stage: see para 32. It followed from this that the discretionary nature of the users decision to initiate the process (for example by switching on his computer or accessing a particular web page) was irrelevant. Having dealt with this point, the court took the opportunity to deal more generally with the requirement that the copying should be an integral and essential part of a technological process: 30 The concept of the integral and essential part of a technological process requires the temporary acts of reproduction to be carried out entirely in the context of the implementation of the technological process and, therefore, not to be carried out, fully or partially, outside of such a process. This concept also assumes that the completion of the temporary act of reproduction is necessary, in that the technological process concerned could not function correctly and efficiently without that act (see, to that effect, Infopaq International, paragraph 61). 37 Finally, it should be noted that the technological process in question could not function correctly and efficiently without the acts of reproduction concerned. That technological process aims at identifying predefined key words in newspaper articles and extracting them on a digital medium. Such electronic research thus requires a transformation of those articles, from a paper based medium, into digital data, since that transformation is necessary in order to recognise that data, to identify the key words and to extract those key words. The court returned to this theme in dealing with the fifth condition about the absence of independent economic significance: 48 In that regard, it should be recalled that the acts of temporary reproduction, within the meaning of Article 5(1), aim to make access to the protected works and their use possible. Since those works have a specific economic value, access to them and their use necessarily has economic significance (see, to that effect, Football Association Premier League [2012] 1 CMLR 769, paragraph 174). 49 Furthermore, as is apparent from Recital 33 in the preamble to Directive 2001/29, the acts of temporary reproduction like the acts enabling browsing and caching have the purpose of facilitating the use of a work or making that use more efficient. Thus, an inherent feature of those acts is to enable the achievement of efficiency gains in the context of such use and, consequently, to lead to increased profits or a reduction in production costs. 50 However, those acts must not have independent economic significance, in that the economic advantage derived from their implementation must not be either distinct or separable from the economic advantage derived from the lawful use of the work concerned and it must not generate an additional economic advantage going beyond that derived from that use of the protected work (see, to that effect, Football Association Premier League and Others, paragraph 175). 51 The efficiency gains resulting from the implementation of the acts of temporary reproduction, such as those in issue in the main proceedings, have no such independent economic significance, inasmuch as the economic advantages derived from their application only materialise during the use of the reproduced subject matter, so that they are neither distinct nor separable from the advantages derived from its use. 52 On the other hand, an advantage derived from an act of temporary reproduction is distinct and separable if the author of that act is likely to make a profit due to the economic exploitation of the temporary reproductions themselves. Finally, the court in Infopaq II expanded on what it had said in the Premier League case about article 5.5: 56 In that regard, suffice it to note that if those acts of reproduction fulfil all the conditions of Article 5(1) of Directive 2001/29, as interpreted by the case law of the Court, it must be held that they do not conflict with the normal exploitation of the work or unreasonably prejudice the legitimate interests of the rightholder (Football Association Premier League and Others, paragraph 181). 57 Consequently, the answer to the seventh question is that Article 5(5) of Directive 2001/29 must be interpreted as meaning that, if they fulfil all the conditions laid down in Article 5(1) of that directive, the acts of temporary reproduction carried out during a 'data capture' process, such as those in issue in the main proceedings, must be regarded as fulfilling the condition that the acts of reproduction may not conflict with a normal exploitation of the work or unreasonably prejudice the legitimate interests of the rightholder. This last conclusion may at first sight seem odd, since it means that article 5.5 adds nothing to article 5.1. But the apparent oddity disappears when one appreciates that article 5.5 reflects the terms of article 9(2) of the Berne Convention by which both the EU and its member states are bound. Under that article, signatories have a right to authorise by legislation copying which would otherwise be an infringement, in special cases provided that this does not conflict with the normal exploitation of the work and does not unreasonably prejudice the legitimate interests of the author. Article 5.1 is the legislation in question. The Court of Justice is pointing out that it has been drafted so as to determine legislatively what exploitation is to be regarded as normal, and what derogations from the authors exclusive rights are to be regarded as reasonable and legitimate. This does not make article 5.5 redundant. Its effect is to require article 5.1 to be as narrowly construed as is consistent with its purpose: see Infopaq I at para 58. But its purpose must nevertheless be at the forefront of any attempt to construe it. The effect of the CJEU decisions The effect of this body of authority can be summarised as follows: (1) Subject to the limitations which I shall summarise in the following sub paragraphs, the exception in article 5.1 applies to copies made as an integral and necessary part of a technological process, in particular the digital processing of data. For this purpose, the making of copies is a necessary part of the process if it enables it to function correctly and efficiently: Infopaq II, at paras 30, 37. (2) These copies must be temporary. This requirement is explained and defined by the words which follow, namely that the making of the copies must be transient or incidental and an integral and essential part of a technological process. It means (i) that the storage and deletion of the copyright material must be the automatic consequence of the users decision to initiate or terminate the relevant technological process, as opposed to being dependent on some further discretionary human intervention, and (ii) that the duration of the copy should be limited to what is necessary for the completion of the relevant technological process: see Infopaq I, at paras 62 and 64. (3) The exception is not limited to copies made in order to enable the transmission of material through intermediaries in a network. It also applies to copies made for the sole purpose of enabling other uses, provided that these uses are lawful. These other uses include internet browsing: Infopaq I, at para 63 and Infopaq II, at para 49. (4) For the purpose of article 5.1, a use of the material is lawful, whether or not the copyright owner has authorised it, if it is consistent with EU legislation governing the reproduction right, including article 5.1 itself: Premier League, at paras 168 173, Infopaq II, at para 42. The use of the material is not unlawful by reason only of the fact that it lacks the authorisation of the copyright owner. (5) The making of the temporary copy must have no independent economic significance. This does not mean that it must have no commercial value. It may well have. What it means is that it must have no independent commercial value, i.e. no value additional to that which is derived from the mere act of digitally transmitting or viewing the material: Premier League, at para 175, Infopaq II, at para 50. (6) If these conditions are satisfied no additional restrictions can be derived from article 5.5. Application to the present case The first and fundamental question is whether article 5.1 applies at all to temporary copies generated by an end users use of the internet. Mr. Howe QC, who appeared for the Newspaper Licensing Agency, submitted that it did not. He argued that it applied only to copies made in the course of the transmission of the material within a network, for example in the caches of intermediate routers and proxy servers. In my opinion, this is an impossible contention. In the first place, it is clear from the Directives recitals, and in particular from recital 33, that it was intended that the exception should include acts which enable browsing as well as acts of caching to take place. Browsing is not part of the process of transmission. It is the use of an internet browser by an end user to view web pages. It is by its very nature an end user function. The acts referred to are the acts of temporary reproduction referred to at the outset of the recital, with which the whole recital is concerned. The acts of temporary reproduction which enable browsing to occur are accordingly the making of temporary copies in the internet cache of the end users hard drive and on his screen. It follows that the recital expressly envisages that the exception will apply to end user viewing of web pages. Secondly, if Mr Howe is right the scope of the exception corresponds only to that part of the process which is covered by article 5.1(a) (transmission in a network between third parties by an intermediary). In fact, caching is concerned with the transmission of material in a network, because its purpose is to make the operation of the internet more efficient by easing constraints on its capacity: see paragraph 2 above. But the exception in any event is wider than that, for it also extends to operations covered by article 5.1(b) (lawful use). Lawful use refers to the use of the work which is the subject of the copyright. It extends to use, as the Court of Justice made clear in the Premier League case and Infopaq II, whether or not authorised by the copyright owner, which is not restricted by the applicable legislation. This necessarily includes the use of the work by an end user browsing the internet. Third, Mr. Howes submission is directly contradicted by the judgment in the Premier League case, where article 5 was applied to Mrs Murphys use of the copyright material by displaying it on her television. She was the end user. She and her customers were consuming the product. In the context of the fifth condition, that the copy should have no independent economic significance, the court considered at para 176 the status of the copy made on the television screen, because it had been suggested by the Advocate General (at AG95) that the screen copy might have an independent economic significance that the cached copy lacked. At para 179, the court pointed out that if article 5.1 did not apply to the viewing of copyright material by a television end user, such viewers would be prevented from receiving broadcasts. in the absence of an authorisation from copyright holders, which would impede and even paralyse the actual spread and contribution of new technologies in disregard of the will of the EU legislature as expressed in recital 31. For this purpose, there is no rational distinction to be made between viewing copyright material on a television screen and viewing the same material on a computer. Once it is accepted that part of the purpose of article 5.1 is to authorise the making of copies to enable the end user to view copyright material on the internet, the various conditions laid down by that article must be construed so far as possible in a manner consistent with that purpose. It must, if the exception is to be coherent, apply to the ordinary technical processes associated with internet browsing. There is, to my mind, no room for argument on the facts of this case about the third, fourth and fifth conditions in article 5.1. The third condition is that the making of copies in the internet cache and on screen should be an integral and essential part of a technological process. Manifestly it is. These were at the time of the Directive and remain today basic features of the design of modern computers. It would no doubt be possible to design computers that did not cache material in the course of internet browsing, but in the words of the judgment in Infopaq II, the technological processes required to browse the internet could not function correctly and efficiently without the acts of reproduction concerned: see paras 30 and 37. The fourth condition, as applied to end users like Meltwater's customers, is that its use should be lawful. Once it is established, as it is by the decisions in the Premier League case and Infopaq II, that this means lawful apart from any lack of authorisation by the copyright owner, it is equally clear that this condition is satisfied. The fifth condition, that the copying should have no independent economic significance, is satisfied for the same reason as it was satisfied in the Premier League case, namely that it has no independent economic value to Meltwaters customers. This is because unless they download or print out the material (in which case it is not disputed that they require a licence), the sole economic value which they derive from accessing information on Meltwaters website is derived from the mere fact of reading it on screen. These considerations no doubt explain why Mr. Howes submissions were addressed mainly to the first two conditions, that the copies generated by the technical processes involved in browsing should be temporary and transient or incidental. It is not suggested that transient means anything different from temporary, and in my view they are the same. Transience is simply part of the elaborate explanation of temporary which follows that word. If, as the Court of Justice has accepted, browsing copyright material on the internet is a method of using it which is within the scope of article 5.1, and if the making of copies in the internet cache or on screen is indispensable to the correct and efficient operation of the technical processes involved in browsing, it would be strange if the law said that the period of time for which these copies will exist in the ordinary course of that operation was insufficiently temporary or transient to qualify. As I have explained above by reference to the judgment in Infopaq I, the relevant requirements are (i) that the storage and deletion of the copyright material should be automatic, as opposed to being dependent on discretionary human intervention, and (ii) that the duration of the copy should be limited to what is necessary for the completion of the technological processes in question: see paras 62 and 64. The storage of the material, i.e. the creation of copies in the cache or on screen, is the automatic result of browsing the internet. It requires no other human intervention than the decision to access the relevant web page. Its deletion is the equally automatic result of the lapse of time coupled with the continuing use of the browser. The technological processes in question are those necessarily associated with web browsing, including the retention of material in the cache. It is retained there for no longer than the ordinary processes associated with internet use continue. Standing back for a moment from this fine verbal analysis of the language of the court, the purpose of these formulations is plain. It is to distinguish between the use of a computer or other equipment simply to view the relevant material, and its use to record it. The object of the restriction to temporary or transient copies is to ensure that the exception does not apply to protect downloading or other forms of digital or physical copying which will remain in existence until the user chooses to delete or destroy them and are therefore as permanent as he chooses to make them. Mr Howes argument was that cached material was not temporary or transient because the user could make a discretionary decision to close down the computer, thereby leaving the material in the cache indefinitely until the browser was used again. Or he could adjust the settings so as to enlarge the cache, thereby extending the period for which material might remain in it even while the browser was in use. He could also access a web page and leave his computer on with the web page on screen indefinitely. These are certainly examples of discretionary human intervention, but they are irrelevant because they do not involve a discretionary decision whether to retain the material in memory or not. They are merely rather artificial ways of extending the duration of the relevant technological processes. They call for three comments in the present context. The first is that the effect of creating copies in the internet cache or on screen in the course of browsing, must be judged in the light of the normal operation of a computer or its browser. It is not enough that forensic ingenuity can devise a method of extending to some extent the life of copies which are by their nature temporary. Secondly, the question is whether human intervention is required to delete the material: see Infopaq I at para 66. There is a difference, which is fundamental to the object of article 5.1, between a discretionary decision to extend the duration of what remains an automatic process, and the storage of a copy of material in the course of the browsing in a manner which will ensure that it is permanent unless and until a discretionary decision is made to delete or destroy it. The decisions of the Court of Justice show that in principle the former satisfies the first two conditions in article 5.1 whereas the latter does not. Third, the Respondents examples, as examples go, prove too much. If the mere fact that it is in principle possible to close down a computer, alter the browser settings to enlarge the internet cache or leave an image on screen indefinitely were enough to prevent article 5.1 from applying, then it would never apply to internet browsing. This would frustrate the purpose of the legislation. If, as I consider, the copies made in the internet cache or on screen are transient, it is strictly speaking unnecessary to consider whether they are also incidental. But I think it clear that they are. The software puts a web page on screen and into the cache for the purpose of enabling a lawful use of the copyright material, i.e. viewing it. The creation of the copies is wholly incidental to the technological process involved. Once these matters are established, it follows that article 5.5 is also satisfied. Consequences It is the policy of the EU to maintain a high level of protection of intellectual property. That policy is acknowledged both in the Directive itself (see recitals 4 and 9), and in the case law (for example, Premier League at para 186). We were pressed with the argument that if the viewing of copyright material on a web page did not require a licence from the copyright owner, he would be exposed to large scale piracy of a kind which would be difficult to detect or prevent. I am not persuaded by this argument and nor, it is clear, was the Court of Justice on the successive occasions when it has dealt with this issue. Of course, any diminution in the rights of copyright owners necessarily narrows the scope of the protection which they enjoy for their works. But we need to keep this point in proportion. In the first place, article 5.1 is an exception to the copyright owners right to control the reproduction of his work. It necessarily operates to authorise certain copying which would otherwise be an infringement of the copyright owners rights. Secondly, it has never been an infringement, in either English or EU law, for a person merely to view or read an infringing article in physical form. This state of affairs, which is recognised in the enumeration of the copyright owners rights in articles 2, 3 and 4 of the Directive, has never been thought inconsistent with a high level of protection for intellectual property. All that article 5.1 of the Directive achieves is to treat the viewing of copyright material on the internet in the same way as its viewing in physical form, notwithstanding that the technical processes involved incidentally include the making of temporary copies within the electronic equipment employed. Third, if it is an infringement merely to view copyright material, without downloading or printing out, then those who browse the internet are likely unintentionally to incur civil liability, at least in principle, by merely coming upon a web page containing copyright material in the course of browsing. This seems an unacceptable result, which would make infringers of many millions of ordinary users of the internet across the EU who use browsers and search engines for private as well as commercial purposes. Fourth, nothing in article 5.1 affects the obligation of Meltwater to be licensed in order to upload copyright material onto their website or make non temporary copies of it in some other way. At the moment, the licence fee payable by Meltwater is fixed on the basis that its customers need a licence of their own from the publishers and that the service will be supplied only to end users who have one. It seems very likely (although I am not deciding the point) that the licence fee chargeable to Meltwater will be substantially higher if end users do not need a licence because on that footing the value of the rights for which Meltwater is licensed will be significantly higher. The respondents have lodged an alternative claim with the Copyright Tribunal on that basis. In my view it is altogether more satisfactory that a single large licence fee should be payable representing the value to the person who puts the material onto the internet, than that tiny sums should be separately collectable from hundreds (in other cases it may be millions) of internet viewers. Fifth, if merely viewing a web page is not an infringement, that does not leave the copyright owner without effective remedies against pirates. It simply means that his remedy must be found against others who on the face of it are more obviously at fault. Nothing in article 5.1 impairs the copyright owners right to proceed against those who unlawfully upload copyright material onto the internet, just as the copyright owner has always been entitled to proceed against those who make or distribute pirated copies of books, films, music or other protected works. The Directive itself contains in Chapters III and IV important provisions enlarging the range of procedures and sanctions available against piracy. The decisions below Proudman J decided that Meltwaters customers needed a licence both to receive the monitoring reports by email and to access them on Meltwaters website. Her reasons were (i) that the making of copies, however temporary, in the end users computer in the course of browsing was not part of the technological process because it was generated by his own volition, i.e. by his voluntary decision to access the web page; (ii) that it was outside the scope of the technological process for the additional reason that it was in reality the end result of that process since it was what the end user viewed; and (iii) that the viewing of these copies did not constitute lawful use because they were not authorised by the copyright owner: see para 109. These reasons are of course related, and all three of them lead to the conclusion that, in the judges words, the kind of circumstance where the defence may be available is where the purpose of the copying is to enable efficient transmission in a network between third parties by an intermediary, typically an internet service provider para 110. The Court of Appeal agreed with her, essentially on her ground (i). In their view the acts of reproduction are those occasioned by the voluntary human process of accessing that web page para 35. For practical purposes, this amounted to an endorsement of Proudman Js view that unlicensed internet browsing could never satisfy the conditions in article 5.1. It will be apparent that Proudman J and the Court of Appeal could not have arrived at these conclusions if they had had the benefit of the judgments in Premier League and Infopaq II. In particular, the far broader meaning given by the Court of Justice in these cases to the concept of lawful use makes it impossible to confine the scope of the exception to the internal plumbing of the internet. Once it is accepted that article 5.1 extends in principle to temporary copies made for the purpose of browsing by an unlicensed end user, much of the argument which the courts below accepted unravels. Reference In its recent recommendations in relation to references, OJ C338, 6.11.2012, the Court of Justice of the European Union has observed that while a national court may consider that sufficient guidance is available in the existing case law of the Court of Justice to enable a case to be decided, a reference may be useful where there is a new question of interpretation of general interest for the uniform application of European Union law or where the existing case law does not appear to be applicable to a new set of facts. I have set out in this judgment the conclusions that I have reached on the effect of the Directive, as the Court of Justice has interpreted and applied it to date. However, I recognise the issue has a transnational dimension and that the application of copyright law to internet use has important implications for many millions of people across the EU making use of what has become a basic technical facility. These considerations make it desirable that any decision on the point should be referred to the Court of Justice for a preliminary ruling, so that the critical point may be resolved in a manner which will apply uniformly across the European Union. In my view, before making any order on this appeal, this court should refer to the Court of Justice the question whether the requirements of article 5.1 of the Directive that acts of reproduction should be (i) temporary, (ii) transient or incidental and (iii) an integral and essential part of the technological process, are satisfied by the technical features described at paragraphs 2 and 31 32 of this judgment, having regard in particular to the fact that a copy of protected material may in the ordinary course of internet usage remain in the cache for a period of time after the browsing session which has generated that copy is completed until it is overlaid by other material, and a screen copy will remain on screen until the browsing session is terminated by the user. I would invite Counsel to comment on the proposed issue to be referred and to prepare and if possible agree a draft reference for consideration by this court.

This appeal raises an important question about the application of copyright law to the technical processes involved in viewing copyright material on the internet. Where a web page is viewed by an end user on his computer, without being downloaded, the technical processes involved will require temporary copies to be made on screen and in the internet cache on the hard disk of the computer. The end users object is to view the material. He does not make a copy unless he downloads or prints the image. The copies temporarily retained on the screen or in the cache are merely an incidental consequence of using a computer to view the material. Temporary copies of copyright material on a computer are dealt with by section 28A of the Copy, Designs and Patents Act 1988. S28A gives effect to Directive 2001/29/EC (the Directive). The Directive gives copyright owners various rights. Article 5.1 qualifies rights in relation to temporary acts of reproduction which are transient or incidental [and] an integral and essential part of a technical process whose sole purpose is to enable: (a) the transmission in a network between third parties by an intermediary, or (b) a lawful use of a work or other subject matter to be made, and which have no independent economic significance The appellant is a professional association of public relations professionals who monitor news coverage for clients, using on line monitoring and search services. The Meltwater group of companies provides members of the association with automated software programmes to create a daily index of words appearing on newspaper websites. Meltwaters customers supply them with search terms, and Meltwater produces a monitoring report listing the results. Meltwater sends the monitoring report to the customer by email, but the customer can also access it through Meltwaters website. The question in this appeal is whether Meltwaters customers need a licence to receive its service if a monitoring report is made available only on Meltwaters website. Proudman J held that the end user needed a licence and the Court of Appeal agreed, largely on the ground that making copies, however temporary, in the end users computer while browsing was not part of the technological process but generated by the users voluntary decision to access the web page. Before making an order, the Court refers the question of whether the requirements of article 5.1 of the Directive are satisfied to the CJEU for a preliminary ruling. Lord Sumption gives the judgment of the Court. Lord Sumption reviewed and summarised the effects of a series of CJEU decisions [26]. He rejects the idea that article 5.1 does not apply to temporary copies generated by an end user of the internet. Recital 33 to the Directive makes clear it was intended to include acts which enable browsing as well as acts of catching to take place. Browsing by its very nature is an end user function. These acts are acts of temporary reproduction which enable browsing and are the making of temporary copies in the end users cache and screen. The exception is wider than the process of transmission in a network between third parties by an intermediary. Article 5.1(b) also extends it to lawful use. This covers use of work subject to copyright, whether or not authorised by the copyright owner, provided it is not restricted by legislation. This necessarily includes use of the work by an end user browsing the internet [27]. Once it is accepted that the purpose of article 5.1 is to authorise the making of copies to enable the end user to view copyright material on the internet, the various conditions laid down by it must be constructed consistently with that purpose, and apply to ordinary technical processes associated with internet browsing [28]. As to the other conditions of article 5.1, copies in the cache and on screen are an integral part of a technological process as they are basic features of modern computers. The technical process required to browse the internet could not function correctly and efficiently with the acts of reproduction concerned [29]. Copies are stored automatically by browsing and deleted automatically by a lapse of time coupled with continuing browser use, rather than being dependent on discretionary human intervention. The technological processes are those necessarily associated with browsing including retention of material in the cache for no longer than the ordinary processes associated with internet use continue. The restriction to temporary and transient is designed to prevent downloading or copying which is permanent until the user chooses to delete the material. The copying has no independent economic value unless Meltwaters customers download or print the material. The sole economic value is from accessing information on Meltwaters website which is derived from merely reading it on screen [31]. The above conclusions would not result in large scale piracy. It has never been an infringement of EU or English law to view or read an infringing article in physical form. Making mere viewing, rather than downloading or printing, the material an infringement could make infringers of millions of ordinary internet users across the EU. Nothing in article 5.1 stops Meltwater needing a licence to upload copyright material on their website. The copyright owner still has remedies against pirates including the remedies provided in the Directive itself. Given the appeals transnational dimension and potential implications for internet users across the EU, the Court, while expressing its own view of the matter, proposes to refer the matter to the CJEU for a preliminary ruling. The question which it will refer is (in substance) whether the requirements of article 5.1 of the Directive that acts of reproduction should be (i) temporary (ii) transient or incidental and (iii) an integral and essential part of the technological process are satisfied, having regard in particular to the fact that copies may remain in the cache after the browsing session that generated them has ended until overlaid by other material, and a screen copy will remain on screen until the browsing session is terminated by the end user [38].

This case is about the criteria for judging whether the living arrangements made for a mentally incapacitated person amount to a deprivation of liberty. If they do, then the deprivation has to be authorised, either by a court or by the procedures known as the deprivation of liberty safeguards, set out in the Mental Capacity Act 2005 (the Mental Capacity Act). If they do not, no independent check is made on whether those arrangements are in the best interests of the mentally incapacitated person, although of course the health or social care bodies who make the arrangements do so in the hope and belief that they are the best which can practicably be devised. It is no criticism of them if the safeguards are required. It is merely a recognition that human rights are for everyone, including the most disabled members of our community, and that those rights include the same right to liberty as has everyone else. The statutory background The deprivation of liberty safeguards were introduced into the Mental Capacity Act by the Mental Health Act 2007. In a sense the wheel has turned full circle. Throughout the 19th century it was assumed that persons of unsound mind (then known as either lunatics or idiots) should be kept in some form of confinement and reformers concentrated upon providing more and better institutions where they could live. But it was also recognised that there was a risk of unjustified confinement and assumed that some form of judicial certification was the best protection against this. This was therefore the approach adopted under the Mental Deficiency Acts of 1913 and 1927, under which publicly funded institutions were established for people whose mental handicaps ranged from the severe (known as idiots), through the moderate (known as imbeciles), to the mild (known as feeble minded). Those Acts did not provide for a voluntary status for patients who were able to consent to their admission to hospital, nor did they provide for an informal status for those who lacked the capacity to consent but raised no objection to their admission. However, unlike the institutions providing for people with mental illnesses, the institutions in question were not prohibited from admitting patients without formal certification. During the 1950s, therefore, this was first encouraged for patients admitted for a short time; and the Report of the Royal Commission on the Law relating to Mental Illness and Mental Deficiency 1954 1957 (chaired by Lord Percy), recommended that this could and should become the general practice without waiting for legislative reform (1957, Cmnd 169). Certification was seen, not only as bringing with it some stigma, but also as inconsistent with the goal of normalising the care and treatment of these patients and bringing it into line with the care and treatment of people with physical disorders and disabilities. A legislative basis for such informal admissions to hospital was provided by section 5(1) of the Mental Health Act 1959, now contained in section 131(1) of the Mental Health Act 1983 (the 1983 Act): Nothing in this Act shall be construed as preventing a patient who requires treatment for mental disorder from being admitted to any hospital or registered establishment in pursuance of arrangements made in that behalf and without any application, order or direction rendering him liable to be detained under this Act . But that, of course, begged the question of the underlying law: on what legal basis could a person who lacked the capacity to decide to go into hospital or indeed anywhere else be admitted and treated there, whether for mental or physical disorder? The answer came in the case of In re F (Mental Patient: Sterilisation) [1990] 2 AC 1. The House of Lords confirmed that there was no one authorised by law to consent to treatment on behalf of an adult who lacked the capacity to consent for himself, nor was there any jurisdiction in the courts to give such consent. It was, however, lawful for him to be given such treatment and care as was necessary in his own best interests. In cases of doubt or dispute, moreover, the High Court could declare whether or not proposed treatment would be lawful. That principle has now been given statutory backing in section 5 of the Mental Capacity Act; as originally enacted, however, section 6(5) of the Act was designed to make it clear that this did not permit hospitals or other carers to deprive a person of his liberty. This was prompted by the litigation concerning HL. Quite how far the necessity principle might extend at common law was tested in the case of R v Bournewood Community and Mental Health NHS Trust, ex p L [1999] 1 AC 458. HL was autistic and profoundly mentally disabled. He had lived in a hospital for many years before being discharged to live with paid foster carers, Mr and Mrs E. One day he became agitated at his day centre and, as the foster carers could not be contacted, a social worker and doctor were called, he was sedated and taken to A & E, where he was examined by a psychiatrist. The psychiatrist assessed that he needed in patient treatment, but by then he appeared fully compliant, and so he was admitted informally. Although the plan was to return him to Mr and Mrs E as soon as the hospital staff thought it possible, their contact with him was restricted and he would have been prevented from leaving had he tried to do so. Habeas corpus and judicial review proceedings were brought on his behalf. These succeeded in the Court of Appeal (whereupon HL was promptly sectioned under the Mental Health Act), but failed in the House of Lords. The majority held that the hospital had not detained him. Lord Nolan and Lord Steyn held that it had. Lord Steyn expressed himself with some force, at p 495: Counsel for the trust and the Secretary of State argued that L was in truth always free not to go to the hospital and subsequently to leave the hospital. This argument stretches credulity to breaking point. The truth is that for entirely bona fide reasons, conceived in the best interests of L, any possible resistance by him was overcome by sedation, by taking him to hospital and by close supervision of him in hospital and, if L had shown any sign of wanting to leave, he would have been firmly discouraged by staff and, if necessary, physically prevented from doing so. The suggestion that L was free to go was a fairy tale. Nevertheless, both he and Lord Nolan agreed with the majority that what had been done was justified by the necessity principle and that section 131(1) covered, not only a patient who was able to and did give a valid consent, but also a patient who was unable to do so. The case then went to the European Court of Human Rights as HL v United Kingdom (2004) 40 EHRR 761. The court agreed with Lord Steyn that HL had been deprived of his liberty. It found violations, both of the right to liberty, in article 5(1) of the Convention for the Protection of Human Rights and Fundamental Freedoms, and of the right of a detained person to speedy access to a court which can order his release if his detention is not lawful, in article 5(4). Article 5(1)(e) permits the lawful detention of persons of unsound mind, but that detention has to conform to the Convention standards of legality, and the doctrine of necessity did not provide HL with sufficient protection against arbitrary deprivation of his liberty. The court was struck by the difference between the careful machinery for authorising the detention and treatment of compulsory patients under the Mental Health Act and the complete lack of any such machinery for compliant incapacitated patients such as HL. Key passages from the judgment are these: 89. It is not disputed that in order to determine whether there has been a deprivation of liberty, the starting point must be the specific situation of the individual concerned and account must be taken of a whole range of factors arising in a particular case such as the type, duration, effects and manner of implementation of the measure in question. The distinction between a deprivation of, and restriction upon, liberty is merely one of degree or intensity and not one of nature or substance. 90. . The majority of the House of Lords specifically distinguished actual restraint of a person (which would amount to false imprisonment) and restraint which was conditional upon his seeking to leave (which would not constitute false imprisonment). The court does not consider such a distinction to be of central importance under the Convention. Nor, for the same reason, can the court accept as determinative the fact . that the regime applied to the applicant (as a compliant incapacitated patient) did not materially differ from that applied to a person who had the capacity to consent to hospital treatment, neither objecting to their admission to hospital. The court recalls that the right to liberty is too important in a democratic society for a person to lose the benefit of Convention protection for the single reason that he may have given himself up to be taken into detention, especially when it is not disputed that that person is legally incapable of consenting to, or disagreeing with, the proposed action. 91. the court considers the key factor in the present case to be that the health care professionals treating and managing the applicant exercised complete and effective control over his care and movements from the moment he presented acute behavioural problems on 22 July 1997 to the date he was compulsorily detained on 29 October, 1997. Accordingly, the concrete situation was that the applicant was under continuous supervision and control and was not free to leave. Any suggestion to the contrary was, in the Courts view, fairly described by Lord Steyn as stretching credulity to breaking point and as a fairy tale. It therefore became necessary for this country to introduce some such machinery for the many thousands of mentally incapacitated people who are regularly deprived of their liberty in hospitals, care homes and elsewhere. The Mental Health Act 2007 amended the Mental Capacity Act accordingly. Section 6(5) was repealed and replaced with sections 4A and 4B. Deprivation of liberty is not permitted under the Act save in three circumstances: (i) it is authorised by the Court of Protection by an order under section 16(2)(a); (ii) it is authorised under the procedures provided for in Schedule A1, which relates only to deprivations in hospitals and in care homes falling within the meaning of the Care Standards Act 2000 (see Schedule A1, para 178); (iii) it falls within section 4B, which allows deprivation if it is necessary in order to give life sustaining treatment or to prevent a serious deterioration in the persons condition while a case is pending before the court. The safeguards have the appearance of bewildering complexity, much greater than that in the comparable provisions for detaining mental patients in hospital under the Mental Health Act; but their essence is to secure professional assessment, by people independent of the hospital or care home in question, of (a) whether the person concerned lacks the capacity to make his own decision about whether to be accommodated in the hospital or care home for the purpose of care or treatment (Schedule A1, para 15), and (b) whether it is in his best interests to be detained (para 16). The procedures are administrative, but the authorisation can be challenged in the Court of Protection under section 21A. There have been far fewer authorisations under Schedule A1 than was predicted before the amendments came into force, although the numbers are rising (from 7157 applications in 2009 2010 to 11,887 in 2012 13). There have also been very few cases coming before the Court of Protection seeking authority to deprive someone of his liberty in a setting other than a hospital or care home (it is not known how many of the 88 applications made in 2012 were challenges under section 21A or for orders under section 16). It would not be at all surprising if those arranging for the care of people with severe learning disabilities were reluctant to see those arrangements, made in what they think are the best interests of the people concerned, as also depriving them of their liberty. As with detention under the Mental Health Act, they may worry that it carries a stigma. They may also baulk at the bureaucracy of the procedures and the time they take. They may even see the procedures as a return to the bad old days before the Mental Health Act 1959, when all mental patients were seen as prisoners rather than patients or residents like any others. Legal formalities may be seen as the antithesis of the normalisation which it is the object of both the Mental Health and the Mental Capacity Acts to achieve. The facts of the two cases before us are a good illustration of the sort of benevolent living arrangements which many might find difficult to characterise as a deprivation of liberty. What follows are the facts as they were when the cases were heard in the Court of Protection, which is now a long time ago. The facts: P (otherwise known as MIG) and Q (otherwise known as MEG) v Surrey County Council MIG and MEG are sisters who first became the subject of care proceedings under the Children Act 1989 in 2007, when they were aged respectively 16 and 15. MIG has a learning disability at the lower end of the moderate range or the upper end of the severe range. She also has problems with her sight and her hearing. She communicates with difficulty and has limited understanding, spending much of her time listening to music on her iPod. She needs help crossing the road because she is unaware of danger. MEG has a learning disability at the upper end of the moderate range, bordering on the mild. Her communication skills are better than her sisters and her emotional understanding is quite sophisticated. Nevertheless, she may have autistic traits and she exhibits challenging behaviour. Until 2007 they lived with their mother and from 1997 also with their step father. They were ill treated and neglected there. They were removed from home after siblings made allegations of sexual abuse against their step fathers father, and then against their step father and their mother. Their step father was later convicted of raping their half sister and their mother of indecently assaulting her. At the time of the final hearing before Parker J in 2010, MIG (then aged 18) was living with a foster mother with whom she had been placed when she was removed from home. She was devoted to her foster mother (whom she regarded as her mummy). Her foster mother provided her with intensive support in most aspects of daily living. She had never attempted to leave the home by herself and showed no wish to do so, but if she did, the foster mother would restrain her. She attended a further education unit daily during term time and was taken on trips and holidays by her foster mother. She was not on any medication. MEG (then aged 17) had originally been placed with a foster carer, who was unable to manage her severe aggressive outbursts, and so she was moved to a residential home. She mourned the loss of that relationship and wished she was still living with her foster carer. The home was an NHS facility, not a care home, for learning disabled adolescents with complex needs. She had occasional outbursts of challenging behaviour towards the other three residents and sometimes required physical restraint. She was also receiving tranquillising medication. Her care needs were met only as a result of continuous supervision and control. She showed no wish to go out on her own and so did not need to be prevented from doing so. She was accompanied by staff whenever she left. She attended the same further education unit as MIG and had a much fuller social life than her sister. In 2008, when the sisters were aged 17 and 16, the care proceedings were transferred to the Court of Protection, the interim care orders expired, and Court of Protection proceedings were issued instead. (The Court of Protection has jurisdiction over people aged 16 or more, whereas a family court cannot make a care order once a child has reached 17: Children Act 1989, s 31(3).) On 15 April 2010, Parker J decided that the sisters living arrangements were in their best interests and concluded that they did not amount to a deprivation of liberty: [2010] EWHC 785 (Fam), [2011] Fam Law 29 (sub nom In re MIG and MEG). The Court of Appeal agreed: [2011] EWCA Civ 190 [2012] Fam 170. Wilson LJ, who gave the leading judgment, laid stress on the relative normality of the sisters lives, compared with the lives they might have at home with their family (paras 28, 29), together with the absence of any objection to their present accommodation (para 26). Mummery LJ was also impressed with the greater fulfilment in an environment more free than they had previously had (para 52). Smith LJ, on the other hand, thought their previous arrangements were not relevant, but stressed that what may be a deprivation of liberty for one person may not be for another (para 40). The facts: Cheshire West and Chester Council v P P was aged 38 at the time of the Court of Protection hearing. He was born with cerebral palsy and Downs syndrome and required 24 hour care to meet his personal care needs. Until he was 37 he lived with his mother, who was his principal carer, but her health began to deteriorate and the local social services authority concluded that she was no longer able to look after P. In 2009 they obtained orders from the Court of Protection that it was in Ps best interests to live in accommodation arranged by the local authority. Since November 2009, he had been living in Z house. This was not a care home. It was a spacious bungalow, described by an independent social worker as cosy and with a pleasant atmosphere, and close to Ps family home. At the time of the final hearing, he shared it with two other residents. There were normally two staff on duty during the day and one waking member of staff overnight. P received 98 hours additional one to one support each week, to help him to leave the house whenever he chose. He went to a day centre four days a week and a hydrotherapy pool on the fifth. He also went out to a club, the pub and the shops, and saw his mother regularly at the house, the day centre and her home. He could walk short distances but needed a wheel chair to go further. He also required prompting and help with all the activities of daily living, getting about, eating, personal hygiene and continence. He wore continence pads. Because of his history of pulling at these and putting pieces in his mouth, he wore a body suit of all in one underwear which prevented him getting at the pads. Intervention was also needed to cope with other challenging behaviours which he could exhibit. But he was not on any tranquillising medication. By the time of the final hearing before Baker J in April 2011, the principal issue was whether these arrangements amounted to a deprivation of liberty. Baker J held that P was completely under the control of the staff at Z House, that he could not go anywhere, or do anything, without their support and assistance (para 59). Further, the steps required to deal with his challenging behaviour lead to a clear conclusion that, looked at overall, P is being deprived of his liberty (para 60). Nevertheless it was in his best interests for those arrangements to continue: [2011] EWHC 1330 (Fam). The Court of Appeal substituted a declaration that the arrangements did not involve a deprivation of liberty: [2011] EWCA Civ 1257, [2012] PTSR 1447. Munby LJ, who delivered the leading judgment with which Lloyd and Pill LJJ agreed, developed the concept of relative normality adopted in P and Q, and considered it appropriate to compare Ps life, not with that which he had enjoyed before when living with his mother, but with that which other people like him, with his disabilities and difficulties, might normally expect to lead. As Lloyd LJ put it, It is meaningless to look at the circumstances of P in the present case and to compare them with those of a man of the same age but of unimpaired health and capacity. the right comparison is with another person of the same age and characteristics as P (para 120). What is a deprivation of liberty? In cases under the Human Rights Act 1998, the courts have frequently to consider how far their duty, in section 2(1), to take into account the jurisprudence of the European Commission and Court of Human Rights goes. That problem does not trouble us in this case. Section 64(5) of the Mental Capacity Act states that: In this Act, references to a deprivation of a persons liberty have the same meaning as in article 5(1) of the Human Rights Convention. As the object was to avoid the violation identified in HL 40 EHRR 761, it seems clear that we are expected to turn to the jurisprudence of the Strasbourg Court to find out what is meant by a deprivation of liberty in this context. There is no case in Strasbourg which concerns the type of placements with which we are here concerned. However, there have been several relevant decisions in Strasbourg since the judgments in the courts below. The most important is probably the decision of the Grand Chamber in Stanev v Bulgaria (2012) 55 EHRR 696, because this concerned the placement of a mentally disabled man in a care home rather than a hospital. The Court summarised the general principles in the context of people with mental disorders or disabilities. It is therefore convenient to repeat each of those principles, together with an explanation of the previous case law from which it is taken. First, 115. The Court reiterates that the difference between deprivation of liberty and restrictions on liberty of movement, the latter being governed by article 2 of Protocol No 4, is merely one of degree or intensity, and not one of nature or substance. Although the process of classification into one or other of these categories sometimes proves to be no easy task in that some borderline cases are a matter of pure opinion, the Court cannot avoid making the selection upon which the applicability or inapplicability of article 5 depends. In order to determine whether someone has been deprived of his liberty, the starting point must be his concrete situation and account must be taken of a whole range of criteria such as the type, duration, effects and manner of implementation of the measures in question. This is a reference back to the well known cases of Guzzardi v Italy (1980) 3 EHRR 333, paras 92 93, where the same points were made, derived from Engel v Netherlands (1976) 1 EHRR 647, paras 58 and 59, and to Storck v Germany (2005) 43 EHRR 6, para 71, where they were repeated. Guzzardi was a case of internal exile, where a suspected Mafioso was confined to a small area on an island with various other restrictions designed to prevent his engaging in Mafia activities. This was held to deprive him of his liberty. Secondly, 116. In the context of deprivation of liberty on mental health grounds, the court has held that a person could be regarded as having been detained even during a period when he was in an open hospital ward with regular unescorted access to the unsecured hospital grounds and the possibility of unescorted leave outside the hospital. This is a reference to Ashingdane v United Kingdom (1985) 7 EHRR 528, para 42. Ashingdane was concerned with the rather different question of whether article 5 could protect a patient from being detained in a secure hospital such as Broadmoor when he did not need to be there. But the court accepted that a compulsory patient is deprived of his liberty in the hospital where he is detained, irrespective of the openness or otherwise of the conditions there. Thirdly, 117. Furthermore, in relation to the placement of mentally disordered persons in an institution, the Court has held that the notion of deprivation of liberty does not only comprise the objective element of a persons confinement in a particular restricted space for a not negligible length of time. A person can only be considered to have been deprived of his liberty if, as an additional subjective element, he has not validly consented to the confinement in question. (Emphasis supplied) This is again a reference to Storck v Germany 43 EHRR 6, para 74. That case concerned a young woman who had twice been admitted to a private clinic for psychiatric treatment. The first time she had gone there with her father, had been placed in a locked ward and forcibly medicated, had tried to escape and been returned to the clinic by the police. The court held that she could not be taken to have consented to her confinement. The second time she had presented herself to the clinic and had not tried to escape, so the court accepted the factual finding of the national court that she had not been confined against her will. Fourthly, 118. The court has found that there was a deprivation of liberty in circumstances such as the following: (a) where the applicant, who had been declared legally incapable and admitted to a psychiatric hospital at his legal representatives request, had unsuccessfully attempted to leave the hospital; (b) where the applicant had initially consented to her admission to a clinic but had subsequently attempted to escape; and (c) where the applicant was an adult incapable of giving his consent to admission to a psychiatric institution which, nonetheless, he had never attempted to leave. (a) is a reference to Shtukatarov v Russia (2008) 54 EHRR 962, para 108; (b) is another reference to Storck, at para 76; and (c) is a reference to HL v United Kingdom 40 EHRR 761, at para 90 (see para 7 above). Fifthly, 119. The court has also held that the right to liberty is too important in a democratic society for a person to lose the benefit of Convention protection for the single reason that he may have given himself up to be taken into detention, especially when it is not disputed that person is legally incapable of consenting to, or disagreeing with, the proposed action. The first reference is to De Wilde, ooms and Versyp v Belgium (No 1) (1971) 1 EHRR 373, paras 64 65, and the second is again to HL v United Kingdom 40 EHRR 761, para 90 (see para 7 above). Finally, and for completeness, 120. In addition, the court has had occasion to observe that the first sentence of article 5(1) must be construed as laying down a positive obligation on the state to protect the liberty of those within its jurisdiction. Otherwise, there would be a sizeable gap in the protection from arbitrary detention, which would be inconsistent with the importance of personal liberty in a democratic society. The state is therefore obliged to take measures providing effective protection of vulnerable persons, including reasonable steps to prevent a deprivation of liberty of which the authorities have or ought to have knowledge. Thus, having regard to the particular circumstances of the cases before it, the court has held that the national authorities responsibility was engaged as a result of detention in a psychiatric hospital at the request of the applicants guardian and detention in a private clinic. The references are once again to Storck and to Shtukaturov. On occasions, therefore, the state may be accountable even for arrangements which it has not itself made. The applicant in Stanev had spent many years in a social care home where conditions were so bad that the court also found they amounted to inhuman and degrading treatment for the purpose of article 3. But the court also considered that (i) the objective requirement of deprivation of liberty was met because he had been kept at the home, in a mountain region far from his home town, needing permission to go out to the nearest village and leave of absence to visit his home, entirely at the discretion of the homes management which kept his identity papers and managed his finances, and accordingly he was under constant supervision and was not free to leave the home without permission (para 128); and (ii) the subjective element was met because he could understand his situation and had expressed his wish to leave, thus setting the case apart from the decision in HM v Switzerland (2002) 38 EHRR 314, where the court found that there was no deprivation of liberty as the applicant had been placed in a nursing home purely in her own interests and after her arrival there had agreed to stay (para 131). HM v Switzerland concerned an old lady who was placed, by order of the authorities confirmed by the courts, in a care home because of severe neglect in her own home. It is a difficult case, not least because the Swiss legislation in question referred to the deprivation of liberty. In deciding that she had not been deprived of her liberty, the Strasbourg court referred to the fact that she had freedom of movement and was able to entertain social contacts with the outside world (para 45), that she hardly felt the effects of her stay and was undecided as to which solution she in fact preferred (para 46), that after she had moved there she agreed to stay (para 47), but in particular the fact that the Cantonal Appeals Commission placed the applicant in the foster home in her own interests in order to provide her with the necessary medical care, as well as satisfactory living conditions and hygiene, and also taking into consideration the comparable circumstances in the case of Nielsen v Denmark (para 48). There was a powerful dissent from Judge Jorundsson, who pointed out that it was clear that she was not permitted to leave the institution and go home; and that if she did, she would have been brought back (para O 16). This reference to the benevolent purpose of the placement is inconsistent with the later Grand Chamber decisions of Creanga v Romania (2012) 56 EHRR 361, para 93, and Austin v United Kingdom (2012) 55 EHRR 14, para 58. There it was stated that an underlying public interest motive has no bearing on the question whether that person has been deprived of his liberty . The same is true where the object is to protect, treat or care in some way for the person taken into confinement, unless that person has validly consented to what would otherwise be a deprivation of liberty (para 58). In HL v United Kingdom, the Court distinguished HM v Switzerland principally on the basis that she had often stated that she was willing to enter the nursing home and, within weeks of being there, she had agreed to stay, although it also referred to a regime entirely different to that applied to the present applicant (para 93). However, the court has also distinguished it in four later cases concerning placements in social care homes rather than in hospitals. In Stanev v Bulgaria 55 EHRR 696, the court distinguished it on the basis that she had agreed to stay whereas the applicant in that case had at no time consented to the placement or accepted it tacitly. In DD v Lithuania (Application no 13469/06), 14 February 2012, the Court distinguished it on the same basis, coupled with the procedural safeguards, including judicial scrutiny, which were in place to protect HM (para 147). In Kedzior v Poland (Application no 45026/07), 16 October 2012, the government relied upon HM v Switzerland, but the court did not refer to it in its assessment. Finally, in Mihailovs v Latvia (Application no 35939/10), 22 January 2013, the court referred to it, not during its assessment of the objective element of confinement but only during its assessment of the subjective element of consent (see para 135). The Court did not refer in its assessment in any of these later cases to Nielsen v Denmark (1988) 11 EHRR 175, which concerned a 12 year old boy placed in a childrens psychiatric unit by his mother (who alone had parental responsibility for him). The court held, by a majority of nine to seven, that he had not been deprived of his liberty. The restrictions to which he was subject were no more than the normal requirements for the care of a child of 12 years of age receiving treatment in hospital. The conditions . did not, in principle, differ from those obtaining in many hospital wards where children with physical disorders are treated (para 72). Hence his hospitalisation did not amount to a deprivation of liberty within the meaning of article 5, but was a responsible exercise by his mother of her custodial rights in the interest of the child (para 73). The seven dissenting judges considered that placing a 12 year old boy who was not mentally ill in a psychiatric ward for several months against his will was indeed a deprivation of liberty. It would appear, therefore, that the case turns on the proper limits of parental authority in relation to a child. As already mentioned (para 4 above) there is no equivalent in English law to parental authority over a mentally incapacitated adult. In any event, the Strasbourg court was not deterred from finding a deprivation of liberty in the cases of Stanov, DD, Kedzior and Mihailovs by the fact that the placements were arranged by the person who had been appointed legal guardian of the applicant. In all these cases, the applicant lacked the legal capacity to consent to the placement. In Shtukaturov v Russia 54 EHRR 962, decided in 2008, the applicant had been placed in a psychiatric hospital at the request of his legal guardian, which in Russian law was regarded as a voluntary admission. Although he lacked the de jure legal capacity to decide for himself, this did not necessarily mean that he was de facto unable to understand his situation (para 108). Indeed, he had evinced his objections. The subjective element of lack of consent was made out (para 109). The court took the same view in DD (para 150) and in Kedzior (para 58). Thus it appeared to give some weight to the objections of a person who lacked legal capacity when deciding that the subjective element was made out despite the consent of the persons legal guardian. But in Mihailovs, the court seems to have gone further. In relation to one of the care home placements, the court held that there was a deprivation of liberty, because although the applicant lacked legal capacity he subjectively perceived his compulsory admission there as such a deprivation (para 134). In relation to a later placement, however, he did not raise any objections or attempt to leave and the court concluded that he had tacitly agreed to stay there and thus had not been deprived of his liberty (paras 139, 140). In contrast, of course, in HL v United Kingdom, the patient was deprived of his liberty in the hospital despite his apparent compliance. The Strasbourg case law, therefore, is clear in some respects but not in others. The court has not so far dealt with a case combining the following features of the cases before us: (a) a person who lacks both legal and factual capacity to decide upon his or her own placement but who has not evinced dissatisfaction with or objection to it; (b) a placement, not in a hospital or social care home, but in a small group or domestic setting which is as close as possible to normal home life; and (c) the initial authorisation of that placement by a court as being in the best interests of the person concerned. The issue, of course, is whether that authorisation can continue indefinitely or whether there must be some periodic independent check upon whether the placements made are in the best interests of the people concerned. The arguments The first and most fundamental question is whether the concept of physical liberty protected by article 5 is the same for everyone, regardless of whether or not they are mentally or physically disabled. Munby LJ in Ps case appears to have thought that it is not, for he criticised the trial judge for failing to grapple with the question whether the limitations and restrictions on Ps life at Z house are anything more than the inevitable corollary of his various disabilities. The truth, surely, is they are not. Because of his disabilities, P is inherently restricted in the kind of life he can lead. Ps life, wherever he may be living, whether at home with his family or in the home of a friend or in somewhere like Z House is, to use Parker Js phrase, dictated by his disabilities and difficulties (para 110). In the same way, both Lloyd LJ in that case, and Smith LJ in P and Q, thought that a persons life had to be compared with that of another person with his same characteristics. What was a deprivation of liberty for some people might not be a deprivation for others. The answer given by Mr Richard Gordon QC, who appears instructed by the Official Solicitor on behalf of all three appellants, is that this confuses the concept of deprivation of liberty with the justification for imposing such a deprivation. People who lack the capacity to make (or implement) their own decisions about where to live may justifiably be deprived of their liberty in their own best interests. They may well be a good deal happier and better looked after if they are. But that does not mean that they have not been deprived of their liberty. We should not confuse the question of the quality of the arrangements which have been made with the question of whether these arrangements constitute a deprivation of liberty. Allied to the inevitable corollary argument it might once have been suggested that a person cannot be deprived of his liberty if he lacks the capacity to understand and object to his situation. But that suggestion was rejected in HL v United Kingdom. In any event, it is quite clear that a person may be deprived of his liberty without knowing it. An unconscious or sleeping person may not know that he has been locked in a cell, but he has still been deprived of his liberty. A mentally disordered person who has been kept in a cupboard under the stairs (a not uncommon occurrence in days gone by) may not appreciate that there is any alternative way to live, but he has still been deprived of his liberty. We do not have any difficulty in recognising these situations as a deprivation of liberty. We should not let the comparative benevolence of the living arrangements with which we are concerned blind us to their essential character if indeed that constitutes a deprivation of liberty. The whole point about human rights is their universal character. The rights set out in the European Convention are to be guaranteed to everyone (article 1). They are premised on the inherent dignity of all human beings whatever their frailty or flaws. The same philosophy underpins the United Nations Convention on the Rights of Persons with Disabilities (CRPD), ratified by the United Kingdom in 2009. Although not directly incorporated into our domestic law, the CRPD is recognised by the Strasbourg court as part of the international law context within which the guarantees of the European Convention are to be interpreted. Thus, for example, in Glor v Switzerland, Application No 13444/04, 30 April 2009, at para 53, the Court reiterated that the Convention must be interpreted in the light of present day conditions and continued: It also considers that there is a European and Worldwide consensus on the need to protect people with disabilities from discriminatory treatment (see, for example, Recommendation 1592 (2003) towards full inclusion of people with disabilities, adopted by the Parliamentary Assembly of the Council of Europe on 29 January 2003, or the United Nations Convention on the Rights of Persons with Disabilities, which entered into force on 3 May 2008). The second question, therefore, is what is the essential character of a deprivation of liberty? It is common ground that three components can be derived from Storck, paras 74 and 89, confirmed in Stanev, paras 117 and 120, as follows: (a) the objective component of confinement in a particular restricted place for a not negligible length of time; (b) the subjective component of lack of valid consent; and (c) the attribution of responsibility to the state. Components (b) and (c) are not in issue here, but component (a) is. Ms Jenni Richards QC, who appears for both the local authorities involved, relies heavily on the statement in Guzzardi v Italy, which is repeated in all the later cases, that the difference between restriction and deprivation of liberty is one of fact and degree in which a number of factors may be relevant. Simply asking whether a person is confined is not enough except in obvious cases. The starting point is always upon the concrete situation of the particular person concerned and account must be taken of a whole range of criteria such as the type, duration, effects and manner of implementation of the measures in question: 3 EHRR 333, para 92. The presence or absence of coercion is also relevant. Thus there is no single touchstone of what constitutes a deprivation of liberty in this or any other context. She contrasts the concrete situations of those who were held to have been deprived of their liberty in hospitals or care homes with others who were not: in particular in this context, Nielsen v Denmark and HM v Switzerland. She also refers to Haidn v Germany (Application no 6587/04), 13 January 2011, para 82, where the court expressed serious doubts whether instructing the applicant to live in an old peoples home which he was not to leave without his custodians permission amounted to a deprivation rather than a restriction of liberty. However, the court did not have to decide the question, as the applicant was complaining about his preventive detention in prison after the expiry of his sentence for serious sexual offences. Mr Gordon argues that, in this context, the answer is clear: it is, as expressed in HL v United Kingdom 40 EHRR 761, para 91, whether the concrete situation of the person concerned is that he [is] under continuous supervision and control and [is] not free to leave the accommodation where he has been placed. By free to leave he means what Munby J meant in JE v DE [2007] 2 FLR 1150, para 115: The fundamental issue in this case . is whether DE was deprived of his liberty to leave the X home and whether DE has been and is deprived of his liberty to leave the Y home. And when I refer to leaving the X home and the Y home, I do not mean leaving for the purpose of some trip or outing approved by SCC or by those managing the institution: I mean leaving in the sense of removing himself permanently in order to live where and with whom he chooses . Freedom to leave in this sense was the crucial factor, not only in HL v United Kingdom, where the complainant was placed in a hospital, but also in Stanev v Bulgaria, where the complainant was placed in a care home, as were the complainants in DD v Lithuania, Kedzior v Poland, and Mihailovs v Latvia. In each of these, the courts focus when considering the confinement question was on whether the complainant was under the complete supervision and control of the staff and not free to leave. The fact that these were social care settings with relatively open conditions was no more determinative than had been the open hospital conditions in Ashingdane. In these more recent cases, HM v Switzerland, another care home placement, has consistently been distinguished because of the complainants willingness to be in the home, rather than because of the conditions within the home. Although Nielsen has not been departed from, it is to be regarded as a case of substituted consent, and thus not fulfilling component (b). In none of the more recent cases was the purpose of the confinement which may well have been for the benefit of the person confined considered relevant to whether or not there had been a deprivation of liberty. If the fact that the placement was designed to serve the best interests of the person concerned meant that there could be no deprivation of liberty, then the deprivation of liberty safeguards contained in the Mental Capacity Act would scarcely, if ever, be necessary. As Munby J himself put it in JE v DE [2007] 2 FLR 1150, para 46: I have great difficulty in seeing how the question of whether a particular measure amounts to a deprivation of liberty can depend upon whether it is intended to serve or actually serves the interests of the person concerned. For surely this is to confuse . two quite separate and distinct questions: Has there been a deprivation of liberty? And, if so, can it be justified? This view has been confirmed by the rejection in Austin v United Kingdom 55 EHRR 359, para 58, with specific reference to the care and treatment of mentally incapacitated people, of any suggestion by the House of Lords in Austin v Comr of Police of the Metropolis [2009] AC 564 that a beneficial purpose might be relevant (and see also MA v Cyprus (Application No 41872/10), 23 July 2013 and Creanga v Romania 56 EHRR 361). Nevertheless, while a benevolent or beneficial purpose may be irrelevant, the context of the measures may not. Mr Paul Bowen QC, for the Equality and Human Rights Commission, has analysed the deprivation of liberty cases into two types. Type 1 consists of those situations which are catered for in article 5(1), including the detention of convicted criminals and of persons of unsound mind. In such cases, the Strasbourg Court has not had to concern itself with questions of degree, because the confinement is always potentially justifiable. Hence a person can be deprived of his liberty in an open prison, in an unlocked hospital ward, or in the ordinary conditions of a care home. The problem lies with type 2 cases, where deprivation of liberty is not catered for in the exhaustive list of permissible deprivations in article 5(1)(a) to (f) and thus what has happened, if it is a deprivation, cannot be justified. This was the position in Guzzardi v Italy, which concerned preventive measures against a suspected Mafioso, and for that matter in the English control order cases (such as Secretary of State for the Home Department v JJ [2008] AC 385), which concerned preventive measures against suspected terrorists. It was also the position in Austin v United Kingdom, which concerned kettling to maintain public order at a demonstration. Ms Richards rejects any such distinction. Indeed it cannot be found in the Strasbourg case law, which, as we have seen, repeats all the principles irrespective of the context. Nevertheless, we may find it helpful in understanding some of its decisions: for example, why it was not a deprivation of liberty to kettle people at Oxford Circus for some seven hours (Austin) while it was a deprivation to confine a person for several hours in a police station (Creanga) or in a sobering up centre (Litwa v Poland (2001) 33 EHRR 1267). We may therefore find it most helpful to consider how the question has been approached in the particular context, in this case the placement of mentally incapacitated people, whose lawful detention in any setting designed for their care is always potentially justifiable under article 5(1)(e). Discussion In my view, it is axiomatic that people with disabilities, both mental and physical, have the same human rights as the rest of the human race. It may be that those rights have sometimes to be limited or restricted because of their disabilities, but the starting point should be the same as that for everyone else. This flows inexorably from the universal character of human rights, founded on the inherent dignity of all human beings, and is confirmed in the United Nations Convention on the Rights of Persons with Disabilities. Far from disability entitling the state to deny such people human rights: rather it places upon the state (and upon others) the duty to make reasonable accommodation to cater for the special needs of those with disabilities. Those rights include the right to physical liberty, which is guaranteed by article 5 of the European Convention. This is not a right to do or to go where one pleases. It is a more focussed right, not to be deprived of that physical liberty. But, as it seems to me, what it means to be deprived of liberty must be the same for everyone, whether or not they have physical or mental disabilities. If it would be a deprivation of my liberty to be obliged to live in a particular place, subject to constant monitoring and control, only allowed out with close supervision, and unable to move away without permission even if such an opportunity became available, then it must also be a deprivation of the liberty of a disabled person. The fact that my living arrangements are comfortable, and indeed make my life as enjoyable as it could possibly be, should make no difference. A gilded cage is still a cage. For that reason, I would reject the relative normality approach of the Court of Appeal in the case of P [2012] PTSR 1447, where the life which P was leading was compared with the life which another person with his disabilities might be leading. To some extent this approach was premised on the relevance of the reason for and purpose of the placement (para 76), derived from the House of Lords decision in Austin, and later disapproved by the Grand Chamber. It is in any event inconsistent with the view that people with disabilities have the same rights as everyone else. I have much more sympathy with the relative normality approach in P and Q, where the lives which MIG and MEG were living were compared (by the majority) with the ordinary lives which young people of their ages might live at home with their families. This seems both sensible and humane. But the fact remains that the lives which MIG and MEG were leading were not the same as those which would be led by other teenagers of their age. Their comparative normality in the sense of their home like quality does not answer the question of whether in other respects they involved a deprivation of liberty for which the state was responsible. So is there an acid test for the deprivation of liberty in these cases? I entirely sympathise with the desire of Munby LJ to produce such a test and thus to avoid the minute examination of the living arrangements of each mentally incapacitated person for whom the state makes arrangements which might otherwise be required. Ms Richards is right to say that the Guzzardi test is repeated in all the cases, irrespective of context. If any of these cases went to Strasbourg, we could confidently predict that it would be repeated once more. But these cases are not about the distinction between a restriction on freedom of movement and the deprivation of liberty. P, MIG and MEG are, for perfectly understandable reasons, not free to go anywhere without permission and close supervision. So what are the particular features of their concrete situation on which we need to focus? The answer, as it seems to me, lies in those features which have consistently been regarded as key in the jurisprudence which started with HL v United Kingdom 40 EHRR 761: that the person concerned was under continuous supervision and control and was not free to leave (para 91). I would not go so far as Mr Gordon, who argues that the supervision and control is relevant only insofar as it demonstrates that the person is not free to leave. A person might be under constant supervision and control but still be free to leave should he express the desire so to do. Conversely, it is possible to imagine situations in which a person is not free to leave but is not under such continuous supervision and control as to lead to the conclusion that he was deprived of his liberty. Indeed, that could be the explanation for the doubts expressed in Haidn v Germany. The National Autistic Society and Mind, in their helpful intervention, list the factors which each of them has developed as indicators of when there is a deprivation of liberty. Each list is clearly directed towards the test indicated above. But the charities do not suggest that this court should lay down a prescriptive list of criteria. Rather, we should indicate the test and those factors which are not relevant. Thus, they suggest, the persons compliance or lack of objection is not relevant; the relative normality of the placement (whatever the comparison made) is not relevant; and the reason or purpose behind a particular placement is also not relevant. For the reasons given above, I agree with that approach. Application in the case of P In the case of P, the Court of Appeal should not have set aside the decision of the judge for the reasons they gave. Does it follow that the decision of the judge should be restored? In my view it does. In paragraph 46 of his judgment, he correctly directed himself as to the three components of a deprivation of liberty derived from Storck; he reminded himself that the distinction between a deprivation of and a restriction of liberty is one of degree or intensity rather than nature or substance; and he held that a key factor is whether the person is, or is not, free to leave. This may be tested by determining whether those treating and managing the patient exercise complete and effective control of the persons care and movements (para 46(5)). It is true that, in paragraph 48, he summarised the further guidance given by the Court of Appeal in P and Q, including the relevance of an absence of objection and the relative normality of the persons life, which in my view are not relevant factors. But when he considered the circumstances of Ps life at the Z house, he remarked (para 58) upon the very great care taken by the local authority and the staff of Z House to ensure that Ps life was as normal as possible, but continued (para 59): On the other hand, his life is completely under the control of members of staff at Z House. He cannot go anywhere or do anything without their support and assistance. More specifically, his occasionally aggressive behaviour, and his worrying habit of touching and eating his continence pads, require a range of measures, including at time physical restraint, and, when necessary, the intrusive procedure of inserting fingers into his mouth whilst he is being restrained. In my view, in substance the judge was applying the right test, derived from HL v United Kingdom, and his conclusion that looked at overall, P is being deprived of his liberty (para 60) should be restored. Application in the case of P (MIG) and Q (MEG) Wilson LJ found MEGs case difficult and only reached the conclusion that she had not been deprived of her liberty after protracted thought: [2012] Fam 170, para 34. He relied upon the small size of the adolescent home, her lack of objection to life there, her attendance at the educational unit; her good family contact; and her fairly active social life. It is, however, very difficult to see how her case can be distinguished from that of P, who also enjoyed all of those features. She did not require the sort of restraint which P required because of his incontinence pads, but she did sometimes require physical restraint and she received medication to control her anxiety. Above all, the staff did exercise control over every aspect of her life. She would not be allowed out without supervision, or to see people whom they did not wish her to see, or to do things which they did not wish her to do. MIGs case was different in one important respect. She was living in an ordinary family home, and also going out to attend an educational unit, and enjoying good family contact. Both Parker J and Wilson LJ were concerned that if these arrangements constituted a deprivation of liberty for which the state was responsible, then so too would HLs placement with his foster carers: but no one had suggested this indeed, the restriction on contact with them was one of the features relied upon in concluding that the hospital had deprived HL of his liberty. But the court was not called upon to confront that issue. The reality is that MIGs situation is otherwise the same as her sisters, in that her foster mother and others responsible for her care exercised complete control over every aspect of her life. She too would not be allowed out without supervision, or to see anyone whom they did not wish her to see, or to do things which they did not wish her to do. If the acid test is whether a person is under the complete supervision and control of those caring for her and is not free to leave the place where she lives, then the truth is that both MIG and MEG are being deprived of their liberty. Furthermore, that deprivation is the responsibility of the state. Similar constraints would not necessarily amount to a deprivation of liberty for the purpose of article 5 if imposed by parents in the exercise of their ordinary parental responsibilities and outside the legal framework governing state intervention in the lives of children or people who lack the capacity to make their own decisions. Several objections may be raised to the conclusion that both MIG and MEG are being deprived of their liberty. One is that neither could survive without this level of supervision and control: but that is to resurrect the comparison with other people sharing their disabilities and to deny them the same concept of liberty as everyone else. Another is that they are both content with their placements and have shown no desire to leave. If the tacit acceptance of the applicant was relevant in Mihailovs, why should the same tacit acceptance of MIG and MEG not be relevant too? I have found this the most difficult aspect of the case. But Mihailovs was different because he had a level of de facto understanding which had enabled him to express his objections to his first placement. The Strasbourg court accepts that there are some people who are not capable of expressing a view either way and this is probably the case with both MIG and MEG. As HL 40 EHRR 761 shows, compliance is not enough. Another possible distinction is that, if either of them indicated that they wanted to leave, the evidence was that the local authority would look for another placement: in other words, they were at least free to express a desire to leave. In the end, none of these suggested distinctions is satisfactory. Nor, in my view, should they be. It is very easy to focus upon the positive features of these placements for all three of the appellants. The local authorities who are responsible for them have no doubt done the best they could to make their lives as happy and fulfilled, as well as safe, as they possibly could be. But the purpose of article 5 is to ensure that people are not deprived of their liberty without proper safeguards, safeguards which will secure that the legal justifications for the constraints which they are under are made out: in these cases, the law requires that they do indeed lack the capacity to decide for themselves where they should live and that the arrangements made for them are in their best interests. It is to set the cart before the horse to decide that because they do indeed lack capacity and the best possible arrangements have been made, they are not in need of those safeguards. If P, MIG and MEG were under the same constraints in the sort of institution in which Mr Stanev was confined, we would have no difficulty in deciding that they had been deprived of their liberty. In the end, it is the constraints that matter. Policy Because of the extreme vulnerability of people like P, MIG and MEG, I believe that we should err on the side of caution in deciding what constitutes a deprivation of liberty in their case. They need a periodic independent check on whether the arrangements made for them are in their best interests. Such checks need not be as elaborate as those currently provided for in the Court of Protection or in the Deprivation of Liberty safeguards (which could in due course be simplified and extended to placements outside hospitals and care homes). Nor should we regard the need for such checks as in any way stigmatising of them or of their carers. Rather, they are a recognition of their equal dignity and status as human beings like the rest of us. Conclusion I would therefore allow both appeals. In the case of P I would restore the declaration of the judge. In the case of MIG and MEG I would make a declaration that their living arrangements at the relevant time constituted a deprivation of liberty within the meaning of section 64(5) of the Mental Capacity Act 2005. LORD NEUBERGER Having read the judgment of Lady Hale, with which Lord Kerr and Lord Sumption agree, and the judgment of Lord Carnwath and Lord Hodge, with which Lord Clarke agrees, I have come to the conclusion that I agree with Lady Hale. The issues raised by these appeals are both difficult and important, and the reasons which Lord Carnwath and Lord Hodge advance for differing from Lady Hale plainly merit serious consideration. Accordingly, I propose to explain the reasons for my conclusion, while avoiding retreading the ground covered by Lady Hale so far as I can. I start with the proposition that, particularly in the field of mental health, it would be highly desirable to have as much authoritative guidance, or, as Lord Carnwath and Lord Hodge put it, as focussed a test, as possible in order to decide whether the circumstances of a particular case involve a deprivation of liberty falling within article 5.4 or a restriction on liberty falling outside article 5. Psychiatrists, social workers, local authorities, charities, and no doubt many others responsible for the health and welfare of those suffering from mental and physical impairment, as well as those people whose liberty is being interfered with, need, and are entitled to, as much in the way of clear guidance as it is possible for the courts to give. Of course, the issue of whether a particular case involves deprivation or restriction must depend on the specific facts of that case, but that does not mean that there can be no focussed guidance. It is also true that, however clear the guidance, there will be cases where it will be difficult to decide which side of the line the facts fall, but that is not a reason for the courts not seeking to minimise the uncertainty. On the contrary. Accordingly, at least in principle, the approach proposed by Lady Hale appears to me to be attractive, and should be adopted unless there is good reason not to do so. Lord Carnwath and Lord Hodge suggest that there are two reasons for not adopting that approach, both of which reasons merit serious consideration. The first reason is that the Strasbourg jurisprudence has not gone as far as Lady Hales analysis, and this is a case where we cannot properly go beyond Strasbourg in the light of section 64(5) of the Mental Capacity Act 2005. The second reason is that Lady Hales analysis produces an undesirable or inappropriate outcome in cases such as those of P and Q in the appeal involving Surrey County Council. So far as the first reason is concerned, it is true that there has been no decision of the Strasbourg court involving the combination of factors which arise in the present cases. It is also true that, in almost every decision to which we were referred, the Strasbourg court has been at pains to emphasise that the question whether article 5.4 is engaged is highly fact sensitive, and that the distinction between deprivation and restriction is matter of degree or intensity. However, it is self evident that this does not mean that this court cannot seek to extract specific principles from those decisions, and then apply them to the facts of the cases before us. In agreement with Lady Hale, I consider that the Strasbourg court decisions do indicate that the twin features of continuous supervision and control and lack of freedom to leave are the essential ingredients of deprivation of liberty (in addition to the area and period of confinement). In that connection, see Guzzardi v Italy (1980) 3 EHRR 333, para 95 (supervision carried out strictly and on an almost constant basis [and] not able to leave his dwelling between 10 pm and 7 am), HL v United Kingdom (2004) 40 EHRR 761, para 91 (under continuous supervision and control and not free to leave), Storck v Germany (2005) 43 EHRR 96, para 73 (continuous supervision and control and not free to leave), Kedzior v Poland (Application No 45026/07) 16 October 2012, para 57 (constant supervision and not free to leave), Stanev v Bulgaria (2012) 55 EHRR 696, para 128 (constant supervision and not free to leave), and Mihailovs v Latvia [2013] ECHR 65, para 132 (under constant supervision and not free to leave). The factors which are relied on by Lord Carnwath and Lord Hodge to support the point that these cases differ from those decided by the Strasbourg court are as follows: a) the person concerned lacks capacity to decide upon her placement but has not evinced dissatisfaction with or objection to it; the placement is in a small group or domestic setting which is as close as possible to normal home life; b) c) d) a court authorised that placement for the best interests of the person concerned; and the regime is no more intrusive or confining than is required for the protection and well being of the person concerned. It is convenient to take factor (d) first, followed by factor (a), and then factor (c), and finally factor (b). As to factor (d), the Grand Chamber made it clear in Austin v United Kingdom (2012) 55 EHRR 359, para 58 that the fact that the object is to protect treat or care in some way for the person taken into confinement has no bearing on the question whether that person has been deprived of his liberty, although it might be relevant to the subsequent inquiry whether the deprivation of liberty was justified . To the same effect, the Grand Chamber said in Creanga v Romania (2012) 56 EHRR 361, para 93 that the purpose of measures by the authorities depriving applicants of their liberty no longer appears decisive for the courts assessment of whether there has in fact been a deprivation of liberty, on the basis that the purpose is to be taken into account only at a later stage of its analysis, when examining the compatibility of the measure with article 5.1. So far as factor (a) is concerned, I consider that it would be inappropriate to hold that, if certain conditions amounted to a deprivation of liberty in the case of a person who had the capacity to object and did object, they may, or even worse would, not do so in the cases of a person who lacked the capacity to object. On one view, such a conclusion would mean that, however confining the circumstances, they could not amount to a deprivation of liberty if the person concerned lacked the capacity to object. That cannot possibly be right. Alternatively, there would be a different test for those who were unable to object and those who could do so. That would be a recipe for uncertainty. In addition, the notion that the absence of objection can justify what would otherwise amount to deprivation of liberty is contrary to principle. It is true, and indeed sensible, that a persons consent (provided that it is freely and properly given) may serve to defeat a contention that she has been deprived of her liberty. However, it involves turning that principle on its head to say that the absence of objection will justify what would otherwise be a deprivation of liberty save in those rare circumstances where the absence of objection can be said to amount to consent, as in Mihailovs v Latvia, paras 138 139. Further, if factor (a) had validity, it would tend to undermine the universality of human rights to which Lady Hale rightly refers. Over and above this, it seems to me that the principle referred to by the Grand Chamber in the decisions in para 66 would be infringed. I also draw support from the closing comments of the Strasbourg court in HL v United Kingdom 40 EHRR 761, para 90, where, after stating that a person should not lose the benefit of Convention protection for the single reason that he may have given himself up to be taken into detention, the court added especially when it is not disputed that that person is legally incapable of consenting to, or disagreeing with, the proposed action. I am unimpressed with factor (c). The courts involvement in cases such as those to which these appeals relate is not equivalent to that of a court sentencing a criminal to a specific term of imprisonment. It is deciding that the circumstances of an innocent and vulnerable person, suffering from disability, are such that there must be an interference with his liberty. If that interference would otherwise amount to a deprivation of liberty, I find it hard to understand why it should be otherwise simply because the court has approved it. The courts approval will almost always justify the deprivation from its inception, but, again, it is hard to see why it should continue to justify it for a potentially unlimited future. The only reason which can be advanced to justify such a conclusion is, as I see it, based on the purpose of the interference with liberty which brings one back to the observations in the Grand Chamber referred to in para 8 above. Factor (b) forms the basis upon which Lord Carnwath and Lord Hodge rest their view that P and Q have not been deprived of their liberty. It is a fair point that the Strasbourg court has never had to consider a case where a person was confined to what may be described as an ordinary home. However, I cannot see any good reason why the fact that a person is confined to a domestic home, as opposed to a hospital or other institution, should prevent her from contending that she has been deprived of her liberty. In that connection, however, I note that article 5.4 was held to be infringed in Guzzardi v Italy 3 EHRR 333, where, as mentioned above, the Grand Chamber referred to the applicant not being able to leave his dwelling between 10 pm and 7 am. I agree with Lord Carnwath and Lord Hodge that many people might react with surprise at simply being told that a person living in a domestic setting could complain of deprivation of liberty, but that is a point of little weight, particularly as such people may well retract the surprise when the consequences either way under article 5 are explained. In the case of children living at home, what might otherwise be a deprivation of liberty would normally not give rise to an infringement of article 5 because it will have been imposed not by the state, but by virtue of what the Strasbourg court has called the rights of the holder of parental authority, which are extensive albeit that they cannot be unlimited (see Nielsen v Denmark (1988) 11 EHRR 175, para 72, a decision which, at least on its facts, is controversial, as evidenced by the strength of the dissenting opinions). However, it is fair to say that, while this point would apply to adoptive parents, I doubt that it would include foster parents (unless, perhaps, they had the benefit of a residence order). But in the great majority of cases of people other than young children living in ordinary domestic circumstances, the degree of supervision and control and the freedom to leave would take the situation out of article 5.4. And, where article 5.4 did apply, no doubt the benignly intimate circumstances of a domestic home would frequently help to render any deprivation of liberty easier to justify. I do not accept that the cases cited by Lord Carnwath and Lord Hodge cast doubt on the notion that such confinement can fall within article 5.4. The comparison of the restrictions in the hospital in Nielsen v Denmark 11 EHRR 175, para 70 with a real home was made in connection with consideration of the contention that the treatment given at the hospital and the conditions under which it was administered were inappropriate in the circumstances. The case involved a child, and was decided on the basis that his mother was exercising her article 8 rights responsibly, in good faith and on the basis of medical advice see para 71. Indeed, the strength of the minority view to the contrary in that decision is a measure of the importance which the Strasbourg court attaches to the protection afforded by article 5.4. HM v Switzerland (2002) 38 EHRR 314 does not assist on the issue, not least because it turned on the consent given by the applicant, as explained in HL v United Kingdom 40 EHRR 761 para 93. HL itself seems to assist Lady Hales conclusion to the extent that, as explained by the Grand Chamber in Stanev v Bulgaria 55 EHRR 696, para 118, the court there held that there was a deprivation of liberty where the applicant was an adult incapable of giving his consent to admission to a psychiatric institution which, nonetheless, he had never attempted to leave. The serious doubts expressed in Haidn v Germany [2011] ECHR 39, para 82 take matters no further, not least because the factual circumstances are unclear. Accordingly, I agree with Lady Hale that the appeal of P and Q against Surrey County Council, as well as the appeal of P against Cheshire West and Chester Council, should be allowed. LORD KERR For the reasons given by Lady Hale and Lord Neuberger, with which I agree, I would allow these appeals. While there is a subjective element in the exercise of ascertaining whether ones liberty has been restricted, this is to be determined primarily on an objective basis. Restriction or deprivation of liberty is not solely dependent on the reaction or acquiescence of the person whose liberty has been curtailed. Her or his contentment with the conditions in which she finds herself does not determine whether she is restricted in her liberty. Liberty means the state or condition of being free from external constraint. It is predominantly an objective state. It does not depend on ones disposition to exploit ones freedom. Nor is it diminished by ones lack of capacity. The question whether one is restricted (as a matter of actuality) is determined by comparing the extent of your actual freedom with someone of your age and station whose freedom is not limited. Thus a teenager of the same age and familial background as MIG and MEG is the relevant comparator for them. If one compares their state with a person of similar age and full capacity it is clear that their liberty is in fact circumscribed. They may not be conscious, much less resentful, of the constraint but, objectively, limitations on their freedom are in place. All children are (or should be) subject to some level of restraint. This adjusts with their maturation and change in circumstances. If MIG and MEG had the same freedom from constraint as would any child or young person of similar age, their liberty would not be restricted, whatever their level of disability. As a matter of objective fact, however, constraints beyond those which apply to young people of full ability are and have to be applied to them. There is therefore a restriction of liberty in their cases. Because the restriction of liberty is and must remain a constant feature of their lives, the restriction amounts to a deprivation of liberty. Very young children, of course, because of their youth and dependence on others, have an objectively ascertainable curtailment of their liberty but this is a condition common to all children of tender age. There is no question, therefore, of suggesting that infant children are deprived of their liberty in the normal family setting. A comparator for a young child is not a fully matured adult, or even a partly mature adolescent. While they were very young, therefore, MIG and MEGs liberty was not restricted. It is because they can and must now be compared to children of their own age and relative maturity who are free from disability and who have access (whether they have recourse to that or not) to a range of freedoms which MIG and MEG cannot have resort to that MIG and MEG are deprived of liberty. Lord Clarke has commended the judgment of Parker J in the case of P and Q as setting out the factors relevant to an assessment of whether they are deprived of their liberty. The judgment is indeed a model of clarity but it is because it proceeds on the premise that liberty is to be judged subjectively that I cannot agree with it. Although the Strasbourg court has not had to confront precisely the situation in which the parties in these cases find themselves, it is clear, in my view, that the approach adopted by that court to the question of a deprivation of liberty is primarily rooted in an objective assessment of the conditions which are said to amount to that state. Thus in Stanev v Bulgaria (2012) 55 EHRR 696 and the cases which preceded it, the European Court of Human Rights was careful to point out that the starting point was the concrete situation of the person concerned. The rubric employed to describe the criteria to be taken into account, the type, duration, effects and manner of implementation of the measures confirms the paramount importance of an objective assessment. The subjective element in deprivation of liberty is the absence of valid consent to the confinement in question see para 117 of Stanev. This must be distinguished from passive acquiescence to the deprivation, particularly where that stems from an inability to appreciate the fact that ones liberty is being curtailed. In para 118 (c) the court said that deprivation of liberty occurs when an adult is incapable of giving his consent to admission to a psychiatric institution, even though he had never attempted to leave it. And, as Lady Hale has pointed out (in para 24 of her judgment) the court also said in para 119 that the right to liberty was too important to be lost simply because a person had given himself up to detention, especially where he is legally incapable of consenting to or disagreeing with it. Benevolence underpinning a regime which restricts liberty is irrelevant to an assessment of whether it in fact amounts to deprivation. Lord Carnwath and Lord Hodge suggest (in para 90 of their judgment) that the fact that a regime is no more intrusive or confining than is required for the protection and welfare of the person concerned, while principally relevant to justification of restriction of liberty, may also be taken into account in deciding whether the restriction amounts to deprivation of liberty. I cannot agree. The suggestion has echoes of some oblique observations in HM v Switzerland (2004) 38 EHRR 314 where it was found that the applicant had been placed in a nursing home in her own interests. But, as Lady Hale has pointed out (in para 28) this is inconsistent with later Grand Chamber decisions in Creanga v Romania (2012) 56 EHRR 361, and Austin v United Kingdom (2012) 55 EHRR 359. In Creanga the court said (at para 93) that the purpose of the measures which deprived applicants of their liberty was no longer decisive for the courts assessment of whether there has in fact been a deprivation of liberty. This factor was to be taken into account only at a later stage of [the courts] analysis, when examining the compatibility of the measure with article 5.1 of the Convention, in other words, whether the deprivation was justified. And in Austin at para 58 the point is made even more directly. There it was said that the courts jurisprudence made it clear that an underlying public interest motive has no bearing on the question whether [the] person has been deprived of his liberty, although it might be relevant to the subsequent inquiry whether the deprivation of liberty was justified under one of the subparagraphs of article 5.1. These statements are consistent with the analysis of whether liberty has been deprived as involving principally an objective assessment. Placing restrictions on someones liberty for their own good or even to make available to them a range of activities that they might not otherwise be capable of does not transform the restrictions into something less than constraints. To suggest that the purpose of the restriction is relevant to whether it amounts to a deprivation of liberty is to conflate the object of the restraints with their true character. If, as Lord Carnwath and Lord Hodge have suggested, section 64(5) of the Mental Capacity Act 2005 ties us yet closer to the jurisprudence of Strasburg than does section 2 of the Human Rights Act 1998, this does not alter the requirement that we meet and deal with the claim that the restrictions on Ps and MIGs and MEGs liberty amount to a deprivation under article 5 of the Convention for the Protection of Human Rights and Fundamental Freedoms, even if there is no clear and constant line of authority from the European Court of Human Rights on similar facts to those which arise in the present appeals. Reference has been made to Lord Dysons judgment in Ambrose v Harris [2011] 1 WLR 2435 para 88, where he said that it may be possible to find a sufficiently clear indication in the Strasbourg jurisprudence of how the European court would resolve the question. But Lord Carnwath and Lord Hodge state that, in the absence of such a clear indication, this court should be cautious about extending a concept as sensitive as deprivation of liberty beyond the meaning which it would be regarded as having in ordinary usage para 93 of their judgment. With respect, I do not agree that caution is the appropriate reaction to an absence of authoritative guidance from Strasbourg. This court, in common with all public authorities, has the duty under section 6 of the Human Rights Act not to act in a way which is incompatible with a Convention right. That statutory obligation, to be effective, must carry with it the requirement that the court determine if the Convention right has the effect claimed for, whether or not Strasbourg has pronounced upon it. This court must therefore resolve the question of whether a claim to a Convention right is viable or not, even where the jurisprudence of the Strasbourg court does not disclose a clear current view. In any event for the reasons given by Lady Hale, it is apparent that two central features of the current Strasbourg jurisprudence point clearly to the conclusion that there is a deprivation of liberty in these cases. These are that the question of whether there has been a deprivation is to be answered primarily by reference to an objective standard and that the subjective element of the test is confined to the issue of whether there has been a valid and effective consent to the restriction of liberty. I do not accept that this clear guidance can be substituted with an ordinary usage approach to the meaning of deprivation of liberty. If deprivation of liberty is to be judged principally as an objective condition, then MIG, MEG and P are unquestionably subject to such deprivation, no matter how their situation might be regarded by those using ordinary language. LORD CARNWATH AND LORD HODGE We gratefully adopt the bulk of Lady Hales judgment, including her exposition of the legislative history, the relevant jurisprudence, and the facts of the cases before us. There is much common ground. We agree that the comparator should in principle be a person with unimpaired health and capacity for the reasons which the judgment advances. We also see real value in the clarity of a focused test as it would greatly assist the psychiatrists and other professionals who have to administer the Mental Capacity Act 2005 (the 2005 Act). We also recognise the arguments in favour of a policy of periodic supervision of arrangements made under that Act to safeguard those who have an incapacity in order to ensure that those arrangements are in their best interests. That is consistent with a commitment to give effective protection to vulnerable persons. On the other hand, as she recognises, there are legitimate concerns about the potential bureaucracy of the statutory procedures, and about including within the test the sort of benevolent living arrangements which many might find difficult to characterise as a deprivation of liberty (para 10). There is also common ground that the approach proposed by Lady Hale goes further than any existing Strasbourg case law. As she says, Strasbourg has not yet ruled on a case which combines the following features of the cases before us: (a) a person who lacks both legal and factual capacity to decide upon his or her own placement but who has not evinced dissatisfaction with or objection to it; (b) a placement, not in a hospital or social care home, but in a small group or domestic setting which is as close as possible to normal home life; and (c) the initial authorisation of that placement by a court as being in the best interests of the person concerned. To those we would add a fourth: (d) that the regime is no more intrusive or confining than is required for the protection and well being of the person concerned. We recognise that this fourth point, like the purpose of a regime, is principally relevant to the justification of that regime rather than the analysis of its nature: see Austin v United Kingdom (2012) 55 EHRR 359, para 58. But in our view the degree of intrusion is nonetheless relevant to the latter. The Strasbourg jurisprudence seems to us of added significance where, as Lady Hale notes (para 19), section 64(5) of the 2005 Act ties the concept of deprivation of liberty into article 5(1) of the Convention for the Protection of Human Rights and Fundamental Freedoms by providing that it will have the same meaning. As the Strasbourg court is the authoritative interpreter of the Convention, it appears to us that under the 2005 Act we are more closely tied to its interpretation of the Convention than we are under section 2(1) of the Human Rights Act 1998. In effect Parliament has decided that it is to the Strasbourg jurisprudence that we must turn to find out what is meant by deprivation of liberty. Even if we are wrong in suggesting that section 64(5) constrains us more than section 2 of the 1998 Act, we have clear and recent authority from a nine Justice Bench that we should follow a clear and constant line of decisions, especially those of the Grand Chamber (Manchester City Council v Pinnock (Secretary of State for Communities and Local Government Intervening) [2011] 2 AC 104, per Lord Neuberger (giving the judgment of the court) at para 48). See also R (Chester) v Secretary of State for Justice [2013] UKSC 63, [2013] 3 WLR 1076 per Lord Sumption at para 121. We accept that the mere fact that Strasbourg has not yet had occasion to consider a case with this combination of factors does not of itself preclude us from forming our own view of how it would decide the matter if cases such as the present were to come before it. As Lord Dyson said, in Ambrose v Harris (Procurator Fiscal, Oban) [2011] 1 WLR 2435, para 88, it may be possible to find a sufficiently clear indication in the Strasbourg jurisprudence of how the European court would resolve [the] question. However, short of such a clear indication, we should be cautious about extending a concept as sensitive as deprivation of liberty beyond the meaning which it would be regarded as having in ordinary usage. We can see the attractions of a universal test, applicable to all regardless of any physical or mental disabilities, as Lady Hale proposes (para 46). But it is not a concept which we can find reflected in the Strasbourg cases. The court has remained wedded to a case specific test. It has consistently reaffirmed the need for an examination of the concrete situation taking into account a whole range of criteria such as the type, duration, effects and manner of implementation of the measure in question; and that the difference between deprivation of liberty and restrictions on liberty was merely one of degree or intensity, and not one of nature or substance. Turning to the individual cases discussed by Lady Hale, we would attach particular importance to Stanev v Bulgaria (2012) 55 EHRR 696, as a recent Grand Chamber decision in which the court also took the opportunity to review the early cases. It is important however to keep in mind that the focus of the judgment was on state run social care institutions, such as the one in issue in that case, rather than the more domestic environments with which we are concerned. The relevant facts have been sufficiently summarised by Lady Hale (para 26). We would highlight the following points in the judgment: (a) The test is not hard edged. The court repeated its standard Engel formula: In order to determine whether someone has been deprived of his liberty, the starting point must be his concrete situation and account must be taken of a whole range of criteria such as the type, duration, effects and manner of implementation of the measure in question (para 115) (b) The court summarised the effect of previous decisions in comparable cases: The court has found that there was a deprivation of liberty in circumstances such as the following: (a) where the applicant, who had been declared legally incapable and admitted to a psychiatric hospital at his legal representatives request, had unsuccessfully attempted to leave the hospital (see Shtukaturov v Russia (2008) 54 EHRR 962, para 108); (b) where the applicant had initially consented to her admission to a clinic but had subsequently attempted to escape (see Storck v Germany (2005) 43 EHRR 96, para 76); and (c) where the applicant was an adult incapable of giving his consent to admission to a psychiatric institution which, nonetheless, he had never attempted to leave (see HL v United Kingdom (2004) 40 EHRR 761, paras 89 94). (c) It is true that the court attached weight to the fact that he was under constant supervision and was not free to leave the home without permission whenever he wished (para 128), but this was not treated as conclusive in itself; it was only one of a number of factors leading to the overall assessment. (d) The court noted (at para 130) its previous holding that the fact that a person lacks legal capacity does not necessarily mean that he is unable to comprehend his situation (see Shtukaturov, at para 108) In Stanev itself, the subject was well aware of his situation, and had expressed his desire to leave the social care home. Unlike HM (see below) it could not be said that he had consented to or tacitly accepted his placement there (para 130 131). It is notable that all the cases cited in the courts review related to people living in institutions of some kind, not in ordinary homes. Conversely, we have been referred to no Strasbourg case in which detention has been found in comparable circumstances to the present. A number of cases, in which no deprivation of liberty was found, contain pointers in the other direction: i) ii) iii) In Nielsen v Denmark (1988) 11 EHRR 175 it was significant that restrictions on the child applicants freedom of movement and contacts were no different from restrictions which might be imposed on a child in an ordinary hospital, the conditions being as similar as possible to a real home (para 70). In HM v Switzerland (2002) 38 EHRR 314 it was relevant that, though not able to go home (para 32), she had freedom of movement, was able to maintain social contact with the outside world and hardly felt the effects of her stay (paras 45 46). The case was regarded as comparable to Nielsen v Denmark (para 48). In HL v United Kingdom (2004) 40 EHRR 761, para 93 the court distinguished HM on the grounds that the nursing home in that case was an open institution which allowed freedom of movement and encouraged contacts with the outside world and offered a regime entirely different from that in HL. (It is true that in Stanev 55 EHRR 696, HM was distinguished in part on the basis that HM, unlike Stanev, had agreed to stay (para 131). However, that is not the ground on which HM was actually decided, and the fuller discussion in HL shows that such assumed agreement was only part of the story.) iv) In Haidn v Germany (Application No 6587/04) 13 January 2011, the subject, following release from detention on probation, was required by the court to live in an old peoples home, which he could not leave without his custodians permission (para 82). The court expressed serious doubts whether there was a deprivation of liberty, although did not need to decide the point. None of these cases is conclusive. As Lady Hale has shown, different interpretations are possible. However, if we are to look, in Lord Dysons words, for a clear indication of how Strasbourg would decide the matter, we are not persuaded that they provide sufficient support for the general test proposed by Lady Hale. We are concerned that nobody using ordinary language would describe people living happily in a domestic setting as being deprived of their liberty. We recognise that the concept in the Convention may be given an autonomous meaning by the Strasbourg court. But we are struck by how the judges in the courts below, with far more experience than we ourselves can claim, have laboured to keep the concept of deprivation of liberty in touch with the ordinary meaning of those words. Although we agree with some of the criticisms made of the Court of Appeal's relevant comparator approach, we understand what the judges were striving to achieve. We also share the concern of some of the judges below as to how such a test would have applied to HL, once returned from hospital to the placement with his foster parents, as required by the courts decision in that case. It is true as Lady Hale says (para 53) that no one suggested in that case that his position there would involve a deprivation of liberty. But that, surely, was because it had not occurred to anyone (including the court) that such a placement in an ordinary home environment could constitute a deprivation of liberty for the purpose of article 5, even though the degree of control for practical purposes would be the same as before. The present cases No doubt P and Q can be said to have had their liberty restricted, by comparison with a person with unimpaired health and capacity. But that is not the same as a deprivation of liberty. Parker J summarised their position in this way: 228 In neither placement in my judgment is there confinement in a restricted space for a not negligible length of time. [P] is living in a foster home and goes to college during the day; [Q] is living in a residential home and goes to college during the day. In the evenings they return to their respective homes 229 The concrete situation is that each lives exactly the kind of life that she would be capable of living in the home of her own family or a relative: their respective lives being dictated by their own cognitive limitations. In our view that is entirely consistent with the Strasbourg jurisprudence and we would uphold her decision. In P v Cheshire West and Chester Council Baker J took a different view, on the facts of that case. Lady Hale has summarised the judges reasoning. He concluded: 59. On the other hand, his life is completely under the control of members of staff at Z House. He cannot go anywhere or do anything without their support and assistance. More specifically, his occasional aggressive behaviour, and his worrying habit of touching and eating his continence pads, require a range of measures, including at times physical restraint, and, when necessary, the intrusive procedure of inserting fingers into his mouth whilst he is being restrained. The Court of Appeal took a different view. While we agree with Lady Hales criticisms of parts of their reasoning, we see some force in their point that occasional restraint for purely therapeutic purposes should not be enough in itself to tip restriction over the edge into deprivation. As Munby LJ said: The measures described by the judge as applied from time to time to P are far removed from the physical or chemical restraints which one sometimes finds, for example, in mental hospitals. They are, in truth, the kinds of occasional restraint that anyone caring for P in whatever setting for example, his own mother if he was still living at home would from time to time have to adopt. ([2012] PTSR 1447, para 113) However, we think that this is too narrow a reading of the judges assessment overall and was not enough in itself to justify the court interfering with his decision in what in our view was a marginal case. Although we might not have reached the same decision, we are satisfied that he directed himself correctly on the legal principles, and that his conclusion was one which was reasonably open to him on the particular facts of the case. For these reasons, we would dismiss the appeal in P & Q but, in agreement with the majority, allow the appeal in P v Cheshire West. LORD CLARKE Introduction I agree with the conclusions and reasoning of Lord Carnwath and Lord Hodge. As I see it, the question in these appeals is whether, on the facts found, the appellants were deprived of their liberty or whether their liberty was interfered with. This is a question of fact which, as so often, depends upon all the circumstances of the case. The jurisprudence of the European Court of Human Rights (ECtHR), which is discussed in detail by others, shows to my mind that, in order to answer the question, it is necessary to conduct a multi factorial exercise which involves a balancing of a number of considerations. The ECtHR has not held that there is only one question (or acid test), namely whether the individual concerned is free to leave. Its approach is more nuanced than that. As Smith LJ put it in P and Q [2012] Fam 170, para 40, whether in each case MIG and MEG was deprived of her liberty or whether her liberty was merely interfered with is a question of fact and degree. It is essentially a jury question and thus a question for the trial judge. Given that it involves a balancing of many different considerations, the decision of the judge should not be interfered with by an appellate court unless it concludes that the judge has erred in principle or that the judge was wrong. An appellate court should not simply substitute its own view for that of the judge. In these cases the judges of first instance, Parker J in P and Q and Baker J in P, were very experienced in this field so that their opinions deserve great respect. In P and Q Parker J conducted a careful analysis of the facts relevant to each case: see paras 207 to 237. In para 224 she concluded (in my opinion correctly) that mere lack of capacity to consent cannot in itself create a deprivation of liberty. If it did, everyone placed by a local authority would be considered to be deprived of their liberty. She then said this: 225. Freedom to leave has to be assessed against the background that neither wants to leave their respective homes, there is no alternative home save that of their mother where neither wishes to live, and neither appears to have the capacity to conceptualise any alternative unfamiliar environment. I have been told and I accept that if the local authority felt that either was actively unhappy where they were placed, then other arrangements would be made. 226. In my view it is necessary to analyse what specific measures or restraints are in fact required. The judge then referred to Salford City Council v GJ [2008] EWHC 1097 (Fam), [2008] 2 FLR 1295 a case in which declaration had been made as to the lawfulness of certain measures and continued in this way. 227. No such declarations or authorisations were sought here. Specifically no authorisation was sought to prevent either from leaving the placement. No declaration was sought that it was lawful to administer Risperidone to MEG. In the draft order submitted at the hearing the relevant declarations sought in the event that I concluded that there was a deprivation of liberty were that each should live in their respective homes, attend C College, and have contact with family members as set out in the schedule to the draft order. There was no reference to medication. No more specific measures were referred to in the draft order, or in the care plans which were sought to be authorised. On the basis, as I have found, that placement in itself and lack of consent in itself is not sufficient to create a deprivation of liberty in the circumstances of this case, then there must in my judgment be some other specific course of action adopted or measure taken whereby restraints or restrictions are placed upon an individual of sufficient degree and intensity to constitute a deprivation of liberty. The guidance in the Deprivation of Liberty Safeguards Code supports this analysis. 228. In neither placement in my judgment is there confinement in a restricted space for a not negligible length of time. MIG is living in a foster home and goes to college during the day; MEG is living in a residential home and goes to college during the day. In the evenings they return to their respective homes. In their circumstances, and by comparison with the considerations in the control order cases, neither is subject to any form of house arrest or curfew. 229. The concrete situation is that each lives exactly the kind of life that she would be capable of living in the home of her own family or a relative: their respective lives being dictated by their own cognitive limitations. Each is subject to limitations on her own autonomy and freedom of movement and ability to enjoy activities by being guided or accompanied in order to provide for her own immediate protection. 233. With specific regard to the measures said to amount to deprivation of liberty here, and to the Deprivation of Liberty Safeguards Code set out above, it is relevant that: i) Each was under the age of majority when admitted under the powers conferred by the Care Orders to their respective homes. Neither was admitted using restraint or medication. ii) The question of where each is to live is for the court, and no decision has been taken by MIG's foster mother (who is not staff) or the staff of B Home that either cannot leave; iii) Each lacks freedom and autonomy dictated by their own disability, rather than because it is imposed on them by their carers. Each is under the continuous supervision and control of her carers (and in the case of MIG, of her foster family rather than staff) so as to meet her care needs rather than to restrain her in any way. iv) MEG is accommodated as a child in need. v) Neither is restrained save for immediate purpose of ensuring safety, and, in the case of MEG, for her immediate protection and that of others when she has an outburst. In my view the case of neither does this cross the line so as to constitute deprivation of liberty. vi) Medication is not administered to MEG so as to restrain her from leaving or to restrain her activities generally. In my view this does not cross the line either. vii) Neither is in a locked environment. viii) If either wished to leave in the immediate sense each would be restrained or brought back for their safety. If either were unhappy in their residential settings other arrangements would be sought. ix) Neither is deprived of social contacts, and in the school environment they can associate with whom they will, subject to the teachers or other support staff in that environment. Specific controls are placed on their contact with their mother and stepfather, but these controls are imposed not by their carers, but by court order. The arrangements in relation to contact with HG and SG are dictated by practicalities. x) Neither is in their respective homes all the time. They go to college for significant periods of time, where it is not suggested that either is deprived of her liberty, notwithstanding their respective lack of capacity to consent to attending college or to restraints on leaving that environment during the school day. xi) Some relatives support their placements and some do not. None actively objects to the placement. No relative objects to the care regime. No request by any interested person for either to be released into their care has been refused. xii) The fact that MEG is living in a residential home does not mean that she is deprived of her liberty. It is, to quote McFarlane J in LLBC v TG, JG and KR1, an ordinary care home where only ordinary restrictions on liberty applied; xiii) As in LLBC v TG, JG and KR, the subjects of these proceedings have at all times been the subject of either care orders or Court of Protection orders, under whose auspices they have been placed originally, and each person with an interest in the care and other arrangements for MIG and MEG has and has had the ability to apply to the court; xiv) No challenge to their placements has been made and the case has proceeded without any active attempt to invite the court to authorise deprivation of liberty until the final hearing; xv) No other arrangements less restrictive or invasive could be devised that would meet their care needs. 234. I have not met MIG or MEG but I have read much about them and heard much too. Their wishes and feelings are manifest and clearly expressed. They plainly have no subjective sense of confinement. In a non legal sense they have the capacity to consent to 1 [2007] EWHC 2640, [2009] 1 FLR 414, per McFarlane J at [105(i)] their placements. I cannot imagine that any person visiting MIG at the home of JW, or MEG at B Home would gain any sense of confinement or detention. 235. Those circumstances are in my judgment very far from the paradigm example of imprisonment. I have set out that part of Parker Js judgment in detail because it seems to me to set out the many relevant factors with clarity and to demonstrate why she was entitled to hold that MIG and MEG were not deprived of their liberty. For my part, I see no reason to hold that the judge reached a wrong conclusion. In particular I agree with the conclusions of Lord Carnwath and Lord Hodge that nobody using ordinary language would describe people living happily in a domestic setting as being deprived of their liberty. I am not persuaded that the ECtHR would so hold. A more measured conclusion would be that MIGs liberty was interfered with and not that she had been deprived of her liberty. The same is true of MEG. In conclusion, I would stress that, contrary to the view expressed by Lord Kerr in para 80, I do not read Parker J as adopting a subjective approach. As I see it she is essentially carrying out an objective assessment of the various factors in arriving at her conclusion. I have tried to do the same. This is not a comparative exercise with other people in different circumstances but an assessment of the position of MIG and MEG on the facts of their particular cases. For these reasons, in agreement with Lord Carnwath and Lord Hodge, I would dismiss the appeals in P and Q v Surrey County Council. Applying the same approach in P v Cheshire West and Chester Council, I would again decline to interfere with the conclusions of the judge at first instance, Baker J, and would allow the appeal.

These appeals concern the criteria for judging whether the living arrangements made for a mentally incapacitated person amount to a deprivation of liberty. If they do, the deprivation must be authorised by a court or by the procedures known as the deprivation of liberty safeguards (DOLS) in the Mental Capacity Act 2005 (the Act) and subject to regular independent checks. P and Q (otherwise known as MIG and MEG) are sisters who became the subject of care proceedings in 2007 when they were respectively 16 and 15. Both have learning disabilities. MIG was placed with a foster mother to whom she was devoted and went to a further education unit daily. She never attempted to leave the foster home by herself but would have been restrained from doing so had she tried. MEG was moved from foster care to a residential home for learning disabled adolescents with complex needs. She sometimes required physical restraint and received tranquillising medication. When the care proceedings were transferred to the Court of Protection in 2009, the judge held that these living arrangements were in the sisters best interests and did not amount to a deprivation of liberty. This finding was upheld by the Court of Appeal. P is an adult born with cerebral palsy and Downs syndrome who requires 24 hour care. Until he was 37 he lived with his mother but when her health deteriorated the local social services authority obtained orders from the Court of Protection that it was in Ps best interests to live in accommodation arranged by the authority. Since November 2009 he has lived in a staffed bungalow with other residents near his home and has one to one support to enable him to leave the house frequently for activities and visits. Intervention is sometimes required when he exhibits challenging behaviour. The judge held that these arrangements did deprive him of his liberty but that it was in Ps best interests for them to continue. The Court of Appeal substituted a declaration that the arrangements did not involve a deprivation of liberty, after comparing his circumstances with another person of the same age and disabilities as P. The Supreme Court, unanimously in the appeal of P, and by a majority of 4 to 3 in the appeal of MIG and MEG, allows the appeals. MIG, MEG and P have all been deprived of their liberty. Lady Hale, with whom Lord Sumption agrees, gives the main judgment. Lord Neuberger agrees with Lady Hale in an additional judgment and Lord Kerr agrees with Lord Neuberger and Lady Hale, also in a separate judgment. Lord Carnwath and Lord Hodge give a joint judgment dissenting in the appeal of MIG and MEG. Lord Clarke agrees with them in an additional judgment. The DOLS were introduced into the Act following the case of HL v United Kingdom (2004) 40 EHRR 761, which found that the treatment of a severely mentally disabled adult after his informal admission to hospital amounted to a deprivation of his liberty by the hospital. Their purpose is to secure independent professional assessment of (a) whether the person concerned lacks the capacity to make his own decision about whether to be accommodated in the hospital or care home for care or treatment, and (b) whether it is in his best interests to be detained [8 9]. The European Court of Human Rights (ECtHR) has established general principles relating to the deprivation of liberty of people with mental disorders or disabilities, albeit that it has not yet had to decide a case involving, as here, a person without capacity, who appears content with their care placement, which is in a small group or domestic setting as close to home life as possible, and which has been initially authorised by a court [32]. The general principles make it clear that it is important not to confuse the question of the benevolent justification for the care arrangements with the concept of deprivation of liberty. Human rights have a universal character and physical liberty is the same for everyone, regardless of their disabilities [45]. What would be a deprivation of liberty for a non disabled person is also a deprivation for a disabled person [46]. The key feature is whether the person concerned is under continuous supervision and control and is not free to leave [49]. The persons compliance or lack of objection, the relative normality of the placement and the purpose behind it are all irrelevant to this objective question [50, 87]. It follows that in Ps case the judge applied the right test and his decision should be restored [51]. MIG and MEG were also both under continuous supervision and not free to leave the place where they lived. The deprivation of their liberty was the responsibility of the state and therefore different from similar constraints imposed by parents in the exercise of their ordinary parental responsibilities [54]. Accordingly the decisions of the courts below must set aside and a declaration made that their living arrangements constitute a deprivation of liberty within the meaning of s 64(5) of the Act. Periodic independent checks are needed for such vulnerable people to ensure that the arrangements remain in their best interests, although it is not necessary that the checks be as elaborate as those currently provided for in the Court of Protection or in the DOLS [57 58]. Lord Carnwath, Lord Hodge and Lord Clarke would have upheld the decision of the judge in both cases. They consider that the degree of intrusion is relevant to the concept of deprivation of liberty, and in the appellants cases the care regime is no more intrusive or confining than required for the protection and well being of the persons concerned [90]. The ECtHR has yet to decide a case of this kind and it is far from clear that it would adopt a universal test which disregarded any disabilities. It remains wedded to a case specific test [94]. They are concerned that nobody using ordinary language would describe persons living happily in a domestic setting, like MIG and MEG, as being deprived of their liberty [99].

This appeal is concerned with legislation under which planning authorities have the duty of reviewing what are commonly referred to as old planning permissions for mineral working. The process of review is sometimes referred to by the acronym ROMP (Review [of] Old Mineral [planning] Permissions). The statutory provisions were introduced by the Environment Act 1995 and then reenacted in substantially the same form in the Town and Country Planning (Scotland) Act 1997 (the 1997 Act). The principal legislative purpose of these provisions is to ensure that old mineral permissions are made subject to conditions meeting modern environmental standards. Some of the old permissions were granted many years ago subject to conditions less stringent and less precise than are appropriate today. Where more stringent conditions are imposed compensation is payable in certain cases, but only where the mineral site in question is classified as active rather than dormant. A subsidiary purpose of the legislation is to achieve better and more reliable records of old planning permissions for mineral working. The evolution of the legislation has been described in detail by the Lord President (Lord Cullen) in Lafarge Aggregates Ltd v Scottish Ministers 2004 SC 524, paras 2 and 3. The relevant provisions of the 1997 Act are section 74 and Schedule 9 (Review of Old Mineral Planning Permissions). Schedule 9 contains several special definitions and some interlocking provisions which call for careful examination, but on examination (and with the background history as explained by the Lord President) its general scheme becomes clear. It distinguishes between three categories of mineral sites, and lays down how the process of review is to affect each category. The three categories are Phase I active sites, Phase II active sites and dormant sites. The difference in treatment as between the first and second of these categories is a simple matter of administrative prioritisation: Phase I active sites include sites of particular environmental sensitivity (para 2(4)) and those which are the oldest sites dealt with by Schedule 9, and so most likely to have inadequate conditions (para 2(6); it should be added, for the sake of completeness, that an even older category of permissions, those granted before 1 July 1948, had been covered by earlier legislation). Phase I active sites are therefore to be reviewed first. By contrast the difference in treatment between all active sites (on the one hand) and dormant sites (on the other hand) is more substantial. Dormant sites (which may be either Phase I or Phase II) are defined (para 1(1)) as sites on which no substantial minerals development was carried out in the period beginning 22 February 1982 and ending with 6 June 1995. Although a planning permission cannot be lost by abandonment, Parliament thought it right to deal with dormant sites in a rather more robust way, by freezing any further mineral working until new conditions had been applied for and approved (para 12(3)). This appeal relates to a dormant site. As the Lord Justice Clerk (Lord Gill) said in his opinion in the Inner House (para 8) there are two stages in the Schedule 9 procedure. Stage 1 involves the preparation of two lists, termed the first list (para 3) and the second list (para 4). The first list has three main functions: (i) to list all mineral sites in the authoritys area (para 3(1) and (2)); (ii) to sort them into the three categories already mentioned (para 3(3)); and (iii) for active Phase I sites only, to specify a date by which a para 9 application is to be made (para 3(4) and (5)). In that way active Phase I sites are given priority. The second list is simpler. It relates only to active Phase II sites and performs function (iii) above for them (para 4(3), (4) and (5)). Paragraphs 5, 6, 7 and 8 contain further administrative provisions relevant to what the Lord Justice Clerk called stage 1. Counsel for the appellant placed particular emphasis on the provisions of para 6 (Applications for inclusion in the first list of sites not included in that list as originally prepared and appeals from decisions upon such applications) but it is better to defer consideration of that point. Paragraphs 9 to 16 of Schedule 9 deal with Stage 2. Some of these provisions (including those as to compensation) do not apply to dormant sites. In relation to dormant sites the key provisions are para 9(1) and (5), para 11 and para 12(3) and (4). Para 9(1) is as follows: Any person who is the owner of any land, or who is entitled to an interest in a mineral, may, if that land or mineral is or forms part of a dormant site or an active Phase I or II site, apply to the planning authority to determine the conditions to which the relevant planning permissions relating to that site are to be subject. Para 9(5) is as follows: Where the planning authority receive an application under this paragraph in relation to a dormant site or an active Phase I or II site they shall determine the conditions to which each relevant planning permission relating to the site is to be subject; and any such permission shall, from the date when the conditions to which it is to be subject are finally determined, have effect subject to the conditions which are determined under this Schedule as being the conditions to which it is to be subject. Para 11 gives a right of appeal (now to Scottish Ministers) as to the terms of any new conditions to be imposed. Para 12(3) is as follows: Subject to sub paragraph (4), no relevant planning permission which relates to a dormant site shall have effect to authorise the carrying out of minerals development unless (a) an application has been made under paragraph 9 in respect of that site, and (b) that permission has effect in accordance with paragraph 9(5). Para 12(4) provides for the termination of mineral permissions which are not included in the first list (either initially or on an application under para 6) except so far as concerns conditions for restoration or aftercare. The facts Some of the documentary evidence has to be addressed in detail. The relevant documents are not in chronological order in the appendix. The references are to pages in the hard copy of the appendix. The mineral site with which this appeal is concerned is in a sparsely populated area on the edge of Strathspey. It is on the A938 road between Carrbridge and Dulnain Bridge, near Grantown on Spey. The appellant company, G. Hamilton (Tullochgribban Mains) Ltd (Tullochgribban Mains) is the heritable proprietor of tenanted farmland in the vicinity. The first respondent, the Highland Council (the Council) is the planning authority for the area, having taken over that responsibility from the Inverness County Council. The second respondent, Breedon Aggregates Scotland Ltd, formerly Ennstone Thistle Ltd (Breedon) is the proprietor of the minerals on the site and has the right to work them. Both Tullochgribban Mains and Breedon derive title from the same landowner, Lord Reidhaven. By a disposition [66] signed on 21 April 1967 and registered on 6 July 1967 Lord Reidhaven disponed to Breedons predecessor in title, George MacWilliam and Son (Contractors) Ltd (MacWilliam) all the deposits of sand and gravel and associated substances (except coal) in, on or under the land delineated in red on an annexed plan [74]. This land (the red land) is adjacent to and on the north of the Carrbridge road. It is roughly rectangular except that it does not include a small loch, Loch Mor, which juts into the land on the east side. The disposition provided for entry on 1 August 1965. The property disponed included a number of express rights and privileges, including full right and power . to search for work and carry away the minerals included in the disposition. Counsel did not find it necessary to make any submissions about the detailed terms of the disposition. The pleadings show that at the time when the proceedings were commenced in 2008, Tullochgribban Mains was in the course of registering its title under a disposition made by Lord Reidhaven. Possibly for that reason, its title has not been formally admitted. But nothing turns on that. The argument has proceeded at every level on the basis that Tullochgribban Mains has a sufficient interest to give it locus standi in the proceedings, and that its rights are subject to the mineral rights in the red land disponed to Breedons predecessor in title. The dispute is about planning law, not property law. The original planning permission [75] was granted to MacWilliam by Inverness County Council on 12 February 1965. It was expressed in general terms as permission for the working of minerals on land at Tullochgorum, Carrbridge, in accordance with the plan(s) submitted and docquetted. The permission set out eleven conditions in numbered paragraphs, stated to be in the interests of health, safety and amenity. It is common ground that the names Tullochgribban and Tullochgorum are variants of the same name. The docquetted plan is not extant. It is common ground that it has been lost, possibly at the time when responsibility as planning authority passed to the Council. It would be surprising if it had shown an area materially different from the red land shown on the plan annexed to Lord Reidhavens disposition and Breedon and its predecessors in title appear to have acted consistently with the supposition that they were the same. MacWilliams immediate successor was Tilcon (Scotland) Ltd (Tilcon), and Breedon is Tilcons immediate successor. The mineral site was worked for some years, but it is common ground that no work has taken place for at least 20 years. The direction of working, when it took place, was towards the north, away from the road. The worked area (which has come to be called the green land) was relatively small. Counsel for the appellant put it at about one sixth or one seventh of the whole area of the red land. In March 1997 the Council issued its first list of mineral sites [76]. It was then acting under Schedule 13 of the Environment Act 1995, but it is agreed that the procedure was just the same as under the 1997 Act. The Tullochgribban site was not included in the first list, and in May 1997 Tilcon (which had by then acquired the mineral rights from MacWilliam) applied for it to be included as a Phase I active site. It did so by an undated letter, received on 7 May 1997 [77], with enclosures of (i) a copy of the planning permission dated 12 February 1965 [78]; (ii) a plan [79] (apparently copied from the plan on Lord Reidhavens 1967 disposition) showing the red land; and (iii) a reserve schedule [80] intended to serve as evidence that the site was an active site (that is, one on which some extraction took place after 22 February 1982). The Council (acting by Mr Andrew Brown, who has made an affidavit in the proceedings) replied on 26 June 1997 [107] pointing out that the reserve schedule was inadequate as evidence of working since 1982, and stating that the site would be registered as dormant. Tilcon accepted this by a letter dated 7 July 1997 [108] without further argument and it is not an issue in the appeal. Of more direct relevance, the Councils letter of 26 June 1997 stated: From the information provided, the Council has been able to trace this old planning permission (Reference number ICC/1964/798, approved on 12 February 1965) and has been able to locate a working on the ground as shown by the enclosed map. It would therefore seem appropriate to include Tullochgribban in the first list of sites. The Council then sent Tilcon a letter dated 15 July 1997 [81] framed (as counsel for the appellant pointed out) in the formal language of a decision letter. The substance of the decision was in the first two paragraphs: I refer to your letter of 7 July 1997 in relation to previous correspondence, and hereby give notice that the above mineral site [identified as Tullochgribban Quarry, Carrbridge] has been added to the first list of sites prepared by the Council as a Dormant site. The appropriate reference sheet and site plan relating to this additional entry are enclosed. As this site has been classified as Dormant, no development consisting of the winning and working of minerals or involving the depositing of mineral waste may lawfully be carried out until new planning conditions have been submitted to, and approved by, the Council. The letter was signed by Mr Bob Shannon, who was the Councils Head of Strategic Plans, and Mr Browns superior. The first of the enclosures, the reference sheet [82], was clear and uncontroversial. It set out particulars, correct in every respect, of the original planning permission. It noted at the foot, Original definitive site plan not available. The second enclosure [83] is at the heart of the controversy. It was a plan which identified the green land, a roughly kidney shaped area forming an island within the southern part of the red land. Counsel for the appellant did not accept that the site plan enclosed with the Councils letter of 15 July 1997 was the same as the enclosure with the Councils letter of 26 June 1997 (which referred to the Council being able to locate a working on the ground as shown by the enclosed map), and Mr Browns affidavit (para 4) indicates that the earlier enclosure was probably an extract from the Councils visual record plan [110, which is Appendix 4 of Mr Browns affidavit, with a better copy at 119]. The site plan [83] enclosed with the letter of 15 July 1997 was headed Review of Old Mineral Workings and there is discernible on it, at two places just within the boundary of the green land, the word spreads (apparently indicating some sort of land slippage). The site was therefore classified, by a revision of the first list, as a dormant site [109]. Tilcon did not make any comment on the letter of 15 July 1997 and its enclosures. There is no indication that it occurred to any of Tilcons management that the letter and enclosures were intended to reduce dramatically the extent of the original planning permission, or that it had that effect. Mr Browns affidavit (para 8) indicates that it was not intended to have that effect: It was not the intention of this site plan to seek to restrict the original planning permission to the area indicated. To have done so would not have been reasonable since the site would have been restricted in extent to its prior workings, thereby excluding any possible reserves, without evidence that this reflected the 1965 permission. The intention as explained in paragraph 5 was that the mineral operator when submitting an application for updated conditions could indicate a larger or more definitive area over which the application should relate, with due justification. The Council would then consider this along with the proposed new conditions in the light of the information to hand. Nothing else material occurred until October 2006, by which time Breedon had acquired the mineral rights. As the site had been classified as a dormant site, there was no time limit for the making of a paragraph 9 application, but in the meantime no further working could take place. On 17 October 2006 Breedons agents sent to the Council a copy of the plan annexed to Lord Reidhavens 1967 disposition. On behalf of the Council Mr Brown (then a senior planner engaged on development control) sent a reply dated 24 October 2006 [88] acknowledging the copy of the plan and stating: On this basis, and given that no more definitive information appears to be available concerning the site boundary for Inverness County Council Permission No 1964/798, it is agreed that an application under Section 74 of the Town and Country Planning (Scotland) Act 1997 should be on the basis of this boundary, with the following exception that the south eastern boundary should be revised to exclude Loch Mor as it presently extends. The shape of Loch Mors shoreline had undergone some change since 1967. On 20 April 2007 Breedon made its paragraph 9 application for approval of a schedule of conditions. After discussion with the Council a final draft of new conditions was prepared [93] which the Council was minded to approve. The first numbered condition was as follows: For the avoidance of doubt, in the absence of a definitive docquetted site plan, the boundary of the site to which these conditions relate under planning permission ICC/1964/798, issued by the County Council of Inverness on 12 February 1965, shall be as outlined in red on the approved plans EG 320/RMP/F/01&2. But after the application was advertised in May 2007, Tullochgribban Mains contended that it would be ultra vires for the Council to approve conditions in relation to the red land. It contended that the Council had, when it revised the first list so as to include Tullochgribban Quarry, definitively determined its extent as being limited to the green land. Tullochgribban Mains commenced these proceedings seeking declarator, reduction of the Councils purported decision, and interdict ad interim. The decisions in the courts below In her reserved judgment the Lord Ordinary (Lady Clark of Calton) carefully analysed the provisions of Schedule 9 to the 1997 Act. She stated (para 27): when a planning authority in accordance with paragraph 3 prepares a list of mineral sites within their area (the first list) what they are preparing is a list of the land to which a relevant planning permission relates. I consider that the intention of the legislation in relation to review of old mineral planning permissions in Schedule 9, is not to permit the planning authority to change the boundaries of land by reducing or increasing an area of land to which a relevant planning permission has been granted at an earlier date. The listing procedure envisages a listing of something which pre exists ie the planning permission granted at an earlier date in respect of mineral sites. The last sentence was criticised by counsel for the appellant as suggesting that the first list was to be a list of planning permissions. But it is clear from the passage as a whole, and indeed from the Lord Ordinarys judgment as a whole, that she well understood that it was to be a list of sites to which a relevant planning permission related (the wording used in Schedule 9, para 1(2)(b)). Normally the boundaries of the site would be identifiable from a plan referred to in the planning permission, but fixing the exact boundaries was not necessary at the listing stage. What was required was identification of the site. The Lord Ordinary considered that the submissions made on behalf of Tullochgribban Mains were not well founded. By an interlocutor of 10 March 2009 she repelled Tullochgribban Mainss first and second pleas in law and dismissed the petition. On 7 January 2011 the Inner House of the Court of Session refused Tullochgribban Mains reclaiming motion for review of the Lord Ordinarys interlocutor. The Lord Justice Clerk gave an opinion in which Lord Carloway and Lady Smith concurred. The Lord Justice Clerk defined the two issues in the appeal: (i) whether the Council was entitled or obliged to define the extent of the mineral site in the first list; (ii) whether, if it had power to define the extent of the site at that stage, the Council defined it as the green land. On the first issue counsel for the appellant argued (as he has before this Court) that the boundaries of a mineral site fell to be determined by the planning authority in the first list, at what the Lord Justice Clerk called Stage 1 (para 30 of his judgment, summarising counsels argument): that is to say, an entry in the first list is not merely site specific but boundary specific too. It follows, on this submission, that at Stage 2, when it comes to consider the question of conditions, it is too late for the planning authority to define the boundaries of the site. The Lord Justice Clerk did not accept that argument. He considered the Lord Ordinarys decision to be correct (paras 33 34, with two case references rearranged): Looking at the overall scheme of Schedule 9, I think that the procedure of listing (paras 3 to 6) is administrative in nature (Dorset CC v Secretary of State [1999] JPL 633, at pp 642 643). Listing is the qualification that entitles the interested party to apply to the planning authority to determine the conditions that should govern the existing planning permission (cf R v Oldham MBC and Anr, ex p Foster [2000] Env LR 395; and R (Payne) v Caerphilly CBC [2002 PLCR 496, [2003] Env LR 679 (Court of Appeal). Listing is about preserving an extant planning permission, not about restricting or rescinding it. The first list is a census of the mineral sites in the planning authoritys area (para 3(1); R v Oldham MBC and Anr, ex p Foster, supra at p 402; R (Payne) v Caerphilly CBC, supra; Lafarge Aggregates Ltd v Scottish Ministers 2004 SC 524, at para 37). It is not a list of defined areas of land. It is drawn up to identify where the mineral sites are and to classify each of them in order to determine the procedures that are to be followed at Stage 2. The existence of a relevant planning permission relating to it is the condition precedent to the inclusion of the site in the list. Therefore the planning authority is bound to satisfy itself that a relevant planning permission exists; but it need not identify the planning permission in the list itself (R v Oldham MPC, ex p Foster, supra) and a fortiori, in my view, it need not define its boundaries. Since the site is by definition land to which a relevant planning permission relates, the extent of it will be defined by the planning permission itself. If the site is then listed, the extant planning permission will remain alive in its entirety. It is only when the site is listed that the extent of the existing development rights over it becomes important. That question will be determined at Stage 2 by reference to the relevant planning permission itself. It is at that stage that planning judgments have to be made on the merits of each case. The Lord Justice Clerk considered that Tullochgribban Mains case was based on a misinterpretation of Schedule 9, para 6(3). A planning authority could grant an application for listing in part (giving rise to a right of appeal) only if satisfied, on clear evidence, that part of the land sought to be listed did not enjoy a relevant planning permission at all. That was quite different from a case where the plan on the original planning permission had been lost. On the second issue, the Lord Justice Clerk concluded that the Council did not purport to exercise its power under para 6(3)(b) to list part only of a site for which an application for listing was made. He accepted that on the uncontradicted evidence of Mr Brown, the green land was no more than an indication of the area which had been worked by then. The Council was not at that stage intending to make a definitive statement about boundaries. Conclusions In my judgment the Lord Ordinary and the Inner House were plainly correct. Counsel for the appellant criticised their reasoning as inadequate. But once the general scheme of Schedule 9 of the 1997 Act is understood the first point is really quite a short one. The procedure at what the Lord Justice Clerk called Stage 1 is administrative and preliminary in nature. It involves the identification of sites and the setting of an order of priority for Stage 2 (with activity on a dormant site being frozen in the meantime). By contrast Stage 2, which is initiated in every case by a paragraph 9 application, requires decisions calling for planning judgment. Counsel for the appellant concentrated in his submissions on para 6 of Schedule 9, and on the right of appeal conferred by it. But the Lord Justice Clerk was correct in his analysis of paragraph 6. It is possible to imagine some circumstances (such as overlapping applications) in which a planning authority might at Stage 1 find it necessary to form a provisional view as to the boundaries of a site. But such cases would be unusual and a provisional determination at Stage 1 could not have the effect of cutting down a valid existing planning permission. The second issue identified by the Lord Justice Clerk does not therefore strictly arise for decision. But the Lord Ordinary and the Inner House were also plainly correct in their observations on this point. Even without Mr Browns affidavit, the correspondence as a whole, considered objectively, gives no indication that the Council was purporting to exercise a power to cut down an existing planning permission. I would therefore dismiss this appeal. It is not an appeal for which permission would have been given by this Court, had permission been necessary. It does not raise any point of law of general importance, and the judgments below set out the position clearly and correctly.

This appeal is concerned with the process by which planning authorities review what are commonly referred to as old planning permissions for mineral working, under the Environment Act 1995 and the Town and Country Planning (Scotland) Act 1997. The review is necessary because the conditions attached to old permissions often fail to meet modern environmental needs. The legislation distinguishes between three categories of mineral sites, Phase I active, Phase II active and dormant, and lays down how the process of review is to affect each category. Dormant sites are those on which no substantial minerals development was carried out in the period from 22 February 1982 and 6 June 1995. On classification as dormant, all further mineral working is frozen until new conditions have been applied for and approved. The procedure for classification of sites is in two stages. Stage 1 involves the preparation of two lists. The first list enables Phase I active sites to be given priority. The second list relates to Phase II active sites. Stage 2 enables a person who owns the land or has an interest in minerals to apply to the planning authority to determine the conditions to which the relevant planning permission is to be subject with a right of appeal to Scottish Ministers, and provisions for compensation for some active sites. The mineral site in question is in a sparsely populated area on the edge of Strathspey. The Appellant company (Tullochgribban Mains) is the heritable proprietor of tenanted farmland in the vicinity. The First Respondent, the Highland Council (the Council) is the planning authority for the area and the Second Respondent, Breedon Aggregates Scotland Ltd (Breedon) is the proprietor of the minerals on the site and has the right to work them. Tullochgribban Mains and Breedon derive title from Lord Reidhaven, who by a disposition registered on 6 July 1967 disponed to Breedons predecessor in title all the deposits of sand and gravel and associated substances (except coal) in, on or under the land delineated in red on an annexed plan (the red land) The property included a number of rights and privileges including full right and powerto search for workand carry away the minerals. The original planning permission was granted on 12 February 1965 and was expressed in general terms as permission for the working of minerals on land at Tullochgorum, Carrbridge, in accordance with the plan(s) submitted and docquetted. It set out 11 conditions stated to be in the interests of health, safety and amenity. The original plan has been lost. The site was worked for some years, but no work has taken place for a least 20 years. The worked area (the green land) was quite small, about one sixth or seventh of the red land. In March 1997, the Council issued its first list of mineral sites. The Tullochgribban site was not included and in May 1997 an application was made for it to be included as a Phase I active site. Council decided to register it as dormant as there was inadequate evidence of working since 1982. This was communicated by the Council by letter dated 15 July 1997 which included with it a plan which identified the green land, a roughly kidney shaped area forming an island within the southern part of the red land. In 2007, by which time Breedon had acquired the mineral rights, Breedon made its application for approval of a schedule of conditions. After the application was advertised in May 2007, Tullochgribban Mains contended that it would be outside the power of the Council to approve conditions in relation to the red land, contending that when the Council revised the first list so as to include Tullochgribban Quarry, it definitively determined its extent as being limited to the green land. By an interlocutor of 10 March 2009 the Lord Ordinary (Lady Clark of Calton) dismissed Tullochgribban Mains petition. On 7 January 2011, the Inner House of the Court of Session (Lord Justice Clerk, Lord Carloway and Lady Smith) refused Tullochgribban Mains appeal against that decision. Tullochgribban Mains seeks to appeal that decision to the Supreme Court. The Supreme Court unanimously dismisses Tullochgribban Mains appeal. The Stage 1 procedure is administrative and preliminary in nature. In any event, the correspondence as a whole gives no indication that the Council was purporting to exercise a power to cut down an existing planning permission. The Court notes that, as a Scottish civil case, permission was not required to bring an appeal to the Supreme Court. Had it been required, permission would not have been given by this Court. It does not raise any point of law of general importance and the judgments below set out the position clearly and correctly. Lord Walker gives the leading judgment with which Lords Hope, Kerr, Clarke and Dyson agree. The stage 1 procedure is administrative and preliminary in nature. It involves the identification of sites and the setting of an order of priority for Stage 2. By contrast Stage 2 requires planning judgment. It is possible to imagine circumstances, such as overlapping applications, in which a planning authority might at Stage 1 find it necessary to form a provisional view as to the boundaries of a site. But such cases would be unusual and a provisional determination at Stage 1 could not have the effect of cutting down a valid existing planning permission. The correspondence as a whole, considered objectively, gives no indication that the Council was purporting to exercise a power to cut down an existing planning permission.

Section 3(2) of the Immigration Act 1971 (the 1971 Act) provides that: The Secretary of State shall from time to time (and as soon as may be) lay before Parliament statements of the rules, or of any changes in the rules, laid down by him as to the practice to be followed in the administration of this Act for regulating the entry into and stay in the United Kingdom of persons required by this Act to have leave to enter. The central question that arises in these two appeals is whether statements by the Secretary of State of her policy as regards the granting of concessions outside the immigration rules and of their subsequent withdrawal amount to statements as to the practice to be followed within the meaning of section 3(2) of the 1971 Act which she must, therefore, lay before Parliament. The statutory framework The 1971 Act lies at the heart of these appeals. Section 1(4) provides: (4) The rules laid down by the Secretary of State as to the practice to be followed in the administration of this Act for regulating the entry into and stay in the United Kingdom of persons not having the rights of abode shall include provision for admitting (in such cases and subject to such restrictions as may be provided by the rules, and subject or not to conditions as to length of stay or otherwise) persons coming for the purpose of taking employment, or for purposes of study, or as visitors, or as dependants of persons lawfully in or entering the United Kingdom. Section 3(1) provides that a person who is not a British citizen (a) shall not enter the United Kingdom unless given leave to do so in accordance with the provisions of or made under the 1971 Act; (b) may be given leave to enter or remain for a limited or indefinite period; and (c) if given leave to enter or remain, it may be subject to all or any of the specified conditions. Section 3(2) should be set out more fully than at para 1 above: (2) The Secretary of State shall from time to time (and as soon as may be) lay before Parliament statements of the rules, or of any changes in the rules, laid down by him as to the practice to be followed in the administration of this Act for regulating the entry into and stay in the United Kingdom of persons required by this Act to have leave to enter, including any rules as to the period for which leave is to be given and the conditions to be attached in different circumstances If a statement laid before either House of Parliament under this subsection is disapproved by a resolution of that House passed within the period of forty days beginning with the date of laying.then the Secretary of State shall as soon as may be make such changes or further changes in the rules as appear to him to be required in the circumstances, so that the statement of those changes be laid before Parliament at latest by the end of the period of forty days beginning with the date of the resolution Section 3A(1) states that the Secretary of State may by order make further provision with respect to the giving, refusing or varying of leave to enter; and the following subsections make particular provisions in relation to such orders. Section 3B makes similar provisions in relation to the giving, refusing or varying of leave to remain. Section 3C deals with continuation of leave pending a variation decision, subsection (6) providing that the Secretary of State may make regulations determining when an application is decided for the purposes of this section. Section 4(1) provides: (1) The power under this Act to give or refuse leave to enter the United Kingdom shall be exercised by immigration officers, and the power to give leave to remain in the United Kingdom, or to vary any leave under section 3(3)(a) (whether as regards duration or conditions), shall be exercised by the Secretary of State. Section 33(1) states that immigration rules means the rules for the time being laid down as mentioned in section 3(2) above. Section 33(5) provides: This Act shall not be taken to supersede or impair any power exercisable by Her Majesty in relation to aliens by virtue of Her prerogative. The relevant policies In March 1996, the Secretary of State introduced Deportation Policy 5/96 (DP5/96). It was entitled Deportation in cases where there are children with long residence. It defined more clearly the criteria to be applied by immigration decision makers when considering whether enforcement action should proceed or be initiated against parents who have children who were either born here and are aged 7 or over or where, having come to the United Kingdom at an early age, they have accumulated 7 years or more continuous residence. It stated that, whilst it was important that each individual case must be considered on its merits, certain factors (which were specified) might be of particular relevance in reaching a decision. In June 1998, the Secretary of State issued chapter 18 of the Immigration Directorates Instructions (The Long Residence Concession). It recognised that there was no provision in the immigration rules for a person to be granted indefinite leave to remain solely on the basis of the length of his or her residence. It stated that, where a person had 10 years or more continuous lawful residence or 14 years continuous residence, indefinite leave to remain should normally be given in the absence of any strong countervailing factors. It made no specific reference to the position of children. On 24 February 1999, the Under Secretary for the Home Department announced a revision to DP5/96. The policy modification statement said that, whilst it was important that each case be considered on its merits, there were certain factors which were likely to be of particular relevance when considering whether enforcement action should proceed or be initiated against parents who had children who had lengthy residence in the United Kingdom. The general presumption would be that enforcement action would not normally proceed in cases where a child was born here and had lived continuously to the age of 7 or over, or where, having come to the United Kingdom at an early age, 7 years or more of continuous residence had been accumulated. The statement identified certain factors which would be relevant to reaching a judgment on whether enforcement action should nevertheless proceed in such cases. On 31 March 2003, the Secretary of State laid before Parliament a statement of a number of changes to the immigration rules (HC 538). These included rules 276A to 276D which dealt with the issue of long residence. To a considerable extent, they occupied the same ground as the Long Residence Concession, but added some detail. So far as I am aware, there was no formal withdrawal of the Long Residence Concession, although it had been taken off the website by 8 November 2011. Rule 276B provided that the requirements for indefinite leave to remain on the ground of long residence were that an applicant had had at least 10 years continuous lawful residence or (excluding certain periods) at least 14 years residence and that, having regard to the public interest, there were no reasons why it would be undesirable for him to be given indefinite leave to remain on the ground of long residence, taking into account various specified factors. On 9 December 2008, the Minister for Borders and Immigration announced the immediate withdrawal of DP5/96. In a written Parliamentary ministerial statement, he said: The [seven year child] concession set out the criteria to be applied when considering whether enforcement action should proceed or be initiated against parents of a child who was born here and has lived continuously to the age of seven or over or where, having come to the UK at an early age, they have accumulated seven years or more continuous residence. The original purpose and need for the concession has been overtaken by the Human Rights Act and changes to immigration rules. The fact that a child has spent a significant period of their life in the United Kingdom will continue to be an important relevant factor to be taken into account by case workers when evaluating whether removal of their parents is appropriate. Any decision to remove a family from the UK will continue to be made in accordance with our obligations under the European Convention on Human Rights (ECHR) and the Immigration Rules. The facts Mr Rahman is a citizen of Bangladesh. He entered the United Kingdom with his wife and two children on 17 September 2001 on a visitors visa which expired on 16 February 2002. His application for an extension of his leave was refused on 11 March 2003. Thereafter, he and his family remained in the country unlawfully. On 20 July 2009, he applied for indefinite leave to remain. This application was refused on 12 February 2010 on the grounds that he did not satisfy the test for indefinite leave to remain under rule 276B. The Secretary of State also considered the application on an exceptional basis outside the immigration rules, but was satisfied that there were no compelling or compassionate grounds that would warrant the grant of indefinite leave to stay on that basis. Nor would the refusal of leave to remain involve an interference with the rights of Mr Rahman and his family under article 8 of the European Convention on Human Rights (the Convention). Mr Rahman issued proceedings challenging the refusal of leave to remain. The principal issue was whether the Secretary of State should have afforded him the benefits of policy DP5/96. His grounds of challenge included that he and his family had been resident in the United Kingdom for more than 7 years before the withdrawal of the policy and that it was irrational and unfair for the Secretary of State to withdraw DP5/96 in a way which prevented persons already in the United Kingdom who had built up at least 7 years residence prior to the withdrawal of the policy from benefiting from it. On 12 November 2010, Judge Bidder QC allowed the claim for judicial review on this ground. He held that, having regard to what he described as the clear practice of the Secretary of State to grant indefinite leave to remain when DP5/96 was satisfied, it would be irrational to distinguish between (i) persons who had prior to 9 December 2008 had the necessary period of residence but who, like Mr Rahman, had not prior to that date been the subject of enforcement proceedings, and (ii) those with the necessary residence qualification but who had prior to that date been the subject of such proceedings. The judge also said that it was unfair not to have given a warning that the concession was to end. Not to afford Mr Rahman and his family the benefit of DP5/96 when they had accrued 7 years residence prior to the withdrawal of the policy was so conspicuously unfair as to amount to an abuse of power. The judge quashed the refusal decision and ordered the Secretary of State to reconsider the application under DP5/96. He gave the Secretary of State permission to appeal. Mr Munir is a citizen of Pakistan. He entered the United Kingdom with his wife and daughter on 18 August 2002 on a visitors visa. The visa expired on 17 January 2003. They remained in the United Kingdom unlawfully after that date. A son was born in 2005. On 27 November 2009, they applied for indefinite leave to remain outside the immigration rules and in reliance on article 8 of the Convention. The application was refused by the Secretary of State on 18 June 2010. Mr Munir issued proceedings challenging the refusal decision. His grounds of challenge were essentially the same as those of Mr Rahman. On 17 February 2011, Mr David Holgate QC (sitting as a Deputy Judge of the High Court) refused his application for permission to apply for judicial review. Mr Munir had accepted that, prior to the withdrawal of DP5/96, neither of his children had been resident in the United Kingdom for a continuous period of 7 years. Accordingly, the reasoning of Judge Bidder could not apply to his case. Mr Munir was nevertheless granted permission to appeal by the Court of Appeal. Shortly before the hearing of the appeals, the Secretary of State reconsidered the cases. She informed the Court of Appeal that, taking account of the passage of time since the original decisions were taken, the impact of removal on the particular children involved and article 8 of the Convention, she had decided that removal would not be enforced and that the families would be granted discretionary leave to remain outside the immigration rules for 3 years. Nevertheless, the Secretary of State pursued her appeal in the case of Mr Rahman and resisted the appeal of Mr Munir because of the point of principle raised by the decision of Judge Bidder, namely that DP5/96 continued to apply to families with children who had been in the United Kingdom for 7 years or more when the policy was withdrawn. The Court of Appeal The Court of Appeal (Thomas, Moore Bick and Stanley Burnton LJJ) allowed the Secretary of States appeal and dismissed that of Mr Munir: [2011] EWCA Civ 814. The lead judgment was given by Stanley Burnton LJ. They held that the Secretary of State had acted lawfully in withdrawing DP5/96 and in determining the transitional arrangements that would apply. The Secretary of State was entitled to review her policy (such as that contained in DP5/96) and to change or revoke it whenever she considered it to be in the public interest to do so. They rejected the argument that the decision to withdraw the policy was irrational or unfair and held that the interests of the children were adequately addressed by article 8 of the Convention. There has been no challenge to this part of the Court of Appeals reasoning. It was plainly correct. The appeal to this court arises because before the Court of Appeal, for the first time, it was submitted on behalf of Mr Rahman and Mr Munir that the withdrawal of DP5/96 amounted to a statement of a change in the immigration rules within the meaning of section 3(2) of the 1971 Act and that it was unlawful and of no effect because it had not been laid before Parliament in accordance with the subsection. Stanley Burnton LJ dealt with this argument crisply in these terms: 38. In my judgment, Mr Maliks submission that the withdrawal of DP5/96 amounted to a change in the immigration Rules proves too much. If the withdrawal of DP5/96 was such a change, it necessarily follows that DP5/96 itself should have been laid before Parliament in accordance with section 3(2). It was not. On this basis, DP5/96 was unlawful, and its withdrawal was lawful since it brought to an end the application of an unlawful policy. 39. It is therefore unnecessary to decide whether or not DP5/96 should have been laid before Parliament pursuant to section 3(2) of the 1971 Act. It is sufficient to say that it seems to me to be well arguable that it was indeed a rule laid down by [the Secretary of State] as to the practice to be followed.for regulating the entry into and stay in the United Kingdom of persons required. to have leave to enter. A direction that in defined circumstances a discretion conferred on the Secretary of State is normally to be exercised in a specified way may well be such a rule. Discussion The starting point is to consider the legal status of DP5/96. On its face, it was a statement by the Secretary of State of the criteria to be applied when considering whether enforcement action should proceed or be initiated against parents [where there are children with long residence]. Mr Malik submits that this shows that it was a statement of the practice to be followed in the administration of [the 1971] Act for regulating the.stay in the United Kingdom of persons required by this Act to have leave to enter and, therefore, fell within the scope of section 3(2) of the 1971 Act. In other words, it was no less a statement of practice than a statement described as a rule to that effect would have been. He submits that any statement of a concessionary policy which is more favourable to migrants than a rule which makes provision for the grant of leave to enter or remain is, by definition, a statement of a change in the rules within the meaning of section 3(2). The primary answer given by Mr Swift QC is that everything done by the Secretary of State for the purpose of regulating the entry into and stay in the United Kingdom of persons who require leave to enter or remain is done in exercise of the prerogative power. She is under no legal obligation to lay any rules before Parliament (although she may be subject to political constraints to do so). He therefore submits that (i) the making and laying of immigration rules before Parliament is an exercise by the Secretary of State of the prerogative power and (ii) the publication of a policy which identifies the circumstances in which there may be a relaxation of legislation or the rules which regulate entry into and stay in the United Kingdom is also an exercise of the prerogative power and not a statement within the meaning of section 3(2). Source of the power to lay down immigration rules Although the present appeals concern the withdrawal of a policy published outside the immigration rules, I propose to start by considering Mr Swifts submission that the making and laying of rules before Parliament is an exercise of the prerogative power. There has been some debate as to the scope of the prerogative power in relation to aliens, and in particular as to whether there is a distinction between alien friends and alien enemies in this context: see the discussion in Macdonalds Immigration Law and Practice 8th ed (2010) at para 1.5. For present purposes, it is unnecessary to enter into this debate. The traditional view is that the situation of British subjects differed from that of all aliens. British subjects, including Commonwealth citizens until the passing of the Commonwealth Immigrants Act 1962 (the 1962 Act), had a right of abode in the United Kingdom, whereas aliens did not. Until the passing of the 1962 Act, the prerogative power that existed to control the entry and expulsion of aliens could not be exercised in relation to a Commonwealth citizen who had the right at common law to enter the United Kingdom without let or hindrance when and where he pleased and to remain here as long as he listed: per Lord Diplock in Director of Public Prosecutions v Bhagwan [1972] AC 60, 74B C. As Lord Diplock said, Commonwealth citizens continued to enjoy that right following the enactment of the 1962 Act, save in so far as it was restricted or qualified by the provisions of that Act. A prerogative power to control the entry and stay of Commonwealth citizens did not, by some process of alchemy, come into being after the 1962 Act. The prerogative power to control the entry of aliens into the United Kingdom had no more relevance to Commonwealth citizens after the 1962 Act than it had before. Neither the 1962 Act nor the Immigration Appeals Act 1969 (the 1969 Act) made any reference to the prerogative power. It is not necessary to consider the questions raised at para 1.7 of Macdonald as to the juridical basis for Lord Diplocks observations. All that matters is that, whatever the scope of the prerogative power in relation to aliens, it had no application to Commonwealth citizens before or after the 1962 Act. The 1969 Act conferred on Commonwealth citizens a right of appeal to an adjudicator. Section 8(1)(a)(i) provided that an adjudicator should allow an appeal if he considered that the decision or action against which the appeal was brought was not in accordance with the law or with any immigration rules applicable to the case. Section 24(1) defined immigration rules as rules made by the Secretary of State for the administration of [control on and after entry], being rules which have been published and laid before Parliament. This is the first reference in a statute to immigration rules. The long title of the 1971 Act is that it is an Act to amend and replace the present immigration laws, to make certain related changes in the citizenship law and enable help to be given to those wishing to return abroad, and for purposes connected therewith (emphasis added). Of particular significance is section 33(5): This Act shall not be taken to supersede or impair any power exercisable by Her Majesty in relation to aliens by virtue of Her prerogative. This saving provision gives rise to two inferences. First, Parliament must have considered that the prerogative power to regulate immigration control did not apply to those who owed their allegiance to the Crown, that is British and Commonwealth citizens, and only applied to aliens. Otherwise, Parliament would surely have made some provision as to how, if at all, the prerogative power was to be exercised in relation to Commonwealth citizens. Secondly, Parliament must have intended that, subject to the saving in section 33(5), all powers of immigration control were to be exercised pursuant to the statute. These inferences are supported by the fact that, when promoting the 1971 Act, the Government made it clear that it intended that the use of the prerogative should be limited to controlling the entry of enemy aliens into the United Kingdom. On 3 August 1971, Lord Brockway moved an amendment to the Bill to omit clause 33(5). The debate included the following exchanges Hansard (HL Debates) 3 August 1971, Col 1046 1047: LORD BROCKWAY I desire to move this Amendment largely to obtain information. Subsection (5) of this clause reads: This Act shall not be taken to supersede or impair any power exercisable by Her Majesty in relation to aliens by virtue of Her prerogative. I want to ask what these powers are. The powers which are in the Bill already are so comprehensive and of such detail that I find it difficult to think that any additional powers are necessary. When immigration is to be regulated by the rules under the Bill, why should it be necessary to have extra powers of this kind, powers of which we have no knowledge? Why should these powers be extended by the Royal prerogative? LORD WINDLESHAM I think I can answer the noble Lord quite briefly. The prerogative powers in question have existed for very many years. They include the power in the Crown at times of war to intern, expel or otherwise control enemy aliens at its discretion, which is exercised on the advice of the Home Secretary. The Government do not think it necessary to surrender these powers, which go back many years. We are talking about residuary prerogative powers for the kind of exceptional circumstances which have arisen in this century only on the occasions of the two World wars. LORD BROCKWAY . in view of the assurances given by the noble Lord, I beg leave to withdraw the Amendment. In my view, the power to make immigration rules under the 1971 Act derives from the Act itself and is not an exercise of the prerogative. As its long title indicates, the purpose of the 1971 Act was to replace earlier laws with a single code of legislation on immigration control. Parliament was alive to the existence of the prerogative power in relation to enemy aliens and expressly preserved it by section 33(5). But prima facie, subject to the preservation of that power, the Act was intended to define the power to control immigration and say how it was to be exercised. It is true that there is no provision in the 1971 Act which in terms confers on the Secretary of State the power or imposes on her the duty to make immigration rules. But for the reasons that follow, in my view it is implicit in the language of the Act that she is given such a power and made subject to such a duty under the statute. Section 1(4) states that the rules laid down by the Secretary of State shall include provision for admitting persons coming for the purpose of taking employment, or for purposes of study, or as visitors or as dependants of persons lawfully in or entering the United Kingdom. It is implicit in the wording of this subsection that, in the case of the persons described, the Secretary of State is obliged to lay down rules as to the practice to be followed in the administration of this Act for regulating the entry into and stay in the United Kingdom of persons not having the right of abode. It cannot have been the intention of Parliament to leave it entirely to the discretion of the Secretary of State to decide whether to lay down any rules as to her practice, insisting only that, if she decided to do so, the rules should include provision for admitting the classes of person identified in the subsection. If that had been the intention of Parliament, the 1971 Act would have made it clear that the Secretary of State had a power (but not a duty) to lay down rules of practice, but it did not do so. Section 3(2) requires the Secretary of State to lay before Parliament statements of the rules, or of any changes in the rules, laid down by him as to the practice to be followed etc. Here too, the statute does not state explicitly that the Secretary of State is obliged to make statements of the rules or changes of the rules. It merely states that she is obliged to lay before Parliament statements of the rules or changes of the rules. But the whole point of section 3(2) is to give Parliament a degree of control over the practice to be followed by the Secretary of State in the administration of the 1971 Act for regulating immigration control. If the Secretary of State were free not to lay down rules as to her practice, the plain purpose of section 3(2) would be frustrated. This cannot have been intended by Parliament. At the House of Lords Committee stage on 21 and 22 July 1971, a further amendment was tabled proposing an affirmative resolution procedure. This was resisted by the Government because of the need for the Secretary of State to have power to change these rules at short notice if any unforeseen gap in the immigration control comes to light (see Hansard 12 October 1971). Section 3(1) of the 1971 Act provides that a person who is not a British citizen shall not enter the United Kingdom unless given leave to do so in accordance with the provisions of, or made under, this Act. Sections 3A to 3C give the Secretary of State further relevant powers. Section 3A(1) states that she may by order make further provision with respect to the giving, refusing or varying of leave to enter the United Kingdom and the following subsections say what such an order may provide. There is a similar provision in section 3B(1) in relation to the giving, refusing or varying of leave to remain. Section 3C deals with continuation of leave pending a decision on variation of leave and subsection (6) provides that the Secretary of State may make regulations determining when an application is decided for the purposes of this section. Section 4(1) provides that the power under this Act to give or refuse leave to enter the United Kingdom shall be exercised by immigration officers and the power to give leave to remain in the United Kingdom, or to vary any leave.shall be exercised by the Secretary of State (emphasis added). In addition to the powers conferred on the Secretary of State to which I have referred, Schedule 2 to the Act contains detailed administrative provisions as to control on entry etc. Para 1(3) provides: In the exercise of their functions under this Act immigration officers shall act in accordance with such instructions (not inconsistent with the immigration rules) as may be given them by the Secretary of State, and medical inspectors shall act in accordance with such instructions as may be given them by the Secretary of All of these detailed powers and duties derive from the 1971 Act. In particular, the power to make rules and to grant and vary leave to enter and remain is vested in the Secretary of State by the Act. The exercise of that power is an exercise of statutory power and not the prerogative. The prerogative has never been exercised over Commonwealth citizens. It had been exercised over (at least) enemy aliens and the power to continue to exercise the prerogative power for that limited purpose was expressly preserved by section 33(5) of the 1971 Act. But if (contrary to my view) the prerogative power was exercisable in order to control immigration of Commonwealth citizens before the 1971 Act came into force, then the power was implicitly abrogated or, at least, suspended by the Act: see, for example, AG v de Keysers Royal Hotel Ltd [1920] AC 508, 539 40. Odelola v Secretary of State for the Home Department Mr Swift submits that my conclusion that the 1971 Act is the source of the power and duty to lay down immigration rules cannot be reconciled with the House of Lords decision in Odelola v Secretary of State for the Home Department [2009] 1 WLR 1230. In that case, the applicant applied for leave to remain in the United Kingdom as a postgraduate doctor. The immigration rules which had been laid before Parliament in accordance with section 3(2) of the 1971 Act and which were current at the time of her application stated that a person who had only an overseas medical degree was (subject to other requirements) eligible to apply for an extension of leave as a postgraduate doctor. After the date of her application, the relevant rule was replaced by a rule which required an applicant to have completed a recognised United Kingdom degree. The issue was whether the Secretary of State was entitled to determine the application by reference to the new rule. The House of Lords unanimously decided that she was. In the opinion of Lord Hoffmann, the case turned on the construction of the new rule (para 3). He said that the rules are a statement by the Secretary of State as to how she will exercise powers of control over immigration (para 7). For that reason, the most natural reading of the rules (in the absence of any statement to the contrary) was that they would apply to the decisions she makes until such time as she promulgates new rules. In my view, that is the essential ratio of the decision. It is, however, right to record that one of the submissions of Mr Drabble QC for the applicant in that case was that immigration rules are subordinate legislation within the meaning of section 23 of the Interpretation Act 1978 (the 1978 Act) and that this submission was rejected by Lord Brown and Lord Neuberger. It was Mr Drabbles case that section 16(1) of the 1978 Act provides that, where an Act repeals an enactment, the repeal does not affect any right or privilege acquired (unless the contrary intention appears); section 23 of the 1978 Act applies to subordinate legislation; section 21 provides that subordinate legislation includes any rulesmade or to be made under any Act (emphasis added); and a change in the immigration rules constitutes subordinate legislation repealing earlier such enactment. Lord Brown (with whom Lord Hope and Lord Scott agreed) said at para 34 that the core consideration in the case was the fact that immigration rules are essentially executive, not legislative. Indeed, Lord Hoffmann also said at para 6 that immigration rules are not subordinate legislation, but detailed statements by a minister of the Crown as to how the Crown proposes to exercise its executive power to control immigration. Lord Brown said this at para 35: The immigration rules are statements of administrative policy: an indication of how at any particular time the Secretary of State will exercise her discretion with regard to the grant of leave to enter or remain. Section 33(5) of the 1971 Act provides that This Act shall not be taken to supersede or impair any power exercisable by Her Majesty in relation to aliens by virtue of Her prerogative. The Secretary of States immigration rules, as and when promulgated, indicate how it is proposed to exercise the prerogative power of immigration control. It is not clear what part this view of the nature of immigration rules played in Lord Browns decision. His overall conclusion at para 39 was that, standing back from the detail and addressing a single indivisible question, to be answered largely as a matter of impression, he had no doubt that changes in immigration rules, unless they specify to the contrary, take effect whenever they say they take effect. Ultimately, therefore, like Lord Hoffmann he treated the question as one of construction of the relevant rule. I would accept that the immigration rules are statements by the Secretary of State as to how she will exercise her power to regulate immigration. But that is so whether the power to make the rules is statutory or is an exercise of the prerogative. I have difficulty in seeing how the source of the power sheds light on the question of construction that the House had to resolve. Be that as it may, it is clear from what I have already said that I cannot agree with Lord Brown that the immigration rules indicate how the Secretary of State proposes to exercise the prerogative power of immigration control. Lord Brown referred in para 35 to section 33(5) of the 1971 Act. It may be that he did not appreciate the significance of the reference there to the exercise of the prerogative in relation to aliens (emphasis added). As already stated, there was no prerogative power to control immigration by Commonwealth citizens and, far from supporting the argument that the making of immigration rules was an exercise of prerogative power, section 33(5) is inconsistent with it. Lord Neuberger also rejected Mr Drabbles argument based on the 1978 Act. At para 46, he said that the view that the rules were not made under any enactment was consistent with the statutory history. He said that immigration rules had existed long before the 1971 Act and this tended to support the view that the rules were non statutory in origin. But as I have said the first statutory reference to immigration rules is to be found in the 1969 Act. There is no basis for saying that the immigration rules were non statutory in origin. The position is that until the 1969 Act, there were no immigration rules so called; and the prerogative power was exercised, but only in relation to aliens. Lord Neuberger went on to consider whether the common law presumption against retrospectivity had any application to changes in the rules and concluded that it did not. In my view, the views expressed by their Lordships on whether the rules were subordinate legislation within the meaning of section 23 of the 1978 Act 1978 were not necessary for their decision. The ratio of the case is that, as a matter of construction, in the absence of a statement to the contrary, immigration rules apply when they say they take effect. Concessionary policies I would, therefore, reject Mr Swifts primary submission that, if a concessionary policy such as DP5/96 is a rule as to the practice to be followed in the administration of the 1971 Act for controlling immigration, there is no legal obligation on the Secretary of State to lay it before Parliament. What about the Secretary of States power to make policies about the circumstances in which she will or may relax the rigorous application of the rules? It is important to distinguish between (i) the exercise of a discretion given by an immigration rule and (ii) a policy (such as DP5/96) which identifies the circumstances in which exceptionally leave to enter or remain will or may generally be granted outside the rules. We are concerned with (ii). There is undoubtedly support in the authorities for the view that the power to make immigration decisions outside the immigration rules is exercised pursuant to the prerogative. In R v Secretary of State for the Home Department, Ex p Rajinder Kaur [1987] Imm AR 278, 291, Glidewell LJ said at p 291: immigration was formerly covered by the royal prerogative and it was a matter which lay entirely within the exercise of that prerogative. Much of the prerogative powers vested in the Crown in this field have now been superseded by a statute but there remains and this is what the royal prerogative isa residual power in the Crown, through Her Majestys Secretary of State for Home Affairs, to exercise such residual power as is necessary for the proper control of immigration. In my view, the exercise of discretion in relation to leave to enter outside the rules is an exercise of the remaining part of that prerogative power. But those conjoined cases concerned Commonwealth citizens. For the reasons I have given, the observations by Glidewell LJ were incorrect. Similar comments were made in R v Secretary of State for the Home Department, Ex p Ounejma [1989] Imm AR 75, 82 and Ahmed v Secretary of State for the Home Department [1999] Imm AR 22. These cases also concerned Commonwealth citizens. In my view, it is the 1971 Act itself which is the source of the Secretary of States power to grant leave to enter or remain outside the immigration rules. The Secretary of State is given a wide discretion under sections 3, 3A, 3B and 3C to control the grant and refusal of leave to enter or to remain: see paras 4 to 6 above. The language of these provisions, especially section 3(1)(b) and (c), could not be wider. They provide clearly and without qualification that, where a person is not a British citizen, he may be given leave to enter or limited or indefinite leave to remain in the United Kingdom. They authorise the Secretary of State to grant leave to enter or remain even where leave would not be given under the immigration rules. The question remains whether DP5/96 was a statement of practice within the meaning of section 3(2). If a concessionary policy statement says that the applicable rule will always be relaxed in specified circumstances, it may be difficult to avoid the conclusion that the statement is itself a rule as to the practice to be followed within the meaning of section 3(2) which should be laid before Parliament. But if the statement says that the rule may be relaxed if certain conditions are satisfied, but that whether it will be relaxed depends on all the circumstances of the case, then in my view it does not fall within the scope of section 3(2). Such a statement does no more than say when a rule or statutory provision may be relaxed. I have referred to DP5/96 at para 9 above. It was not a statement of practice within the meaning of section 3(2). It made clear that it was important that each case had to be considered on its merits and that certain specified factors might (not would) be of particular relevance in reaching a decision. It was not a statement as to the circumstances in which overstayers would be allowed to stay. It did not have to be laid before Parliament. Conclusion For the reasons that I have given, I would reject Mr Swifts submission that the issuing of a concessionary policy (or indeed the waiving of a requirement in the rules in an individual case) is an exercise of prerogative power which for that reason does not come within the scope of section 3(2). But, subject to the constraints to which I have referred and any relevant public law principles, the Secretary of State is authorised by the 1971 Act to make policies setting out the principles by which she may, as a matter of discretion, grant concessions in individual cases to those seeking leave to enter or remain in the United Kingdom. The less the flexibility inherent in the concessionary policy, the more likely it is to be a statement as to the practice to be followed within the meaning of section 3(2) and therefore an immigration rule. But DP5/96 was amply flexible and was therefore not an immigration rule and did not have to be laid before Parliament. I would not, therefore, agree with the tentative obiter dicta of Stanley Burnton LJ at para 39 of his judgment, but would nevertheless dismiss both appeals. Since the Secretary of State was not obliged to lay DP5/96 before Parliament, she was not obliged to lay the 24 February 1999 revision or statement of its withdrawal on 9 December 2008 before Parliament either. In these circumstances, it is not necessary to deal with the point on which Stanley Burnton LJ decided this issue at para 38 of his judgment (the proves too much point).

The central question in these two appeals is whether statements by the Secretary of State of her policy as regards the granting of concessions outside the immigration rules and of changes to it amount to statements as to the practice to be followed within the meaning of section 3(2) of the Immigration Act 1971 (the 1971 Act) which requires her to lay such statements before Parliament [1]. In March 1996, the Secretary of State introduced Deportation Policy 5/96 (DP5/96) relating to cases involving children with long residence in the UK [9]. On 24 February 1999, this was revised so as to introduce the general presumption that enforcement action (broadly, deportation) would not normally proceed in cases where a child, either from birth or an early age, had accumulated 7 years or more continuous residence in the UK [11]. On 9 December 2008, the Minister for Borders and Immigration announced the immediate withdrawal of DP5/96 [13]. The introduction, revision and withdrawal of DP5/96 were not laid before Parliament. The Appellants, Mr Rahman and Mr Munir are citizens of Bangladesh and Pakistan respectively. Mr Rahman entered the UK with his wife and two children in 2001. His visitors visa expired in February 2002 and his application for an extension of his leave was refused in March 2003. He remained in the UK unlawfully after that date. On 20 July 2009, he applied for indefinite leave to remain. This application was refused on 12 February 2010 on the ground that he did not satisfy the test for indefinite leave to remain under the relevant immigration rule [14]. Mr Munir entered the UK with his wife and daughter in August 2002 on a visitors visa, which expired in January 2003. They remained unlawfully after that date. They had a son together in 2005. On 27 November 2009, they applied for indefinite leave to remain. The application was refused on 18 June 2010 [16]. Mr Rahman and Mr Munir claimed judicial review of the Secretary of States refusal of their applications, seeking to rely on DP5/96 among other grounds. Mr Rahmans claim was allowed by the judge on the basis that he and his family had been resident in the UK for more than 7 years before the withdrawal of the policy and that it was irrational and unfair for the Secretary of State to withdraw DP5/96 in a way which prevented persons already in the UK who had built up at least 7 years residence prior to the withdrawal of the policy from benefiting from it [15]. Mr Munirs claim failed because neither of his children had been resident in the UK for a continuous period of 7 years before the withdrawal of DP5/96 [17]. Prior to the appeals to the Court of Appeal, the Secretary of State reconsidered the cases and decided not to enforce removal because of the length of time since the original decisions, but she decided to proceed with the appeals because of the importance of the central question referred to above [18]. The Court of Appeal allowed the Secretary of States appeal in Rahmans case and dismissed Mr Munirs appeal. Mr Munir and Mr Rahman appeal to the Supreme Court. The Supreme Court unanimously dismisses the appeals. The source of concessionary policies is the 1971 Act and not the Royal prerogative. However, DP5/96, being an amply flexible statement that a rule may be relaxed depending on all the circumstances of the case, is not a rule within the meaning of s.3(2) of the 1971 Act and the Secretary of State did not have to lay it before Parliament. Lord Dyson gives the leading judgment with which Lord Hope, Lord Walker, Lord Clarke and Lord Wilson agree. The power to make immigration rules under the 1971 Act derives from the Act itself and is not an exercise of the Royal prerogative. The purpose of the 1971 Act was to replace earlier laws with a single code of legislation on immigration control. While there is no provision in the 1971 Act which in terms confers on the Secretary of State the power or imposes on her the duty to make immigration rules, it is implicit in the language of the Act that she is given such a power and made subject to such a duty under the statute itself [21] [33]. The Court therefore rejects the Secretary of States submission that, if a concessionary policy such as DP5/96 is a rule as to the practice to be followed in the administration of the 1971 Act, there is no legal obligation on the Secretary of State to lay it before Parliament [41]. If a concessionary policy statement says that the applicable rule will always be relaxed in specified circumstances, it may be difficult to avoid the conclusion that the statement is itself a rule within the meaning of s.3(2) of the 1971 Act which should therefore be laid before Parliament. But if the statement says that the rule may be relaxed if certain conditions are satisfied, but that whether it will be relaxed depends on all the circumstances of the case, then it does not fall within the scope of s.3(2) [45]. DP5/96 was not a statement as to the practice to be followed within the meaning of section 3(2). It made clear that it was important that each case had to be considered on its merits and that certain specified factors might (not would) be of particular relevance in reaching a decision. It was not a statement as to the circumstances in which overstayers would be allowed to stay. It did not therefore have to be laid before Parliament [45]. While the Court rejects the Secretary of States submission that the issuing of a concessionary policy (or indeed the waiving of a requirement in the rules in an individual case) is an exercise of prerogative power which for that reason does not come within the scope of s.3(2), the Secretary of State is authorised by the 1971 Act to make policies setting out the principles by which she may, as a matter of discretion, grant concessions in individual cases to those seeking leave to enter or remain in the UK. The less the flexibility inherent in the concessionary policy, the more likely it is to be a statement as to the practice to be followed within the meaning of section 3(2) and therefore an immigration rule. But DP5/96 was amply flexible and was therefore not an immigration rule and did not have to be laid before Parliament [46].

We have before us two cases under the Extradition Act 2003 involving the parents of young children. In one, an Italian court has issued a European Arrest Warrant (EAW) in respect of both parents of three children now aged 11, 8 and 3, the parents having been convicted of a series of drug trafficking offences. The parents are both British nationals. In the other, a Polish court has issued EAWs in respect of the mother of five children aged 21, 17, 13, 8 and 3, who is accused of offences of dishonesty. The parents are both Polish nationals who have been living here since 2002, after the alleged offences were committed. No one seriously disputes that the impact upon the younger children of the removal of their primary carers and attachment figures will be devastating. The issue is the relevance of their interests in the extradition proceedings. The question certified by the Administrative Court in each of the two cases before us is as follows: Where, in proceedings under the Extradition Act 2003, the article 8 rights of children of the defendant or defendants are arguably engaged, how should their interests be safeguarded, and to what extent, if at all, is it necessary to modify the approach of the Supreme Court in Norris v Government of the United States of America (No 2) in light of ZH (Tanzania)? It is necessary, therefore, to consider what each of those cases decided. In Norris v Government of the United Sates of America (No 2) [2010] UKSC 9, [2010] 2 AC 487, the issue was the compatibility with the article 8 rights of both Mr and Mrs Norris of extraditing Mr Norris to the USA to face charges of conspiracy to obstruct justice. The couple were both in their mid sixties and had a long and close marriage which made them highly dependent on one another. The husband had a variety of health problems, including a history of prostate cancer and other ailments. The wife was suffering from either a major depression of moderate severity or a moderate depressive episode. The proceedings had caused her severe psychological suffering and mental deterioration which would be greatly worsened were her husband to be extradited. Lord Phillips gave the leading judgment, with which all other members of the court agreed, including those who added short judgments of their own. He agreed that there could be no absolute rule that any interference with article 8 rights as a consequence of extradition will be proportionate. On the other hand, it was certainly not right to equate extradition with expulsion or deportation in this context (para 51). It was instructive to consider the approach of the Convention to dealing with criminals or suspected criminals in the domestic context. Normally it is treated as axiomatic that the interference with article 8 rights consequent upon detention is proportionate (para 52). He rejected counsels submission that it was wrong to apply a categorical assumption about the importance of extradition in general. Such an assumption was an essential element in the task of weighing the public interest against the rights of the individual. It did not mean that the latter could never prevail, but the interference with human rights will have to be extremely serious if the public interest is to be outweighed (para 55). Thus: The reality is that it is only if some quite exceptionally compelling feature, or combination of features, is present that interference with family life consequent upon extradition will be other than proportionate to the objective that extradition serves. Instead of saying that interference with article 8 rights can only outweigh the importance of extradition in exceptional circumstances it is more accurate and more helpful, to say that the consequences of interference with article 8 rights must be exceptionally serious before this can outweigh the importance of extradition. (para 56) However, he also rejected the submission that the gravity of the offence could never be relevant. Usually it would not be. If, however, the particular offence is at the bottom of the scale of gravity, this is capable of being one of a combination of features that may render extradition disproportionate . (para 63). Furthermore, the impact upon family life was not to be considered only from the point of view of the person facing expulsion. In Beoku Betts v Secretary of State for the Home Department [2009] AC 115, the House of Lords concluded that, when considering interference with article 8, the family unit had to be considered as a whole, and each family member had to be treated as a victim. This also applied to extradition (para 64). Finally, Indeed, in trying to envisage a situation in which interference with article 8 might prevent extradition, I have concluded that the effect of extradition on innocent members of the extraditees family might well be a particularly cogent consideration. If extradition for an offence of no great gravity were sought in relation to someone who had sole responsibility for an incapacitated family member, this combination of circumstances might well lead a judge to discharge the extraditee . (para 65). Agreeing with Lord Phillips, Lord Hope also stressed that exceptionality is not a legal test and that extradition was not a special category which diminishes the need to examine carefully the way the process will interfere with the individuals right to respect for his family life (para 89). The public interest in extradition is a constant factor and will always be a powerful consideration to which great weight must be attached. Against this, those aspects of the article 8 right which must necessarily be interfered with in every case where criminal proceedings will be brought will carry very little, if any, weight. What is the extra compelling element that marks the given case out from the generality? (para 91). The only feature of this case which was not inherent in every extradition case was the delay (para 93). Lord Mance cautioned against formulations such as a high threshold, striking and unusual facts or exceptional circumstances. They could be read as suggesting that the public interest in extradition is the same in every case, when it is not, and also that the extraditee has some sort of legal onus to overcome the threshold, when in fact the competing public and private interests have to be weighed against each other (para 108). Further, such formulations may tend to divert attention from consideration of the potential impact of extradition on the particular persons involved . towards a search for factors (particularly external factors) which can be regarded as out of the run of the mill. Some circumstances which might influence a court to find that the interference was unjustified could hardly be described as exceptional or striking and unusual: Take a case of an offence of relatively low seriousness where the effect of an extradition order would be to sever a genuine and subsisting relationship between parent and baby, or between one elderly spouse and another who was entirely dependent upon the care performed by the former (para 109). He too favoured balancing the general public interest in extradition to face trial for a serious offence against the exceptional seriousness of the consequences which would have to flow from the anticipated interference with private and family life in the particular case (para 114). We can, therefore, draw the following conclusions from Norris: (1) There may be a closer analogy between extradition and the domestic criminal process than between extradition and deportation or expulsion, but the court has still to examine carefully the way in which it will interfere with family life. (2) There is no test of exceptionality in either context. (3) The question is always whether the interference with the private and family lives of the extraditee and other members of his family is outweighed by the public interest in extradition. (4) There is a constant and weighty public interest in extradition: that people accused of crimes should be brought to trial; that people convicted of crimes should serve their sentences; that the United Kingdom should honour its treaty obligations to other countries; and that there should be no safe havens to which either can flee in the belief that they will not be sent back. (5) That public interest will always carry great weight, but the weight to be attached to it in the particular case does vary according to the nature and seriousness of the crime or crimes involved. (6) The delay since the crimes were committed may both diminish the weight to be attached to the public interest and increase the impact upon private and family life. (7) Hence it is likely that the public interest in extradition will outweigh the article 8 rights of the family unless the consequences of the interference with family life will be exceptionally severe. I turn, therefore, to ZH (Tanzania) v Secretary of State for the Home Department [2011] UKSC 4, [2011] 2 AC 166. This was an expulsion case. The mother had been in the United Kingdom since 1995. She formed a relationship with a British citizen and had two children with him, born in 1998 and 2001, both of whom were British citizens and had lived here all their lives. They had a good relationship with their father, although the parents were now separated. Because of his health and other matters, their father would not be able to look after them if their mother were removed to Tanzania, so they would have to go with her. Their mother had an appalling immigration history. She had made three unsuccessful applications for asylum, one in her own name and two in false identities. Because of this she had twice been refused leave to remain under different policy concessions. An earlier human rights application had also been refused, as was the current claim, by the Secretary of State, the immigration appellate authorities, and the Court of Appeal. Before the case reached the Supreme Court, however, the Secretary of State had conceded that on the particular facts of the case removing the mother would be a disproportionate interference with the article 8 rights of the children. I gave the leading judgment, and all the other members of the court, including those who added short judgments of their own, agreed with it. The Strasbourg jurisprudence had adopted rather different approaches to the assessment of article 8 rights when considering the expulsion of, on the one hand, long settled foreigners who had committed criminal offences and, on the other hand, foreigners who had no right to be or remain in the country. In the former type of case, the best interests and well being of the children had been explicitly recognised as a factor by the Grand Chamber in ner v The Netherlands (2006) 45 EHRR 421, at para 58. In the latter type of case, this was not explicitly listed as a factor in, for example, Rodrigues da Silva, Hoogkamer v The Netherlands (2006) 44 EHRR 729, at para 39. Nevertheless, the court had in fact taken into account that it was clearly in the best interests of the child that her mother remain in the Netherlands. Significantly, the childs interests prevailed, despite the fact that the [mother] was residing illegally in the Netherlands at the time of [the childs] birth (para 44). In Neulinger v Switzerland (2010) 28 BHRC 706, the Grand Chamber had held that the Convention cannot be interpreted in a vacuum but must be interpreted in harmony with the general principles of international law (para 131). These of course included article 3.1 of the United Nations Convention on the Rights of the Child: In all actions concerning children, whether undertaken by public or private social welfare institutions, courts of law, administrative authorities or legislative bodies, the best interests of the child shall be a primary consideration. I pointed out that despite the looseness with which these terms are sometimes used, a primary consideration is not the same as the primary consideration, still less as the paramount consideration (para 25). Where the decision directly affects the childs upbringing, such as the decision to separate a child from her parents, then the childs best interests are the paramount, or determinative, consideration. Where the decision affects the child more indirectly, such as the decision to separate one of the parents from the child, for example by detention or deportation, then the childs interests are a primary, but not the paramount, consideration (para 25). As the Federal Court of Australia had explained in Wan v Minister for Immigration and Multicultural Affairs (2001) 107 FCR 133, at para 32: [The tribunal] was required to identify what the best interests of Mr Wans children required with respect to the exercise of its discretion and then to assess whether the strength of any other consideration, or the cumulative weight of other considerations, outweighed the consideration of the best interests of the children understood as a primary consideration. Although nationality was not a trump card it was of particular importance in assessing the best interests of any child (para 30). As citizens the children had rights which they would not be able to exercise if they moved to another country (para 32). We now had a much greater understanding of the importance of such issues in assessing the overall well being of the child: In making the proportionality assessment under article 8, the best interests of the child must be a primary consideration. This means that they must be considered first. They can, of course, be outweighed by the cumulative effect of other considerations. The countervailing considerations were the need to maintain firm and fair immigrations control, the mothers immigration history and the precariousness of her position when family life was created. But the children were not to be blamed for that (para 33). Lord Hope also stressed the importance of the childrens citizenship as a very significant and weighty factor in the overall assessment of what was in the childrens best interests (para 41) and, more fundamentally, that it would be wrong in principle to devalue what was in their best interests by something for which they could in no way be held responsible, such as the suspicion that they might have been conceived as a way of strengthening the mothers case for being allowed to remain here (para 44). international and domestic instruments: Lord Kerr put it even more strongly. It is a universal theme of both that, in reaching decisions that will affect a child, primacy of importance must be accorded to his or her best interests. This is not, it is agreed, a factor of limitless importance in the sense that it will prevail over all other considerations. It is a factor, however, that must rank higher than any other. It is not merely one consideration that weighs in the balance alongside other competing factors. Where the best interests of the child clearly favour a certain course, that course should be followed unless countervailing reasons of considerable force displace them (para 46). However the matter is put, therefore, ZH (Tanzania) made it clear that in considering article 8 in any case in which the rights of a child are involved, the best interests of the child must be a primary consideration. They may be outweighed by countervailing factors, but they are of primary importance. The importance of the childs best interests is not to be devalued by something for which she is in no way responsible, such as the suspicion that she may have been deliberately conceived in order to strengthen the parents case. Should Norris be modified? Mr David Perry QC, who appears for the respondent in each case, argues that nothing in ZH (Tanzania) was intended to depart from the approach to the assessment of proportionality in Norris. The extraditing judge may properly proceed on the basis that the best interests of the child are a primary consideration, but they are not the primary or the only consideration. The compelling public interest in extradition will ordinarily outweigh the best interests of the child, especially where the offence is serious. Indeed, there is no known Strasbourg case in which article 8 interests have prevailed against the legitimate aims of extradition, recognised by the court in Launder v United Kingdom (1997) 25 EHRR CD67 and Aronica v Germany, (Application No 72032/01) (unreported) given 18 April 2002. The court has recently stated that only in exceptional circumstances will an applicants private or family life outweigh the legitimate aim pursued by extradition: see King v United Kingdom, (Application No 9742/07) (unreported) given 26 January 2010, para 29; Babar Ahmad v United Kingdom (2010) 51 EHRR SE97, para 172. The appellants all argue that some modification, either of the approach in Norris or of its application, is required in the light of ZH (Tanzania). Mr Alun Jones QC, on behalf of the mother in the Italian case, argues that no distinction should be drawn between extradition and immigration cases. In Harkins and Edwards v United Kingdom (Application Nos 9146/07 and 32650/07) (unreported) given 17 January 2012, the Strasbourg Court drew no such distinction when considering whether a person would face a real risk of treatment contrary to article 3 if sent abroad (thus disagreeing with the majority in R (Wellington) v Secretary of State for the Home Department [2008] UKHL 72, [2009] AC 335). The same should apply in the context of article 8. It was wrong to treat the public interest in extradition as a constant factor or to conclude that the best interests of children could not generally override it. Mr Matthew Ryder QC, on behalf of the father in the Italian case, does not consider that it is necessary to modify the general principles in Norris, provided that primacy of importance is given to the childrens rights. But this may involve some changes in practice. Any infringement of the childrens rights which causes significant and serious damage to their development should be considered sufficiently exceptional to warrant the court considering carefully whether the infringement is justified. The court will need to examine carefully the extent of the public interest in extradition in the particular case and also whether there is any course of action which might reduce the damage to the childrens well being. Mr Edward Fitzgerald QC, on behalf of the mother in the Polish case, also argues that it is wrong to say that the public interest in extradition is always greater than the public interest in sound immigration control. It will vary. He also points out that the effects upon family relationships are far more extreme and immediate in extradition than are the effects of domestic prosecution and imprisonment. The extraditee may be sent a very long way away with little or no opportunity to maintain contact with the family left behind. The mitigating effects of wise prosecutorial or judicial discretion are less predictable when extradition is to a totally different judicial system. In the domestic context it is clearly established that a sentencing judge should have at the forefront of his mind the consequences for the children if their sole carer is sent to prison and consider whether on balance the seriousness of the offence(s) justifies their separation: see R (P) v Secretary of State for the Home Department [2001] EWCA Civ 1151, [2001] 1 WLR 2002, per Lord Phillips MR at para 79; R v Mills [2002] EWCA Crim 26, [2002] 2 Cr App R(S) 229; R v Bishop [2011] EWCA Crim 1446 and see also the South African case of M v The State [2007] ZACC 18. The Court in Norris did not have to consider the special rights of children when the extradition of their sole or primary carer will have a devastating impact upon their wellbeing. Mr Hugo Keith QC appears for the Official Solicitor as litigation friend of the children in the Italian case. He argues that the best interests of the children of extraditees should be considered first and foremost, and separately, and in a fact sensitive and meaningful way which pays regard to their individual circumstances. A conclusion that the undoubted public interest in extradition (which may not be of a wholly different order from that which arises in deportation and immigration cases) outweighs the best interests of the children should never be reached automatically or mechanically. Consideration should be given, where necessary, to any alternatives to extradition: for example, delaying the extradition of the primary carer parent; arranging for a mother to be placed in a mother and baby unit in the requesting state; seeking an assurance that speedy repatriation will be considered by both the requesting and the sending state; when available in a conviction case, arranging for the sentence to be served here; and, where possible in an accusation case, prosecuting the case here rather than in the requesting state. The court should also consider the alternative care arrangements for the child and satisfy itself that steps have been taken to protect the childs welfare if a sole or primary care giver is extradited. We have also had the benefit of valuable interventions by JUSTICE and the Coram Childrens Legal Centre. Mr Alex Bailin QC, for JUSTICE, emphasises that the requirement to interpret article 8 in the light of the Convention on the Rights of the Child (CRC) is of general application and is not limited to immigration cases. The CRC has also been enshrined in article 24 of the European Union Charter of Fundamental Rights. Article 24.2 requires that In all actions relating to children, whether taken by public authorities or private institutions, the childs best interests must be a primary consideration. Article 24.3 requires that Every child shall have the right to maintain on a regular basis a personal relationship and direct contact with both his or her parents, unless that is contrary to his or her interests. He points to recital 12 of the Framework Decision on the European arrest warrant and article 1.3, which provides that the Decision shall not have the effect of modifying the obligation to respect fundamental rights and fundamental legal principles, as enshrined in article 6 of the Treaty on European Union. Full and proper adherence to article 8 is thus entirely compatible with the EAW system. The executing state cannot rely upon the issuing state to have considered the childrens rights before issuing the warrant or to protect those rights after the warrant is executed. A bright line distinction between the public interest in extradition and the public interest in deportation could not be drawn (he too makes reference to Harkins and Edwards). As for domestic criminal proceedings, the interests of children were not infrequently a material consideration in sentencing and there were more options available to mitigate the consequences of separating parent and child. As to alternatives to extradition, articles 4.6 and 5.3 of the Framework Decision, which permit refusal to execute a conviction EAW if the sentence is to be served in the UK, or the conditional execution of an accusation EAW, have not been transposed into UK law. But it would be possible to refuse to execute an EAW, indicating that the childrens article 8 rights currently prevent this, but would be unlikely to do so in the future. Most helpfully, he points out that further guidance on the application of Norris in cases involving dependent children is necessary, because later cases show that Norris has been wrongly interpreted so as to impose an exceptionality test and applied so as to set a threshold which is unattainable in practice. They reveal a reluctance to make a detailed assessment of the effect of extradition on each child and a failure to consider the childs best interests first. The examples he gives are (in chronological order): R (Stojkova) v District Court in Okresny, Slovakia [2010] EWHC 3532 (Admin), para 31; R (Antonovic) v Prosecutor Generals Office (A Lithuanian Judicial Authority) [2010] EWHC 2967 (Admin), paras 18 and 20; Budaj v District Court of Presnov, Slovak Republic [2011] EWHC 193 (Admin), para 14; R (Bartosiewicz) v District Court Warszawa Praga, Warsaw [2011] EWHC 439 (Admin), paras 7 and 9; B v District Court in Trutnov and District Court in Liberec [2011] EWHC 963 (Admin), paras 63 and 68; Irwinski v Regional Court in Bydgoswcz, Poland [2011] EWHC 1594 (Admin), para 8; Rzeczkowski v Provincial Court in Warsaw, Poland [2011] EWHC 1698 (Admin), paras 13, 15 and 16; Semen v Legnica District Court, Poland [2011] EWHC 1960 (Admin), para 7; Smuda v District Court of Poznan, Poland [2011] EWHC 2734 Admin), para 7. A similar approach can be detected in Kudzevica v Riga Circuit Court Latvia [2010] EWHC 3505 (Admin), paras 11 and 12, and R (Gorczowska) v District Court in Torun, Poland [2012] EWHC 378 (Admin), paras 11 and 12. After the oral hearing, the court was informed that the Strasbourg Court has granted interim relief under rule 39 of the Rules of Court (2009) in the Gorczowska case, as it had already done in the case of R (B) v Regional Court of Elbag [2010] EWHC 2958 (Admin): see EB v United Kingdom (Application No 63019/10) (unreported) given 28 February 2011. This indicates that the Court is at least prepared to consider that there may be circumstances in which extradition (in that case of a breast feeding mother) would be in breach of the article 8 rights of the family. JUSTICE does not argue that any of these cases was necessarily wrongly decided, rather that they are indicative of an approach which prevents the court from taking account of the welfare of children as it is required to do. In fact, Mr Bailin suggests that there are very few cases in which the right approach would have produced a different result. He has produced a list of 75 cases decided after Norris involving article 8 and dependent children. In only five of these was the prospective extraditee the sole carer and in only one was the extradition of both parents sought. But in only one (R (Cepkauskas) v District Court of Marijampole, Lithuania [2011] EWHC 757 (Admin)) was extradition refused, and then on grounds of delay and oppression rather than because of the rights of the children. In his written submissions on behalf of the Coram Childrens Legal Centre, Mr Manjit Gill QC argues that international human rights instruments, including the Universal Declaration of Human Rights and the UNCRC, have recognised the special and unique status of children. This involves not only a negative duty to avoid doing them harm but also positive obligations to promote their development into adulthood. In this they are different from adults, even vulnerable adults, because adults have passed the growing up stage while children need special attention in order to grow up. It is not just a matter of balancing the private rights of children against the public interest in extradition, because there is also a wider public interest and benefit to society in promoting the best interests of its children. Children are (as Latey J put it in In re X (A Minor)(Wardship: Jurisdiction) [1975] Fam 47, at 52) a countrys most valuable asset for the future. More than that, promoting their proper development is in the public interest in order to prevent their becoming the criminals of the future. In addition to article 3.1 of UNCRC, he draws attention to article 3.2: States Parties undertake to ensure the child such protection and care as is necessary for his or her well being, taking into account the rights and duties of his or her parents, legal guardians, or other individuals legally responsible for him or her, and, to this end, shall take all appropriate legislative and administrative measures. Norris concerned an adult couple and so the court did not, and did not have to, consider the special position of children. It could, and did, treat the interests to be balanced as the public interest in extradition and the individuals interest in their private and family life. There is, however, a strong public interest in the protection of children which makes their case different from that of adult family members, even adults who need support on health grounds. Discussion It will be apparent from the above that, for the most part, the parties do not criticise the principles laid down in Norris. But they make two points. First, they criticise the way in which those principles have been summarised and applied in subsequent cases. Some of those criticisms might apply whether or not there were any children involved. And second, they point out that Norris did not, and did not have to, consider the special position of children. These cases give the court the opportunity to fill that gap. Two main criticisms are levelled against the approach of the Administrative Court in these and other cases after Norris. The first is the bright line distinction between the public interest in extradition and the public interest in immigration control, exemplified by the observations of Laws LJ in the Italian case at [2011] EWHC 1145 (Admin): Expulsion and deportation are matters only of domestic policy (para 62), in which the striking of reasonable balances is an inherent feature of the policy itself (para 63); whereas extradition promotes a universal public benefit (para 62), which is systematically served by the extraditions being carried into effect (para 63). An even stronger view was taken by Silber J in B v District Court in Trutnov and District Court in Liberec [2011] EWHC 963 (Admin), at para 55, when he stated that It is clear that the approach of the courts to article 8 rights has to be radically different in extradition cases . because of the very important obligation of the state to ensure that those who are to be investigated, prosecuted or imprisoned for criminal offences are returned to those countries (emphasis supplied). It is not correct that the approach of the court to article 8 rights has to be radically different as between extradition and expulsion cases. The Extradition Act 2003 imposes a structured approach upon the court, so that it will already have considered the validity of the warrant (section 2), the identity of the person arrested (section 7), whether the offences are extradition offences (section 10), whether the various bars listed in section 11 apply, and conviction in absentia (section 20), before it gets to section 21. Section 21 requires the judge to decide whether the persons extradition would be compatible with the Convention rights and to discharge the person if it would not. In answering that question, the court would be well advised to adopt the same structured approach to an article 8 case as would be applied by the Strasbourg court. First, it asks whether there is or will be an interference with the right to respect for private and family life. Second, it asks whether that interference is in accordance with the law and pursues one or more of the legitimate aims within those listed in article 8.2. Third, it asks whether the interference is necessary in a democratic society in the sense of being a proportionate response to that legitimate aim. In answering that all important question it will weigh the nature and gravity of the interference against the importance of the aims pursued. In other words, the balancing exercise is the same in each context: what may differ are the nature and weight of the interests to be put into each side of the scale. There are differences between extradition and other reasons for expulsion. Thus, as Lord Judge points out (para 122), an extradition order may be appropriate where deportation or removal would not. In particular, extradition is an obligation owed by the requested state to the requesting state in return for a similar obligation owed the other way round. There is no comparable obligation to return failed asylum seekers and other would be immigrants or undesirable aliens to their home countries (which would sometimes be only too pleased never to see them again). But there is no obligation to return anyone in breach of fundamental rights. Furthermore, although domestic immigration policy does try to strike a balance between competing interests, article 8 typically comes into play when it has not done so. That is why an exceptionality test was disapproved in immigration cases in Huang v Secretary of State for the Home Department [2007] UKHL 11, [2007] 2 AC 167, just as it was later disapproved in extradition cases in Norris. Hence, as Lord Hope observed, there are [no] grounds for treating extradition cases as falling into a special category which diminishes the need to examine carefully the way the process will interfere with the individuals right to respect for his family life (para 89). The second main criticism of the approach in later cases is that the courts have not been examining carefully the nature and extent of the interference in family life. In focussing on some quite exceptionally compelling feature (para 56 in Norris), they have fallen into the trap identified by Lord Mance, tending to divert attention from consideration of the potential impact of extradition on the particular persons involved . towards a search for factors (particularly external factors) which can be regarded as out of the run of the mill (para 109). Some particularly grave consequences are not out of the run of the mill at all. Once again, the test is always whether the gravity of the interference with family life is justified by the gravity of the public interest pursued (see also Lord Wilson, at para 152). Exceptionality is a prediction, just as it was in R (Razgar) v Secretary of State for the Home Department [2004] UKHL 27, [2004] 2 AC 368, and not a test. We are all agreed upon that. These two points clarified, what more needs to be said about the interests of children? There appears to be some disagreement between us about the order in which the judge should approach the task. I agree entirely that different judges may approach it in different ways. However, it is important always to ask oneself the right questions and in an orderly manner. That is why it is advisable to approach article 8 in the same order in which the Strasbourg court would do so. There is an additional reason to do so in a case involving children. The family rights of children are of a different order from those of adults, for several reasons. In the first place, as Neulinger and ZH (Tanzania) have explained, article 8 has to be interpreted in such a way that their best interests are a primary consideration, although not always the only primary consideration and not necessarily the paramount consideration. This gives them an importance which the family rights of other people (and in particular the extraditee) may not have. Secondly, children need a family life in a way that adults do not. They have to be fed, clothed, washed, supervised, taught and above all loved if they are to grow up to be the properly functioning members of society which we all need them to be. Their physical and educational needs may be met outside the family, although usually not as well as they are met within it, but their emotional needs can only be fully met within a functioning family. Depriving a child of her family life is altogether more serious than depriving an adult of his. Careful attention will therefore have to be paid to what will happen to the child if her sole or primary carer is extradited. Extradition is different from other forms of expulsion in that it is unlikely that the child will be able to accompany the extraditee. Thirdly, as the Coram Childrens Legal Centre point out, although the child has a right to her family life and to all that goes with it, there is also a strong public interest in ensuring that children are properly brought up. This can of course cut both ways: sometimes a parent may do a child more harm than good and it is in the childs best interests to find an alternative home for her. But sometimes the parents past criminality may say nothing at all about their capacity to bring up their children properly. Fourthly, therefore, as the effect upon the childs interests is always likely to be more severe than the effect upon an adults, the court may have to consider whether there is any way in which the public interest in extradition can be met without doing such harm to the child. One thing is clear. It is not enough to dismiss these cases in a simple way by accepting that the childrens interests will always be harmed by separation from their sole or primary carer but also accepting that the public interest in extradition is almost always strong enough to outweigh it. There is no substitute for the careful examination envisaged by Lord Hope in Norris. How the court is to go about investigating the situation of the children is a question to which I shall return. In each of the cases before the court, the interests of the children have been fully investigated. In the Polish case, this was done by those representing the mother. In the Italian case, the children have had the benefit of separate representation by the Official Solicitor. I turn, therefore, to the facts of each case, beginning with the more straightforward Polish case. F K v Polish Judicial Authority The father, MF K, and the mother, AF K, were married in 1991. They are both Polish. They have five children. A, who is now 21, B, who is now 17, and C, who is now 13 years, were born in Poland before the family moved to this country in June 2002. D was born here on 17 February 2004, so is now aged eight, and E was born here on 14 August 2008, so is now aged three years and ten months. The whole family live together in a house where they have lived since December 2007. The father works as a builder. The mother looks after the family. They applied for permanent residence here before these proceedings were begun and were granted it in 2010. The mothers extradition is sought on two European Arrest Warrants. The first in time (EAW1 issued by the Gliwice Circuit Court) is dated 10 January 2006. It alleges that she, together with her husband, misappropriated clothing entrusted to her for sale to a value equivalent to 4307, between 19 June and 24 August 2001. The second (EAW2 issued by the Katowice Regional Court) is dated 9 July 2007. It alleges three offences: (i) falsifying customs documents in relation to an imported car between 17 November 1997 and 24 January 1999; (ii) seven instances of fraud involving a total equivalent to 1160 between 19 May and 12 June 2000; and (iii) a further instance of a similar fraud, on 21 June 2000. It appears from the further information obtained from the issuing judicial authorities that the bill of indictment in relation to the offences alleged in EAW2 of July 2007 was filed at court in May 2002. It is also said that she failed to appear at court in relation to the theft offences alleged in EAW1 of 10 January 2006 despite having been instructed to do so whenever required by the district public prosecutor on 10 June 2002. AF K denied this or that she and the children left Poland later that same month in order to escape prosecution. It is, as the District Judge observed, difficult to match some of the information received from Poland to the offences in the two EAWs, and some of it appears to relate to different matters. But having heard evidence from AF K, he made a clear finding that she fled in June 2002 to avoid prosecution and that she was a fugitive from justice (for the purpose of section 14 of the Extradition Act 2003). Domestic warrants for her arrest in Poland were not issued until 9 January 2003 in respect of the customs offence in EAW2 (by the District Court in Chorzw), until 7 April 2003 in respect of the fraud offences in EAW2 (by the District Court in Bytom), and until 29 March 2004 in respect of the theft offences in EAW1 (by the District Court in Racibrz). Further information (from the District Court in Bytom, via the Circuit Court in Katowice) in relation to EAW2 states that the police informed the (Bytom) court in May 2004 that she might be staying outside Poland. The request for EAW2 was made in April 2007, three years after that, and the warrant issued that July. Further information (from the Circuit Court in Gliwice) states that the request for EAW1 was made on 1 December 2005 and the EAW issued on 10 January 2006. The international search started in January 2006. EAW2 issued on 9 July 2007 was certified by SOCA on 14 April 2008. EAW1 issued on 10 January 2006 was certified on 2 September 2008. AF K was arrested under both warrants on 10 March 2010. Senior District Judge Riddle ordered her extradition on 28 September 2010. Ouseley J dismissed her appeal to the Administrative Court on 19 January 2012: [2012] EWHC 25 (Admin). The District Judge had before him a report on the family from Dr Ruth Armstrong, a consultant clinical psychologist; Ouseley J had before him a second report from Dr Armstrong, to which was attached some literature on attachment (Dr Peter S Cook) and on the effect of parental incarceration on young children (Ross D Parke and K Alison Clarke Stewart). Both reports were based on long visits to the home, interviews, observations, psychological tests and questionnaires and information provided by the childrens school and college. In her first report, dated 2 July 2010, Dr Armstrong stated that all the children had good health and good emotional and social adjustment. The mother appeared to be at the heart of the family, providing loving warmth and nurturing of a high calibre. If she were extradited, the childrens secure attachment to her would be ruptured and many negative consequences are likely to ensue. D and E, in particular, were likely to be devastated by the loss of their mother which would be very likely to have severe detrimental consequences psychologically and for their developmental trajectories. They were reported to have reacted very badly to the mothers short absence after her arrest in 2010. The father had shown evidence of significant emotional disturbance (and even suicidal traits) on psychological testing. Without his wife he would have to give up work to look after the children and this was likely to lead to severe and crippling depression. Returning to Poland would cause a significant upheaval and damage to the older childrens education. She concluded that the potential psychological damage all the other six members of the family would be very likely to suffer and the educational setbacks for each of the children, were [the mother] to be deported, would be extreme. In her second report, of 15 July 2011, she remained very concerned for the welfare of the family should the mother be extradited. The father had had to give up work because of an earlier accident. His physical mobility had deteriorated markedly (although his physical symptoms might in part have a psychosomatic origin) and he might even be more psychologically fragile than before, although he was trying to create a good impression, and determined to keep the family together. The enormous attachment of the children to their mother means that they might be plummeted into what could be paralysing grief. There could be many risks to the young children. Apart from grief and loss, the two youngest, who are girls, would be looked after only by older males, which could pose risks in terms of inappropriate relationships developing as the family members seek comfort normally provided in an entirely appropriate way by the presence of a nurturing and competent mother and wife. There was also evidence that if extradited the mother would be detained in prison pending trial and would not be able to have her youngest child, who is still under four, with her in prison. Mr Fitzgerald drew attention to two Strasbourg decisions in which the length of pre trial detention in Poland had been held to violate article 5.3: Dyller v Poland (Application No 39842/05) (unreported) given 7 July 2009; Kumenda v Poland (Application No 2369/09) (unreported) given 8 June 2010. Discussion If we were only concerned with the three oldest children, things would be different. They would be very unhappy at the loss of their mother, and might suffer some educational setbacks as a result, but they would be able to get on with their lives with the help of their father, who is determined to keep the family together. They would be able to recall their mother while she was away, even if they were only able to see her rarely, and they would be able to look forward to her coming back. As Dr Armstrong points out, the consequences for the two youngest would be far more severe. E, in particular, would be deprived of her primary attachment figure while she is still under the age of four. Such losses can have lasting effects upon a childs development and it does not appear that her father would have the psychological resources to fill the gap or that help would be available from the social or other services to support the family. The eight year old would also suffer from the loss of her mother, might well blame herself for it, and would find it hard to look forward to her return. It is not an abuse of language to describe the effects upon these two children as exceptionally severe. Indeed, Ouseley J accepted without reservation that the impact on the two younger children would be very severe: para 44. Against that, there is the constant factor of the need to honour our obligations under the Framework Decision. But as these are subject to the need to respect fundamental rights, they do not absolve us of the duty to weigh the competing interests as required by article 8. The various offences for which extradition is sought are by no means trivial. But they are offences of dishonesty which can properly be described as of no great gravity. Furthermore, we can take notice of the fact that no prosecutorial discretion is exercised by the Polish authorities when deciding whether or not to apply for the issue of an EAW, no matter how comparatively minor the offences, how much time has elapsed since they were committed, and how respectable the life which the offender has led since then. The European Commission has criticised the lack of a proportionality check in some states before issuing an EAW: it is not suggested that an article 8 proportionality check is required, but that there should be some relationship of proportionality between the offending and the consequences. The delay in this case has been considerable. There was some delay between the offences themselves and the bringing of the Polish prosecutions; there was further delay between the appellants failure to attend court in Poland and the issue of the domestic arrest warrants; even further delay between the issue of the domestic arrest warrants and the requests for the EAWs; and again between the issue of the EAWs and the appellants arrest in March 2010. While the district judge did find that the appellant fled Poland in order to avoid prosecution, and thus was not entitled to rely upon passage of time as a bar for the purpose of section 14 of the 2003 Act, the overall length of the delay is relevant to the article 8 question. Whatever the reasons, it does not suggest any urgency about bringing the appellant to justice, which is also some indication of the importance attached to her offending. During that lapse of time, the appellant and her family have made a new, useful and blameless life for themselves in this country. Two more children have been born. D must have been conceived approximately eleven months after the family arrived here and E more than four years after that. At neither time did the parents have any reason to believe that the Polish authorities were seeking the mothers return. Whatever the relevance of deliberately conceiving children in order to strengthen the case against extradition (which does arise in the next case) it does not arise on the facts of this case. In all the circumstances, the public interest in returning the appellant to face trial and sentence upon the charges in these two warrants is not such as to justify the inevitable severe harm to the interests of the two youngest children in doing so. I would allow this appeal. HH and PH v Deputy Prosecutor of the Italian Republic, Genoa PH, the father, and HH, the mother, were married in 1996. Both are British citizens but HH was born and bred in Morocco, where they met while PH was working as a long distance lorry driver all over Europe. They bought a house in Spain in 2000. Their first child, X, was born in England on 23 November 2000, so he is now aged 11. The events which led to these proceedings took place between April and September 2003, when X was only two, and his mother was pregnant with their second child. The parents were arrested in Italy on 23 September 2003. HH, then 8 months pregnant, was released under house arrest on 20 October 2003. The child, Y, was born in Italy on 21 November 2003, and so she is now aged eight. HH left Italy in July 2004 in breach of the conditions of her release. PH remained in prison in Italy until the custody time limit ran out and he too was conditionally released on 7 October 2004. He too left Italy shortly afterwards, also in breach of his conditions. Both were formally declared to be unlawfully at large on 15 March 2005. Having heard their evidence, District Judge Evans found (in his judgment of 25 March 2009) that both HH and PH had quite deliberately breached their bail and fled Italy in the full knowledge that they were to be tried for very serious offences. They were arrested for two offences connected with drug trafficking: (1) criminal association for the purpose of drug trafficking, which carries a sentence of between ten and 24 years imprisonment; and (2) a specific act of importation, transportation, possession and supply of drugs, aggravated by being committed by more than three persons, which carries a sentence of between three and nine years imprisonment. As to (1), it was alleged that they had conspired with one another, with HHs uncle Hassan El Faria, with a courier Brian Stott, with Hassan El Farias wife, Virginia Donnarumma, with Abderrahin Fadlam, and with other people as yet unknown, to commit multiple offences of smuggling hashish. The uncle was the point of contact with the suppliers; PH and HH received the drugs, recruited the couriers and took part in the importation; Fadlam received the drugs in Italy and was in charge of trading them there; and Donnarumma was in charge of trading the proceeds and sending it back to her husband to finance further operations. These operations continued from April to September 2003. As to (2), it was alleged that they had imported over 205 kilos of hashish into Italy on 23 September 2003. It was also alleged that there had been six earlier such episodes involving similar quantities, totalling some 1613 kilos in all. These formed part of the subject matter of the later convictions, but not of the original remands in custody. The Italians had been intercepting their telephone calls and monitoring the car, rented in Spain, in which they were travelling. This showed that they were in repeated contact with the courier, Stott, guiding him into the hotel car park where they met. The couriers car had been hired by him in Italy, but paid for by PH, and the car was carrying false English number plates. After they left the car park, heading for France, Stott was arrested with the drugs. They both phoned him to find out what had happened. Once they found out that he had been arrested, they both phoned their accomplices, in particular Hassan, to explain what had happened. Hassan advised HH to take advantage of her pregnancy to avoid pre trial custody and escape from justice. On 17 December 2004, they were both convicted in the first instance court in their absence and sentenced to 14 years imprisonment. The first European Arrest Warrants (EAWs) were issued on 11 January 2006. The first instance judgment was confirmed in the second instance in the Court of Appeal in Genoa on 19 April 2006. The EAWs with which these proceedings began were issued on 1 August 2008. These were still accusation warrants, because the proceedings were not yet finally over. There was a further appeal to the Court of Cassation, which on 28 April 2009 confirmed the sentence on HH which then became final. A conviction European Arrest Warrant was therefore issued in respect of HH on 23 October 2009. This states that she has nine years, six months and 21 days of her 14 year sentence still to serve. However, the conspiracy case against PH was sent back to the Court of Appeal in Genoa to determine whether he had been organiser and instigator of the conspiracy or a mere participant. On 25 January 2010, a conviction EAW was issued in respect of PH for the seven specific importation offences, which states that he has four years of imprisonment of the original eight year sentence still to serve. On 9 February 2010, the Court of Appeal determined that he had been a lesser participant in the conspiracy and imposed a (total) sentence of nine years and four months imprisonment which became enforceable on 1 February 2011. On 21 September 2011, therefore, a new conviction EAW was issued in respect of all eight offences, which states that he has eight years and four months still to serve. According to the calculations of his legal team, however, if the collective clemency law and the potential reduction for good behaviour are taken into account, this would come down to four years and 22 days. Proceedings first began in this country on 16 July 2008, after PH was arrested pursuant to the first EAW of 11 January 2006. He was arrested again on 4 August pursuant to the EAW dated 1 August 2008. HH was arrested pursuant to the EAW dated 1 August on 8 August 2008. The proceedings have been continuing ever since. Both parents have been on bail most of the time since their arrest. Between one and two months after her arrest, HH must have become pregnant with their third child, Z. Z was born on 10 June 2009 (it is said in one of the reports that she was born one month prematurely because of her mothers diabetes) and so is now just three years old. District Judge Evans commented that It must remain an open question whether Zs conception was (irresponsibly and selfishly) intended to provide a useful argument in support of HH and PHs opposition to the extradition request (Judgment of 14 April 2010, para 44). But in the Divisional Court, Laws LJ considered this comment to be unwarranted (para 38). After a number of vicissitudes, the hearing before the District Judge was fixed for 20 February 2009. Both parents gave evidence, but it was adjourned part heard. They were told by counsel that things were not looking good and extradition was likely. This was an accurate prediction as District Judge Evans ruled on 25 March 2009 that he would have ordered extradition against both had it not been for HHs illness. He later observed that on 20 February she was able to give coherent if untruthful evidence and was not suffering from any significant ill health (judgment of 14 April 2010, para 45). HH collapsed shortly after the hearing, was taken to A & E in London, transferred to a psychiatric hospital and then admitted to a psychiatric ward in Nottinghamshire, initially under section 2 of the Mental Health Act 1983. She remained there voluntarily until discharged on 17 or 18 June 2009, a week after the birth of her younger daughter. From March 2009 she was unfit to attend court. Eventually, on 14 April 2010, District Judge Evans ordered the extradition of HH on the conviction EAW, and on 21 June 2010, he ordered the extradition of PH on both the accusation and the first conviction warrants. Their appeals were dismissed by Laws LJ in the Administrative Court on 11 May 2011: [2011] EWHC 1145 (Admin). In relation to the mothers mental health, there were reports from her consultant psychiatrist, Dr Meats, dated 20 March 2009 and 3 April 2009, finding no evidence of any psychotic illness, diagnosing a conversion disorder in association with repeated court appearances, for which a small dose of anti anxiety medication had been prescribed, and predicting that her condition would persist and become long term, but that a decision one way or the other would allow resolution of her anxiety symptoms. There was a report commissioned by the Crown Prosecution Service, from Dr Philip Joseph, dated 22 May 2009. He agreed that she had suffered an acute stress reaction after court on 20 February, but other forms of mental illness had been excluded and she was not suffering from mental disorder of a nature or degree which would prevent her extradition. There was a report commissioned by HHs solicitors, from Dr Seyyed Nabavi, dated 8 August 2009. He diagnosed post traumatic stress disorder with co morbid depressive and anxiety disorders of moderate to severe severity, precipitated by her experience of arrest and being treated inappropriately in Italy, and continued by the lengthy legal proceedings. She was unable to look after herself or her children. The prognosis was moderately poor and she was currently unfit to plead and stand trial. In a follow up report on 26 October 2009, Dr Joseph strongly disagreed with these diagnoses. He maintained the diagnosis of an acute stress reaction to the fear of being extradited to Italy and being separated from her children. If there were no court proceedings she would have no difficulty living her life and managing her family. In November 2009, there was another brief admission to hospital under section 2 of the Mental Health Act 1983, after HH walked blindly (according to PH) into the road shortly before they were due to appear in court on 10 November 2009. A follow up report from Dr Nabavi, dated 31 December 2009, maintained the view that her current mental disorder, a dissociative (conversion) disorder, was a reaction to her arrest in Italy, maintained by the continuing court proceedings. He ruled out malingering or factitious disorders and remained of the view that she was unfit to look after her family or take part in the proceedings. These reports were all before District Judge Evans on 14 April 2010. There was also a letter from Gabrielle OBrien, a mental health support worker who had been regularly visiting the home, where she found that HH appeared to be extremely unwell and withdrawing into herself on each visit, lying on a mattress and apparently unaware of her husband, her children or visitors. A witness statement from HHs solicitor described the pitiful condition in which he had found her when visiting the home in September 2009 and the unedifying events when she was (eventually) arrested on the conviction warrant and brought to court in London in February 2010. It had not proved possible to transfer her from the security van into court and the hearing had to be held in the car park. Incontinence was a feature on both occasions. The district judge heard evidence from both Dr Nabavi and Dr Joseph and found Dr Joseph the more compelling. He concluded that HH had a real condition, which she was not putting on only when she was in public, but that it appeared to be self induced and not as severe as suggested by Dr Nabavi. He had little doubt that she would recover quickly if not extradited. Similarly the realisation that the game was up could also assist in her speedy recovery. There was therefore no medical condition rendering her extradition inappropriate and it would not be oppressive to order it (judgment of 14 April 2010, paras 58 59). When the appeal came before Laws LJ, there were fresh psychiatric reports. Dr Samantha Dove was instructed by HH, whom she had visited at home. In her report of 6 December 2010, her opinion was that HHs presentation was consistent with the initial diagnosis of dissociative conversion disorder, but that the symptoms of a moderate to severe depressive disorder had now become more marked. It was likely that the stress of the current legal situation had precipitated her mental illness. This was of a nature or degree to warrant her detention in hospital as she was unable to look after herself, including taking her medication and maintaining personal hygiene. She was not fit to plead or attend court. Dr Joseph provided a further report dated 20 January 2011. He had read the records of HHs short readmission to hospital in November 2009, after which it had been concluded that her presentation was due to a current life situation rather than a mental illness. He had also discussed the case with Dr Dove, and concluded that it would not help for him to see HH again. He disagreed with the diagnosis of dissociative disorder and also that her disorder warranted detention in psychiatric hospital or that she was unfit as opposed to unwilling to take part in the proceedings. Laws LJ heard brief evidence from both doctors. He also took into account the observations of Dr Pettle, the psychologist (instructed by the Official Solicitor) who had visited the family to assess the children. The childrens comments suggested that HHs withdrawn state persisted within the family and not just when professionals visited. He considered that there was a third explanation for HHs behaviour pattern, not that it was all a deliberate pretence, or that it was the product of a mental illness, but that it was an extreme reaction to the extradition proceedings (hardly different from the notion of an unconscious fabrication spoken of by Dr Dove) (paras 44 to 46). If so, it was perhaps more likely to be resolved once the proceedings were over. Her mental condition was not such that it would be oppressive to extradite her. Further, that is not to say that I would have found the other way had I concluded she was suffering from a mental illness. There was every reason to conclude that she would be properly looked after in Italy (para 47). (It may be that Laws LJ had in mind psychosis when he referred to mental illness, for many perhaps most psychiatrists would label the mothers condition an illness.) By the time of that judgment (in May 2011), following a suggestion made in Dr Doves report, HH had already been referred by her GP to the neuropsychiatry unit at the Maudsley Hospital, where she was admitted on 11 June 2011. This Court has a report from Professor Anthony David dated 30 January 2012. He had prompted an unannounced visit in February from Gabrielle OBrien, who found HH in the kitchen talking (and not lying mute on a mattress in the lounge). HH had taken a significant overdose of diazepam and citalopram on 9 May 2011 (perhaps connected with or in anticipation of the High Court judgment handed down on 11 May 2011). On admission, she walked with a pronounced stoop, was very tearful, had difficulties with sleep, refused meals at times, showed very poor levels of self care and personal hygiene, with episodes of incontinence, showed little interest in ward activities but apparent signs of severe memory difficulties and an inability to perform routine tasks such as boiling a kettle. Her very poor performance in psychometric testing showed that she was not engaging with the tasks. Professor Davids opinion is that her initial presentation was characterised in part by regressive and pseudo demented behaviour which though variable to an extent, was persistent and highly dysfunctional. This may have been feigned or a gross exaggeration given the close temporal relationship between the onset of the disorder and court appearances connected with extradition to Italy. Once they had been able to get her to relinquish these behaviours, there was revealed a clear and genuine phobic anxiety disorder (agoraphobia with panic) associated with busy streets, policemen and women, and sirens and alarms obviously relating to her dread of extradition and separation from her children, together with an underlying affective component of low mood and hopelessness. His view is that there was a strong element to the regressive behaviour which was under conscious control but that once HH had sunk into this state it took on a life of its own. Given that there was a background of low mood and fear, complicated perhaps by a reawakening of adverse childhood experiences, it was impossible for her to simply snap out of it. The behaviours then became habitual and ingrained. It had taken three months in a specialist unit to overcome this. Further court appearances would cause major disruption in her mental state. He is convinced that the profound overt distress they would cause would soon become intractable and she would end up once again in a totally dependent and dilapidated condition. She would resist extradition and any attempt to force her to return to Italy under any circumstances would result in a catastrophic collapse. Following the proceedings in the Magistrates Court, the Official Solicitor was permitted to file evidence and make submissions on behalf of the children in the Administrative Court. Dr Sharon Pettle, a clinical psychologist, prepared a report dated 13 September 2010. X, then nearly ten, generally appeared to be a well adjusted boy, sensitive and caring, with a strong bond with his father, but he was highly anxious about the deterioration in his mothers functioning, and has no clear explanation of what is wrong. Y, then nearly seven, was a bright and articulate child who did not express anxiety about her mothers condition, and whose strongest relationship was with her father. Z, then 15 months old, was meeting all her developmental milestones and clearly looked to her father as her primary attachment figure. It was inevitable that separation for years from one or both parents would cause the children intense and long lasting distress. Being left in the sole care of their mother would be an intensely worrying experience unless she were to make an immediate recovery. Separation from their father would be acutely emotionally distressing for all the children, and their responses would vary in severity according to what other losses followed. If separated from their mother, X and Y would be likely to worry about her health and who was looking after her, but if they remained with their father, it seemed likely that he would go on looking after them well and offer them as much support as possible. To be suddenly faced with the departure of both parents, and a move to live with strangers is one of the most catastrophic events to befall any child, and represents a massive emotional and psychological challenge. The departure of both parents, even for children with some resilience, is likely to be an overwhelmingly painful experience, and their immediate reactions may be very similar to bereavement: over activity, profound sadness and distress, withdrawal and regression, anger and defiance, poor sleeping and eating, and a deterioration in their school performance. The research on children of imprisoned parents would suggest that X, Y and Z are all in a highly vulnerable group. Generally siblings should be kept together. X and Y would find it hard to understand if Z were to be cared for by their mothers family in Morocco and would worry about her. Worst of all would be if all three had to be separated, with Z in Morocco and X and Y in different foster placements. In an addendum report, dated 24 March 2011, based on an interview with PH who had brought Z with him, she described Z as a very happy and well adjusted two year old, secure enough in her attachment to her father to be able to spend time at playschool and with other familiar people. But from her fathers description, she had not formed a significant bond with her Moroccan grandmother while she was staying with the family. Based on school reports, the older children appeared to be showing signs of strain which were not apparent last year. Dr Pettle expected that they would be hopeful that their mother would return from her stay in the Maudsley Hospital more like the mother they remembered (and it would appear from Professor Davids report that such hopes have been fulfilled). If she were then to be removed to serve a prison sentence, this would be particularly difficult for them to accept. It was likely that Z would be extremely distressed at being uprooted from her family and going to live in Morocco, all her familiar routines disrupted and in a new culture with a different language spoken around her. If all the children were in foster care, there would be some advantage to all of them in being able to remain in touch with one another even if placement together were not possible. The Official Solicitor also prompted a report, dated 15 September 2010, from Gemma Manzoor, of the local Childrens Services department, who had been the childrens allocated social worker from August 2009 until June 2010. The reason for this was concern about the childrens welfare because of their mothers mental state. The case was closed in June 2010 because there were no issues about their fathers care of them. Were the extradition to go ahead, PH accepted that it might be difficult to place all three children together, so he had agreed to X and Y being looked after by the local authority, but was at that time hoping that Z would be looked after by HHs family in Morocco. However, as explained in the witness statement of the solicitor instructed by the Official Solicitor of 24 November 2010, the maternal grandmother did not feel able to look after any of the children, owing to her other responsibilities and her own ill health. Their solicitor then explored with PH whether there were other members of the family who might be able to look after the children. In his witness statement of 30 March 2011, he explains why none of the fathers four siblings or his three children by an earlier marriage is able to help. None of them has appropriate accommodation to take in three more children, all have jobs, and most have other children to look after. The solicitor has recently made further inquiries of the local authority, from which it is clear that they will not reopen the case until they are told that the parents are to be extradited, even if this means that there would then be only a very short time in which to make the arrangements. Thus the prospect of the children being placed together, and in an area close to where X and Y are at school, will not be known until the decision is made. It follows that no thought has been given to how the children will be able to keep in contact with their parents if they are extradited to Italy. Discussion Before Laws LJ, HH relied, not only on article 8, but also on section 25 of the Extradition Act, which permits the judge to discharge the person or adjourn the hearing if her physical or mental condition is such that it would be unjust or oppressive to extradite her. As by now she was wanted on a conviction warrant, the question was whether it would be oppressive (as opposed to unjust) to extradite her. Having heard the evidence described earlier, he concluded that it would not. The question certified for this court relates only to the article 8 question. It is open to the court to consider issues other than those certified: Attorney General for Northern Ireland v Gallagher [1963] AC 349. However, this court would not normally entertain an appeal on a question of fact or on the application of settled law to the facts of the case. It would be difficult for us to differ from the factual findings of Laws LJ, who heard as well as read the psychiatric evidence. His findings on the nature and causes of the mothers condition are in any event broadly consistent with Professor Davids report, although they do differ in their predictions as to the effect of extradition. That is not, however, a reason for us to differ from the conclusion reached by Laws LJ. He concluded that it would not be oppressive to extradite the mother in the condition she was then, before she had had the benefit of three months specialist treatment in the Maudsley. She is better now, and would be no worse than she was when Laws LJ reached his conclusion, even if she were to regress in the way predicted by Professor David. We cannot, therefore, reach any different conclusion under section 25. But we can, of course, take the mothers mental condition into account when we are considering the situation of the whole family under article 8. The principal focus of this appeal has been on the article 8 rights of the children, not of the adults. It is a very rare case indeed when the extradition of both parents is sought. The table prepared by JUSTICE contains only one other, apart from the case of BH and KAS v United States of America, which was heard along with this case (see Lord Advocate on behalf of Criminal Court of Lisbon, Portugal v JK and NF [2011] HCJAC 121, 9 December 2011). These are all young children, Z is just three and still at the age when the effect of breaking her most secure attachment will be severe, Y is also at a vulnerable age, and X appears to be less resilient than she. They have already had to cope with living with a mother who, on any view, has not been able to look after them properly since February 2009. The father has given up work to look after them all and by all accounts has done a very good job. They are happy and well adjusted children now, but the evidence is that separation for years from one or both parents would inevitably cause the children intense and long lasting distress. It would be akin to taking the children compulsorily into care. But whereas children are only taken compulsorily into care if they are already suffering or likely to suffer significant harm, these children have not so far suffered significant harm. On the contrary, they are doing well in difficult circumstances. It is the compulsory separation from their parents, and the move to live with strangers, which will do them harm; it is, in Dr Pettles words, one of the most catastrophic events to befall any child, and represents a massive emotional and psychological challenge. There is, of course, every incentive for parents in this position to fail to find or encourage other family members to take care of the children, so that they will have to be looked after by the local authority. But in this case we have the benefit of the enquiries made by the Official Solicitor, and it would appear that the family members whom the children know have good and genuine reasons for not being able to look after them if their parents are extradited. It is regrettable in the extreme that the local authority have apparently made no plans at all for where they will place the children if extradition is ordered. This means that no work has been done with the children to prepare them for this; that places will have to be found in a hurry; that it is quite likely that those places will be short lived; and it is also quite likely that they will be placed in separate foster homes. These too may well be short lived and unstable, not through any fault of the local authority, but because of the pressures under which they have to work. The state, however well meaning, is no substitute for the family. There has even been mention of the possibility that Z might be compulsorily placed for adoption, but Lord Wilson and I share the view that it is unlikely that a court would find that her welfare required it to dispense with parental consent in circumstances such as these. Evidently, too, no thought has been given by the local authority to how they will maintain contact with their parents while the parents are in prison in Italy. Yet such contact will obviously be essential for them. That harm would be much reduced if only one parent were to be extradited. If the mother were extradited alone, the children would no doubt grieve for her, and worry about her, but they have been used to her absence in hospital before. They have not been used to relying upon her for their day to day care and emotional support. Their father would be able to help them maintain contact with her. If their father were extradited alone, on the other hand, they would lose the mainstay of their lives to date. Z would lose her primary attachment figure. And we have been presented with no evidence that their mother is capable of looking after them alone. The plain fact of the matter, therefore, is that from the childrens point of view, the extradition of their father would be seriously damaging, but the extradition of their mother would not. Against all that there is, of course, the constant public interest in extradition and the gravity of the offences of which both parents have been convicted. We are not here dealing with comparatively routine crimes of dishonesty, but with a major drug smuggling conspiracy, persisted in over many months. As Laws LJ put it, the appellants were effectively caught red handed while escorting a consignment to its destination. The sentences imposed were lengthy, although possibly not as lengthy as the sentences which would be imposed for comparable offences here. Just as the harm to children will be greater if the father is extradited than it will be if the mother is extradited, it is also the case that the public interest in extraditing the mother is greater than the public interest in extraditing the father. The Italian courts have held that the mother played the greater part in the conspiracy and imposed a correspondingly longer sentence upon her. She fled the country having spent only three weeks in prison. Although Dr Nabavi attributed her initial mental distress to the treatment which she had received in Italy, she was in apparent good health until the hearing on 20 February 2009. By contrast, although the father has now been convicted of both the conspiracy and the seven specific smuggling offences, he has been held to have played a lesser part in the conspiracy. He also spent a year in prison in Italy before his release. He has therefore paid some part, albeit only a small part, of the debt he owes to society on account of his very serious and persistent offending. Furthermore, he has so far evaded paying the rest of that debt by breaching the conditions of his release. But the point urged most strongly upon us on his behalf is that his lawyers researches suggest that, if the family were living in Italy, he would be allowed to serve most of the rest of his sentence at home in order to look after the children. They calculate that the total sentence of 9 years and 4 months would be reduced: (1) to 6 years and 4 months, because of the Collective Clemency Bill, Law 214/06, which reduces all sentences for offences committed before 2 May 2006 by three years; then (2) to 5 years and 3 and a half months, because of the time already spent in prison; then (3) to one year and 27 days, because of the Prison Reform Law No 354 of 26 July 1975, which allows sole carers of young children who have served one third of their sentence to serve the remainder on home detention; and finally (4) to 10 months, because of the potential reduction (of 45 days per six months) for good behaviour. We have looked at the laws in question but have no expert evidence as to how they would operate in a case where the primary carer was the father rather than the mother. The position is not, however, disputed by the respondent. Thus, it is argued, if the family were living in Italy, the Italian state would not consider it in the public interest for this father to serve more than ten more months in a prison. They would prioritise the interests of his children over the serving of his sentence. It is wrong, therefore, to conclude that the public interest requires him to be sent back to Italy to serve a further four years and 22 days in prison. Against that, of course, is the fact that the Italian authorities have issued these warrants to secure his return. In common with the other members of this court, I have found the case of PH the most difficult of all the five parents in the three cases with which we are concerned. There is no doubt that the offences of which he has been convicted are very serious indeed. They are the sort of cross border offending in which international co operation is particularly important. If we were concerned only with the two older children, I would have concluded that these considerations were sufficiently weighty to justify the interference with their lives. They are old enough to retain memories of their father, and to understand that he will come back to them one day, and they would have one another. There is a better chance that they would be found a foster placement together, or even that other members of the family would be persuaded to step in after all. But Z is in a different situation. She is still at the most vulnerable age. And her presence makes finding satisfactory placements to keep the children together more difficult. It is troubling that Z was conceived so very soon after the parents were arrested on the EAWs. No court wishes to send a message that drug smugglers or other serious criminals might escape extradition by getting their partners pregnant. However, the district judge declined to make a finding to that effect, despite the generally unfavourable view that he took of the parents evidence and the information from Italy that the mother had been advised to take advantage of her earlier pregnancy to escape from justice. Laws LJ described his remark that it remained an open question as unwarranted. We must therefore approach this particular case on the basis that it has not been shown that this was a deliberate attempt to improve their position in the proceedings. If there had been such a finding, what relevance would it have had? Z did not ask to be born and is in no way to be blamed for her parents conduct. But it would have made the parents offending behaviour even more serious than it already was: it is an act of some wickedness deliberately to bring a child into the world in an attempt to evade justice. It would have added to the weight on one side of the scales, while in no way diminishing the weight to be given to the childs interests on the other. The circumstances in this case can properly be described as exceptional. The effect upon the children, but Z in particular, of extraditing both their parents will be exceptionally severe. The effect of extraditing their mother alone would not be so severe and is clearly outweighed by the public interest in returning her to Italy. But the same cannot be said of the effect of extraditing their father. I have, not without considerable hesitation, reached the conclusion that it is currently so severe that the proportionality exercise requires the court to consider whether it can be mitigated. If he is discharged in the current proceedings (and in these I would include the proceedings under the warrant issued in September 2011), it will remain open to the Italian authorities to consider whether to issue another warrant in the future, when the effect upon the children will not be so severe. In doing so, they would no doubt wish to consider whether the spirit, if not the letter, of the Prison Reform Law of 1975 reduces the public interest in having him return to Italy to serve the balance of his sentence, in circumstances were, if it were an Italian family, he would be able to serve it at home looking after his children. We do not know whether this consideration was present to the minds of the authorities when the warrants were issued. Left to myself, therefore, I would have struck the balance in that way in this very unusual case and discharged PH in the current proceedings. Postscript: Conviction in absentia Mr Jones sought to raise a further point on behalf of HH. Section 20 of the 2003 Act has not been amended to take account of the amendments to the 2002 Framework Decision made by the Framework Decision of 2009 (2009/299/JHA), which required implementation by 28 March 2011 (with a possibility of delayed implementation by March 2014). This adds a new article 4a to the Framework Decision, permitting the executing authority to refuse to execute an EAW if a person was convicted in her absence, unless she was unequivocally made aware of the date and place of the trial. The EAW in question was issued before the 2009 Framework Decision took effect and does not state that HH was unequivocally made aware of the date and place of her trial. Were this to raise a discrete point of law as to the alleged non implementation of the 2009 Framework Decision in UK law, it would in my view be quite inappropriate for this court to consider it. It has not been certified as a point of law of general public importance and it has not been fully explored in the arguments before us. Rather, the point has been argued as a technical matter concerned with the content of the EAW. It is difficult to believe that HH has been the victim of a serious injustice in this case, as she was represented by lawyers throughout the Italian proceedings, who clearly pursued every avenue of appeal on her behalf, while she had deliberately deprived herself of any additional advantage that presence at those proceedings might have given her. Indeed, given the circumstances of the arrest and the nature of the evidence against her, it is perhaps difficult to envisage what that advantage would have been. For the same reasons, it is difficult to see what this factor adds to the strength of the article 8 case on her behalf. Procedure If the childrens interests are to be properly taken into account by the extraditing court, it will need to have some information about them. There is a good analogy with domestic sentencing practice, although in the first instance the information is likely to come from the parties, as there will be no pre sentence report. The court will need to know whether there are dependent children, whether the parents removal will be harmful to their interests and what steps can be taken to mitigate this. This should alert the court to whether any further information is needed. In the more usual case, where the person whose extradition is sought is not the sole or primary carer for the children, the court will have to consider whether there are any special features requiring further investigation of the childrens interests, but in most cases it should be able to proceed with what it has. The cases likely to require further investigation are those where the extradition of both parents, or of the sole or primary carer, is sought. Then the court will have to have information about the likely effect upon the individual child or children involved if the extradition is to proceed; about the arrangements which will be made for their care while the parent is away; about the availability of measures to limit the effects of separation in the requesting state, such as mother and baby units, house arrest as an alternative to prison, prison visits, telephone calls and face time over the telephone or internet; and about the availability of alternative measures, such as prosecution here or early repatriation. Some of this information should be available from the parents, but the court may also wish to make a referral to the local Childrens Services for the childrens needs to be assessed under the Children Act 1989. If the children are to lose their sole or primary carer for any length of time, they may well have to be accommodated under section 20 of the 1989 Act and will almost certainly be children in need for the purposes of section 17(10) of that Act. In some cases, especially where there is a very young child or a child with health or developmental problems, it may be necessary to obtain a psychological or psychiatric assessment, as in fact was done in these cases. There is also the question of the childrens own views (or wishes and feelings) to consider. Article 12 of UNCRC provides: 1. States Parties shall assure to the child who is capable of expressing his or her own views the right to express those views freely in all matters affecting the child, the views of the child being given due weight in accordance with the age and maturity of the child. 2. For this purpose, the child shall in particular be provided the opportunity to be heard in any judicial and administrative proceedings affecting the child, either directly, or through a representative or an appropriate body, in a manner consistent with the procedural rules of national law. The United Nations Committee on the Rights of the Child, in its General Comment No 12 on The Right of the Child to be Heard (CRC/C/GC/12, July 2009), points out that this is one of the fundamental values of the Convention and that there can be no correct application of article 3 if the components of article 12 are not respected. This poses a problem in extradition cases, as there is no obvious machinery for ascertaining the childs views, save by making the child party to the case or (at least in the Administrative Court) by allowing the child to file evidence or make representations under CPR rule 52.12A. The Official Solicitor accepts that this will rarely be necessary, as Laws LJ observed in the postscript to his judgment (para 68), but the Coram Childrens Legal Centre submit that this understates the strength of the obligation to hear the child. They point out that the childrens views and interests do not always coincide with their parents and that, especially in criminal cases, the parents may not be able properly to put the childrens views before the court. There is the further problem, exemplified in these cases, that a loving parent may be reluctant to discuss the problem with the children, hoping to spare them the distress and anxiety involved in what may be a long drawn out process. Indeed, that problem illustrates only too well how the interests of the parents and the children diverge. The parents may wish to fight extradition for as long as and as hard as they can, thus increasing the stress and the delay which, as section 1(2) of the Children Act 1989 tells us, is bad for children whose sense of time is so different from that of adults. I share the view of the Official Solicitor that separate legal representation of the children will rarely be necessary, but that is because it is in a comparatively rare class of case where the proposed extradition is likely to be serious damaging to their best interests. The important thing is that everyone, the parties and their representatives, but also the courts, is alive to the need to obtain the information necessary in order to have regard to the best interests of the children as a primary consideration, and to take steps accordingly. Conclusion dismiss the appeal in the case of Mrs HH. I would therefore allow the appeal in the cases of Mrs F K and Mr PH, but LORD HOPE I am grateful to Lady Hale for her careful description of the facts of these cases and for her analysis of the extent to which the approach of the Supreme Court in Norris v Government of the United States of America (No 2) [2010] 2 AC 487 needs to be modified in the light of ZH (Tanzania) v Secretary of State for the Home Department [2011] 2 AC 166. I agree with her that the need to examine the way the process will interfere with the childrens best interests is just as great in extradition cases as it is in cases of immigration control. The context in which the exercise must be conducted is, of course, quite different and the nature and weight of the interests that are to be brought into the balance on each side will differ too. But I remain of the view which I expressed in Norris, para 89 that it would be wrong to treat extradition cases as falling into a special category which diminishes the need to examine carefully the article 8 issues that the separation of the parents from the children will give rise to. As Lady Hale says in para 33, this involves asking oneself the right question and in an orderly manner, following the example of the Strasbourg court. That having been said, each case will depend on its own facts and some cases will be more easily resolved than others. An exploration of the theoretical basis for the exercise can only carry one so far. Ultimately it will come down to the exercise of judgment as to where the balance must be struck between what Lord Wilson has described in para 150 as two powerful and conflicting interests. The facts are fully before us, and so are the factors that must be weighed in the balance. I agree with Lady Hale that the public interest in returning Mrs F K to Poland is not so great as to justify the severe harm that this would cause to the two youngest children. The offences of dishonesty that are alleged against her, while not trivial, are relatively minor and certainly not of the kind that could be described as seriously criminal. There has been a conspicuous delay on the part of the prosecuting authorities. The welfare of these children would be at serious risk if their mother were to be removed from them. For these and all the reasons that Lady Hale gives I too would allow this appeal. The offences of which PH and HH have been convicted are of a quite different kind. We are dealing in their case with serious professional cross border crime involving trading in narcotic drugs which there is an international obligation to suppress. As Lord Judge says (see para 137), there are very strong reasons of public policy that persons who are accused or found guilty of such crimes and who break their bail conditions abroad should not be permitted to find a safe haven in this country. I agree with Lady Hale (see para 79) that the part the mother HH played in the conspiracy was such that the effect on her children is clearly outweighed by the public interest in returning her to Italy. So I too would dismiss her appeal. This leaves the case of the father PH. Like Lady Hale, I have found this by far the most difficult of all the cases that are before us, including those of the parents in BH and KAS v Lord Advocate [2012] UKSC 24. For the reasons she has explained, the effects that the extradition of both parents would have on their children, and on the youngest child Z in particular, are likely to be deeply painful and distressing and the long term effects very damaging. Such steps as might be taken to minimise these effects and ensure that the children will be adequately cared for are unresolved and are likely to remain so until extradition takes place. The uncertainty that this creates increases ones deep sense of unease. The circumstances can, as Lady Hale puts it in para 79, properly be described as exceptional. To accord them that description is, of course, not the end of the exercise. It cannot, in itself, be the test: see Norris, para 89. What then are the factors on the other side of the balance which would justify the fathers extradition despite the effects that have been described? Are the very strong reasons of public policy referred to in para 91 above as strong in his case as they are in the case of the mother? The fact that the father was not proved to have organised or promoted the trafficking enterprise shows that he played a lesser part in it. But I cannot attach much weight to this in view of the serious nature of the other offences of which he has been convicted. He too came to this country in breach of his bail conditions. There is really not much to choose between the father and the mother in these respects. I was initially attracted by the argument that, if the family were living in Italy, the father would be allowed to serve most of the rest of his sentence at home so that he could look after the children. I was attracted too by the point that Lady Hale makes in para 79 that if extradition were to be refused now it would remain open to the Italian authorities to issue another warrant in the future when the effects on the children would not be so severe. But I have concluded that it is not open to us, as the requested court, to question the decision of the requesting authorities to issue an arrest warrant at this stage. This is their case, not ours. Our duty is to give effect to the procedure which they have decided to invoke and the proper place for leniency to be exercised, if there are grounds for leniency, is Italy. If these factors are left out of account, as I think they must be, the decision remains a very difficult one. Taking everything into account, however, the balance seems to me to lie in favour of the fathers extradition. For all the reasons that Lady Hale gives, I very much hope that leniency will be exercised in his case having regard to the interests of the children. But that must be left to the authorities in Italy. I would dismiss his appeal. LORD BROWN I have read with great admiration the draft judgments respectively of Lady Hale in favour of allowing Mr PHs appeal and Lord Judge and Lord Wilson for dismissing it. Of all the many final appeals to which I have been party, truly I have found this to be one of the most troubling, each of the two powerful and conflicting interests (per Lord Wilson at para 150) at stake carrying such obvious weight. In the end, however, sorely tempted though I confess to have been to adopt Lady Hales approach, I am persuaded by the majority judgment that it would not be right to succumb. PHs criminality here was simply at too high a level of gravity to be outweighed by the interests of his children, heart rending though in the result their plight must be. For what seemed to me ultimately the yet more compelling reasons given by Lord Judge and Lord Wilson I too, therefore, would dismiss Mrs HH and Mr PHs appeals whilst (in common with the rest of the Court) allowing that of Mrs F K. LORD MANCE I have read to great advantage the draft judgments prepared by other members of the Court. Each case falls for consideration on its own facts, but, speaking generally, I agree that there may be a closer analogy between extradition and the domestic criminal process than between extradition and deportation or expulsion (Lady Hale, para 8(1)). One difference between extradition and deportation or expulsion is that the former process is usually founded on mutual international obligations (Lady Hale, para 31 and Lord Judge, paras 120 121). Both the UN Convention on the Rights of the Child dated 20 November 1989 and the Charter of Fundamental Rights referred to in article 6 TEU make the childs best interests a primary consideration in all actions concerning children. This means, in my view, that such interests must always be at the forefront of any decision makers mind, rather than that they need to be mentioned first in any formal chain of reasoning or that they rank higher than any other considerations. A childs best interests must themselves be evaluated. They may in some cases point only marginally in one, rather than another, direction. They may be outweighed by other considerations pointing more strongly in another direction. In some circumstances, it may be appropriate from the outset to identify competing primary considerations. Thus, in Wan (Wan v Minister for Immigration and Multicultural Affairs (2001) 107 FCR 133), cited by Lord Kerr in his para 145, the court found it appropriate to refer to the expectations of the Australian community (in an effective immigration policy) as one primary consideration and the separate interests of the children of the applicant for a visa as another (see para 33 in the judgment in Wan). Under article 8 of the European Convention on Human Rights, the ultimate substantive issue, where a right to respect for family life is engaged, is whether there exist factor(s) within article 8(2) outweighing that right. It is likely to be helpful at some point to address the issue specifically in those terms. But I do not think that any particular starting point or order can or should be imposed in the way in which courts address such an issue in the context of extradition. On this I agree with Lord Judge (para 126) and Lord Wilson (para 155). So long as it is clear that the issue has in substance been addressed and answered, that is what matters, rather than how or in what order the judge has expressed him or herself. At root, therefore, what is required is a balancing of all relevant factors in the manner called for by the Supreme Courts decision in Norris v Government of the United States of America (No 2) [2010] UKSC 9, [2010] 2 AC 487. The Courts subsequent decision in ZH (Tanzania) v Secretary of the State for the Home Department [2011] UKSC 4, [2011] 2 AC 166, as explained by Lady Hale in para 15 of her judgment on the present appeal, emphasises the importance of any relevant childs interests as a primary consideration, and is consistent with all that I have already said. Taking the present appeals, I entirely agree with and have nothing to add to Lady Hales reasoning on and disposition of the appeal in F K v Polish Judicial Authority. Like other members of the Court, I have found the appeal in HH and PH v Deputy Prosecutor of the Italian Republic, Genoa much more troubling. The difficulty is not just that the considerations on each side are powerful and conflicting, but that they are entirely different in nature. Balancing them against each other is inherently problematic. Like other members of the Court, I see no reason to disturb the factual or legal assessment of the position relating to the mother HH. But, ultimately and although this will involve the extradition of both parents, I also conclude that the childrens interests are under article 8 outweighed by the very strong considerations (identified in particular by Lord Judge in para 135 and Lord Wilson in paras 163 172) militating in favour of the extradition of the father PH as well as the mother HH. I am not persuaded that the position (as to the length of time that PH would have to serve) that would apparently apply if the family were living in Italy is relevant in circumstances where it cannot be said, by any stretch, that the sentence which PH would in fact to serve following return would be objectively disproportionate to what one might expect for the offences committed. Nor do I do think that it could be appropriate to invite the Italian authorities in effect to make another application in some years time. It is not easy to fit such a possibility within the scheme of the relevant Council Framework Decision of 13 June 2002 (2002/584/JHA) and Part 1 of the Extradition Act 2003, both of which contemplate a speedy once and for all resolution of any request for surrender. But, assuming that that problem were overcome, such a procedure would mean that the shadow of extradition would hang over the father and children for an uncertain period and would require at some future point to be dissolved or resolved under different circumstances which could prove no less difficult to balance than the present. In reaching my decision relating to HH and PH, I am though this is not essential to my conclusion comforted by the hope that it may be possible for both parents to be returned speedily to the United Kingdom to serve here the balances of their sentences under Council Framework Decision 2008/909/JHA of 27 November 2008. The Court was informed that this Framework Decision has now been transposed into Italian law. Mr Perry QCs instructions were that, under the previous regime of the Council of Europe Convention on the Transfer of Sentenced Persons of 21 March 1983, repatriation from Italy took 8 to 12 months, although statistics for all repatriations from all Council of Europe countries show a longer average period of around 18 months. Whichever figure is taken, it is to be hoped that much speedier results can be achieved under the Framework Decision, the purpose of which is to limit the rupture of environmental and family links resulting from imprisonment abroad. LORD JUDGE The issue in these appeals from the Administrative Court in England and Wales is summarised in the certified questions. This reads: Where, in proceedings under the Extradition Act 2003, the Article 8 rights of children of the defendant or defendants are arguably engaged, how should their interests be safeguarded, and to what extent, if at all, is it necessary to modify the approach of the Supreme Court in Norris v Government of the United States of America (No 2) in light of ZH (Tanzania)? The same issue arose, via the devolution route, in the appeal from the High Court of Justiciary in Scotland. In Norris v the Government of the United States [2010] 2 AC 487, sitting in a constitution of nine Justices, this court addressed the impact of section 21 and section 87 of the Extradition Act 2003 (the Act) in the context of the right to respect for private and family life contained in article 8 of the European Convention of Human Rights. The case was concerned with the rights of a husband and wife, neither of whom was in good health, who had been married for many years. The interests of children were not directly involved and did not arise for consideration. Nevertheless this decision was focussed on the single issue of article 8 rights in the context of extradition proceedings. Consistently with section 21 of the Act, section 87 provides: (1) If the judge is required to proceed under this section (by virtue of section 84, 85, or 86) he must decide whether the persons extradition would be compatible with the Convention rights within the meaning of the Human Rights Act 1998. (2) If the judge decides the question in subsection (1) in the negative he must order the persons discharge. (3) If the judge decides that question in the affirmative he must send the case to the Secretary of State for his decision whether the person is to be extradited. The legislative structure of the Act clearly envisages that the extradition process should be sequential, and that the question whether the extradition of any individual would be compatible with Convention rights does not arise for consideration until the statutory requirements have otherwise been fulfilled. The procedures envisaged in the Act include an examination of the relevant material sent to the court by the Secretary of State (section 78), and the requirement for the judge to address the question whether there is any bar to extradition (sections 79 83). These include, among other considerations, whether extradition is being sought for the purpose of prosecuting or punishing an individual on the basis of his race, religion, nationality, gender, sexual orientation or political opinions, and whether at any trial in the country seeking extradition he might be prejudiced on these grounds. By section 84 itself, which applies where there has been no conviction, the judge must decide whether there is sufficient evidence to make a case requiring an answer. If, in relation to any of these stages in the process, the application for extradition is flawed, the process comes to an end. It is only when the judge is otherwise satisfied that the statutory requirements justifying extradition are established that the final hurdles remain. One is the compatibility of the extradition with Convention rights, including article 8 (section 87): another is that extradition would be unjust or oppressive because of the physical or mental ill health of the person to be extradited (section 91). Article 8 of the Convention is familiar. It provides: 1. Everyone has the right to respect for his private and family life, his home and his correspondence. 2. There shall be no interference by a public authority with the exercise of this right except such as in accordance with the law and is necessary in a democratic society in the interests of national security, public safety or the economic well being of the country, for the prevention of disorder or crime, for the protection of health or morals, or for the protection of the rights or freedoms of others. In Norris it was accepted without reservation, and in accordance with section 87 of the Act, that on occasions in the extradition process article 8 rights may prevail, with the result that what would otherwise be a well founded extradition application would be dismissed. All that acknowledged, the judgments are unequivocal about the importance of giving full weight to the public interest in well founded extradition proceedings: (a) Lord Phillips of Worth Matravers speaking for the Court, made clear at para 56 that these occasions would inevitably be rare: The reality is that only if some quite exceptionally compelling feature, or combination of features, is present that interference with family life consequent upon extradition will be other than proportionate to the objective that extradition serves. (b) Lord Hope of Craighead, at para 87, observed: Resisting extradition on this ground (respect for family life under article 8) is not easy. He continued by expressly agreeing with the passage from the judgment of Lord Phillips referred to in the previous paragraph: The public interest in giving effect to a request for extradition is a constant factor, and it will always be a powerful consideration to which great weight must be attached. The more serious the offence the greater the weight that is to be attached to it (para 91). (c) Lord Brown of Eaton under Heywood, at para 95, added: It will be only in the rarest cases that article 8 will be capable of being successfully invoked under section 87 of the Extradition Act 2003. (d) Lord Mance, at para 107, stated: Interference with private and family life is a sad, but justified, consequence of many extradition cases. Exceptionally serious aspects or consequences of such interference may however outweigh the force of the public interest in extradition in a particular case. (e) Lord Collins of Mapesbury, at paras 127 and 128, commented: It hardly needs to be said that there is a strong public interest in international co operation for the prevention and punishment of crime. Consequently, the public interest in the implementation of extradition treaties is an extremely important factor in the assessment of proportionality As a result, in cases of extradition, interference with family life may easily be justified under article 8(2) . (f) Lord Kerr of Tonaghmore, at para 136, addressed the exceptionality question: It is entirely possible to recognise that article 8 claims are only likely to overcome the imperative of extradition in the rarest of cases without articulating an exceptionality test. The essential point is that such is the importance of preserving an effective system of extradition, it will in almost every circumstance outweigh any article 8 argument. This merely reflects the expectation of what will happen. It does not erect an exceptionality hurdle. These observations from the Supreme Court speak for themselves. They provide the clearest, authoritative, indication of the approach to be taken to extradition proceedings where article 8 considerations are engaged. What is more, the approach is entirely consistent with the views adopted in the European Court of Human Rights itself. The jurisprudence of the European Court of Human Rights to which reference was made by Lord Phillips (with whose wide ranging judgment every member of the Court agreed) includes a number of decisions of the court where the interests of young children of the individual whose extradition was in contemplation were engaged. In Launder v United Kingdom (1997) 25 EHRR CD67 a complaint of a potential violation of article 8 if the applicant were extradited to Hong Kong was found to be manifestly ill founded. The Commission emphasised that it was only in exceptional circumstances that extradition to face charges of serious criminal offences would constitute an unjustified or disproportionate interference with the right to respect for family life. In King v United Kingdom (Application No 9742/07) (unreported) given 26 January 2010 a much more recent case, the defendant was facing serious drug trafficking charges in Australia. His extradition was ordered. He was a husband, father of two children born in 1998 and 2004, and his mother was in poor health. If convicted he faced a very lengthy term of imprisonment. The application was unanimously declared to be inadmissible: Mindful of the importance of extradition arrangements between states in the fight against crime (and in particular crime with an international or cross border dimension), the court considers that it will only be in exceptional circumstances that an applicants private or family life in a contracting state will outweigh the legitimate aim pursued by his or her extradition. If the applicant were [eventually] sentenced to imprisonment [in Australia, with the consequent impact on the rest of his family,] his extradition cannot be said to be disproportionate to the legitimate aim served. It is unnecessary to add to the authorities, but the trend has been consistent. (See, for example, Aronica v Germany (Application No 72032/01) (unreported) given 18 April 2002 and Kleuver v Norway (Application No 45837/99) (unreported) given 30 April 2002 another drug trafficking case, in which a baby was separated at birth from his mother). As far as counsel have been able to discover in the European Court itself the article 8 rights of young children whose parents have been involved in extradition proceedings, have never yet prevailed over the public interest considerations involved in their extradition. That, of course, and entirely consistently with the decision in Norris does not mean that they never will, or that they never should, (see R (Gorczowska) v District Court in Torun, Poland [2012] EWHC 378), but it does underline that there is no difference between the approach of this court in Norris and the European Court of Human Rights to the possible impact of article 8 considerations in the context of extradition. Not long after Norris was decided, in ZH (Tanzania) v Secretary of State for the Home Department [2011] 2 AC 166, this court was concerned with the implementation of immigration law in the context of a decision to remove or deport a non citizen parent of two UK citizens, who were born and had lived here throughout their 12 and 9 years. Their article 8 rights were clearly engaged because, if their mother were deported, they would inevitably have to accompany her. In the Supreme Court it was conceded on behalf of the Secretary of State that the decision to remove the mother was incompatible with article 8. Article 8, it was submitted, involved a careful evaluation of all the relevant factors, with no one factor decisive or paramount. Counsel argued that although the best interests of the child were a primary consideration, they were not the primary consideration. The issue of principle was examined in the context of immigration control, and well established principles in the House of Lords in Beoku Betts v Secretary of State for the Home Department [2009] AC 115 and EB (Kosovo) v Secretary of State for the Home Department [2009] AC 1159 and the Privy Council decision in Naidike v Attorney General of Trinidad and Tobago [2005] 1 AC 538. The Strasbourg jurisprudence, again in the context of immigration control, was also analysed. Baroness Hale identified two different situations, the first involving long settled alien residents who had committed criminal offences, and the second where an individual was to be removed because he or she had no right to be or remain in. Having described the entitlement of states to control the entry and residence of aliens as the starting point, Baroness Hale concluded that: In making the proportionality assessment under article 8, the best interests of the child must be a primary consideration. This means that they must be considered first. They can, of course, be outweighed by the cumulative effect of other considerations. She identified what she described as the countervailing considerations, which, in the particular context of ZH, did not begin to displace the best interests of the children. However the best interests of the children were not the paramount nor even the primary consideration. Lord Kerr spoke of a primacy of importance to be accorded to the best interests of a child, which although not a factor of limitless importance was said to rank higher than any other. They should normally dictate the outcome of cases such as the present. The approach of the European Court of Human Rights to the relationship between immigration control and article 8, like its approach to the relationship between extradition and article 8, is well established. Taken together, Boultif v Switzerland (2001) 33 EHRR 1179 and ner v The Netherlands (2006) 45 EHRR 421, identify no less than ten factors or guiding principles which might arise for consideration in the context of immigration control and article 8. None is given priority over any of the others, and by the same token, none is secondary to any of the others. ZH (Tanzania) was not concerned with and did not address extradition. Neither the decision in Norris, nor the judgment of Lord Phillips, nor those of any other members of the court, nor the decisions relating to extradition from the European Court of Human Rights, nor indeed the structure of the Act itself, were cited or addressed, nor was it suggested that in the context of extradition proceedings the principles identified in Norris were subject to any further amplification or modification. It seems improbable that, without doing so expressly and unequivocally, the Court in ZH (Tanzania) intended to or would have modified the way in which Norris had stated that the article 8 rights of the family of a proposed extraditee should be approached. Stripped to essentials ZH (Tanzania) decided that in the context of immigration control and the entitlement of this country to decide which aliens may reside here, the article 8 rights of a child or children should be treated as a primary consideration against which other relevant factors might countervail, whereas in Norris, in the context of extradition, it was decided that article 8 rights might prevail notwithstanding the immense weight or imperative which attached to the public interest in the extradition of those convicted or suspected of having committed offences abroad. It is of course well understood that the critical question, whether the decision arises for consideration in the context of immigration or extradition, is whether the interference is necessary in a democratic society for the prevention of disorder or crime. Unlike the absolute prohibition against torture in article 3, the right to family life involves a proportionality assessment. In this assessment public interest considerations arising from the control of immigration and the implementation of extradition obligations arise in distinct contexts. Dealing with it briefly, in the immigration process this country is exercising control over the presence of aliens. This is a purely domestic decision made subject to domestic considerations, in the light of domestic legislation, including the Human Rights Act 1998 and the Borders, Citizenship and Immigration Act 2009. An order for deportation may be wholly unconnected to any criminal activity, and even when it is consequent on criminal convictions, it usually follows after not before the appropriate sentence has been imposed and served here. On the occasions when, because of fears of persecution or prosecution abroad, an order is not made, that continues to be a reflection of domestic rather than international processes. As explained in Norris extradition is concerned with international co operation in the prevention and prosecution of crime. The objectives served by the process require international co operation for the prosecution of crimes and the removal of sanctuaries or safe havens for those who have committed or are suspected of having committed criminal offences abroad. The private and family rights of the victims of criminal offences committed abroad will themselves have been damaged by offences like rape and wounding, theft and robbery and child abduction, as well as drug trafficking and fraud. That consideration is absent from the immigration context. Consistently with this analysis, section 55 of the Borders, Citizenship and Immigration Act 2009 made specific provision which imposed an obligation on the Secretary of State to make arrangements to ensure that the welfare of children in the United Kingdom should be safeguarded and promoted in the context of immigration, asylum or nationality processes without identical responsibilities being enacted in the context of the exercise of the extradition process. And, as already noted, to date at any rate, the European Court of Human Rights has treated immigration and extradition as distinct concepts, while in the context of immigration control, enumerating guiding principles of equal importance to the balancing exercise. For these reasons, in my judgment, assuming for the sake of argument that the child or children are in identical family situations, it follows that an extradition order for one or both parents may be appropriate when deportation or removal would not. In other words, because distinct issues are involved, the same facts, involving the same interests of and the same potential or likely damage to the child or children, may produce a different outcome when the court is deciding whether to remove foreign citizens from this country or extraditing convicted or suspected criminals (including citizens of this country) to serve their sentences or stand trial for crimes committed abroad. The impact of ZH (Tanzania) and the valuable submissions made to this court founded on it in the context of the extradition process, is to highlight that Norris has been subject to a deal of misunderstanding. Norris did not decide that the article 8 rights of the family of the proposed extraditee can never prevail unless an exceptionality test is satisfied. What it suggested was that when article 8 rights were properly examined in the extradition context, the proportionality assessment would be overwhelmingly likely to be resolved in favour of extradition. This description of the likely results of the extradition process appears to have been adopted as a forensic shorthand for the test. Just because courts fully appreciate that children who are subjected to long term separation from their parent or parents will almost without exception suffer as a result, the application of a stark exceptionality test may, even if unconsciously, diminish the weight to be given to the interests of the children. The prohibited thought processes run along readily identified lines: as separation from their parent or parents inevitably causes damage to virtually every child, what is exceptional about the situation of the children involved in this particular case, and what would be exceptional about the extradition of their parent or parents? Accordingly the decision in ZH (Tanzania) provided a helpful opportunity for the application of Norris to be re evaluated, and the principles identified in the judgments to be better understood. In the end, however, the issue remains proportionality in the particular circumstances in which the extradition decision has to be made when the interests of dependent children are simultaneously engaged. With respect to those who, by reference, by example, to an international Convention like the UN Convention on the Rights of the Child or the Charter of Fundamental Rights of the European Union, or indeed article 8 of the Convention itself, take a different view, it does not seem to me appropriate to prescribe to the judges who deal with extradition cases any specific order in which they should address complex and sometimes conflicting considerations of public policy. Indeed in some cases it may very well be sensible to postpone any detailed assessment of the interests of children until the crime or crimes of which their parents have been convicted or are alleged to have committed, and the basis on which their extradition is sought have all been examined. Self evidently theft by shoplifting of a few items of goods many years earlier raises different questions from those involved in an armed robbery of the same shop or store: possession of a small quantity of Class C drugs for personal use is trivial when set against a major importation of drugs. Equally the article 8 considerations which arise in the context of a child or children while nearly adult with the advantages of integration into a responsible extended family may be less clamorous than those of a small baby of a single mother without any form of family support. Ultimately what is required is a proportionate judicial assessment of sometimes conflicting public interests. Like the sentencing decision following conviction, the extradition process arises in the context of alleged or proved criminal conduct. The sentencing decision is similarly based on statute. By section 142 of the Criminal Justice Act 2003 (the 2003 Act) the court must have regard to a number of wide ranging and sometimes inconsistent specific purposes of sentencing. Thus, they include the punishment of offenders and their rehabilitation. By section 143 the seriousness of the offence must be considered and when it is being determined, the court is required to consider the offenders culpability in committing the offence and any harm which the offence caused, was intended to cause or might foreseeably have caused. By section 166 any matters which the sentencing court considers relevant to mitigation may be taken into account. It is at this stage of the sentencing process that, among other matters of mitigation, the interests of the defendants child or children, and any of his or her or their dependants and indeed his or her health, and the health and wellbeing of members of the family usually fall to be considered. Bringing the somewhat complex statutory threads together, unless it is justified by the seriousness of the offence a custodial sentence may not be imposed, and when a custodial sentence is justified, it must be no longer than appropriate in the light of all the aggravating and mitigating features (see section 152(2) and section 153(2)). From this it follows that even if the custody threshold is passed, matters of mitigation may nevertheless result in the imposition of a non custodial sentence: and even if a custodial sentence must be imposed, it may be reduced for the same reasons. However, in accordance with statute and practice, the starting point is not usually the mitigation, whatever form it may take, but the offence and its seriousness. In the end what of course matters, whatever starting point may have been taken, is that all the considerations should have been carefully evaluated and a fair balance struck between them. Long before the enactment of the Human Rights Act 1998, sentencing courts had taken account of the likely impact of a custodial sentence on children dependent on the defendant, not in his or her interests, but in the interests of the children. The history can be traced in the first and second editions of Principles of Sentencing, first published in 1970, and by the date of publication of the second edition in 1979, based on a study by Dr David Thomas of the Institute of Criminology at Cambridge University of many thousands of judgments in sentence appeals, beginning in 1962. Dr Thomas identified what he described as a marked difference in the approach to sentences imposed on mothers with caring responsibilities. There are numerous examples; thus, in Smith (February 1965) the sentence of 18 months imprisonment for cheque book frauds by a deserted mother with four dependent children was varied to a probation order. Some ten years later, in Charles (July 1975) a woman convicted of unlawful wounding, using a pair of scissors to stab her victim, was suspended partly because the defendant was the mother of a number of small children. The continuing responsibility of the sentencing court to consider the interests of children of a criminal defendant was endorsed time without number over the following years. Examples include Franklyn (1981) 3 Cr App R(S) 65, Vaughan (1982) 4 Cr App R(S) 83, Mills [2002] 2 Cr App R (S) 229, and more recently Bishop [2011] EWCA Crim 1446 and, perhaps most recently in Kayani; Solliman [2011] EWCA Crim 2871, [2012] 1 Cr App R 197 where, in the context of child abduction, the court identified a distinct consideration to which full weight must be given. It has long been recognised that the plight of children, particularly very young children, and the impact on them if the person best able to care for them (and in particular if that person is the only person able to do so) is a major feature for consideration in any sentencing decision. Recent definitive guidelines issued by the Sentencing Council in accordance with the Coroners and Justice Act 2009 are entirely consistent. Thus, in the Assault Guideline, taking effect on 13 June 2011, and again in the Drug Offences Guideline, taking effect on 29 February 2012, among other features the defendants responsibility as the sole or primary carer for a dependant or dependants is expressly included as potential mitigation. The principle therefore is well established, and habitually applied in practice. However it should not obscure the reality that in the overwhelming majority of cases when the criminal is convicted and sentenced for offences which merit a custodial sentence, the innocent members of his family suffer as a result of his crimes. Although custodial sentences are sometimes avoided altogether where the level of seriousness is relatively minor and are sometimes reduced by reference to the needs of dependent children, care must also be taken to ensure that considerations like these do not produce injustice or disparity as between co defendants with different family commitments, or undermine the thrust towards desirable consistency of approach to sentencing decisions on a national basis, a process which began with the issue of sentencing guidelines by the Court of Appeal, Criminal Division, and now given statutory authority by the creation of first, the Sentencing Guidelines Council (by section 167 of the 2003 Act), and now the Sentencing Council itself. Accordingly, while for generations making allowances for the interests of dependent children, and what would now be described and in Bishop were described as their article 8 interests, the need to impose appropriate sentences in accordance with established, and now statutory provisions, is unchanged. As Hughes LJ has recently explained in R v Boakye and others (3 April 2012) The position of children and a defendants family may indeed be relevant, but it will be rare that their interests can prevail against societys plain interest in the proper enforcement of the criminal law. The more serious the offence, generally the less likely it is that they can possibly do so. This observation mirrors observations to the same effect in Norris in the context of extradition. The effect of this analysis is to underline that the starting point in the sentencing decision involves an evaluation of the seriousness of the crime or crimes and the criminality of the offender who committed them or participated in their commission and a balanced assessment of the countless variety of aggravating and mitigating features which almost invariably arise in each case. In this context the interests of the children of the offender have for many years commanded principled attention, not for the sake of the offender, but for their own sakes, and the broader interests of society in their welfare, within the context of the overall objectives served by the domestic criminal justice system. Sadly the application of this principle cannot eradicate distressing cases where the interests even of very young children cannot prevail. The extradition process involves the proper fulfilment of our international obligations rather than domestic sentencing principles. So far as the interests of dependent children are concerned, perhaps the crucial difference between extradition and imprisonment in our own sentencing structures is that extradition involves the removal of a parent or parents out of the jurisdiction and the service of any sentence abroad, whereas, to the extent that with prison overcrowding the prison authorities can manage it, the family links of the defendants are firmly in mind when decisions are made about the establishment where the sentence should be served. Nevertheless for the reasons explained in Norris the fulfilment of our international obligations remains an imperative. ZH (Tanzania) did not diminish that imperative. When resistance to extradition is advanced, as in effect it is in each of these appeals, on the basis of the article 8 entitlements of dependent children and the interests of society in their welfare, it should only be in very rare cases that extradition may properly be avoided if, given the same broadly similar facts, and after making proportionate allowance as we do for the interests of dependent children, the sentencing courts here would nevertheless be likely to impose an immediate custodial sentence: any other approach would be inconsistent with the principles of international comity. At the same time, we must exercise caution not to impose our views about the seriousness of the offence or offences under consideration or the level of sentences or the arrangements for prisoner release which we are informed are likely to operate in the country seeking extradition. It certainly does not follow that extradition should be refused just because the sentencing court in this country would not order an immediate custodial sentence: however it would become relevant to the decision if the interests of a child or children might tip the sentencing scale here so as to reduce what would otherwise be an immediate custodial sentence in favour of a non custodial sentence (including a suspended sentence). F K (FC) v Polish Judicial Authority The facts are fully described in the judgment of Lady Hale. They are stark, and in the present context highlight the combination of circumstances which can fairly be described as borderline. We must proceed on the basis that the appellant fled Poland knowing of the criminal charges she was due to face. The offences were not trivial, but nor were they of the utmost seriousness. The most recent occurred over a decade ago. The prosecuting authorities have been dilatory in the extreme. As far as we can tell, the extradition process began without reference to the new life the appellant and her husband have made for themselves in this country, and in particular the birth to them of two further children, one of whom is very young, and the other who is only just past the toddler stage. Given the interests of the two youngest children in the context of the current long established family arrangements in this country, and not least the uncertain health of their father, it can safely be said that an immediate custodial sentence would not be in contemplation. In agreement with Lady Hale I agree that the damage to the interests of the two youngest children would be wholly disproportionate to the public interest in the extradition of the appellant on the two European Arrest Warrants. R (HH) and R (PH) v Deputy Prosecutor of the Italian Republic Genoa. The facts are fully described in the judgments of Lady Hale and Lord Wilson. They show something of the heavy burden resting on judges responsible for the application of the Act. They are agreed that the appeal of HH should be dismissed. I, too, agree. The effect of this decision is to highlight the desperate plight which will befall the children if the appeal of PH, too is dismissed. This is movingly analysed in the judgment of Lady Hale, and no member of the Court could be unaware of it or fail to give it the full measure of importance which it commands. What, then, is the basis on which the extradition of PH is sought? HH and PH were both engaged in serious professional cross border crime. This involved not one but seven separate expeditions from Morocco across the Mediterranean into Europe for onward distribution from their eventual destination in Genoa. Although PH was not to be treated as an organiser of the enterprise in the sense required for a conviction of this offence in Italy (see the decision of 9 February 2010) in English law he was undoubtedly guilty of conspiracy to import drugs. Whether correctly described in law as a conspirator or not, PH was an active participant and member of a gang of professional criminals, with a crucial role as a trusted member of the gang, trusted to supervise and see to the safe arrival and eventual disposal and distribution of the drugs after they arrived in Italy. He was therefore crucial to the inner workings and success of the enterprise. As to the offences themselves, there was no personal mitigation. At all material times PH was a mature intelligent adult who appreciated exactly what he was doing. Unlike some of those who become involved in drug smuggling he was not under any form of pressure or compulsion, whether arising from fear of the consequences of non participation or motivated by some desperate family need for funds. In short he was no more, and certainly no less than a professional criminal. Making full allowance for the interests of his children and their welfare in the absence of their mother, in England and Wales anything lower than a 10 year sentence would be improbable. On the basis of such a sentence, imposed today he would serve 5 years, with credit given for the time spent in custody on remand before sentence. In the extradition context, but not the sentencing context, there is this further consideration. PH was granted bail in Italy and almost immediately broke his bail conditions and has now made his home in the United Kingdom. In this jurisdiction that would constitute a separate offence, normally dealt with by way of a consecutive sentence. In the extradition context it is sufficient to underline the very strong public policy consideration that professional criminals who break their bail conditions abroad should not be permitted to find a safe haven here. Taken together, I cannot avoid the conclusion that the overwhelming public interest requires the extradition of PH as well as HH, and accordingly that his appeal, like her appeal, should be dismissed. By way of further comment, I should add that I have ignored my misgiving that the youngest child may have been conceived in an endeavour by the parents to improve their position in the criminal justice and extradition processes. Of course that would neither be the fault of nor diminish the article 8 entitlements of the child. Nevertheless it would in my view have had an impact on the proportionality test adverse to the irresponsible parent who treated the conception of a child as a selfish device to evade justice. LORD KERR Should the approach of the courts to article 8 rights be radically different in extradition cases from that in deportation or immigration cases because of the very important obligation of the State to ensure that those who are to be investigated, prosecuted or imprisoned for criminal offences are returned to those countries as per Silber J in para 55 of his judgment in B v District Courts in Trutnov and Liberec [2011] EWHC 963 (Admin)? There is a principled distinction to be recognised between extradition and expulsion. The latter is performed unilaterally and is designed to protect the states national interest; the former involves compliance with an international obligation and is performed in furtherance of the suppression of transnational crime and the elimination of safe havens. But, just because the interests that require to be protected are different in the two contexts, it does not automatically follow that the approach to an evaluation of article 8 rights has to be different. It is true that the importance of protecting a system of extradition carries greater weight than will (in general terms) arrangements to expel unwanted aliens or the control of immigration. Extradition is, par excellence, a co operative endeavour and it depends for its success on comprehensive (if not always total) compliance by those who participate in the system. As a matter of generality, therefore, it will be more difficult to overcome the imperative for extradition by recourse to article 8 rights than it will be in the field of expulsion and immigration. But that is a reflection of the greater importance of the need to promote the system of extradition rather than a diminution in the inherent value of the article 8 right. The intrinsic value of the right cannot alter according to context; it will merely be more readily defeasible in the extradition context. Although there were some references in Norris (Norris v Government of the United Sates of America (No 2) [2010] UKSC 9, [2010] 2 AC 487) to article 8 considerations arising from separation from dependent relatives, these were, at most, fairly oblique. There was no discussion in ZH (ZH (Tanzania) v Secretary of State for the Home Department) [2011] UKSC 4, [2011] 2 AC 166 about extradition but I agree with Lady Hale that this does not mean that it has nothing to say about how article 8 issues involving children should be approached in the extradition context. As she has pointed out, these cases provide the opportunity to synthesise the reasoning that underlies both Norris and ZH. The debate about whether the interests of the child should be, in article 8 terms, a primary consideration or the primary consideration is a fairly arid one but I have to say that I find the notion that there can be several primary considerations (or even more than one) conceptually difficult. Primary, as an adjective, means occurring or existing first in a sequence or series of events or circumstances (Oxford English Dictionary). Its natural synonyms are main, chief, most important, key, prime, and crucial. I have found the argument about the place that childrens interests should occupy in the hierarchy of the courts consideration of article 8 most persuasively expressed in the Coram Childrens Legal Centre note submitted in the course of this appeal. It is unquestioned that in each of these cases, the childrens article 8 rights are engaged. As a matter of logical progression, therefore, one must first recognise the interference and then consider whether the interference is justified. This calls for a sequencing of, first, consideration of the importance to be attached to the childrens rights (by obtaining a clear sighted understanding of their nature), then an assessment of the degree of interference and finally addressing the question whether extradition justifies the interference. This is not merely a mechanistic or slavishly technical approach to the order in which the various considerations require to be evaluated. It accords proper prominence to the matter of the childrens interests. It also ensures a structured approach to the application of article 8. Lord Wilson says (in para 153) that there is no great logic in suggesting that in answering the question, does A outweigh B, attention must first be given to B rather than to A. At a theoretical level, I do not disagree. But where a childs interests are involved, it seems to me that there is much to be said for considering those interests first, so that the risk that they may be undervalued in a more open ended inquiry can be avoided. Lady Hale (in para 14 above) has correctly described my statement in para 46 of ZH (Tanzania) v Secretary of State for the Home Department [2011] UKSC 4, [2011] 2 AC 166 as expressing more strongly than other members of the court the importance that should be attached to their best interests in reaching decisions that will affect children. In suggesting that these should be given a primacy of importance, I did not intend to stoke the debate about the distinction between a factor of primary importance and the factor of primary importance. What I was seeking to say was that, in common with the opinion of the High Court of Australia in Wan (Wan v Minister for Immigration and Multicultural Affairs (2001) 107 FCR 133), no factor must be given greater weight than the interests of the child. This is what that court said at para 32: Provided that the Tribunal did not treat any other consideration as inherently more significant than the best interests of Mr Wan's children, it was entitled to conclude, after a proper consideration of the evidence and other material before it, that the strength of other considerations outweighed the best interests of the children. However, it was required to identify what the best interests of Mr Wan's children required with respect to the exercise of its discretion and then to assess whether the strength of any other consideration, or the cumulative effect of other considerations, outweighed the consideration of the best interests of the children understood as a primary consideration. (Emphasis added). In the field of extradition, as in every other context, therefore, the importance of the rights of the particular children affected falls to be considered first. This does not impair or reduce the weight that will be accorded to the need to preserve and uphold a comprehensive charter for extradition. That will always be a factor of considerable importance, although, as Lady Hale has said (in para 8(5)), the weight to be attached to it will vary according to the nature and seriousness of the crime or crimes involved and (at para 8(6)), delay in applying for extradition may reduce the weight to be attached to the public interest in maintaining an effective system of extradition. Following the approach that I have outlined, I have no hesitation in expressing my agreement with Lady Hale in her proposed disposal of the appeal in F K v Polish Judicial Authority. As she has pointed out, the offences, although not trivial, do not rank among the most serious in the criminal calendar. There has been substantial delay. The offences are already of considerable vintage. The public interest importance of maintaining a comprehensive system of extradition will not suffer a significant impairment if F Ks surrender to the Polish authorities is not ordered. By contrast, the adverse impact on her family and, particularly its younger members, is likely to be profound and irretrievable. I too would allow the appeal in that case. In the case of PH and HH, the consequences of both parents being extradited have been thoroughly charted by Lady Hale and Lord Wilson and need no further elaboration. The anticipated plight of these innocent children, the momentous upheaval to their lives and the inevitable emotional damage that they will suffer are indeed, as Lord Wilson has put it, heart rending. But pitted against those circumstances are the extremely serious crimes of which both PH and HH were convicted; the nature of their participation in those crimes; and the fact that they have exploited the criminal justice system in Italy in their attempts to avoid punishment. These considerations, allied to the pressing need to preserve an effective system of extradition based on international co operation and the denial of safe havens, create a formidable case in favour of the appellants extradition. Ultimately, as Lord Wilson has said (para 150), the differing conclusions as to the disposal of these appeals rests not on any difference in legal analysis but on a judgment as to where the balance of the competing interests is found to fall. For the reasons given by Lord Judge and Lord Wilson, with which I agree, I have concluded that it must firmly fall in favour of the appellants extradition. I would dismiss their appeals. LORD WILSON In her judgment Lady Hale sets out the facts of the appeals comprehensively; and analyses the law in terms to which, in most respects, I can readily subscribe. But while I agree with her, for the reasons which she gives, that the appeal of Mrs F K should be allowed and that that of Mrs HH should be dismissed, I do not agree with her that the appeal of Mr PH should be allowed. The difference between us represents no difference of legal analysis. It is a difference of value judgement upon the weight to be attached to two powerful and conflicting interests. To be more specific, our sense of proportion in relation to them is different. In accordance with that reached by Laws LJ, and now by Lord Judge, the Lord Chief Justice, with whose judgment I agree, I have reached the conclusion, heart rending in the light of its devastating effect upon his three children, that the order for the extradition of PH to Italy should stand. Section 21 of the 2003 Act provides: (1) If the judge is required to proceed under this section (by virtue of section 11 or 20) he must decide whether the persons extradition would be compatible with the Convention rights within the meaning of the Human Rights Act 1998 (c 42). The reference to sections 11 and 20 is a reference to subsections (4) of each of the sections, which relate to warrants prior to, and following, conviction respectively. What section 21(1) adds to the overarching obligation of the court under section 6 of the Human Rights Act 1998 not to act in a way which is incompatible with Convention rights is to identify the stage in its sequential consideration of an application for an extradition order under Part 1 of the 2003 Act at which it must turn to that question. It follows that the nature of the offence of which the person stands convicted or accused will already have been considered at an earlier stage or stages, in particular at that of considering pursuant to section 10(2) whether the offence specified in the warrant is an extradition offence. Where it is suggested to the court (or, in the light of its free standing obligation not to act incompatibly with Convention rights, where it appears to the court) that the defendants extradition might infringe the rights of himself and of the other members of his family to respect for their family life under article 8, the requisite inquiry under para 2 of the article is likely to reduce to one issue. There is likely to be no doubt (a) that the extradition would interfere with the exercise of their rights; (b) that, inasmuch as the application for the extradition order will have survived the earlier stages of the inquiry, the interference would be in accordance with the law; and (c) that the aim of the extradition would be one of those specified in para 2, namely the prevention of crime. The issue is likely to be whether the interference is necessary in a democratic society. [The] notion of necessity implies that the interference corresponds to a pressing social need and, in particular, that it is proportionate to the legitimate aim pursued: Olsson v Sweden (No 1) (1988) 11 EHRR 259. The concept of a pressing social need adds little, if anything, to that of a legitimate aim: in Norris v Government of the United States of America (No 2), [2010] UKSC 9, [2010] 2 AC 487, Lord Phillips, with whose judgment all the other members of the court agreed, equated them (para 10). So the court must survey the individual, or private, features of the case, namely the circumstances of the family on the one hand and of the offence (or alleged offence) on the other and, in the light also of the public interests on both sides to which I will refer in paras 156 and 167, must proceed to assess the proportionality of the interference. Is the right question whether the likely gravity of the interference with respect for family life outweighs the potency of the legitimate aim of the extradition order? Or is it whether the potency of the legitimate aim outweighs the likely gravity of the interference? Such is a question, of significance no doubt much more theoretical than practical, in which, perhaps to its credit, the European Court of Human Rights (the ECtHR) seems not much interested. It stated in Babar Ahmad v UK, (2010) 51 EHRR SE97, at para 172, that it will only be in exceptional circumstances that an applicants private or family life in a contracting state will outweigh the legitimate aim pursued by his or her extradition. As it happens, however, I agree with the submission on behalf of the Coram Childrens Legal Centre, reflective of an observation by Lord Kerr in the Norris case, at para 137, that the structure of article 8, which requires the state to justify interference, is such as to cast the question in the opposite way: does the aim outweigh the interference? In ZH (Tanzania) v Secretary of State for the Home Department, [2011] UKSC 4, [2011] 2 AC 166, Lady Hale said, at para 33: In making the proportionality assessment under article 8, the best interests of the child must be a primary consideration. This means that they must be considered first. With great respect, I do not consider that Lady Hales second sentence follows logically from her first. Nor do I discern any greater logic in a conclusion that, in answering a question does A outweigh B?, attention must first be given to B rather than to A. In my view a judge is entitled to decide for himself how to approach his task. No doubt in some cases a defendant to an application for an extradition order will invoke the article 8 rights of himself and his family in circumstances in which the judge can swiftly reject the suggested incompatibility. But in others, in particular where the defendant lives in a family with a minor child, of whom he is (or claims to be) the sole or principal carer, a full inquiry is necessary, such as was indeed conducted in the case of PH and HH by the district judge and, on appeal and with the benefit of additional evidence adduced by the Official Solicitor, by Laws LJ. Article 3.1 of the UN Convention on the Rights of the Child dated 20 November 1989 provides that in all actions concerning children. the best interests of the child shall be a primary consideration. Analogously article 24.2 of the Charter of Fundamental Rights of the European Union (2000/C 364/01) dated 7 December 2000 provides that in all actions relating to children. the childs best interests must be a primary consideration. The word concerning in article 3.1, like the phrase relating to in article 24.2, encompasses actions with indirect, as well as direct, effect upon children: the ZH (Tanzania) case, para 26 (Lady Hale). The rights of children under article 8 must be examined through the prism of article 3.1: see paras 21 to 23 of the same case. Thus, in the present inquiry, article 8 affords to the best interests of the three children a substantial weight which, following examination, other factors may earn and even exceed but with which, under the law of the article, they do not start. When we come to consider the other side of the equation, we will notice, at para 167 below, not just the importance that PH should be punished for his wrong doing but the public importance of adhering to arrangements for extradition. So, at this earlier stage, we should notice not just the grave effects of his extradition upon these three children but the public importance that children should grow up well adjusted. The principle which pervades the despatch of issues relating to children in the family courts is that, as a rule, they are more likely to grow up well adjusted if they continue to live in the home of both or at least one of their parents: see, for example, In re KD (A Minor) (Ward: Termination of Access) [1988] 1 AC 806 at p 812 B C (Lord Templeman). I agree with Lady Hales comments on this point at para 25 above. To A commentary on the UN Convention on the Rights of the Child, published by Nijhoff in 2007, Professor Freeman contributed Chapter 3, of which the title was Article 3: The Best Interests of the Child. He wrote, at p 41: There are also utilitarian arguments in favour of prioritizing childrens interests. Thus, it may be thought that giving greater weight to childrens interests maximises the welfare of society as a whole. Barton and Douglas have even argued that children are important for the continuity of order in society. Putting children first is a way of building for the future. It is significant that countries reconstructing after nightmares of rightlessness have put childrens interests in the foreground. I turn to consider the likely arrangements for the children in the event that PH, as well as HH, was to be extradited to Italy. Although there are wider members of the family, to whom I will refer in para 158, who would be likely to continue to have contact with the children, none of them is in a position to offer any of them a home. So the local authority would have to accommodate the children. In para 69 above Lady Hale criticises the authority for not having made plans for them in that event and thus for not having done work with them in preparation for it. But the parents have decided not to explain, even to X, that they might be removed to Italy so no work could have been done with the children until they had been persuaded to reverse that decision. They raise the spectre that, notwithstanding their refusal to consent, Z might be adopted. It is, however, clear to me that, in circumstances in which a loving father was to say that, following the next four years in prison, he wished to resume his care of a child, a court could not properly be satisfied that the childs welfare required it to dispense with his consent pursuant to section 52(1)(b) of the Adoption and Children Act 2002. So the authority would accommodate all three children in foster homes. Under section 22C(7)(b) and (8)(c) of the Children Act 1989 (the 1989 Act) the authority would have a duty to place all three children together so far as was reasonably practicable. My past service in the Family Division emboldens me to predict, with fair confidence, that they would succeed in placing X and Y together but that it might prove not reasonably practicable to place Z with them. The three children have a close relationship with each other and any placement of Z separately from X and Y would be highly unfortunate, perhaps particularly for Z herself. But the local authority would undoubtedly arrange regular contact between the three of them; and it is of some, if limited, comfort that, in the event of the sudden dismantling of their home life, at least the three of them would have a continuing relationship with each other to which to cling. Paragraph 15(1) of Schedule 2 to the 1989 Act would oblige the authority, so far as was reasonably practicable and consistent with their welfare, to endeavour to promote contact not only as between the children themselves, if placed separately, but also between them and their parents and other relatives. It would be nave to consider that more than about one annual visit to PH and HH in prison in Italy would prove practicable. But PHs wide extended family is close knit: both one of his sisters and the wife of one of his sons by his former marriage have, in particular, been visiting the three children on a regular basis and have expressed a wish to continue to do so. Equally HHs mother came from Morocco to help to look after the children for three months in 2011 and might well make further visits to them. Nevertheless, although she acknowledged the value of the likely continuing contact to which I have referred, Dr Pettle expressed in stark and convincing terms the emotional damage likely to be caused to the children by the extradition of PH as well as of HH. It would, she said, be likely to be catastrophic for them; a massive emotional and psychological challenge; overwhelmingly painful; and analogous to a bereavement. She predicted that the carers would need to cope with withdrawal, regression, anger and defiance on the part of the children; that they would sleep and eat poorly; and that the performance of X and Y at school would deteriorate. Although he lacked the benefit of Dr Pettles evidence, the district judge squarely confronted the effect of his order upon the children. He said that it would tear the family apart, would profoundly affect the childrens physical and emotional health and might lead to multiple future problems for them. With the benefit of her evidence, Laws LJ endorsed the district judges conclusions. In relation to Z the Official Solicitor also pressed upon Laws LJ, as he does upon this court, the statement on p 19 of the paper published by the Childrens Commissioner for England in January 2008, entitled Prison Mother and Baby Units do they meet the best interests of the child?, that Attachment between babies and their mothers or primary caregivers starts in the early stages of life and babies become attached by around six months. Severe psychological damage may occur to babies if the bond or attachment with the primary caregiver is severed between the age of six months and four years. Z will not attain the age of four until a year from now; and so the Official Solicitor suggests that consideration of PHs extradition might at least be delayed until next year. It is now clear that the law does not welcome, still less require, an examination of whether the circumstances disclosed by the inquiry under article 8 are exceptional. In the Norris case, cited above, there are helpful observations by Lord Phillips in para 56, by Lord Hope in para 89 and by Lord Mance in para 109, about the snare that, as in many other areas of the law, a test of exceptional circumstances sets: for it may lead to the wrongful downgrading of the significance of circumstances just because they happen not to be exceptional or to their wrongful upgrading just because they happen to be exceptional. Take, suggested Lord Mance at para 109, a case of an offence of relatively low seriousness where the effect of an extradition order would be to sever a genuine and subsisting relationship between parent and baby: the circumstances might not be exceptional yet the proper application of article 8 might lead to a refusal to make the order. Lord Kerr observed, at para 136, that the importance of preserving an effective system of extradition . will in almost every circumstance outweigh any article 8 argument but he explained that such was a fact which exemplified the likely result of the inquiry rather than furnished the criterion by which the issue should be resolved. I should add that I am not convinced that, in the eleven appeals to the Divisional Court cited in para 22 of Lady Hales judgment, the judges fell, as suggested, into the error of applying a test of exceptional circumstances. In his judgment in the Norris case Lord Phillips stated in para 56: Instead of saying that interference with article 8 rights can only outweigh the importance of extradition in exceptional circumstances it is more accurate and more helpful, to say that the consequences of He added in para 62: interference with article 8 rights must be exceptionally serious before this can outweigh the importance of extradition. If. the nature or extent of the interference with article 8 rights is exceptionally serious, careful consideration must be given to whether such interference is justified. In such a situation the gravity, or lack of gravity, of the offence may be material. He gave an example at para 65: [In] trying to envisage a situation in which interference with article 8 might prevent extradition, I have concluded that the effect of extradition on innocent members of the extraditees family might well be a particularly cogent consideration. If extradition for an offence of no great gravity were sought in relation to someone who had sole responsibility for an incapacitated family member, this combination of circumstances might well lead a judge to discharge the extraditee. No one suggests a need to dilute the strength of these remarks just because in the present appeal, unlike in the Norris case, the rights in play under article 8 are those of children, whose interests are a primary consideration. Nevertheless my view of the evidence in the present appeal supports a conclusion that the consequences of extradition upon the rights of the three children under article 8 would be interference with them of an exceptionally serious character. The importance of PHs extradition might therefore fail to outweigh consequences of such seriousness. But does it? On 23 September 2003 HH and PH drove across the French border into Italy. They were escorting another car, driven by a courier and containing 205.7 kg of hashish. By telephone they instructed the courier to drive to a rendezvous at which he was supposed to deliver the drugs to them for onward distribution to others. But the Italian police were intercepting their calls. When the police were about to arrest him, the courier alerted PH and HH, who, by telephone, acquainted others with what had happened and tried to drive back into France. On their way back, however, they too were arrested, charged and remanded in custody. HH and PH were charged with, and later convicted of, being concerned in the importation of cannabis into Italy from Morocco, through France, not just on 23 September 2003 but also on six earlier occasions. The details of the seven charges were as follows: 350 kg (a) 25 April 2003 94.2 kg (b) 11 June 2003 120 kg (c) 19 July 2003 310 kg (d) 6 August 2003 334.6 kg (e) 29 August 2003 200 kg (f) 13 September 2003 205.7 kg (g) 23 September 2003 Total 1614.5 kg An eighth charge was brought against HH and PH, namely of conspiracy with other persons, of whom four were named, to import cannabis into Italy. They were both also convicted under the eighth charge. But on 28 April 2009 the Court of Cassation in Rome ordered a retrial of that charge in the case of PH; and on 9 February 2010 the Court of Appeal in Genoa held that, unlike in the case of HH, it had not been proved that PH, albeit an active participant, had organised or promoted the trafficking enterprise in the sense necessary for a conviction under the eighth charge. His acquittal in this respect explains the fact that, whereas the time likely to be served by HH in prison in Italy is nine and a half years, that likely to be served by PH, following various adjustments, is four years and 22 days. I should add that the fact that, had he been resident with the family in Italy, a further significant adjustment would have been made in his favour adds yet further piquancy to the case; but it is not for the requested court to pick over the rules of the requesting court which govern the time to be served by the defendant in prison any more than it should appraise the justice of his sentence itself although it must be long enough to qualify as an extradition offence. There is an important extra dimension to the gravity of PHs conduct. Just as in 2004 HH had sought to evade justice by leaving Italy in breach of her conditions of bail, so too, later in 2004, did PH. On 7 October 2004, following a year spent in custody on remand, he was granted bail on condition that he should reside in Genoa and report daily to the police; but three weeks later he left Italy and rejoined HH in Spain. In Gomes v Government of the Republic of Trinidad and Tobago [2009] UKHL 21, [2009] 1 WLR 1038, Lord Brown, giving the opinion of the appellate committee, said at para 36: The extradition process, it must be remembered, is only available for returning suspects to friendly foreign states with whom this country has entered into multilateral or bilateral treaty obligations involving mutually agreed and reciprocal commitments. The arrangements are founded on mutual trust and respect. There is a strong public interest in respecting such treaty obligations. As has repeatedly been stated, international co operation in this field is ever more important to bring to justice those accused of serious cross border crimes and to ensure that fugitives cannot find safe havens abroad. Rolled up in Lord Browns observations are several overlapping considerations which combine to confer upon the UKs extradition arrangements their profound importance: (a) perpetrators of crimes should be punished; (b) crime is deterred by the likelihood of punishment; (c) cross border crime is increasing; (d) the movement of criminals across borders has become easier; (e) inter state co operation is increasingly necessary in order to combat crime and to bring criminals to justice; (f) states which offer sanctuary to criminals substantially undermine the efforts of the others to eliminate any advantage in remaining in, or indeed escaping to, a jurisdiction other than that of the prosecuting court; and (g) the UK should adhere to its bilateral (or multilateral) treaty obligations and its breaches or perceived breaches may generate a more widespread unravelling of them on both (or all) sides. The especial importance of adherence to arrangements for extradition is written across all the judgments in the Norris case, and one could well argue that it transcends even the importance of immigration control. Of course I accept that an effective system of removal, or deportation, from the UK of a foreign citizen who has had no right, or has forfeited his right, to remain here carries an importance which extends well beyond his particular circumstances; but the destructive effects on societies of crime are far less plainly and directly countered by immigration control than by adherence to arrangements for extradition. There is a dearth of decisions in which an order for extradition has been refused by reference to the rights of the defendant and his family under article 8. There is Ministry of Justice of Lithuania v AI, [2010] EWHC 2299 (Admin): the defendant had served eight months of a sentence of 20 months for fraud prior to her departure, in breach of the conditions of her release, from Lithuania to England, where she was forced into prostitution, suffered serious trauma and was providing valuable assistance to the police, such combination of circumstances being (said Leveson LJ at para 21) truly exceptional and from which nobody should seek to derive any wider principles. There is Jansons v Latvia [2009] EWHC 1845 (Admin): the defendant was accused of thefts to a value of about 450 and would commit suicide if extradited. Now, today in these conjoined proceedings, also arrives the unanimous decision of this court in F K v Polish Judicial Authority: the facts are set out by Lady Hale in paras 35 to 43 above and reveal not only the need of children aged eight and three for the defendants care but also, and in particular, the relative lack of gravity of the offences alleged against her, their antiquity and the delay in the seeking of her extradition. Counsel can find no evidence that article 8 has ever operated so as to bar extradition for an offence approaching the gravity of those of which PH has been convicted, whether in the courts of England and Wales or of any other member state of the Council of Europe or in the European Court of Human Rights itself. No doubt the constituency of defendants who provide the sole or main care to young children is relatively small. But in my view the principal driver behind such absence of authority is the high degree of public importance attached throughout (and no doubt beyond) Europe to the extradition of persons so that they may answer for serious crime. Indeed the Conseil dEtat in France, for example, appears even to take a step further in considering that, as a matter of principle, extradition will justify any interference with rights under article 8: the Norris case, para 50 (Lord Phillips). The effects on family life of a defendants imprisonment in England and Wales following domestic criminal proceedings, on the one hand, and of his imprisonment abroad following extradition there, on the other, are likely to be somewhat different. Visits to him by his family members would more easily be arranged if his prison was in England and Wales although whether, for his children, the positives outweigh the negatives would so I have long considered be an interesting subject for study; and special facilities, such as for a mother to have her baby with her in prison, might be available in England and Wales but not abroad. In my view, however, it remains of substantial relevance to note the extent to which rights under article 8 affect the process of sentencing in domestic criminal proceedings. In para 128 above Lord Judge quotes from para 54 of his own recent judgment on behalf of the Court of Appeal in R v Kayani, R v Solliman [2011] EWCA Crim 2871, [2012] 1 Cr App R 197. But having stressed in the passage which he has set out, the need in every case for careful scrutiny of the plight of children for whom a defendant has primarily been caring, Lord Judge continued, at para 56: Dealing with it generally, where the only person available to care for children commits serious offences, even allowing fully for the interests of the children, it does not follow that a custodial sentence, of appropriate length to reflect the culpability of the offender and the harm consequent on the offence, is inappropriate. There are a number of reported examples of sentences of immediate imprisonment, almost all measured in months, which, even before article 8 acquired the force of law, the Court of Appeal set aside in the interests of children of whom the defendant was the sole or primary carer: see, for example, R v Whitehead [1996] 1 Cr App R(S)111; and now see also R v Bishop cited above. But, on behalf of the Deputy Prosecutor of the Italian Republic, Genoa, Mr Perry made an unchallenged submission that, were PH to have been sentenced in England and Wales for offences of drug trafficking of gravity equivalent to those of which he has been convicted in Italy, he would be likely to have received a very substantial sentence of imprisonment which, in that they would have been outweighed, the rights of his children under article 8 would not have displaced. Indeed Lord Judge predicts, at para 136 above, that the sentence would be likely to have been at least ten years; and there can be no more authoritative prediction than his. In M v The State [2007] ZACC 18 the Constitutional Court of South Africa delivered judgment on the following question, posed by Sachs J at para 1: When considering whether to impose imprisonment on the primary caregiver of young children, did the courts below pay sufficient attention to the constitutional provision that in all matters concerning children, the childrens interests shall be paramount? Sachs J thereupon offered an analysis of the relevant principles; and with that part of his judgment all the other members of the court agreed. He referred, at para 10, to the classic approach to sentencing, articulated in S v Zinn 1969 (2) SA 537 (A) at 540G H, that what has to be considered is the triad consisting of the crime, the offender and the interests of society. He explained, at para 26, that, when used in s 28(2) of the Constitution, the word paramount does not mean that the interests of the children necessarily dictate the result. He proceeded as follows: 33. Specific and well informed attention will always have to be given to ensuring that the form of punishment imposed is the one that is least damaging to the interests of the children, given the legitimate range of choices in the circumstances available to the sentencing court. 34 In this respect it is important to be mindful that the issue is not whether parents should be allowed to use their children as a pretext for escaping the otherwise just consequences of their own misconduct. This would be a mischaracterisation of the interests at stake. 35. Rather, it is to protect the innocent children as much as is reasonably possible in the circumstances from avoidable harm. 36. (c) If on the Zinn triad approach the appropriate sentence is clearly custodial and the convicted person is a primary caregiver, the court must apply its mind to whether it is necessary to take steps to ensure that the children will be adequately cared for while the caregiver is incarcerated. (e) Finally, if there is a range of appropriate sentences on the Zinn approach, then the court must use the paramountcy principle concerning the interests of the child as an important guide in deciding which sentence to impose. The judgment of Sachs J draws the interests of children vividly into the foreground and it has led me to reflect again, albeit more profoundly, upon the plight of the three children of PH. It is also important to observe that the exercise mandated by article 8 is not identical to that required by the Constitution of South Africa. For we do not start, as a given, with the legitimate range of choices and then fit the interests of the children into it; under article 8 their interests may, through the proportionality exercise, help to identify the legitimate range. But, in a judgment of especial child sensitivity, the weight which Sachs J nevertheless places upon the public interest in the punishment of serious domestic crime confirms me in my conclusion, firm if bleak, that the public interest, not identical but no less powerful, in the extradition of PH to Italy outweighs the interference with the rights of his children.

These appeals concern requests for extradition in the form of European Arrest Warrants (EAWs) issued, in the joined cases of HH and PH, by the Italian courts, and in the case of FK, a Polish court. The issue in all three is whether extradition would be incompatible with the rights of the Appellants children to respect for private and family life under article 8 of the European Convention on Human Rights (ECHR). HH is the mother and PH the father of three children: X aged 11, Y aged 8 and Z aged 3. HH and PH are both British citizens, although HH was born and bred in Morocco. In 2003 they were arrested in Italy and prosecuted on eight charges relating to the importation of cannabis into Italy from Morocco on various dates earlier that year. After a month HH was released under house arrest. She fled the country in July 2004. PH spent a year in custody before being conditionally discharged whereupon he also fled. They were later convicted of all charges although PH received a lesser sentence in respect of the eighth charge, that of conspiracy, because of his lesser degree of participation. HHs EAW states that she has just over nine and a half years of her prison sentence to serve. PPs states that he has eight years and four months to serve. According to calculations made by PHs legal team, he is likely in fact to have only around four and a half years to serve. Further, as primary carer for the children, were the family living in Italy he would be allowed to serve all but a few months of that at home. PH has become the primary carer for the children because HH had experienced a collapse in her mental health. There was expert evidence of the serious harm which would be suffered by the children if both their parents were extradited, in particular by Z who would be separated from her primary attachment figure The District Judge ordered extradition of both HH and PH. Their appeals were dismissed by the Administrative Court on 11 May 2011. FK and her husband are Polish and have five children aged 21, 17, 13, 8 and 3. They have lived in the United Kingdom since 2002. The two youngest children were born in this country. FK is charged with offences of dishonesty with a total equivalent value of less than 6,000. She fled Poland in 2002 and has not been tried or convicted of the alleged offences. There was expert evidence of the serious harm which would be suffered, in particular by the two youngest children, if their mother was extradited. The children had reacted badly to her arrest in 2010. FKs husband is physically impaired and was found to display signs of psychological disturbance. The Senior District Judge ordered extradition. Her appeal was dismissed by the Administrative Court on 1 January 2012. The Supreme Court unanimously allows the appeal in the case of FK. The appeal in respect of HH is unanimously dismissed. By a majority, the Court also dismisses PHs appeal, Lady Hale dissenting. Lady Hale gives the lead judgment. The application of article 8 of the ECHR in the context of extradition was considered by the Supreme Court in Norris v Government of the United States of America (No 2) [2010] UKSC 9, [2010] 2 AC 487. The case concerned the effect on Mrs Norris of her husband of many years being extradited to face charges of conspiracy. Whilst not involving the rights of children, the following principles can nonetheless usefully be drawn from that case [08]. First, there may be a closer analogy between extradition and the domestic criminal process than between extradition and deportation, but the court must still carefully examine the way in which it will interfere with family life. Secondly, there is no test of exceptionality. Third, the question is whether the interference with private and family life is outweighed by the public interest in extradition. Fourthly, there is a constant and weighty public interest in extradition: people should stand trial and serve appropriate sentences for their crimes, the United Kingdom should honour its treaty obligations towards other States, and there should be no safe haven for fugitive offenders. Fifthly, the public interest will always carry great weight but the weight does vary according to the nature and seriousness of the crimes involved. Sixthly, delay in seeking extradition may diminish the public interest element and increase the impact on family life. Lastly, as a result of the above it is likely that the public interest will outweigh the article 8 rights of the family unless the interference is exceptionally severe. In ZH (Tanzania) v Secretary of State for the Home Department [2011] UKSC 4, [2011] 2 AC 166 the Supreme Court considered the potential impact of Hs deportation on the article 8 rights of her two children, British citizens who had always lived here. The United Nations Convention on the Rights of the Child required that the best interests of the child shall be a primary consideration (not, it should be noted, the primary consideration or the paramount consideration, [11]), although they can be outweighed by the cumulative effect of other considerations [15]. The approach of the court to article 8 rights is not radically different as between extradition and expulsion cases [29]. The countervailing public interest arguments may be different, in particular because extradition is an obligation owed by the requested state to the requesting state, but the balancing process involves asking the central question set out above. In all cases there must be a careful analysis under article 8 of the potential effects of extradition [31, 32]. For guidance as to procedure in respect of gathering evidence, see [82 86]. In respect of FK, her extradition would have a severe effect on her two youngest children, who would lose their primary attachment figure. That loss could have a lasting impact on their development. Their father, though well intentioned, is unlikely to be able to fill that gap [44]. The alleged offences are not trivial but are of no great gravity [45]. There is no prosecutorial discretion in Poland and there has been considerable delay which may indicate the importance attached to her offending by the Polish authorities [46]. The public interest in extraditing FK does not justify the inevitable harm that it would cause to the lives of her children [48]. In the Italian case, the extradition of both parents would have a severe impact on the children. However, having regard to the limited role of HH in the childrens lives and the central part she played in the very serious offences committed, the interference with the rights of the children is outweighed by the public interest in her extradition. On this point all members of the Court agree. As regards PH, the majority conclude that he ought to be extradited also. Lord Judge notes that in the domestic sentencing context judges have for many years considered the effects of imprisonment on the children of offenders. Unfortunately, the seriousness of the offences committed often means that innocent members of the offenders family will suffer as a result of their crimes [130, 131]. Given the nature of the crimes committed by PH, the public interest in extradition outweighs the interference with the rights of his children [135 138], a sentiment echoed by the majority: Lord Hope, [94]; Lord Brown, [96]; Lord Mance, [103]; Lord Kerr, [149]; and Lord Wilson at [170 172]. Lady Hale would have found that the current effect on the children and in particular the youngest is such that the extradition of their father in addition to their mother is not justified at present [79].